international trade law and aboriginal-law (part 1)

Free-Trade / Fair TradeFrom the 20th Century to 21st Century

Part I

Second Conference in International Inter-Tribal TradeThompson Rivers University - Faculty of LawKamloops, BC - November 12, 2016Michael Woods, Partner – Woods LaFortune LLP

Woods, LaFortune LLPWoods, LaFortune LLP is  an  innovative,  flexible  and  proactively  cost-effective  boutique law  firm  that  focuses  on  international  trade  and  business,  investment,  customs, government procurement and government relations.  We provide a wide range of services to our clients including advocacy before domestic and international courts and tribunals, strategic advice and analysis, business planning and analytical research.

Michael Woodswoods@wl-tradelaw.com 613.355.0382

www.wl-tradelaw.com

From the 20th Century to the 21st Century

“There was a time in this fair land when the railroad did not runWhen the wild majestic mountains stood alone against the sunLong  before  the  white  man  and long before the wheelWhen  the  green  dark  forest  was too silent to be real”

Gordon Lightfoot

Free Trade – Fair Trade“The ground on which we stand is sacred ground. It is the dust and blood of our ancestors.”

Chief Plenty Coups, Crow (1848-1932)

Free Trade – Fair Trade“Suppose  a  white  man  should  come  to  me  and  say, Joseph, I like your horses. I want to buy them.I say to him, no, my horses suit me; I will not sell them.Then  he  goes  to  my  neighbor  and  he  says,  pay  me money, and I will sell you Joseph's horses.The white man returns to me and says,  Joseph,  I have bought your horses and you must let me have them.If we sold our lands to the government, this is the way they bought them.”

Chief Joseph, Nez Perce (1840-1904)

Free Trade – Fair Trade• Free Trade Agreement

“An agreement among two or more countries (more specifically, customs territories) to drop all internal trade barriers as among the countries. Each party to an FTA, however, retains its own

separate schedule of tariffs for imports from third countries, thus making the FTA a less economically integrated entity than a customs union.

[…] The North American Free Trade Agreement (NAFTA) is the

quintessential example of a FTA.”Raj Bhala, 

Dictionary of International Trade Law

What is Free Trade?• Economic Strategy and Doctrine

• Free  exchange  of  goods  and services and investment

• Assumption:  the  more  country exchange,  (goods,  services, capital)  the  more  they  creates wealth

• Requires elimination of barriers to trade

• Comparative advantage

What is Free Trade?Arguments in favour:• Promotes peace and economic development• Encourage competitiveness• Creates employment• Increases global wealth

What is Free Trade?Arguments against:• Employment in areas that are less effective will disappear

• The opening of global market can create an important adjustment • In exchange, a much larger global wealth is created. Some indicate that this wealth  allows  to mitigate  the negative  effect  of  job  loss  in  areas that a relatively less effective.

• Opening of markets – painful adjustments, employment threatened. 

What is Free Trade?Arguments against:• Foods security•Protection of Environment•Developing countries exploited (North-South) 

KEY GATT Articles• Article I – Most Favoured Nation (MFN)• Articles II – Tariff Concessions• Articles III – National Treatment• Articles XI – Elimination of Import /                          Export Restriction• Articles XX – General Exceptions• Articles XXIII – Dispute settlement• Articles XXIV – Customs Unions / FTAs

History of Free Trade• 21st Century:

• RTA made their apparition in the late 20th Century, but by the  21st  ,  they  were  dominating  as  the  go  to  trade agreement

• NAFTA, came into force in Jan 1, 1994• Asia Pacific Trade Agreement – APTA, came into for Jan 1, 2002• EU-US TTIP – still under negotiation• EU-Canada (CETA)  – provisional application 2017• Trans-Pacific Partnership (TPP) – still under negotiation

From the 20th Century to the 21st Century

NAFTA

The North American Free Trade Agreement - (NAFTA)

• Tri-lateral free trade agreement• Binding upon U.S.A., Canada and Mexico (“the Parties”)• For U.S. and Canada, extension of pre-existing FTA• Coverage:

• Goods (Tariff and Non-Tariff)• Investments• IP rights• Services• Government Procurement

What is the NAFTA?• A snapshot of its scope:

• In  1993,  trilateral  trade  within  the  North  American  region  was US$288  billion.    In  2014,  Canadian’s  total  trilateral  merchandise  trade exceeded US$1.12 trillion.*

• As of 2014, the prosperity and development of the North American economy has more than doubled  in size since 1994. The combined gross  domestic  product  (GDP)  for  Canada,  the  U.S.,  and  Mexico surpassed US$20.0 trillion  in 2014 up from nearly US$8.0 trillion  in 1993.*

   *Global Affairs Canada

What is the NAFTA?• A snapshot of its scope (continued):

• Created world’s largest free trade area• Links 450 million people producing $17 trillion in goods and services*• U.S. had $918 billion in two-way trade in goods and services with its

NAFTA partners in 2010 alone*

*Office of the U.S.T.R.

What is the NAFTA?• What is in the NAFTA?

• National Treatment•Most-Favoured-Nation Treatment• Tariff Elimination• Import and Export Restrictions• Investment provisions

NAFTA – A Comprehensive Protection Plan

NAFTA also provides:• A reduction of trade barriers• Creation an expanded market for goods and services produced in North America

• Implementation of intellectual-property protections• Creation of dispute-resolution mechanisms• Implementation of regional labor and environmental safeguards

NAFTA Chapter 11• Designed to:

• Establish a more stable and predictable• Enhance prosperity by increasing FDI• Ensure that investment policies are held to uniform standards

NAFTA Chapter 11• Mechanism:

• Establish  obligations  for  the  Parties’  treatment  of NAFTA investors and their investments

• Investors  can  seek  to  have  these  standards  enforced  by bringing a claim under Ch. 11

•Where a Tribunal determines that Ch. 11’s standards been breached,  the  investor  may  be  entitled  to  recover damages

NAFTA Chapter 11 Claim Procedure

• Standing:• In  order  to  commence  a  Ch.  Claim,  a  party  must  be  an “investor of a Party”

• Can  be  any  citizen  (corporate  or  individual)  of  any  of the  three  countries, who has  an  investment  in  one of the other countries

NAFTA Chapter 11 Claim Procedure

• Consent to arbitration and jurisdiction:• NAFTA  Parties  bound  by  general  consent  to  Arbitrate  in Article 1122

• Therefore,  an  investor  need  only  bring  a  claim  to commence arbitration

•Claimant  must  not  pursue  other  judicial  or  quasi-judicial remedies, other  than  for  injunctive and other extraordinary relief

Article 1102 – National Treatment

•Article 1102: National Treatment“Each Party shall accord to investors of another Party treatment  no  less  favorable  than  that  it  accords,  in like circumstances, to  its own investors with respect to  the  establishment,  acquisition,  expansion, management,  conduct,  operation  and  sale  or  other disposition of investments.”

Article 1102 – National Treatment

•Same protection is extended in 1102(2) to “investments of investors”- Article 1102 requires a host state to provide NAFTA investors and  investments with treatment that  is no less  favorable  than  the  treatment  they  provide  to domestic  investors  and  investments  in  like circumstances.

Article 1102 – National Treatment

1. Treatment “no less favorable”-  Host  state  must  provide  to  qualifying  NAFTA investors/investments  treatment  that  is  at  least  as advantageous  as  that  provided  to  its  own investors/investments

Article 1102 – National Treatment

2. In “like circumstances”- To trigger 1102 protection, NAFTA investor/investment must be in “like circumstances” to a domestic investor/investment receiving more favorable treatment:

- For example:- Same industry- Same economic sector- In direct competition

Article 1102 – National Treatment

3. With respect to the establishment, etc.- Treatment complained of must concern any of the enumerated actions related to the investment:

- Establishment- Acquisition- Expansion- Management- Conduct- Operation- Sale or other disposition

Article 1103 – MFN Treatment•Article 1103: Most-Favored Nation (MFN)

“Each Party shall accord to investors of another Party treatment  no  less  favorable  than  that  it  accords,  in like circumstances, to investors of any other Party or of  a  non-Party  with  respect  to  the  establishment, acquisition,  expansion,  management,  conduct, operation,  and  sale  or  other  disposition  of investments.”

