In a recent post here, I commented on the absence of Fair and Equitable Treatment and protection against expropriation from the text on investment in the recently released (thought not finalized) Japan-EU Economic Partner Agreement (JEEPA), speculating that this might be seen as a shift to a focus on non-discrimination in international investment law, in contrast to investor protection. Yesterday in releasing its re-negotiation objectives for NAFTA the Trump Administration seemed to be making a parallel move, stating the principle of "ensuring that NAFTA country investors in the United States are not accorded greater substantive rights than domestic investors."
This is one Trump Administration move that Senator Elizabeth Warren and other progressive Democrats should love. Those familiar with the history of international investment law will recognize this principle as part of the Calvo Doctrine, which was, ironically, a position taken by states in the global South against the United States, and other developed-country exporters of capital ; they should not have to provide rights to foreign investors beyond those provided to domestic investors in the same circumstances. Now with the Trump Administration, the United States is propounding the Calvo Doctrine (or at least that part that concerns substantive rights rather than dispute settlement) against its NAFTA partners, Canada and Mexico.
At the same time as asserting the Calvo Doctrine for itself, the United States, according to the Trump Administration's negotiating objectives, should also "secure for U.S. investors in the NAFTA countries important rights consistent with U.S. legal principles and practice."
So how can Mr. Trump's NAFTA negotiators square the circle, demanding important rights for US investors while holding the line at the Calvo Doctrine as far as how investors from Canada and Mexico are treated in the United States?
The answer is rather straightforward: focus on market access and removing discriminatory barriers to investment that matter to US companies-in other words, take a hard look at exceptions to the National Treatment obligation in NAFTA as a start, as well as the reservations, and the interaction of National Treatment and the investment chapter with other chapters, such as Financial Services and Monopolies and State Enterprises. Adding a general public policy exception to the NAFTA investment chapter while perhaps narrowing these specific carve outs could strengthen the rights of inter alia US investments and investors, while at the same time holding the line at non-discrimination. In their classic form, by contrast, the fair and equitable treatment obligation and the expropriation obligation would need to be eliminated. Certainly Canadians and Mexicans will not tolerate the United States insisting that these norms may give US investors greater rights than domestic firms in those countries, while the Calvo Doctrine applies with respect how Canadian and Mexican investors are treated in the US. An alternative to eliminating FET and protection against expropriation, would be to have a kind of cap or defense to a claim on those provisions, which states that the treatment of investors/investments from other NAFTA parties required under those provisions need not exceed the standard of treatment provided to domestic investors/investments under like circumstances.
If the Calvo Doctrine (as applied to substantive rights) is to be entrenched in the NAFTA effectively, the MFN clause in the investment chapter will need to be substantially rewritten, to prevent treaty-shopping-since the entire US approach until now has been different, above all, as represented by norms against expropriation and FET understood as autonomous international standards largely unaffected by the level of treatment afforded domestic actors (though FET does itself have a non-discrimination component). More on how to achieve this revision of MFN in posts to come (as well as thinking about strengthening the non-discrimination part of the investment chapter of NAFTA in light of the case law to date on National Treatment.)
