A General Investment Agreement in the
Lessons from Chapter 11 of NAFTA and the OECD
At the recent Ministerial Conference
at Doha in Qatar, the WTO member states agreed to commence investment
negotiations at the next Ministerial Conference in 2003. Yet it was only in
1998 that similar negotiations in the OECD towards a Multilateral Agreement on
Investment (MAI) ended without result. The MAI provisions in turn were heavily
influenced by the detailed investment provisions in Chapter 11 of the North
American Free Trade Agreement (NAFTA).
This paper examines the experience
of both NAFTA Chapter 11 and the MAI to draw some suggestions for the
investment negotiations within the WTO. The paper argues that there are two
fundamental challenges negotiators face in creating investment rules in the
WTO. Firstly, it is argued that a WTO agreement must reflect the interests of
developing countries. In this respect, WTO negotiators should avoid a MAI-type
scenario of simply replicating the very strong investment liberalization and
protection provisions of NAFTA Chapter 11. The paper examines the way in which
host states typically regulate foreign investment as a means to suggest
realistic ways in which to craft an investment agreement broadly reflective of
both North and South members of the WTO. The paper also puts forward a second
formidable challenge for WTO negotiators. This is to address some of the
concerning jurisprudence that has emerged from the NAFTA Chapter 11 arbitral
case law. The paper focuses on the way in which some arbitral cases have
extended the coverage of NAFTA Chapter 11 beyond de jure discriminatory
measures to encompass seemingly legitimate regulations with little adverse
impact on foreign investors.
The paper concludes with a modest
but realistic set of recommendations for a WTO investment agreement.
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