The NAFTA chapter 11 expropriation debate through the eyes of a property theorist.
I. INTRODUCTION
II. BACKGROUND ON NAFTA CHAPTER 11
III. THE FUNDAMENTAL THEORETICAL DISTINCTION BETWEEN
"DIRECT EXPROPRIATION" AND "INDIRECT EXPROPRIATION"
OR "MEASURES TANTAMOUNT TO EXPROPRIATION
IV. CONSEQUENCES OF THE DISTINCTION BETWEEN "EXPROPRIATION"
AND "INDIRECT EXPROPRIATION" OR "MEASURES TANATAMOUNT TO
EXPROPRIATION" FOR CONCEPTUALIZATION OF NAFTA ARTICLE 1110
ISSUES
A. The Split Nomos Problem
B. Problems of Territoriality
C. Split Nomos and Territoriality Problems
in the Context of Globalization
V. CONSEQUENCES FOR INTERPRETATION AND RESTRUCTURING
OF NAFTA CHAPTER 11 AND ARTICLE 1110
A. Substantive Norm for "Indirect Expropriation" and
"Measures Tantamount to Expropriation"
1. A Vague Substantive Standard
2. The Role of National Variation, Given Vagueness
in the Substantive Standard
3. Recent Statutory and FTA Modifications
to the NAFTA Article 1110 Approach: Substantive Aspects
B. The Dispute Resolution Mechanism for "Indirect Expropriation"
and "Measures Tantamount to Expropriation"
VI. CONCLUSION
I. INTRODUCTION It has become clear that something is amiss with Chapter 11 of the North American Free Trade Agreement (NAFTA). (3) This Chapter provides protection for foreign investors through a series of substantive guarantees, backed up by an Investor State Dispute Mechanism (ISDM) that allows direct arbitration by a foreign investor against a state. (4) These guarantees--especially the guarantees of fair treatment under minimum international standards (5) and of compensation for indirect expropriation of property, (6) and to some extent the guarantee of national treatment (7)--are being invoked broadly to attack perfectly standard exercises of the police power that purport to protect public health, safety, welfare, and the environment. In one pending arbitration, Methanex v. United States, damages of close to $1 billion are being sought from the United States for lost market share because California has banned a gasoline additive that it believes imperils the water supply. (8) In Metalclad v. United Mexican States, an arbitration that concluded in 2000, a U.S. investor sought $90 million and was awarded $16 million because a Mexican city denied a building permit for a hazardous waste facility and a Mexican state declared the land an environmentally protected area. (9) The British Columbia Supreme Court subsequently narrowed the holding of the arbitration panel, but the award was not reversed altogether, (10) and the claim was settled in 2001 for the $16 million. (11) Indeed, in the first invocation of NAFTA Chapter 11, Ethyl Corp. v. Gov't of Canada, (12) Ethyl Corp., a U.S. corporation, challenged a Canadian ban on the import of MMT, a gasoline additive. Ethyl claimed $250 million U.S. for loss of sales and profits, injury to its Canadian subsidiary, the threat that other countries would follow Canada's lead thus further injuring the MMT market, and so on. This caused Canada to back off by rescinding its regulation and paying $13 million U.S. in damages to the foreign investor. Beyond these first few specific cases, some of the arbitral panels dealing with these and similar investor claims axe apparently adopting an approach to Chapter 11 that equates loss of significant value or even of potential market share with an automatic obligation to compensate. On another, equally problematic front, the Chapter 11 substantive provisions are enforced through a compulsory arbitration process. It can be invoked by a private investor without first resorting to a government-to-government negotiation, as has been usual in international claims for compensation due to expropriation. The arbitration proceedings and decisions often have been secret, without any obligatory participation by others affected by the rulings. They proceed under narrowly tailored rules modeled after those designed for commercial arbitration. They occur at a location chosen for the convenience of the parties somewhere within the territories of the NAFTA signatory states, but not necessarily in any geographical proximity to the locus of the environmental concerns. An opinion explaining the decision is not required. There is very limited judicial reconsideration of these arbitral awards and no single appellate body that might consolidate the holdings of individual arbitrations into a coherent whole. Whether it is due to the novel enforcement mechanism or to the novel interpretation of the boilerplate investor protections in the underlying agreement provisions, bona fide environmental regulatory restrictions and legitimate attempts to control natural resources within a state's territory are in jeopardy. If the broad reading of the substantive provisions is accurate, wherever foreign investors are adversely affected by a regulation, the regulation must be paid for. At some level of damages this potential liability will influence governmental decisions not to protect public health, safety, welfare, and the environment. (13) David Schneiderman, a Canadian critic of the process, writes that "takings rules have the potential for disrupting state regulation of the marketplace significantly." (14) He explains, "As third-party investors increasingly have standing to sue before domestic courts and international arbitration tribunals, unmediated by the foreign- policy goals of party states, states host to foreign investment will be forced to abandon social policy initiatives that impact negatively on investment interests." (15) The stakes are much larger than the few NAFTA Chapter 11 decisions handed down to date. The NAFTA Chapter 11 provisions, both substantive and procedural, are likely to provide the model for investor protection provisions in future multilateral trade agreements such as a Free Trade Agreement of the Americas (FTAA). (16) The early reaction by environmentalists worldwide to the Ethyl Corp. controversy helped to sink a proposed Multilateral Investment Agreement (MIA) being negotiated among the members of the Organization for Economic Cooperation and Development (OECD). (17) The Bipartisan Trade Promotion Authority Act of 2002 (Trade Act of 2002), (18) recently enacted by Congress, sets goals for future U.S. trade agreements that specifically address substantive and procedural issues raised by the NAFTA controversy. (19) Recently signed Free Trade Agreements (FTAs) between the United States and Singapore and between the United States and Chile contain investor protection provisions influenced by NAFTA Chapter 11 and shaped by the controversy surrounding them. (20) Developments under NAFTA Chapter 11 have unleashed a torrent of commentary. Much of it recognizes that proper interpretation of NAFTA Article 1110 calls for an appropriate balance between respect for the stability of property expectations and legitimate needs for environmental regulation. In other words, NAFTA Article 1110 is not to be understood as just a guarantee against direct, full-blown expropriations. It is functioning as a regulatory takings doctrine. That is, it promises Investors compensation in at least some circumstances for losses from regulation that "goes too far." (21) Investors are therefore entitled to compensation at least some of the time for their losses from regulation. Once this fact is acknowledged, commentators typically fall into one or more of several problematic discussions. What ought the rule of transnational regulatory takings be, for example? This is no more easily resolvable in the transnational context than it is in the domestic U.S. context, where vagueness seems endemic. (22) Another line of argument asks whether it is even necessary to have a separate treaty provision on regulatory takings. Another article of Chapter 11 already provides for national treatment, thus guaranteeing foreign investors access to whatever regulatory takings protection would be available in domestic courts for property owned by nationals. A third inquiry explores what role international law ought to play in shaping regulatory takings doctrine, given the different approaches to regulatory takings reflected in the domestic laws of various countries. Yet another conundrum is posed by the fact that the NAFTA signatories are three nations with federal systems, so that state and local regulation may cause liability to accrue to the federal government. (23) Pro-environmental commentators on Chapter 11 also attack the ISDM procedures for their lack of transparency. They are evidently designed for swift decision making and compensation, not with the needs of public dialogue and the slow building of precedent in mind. Advocates of environmental protection know they are shut out by the ISDM, and they know this is wrong. But they have not always connected the procedural flaws of the ISDM with the issues raised substantively by a broad view of the Article 1110 protection against expropriation. Another group of critics, whom I shall call pro-sovereignty commentators, argue that NAFTA Chapter 11 impermissibly infringes on the exercise of national sovereignty both by imposing substantive norms and by imposing legal mechanisms that differ from individual countries' own approaches to balancing property rights and bona fide police power regulation. (24) The environmentalist critics and pro-sovereignty critics overlap to some extent, but have somewhat different arguments and agendas. Sometimes looking at a problem from a new angle shines light on its structure. Thus, fine arts students are encouraged to look at a classic painting in a mirror or upside down as a way of seeing it afresh. This Article develops insights from an approach to regulatory takings that focuses on the dialogic nature of property rules and the police power, and applies them to NAFTA Chapter 11. The basic insight is that property rights and regulatory practices are interdependent, and that they are legitimately renegotiated from time to time. (25) Changes in science, knowledge, technology, custom, or circumstances may motivate these changes in the interface of property and regulation. (26) Regulatory takings doctrine is part of this process of ongoing negotiation about property. It addresses these regulatory transitions. (27) Some modicum of fairness is promised during transitions, thus smoothing negotiations and reinforcing a sense of community during reallocation of resources. By reinforcing a sense of community, regulatory takings doctrine facilitates the generation and acceptance over time of property practices and regulatory practices that are appropriate to a community's circumstances. (28) The foundation of my argument concerning Article 1110 and the ISDM of Chapter 11 is straightforward. I distinguish between the easy case of "direct" nationalizations or expropriations and the hard case of bona fide regulatory measures that are allegedly "indirect expropriations" or "measures tantamount to expropriation." The NAFTA text itself makes just such a distinction. (29) "Direct" expropriations are easy cases. The classic controversy occurs when one state nationalizes or expropriates private property owned by a foreign investor. The act of expropriation is clear, the legal obligation to compensate is clear, and typically the only difficult legal question is how to calculate compensation. Concepts of "indirect expropriations" or "measures tantamount to expropriation," where they are addressed to losses due to bona fide and evenhanded regulation, are not so easy. Regulatory takings claims require contextual, essentially ad hoc, fact-based determinations much of the time. (30) It seems to be impossible to specify in a few words or sentences all the circumstances that go into our sense of fairness and reasonableness when a property owner is affected by regulation, all the reasons that might justify a change in the rules on the one hand or compensation on the other. (31) Where the rule is vague, however, the process becomes all the more important. Also, as regulatory takings is about renegotiation of property norms, the process by which claims of loss from regulatory changes are evaluated must be public, so as to engage public values and reflect and influence public norms. (32) Such an analysis puts the NASA Chapter 11 expropriation debate in proper context. An international community of investors may desire property rules and practices of a clear and certain type. But this desire cannot be allowed to overshadow the equally legitimate claims of local communities to be able to renegotiate property practices piecemeal, in appropriate circumstances, without undue constraint. When we understand regulatory takings doctrine as part of a process of transition management for property rules, we can see why it ought to remain substantively vaguer and procedurally slower and more transparent than foreign investors or other property owners would like. While this process approach to regulatory takings does not lead to a comfortable resolution of all the questions raised by an international regulatory takings doctrine, it at least helps us to understand what we are dealing with. It also highlights the particular importance of the transnational, regional nature of the NASA regime. In these circumstances, does it in fact make sense to talk about developing property norms and practices in a population that covers a continent and spans three countries? Similarly, does it make sense to talk about developing property norms when the proponents of one view are not a territorially based community at all, but a community of financial interests? Is it significant that the Chapter 11 arbitration process itself, which presumably is supposed to help generate and refine property norms, is not territorially based? These questions are large ones. They suggest that the problems with NAFTA Chapter 11 and Article 1110 are, at bottom, about globalization. They bring to the foreground the tension between the economic and cultural aspects of trade, markets, and, yes, property. They make clear that emerging, increasingly globalized practices of property are problematic inter alia precisely because they put into question altogether the notion of an underlying societal property process rooted in custom. It may well be that Article 1110 and Chapter 11, if they continue to develop in the direction indicated by the first few cases, will constitute the imposition of a property norm by a particular interest group--transnational investors--through mechanisms of international law, rather than an organic evolution of a property norm within an affected community. Given the apparent inevitability of economic and cultural globalization, the stakes of this potential transformation are high and the potential outcome indeed troubling. This Article will proceed as follows. Part II sets out background on NAFTA Chapter 11 and Article 1110. Part III grounds my argument about regulatory taking and property process in the distinction between "direct expropriation" on the one hand, and "indirect expropriation" and "measures tantamount to expropriation" on the other. Part IV explores three implications of the regulatory takings analysis: the problem of multiple communities, or what I shall call the problem of the split nomos; the issue of territoriality as related to the dispute resolution process; and the implications of the background of globalization against which the NAFTA Chapter 11 controversy takes place. Part V returns to the matter at hand, exploring some of the possible reforms to Article 1110 and to the Chapter 11 dispute mechanism in light of the analysis presented in the preceding Parts. II. BACKGROUND ON NAFTA CHAPTER 11 The North American Free Trade Agreement was signed in 1992 and entered into force in 1994. (33) It created a free trade area consisting of Canada, the United States, and Mexico. It is noteworthy for including a developing country, Mexico, into an already strong trade arrangement between two developed countries, Canada and the United States. Mexico wanted to assure foreign direct investors and traders that its economic policies were secure, and "to persuade potential capital investors that it would provide a secure financial environment." (34) One objective of Canada and the United States was to ensure the security of theft investors and traders. (35) NAFTA was widely understood to be a precursor of a wider Free Trade Agreement of the Americas (FTAA). NAFTA did include a number of environmental provisions: a discussion of the importance of environmental principles in its preamble, (36) a provision allowing signatory states to maintain levels of environmental protection, (37) and incorporation of the environmental exceptions to trade liberalization contained in Article XX of the General Agreement on Tariffs and Trade (GATT). (38) A side agreement, the North American Agreement on Environmental Cooperation (NAAEC), (39) established other procedures and principles as well as a Commission on Environmental Cooperation (CEC) based in Montreal. (40) For these reasons, NAFTA was initially hailed as an environmentally progressive trade agreement. (41) These provisions have not been central to the problematic investor protections contained in Chapter 11, at least so far. (42) NAFTA Chapter 11 extends several guarantees to foreign investors. I focus here on Article 1110, the provision guaranteeing fair compensation for nationalization or expropriation, indirect nationalization or expropriation, or "measure[s] tantamount to nationalization or expropriation." (43) Other contested Chapter 11 guarantees include most favored nation status, (44) national treatment, (45) minimum international standards including fair and equitable treatment, (46) and a prohibition on process requirements. (47) Some of these are standard provisions for trade liberalization and foreign investment agreements. NAFTA Chapter 11 also provides an innovative mechanism for resolving disputes between foreign investors and states: the ISDM. (48) The remedies available include damages, restitution, and costs. (49) Instead of forcing the investor to work through its home government to try to obtain compensation for expropriations, as traditional approaches to international obligations concerning expropriation would have required, NAFTA Chapter 11 allows an investor to invoke an arbitration provision, forcing the offending government to deal directly with a private party on its claim for compensation. This procedure is novel in multilateral agreements (50) and is ultimately modeled on compulsory international commercial arbitration between private parties. The investor may elect one of three standard sets of international arbitration rules. (51) One panelist is selected by each party, the third by mutual agreement of the parties. (52) There is no provision for public hearing, no automatic right of intervention or amicus participation, and no obligation of the arbitration panel to produce a public written decision. (53) One arbitral tribunal is not bound by a prior tribunal's decision, (54) though it may be guided by it. Appellate review, if any, (technically it is vacatur or annulment, not hill judicial review) (55) depends principally on where the arbitration panel was held (the "seat of arbitration" or "situs" or "place"). The standard of judicial review is very deferential, in accordance with standard principles for review of commercial arbitration. (56) An arbitral award may be enforced subsequently in a court of a jurisdiction in which losing party has assets, (57) under the ICSID Convention, (58) the New York Convention, (59) or the Inter-American Convention. (60) These rules give much authority back to a reviewing court at the situs of the arbitration. (61) One commentator generally sympathetic to Chapter 11 has described it in this manner: Chapter 11 alters the traditional, hierarchical relationship between foreign investors and host states in two ways. First, it prohibits certain exercises of sovereignty at the expense of foreign investors. Second, it creates a mechanism for resolving investment disputes that places foreign investors and their host states on a more equal footing. Because investors do not have to rely on the mercy of their host states or their home states for protection, Chapter 11 redistributes bargaining power in a manner more reminiscent of relationships between commercial actors. As one U.S. negotiator of Chapter 11 explained, the point of this exercise is to remove investment disputes from "the political realm and put them more into the realm of commercial arbitration." (62) Since 1997, Chapter 11 arbitration has been used, sometimes successfully, to challenge environmental and land-use regulation. The first claim, brought by Ethyl Corp., challenged a Canadian prohibition on importation of a hazardous substance. (63) The claim was never heard on the merits. Embarrassed by a challenge to federal promulgation of the regulation, Canada rescinded it and paid Ethyl a monetary settlement. (64) Among the early significant arbitral decisions is Metalclad Corp. v. United Mexican States. (65) A toxic waste facility to be located in Mexico was precluded by local land-use and state environmental actions, including denial of a local permit and the state's creation of an environmental preserve that precluded development. The claim was filed in 1997. The foreign investors initially claimed $90 million in losses, and eventually received an arbitral award of $16.7 million. This award was reviewed and its reasoning limited by the British Columbia courts, (66) and the case was settled while an appeal was pending. (67) In S.D. Myers, Inc. v. Government of Canada, a U.S. hazardous waste company with a Canadian subsidiary challenged Canada's ban on the export of PCBs, which the company planned to treat in a facility in Ohio, seeking $20 million in damages. A partial award found liability under Chapter 11, Articles 1102 and 1105, although not under the expropriation theory of Article 1110. (68) Subsequent decisions have recently awarded $6 million Canadian for lost income, (69) as well as part of the prevailing party's legal fees. (70) Challenges to this proceeding are pending in the Canadian courts, with a hearing set for October 2003. (71) Methanex Corp. v. United States, a pending dispute, challenges the State of California's prohibition of methyl-tertiary-butyl ether (MTBE) as a gasoline additive because of its possible carcinogenicity and its effect on the water supply. (72) A Canadian corporation that indirectly owns a Texas partnership that manufacturers a component of MTBE invoked the arbitration procedure in 1999, claiming it has lost nearly $1 billion in future sales of the product. (73) Other Canadian proposals to regulate the tobacco and pesticide industries have been met with threats of NAFTA proceedings. (74) There are approximately 13 pending NAFTA expropriation claims. (75) Some of these NAFTA Chapter 11 actions may bear little resemblance to typical environmental regulatory takings cases. (76) Some of the claims have involved loss of market share or potential market share, for example, the Methanex proceeding. Vicki Been and Joel Beauvais identify another important issue: The definition of "investments" "covers a great deal more than the property interests traditionally protected by the Fifth Amendment." (77) Some other arbitrations have involved claims that judicial actions may be treated as expropriations. (78) The NAFTA Chapter 11 procedure has only been invoked in some 32 proceedings altogether, and perhaps a quarter of these do not involve the expropriation provision. (79) Some argue that the protections provided are defensible because they are necessary to promote investment and development in the developing world. (80) Vicki Been and Joel Beauvais are agnostic, arguing that even if there is deterrence of environmental regulation because of NAFTA Article 1110, it may be deterrence of unjustifiable regulation; we need more data. (81) But it is fair to say that "[t]he possibility that NAFTA's Article 1110 may be used to force governments in the United States and elsewhere to pay compensation for environmental and land-use regulations is causing considerable consternation in the domestic and global environmental and land-use communities." (82) As expressed by Frank Loy, a former Under Secretary of State for Global Affairs in the Clinton Administration as well as a former chairman of the Environmental Defense Fund, These cases raise starkly the question whether NAFTA's efforts to protect investors has [sic] unacceptably compromised our nations' right to legislate in a way so as to protect the environment and the health of their citizens. The cases sent shock waves through the environmental community. Regulating the environment requires a delicate balancing of important public interests, and many believe that the balance has been tilted by these cases in such a way so that many environmental laws and regulations are threatened.... I am talking about whether these NAFTA-protected investments curtail the ability of nations to protect their citizenry. That protection requires governments to fix the context in which the investment takes place and to set the standards that serve to balance the dual public policy interests. (83) Indeed, soon after it became apparent in 1997 that NAFTA's investor protections might have an expansive scope, the OECD's move for a Multilateral Agreement on Investment (MAI) was scuttled, in part by a flood of NGO opposition, based in significant part on antagonism to proposed investment protections similar to those in NAFTA. (84) Current proposals for an FTAA will likely include similar investment protections, (85) and will generate similar hostility. Indeed, already "[p]rovisions nearly identical to NAFTA's Article 1110 are contained in many of the 1500 bilateral investment treaties (BITs) in effect around the world." (86) And the concerns that have been highlighted by NAFTA Chapter 11 are shaping current policy positions and developments. A recent fight in Congress over "fast-track" authority for Congressional approval of trade agreements was based in part on concerns that investment protection provisions in trade treaties negotiated under trade promotion authority would compromise governmental police power authority in matters such as environmental regulation, by subjecting governing bodies to concerns about an obligation to compensate investors for losses of value. (87) The U.S. Trade Representative has announced that the approach in future agreements would be different than in NAFTA. (88) In February 2003, evaluations of the U.S.-Singapore and U.S.-Chile FTAs by the Trade and Environment Policy Advisory Committee (TEPAC) used NAFTA as a yardstick. (89) So the interpretation of NAFTA Chapter 11 is not a small matter. "NAFTA articulates, in a precedent-setting way, rules for the admission and treatment of foreign investment that have global implications." (90) An analysis of NAFTA thus paves the way both for possible reforms of NAFTA and for reforms that could be implemented in other subsequent agreements that model themselves on NAFTA. (91) III. THE FUNDAMENTAL THEORETICAL DISTINCTION BETWEEN "DIRECT EXPROPRIATION" AND "INDIRECT EXPROPRIATION" OR "MEASURES TANTAMOUNT TO EXPROPRIATION" In thinking through NAFTA Chapter 11, we would do well to first consider as a basic theoretical distinction the difference between "expropriation" on the one hand and "indirect expropriation" or "measures tantamount to expropriation" on the other. (92) Ordinary expropriations, despite their impact on investors, are easy cases. An inquiry into an expropriation concerns whether private property was physically possessed or title to it formally transferred. It can reasonably be limited to a factual inquiry about what happened and about what level of compensation is appropriate. It is in the parties' interest to get a quick resolution, to clarify title as well as to secure compensation where it is due. By hypothesis the boundaries of the property right are clear and the expropriation is full and complete, so few inquiries about the appropriate scope of police power based regulation are likely to occur. The dispute is between the state and the investor, and does not implicate practices of property regulation to protect the public health, safety, or welfare. The whole matter is therefore suitable for a private arbitration panel. It is unlikely to become part of a process of developing new standards of law, except perhaps in the area of how to calculate appropriate compensation. (93) Now contrast state actions based in a regulatory or police power that reduce the scope of use of property and thus cause the owner economic harm. These include typical environmental and land-use regulations intended to address negative externalities from particular uses of property. Assume that the police power based regulation is entered into in good faith, and is not merely a pretext for expropriation. (94) Where a government regulation reduces the uses and hence the value of the property in good faith, pursuant to the police power to protect public health, safety, or welfare, the inquiry about whether compensation is appropriate implicates a wholly different, much broader, and more heterogeneous set of concerns. The question boils down to one of balancing public and private interests in the way property is used when its use adversely affects the public or, at the very least, the neighbors. (95) Where the police power is applied properly and uniformly, compensation is not owed. (96) Bona fide police power regulation may also be rooted in sovereign dominion over common natural resources. Often the externalities addressed in police power regulation occur because supposedly private use of property in fact has impacts on shared resources such as air and water--both Metalclad and Methanex present these issues--or upon biological resources and genetic diversity in which humankind as a whole arguably has an interest. Consider here the environmental preserve issue in Metalclad Sometimes a supposedly private property use is not so private once the effect on common resources is taken into account. I have recently explored the argument that bona fide regulatory takings disputes implicate an ongoing societal dialogue about the proper scope of the police power and of private property protections. (97) It is not obvious that the property owner always deserves compensation. It is not obvious that the property owner never deserves compensation. (98) What is clear is that societal dialogue over the formalities of property law and compensation needs to occur within a broader context of social practices in order to be informed by it and maintain its legitimacy. (99) Articulation of the rationale for specific determinations of boundaries between private property protection and police power based regulation through the resolution of specific disputes in turn reinforces and shapes social practices and reasonable property expectations. Consequently, the broader public must be involved in the resolution of regulatory takings disputes, in order to achieve the appropriate societal dialogue about, and balance concerning, the public and private sides of property. In making this threshold theoretical argument about why "indirect expropriations" or measures "tantamount to expropriation" are different from "direct expropriations," I rely on the recent United States Supreme Court opinion in Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency (Tahoe-Sierra). (100) Justice Stevens, writing for the majority, carefully and emphatically distinguished physical takings cases from regulatory takings cases. (101) The two lines of precedent should not be confused. Moreover, the Lucas v. South Carolina Coastal Council (Lucas) (102) principle, which requires compensation for the loss of all economically valuable use due to a regulatory taking, is recast by Stevens in Tahoe-Sierra as an exceptional case. (103) Lucas did not serve as controlling precedent for a categorical rule for compensation for a temporary taking in Tahoe-Sierra, which involved a loss of all use for a limited period due to a development moratorium. That loss of use was held to be compensable, if at all, only under an ad hoc balancing test. (104) In my view, my first Article 1110 category, the run of the mill expropriation case, is like the physical takings cases. If the government occupies or takes title, it pays. The matter is quite straightforward. The second category, the "indirect" or "tantamount to" expropriation category--again assuming regulatory bona fides--is like the U.S. regulatory takings cases, which the Supreme Court has now clearly and definitively said must almost always be subject to Individualized scrutiny under all the circumstances. (105) A recent article by Ronald Krotoszynski, Jr. similarly recommends distinguishing conceptually between complete takings and various kinds of government regulatory actions that have unfair results. (106) Krotoszynski argues that the former are all that were intended to be comprehended within the Fifth Amendment's Takings Clause. Losses due to unfair government actions might still be compensable, he argues, but only under the rubric of substantive due process. (107) Krotoszynski's article is helpful on another point as well. He asserts repeatedly that distinguishing between bona fide regulatory actions and those that are pretexts for a full taking is not too difficult a task to ask of a tribunal. This is especially important in an international context, where purported environmental measures can sometimes be a pretext for trade protectionism. Finally, Carol Rose's account of regulatory takings and full-fledged expropriations distinguishes between the two types of action, precisely along the lines I have described. (108) That is, she distinguishes in principle between regulatory transitions and full-blown expropriations. Regulatory disruptions alter property fights when environmental, demographic, or technological changes necessitate readjustment. (109) Extraordinary disruptions, or expropriations, create massive overthrowings of existing property rights and resource uses. (110) It might be thought that I have overlooked an important step in the process of evaluating whether an action is an expropriation, namely, defining the scope of the "property" protected. Rudolph Dolzer, for example, identifies this as a separate question from the issue of both direct and indirect expropriation. (111) To the extent that whole classes of interest, such as loss of a future market share, can be distinguished as fundamentally non compensable, there is indeed a possibility of adjusting the hard-edged rule that needs to be explored. (112) At the same time, since an indirect expropriation involves some loss of use or value even though the title remains with the owner, it seems to me that the question of when an indirect expropriation has occurred is often tied up with, and can be indistinguishable from, whether some less-than-total property interest has been taken. IV. CONSEQUENCES OF THE DISTINCTION BETWEEN "EXPROPRIATION" AND "INDIRECT EXPROPRIATION" OR "MEASURES TANTAMOUNT TO EXPROPRIATION" FOR CONCEPTUALIZATION OF NAFTA ARTICLE 1110 ISSUES A. The Split Nomos Problem The problem presented by disputes between foreign investors and government regulation under NAFTA Chapter 11 can be seen, in this new light, as especially difficult for several related reasons. First, typically, let us posit that societal dialogue over the contours of property and regulation occurs within a "nomos," to use Robert Cover's term. (113) A nomos represents both a community of like-minded individuals sharing a way of life, and the world view that facilitates and expresses that way of life. (114) One could find an analogy in a Burkean account of the social practices in which property is grounded. (115) That is, property norms reflect shared social custom, which is not static but evolves slowly over time. Within this conceptual framework, the regulatory takings doctrine can be understood as putting the question whether the law as a tool of property practice has diverged too far from those practices. As Daniel Hulsebosch puts it, "Understood functionally, when the Court holds that a regulation effects a taking, it is signaling that the legislature has tried to accelerate change faster than the Justices believe fair or wise." (116) The effect of the regulatory law is measured against the legitimate expectation. In the context of international investment, however, not one but two nomoi are involved. The community within which any resource- and regulation-based dispute occurs is different from the community of foreign investors. Take the latter first. Like the medieval merchants who developed the law merchant and the law of insurance to facilitate commercial relationships inter sese, (117) foreign investors have an interest in developing a property rule around regulatory takings that is 1) clear, 2) portable to different cultures worldwide, and 3) protective of their investments to the maximum extent possible. (118) In contrast, local, regional, and often national level conflicts between private property rights and bona fide regulatory adjustments involve particular resource use conflicts that may well be local, especially in their locally felt adverse environmental effects. Government regulators typically seek to balance private property guarantees and community-protective actions, as do tribunals faced with claims of regulatory taking. This dialogic conception of the property-regulatory takings interface