17 Pages Posted: 24 Nov 2003
No feature of NAFTA is more often criticized than Chapter 11. It has proved to be a lightning rod for anti-NAFTA and anti-globalization critics. Environmentalists, labor organizers and human rights advocates all decry its secrecy, its potential disruptiveness to ordinary lawmaking and its placing of investors' interests before those of the broader public. Chapter 11 is portrayed as a great give-away - an elaborate ruse to evade checks on corporate activity in the three NAFTA countries. Nor do any of the three NAFTA Parties - the governments of the United States, Canada, and Mexico - seem particularly pleased with Chapter 11's operation. There is more than a little buyer's remorse evident. All three nations share a general discomfort with the extensive reach Chapter 11 has displayed. Through an unanticipated flow of decisions, Chapter 11 tribunals have entertained - if not endorsed - far more extravagant investment claims than were likely imagined by the three nations while negotiating Chapter 11's substantive terms. Such widespread unhappiness with Chapter 11 is somewhat unanticipated, as Chapter 11 attracted little attention during its negotiations. Indeed, it is now viewed as having been something of a Trojan Horse: seemingly benign upon first delivery, but later understood to have brought destruction to national democratic institutions.
Many of the attacks on Chapter 11 are expressed in terms of a lack of legitimacy. The exercise of authority by Chapter 11 tribunals over public decisions seems wildly inconsistent with the understandings and expectations in all three countries of how legitimate political and judicial determinations should be made. There is a repeated and emphatic protest of unfair surprise advanced by critics of Chapter 11 - many, if not most, state/provincial and local public officials in the three NAFTA Parties claim to have been unaware of the establishment of an external mechanism that can impose monetary liability for legislative and judicial decision-making. The implication made here is that had Chapter 11 been better known and understood, it would never have been implemented. It is a sucker-punch, a hidden rider, the unnoticed fine print. Now in place, the potential of Chapter 11 to restrict lawmaking prerogatives chafes legislators throughout North America.
Chapter 11, as part of NAFTA, is layered on top of the domestic legal regimes of the three NAFTA Parties. As such, questions of its legitimacy are perhaps best viewed from the specific legal traditions - and legal expectations - native to each Party. Thus, to answer whether Chapter 11 is legitimate, one can usefully draw on the structures, constitutional understandings and functional notions of legitimacy found within each NAFTA Party. To the extent Chapter 11 goes beyond the expected (even if this is exactly the intended point of its construction), legitimacy is tested. This essay presents a catalogue of defects, surprises, shortcomings and deliberate design associated with Chapter 11 - all of which have prompted attacks on its legitimacy.
Suggested Citation: Suggested Citation
Atik, Jeffery, Repenser NAFTA Chapter 11: A Catalogue of Legitimacy Critiques. Asper Review of International Business and Trade Law, Vol. 3, 2004. Available at SSRN: https://ssrn.com/abstract=470141 or http://dx.doi.org/10.2139/ssrn.470141
By David Gantz