By Hao Zhu
The North American Free Trade Agreement (NAFTA)’s Article 1110 — which created an expropriations remedy for foreign investors — has expanded into an international regulatory takings regime over the last two decades. Newer international trade agreements, such as the Trans Pacific Partnership Agreement (TPPA), have continued to include expropriations provisions by default, further expanding the reach of these takings regimes.
This Note focuses on the NAFTA in order to explore the tension within international regulatory takings regimes, between investor property interests and sovereign interests to regulate for the public welfare. First, this Note traces the contours of international regulatory takings doctrines, organizing them in a Penn Central framework. Against other commentators, this Note argues that though the case law has not been a model of clarity, the law has settled into a framework analogous to Penn Central. Second, this Note elaborates on and rejects the critique that international regulatory takings regimes erode states’ sovereignty to regulate for the public welfare, while acknowledging that the structural problem of private law tribunals deciding the public law values of property needs to be addressed.
To address this structural problem, this Note proposes that the NAFTA’s authoritative bodies interpret property dynamically, in light of the public welfare concerns raised by global climate change. Specifically, this Note proposes that the NAFTA’s Free Trade Commission issue authoritative Notes of Interpretation to dynamically interpret Article 1110 to shift the balance toward sovereign regulatory power to address global climate change. Lastly, this Note applies that interpretation of Article 1110 to the facts of the dispute between TransCanada Corp. and the United States over the Keystone XL oil pipeline, ultimately concluding that no regulatory takings occurred.