How do NAFTA Chapter 11 Courts Resolve Disputes Between Companies and Countries?

  1. publishing
  2. February 9, 2013 6:14 pm

How do NAFTA Chapter 11 Courts Resolve Disputes Between Companies and Countries?

What Are NAFTA Chapter 11 Tribunals and How Can a Company Use Them?

NAFTA Chapter 11 creates an arbitration process for investing companies that claim a NAFTA country has violated NAFTA investment provisions. These expansive provisions include prohibitions against laws that impose local ownership or management requirements, mandate sale based on nationality, and condition investments on minimum or maximum imports, exports, sales, or foreign exchange earnings. The NAFTA investment provisions have encouraged significant cross-border investment growth not only by eliminating discrimination against foreign investment, but also by creating accessible tribunals where investors can directly sue a NAFTA country.

A company harmed by a NAFTA violation may file a Chapter 11 arbitration complaint against the country. An arbitration panel of the World Bank or United Nations will hear the dispute and issue a binding decision. The tribunal may award compensatory monetary damages. Investors have used this process to resolve disputes over public health laws, natural resource, environmental, and energy regulations, land use policies, and transportation restrictions. To date, more than $380 million have been awarded to companies through arbitration.

It should be noted that the arbitration process is complex. The investor, investment, and alleged violation must meet jurisdictional requirements to avoid procedural dismissal. Claims must be filed within the three-year limitations period, and the investor’s injury must be “sufficiently connected” to the claimed law, regulation, or policy in dispute. Examples of pending disputes include a $6 billion claim against the United States by Mexican truckers arising from cancellation of cross-border trucking services in 2009 and claims of more than $525 million by Canadian drug manufacturer Apotex against discriminatory inspection, import, and approval policies of the United States Food and Drug Administration.


Leave a Reply