Investor-State Dispute Settlement (ISDS) is a standard component of most multilateral free-trade and investment regimes as a way of encouraging cross-border investment. However, the concept has long been mired in controversy, primarily due to its alleged transgression against national sovereignty and domestic regulatory powers. As ideas such as free trade and globalization come under increasing scrutiny in the post-Great Recession era, these controversies have not only rendered ISDS itself politically vulnerable, but also came to jeopardize the success and survival of free-trade and investment regimes that commonly contain ISDS provisions. A salient example of the increasing political risks carried by ISDS is the renegotiation of the North American Free Trade Agreement (NAFTA), during which ISDS reform became a major point of contention between Canadian, Mexican, and U.S. negotiators. This Comment first presents an overview and case studies regarding the existing ISDS mechanism contained within NAFTA Chapter 11, before moving onto an examination of its counterpart in the Chapter 14 of the United States-Mexico-Canada Agreement (USMCA). While USMCA Chapter 14 is narrower in scope compared to its NAFTA predecessor, it strikes a much-needed balance between reducing the political risks that have long plagued the traditional ISDS model and encouraging cross-border investment from the United States into Mexico, the latter being a developing country which uses ISDS to attract and reassure foreign investors. In sum, while questions regarding further revisions and potential alternatives remain, the USMCA's approach towards ISDS may well prove to be a viable template for the next generation of ISDS provisions.
Jerry L. Lai,
A Tale of Two Treaties: A Study of NAFTA and the USMCA's Investor-State Dispute Settlement Mechanisms,
Emory Int'l L. Rev.
Available at: https://scholarlycommons.law.emory.edu/eilr/vol35/iss2/3