The Political Economy of NAFTA Chapter Eleven: Equality Before the Law and the Boundaries of North American Integration
5 Pages Posted: 9 Dec 2013 Last revised: 28 Mar 2014
Date Written: February 26, 2000
Issues regarding the NAFTA Chapter 11 investment dispute mechanism are part of a larger context of issues that arose in connection with the transformation of the GATT dispute settlement mechanism into the WTO Dispute Settlement Understanding, and were reflected in the breakdown of the OECD negotiations on a Multilateral Agreement on Investment (MAI) and the Seattle Ministerial Conference (SMC). These issues relate to multilateral and regional governance: who is authorized to make decisions, and how are those decisions made and carried out on behalf of international society? In short, there are increasing public demands for transparency, democratic representation and account-ability that, on the one side, are legitimate and useful but, on the other side, are creating tremendous stresses on multilateral governance mechanisms. At the moment, we are reaching something of a crisis point reflecting the inability of governments to make and execute policy -- a situation that demands close attention and creative solutions.
The question under NAFTA is whether we have the proper institutions to serve the ECJ-type function. It is very questionable whether we do. Are we comfortable with three private arbitrators ruling on critical questions of public health, even if their decisions only involve compensation, and not changes to legislation? I suspect not, because there are no adequate provisions for transparency, continuity or appellate review (except under New York Convention public policy exceptions).
The NAFTA investment chapter attempted to provide financial risk guarantees that would be attractive to the investment community, but did not build a framework strong enough to accommodate social policies. As such, there is a need to limit how far the scope of investment-related review should extend until the juridical framework of the NAFTA is made more complete.
Keywords: NAFTA, Chapter 11, Investment Disputes, Social Welfare
JEL Classification: F15, K33
Suggested Citation: Suggested Citation