Article 1103 – MFN Treatment• Same protection is extended in 1103(2) to “investments of investors”• Imposes the same obligation upon NAFTA Parties as Article 1102, but extends the comparators beyond domestic investors and investments to third-party investors and investments as well

Article 1103 – MFN TreatmentSame principles apply as in Art. 1102, except that group  of  possible  comparators  is  broadened  to include not only domestic  investors but  investors of other non-Parties as well.

Article 1105 – Minimum Standard of Treatment

•Article 1105: Minimum Standard of Treatment

“Each  Party  accord  to  investments  of  investors  of another  Party  treatment  in  accordance  with international  law,  including  fair  and  equitable  and full protection and security.”

Article 1105 – Minimum Standard of Treatment

• This  obligation  imposes  an  absolute  (rather  than comparative, as in 1102, and 1103) baseline with respect to the standard of acceptable treatment that must be provided to foreign investors and their investments, which includes:

• Treatment in accordance with international law • Fair and equitable treatment• Full protection and security

Article 1105 – Minimum Standard of Treatment

Treatment in accordance with international law :•Denial of justice, arbitrary • grossly unfair treatment•outright and unjustified repudiation of obligations)

Article 1105 – Minimum Standard of Treatment

Fair and equitable treatment:•Detrimental reliance upon legitimate expectations

•Certainty, transparency and stability of host state’s regulatory regime

Article 1105 – Minimum Standard of Treatment

Full protection and security:•Protection from discriminatory treatment•Government’s adherence to its own laws and regulations

Article 1106 –Performance Requirements

Article 1106 – Performance Requirements“ No Party may impose or enforce any of the following requirements, or enforce any commitment or undertaking, with respect to the establishment, acquisition, expansion, management, conduct or operation of an investment of an investor of a Party or of a non-Party in its territory:• To export a given level or percentage of goods or services;• To achieve a given level or percentage of domestic content;• To purchase, use or accord a preference to goods produced or services provided

in its territory, or to purchase goods produced or services provided by persons in its territory

• […]”

Article 1106 –Performance Requirements

“Performance requirements” refers to an array of requirements put in place by a host state concerning the performance of foreign-owned enterprises in its territory.• Art. 1106 sets out those performance requirements that are

prohibited under NAFTA, as well as a list of exceptions.

Article 1110 – Expropriation and Compensation

• Article 1110: Expropriation and Compensation

“No party may directly or indirectly nationalize or expropriate an investment of an investor of another Party in its territory or take a measure tantamount to nationalization or expropriation of such an investment (“expropriation”), except:(a) for a public purpose;(b) on a non-discriminatory basis;(c) in accordance with due process of law and Article 1105(1); and (d) on payment of compensation in accordance with paragraphs 2 through 6.”

Article 1110 – Expropriation and Compensation

Nationalization  :  The  state  takes  ownership  of  property  or investments across a sector or industry

Direct Expropriation : Taking physical possession of an investment or property by transfer of title or seizure of property

Indirect Expropriation:  Taking measures which have  the effect of destroying  the  ability  to manage  and  control  the  investment,  or have  the  effect  of  depreciating  substantially  the  value  of  the investment

NAFTA EXEMPTIONSIndigenous  peoples  were  not  present  at  the  NAFTA  negotiations  but Canada,  USA,  &  Mexico  each    inserted  specific  language  or  "non-conforming measures" within NAFTA that exempt specific sectors from operation of the treaty. 

Canada -   Annex II (reservations or exemptions) exempted "Aboriginal Affairs” sector Canada reserves the right to deny investors or "another Party" the rights or preferences provided to "aboriginal peoples" in five areas:  national  treatment,  most-favored-nation  treatment,  local presence,  performance  requirements,  and  senior  management  and boards of directors.

NAFTA EXEMPTIONSUS  exemption  under  "Minority  Affairs”  included  indigenous interests  within  its  borders  with  non-indigenous  minorities  and reserves  the  right  to  adopt  or  maintain  rights  or  preferences  to what  are  termed  "socially  or  economically  disadvantaged minorities."  The  USA  reserves  these  rights  in  the  same  areas  as Canada with the exception of MFN. Mexico also exempted sector "Minority Affairs," obscuring the fact that only 10% of  its minority population can arguably be  termed non-indigenous.    Reserved  these  rights  in  only  the  two  areas  of national treatment and local presence.