January 1, 1994 marks the date in which North American Free Trade Agreement (NAFTA) was formerly implemented, creating the largest free trade zone in history. NAFTA advocates maintained that in the North American context through the implementation of the agreement thousands of new high wage jobs would be created, living standards would be elevated, environmental conditions would be improved and that Mexico would be transformed from a developing country to a "booming market" for US exports1.
Ten years after the implementation of NAFTA, this calculation would prove to be overtly false as wages have drastically declined, thousands of jobs have been lost as companies relocated to Mexico, democratic law making is threatened and environmental standards are practically non-existent. Chapter eleven of NAFTA is at the heart of the controversy that surrounds the agreement.
Critics of the investor chapter of NAFTA suggest that corporate interests have distorted the "shield" that chapter 11 intended to protect their interest and coerced it into a "sword" whereby they assault the autonomy of signatory countries2. Democracy has fell victim to Chapter eleven in the countries of North America, as national sovereignty and the ability to engage in democratic law-making processes are increasingly threatened because governments have to access the impacts of foreign corporation in the large part of the decisions that they make in order to avoid millions of dollars in potential compensation.
Civil society, views this investment chapter as merely an extension of the broad goals of the NAFTA agreement in that they want to prevent the governments from doing what they are elected to do- serve the interest of the people instead of enslaving themselves to corporate economic desires. Proponents of NAFTA Chapter eleven, suggest that these "extensive investor protections and private enforcement" are essential in order to protect their private property from state appropriation3.
Nonetheless, critics are quick to dismiss these allegations as they point to the fact that the more times than often investor-to-state cases have not a thing to do with the cover of private property, but, rather have to do with their personal corporate interests. In the age of NAFTA, investors have exploited Chapter Eleven in the name of self-interest and personal profit, resulting in challenges to national and local jurisdiction, government decisions and governmental provisions of services.
Investment rights pertain a huge degree of power, lacking of any sorts of responsibility guidelines to which the investor should adhere to. Many consider this to be inherently dangerous since there is no balance of rights and responsibilities even though the influence of corporate interests are essentially equivalent, if not more powerful, than local and national governments. Essentially, what this boils down to is the fact that the only interest that potential investors have to consider is that of their own.
Foreign investors in all actuality have nothing to really loose as they lack any sort of consequences with regards to their code of conduct as states are prohibited from taking foreign investors to the tribunal. Instead, foreign investors often use the rights granted under Chapter 11 as a destructive mechanism in their quest to attack public policies that have undesirable impacts on their personal corporate pursuits. While in theory, foreign investors are subject to local laws when in a host country, at the same time Chapter eleven asserts them the right to challenge those same laws with a degree of ease.
Another problematic issue which feeds into the undermining of democracy with regards to Chapter 11 is the lack of public access and accountability as it provides no transparent checks and balances that are common in other institutions that hold as much power as foreign investors do in the public sphere. While ordinary citizens are not made aware of the details of cases pending in the Tribunals they are still made to carry the levy of compensation if it is awarded to the foreign investor as it comes out of tax dollars.
In the first seven years of NAFTA though cases that were filed were limited in numbers, thirteen billion dollars were claimed by corporations in their initial filing4. Of this thirteen billion dollars; 1. 8 billion dollars were paid by US tax payers, 294 million dollars were paid by Mexican taxpayers and the remainder of the11 billion dollars were paid by Canadian tax payers5. The defining principle of nation states, "sovereign immunity" has been blatantly attacked under chapter eleven of NAFTA.
This founding principle of the nation state holds to the fact that governments of a given country may not be sued by external forces unless the lawsuit is prescribed under law. This utter disregard of this principle under Chapter 11 is currently being challenged in the case Mondev who is challenging a ruling by the Supreme Court of Massachusetts. Mondev is a Canadian company, who has been in combat with the City of Boston over its' right to purchase a parcel of land6. When, Mondev took the City of Boston they lost as the Supreme Court on the grounds of sovereign immunity.
Upset with the decision, Mondev than decided to appeal this decision to a NAFTA tribunal and in effect was able to challenge a country's Supreme Court decision and a country's right to utilize its' own sovereign immunity protections. Perhaps the most troubling aspect is the fact that corporations have exploited Chapter 11 in many of their cases as they had nothing to do with expropriation, but rather their desire to obtain a dominating position in the marketplace. A prime example of this is the UPS case against Canada Post.
UPS contended that since Canada Post provides a public mailing system, it should not be able to "monopolize" on the parcel and courier industries as well7. UPS proclaimed that by the way of Canada running a subsidized parcel and courier service it was in breach of the NAFTA investment chapter as it gave UPS an unfair advantage in the Canadian marketplace. This UPS case directly threatens whether the few public subsidized services that we have left, as many wonder whether such services would be immune under the investment chapter in the age of privatization and intermingling between public and private sectors.
Over the past years, many civil society NGO's in Canada, Mexico, and the United states have become increasingly concerned about the effects that Chapter 11 of NAFTA have had on the deterioration of democracy in their respective countries. They expose the negative consequences that affect the daily lives of citizens as foreign investors neglectfully pollute their environments, challenge their judicial systems, and destroy public policy.