is pragmatic and evolutionary, not based on clear or universal property rules. (119) In contrast to what the international merchant and finance nomos would like, property practices on the ground in communities where environmental effects will be felt are expected often to be contextual standards, rather than clear and portable rules. Moreover, the resolution of these conflicts seeks to accommodate all interests in a resource, not just the interest of the property owner. (120) This contrast in interests is easily extended to the procedural mechanism favored by each nomos. Choices of forum and procedure situate the dispute resolution process within one nomos or the other. And these choices may subtly but pervasively influence the substantive outcomes over time. The very speed, clarity, and narrowness of the arbitration proceeding, along with its explicit lack of precedential value and of a disciplining appellate process, undermine the dialogic and negotiation-forcing aspects of judicial regulatory takings dispute procedures, which would typically be slower and sometimes muddier, but certainly more public. (121) One fundamental bifurcation here is arbitration versus adjudication. Proponents of international commercial arbitration claim it "has been a vital engine in the creation of a transborder rule of law." (122) At the same time, international commercial arbitration standards have been developed to further the interests of international economic development. (123) Indeed, "the rationale for the 1965 Washington ICSID Convention was to assure potential prospective investors that disputes arising out of investments, primarily in developing countries, could be adjudicated before an international tribunal, rather than before the courts of the country concerned." (124) The resolution of expropriation disputes in the courts of the host country is anathema to investors. (125) "[F]oreign investors ... unwilling to subject themselves to the perceived vagaries of host country courts ... require binding private international dispute resolution mechanisms before proceeding." (126) Thomas Carbonneau argues that "[t]he recourse to arbitration defuses such disputes--takes them out of the larger and more volatile circumstances of political contention--and provides for their resolution by impartial and expert adjudicators whose decision is basically final, binding, and enforceable." (127) As international commercial arbitration has expanded, its framework has been applied to more public law-oriented disputes, NAFTA investor-state disputes among them. But is this right? Professor Thomas argues, for example that investor-state disputes should not be treated as ordinary commercial arbitration, either substantively or procedurally. In the context of Metalclad, Canada and Mexico considered that a [C]hapter 11 arbitration is completely unlike an ad hoc private commercial arbitration where the result is not likely to have much effect upon others in the future. The work of NAFTA tribunals, and the work of the reviewing courts of the three Parties, is of intense and general interest to the Parties (including their executives and legislatures), their Citizens, and their investors given the generality of the application of the questions involved. (128) Procedurally, Thomas argues, "Investor-state arbitration differs from ordinary international commercial arbitration. The very mechanism is an extraordinary elevation of the private party's standing to assert international legal rights owed to the state of which it is a part." (129) Indeed, "NAFTA tribunals themselves are increasingly agreeing with the NASA Parties that [C]hapter 11 arbitration is not ordinary international commercial arbitration." (130) Charles H. Brower, II, disagrees. As far as he is concerned, investor-state arbitration takes place within a framework that resembles international commercial arbitration. (131) This is proper. The ICSID, ICSID Additional Facility, and UNCITRAL processes are all widely regarded as falling within a broad definition of commercial arbitration. (132) He does admit that "the relationships that give rise to Chapter 11 disputes defy easy characterization as 'commercial' or 'noncommercial,'" (133) and points out ultimately that "Chapter 11 represents an attempt to create a balanced regime for managing disputes that have significant commercial and noncommercial elements." (134) The argument parallels more general critiques of non-public dispute resolution of matters regarding the public. (135) Owen Fiss, for example, has argued that lawsuits have social functions, because they are brought before public officials, involve public participation, and depend on public law, not private agreement. (136) These actions, when brought to a conclusion, interpret public values and bring reality into accord with them. (137) Settlements, which are not public in any of these ways, disable courts and judges from performing these public functions. (138) Private arbitration that is not public, and that replaces public judicial resolution, might deserve the same criticism. Judge Harry Edwards argues that while alternative dispute resolution (ADR) is vital to the U.S. judicial system, its role should be "strictly limited to prevent the resolution of important constitutional and public law issues by ADR mechanisms that are independent of our courts." (139) Even judicial review on the merits of arbitration awards, where available, can be seen to provide public "legal capital" that arbitration alone would not. (140) These general arguments favoring adjudication where public law matters are concerned can easily be extended to the need for open, public, judicial resolution of regulatory takings issues. (141) In several regards, then, the split nomos problem identifiable in NAFTA Chapter 11 is related to, and is arguably an offshoot of, a larger, longer-term development in international commercial arbitration--its expansion to include public law or "mandatory" national law (142) disputes as proper topics for arbitration. I broach this topic here and return to it at several subsequent points in the article. Traditionally, with regard to mandatory national laws on subjects regulated in the public interest, international commercial arbitration could not supplant adjudication in the national courts with arbitration, nor could it supplant it through choice of law. (143) Private commercial matters were distinguished in principle from the kinds of matters addressed in mandatory law on a range of public subjects, through doctrines of inarbitrability. International arbitration covered the same territory as private contractual prerogative (144) and doctrines of inarbitrability helped keep separate the political function of states and their participation in international trade. (145) While this distinction holds, one can justify the relative informality of arbitration--what Philip McConnaughay calls its "lawlessness" (146)--as a substantive and procedural choice by the private parties for which they alone suffer the consequences. (147) In contrast, "a legally incorrect arbitral resolution of a mandatory law claim is significantly more likely to affect interests beyond those of the disputing parties than is a legally incorrect arbitral resolution of a contractual or other elective law claim." (148) This has generated dire concerns about the misuse of arbitration for public matters. Thomas Carbonneau, for example, wrote, "The extension of arbitral jurisdiction to encompass regulatory disputes that attend commercial transactions ... amounts--by definition--to an excess of arbitral authority" (149) that "disturbs the balance between vital national interests and the need for arbitral autonomy." (150) During the 1970s and 1980s, this separation between private law matters that were arbitrable, and those that were not, was considerably loosened. In the United States, the key case was Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. (Mitsubishi), (151) although Mitsubishi is neither the first nor the last in the line of cases. (152) Mitsubishi held that a claim under the Sherman Act (153) was arbitrable under the Federal Arbitration Act (154) if arbitration was agreed to in a contract governing an international commercial transaction. But Mitsubishi was also the opening that proponents of broader international arbitration for public law disputes had been looking for. Yves Dezalay and Bryant Garth argue that: Mitsubishi was actually not about domestic business disputing, but rather about the willingness of the U.S. courts to make a space for international commercial arbitration. From that perspective, the case was only about bringing the United States in line with the reforms that took place in the 1970s and 1980s in the various centers of international arbitration.... [T]he U.S. Supreme Court substantially altered the relationship between the courts, the federal government, and the regulation of private enterprise that had been established in the aftermath of the New Deal. (155) Mitsubishi acknowledged that arbitration did not have to be small, informal, and ill-suited for major business disputes, thus malting large-stakes arbitration feasible. (156) Or one could say, instead, that the Supreme Court rulings "fail to respect ordinary legal limitations on arbitration and eviscerate the significance of mandatory municipal law in transnational commerce." (157) The contest as to where to adjudicate or arbitrate international commercial disputes governed in part by public law has extended not only to the choice of judicial or arbitral forum, but also to the type of procedure to be applied. Arbitration is typically quick, informal, and private. The essence of commercial arbitration, especially in an international context, is that it is a completely private and secret affair, purposefully anational, procedurally uncertain, typically without discovery, rules of evidence or a record, with arbitrators of varying nationalities and qualifications who are not required to give reasons for their awards, whose notions of "appropriate" or "correct outcomes" can be so radically different as to employ wholly different parameters, and whose decisions typically axe not subject to meaningful judicial review. (158) In contrast, judicial proceedings have a number of features that allow for greater public participation and tidier review of matters of public importance in full view of those affected by the decisions. These might include greater transparency, more formal rules of evidence and procedure, the production of written opinions, clearer reference to substantive law in those opinions, judicial review, and decisions by judges rather than appointed arbitrators. (159) In short, arbitration "trades the procedures and opportunity for review of the courtroom for the simplicity, informality, and expedition of arbitration." (160) To the extent that arbitration is allowed on public law topics, pressure typically develops for procedural reforms of arbitration itself, along just these formalizing lines, to make it more adjudication-like and therefore seemingly more legitimate. (161) "[T]he proposed reforms seek ... to restore lawfulness to the arbitral process." (162) This development is troublesome to some authorities. For one thing, generally speaking, more formalization in order to reassure the participants and the public about the legitimacy of deciding public law issues in arbitration is in effect a judicialization of arbitration, counter to the very purposes for arbitration in the first place. (163) Especially if the added procedures are based upon American concepts, they might run counter to the expectations that other cultures hold for arbitration, again defeating the overall purpose of international arbitration. (164) Finally, the formalization of international arbitration concerning public law matters amounts to "the establishment of an ad hoc, 'supranational,' quasi-public judicial process through arbitration. This indeed would constitute a situation of 'unbounded' arbitral a-nationalism where national legal authority is truly usurped and the design and destiny of arbitration assume an entirely different character." (165) Thus, it is recognized that the judicialization of international arbitration as to public law matters threatens to transform governance. These arguments about the consequences of using formalized arbitration to address public law matters thus lead us to the brink of the matters considered in Part IV.C. infra, addressing globalization. But first we should turn to issues of territoriality. This will help us to understand exactly what is at stake in the aspect of the polarity between adjudication and arbitration that involves disconnecting the dispute resolution process from the territory where adverse environmental effects may be experienced. B. Problems of Territoriality Like the medieval merchant community, the global merchant and investor community is defined not by spatial location governed by a spatially located sovereign, but by professional activity, commercial interest, and various social ties. (166) Yet the adverse environmental effects of their decisions may often be felt most by those in a location far away from the situs of those decisions and unrelated to it. (167) Even within domestic environmental politics, national level groups are often criticized for influencing environmental decision-making in ways that leave out local affected interests. (168) The disconnect is, if anything, even more complete between international commercial interests without a tie to place and locally situated environmental interests. There is a territorial asymmetry to the conflict between the nomos that is generating property-based claims for investment protection and the nomos that generates balancing between property rights and police power within a geographically defined community. (169) The latter will likely be much more sensitive to bona fide claims for regulation to protect the public health and the environment because these claims are often bound to a specific territory and hence generate a stronger interest in managing the effects of various actions on natural resources and natural services. The notion that there are two nomoi competing for control of the societal dialogue over international regulatory takings issues--one situated territorially, the other an aterritorial community of interest--also leads to reflections on the connection between place and tribunal. First of all, the fact that a NAFTA Chapter 11 arbitral tribunal can convene anywhere in any of the signatory countries may be especially troubling if it is addressing the legitimacy of a regulation that is intended to protect a specific population. In a U.S. regulatory takings case that involves state or local regulation, the proceeding would likely occur within the same jurisdiction where the adverse environmental effects were felt. (170) In contrast, an arbitration under NAFTA Chapter 11 may occur very far away from the local adverse effects. Metalclad is a good example. Vancouver, B.C., which was selected as the site of the arbitration, is thousands of miles from San Luis Potosi, the Mexican state where the hazardous waste facility site would have been located. This is not simply a question of a distance that makes local participation in the arbitration process more onerous (assuming such participation was generally allowed as of right, which it now is not). There are several related issues that make it desirable to have the dispute resolution in the general territory where the adverse environmental effects are felt. This contrasts to the general run-of-the-mill international commercial arbitration, where a prime goal is often to remove a dispute from the territory of either party. There is also symbolic value to having disputes linked to a region decided by judges or arbitrators with links to that region. This connection helps to legitimate the authority of the tribunal. It physically links the formal articulation of law to the social practices to which it will inevitably be compared. Thus, federal district judges are required to live in the district in which they sit. (171) Federal appellate judges are required to live in the circuit in which they sit, are apportioned by state, and by law each circuit must have at least one judge from each state in the circuit. (172) In the course of an examination of the regulatory functions of private international law in an era of globalization, Robert Wai gives a succinct analysis of the shortcomings of adjudicators who are not tied to a territorial polity but instead derive from a particular interest community. [T]here may be a difference in outcomes between state regulators or adjudicators and non-state arbitrators. State-based private law often includes protection of third parties and social interests among its substantive objectives, but there may be a tendency for private adjudicators to ignore arguments about the protection of individuals and groups not party to the actual decision in their interpretation of these laws. This may result from a form of "democracy deficit" in denationalized legal regimes. The nature of the denationalized regulatory regimes is such that they are subject to less pressure from different third-party constituencies than are national regulators, yet their decisions do have an impact on third parties.... While territorially-defined jurisdictions also exclude interested parties, in comparison they are more inclusive because of their broader scope of membership and their more widely-understood and relatively non-volitional concept of territorially defined membership. (173) The implication of Wai's argument for NAFTA Chapter 11 disputes is that arbitrators chosen from a particular non territorial nomos are not in fact as likely to act in the general public interest in matters that, like the "indirect" and "tantamount to" expropriation issues, combine public and private matters. (174) It is not only a question of who is allowed to participate in the arbitration. Because denationalized regulatory regimes do not include the whole citizenry, they are less democratic than a regime based on a territorially defined membership. In Spheres of Justice: A Defense of Pluralism and Equality, (175) Michael Walzer gives us some further clues about the importance of territoriality, although because he does so in the context of a discussion of citizenship and immigration, his discussion requires some refocusing. Walzer writes: [T]he link between people and land is a crucial feature of national identity. [A nation's] leaders understand, moreover, that because so many critical issues (including issues of distributive justice, such as welfare, education, and so on) can best be resolved within geographical units, the focus of political life can never be established elsewhere. "Autonomous" corporations will always be adjuncts, and probably parasitic adjuncts, of territorial states; and to give up the state is to give up any effective self-determination.... Hence the theory of justice must allow for the territorial state, specifying the rights of its inhabitants and recognizing the collective right of admission and refusal. (176) Why does Walzer write that issues of distributive justice can best be resolved within territorial units, and that the focus of political life can never be established elsewhere? I believe he does so because of an appreciation that political discourse involves what David Van Zandt has called micropolitical interactions. (177) That is, citizens produce and reproduce to one another the context and substance of their citizenship in an ongoing, pragmatic, dialogic process. Disputes over property, natural resources, and distribution generally are among the issues addressed within this ongoing dialogic context. Indeed, a sense of commonality as citizens helps to contain and defuse the rancor of resource disputes. (178) There is also a pragmatic aspect to this argument about the importance of locality to communal norm formation and dispute resolution. Typically, and throughout most of human history, the only way to fully engage discourse with others has been to be in their proximity if not in their actual presence. Until the advent of modern telecommunications and transportation, community was in an important sense inherently and inevitably local. (179) It was thus tied to place and presence in a place. "Where are you from?" is also inevitably a question about who you are and who your community is. (180) Where natural resources are concerned, the link of territory and localism to norm formation takes on even more importance. As Walzer writes, territory is also a social good because "[i]t is living space, earth and water, mineral resources and potential wealth, a resource for the destitute and the hungry." (181) While Walzer writes in the context of refugees--those external to the community who are destitute it must be recognized that environmental decisionmaking is essentially always about the allocation of resources. (182) It is about how to share natural services. (183) Thus, environmental decisions, among them the question of when an environmental regulation "goes too far" and should be treated as a taking, always have an element of distribution attached to them. As might be expected, different groups will consequently value the particular outcomes of resource conflicts differently, as they will the outcome of most any distributional conflict. This observation in and of itself may argue for inclusiveness in environmental regulatory decisionmaking, but it does not yet fully account for the importance of territoriality and locality to legitimacy of tribunal. Two further factors must be addressed. The first comes under the rubric of the land ethic. The basic idea here is that we are not in fact free to make whatever choices we please with natural resources. Natural systems have their limits, and will not tolerate exploitation and abuse indefinitely without consequences. Our approach to environmental regulation must be guided by the land, not just out of some sense of aesthetics or of identification, but because there are in fact dire consequences for ignoring the hard facts that underlie the land ethic. Thus, Eric Freyfogle, a champion of the land ethic, contrasts two approaches to property. (184) In one model, which he calls "property and the evolving community," private property is viewed as a creature of social evolution. (185) It is evolutionary and community oriented. But Freyfogle also posits another version of property, which he calls the "narrative of natural use." (186) Here, some of the basic principles of land and resource management are just not up for grabs; they are dictated by a proper understanding of the natural world. The public good must have an ecological component, and the social process of negotiating property norms cannot ignore it. (187) In my interpretation of Freyfogle's argument, linking the process of developing social norms around environmental issues to nature, place, and territory is important because it provides a kind of feedback mechanism. That is, arguments and decisions about resource uses which will have consequences are made more sensibly if the impact of those consequences will be felt by those making the decisions. Or, if not felt by the decision makers themselves, by their communities and the places they depend on, or by their immediate descendants. Indeed, I believe that as a matter of deliberative process and of the likely legitimacy of substantive results, it would be wrong to place a process for decision making about resources in a specific location that excluded those who live, work, and play in that location and to hand over decision-making authority to those half a world away, who would not be touched directly or indirectly by the consequences of their decisions. Similarly, advocates of ecological economics would argue that globalized free trade is perilous among other reasons because it further separates consumption from the natural limits or resource regenerative ability and absorptive capacity. Essentially, there is a failure of cost internalization. Herman Daly is one of the leading proponents of this approach. He writes: [T]he larger the free trade area and the larger and more footloose the corporation, the less it will be responsible to any local or even national community.... The larger the free trade bloc, the longer you can get away with depleting resources and absorptive capacities in one area in order to enjoy the benefits produced from these costs in a well-preserved environment somewhere else. The larger the trading area, the more feasible it is to separate costs and benefits spatially, thus avoiding the discipline of cost internalization geographically. That is why transnational corporations like free trade, and why ... environmentalists do not. (188) Elsewhere, Daly's concern about the loss of feedback mechanisms when decision makers are geographically separated from the locale of the externality is made even clearer. [T]rade does postpone the day when countries must face up to the discipline of living within natural regenerative and absorptive capacities, and by doing that probably serves on balance to increase throughput growth and environmental degradation. Free trade also introduces greater spatial separation between the production benefits and the environmental costs of throughput growth, making it more difficult for the latter to temper the growth of the former. Furthermore, as a result of the increased integration caused by trade, countries will face tightening environmental constraints more simultaneously and less sequentially than they would with less trade and integration. Therefore, there will be less opportunity to learn from other countries' prior experience with controlling throughput. (189) This argument about feedback and differential impact of externalities segues nicely into the last set of points I wish to make about the theoretical importance of territoriality and locality in environmental decision making. I shall call this the environmental justice argument. Typically, environmental justice advocates make several related claims. They argue that the groups for whom they speak are disadvantaged in what they have and in the allocation of physical resources to them. This misallocation may take the form of less access to positive amenities such as decent neighborhoods, clean water, sanitation, and recreation, or of increased exposure to harmful living and working conditions and environmental disamenities such as polluted air, water, and soil. Environmental justice advocates at the same time argue that these groups are disadvantaged procedurally and politically, in the processes that allocate physical resources and that enforce whatever environmental protections are supposedly on the books. (190) That is, whatever combination of common access regimes, property, and regulation is arrived at to manage resources, (191) these groups are disadvantaged at every step of the process. As William Shutkin writes, environmental justice involves "the notion that the true test of democracy is the ability and capacity of ordinary people, especially the disenfranchised and dispossesed, to participate in the decision-malting procedures of institutions that fundamentally regulate their lives." (192) It is telling that so many theorists of environmental justice are unable or unwilling to separate out substantive inequities and procedural inequities. (193) This linkage demonstrates that environmental justice advocates understand the dialogic nature of property and of environmental regulation. (194) Two further aspects of allocation factor into the environmental justice argument. First, environmental disputes are often about one individual or group sacrificing the interests of another individual or group. Pollution is problematic precisely when it is about externalities, that is, when one person's waste disposal causes costs to another who either cannot influence the decision to dispose of the waste or cannot be satisfactorily compensated for the injury. (195) When pollution is challenged, it is always because there is a displacement of its harmful effects, spatially, temporally, or both. Thus the possibility of a shifting of risk from one individual or community to another lurks behind all pollution disputes. With this understanding comes an appreciation of the vital role of including different territorially located groups in the decision-making process. To what extent should decision makers in one location ever be able to sacrifice the interests of those in another without the second group's full participation in the decision-malting process? A second environmental justice point has to do specifically with risk assessment. It is often argued that the only way to arrive at rational allocations of expenditures on regulation is to engage in a cost-benefit analysis and not to throw money at small risks where large costs would be involved. (196) This argument from expertise has come under criticism for two related reasons. First, it blurs the line between what science can accomplish and what must be dictated by policy. (197) Second, it often excludes those who are at risk from the decision making processes related to those risks. (198) This is an affront to their dignity as human beings. It lets others place value on the suffering of particular humans. It may also overlook important contextual information about the nature of the risks. (199) Thus, challenges to expert risk assessments are, in part, about an expertise-based process that removes decision making from the communities where the risks are experienced. Expertise-based risk-allocation decisions also implicate the land ethic issue of feedback from nature and the dignitary issue of participation in the political process by local communities that will be affected by the decisions. Both of these subsidiary issues have territorial dimensions. The regulatory takings disputes brought before NAFTA Chapter 11 tribunals will often include the same kinds of environmental considerations that straightforward environmental decisions would include. The nature of the risk involved, the appropriateness of the government's police power-based response, the expectations of the parties affected (positively as well as negatively) by the challenged regulation, all ought to be figured into the development of appropriate norms for the boundary between population and regulation. Substantive issues of risk and impact, and procedural issues of participation, are at stake just as much as in other kinds of environmental decision making. Again, these issues have territorial dimensions. C. Split Nomos and Territoriality Problems in the Context of Globalization As argued at the beginning of this Part, foreign investors have an interest in developing an internationally valid rule around regulatory takings that is 1) clear, 2) portable to different cultures worldwide, and 3) protective of their investments to the maximum extent possible. They seek to achieve this despite the fact that local, regional, and often national level conflicts between private property rights and bona fide regulatory adjustments involve particular resource use conflicts that may well be local, especially in their locally felt adverse environmental effects. In contrast, governmental regulators have typically sought to balance private property guarantees and community-protective actions, as do tribunals faced with claims of regulatory taking. This dialogic conception of the interface between property and regulatory takings is 1) pragmatic and evolutionary, 2) contextual, and 3) inclusive, seeking to accommodate all interests in a resource, not just the interest of the property owner. The tension between the two approaches is made more salient by the fact that foreign investors are not physically part of the locality where the effects of their actions will be felt. Michael Walzer may have had a basis for writing, in 1983, that "'autonomous' corporations will always be adjuncts, and probably parasitic adjuncts, of territorial states...." (200) But in an era of globalization, he is wrong. As Richard Falk opines, "the states system as the self-sufficient organizing framework for political life on a global level is essentially over...." (201) Robert Wai describes the international business community nowadays as a "'semi-autonomous social field.'" (202) Many transnational corporations are larger than all but the largest national economies. Capital flows freely in and out of many countries, so that it may dictate national policy rather than vice-versa. Many analysts suggest that autonomous corporations seem to be well along the way to detaching themselves from particular territorial states. Similarly, in some arenas, including importantly trade and environment matters, decision making has been increasingly removed from national arenas and even from state-to-state negotiations. The WTO's compulsory dispute settlement process is a prime example. Negotiation and administration of intellectual property treaties away from fora where those interested in access could more easily witness and perhaps influence the principles being developed is another example. (203) Unease about the globalization of property processes is evident in the tensions involved when world trade leaders meet in a populated locale where they are vulnerable to protest; (204) as is the move, in reaction to protests, to hold such meetings in publicly inaccessible locations like the Arabian peninsula (Doha). In short, the territorial and locality-based politics of the tension between globalization on the one hand and environmental, labor, and human rights concerns on the other is unmistakable. It forms the inescapable backdrop to the NAFTA Chapter 11 controversy. The property process theory of regulatory takings exposes the NAFTA Chapter 11 litigation as, plausibly, another front in what Doug Kendall and Charlie Lord have called the "takings project," a deliberate attempt to use a rhetoric of property rights to undermine the regulatory state. (205) At stake is no less than the extent to which locally harmful activities pursuant to transnational investments can be regulated by a host country. (206) This indeed could be described as potentially a new set of corporate private property rights. (207) The description of NAFTA Chapter 11 as an attempt to reframe certain property rights is especially plausible when it is understood that the NAFTA model for investment protection is likely to be incorporated, with some changes, into forthcoming, broader multilateral free trade agreements. One could also link the charge of a domestic "takings project" to charges of "predatory globalization," (208) which includes a tendency to disable regulatory restrictions on foreign capital's use of land and extraction of resources. Globalization is arguably accompanied by a neo-liberal mind set that is "deeply opposed to social public sector expenditures devoted to welfare, job creation, environmental protection, health care, education, and even the alleviation of poverty." (209) Richard Falk argues that even though The primacy of the territorial state is being challenged as never before[.] ... [T]he resilience of the state should not be underestimated, especially of those states capable of geopolitical ambitions on a regional and global scale. By aligning with market and other globalizing tendencies, the state may be reconceived, but not superseded, especially so long as market forces depend on militarism. To retain its ascendency, the state must also co-opt environmentalist tensions, and tiffs probably entails strengthening existing structures of global governance.... (210) Indeed, speaking more generally, Falk writes that in the past "[t]he state in democratic societies mediated between market and social forces" in a process that was "complex and contextual, reflecting many factors." (211) Nowadays, however, this role has been "partially superseded by the imperatives of 'competitiveness' in the wider settings of the regionalization and globalization of economic life." (212) In this process of what Falk calls "[n]egative globalism ... [s]tates are co-opted or subordinated, weakening impulses to regulate on behalf of the common good." (213) Indeed, Falk describes the United States's negotiation of NAFTA itself (the whole agreement, not just the investor protection provisions) as "an expression of the instrumentalization of state power in the strongest of states in relation to the priorities of economic globalism." (214) Saskia Sassen provides a powerful parallel analysis in her provocative 1995 lecture The State and the New Geography of Power, (215) written before the full emergence of the NAFTA Chapter 11 issue. She argues that economic globalization creates both a "geographic dispersal of firms' factories, offices, service outlets, and markets," (216) and a centralization of control in corporate structures that are "disproportionately concentrated in the national territories of the highly developed countries." (217) "From the perspective of the national state, specifically the state in highly developed countries, offshoring creates a space economy that goes beyond the regulatory umbrella of the state. And in this regard, the significance of the state is in decline." (218) But this is not the whole story, Sassen observes:
Firms operating transnationally need to ensure the functions
traditionally exercised by the state in the national realm of the
economy, such as guaranteeing property rights and contracts....
....
