Lima Arbitration

GUILLERMO AGUILAR ÁLVAREZ / WILLIAM W. PARK
An editorial in the Toronto Globe and Mail criticized the confidentiality inherent
in arbitration as a «cone of silence,» claiming that «lawsuits against the Canadian
government under NAFTA’s Chapter 11 end up being composed almost entirely
of rumor and leaks rather than official documents.» 110
C. Understandable Concerns
Many host state concerns about NAFTA arbitration are understandable. Considerable
ambiguity exists with respect to what constitutes «fair and equitable»
treatment. The law on expropriation is also relatively malleable, with little consensus
on the standards that determine when administrative regulations give
rise to a governmental taking that requires compensation. Must a claimant show
an abuse of power by the host government? Must the nationalization include
an element of bad faith? May a foreign investor recover in circumstances where
the claim of a domestic owner would fail?
The crux of the problem is that not all discrimination is outright and abrupt.
Arbitrary taking of property may occur in a gradual fashion through abusive
manipulation of the legal system. Various names have been applied to such de
facto nationalization: «creeping expropriation,» «indirect expropriation,» and «constructive
expropriation,» as well as measures «tantamount to» or «equivalent to»
expropriation. 111 Indirect nationalization through improper administrative measing
Pope & Talbot’s Interim Award (June 26, 2000), which held that Canadian export
controls on softwood lumber discriminated against an Oregon investor); Pope & Talbot,
Award in Respect of Damages (May 31, 2002), 41 I.L.M. 1347 (2002); Joseph de Pencier,
Investment, Environment and Dispute Settlement: Arbitration Under NAFTA Chapter
Eleven, 23 Hastings Int’l & Comp. L. Rev. 409 (2000); Weiler, supra note 99.
110
NAFTA Cone of Silence, The Globe and Mail, Aug. 26, 1998, at A14. Responses to this
editorial include letters to the editor by Sergio Marchi (Canadian Trade Minister), who
asserted that investor rights must not «inhibit the sovereign responsibility of governments
to legislate and regulate in the public interest,» The Globe and Mail, Aug. 31, 1998, at A12,
and Maude Barlow, who asserted that NAFTA was the «first international treaty in history
to grant foreign investors the right to bypass their own governments in a trade dispute and
sue the government of another country for cash compensation» and that NAFTA arbitrators
were all «trade bureaucrats,» The Globe and Mail, Sept. 5, 1998, at D7.
111
See generally Markham Ball, Assessing Damages in Claims by Investors Against States, 16
Icsid Rev.—Foreign Inv. L.J. 408 (2001); Dolzer, supra note 64; Higgins, supra note 64; Weston,
supra note 64. See also infra discussion of Overseas Private Investment Corporation (OPIC).
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