Regulatory Takings and Environmental Regulation in Nafta's Chapter 11
34 Pages Posted: 3 Mar 2006
Date Written: February 21, 2006
NAFTA's investment treaty has led to several expropriation compensation claims from investors hurt by new environmental regulations. Expropriation clauses in international treaties solve post-investment moral hazard problems such as hold-ups. However, these clauses can interact with National Treatment clauses in a manner that hinders investment. A police powers carve-out from the definition of expropriation can be Pareto-improving and can increase the level of foreign investment.
Keywords: foreign direct investment, regulatory takings, expropriation, NAFTA, National Treatment, environment
JEL Classification: K3, Q58, F21
Suggested Citation: Suggested Citation