NAFTA

The North American Free Trade Agreement (NAFTA) was comprised of Canada, Mexico and the United States. It came into effect in 1994 and was the first trade agreement among developed countries to include investor-state dispute settlement (ISDS) provisions.

Over 20 years later, Canada became the third most sued developed country in the world. Of the 77 known NAFTA investor-state disputes, 35 have been filed against Canada, 22 against Mexico and 20 against the US. American investors have won 11 of their cases and the US never lost a NAFTA investor dispute or paid any compensation to Canadian or Mexican companies.

Canada has paid American corporations more than US$200 million in the nine cases it has lost or settled. Besides, Canada has spent over US$65 million in legal fees, regardless of the cases’ outcome.

Most NAFTA arbitration disputes involved challenges to environmental protection or resources management that were claimed to have interfered with the profit of US corporations.

NAFTA was recently renegotiated and replaced by the US-Mexico-Canada Agreement (USMCA), which was signed on 30 November 2018. The ISDS mechanism between the US and Canada, and between Mexico and Canada has been removed – even though it is included in the TPP, to which both countries belong. New procedures replace the ISDS between the US and Mexico. Expansive rights for investors are mostly terminated. Only limited claims are allowed after exhaustion of local remedies. But the ISDS mechanism has been maintained between the two countries for claims pertaining to Mexico’s oil and gas sector.

The most well-known cases include:

Ethyl (US) vs. Canada: case settled in 1998 for US$13 million paid to the US chemical company, in compensation for the ban of the toxic gasoline additive MMT. The ban was also lifted.

Metalclad (US) vs. Mexico: US$16.2 million awarded in 2000 to the investor, a waste management corporation, for not having been granted a construction permit for a toxic waste facility.

Loewen (Canada) vs. United States: the dispute over a funeral home contract was dismissed on far-fetched procedural grounds in 2003.

Photo: Obert Madondo / CC BY-NC-SA 2.0

(March 2020)

NY Times | 18-Oct-2017
This far-flung peninsula in the North Atlantic seems an unlikely place for an international trade dispute. But an American company’s scuttled plans to build a quarry here have turned these quiet fishing grounds into a case study.
24 Horas | 17-Oct-2017
Termina 5o. día de la 4a. ronda de conversaciones con más exigencias; Grupos opositores presionan a los negociadores con manifestaciones y panfletos
Bloomberg | 16-Oct-2017
US Nafta negotiators are proposing to essentially do away with the independent tribunals that oversee the trading and investment relationship.
Radio Canada | 16-Oct-2017
Les États-Unis ont réclamé un affaiblissement important des mécanismes de règlement des différends prévus à l’Accord de libre-échange de l’Amérique du Nord (ALENA).
IELP Blog | 11-Oct-2017
US ISDS proposal in NAFTA would cut fair and equitable treatment and indirect expropriation.
International Economic Law and Policy Blog | 29-Sep-2017
Today, a considerable number of claims arise from the commitment to accord fair and equitable treatment (FET) to covered investments.
El Economista | 28-Sep-2017
Pretende quitar el carácter de obligatoriedad a los paneles para dirimir conflictos entre inversionistas y estados del bloque comercial.
Argus | 28-Sep-2017
Mexico is considering writing into law investor-state dispute settlement provisions contained in the North American Free Trade Agreement (Nafta) to reassure US and Canadian investors in its energy sector.
The Globe and Mail | 14-Sep-2017
The goal of Foreign Affairs Minister Chrystia Freeland is to revamp Chapter 11 so it more closely mirrors the investor-state dispute-resolution mechanism that forms part of the 2016 Canada-European Union trade deal.
The Hill | 13-Sep-2017
By pushing for a little-known but damaging legal concept buried in the North American Free Trade Agreement (NAFTA), the chamber has chosen to represent the interests of a handful of corporations instead of the interests of responsible business owners.