Since the end of the second world war, the United States has been at the forefront of free trade and economic globalisation. Presidents of both political parties are responsible for creating the global free trade architecture that exists today, including the WTO and NAFTA. The election of Donald J Trump as President, however, ushered in a significant policy shift. Echoing his campaign themes, in his address to the United Nations on 18 September 2017, for instance, President Trump criticised ‘multinational trade deals, unaccountable international tribunals, and powerful global bureaucracies’, and his administration has taken a number of concrete steps to withdraw from or re-negotiate key multilateral and bilateral trade agreements. For example, in January 2017, President Trump, withdrew the United States from the TPP, which had been signed by the United States and 11 other Pacific Rim countries during the Obama presidency. Following the withdrawal of the United States, the remaining signatories entered into a revised agreement called the CPTPP. This new agreement contains most of the provisions of the now defunct TPP but revised those that were a priority to the United States. Nevertheless, President Trump has reportedly instructed his international trade team to look into the possibility of the United States negotiating individual BITs with TPP signatories.
Additionally, President Trump recently announced that the United States had reached an agreement with Mexico and Canada to sign the USMCA, in place of NAFTA. If ratified as proposed, the new agreement would carry with it some significant alterations to the NAFTA investor-protection regime. For instance, the USMCA would eliminate the investor-state arbitration regime between Canada and Mexico, and Canada and the United States. Regarding the United States-Mexico regime, the ISDS mechanism would also be largely modified. Most investors would have neither protection against indirect expropriation, FET treatment, nor for pre-investment activities. In turn, claims based on direct expropriation, and the obligations to provide national treatment and MFN treatment during the course of the investment would remain available. Under the proposed USMCA, before filing an arbitration claim, most investors would need to exhaust claims before local courts, or pursue them for a minimum of 30 months, unless otherwise futile. In addition, claimants would need to give host states a 90-day notice period before submitting a claim to arbitration. Notably, however, some categories of investments would continue to have substantially the same protections as in NAFTA. The proposed USMCA specifically states that ‘covered sectors’, including oil and natural gas, and power generation services, with regard to ‘covered government contracts’, would still be able to assert claims alleging indirect expropriation and violations of FET. Additionally, these claimants would not need to pursue local remedies. Finally, the proposed USMCA text, as of October, 2018, notes that pending arbitration claims brought under NAFTA would not be affected by the new agreement. In addition, the USMCA clarifies that ‘legacy investments’, that is, investments made under NAFTA, would continue to be governed by the dispute settlement provisions and the protections of NAFTA for a three-year period. Thus, investors may continue to bring claims relating to legacy investments, as long as they are brought within three years following NAFTA’s termination.
Further, President Trump has also asked South Korea to renegotiate its bilateral FTA with the United States. The two countries reached an agreement on March 2018. The renegotiated agreement addresses a number of regulatory and implementation areas, especially concerning automobile exports.
In addition to the above efforts to withdraw from or renegotiate various bilateral and multilateral trade agreements, since early 2018, the Trump administration has imposed a series of new tariffs on various products that have led to highly contentious (and continuing) trade disputes with many of the United States’ leading trading partners. With the stated objectives of enhancing national security, and protecting American jobs and industry by abating the flood of cheap Chinese steel on the world market, the United States has implemented a number of restrictions on aluminum and steel imports against China as well as against many other countries, including major US allies in Europe and North America. The Trump administration has also imposed high tariffs against China - up to 25 per cent - on a variety of other goods such as fish, petroleum and chemicals. In turn, China has announced its own tariffs on US imports ranging from 15 per cent to 25 per cent on goods ranging from steel pipes to pork. This has translated into a back-and-forth ‘trade war’ between the two countries, with no foreseeable end as of October 2018. In addition, President Trump has threatened to withdraw the United States from the WTO, alleging that it treats the United States unfairly in disputes before the organisation. A new bill with this effect has allegedly been drafted but not delivered to Congress. On the other hand, on 7 September 2018, President Trump announced that he has started trade talks for an FTA with Japan.
In other trends, the United States remains a prominent jurisdiction for actions to enforce investment awards, including against sovereign debtors. Federal courts in the United States have demonstrated a lack of receptiveness to both procedural and tactical defenses to enforcement based on sovereign immunity, the standing of third-party assignees of award creditors and res judicata or statute of limitations defenses. The New York federal courts were at the nexus of efforts of foreign bondholders to recover against Argentina in actions resulting from its 2001 debt crisis and default. While many of Argentina’s creditors accepted substantial haircuts on their investments during the 2005 and 2010 bond swaps (the ‘exchange’ creditors), in recent years, the New York federal courts have issued a string of decisions favoring ‘holdout’ creditors, including decisions barring Argentina from paying exchange and other creditors before the holdouts. Most of the lawsuits against Argentina in the New York courts ended in the spring of 2016 through landmark cash settlements with the major litigants. At the same time, a New York federal judge vacated a series of injunctions that had prevented Argentina from paying the exchange creditors, and thereby paving the way for Argentina’s renewed entry into the global financial markets.
Lately, two decisions issued by European authorities have raised alarms in the international investment arbitration community, which may cause reverberations within the United States. First, the European Commission’s Decision regarding Support for Electricity Generation from Renewable Energy Sources, Cogeneration and Waste, and, second, the European Court of Justice ruling in Achmea.
Following these two decisions, European investors will likely face difficulties in enforcing intra-EU investment arbitration awards within the European Union and may turn to non-EU courts to do so. In this sense, US courts are arguably a safe forum for investors. Indeed, American courts are not bound to accord supremacy to EU law and, instead, would be required to give legal effect to arbitral awards pursuant to treaties to which the United States is a party, namely, the ICSID Convention and the New York Convention.
To date, the Micula case is the only known US case that addresses the potential conflicts in enforcing an intra-EU arbitral award. The Micula brothers petitioned the Southern District of New York to recognise and enforce an award obtained against Romania. The European Commission (EC) had taken an active part in opposing the petition. However, the district court rejected the EC’s arguments and converted the ICSID award into a judgement. The court held that courts in the United States have a ‘compelling interest in fulfilling [the United States’] obligation under Article 54 to recognize and enforce ICSID awards regardless of the actions of another state.’ Micula v Gov’t of Romania, No. 15 MISC. 107, 2015 WL 4643180, at *7 (SDNY, 5 August 2015), rev’d on other grounds, No. 15-3109-CV, 2017 WL 4772435 (2d Cir, 23 October 2017). Although the district court decision was reversed on the grounds that a Foreign Sovereign Immunities Act complaint suit was required, the rejection of the EC’s arguments was left intact. Therefore, the compelling interest in upholding the ICSID Convention highlighted by the US district court should trump any future concern over a legal conflict with a foreign law that the United States is not bound to follow.
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