The Notion of Discrimination in Article 1102 of nafta

Download 329.15 Kb.
Date conversion15.05.2016
Size329.15 Kb.
1   2   3

1. Article 1102 prohibits discrimination aimed at protectionism.
2. The notion of discrimination embodied in Article 1102 is therefore, that which distinguishes on the basis of nationality.
3. There are at least two methods of interpretation of Article 1102 that may distinguish between protectionist discrimination and legitimate measures.
4. One of these methods requires evidence of protectionist intent, whereas the other requires evidence of a reasonable link with reasonable policies.
5. The relevance of applying one of these methods or the other depends on the facts of each case.

1 See Burns H. Weston, The Charter of Economic Rights and Duties of States and the Deprivation of Foreign-owned Wealth, 75 Am. J. Int’l. L. 437, 441 (1981); see also W.A. McKean, The Meaning of Discrimination in International and Municipal Law, 44 Brit. Y.B. Int’l L. 177, 277 (1970) (arguing that the non-discrimination principle should be considered as ius cogens); see also Kaj Hober, Investment Arbitration in Eastern Europe: Recent Cases on Expropriation, 14 Am. Rev. Int'l Arb. 377, 385 (2003) (arguing that the principle of non-discrimination is a rule of customary law in the field of foreign investment, specifically in that of expropriation).

2 See W.A. McKean, supra note 1, at 185-86.

3 Advisory Opinion on the Minority Schools in Albania 1935 P.C.I.J. (ser. A/B) No. 64.

4 Oscar Schachter, Sharing the World's Resources, cited in A.F.M. Maniruzzaman, Expropriation of Alien Property and the Principle of Non-Discrimination in International Law of Foreign Investment: An Overview, 8 J. Transnat'l L. & Pol'y 57, 62 (1988).

5 Oscar Chinn (Belg. v. Gr. Brit.), 1934 P.C.I.J. (ser. A/B) No. 63; Italian Government v. E.E.C. Commission European Court of Justice Case 13/63, [1963] 2 C.M.L.R. 289; Restatement (Third) of Foreign Relations Law of the United States § 711 (1986); Sir Hersch Lauterpacht, The Development of International Law by the International Court 265 (1958).

6 A.A. Fatouros, Towards an International Agreement on Foreign Direct Investment?, 10 ICSID Rev. Foreign Inv. L.J. 181, 196 (1995).

7 North American Free Trade Agreement, Dec. 17, 1992, U.S.-Mex.-Can., 32 I.L.M. 605.

8 Henrik Horn & Joseph H.H. Weiler, European Communities – Measures Affecting Asbestos and Asbestos-Containing Products in The WTO Case Law of 2001 13 (Henrik Horn & Petros C. Mavroidis eds., 2004).

9 Article 1108 establishes:

“Article 1108: Reservations and Exceptions

“1. Articles 1102, 1103, 1106 and 1107 do not apply to:

“(a) any existing non-conforming measure that is maintained by

“(i) a Party at the federal level, as set out in its Schedule to Annex I or III,

“(ii) a state or province, for two years after the date of entry into force of this Agreement, and thereafter as set out by a Party in its Schedule to Annex I in accordance with paragraph 2, or

“(iii) a local government;

“(b) the continuation or prompt renewal of any non-conforming measure referred to in subparagraph (a); or

“(c) an amendment to any non-conforming measure referred to in subparagraph (a) to the extent that the amendment does not decrease the conformity of the measure, as it existed immediately before the amendment, with Articles 1102, 1103, 1106 and 1107.

“2. Each Party may set out in its Schedule to Annex I, within two years of the date of entry into force of this Agreement, any existing nonconforming measure maintained by a state or province, not including a local government.

“3. Articles 1102, 1103, 1106 and 1107 do not apply to any measure that a Party adopts or maintains with respect to sectors, subsectors or activities, as set out in its Schedule to Annex II.

“4. No Party may, under any measure adopted after the date of entry into force of this Agreement and covered by its Schedule to Annex II, require an investor of another Party, by reason of its nationality, to sell or otherwise dispose of an investment existing at the time the measure becomes effective.

“5. Articles 1102 and 1103 do not apply to any measure that is an exception to, or derogation from, the obligations under Article 1703 (Intellectual Property National Treatment) as specifically provided for in that Article.

“6. Article 1103 does not apply to treatment accorded by a Party pursuant to agreements, or with respect to sectors, set out in its Schedule to Annex IV.

“7. Articles 1102, 1103 and 1107 do not apply to:

“(a) procurement by a Party or a state enterprise; or

“(b) subsidies or grants provided by a Party or a state enterprise, including government supported loans, guarantees and insurance.

“8. The provisions of:

“(a) Article 1106(1)(a), (b) and (c), and (3)(a) and (b) do not apply to qualification requirements for goods or services with respect to export promotion and foreign aid programs;

“(b) Article 1106(1)(b), (c), (f) and (g), and (3)(a) and (b) do not apply to procurement by a Party or a state enterprise; and

“(c) Article 1106(3)(a) and (b) do not apply to requirements imposed by an importing Party relating to the content of goods necessary to qualify for preferential tariffs or preferential quotas.”

10 See e.g. United Mexican States v. United States of America, Final Report of the Panel in the Matter of Cross-Border Trucking Services, Secretariat File No. USA-MEX-98-2008-01 (Feb. 6, 2001) ¶ 293 [hereinafter Cross-Border Trucking Services]; see also Reply of Claimant Methanex Corporation to United States Amended Statement of Defense (Methanex Co. v U.S.) (Feb. 19, 2004) ¶¶ 188-197 [hereinafter Methanex’s Reply].

11 See e.g. Methanex’s Reply supra note 10, ¶ 188 n. 285.

12 Id. at ¶ 188. In this document the claimant stated:

“There is no provision in NAFTA Chapter 11 explicitly permitting environmental exceptions to the national treatment obligation. The closest general exception in the NAFTA is Article 2101, which specifically incorporates the standards of Article XX of the GATT. GATT and WTO case law clearly places on the U.S. the burden of proof regarding the validity of an environmental measure that denies national treatment.


“The WTO provides an exception to its national treatment regime for environmental measures, but it is a very narrow exception. Under the WTO regime, the U.S. must prove that the measures were “necessary” to protect human, animal, or plant life or health. Then, it must prove that, in order to achieve California’s objective, there existed no alternative that was less restrictive with respect to other NAFTA investors and their investments.”

13 Article 915 expressly establishes:

“Article 915: Definitions

“1. For purposes of this Chapter:


“legitimate objective includes an objective such as:

“(a) safety,

“(b) protection of human, animal or plant life or health, the environment or consumers, including matters relating to quality and identifiability of goods or services, and

“(c) sustainable development,

“considering, among other things, where appropriate, fundamental climatic or other geographical factors, technological or infrastructural factors, or scientific justification but does not include the protection of domestic production;”

14 Cross-Border Trucking Services supra note 10, ¶ 293.

15 S.D. Myers, Inc. v. Canada, Partial Award on the Merits (Nov. 13, 2000) ¶ 254 [hereinafter S.D. Myers Award].

16 Ari Afilalo, Meaning, Ambiguity and Legitimacy: Judicial (Re-) Construction of NAFTA Chapter 11, 25 NW. J. Int’l L. & Bus. 279, 304-305 (2005).

17 Submission of the Government of Canada Pursuant to NAFTA Article 1128 (Loewen Group, Inc. & Raymond L. Loewen v. U.S.) (Nov. 19, 2001) ¶ 7.

18 Forth Submission of the Government of Canada Pursuant to NAFTA Article 1128 (Methanex Corp. v. U.S.) (Jan. 30, 2004) ¶ 5.

19 Marvin R. Feldman v. Mexico, Award on the Merits (Dec. 16, 2002) ¶ 181.

Id. ¶ 181.

20 See e.g. the Article 1102 analysis of the tribunal in Marvin Feldman included the following subsections: “In Like Circumstances”, “Existence of Discrimination” and “Discrimination as a Result of Nationality,” id. ¶¶ 170-80.

21 Supra note 19, ¶ 183.

22 Id. ¶ 166.

23 Declaration on International and Multinational Enterprises OECD (June 21, 1976 revised in 1993) available at,2340,en_2649_34887_1933109_119672_1_1_1,00.html.

24 See e.g. S.D. Myers Award, ¶ 250, see also Pope & Talbot, Inc. v. Canada, Award on the Merits of Phase 2 (Apr. 10, 2001) ¶ 78 [hereinafter Pope & Talbot Award II].

25 Supra note 19, ¶ 182.

26 Methanex Corp. v. United States, Preliminary Award on Jurisdiction and Admissibility (Aug. 7, 2002) ¶ 172. Thereby the tribunal ordered:

“As regards part of Methanex’s Amended Statement of Claim (as subsequently supplemented by its written and oral submissions), the Tribunal decides that certain allegations relating to the “intent” underlying the US measures could potentially meet the requirements of Article 1101(1) NAFTA, thereby allowing part of Methanex’s case to fall within the jurisdiction of the Tribunal.

