Glamis Gold Ltd. v. the United States and the fair and equitable treatment standard.

• Author: Ryan, Margaret Clare

This article critiques the arbitral tribunal's decision in Glamis Gold, Ltd. v. The United States of America on the basis of its interpretation of the fair and equitable treatment standard (FET) owed by state parties to foreign investors under NAFTA article 1105.

Part I outlines the post-WWII development of the FET standard in relation to the restrictive, customary international law of minimum standard of treatment (MST). The author traces the expansive treatment of the FET standard by tribunals in both bilateral investment treaty and NAFTA disputes. Despite a binding Free Trade Commission Note of Interpretation limiting the scope of article 1105, NAFTA tribunals had consistently interpreted the FET standard more broadly until the award in Glamis.

Part II evaluates the tribunal's reasoning in Glamis, arguing that it departs from a growing body of jurisprudence on the FET standard under NAFTA without sufficient justification. The author also criticizes the tribunal's decision to place an unprecedented evidentiary burden on the claimant by requiring proof of both state practice and opinio juris of the FET standard.

The conclusion suggests that the decision of the tribunal in Merrill & Ring Forestry L.P. v. Canada may provide a better approach to balancing governments' legitimate regulatory objectives and foreign investors' treaty rights.

L'auteure critique la decision du tribunal d'arbitrage dans la cause Glamis Gold, Ltd. v. The United States of America en raison de son interpretation de la norme du traitement juste et equitable (TJE). Selon l'article 1105 de l'ALENA, les Etats membres doivent le TJE aux investisseurs etrangers.

La Partie I trace les grandes lignes du developpement de la norme du TJE apres la Seconde Guerre mondiale en ce qui a trait a la norme minimale de traitement (NMT), une norme restrictive et coutumiere du droit international.

L'auteure retrace l'interpretation large de la norme du TJE par les tribunaux lors de disputes impliquant les traites bilateraux d'investissement et l'ALENA. Malgre une Note d'interpretation contraignante emise par la Commission du libre-echange sur la portee de l'article 1105, les tribunaux de l'ALENA avaient, jusqu'a la decision Glamis, interprete la norme du TJE plus largement, et ce, de facon constante.

La Partie II evalue le raisonnement du tribunal dans Glamis et soutient que celui-ci s'eloigne sans justification d'une jurisprudence croissante sur la norme du TJE dans le cadre de l'ALENA. L'auteur critique aussi la decision du tribunal d'imposer au demandeur un fardeau de preuve sans precedent en exigeant qu'il prouve a la fois la pratique etatique et Yopinio juris relatifs a la norme du TJE.

La conclusion suggere que la decision du tribunal dans la cause Merrill & Ring Forestry LP v. Canada presente peut-etre une meilleure approche pour atteindre l'equilibre entre les objectifs legitimes des gouvernements en matiere de reglementation et les droits issus des traites des investisseurs etrangers.

Introduction I. The Context of Glamis A. The Questions in Dispute B. The Fair and Equitable Treatment Standard 1. Origins and Basic Features of FET 2. FET and Customary International Law 3. Contemporary Evolution of FET in Bilateral Investment Treaties 4. Contemporary Evolution of FET under NAFTA C. The Glamis Ruling on Article 11 OS II. Critical Response to the Glamis Award A. The Tribunal's Unconvincing Treatment of Precedent B. The Tribunal's Unqualified Acceptance of NAFTA Party Submissions C. The Tribunal's Onerous Evidentiary Approach to Article 1105 D. The Tribunal's Support of Regulatory Authority under NAFTA E. The New Approach to the MST in Merrill & Ring Conclusion Introduction

In a recent award rendered under chapter 11 of the North American Free Trade Agreement (NAFTA), (1) the arbitral tribunal in Glamis Gold, Ltd. v. The United States of America (2) renewed the unsettled discussion surrounding the fair and equitable treatment (FET) standard in investment treaty arbitration. Bringing an end to the protracted dispute between the Canadian gold mining company and the United States, the tribunal dismissed the claims of Glamis that the United States had expropriated its mining rights in southeastern California and had breached its FET obligations under article 1105 of NAFTA. The tribunal's assessment of Glamis's article 1105 claim raises important issues regarding the content and interpretation of the FET standard under NAFTA and the appropriate test for determining its breach. The award represents a decisive shift in NAFTA case law because it restricts the scope of article 1105 and adopts an evidentiary approach, requiring a claimant to bring evidence of customary international law in order to succeed.

