A Clash of Treaties: The Legality of Countermeasures in International Trade Law and International Investment Law
37 Pages Posted: 22 Jun 2014
Date Written: June 20, 2014
Countermeasures are well recognized under Customary International Law and have been incorporated into the WTO Dispute Settlement Understanding as a mechanism to facilitate compliance, subject to an authorization by the WTO Dispute Settlement Body. However, such a countermeasure — increased tariffs, quantitative restrictions and permission to breach intellectual property rights — may also affect private investors. When there is an investment treaty between two WTO Members and one of the Members is subject to WTO countermeasures by the other Member, a clash of treaties may arise. This happened in the Sugar Dispute between Mexico and the United States. Mexico claimed that their measures on High Fructose Corn Syrup were trade countermeasures under the North America Free Trade Agreement (NAFTA) in retaliation for a US breach of NAFTA. US investors affected by these measures brought claims against Mexico for breach of NAFTA Chapter 11 — the Investment Chapter. All three International Centre for the Settlement of Investment Disputes tribunals held for different reasons, that a countermeasure that affects the rights of investors would not be valid. In contrary, this paper argues that a legitimate trade countermeasure should also be legitimate in the investment regime. A failure to consider the need for such coherence between the regimes could lead to a clash between the regimes and limit states’ ability to enforce its legitimate trade interests.
Keywords: Countermeasures, Legality, Trade and Investment, Independent Investor Rights
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