The North American Experience with Investor-State Arbitration: Does It Lead to a Permanent Investment Court?
This paper addresses two related questions: (1) does the experience of the three NAFTA Parties suggest that they would be more comfortable with a court structure replacing arbitration and (2) does this reflect the discomfort of developed democracies with
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Contents 1 The Experience of the Three Countries with NAFTA Chapter 11 1.1 Canada 1.2 United States 1.3 Mexico 1.4 Comments on the Experience in the Three Countries 2 Steps Taken by the Three Countries Under the NAFTA 3 Evolution of the US and Canadian Model BITs Since 1994 4 Evolution of Treaty Practise Since 1994 4.1 Canada 4.2 United States 4.3 Mexico 5 Extent to Which Canada, the United States and Mexico Are Open to a Standing International Investment Tribunal? 6 Conclusions References
Abstract This paper addresses two related questions: (1) does the experience of the three NAFTA Parties suggest that they would be more comfortable with a court structure replacing arbitration and (2) does this reflect the discomfort of developed democracies with investor-state arbitration (ISA)? To answer these questions the paper examines the experience of the three states Parties to NAFTA Chapter 11, the steps that they have taken over the years to change the procedure or interpretation of Chapter 11, the evolution of their Model BITs, other investment treaty practice and the extent to which they appear to have embraced the European Union’s call for some form of standing foreign investment tribunal to replace investor-state arbitration.
A. de Mestral (*) and L. Vanhonnaeker Faculty of Law, McGill University, Montreal, QC, Canada e-mail: [email protected]; [email protected] © Springer Nature Switzerland AG 2020 European Yearbook of International Economic Law 2020, European Yearbook of International Economic Law 10, https://doi.org/10.1007/8165_2020_49
A. de Mestral and L. Vanhonnaeker
1 The Experience of the Three Countries with NAFTA Chapter 11 The objective of including Investor-State Arbitration (ISA) in Chapter 11 Part B was to ensure that Mexico would be required to honour its obligations under Part A which outlines the standards of treatment of investors and investments of the two other Parties. This was done on the initiative of the United States which entertained some doubt that the Mexican legal system was adequate to ensure the high standard of protection required by Chapter 11.1 The drafting of Part B was based on the US Model BIT of the time.2 Canadian negotiators fully understood the implications and shared the concerns of the United States. Ironically, the largest number of claims under Chapter 11 have been filed against Canada, followed by Mexico and the United States.3 Interestingly in all three countries by no means all claims have been pursued beyond a statement of claim and request for arbitration.
1.1 1.1.1
Canada Cases That Have Caused the Most Concern
A number of cases have caused public concern in Canada. The very first, the Ethyl4 claim involved an import (but not internal production) ban on a gasoline additive deemed harmful to the environment. This claim was settled by Canada. The S.D. Myers5 arbitration, which was lost by Canada, arose out of the denial of a permit to export nuclear waste for disposal after the making of the contractual arrangements by the would-be expor
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