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Influences on the Canadian FIPA Model and the US Model BIT: NAFTA Chapter 11 and Beyond

Published online by Cambridge University Press:  09 March 2016

Céline Lévesque
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Summary

In recent years, Canada and the United States have modified their model bilateral investment treaties (BITs). If NAFTA Chapter 11 cases have provided the new lens through which investment issues are considered, the solutions to problems experienced in this context have come from different sources. This article explores three influences on the model BITs: the NAFTA Free Trade Commission's interpretation and statements, World Trade Organization law and cases, and US domestic law and principles. A range of interpretation issues is raised, from the effects of changes in wording in successive treaties, to the “transferability” of law across systems (international and domestic), to the use of arbitral awards as precedent. Issues of a systemic nature are also raised, including attempts at limiting the discretion of arbitral tribunals through state interpretations, the possibility of creating an appellate mechanism, and a push for expedited preliminary procedures. The article illustrates the fast-paced evolution of international investment law and highlights the influence of the United States on this evolution.

Summary

Summary

Le Canada et les États-Unis ont adopté, ces dernières années, de nouveaux modèles de traités bilatéraux sur les investissements. L’expérience acquise dans les affaires relevant du Chapitre 11 de l’ALÉNA a certainment coloré la perception des problèmes de réglementation des investissements étrangers. Toutefois, les solutions élaborées afin de faire face à ces problèmes proviennent de sources multiples. Les modèles canadien et américain ont en effet aussi subi l’influence (1) des interprétations et déclarations de la Commission du libre-échange de l’ALÉNA; (2) du droit de l’Organisation mondiale du commerce; et (3) du droit interne américain. Plusieurs questions d’interprétation se soulèvent alors, notammeni les effets des modifications au libellé des dispositions par rapport à des traités antérieurs, la possibilité de “transférer” des règles d’un système juridique à un autre (droit international ou interne), et l’utilisation des sentences arbitrales à titre de précédent. Des questions systémiques sont également soulevées relativement aux efforts du Canada et des États-Unis afin de limiter la discrétion des tribunaux arbitraux notamment à travers des déclarations d’interprétation, la création possible d’un mécanisme d’appel des sentences et l’élaboration de procédures accélérées de traitement des objections préliminaires. Cet article illustre l’évolution rapide du droit international des investissements et souligne l’influence des États-Unis sur cette évolution.

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Canadian Yearbook of International Law/Annuaire canadien de droit international , Volume 44 , 2007 , pp. 249 - 298
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Copyright © The Canadian Council on International Law / Conseil Canadien de Droit International, representing the Board of Editors, Canadian Yearbook of International Law / Comité de Rédaction, Annuaire Canadien de Droit International 2007

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References

1 Foreign Affairs and International Trade Canada (DFAIT), “Canada’s FIPA Model,” 20 May 2004, <http://www.dfait-maeci.gc.ca/tna-nac/what_fipa-en.asp#structure> [Canadian FIPA Model].

2 Office of the United States Trade Representative (USTR), “U.S. Model Bilateral Investment Treaty (BIT),” November 2004, <http://www.ustr.gov/Trade_Sectors/Investment/Model_BIT/Section_Index.html> [US Model BIT].

3 Generally, see United Nations Conference on Trade and Development (UNCTAD), UNCTAD Series on Issues in International Investment Agreements (New York: United Nations, 1999); Dolzer, R. and Stevens, M., Bilateral Investment Treaties (The Hague: Martinus Nijhoff, 1995)Google Scholar; Sacerdoti, G., “Bilateral Treaties and Multilateral Instruments on Investment Protection” (1998) 269 Rec. des C. 251 Google Scholar; and Laviec, J.-P., Protection et promotion des investissements (Paris: Presses Universitaires de France, 1985).CrossRefGoogle Scholar

4 The Canadian FIPA Model, supra note 1, contains five sections, fifty-two articles (including seven footnotes) and five annexes, for a total of forty-nine pages. The US Model BIT, supra note 2, contains three sections, thirty-seven articles (including eighteen footnotes) and four annexes, for a total of forty pages. The models analyzed in this article are those as of 2004, unless specified.

5 North American Free Trade Agreement, 17 December 1992, Can. T.S. 1994 No. 2, 32 I.L.M. 289 (entered into force 1 January 1994) [NAFTA]. According to DFAIT, “[i]n 2003, Canada updated its FIPA model to reflect, and incorporate the results of, its growing experience with the implementation and operation of the investment chapter of the NAFTA. The principal objectives of this exercise were: to enhance clarity in the substantive obligations; to maximize openness and transparency in the dispute settlement process; and to discipline and improve efficiency in the dispute settlement procedures. Canada also sought to enhance transparency in the listing of reservations and exceptions from the substantive disciplines of the Agreement.” See <http://www.dfait-maeci.gc.ca/tna-nac/fipa-en.asp>. See also Kinnear, M. and Hansen, R., “The Influence of NAFTA Chapter 11 in the BITs Landscape” (2005) 12 J. Int’l. L. & Pol’y 101 at 115.Google Scholar In addition, a number of provisions find their source in other NAFTA chapters, for example, Chapter 2 (General Definitions), Chapter 15 (Competition Policy, Monopolies, and State Enterprises), Chapter 18 (Publication, Notification, and Administrative Laws), and Chapter 21 (Exceptions).

An abundant literature now exists on NAFTA Chapter 11 . For an extensive guide, see Kinnear, M. N., Bjorklund, A. K., and Hannaford, J. F. G., Investment Dis-putes under NAFTA: An Annoted Guide to NAFTA Chapter 11 (Alpen aan den Rijn: Kluwer Law International, 2006).Google Scholar And for a collection of essays, see Weiler, T., ed., NAFTA Investment Law and Arbitration: Past Issues, Current Practice, Future Prospects (Ardsley, NY: Transnational Publishers, 2004).CrossRefGoogle Scholar

6 For example, Canadian FIPA Model, supra note 1 at Articles 41–45, which mirror Articles 1132–36 of NAFTA, supra note 5.

7 For example, Canadian FIPA Model, supra note 1 at Article 26(5), which provides that failure by a disputing investor to meet the conditions precedent to submission of a claim to arbitration nullifies the consent given by the state. Contradictory decisions were rendered on this issue in Ethyl Corp. v. Government of Canada, Award on Jurisdiction, UNCITRAL (24 June 1998) [Ethyl]; and Waste Management Inc. v. United Mexican States, ICSID Case No. ARB(AF)/98/2 (ICSID Add. Fac.) (2 June 2000) [Waste Management I]. See also Lévesque, C., “Investor-State Arbitration under NAFTA Chapter 11: What Lies beneath Jurisdictional Challenges” (2002) 17 ICSID Rev.-FILJ 320.CrossRefGoogle Scholar

A number of websites provide online access to awards of investment arbitration tribunals, including the International Center for Settlement of Investment Disputes (ICSID), <http://www.worldbank.org/icsid/cases/cases.htm>; A. Newcombe, <http://ita.law.uvic.ca/>; and T.J. Grierson-Weiler and I. Laird, <http://investmentclaims.com/>. For NAFTA Chapter 11 cases, the best sources are the member government websites, which are listed in note 9, as well as T. Grierson-Weiler, <http://www.naftaclaims.com/>.

8 See UNCTAD, “International Investment Disputes on the Rise,” Occasional Note, 29 November 2004, <http://www.unctad.org/sections/dite/iia/docs/webiteiit20042_en.pdf>.

9 See the table of cases prepared by Sinclair, S., “NAFTA Chapter 11 Investor-State Disputes,” Canadian Centre for Policy Alternatives (CCPA), January 2005, <http://www.policyalternatives.ca/documents/National_Office_Pubs/2005/chapter11_january2005.pdf>.Google Scholar The websites of the NAFTA parties contain information and documents regarding the disputes, including the text of the awards. See, for Canada, DFAIT, <http://www.dfait-maeci.gc.ca/tna-nac/gov-en.asp>; for the United States: U.S. Department of State, <http://www.state.gov/s/1/c3741.htm>; for Mexico, Secretaría de Economía, <http://wwweconomia.gob.mx/?P=2259&NLang=en>.

10 See list and text of FIPAs at DFAIT, <http://www.dfait-maeci.gc.ca/tna-nac/fipa_list-en.asp>. For a comparison with other countries, see UNCTAD, “Country-Specific Lists of BITs,” <http://www.unctad.org/Templates/Page.asp? intItemID=2344&lang=1> [UNCTAD, “BITs Database”].

