Over at the Kluwer Arbitration blog, Charles Brower II has an excellent post about possibilities for “rebalancing” or “recalibration” of substantive investment disciplines in FTAs, including NAFTA. Two of the key points are as follows:
1. It's not easy to amend the investment provisions of FTAs.
When it comes to bilateral investment treaties, recalibration involves a comparatively simple task, ... . By contrast, when it comes to free trade agreements, recalibration of investment chapters involves a more complex task, ....
... one need only refer to the NAFTA’s investment chapter. Despite perceived flaws, states parties cannot renounce their investment disciplines without sacrificing interlocking compromises on trade in goods, trade in services, intellectual property, government procurement, and technical standards. Likewise, states parties cannot revisit the scope of investment disciplines without also reopening negotiations on all topics addressed by the NAFTA’s twenty-two chapters, the corresponding annexes, and the exceptions negotiated by states parties in 1993—an unappealing venture fraught with the risk of failure.
That's probably right. Unless all the parties dislike the current investment disciplines equally, a modification that involves investment provisions only will be difficult.
2. The cases provide the flexibility to change the substantive law of investor protection a bit.
... after the pro-investor triad of Metalclad, S.D. Myers, and Pope & Talbot, which threw the NAFTA parties into a near state of panic, a different trinity emerged.
...
Together, Loewen, Methanex, and Glamis represent a decisive shift in emphasis towards the preservation of regulatory space for host states.
...
Although the new trinity clearly signals the development of a trend, it remains to be seen whether its momentum will build or will dissipate in the face of resistance.
...
Given the criticisms leveled at recent awards, it seems possible that the tide could turn against Loewen, Methanex, and Glamis. However, that is the point: while adjudicative recalibration by single-instance tribunals remains a tool for course correction even under free trade agreements, that only establishes the possibility for a soft reset. Because a hard reset remains beyond reach, the continuation or reversal of trends depends on the views of arbitrators in subsequent cases. Under these circumstances, disputing parties have even more incentives to exercise care in the selection of arbitrators for disputes under free trade agreements.
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So what is the future of investment provisions in FTAs? Perhaps we will learn something from the Trans-Pacific Partnership (TPP) negotiations the Obama administration will join. USTR Kirk says he wants a "high standard" trade agreement. What will that mean in terms of investment provisions?