“It is impossible for the Tribunal now to make a ruling on jurisdiction in regard to this part of Methanex’s case without a fresh pleading from Methanex accompanied by evidential materials…”

27 Id. ¶ 150.

28 Id.¶ 147.

29 Article 1101(1) of NAFTA establishes:

“Article 1101: Scope and Coverage

“1. This Chapter applies to measures adopted or maintained by a Party relating to:

“(a) investors of another Party;

“(b) investments of investors of another Party in the territory of the Party; and

“(c) with respect to Articles 1106 and 1114, all investments in the territory of the Party (emphasis added).”

30 Supra note 27, ¶ 137.

31 Id. ¶ 137.

32 Id. ¶ 139.

33 United Mexican States’ Submission Pursuant to Article 1128 of NAFTA (Methanex Corp. v. U.S.) (Apr. 30, 2001) ¶¶ 7-8 [hereinafter Mexico’s Submission in Methanex].

34 Supra note 27, ¶ 147.

35 Id. ¶ 142. The tribunal set forth:

“In Pope & Talbot, Canada contended that a measure could only relate to an investment if it was “primarily directed” at that investment and, in particular, that an allocation quota was not related to an investor whose trade was nevertheless directly affected by that quota. As is clear from paragraphs 33-34 of the award, the tribunal did not reject Canada’s argument that it was insufficient that a measure “affect” an investor. The tribunal did reject the contention that the measure must be primarily directed at the investment; but this is not what the USA now contends; and the case is therefore only of limited assistance to Methanex’s submissions.”

36 Id. ¶ 152.

37 Id. ¶ 172.

38 Todd Weiler, I NAFTA News II (Sept. 21, 2002) at

39 Methanex’s Reply supra note 10, ¶ 196.

40 United Mexican States’ Submission Pursuant to Article 1128 of NAFTA, (Loewen Group, Inc. & Raymond L. Loewen v. U.S.) (Nov. 9, 2001) 15, see also Mexico’s Submission in Methanex supra note 34, ¶ 16 (supporting the same position).

41 Loewen Group, Inc. & Raymond L. Loewen v. United States of America, Award (June 26, 2003) ¶ 139.

42 Mondev International Ltd. v. United States, Award (Oct. 11, 2002) ¶ 64. The tribunal declared:

“As to Article 1102, Mondev complained of certain remarks by officials of Boston and BRA which, it maintained, indicated a certain anti-Canadian animus. The United States sought to explain these as de minimis or incidental, and it argued that they had and could have had no effect on the outcome of the dispute. It also noted that LPA achieved a striking verdict before a Boston jury, notwithstanding its Canadian ownership.”

43 Id. ¶ 65.

44 Dana Krueger, The Combat Zone: Mondev International, Ltd. V. United States And The Backlash Against NAFTA Chapter 11, 21 B.U. Int'l L.J. 399, 407-408 (2003).

45 Supra note 15, ¶ 254.

46 Supra note 19, ¶ 185.

47 Id. ¶ 186.

48 Article 1102(3) establishes:

“Article 1102: National Treatment


“3. The treatment accorded by a Party under paragraphs 1 and 2 means, with respect to a state or province, treatment no less favorable than the most favorable treatment accorded, in like circumstances, by that state or province to investors, and to investments of investors, of the Party of which it forms a part.”

49 Supra note 25, ¶¶ 39-42.

50 Id. ¶ 42.

51 Id. ¶ 42.

52 See e.g. Notice of Arbitration (Grand River Enterprises Six Nations, Ltd. v. U.S.) (Mar. 10, 2004) ¶ 64 [hereinafter Grand River], see also Notice of Arbitration (Terminal Forest Products Ltd. v. U.S.) (Mar. 30, 2004) ¶ 31, also Second Amended Statement of Claim (Methanex Corp. v. U.S.) (Nov. 5, 2002) ¶ 308, see also Notice of Intent to Submit a Claim to Arbitration (Doman Indus. v. U.S.) (May 1, 2002) ¶ 16.

53 Supra note 10, ¶ 289.

54 Id. ¶ 292.

55 Supra note 17, ¶ 7.

56 Supra note 15, ¶ 252.

57 Krueger, supra note 45, at 407-408.

58 Id. at 409.

59 Supra note 42, ¶ 139.

60 ADF Group Inc. v. United States, Award (Jan. 9, 2003) ¶ 157.

61 Supra note 19, ¶ 177.

62 Todd Weiler, The Treatment of SPS Measures Under NAFTA Chapter 11: Preliminary Answers to an Open-Ended Question, 26 B.C. Int'l & Comp. L. Rev. 229, 240 (2003).

