Dominican Republic-Central America-United States Free Trade Agreement - CAFTA-DR - World Arbitration Reporter (WAR) - 2nd Edition
Author(s):
Alejandro A. Escobar
Michael P. Lennon Jr.
Page Count:
26 pages
Media Description:
1 PDF Download
Published:
December, 2013
Description:
Originally from World Arbitration Reporter (WAR) - 2nd Edition
Preview Page
I. INTRODUCTION—SUBSTANTIVE OBLIGATIONS AND
ARBITRATION PROCEDURES
ARBITRATION PROCEDURES
A. Background on the CAFTADR
On August 5, 2004, Costa Rica, the Dominican Republic, El
Salvador, Guatemala, Honduras, Nicaragua, and the United States
(collectively, the “Contracting Parties” or “Parties”) concluded the
Dominican Republic‐Central America‐United States Free Trade
Agreement (“CAFTA‐DR” or “Treaty”).1 The Treaty entered into force
for El Salvador, Guatemala, Honduras, Nicaragua, and the United
States in 2006, for the Dominican Republic in March 2007, and for
Costa Rica in January 2009. The objectives of the Treaty are wideranging,
and include: encouraging the expansion and diversification
of trade between the Parties; eliminating barriers to trade in, and
facilitating the cross‐border movement of, goods and services
between the territories of the Parties; promoting conditions of fair
competition in the free trade area; substantially increasing
investment opportunities in the territories of the Parties; and
creating effective procedures for the implementation and application
of the Treaty and for the resolution of disputes.2
The final negotiations of the Treaty coincided with the
completion of the 2004 U.S. Model Bilateral Investment Treaty (“U.S.
Model BIT”) review process. Thus, the structure and text of the
CAFTA‐DR reflect not only the United States’ decade‐long experience
with the North American Free Trade Agreement (“NAFTA”), but also
the United States’ “most extensive revision of the model negotiating
text” ever made, which resulted in the 2004 U.S. Model BIT.3 The
2004 U.S. Model BIT contained various significant changes from the
prior 1994 U.S. Model BIT. For example, the 2004 U.S. Model BIT
emphasized that “investments” must have certain economic
characteristics in addition to a permitted legal form. Likewise, the
2004 U.S. Model BIT elaborated on the “denial of benefits” provision
to enable host States to prevent purported “investors” that lacked a
real connection with a BIT signatory from asserting rights under the
treaty. Other changes sought to clarify the content of the investment
protections provided while preserving each State’s authority to
regulate for the public welfare. To this end, the 2004 U.S. Model BIT
expanded the States Parties’ ability to except measures otherwise
not in conformity with the substantive obligations of the treaty. In
addition, the 2004 U.S. Model BIT addressed the relationship
between certain treaty provisions and customary international law
in an effort to prevent arbitral tribunals from unduly hampering
State authority through expansive interpretations of the treaty text.4
The 2004 Model BIT included significantly broader transparency
provisions than had previously applied to investor‐State disputes.
Although the revision of the U.S. Model BIT was only finalized in
November 2004,5 these important developments influenced the
structure of the CAFTA‐DR as well as the text of its investment
protections. The CAFTA‐DR Chapter Ten on Investment (“Chapter