Originally from American Review of International Arbitration - ARIA

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There has been a considerable amount of political hand wringing, but not much actually written, about investor-state arbitration under the North American Free Trade Agreement (“NAFTA”).1 To date there have only been four final awards made on the merits of a claim, and three awards made concerning the jurisdiction of an arbitral tribunal established under the NAFTA to hear a claim.2 The following is a brief commentary on the first of these two jurisdictional awards: Ethyl Corporation and the Government of Canada (the “Ethyl Award”).3 It canvasses the various arguments made before the tribunal, and evaluates the tribunal’s decisions in respect of each, ending with a brief comment about what can be expected from other tribunals in the disputes to come.

NAFTA Chapter 11 represents a significant development in the evolution of international trade and investment law. Apparently based mostly on the provisions of the United States Model Bilateral Investment Treaty, NAFTA Chapter 11 is the first investment agreement to be concluded between both developed and less-developed countries (the Unites States, the United Mexican States and the Dominion of Canada). It contains very broad definitions of “investor” and “investment” (potentially providing for an incredibly wide-ranging application),4 and provides not only for state-to-state arbitration, but also for binding, ad hoc investor-state arbitration, through recourse to disputing investor’s choice of either the United Nations Commission on International Trade Law Rules of Arbitration5 (the “UNCITRAL Rules”) or the Additional Facility Rules of the International Centre for the Settlement of Investment Disputes (“ICSID”).6 While not binding on future tribunals, awards made in the early claims submitted to arbitration promise to establish a pattern for how the NAFTA’s investor-state provisions will work in practice.