On the Canadian FIPA program, see Paterson, R. K., “Canadian Investment Promotion and Protection Treaties” (1991) 29 Can. Y.B. Int’l L. 373 CrossRefGoogle Scholar; McIlroy, J., “Canada’s New Foreign Investment Protection and Promotion Agreement: Two Steps Forward, One Step Back?” (2004) 5 J. of World Investment and Trade 621 CrossRefGoogle Scholar; Newcombe, A., “Canada’s New Model Foreign Investment Protection Agreement” (2004) 30 C.C.I.L. Bulletin 9, <http://ita.law.uvic.ca/documents/CanadianFIPA.pdf> Google Scholar; Côté, C. E., “Chronique de Droit international économique en 2004: Investissement” (2005) 43 Can. Y.B. Int’l L. 486 at 488–97CrossRefGoogle Scholar; and Lévesque, C.,“Chronique de Droit international économique en 1999: Investissement” (2000) 38 Can. Y.B. Int’l L. 310 at 325–29.CrossRefGoogle Scholar

11 EnCana Corporation v. Republic of Ecuador, LCIA Case UN3481 , UNCITRAL (3 February 2006). In this case, the tribunal determined that it only had jurisdiction to rule on the expropriatory nature of the taxation measure in question. The majority of the tribunal rejected the Canadian corporation’s claim. Other cases under Canadian FIPAs are underway.

12 See DFAIT, “Regional and Bilateral Initiatives: Status of Negotiations,” <http://www.dfait-maeci.gc.ca/tna-nac/fipa-en.asp>.

13 See Agreement between Canada and the Republic of Peru for the Promotion and Protection of Investments, 14 November 2006, <http://www.dfait-maeci.gc.ca/tna-nac/documents/Canada-Peru10nov06-en.pdf> [Canada-Peru FIPA]. This agreement generally follows the Canadian FIPA model. However, negotiations have led to the inclusion of provisions relating to “legal stability agreements” and some clarifications, for example, on the temporal scope of application of the FIPA and on the meaning of “public purpose” in the expropriation provision. Some new language appears on taxation matters and submission of a claim to arbitration. One notable addition is Annex B.4, which clarifies that dispute resolution procedures are excluded from the application of the most-favoured-nation (MFN) provision of the FIPA. This is a response to the line of cases following Emilio Augustin Maffezini v. Kingdom of Spain, infra note 137.

14 See DFAIT, “Canada’s International Market Access Report 2007,” <http://www.international.gc.ca/tna-nac/2007/pdf/ITC_MarketAccess_ENGfinal.pdf>

15 Bipartisan Trade Promotion Authority Act, 2002, Pub.L. 107–210 (107th Cong., 2nd Sess.), Division B, Title XXI, Sec. 2101 and ff. [TPA]. The TPA was formerly known as “fast-track.” See Gantz, D. A., “The Evolution of FTA Investment Provisions: From NAFTA to the United States—Chile Free Trade Agreement” (2004) 19 Am. U. Int’l L. Rev. 679 at 704–8.Google Scholar See also Gagné, G. and Morin, J.-F., “The Evolving American Policy on Investment Protection: Evidence from Recent FTAs and the 2004 Model BIT” (2006) 9 J. Int’l Econ. L. 357 CrossRefGoogle Scholar; and Kantor, Mark, “The New Draft Model U.S. BIT: Noteworthy Developments” (2004) 21 J. Int’l Arb. 383 at 384.Google Scholar

16 Ironically, this mandate is reminiscent of the Calvo doctrine to which the United States was fervently opposed in the late nineteenth and early twentieth centuries. This doctrine stands, among others, for the principle that “aliens are not entitled to rights and priviledges not accorded to nationals, and that therefore they may seek redress for grievances only before the local authorities.” See Shea, D. R., The Calvo Clause: A Problem of Inter-American and International Law and Diplomacy (Minneapolis: University of Minnesota Press, 1955) at 19.Google Scholar See J.E. Alvarez, who refers to the “Calvo-like” concerns expressed by the US Congress in Alvarez, J. E., “The Emerging Foreign Direct Investment Regime” (2005) 99 Am. Soc’y Int’l. L. Proc. 94 at 96Google Scholar; and Kinnear and Hansen, who refer to the fact that “the political climate was shifting towards a U.S.-style Calvo doctrine,” in Kinnear and Hansen, supra note 5 at 108.

17 TPA, supra note 15 [emphasis added].

18 See Treaty between the United States of America and the Oriental Republic of Uruguay Concerning the Encouragement and Reciprocal Protection of Invest-ment, 4 November 2005, <http://www.ustr.gov/assets/Trade_Agreements/BIT/Uruguay/asset_upload_file748_9005.pdf> [US-Uruguay BIT]. A wide literature exists on the US BITs program. K.J. Vandevelde and J.W. Salacuse, to name a few, have written extensively on US BITs, including Vandevelde, K. J., United States Investment Treaties; Policy and Practice (Deventer: Kluwer Law International, 1992)Google Scholar; Salacuse, J. W. and Sullivan, N. P., “Do BITs Really Work? An Evaluation of Bilateral Investment Treaties and Their Grand Bargain” (2005) 46(1) Harvard Int’l L. J. 67.Google Scholar

19 See United States Trade Representative (USTR), <http://www.ustr.gov/Trade_Agreements/Section_Index.html>.

20 NAFTA, supra note 5 at Article 1131 (2). The Free Trade Commission (FTC) is composed of cabinet-level representatives of the NAFTA parties (Article 2001).

21 See the table of cases prepared by Sinclair, S., “NAFTA Chapter 11 Investor-State Disputes” CCPA, March 2007, <http://policyalternatives.ca/documents/National_Office_Pubs/2007/NAFTA_Dispute_Table_March2007.pdf>.Google Scholar For possible reasons as to the popularity with investors of such claims in the context of BITs, see Dolzer, R., “Fair and Equitable Treatment: A Key Standard in Investment Treaties” (2005) 39 Int’l L. 87 at 87–88.Google Scholar

22 See, for example, Pope & Talbot Inc v. The Government of Canada, Award on the Merits of Phase 2, UNCITRAL (10 April 2001), at paras. 105–11 [Popeand Talbot, Phase 2]; and S.D. Myers Inc. v. Government of Canada, Partial Award, UNCITRAL (13 November 2000), at paras 264–68 [S.D. Myers, Partial Award]. See also Metalclad Corporation v. United Mexican States, ICSID Case No. ARB(AF)/97/1 (ICSID Add. Fac.) (30 August 2000) [Metalclad]. For a description of the tribunals’ holdings, see Kinnear, Bjorklund and Hannaford, supra note 5 at 1105:18–28.

23 NAFTA FTC, “Notes of Interpretation of Certain Chapter 11 Provisions,” 31 July 2001, <http://www.dfait-maeci.gc.ca/tna-nac/NAFTA-Interpr-en.asp> [FTC Interpretation]. See Franck, S. D., “The Legitimacy Crisis in Investment Treaty Arbitration: Privatizing Public International Law through Inconsistent Decisions” (2005) 73 Fordham L. Rev. 1521 at 1574–82Google Scholar; and Gantz, supra note 15 at 709–16.

24 Much of the debate centred on the Neer standard, established by the Mexico-United States mixed Claims Commission in the 1920s, which set a high thresh-old for protection. The decision concerned the physical security of aliens — in this case, Mr. Neer a US citizen who had been killed in Mexico. See L.F.H. Neer and Pauline Neer (USA) v. United Mexican States, General Claims Commission, 4 R.I.A.A. 60 (1926) (15 October 1926). On the evolutionay nature of the standard and rejection of the Neer standard as a benchmark, see ADF Group Inc. v. United States of America, ICSID Case No. ARB(AF)/00/1 (ICSID Add. Fac.) (9 January 2003), at paras. 179–181 [ADF]; and Mondev International Ltd. v. United States of America, ICSID Case No. ARB(AF)/99/2 (ICSID Add. Fac.) (11 October 2002) at paras. 114–16 [Mondev]. For a more recent award, see also International Thunderbird Gaming Corporation v. The United Mexican States, Arbitral Award, UNCITRAL (26 January 2006), at paras. 192–201 [Thunderbird].

25 See Kinnear, Bjorklund and Hannaford, supra note 5 at 1105:28–43.

26 See Waste Management, Inc. v. United Mexican States, ICSID Case No. ARB(AF)/00/3, (ICSID Add. Fac.) (30 April 2004) [Waste Management II]: “The search here is for the Article 1105 standard of review, and it is not necessary to consider the specific results reached in the cases discussed above. But as this survey shows, despite certain differences of emphasis, a general standard for Article 1105 is emerging. Taken together, the S.D. Myers, Mondev, ADF, and Loewen cases suggest the minimum standard of treatment of fair and equitable treatment is infringed by conduct attributable to the State and harmful to the claimant if the conduct is arbitrary, grossly unfair, unjust or idiosyncratic, is discriminatory and exposes the claimant to sectional or racial prejudice, or involves a lack of due process leading to an outcome which offends judicial propriety — as might be the case with a manifest failure of natural justice in judicial proceedings or a complete lack of transparency and candour in an administrative process. In applying this standard, it is relevant that the treatment is in breach of representations made by the host State which were reasonably relied on by the claimant” (at para. 98).

