Academic journal article Law and Policy in International Business

Taking a Constitutional Look: NAFTA Chapter 11 as an Extension of Member States' Constitutional Protection of Property

Academic journal article Law and Policy in International Business

Taking a Constitutional Look: NAFTA Chapter 11 as an Extension of Member States' Constitutional Protection of Property

Article excerpt

I. INTRODUCTION

As the slogan-chanting street demonstrations that consistently disrupt the meetings of the World Trade Organization (WTO) illustrate, there exists a contentious debate over the role of international trade organizations. The clash centers around the role of free trade regimes in the context of traditional ideas of state sovereignty in international trade relations. This debate has not only polarized the development of the WTO, but it has also controlled the development of regional trade arrangements. Specifically, the creation of the North American Free Trade Agreement (NAFTA) (1) between the United States, Canada, and Mexico sparked much controversy among the domestic constituents of each country. The continued debate turns on whether NAFTA represents a pragmatic approach to maximizing trade benefits and opening markets to trade, or a step towards member countries relinquishing their sovereignty to a regional trade regime. In the more dramatic of the two interpretations, NAFTA represents a quasi-constitutional framework, both politically and legally binding, which restrains the ability of the United States, Canada and Mexico to implement public policy. As a type of regional constitution, NAFTA presents important questions about the tension between domestic constitutional traditions and the agreement's quasi-constitutional legal obligations. If NAFTA presents a significant challenge to a member country's constitutional tradition, domestic constituencies less likely to support the organization may undermine the political legitimacy of the institution. Alternatively, obligations under NAFTA that significantly depart from a country's constitutional tradition may signify an attempt to make backdoor constitutional changes in the country's domestic law. Additionally, examining the consistency between NAFTA and its member states' constitutional systems can provide important insights on how NAFTA-type regimes are influenced by their members' constitutional frameworks.

In the context of NAFTA, this constitutional tension is best illustrated in the chapter 11 provisions of the agreement that protect foreign investment from expropriation. Accordingly, this Note will examine the extent to which NAFTA countries have departed from their constitutional traditions in obligating themselves to NAFTA's protection of foreign investments. Additionally, it will ask whether NAFTA's expropriation provisions are consistent with each member country's constitutional framework and domestic law protecting private property from government expropriation.

Part II will present the domestic constitutional framework and jurisprudence in the United States, Canada, and Mexico protecting private property from government expropriation. Part III will introduce NAFTA's foreign investment provisions and review article 1110's protection of foreign investment from nationalization or expropriation. It will present four investor claims that have been filed under NAFTA's arbitration provisions alleging an expropriation in violation of article 1110 and examine the arbitration tribunal's legal reasoning. The Note will then proceed in Part IV to analyze the consistency between each country's takings law and its obligations under NAFTA. Finally, Part V will consider the potentially drastic implications of NAFTA's departure from the constitutional traditions of its members in the context of environmental regulations challenged under NAFTA's expropriation provisions. The prospect of NAFTA's expropriation provisions obstructing valid public regulations is at the forefront of the NAFTA debate, and Section V will examine the issue in the context of domestic environmental policies.

II. NAFTA PARTIES' DOMESTIC TAKINGS LAW

A. United States

The Fifth Amendment of the U.S. Constitution provides, "[N]or shall private property be taken for public use, without just compensation. …

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