Viewpoint 42-1: Scoring NAFTA: The United States Trounces Canada in Investor-State Disputes.

• Author: Bowal, Peter

"NAFTA is the worst trade deal maybe ever signed anywhere, but certainly ever signed in this country" (September 26, 2016) "Because NAFTA... is perhaps the greatest disaster trade deal in the history of the world. Not in this country. It stripped us of manufacturing jobs. We lost our jobs. We lost our money. We lost our plants. It is a disaster." (October 9, 2016) "NAFTA's been very, very bad for our country. It's been very, very bad for our companies and for our workers, and we're going to make some very big changes... Cannot continue like this, believe me." (April 18, 2017) -Donald Trump (candidate and US President) Introduction

In light of the current renegotiation of the North American Free Trade Agreement (NAFTA), we focus on a 'chapter' of decisions in investor-state disputes.

Chapter 11 of NAFTA, arguably the most controversial part of NAFTA, prohibits each of the three countries from punishing or nationalizing businesses and investments from the other countries. If there is to be free trade in investments across the three countries, each country must accord the NAFTA investor no less favourable treatment than it grants to its own investors and minimum standards of fairness in any event. Expropriating vulnerable foreign investments and assets are the worst sin under this Chapter. If these investor-state disputes are not settled, there is an arbitrated decision.

It is well known that the US President continues to sharply criticize NAFTA on the basis of unfairness. It is described as a leading cause of harm to American economic interests. What is less well known is how dominant and successful the US has been under Chapter 11 since it came into effect in 1994. (This should not be confused with another dispute resolution mechanism in Chapter 19 where Canada has enjoyed better outcomes.)

Background

The Chapter permits investors to bring direct proceedings against non-compliant governments before impartial international tribunals. While observers originally expected Mexico to face the most claims under Chapter 11, Canada has (by far) been the target of most investor-state arbitration claims. Up to now, Canada is the most sued country under Chapter 11, but has answered claims only from American investors. We have not found any of these claims by Mexican investors against Canada and vice versa.

Summary of Claim Outcomes

Accurate statistics are difficult to obtain because all claims are not publicly reported. About half of the total number of 84 claims against all three nations have been against Canada.

Half of the reported final cases brought by American investors against Canada have been successful (six out of twelve). As a result, Canada has paid a total of C$215 million in compensation, mostly due to provincial breaches. An example is the AbitibiBowater claim, the settlement of which cost the Government of Canada $130 million.

On the other hand, Canadian investors have lost all eleven reported claims they have filed against the United States. The most recent case filed against the United States by TransCanada Corporation, for more than $15 billion in connection with the cancellation of the Keystone XL Pipeline, was withdrawn.

The two tables below describe the completed Chapter 11 claims raised by Canadian companies against the United States and American companies against Canada, respectively. Withdrawn and ongoing cases are not included.

Observations and Analysis

In reviewing the reported decisions under Chapter 11, several observable patterns arise:

* The number of US-investor disputes against Canada is about the same as the number of disputes Canadian investors have filed against the United States. However, Canada's perfect loss rate on its own claims is highly anomalous. Many of the tribunal decisions simply cannot be...