In fact, globalization has been accompanied by the creation of
new legal regimes and practices and the expansion and renovation of
some under forms that bypass national legal systems. Globalization
and governmental deregulation have not meant the absence of
regulatory regimes and institutions for the governance of
international economic relations. Among the more important in the
private sector today [is] international commercial
arbitration.... (219)
International commercial arbitration, as Sassen and others recognize, is basically an aterritorial private justice system. (220) Its authority is not centered in the state, even though it still ultimately depends on the state for enforcement. (221) Economic globalization has also spurred the formation of transnational legal regimes, which have penetrated into national fields hitherto closed. In their turn, national legal fields are becoming more internationalized in some of the major developed economies. Some of the old divisions between the national and the global are becoming weaker and, to some extent have been neutralized. (222) So far, this general description fits the NAFTA Chapter 11 debate remarkably well. NAFTA Chapter 11 in fact appears to be an amalgam of the lex mercatoria of private arbitration and a new transnational legal form. (223) It is aimed at preserving the institution of property in transnational contexts in a particular way. It replaces and arguably undermines an earlier understanding of the role of the sovereign state in balancing public and private interests through legitimate police power-based regulation, as well as through government-to-government settlement of expropriation disputes. And with all that, NAFTA Chapter 11 threatens to replace one version of property with another. Sassen also argues that the new transitional regimes assume a specific form in which highly developed countries "play a strategic geopolitical role." (224) Basically, the transnational law developing as a result of globalization is not truly "international" but is centered in Western economic concepts, often specifically American legal concepts. (225) While Sassen focuses on European resistance to the American export of regulatory standards in various fields, (226) one could equally well parse NAFTA Chapter 11 in this fashion, especially insofar as Chapter 11 may tend to delimit the permissible scope of economic and environmental regulation. As a parallel to European resistance, we might note within the NAFTA Chapter 11 context the resistance of some Canadians and Mexicans to a treaty regime that seems to have inadvertently committed them to a version of property protection that they argue violates their countries' sovereignty and their legal traditions by imposing a foreign, often American standard. (227) Meanwhile, on this side of the border, once NAFTA's threat of an independent transnational standard of regulatory takings became apparent, U.S. Congress itself resisted. Acting from the position of American hegemony, it took steps to require the inclusion of the substantive U.S. domestic regulatory takings standard in all future international investment treaties. (228) Investment protection in the generation of FTAs after NAFTA will be American indeed. (229) Finally, Sassen points out, "An important question running through these different interpretations is whether the new transnational regimes and institutions are creating systems that strengthen the claims of certain actors (corporations, the large multinational legal firms) and correspondingly weaken the positions of states and smaller players." (230) In other words, "this reconfiguration is partial, selective, and above all strategic." (231) In the context of NAFTA Chapter 11 and similar investor protection schemes that will follow, Jose Alvarez writes that the NASA investment chapter is "a dream come true for the U.S. foreign investor." (232) I have suggested in Parts IV.A and B, supra, what the stakes are on the public side. They include the continued viability of a nationally and geographically based norm-formation process for balancing private property and public needs in the evolution of property norms; maintenance of the legitimacy of the dispute resolution process itself through territorial linkages to the affected populations; the land ethic theme of relying on territorial links to incorporate into decision malting the feedback that ought to be observed from inherently limited natural services; and the environmental justice themes of local participation in relevant decision malting and of local input into risk and value calculations, themes that are about both democratic process and just results in the distribution of environmental goods and bads. V. CONSEQUENCES FOR INTERPRETATION AND RESTRUCTURING OF NAFTA CHAPTER 11 AND ARTICLE 1110 The question of how practically to respond to "indirect expropriation" and "tantamount to expropriation" claims from foreign investors has two aspects: 1) how to articulate and apply the substantive law, such as it is, addressing regulatory actions that result in the loss of property value; and 2) what forum(s) and procedures should be made available to do so. This Part will address each of these questions in turn in light of the themes of split nomos and territoriality just presented. The substantive and procedural questions are not altogether separate inquiries, however. Where there is a tradition of societal dialogue within a nomos, a vague balancing test can serve all the necessary substantive purposes (though it must be expected that clear rules will develop wherever there is enough social consensus to do so). (233) At the margin, in the difficult cases of arguably harsh regulatory effects on property, the rule can only continue to be a vague one. (234) Such a vague promise of negotiation towards a fair result works best to reconstitute community around property and regulation issues when those who feel they have been, or could be, injured are willing to trust in the promise of negotiation. (235) In the context of international investment, it is much dicier to presume that there will be a common background for societal dialogue, grounded in mutual trust, between foreign investors and a regulating governmental entity, let alone the locals who may be affected by any particular resolution of the dispute. (236) This is the split nomos problem. Strangers to the community, who do not trust its processes, will want clear rules and aterritorial fora to protect their property. (237) Foreign investors concerned about the security of their investments are likely to be strangers in this sense. Careful design of the adjudication process can partially address this issue of trust. A reassuring process might help to balance out the distrust generated by a vague substantive standard. (238) Here, both the split nomos problem and issues of territoriality and place are important considerations. A. A Substantive Norm for "Indirect Expropriation" and "Measures Tantamount to Expropriation" 1. A Vague Substantive Standard International law on regulatory takings, such as it is, (239) provides a clear obligation to compensate for direct expropriations. It also provides an obligation to compensate for "indirect expropriations" or "measures tantamount to expropriation." (240) But there is no obligation to compensate for losses due to bona fide regulations uniformly applied. (241) There is some agreement at this very general level about international law on expropriations in the form of regulatory takings. The problem is how to apply this standard. The Restatement of Foreign Relations of the United States, for example, comments that "the line between a taking and regulation is sometimes uncertain." (242) Charles N. Brower and Lee Steven, perhaps typical supporters of investment interests, write, "[I]t is often an extremely difficult, politically sensitive task to distinguish between a compensable taking and a non-compensable regulation in a specific case." (243) David Schneiderman, a sovereignty critic of NAFTA, writes, "There are no clear, bright lines between what constitutes a noncompensable and a compensable event...." (244) Martin Wagner, an environmentalist critic of NAFTA, argues against compensation for indirect expropriations under NAFTA, claiming that "international law does not require government to provide compensation for the economic impact of most legitimate environmental laws or regulations." (245) Yet later in the same article he points out that "[i]nternational tribunals have seldom, if ever, addressed whether environmental regulations affecting foreign-owned property give rise to a right of compensation." (246) Rudolph Dolzer, an internationally recognized academic expert, appears stymied. (247) Andre van der Walt states, "The distinction between compensated, eminent-domain expropriations and police-power regulatory limitations of property is perhaps the most controversial and difficult issue in the whole of constitutional property." (248) Vicki Been and Joel Beauvais recently concluded that the standard is uncertain. (249) In short, we do have an international legal standard for regulatory takings. We just do not know what it means. The problem cannot be escaped by giving up on current international law and setting out to draft a clearer treaty provision. "Attempts to restate regulatory takings doctrine in clearer form--whether of the distillation or 'start over' variety--sooner or later almost always rely on terms or procedures that reinsert vagueness into the formulation." (250) Indeed, the negotiators of NAFTA went down this path. Daniel Price, one of the principal United States negotiators, on behalf of the U.S. Trade Representative, writes: The negotiators considered whether or not they ought to try to draw a bright line in the text that would distinguish between legitimate, bona fide and nondiscriminatory regulation, one the one hand, and an expropriatory act requiring compensation, on the other. We quickly gave up that enterprise. If the United States Supreme Court and arbitral tribunals could not do it in over 200 years, it was unlikely that the negotiators were going to do it in a matter of weeks with one line in a treaty. (251) So the omission of a clearer definition from NAFTA is not just an oversight, as many commentators conclude. (252) It is sometimes suggested instead that we should consider abandoning the regulatory takings doctrine altogether. (253) This argument can be motivated by a willingness to trust the legislature to do the right thing and a reluctance to trust the courts to do the right thing, as well as by frustration at the seeming impossibility of articulating a detailed role. Law and economics and public choice arguments are often marshaled on both sides of this approach to regulatory takings. One of the best treatments of Chapter 11 expropriation as a regulatory takings problem, by Vicki Been and Joel Beauvals, also comes out here, finding no strong justification for regulatory takings doctrine, domestically or internationally. (254) They conclude that "[a]rguments for compensation requirements that are dubious in the U.S. domestic context become altogether untenable when translated into the international sphere." (255) While I am not an advocate of especially strong property rights vis-a-vis regulation, I believe Vicki Been and Joel Beauvais may have gone too far. For one, there are, very occasionally, regulatory actions so unfair, so much a result of "singling out," or so unexpected, that they should be sanctioned. (256) Here, to be sure, if we eliminated regulatory takings as a separate doctrinal provision, some sort of basic fairness requirement could be linked to another provision of law. Thus, we could rely on the Due Process Clause domestically to address unfair regulation. (257) In the international context of foreign investment, however, it might be harder to find a single blanket "fairness" provision analogous to the Due Process Clause. "Fairness" could simply be read into international law on expropriation as a part of the basic test for indirect regulatory takings. (258) In the context of NAFTA Chapter 11 itself, of course, there is already a guarantee of fair treatment in Article 1105, and a similar guarantee can be expected in other FTAs. Though that provision's scope has been curtailed by the recent interpretation of the NAFTA parties, it could be pressed into service. There is another, often overlooked, argument in favor of keeping some regulatory takings doctrine applicable to direct expropriations. Regulatory takings doctrine serves an important rhetorical function, by stating a formal commitment to protect stability in property expectations. (259) This provides a general reassurance to expectations of stability in property ownership, along the lines sketched long ago by Frank Michelman, at least under one understanding of "demoralization costs." (260) As a general statement of the principle of stability of property rights, regulatory takings doctrine thus facilitates stability during regulatory transitions. This is a central argument of the regulatory transition approach to regulatory takings doctrine. (261) This perspective on regulatory takings may help to fortify an argument that Vicki Been and Joel Beauvais make only haltingly. Having concluded that a regulatory takings doctrine for indirect expropriations is not needed, (262) they are somewhat tentative in explaining why there should be a protection against direct expropriations. They suggest that perhaps an obligation to compensate for direct expropriations reflects "a comparatively longstanding international norm" (263) or a "clear international consensus" (264) and that it ought to be retained on that basis. (265) In fact, making a normative statement through legal standards against the most invasive forms of government interference with private property is important not only to international norms but to domestic property norms as well It stabilizes expectations generally and takes a stand in principle and in the abstract against unjustified government interference. (266) Neither of these doctrinal proposals resolves the problem of vagueness in takings doctrine. The underlying problem remains. What ought an international regulatory takings doctrine say? As Frank Michelman has pointed out, general statements about property and regulation are likely to be unhelpful. (267) They are too general to get at the complicated factors that ought to be considered, and, if made specific, are too inflexible over time. (268) The simplest positions are easy to state, but unacceptable. They do not address balance properly. Thus, the strong property rights protection adumbrated in some of the NAFTA Chapter 11 arbitrations is wrong, for it would impair traditional police power regulation in novel and harmful ways. Abolishing the regulatory takings principle altogether is wrong, for it would fail to account for occasional gross unfairness and would not symbolically represent the importance of stability of property. That leaves us in an in-between territory, needing to determine the difficult conflicts case by case, on an all-things-considered basis. In other words, I come out right where international law currently stands. Setting aside the issue of direct appropriations, which should be dealt with separately, international regulatory takings doctrine cannot sensibly be anything other than a Penn Central-like gesture towards a vague balancing test. Surveying international precedent, Martin Wagner concluded that it would involve examining the reasonableness of the regulation, the severity of the impact on the property owner, the duration of the regulation, and the reasonableness of the owner's expectations. (269) This sounds about right. Indeed, the 2002 FTAs with Singapore and Chile write these factors right into the agreements. (270) 2. The Role of National Variation, Given Vagueness in the Substantive Standard I turn now to the question of "national treatment" as a possible substantive standard for transnational regulatory takings. At the outset, we should appreciate that national treatment has both substantive and procedural components, and that discussions of national treatment sometimes conflate the two topics. National treatment addresses both using whatever national legal standard there may be for regulatory takings and the issue of whether it should be applied by going through the national court system. These inquiries can be separated. For example, an independent arbitral panel could in theory apply domestic law of the locus in quo to a NAFTA regulatory takings dispute. Alternatively, a domestic court could apply international law. To the extent that the distinction between substantive and procedural aspects of national treatment is sometimes glossed over, it may be because we recognize intuitively that with an inherently vague substantive standard, the choice of forum is extraordinarily important, indeed potentially determinative. In any event, here I address the substantive aspect of national treatment. (271) For countries that have a meaningful domestic law of regulatory takings, using that national law seems substantively appropriate. Such a standard would by definition tend to accommodate the nomos and territoriality concerns of the polity, while at the same time providing some kind of promise of stability to investors. Indeed, the Separate Comments of three members of the Trade and Environmental Advisory Committee made just this point with regard to the U.S.-Singapore and U.S.-Chile FTAs: [T]here has been no evidence provided to TEPAC that investment rules are necessary in bilateral relations with Chile or Singapore. To our knowledge, there is no publicly available information that would suggest that either jurisdiction has mistreated U.S. investors in recent years. Equally, there has been no showing that either Chile or Singapore's judicial systems are not capable of resolving complaints of U.S. investors. One must thus question the need for investment rules and the invest-state mechanism in the first place. (272) Moreover, where there is a meaningful domestic law of regulatory takings, having a different, international standard apply to foreign investors can only mean one of two things. One is that the foreign investor is treated worse, which would independently violate the national treatment provision contained in typical FTAs, including NAFTA Article 1102, and perhaps the most favored nation provision as well. (273) It might also violate the requirement of the international law on expropriations that regulations be applied in a nondiscriminatory manner. The other possibility is that the foreign investor would be treated better. This latter situation is politically difficult--witness the requirement in the Trade Act of 2002 that foreign investors may not be treated better, a requirement due in large part to reaction to NAFTA Chapter 11 and Article 1110. Also, if foreign investors are in fact treated better, there will be an incentive, as with tax matters, to engage in corporate restructuring to take advantage of what amounts to a legal loophole for certain types of regulation. This ought to be unacceptable. To be sure, investors will still want to investigate the content of a country's regulatory takings doctrine promise in the context of local law and politics. It might be objected that foreign investors may not be familiar enough with the cultural background of a country's property practices to predict accurately what will and will not be compensable. But they ought to be able to hire people who will be able to predict as well as anyone can. (274) But it is not clear that all countries have developed a domestic approach to regulatory takings. Writing only a few years ago, Andre van der Walt did not see a universal pattern. (275) What should be done about this? A national treatment doctrine applied to regulatory takings only provides an appropriate assurance of security of property in countries where a meaningful regulatory takings doctrine exists. (276) Elsewhere, investors could seek to obtain protection specifically for foreign investment through a treaty provision. This seems to be what the Separate Comments of the three TEPAC members had in mind--for Chile and Singapore you do not need a separate protection, but for some other country, maybe so. (277) In any event, given the discussion above, a regulatory takings doctrine written out in a treaty might not be able to be a terribly specific one. (278) International law has also served this function, by providing a background default protection for foreign investment in the absence of agreement, albeit a vague one. To the extent that any particular society adopts private property as a basic framework for that particular society, I do not see how it can do so without some form of a domestic regulatory takings doctrine. The tension between stability and change in property relations as conditions shift is unavoidable, and the mediating function of regulatory takings doctrine serves an important purpose. Whether such a principle has to be constitutionalized, or can survive on a strong preference for respect to property still ultimately subject to the legislature, is another question. (279) These matters go beyond the scope of this article. I do not wish to imply, however, that there should be a single substantive standard of international law protecting property that must be applied by all nations. All that ought to be required, given the issue of nomos and the function of regulatory takings doctrine, is that some type of balancing and negotiation will take place under the aegis of a regulatory takings doctrine. (280) The international standard should be that a regulatory takings balancing rule must be formally in place, that it must be understood to be real, and that it must be carried out in practice. The content of the test, however, will inevitably be vague in some regards, and I mean to leave it vague. (281) Any particular result of the balancing is subject to some degree of freedom, as befits an ad hoc, fact-specific inquiry that necessarily takes place within a particular nation's culture and historical practices. As Rudolph Dolzer writes: [T]he facts of each case will have to be weighed individually. As a rule, one may assume that host states enjoy a margin of appreciation in those areas where the general principles are vague owing to a certain divergence of national practices. This assumption appears appropriate in light of the sovereign rights of the host state and the political, social and economic implications of the rules governing private property. (282) Moreover, it is not evident what kind of balancing of property stability against public policy concerns would occur ff we were to suppose an international focus for the regulatory transition. As one commentator recently put it, "[T]here is, as yet, no clear notion of an international public policy of the kind that is taken for granted within national legal systems.... This, in turn, ... reflect[s] the fact that there is no real, effective sense of international morality, no sense of common responsibility." (283) But a regulation is invalid if done on a basis that is discriminatory or pretextual. There seems to be a convergence of opinion on this point, at least. 3. Recent Statutory and FTA Modifications to the NAFTA Article 1110 Approach: Substantive Aspects I am constrained here to discuss a provision of the Trade Act of 2002 which requires U.S. trade agreements to ensure that foreign investors do not get greater protection than U.S. property owners and also requires the application of U.S. principles and practices concerning regulatory takings. (284) Several comments come to mind. First, to those who have argued that an objective of U.S. trade and investment policy is to export a specific concept of property protection, here is the explicit proof. Second, to those who have argued that the protection afforded by international standards and by the development of investment-state dispute settlement tribunals such as those provided in NAFTA Chapter 11 are problematic, here is the confirmation. The United States is unwilling to submit substantively to any other standard than its own. Only U.S. law will do. Also, whatever the merits of my recommendation for some leeway in allowing different countries to balance the needs of property protection and public welfare-based regulation, the Trade Act of 2002 seems to forbid it where future U.S. agreements are concerned. To be sure, the United States ad hoe, fact-specific balancing test is itself so capacious that it may not unduly limit the bona fide regulatory actions of other countries. As one convinced that regulatory takings law must retain an inherently vague core, I find it instructive to observe the first attempts to comply with the Trade Act's statutory mandate, in the U.S.-Singapore and U.S.-Chile FTAs. Both agreements attempt to state succinctly the substantive content of U.S. regulatory takings law. "Indirect expropriation" is defined as "an action or series of actions by a Party [having] an effect equivalent to direct expropriation without formal transfer of title or outright seizure." (285) The agreements then recite a version of the three-part Penn Central balancing test, (286) followed by a statement that "except in rare circumstances, nondiscriminatory regulatory actions ... that are designed and applied to protect legitimate public welfare objectives, such as public health, safety, and the environment, do not constitute indirect expropriation." (287) The TEPAC reaction to this approach was that the definition lacked clarity. Specifically, it noted that the FTAs protect "a tangible or intangible property right or property interest." (288) It found this term unclear and with "no comparable U.S. jurisprudential concept." (289) It recommended that: To further enlighten the appropriate development of this now more refined concept, we urge the respective national governments to exchange soon, and in an appropriately formal manner, exemplars of what currently constitutes such an "indirect expropriation" in each of their respective legal regimes in order to better inform each national perspective as to the current application of this critical concept in the other's jurisdiction. These exemplars should also be made available to any empanelled arbitral panel for appropriate reference. (290) The TEPAC also stated that the "rare circumstances" language could be strengthened for greater clarity. (291) The Separate Comments by three members of TEPAC went further, however. These comments argued that the two FTAs did not in fact reflect United States law, (292) as required by the Trade Act of 2002, and also complained about the inherent vagueness of the core balancing test. These agreements cannot ultimately comport with the "no greater rights" congressional mandate if foreign investors are able to bring claims that would be decided by ad hoc panels that are not trained in or bound by U.S. Supreme Court precedent and that would not be subject to review by U.S. courts to ensure that they do not in fact deviate from U.S. law and grant greater rights to foreign investors. The prospects of such panels engaging in subjective balancing tests, and on the basis of those, imposing financial liability on the U.S. for legitimate regulatory and other actions is extremely troubling. (293) This comment recognizes that, without a clear standard, ad hoc panels even acting in good faith may be at sea in trying to apply U.S. law on takings---as indeed arguably are U.S. courts and legislatures themselves. The Separate Comments, and to some extent the TEPAC comments, do indicate a couple of areas where there are additional available clear rules or almost-rules. (294) But at a level of application to specific cases, often not that much is clear about U.S. regulatory takings law. (295) As Vicki Been and Joel Beauvais succinctly put it, "Any attempt to translate the exceptionally complex and notoriously fact bound body of U.S. jurisprudence into intelligible treaty provisions would be a fool's errand." (296) The suggestion of exemplars is not bad, but of course exemplars instruct by analogy and there will be leeway to interpret them differently. (297) In short, the persistent problem with vagueness in stating regulatory takings principles in a rule-like manner simply indicates that the process is ultimately one that requires participants and tribunals to engage in an ongoing dialogue about the appropriate boundary between property and evenhanded regulation. (298) At that point the identity, traditions, and procedures of the dispute resolution tribunal become all the more important. (299) B. The Dispute Resolution Mechanism for "Indirect Expropriation" and "Measures Tantamount to Expropriatio" Designing the proper procedural mechanism for adjudicating "indirect" and "tantamount to expropriation" disputes is every bit as puzzling as articulating a substantive standard. The most likely possibilities are considered here. (300) This section is written as a bit of an abstraction, as the approach I hesitantly recommend--decisions by national tribunals in the first instance, so long as they apply some version of a balancing test, subject to a subsequent review by an appellate panel under a limited international standard of review--is unlikely to be achievable within the NAFTA framework and has not been implemented in the Trade Act of 2002 and FTA revisions of the NAFTA framework. Among other reasons, because it ultimately recommends that domestic courts examine indirect expropriations claims in the first instance, it is likely to be totally unacceptable to transnational investors concerned with bias in the forum. They are likely to be in control of the shape of future FTAs in this regard. One procedural possibility is to abandon the ISDM and return to government-to-government diplomacy. After all, as one observer has suggested, "Investor-state arbitration's removal of the screening process in diplomatic protection inevitably leads to novel and expansive, even extravagant, claims." (301) However, simply returning to a traditional government-to-government approach to expropriation disputes is problematic. Charles N. Brower and Lee Steven characterize it as "highly inefficient, arbitrary, and politically explosive." (302) While state-to-state case-by-case resolution makes the compensation process "public" again, this may not be the appropriate public to satisfy the demands of a theory that understands regulatory takings to be about norm building and negotiation. The filters used when a state decides when and where to bring a claim against another state reach far beyond property and police power to various other political considerations. (303) A state-to-state process would thus subject the interests of both foreign investors and those potentially protected by bona fide regulation to the vagaries of international relations. This is contrary to the spirit of free-trade agreements generally, insofar as they seek to level the playing field and facilitate transnational commerce insulated from ad hoc governmental actions motivated by international concerns. (304) Charles H. Brower, II, points out that this process would also likely result in incoherent doctrine, although the incoherence may be masked by the smaller number of cases actually pursued. (305) Moreover, the kinds of inadequate access issues raised by NGOs to challenge the NAFTA Chapter 11 arbitration procedures could well be implicated equally in a government-to-government decision whether to seek compensation and how to frame the claim. Transparency is potentially lacking here, which enables legitimacy to be questioned on these grounds. Another frequently raised possibility is simply to relegate international investors to the same constitutional or statutory protections of private property available to each country's domestic investors. This would still be consistent with the national treatment provision of NAFTA Chapter 11 and the more recent FTAs. As discussed earlier, there are substantive and procedural aspects to national treatment. (306) The focus of this section is on procedure, that is, the choice of national courts versus an arbitral panel or some other supranational dispute resolution mechanism and, if arbitration is selected, the appropriate structure of that arbitration. Why not rely on national courts to implement regulatory takings law vis-a-vis foreign investors? They resolve domestic regulatory takings disputes, after all. Investors' concern about where the dispute process is located is driven primarily by concern about the results. "[D]omestic courts are often in fact, and, just as important, usually are perceived to be, biased against alien investors, especially when those courts must evaluate and pronounce upon acts of their own governments." (307) Thus, even if an international substantive standard were supposedly in place, processing regulatory takings claims through domestic tribunals would severely diminish the reassurance sought by foreign investors. (308) To the extent that the perception is shared, locating the process in national courts might also diminish the incentive for restraint by the legislature or agency involved in the regulation, since they would figure they could prevail in court. But what is sauce for the goose is sauce for the gander. Resolving international regulatory takings disputes through arbitral tribunals is equally suspect from the opposite direction. David Schneiderman, for example, expresses doubts that NAFTA arbitral panels will be representative of the public rather than of international trade interests. (309) His sentiment is evidently shared by many of the critics of the current Chapter 11 process. (310) It might seem ironic that this is so, since by providing for each side in a dispute to choose an arbitrator, with the third selected mutually, the design of standard commercial arbitration is supposed to meet the concern about biased decision makers head-on. But for better or worse, expert arbitrators are viewed as situated squarely within the investor nomos. They will be perceived to be alien to and biased against domestic public policy concerns. There seems no way out of this split nomos problem. But the law demands that a solution be proposed anyway. It may help, then, to observe that a claim for compensation for a regulatory taking is, in a sense, an appellate review procedure. Some government action that has already occurred or is threatened to occur is being challenged through the NAFTA Chapter 11 claim process. Speaking generally, appellate processes that review administrative actions can be understood as establishing a dialog among different branches of government entrusted with the responsibility for carrying out the law. The topics are fidelity to the law and to overriding procedural principles, whether they are established by statute or enshrined in a constitution. We put judges in charge of judicial review because they are somewhat removed from the exigencies and political pressures that can sometimes infect legislatures and agencies. But while removed in this sense, they are very much a part of the overall decision-malting process and of the nomos. (311) They protect its underlying values. Ad hoc arbitrators drawn from a worldwide pool, and of a particular socioeconomic class, (312) are not as likely to be able to do this. (313) They will engender a perception of bias or incompetence. (314) Perhaps this analogy helps with the split nomos problem here. If the regulatory takings process is understood as a particular kind of limited judicial review of administrative and legislative actions, it can be seen as a part of a fundamental societal dialogue. It is, to be precise, part of the dialogue that regulatory takings doctrine is supposed to promote within the nomos. (315) Where a vague substantive standard seems unavoidable, judicial interpretation in specific cases is key, (316) and the identity of the judge becomes a crucial issue. (317) If put to it to make a recommendation, then I come down on the side of having international regulatory takings disputes determined in the first instance by national tribunals. (318) Judges in national tribunals are more likely to be in touch with relevant views about property, and are also more likely to be perceived as in touch, giving their inherently discretionary decisional process more legitimacy. (319) As discussed above, in my view the substantive standard they apply should be a balancing standard, derived from domestic law where that law does balance stability and change in property rights. (320) But what is to assure investors that this review process within domestic courts is to be trusted? It could be biased or discriminatory, or it could effectively conceal and legitimize improper motives for regulation. Or judges could be corrupt. There needs to be a review of the review. To provide at least some protection, one could structure an "indirect expropriation" and measures "tantamount to expropriation" dispute resolution mechanism to require a first attempt to obtain similar treatment in domestic courts, followed by a move to an international arbitration or other review process if that attempt to obtain compensation was tainted. (321) This approach would in essence function as a kind of exhaustion of local remedies principle. Such a procedure would have the merit of locating the baseline consideration of the boundary between property rights and the police power within the territorially based nomos. It would make clear that the special consideration to be applied subsequently to foreign investors is an extra level of guarantee that a balancing process occur and that it occur in a nondiscriminatory fashion. Keeping the first round of an indirect expropriation claim within the national court system would thus help to prevent the NAFTA foreign investment protection standard from becoming a de facto international property right, in derogation of local practices and understandings, by insisting on a local standard and a local tribunal at least in the first instance. (322) At the same time, it would insist that there be a legitimate attempt to apply the vague substantive standard, and that this be done in a nondiscriminatory manner. It would thus not allow a situation to occur where there is in fact no property protection and where assertions of police power become a blank check for potential governmental abuse. Such a process includes several stages and might be thought to be undesirably longer and more expensive than the current Chapter 11 procedure. (323) It should be noted that the present process already provides a review, albeit quite limited, through judicial review of the arbitral award. That is, in at least some of the Chapter 11 cases (e.g., Metalclad and S.D. Myers) the arbitral decision is not the end of the process. To be sure, the current bases for challenging an arbitration award under the ICSID Additional Facility rules or the UNCITRAL rules, while dependent on domestic law, are typically narrow. (324) But, in fact, the grounds this Article suggests for review of national court decisions are remarkably similar to the limited grounds now typically allowed for judicial vacatur of arbitral decisions. Moreover, the delay and expense of a two-tiered approach might also be useful, functioning as a negotiation-forcing mechanism, much as the U.S. takings ripeness doctrine forces claims against state and local governments to be brought locally first. (325) The model of domestic exhaustion of remedies is already in use in the international human rights area, where domestic remedies must be sought before resort to the international tribunal. (326) This analogy is not at all farfetched. After all, it is often argued that property is a human right. (327) And it is treated so legally, in Europe for example. (328) Jose Alvarez suggests another, similar model: the complementarity principle of the International Criminal Court (ICC). In complementarity, "international prosecutors step in only after national courts are shown to be unwilling or unable to prosecute." (329) Complementarity is "a substantive and sound operating rule that recognizes that trials closer to the scene of the events at issue have inherent practical as well as expressive value." (330) Basically, "local justice through localized proceedings has values of its own." (331) To some extent complementarity reflects principles of exhaustion of local remedies and of subsidiarity as used in European Union law. (332) A contrary principle, In which high-level criminals are handed over to an International court, has negative implications about the legitimacy of domestic trials and laws. (333) In short, the ICC process also suggests the wisdom of my recommendation to allow national courts in the first instance to deal with indirect expropriations. For better or worse, however, transnational investors seem to have a strong preference for keeping all expropriation disputes out of domestic courts. Therefore, my argument above to the contrary is not likely to prevail. (334) Realistically, the existing NAFTA process, and existing as well as future FTAs, are likely to be structured to respond to investor Interests more than to countervailing domestic public law concerns. In this event, two second best alternatives have to be considered: 1) review of initial arbitral decisions in domestic courts, and 2) review of initial arbitral decisions in some non-national appellate body. (335) Writing generally about the expansion of international commercial arbitration into public law areas, William Park explored the admittedly imperfect approach of allowing arbitrators to rule in the first instance and then having a limited judicial review on the merits in national courts. Allowing an arbitrator to decide a public law claim, although his award later may be refused enforcement on grounds of public policy, is not a perfect accommodation of the competing objectives of providing a neutral forum and safeguarding the public interest. It does, however, respond to the special needs of international commerce by permitting the legal merits of the dispute to pass through the strainer of neutral arbitration before national judges review the award on the restricted grounds of what has been called a nation's "most basic notions of morality and justice." (336) Park argues that this approach preserves "the paramount importance of insuring a neutral forum" (337) for transnational investors even at the expense of an arguably more correct decision. (338) The New York Convention and Inter-American Convention do accommodate review of arbitral decisions at the seat of arbitration if the arbitral decisions are contrary to public policy. (339) The phrase "contrary to public policy" is, however, open to interpretation. (340) More recently, however, Park has argued that even this much involvement by the national courts may be too much for investors. (341) Thus, the sticking point is likely to be investor resistance to even this level of inclusion of domestic courts in the dispute resolution process. The prone example is Metalclad, where the Canadian and Mexican assertion of relatively broad jurisdiction to review was met with strident opposition, and Canada's assertion of a relatively expansive review has led subsequent disputants to avoid Canada as a place of arbitration. (342) As Charles H. Brower, II, articulates this position, Article 1115 ... seeks to provide equal treatment to the investors of different NAFTA Parties by removing their claims from the eccentricities of municipal legal systems and submitting them to the more generic process of international commercial arbitration. Extensive litigation in municipal courts following arbitration would both undermine that goal and frustrate the undertaking to create effective mechanisms for dispute resolution. (343) Elsewhere, Brower is more explicit about his concern that judicial review in municipal courts simply cannot avoid bias, or the appearance of bias, in favor of the host state. (344) Speaking generally about judicial review of arbitral decisions, William Park argues that the situation of judicial review of domestic arbitrations is fundamentally different from that of international arbitrations. With regard to a far-reaching merits review of arbitration by courts, Park allows that it may be useful in a domestic context to help develop the law. (345) But in an international context, "the parties' interest in procedural neutrality often outweighs benefits derived from using commercial disputes to develop substantive national law." (346) The problem, of course, is that international "indirect expropriation" disputes are not typical private international commercial disputes. The regulatory mechanisms challenged in them affect many others, and may govern resources that are considered publicly owned. At stake is both the resolution of a regulatory dispute, with sometimes severe domestic consequences, and the course of more general development of property rules that affect others beyond the parties. In other words, we encounter the split nomos problem once again. The inevitable presence of strong public interest concerns in international regulatory takings disputes recommends against simply adopting standard forms of international commercial arbitration and judicial review. Nevertheless, the players with the upper hand--international investors--are likely to prevail and hence to exclude national courts from any role in resolving expropriation disputes. Practically speaking, this leaves us with the third alternative: a better, more focused appellate review of arbitral decisions, but one outside national court systems. Typically arbitral decisions are not reviewable on mere questions of getting the law right, and one decision does not bind another. (347) They are thus short on the process of public dialog and norm formation, a key aspect of public law issues in general and of regulatory takings in particular. For these reasons, there seems to be a general movement to develop an appellate mechanism for arbitration decisions addressing expropriations. (348) If such an appellate mechanism cannot be located in a national forum, it ought to be focused in a body that understands that it is engaged in the process of supervising the gradual articulation and reevaluation of norms for managing the boundary between property rights and the police power. This might require tweaking the standard of review. (349) The current NAFTA Chapter 11 approach is just wrong here. It has no centralized appellate body, but depends on the vagaries of where the arbitration took place or is enforced for limited appellate guidance. (350) (The three parties may also provide interpretations of the agreement, as has happened once to date by the Free Trade Commission (FTC), in reaction to Metalclad.) (351) This lack of centralized review merely amplifies the effect of "a system of ad hoc arbitration before tribunals that issue nonprecedential awards [that creates] a lack of institutional and jurisprudential continuity." (352) In Metalclad, for example, the last word on the dispute was spoken by the British Columbia Supreme Court, even though the parties were a United States investor and the Mexican government. (353) In contrast, for example, the WTO has a single Appellate Body with permanent members. It reviews the decisions of ad hoc dispute settlement panels. (354) Though not geographically based, (355) at least this permanency of mission of the Appellate Body may give some sense of continuity and coherence to the project of developing international norms, and thus confer legitimacy. (356) The WTO approach has been suggested as a model for a NAFTA appellate tribunal. (357) A small and stable "appellate tribunal could focus on reviewing adherence to ritual at the first instance and supervising the development of a coherent body of law among the various tribunals." (358) Indeed, one or more appellate bodies are probably on the horizon for future agreements, thanks to the Trade Act of 2002. That Act requires future treaty provisions addressing dispute resolution mechanisms between an investor and a government to "provid[e] for an appellate body or similar mechanism to provide coherence to the interpretations of investment provisions in trade agreements." (359) In what might be compliance with this statutory provision, the U.S.-Singapore and U.S.-Chile FTAs include a commitment to explore within three years the creation of an appellate body to review arbitration decisions bilaterally within the framework of each FTA. (360) Charles H. Brower, II, argues that a standing appellate body would show "recognized expertise and probably a developed sense of accountability...." (361) But expertise as to what? Not necessarily the subtleties of property practices in the various states. And accountability to whom? The perception of an aterritorial community of investors lurks. In other words, issues of split nomos and territoriality are not avoided by keeping the appellate review non-national. The burden of potential insensitivity and unfairness of the decision makers is just shifted from transnational investors to the residents of the host country. The question of where to place a non-national review tribunal cannot be avoided. A tribunal for review of national courts' regulatory takings decisions involving foreign investors could be installed under the Council on Environmental Cooperation (CEC), which is already established in the NAFTA environmental side agreement. The CEC already has authority to review shortcomings of the signatory states in enforcing their environmental laws. So a compromise has already been reached here between the processes of national sovereignty and the requirements of an international treaty. It places ultimate enforcement authority for certain matters in the hands of the CEC. This would provide a unity of mission that could lead this tribunal to seek generally balanced and consistent decisions. And it might be seen to coincide geographically, in a broad sense, with the domiciles of both the investors and the regulating states. One has to ask whether the CEC has the legitimacy to facilitate transnational public conversations about the police power and to limit the sovereignty of its signatories. It is, in the view of some, a relatively ineffectual organization. Conceivably, some other stable adjudicatory body could be developed, under the auspices of the WTO or otherwise. The strongest supranational judicial decision making is coming out of the WTO and, to some extent, international human tights courts. (362) But the WTO is already viewed with suspicion and may be politically unacceptable for that reason. The split nomos problem reappears. A review body linked to the NAFTA treaty regime seems preferable. In a more far-flung multilateral treaty, such as the FTAA, finding a single legitimate geographical home for a tribunal or an appellate tribunal would be even more difficult. I cannot figure a way to accommodate the concerns of territoriality any better at the appellate level. Requiring that regulatory takings challenges occur foist in domestic courts, with the limited review described above, would take some of the edge off of the issue. But as I suggested above, it is unlikely. Finally, there are the transparency issues. The one set of ISDM reforms that most everyone seems to agree on is some restructuring of the current international arbitration mechanisms governing investor-state disputes to facilitate public dialogue. (363) It was a mistake at the outset to sweep regulatory takings disputes into the mechanism for simple out-and-out expropriations. Procedural reforms should involve the kinds of steps that environmental NGOs and other general critics have been demanding--a tight to participate as a party or amicus, open briefs and arguments, an obligation for the tribunal to write a published opinion, and a tight to appeal that includes at least some review for consistency with domestic policy. (364) All of these will facilitate public dialogue and should be incorporated into any wholesale revisions of the investor-state dispute resolution mechanism. The U.S.-Singapore and U.S.-Chile FTAs do take some steps in this direction, although not enough in the views of some. (365) To the extent that national courts become the fora for international regulatory takings disputes, we should expect the same transparency of them. As for the existing arbitration provisions, we should question whether a simple treaty reference to existing models of international arbitration should be adopted with amendments, as they are so clearly oriented towards a different end. (366) Instead, perhaps, a new model of public-minded arbitration needs to be developed specifically for this task. VI. CONCLUSION Generally speaking, as to international "indirect expropriation" and "measures tantamount to expropriation" claims, any dispute resolution institution one can imagine will be unsatisfactory, for reasons illuminated by my analysis. We are in an age where we have, on the one hand, an increasingly coherent community consisting of transnational investors and companies. These entities share a consistent view of what they need to operate to the best of their ability. I have called it a nomos, or world view, invoking Robert Cover. (367) Their nomos includes a rigid and highly protective definition of property rights. Property is portrayed as a freestanding right, (368) even as these interests work to instill a particular vision of property through treaties and protocols at the supernational level. (369) They also seek a prompt compensation mechanism that had best be private in its procedural structure. We have, on the other hand, a much more heterogeneous set of property practices, regulated to a greater or lesser extent at the national, state, and local level (and supranationally currently in the case of the EU). Property regulators are committed, to varying degrees, to the balancing of private and public regarding aspects of property. To such geographically based communities, the sovereign power naturally does, and ought to, include police power-based limitations on property. The police power can be understood as, in part, an expression of the natural need for members of a geographic community to cooperate and limit the ways in which they interfere with one another. It is also an assertion of dominion over common resources that are affected by private uses of property. Within this paradigm, government cannot survive without readjusting the benefits and burdens of society from time to time. (370) Claims of transnational investors to condition bona fide police power regulations upon payment of compensation will seem wrong, and any proposal to establish some nonsovereign state-based tribunal to adjudicate those claims will seem nonpublic and not based in the community. It therefore will be suspect. The two interpretive communities are at loggerheads. No final resolution, but only ongoing dialogue, is possible. The issue is not only the substantive standards for compensation, but also to a very great extent the procedure under which disputes are addressed. Perhaps by clarifying the underlying structure of the dispute, the two camps can find a better way to work together on managing different types of disputes differently, and on establishing the level of clarity and generality of the substantive standard that investment treaties ought to incorporate. Distinguishing direct expropriations from regulatory takings would be a good start. (1) Hudson Water Co. v. McCarter, 209 U.S. 349, 355 (1908) (Holmes, J.). (2) SASKIA SASSEN, LOSING CONTROL?: SOVEREIGNTY IN AN AGE OF GLOBALIZATION 26 (1996). (3) North American Free Trade Agreement, Dec. 8, 11, 14, & 17, 1992, Can.-Mex.-U.S., 32 I.L.M. 289 [hereinafter NAFTA]. (4) To nip potential confusion in the bud, I should point out that "state" here refers to a nation-state signatory to the treaty. All three NAFTA signatories have federal systems and two of them--the United States and Mexico--refer to the components of their federal systems as "states." (Canada of course has its "provinces.") NAFTA does not directly obligate these smaller governmental components of federal states either to engage in compulsory arbitration or to pay damages and make restitution. The risk of confusion is inherent in the customary vocabulary, from which I cannot depart altogether. (5) NAFTA, supra note 3, art. 1105, 32 I.L.M. at 639-40. (6) Id art. 1110, 32 I.L.M. at 641. (7) Id. art. 1103, 32 I.L.M. at 639. (8) There is no comprehensive reporting system for Chapter 11 decisions, as they are arbitrations. Documents on Methanex v. United States are available at http://www.state.gov/s/l/c5818.htm, the website of the United States Department of State, and at http://www.naftalaw.org, a website maintained by Todd Weiler, a lawyer who often represents investors in Chapter 11 disputes. Weiler's site purports to contain all documents related to Chapter 11 arbitrations that have been made public. Four important NAFTA Chapter 11 decisions are ably described in Lauren E. Godshull, Student Article, In the Cold Shadow of Metalclad: The Potential for Change to NAFTA's Chapter Eleven, 11 N.Y.U. ENVTL. L.J. 264 (2002). (9) Metalclad Corp. v. United Mexican States, 16 ICSID REV. FOREIGN IN'V. L.J. 168 (2001) (Int'l Centre for Settlement of Investment Disputes (Additional Facility) Aug. 30, 2000), available at 40 I.L.M. 36 (2001). This decision is also available on the website of Canada's Department of Foreign Affairs and International Trade, located at http://www.dfait-maeci.gc.ca/tna-nac/documents/Award-e.pdf, as well as on the website of the International Centre for Settlement of Investment Disputes, an arbitral body authorized to manage Chapter 11 disputes, located at http://www.worldbank.org/icsid/cases/mm-award-e.pdf. (10) United Mexican States v. Metalclad Corp., [2001] 89 B.C.L.R.3d 359, 395-96, available at http://www.dfait-maeci.gc.ca/tna-nac/documents/trans-2may.pdf. Later still, in response to Metalclad, the three signatories of NAFTA adopted an interpretation that narrowed the reading of Article 1105. NAFTA FREE TRADE COMMISSION, NOTES OF INTERPRETATION OF CERTAIN CHAPTER 11 PROVISIONS (July 31, 2001), http://www.dfait-maeci.gc.ca/tna-nac/NAFTA-interpr-en.asp. (11) United Mexican States v. Metalclad Corp., Notice of Abandonment of Appeal (Oct. 30, 2001), http://www.dfait-maeci.gc.ca/tna-nac/documents/Metal-appeal.pdf; United Mexican States v. Metalclad Corp., Notice of Abandonment of Cross-Appeal (Oct. 30, 2001), http://www.dfait-maeci.gc.ca/tna-nac/documents/Metal-cross-appeal.pdf. (12) Documents related to this action can be found at http://www.dfait-maeci.gc.ca/tna-nac/ethyl-en.asp and at http://www.naftalaw.org. For accounts of the Ethyl Corp. complaint and settlement, see Godshall, supra note 8, at 273-74; J. Martin Wagner, International Investment, Expropriation and Environmental Protection, 29 GOLDEN GATE U. L. REV. 465, 490-96 (1999). (13) See M. SORNARAJAH, THE INTERNATIONAL LAW ON FOREIGN INVESTMENT 299 (1994) (discussing the idea that if foreign investors could claim broad compensation for losses due to regulations, regulatory measures could become impossible). I am generally unpersuaded by the argument that a compensation obligation typically will force the government to better account carefully for the costs of regulation and thus to make more efficient decisions. This so-called cost internalization or "fiscal illusion" argument is ably rebutted in Vicki Been & Joel C. Beauvais, The Global Fifth Amendment? NAFTA's Investment Protections and the Misguided Quest for an International "Regulatory Takings" Doctrine, 78 N.Y.U.L. REV. 30, 88-100 (2003). A briefer version of the critique of regulatory takings doctrine can be found in Vicki Been, Does an International "Regulatory Takings" Doctrine Make Sense?, 11 N.Y.U. ENVTL. L.J. 49 (2002). Sornarajah is correct that at some level of regulatory compensation obligation, governmental actions would be influenced and eventually sidetracked. But this restraint will not necessarily steer government decision making appropriately or efficiently. Other, less focused interests that benefit from regulation still would not be properly voiced and recognized. See, e.g., Daniel A. Farber, Economic Analysis and Just Compensation, 12 INT'L REV. L. & ECON. 125, 131 (1992) (discussing bow some interest groups lack the political clout to receive fair compensation); Daniel A. Farber, Public Choice and Just Compensation, 9 CONST. COMMENTARY 279, 290 (1992) (discussing how small interest groups are disadvantaged in the compensation process); see also Marc R. Poirier, Takings and Natural Hazards PoKey: Public Choice on the Beachfront, 46 RUTGERS L. REV. 243, 327-38 (1993) (discussing a public choice analysis of takings doctrine). (14) David Schneiderman, Investment Rules and the New Constututionalism, 25 LAw & Soc. INQUIRY 757, 771 (2000). Schneiderman, a law professor at the University of Toronto, elaborates on the effects on Canada of the threat of an obligation to compensate investors for the effects of regulation on foreign investments protected by NAFTA. Id at 782. (15) Id. (16) Negotiations on an FTAA are supposedly entering their final stage, with a goal of concluding negotiations by January 1, 2005. John Nagel & Rossella Brevetti, TTAA Talks Enter "Last Stage," Trade Officials Say After Meeting, 20 Int'l Trade Rep. (BNA) 683 (Apr. 17, 2003). A United States-Central America Free Trade Agreement is expected to be concluded even sooner, by the end of 2003. Rossella Brevetti, Zoellick Says Central America FTA Talks Are "On Track" for Conclusion This Year, 20 Int'l Trade Rep. (BNA) 684 (Apr. 17, 2003). The collapse of the WTO talks at Cancun this fall suggests that these optimistic timetables for an FTAA may face new obstacles. Much Wind and Little Light, THE ECONOMIST, Oct. 18, 2003, at 35 (Cancun fiasco has hurt the chances of free trade in the Americas.). (17) See infra Part II. (18) 19 U.S.C.A. [sub section] 3801-3813 (West 2003). (19) Id. [section] 3802(b)(3). In particular, this statute calls for investor protections against expropriation comparable to those that would be available under U.S. principles and practices, for "meaningful procedures for resolving investment disputes," for some specific changes to dispute resolution mechanisms, and for mechanisms to ensure "transparency in the dispute settlement mechanism." Id [sub section] 3802(b)(3)(D), 3802(b)(3)(F)-(H). See further discussion in Part V.A.3 infra, (20) The United States-Singapore Free Trade Agreement [hereinafter U.S.-Singapore FTA] and the United States-Chile Free Trade Agreement [hereinafter U.S.-Chile FTA] were both signed at Washington, D.C. on May 6, 2003. Congress approved both in July, 2003. 149 CONG. REC. H734950 (daily ed. July 23, 2003); 149 CONG. REC. S10585-56, 10588 (daily ed. July 31-Aug. 1, 2003). The U.S.-Singapore FTA addresses investment protection in Article 15, with Article 15.6 addressing expropriation specifically and Section C, Article 15.14-15.27, providing for dispute resolution procedures. Also relevant are letter exchanges on the meaning of "customary international law," on expropriation, on land expropriation, and on the eventual establishment of a bilateral appellate mechanism. The U.S.-Chile FTA addresses investment protection in Article 10, with Article 10.9 addressing expropriation and compensation, and Article 10.14-10.26, setting forth a dispute resolution procedure. Also relevant are Annex 10-A ("Customary International Law"), Annex 10-D ("Expropriation"), Annex 10-E ("Submission of a Claim to ArbitrationS), and Annex 10-H ("Possibility of a Bilateral Appellate Body/Mechanism"). The texts of the treaties and related documents such as side letters are currently available from the website of the United States Trade Representative at http://www.ustr.gov. Specifically, the U.S.-Singapore FTA is located at http://www.ustr.gov/new/fta/Singapore/final/text%20final.PDF, while the U.S.-Chile FTA is found at http://www.ustr.gov/new/fts/Chile/final. These two most recent free trade agreements evidently reflect adjustments to the template the United States is now applying to the negotiation of investor protections in free trade agreements. UNITED STATES TRADE REPRESENTATIVE, FINAL ENVIRONMENTAL REVIEW OF THE U.S.-SINGAPORE FREE TRADE AGREEMENT 28 (2003), available at http://www.ustr.gov/environment/tpa/singapore-environment.pdf. ("[T]hese [investment agreement] provisions are significant improvements and further reduce the possibility of a successful challenge under the investment provisions to a U.S. environmental law or regulation. These provisions should help to alleviate public concerns with some arbitral proceedings that have been brought under the investment provisions of the NAFTA...."). Accord UNITED STATES TRADE REPRESENTATIVE, FINAL ENVIRONMENTAL REVIEW OF THE U.S.-CHILE FREE TRADE AGREEMENT 31 (2003), available at http://www.ustr.gov/environment/tpa/chile-environment.pdf. This article was developed with a focus on NAFTA. Nevertheless, some additional discussion of specific substantive and procedural provisions of the U.S.-Singapore and U.S.-Chile FTAs is provided herein, principally in Part V harm The same underlying theoretical analysis applies to NAFTA and to other bilateral and multilateral agreements that address transnational investment protection, and the discussion here can be carried forward when analyzing other FTAs. We also have experience with NAFTA's language as applied, which we do not with these new FTAs. (21) Pa. Coal Co. v. Mahon (Pa. Coal), 260 U.S. 393, 415 (1922). In United States domestic jurisprudence, the Federal Constitutional provision at issue reads, "Nor shall Private Property be taken for Public Use without Just Compensation." U.S. CONST. amend. V. This provision applies not only to straightforward eminent domain proceedings, but also occasionally to regulation that "goes too far." Pa. Coal, 260 U.S. at 415 (1922). The leading modern case establishes that typical regulatory takings cases are decided on an essentially ad hoc, fact-specific basis, looking at three factors: 1) the reasonable investment-backed expectations of the property owner, 2) the injury to the property owner, and 3) the nature of the government action. Penn Central Transp. Co. v. City of New York (Penn Central), 438 U.S. 104, 124 (1978). The federal takings doctrine applies to the states through the Fourteenth Amendment. Chicago, Burlington & Quincy R.R. v. Chicago, 166 U.S. 226 (1897). All states also have their own takings doctrine, which may provide a higher level of protection for property than does federal law. See Marc R. Poirier, Regulatory Takings, [section] 10A.20, in 2 ENVIRONMENTAL LAW PRACTICE GUIDE (Michael B. Gerrard ed., 1999) (table of citations to state law takings provisions). On regulatory takings generally, see Pokier, supra. A classic article that focused attention on disappointed expectations and demoralization as a central factor in regulatory takings analysis is Frank I. Michelman, Property, Utility and Fairness: Comments on the Ethical Foundations of "Just Compensation "Law, 80 HARV. L. REV. 1165 (1967). It influenced the Supreme Court's discussion in Penn Central, and has been a prime influence in the development of modern regulatory takings doctrine. (22) See Marc R. Poirier, The Virtue of Vagueness in Takings Doctrine, 24 CARDOZO L. REV. 93, 97-101, 107-49 (2002) [hereinafter Virtue of Vagueness] (discussing the mistaken expectation that takings doctrine will be altogether rule-like); Margaret Jane Radin, Diagnosing the Takings Problem, in REINTERPRETING PROPERTY 160 (1993) ("The takings issue ... poses a crisis for the ideal of the Rule of Law, because no one has been able to bring the issue satisfactorily under a general rule or a regime of general rules."). (This chapter was first published in NOMOS XXXIII, COMPENSATORY JUSTICE (John W. Chapman ed., 1991). I will cite to the Radin anthology version.) (23) This article will bracket many of the federalism issues raised by NAFTA Chapter 11. For a helpful discussion of these issues, see Vicki Been, NAFTA's Investment Protections and the Division of Authority for Land Use and Environmental Controls, 32 Envtl. L. Rep. (Envtl. L. Inst.) 11,001 (2002). Some discussion may also be found in Been & Beauvais, supra note 13, at 135-7. (24) See, e.g., Leo Panitch, Rethinking the Role of the State, in GLOBALIZATION: CRITICAL REFLECTIONS 83, 96-97 (James H. Mittelman ed., 1996); IAN ROBINSON, NORTH AMERICAN TRADE AS 1F DEMOCRACY MATTERED 20-24 (1993); Gloria L. Sandrino, The NAFTA Investment Chapter and Foreign Direct Investment in Mexico: A Third World Perspective, 27 VAND. J. TRANSNAT'L L. 259, 262, 323-26 (1994); Schneiderman, supra note 14, at 759-60. Although many of these critics are Canadian or Mexican, once it became apparent that NAFTA Chapter 11 might infringe on U.S. prerogatives, similar voices were heard in the United States. The sovereignty critics of NAFTA draw on a long line of critical commentary on globalization. See discussion infra Part IV.C. (25) See Virtue of Vagueness, supra note 22, at 97-101 (noting that "property is a kind of social relation that is renegotiated over time as circumstances change"); Marc R. Poirier, Property, Environment, Community, 12 J. ENVTL. L. & LITIG. 