TY - JOUR

T1 - Metalclad, Methanex and Chemtura

T2 - 10 Years of Environmental Issues in NAFTA Investment Arbitration

AU - Asteriti, Alessandra

PY - 2012

Y1 - 2012

N2 - The North American Free Trade Agreement (‘NAFTA’ or ‘the Agreement’), ratified in 1994, is the first free trade agreement to openly incorporate environmental provisions. Its ratification engendered a sustained debate on the effects of trade on environmental degradation that has hardly abated and has been joined by critical voices on the investment regime protected by Chapter 11. While the debate has often been monopolized by critical voices, praise has been expressed for the wealth of provisions contained in the NAFTA that make reference to environmental considerations. What has been not debated with equal vigor is the function of these environmental clauses. The thesis advanced in this article is that environmental clauses in investment and free trade agreements fulfill a function similar to BITs in general, of 'signalling devices', to signal the State’s commitment to a certain level of environmental protection, not necessarily to be tested by arbitration tribunals (or to be raised as a defense by the State). In the following article, this thesis will be tested through the prism of three influential awards, where the claimants alleged that environmental measures resulted in a breach of Article 1110 (Expropriation) of the NAFTA. The importance of this area of investment law has ebbed and flowed. Expropriation has traditionally been the cornerstone of the substantive protections guaranteed in investment treaties, an inheritance of its importance in the customary law on the protection of aliens and their property. At the time of the conclusion of the NAFTA in the early 1990s, it was indirect expropriation to be the main concern of investors, and the early jurisprudence reflects this trend. The conflict between investment protection and environmental regulation is starker when at stake is a claim of regulatory expropriation and, in the context of debates on the scope of takings, familiar to the US public and constitutional scholars, it allowed critics of the investment regime to adopt the ‘takings language’ in vocalizing their discontent and anxiety on the reach of international investment law in the domestic domain of public interest regulation.

AB - The North American Free Trade Agreement (‘NAFTA’ or ‘the Agreement’), ratified in 1994, is the first free trade agreement to openly incorporate environmental provisions. Its ratification engendered a sustained debate on the effects of trade on environmental degradation that has hardly abated and has been joined by critical voices on the investment regime protected by Chapter 11. While the debate has often been monopolized by critical voices, praise has been expressed for the wealth of provisions contained in the NAFTA that make reference to environmental considerations. What has been not debated with equal vigor is the function of these environmental clauses. The thesis advanced in this article is that environmental clauses in investment and free trade agreements fulfill a function similar to BITs in general, of 'signalling devices', to signal the State’s commitment to a certain level of environmental protection, not necessarily to be tested by arbitration tribunals (or to be raised as a defense by the State). In the following article, this thesis will be tested through the prism of three influential awards, where the claimants alleged that environmental measures resulted in a breach of Article 1110 (Expropriation) of the NAFTA. The importance of this area of investment law has ebbed and flowed. Expropriation has traditionally been the cornerstone of the substantive protections guaranteed in investment treaties, an inheritance of its importance in the customary law on the protection of aliens and their property. At the time of the conclusion of the NAFTA in the early 1990s, it was indirect expropriation to be the main concern of investors, and the early jurisprudence reflects this trend. The conflict between investment protection and environmental regulation is starker when at stake is a claim of regulatory expropriation and, in the context of debates on the scope of takings, familiar to the US public and constitutional scholars, it allowed critics of the investment regime to adopt the ‘takings language’ in vocalizing their discontent and anxiety on the reach of international investment law in the domestic domain of public interest regulation.

KW - Law

KW - NAFTA

KW - regulation expropriation

KW - investment arbitration

UR - http://www.transnational-dispute-management.com/article.asp?key=1831

U2 - 10.2139/ssrn.2021180

DO - 10.2139/ssrn.2021180

M3 - Journal articles

VL - 9

JO - Transnational Dispute Management

JF - Transnational Dispute Management

SN - 1875-4120

IS - 3

ER -