NAFTA Chapter XI and Canada's Environmental Sovereignty: Investment Flows, Article 1110 and Alberta's Water Act

By Cumming, Joseph; Froehlich, Robert | University of Toronto Faculty of Law Review, Spring 2007 | Go to article overview

NAFTA Chapter XI and Canada's Environmental Sovereignty: Investment Flows, Article 1110 and Alberta's Water Act


Cumming, Joseph, Froehlich, Robert, University of Toronto Faculty of Law Review


I    INTRODUCTION
II   BACKGROUND
       Foreign Direct Investment
       Past, Present and Future Canadian Treatment of FDI
       Policy Objectives of NAFTA Chapter XI
III  CANADA'S INVESTMENT OBLIGATIONS UNDER THE FTA AND NAFTA
       Chapter XVI of the FTA
       Chapter XI of NAFTA
IV   THE INCONSISTENT TREATMENT OF CANADA'S INVESTMENT OBLIGATIONS:
     EXPROPRIATION & REGULATORY TAKING DECISIONS
       Case Law Review
         Ethyl Corporation v. Government of Canada
         Sun Belt Water Inc. v. Government of Canada
         Pope & Talbot Inc. v. Government of Canada
         Metalclad Corporation v. The United Mexican States
         S.D. Myers Inc. v. Government of Canada
         Methanex Corporation v. United States of America
       Conclusions on Article 1110 Case Law
V    EXAMPLE OF AN ARTICLE 1110 CLAIM ARISING UNDER
     Alberta's Water Act
       Factual Context
       Application of the International Investment Jurisprudence
         Investor and Investment Thresholds
         Expropriation
         Outcome of the Claim
         Other Options for Canada
       Conclusions Based on the Case Study
VI   CANADIAN ENVIRONMENTAL SOVEREIGNTY
VII  CONCLUSIONS: POLICY OPTIONS

ABSTRACT

This article addresses the potential affect of Chapter XI of the North American Free Trade Agreement (NAFTA) on Canada's ability to effectively protect its natural resources' through regulation. Specifically, the article discusses a case study involving Alberta's Water Act and how its' objectives could be undermined by Article 1110 of NAFTA. The article first outlines the historical and current position of Foreign Direct Investment Agreements and provides a perspective on Canada's involvement in both bilateral and multilateral agreements up to and including NAFTA. This is followed by a case law review of the relevant NAFTA Chapter XI tribunal decisions A case study regarding the interaction of Alberta's Water Act with a potential claim under Chapter XI is then considered. Using this case study, and in the context of the applicable case law, the article ultimately evaluates the potential policy implications that Chapter XI introduces with respect to Canada's environmental sovereignty.

RESUME

Cet article adresse l'affectation potentiel du chapitre XI de l'accord du libre-echange nord-americain sur la capacite du Canada de proteger effectivement ses ressources naturelles a travers la reglementation. Specifiquement, l'article discute d'une etude de cas impliquant la Loi sur la protection des eaux de l'Alberta et comment ses objectifs pourraient etre minos par Article 1110 de l'ALENA. L "article decrit premierement la position historique et actuelle des' accords d'investissement direct etranger et fournit une perspective sur l'intervention du Canada dans des accords bilateraux et multilateraux y compris celle de l'ALENA. Ceci est suivi d'un examen de jurisprudence des' decisions appropriees de tribunal du chapitre XI de l'ALENA. Une etude de cas concernant l'interaction de la Loi sur la protection des eaux de l'Alberta avec une reclamation potentielle sous le chapitre XI est alors consideree. Utilisant cette etude de cas, et dans le cadre de la jurisprudence applicable, l'article evalue finalement les implications potentielles de la politique que le chapitre XI presente en ce qui concerne la souverainete environnementale du Canada.

I INTRODUCTION

When the Parties to the North American Free Trade Agreement (1) negotiated its provisions, there was significant concern amongst academics, environmentalists, the media and the general public. Much of the outcry centred on the substance of Chapter XI, NAFTA's "Investment" Article, which attracted "virulent criticism" on the basis that it imposed "severe constraints on national sovereignty." (2) In particular, concerns were expressed that Chapter XI's provisions would prevent Canada from protecting its natural environment. …

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