In response to the recent NAFTA Chapter 11 Bilcon award, Canada, Mexico and the U.S. all made submissions in the ongoing Mesa arbitration, offering their views on the Bilcon reasoning. One issue they all addressed was whether the national treatment standard covers only nationality-based discrimination:
- Canada: "As Canada previously argued, a national treatment violation must be founded upon a finding of discrimination based on a foreign investor’s nationality. This position has been unanimously supported by the United States and Mexico. Specifically, the United States agrees that “[a] claimant must establish that the measure, whether in law or in fact, treats foreign investors or investments less favorably than domestic investors or investments on the basis of nationality.” By failing to require proof of nationality-based discriminatory treatment, the Bilcon tribunal erred in its interpretation of Article 1102. This Tribunal should not do the same, and instead, should follow the mandate given to it by the NAFTA Parties, and reaffirmed in the NAFTA Parties submissions here, by limiting its analysis with respect to Article 1102 to whether the Claimant has proven nationality-based discrimination. Any differing or broader interpretation put forward by the Claimant must be rejected."
- Mexico: "Article 1102 is intended to prevent discrimination on the basis on nationality. Mexico agrees that the NAFTA Parties are unanimously of the view that a national treatment violation requires a finding of discrimination based on a foreign investor's nationality. ... "
- U.S.: "The purpose of Article 1102 is to protect against nationality-based discrimination. Article 1102 is not intended to prohibit all differential treatment among investors and investments, but to ensure that the NAFTA Parties do not treat investors in like circumstances differently based on their NAFTA-Party nationality. A claimant must establish that the measure, whether in law or in fact, treats foreign investors or investments less favorably than domestic investors or investments on the basis of nationality. All three NAFTA Parties agree on this point. The Parties’ common, concordant, and consistent position constitutes the authentic interpretation of Article 1102 and, under the Vienna Convention on the Law of Treaties, “shall be taken into account, together with the context.”
I find this situation puzzling. All three NAFTA parties agree that the Chapter 11 national treatment obligation is about nationality-based discrimination. Yet somehow that's not always the standard being applied by tribunals.
Why can't this situation be corrected? The governments have options for forcing tribunals to follow the government view. I don't think the text is unclear on this point, and I agree with these governments' view of the proper interpretation, but they could certainly amend the text to make it impossible for the tribunal to follow any other approach. Why don't the governments do that? Alternatively, the governments could issue an official interpretation, as they did a while back with the minimum standard of treatment.
Do they not care enough about this issue to fix the problem? They seem to be satisfied, at least for now, with making arguments to tribunals in the hopes that eventually the jurisprudence will go their way.
This has implications for the TPP/TTIP as well. If you use the same treaty language there, the same problems could arise.
ADDED: For reporting on this and related issues, see Lise Johnson's article at IAReporter: https://www.iareporter.com/articles/as-decision-in-mesa-v-canada-looms-investor-and-all-three-nafta-parties-weigh-in-on-significance-of-bilcon/