27 Canadian FIPA Model, supra note 1 at Article 5; and US model BIT, supra note 2 at Article 5.

28 TPA, supra note 15 at section 2102 (b)(3)(E.).

29 On possible readings of the provision and annex, see Gantz, supra note 15 at 726–27.

30 See Report of the Subcommittee on Investment Regarding the Draft Model Bilateral Investment Treaty, presented to the Advisory Committee on International Economic Policy, US Department of State (30 January 2004). See also letter from AFL-CIO, Center for International Environmental Law, Earth Justice, Friends of the Earth-U.S., National Wildlife Federation, Oxfam America, Sierra Club to US Department of State and USTR officials, 16 January 2004, Center for International Environmental Law, <http://www.ciel.org/Publications/BIT_Comments_Jan1604.pdf>. For a reference to the highly political inter-departmental negotiations, see Mann, H., “The Final Decision in Methanex v. United States: Some New Wine in Some New Bottles,” International Institute for Sustainable Development (IISD), 2005, <http://www.iisd.org/publications/pub.aspx?id=719> at 9–10.Google Scholar On the questionable utility of the new language, see Rubins, N., “The Arbitral Innovations of Recent U.S. Free Trade Agreements: Two Steps Forward, One Step Back” (2003) I.B.L.J. 865 at 878–80.Google Scholar

31 For example, Agreement between the Government of Canada and the Government of the Republic of Armenia for the Promotion and Protection of Invest-ments, 8 May 1997, Can. T.S. 1999 No. 22 at Article II(2) (entered into force 29 March 1999). FIPAs are available online, see note 10 in this article.

32 For example, Treaty between the Government of Canada and the Government of the Republic of Panama for the Promotion and Protection of Investments, 12 September 1996, Can. T.S. 1998 No. 35 at Article II(2) (entered into force 13 February 1998) [Canada-Panama FIPA]; and Agreement between the Government of Canada and the Government of the Republic of Venezuela for the Promotion and Protection of Investments, 1 July 1996, Can. T.S. 1998 No. 20 at Article II(2) (entered into force 28 January 1998).

33 Agreement between the Government of Canada and the Government of the Republic of Romania for the Promotion and Reciprocal Protection of Investments, 17 April 1996, Can. T.S. 1997 No. 47 at Article II(2) (entered into force 11 February 1997).

34 Agreement between the Government of Canada and the Government of the Republic of Hungary for the Promotion and Reciprocal Protection of Invest-ments, 3 October 1991, Can. T.S. 1993 No. 14 at Article 1 ) (entered into force 21 November 1993): “Investments or returns of investors of either Con-tracting Party shall at all times be accorded fair and equitable treatment and shall enjoy full protection and security in the territory of the other Contracting Party.” These few examples reflect the many variations in the wording of standards found in BITs. See Dolzer and Stevens, supra note 3 at 58 and ff.; and Dolzer, supra note 21 at 90. See also OECD, “Fair and Equitable Treatment Standard in International Investment Law,” Working Papers on International Law, 2004, Doc. 2004/3.

35 A case in point is Saluka Investments BV (The Netherlands) v. The Czech Republic, Partial Award, UNCITRAL (17 March 2006) [Saluka], where the tribunal had to determine the meaning of a provision that did not refer to international law. It stated: “Whichever the difference between the customary and the treaty standards may be, this Tribunal has to limit itself to the interpretation of the ‘fair and equitable treatment’ standard as embodied in Article 3.1 of the Treaty. That Article omits any express reference to the customary minimum standard. The interpretation of Article 3.1 does not therefore share the difficulties that may arise under treaties (such as the NAFTA) which expressly tie the ’fair and equitable treatment’ standard to the customary minimum standard. Avoidance of these difficulties may even be regarded as the very purpose of the lack of a reference to an international standard in the Treaty. This clearly points to the autonomous character of a ‘fair and equitable treatment’ standard such as the one laid down in Article 3.1 of the Treaty” (at para. 294) [notes omitted].

36 Similar reasoning can be found in Azurix Corp. v. The Argentine Republic, ICSID Case No. ARB/01/12 (14 July 2006) [Azurix], where the tribunal interpreted yet another formulation of the standard from the US-Argentina BIT: “Investment shall at all times be accorded fair and equitable treatment … and shall in no case be accorded treatment less than required by international law.” It held that “[t]he interpretation of the FTC or the examples of FTAs adduced by the Respondent may be evidence of a significant practice by one of the parties to the BIT, but the Tribunal has difficulty in reading it in the text of the BIT which governs these proceedings. The fact that the FTC interpreted Article 1105 in reaction to a tribunal’s different understanding of this article and that, in recent agreements, the correlative clause has been drafted to reflect the FTC’s interpretation show that the meaning of that article and similar clauses in other agreements could reasonably be understood to have a different meaning” (at para. 363). See also Schreuer, C., “Fair and Equitable Treatment in Arbitral Practice” (2005) 6 J. of World Investment and Trade 357 at 360.Google Scholar See also Gantz, supra note 15 at 766, who raises similar issues in regard to the interpretation of NAFTA Chapter 11.

37 In the context of NAFTA, this issue came up when investors argued the application of the MFN treatment (Article 1103) to benefit from allegedly more favourable provisions found in BITs signed by the United States and FIPAs signed by Canada, respectively. In United Postal Service of America Inc. v. Government of Canada, Government of Canada, Counter-Memorial (Merits Phase) (22 June 2005), at para. 1009 and ff [UPS-Counter-Memorial], Canada argued: “There is no difference in the standards of treatment afforded under NAFTA Article 1105 and the 16 FIPAs [signed after NAFTA]—both accord the customary international minimum standard of treatment” (at para. 1009). See also US arguments in ADF, supra note 24: “The Respondent rejects the Investor’s reading of the ’fair and equitable’ language in the U.S.-Albania and U.S.-Estonia treaties. Although there are textual differences between NAFTA Article 1105(1) on the one hand, and Article II(3)(a) and (b) of the U.S.-Albania and the U.S.-Estonia treaties on the other hand, the Respondent argues vigorously that the two treaties have much the same effect as Article 1105(1) of NAFTA as construed in the FTC interpretation of 31 July 2001” (at para. 195; see also para. 107). See also discussion in Pope and Talbot, Phase 2, supra note 22 at para. 117. See Kinnear, Bjorklund, and Hannaford, supra note 5 at 1103:9–12. Annex III of the Canadian FIPA Model, supra note 1, on exceptions from MFN treatment, provides that “Article 4 shall not apply to treatment accorded under all bilateral or multilateral international agreements in force or signed prior to the date of entry into [force] of this Agreement.”

38 The award in Pope and Talbot could be seen as a precursor of this approach (see Pope and Talbot Inc. v. Canada, Award in Respect of Damages, UNCITRAL (31 May 2002), at para. 65 [Pope and Talbot, Damages]. See Azurix, supra note 36 at para. 364 and ff. Along these lines, see CMS Gas Transmission Company v. The Argentine Republic, ICSID Case No. ARB/01/8 (12 May 2005) at para. 284 [CMS]. On the different standards, see also Occidental Exploration and Production Company v. The Republic of Ecuador, LCIA Case No. UN3467, UNCITRAL (1 July 2004), at para. 189–92 [Occidental]; and Saluka, supra note 35 at para. 291 and ff.

39 Again, the award in Pope and Talbot could be seen as a precursor, as its reasoning privileges the formulation of BITs generally over the text of NAFTA Chapter 11 (see Pope and Talbot, Phase 2, supra note 22 at para 110–18 and Pope and Talbot, Damages, supra note 38 at paras. 58–62). The tribunal in Mondev, supra note 24, also highlights that the more than 2,000 BITs in existence “almost uniformly provide for fair and equitable treatment of foreign investments.” And concludes that “[i]n the Tribunal’s view, such a body of concordant practice will necessarily have influenced the content of rules governing the treatment of foreign investment in current international law” (at para. 117). See also CME Czech Republic B.V. (TheNetherlands) v. The Czech Republic, Final Award, UNCITRAL (14 March 2003), at paras 497–98, in the context of a discussion of compensation in cases of expropriation. See also Lowenfeld, A. F., “Investment Agreements and International Law” (2003) 42 Colum. J. Transnat’l L. 123 at 128–30Google Scholar; Schwebel, S. M., “The Influence of Bilateral Investment Treaties on Customary International Law” (2004) 98 Am. Soc’y Int’l. L. Proc. 27 at 27–30Google Scholar; and Salacuse and Sullivan, supra note 18 at 112–15. This issue is obviously very controversial, see, for example, the US rejoinder in Glamis Gold Ltd v. United States of America, (15 March 2007) at 142 and ff. [Glamis], which provides a strong rebuttal.

