Canada: Arbitral Dispute Resolution In Flux: US Positions In NAFTA Renegotiations

On May 18, 2017, the United States served notice on Mexico and Canada that it intended to renegotiate the North American Free Trade Agreement ("NAFTA"). The first round of negotiations is scheduled to begin in Washington D.C. on August 16th continuing to August 20th.

On July 17, 2017 the US Trade Representative ("USTR") released a document entitled "Summary of Objectives for the NAFTA Renegotiation". This document sets out the goals of the United States for revisions to NAFTA (the "US Objectives"). The US Objectives are subdivided into different categories, with each one a major component of the NAFTA negotiations.

In response to the release of the US Objectives, the Canadian government has decided to extend indefinitely the consultation period which was set to expire on July 18, 2017. Any Canadian person or organization is free to provide comment on Canada's objectives at this time.

Overview of the US Objectives

Overall, the US Objectives reflect a tweaking of NAFTA rather than full overhaul as Donald Trump had suggested as a Presidential candidate on the campaign trail. In many cases, the proposed changes echo the provisions of the Trans-Pacific Partnership ("TPP"), an agreement the United States pulled out of shortly after Trump took office. Further, the US Objectives generally seem heavily tilted towards addressing perceived imbalances and issues regarding the US trade relationship with Mexico. Many of the provisions relate to matters in which there is already a great deal of coherence between the stated US position, and current Canadian law.

However, several points in the US Objectives demonstrate either a lack of understanding of the theory and practice of international trade, demonstrate a surprising inconsistency, or directly conflict with what have historically been fundamental Canadian and even US positions.

Understanding the US Objectives is essential for the Canadian government to negotiate an outcome consistent with its goals. Understanding these US objectives is also essential for any stakeholders with an interest in either of the two major arbitral processes available to individuals and businesses under NAFTA: Chapter 11 Investor-State Arbitration and Chapter 19 Dispute Resolution Panels.

Specific Provisions

1. Investment Protection and ISDS

The US Objectives are relatively silent on investment protection and ISDS mechanisms, providing only two points of interest. First, they speak of securing more rights for US investors in NAFTA countries, while simultaneously ensuring that foreign investors are not granted greater substantive rights in the United States than US investors. Second, they speak of reducing or eliminating barriers to US investment in all sectors in the NAFTA countries.

It is highly unlikely that either Canada or Mexico will agree to an alteration in the investment protection provisions that would see substantial gains for US investors in their territories without any form of corresponding or reciprocal gains for their own investors.

What is more likely is that the investment protection provisions and ISDS mechanisms will remain relatively stable. The current rules certainly have not been operating to the detriment of US investors and, historically, the United States government has been a major champion of the forms of investment protection provisions set out in NAFTA. Those seeking to anticipate what tweaks the United States may seek might look to the investment chapter negotiated under the TPP.

There is likely to be an increased emphasis on involvement of civil society in investment arbitration disputes. This may include mandatory transparency in process and documents and the opportunity to file intervenor or amicus briefs. This would fit with the US Objectives' desire to see dedicated chapters on labour and the environment – with an emphasis on ensuring that the new NAFTA looks beyond just trade issues. This also dovetails with increasing pressure in Canada and the United States towards greater public involvement in such cases.

This also fits with the approach taken by Canada and the EU in CETA. What may be interesting is whether Canada attempts to sell the United States and Mexico on buying into another aspect of CETA that was enacted to achieve these goals: the "Investment Court" concept. The intention of the EU has been to expand this concept into a truly multilateral venue that would replace ad hoc arbitration with a system more analogous to a court – which can develop its own binding appellate authority.

However, the US track record with supranational judicial bodies is far from enthusiastic. Given the nationalistic drum that was beaten heavily by the Trump campaign, and by the current leaders of the USTR, it appears highly unlikely that such an accommodation would be made.

The second US Objective in the investment sphere, improved market access for US investors, is also unlikely to bring many Canadian changes. Canada has traditionally always strongly protected the Investment Canada Act, provincial securities laws requiring Canadian board members and representation on Canadian corporations, and the protection of certain industries (especially the cultural industries).

Given that Canada has recently made certain concessions, such as a major increase in the Investment Canada Act threshold for reviewing transactions, any further concessions would likely be difficult.

2. Elimination of Chapter 19 and Trade Remedies

Under NAFTA Chapter 19, member nations benefit from a dispute resolution mechanism that may be triggered by aggrieved companies, providing an alternative to judicial review by domestic courts in antidumping and countervailing duty cases. Instead, binational panels would hear petitions and render judgements, binding upon NAFTA governments.

While US firms were initially active as applicants, having instituted approximately fifty percent of hearings brought before binational dispute resolution panels in the first two years of NAFTA coming into force, the United States has nonetheless been primarily on the receiving end of dispute resolution proceedings, having acted as respondent in approximately two thirds of matters instituted under NAFTA Chapter 19.

Notably, the binational panels established under NAFTA Chapter 19 were convened for the Softwood Lumber disputes, whereby Canadian softwood lumber exporters contested duties imposed by the US Department of Commerce ("DoC"). On August 13, 2003, a NAFTA binational panel found that the benefits granted to Canadian exporters were not sufficient to constitute a subsidy, such that imposed duties were unjustified. NAFTA panels later rejected, on five separate occasions, the calculated duties suggested by the DoC.

Recently, however, the softwood lumber dispute has reared its ugly head. On April 24, 2017, the DoC made a preliminary determination that countervailable subsidies are being provided to producers and exporters of certain softwood lumber products from Canada; a final determination on the subject is expected no later than September 6, 2017. It would be expected that imposed duties would be subject to the dispute resolution process provided by NAFTA Chapter 19, which had previously been used to great success by Canadian softwood lumber exporters. It is therefore unsurprising that the USTR has expressed its desire to eliminate the NAFTA Chapter 19 dispute settlement mechanism.

In the negotiation of the Canada-US Free Trade Agreement, Canada's key objective was the elimination of trade remedy cases with the United States, a laudable and eminently logical goal for a true free trade area. The binational panel system, which continues today under NAFTA, was a second-best solution. Canada has made clear that this was essential to trading confidence, and that Canada would not sign a NAFTA which left Canadian exporters to the unreviewable mercy of US courts. Canada may well have to re-examine its attachment to Chapter 19.


The US Objectives provide a window into the potential outcomes of NAFTA negotiations and provide considerable insight for stakeholders that have an interest in the outcome of those negotiations. With the start of negotiations rapidly approaching, time is of the essence for any interested parties to make representations to the government regarding their views on the components of NAFTA which they wish to see addressed.

To view original article, please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions