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.
- 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).
- 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).
- 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.”
- 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:
- Upgrading the treaty’s investment chapter while leaving the main substantive and procedural aspects of investment protection in place.
- Abandoning legalized treaty-based investment protections, leaving any provisions on investment not directly legally enforceable.
- Shifting from an investor-state framework to a state-state framework, in which states would be responsible for legal enforcement of investment regulations.
- 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.