NAFTA's Chapter 11 contains provisions allowing investors from one country to obtain redress for violations of NAFTA provisions by one of the other countries party to the agreement (U.S., Canada, and Mexico). Canadian trade lawyer Todd Weiler provides some background on his web page (click on the "NAFTA Claim Info" button on the left of his page).
"A NAFTA claim [under Chapter 11] is a legal complaint submitted by a NAFTA Investor who has suffered loss by reason of a breach of certain NAFTA provisions by a NAFTA Party. The claim is heard by an international tribunal, normally composed of three members appointed by the Investor and the NAFTA Party being sued. Tribunals are formed under the Investor?s choice of commercial arbitration rules laid out by either the World Bank (through its International Centre for the Settlement of Investment Disputes ? the ICSID) or by the United Nations Commission on International Trade Law (under the UNCITRAL Rules).
After hearing arguments from the Investor and the three NAFTA Parties (i.e. the government being sued for breach of the NAFTA plus the other two governments ? if they choose to intervene), the tribunal will issue its written decision (known as an ?award?). If the tribunal finds in favour of the Investor, the government found in breach of its NAFTA obligations will be ordered to pay compensation to the Investor for the losses it suffered as a result of the breach..."
Today's New York Times has a story headlined: "Nafta Tribunals Stir U.S. Worries. The thrust of it is that tribunals created under NAFTA create a threat to the U.S. consititional order.
"Tribunals like the one that ruled on the Massachusetts case [a case described earlier in the story - Ben] were created by the North American Free Trade Agreement, and they have heard two challenges to American court judgments. In the other, the tribunal declared a Mississippi court's judgment at odds with international law, leaving the United States government potentially liable for hundreds of millions of dollars.
Any Canadian or Mexican business that contends it has been treated unjustly by the American judicial system can file a similar claim. American businesses with similar complaints about Canadian or Mexican court judgments can do the same. Under the Nafta agreement the government whose court system is challenged is responsible for awards by the tribunals. "This is the biggest threat to United States judicial independence that no one has heard of and even fewer people understand," said John D. Echeverria, a law professor at Georgetown University... The availability of this additional layer of review, above even the United States Supreme Court, is a significant development, legal scholars said. "It's basically been under the radar screen," Peter Spiro, a law professor at Hofstra University, said. "But it points to a fundamental reorientation of our constitutional system. You have an international tribunal essentially reviewing American court judgments."
Brad DeLong provides some perspective at his blog today. He's very critical of the Times story, which he characterizes as a "scare" piece. During the course of a detailed analysis of a case described in the Times story, he points out that the NAFTA tribunals are not appeals courts:
"...It has no power to set aside the Mississippi verdict. It has no jurisdiction over the O'Keefes [a Mississippi family involved in the controversy - Ben], and cannot command them to repay a cent of the settlement they have won. The independence of Mississippi's courts is not threatened. The NAFTA tribunal is judging between the Loewens and the U.S. government: has the U.S. government lived up to its treaty obligations to provide foreign investors honest and uncorrupt courts? So far the answer appears to be that the Mississippi court took a serious dive, but that the Loewens still lose because they are not properly foreign investors."
and:
"...these NAFTA tribunals are not review courts, not appeals courts. They do not set aside judgments. Nobody who wins a case in the U.S. has anything to fear from these NAFTA tribunals. No Mississippi court has anything to fear from these NAFTA tribunals--the awards it makes stand, and the flow of this year's campaign contributions to judges from lawyers who have won verdicts over the past decade continues as well. All these tribunals do is to give some possibility of recourse to those foreign investors ground fine by the wheels of America's courts if and only if they can persuade judges like Mikva, Mason, and Mustill that injustice has been done."
Public Citizen takes a dimmer view of Chapter 11 on their web page.
Revised 10:30 PM, 4-18-04
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