Chopping Away at Chapter 11: The Softwood Lumber Agreement's Effect on the NAFTA Investor-State Dispute Resolution Mechanism

Abstract

On September 12, 2006, the governments of Canada and the United States signed the Softwood Lumber Agreement 2006 (SLA 2006), hoping to end the longstanding dispute between the two countries on the issue of softwood lumber. Fearing liability for measures taken to give effect to the agreement, the Parties included a provision in Article XI(2) of the SLA 2006, limiting the availability of the North American Free Trade Agreement (NAFTA) Chapter 11 dispute resolution.

This comment argues that in limiting the availability of NAFTA Chapter 11 dispute resolution, Article XI(2) of SLA 2006 effects the application of NAFTA Chapter 11 in a way that is inconsistent with customary international law. Specifically, Article XI(2) impermissibly affects the applicability of NAFTA Chapter 11 in one of two ways: (a) it separates provisions of Chapter 11 that are inseparable, were critical to the consent of Canada and the United States in signing NAFTA, and renders the continued performance of NAFTA unjust; or (b) it modifies Chapter 11 in a prohibited manner that limits the effective execution of the object and purpose of NAFTA.

Regardless of which interpretation of the SLA 2006's effect on NAFTA is more accurate, both are inconsistent with the Vienna Convention on the Law of Treaties (Vienna Convention). In recognition of these inconsistencies, this comment recommends a litigation strategy for Canadian and American lumber producers that challenges the validity of SLA 2006 Article XI(2). This comment also recommends a series of measures for the Canadian and U.S. governments designed to bring the SLA 2006 in line with customary international law, while still insulating them from liability for measures taken to implement the SLA 2006.

Keywords: NAFTA, Softwood Lumber, Chapter 11, Vienna Convention on the Law of Treaties, Canada, Investor-State, Investment, Dispute