Research On The Investor-State Dispute Settlement Mechanism In United States

On December 11,2019,the United States,Mexico and Canada signed a revised version of the United States-Mexico-Canada Agreement(USMCA)in Mexico City,which is considered to be a version 2.0 of North American Free Trade Agreement(NAFTA)in the 21 st century.One of the most striking changes in the new agreement is the adjustment and reform of the investor-state dispute settlement mechanism(ISDS).Based on the reform attempts of ISDS mechanism in the international community,the trend of the development of ISDS,its characteristics in USMCA and several possible enlightenment to China will be discussed in the following parts in this article.The first chapter outlines the trend of the development of the ISDS mechanism,from its birth to its vigorous development in the international community,to the challenges and reform demands of various countries in the world,as well as some existing reform attempts in the international,regional and national level.The current ISDS mechanism has such drawbacks as inconsistency in arbitration awards,favoring investors while neglecting the interests of the host state,and inherent procedural defects of international investment arbitration.Based on the different standpoints of various countries in the world on how to change the ISDS mechanism,several options are proposed to cope with its drawbacks,such as the establishment of a international investment court,introducing measures to enhance efficiency and transparency during the arbitration process under the present mechanism and a complete rejection on the existing mechanism.The second chapter mainly introduces a prominent feature of the ISDS mechanism in USMCA,which is the diversified mechanism arrangement to meet the different interest demands of the three contracting countries.This chapter is mainly divided into three sections.The first section focuses on the influence of NAFTA on the direct investment among those three countries and on the relevant investment arbitration practices.As a result of the respectively different impact on those three countries of the arbitration practice under NAFTA,standpoints of USA,Mexico and Canada to change the ISDS mechanism under NATFA will be discussed in detail in the second section,in combination with their attempts to reform this mechanism in recent years.Due to the different demands of these three countries,USMCA allows Canada and the United States to opt out the ISDS mechanism.Investors are divided into two different categories,those related to covered government contracts and the rest,under the ISDS mechanism between United States and Mexico,according to which the scope of investors,the disputes that could be submitted to arbitration and relevant procedural arrangements in arbitration are different.Special provisions vis-à-vis non-market economy countries will be addressed in the third chapter,which is mainly divided into three sections.The first section focuses on the restrictions put on the rights of investors from non-market economy countries to avail themselves of the ISDS mechanism under USMCA and objectives pursued by introducing such provisions.Restrictions on the freedom of USMCA contracting parties to enter into free trade agreements with non-market economy countries will be commented as well in this section and so will be the objectives of this restriction.In the second section,the criteria to evaluate the market place of a third country in relevant international organizations,such as UNCTAD,WTO and World Bank,will be quoted.Due to the lack of a clear and universal legal definition of the expression non-market economy in the international level,USMCA endows the three contracting countries with arbitrary power to evaluate the market economy status of a third country on the basis of their respective domestic trade relief law.Given the fact that some political factors could be included in the criteria in the process of anti-dumping investigations,the third country and its investors are at a disadvantage.Therefore,the third section will focus on the potential influence of such provisions on contracting parties and on third countries.Latent impacts of such provisions on international investment law will be addressed as well in this section.Since the investment arbitration practice in recent years has exercised negative effects on the right to regulate of those three countries on its respective public interests,including protection on environment,improvement on labor rights and protections and public sanitary interests,the fourth chapter of this article puts emphasis on the efforts made by the ISDS mechanism in USMCA to strike a balance between the protection on investors and the maintenance of the host country’s right to regulate.USMCA strikes a balance between safeguarding the state’s regulatory power on its public interests and protecting investors by means of limiting the scope of investors,narrowing the types of disputes that can be submitted to investment arbitration and appropriately expanding the proportion of local remedies in the ISDS mechanism.The last chapter of the article will address the enlightenment and possible solutions brought to China by the USMCA.First of all,in the negotiation of new multilateral free trade agreement,it would be helpful to introduce a multi-mechanism arrangement like USMCA so as to balance the interests of all parties and to meet the interests of all parties.Detailed provisions should be introduced to ensure a proper transition between the old agreement and the new one.Secondly,in view of the special provisions vis-à-vis non-market economy countries,China should take an active part in dealing with this issue in the process of investigation initiated by other countries under their respective national trade remedy laws and improve the market system in order to gain greater benefits in international trade and provide more protection to Chinese investors abroad.In addition,in the future process of negotiating bilateral investment agreements or free trade agreements,for the sake of protecting the regulatory rights of our country,it would be useful to limit the types of investment disputes that can be submitted to arbitration and to put procedural restrictions prior to the submission of investment disputes to arbitration.