The following analysis of the Glamis award is in two parts. Part I provides a context for the award, first introducing the questions in dispute and then explaining the origins of the FET standard and its important place in the growing number of investment instruments that have promoted economic liberalization since the Second World War. Part I will also introduce the key interpretive debate surrounding the FET standard, namely, its place within the general body of international law and its specific relation to the customary international law minimum standard of treatment (MST). This debate has generated significant uncertainty in the contemporary context of investor-state disputes, as will be illustrated by comparing the treatment of the FET standard by tribunals constituted under bilateral investment treaties (BITs) with those under NAFTA. An overview of the early NAFTA treatment of the FET standard will provide a context for a discussion of the binding Note of Interpretation issued by the Free Trade Commission (FTC) in 2001, which limited the scope of article 1105. The final section of Part II will underline the growing consensus in the NAFTA case law that dealt with these issues before Glamis. NAFTA awards rendered after 2001, though following the FTC Note of Interpretation in light of its binding character, continued to adopt a permissive stance on article 1105 with an expansive reading of the obligations it entailed. As will be shown, tribunals consistently rejected the restrictive test advanced by the respondent parties for determining breaches of the MST, and insisted on the evolutionary character of customary international law and a wider scope of legal sources as being relevant to the determination of article 1105.

A detailed examination of the Glamis ruling on article 1105 at the end of Part I will set the stage for a critical assessment of the tribunal's conclusions in Part II. Proceeding from an analysis of the question of the operation of precedent in investment treaty arbitration and the tribunal's comments on its own role as an adjudicative institution, this article will argue that the Glamis tribunal departed from a growing body of jurisprudence on the FET standard under NAFTA without fully justifying its approach. Adopting an unfamiliar evidentiary method for article 1105, the Glamis tribunal accepted the United States' contention that the claimant to a chapter 11 arbitration had the burden of proving the evolution of customary international law by bringing evidence of state practice and opinio juris. Concluding that Glamis had not met this burden, the tribunal accepted the NAFTA party submissions regarding the content of the contemporary MST that denied its evolution since the 1920s, and dismissed the applicability of prior NAFTA awards interpreting the same provision. Questioning the suitability of a restricted interpretation of article 1105 in the current climate of foreign investment and the Treaty's overall objectives, this article will analyze whether the Glamis approach strikes an appropriate balance between the legitimate regulatory role of states and the interests of NAFTA investors. The final section will highlight the general problems raised by applying the customary MST to foreign direct investment and will consider whether a newly issued NAFTA award, Merrill & Ring Forestry L.P. v. Canada, (3) moves beyond the Glamis approach and presents a potential solution to these issues.

1. The Context of Glamis

   1. The Questions in Dispute

      The Glamis decision, issued on June 8, 2009, concerned a dispute over the Imperial Project, a mining investment located on federal lands in southeastern California. Glamis is a gold mining company incorporated in British Columbia in 1972. Its wholly owned subsidiaries have operated open-pit gold and silver mines in Nevada and Latin America since the early 1980s. In preparation for the Imperial Project, Glamis had been working to acquire mining rights in southeastern California pursuant to the US mining law of 1872, (4) and secured full ownership of these claims by 1994. During the investment's projected life span from 1998 to 2017, Glamis planned to remove 150 million tons of ore and 300 million tons of waste rock from three large open-pit mines and to extract gold on site. (5)

      The Imperial Project was controversial from its inception. It met particular resistance because of its location near designated Native lands known as the "Indian Pass" near the Arizona and Mexico borders. Glamis's opponents argued that the proposed mine would destroy portions of the Trail of Dreams and other areas used by the Native Quechuan people for ceremonial and educational purposes. Adding to the controversy, the Indian Pass was protected within the California Desert Conservation Area (CDCA), an area of land designated under the 1976 Federal Land Policy and Management Act (FLMPA)(6) to be protected as scenic and biologically important public land. Under this act, the area at Indian Pass was given a "limited use" designation. Any mining operations within the area would be subject to regulations "to protect the scenic, scientific, and environmental values of the public lands ... against undue impairment, and to...