Wednesday, April 29, 2009

Second Front on Mexico Trucks

A Mexican truckers association has filed a claim under Chapter 11 of the NAFTA seeking damages for the U.S. failure to open its market to Mexico-domiciled truckers.  

The original notice of a demand for arbitration was filed April 2, 2009.  [Tip to Todd at for the document.]  Under the NAFTA rules, the notice creates an obligation for the parties to consult on the issue.  This article provides some background.

The claim here is that the moratorium violates key provisions of Chapter 11 including national treatment, most-favored-nation treatment, and the minimum standard of treatment under customary international law (sometimes summarized as "fair and equitable treatment.").  National treatment seems clear:  Mexican carriers are barred from the U.S. market by virtue of their status as Mexican.  Most-favored-nation treatment is equally clear: Canadian carriers are permitted to operate in the U.S.  The minimum standard issue is more amorphous and harder to get a quick read on.  But, the claimant only needs to prove one violation, not all three.

The notice asserts that Mexico is harmed to the tune of approximately $2 billion per year and states it is working on quantifying the damages to the carriers.

This is an interesting case in that it applies the Chapter 11 protections provided to investors to what had previously been handled as a state-to-state dispute under Chapter 20.  The prior Chapter 20 process resulted in a decision favoring Mexico under which Mexico has no imposed retaliatory (really "offsetting") duties on certain U.S. products entering Mexico.  In the Chapter 11 case, it seems liability is all but assured.  The Chapter 20 decision went against the U.S.  Moreover, in the list of reservations in the NAFTA itself, the U.S. all but admits that the moratorium on Mexican trucks in the U.S. interferes with Mexican investment in a way that is inconsistent with the Agreement.

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