Canada celebrated Canada Day two weeks early in Washington DC, completing its NAFTA Chapter 11 arbitration takedown of T. Boone Pickens’ Mesa Power with a New York Convention award confirmation in the US District Court of a NAFTA Arbitral Tribunal’s rejection of Mesa’s unfair treatment claims against the Government of Ontario in regard to Ontario’s procurement of wind-powered electricity from Mesa’s Canadian renewable energy venture.  (Mesa Power Group, LLC v. Government of Canada, 2017 WL 2592414 (D.D.C. June 15, 2017)). Your Commentator, having failed despite mighty efforts to determine if Mr. Pickens called his friend the incumbent President to affirm that NAFTA is “a total disaster” and “the worst trade deal ever,” instead devoted some quiet hours of the Independence Weekend to compiling some program notes for the gripping drama that is to unfold starting later this summer:  the US-requested renegotiation of NAFTA. Whereas I maintain, in my modest free trade zone, an adequate supply of softwood lumber and a sturdy vehicle assuredly not manufactured in a factory on the soil of a NAFTA Party, I focus here on prospects for changes to the investment protection chapter (#11) of the treaty.

1. Devotees of Investor State Dispute Settlement (ISDS) looking for hints of what might be Canada’s Chapter 11 agenda would take interest in prominent think-tank analysis that might make its way to PM Justin Trudeau’s nightstand: A report by scholars at Waterloo, Ontario-based Center for International Governance Innovation (CIGI) urging that measures already adopted by the parties via the NAFTA Free Trade Commission, or better yet those adopted in the EU-Canada Comprehensive Economic and Trade Agreement (CETA), for transparency of and access to investment arbitration proceedings (including amicus participation) should be incorporated in the revised text. And while giving a full account of the CETA permanent investment tribunal and appellate tribunal features, the report stops short of urging that this be a key element of Canada’s Chapter 11 renegotiation agenda. They do however endorse adoption of CETA’s provisions for accelerated dismissal of frivolous claims. (“Modernizing NAFTA: A New Deal for the North American Economy in the Twenty-first Century,” CIGI Papers No. 123 March 2017).
2. A recent submission by the US Council on International Business (USCIB) to the US Trade Representative devotes only three paragraphs to ISDS in a 16-page submission, and in general terms endorses reference to the 2012 US Model Bilateral Investment Treaty as a reference point for modernizing Chapter 11. (“USCIB Comments on Negotiating Objectives Regarding NAFTA Modernization,” Dkt. No.: USTR-2017-0006, June 12, 2017).
3. The Trump Team at the NAFTA negotiation table may have its eye on maintaining the US’s unblemished records of wins in ISDS cases, perhaps anxiously taking note of recent published reports that the US withdrawal from the Paris climate change accord might lead to a surge in ISDS claims against the US by foreign investors who claim to have relied on a US regulatory framework favorable to (for example) renewable energy. (See “Could the US Withdrawal from the Paris Agreement Spur ISDS Claims?,” Stockholm Chamber of Commerce ISDS Blog, posted June 21, 2017). If so, and even if the Trump-led US trade team remains as resolute in remaining outside the Trans-Pacific Partnership (TPP) as many of the other TPP nations are in their resolve to forge ahead (see “Canada, other countries will move forward on new Trans-Pacific Partnership after U.S. withdrawal,” Toronto Sun, May 21, 2017), we could see a US pitch to add to Chapter 11 a pro-State-regulatory-power provision akin to TPP Article 9.15: “Nothing in this Chapter shall be construed to prevent a Party from adopting, maintaining or enforcing any measure otherwise consistent with this Chapter that it considers appropriate to ensure that investment activity units territory is undertaken in manner consistent with environmental, health or other regulatory objectives.”
4. Some one or more persons on the Trump Team will have read (perhaps out of view of colleagues and superiors) an excellent brief report by Brookings Institution analyst Geoffrey Gertz entitled “Renegotiating NAFTA: Options for Investment Protection” (Global Views, No. 7, March 2017), which briefly sketches:

four broad options for the future of investment protection in NAFTA:

1. Upgrading the treaty’s investment chapter while leaving the main substantive and procedural aspects of investment protection in place.
2. Abandoning legalized treaty-based investment protections, leaving any provisions on investment not directly legally enforceable.
3. Shifting from an investor-state framework to a state-state framework, in which states would be responsible for legal enforcement of investment regulations.
4. Linking NAFTA to the recently proposed multilateral investment court.

The report takes no prescriptive position but advocates “for more ambitious and creative thinking on investment protection policy, particularly in the US.”

