Taking a quick break from the big picture questions in the Great Trade Debate, I'm going to bring up a very narrow and technical trade issue: How to apply a non-discrimination standard in the NAFTA Chapter 11 context.
As was widely reported last week, AbitibiBowater is going ahead with its NAFTA Chapter 11 claim in relation to an expropriation of certain of its assets by the Canadian Province of Newfoundland. When there's a big NAFTA Chapter 11 case going on, I always go straight to the non-discrimination aspects. I recognize, of course, that often the other claims are more important (as is likely in this case), but non-discrimination is what interests me, and here the claims raise some fundamental issues as to how non-discrimination is to be established. Here's a short statement of the argument, from the Notice of Arbitration and Statement of Claim (obviously, more detail will be coming in the briefs):
96. NAFTA Chapter Eleven prohibits discrimination against investors of the other State Parties, vis-a.-vis both nationals or investors of other States. Under Article 1102(2), "[e]ach Party shall accord to investments of investors of another Party treatment no less favorable than it accords, in like circumstances, to investments of its own investors with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments." The same principle is found in Article 1103(2), but in reference to "investment of investors of any other Party or of a non-Party."
97. In effect, these NAFTA provisions make it illegal for Canada, through the Province, to discriminate against a U.S. investor's activities in Canada, whether by comparison to a local investor or to an investor from any other country. The Act undoubtedly breaches NAFTA's non-discrimination guarantees, by explicitly targeting and singling out the Canadian operations of AbitibiBowater, a single foreign investor, rather than serving as a measure of general applicability. Although the Province may have a right under NAFTA to expropriate in the public good subject to certain conditions, it cannot discriminate as between the owners of such assets by unilaterally imposing acts of retaliation on one investor, while treating other investors more favorably. Certainly, AbitibiBowater is not the first employer in the Province to close a facility in hard economic times. Where the Province has not attempted in other cases to penalize companies by unilaterally seizing their remaining assets and cancelling their remaining legal rights, it is clearly discriminating against AbitibiBowater.
98. Discrimination is also apparent in the Province's approach to compensation for the expropriation. The Act limits AbitibiBowater's rights to be made whole while the Province has publicly stated that it plans to insulate AbitibiBowater's lenders and independent business partners from any adverse effects on their business interests. Discrimination is further apparent, as previously discussed, in the Act's attempt to preclude AbitibiBowater from accessing the courts or continuing with pending claims, while all other investors in the Province still retain the full panoply of judicial options as recourse for any ill treatment.
I think this argument can be loosely summarized as follows: The Province's actions in relation to the expropriation discriminate against AbitibiBowater, and AbitibiBowater is foreign (partly at least), hence the actions discriminate against a foreign investor, in violation of Article 1102 (and also discriminate among investors of different countries, in violation of Article 1103). I think that's a reasonable characterization of the argument, but feel free to correct me. I'm not trying to frame it in an unfair way; it's just hard to get the wording exactly right.
I've talked about this issue a number of times, on this blog and elsewhere (e.g., here and here). I'm very curious to see how this NAFTA Chapter 11 tribunal addresses the argument, as it is extremely important for defining the boundaries of non-discrimination in the investor-state context. Some questions that I would very much like to see answered (focusing on National Treatment, rather than MFN, but the issues are similar):
-- Under Article 1102, is it the treatment of an "individual" investor that is most important, or is it the overall treatment of the "group" of foreign and domestic investors that is the key? And if the latter, how do you identify that "group" here? Perhaps along the same lines as defining the group, what are the "like circumstances" here?
-- With regard to the "individual" investor theory, is it the case under this approach that any time you single out a particular foreign investor with some kind of negative government action you have violated the NAFTA Chapter 11 National Treatment provisions?
-- There has been a lot of talk about "individual" versus "group" theories of non-discrimination in the WTO context. Will the parties and the tribunal cite to the various WTO-related journal articles and cases? Or are the situations too different for the WTO arguments to be relevant? And is the NAFTA Chapter 11 jurisprudence extensive enough at this point that the parties will be too busy arguing about what it all means, and thus will not bother with insights from the WTO?
