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Published in Spring 2003
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NAFTA Chapter 11 and the future
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By Gustavo Alanís-Ortega
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 As the new chair of the Joint Public Advisory Committee (JPAC), I am looking forward to 2003, as JPAC will be tackling issues of importance to all North Americans. Through various activities, including public meetings, JPAC will address law enforcement cooperation among NAFTA countries, challenges posed by invasive species and the effects of transgenic maize in Mexico. JPAC will also contribute to the ten-year review of the NAAEC and continue to follow closely the implementation of NAAEC Articles 14 and 15.
JPAC will hold its first public workshop of the year on 24 March 2003, in Mexico City. The goal of the meeting is to hear the views of the public on a series of issues related to NAFTA’s chapter on investment, also known as Chapter 11. This session will be the second held by JPAC on this topic—the first was held in Ottawa in June 2002. Following that meeting, the CEC Council agreed to facilitate public input in the work on NAFTA Chapter 11 undertaken by the Chapter 11 Experts’ Group of the NAFTA Free Trade Commission. The Council further agreed to work with its trade ministerial counterparts to arrange a forum where interested parties could express their views on the operation and implementation of Chapter 11.
Sources from the OECD and UNCTAD state that the 1990s saw foreign direct investment (FDI) become one of the main drivers of economic globalization, fuelling international trade and development around the world. Global FDI increased from US$230 billion in 1990 to US$1,37 trillion in 2000. This global growth was supported by innovative provisions contained in NAFTA Chapter 11 on investment, and by nearly 2000 bilateral investment treaties worldwide. While the economic benefits generated by the liberalization of investment flows are generally considered positive, the environmental and social impacts associated with the provisions of Chapter 11 and other international investment treaties are the subject of an important debate within and among the academic community, governments, the private sector and civil society.
Indeed, the perceived potential negative effects of Chapter 11, including the chilling effect on regulators and the use of its provisions as a weapon against environmental protection initiatives by some multinational corporations, are fuelling distrust. This is one of the factors that ultimately led to the failure of Multilateral Agreement on Investment (MAI), negotiated under the aegis of the OECD, and also the lack of agreement among countries on what could be excluded. Therefore, now more than ever, an open and transparent debate about the actual ramifications of the provisions of Chapter 11 is warranted.
For these reasons, central to the debate surrounding Chapter 11, the issue of whether the adoption of bona fide regulations, including environmental regulations, should open the door to claims of expropriation and compensation by foreign corporations pursuant to Chapter 11 will be discussed at the JPAC workshop. Similarly, the workshop will consider whether import bans should be considered “performance requirements”—measures that Chapter 11 prohibits. Then the participants will consider whether or not an environmental, health and safety exception should be incorporated in Chapter 11 to allow governments the freedom to regulate these matters without fear of having to compensate foreign corporations operating on their territory. Would an exception similar to
GATT Article XX achieve this goal? The issues of transparency, legitimacy and accountability of the arbitral process, as well as the need for an appeal process, will also be discussed. Finally, the participants will consider whether amendments to NAFTA and/or interpretive statements issued by the Parties constitute the best approach to addressing Chapter 11’s imperfections. The Parties issued one such interpretative statement in July 2001.
All these and other issues will be covered during the public workshop. JPAC will then prepare a report of the workshop and provide an advice to the CEC Council.
For more information, please consult the CEC web site at www.cec.org.
I look forward to meeting you all throughout the year and working together to improve our common North American environment.
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