43, 63 (1997) (asserting that property's relationship to regulation, including environmental regulation, is renegotiated regularly); Carol M. Rose, Property and Expropriation: Themes and Variations in American Law, 2000 UTAH L. REV. 1, 22; Laura S. Underkuffler-Freund, Takings and the Nature of Property, 9 CAN. J. L. & JURISPRUDENCE 161, 179-80 (1996) (describing renegotiation of property); Laura S. Underkuffler, On Property: An Essay, 100 YALE L.J. 127, 147-48 (1990) (describing renegotiation of property). Underlying this approach to regulatory takings is an understanding that "property is so fundamental a set of human practices that it is always incomplete, always a work in progress." Virtue of Vagueness, supra note 22, at 133. See also David E. Van Zandt, An Alternative Theory of Practical Reason in Judicial Decisions, 65 TUL. L. REV. 775, 820-22 (1991) (describing how judges' reliance on common sense allows social practices of property to evolve). (26) Virtue of Vagueness, supra note 22, at 179 ("[T]echnological shifts, shifts in mores or tastes, new socioeconomic situations, and new scientific information can all prompt regulatory readjustment of property rights." (emphasis in original)); Rose, supra note 25, at 6 ("[A]lterations in property rights ... occur when environmental, demographic, or technological changes necessitate readjustments ... normally through regulation."); Underkuffler-Freund, supra note 25, at 179 (concluding that human society is not static, and that as human needs change, "so win the bases on which prior property regimes were constructed"). (27) See Jerry L. Anderson, Takings and Expectations: Toward a "Broader Vision" of Property Rights, 37 U. KAN. L. REV. 529 (1989); F. Patrick Hubbard, Palazzolo, Lucas, and Penn Central: The Need for Pragmatism, Symbolism, and Ad Hoc Balancing, 80 NEB. L. REV. 465 (2001); Daniel J. Hulsebosch, The Tools of Law and the Rule of Law: Teaching Regulatory Takings after Palazzolo, 46 ST. Louis U. L.J. 713 (2002); Virtue of Vagueness, supra note 22; Rose, supra note 25. This process approach is also reflected in some of the work of Thomas Merrill. E.g., Thomas W. Merrill, The Landscape of Constitutional Property, 86 VA. L. REV. 885, 945 (2000) ("Property is a dynamic institution that evolves over time in response to changing technologies and changing levels of supply and demand."). (28) I summarized this argument in a recent article: As an essentially contested concept, [regulatory takings doctrine] is fertile and generative precisely because it is inevitably, and perhaps quintessentially, vague and unresolvable. It does not and cannot give clear rules at the level of generality and simplicity demanded of it. Yet it binds society together, for those who believe its promise, and even for those who just pretend to believe it and yet invoke it and perform it. It defines the societal playing field, as it were, for the working out of tensions between self- and other-regarding versions of property. Virtue of Vagueness, supra note 22, at 190. (29) The text of Article 1110 provides: "No party may directly or indirectly nationalize or expropriate an investment or an investor of another Party in its territory or take a measure tantamount to nationalization or expropriation of such an investment" unless four conditions are met. NAFTA, supra note 3, art. 1110, 32 I.L.M. at 641. The action must be "(a) for a public purpose; (b) on a non-discriminatory basis; (c) in accordance with due process of law and the Article 1105(1)" requirements of equity, fairness, full protection, and security; and (d) compensation equivalent to the fair market value of the investment must be paid. Id. The most recent U.S. free trade agreements, the U.S.-Singapore FTA and the U.S.-Chile FTA, drop the "tantamount to" language. Instead, they provide that "[n]either Party may expropriate or nationalize a covered investment either directly or indirectly through measures equivalent to expropriation or nationalization ('expropriation') except" if the four conditions are met. U.S.-Singapore FTA, supra note 20, art. 15.6 para. 1; U.S.-Chile FTA, supra note 20, art 10.9 para. 1. (30) As a side letter to the U.S.-Singapore FTA and an Annex to the U.S.-Chile FTA point out, "The determination of whether an action or series of actions by a Party, in a specific fact situation, constitutes an indirect expropriation, requires a case-by-case, fact-based inquiry...." Letter from Robert B. Zoellick, U.S. Trade Representative to George Yeo, Minister for Trade and Industry, Singapore (May 6, 2003), available at http://www.ustr.gov/new/fta/Singapore/final/15%20expro.PDF; Letter from George Yeo, Minister for Trade and Industry, Singapore, to Robert B. Zoellick, United States Trade Representative (May 6, 2003), available at http://www.ustr.gov/new/fta/Singapore/final/15%20expro.PDF; U.S.-Chile FTA, supra note 20, at Annex 10-D, para. 4. See also Hudson Water Co. v. McCarter, 209 U.S. 349, 355 (1908) (explaining that private property rights and state police power are not balanced by a general formula, but by precedent, and discussing the difficulty of fixing boundaries when few decisions are on point). (31) Virtue of Vagueness, supra note 22, at 97-103, 107-49. (32) See id at 142-43 (discussing the difference between deciding regulatory takings cases by coin flip and by judicial process, in terms of facilitating societal dialogue over property and regulation, and recognizing dignitary interests in the dispute). On dignitary interests generally, see Jerry L. Mashaw, Administrative Due Process: The Quest for a Dignitary Theory, 61 B.U.L. REV. 885 (1981). (33) NAFTA, supra note 3, art. 2203, 32 I.L.M. at 702. (34) Frederick M. Abbott, NAFTA and the Legalization of World Politics: A Case Study, in LEGALIZATION AND WORLD POLITICS 135, 149, 158 (Judith L. Goldstein et al. eds., 2001). See also Ari Afilalo, Constitutionalization Through the Back Door: A European Perspective on NAFTA's Investment Chapter, 34 N.Y.U.J. INT'L L. & POL. 1, 19 (2001) (noting that Mexico "accept[ed] the inevitability of accession to the U.S. demands in order to attract foreign investment"); Howard Mann, NAFTA and the Environment: Lessons for the Future, 13 TUL. ENVTL. L.J. 387, 402 (2000) (discussing Mexico's belief that attracting investment was an important goal of NAFTA); see generally Sandrino, supra note 24. (35) Abbott, supra note 34, at 148; Afilalo, supra note 34, at 19; HOWARD MANN, FIRST NORTH AMERICAN SYMPOSIUM ON UNDERSTANDING THE LINKAGE BETWEEN TRADE AND THE ENVIRONMENT: ASSESSING THE IMPACT OF NAFTA ON ENVIRONMENTAL LAW AND MANAGEMENT PROCESSES 25 (2000) ("Chapter 11 of NAFTA, on investment, was developed for two main purposes: to promote investment into Mexico as part of the NAFTA process by providing enhanced guarantees for Canadian and U.S. investors concerning the safety of theft investments; and to help protect those foreign investors from capricious action against them or their investments."), available at http://www.iisd.org/pdf/2001/trade_mann_final.pdf; Panitch, supra note 24, at 96 ("Far more important than the reduction in tariffs ... were the guarantees the agreement provided for U.S. investment in Mexico."). (36) NAFTA, supra note 3, pmbl., 32 I.L.M. at 297. (37) Id. art. 1114, 32 I.L.M. at 642. (38) Id. art. 2101(1), 32 I.L.M. at 699. (39) North American Agreement on Environmental Cooperation, Sept. 8, 9, 12, & 14, 1993, Can.-Mex.-U.S., 32 I.L.M. 1480. (40) See Wagner, supra note 12, at 478-80 (discussing NAFTA's environmental provisions and the NAAEC). (41) See generally PIERRE MARC JOHNSON & ANDRE BEAULIEU, THE ENVIRONMENT AND NAFTA: UNDERSTANDING AND IMPLEMENTING THE NEW CONTINENTAL LAW 117-18 (1996) ("[T]hat a trade agreement could go to such lengths to recognize and accommodate environment-related concerns was inconceivable before NAFTA."); Daniel Magraw, NAFTA & the Environment: Substance & Process, in NAFTA & THE ENVIRONMENT: SUBSTANCE & PROCESS 1, 23 (Daniel Magraw ed., 1995) (describing environmental aspects of NAFTA as "unprecedented"). But see, e.g., Xavier Carlos Vasquez, The North American Free Trade Agreement and Environmental Racism, 34 HARV. INT'L L.J. 357, 358-60 (1993) (arguing that NAFTA does not adequately address environmental concerns that will come with increased trade). (42) See Charles H. Brower, II, Structure, Legitimacy, and NAFTA's Investment Chapter, 36 VAND. J. TRANSNAT'L L. 37, 61 (2003) (arguing that NAFTA Chapter 11 does not make clear how its two pro-environmental provisions (NAFTA arts. 1101(4) and 1114(1)) relate to or possibly qualify the obligations of host states). In one controversy that was reviewed by the courts, arguments based on the pro-environmental aspects of NAFTA had no effect on the decision. Chris Tollefson, Metalclad v. United Mexican States Revisited: Judicial Oversight of NAFTA's Chapter Eleven Investor-State Claim Process, 11 MINN. J. GLOBAL TRADE 183, 226-27 (2002). See also Terri L. Lilley, Note, Keeping NAFTA "Green" for Investors and the Environment, 75 S. CAL. L. REV. 727, 744 (2002) (arguing that environmental protections in international treaties are systematically vaguer than investor protection provisions, leading to a difficulty in integrating environmental regulation when it must compete with trade promotion). (43) NAFTA, supra note 3, art. 1110, 32 I.L.M. at 641-42. Expropriation and nationalization actions must also be for a public purpose, must occur on a nondiscriminatory basis, and must be accomplished in accordance with due process of law and the guarantee of minimum international standards in Article 1105(1). Id. art. 1105(1), 32 I.L.M. at 639. (44) Id. art. 1103. (45) Id. art. 1102. (46) Id. art. 1105, 32 I.L.M. at 639-40. For a helpful discussion of the developing jurisprudence under NAFTA Article 1105, guaranteeing fair and equitable treatment, see Fair and Equitable Treatment Under NAFTA's Investment Chapter, 96 AM. SOC. INT'L L. PROC. 9 (2002) (panel discussion) [hereinafter Fair and Equitable Treatment]. As Charles H. Brower, II, points out, Article 1105 is even more regularly the source of investor claims against government action than is Article 1110. Charles H. Brower, II, supra note 42, at 61. (47) NAFTA, supra note 3, art. 1106, .32 I.L.M. at 640. That is, broadly speaking, an importing country may not impose restrictions based on the way a good was manufactured in another country. Such requirements might address labor or environmental concerns. (48) Id. arts. 1115-1138, 32 I.L.M. at 642-47. (49) Id art. 1135, 32 I.L.M. at 646. (50) One commentator calls it "an extraordinary set of rules." Daniel Q. Posin, The Multi-Faceted Investment Arbitration Rules of NAFTA, 13 WORLD. ARB. & MEDIATION REP. 13, 15 (2002). Posin continues, "the ability of a private corporation, citizen of one country, to 'bring to heel,' so to speak, a government of another country by compelling it to participate in an arbitration, without permission of its own government, is unprecedented in the international legal community." Id. Another commentator calls Chapter 11 "the most expansive combination of rights and remedies ever given to the private sector in an international agreement." Mann, supra note 34, at 403. But cf. Barton Legum, The Innovation of Investor-State Arbitration Under NAFTA, 43 HARV. INT'L L.J. 531, 538-39 (2002) (arguing that NAFTA is not a radical departure from earlier mechanisms, at the same time, acknowledging that "[t]he combination of direct claims, comprehensive investment protection, prospective application, contracting States with substantial two-way capital exchange, and ad hoc tribunals is not one previously encountered in international claims law"). Another measured supporter of NAFTA Chapter 11 agrees that because it governs foreign investors and host states with mature regulatory systems and a high volume of cross-border investment, it will generate many challenges to core activities of host governments, and it is in this sense a new type of commercial arbitration. Charles H. Brower, II, supra note 42, at 69-70. (51) NAFTA, supra note 3, art. 1120(1), 32 I.L.M. at 643. The three sets of rules include: 1) The Convention on the Settlement of Investment Disputes between States and Nationals of Other States, opened for signature, Mar. 18, 1965, 17 U.S.T. 1270, 575 U.N.T.S. 159 (ICSID Convention); 2) The Rules Governing the Additional Facility for the Administration or Proceedings by the Secretariat of the International Centre for Settlement of Investment Disputes, ICSID Doc. 11 (June 1979), available at http://www.worldbank.org/icsid/facility-archive/iii.htm (Additional Facility Rules); and 3) The United Nations Commission on international Trade Law (UNCITRAL) Arbitration Rules, G.A. Res. 31/98, U.N. Commission on International Trade Law, 31st Seas., Supp. No. 17, Ch. V, [section] C, U.N. Doc. A/31/17 (1976), available at http://www.uncitral.org/english/texts/arbitration/arb-rules.htm. In point of fact, the ICSID Convention is only available if both states involved (directly, or indirectly as home of the investor) are signatories, and of the three NAFTA signatory states only the United States is a signatory to ICSID. Thus, as a practical matter the choice provided by the ISDM is between the ICSID Additional Facility Rules and the UNCITRAL Rules. See, e.g., Andrew J. Shapren, Note, NAFTA Chapter 11: A Step Forward in International Trade Law or a Step Backward for Democracy?, 17 TEMP. INT'L & COMP. L.J. 323, 328-90 (2003) (discussing the expansion of ICSID and UNCITRAL arbitration to arenas outside the private contractual disputes they were intended originally to govern); Marcia J. Staff & Christine W. Lewis, Arbitration Under NAFTA Chapter 11: Past; Present and Future, 25 HOUS. J. INT'L L. 301, 311-12 (2003) (detailing when ICSID and UNCITRAL rules apply to disputes). This limitation in practice has an important practical consequence, as a limited review of initial arbitration decisions would be available internally within ICSID under the ICSID rules, but is available only under the laws of the jurisdiction of the place of the arbitration under the ICSID Additional Facility Rules and the UNCITRAL Rules. (52) NAFTA, supra note 3, art. 1123, 32 I.L.M. at 644. (53) Recently, Canada, Mexico, and the United States have agreed to make available to the public all documents submitted to, or issued by, a Chapter 11 tribunal. NAFTA FREE TRADE COMMISSION, NOTES OF INTERPRETATION OF CERTAIN CHAFFER 11 PROVISIONS (2001), available at http://www.dfait-maeci.gc.ca/tna-nac/NAFTA-Interpr-en.asp. (54) NAFTA, supra note 3, art. 1136(1), 32 I.L.M. at 646. (55) Technically, we are not talking about appellate review in the same sense that an appellate court of the United States reviews a trial court's decision. Rather, an arbitration award is typically subject to a request for vacatur or annulment on limited grounds in the jurisdiction where the arbitration took place, and is also subject to some kind of review in the course of enforcement in whatever jurisdiction the losing party in the arbitration may have assets. See, e.g., Staff & Lewis, supra note 51, at 314 (discussing enforcement of NAFTA arbitral awards). See generally Margaret L. Moses, Vacatur or Non-enforcement of International Commercial Arbitration: A Dual System of Judicial Control (unpublished manuscript, on file with author); William W. Park, Why Courts Review Arbitral Awards, in LAW OF INTERNATIONAL BUSINESS AND DISPUTE SETTLEMENT IN THE 21ST CENTURY, LIBER AMICORUM KARL-HEINZ BOCKSTIEGEL 595 (Robert Briner et al. eds., 2001) [hereinafter LAW OF INTERNATIONAL BUSINESS] (discussing scope of judicial review of arbitration awards in international arbitration). (56) Typically, the bases for annulment are narrow. Charles H. Brower, II, supra note 42, at 74-75 n.203; Moses, supra note 55, at 5, 10; Park, supra note 55, at 597. They involve disqualification of arbitrators, bias or other procedural defects, or a failure of the arbitration panel to follow the terms of the arbitration agreement. They will not include review of findings of fact or of the application of principles of law. See, e.g., Federal Arbitration Act, 9 U.S.C. [section] 10 (2000) (explaining grounds for vacating an arbitration award in United States law). Most national arbitration laws allow only narrow grounds for vacating arbitration awards. See Moses, supra note 55, at 10. To be sure, specific states' statutes may also allow for an annulment of an arbitration award on an often in-defined basis of "domestic policy." See Park, supra note 55, at 597. Some states do not, however. See Moses, supra note 55, at 10. And some judges may not stick to the narrow grounds for annulment articulated in the statute. Id. There was in fact a dispute over which of Canada's two arbitration statutes should apply to the judicial annulment proceeding in Metalclad. This amounted to a dispute over the standard of review, as well as eventually a disagreement over whether the British Columbia Supreme Court in fact applied the standard of review it said it did. Charles H. Brower, II, Beware the Jabberwock: A Reply to Mr. Thomas, 40 COLUM. J. TRANSNAT'L L. 465, 471-79 (2002) [hereinafter Beware the Jabberworck]; Charles H. Brower, II, Investor-State Disputes Under NAFTA: The Empire Strike Back, 40 COLUM. J. TRANSNAT'L L. 43, 61-68 (2001) [hereinafter Investor-State Disputes]; J.C. Thomas, A Reply to Professor Brower, 40 COLUM. J. TRANSNAT'L L. 433, 441-55 (2001); Tollefson, supra note 42, at 199-200, 203-07. There are similar uncertainties about applicable rules of review in Mexico and the United States. Id at 201-62. (57) See NAFTA, supra note 3, art. 1136, 32 I.L.M. at 646 (addressing enforcement of an arbitration award). (58) ICSID Convention, supra note 51, 17 U.S.T. 1270. (59) Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38 [hereinafter New York Convention]. The New York Convention became law in the United States in 1970, and is codified at 9 U.S.C. [section] [section] 201-208. (60) Inter-American Convention on Commercial Arbitration, Jan. 30, 1975, 104 Stat. 44 (1990), O.A.S. Treaty Series no. 42, 14 I.L.M. 336 (1975) [hereinafter Inter-American Convention]. (61) Consider the New York Convention, a key instrument in the enforcement of many international arbitral awards. This Convention is about enforcement, but allows for nonenforcement by a court in the jurisdiction where enforcement is sought when the award has been annulled by a court at the seat of arbitration. New York Convention, supra note 59, art. V(1), (2), 21 U.S.T. at 2520. The New York Convention specifies violation of domestic policy as a basis for annulment and consequently for nonenforcement. Id. art. V(2)(b). It also permits refusal of enforcement if the decision has been set aside under the laws of the country where the decision was made. Id. art. V(1)(e). The Inter-American Convention likewise requires refusal of enforcement if a prior review at the seat of arbitration has annulled the award. Inter-American Convention, supra note 60, art. 5, para. 1(e). The ICSID rules differ here, setting out the grounds for annulment by internal review within the ICSID and not allowing courts at the place of enforcement to refer to a judicial vacatur at the seat of arbitration. See generally Vincent O. Orlu Nmehielle, Enforcing Arbitration Awards Under the International Convention for the Settlement of Investment Disputes (ICSID Convention), 7 ANN. SURV. INT'L & COMP. L. 21, 41-48 (2001) (discussing annulment under ICSID). (62) Investor-State Disputes, supra note 56, at 73 (footnotes omitted, quoting Daniel M. Price, Chapter 11--Private Party vs. Government, Investor-State Dispute Settlement: Frankenstein or Safety Valve?, 26 CAN.-U.S. L.J. 107, 112 (2002)). (63) Statement of Claim, Ethyl Corp. v. Government of Canada (Oct. 2, 1997), available at http://www.dfait-maeci.gc.ca/tna-nac/documents/ethy13.pdf. There was an earlier threat to invoke NAFTA Chapter 11 the year it came into force. The U.S. tobacco industry was prepared to bring a NAFTA Chapter 11 claim in 1994 in response to Canadian plain-packaging legislation. The industry would have claimed that the law expropriated the value of their trademarks. David Schneiderman, NAFTA's Takings Rule: American Constitutionalism Comes to Canada, 46 U. TORONTO L.J. 499, 523-35 (1996). (64) See Godshall, supra note 8, at 273-74; Lilley, supra note 42, at 730-31; Wagner, supra note 12, at 466-67. (65) Metalclad Corp. v. United Mexican States, 16 ICSID REV. FOREIGN INV. L.J. 168 (2001) (International Centre for Settlement of Investment Disputes (Additional Facility) Aug. 30, 2000), available at 40 I.L.M. 36 (2001). These opinions were the first ever judicial review of an award made under ICSID proceedings, the first ever national court review of an investor-state arbitral award, and the first review of a NAFTA investor-state arbitration award. Thomas, supra note 56, at 441. (66) Decisions in Canadian courts related to enforcement of the Metalclad award are United Mexican States v. Metalclad Corp., [2001] 89 B.C.L.R. 3d 359, available at http://www.worldbank.org/icsid/cases/metalclad_reasous_for_judgment.pdf; United Mexican States v. Metalclad Corp, [2001] 95 B.C.L.R. 3d 169 (supplemental reasons for judgment), available at http://www.courts.gov.bc.ca/jdb-txt/sc/01/15/2001bcsc1529.htm. These opinions were the first ever judicial review of an award made under ICSID proceedings, the first ever national court review of an investor-state arbitral award, and the first review of a NAFTA investor-state arbitration award. Thomas, supra note 56, at 441. The reader should note that the British Columbia Supreme Court is a court of first instance for civil litigation and serious criminal matters, not the highest court of the province. I LEGAL SYSTEMS OF THE WORLD: A POLITICAL, SOCIAL, AND CULTURAL ENCYCLOPEDIA 198 (Herbert M Kritzer ed, 2002). (67) See Godshall, supra note 8, at 266-67, 278-85 (describing Metalclad proceeding); Lilley, supra note 42, at 731-35 (describing Metalclad proceeding and background); Courtney N. Seymour, Comment, The NAFTA Metalclad Appeal--Subsequent Impact or Inconsequential Error? ... Only Time Will Tell, 34 U. MIAMI INTER-AM. L. REV. 189 (2002). (68) S.D. Myers, Inc. v. Government of Canada, Partial Award (Nov. 13, 2000), 40 I.L.M. 1408, available at http://www.dfait-maeci.gc.ca/tna-nac/documents /myersvcanadapartialaward_final_13-11-00.pdf. (69) S.D. Myers, Inc. v. Government of Canada, Second Partial Award, (Oct. 21, 2002), available at http://www.dfait-maeci.gc.ca/tna-nac/documents/myersPA.pdf. (70) S.D. Myers, Inc. v. Government of Canada, Final Award, (Dec. 30, 2002), available at http://www.dfait-maeci.gc.ca/tna-nac/SDM-en.asp. S.D. Myers had claimed $4 million Canadian in costs and fees on an award that including interest totaled about $8 million Canadian. (71) See Godshall, supra note 8, at 274-75 (describing S.D. Myers proceeding); Lilley, supra note 42, at 731-37 (same). (72) Methanex Corp. v. United States, Draft Amended Claim 3 (Feb. 12, 2001), available at http://www.methanex.com/investorcentre/mtbe/draft_amended_claim.pdf, and http://www.state.gov/documents/organization/3940.doc. (73) Id. See also Godshall, supra note 8, at 276-77 (describing Methanex proceeding); Lilley, supra note 42, at 737-40 (same). (74) Been & Beauvais, supra note 13, at 134; see also Afilalo, supra note 34, at 21-22. (75) This total is based on a summary compiled by the U.S. Environmental Protection Agency, Region V. See generally YONE YU, U.S. ENVTL. PROT. AGENCY, NAFTA CHAFFER 11 INVESTOR DISPUTES: CASE HISTORIES (Aug. 28, 3003) [hereinafter CASE HISTORIES], available at http://www.epa.gov/region5/orc/articles/nafta_cases.pdf. The number is inexact because a few proceedings have been secret and in at least one proceeding the status is unclear. Pending NAFTA Chapter 11 arbitrations that include Article 1110 expropriation claims include Crompton Corp. (against Canada, invoicing lindane); Canfor Corp. (against the United States, involving softwood lumber); Doman (against the United States, involving softwood lumber); Glamis Gold Ltd. (against the United States, involving regulation of gold mining); Methanex (against the United States, involving the MTBE gasoline additive); Adams et al. (against Mexico, involving a direct talking of real property); Calmark Commercial Development, Inc. (against Mexico, involving a dispute over development); Corn Products, Inc. (against Mexico, involving taxes on products containing corn sweeteners); Fireman's Fund (against Mexico, involving insurance); Robert J. Frank (against Mexico, involving a direct taking of real property); GAMI Investments (against Mexico, involving sugar investments); and Waste Management, Inc. (against Mexico, involving a breach of a concession contract). Id. (76) A Mississippi punitive damage award of $500 million against a Canadian company for breach of contract was challenged, for example, under NAFTA Articles 1102, 1105, and 1110. Loewen Groups, Inc. v. United States, Notice of Claim 64-67 (Oct. 30, 1998), available at http://www.state.gov/documents/organization/3922.pdf. The arbitral panel recently dismissed this claim. NAFTA Panel Dismisses Claims Against Mississippi Jury Verdict, 20 Int'l Trade Rep. (BNA) 1142 (July 3, 2003). Once one goes past Article 1110 to claims under the other NAFTA Chapter 11 provisions, the landscape becomes even stranger. For example, United Parcel Service commenced an arbitration against Canada, based on the fact that UPS must compete with a subsidized national postal service, allegedly in violation of Chapter 11, Articles 1102 and 1105. The arbitral panel recent substantially narrowed jurisdiction over this claim. NAFTA Tribunal Rules for Canada on Jurisdictional Issues in UPS Case, 19 Int'l Trade Rep. (BNA) 2054 (Nov. 28, 2002). Documents in this proceeding are available at http://www.dfait-maeci.gc.ca/tna-nac/parcel-e.asp. (77) Been & Beauvais, supra note 13, at 42 (footnote omitted); see id. at 63-69 (discussing ways in which NAFTA awards have gone beyond United States precedent in their treatment of what is compensable as property). Consider, for example, the claim in Methanex, based on loss of a market. See also Pope & Talbot, Inc. v. Canada, Interim Award, [paragraph][paragraph] 96-99 (June 26, 2000), available at http://www.dfait-maeci.gc.ca/tna-nac/documents/pubdoc7.pdf (treating access to the U.S. softwood lumber market as a property interest protected under NAFTA, but rejecting the claimant's Article 1110 expropriation claim); Godshall, supra note 8, at 268-69 (discussing Chapter 11's broad definition of investment). (78) An example of this is the Loewen Group case, supra note 76. See generally Been & Beauvais, supra note 13, at 79-83 (discussing how several NAFTA awards indicate that the judiciary "can be found to have expropriated property"). Cf. Barton H. Thompson, Jr., Judicial Takings, 76 VA. L. REV. 1449 (1990) (considering the possibility of judicial takings in U.S. jurisprudence). (79) CASE HISTORIES, supra note 75. According to this source, there have been about 32 NAFTA Chapter 11 arbitrations, 23 of which involved Article 1110. (80) E.g., Charles N. Brower & Lee A. Steven, Who Then Should Judge?: Developing the international Rule of Law Under NAFTA Chapter 11, 2 CHI. J. INT'L L. 193 (2001); Stephen Clarkson, Systemic or Surgical?: Possible Cures for NAFTA's Investor-State Dispute Process, 36 CAN. BUS. L.J. 368, 385 (2002); Lilley, supra note 42, at 727-28. (81) Been & Beauvais, supra note 13, at 134. "The concern that NAFTA will deter local, state, and national governments from enacting efficient regulations where there is a risk of a NAFTA expropriation claim ks much less clear, but it gives reason for caution." Id. at 139. Been and Beauvais do find NAFTA Chapter 11 more clearly problematic for another reason: it would give foreign firms an advantage in the U.S. market. Id They also conclude that NAFTA Chapter 11 may have shifted the balance of property rights and public regulation without appropriate democratic input, and may alter the allocation of authority for environmental and land-use regulation away from state and local authorities. Id. (82) Id. at 34. (83) Frank E. Loy, On a Collision Course? Two Potential Environmental Conflicts Between the U.S. and Canada, 28 CAN.-U.S. L.J. 11, 18-19 (2002). (84) Nevertheless, "the MAI suffered from more shortcomings than just the widely advertised environmental ones. With its focus on investor rights--certainly an essential part of any investment agreement--the MAI perpetuated a polarization of the process that consistently separated investor rights from investor obligations." KONRAD VON MOLTKE, AN INTERNATIONAL INVESTMENT REGIME? ISSUES OF SUSTAINABILITY iii (2000). See id. at 9 (contrasting two fundamental approaches to international investment, one that seeks to protect foreign investors through a definition of rights and provision of a dispute settlement procedure, and the other that seeks to "define the obligations of corporations that invest in foreign countries"). For other accounts of the MAI, see, e.g., Rainer Geiger, Regulatory Expropriations in International Law: Lessons from the Multilateral Agreement on Investment, 11 N.Y.U. ENVTL. L.J. 94 (2002); Kevin C. Kennedy, A WTO Agreement on Investment: A Solution in Search of a Problem?, 24 U. PA. J. INT'L ECON. L. 77, 87-91 (2003); Jurgen Kurtz, A General Investment Agreement in the WTO? Lessons from Chapter 11 of NAFTA and the OECD Multilateral Agreement on Investment, 23 U. PA. J. INT'L ECON. L. 713, 756-73 (2002); Wagner, supra note 12, at 480-86. (85) See, e.g., Godshall, supra note 8, at 288. See generally Christopher M. Bruner, Hemispheric Integration and the Politics of Regionalism: The Free Trade Area of the Americas (FTAA), 33 U. MIAMI INTER-AM. L. REV. 1 (2002) (discussing tactical considerations in negotiations of the FTAA). (86) Been & Beauvais, supra note 13, at 34 (footnotes omitted) (citing Daniel M: Price, NAFTA Chapter 11--Investor-State Dispute Settlement: Frankenstein or Safety Valve? 26 CAN.-U.S. L.J. 1, 2 (2001)). (87) See, e.g., Been, supra note 23, at 11,012; Elisabeth Bumiller, Bush Signs Trade Bill, Restoring Broad Presidential Authority, N.Y. TIMES, Aug. 7, 2002, at A5 (discussing enactment of trade promotion legislation). Although a fast-track trade promotion mechanism was approved, Senator John Kerry of Massachusetts pledged to keep up the fight. He says he will use subsequent legislation to reassert the Senate's tight to maintain the balance between property protection and environmental regulation in trade treaties. Trade Policy: Sen. Kerry Signals Unhappiness with Investment Language in Trade Bill, 19 Int'l Trade Rep. (BNA) 891 (May 16, 2002). This choosing up of sides in the recent fast track debates is typical. Richard Falk writes that "within the United States the executive branch is most responsive, by and large, to ... globalist pressures, while the Congress remains more influenced by local and territorial factors, more resistant, as a result, to the pure allure of nonterritorial influences." RICHARD FALK, PREDATORY GLOBALIZATION: A CRITIQUE 74 (1999). On the fast track issue, see generally Bruce Ackerman & Dana Golove, Is NAFTA Constitutional?, 108 HARV. L. REV. 801 (1995); Harold Kongju Koh, The Fast Track and United States Policy, 18 BROOK. J. INT'L L. 143 (1992); Hal Shapiro & Lael Brainard, The Trade Promotion Authority Formerly Known as Fast Track: Building Common Ground on Trade Demands More than a Name Change, 35 GEO. WASH. INT'L L. REV. 1 (2003); Chantal Thomas, Constitutional Change and international Government, 52 HASTINGS L.J. 1 (2001). (88) Investor Chapters in Future Trade Accords to Differ from NAFTA, Official Says, Int'l Trade Rep. (BNA) 987 (June 6, 2002). (89) The Committee stated The Committee members' analysis of the environmental implications of these [trade agreements] provisions [related to expropriation] is based largely on their's [sic] and others' experience with the North American Free Trade Agreement (NAFTA). Congress, for example, gave specific instruction to U.S. trade negotiators as a result of its concern that NAFTA's investment protection and dispute resolution provisions might hinder a Party's attempts to implement more stringent (but bona fide) environmental controls. By "bona fide," we refer to environmental controls which are not adopted for the purpose of arbitrarily or unjustifiably discriminating against a parties' [sic] exports or are simply disguised barriers to trade.... With this background, a majority of the Committee believes that the Agreement's investment protection and dispute resolution provisions are an improvement over those in NAFTA. TRADE & ENV'T POLICY ADVISORY COMMITTEE, THE U.S.-SINGAPORE FREE TRADE AGREEMENT: REPORT OF THE TRADE AND ENVIRONMENT POLICY ADVISORY COMMITTEE (TEPAC) 5 (2003) [hereinafter TEPAC REPORT ON U.S.-SINGAPORE FTA], available at http://www.ustr.gov/new/fta/Singapore/ac-tepac.pdf. The TEPAC report for the U.S.-Chile FTA includes identical language. TRADE & ENV'T POLICY ADVISORY COMMITTEE, THE U.S.-CHILE FREE TRADE AGREEMENT: REPORT OF THE TRADE AND ENVIRONMENTAL POLICY ADVISORY COMMITTEE (TEPAC) 5 (2003) [hereinafter TEPAC REPORT ON U.S.