Arbitration Under the North American Free Trade Agreement

Abstract

Arbitration occupies a privileged place among the dispute resolution methods in the North American Free Trade Agreement (NAFTA).1 At the public level, arbitration plays an important role in the general dispute resolution provisions for disputes between State Parties contained in Chapter 20 of the NAFTA.2 With respect to private commercial disputes within the Free Trade Area, the Agreement imposes an obligation on NAFTA Parties to encourage and facilitate, to the maximum extent possible, the use of arbitration and other means of alternative dispute resolution of international commercial disputes between private parties.3 However, it is in its Chapter 11 on investment that the NAFTA creates the most important and far-reaching role for arbitration. Chapter 11 of the NAFTA creates an innovative regime for the resolution of a broad scope of investment disputes between Parties to the Agreement and investors of another Party. While many details regarding its breadth of application, operation and effectiveness are yet to be explored and determined, Chapter 11 represents a remarkable tool for private investors. It provides for guaranteed access to international commercial arbitration, which, despite a number of modifications and exceptions to harmonize procedures and protect certain interests of the State Parties, offers many advantages to investors and enhances the security of their investments. Early experience indicates that this new arbitral regime may offer some surprises and its application and effects may extend beyond original expectations. Although this regime is still in its early days, it appears likely to be used frequently and to contribute substantially to the development of arbitration in investor-state disputes.