40 Ironically, support for this approach is often linked to the award in Metalclad, supra note 22, which raised controversy over its use of “transparency” as a standard. In particular, the tribunal primarily relied on the general NAFTA objective of “transparency” to make its finding, since Chapter 11 does not contain a trans-parency provision (see paras. 76–101). See the judicial review process by BC Supreme CourtJudge Tysoe in United Mexican States v. Metalclad Corp., 2001 BCSC 664 at paras. 67–72 [Metalclad, judicial review]. Tecmed is also often used as a “precedent,” although its broad declaration of principles on legitimate expectations is basically justified with a general reference to “good faith.” See Tecnicas Medioambientales Tecmed S.A. v. The United Mexican States, ICSID Case No. ARB(AF)/00/2 (ICSID Add. Fac.) (29 May 2003), at paras. 153–54 [Tecmed]. Tribunals in Occidental, supra note 38, in particular, at paras. 185–86, and CMS, supra note 38 at paras. 278–79, refer to both of these cases. See also MTDEquity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7 (25 May 2004), at paras. 114–15 [MTD], which relies on Tecmed. This use of Tecmed was discussed in MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, Decision on Annulment, ICSID Case No. ARB/01/7 (Annulment Proceeding) (21 March 2007), at paras. 65–71 . The tribunal in Saluka, supra note 35, also refers to Tecmed, and espouses the concept, although it warns of the risks in taking this concept too far (at paras. 304–8). A detailed analysis of this trend to use investors’ legitimate expectations as a predominant factor in BIT interpretation is beyond the scope of this article. However, it can be noted that the use of this concept thus far appears to rely on citations, from one case to another, without much effort spent on the identification of sources of international law, beyond those awards that were themselves lacking in sources … A notable exception is found in the separate opinion in Thunderbird, supra note 24, where T. Wàlde spends considerable energy to validate the use of this concept (at paras. 25–57). On the deficiency of sources, see Douglas, Z., “Nothing If Not Critical for Investment Treaty Arbitration: Occidental, Eureko and Methanex ” (2006) 22 Arb. Int’l. 27 at 27–28CrossRefGoogle Scholar and, in passing, Snodgrass, E., “Protecting Investors’ Legitimate Expectations: Recognizing and Delimiting a General Principle” (2006) 21 ICSID Rev.-FILJ 1 at 11.CrossRefGoogle Scholar Generally, see Vicuña, F. O., “Regulatory Authority and Legitimate Expectations: Balancing the Rights of the State and the Individual under International Law in a Global Society” (2003) 5 Int’l L. Forum 188 Google Scholar; Dolzer, supra note 21; Schreuer, supra note 36; Fietta, S., “Expropriation and the ‘Fair and Equitable’ Standard” (2006) 23 J. Int’l Arb. 375 Google Scholar; Weiler, T., “Good Faith and Regulatory Transparency: The Story of Metalclad v. Mexico ,” in Weiler, T., ed., International Investment Law and Arbitration: Leading Cases from the ICSID, NAFTA, Bilateral Treaties and Customary International Law (London: Cameron May, 2005), 701.Google Scholar

41 On the issue of “transparency,” both the Canadian FIPA model, supra note 1 at Article 19, and the US model BIT, supra note 2 at Article 11, provide for obligations similar to those found in Chapter 18 of NAFTA on “Publication, Notification and Administration of Laws.” Notably, however, both models exclude the recourse to investor-state arbitration for matters that arise from these provisions (see FIPA Model, Article 19, footnote 7; and US Model BIT, Article 24). It remains to be seen how the transparency provisions would be interpreted in relation to the minimum standard of treatment.

42 Both the Canadian FIPA model, supra note 1 at Article 40, and the US model BIT, supra note 2 at Article 30(3), include similar mechanisms. The FIPA model (as well as model BIT) goes one step further than Article 1131(2) of NAFTA, however, adding to the binding character that “any award under this Section shall be consistent with such interpretation.” This language appears to be a response to the debates in Pope and Talbot case. For one thing, the FTC interpretation was issued after the findings on the merits but before the damages were awarded in the case. More importantly, the FTC interpretation on its face disavowed the tribunal’s interpretation of Article 1105. It is in this context that the tribunal had to weigh the impact of the interpretation on its decision. In particular, the tribunal questioned whether what the FTC had done was more akin to an amendment of the provision than an interpretation. In the end, the tribunal stated that it did not need to answer this question, but, if it had to, it would have ruled the July “interpretation” an amendment (see Pope and Talbot, Damages, supra note 38 at para. 47). Later awards distanced themselves from this line of thought by holding the interpretation valid. See, in particular, ADF, supra note 24 at para. 177. See also discussion in Mondev, supra note 24 at para. 100–25; and Methanex Corporation v. United States of America, Final Award of the Tribunal on Jurisdiction and Merits, UNCITRAL (3 August 2005), at part II, chapter B, paras. 11–21 and at part IV, chapter C, paras. 10–27 [Methanex, Final]. See Gantz, supra note 15 at 699–700, 716–24, 727, and 754; Franck, supra note 23 at 1604–6; and Brower, C. N., Brower, C. H., and Sharpe, J. K., “The Coming Crisis in the Global Adjudication System” (2003) 9(4) Arb. Int’l 415 at 432–35.CrossRefGoogle Scholar

43 For example, Mann, H. and von Moltke, K., “NAFTA’s Chapter 11 and the Environment: Addressing the Impacts of the Investor-State Process on the Environment,” I.I.S.D., 1999, <http://www.iisd.org/publications/pub.aspx?id=409> at 17–18 and 50–59Google Scholar; DePalma, A., “NAFTA’s Powerful Little Secret; Obscure Tribunals Settle Disputes, but Go Too Far, Critics Say,” New York Times (11 March 2001).AMBIGUOUS (83 citations)Google Scholar See also Legum, B., “Lessons Learned from the NAFTA: The New Generation of U.S. Investment Treaty Arbitration Provisions” (2004) 19 ICSID Rev.-FILJ 344 at 349–50.CrossRefGoogle Scholar

44 FTC Interpretation, supra note 23.

45 The Canadian statement, 7 October 2003, <http://www.dfait-maeci.gc.ca/nafta-alena/open-hearing-en.asp> reads: “Having reviewed the operation of arbitration proceedings conducted under Chapter Eleven of the North American Free Trade Agreement, Canada affirms that it will consent, and will request the consent of disputing investors and, as applicable, tribunals, that hearings in Chapter Eleven disputes to which it is a party be open to the public, except to ensure the protection of confidential information, including business confidential information. Canada recommends that tribunals determine the appropriate logistical arrangements for open hearings in consultation with disputing parties. These arrangements may include, for example, use of closed-circuit televi-sion systems, Internet webcasting, or other forms of access.”

46 See Methanex Corporation v. United States of America, Decision of the Tribunal on Petitions from Third Persons to Intervene as Amici Curiae, UNCITRAL (15 January 2001) [Methanex, Amicus]. Actual submissions were made by a number of amici in March 2004. See Mann, supra note 30 at 11–13.

47 Methanex, Amicus, supra note 46 at para. 49.

48 This was done through live, closed circuit televison. See Mann, supra note 30 at 12.

49 See United Postal Service of America Inc. v. Government of Canada, Decision of the Tribunal on Petitions for Intervention and Participation as Amici Curiae, UNCITRAL ( 17 October 2001) at para. 70 [UPS, Amicus]. See Mistelis, L., “Confidentiality and Third Party Participation: UPS v. Canada and Methanex Corp v. USA ,” in Weiler, , ed., supra note 40 at 169 AMBIGUOUS (42155 citations)Google Scholar; and Rubins, supra note 30 at 868–71.

50 See Canadian FIPA Model, supra note 1 at Article 39 and Annex C.39.

51 Ibid. at Article 38.

52 See Convention on the Settlement of Investment Disputes between States and Nationals of Other States, 18 March 1965 [ICSID Convention]. Its most recent set of rules and regulations took affect in 2006 (the rules and regulations are available at <www.worldbank.org/icsid>). On submissions by non-disputing parties, see ICSID Arbitration Rules, Rule 37; and ICSID Additional Facility Rules, Article 41. On open hearings, the rules have been modified from the 2003 version, since the parties’ consent has been replaced by the possibility of an objection (“Unless either party objects …”). Proposals were made to remove the effective party veto, but it was not retained. See ICSID Arbitration Rules, Rule 32 and ICSID Additional Facility Rules, Article 39. On the publication of awards by ICSID, the rule of party consent has been maintained. The rule on publication of excerpts was modified to provide that: “The Centre shall, however, promptly include in its publications excerpts of the legal reasoning of the Tribunal” (ICSID Arbitration Rules, Rule 48(4)). See also ICSID Additional Facility Rules, Article 53. Both sets of rules were amended and effective as of 10 April 2006. See also ICSID, “Possible Improvements of the Framework for ICSID Arbitration,” ICSID Secretariat Discussion Paper, 22 October 2004, <http://www.worldbank.org/icsid/highlights/DiscussionPaper.pdf> [ICSID, Discussion Paper]; ICSID, “Suggested Changes to the ICSID Rules and Regulations,” Working Paper of the ICSID Secretariat, 12 May 2005, <http://www.worldbank.org/icsid/highlights/052405-sgmanual.pdf> [ICSID, Working Paper].

53 United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules, approved by the UN General Assembly, 15 December 1976. See UNCITRAL, Report of the Working Group on Arbitration and Conciliation on the Work of Its Forty-Sixth Session, 46th Sess., Doc. A/CN.9/619 (2007) at 14 and 25. It should be noted, however, that amici submissions have been made under the current rules. See, for example, Methanex, Amicus, supra note 46; and UPS, Amicus, supra note 49.

54 See IISD, “Canada Encountering Static from Negotiating Partners over Transparency Demands,” Investment Treaty News (16 March 2007), <http://www.iisd.org/pdf/2007/itn_mar16_2007.pdf>. See A.K. Bjorklund, who presents some of the benefits but also explains some of the resistance to the participation of third parties in Bjorklund, A. K., “The Participation of Amici Curiae in NAFTA Chapter Eleven Cases,” in Essay Papers on Investment Protection: Ad Hoc Experts Group on Investment Rules (22 March 2002), <http://www.dfait-maeci.gc.ca/tna-nac/participate-en.asp>.Google Scholar

55 In the case of UNCITRAL, the model does modify the rules regarding appointing authority, appointment time, and the rendering of the award. See Indian Model BIT, Article 9(3)(c). See also Article 9 of the Hungary-India BIT, 3 November 2003, which differs in some ways from the model, but not in matters of transparency of the dispute resolution procedures. See UNCTAD, “BITs Database,” supra note 10.

56 See, for example, the “second generation” BITs signed by China with the Netherlands (2001), Germany (2003), and Finland (2004), which replaced the treaties signed in the 1980s. The China-Finland BIT does contain a “transparency provision,” but it does not enhance transparency in the dispute resolution process (see Article 9 and 12). In the case of the China-Madagascar BIT (2005), international arbitration is contemplated under the ICSID Convention only. See UNCTAD, “BITs Database,” supra note 10.

57 DFAIT, “Canada’s Foreign Investment Protection and Promotion Agreements (FIPAs) Negotiating Programme,” <http://www.international.gc.ca/tna-nac/what_fipa-en.asp#structure>.

58 See UNCTAD, “BITs Database” supra note 10.

59 See IISD, “Canada Encountering Static,” supra note 54. See the model’s presentation on the DFAIT website, <http://www.international.gc.ca/tna-nac/what_fipa-en.asp#structure>, for example: “One of the most significant improvements in the FIPA model is the institutionalisation of the possibility for non-disputing individuals or organisations to seek leave from the Tribunal to make their views known on the matters at issue in the arbitration.”

60 Patrick Juillard also raises the issue of lack of capacity in many developing countries to conduct negotiations based on the complex and lengthy US model. See Juillard, P., “Le nouveau modèle américain de traité bilatéral sur l’encouragement et la protection réciproques des investissements (2004)” (2004) 50 A.F.D.I. 669 at 670.Google Scholar

61 This is in accord with the TPA’s mandate, supra note 15 at sec. 2102 (b)(3)(H); and Legum, supra note 43.

62 US Model BIT, supra note 2 at Article 28(3).

63 See Canadian FIPA Model, supra note 1 at Article 38(3). Exception is made for the publication of the award. See Article 38( 4).

64 Compare US Model BIT, supra note 2 at Article 29, and Canadian FIPA Model, supra note 1 at Article 38.

65 In 2004, Mexico also agreed in principle to open hearings in NAFTA Chapter 11 cases. See DFAIT, “Commission Meetings — NAFTA Free Trade Commission Joint Statement,” 16 July 2004, <http://www.dfait-maeci.gc.ca/nafta-alena/JS-SanAntonio-en.asp>. Generally, see Stern, B., “Un petit pas de plus: l’installation de la société civile dans l’arbitrage CIRDI entre Etat et investisseur” (2007) 1 Revue de l’arbitrage 3.Google Scholar

66 See Canada-Peru FIPA, supra note 13 at Articles 38–39.

67 See, for example, US-Uruguay BIT, supra note 18. More generally, the issue of transparency and access is making inroads in other fora. See Statement by the OECD Investment Committee, June 2005, in favour of additional transparency; and the working paper “Transparency and Third Party Participation in Investor-State Dispute Settlement Procedures,” April 2005, <http://www.oecd.org/dataoecd/25/3/34786913.pdf>. See also the judgment of the Inter-American Court of Human Rights in Claude Reyes et al. v. Chile, (19 September 2006). In this case, information was requested of the government regarding a foreign investment contract in the forestry sector, which raised environmental concerns. The court ruled that Article 13 (on freedom of thought and expression) of the American Convention on Human Rights, O.A.S.Treaty Series No. 36, 1144 U.N.T.S. 123 (entered into force 18 July1978), includes the protection of the right of access to state-held information (at para. 77). The court stated: “In this regard, the State’s actions should be governed by the principles of disclosure and transparency in public administration that enable all persons subject to its jurisdiction to exercise the democratic control of those actions, and so that they can question, investigate and consider whether public functions are being performed adequately. Access to State-held information of public interest can permit participation in public administration through the social control that can be exercised through such access” (at para. 86).

68 Marrakech Agreement Establishing the World Trade Organization, 15 April 1994 (1994) 33 I.L.M. 15 [WTO Agreement]. See Canadian FIPA Model, supra note 1, for example, at Article 9(4) on intellectual property rights; Article 10(7) on waiver of an obligation; Article 13(5) on compulsory licenses; and Article 14(7) on transfers. See also McIlroy, supra note 10 at 638.

69 General Agreement on Tariffs and Trade, 30 October 1947, 55 U.N.T.S. 187 [GATT].

70 UNCTAD, National Treatment, UNCTAD Series on Issues in International Investment Agreements (New York: United Nations, 1999) at 1; and Laviec, supra note 3 at 95.

71 UNCTAD, supra note 70 at 7–8.

72 Canadian FIPA Model, supra note 1 at Article 3.

73 One element that differentiates the model FIPA and BIT from NAFTA Article 1102 is the addition of the terms “in its territory” in paragraphs 1 and 2. This may be a response to the award in SD Myers where Canada argued unsuccessfully that the investor did not have an investment in Canada. See S.D. Myers, Partial Award, supra note 22 at paras. 222–32. Another difference concerns paragraph 3 , dealing with sub-national governments, where the Canadian FIPA model and the US model BIT refer, inter alia, to “the treatment accorded” rather than to “the most favourable treatment accorded” at Article 1102 of NAFTA, supra note 5.

74 GATT, supra note 69 at Article XX.

75 Canadian FIPA Model, supra note 1 at Article 10. The article also provides exceptions, inter alia, relating to prudential measures, monetary policies, essential security interests, access to information, and cultural industries.

76 See NAFTA, supra note 5 at Article 2101 (1), which incorporates Article XX of the GATT, supra note 69, for the purposes of trade in goods and technical barriers to trade.

77 Some variations can be found. For instance, many FIPAs follow more closely Article XX(g) of the GATT than the model. For example, Canada-Panama FIPA, supra note 32 at Article XVII(3)(c). For a longer list of exceptions, see Agreement between the Government of Canada and the Government of the Kingdom of Thailand for the Promotion and Protection of Investments, 17 January 1997, Can. T.S. 1998 No. 29 at Article XVII(3) (entered into force 24 September 1998).

78 See also Newcombe, supra note 10 at 10; and Côté, supra note 10 at 491–93.

79 This issue was faced head on, for example, in Methanex, Final, supra note 42 at part II, chap. B, para. 4–6 and part IV, chap. B, paras. 4–38. See also, for instance, Occidental, supra note 38 at paras. 174–76. See also Gantz, D. A., “Potential Conflicts between Investor Rights and Environmental Regulation under NAFTA’s Chapter 11” (2001) 33 Geo. Wash. Int’l L. Rev. 651 at 731–38Google Scholar; and Kinnear, Bjorklund, and Hannaford, supra note 5 at 1102:16–18.

80 For example, Methanex, Final, supra note 42; Methanex Corporation v. United States of America, Amended Statement of Defense of Respondent United States (5 December 2003), at para. 300 and ff.; and United Postal Service of America Inc. v. Government of Canada, Investor’s Memorial (Merits Phase), (23 March 2005), at para. 510 and ff.; and UPS-Counter-Memorial, supra note 37 at para. 574 and ff.

81 This accounts for Loewen Group, Inc. and Raymond L. Loewen v. United States of America, ICSID Case No. Arb(AF)/98/3 (ICSID Add. Fac.) (26 June 2003) [Loewen]; ADF, supra note 24; Methanex, Final, supra note 42; and Thunderbird, supra note 24.

82 This group includes Pope and Talbot, Phase 2, supra note 22; S.D. Myers, Partial Award, supra note 22; Marvin Roy Feldman Karpa v. United Mexican States, ICSID Case No. ARB(AF)/99/1 (ICSID Add. Fac.) (16 December 2002) [Feldman]; and GAMI Investments, Inc. v. United Mexican States, UNCITRAL (15 November 2004) [GAMI].

83 For a description of the tribunal’s holdings, see Kinnear, Bjorklund, and Hannaford, supra note 5 at 1102:21–35.

84 The tribunal in Feldman, supra note 82 at paras. 176–77, is the most explicit on the burden shift, followed by the tribunal in Pope and Talbot, Phase 2, supra note 22 at para. 78, which refers to a presumption of violation that can be rebutted. The treatment of government justifications in S.D. Myers, Partial Award, supra note 22 at para. 255 and GAMI, supra note 82 at para. 114, imply such a shift.

85 Weiler, T., “Saving Oscar Chin: Non-Discrimination in International Investment Law,” in Weiler, , ed., supra note 40 at 573–77.Google Scholar But see Kinnear, Bjorklund and Hannaford, supra note 5 at 1102:26.

86 In UPS-Counter-Memorial, supra note 37, Canada argued that “like circumstances” is not an exception and that “it operates as something in the nature of a condition precedent” (at para. 627).

87 Pope and Talbot, Phase 2, supra note 22 at para. 78.

88 S.D. Myers, Partial Award, supra note 22 at para. 246.

89 Feldman, supra note 82 at paras. 170 and 182.

90 GAMI, supra note 82 at para. 114.

91 The tribunal in GAMI, supra note 82, went the furthest when it stated: “The Government may have been clumsy in its analysis of the relevant criteria for the cutoff line between candidates and non-candidates for expropriation. Its understanding of corporate finance may have been deficient. But ineffectiveness is not discrimination” (at para. 114). The factual determinations in Pope and Talbot, Phase 2, supra note 22, support this view (at paras. 83–104). The tribunal in Feldman, supra note 82, did not address this question directly as it drew a negative inference from the fact that Mexico did not provide any credible evidence to rebut the presumption of discrimination (see, for example, at para. 177). S.D. Myers, Partial Award, supra note 22, could be the exception, in the way the tribunal effectively imported GATT Article XX concepts, including the idea of least restrictive measure, into its analysis (at paras. 246 and 255). This is consistent with the separate opinion of Brian Schwartz, who argues that Article XX disciplines do apply to Chapter 11 (at paras. 132–35). This is in contrast with the position taken by the tribunal in respect of Article 1105: “[A] Chapter 11 tribunal does not have an open-ended mandate to second guess government decision making” (at para. 261).

92 One exception is an obiter in Loewen, supra note 81 at para. 139.

93 See Feldman, supra note 82 at paras. 181–83; and Pope and Talbot, Phase 2, supra note 22 at para. 79. See also Thunderbird, supra note 24 at para. 177.

94 See, for example, Japan – Taxes on Alcoholic Beverages, Appellate Body Report, Doc. AB-1996-2 (4 October 1996).

95 A smoking gun was found in S.D. Myers, Partial Award, supra note 22 at paras. 161–95, and some “smoke” in Feldman, supra note 82 at para. 182. The question of proof of intent raised issues as to “whose intent?” This difficulty was aknowledged in S.D. Myers, where the protectionist intent of the minister of the environment was key (ibid. at paras. 161–63).

96 On the drafters fluency with GATT law and impact on interpretation, see Methanex, Final, supra note 42, at part IV, chap. B, paras. 30–38.

97 See United States – Standards for Reformulated and Conventional Gasoline, Appellate Body Report, Doc. AB-1996-1 (29 April 1996) [Gasoline]; and European Communities – Measures Affecting Asbestos and Asbestos-Containing Products, Appellate Body Report, AB-2000-11 (12 March 2001) at paras 164 and ff. [Asbestos].

98 See Gasoline, supra note 97 at part IV. On Article XX interpretation methodology, see McRae, D. M., “GATT Article XX and the WTO Appellate Body,” in Bronckers, M. and Quick, R., eds., New Directions in International Economic Law: Essays in Honour of John H. Jackson (London: Kluwer Law International, 2000) at 219–36.Google Scholar

99 Asbestos, supra note 97.

100 Ibid. at para. 88.

101 Ibid. at para. 115.

102 Ibid.

103 See In the Matter of Cross-Border Trucking Services, NAFTA Chapter 20, Sec. File No. USA-MEX-98-2008-01, Final Report of the Panel (6 February 2001) [Cross-Border Trucking Services]. The tribunal also dealt with Article 1102 and 1103, but its reasoning does not include a consideration of “like circumstances” in the investment context (at paras. 285–94).

104 The tribunal added: “Here the GATT/WTO history, liberally cited by the Parties, and the FTA language, noted earlier, are both instructive. Although there is no explicit language in Chapter Twelve that sets out limitations on the scope of the ’in like circumstances’ language, the general exception in Article 2101:2 invoked by the United States closely tracks the GATT Article XX language, and is similar to the FTA proviso limiting exceptions to national treatment to situations where: ‘the difference in treatment is no greater than necessary for … health and safety or consumer protection reasons’” (ibid. at para. 260).

105 Investors may find additional support in an unlikely place — IISD’s amicus curiae submission in Methanex, supra note 42. In relevant part, it states:

However, as with all tests that are somewhat ‘accordion-like’ in nature, the degree to which one may squeeze the test closed or stretch it open must be determined by the context. IISD submits that a critical additional factor is important in this regard: the Panel in that case [Trucking case] expressly notes in its interpretation of Article 1202 the presence of the applicable exception provision in Article 2101 of NAFTA, which allows for exceptions for environmental and human health reasons. Chapter 11 has no applicable exception provision. Consequently, IISD submits that the Tribunal should have increased leeway to define when legitimate regulatory objectives provide relevant distinguishing circumstances. Otherwise, the absence of an exception provision would lead to very significant limitations on the ability of a state to be able to establish valid distinctions between investors on the basis of the actual impacts and effects of their investments [emphasis added] (at para. 259).

A contrario, the presence of an exception provision could ironically mean less leeway for the government.

106 Vienna Convention on the Law of Treaties, 23 May 1969, 1155 U.N.T.S. 331, 8 I.L.M. 679, Article 31 .

107 UNCTAD, supra note 70 at 1 and 44.

108 Energy Charter Treaty, 17 December 1994, 34 I.L.M.374 (1995), <http://www.encharter.org/index.php?id=7at> at Article 24. See also list of cases prepared by the Energy Charter Secretariat, <http://www.encharter.org/index.php?id=213>.

109 WTO Agreement, supra note 68 at Annex 2: Understanding on Rules and Procedures Governing the Settlement of Disputes” at Article 17 [DSU].

110 Gantz, D. A., “An Appellate Mechanism for Review of Arbitral Decisions in Investor-State Disputes: Prospects and Challenges” (2006) 39 Vand. J. Transnat’l L. 39 at 56–57.Google Scholar

111 See McRae, D., “Comments on Dr. Claus-Dieter Ehlermann’s Lecture” (2003) 97 Am. Soc’y Int’l. L. Proc. 87.Google Scholar

112 See, for example, Metalclad, supra note 22, which concerned the operation of a hazardous waste landfill; and Methanex, supra note 42, which concerned a chemical component of gasoline believed to pose risk to the environment. See also Gantz, supra note 110 at 43; and Gantz, supra note 79 at 659–69 and 705–9.

113 See, for example, the award in Pope and Talbot, Phase 2, supra note 22 at paras. 105–18, where the tribunal interpreted the terms “including” found in Article 1105 as having an “additive” meaning, and the award in S.D. Myers, Partial Award, supra note 22 at paras. 266–68, where the tribunal ruled that a violation of Article 1102 established a violation of Article 1105.

114 See discussion note 42. See also Gantz, supra note 110 at 54–55.

115 Canada was the place of arbitration of the first three Chapter 11 cases reviewed, and, as such, the grounds for review were essentially those of Article 34 of the UNCITRAL Model Law on International Commercial Arbitration. They include, inter alia, a party was unable to present his case, the award contains decisions on matters beyond the scope of the submission to arbitration and the award is in conflict with the public policy of this state. Canada and Mexico, both as applicant and intervener, argued that the level ofjudicial deference due to commercial arbitral awards was not appropriate for Chapter 11 awards as they concerned matters of public interest. As such, they were not protected by a high standard of review. These arguments were rejected in the three cases, as the courts adopted the discourse of deference, even though their application of the standards of review were not necessarily consistent or without criticism. See the court decisions in Metalclad, judicial review, supra note 40; United Mexican States c. Marvin Roy Feldman Karpa, Case 03-CV-23500, Ontario Superior Court (3 December 2003), and Case C41169, Ontario Court of Appeal (11 January 2005); and Canada (P.G.) c. S.D. Myers Inc., [2004] F.C. 38 (13 January 2004). See also Lévesque, C., “Chronique de Droit international économique en 2003: Investissement” (2004) 42 Can. Y.B. Int’l Law 480 at 480–85Google Scholar; Gantz, supra note 110 at 51–55 and 57–58; Brower, Brower, and Sharpe, supra note 42 at 430–32; and Laird, I. and Askew, R., “Finality versus Consistency: Does Investor-State Arbitration Need an Appellate System?” (2005) 7 J. App. Prac. and Process 285 at 287–94.Google Scholar

More recently, two US District Courts denied applications for judicial review in Loewen, supra note 81 (because it was time barred) and Thunderbird, supra note 24 (where the court recognized that judicial review of arbitration awards is “extremely limited”). See Raymond L. Loewen v. United States of America, US District Court for the District of Columbia, 31 October 2005; and International Thunderbird Gaming Corporation v. United Mexican States, US District Court for the District of Columbia, 14 February 2007. All of the court decisions mentioned can be found online at: <http://ita.law.uvic.ca/annulment_judicialreview.htm>.

Under the ICSID Convention, supra note 52, the possibility ofjudicial review by domestic courts has been replaced by an Annulment Committee, which also reviews awards on limited grounds (see Article 52). The convention has not applied in the context of NAFTA since neither Mexico nor Canada were signa-tories. This could change in a few years, as Canada became a signatory to the ICSID Convention on 15 December 2006. See ICSID, “List of Contracting States and Others Signatories of the Convention,” <http://www.worldbank.org/icsid/constate/c-states-en.htm>. See also Gantz, supra note 110 at 49–50.

116 See Brower, Brower, and Sharpe, supra note 42 at 424–28; Franck, supra note 23 at 1558–74; Bjorklund, A. K., “The Continuing Appeal of Annulment? Lessons from AMCO Asia and CME,” in Weiler, , ed., International Investment Law, supra note 40 at 471 Google Scholar; and Gantz, supra note 110 at 44–45.

117 TPA, supra note 15 at sec. 2102 (b)(3)(G).

118 US Model BIT, supra note 2 at Annex D.

119 See USTR, “CAFTA-DR Final Text,” Annex 10-F on Appellate Body or Similar Mechanism, <http://www.ustr.gov/Trade_Agreements/Bilateral/CAFTA/CAFTA-DR_Final_Texts/Section_Index.html> [US-CAFTA-DR]. It is discussed at length in Gantz, supra note 110.

120 Ibid., Chapter 10, Annex 10-F; Chapter 19, Article 19.1 on Free Trade Commission; and Chapter 22, Article 22.2 on Amendments.

121 US Model BIT, supra note 2 at Article 28(10). To the same effect, see US -CAFTA-DR, supra note 119 at Article 10.20(10).

122 Juillard, supra note 60 at 681. However, see Gagné and Morin, supra note 15 at 378.

123 ICSID, Discussion Paper, supra note 52 at 14 and ff.

124 Ibid. at para. 20.

125 Ibid. at para .23.

126 Ibid. at Annex.

127 See ibid. at Annex, for example, notes 4 and 8.

128 ICSID, Working Paper, supra note 52 at para. 4.

129 On Canada’s signature, see note 115 in this article. See also Côté, supra note 10 at 495–96.

130 Gantz, supra note 110 at 75–76.

131 Ibid. at 76.

132 See USTR, supra note 19.

133 The US Senate report on the TPA emphasizes that negotiators should seek to establish a single appellate body to review decisions in order to foster consistency, predictability, and minimize the risk of abberant interpretations. See Senate Report 107–139, <http://www.congress.gov/cgi-bin/cpquery/R?cp107:FLD010:@1(sr139):> at 16.

134 Gantz, supra note 110 at 72.

135 Ibid. at 48.

136 For example, the United States, see US-Uruguay BIT, supra note 18 and Canada, see Canada-Peru FIPA, supra note 13.

137 See Emilio Augustin Maffezini v. Kingdon of Spain, Decision of the Tribunal on Objections to Jurisdiction, ICSID Case No. Arb/97/7 (25 January 2000) in which the tribunal concluded that “if a third-party treaty contains provisions for the settlement of disputes that are more favorable to the protection of the investor’s rights and interests that those in the basic treaty, such provisions may be extended to the beneficiary of the most favored nation clause as they are fully compatible with the ejusdem generis principle” (at para. 56). This reasoning was followed in a number of awards. For another line of cases, see Salini Costruttori S.p.A. and Italstrade S.p.A. v. Hashemite Kingdom of Jordan, Decision on Jurisdiction, ICSID Case No. ARB/02/13 (15 November 2004); and Plama Consortium Ltd v. Republic of Bulgaria, ICSID Case No. ARB/03/24 (8 February 2005). For a discusion, see Freyer, D. and Herlihy, D., “Most-Favored-Nation Treatment and Dispute Settlement in Investment Arbitration: Just How ‘Favored’ is ‘Most-Favored’?” (2005) 20(1) ICSID Rev.-FILJ 58 CrossRefGoogle Scholar; and Kinnear, Bjorklund, and Hannaford, supra note 5 at 1103:12–24.

138 For a discussion, see Franck, supra note 23 at 1606–10 and 1617–25; Bjorklund, supra note 116 at 510 and ff. Some authors are expressing doubts as to the value of an appellate mechanism, see Alvarez, supra note 16 at 96–97; and Vicuña, F. O., “Foreign Investment Law: How Customary Is Custom?” (2005) 99 Am. Soc’y Int’l. L. Proc. 97 at 101.Google Scholar See also Laird and Askew, supra note 115 at 297–302.

139 See Gantz, supra note 110, who discusses the risk “in leaving an allegedly erroneous decision unchallenged” (at 55); and Douglas, supra note 40 at 27–28, who provides examples of abuse of precedents. The question of precedent in international investment law has attracted considerable attention in recent years. For an account and a citation analysis, see J.P. Commission, “Precedent in Investment Treaty Arbitration: A Citation Analysis of a Developing Jurisprudence” (2007) 24J. Int’l Arb. 128.

140 Gantz, supra note 110 at 71.

141 See Metalclad, supra note 22 at paras. 102–12. Excluded from this count are cases that were settled before a final award was made, for example, Ethyl, supra note 7. For a discussion of the cases related to expropriation, see Sampliner, G. H., “Arbitration of Expropriation Cases under U.S. Investment Treaties: A Threat to Democracy or the Dog That Didn’t Bark?” (2003) 18 ICSID Rev.-FILJ 1 at 18–30CrossRefGoogle Scholar; Gantz, supra note 15 at 731–40; and Kinnear, Bjorklund, and Hannaford, supra note 5 at 1110:17–27.

142 NAFTA, supra note 5 at Article 1110.

143 See Inside U.S. Trade, volume 17, no. 6, 12 February 1999, at 1, 18, and ff., citing a “confidential” memo by a DFAIT official to its NAFTA counterparts.

144 See Gantz, supra note 79 at 686. See also note 20 and corresponding text on FTC interpretations under Article 1131(2) of NAFTA.

145 See Metalclad, supra note 22 at paras. 102 and ff. See also Thomas, J. C., “The Experience of NAFTA Chapter 11 Tribunals to Date: A Practitioner’s Perspective,” in Dawson, L. Ritchie, ed., Whose Rights? The NAFTA Chapter 11 Debate (Ottawa: Centre for Trade Policy and Law, 2002), 98 at 124Google Scholar; and Dolzer, R., “Indirect Expropriations: New Developments?” (2002) 11 N.Y.U. Envt’l L.J. 64 at 72.Google Scholar

146 See, for example, DePalma, supra note 43.

147 The final award, rendered on 3 August 2005, found no expropriation in this case. See Methanex, Final, supra note 42 at Part IV, Chapter D, at para. 6–18.

148 TPA, supra note 15.

149 See notes 15–17 in this article and accompanying text. See also Sampliner, supra note 141 at 35–39.

150 This change reflects arguments made in early cases, such as Pope and Talbot Inc. v. Canada, Interim Award, UNCITRAL (26 June 2000) at paras. 84, 89, 94, and 104 [Pope and Talbot, Interim]; and S.D. Myers, Partial Award, supra note 22 at paras. 285–86. See also Sampliner, supra note 141 at 5–6; and Kinnear, Bjorklund, and Hannaford, supra note 5 at 1110:27–29.

151 See US Model BIT, supra note 2 at Article 6 (Expropriation and Compensation), note 9. See Gantz, supra note 15 at 743–46.

152 This paragraph raises issues in relation to the interaction of the definition of investment with the reference to “property rights and property interest in an investment.”

153 Penn Central Transp. Co. v. New York City, 438 U.S. 104 (1978) [Penn Central]. See USTR, “Eight Misunderstandings about U.S. Investment Agreements and Trade,” March 2007 <http://www.ustr.gov/assets/Trade_Sectors/Services/How_does_trade_in_services_benefit_your_state/asset_upload_file123_10869.pdf> [USTR “Eight Misunderstandings]: “4. Investment agreements do not provide greater substantive rights to foreigners than to domestic investors in the United States. Our agreements provide foreign investors with substantive rights that closely correspond to rights already available to any investor under US law—no more no less. For example, the text of our agreements applicable to a dispute involving an expropriation claim would be one drawn directly from U.S. Supreme Court decisions.” See also Inside U.S. Trade, volume 20, no. 39, 27 September 2002, at 18–19.

