A General Investment Agreement in the WTO? Lessons from Chapter 11 of NAFTA and the OECD Multilateral Agreement on Investment

At the recent Ministerial Conference at Doha in Qatar, the WTO member states agreed to commence investment negotiations at the next Ministerial Conference in 2003. Yet it was only in 1998 that similar negotiations in the OECD towards a Multilateral Agreement on Investment (MAI) ended without result. The MAI provisions in turn were heavily influenced by the detailed investment provisions in Chapter 11 of the North American Free Trade Agreement. This article examines the experience of both NAFTA Chapter 11 and the MAI to draw some suggestions for the investment negotiations within the WTO. The article puts forward two fundamental challenges negotiations face in creating investment rules in the WTO. Firstly, it is argued that a WTO agreement must reflect the interests of developing countries. In this respect, WTO negotiators should avoid a MAI-type scenario of simply replicating the very strong investment liberalization and protection provisions of NAFTA Chapter 11. The article examines the way in which host states typically regulate foreign investment as a means to suggest realistic ways in which to craft an investment agreement broadly reflective of both North and South members of the WTO. The article also puts forward a second formidable challenge for WTO negotiators. This is to address some of the concerning jurisprudence that has emerged from the NAFTA Chapter 11 case law. The article focuses on the way in which some arbitral cases have extended the coverage of NAFTA Chapter 11 beyond de jure discriminatory measures to encompass seemingly legitimate regulatory provisions with little adverse impact on foreign investors. The paper concludes with a modest but realistic set of recommendations for a WTO investment agreement.