63 See generally Weiler & Horn supra note 8.

64 Supra note 25, ¶ 79.

65 Supra note 24.

66 See e.g. supra note 15, ¶ 250, see also Pope & Talbot Award II supra note 25, ¶ 78.

67 Supra note 15, ¶ 250.

68 See e.g. Pope & Talbot Award II supra note 25, ¶ 78. The arbitrators established:

“In evaluating the implication of the legal context, the tribunal believes that, as a first step, the treatment accorded a foreign owned investment protected by Article 1102(2) should be compared domestic investments in the same business or economic sector…”

69 Supra note 15, ¶ 250. This was consistent with the view expressed by the OECD, who declared that “[m]ore general considerations, such as the policy objectives of Member countries could be taken into account to define the circumstances in which comparison between foreign-controlled and domestic enterprises is permissible” (emphasis added), see The OECD Declaration on International and Multinational Enterprises, June 21, 1976, as revised in 1993.

70 Id. ¶ 255.

71 Id. ¶ 251.

72 Second Amended Statement of Claim (Methanex Corp. v. U.S.) (Nov. 5, 2002) ¶ 303.

73 Supra note 10 ¶ 6.

74 Supra note 42, ¶ 140.

75 Supra note 19, ¶ 172.

76 Supra note 10, ¶ 184. Methanex argues that:

“The U.S. response is correct, however, in that the GATT “like products” standard is a narrower test than the NAFTA Article 1102 “in like circumstances” standard. Because methanol and ethanol are “like” for purposes of the GATT’s narrow test, they necessarily must be “in like circumstances” for purposes of the NAFTA’s broad Article 1102 test.”

77 Amended Statement of Defense (Methanex Corp. v. U.S.) (Dec. 5, 2003) ¶ 308.

78 Rejoinder of Respondent United States of America (Methanex Corp. v. U.S.) (Apr. 23 2004) ¶ 164.

79 Id. ¶ 165.

80 Supra note 18, ¶ 10.

81 Supra note 42, ¶ 140.

82 Supra note 19, ¶ 171.

83 Id. ¶ 172.

84 See e.g. Korea – Measures Affecting Imports of Fresh, Chilled And Frozen Beef WT/DS161/AB/R (Dec. 11 2000.

85 Supra note 25, ¶ 93.

86 Supra note 10, ¶ 169.

87 Japan - Taxes on Alcoholic Beverages WT/DS8/AB/R (Oct. 4, 1996)

88 Supra note 10, ¶ 173.

89 Gami Invs. v Mexico, Final Award (Nov. 15, 2002) ¶ 114.

90 See Grand River supra note 63¶ 63.

91 Supra note 79, ¶ 152.

92 Id. ¶ 155.

93 Supra note 78, ¶ 301. Methanex contends that:

“The use of the phrase ‘in like circumstances,’ as well as its placement in the provision so that it could modify either the treatment accorded or the investor or the investments, indicates that Article 1102 contemplates that broad account be taken of the circumstances of the treatment, the investor and the investment.”

94 Supra note 25, ¶ 78.

95 Id. ¶ 79.

96 Supra note 15 ¶ 255.

97 Supra note 90, ¶ 114.

98 Supra note 19, ¶ 170. The tribunal reasoned that:

“…there are at least some rational bases for treating producers and re-sellers differently, e.g., better control over tax revenues, discourage smuggling, protect intellectual property rights, and prohibit gray market sales, even if some of these may be anti-competitive. Thus, as discussed in the expropriation section, the Tribunal does not believe that such producer – reseller discrimination is a violation of international law.”

99 Id. ¶ 182.

100 Supra note 18, ¶ 8.

101 Claimant Methanex Corporation’s Reply to the Article 1128 Submissions of the Governments of Canada and Mexico (Methanex Corp. v. U.S.) (Apr. 23, 2004) ¶ 11.

102 Supra note 78 ¶ 332.

103 Supra note 25, ¶ 93.

104 Id. ¶¶ 87-88.

105 Supra note 10, ¶ 194.

106 Supra note 90, ¶ 114.

107 Supra note 10, ¶ 294.

108 Supra note 15, ¶ 255.

109 Supra note 10, ¶ 154.

110 Supra note 18, ¶ 11.

111 See e.g. Grand River supra note 63, ¶ 65.

1   2   3

The database is protected by copyright © 2016
send message

    Main page