Originally from Investment Treaty Arbitration and International Law - Volume 14

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INTRODUCTION

In September 2018, the United States, Canada, and Mexico announced conclusion of negotiations to replace the decades-old North American Free Trade Agreement (“NAFTA”) with a new agreement, the U.S.-Mexico-Canada Agreement (“USMCA”).  The USMCA modernizes the rules governing trade and investment in North America, in part by incorporating into the treaty obligations and commitments included in more recent agreements.  In this respect, there are substantial similarities between the USMCA and other, more recent trade agreements concluded by the NAFTA parties, including the Trade -Pacific Partnership (“TPP”) agreement that was negotiated — but never implemented — between the three countries and nine other Asia-Pacific nations.  In addition, the USMCA also adopts a number of more innovative approaches, including in the area investment.

The USMCA investment chapter differs from its NAFTA predecessor in a number of ways.  The new agreement’s departure in form and substance from the investment disciplines contained in NAFTA Chapter 11 is particularly striking given the groundbreaking role that NAFTA has played as a model for the negotiation of investment treaties for well over two decades.  Indeed, at the time that NAFTA was signed in 1992, Chapter 11 represented a truly state-of-the-art investment treaty that — in the intervening period — has had a monumental impact upon the development of subsequent international investment agreements.  

While the USMCA replicates many of the substantive investment protections contained in NAFTA Chapter 11, the treaty departs from NAFTA’s approach the investor state dispute settlement (“ISDS”) mechanism, which allows private investors of one NAFTA party to bring a claim directly against the government of another party.