Conflict of constitutional proportions: treaty power in constitutional law, and US federalism versus NAFTA Chapter 11

Abstract

Neo-liberal 'world constitutionalism' privileges the right to property for domestic owners and foreign investors against government expropriation. The North American Free Trade Agreement (NAFTA), a 1994 executive agreement between the USA, Canada and Mexico, is a typical example of such constitutionalism for direct and regulatory expropriations. But NAFTA concerns the rights of foreign investors suing a host nation. NAFTA's constitutionality, with regard to protecting the sovereignty of US States against the federal government's encroachments, is uncertain. Federalism as a constitutional process has been challenged by the US legal tradition's result-orientation towards private property rights. Police powers reserved by the States are undermined when State conduct is used by foreign investors (and cannot by domestic investors) to gain relief in NAFTA panel judgements. These judgements are significantly more plaintiff-friendly than are US takings doctrines in constitutional law. NAFTA cannot override the federalism provisions of the Constitution, but the States are penalised by the political process for their alleged NAFTA violation, which they never consented to honour in the first place. Federalism, once so exalted as a currency for constitutional revolution, has been compromised due to NAFTA's surging influence in making good on foreign, and not necessarily domestic, investors' expropriation arguments.