-CHILE FTA], available at http://www.ustr.gov/new/fta/Chile/ac-tepac.pdf. (90) Schneiderman, supra note 14, at 767. (91) "Chapter 11 is arguably the best tool available to consider the way in which to frame the delicate relationship between a multilateral investment agreement and regulatory autonomy." Kurtz, supra note 84, at 733. (92) The distinction is well-accepted. E.g., George C. Christie, What Constitutes a Taking of Property Under International Law, 38 BRIT. Y.B. INT'L L. 307, 331-32 (1962); Rudolph Dolzer, Indirect Expropriation of Alien Property, 1 ICSID REV. FOREIGN INVST. L.J. 41 (1986); SORNARAJAH, supra note 13, at 282-83; Wagner, supra note 12, at 517; ANDRE VAN DER WALT, CONSTITUTIONAL PROPERTY CLAUSES: A COMPARATIVE ANALYSIS 17, 19-20 (1999); see also Rose, supra note 25 (theoretically distinguishing regulatory takings from full-out expropriations). Article 1110 of NAFTA addresses all three of these actions, treating them as though they were the same. What is perhaps worse, the ISDM treats direct and indirect expropriations as though they were the same. (93) In the area of international expropriations law, there are disagreements as to what the standard of compensation ought to be. Indeed, during a previous era when direct expropriations were the larger concern, the standard for compensation for expropriations was a battleground. This Article will not discuss this issue in any detail. (94) This will not always be the ease. See Lilley, supra note 42, at 743, 748. But it is much of the time. (95) See, e.g., Loy, supra note 83, at 18-19 (stressing the balancing function of regulatory actions). To be sure, full-fledged expropriations may also be motivated by concerns about externalities or other broad social issues. But traditionally, when the property is physically taken or title transferred through a direct expropriation, compensation is owed. See infra Part V.A.1. (96) This seems to be the position of international law. RESTATEMENT (THIRD) OF THE FOREIGN RELATIONS OF THE UNITED STATES [section] 712 cmt. g (1987). See infra Part V.A. See also Dolzer, supra note 92, at 60 ("[T]he social function of property in a liberal order provides the justification for regulating ... such forms of property which extend beyond the sphere of strictly personal subsistence."). (97) Virtue of Vagueness, supra note 22, at 100-01. See also Hulsebosch, supra note 27, at 716-19 (discussing societal dialogue over property); Rose, supra note 25. (98) Within U.S. domestic law, that is how I read the Supreme Court's repeated insistence on an ad hoc balancing test based on the facts specific to each regulatory takings controversy. See, e.g., Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency (Tahoe-Sierra), 535 U.S. 302 (2002); Palazzolo v. Rhode Island (Palazzolo), 533 U.S. 606 (2001); Penn Central, 438 U.S. 104, 124 (1978). (99) E.g., Hulsebosch, supra note 27, at 969-81; Merrill, supra note 27, at 979-80. See generally ROBERT C. ELLICKSON, ORDER WITHOUT LAW: HOW NEIGHBORS SETTLE DISPUTES (1991) (examining social practices as the basis of property rules); David E. Van Zandt, Commonsense Reasoning, Social Change, and the Law, 81 NW. U. L. REV. 894 (1987) (arguing that theories of social change through law must be grounded in an understanding of diffuse social practices and the ways in which they both facilitate and hinder change). (100) 535 U.S. 302 (2002). (101) Stevens writes that a "longstanding distinction between acquisitions of property for public use, on the one hand, and regulations prohibiting private use, on the other, makes it inappropriate to treat cases involving physical takings as controlling precedents for evaluation of a claim that there has been a 'regulatory taking,' and vice versa." Tahoe-Sierra, 535 U.S. at 323. Stevens grounds this distinction in the text of the Fifth Amendment. Id. at 321. A similar distinction was made in Palazzolo, 533 U.S. at 628 ("Direct condemnation, by invocation of the State's power of eminent domain, presents different considerations from cases alleging a taking based on a burdensome regulation."). See also Jeremy Paul, The Hidden Structure of Takings Law, 64 S. CAL. L. REV. 1393, 1471-75 (1991) (arguing that takings doctrine is confused because of the conflation of physical takings theories and loss of value theories). (102) 505 U.S. 1003 (1992). There is an exception to the obligation to compensate when a prohibited activity could have been barred without recourse to regulation, pursuant to background principles of property or nuisance law. Id. at 1029. (103) Tahoe-Sierra, 535 U.S. at 323-332. (104) The modern articulation of the ad hoc balancing test is of course set forth in Penn Central, 438 U.S. 104, 124 (1978) (regulatory takings determinations depend on "essentially ad hoc, factual inquiries"). Its distant antecedent, and another important source of regulatory takings jurisprudence, is Pa. Coal, 260 U.S. 393, 415 (1922) (a regulation is a taking when it "goes too far"). (105) Interestingly, Mexico's Constitution appears to support this argument, clearly distinguishing expropriation, for which compensation is owed, and losses due to regulatory use limitations, for which compensation is not owed. Wagner, supra note 12, at 514-16 (discussing Article 27 of the Mexican constitution). See Roundtable Discussion on Domestic Challenges if Multilateral Investment Treaties Are Interpreted to Expand the Compensation Requirement for Regulatory Expropriations Beyond a Signatory State's Domestic Law, 11 N.Y.U. ENVTL. L. J. 208, 216 (2002) [hereinafter Roundtable Discussion] (statement of Hugo Perezcano, general counsel for trade negotiations at the Secretariat of the Economy in Mexico, that Mexican law does not have concepts of "indirect expropriation" or "measures tantamount to expropriation"); Lilley, supra note 42, at 749-50 (discussing Mexican law on expropriations). But cf. Schneiderman, supra note 14, at 764-67 (identifying Article 27 as the Mexican instantiation of the Calvo doctrine, which claims ownership of natural resources and thus justifies expropriations). It is surely accurate to say that the situation vis-a-vis Mexico's law on regulatory takings is complicated. As for Canada, it has a well-established law on expropriation, including regulatory takings. But it is a statutory presumption and can be overridden. Commentators differ about how much change has been imposed by the NAFTA standard. Compare Roundtable Discussion, supra at 218-19 (comment from Meg Kinnear, General Counsel and Director of the Trade Law Bureau at the Department of Foreign Affairs and International Trade of Canada), with Schneiderman, supra note 63, at 523-35 (arguing that NAFTA puts the principle of compensation beyond the reach of the legislature and thus causes a fundamental shift from a pure democratic to a quasi-constitutional standard). See also Lilley, supra note 42, at 750 (briefly summarizing Canadian law on expropriation); VAN DER WALT, supra note 92, at 85-95 (discussing Canadian law on constitutional protection of property). (106) Ronald J. Krotoszynski, Jr., Expropriatory Intent: Denning the Proper Boundaries of Substantive Due Process and the Takings Clause, 80 N.C. L. REV. 713 (2002). Other recent explorations of the substantive due process alternative route include Steven J. Eagle, Substantive Due Process and Regulatory Takings: A Reappraisal, 51 ALA. L. REV. 977 (2000); John D. Echeverria & Sharon Dennis, The Takings Issue and the Due Process Clause: A Way Out of a Doctrinal Confusion, 17 VT. L. REV. 605 (1993); and Mark Tunick, Constitutional Protections of Private Property: Decoupling the Takings and Due Process Clauses, 3 U. PA. J. CONST. L. 885 (2001). (107) As I point out in Virtue of Vagueness, Krotoszynski's approach would shift the messiness of domestic takings doctrine into the already messy Substantive Due Process rubric. Virtue of Vagueness, supra note 22, at 115-16. Its appeal is not so much an increase in overall clarity but a conceptual honesty, both in terms of likely original intent and in terms of the difference between taking property outright (expropriation) and making it less useful to its owner in a way that seems grossly unfair (due process concerns). (108) Rose, supra note 25, at 6. (109) Id. (110) Id. (111) Dolzer, supra note 92, at 41. Dolzer identifies the rules governing compensation as yet a third question. Id. (112) See, e.g., Charles Brower, II, supra note 42, at 60 (arguing that failure to be clear on the meaning of measures "relating to" investors is a flaw in the NAFTA text). (113) Robert M. Cover, The Supreme Court, 1982--Foreword Nomos and Narrative, 97 HARV. L. REV. 4, 5 (1983). (114) Id. at 4-5. (115) See, e.g., Hulsebosch, supra note 27; Merrill, supra note 27. See generally Thomas W. Merrill, Bork v. Burke, 19 HARV. J.L. & PUB. POL'Y 509 (1996) (arguing for a slow evolution of law based on custom and democratic process). Cf. Terry Anderson & J. Bishop Grewell, Property Rights Solutions for the Global Commons: Bottom-Up or Top-Down?, 10 DUKE ENVTL. L. & POL'Y F. 73, 74, 77 (1999) (distinguishing bottom-up, customary property rights that are formed over time and that evolve slowly, and top-down property rights mandated by government). I must acknowledge here a critique to my framework, delivered in the course of a Work in Progress session at the LatCrit VIII conference in Cleveland, Ohio in May 2003. Teemu Ruskola challenged my version of nomos. Cover points out, after all, that a nomos is also always policed, and that one of the central functions of law is not only to generate common understandings but to kill off other competing understandings as they develop over time. Cover, supra note 113, at 40. Cover calls this jurispathis. Id. Thus Cover's theory of a nomos is already one of a community riven and subject to strife over social norms. Ruskola suggested that my description of the nomos as a settled, stable community owes more to Edmund Burke, and perhaps he is right. Nevertheless, Cover's nomos does bespeak a community in dialogue with itself, and one in which individuals shape their common norms even as they are shaped by them. Id. at 4-5. But my use of nomos is suspiciously more peaceful and insular than one true to Cover would be. Jerry Anderson has also expressed misgivings about my use of nomos and community. (116) Hulsebosch, supra note 27, at 732. (117) In the old days, "'[l]ex mercatoria' referred to Roman law as a uniform body of law applied to commercial relationships throughout [medieval] Europe." Ferenc Madl, Codification of Commercial Practice in Eastern European Countries: Lex Mercatoria from a Hungarian Perspective, in LEX MERCATORIA AND ARBITRATION 195, 200 n.3 (Thomas E. Carbonneau ed., 1990). But the phenomenon is modern as well as ancient. "The law of the international mercantile community antedates the emergence of a system of nation-states by some centuries; its origins in the West date from the time of the Crusades. Moreover, it has continued to develop, even in the heyday of nationalism." Harold J. Berman & Felix J. Dasser, The "New" Law Merchant and the "Old": Sources, Content, and Legitimacy, in LEX MERCATORIA AND ARBITRATION, supra, at 21, 22 (footnote omitted). "Lex mercatoria" became the site of a specific struggle over the role of international arbitration in the latter part of the twentieth century. See generally YVES DEZALAY & BRYANT G. GARTH, DEALING IN VIRTUE: INTERNATIONAL COMMERCIAL ARBITRATION AND THE CONSTRUCTION OF A TRANSNATIONAL LEGAL ORDER (1996); LEX MERCATORIA AND ARBITRATION, supra. "Lex mercatoria" is also used nowadays as a shorthand to refer generally to a new transnational commercial law. (118) As Charles N. Brower and Lee Steven put it, "[T]he NAFTA Parties are trying to build an international investment protection and promotion regime, a rule-based system that will be elaborated and enforced uniformly and consistently in each of the three NAFTA countries." Brower & Steven, supra note 80, at 196. It is to be "a rule-based investment regime in which foreign direct investment can thrive." Id. at 195. More generally, "[b]usiness planners ... prefer to operate under stable economic conditions in which the rules applicable to transactions are known in advance. Precise rules reduce the need for business planners to insure against risks, reduce the costs of business, and increase the prospects that transactions will be undertaken." Abbott, supra note 34, at 144. Charles H. Brower, II, says the specific goals of investment regimes include the following: "(1) the creation of predictable commercial frameworks for business planning, (2) substantial increases in investment opportunities, and (3) the establishment of effective and internationally neutral procedures for resolving investment disputes before impartial tribunals." Charles H. Brower, II, supra note 42, at 87. See also Amr A. Shalakany, Arbitration and the Third World: A Plea for Reassessing Bias Under the Specter of Neoliberalism, 41 HARV. INT'L L.J. 419, 424 (2000) (arguing that the arbitration process is likely to have a bias against public regulatory initiatives that is "founded on a deep ... loyalty to a public/private distinction"). The process of exporting self-serving property norms is not new. M. Sornarajah writes that, historically, There has been a general tendency in international protection of alien property to transfer domestic norms of property protection on to the international sphere. The European capital-exporting states found it necessary to promote ideas of individual ownership of property in the colonies and other states into which they exported investments as the security of such investments were [sic] achieved by the spread of a uniform notion of property built on notions of sanctity of individual property. SORNARAJAH, supra note 13, at 293. (119) As I argue at length in Virtue of Vagueness, regulatory takings rules at a high level of generality are necessarily vague, although they may be made more precise and rule-like over time with regard to specific types of conflicts and contexts. Virtue of Vagueness, supra note 22, at 175-78, 190-91. I believe this also to be the import of several comments by Frank Michelman on the regulatory takings issue over the last decade and a half. Thus, he pointed out in 1988 that statements about property protection at a high level of generality are likely to be of limited use. Frank I. Michelman, Takings, 1987, 88 COLUM. L. REV. 1600, 1628 (1988) [hereinafter Michelman, Takings]. Elsewhere, Michelman writes, "issues of proprietary justice may ... be so context and culture-dependent that they are unfit for resolution at the level of abstraction and fixity at which the text of a strongly entrenched, rarely amendable bill of rights must speak." Frank I. Michelman, Liberties, Fair Values, and Constitutional Method, 59 U. CHI. L. REV. 91, 100 (1992) [hereinafter Michelman, Liberties]. And Michelman recommended to Congress that, rather than enacting blanket property protection legislation, it should consider carefully each kind of property protection that ought to accompany each of the potentially troubling regulatory schemes it sought to address. See Frank I. Michelman, A Skeptical View of "Property Rights" Legislation, 6 FORDHAM ENVTL. L.J. 409, 415-20 (1995) (arguing that such an issue-by-issue examination would provide a far better gauge of how to balance property protection and police power). Indeed, one might usefully contrast these more recent works of Michelman on regulatory takings with his earlier work. See Michelman, supra note 21. The more recent Michelman is, at least implicitly, a property process theorist when it comes to regulatory takings. (120) I have attributed the split nomos problem here to foreign capital. Teemu Ruskola and Carmen Gonzalez both have suggested that domestic capital would be equally interested in strong property rights and norms, and uninterested in systematically rebalancing property rights to address negative externalities. So the tension I have set up between an aterritorial nomos oriented around investment and a territorial nomos oriented around the balance between property and police power is, in Ruskola's and Gonzalez' view, a false one. I only partly agree. Insofar as domestic capital is territorially based, my intuition is that it has a better chance of being drawn into dialogue over public regarding, property limiting norms. This is in part because of the feedback I posit between the land or nature itself and the community, and in part because there is a better chance that others more attuned to local environmental circumstance will have relationships with decision makers who are part of a domestic and territorially identified institution. See discussion infra Part IV.B. (121) Terry Anderson and Bishop Grewell describe another kind of split nomos problem in the management of natural resources that cross political boundaries. When conflicting resource uses involve individuals or groups on opposite sides of political borders or across non-adjoining borders, there is less possibility for cultural homogeneity, increased communication difficulties, and less-developed adjudication procedures. There is, therefore, less possibility for norms to lower the transaction costs of defining and enforcing property rights at the local level. Anderson & Grewell, supra note 115, at 84. To be sure, Anderson and Grewell go on to recommend the imposition of property rights "top-down" in some circumstances. Id at 94, 100-01. (122) Thomas E. Carbonneau, The Ballad of Transborder Arbitration, 56 U. MIAMI L. REV. 773, 774 (2002). (123) Lucy Reed, Great Expectations: Where Does the Proliferation of International Dispute Resolution Tribunals Leave International Law? 96 AM. SOC'Y INT'L L. PROC. 219, 226 (2002). (124) Andrew Jacovides, Lecture Commentary, 96 AM. SOC'Y INT'L L. PROC. 231, 234 (2002) (footnote omitted). On ICSID and the ICSID Additional Facility, see also YON MOLTKE, supra note 84, at 12-13 (discussing the role of ICSID and its acceptance over the years). (125) Georges R. Delaume, The Myth of the Lex Mercatoria and State Contracts, in LEX MERCATORIA AND ARBITRATION, supra note 117, at 77, 84 ("The primary purpose of having recourse to arbitration in the context of investment disputes is to avoid the jurisdiction of domestic courts."). (126) Reed, supra note 123, at 226. (127) Carbonneau, supra note 122, at 780. (128) Thomas, supra note 56, at 446. (129) Id. at 460. (130) Id. at 443. (131) See Beware the Jabberwock, supra note 56, at 473-74 (132) Id. at 475. (133) Investor-State Disputes, supra note 56, at 74. (134) Id. at 72. (135) See, e.g., Harry T. Edwards, Alternative Dispute Resolution: Panacea or Anathema?, 99 HARV. L. REV. 668, 671 (1986) (asserting that alternative dispute resolution, while useful, is perilous because it undermines discourse on public values); Owen M. Fiss, Against Settlement, 93 YALE L.J. 1073, 1085-86 (1984) (arguing that adjudication expresses and realizes public values, in contrast to settlement). (136) Fiss, supra note 135, at 1085. (137) Id. (138) Id. at 1085-6. (139) Edwards, supra note 135, at 682. (140) Park, supra note 55, at 602-3. (141) Virtue of Vagueness, supra note 22, at 142-43. (142) The two are roughly synonymous. Philip J. McConnaughay, The Risks and Virtues of Lawlessness: A "Second Look" at International Commercial Arbitration, 93 NW. U. L. REV. 453, 474-75 (1999). (143) Id. at 454. (144) Id. at 473. (145) Thomas E. Carbonneau, The Remaking of Arbitration: Design and Destiny, in LEX MERCATORIA AND ARBITRATION, supra note 117, at 1, 18. (146) McConnaughay, supra note 142, at 461-62. (147) Id. at 454. As McConnaughay explains: Precisely because matters of important national interest, as typically expressed in mandatory laws, rarely were implicated in international commercial arbitrations, national legislatures and national courts simply saw no need to impose their parochial notions of procedure or justice on international arbitrations. If arbitral lawlessness occasionally resulted in unjust outcomes, the consequences of the injustice ordinarily were confined to the parties to the dispute and were not significant to the state. Id. (148) Id. at 495. (149) Carbonneau, supra note 145, at 16. (150) Id. at 17. (151) 473 U.S. 614 (1985). (152) The predecessor case was Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974) (arbitration clause in international commercial agreement may be applied to claims under the Securities Exchange Act of 1934, 15 U.S.C. [subsections] 78a-78mm (2000)). A subsequent case important for expanding the scope of international arbitrations is Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528 (1995) (enforcing arbitration clause contained in maritime bill of lading as to issues under the Carriage of Goods by Sea Act, ch. 229, 49 Star. 1207 (1936) (codified at 46 U.S.C App. [subsections] 1300-1315)). Important domestic expansions of arbitrability occurred in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991) (enforcing an arbitration clause in an employment contract for a claim of age-based employment discrimination); Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477 (1989) (standard customer agreement with broker requiring arbitration of disputes is applicable to claims under the Securities Act of 1933 (overruling Wilko v. Swan, 346 U.S. 427 (1953)); and Shearson/American Express, Inc. McMahon, 482 U.S. 220 (1987) (standard customer agreement with broker requiring arbitration of disputes is applicable to claims under the Securities Exchange Act of 1934 and the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. [subsections] 1961-1968 (2000)). Another expansion occurred with holdings that state anti-arbitration statues were preempted by the Federal Arbitration Act, 9 U.S.C. [subsections] 1-14 (2000). Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681 (1996) (state may not single out arbitration provisions in contract for adverse treatment); Allied-Bruce Terminex Cos. v. Dobson, 513 U.S. 265 (1995) (Federal Arbitration Act preempts state anti-arbitration statutes, reaffirming the validity of Southland Corp. v. Keating, 465 U.S. 1 (1984)). (153) Sherman Anti-Trust Act, 15 U.S.C. [subsections] 1-7 (2000). (154) 9 U.S.C. [subsections] 1-14 (2000). (155) DEZALAY & GARTH, supra note 117, at 156-57 (citations omitted). (156) Id. at 161. (157) Carbonneau, supra note 145, at 18. See Mitsubishi, 473 U.S. 614, 640, 645-57 (1985) (Stevens, J., dissenting) (setting out a distinction between contractual rights and statutory rights, the latter not traditionally arbitrable, and arguing that the Sherman Act was a quintessential public law scheme and therefore not arbitrable). (158) McConnaughay, supra note 142, at 494. See also Steven J. Burton, Combining Conciliation with Arbitration of International Commercial Disputes, 18 HASTINGS INT'L & COMP. L. REV. 637, 637 (1995) (summarizing advantages of international commercial arbitration). (159) See generally Fiss, supra note 135, at 1085-87 (discussing the merits of adjudication as opposed to settlement). (160) Mitsubishi, 473 U.S. at 628. (161) Carbonneau, supra note 145, at 18 ("As arbitration's scope of application expands to include public law matters, there also will be increasing pressure to make the process resemble the characteristics of judicial proceedings."); McConnaughay, supra note 142, at 457, 498-99. (162) McConnaughay, supra note 142, at 457-58. (163) Carbonneau, supra note 145, at 4-5; Fali S. Nariman, International Commercial Arbitration--At the Crossroads, in LAW OF INTERNATIONAL BUSINESS, supra note 55, at 555 ("The problem of Judicialised International Commercial Arbitration is that it has now become almost indistinguishable from litigation, which it was at one time intended to supplant."). (164) Carbonneau, supra note 145, at 4-5; see McConnaughay, supra note 142, at 507-10 (arguing specifically that Asian expectations for arbitration as a dispute mechanism will be defeated because arbitration is excessively formalized and legalized); see also Philip J. McConnaughay, The Scope of Autonomy in International Contracts and Its Relation to Economic Regulation and Development, 39 COLUM. J. TRANSNAT'L L. 595, 602-03, 613-21 (2001) (describing the difference between Western and non-Western approaches to arbitration). (165) Carbonneau, supra note 145, at 18 (footnote omitted). (166) It has become commonplace that, in international relations and international law, a deemphasis on a nation-state organized around absolute control of a defined territory may be leading to a situation of interlocking and non-territorial sovereignties and legal systems, not unlike that which prevailed during the Medieval period in Europe. See, e.g., FALK, supra note 87; Jessica T. Mathews, Power Shift, FOREIGN AFFAIRS, January/February 1997, 50 (describing the current transition from the Westphalian system to a global economy and predicting future developments); John Gerard Ruggie, Territoriality and Beyond: Problematizing Modernity in International Relations, 47 INT'L ORG. 139. 149-50 (1993). One locus classicus for this analogy is HEDLEY BULL, THE ANARCHICAL SOCIETY: A STUDY OF ORDER IN WORLD POLITICS 254-66 (2d ed. 1995). But see Anne-Marie Slaughter, The Real New World Order, FOREIGN AFFAIRS, Sep.-Oct. 1997, at 183, 184 (challenging "the new medievalism" as an incomplete analysis). To introduce a term that has not yet become common in the legal literature, but that is helpful in theories of place and space, the global merchant and investment community has no "ubiety." It does not depend on a particular place. (167) To be sure, some adverse environmental effects are widespread or even global, and do not exhibit this characteristic of locality--for example, the effects of depletion of the ozone layer. (168) This is a commonplace of the Environmental Justice literature. See, e.g., Marc R. Poirier, Environmental Justice/Racism/Equity: Can We Talk?, 96 W. VA. L. REV. 1083 (1994). (169) As Jose Alvarez writes, We are ... beginning to consider whether some of our multilateral regimes have been or are being "constitutionalized" such that it is relevant to consider whether their stakeholders constitute a "demos." This necessarily raises questions of the scope of judicial review or the scope of authority of international judicial bodies over relevant constituencies.... Should a NAFTA Chapter 11 panel be able to review a state court judgment issued by a state party? Jose E. Alvarez, The New Treaty Makers, 25 B.C. INT'L & COMP. L. REV. 213, 233-34 (2002) (footnotes omitted). Alvarez is using "demos" in a way suggestive of Cover's use of nomos, Cover, supra note 113, 19-20. But a further investigation of similarities and differences would certainly be warranted. Cover's germinal concept was developed as a tool for exploring the relationship of religiously and culturally autonomous groups, which are relatively homogenous, to the determinedly pluralistic sovereign United States. See also Larry Cata Backer, The Euro and the European Demos: A Reconstitution, 21 Y.B. EUR. L. 13, 16-17 (2002) (considering Volk, nation, citizen, and demos as possible terms in discussing the effects of cultural and economic integration of European peoples). (170) Takings claims against states typically proceed in state court even on a federal constitutional cause of action, because of the Eleventh Amendment prohibition against suing states in federal courts without their consent. Takings claims against local subdivisions in theory may proceed in federal court, but if they do so it is typically in the district where the regulation occurred and where the property is located. Most often, the takings ripeness doctrine and the Rooker-Feldman doctrine combine to keep local regulatory takings issues hi the state court system prior to possible review by the United States Supreme Court. See Poirier, supra note 21, [section] 10A.17 (explaining procedural concerns related to ripeness and jurisdiction). The tribunal for federal takings claims is not spatially related to the location where the taking occurred. All takings claims against the federal government must be tried before the United States Court of Federal Claims, which is located in Washington, D.C. 28 U.S.C. [section] 1491(a) (2000). In view of what is said immediately below about legal requirements for other federal judges to be linked to place, it would be worth further reflection on how and why the United States Court of Federal Claims is different and whether it matters to the substance or legitimacy of takings claims brought against the United States. (171) 28 U.S.C. [section] 134 (2000). The only exceptions are for judges in the Southern and Eastern Districts of New York, who must live within twenty miles of the district in which they sit, and the District of the District of Columbia, whose judges apparently may live anywhere. Id. [section] 134(b). (172) Id. [section] 44(c). Judges of the Federal Circuit must reside within fifty miles of the District of Columbia. There is apparently no residence requirement for judges on the District of Columbia Circuit. Thanks to colleague Ed Hartnett for these examples of federal judicial links to place. (173) Robert Wai, Transnational Liftoff and Juridical Touchdown: The Regulatory Function of Private International Law in an Era of Globalization, 40 COLUM J. TRANSNAT'L L. 209, 263 (2002). (174) Wai recognizes that NAFTA Chapter 11 arbitrations involve "areas of clear public-private overlap." Id. at 262. (175) MICHAEL WALZER, SPHERES OF JUSTICE: A DEFENSE OF PLURALISM AND EQUALITY (1983). (176) Id. at 44. (177) Vail Zandt, supra note 99, at 913-18. (178) This was a central point in my defense of vagueness in regulatory takings doctrine. Virture of Vagueness, supra note 22, at 136-37. It forces negotiation under a vague promise of fairness. (179) See Backer, supra note 169, at 25 n.53 ("Prior to the revolution in transportation of the last five hundred or so years, it was commonly understood that geography provided a natural barrier in communal formation."); Mathews, supra note 166, at 51-52 (noting that modern telecommunications technology has changed people's perception of community and separated "them from natural and historical associations within nations"). (180) Conversely, strangers to the community may not successfully enter into its mores and microprocesses. Thus, Robert Ellickson observed that in Shasta County, conflicts over the damage caused by roving cattle grazing on farmland successfully were managed informally by neighbors who had been longtime residents. Only newcomers resorted to legal processes for dispute resolution, and they were sometimes met by informal responses, both verbal and in terms of serf help. ELLICKSON, supra note 99, at 52-64. See also Patricia Williams, Notes: Reconstructing Ideals from Deconstructed Rights, in CRITICAL RACE THEORY: THE CUTTING EDGE 84 (Richard Delgado ed., 1995) (arguing that as a black female with a family memory of slavery her expectations of property rights were different and considerably more formalistic than those of a white male colleague more comfortably integrated into the community). Thanks to Pat Gilmartin for pointing out this analogy. One might offer, as counterexamples to my argument about the importance of territoriality, ethnic and religious identities that were not incorporated into nation-states. But this does not disprove my point. Typically such identities take the form of a diaspora, in which there is a mythical and sometimes actual homeland that still anchors the identity to place. Moreover, physical proximity continues to be central for the reproduction of culture and identity, through the neighborhood, village, or parish. (181) WALZER, supra note 175, at 44-45. (182) For an explanation of why this is so, see Carol M. Rose, Rethinking Environmental Controls: Management Strategies for Common Resources, 1991 DUKE L.J. 1. Rose argues that where resources are freely available without congestion problems, we need no overarching system of resource management. As congestion manifests, a social group will resort to one of three strategies to resolve conflict over resource use: the restriction of use to a specific group (sometimes called a common access resource strategy, although that is not Rose's term), a property allocation strategy, or a regulatory scheme that governs the use of resources. Pollution issues follow the same paradigm as resource congestion, for they are in fact a particular type of resource congestion. One user wants clean air to breathe, see through, or use in a particular industrial process; another user wants air to use as a receptacle for waste. The conflict must be resolved somehow. See generally Ronald Coase, The Problem of Social Cost 3 J.L. & ECON. 1 (1960). (183) See Richard J. Lazarus, Pursuing "Environmental Justice": The Distributional Effects of Environmental Protection, 87 NW. U. L. REV. 787, 811 (1993) ("[E]nvironmental protection laws possess a significant distributional dimension...."); Dan Tarlock, The Role of Non-Governmental Organizations in the Development of International Environmental Law, 68 CHI.-KENT L. REV. 61, 62 (1992) (environmental problems are "fundamentally resource allocation and distribution conflicts"). (184) Eric T. Freyfogle, Owning the Land: Four Contemporary Narratives 13 J. LAND USE & ENVTL. L. 279, 279-82 (1998). Freyfogle actually presents four myths of land ownership. Two involve relatively static conceptions of property rights. While they are important to understanding the roots of the conflict over regulatory takings, see Virtue of Vagueness, supra note 22, at 183-90, they are not germane to the immediate point here. (185) Freyfogle, supra note 184, at 297-301. (186) Id. at 301-03. (187) See, e.g., Terry W. Frazier, The Green Alternative to Classical Liberal Property Theory, 20 VT. L. REV. 299, 349, 365 (1995). (188) Herman E. Daly, Problems with Free Trade: Neoclassical and Steady-State Perspectives, in TRADE AND THE ENVIRONMENT: LAW, ECONOMICS, AND POLICY 147, 151 (Durwood Zaelke et al. eds., 1993). (189) Id. at 156-57. See also Carmen G. Gonzalez, Beyond Eco-Imperialism: An Environmental Justice Critique of Free Trade, 78 DENV. U. L. REV. 979, 1003-04, 1013 (2001) (discussing the problems of globalization in separating consumption from the place where environmental effects are felt). For a helpful overview of ecological economics, see Douglas A. Kysar, Sustainability, Distribution, and the Macroeconomic Analysis of Law, 43 B.C. L. REV. 1 (2001). See generally ECOLOGICAL ECONOMICS: THE SCIENCE AND MANAGEMENT OF SUSTAINABILITY (Robert Costanza ed., 1991). Thanks to Carmen Gonzalez for insisting on this connection. (190) See Robert R. Kuehn, A Taxonomy of Environmental Justice, 30 Envtl. L. Rep. (Envtl. L. Inst.) 10,681 (Sept. 2000) (identifying four themes within the environmental justice movement: distributive justice, procedural justice, corrective justice, and social justice). I have here combined process and enforcement themes, which Kuehn separates. I have also combined distributive justice and larger social justice themes, which Kuehn also separates. (191) See Rose, supra note 25, at 3-6 (describing routine, regulatory, and extraordinary disruptions and the effect of these disruptions on the management of property resources). (192) William A. Shutkin, The Concept of Environmental Justice and a Reconception of Democracy, 14 VA. ENVTL. L.J. 579, 580 (1995). Shutkin elaborates: First, the environment is about the distribution of benefits and burdens: some are winners and some are losers. Second, the environment is about participation in decision making: who participates determines the allocation of environmental benefits and burdens. Third, the environment is about who we are as individuals and political constituencies: who considers herself an environmentalist and who organizes around environmental issues is essential. Finally, the environment is about political and economic power: whose voice is being heard and whose environment is being protected. Id at 584. (193) See, e.g., Robert D. Bullard, Overcoming Racism in Environmental Decisionmaking, ENV'T, May 1994, at 11, 12-13; Luke W. Cole, Empowerment as the Key to Environmental Protection: The Need for Environmental Poverty Law, 19 ECOLOGY L.Q. 619, 652 (1992) (advocating a new environmental poverty law that must address both substantive and procedural challenges in working with low-income communities to respond to environmental hazards); Robert W. Collin & Robin Morris Collin, The Role of Communities in Environmental Decisions: Communities Speaking for Themselves 13 J. ENVTL L. & LITIG. 