THE NEW FACE OF INVESTMENT ARBITRATION: NAFTA CHAPTER 11
the right to prohibit arbitration on the basis that the claim «lacks legal merit» and would have established a «single appellate body» to review decisions in investment arbitration.106 As finally enacted, last year’s trade legislation includes several provisions designed to restrict the type of arbitration provisions normally found in investment treaties. After a self-congratulatory preamble to the effect that the United States «provides a high level of protection for investment,» the Trade Act of 2002 defines American trade negotiating objectives to include making sure that foreign investors receive no «greater substantive rights with respect to investment protections» than domestic investors—thus echoing objections to investment arbitration long propounded by developing countries.107 The Act sets forth the means to this end, including an improvement of investor/host state dispute resolution through «mechanisms to eliminate frivolous claims,» and «an appellate body . . . to provide coherence to the interpretations of investment provisions in trade agreements.» It also includes a mandate to make public all investment arbitration proceedings and to allow amicus curiae submissions from business, labor, and non-governmental organizations.108 Some groups in Canada have likewise complained bitterly about NAFTA, alleging that it serves «to limit the legitimate rights of governments to regulate.»109
See S.A. 3430 (Kerry Amendment to H.R. 3009), 107th Cong., 148 Cong. Rec. S4504 (2002). While some might imagine that this veto right would be given to the host state, in fact the Kerry proposals accorded this to the «competent authority in the investor’s country.» See S.A. 3430, §§. 2102(b)(3)(H)(i) & (ii). This approach follows the lines of traditional practice in matters of state responsibility, with a capital exporting country espousing its national’s claim in order to assert protection of the investor’s foreign assets. The Kerry proposals would also have modified the substantive contours of what NAFTA arbitrators could award, requiring, inter alia, that trade agreements with investment provisions: (1) ensure that foreign investors receive no greater legal rights than American citizens; (2) exclude compensation for regulatory measures that cause «mere diminution» in the value of property; and (3) ensure that standards for minimum treatment grant foreigners no greater legal rights than possessed by American citizens under the Constitution’s due process clause. See S.A. 3430, Sec. 2102(b)(3)(DF). The amendment was tabled on May 21, 2002. 107 See Trade Act of 2002, Pub. L. No. 107-210, § 2102(b)(3), 116 Stat. 933, 995 (2002). 108 See Id., § 2102(b)(3)(G-H). 109 See Nihal Sherif, Canadian Memo Identifies Options for Changing NAFTA Investment Rules, Inside U.S. Trade, Feb. 12, 1999, at 20 (commenting upon a memo of the Canadian Department of Foreign Affairs and International Trade); see also Pope & Talbot NAFTA Arbitration Moving Into Damages Phase, Mealey’s Int’l Arb. Rep., July 2001, at 20, (discus 106
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LIMA ARBITRATION. N° 1 - 2006