To date there appear to be no particular indications that Chapter 11 on investor protection is a priority agenda item for negotiators from any of the NAFTA Parties. But the fact that negotiation of changes to Chapter 11 lacks the high political profile of issues like import tariffs and government subsidies need not mean the issues will receive no attention. Perhaps thoughtful investment arbitration specialists will make useful progress, out of the spotlight, in a quiet room at the far end of the hotel corridor.

Linked below is my article “A Glance Into History for the Emergency Arbitrator”, published last month in the Fordham International Law Journal. The article was written in conjunction with my presentation on the same topic at the Fordham Conference in New York in October 2016.

http://ir.lawnet.fordham.edu/ilj/vol40/iss3/3

It has been fashionable in some international arbitration circles of late to bemoan the shortcomings of a staple of the arbitral diet: the written testimonial statement of a fact witness, submitted in advance of the merits hearing and intended to stand as the testimony-in-chief (direct). For arbitrators who thrive on a constant regimen of procedural nourishment, this pot-stirring resonates like an anti-croissants diatribe at a conference of the French bakery association: too flaky, too buttery, too … prévisible! (Francophobes, use your Google Translator!).

Avid readers of the burgeoning literature on this subject, and even workaday arbitrators and advocates, will be familiar with the essential virtues of the witness statement (it brings coherent organization to complex facts, and affords disclosure in advance of the party’s evidence) and with its vices (mainly due mainly to its preparation by counsel, it may be tendentious, prolix, and a crude approximation of “the truth”). Your commentator, while reluctant to expose the hazards of a croissant-free French breakfast, does boldly venture below several observations about the more indigestible attributes of arbitration without witness statements:

1. The advocate’s theory of the case may remain a work in progress at the time of submitting the pre-hearing memorandum of law. This being rather late in the game for a party to have a case in search of a theory, arbitrators at the hearing and post-hearing stage can contribute rather less than they might to a focusing of the parties’ attention on potentially decisive issues. And the advocates in turn have less opportunity to advocate on issues the Arbitral Tribunal genuinely cares about. If theories of claim and defense are modified from the pre-hearing to the post-hearing brief, the Tribunal, except in the unlikely event that counsel will confirm the abandonment of positions earlier articulated, now has a greater number of liability theories and defenses to address in deliberations and in the Award.
2. The advocate, lacking confidence that the direct testimony of two witnesses rather than six will be sufficient and effective, protectively names six on the witness list. Seeing the list of six, opposing counsel protectively expands its own provisional witness list of four into an actual list of eight. The Tribunal now wonders, aloud, how it will hear 14 fact witnesses (plus experts) in a four-day hearing, when there promises to be direct, cross, re-direct, re-cross, Tribunal questions, and follow-up to Tribunal questions, for each witness.
3. Lacking adequate foreknowledge of the adverse party’s witnesses’ testimony, the advocate’s preparation for cross-examination is unfocused. What can most safely be done by the advocate is to prepare to read, on cross, helpful highlights of documents the adverse witness is associated with (followed by the unhelpful question “Did I read that correctly?”).
4. The parties’ lists of witnesses being hedged promises of those they may call and not necessarily those they will call, each side insists on the right to call two of the adverse party’s listed witnesses on its own case. Skirmishes ensue about what the adverse party could possibly want from these witnesses that cannot be adduced from its own employees or in cross-examination, and the Tribunal, having only a vague sense of what any witness might contribute, is reluctant to limit any procedural option for either side. Undesirable outcomes abound — such as witnesses waiting, sequestered, for a testimonial appearance that may not materialize (not to mention the legal costs of preparing the witness for the unknown examination by opposing counsel), or, to avoid such a scenario, a commitment is made by the party that employs the witness that she will be called, and this adds a witness who might otherwise not be needed, in service of control over the timing and presentation.
5. The Claimant having no advance disclosure of what the Respondent’s fact witnesses will actual say in their testimony, seeks to reserve the ability to call new witnesses on a “rebuttal case” as well as the opportunity to re-call witnesses who will have already testified in the Claimant’s case-in-chief. The parties are unlikely to have anticipated this hearing-lengthening prospect at the time the hearing schedule was fixed, and the potential necessity to add hearing days for the rebuttal case, after a lengthy hiatus, may loom as the first hearing dates approach.

These are serious disadvantages to proceeding without written witness statements in a complex international arbitration. It is desirable that arbitrators and advocates should become familiar with them so that decisions on witness procedure made at the early stages of the case will be well-informed, and will neither opt in favor of written witness statements merely because their use is customary nor opt against them merely because the backlash against custom has come into fashion.