37, 88-89 (1998) (noting that communities must be included in environmental decision making to redress substantive inequities in environmental problems); Sheila Foster, Justice From the Ground Up: Distributive Inequalities, Grassroots Resistance, and the Transformative Politics of the Environmental Justice Movement, 86 CAL. L. REV. 775, 841 (1998) (arguing that policy makers must reexamine both substantive criteria and participatory processes in reforming the siting process); Eileen Gamin, The Environmental Justice Misfit: Public Participation and the Paradigm Paradox, 17 STAN. ENVTL. L.J. 3, 5 (1998) (arguing that current administrative processes fail to effectively incorporate an important form of public participation, and thus fail to achieve equity in environmental proctection); Alice Kaswan, Environmental Justice: Bridging the Gap Between Environmental Laws and "Justice," 47 AM. U. L. REV. 221, 230 (1997) (suggesting that distributive and political injustices present different injuries and may require different solutions); Alice Kaswan, Environmental Laws: Grist for the Equal Protection Mill, 70 U. COLO. L. REV. 387, 396-407 (1999) (identifying distributional justice and political justice themes within the environmental justice movement); Kuehn, supra note 190, at 10,688 (noting that it is not unusual for people of color and low-income communities to complain about both procedural and substantive aspects of environmental policy decisions); Lazarus, supra note 183, at 812 (noting that the absence of minority involvement in the process may make distributional problem worse for environmental protection); Dorceta E. Taylor, The Rise of the Environmental Justice Paradigm, 43 AM. BEHAV. SCIENTIST. 508, 537 (2000) (discussing the concern with distributive justice and corrective justice in environmental justice). Cf. William Michael Treanor, The Original Understanding of the Takings Clause and the Political Process, 95 COLUM. L. REV. 782, 873-77 (1995) (arguing that process defects that justify protection against regulatory takings are similar to process defects that underlie environmental justice claims). (194) See generally Poirier, supra note 25 (discussing property practices and environmental practices as limits on one another that are renegotiated over time). (195) In an economic account of pollution, the pollution is not problematic when all negative effects of the pollution are properly weighed rationally against the cost savings. So in this account, pollution is not always bad because it is not always an externality. I hasten to add that this argument bypasses a myriad of arguments about why the true costs of pollution of various types cannot be known with enough certainty to be taken into account rationally, or that they will not be taken into account because of various cognitive processes that distort rational weighing of risks and benefits. (196) See, e.g., STEPHEN BREYER, BREAKING THE VICIOUS CIRCLE: TOWARD EFFECTIVE RISK REGULATION 18-19 (1993) (identifying the problem that spending "too much to buy a little extra safety" will, among other things, make fewer resources available to "address more serious environmental or social problems"); CHRISTOPHER H. FOREMAN, JR., THE PROMISE AND PERIL OF ENVIRONMENTAL JUSTICE 110 (1998) (describing the typical economist's view that "regulation is often wasteful because program ends and means display insufficient regard for, or analysis of, the social costs imposed by regulation"). (197) See, e.g., Adam M. Finkel, A Second Opinion on an Environmental Misdiagnosis: The Risky Prescription of Breaking the Vicious Circle, 3 N.Y.U. ENVTL L.J. 295, 366 (1995) (pointing out that risk assessment undertaken without consideration of policy concerns results in "tunnel vision"); Donald T. Hornstein, Reclaiming Environmental Law. A Normative Critique of Comparative Risk Analysis, 92 COLUM. L. REV. 562, 630 (1992) (arguing that "risk analysis gives an undeserved assurance of scientific legitimacy to the inescapably collective (and political) process of establishing social policies...."); Wendy E. Wagner, The Science Charade in Toxic Risk Regulation, 95 COLUM. L. REV. 1613, 1617 (1995) (commenting that a "science charade" "allows agencies to exaggerate science contributions to avoid accountability for underlying policy decisions"). See generally Marc R. Poirier, "It Was the Best of Times, It Was the Worst of Times ...:" Science, Rhetoric and Distribution in a Risky World, 53 CASE W. RES. L. REV. 409, 420-21 (2003) (arguing that when malting risk assessment decisions based on scientific information, policy considerations are inevitably incorporated). (198) See, e.g., Carl F. Cranor, Risk Assessment, Susceptible Subpopulations, and Environmental Justice, in THE LAW OF ENVIRONMENTAL JUSTICE: THEORIES AND PROCEDURES TO ADDRESS DISPROPORTIONATE RISKS 307, 328-29 (Michael B. Gerrard ed., 1999) (noting that susceptible subpopulations may be missed by dose response and exposure assessments); Robert R. Kuehn, The Environmental Justice Implications of Quantitative Risk Assessment, 1996 U. ILL. L. REV. 103, 116 (arguing that the methodology of qualitative risk assessment does not capture the concern of all members of the public). (199) See, e.g., Gauna, supra note 193, at 32-34 (highlighting issue of subsistence consumption of fish when setting water quality standards). Isolated expert decision making may also overlook other issues that fall under the wider rubric of environmental injustice. See Gonzalez, supra note 189, at 1013-14, 1016 (arguing that local participation in environmental decision making is essential in order to capture the complexity of the issues and design more effective responses). (200) WALZER, supra note 175, at 44. (201) FALK, supra note 87, at 35. Falk continues: The state remains the preeminent political actor on the global stage; but the aggregation of states--what has been called "a states system"--is no longer consistently in control of the global policy process. Territorial sovereignty is being diminished on a spectrum of issues in such a serious manner as to subvert the capacity of states to govern the internal life of society, and non-state actors hold an increasing proportion of power and influence in the shaping of world order. Id. at 35. Jose Alvarez describes a "neo-medievalist" analysis of the overall situation as: a reversion to a system of overlapping, non-territorial systems of authority and political identity reminiscent of the pre-Westphalian world. Building on notions of the waning power of states and the corresponding rise in the power of individual and transnational collections of interests (including nongovernmental organizations and multinational corporations), neomedievalists see the state and its institutions (including ... state centric dispute settlement mechanisms) as fading in importance, as power and allegiance shift elsewhere. Jose E. Alvarez, The New Dispute Settlers: (Half) Truths and Consequences, 38 TEX. INT'L L.J. 405, 432 (2003) (footnote omitted). (202) Wai, supra note 173, at 267 (quoting Sally Falk Moore, Law and Social Change: The Semi-Autonomous Social Field as an Appropriate Subject of Study, 7 LAW & SOC'Y REV. 869 (1988)). (203) See, e.g., Keith Aoki, Considering Multiple and Overlapping Sovereignties: Liberalism, Libertarianism, National Sovereignty, "Global" Intellectual Property, and the Internet 5 IND. J. GLOBAL LEGAL STUD. 443, 469-71 (1998) (noting that decision making has shifted "into less democratic, international arenas"). (204) The Seattle protests of the WTO in 1999 are a prime example. (205) Douglas T. Kendall & Charles P. Lord, The Takings Project. A Critical Analysis and Assessment of the Progress So Far, 25 B.C. ENVTL. AFF. L. REV. 509, 528-30 (1998) (presenting evidence of a sustained, deliberate political and academic effort to undermine regulation of private property through advocacy of a particular version of takings doctrine, beginning in the Reagan administration in the early 1980s). An article by William Greider in The Nation notes the ideological link between this movement and the NAFTA Chapter 11 framework and offers an explanation in the ties between the Washington lawyer business community and those who negotiated NAFTA. William Greider, The Right and US Trade Law: Invalidating the 20th Century, THE NATION, October 15, 2001, at 21, 24-26 (describing ideological commitments to property rights of negotiators of NAFTA and subsequent Free Trade Agreements). Even those without Greider's or Kendall and Lord's ideological tinge agree that a shift in the discourse over regulatory takings occurred in the latter part of the twentieth century. See, e.g., Dolzer, supra note 92, at 42 ("Historically, state measures affecting property rights in an indirect manner have not been as prominent in state practice as they are now in the modern interventionist type of state. Moreover, the process of reconsidering the concept of property and the ensuing tendency to equate incorporeal rights for purposes of constitutional law with traditional tangible rights has gained strength only in the latter part of this century."). (206) See, e.g., Jose E. Alvarez, Critical Theory and the North American Free Trade Agreement's Chapter Eleven, 28 U. MIAMI INTER-AM. L. REV. 303, 309-10 (1997) (arguing that "the NAFTA investment chapter does not purport to impose any corresponding duties on the U.S. multinationals it privileges"). (207) Panitch, supra note 24, at 96 (quoting ROBINSON, supra note 24, at 3) (explaining that NAFTA creates special new corporate property rights). See also Alvarez, supra note 206, at 308 (arguing that the NAFTA investment chapter is "a human rights treaty for a special-interest group"). (208) This is the title of Richard Falk's book. FALK, supra note 87. (209) Id at 127. To be sure, Falk points out that a certain level of economic development may bring demands for improved workplace and environmental conditions. Id at 128. But Falk cautions against a kind of "market mysticism" that automatically favors economic growth over protection from adverse social effects. Id. at 129. Relying on economic growth to resolve all environmental problems eventually is sometimes known as an "environmental Kuznets curve" argument, after predictions of economist Simon Kuznets. See Poirier, supra note 197, at 417. But this argument can be abused. See id. at 416-19 (critiquing BJORN LOMBORG, THE SKEPTICAL ENVIRONMENTALIST (2001), for careless and excessive use of environmental Kuznets curves to criticize environmental positions). (210) FALK, supra note 87, at 33 (emphasis added). (211) Id. at 71. (212) Id. (213) Id. (214) Id. at 74. Others agree. See, e.g., Balakrishnan Rajagopal, From Modernization to Democratization: The Political Economy of the "New" International Law, in REFRAMING THE INTERNATIONAL: LAW, CULTURE, POLITICS 136, 138-39 (Richard Falk et al. eds., 2002) ("In the United States, the accession to the Noah American Free Trade Agreement (NAFTA) and then to the 1994 General Agreement on Tariffs and Trade (GATT) Uruguay Round has raised fundamental questions about U.S. sovereignty, democracy, and constitutional law.") (citation omitted). (215) SASSEN, supra note 2. (216) Id. at 7. (217) Id at 10. (218) Id. at 8. Thus, we see free trade zones that may not be subject to local taxation or other regulations. (219) Id. at 14 (footnote omitted). Anne-Marie Slaughter makes the same general points in her critique of the new medievalism. "First, private power is still no substitute for state power...." Slaughter, supra note 166, at 184. Second, "the power shift is not a zero-sum game. A gain in power by nonstate actors does not necessarily translate into a loss of power for the state." Id (220) See discussion supra Part IV.A. (221) SASSEN, supra note 2, at 1. Sassen writes that deregulation is "not simply ... a loss of control by the state but ... a crucial mechanism for handling the juxtaposition of the interstate consensus to pursue globalization and the fact that national legal systems remain as the major, or crucial, instantiation through which guarantees of contract and property rights are enforced." Id at 25-26. (222) Id at 16-17. (223) "Thanks to guaranteed arbitration, U.S. multinationals ... will henceforth be in a strengthened position to claim the benefits of [the doctrine of state responsibility to aliens] as well as the growing body of 'lex mercatoria' so favorable to their interests." Alvarez, supra note 206, at 305. (224) SASSEN, supra note 2, at 17. (225) Id. at 17-18. "The international thus emerges as a site for regulatory competition among essentially national approaches, whatever the issue: environmental protection, constitutionalism, human rights. From this perspective 'international' or 'transnational' has become in the most recent period a form of Americanization...." Id. at 18. (226) Id. at 18-19. (227) See, e.g., Alvarez, supra note 206, at 312 ("[I]nvestment liberalization, NAFTA-style, is not what it appears to be: a manifestation of neutral or impersonal 'market' forces. We may realize just how much the NAFTA investment chapter reflects U.S. laws and perspectives."); Schneiderman, supra note 14, at 761, 766, 768 (noting that "[t]hrough the stringent terms of NAFTA's investment chapter, [Canada and Mexico] have agreed to be bound to strict U.S.-style investment rules," that Mexico altered its constitutional property provisions in highly controversial ways as a consequence of its desire to participate in NAFTA, and that Canada agreed to the new NAFTA investment rules despite its traditional concern with limiting foreign investment). (228) See discussion of the Bipartisan Trade Promotion Authority Act of 2002 infra Part V.A.3. (229) There is an earlier chapter in this Americanization of the international law of expropriation. As Yves Dezalay and Bryant Garth recount it, the battle over the version of the law that would be included in the Restatement (Third) of Foreign Relations, in the early to mid-1980s, is an example of "national" international lawmaking. DEZALAY & GARTH, supra note 117, at 175. The five reporters, all well-known academics, initially took the position that it was difficult to state the international law concerning expropriation of alien property. Id These scholars argued that "the earlier Restatement[] 'went beyond what customary international law requires in its linkages of the American view'" on expropriation to a supposedly universal standard. Id. at 176 (quoting AMERICAN LAW INSTITUTE, 59 A.L.I. PROC. 250 (1982)). The academic position "showed some sympathy--at least as a matter of what the pure law was--for the third-world position being expressed in the United Nations and elsewhere at that time." Id at 177. There ensued "'an acrimonious dispute.'" Id at 176 (quoting Patrick Norton, A Law of the Future or a Law of the Past? Modern Tribunals and the International Law of Expropriation, 85 AM. J. INT'L L. 474 (1991)). The private bar reacted, "form[ing] an ad hoc committee and mobiliz[ing] ... contacts in the ABA, in the State Department, and in the Justice Department." Id. at 177-78. In particular, the Committee's fear was that the Restatement would be used against U.S. interests in the Iran-U.S. Claims Tribunal. Id. at 178. It "did not win every vote," but it did shift the Restatement back considerably towards a position that embodied the U.S. position and was consistent with U.S. interests. Id at 179. Dezalay and Garth's analysis is that "law firms and businesses invest ... in the production of rules" in a way that "serves both the interests of their clients and the interest in producing a law capable of governing international business transactions in a new era of international exchange." Id. Evidently the international law of expropriation is not immune from that process of the production of law. (230) SASSEN, supra note 2, at 26. (231) Id at 30. (232) Alvarez, supra note 206, at 304. (233) See Virtue of Vagueness, supra note 22, at 179-83 (discussing the role of faith in regulatory transitions); see also id. at 175-78 (noting that ongoing dialogue about a vague takings standard generates clear property rules); Gerald Tortes, Taking and Giving: Police Power, Public Value, and Private Right, 26 ENVTL. L. 1, 23 (1996) (positing that a vague takings test is an attempt to use ad hoc decisions to develop the basis for the creation of objective standards). Well-established courts may be an important part of this process. "Domestic legal systems are able to use standards like 'due care' or the Sherman Act's prohibition on 'conspiracies in restraint of trade' because they include well-established courts and agencies able to interpret and apply them ..., developing increasingly precise bodies of precedent." Kenneth W. Abbott et al., The Concept of Legalization, in LEGALIZATION AND WORLD POLITICS, supra note 34, at 17, 29 (citing Duncan Kennedy, Form and Substance in Private Law Adjudication, 89 HARV. L. REV. 1685 (1976)). Indeed, Charles H. Brower, H, argues that this process is already at work as the interpretation of NAFTA Chapter 11 by arbitral tribunals develops clearer rules. Charles H. Brower, II, supra note 42, at 64. (234) Virtue of Vagueness, supra note 22, at 97-100; see also James N. Krier, The Takings-Puzzle Puzzle, 38 WM. & MARY L. REV. 1143 (1997) (commenting on the difficulty of stating takings doctrine clearly); Michelman, Takings supra note 119, at 1628 (observing that generalizations about property protections are most often unproductive); Radin, supra note 22, at 100 (arguing that no single conceptual interpretation suffices in delineating the idea of property). (235) Virtue of Vaguess, supra note 22, at 179-83. (236) This is so not only because of the gap between the nomos of the locality where the resource is located and the nonspatial nolnos of international finance, see supra Part IV.A; it is also so because of the differences between countries disparate in tradition and geography that are linked together by trade and by a free trade agreement. It is not clear to me how much consensus one can expect, or how much Burkean societal custom, in a quasi-polity comprised of Canada, the United States, and Mexico, for example. The difficult gets even worse when we contemplate a single property regime for all of North and South America, under a single Free Trade Agreement of the Americas. Cf. Afilalo, supra note 34, at 7-8, 38-39 (arguing that the constitutionalization of the European Union is not an appropriate model for other transnational dispute processes such as NAFTA Chapter 11; Europe's process is the result of a deep social, economic, and political drive, and has occurred gradually, whereas NAFTA occurred virtually overnight and is driven by much more modest goals); Charles H. Brower, II, supra note 42, at 88-89 (noting that Europe is unlikely to be a helpful model for other investor-state dispute schemes because Europe is already a "highly integrated community"). The implication in these authorities' rejection of Europe as a model is that without a pre-existing cultural integration, the resolution of both the substantive and procedural forms of the split nomos problem becomes considerably more difficult. (237) "For those who are suspicious of a promise to negotiate to a fair result concerning transition losses, nothing short of clear ex ante rules on regulatory takings will do. They serve as an adjunct to clear property rules." Virtue of Vagueness, supra note 22, at 102. (238) The central issue is faith in the promise of fair treatment. Id at 179-83. I thus disagree in part with Charles H. Brower, II, who argues that the purpose of a reassuring property process is "to infuse ambiguous text with clear meaning." Charles H. Brower, II, supra note 42, at 63. To be sure, many of the elements of legitimacy that Brower outlines can serve this process of reassurance as well. Historical practices provide "pedigree" and "ritual" and the incorporation of shared values involves a sense of harmony between legal regimes and the ideologies of the governed communities, as well as a sense of predictability. Id. at 53-57. Elsewhere in the same article, Brewer admits that predictability may not in itself create a perception of legitimacy: "more is required--namely conformity to historical practice or the incorporation of fundamental values." Id. at 87-88. Brower's framework for his discussion of legitimacy is heavily influenced by THOMAS M. FRANCK, THE POWER OF LEGITIMACY AMONG NATIONS (1990); Thomas M. Franck, Fairness in the International Legal and Institutional System, 240 RECUEIL DES COURS 9 (1993); and Thomas M. Franck, Legitimacy in the International System, 82 AM. J. INT'L L. 705 (1988). (239) A standard updated set of sources would include the following: RESTATEMENT (THIRD) OF FOREIGN RELATIONS LAW OF THE UNITED STATES, supra note 96, [section] 712; George H. Aldrich, What Constitutes a Compensable Taking of Property? The Decisions of the Iran-United States Claims Tribunal, 88 AM. J. INT'L L. 585 (1994); Christie, supra note 92; Rudolph Dolzer, Indirect Expropriations: New Developments?, 11 N.Y.U. ENVTL. L.J. 64 (2002); Dolzer, supra note 92; Francesco Francioni, Compensation for Nationalisation of Foreign Property: The Borderland Between Law and Equip, 24 INT'L & COMP. L.Q. 255 (1975); Rosalyn Higgins, The Taking of Property by the State: Recent Developments In International Law, 176 RECUEIL DES COUPS 267 (1982); Wagner, supra note 12; Burns H. Weston, "Constructive Takings" Under International Law: A Modest Foray into the Problem of "Creeping Expropriations," 16 VA. J. INT'L L. 103 (1975). Recent helpful student commentaries include Jon A. Stanley, Comment, Keeping Big Brother Out of Our Backyard: Regulatory Takings as Defined in International Law and Compared to American Fifth Amendment Jurisprudence, 15 EMORY INT'L L. REV. 349 (2001); Joseph A Strazzeri, Note, A Lucas Analysis of Regulatory Expropriations Under NAFTA Chapter 11, 14 GEO. INT'L ENVTL. L. REV. 837, 843-44 (2002). There are few decisions fleshing out the obligation, but some of them are applying a treaty standard that may not reflect the underlying international law standard that would apply in the absence of a treaty. The Iran-U.S. Claims Tribunal, for example, dealt with regulatory expropriations claims, but under a standard that is probably much broader than NAFTA. See Been & Beauvals, supra note 13, at 57-58 (explaining the problems with comparing the Iran-U.S. Claims Tribunals with NAFTA tribunals); SORNARAJAH, supra note 13, at 282-83 (questioning generally the relevance of the Iran-U.S. Claims Tribunal precedents). The European Court of Human Rights and the European Court of Justice are developing a transnational property rights jurisprudence, though it is of course ultimately treaty-based and is formally limited to the EU countries. See generally Michael R. Antinori, Note, Does Lochner Live in Luxembourg?: An Analysis of the Property Rights Jurisprudence of the European Court of Justice, 18 FORDHAM INT'L L.J. 1778 (1995) (examining the property rights case law of the European Court of Justice and property protections under the European Court of Human Rights); Been & Beauvais, supra note 13, at 56-57 (discussing regulatory expropriations jurisprudence of the European Court of Human Rights and the European Court of Justice); Helen Mountfield, Regulatory Expropriations in Europe: The Approach of the European Court of Human Rights, 11 N.Y.U. ENVTL. L.J. 136 (2002) (discussing the approach of the European Court of Human Rights to "regulatory deprivations"). The WTO's interpretations of the GATT Article XX environmental exceptions to trade liberalization also provide some guidance as to the appropriate scope of police powers, but probably do not go all the way. They may be particularly helpful on issues concerning how much science is needed to back up a claim of legitimate regulation, for example. As for the opinions of publicists, a secondary source of international law, one noted commentator wrote a few years back, "It is a curious phenomenon that so much ink has been spilled [concerning regulatory takings] within national orders, and yet so little writing exists in the corresponding sphere of international law...." Dolzer, supra note 92, at 43. Concern over NAFTA Chapter 11 and similar trade and environment issues may be changing that--there has been a tremendous outpouring of writing in the past few years. (240) The Restatement (Third) of the Foreign Relations of the United States, supra note 96, [section] 712 cmt. g, also uses the term "creeping expropriation." (241) Id. (establishing that the duty to compensate does not extend to losses of property or other economic disadvantage "resulting from bona fide general taxation, regulation, forfeiture for crime, or other action ... that is commonly accepted as within the police power of states, if it is not discriminatory"). See, e.g., Brower & Steven, supra note 80, at 198-99 (noting that there is an obligation to compensate for indirect expropriations, but not for losses due to bona fide nondiscriminatory regulation); INT'L INST. FOR SUSTAINABLE DEVELOPMENT, PRIVATE RIGHTS, PUBLIC PROBLEMS: A GUIDE TO NAFTA's CONTROVERSIAL CHAPTER ON INVESTOR RIGHTS 31 (2001) [hereinafter PRIVATE RIGHTS, PUBLIC PROBLEMS] (discussing the ability of a country to exercise its police power, i.e., protecting its public goods or its environment, without triggering an expropriation); SORNARAJAH, supra note 13, at 282-83, 296. The Restatement identifies discriminatory treatment as a separate issue also affecting the duty to provide compensation. RESTATEMENT (THIRD) OF THE FOREIGN RELATIONS OF THE UNITED STATES, supra note 96, [section] 712 cmt. f. The U.S.-Singapore FTA and the U.S.-Chile FTA have made an advance beyond NAFTA here by specifically recognizing that "[e]xcept in rare circumstances, nondiscriminatory regulatory actions by a Party that are designed and applied to protect legitimate public welfare objectives, such as public health, safety, and the environment, do not constitute indirect expropriations." Letter from Robert B. Zoellick, United States Trade Representative, to George Yeo, Minister for Trade and Industry, Singapore para. 4(b) (May 6, 2003) (concerning expropriation), available at http://www.ustr.gov/new/fta/Singapore/final/15%20expro.PDF; Letter from George Yeo, Minister for Trade and Industry, Singapore, to Robert B. Zoellick, United States Trade Representative para. 4(b) (May 6, 2003) (concerning expropriation), available at http://www.ustr.gov/new/fto/Singapore/final/15%20expro.pdf. (242) RESTATEMENT (THIRD) OF THE FOREIGN RELATIONS LAW OF THE UNITED STATES, supra note 96, [section] 712 cmt. g. (243) Brower & Steven, supra note 80, at 199. (244) Schneiderman, supranote 14, at 775. (245) Wagner, supra note 12, at 468. (246) Id. at 520. See id. at 527 ("To the best of my knowledge, ... no international tribunal has yet considered whether this principle [no liability for bona fide police power regulation] applies to environmental regulations, although scholars have assumed that it does and the United States claims to agree.") (footnotes omitted). (247) Dolzer, supra note 92, at 59 ("[T]he law of indirect expropriation can be established, at this moment, on the basis of primary sources of international law, only in a very sketchy and rough manner."). (248) VAN DER WALT, Supra note 92, at 19. (249) Been & Beauvais, supra note 13, at 51, 58. (250) Virtue of Vagueness, supra note 22, at 114. See id. at 112-13 (discussing four types of response to the inherent vagueness in regulatory takings doctrine); id. at 115-24 (discussing ways in which vagueness reinserts itself into restatements of regulatory takings doctrine). (251) Daniel M. Price, NAFTA Chapter 11-Investor-State Dispute Settlement: Frankenstein or Safety Valve?, 26 CAN.-U.S. L.J. 107, 111 (2001), available at WL 26CUSLI107 (The original published version of this essay was incorrect and readers should be sure to refer to the corrected version, available online through Westlaw.). (252) See, e.g., Kurtz, supra note 84, at 738 (describing the failure of NAFTA to define clearly the definition of "indirect expropriation" as a drafting flaw). (253) See, e.g., J. Peter Byrne, Tea Arguments for the Abolition of Regulatory Takings Doctrine, 22 ECOLOGY L.Q. 89, 91 (1995) (arguing that the Supreme Court should simply eliminate regulatory takings doctrine); Sarah E. Waldeck, Comment, Why the Judiciary Can't Referee the Takings Game, 1996 WIS. L. REV. 859, 886-87 (arguing that the political process is best suited to resolve takings claims). Cf. Schneiderman, supra note 14, at 762-73 (relying on Canada's legislative determinations as to when to protect property from regulation, and objecting to the constitutionalization of takings doctrine). But see Lynda L. Butler, The Politics of Takings: Choosing the Appropriate Decisionmaker, 38 WM. & MARY L. REV. 749, 750 (1997) (challenging Byrne's conclusion, and arguing that only the judiciary is sufficiently public-minded and insulated from politics to define regulatory takings doctrine). (254) Been & Beauvais, supra note 13. Vicki Been and Joel Beauvais consider three clusters of arguments generally advanced to support regulatory takings doctrine. The first is cost internalization (also called "fiscal illusion"), the argument that governments should be made to pay attention to the costs imposed by regulation through a compensation mechanism. Id. at 88-100. The second, arguments from general fairness, are also found wanting. Id. at 100-08. The third cluster views regulatory takings as insurance against shifts in government policy. It is likewise found unpersuasive. Id. at 109-16. Been and Beauvals then ask whether there are any special considerations in the foreign direct investment context that would justify a regulatory takings doctrine specifically addressed to protection of foreign investment. Again, they decide not, as investment insurance is available or can become available, and foreign investment does not appear to be much deterred in any event. Id. at 116-26. Another recent theoretical article also ultimately concludes that international regulatory takings protection is unnecessary for foreign investors in most settings, as foreign investors are capable of taking account of the risks inherent in the investment climate. Susan Rose-Ackerman & Jim Rossi, Disentangling Deregulatory Taking, 86 VA. L. REV. 1435, 1483, 1493 (2000). (255) Been & Beauvais, supra note 13, at 143. (256) "Singling out" of one individual to bear a burden that ought to be borne by all is a classic case of unfairness that has been addressed inter alia through regulatory takings doctrine. E.g., Armstrong v. United States, 364 U.S. 40, 49 (1960). (257) See, e.g., Krotoszynski, supra note 106, at 720. As Justice Stevens has written, "it is the Due Process Clause rather than [regulatory takings] doctrine that protects the property owner from improperly motivated, unfairly conducted, or unnecessarily protracted government decisionmaking." First English Evangelical Lutheran Church v. Los Angeles County, 482 U.S. 304, 339 (1987) (Stevens, J., dissenting). To be sure, in U.S. law a successful due process argument typically brings a remedy of invalidation of the offending action, whereas a successful takings claim allows the action to stand and the loss from it to be compensated. And the standard would still be vague. Virtue of Vagueness, supra note 22, at 113-14. (258) Perhaps it is already there. The Restatement allows for bona fide regulation so long as it is not discriminatory. RESTATEMENT (THIRD) OF THE FOREIGN RELATIONS OF THE UNITED STATES, supra note 96, [section] 712 cmts. f, g. Inclusion of modified language on indirect expropriation so as to permit even-handed regulation, in the U.S.-Singapore and U.S.-Chile FTAs, is also suggestive here. (259) Where property is concerned, we may want to promise more stability than we ultimately expect or intend to deliver. Virtue of Vagueness, supra note 22, at 186-89; Underkuffler-Freund, supra note 25, at 167-68. We are in the territory of what Larry Alexander and Emily Sherwin have called "the deceptive nature of rules." Larry Alexander & Emily Sherwin, The Deceptive Nature of Rules, 142 U. PA. L. REV. 1191, 1218-19 (1994). See Virtue of Vagueness, supra note 22, at 186-89 (applying this principle to property rhetoric). (260) Michelman, supra note 21, at 1216. I suppose my argument differs from Michelman's 1967 argument in that he seems to anticipate an accurate and regular application of the takings test as he reformulates it, while I argue that the promise to compensate might be more important than the details of how it is carried through in practice. Virtue of Vagueness, supra note 22, at 151-53 (drawing on Robin Stryker, Rules, Resources, and Legitimacy Processes." Some Implications for Social Conflict, Order, and Change, 99 AM. J. Soc. 847 (1994), to argue that acting as though just compensation were available or even acknowledging that others hold to that standard may lead to the internalized belief that just compensation is available). (261) E.g., Hulsebosch, supra note 27, at 731-32 (asserting that takings doctrine addresses the fairness and wisdom of accelerated legislative change in property rules); Virtue of Vagueness, supra note 22, at 166-69 (discussing transition management); Rose, supra note 25, at 38 (discussing takings jurisprudence as a series of compromise devices that deflate the fears of property owners). (262) Been & Beauvais, supra note 13, at 141 ("Part IV's analysis of rationales for compensation requirements calls into question whether any international compensation requirement, even one limited to nationalization and other traditional forms of expropriations, is justified."). (263) Id at 142. (264) Id at 141. (265) Id. at 142. They also point out that direct expropriation claims "are likely to have significantly lower social costs, from the standpoint of redistribution of rights or deterrence of regulation, than regulatory takings claims." Id. I elaborated on this distinction between direct and indirect expropriations in Part III supra. See generally Rose, supra note 25. Kurtz also argues that a guarantee of compensation in the event of expropriation should be limited to direct, as opposed to indirect claims, but he is even less explicit about the reason for the distinction. Kurtz, supra note 84, at 786. (266) I understand Dan Farber's reasoning concerning regulatory takings ultimately to be similar. He argues that since the legislature will provide compensation for takings much of the time, it should be required to do so all the time, out of concerns for predictability, universality, and fairness. Farber, Public Choice and Just Compensation, supra note 13, at 305-08. This is ultimately a psychological justification for regulatory takings doctrine, as Farber acknowledges. Id. at 286-87 (interpreting Michelman, supra note 21). (267) Michelman, Takings, supra note 119, at 1628; Michelman, Liberties, supra note 119, at 100. (268) Id. (269) Wagner, supra note 12, at 520-26. (270) See Letter from Robert B. Zoellick, United States Trade Representative, to George Yeo, Minister for Trade and Industry, Singapore, supra note 241; Letter from George Yeo, Minister for Trade and Industry, Singapore, to Robert B. Zoellick, United States Trade Representative, supra note 241; U.S.-Chile FTA, supra note 20, Annex 10-D, para. 4(a). (271) Procedural aspects of national treatment will be addressed in Part V.B. infra. (272) Separate Comments of TEPAC Members Durwood Zaelke, Fred O'Reagan, and Rhoda H. Karpatkin, February 27, 2003, Attachment 2 to TEPAC REPORT ON U.S.-CHILE FTA, supra note 89, at 2 [hereinafter Separate Comments of TEPAC Members]. This same document is also Attachment 2 to the TEPAC REPORT ON U.S.