Chicago Journal of International Law


The only potentially unique aspect of NAFTA Chapter 11 is that the governments of two nations with developed economies agreed to enter into an investment protection treaty between themselves. The overwhelming majority of BITs to date have been North to South, between capital-exporting countries and capital-importing countries, and the private investors who actually have benefited from such treaties have been those from the North. Practically speaking, countries such as Canada and the United States simply have not had to worry that they would ever have to defend a claim in arbitration under a BIT. The cross-border investment flows between Canada and the United States, however, are astronomically higher than, for example, those between Cameroon and the United States, and it was inevitable, once NAFTA's investment protection regime became operative, that Canada and the United States would be defending themselves before an international tribunal. Indeed, it is no coincidence that all of the Chapter 11 cases thus far commenced against the United States have been brought by Canadian nationals and all but one of the cases against Canada have been brought by US nationals. One may surmise that at least some of the distress felt by Canada and the United States over NAFTA Chapter 11 has been caused by the novel and disconcerting fact of having to live up to the same substantive and procedural guarantees that they have required of their BIT partners. Of course the fact that the NAFTA Parties are getting precisely what they bargained for does not necessarily answer the specific criticisms being leveled against Chapter 11. In analyzing the substance of this criticism, however, one should not lose sight of the reasons why the NAFTA Parties negotiated Chapter 11 in the first place. NAFTA Chapter 11 creates substantive investment protections that are enforceable in arbitration by the individuals directly impacted by any breach of such protections. In establishing this investment regime, the NAFTA Parties wanted to achieve three main objectives: (1) to tear down existing foreign investment barriers by eliminating arbitrary and discriminatory restrictions; (2) to build investor confidence throughout the region through the elaboration and enforcement of clear and fair rules; and (3) to "depoliticize" the resolution of investment disputes by eliminating the need for State- to-State adjudication. Any criticism of the Chapter 11 regime that fails to take account of these three factors is, literally, beside the point.

Included in

Law Commons