June 02, 2015
The steady growth of cross-border investment activity in recent years has led to a rise in legal battles between investors and foreign governments over asset ownership claims. In order to ensure fair and transparent adjudication in the event of disputes, foreign investors increasingly include dispute resolution terms in their contracts, stipulating that disagreements must be settled by international tribunals. Torys partner John Terry weighed in on this development in a Listed magazine piece. Below is an excerpt of the article.
But it wasn’t until the mid-1990s that companies began making significant use of the system. The catalyst, oddly enough, was the North American Free Trade Agreement and its Chapter 11 section requiring disputes between investors and countries to be sorted out by arbitration tribunals.
“When NAFTA came into force, the U.S. and Canada didn’t pay much attention to Chapter 11,” says John Terry, a partner at Torys LLP. “They were thinking, this is just here for Mexico.” But everyone was surprised by the sudden spate of cases as investors realized that any court system, no matter how rich the country, could be subject to political interests.
Suddenly countries everywhere were looking to sign trade deals with dispute resolution provisions. There are now more than 3,000 such treaties, according to the European Parliamentary Research Service.
To read the full article, click here.