-SINGAPORE, supra note 89, at 2. (273) To be sure, in some instances it will be hard to tell ff differential treatment has occurred--for example where a unique individual permit or variance is denied. (274) It might also seem that a foreign investor would be outmatched in the political processes of a domestic polity. I ought therefore to mention here the political process theory of regulatory takings--the notion that takings doctrine is intended to protect against majoritarian faction, understood through the lens of public choice theory. See, e.g., Saul Levmore, Just Compensation and Just Politics, 22 CONN. L. REV. 285, 306-07 (1990) (arguing that takings clause protects "occasional individuals" not part of organized political interest groups); Glynn S. Lunney, Jr., A Critical Reexamination of the Takings Jurisprudence, 90 MICH. L. REV. 1892, 1895 (1992) (arguing that there are circumstances where takings jurisprudence should not rely on the legislature to be representative of diffuse community interests); Poirier, supra note 13, at 253-55 (setting out public choice justification as protection from the government as a tool of special interests); Treanor, supra note 193, at 856 (arguing that courts today, given modern political realties, should protect those who are unlikely to receive fair consideration from majoritarian decision makers). Vicki Been and Joel Beauvais do a good job of summarizing these arguments. Been & Beauvais, supra note 13, at 102-08. They conclude that foreign investors are adequately protected without a regulatory takings doctrine, and that in any event ad hoc arbitral panels are simply not equipped to evaluate the fairness of complex national political processes. Id at 105-08. (275) VAN DER WALT, supra note 92, at 19 (noting that "[t]he distinction between police-power regulation and eminent-domain expropriation . . . cannot be made on a mechanical or conceptual basis[;]" jurisdictions differ, an intermediate category where regulatory limitations on the use of property does not simplify matters). It should be noted that some countries, notably Canada and the United Kingdom, have some form of well-established balancing test, but not one enshrined in a constitution. Whether some kind of regulatory takings doctrine ought to be expected in any modern state is an interesting question. However, there is a developing supranational property jurisprudence in the European Union. See, e.g., Mountfield, supra note 239, at 136-37; see also Helene Ruiz Fabri, The Approach Taken by the European Court of Human Rights to the Assessment of Compensation for "Regulatory Expropriations" of the Property of Foreign Investors, 11 N.Y.U. ENVTL. L.J. 148, 149-65 (2002) (summarizing the general framework for the protection of property against expropriation in European law). (276) Even then foreign investors may not trust it and will surely want to know what the doctrine says for reassurance. For the reasons discussed above concerning the inevitable vagueness of the substance of regulatory takings doctrine, they are likely to be disappointed. (277) This might recommend a bilateral approach to investment protections rather than a multilateral one. As Konrad von Moltke explains, in the past, most investment protection was obtained through bilateral investment treaties based on prototype models. VON MOLTKE, supra note 84, at 16. The OECD's MAI was "the first serious proposal to apply investment protections on a global level." Wagner, supra note 12, at 481. (278) See discussion in Part V.A.3 infra, concerning the difficulty in the U.S.-Singapore and U.S.-Chile FTAs with spelling out the content of a regulatory takings doctrine. (279) Compare Schneiderman, supra note 14, at 781-82 (arguing that the NAFTA Chapter 11 obligations have inappropriately "constitutionalized" Canada's tradition of legislative respect for property), with Caas R. Sunstein, On Property and Constitutionalism, 14 CARDOZO L. REV. 907, 916, 923 (1993) (arguing that a high degree of stability in properly rights is essential, and that a constitutional protection along the lines of a takings clause is "indispensable on both economic and democratic grounds"). See also Butler, supra note 253, at 776-79 (arguing that regulatory takings doctrine should not be left up to legislature); Byrne, supra note 253, at 90, 136 (arguing that regulatory takings doctrine should be abolished and decisions on compensation left to the legislature). (280) A single substantive standard internationally would experience a very strong gravitational pull towards one of the simple endpoints. In the current climate, this would be the strong property-protection endpoint. (The other endpoint is no limit on legislative action through an explicit regulatory takings doctrine.) See Virtue of Vagueness, supra note 22, at 116-17, 131 (discussing the endpoint positions in regulatory takings). In my view, the strong property protection rule overemphasizes the protection of property fights at the expense of legitimate police power interests. (281) I thus disagree with the argument made by Terri Lilley that only U.S. regulatory takings law properly maintains the tension between public and private interests and that U.S. law should therefore serve as the baseline for NAFTA. Lilley, supra note 42, at 754. (282) Dolzer, supra note 92, at 65. Earlier in the same passage, he observes that: Concepts based on the perspective of a "reasonable economic owner," a "reasonable return of investments" or a "fair balance of interests" provide only for starting points of argumentation, and the task of their substantive implementation in individual cases may often leave the decision-making body with a host of complex questions of a political or economic nature. Often, these questions are of a kind which raise broad issues regarding the propriety of judicial decision-making even for domestic courts. In this context one may well perceive the reason for the reluctance of states to submit issues of indirect expropriation to international tribunals. Id. at 64. See generally MICHAEL WALZER, THICK AND THIN: MORAL ARGUMENT AT HOME AND ABROAD 16-17, 21 (1994) (arguing for "thickly conceived values" that are "idiomatic in... language, particularist in . . . cultural reference, and circumstantial in the two senses of that word: historically dependant and factually detailed"). (283) Comments of Vanghan Lowe, The Internationalization of Legal Relations, 96 AM. SOC'Y INT'L L. PROC. 146, 153, 155 (2002)(panel presentation). (284) 19 U.S.C.A. [section] 3802(b)(3) (West 2003). Specifically, the Act states: Recognizing that Unites States law on the whole provides a high level of protection for investment, consistent with or greater than the level required by international law, the principal negotiating objectives of the United States regarding foreign investment are to reduce or eliminate artificial trade-distorting barriers to foreign investment, while ensuring that foreign investors in the United States are not accorded greater substantive rights with respect to investment protections than United States investors in the United States, and to secure for investors important rights comparable to those that would be available under United States legal principles and practice, by-- .... (D) seeking to establish standards for expropriation and compensation for expropriation, consistent with United States legal principles and practice. Id. This is the so-called Baucus-Grassley amendment. See generally Been & Beauvals, supra note 13, at 130-31 (discussing the Baucus-Grassley amendment). (285) U.S.-Singapore FTA, supra note 20, Exchange of Letters on Expropriation, para. 4.; U.S.-Chile FTA, supra note 20, Annex 10-D, para. 4. (286) Penn Central, 438 U.S. 104, 124 (1978). (287) U.S.-Singapore FTA, supra note 20, Exchange of Letters on Expropriation, para 4.; U.S.-Chile FTA, supra note 20, Annex 10-D, para. 4. (288) TEPAC REPORT ON U.S.-SINGAPORE FTA, supra note 89, at 6; TEPAC REPORT ON U.S.-CHILE FTA, supra note 89, at 6. (289) TEPAC REPORT ON U.S.-SINGAPORE FTA, supra note 89, at 6; TEPAC REPORT ON U.S.-CHILE FTA, supra note 89, at 6. (290) TEPAC REPORT ON U.S.-SINGAPORE FTA, supra note 89, at 6; TEPAC REPORT ON U.S.-CHILE FTA, supra note 89, at 6. (291) TEPAC REPORT ON U.S.-SINGAPORE FTA, supra note 89, at 6; TEPAC REPORT ON U.S.-CHILE FTA, supra note 89, at 6. (292) Separate Comments of TEPAC Members, supra note 272, at 5-7. Elements that they argue have been omitted include considering the loss of value to the parcel as a whole (the denominator problem), id. at 6 n.2; the tolerance given to temporary moratoria and other nonpermanent takings, id. at 6 nn.2-3; an elaboration of the character of the government action, id. at 6 n.3; qualifications to the significance of investors' expectations, id. at 6 n.4; the limitations on expectations derived from background principles of property and nuisance law, id. at 6 n.5; and the fact that regulatory takings findings are extremely rare in U.S. law. Id at 6-7 n.6. The principle put forward by these TEPAC members is that "regulatory actions designed to protect health, environment, or the public welfare do not constitute an expropriation, except in instances equivalent to a permanent, compelled, physical occupation." Id. at 7 (footnote omitted). In my view this statement probably goes beyond what United States regulatory takings doctrine actually holds. (293) Id. at 5. (294) The physical invasion test does provide a clear rule for what is ultimately a very narrow set of regulatory measures. In my opinion, the Separate Comments tend to overstate the clarity of some other rules. For example, after Tahoe-Siena, temporary takings are a better bet for governments than they were, but not absolutely safe. After Palazzolo, investor expectations are a fuzzier test than the Separate Comments let on. (295) Virtue of Vagueness, supra note 22, at 97-101. See also Been & Beauvais, supra note 13. at 131 n.457 (discussing the difficulties experienced by the U.S. Trade Representative in trying to comply with the Trade Act's mandate to incorporate the United States regulatory takings standard into treaties). (296) Been & Beauvais, supra note 13, at 140 (footnotes omitted). (297) See Virtue of Vagueness, supra note 22, at 144-49 (discussing unavoidable metaphorical extensions of property concepts as an explanation for the apparently intractable heterogeneity of property usages). (298) See generally id. (discussing need for societal dialogue to clarify regulatory takings and the benefits of this involvement). (299) See Charles H. Brower, II, supra note 42, at 52-53 (noting that where vague, flexible and conflicting provisions in treaties can only be applied on the facts of individual cases, legal regimes can still maintain predictability and legitimacy through their interpretive processes). (300) Godshall, for example, presents several other alternatives and procedural reform proposals. These include carving out environmental regulation from any claims of expropriation, prescreening of compensation claims by the NAFTA parties prior to arbitration, the elimination of all compensation for indirect expropriation, a sliding-scale approach in which worthier regulation results in less damages, and the elimination of any review of arbitral decisions by domestic courts. Godshall, supra note 8, at 289-314. There is another issue that I will bypass. Up to now, I have been able to segregate my discussion of indirect expropriation from other Chapter 11 claims. But actions brought under Chapter 11 are likely to combine an Article 1110 claim of expropriation with other claims, such as a breach of national treatment (Article 1102) or a failure to apply minimum international standards, including fair and equitable treatment (Article 1105). My weighing of the split nomos and territoriality arguments is focused on regulatory takings theory, not on these other types of Chapter 11 claims. They are arguably different, perhaps implicating domestic property law less directly, although they still do affect a state's willingness and ability to regulate. To the extent that these differences might recommend a different process, I would merely point out here that bifurcation occurs now in the United States. Because a Reconstruction-era statute prohibits bringing the same claim against the United States in two federal courts, it has been necessary to distinguish formally a claim challenging the validity of an administrative action from a claim for compensation based on the effect of that action. The two actions may proceed simultaneously in different courts. Loveladies Harbor, Inc. v. United States, 27 F.3d 1545, 1551-56 (Fed. Cir. 1994) (interpreting 28 U.S.C. [section] 1500). (301) Fair and Equitable Treatment, supra note 46, 14-16 (remarks of J.C. Thomas). To be sure, the arbitration process can be tweaked here to authorize arbitral panels explicitly to dismiss weak claims. This has been identified as an issue. Indeed, Congress mandated such a provision in the Trade Act of 2002. 19 U.S.C.A. [section] 3802 (b)(3)(G)(i)(West 2003). (302) Brower & Steven, supra note 80, at 197. The inefficiency point is a sound one. Where investors do not have to bear the cost of their own advocacy, the government can expect to be bombarded with weak to frivolous complaints. (303) Charles H. Brower, II, supra note 42, at 89 (noting that states base such decisions on political expediency, not just the merits). (304) In this regard Professor Carbonneau's concern about overpoliticization of investor-state disputes is correct. See Carbonnean, supra note 122, at 780 (warning of problems inherent in state-to-state dispute resolution, and extolling the virtues of NAFTA's arbitration process which takes disputes outside contentious political circumstances); Shalakany, supra note 118, at 437 (exploring basis for foreign investors' desire to resolve investment disputes outside the host country's judicial system). Cf. Kenneth J. Vandevelde, The BIT Program: A Fifteen Year Appraisal, 86 AM. SOC. INT'L L. PROC. 532, 535, 538 (1992) (arguing that an important goal of the United States Bilateral Investment Treaty program was to get the United States government out of private investor expropriation disputes with foreign governments; the investor to state dispute resolution mechanism was intended to depoliticize investment disputes). (305) Charles H. Brower, II, supra note 42, at 89-90. (306) See supra Part V.A.1. (307) Brower & Steven, supra note 80, at 196. (308) See Charles H. Brower, II, supra note 42, at 89-90 (arguing that the tendency of national courts to support their own governments makes this approach problematic). See also id. at 75-78 (setting out the sources of bias of judges towards their own governments in the context of municipal court review of arbitral decisions). (309) Schneiderman, supra note 63, at 513 n.76. (310) See, e.g., Afilalo, supra note 34, at 51-54 (recommending that jurisdiction over NAFTA Chapter 11 disputes be transferred to national courts); PRIVATE RIGHTS, PUBLIC PROBLEMS, supra note 241, at 39 (noting that selection of arbitrators by the parties does not make sense "when issues of public welfare and public policy are placed against private interests"). See generally Wai, supra note 173, at 262-63. Even without challenging the allegiance of arbitrators, one could argue that they simply will not be in tune with the free points of the cultures and legal systems whose decisions they are reviewing. Been & Beauvais, supra note 13, at 105. (311) See, e.g., Fiss, supra note 135, at 1085-86 (commenting that the judiciary, like the legislative and executive branches, possesses a power defined and conferred by public law); Owen Fiss, Objectivity and Interpretation, 34 SWAN. L. REV. 739, 756-57 (1982) (arguing that the most important source of a judge's authority to interpret texts arises because judges are part of a societal structure of authority that is good to preserve; they protect tradition and provide stability); McConnaughay, supra note 142, at 495-96 ("[J]udges traditionally serve even in private litigation as protectors of unrepresented public interests, whereas private arbitrators properly define their responsibilities exclusively in terms of the interests of the parties appearing before them."). (312) See DEZALAY & GARTH, supra note 117, at 18-29 (examining the characteristics of international arbitrators); see also Wai, supra note 173, at 263 (arguing that "there may be a differene in outcomes between state regulator or adjudicators and non-state arbitrators"). (313) See, e.g., Kurtz, supra note 84, at 771 (discussing difficulty that an arbitral tribunal will have in discerning whether "a measure tantamount to expropriation ... could be justified as being 'in the public interest'"). (314) Shalakany, supra note 118 (arguing that arbitrators will sham a precommitment involving bias against regulation and in favor of private property). (315) See generally Hulsebosch, supra note 27. (316) Abbott et al., supra note 233, at 29; Afilalo, supra note 34, at 51 (noting that the application of NAFTA's broad standard, which implicates policy interests, to specific cases is "eminently judicial"); Schneiderman, supra note 14, at 775. As Cass Sunstein writes, "[A] constitution cannot possibly spell out, in advance, what government action must be in order to qualify as a 'taking.' Because of the limitations of language, that task must be left to judges dealing with particular cases and particular measures." Sunstein, supra note 279, at 929. (317) Brower & Steven, supra note 80, at 200. As Sunstein writes in the context of regulatory takings rules, debates over interpretive principles "actually ... involve the selection, on political and moral grounds, of norms with which to give meaning to constitutional texts. No document can avoid the grant of discretion to interpreter in choosing among various possible norms." Sunstein, supra note 279, at 929-30. Writing a bit more generally, David van Zandt argues that: Mud [property] rules permit judges to modify the relationship between two claimants to reflect social expectations of how one person in a society should treat another. That is, the content of the legal rule formulated and applied in a particular situation is often dependent on the judge's use of common-sense views of appropriate treatment within a society. van Zandt, supra note 25, at 819. This analysis highlights the crucial importance of judges' sensitivity to social context, especially in situations where the rule to be applied is inherently vague and context-sensitive, as a regulatory takings rule must often be. (318) Afilalo, supra note 34, at 52 ("Jurisdiction over Chapter 11 cases ... should be transferred to the national courts of the NAFTA Parties."). Where a state or local action was challenged in a federal country, the question might remain whether to proceed in federal or state court. I do not discuss this issue here. (319) See Afilalo, supra note 34, at 51, 54 (asserting Chapter 11 arbitral panels lack the hallmarks of legitimacy and transparency that a judiciary would have); Been & Beauvais supra note 13, at 105-06. See also Charles H. Brower, II, supra note 42, at 70-71 (summarizing this critique of arbitrators, although he disagrees with it). (320) The recommendation does not apply as strongly to direct expropriation claims, which could just as appropriately be decided by an arbitral process because such claims do not implicate an ongoing dialogue about the boundary between property and regulation. Even though a takings claim in a direct expropriation context is still a kind of appellate review, it is basically much less likely to have public-regarding aspects to it. (321) Ari Afilalo recommends making available to national courts that are handling NAFTA Chapter 11 matters the power to refer novel questions of law to a permanent NAFTA Appellate Tribunal, in order to provide uniformity in developing law and to make sure that national courts do not favor their own governments. Afilalo, supra note 34, at 52-53 n.125. This recommendation is based on a European model. Id. at 33-34. This proposal does not seem to me to go far enough. Actual, after-the-fact review of national court decisions would be a much more effective way of supervising the process of national courts and of providing an ultimate uniformity to developing NAFTA Chapter 11 law. (322) The Separate Comments to the TEPAC for the recent U.S.-Singapore and U.S.-Chile FTAs put this point cogently: [W]e are concerned that the inclusion of the investor-state process without a requirement that investors exhaust local administrative and judicial remedies (unless to do so would be fruitless) will undermine the rule of law in both Singapore and Chile. By removing disputes from national legal systems, the investor-state process actually stunts the further development of stable and consistent national legal systems. Under the proposed rules, national systems are not even given the opportunity to correct a problem before investors can have recourse to international dispute mechanisms. This process also undermines the legitimacy of the U.S. regulatory and legal system, for the same reason: investors will be able to bypass it altogether or begin using it and then exit it whenever that best serves their overall litigation strategy. Separate Comments of TEPAC Members, supra note 272, at 3. (323) It might also be thought insufficiently protective of investor interests, as they are still subject to potentially "biased, inefficient, or unfamiliar courts of their host states" prior to review. Charles H. Brower, II, supra note 42, at 89. (324) This, of course, sets aside the possibility of a substantive review based on conflict with domestic public policy. See note 56 supra. (325) Williamson County Reg'l Planning Comm'n v. Hamilton Bank of Johnson City, 473 U.S. (172) (1985). See Virtue of Vagueness supra note 22, at 172-73 (exploring the negotiation-forcing effect of the delay caused by the ripeness doctrine in U.S. regulatory takings law). For a recent excellent discussion of ripeness in takings doctrine, see Douglas T. Kendall et al., Choice of Forum and Finality Ripeness: The Unappreciated Hot Topics in Regulatory Takings Cases, 33 URB. LAW. 405 (2001). (326) See, e.g., A.O. Adede, A Survey of Treaty Provisions on the Rule of Exhaustion of Local Remedies, 18 HARV. INT'L L.J. 1, 3-6 (1977) (arguing that exhaustion of domestic remedies is a standard requirement in international human tights law and providing examples); THEODOR MERON, HUMAN RIGHTS AND HUMANITARIAN NORMS AS CUSTOMARY LAW 172 (1989) ("The requirement that local remedies be exhausted before a claim against a state may be submitted to an international forum is stated in all of the principal human rights treaties...."). Thanks to colleague Elizabeth Defeis for advice on this point. (327) See, e.g., JAMES W. ELY, THE GUARDIAN OF EVERY OTHER RIGHT: A CONSTITUTIONAL HISTORY OF PROPERTY 26 (1992) (referring to property rights as fundamental values in a free society). (328) See, e.g., Antinori, supra note 239, at 1796 (discussing Protocol No. 1 to the European Convention on Human Rights, which guarantees the right to property); Fabri, supra note 275, at 150-55 (citing Protocol No. 1 to the European Convention on Human Rights and discussing the interpretations of Article 1 of the Protocol by the European Court of Human Rights); Mountfield, supra note 239, at 139 (describing the history and context of the adoption of Article 1 of Protocol No. 1 of the European Convention on Human Rights, which declares that the right to property is a human right). See also Alvarez, supra note 206, at 307-08 (calling NAFTA Chapter II "the most bizarre human rights treaty ever conceived," but a human rights treaty nevertheless). (329) Alvarez, supra note 201, at 429-30 (footnote omitted). (330) Id. at 437 (footnote omitted). (331) Id. at 438. (332) Id. at 437 n. 146. (333) Id. at 439. At a presentation of this Article, Samuel Murumba observed that, as to human rights law and criminal law both, developing countries will seek assiduously to maintain domestic control of judicial processes because they are so central to maintaining internal order and power. On the other hand, developing countries will be more willing to cede some measure of police power over property to non-national fora, as in NAFTA Chapter 11 or similar bilateral BITs, because the gain in attracting foreign investment is great and the loss of political control is not as central. This analysis rings true. (334) Perhaps, as Ari Afilalo argues, "the United States's historical interest in securing a neutral dispute resolution process is now countervailed by its interest in sheltering sensitive domestic measures from undue challenges under international law" so that it would be more receptive to national court resolution of transnational investment disputes. Afilalo, supra note 34, at 54. I doubt it. The Trade Act of 2002 shows a persistence of the expectation that arbitral panels will decide transnational investment disputes, and seeks to reassure U.S. investors instead by trying to specify more closely the substantive standard to be applied. (Not accidentally, it is a U.S. standard.) Generally speaking, as Jose Alvarez observes, the United States and other regimes are selective in their willingness to submit to international dispute resolution, submitting readily in some circumstances but in other circumstances insisting on national jurisdiction. Alvarez, supra note 201, at 443-44 n.168. (335) Another possibility would be arbitral decisions with no review. But justifiable concerns about procedural irregularity and bias make some review essential. Yet another possibility would be a single non-national tribunal to hear expropriation claims in the first instance, with no review. Charles H. Brewer, II, rejects this possibility because it is "unlikely that a single tribunal could adequately and seasonably establish the facts and shepherd a coherent body of doctrine in the full range of disputes." Charles H. Brewer, II, supra note 42, at 91. I would add that such a tribunal would have split homes and territoriality issues in spades. (336) William W. Park, Control Mechanisms in the Development of a Modern Lex Mercatoria, in LEX MERCATORIA AND ARBITRATION, supra note 117, at 109, 134 (Thomas E. Carbonneau ed., 1990). (337) Id at 132. (338) ld. at 135. (339) New York Convention, supra note 59, arts. II(1), V(2)(a), 21 U.S.T. at 2519, 2520; Inter-American Convention, supra note 60, art. 5, para. 1(e). See also McConnaughay, supra note 142, at 474-75 (arguing that the "inarbitrability of mandatory law claims was, and still is in most countries, a fundamental premise of international arbitration"). However, the public policy grounds for review under the New York Convention have seldom been invoked in the United States. Eloise Henderson Bouzari, The Public Policy Exception to Enforcement of International Arbitral Awards: Implications for Post-NAFTA Jurisprudence, 30 TEX. INT'L L.J. 205, 208 (1995). (340) See note 56 supra. (341) "[I]n parts of the world lacking a tradition of judicial independence, the business community may prefer no judicial review at all, taking its chances with potential arbitrator misbehavior as the lesser of two evils." Park, supra note 55, at 598. (342) See Investor-State Disputes, supra note 56, at 85; Tollefson, supra note 42, at 201 (noting that the United States opposed locating the Methanex tribunal in Canada, based on post-Metalclad concern about Canadian judicial review; the panel was ultimately located in Washington, D.C.). (343) Investor-State Disputes, supra note 56, at 77 (footnotes omitted) (emphasis added). (344) Charles H. Brower, II, supra note 42, at 75-78. (345) Park, supra note 55, at 603. (346) Id. He thus recommends against including public policy as grounds for vacatur of international arbitration awards. Id. at 605. (347) See note 56 supra. (348) Barton Legum suggests another variant, pointing out that most other international claims regimes use a standing tribunal of first instance rather than ad hoc arbitrators. Legum, supra note 50, at 538. (349) From a technical point of view, it would certainly require an amendment to NAFTA to override the relevant provisions of the New York and Inter-American Conventions, which do rely on domestic courts for limited review. Charles H. Brower, II, supra note 42, at 92. (350) The Metalclad appeal, for example, was made possible by reference to Canadian domestic law on judicial annulment of commercial arbitration. Godshall, supra note 8, at 282. (351) Charles H. Brower, II, aptly describes the FTC's authority as similar to a limited appellate review. Charles H. Brower, II, supra note 42, at 92-93. (352) Fair and Equitable Treatment, supra note 46, at 9 (remarks by Charles H. Brower, ID. (353) In a sense, the last word was spoken by the countries party to NAFTA, in the Interpretation Note issued in July 2001. It clarified that the "fair and equitable treatment" guaranteed by Article 1105 should not be interpreted to include general principles of law, such as the principle of transparency that the arbitration panel had invoked. (354) Technically, a consensus by the Governing Body of the WTO may overrule the Appellate Body, but this is most unlikely to happen. (355) That is to say, the WTO is based in Geneva but the members of the Appellate Body may live wherever they choose. (356) See, e.g., Philippe Sands, Searching for Balance: Concluding Remarks, 11 N.Y.U. ENVTL. L.J. 198, 207 (2002) (asserting that the establishment of the WTO Appellate Body has helped to build a coherent, incremental jurisprudence and thus provide a greater degree of legitimacy). (357) See, e.g., Robert K Paterson, A New Pandora's Box? Private Remedies for Foreign Investors Under the North American Free Trade Agreement, 8 WILLAMETTE J. INT'L L. & DISP. RESOL. 77, 123 (2000) (recommending the creation of an appellate body similar to the appellate body under the WTO "to determine questions of law under NAFTA"). (358) Charles H. Brower, II, supra note 42, at 91. (359) 19 U.S.C.A. [section] 3802(b)(3)(G)(iv) (West 2003). (360) U.S.-Singapore FTA, supra note 20, letter exchange of May 6, 2003 concerning a bilateral appellate mechanism; U.S.-Chile FTA, supra note 20, Annex 10-H. The United States Trade Representative understands this language in each treaty to include the possibility of a multilateral appellate body. USTR Final Environmental Review of the U.S.-Singapore FTA, supra note 20, at 29; USTR Final Environmental Review of the U.S.-Chile FTA, supra note 20, at 32. (361) Charles H. Brower, II, supra note 42, at 91. (362) I set aside the supranational processes involved in the consolidation of Europe. Those circumstances are not likely to be replicated elsewhere any time soon. (363) "If the governed community does not see Chapter 11 tribunals as conforming to historical practice, adherence to fundamental values, such as accountability, transparency, and democratic participation, becomes an element essential to the perceived legitimacy of investor-state arbitration." Charles H. Brower, II, supra note 42, at 71 (footnote omitted). (364) See generally Duncan B. Hollis, Private Actors in Public International Law: Amicus Curiae and the Case for the Retention of State Sovereignty, 25 B.C. INT'L & COMP. L. REV. 235 (2002); McConnaughay, supra note 142, at 438-39 (outlining possible procedural reforms to international commercial arbitration to achieve regular, predictable results). (365) The new FTAs require public availability of the notice of intent, notice of arbitration, pleading memorials, and briefs and other written submissions, minutes, or transcripts where available, and written orders, awards, and decisions. U.S.-Chile FTA, supra note 20, at Art. 10.20, para. 1; U.S.-Singapore FTA, supra note 20, art. 15.20, para. 1. Hearings are required to be open to the public, subject to concerns about confidential business information. U.S. Chile-FTA, supra note 20, art. 10.20, paras. 2-4; Amicus submissions may be accepted. U.S.-Chile FTA, supra note 20, art. 10.19, para. 3; U.S.-Singapore FTA, supra note 20, art. 15.19, para. 3. The majority of the TEPAC believes that the statement in the treaties concerning submissions from third persons and interested parties should be strengthened to indicate a preference for openness. TEPAC REPORT ON U.B.-CHILE FTA, supra note 89, at 7; TEPAC REPORT ON U.S.-SINGAPORE FTA, supra note 89, at 7. The U.S.-Chile VIA also requires amicus submissions to be in both English and Spanish, a requirement not imposed on pleadings of parties. The TEPAC report criticizes this additional burden. TEPAC REPORT ON U.S.-CHILE FTA, supra note 89, at 7. (366) See generally Carbonneau, supra note 122. (367) See generally Cover, supra note 113. (368) This is in contrast to the legal realists, e.g., Morris Cohen, Property and Sovereignty, 13 CORNEAL L.Q. 8 (1927), and the more recent social constructionists, e.g., Joseph William Singer & Jack M. Beerman, The Social Origins of Propels, 6 CAN. J.L. & JURISPRUDENCE 217 (1993), who argued that property is not just "there" but is the result of political and social processes. See generally Shalakany, supra note 118, at 424-25, 466-68 (discussing the Legal Realist insights on private property's relation to the state, as a basis for anticipating a subtle bias by arbitrators in the resolution of transnational investment disputes). (369) Indeed, in countries without a strong tradition of private property they also work to instill an understanding of the importance of private property institutions as part of the foundation for economic development. Cf. HERNANDO DE SOTO, THE MYSTERY OF CAPITAL 49-51 (2001) (describing the importance of establishing a formal title system to the creation of capital). (370) Governments must be able to readjust the benefits and burdens of common life for the public good. Penn Central,, 438 U.S. 104, 124 (1978). As Justice Holmes wrote long ago, "Government hardly could go on if to some extent values incident to property could not be diminished without paying for every such change in the general law." Pa. Coal, 260 U.S. 393, 413 (1922). MARC R. POIRIER * * [c] Marc R. Poirier, 2003. Professor of Law, Seton Hall University of Law, Versions of this paper have been presented at Brooklyn Law School's International Economic Law Forum, Case Western Reserve University School of Law, an International Organizations seminar at Fordham Law School, LatCrit VIII in Cleveland, Ohio, Seton Hall University School of Law, and the Stanford Environmental and Natural Resources Seminar. Comments on drafts or other advice and assistance were graciously offered at one time or another by Jerry Anderson, Cathy McCauliff, Margaret Gilhooley, Tim Glynn, Carmen Gonzalez, Ed Hartnett, Daniel Hulsebosch, Margaret Moses, Teemu Ruskola, Calvin Sharpe, and Dan Solove, Seton Hall supported this project with summer research funding. I especially thank my research assistants Patrick Gilmartin, Guy Levi, Rebecca Miller, and Rita Mungioli for all their hard work. |
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