154 Constitution of the United States: Amendment V. Interestingly, the decision, as it relates to reasonable expectations, was inspired by an article published in 1967 by Frank I. Michelman who, in turn, was strongly influenced by the writings of Jeremy Bentham. Under Bentham’s utility theory, “[p]roperty is nothing but a basis of expectations.” See Michelman, F. I., “Property, Utility, and Fairness: Comments on the Ethical Foundations of ‘Just Compensation’ Law” (1967) 80(6) Harv. L. Rev. 1165.CrossRefGoogle Scholar See also Kanner, G., “Making Laws and Sausages: A Quarter-Century Retrospective on Penn Central Transportation Co. v. City of New York” (2004–5) 13 Wm. and Mary Bill Trs J. 679 at 770.Google Scholar

155 See, for example, Kanner, supra note 154, who generally favours the rights of land owners, but notes that “for the past two decades law journals have been full of harshly critical assessments of the state of regulatory takings law, written by authors favoring as well as disfavoring far-reaching land-use regulations” (at 707).

156 See note 30 and accompanying text.

157 To be clear some of the debates predate the US Model BIT, supra note 2, since they occurred in the context of the FTA negotiations with Chile and Singapore. See Sampliner, supra note 141 at 39–42. See also Inside US Trade, supra note 153 at 1 and 18–21.

158 Canadian FIPA Model, supra note 1 at Article 6. As compared to Article 1110 of NAFTA, supra note 5, and Article 6 of the US Model BIT, supra note 2, the model FIPA does not mention the minimum standard of treatment after the reference to due process. See McIlroy, supra note 10 at 636–37.

159 Following is the text of Annex B.13(1) with differences from the US model highlighted in italics:

The Parties confirm their shared understanding that:

  • a)

    a) Indirect expropriation results from a measure or series of measures of a Party that have an effect equivalent to direct expropriation without formal trans-fer of title or outright seizure;

  • b)

    b) The determination of whether a measure or series of measures ofa Party constitute an indirect expropriation requires a case-by-case, fact-based inquiry that considers, among other factors:

  • i)

    i) the economic impact of the measure or series of measures, although the sole fact that a measure or series of measures ofa Party has an adverse effect on the economic value of an investment does not establish that an indirect expropriation has occurred;

  • ii)

    ii) the extent to which the measure or series of measures interfere with distinct, reasonable investment-backed expectations; and

  • iii)

    iii) the character of the measure or series of measures;

  • c)

    c) Except in rare circumstances, such as when a measure or series of measures are so severe in the light of their purpose that they cannot be reasonably viewed as having been adopted and applied in good faith, non-discriminatory measures of a Party that are designed and applied to protect legitimate public welfare objectives, such as health, safety and the environment, do not constitute indirect expropriations.

160 However, Article 40 of the Canadian FIPA model, supra note 1, provides that “[a] Tribunal … shall decide the issues in dispute in accordance with this Agreement and applicable rules of international law.” Also omitted from the Canadian model are paragraphs (2) related to property rights and (3) on the definition of direct expropriation (cited earlier).

161 Some authors actually argue that the factors in Penn Central, supra note 153, are consistent with international customary law. See Newcombe, A., “The Boundaries of Regulatory Expropriation in International Law” (2005) 20 ICSID Rev.-FILJ 1 at 40 and ff.CrossRefGoogle Scholar See also Sampliner, supra note 141 , who notes that, “[a]lthough no known international lawjurisprudence or writings have adopted the three-part Penn Central test to date, these factors are arguably the most prominent ones applied to international takings” (at 11).

162 See Brownlie, I., Principles of Public International Law, 6th edition (Oxford: Oxford University Press, 2003) at 22.Google Scholar

163 See Lévesque, C., “Distinguishing Expropriation and Regulation under NAFTA Chapter 11: Making Explicit the Link to Property,” in Kennedy, K., ed., The First Decade of NAFTA: The Future of Free Trade in North America (Ardsley, NY: Transnational Publishers, 2004) at 293.CrossRefGoogle Scholar However, see Paulsson, and Douglas, Z., “Indirect Expropriation in Investment Treaty Arbitrations,” in Horn, N. and Kroll, S., eds., Arbitrating Foreign Investment Disputes: Procedural and Substantive Legal Aspects (The Hague: Kluwer Law International, 2004), 145 at 157–58.Google Scholar

164 Brownlie, supra note 162 at 16. See also Sornarajah, M., The International Law on Foreign Investment, 2nd edition (Cambridge: Cambridge University Press, 2004),CrossRefGoogle Scholar on the changing notions of property in the United States and Europe (at 368 and ff.).

165 However, one should not overstate the potential impact of “scenario no. 2.” Overall, the language of the annex, including the police power exception, aims to limit the reach of the expropriation provision. See, for example, Gantz, supra note 15 at 745, who states: “[The Annex] unquestionably will make it more difficult for a foreign investor to claim successfully that any sort of government regulatory action is an expropriation, particularly if the regulatory action has any environmental or public health nexus.” See also McIlroy, supra note 10 at 636–37, who discusses the retreat in the provision. For a discussion of the police power language, see, Coe, J. J. Jr., and Rubins, N., “Regulatory Expropriation and the Tecmed Case: Context and Contributions,” in Weiler, , ed., supra note 40 at 642.Google Scholar For a different viewpoint, see Porterfield, M. C., “International Expropriation Rules and Federalism” (2004) 23 Stan. Envt’l L.J. 3 at 2 and 15–18,Google Scholar who argues that even with the clarifications, international law provides for better treatment than US domestic law in matters of regulatory takings.

166 See “Free Trade Agreement between Peru and Chile” (27 August 2006), (in Spanish): <http://2005.sice.oas.org/Trade/CHL_PER_FTA/Texto_s.pdf> at Article 11.10, Annex 11-D; and “Comprehensive Economic Cooperation Agreement between India and Singapore” (29 June 2005), <http://commerce.nic.in/ceca/toc.htm> Article 6.5, Annex 3-Expropriation.

167 Gagné and Morin, supra note 15 at 371–72. See also Kantor, supra note 15 at 383.

168 See Legum, supra note 43 at 351.

169 See UNCITRAL Arbitration Rules, supra note 53 at Article 21 (4); and ICSID Additional Facility Rules, supra note 52 at Article 45(5).

170 Waste Management I, supra note 7.

171 See Methanex Corporation v. United States, Preliminary Award on Jurisdiction and Admissibility, UNCITRAL (7August 2002) at paras. 84–95 [Methanex, Jurisdiction].

172 Ibid. at para. 109 [emphasis added].

173 Ibid. at paras. 84–95. See Laird, I., “A Distinction without a Difference? An Examination of the Concepts of Admissibility and Jurisdiction in Salini v. Jordan and Methanex v. USA,” in Weiler, , ed., supra note 40 at 201 Google Scholar; Legum, supra note 43 at 352.

174 See Methanex, Jurisdiction, supra note 171 at para. 172.

175 The final award, which counts over 300 pages, also considered the merits of the case. See Methanex, Final, supra note 42.

176 TPA, supra note 15 at sec. 2102(b)(3)(G).

177 US Model BIT, supra note 2 at Article 28, paras. 4 and 5 [emphasis added].

178 See USTR, “Eight Misunderstandings” supra note 153: “7. Foreign investors can not abuse the process by filing frivolous investor-state claims that threaten state and local regulations. Our agreements include checks to ensure that investors cannot abuse the arbitration process, such as a special provision (based on US court rules) that allows tribunals to dismiss frivolous claims at an early stage of the proceedings or to award attorneys’ fees and costs as a deterrent to such claims.”

179 US Fed Rules of Civil Procedure, Rule 12(b)(6).

180 See Gantz, supra note 15 at 758–61; and Legum, supra note 43 at 352–53.

181 Canadian FIPA Model, supra note 1 at Article 37.

182 See discussion in Methanex, Jurisdiction, supra note 171 at paras. 107–26. See also Laird, supra note 173.

183 See ICSID, Working Paper, supra note 52 at 7.

184 See ICSID, Arbitration Rules, supra note 52 at Rule 41(5); and ICSID Additional Facility Rules, supra note 52 at Article 45(6).

185 Rule 41 (5) states: “Unless the parties have agreed to another expedited procedure for making preliminary objections, a party may, no later than 30 days after the constitution of the Tribunal, and in any event before the first session of the Tribunal, file an objection that a claim is manifestly without legal merit. The party shall specify as precisely as possible the basis for the objection. The Tribunal, after giving the parties the opportunity to present their observations on the objection, shall, at its first session or promptly thereafter, notify the parties of its decision on the objection.” To the same effect, see ICSID Additional Facility Rules, supra note 52.

186 Canadian FIPA model, supra note 1 at Article 27(3) [emphasis added].