Lawrence Herman Authors NAFTA Trade Disputes Study for C.D. Howe Institute
On July 22, 2010, Trend Spotting: NAFTA Disputes After Fifteen Years, a study authored by trade lawyer Lawrence Herman was published by the C.D. Howe Institute.
Cross-border Investment disputes have supplanted trade disputes as the main focus of legal actions under the North American Free Trade Agreement (NAFTA). Author Lawrence Herman finds that a growing number of these investment disputes entail challenges by American investors against Canada's provincial, as opposed to federal, laws and regulations. Thus, important constitutional issues need clarifying between Ottawa and the provinces. “As party to the treaty, Ottawa must carry the ball in court,” notes Mr. Herman, “but who is really responsible?” Who pays when the provinces -- or municipalities – run afoul of Ottawa’s multilateral commitments?
Mr. Herman observes that there has been a significant cooling down of so-called NAFTA “trade remedy” disputes involving anti-dumping and countervailing duties, and the emergence of NAFTA investment claims as the focus of the action.
While the Canadian federal government, as the official signatory of the NAFTA, is the respondent in these cases, it is the provinces whose actions are being challenged for allegedly offending NAFTA guarantees. There is no statutory provision or other law that provides authority for Ottawa to recover from a provincial government any amounts paid out to a successful complainant.
Given these unresolved questions, writes Mr. Herman, a federal-provincial understanding settling responsibility for paying NAFTA awards seems the best solution. A pragmatic arrangement could help resolve what appears to be an increasing number of potentially costly challenges to provincial and municipal actions.