Monday, July 18, 2011

T. Boone Pickens Invokes NAFTA

According to this article, U.S.-based energy guy T. Boone Pickens feels that he has been unfairly cut out of a deal for the sale of electricity to Canada via wind production. I have no idea about the underlying facts, but I am always happy to see investors invoking the NAFTA Chapter 11 provisions, the corresponding investment provisions in other Free Trade Agreements, or free-standing bilateral investment treaties.

In the case of NAFTA, Mr. Pickens will need to prove that a Canadian governmental entity undertook a "measure" that violated a protection provided to U.S. or Mexican investors in Canada. Those protections include:

National Treatment: This means that the investor must receive treatment that is no less favorable than would be afforded to a similarly situated domestic investor.

Most Favored Nation Treatment: This means that the investor must receive treatment that is no less favorable than would be afforded to a similarly situated investor from any other country.

Minimum Standard: This means that the NAFTA parties must provide investors from other NAFTA countries treatment consistent with international law, including fair and equitable treatment. For American lawyers, this generally correlates to due process

Compensation for Expropriation: If a measure imposed by a NAFTA party directly or indirectly expropriates the investment of an investor from another party, is is "tantamount to nationalization or expropriation" of the investment, the investor is entitled to compensation unless an exception applies. Again, for American lawyers, this is comparable to fifth amendment takings law.

So, investors under NAFTA Chapter 11 and similar agreements have important rights. In the case of the NAFTA, these rights can be invoked through the Chapter 11 dispute settlement process. Here's wishing Mr. Pickens and Mesa Power the best of luck.

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