Investment Treaties

by William S. Dodge

Treaties for the protection of investment are not just for less developed countries anymore. The United States has included chapters on investor protection in its free trade agreements with Canada (NAFTA) and Australia (AUSFTA), and likely will do so in its agreement with South Korea currently under negotiation. While Korean investment in the United States is nowhere near the scale of Canadian and Australian investment here, at more than $4 billion it is still nothing to sneeze at. And this again raises the question of how investor-state disputes between developed countries should be resolved.

In an article about to be published, I analyze the different approaches of NAFTA (which allows direct investor claims) and AUSFTA (which does not) and suggest a third approach. Specifically, I argue that because developed countries have developed legal systems, it is possible to combine the advantages of direct investor claims with those of the local remedies rule, allowing investors to enforce their own rights under a treaty but requiring them to do so in domestic court first. This approach would do a better job of preserving sovereignty and correcting errors and would benefit investors by allowing them to bring their international and domestic claims in a single forum.

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