The interpretation of Article 1105 of the North American Free Trade Agreement or the NAFTA has generated and will generate many controversies regarding the meaning of its first paragraph. Given this provision's open language, the controversies and doubts are understandable. According to Meg N. Kinnear, Andrea Bjorklund and John Hannaford, the positions regarding the notion of the objective standard can be summarized as follows: states that are traditionally capital exporters support the notion of an objective standard implying a minimal level of protection for their individuals investing abroad. On the other hand, less developed states support the theory according to which the protection provided to foreign investors should, at most, attain the level of protection provided to nationals of the host country. The difficulty of the NAFTA's provision lies in its novelty (which implies interpretations and clarifications) and the determination of its place among other standards and concepts.
[...] To this respect the notions of legal certainty and stability are elements that are inherent to an investment friendly environment. Only this kind of environment is able to attract investments in the long run. Thus, the definition and protection of a stable legal framework is a precious tool to both parties in an investment operation. Bibliography Kinnear, Bjorklund and Hannaford, Investment under NAFTA (2006) Mexico v. Metalclad, Br. Columbia Supreme Court (2001 Note of Interpretation dated July Second opinion of Sir Robert Jennings, Methanex (Sept. 2001) Letter from Mexican Government, Methanex (Feb. [...]
[...] Once again, the difficulty lies in the fact that the Notes of Interpretation may be viewed as expressing policy concerns and choices (which was clearly the case for the 2001 Notes) and may have more the nature of amendments rather than the nature of simple clarifications. In order to preserve legal certainty, arbitrators should not take into account the Notes of Interpretation issued after the case in their hands has been filled. This position is also the only way to preserve the independence of arbitrators and their status of a neutral entity in dispute resolution. More important, this approach allows a just balance between the parties' respective interests. It also allows a long-term vision of the parties' relationship. [...]
[...] The latter being binding, the arbitrators should be limited by it. Indeed, the Notes of Interpretation are an integral part of the NAFTA mechanism. Allowing arbitrators to not take into account the Notes would be tantamount to allow them to not respect the NAFTA mechanics. Nevertheless, in order to limit the impact of such Notes of Interpretation and for legal certainty's sake, it seems necessary that the conclusions derived from the Notes of Interpretation are limited to cases filled after their date of issuance and not to pending cases. [...]
[...] This interpretation sets clearly a reference to the notion of an objective minimum standard of treatment. As underlined by Dolzer, given the political and historical background of Article 1105, it is rather meant to set up an objective standard below which States could not go, a floor below which treatment of foreign investors must not fall even if a given state could not be accused of having a discriminatory position. In the same sense, while defining the “international component of Article 1105, Jennings refers to BITs language. [...]
[...] 2002) Gantz, Case Note on Pope & Talbot v. Canada AJIL 937 (2003) Center for International Environmental Law, Issue Brief (August 2003) Response by Todd Weiler (Dec. 2003) Waste Management v. Mexico, Final Award (Apr 2004) US v. Chile, Free Trade Agreement, Article 10.4 (2003) ASIL Proceedings, Mar. 13- R. [...]
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