A Clash of Treaties: The Lawfulness of Countermeasures in International Trade Law and International Investment Law

Abstract

Countermeasures are part of customary international law and have been incorporated into the WTO as a mechanism to facilitate compliance. In the NAFTA sugar disputes, Mexico claimed that the measure in dispute was a countermeasure against a breach of NAFTA by the United States. Three US investors also claimed against Mexico under the investment chapter of NAFTA. All three ICSID tribunals held, for different reasons, that trade countermeasures affecting investor rights would be unlawful. Some of the tribunals’ reasoning that investors have direct rights could set up a clash between the trade and investment regimes. We argue that an authorized trade countermeasure should also be lawful in the investment law context. Coherence between the trade and investment regimes is essential in this age of global value chains in which investors are part of a complex trade network. We suggest ways to improve the jurisprudence and existing investment treaties.