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The White House Announces the 'New NAFTA'

Monthly Wrap: News, insights and analysis from Arent Fox's International Arbitration team.

The White House Announces the 'New NAFTA'

Jeffrey R. Makin

On October 1, 2018, the White House issued a Fact Sheet announcing that a new United States-Mexico-Canada Agreement (USMCA) had been negotiated to replace the North American Free Trade Agreement (NAFTA). Chapter 14 (Investment) of the USMCA has significant implications for foreign investments and investment disputes. To name a few, Canada is not a party to Annex 14-D (Mexico-United States Investment Disputes) and therefore has not consented to investor-state arbitration under the USMCA. Additionally, Chapter 14 limits who can be a claimant, and Annex 14-D limits the bases for investment claims. While there are provisions that grandfather pending NAFTA claims and allow for legacy NAFTA claims, investors should evaluate their options and take steps to protect their rights under NAFTA and their investments going forward.

Read the White House Fact Sheet

Read the USMCA Text

Australia Ratifies CPTPP Allowing It To Enter Into Force

Lee M. Caplan

With the ratification of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) by Australia at the end of October, the mega-trade agreement is set to enter into force as between Australia, Canada, Mexico, New Zealand, Japan, and Singapore. Five other signatories to the agreement—Brunei, Chile, Malaysia, Peru, and Vietnam—have still to ratify the agreement. Under the CPTPP’s investment chapter, investors from one of the six countries to ratify the agreement will be entitled to bring an arbitration claim directly against another of these countries where it has an investment for a breach of the agreement’s investment protections. The CPTPP will enter into force at the end of December, 60 days from the date of Australia’s ratification of the agreement.

Read the CPTPP text here

ICJ Judges May No Longer Participate in Investor-State or Commercial Arbitration

Timothy J. Feighery

In his speech on the occasion of the 73rd Session of the United Nations General Assembly, Judge Abdulqawi Yusuf, President of the International Court of Justice, announced that “in light of [the Court’s] ever-increasing workload,” Members of the Court would no longer be able to serve as arbitrators in investor-State or commercial arbitrations. He stated that, exceptionally, Members could, if called upon by one or more States, serve as an arbitrator in an inter-State dispute; however, any such Member must obtain prior authorization in accordance with the Court’s mechanism, and may only so serve in one arbitration at a time.  Moreover, Members must decline appointments by States that are parties to any case before the ICJ. Judge Yusuf concluded that these rules were “essential to place beyond reproach the impartiality and independence of Judges in their exercise of their judicial functions.”

Read President Yusuf’s Entire Speech

ICJ Rules on Dispute Between Bolivia and Chile Concerning Obligation to Negotiate

Timothy J. Feighery

On October 1, 2018, almost five and a half years after it was filed, the ICJ issued its judgment in the case brought by Bolivia against Chile, in which Bolivia requested that the Court adjudge and declare that “Chile has the obligation to negotiate with Bolivia in order to reach an agreement granting Bolivia fully sovereign access to the Pacific Ocean.” Judgment, p. 31.  At the time of its independence from Spain in 1825, Bolivia had a coastline of over 4oo kilometers along the Pacific Ocean. However, it lost this territory to Chile in the 1879 “War of the Pacific,” and the resulting Truce Pact of April 4, 1884, done in Valparaiso, Chile. Since then, the issue of Bolivia’s access to the sea was discussed between the two States on numerous occasions, with no resolution.

Fundamentally, the issue brought by Bolivia before the Court was not whether Bolivia had a right to access to the sea, nor was it whether or not Chile was under an obligation to negotiate. Rather, the issue was more specific: whether or not Chile was under an obligation “to negotiate with Bolivia in order to reach agreement granting Bolivia a fully sovereign access to the Pacific Ocean.” Judgment, ¶ 175. To support its claim, Bolivia cited alleged bilateral agreements between the Parties over the years since the Truce Pact, unilateral acts on the part of Chile, provisions of the UN Charter and the Charter of the Organization of American States, and principles of acquiescence, estoppel and legitimate expectations.

The Court rejected each argument. The effort to invoke “legitimate expectations” was given particularly short shrift. The Court noted that while “references to legitimate expectations may be found in arbitral awards concerning disputes between a foreign investor and the host State that apply treaty clauses providing for fair and equitable treatment... [i]t does not follow from such references that there exists in general international law a principle that would give rise to an obligation on the basis of what could be considered a legitimate expectation.” In short, the court concluded while the evidence showed a willingness on the part of Chile to negotiate, it did not amount, separately or together, to an obligation to negotiate.

Review the Decision

Chile Seeks Arbitration With Lithium Producer Albemarle

Claudia D. Hartleben

After protracted negotiations between the Chilean state agency that oversees lithium mining in Chile’s Atacama salt flat and top producer Albemarle Corp, the state agency Corfo has decided to pursue arbitration of the contractual dispute before the International Chamber of Commerce. The dispute arises out of a 2016 contract signed between Corfo and Albemarle that grants the US-based miner extraction rights from Salar, the world’s richest lithium deposit. In exchange, Corfo requires Albemarle to offer up to 25 percent of its annual production capacity at a discounted rate to companies seeking to produce battery materials within Chile. The price for that discounted rate is the crux of disagreement between the parties. Additional information is available here and Corfo’s October 17, 2018, press release is available here.

Chile’s Draft Pro-Investment Law I Proceeds to a Vote

Claudia D. Hartleben

The Commission on Economy of the Chilean Chamber of Deputies approved a draft Pro-Investment Law I (Ley Pro-Inversión I), aimed at improving the regulatory environment for investments in Chile. The Ministry of Economy has lauded the text’s approval as a “great step” toward affording greater legal certainty, reduction of processing time and associated costs, and improving the information that is available to investors. The draft law will now move out of Commission for discussion and vote before the full Chamber of Deputies. The Ministry of Economy’s press release is available here. To date, Chile is party to 54 bilateral investment treaties, of which 37 are in force.
 
Also this month, the Chilean Mining Commission of the Chilean Chamber of Deputies approved a controversial measure that would declare SQM, one of the two largest lithium miners in Chile, as a company of national interest, which would make it susceptible to expropriation. More information is available here.

The Global Technology Dispute Resolution Council and the Silicon Valley Arbitration & Mediation Center Release Survey Results Regarding the Benefits of Arbitration for Technology Companies

Jeffrey R. Makin

The Silicon Valley Arbitration & Mediation Center recently highlighted the results of a survey of corporate counsel, law firm counsel, neutrals, and users in the technology sector. Survey respondents identified the top three problems with traditional, court-based litigation involving technology companies as: (1) cost, (2) time to resolution, and (3) inexperienced/unqualified judges and jurors. Survey respondents also identified the benefits of arbitration for technology companies as: (1) specialized/expert decision-making, (2) time to resolution, and (3) increased privacy/confidentiality.

Review the Survey Results

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