The Iran-United States Claims Tribunal, NAFTA Chapter 11, and the Doctrine of Indirect Expropriation

This essay takes its cue from the recent Interim Award rendered under Chapter 11 of the North American Free Trade Agreement ("NAFTA")1 on June 26, 2000 in Pope & Talbot, Inc v Canada.2 Pope & Talbot implied that the awards of the Iran-United States Claims Tribunal concerning expropriation were not relevant to the interpretation of the expropriation provisions of Chapter 11 of NAFTA. My aim here is to explain why, contrary to this suggestion, the precedents of the Iran-United States Claims Tribunal are legitimate and helpful sources of law in NAFTA Chapter 11 disputes. I. Pope & Talbot, Inc is a Delaware company that owns a British Columbia woodproducts company ("Investment"), which manufactures and sells softwood lumber and exports most of its softwood lumber production to the United States. Pope & Talbot, Inc alleged that the way Canada implemented a 1996 Softwood Lumber Agreement ("SLA") with the United States breached certain obligations under NAFTA Chapter 11, Section A. The SLA established a limit on the free export to the United States of softwood lumber first manufactured, among other places, in British Columbia. In its pleadings before the arbitral tribunal established under Chapter 11 of NAFTA ("NAFTA tribunal"), Pope & Talbot, Inc asserted that Canada's Export Control Regime implementing the SLA had limited the Investment's ability to carry out its business of exporting softwood lumber to the United States, thereby expropriating Pope & Talbot, Inc's investment. Pope & Talbot, Inc conceded that the Export Control Regime was a "measure not covered by customary international law definitions or interpretations of the term expropriation"3; however, it argued that the phrase "measure tantamount to expropriation" in NAFTA Chapter 11, Article 1110, paragraph 1,4 broadened the customary definitions to include the Export Control Regime. In this sense, Pope & Talbot, Inc continued, this provision was similar to Article II, paragraph 1, of the Claims Settlement Declaration,5 which confers on the Iran-United States Claims Tribunal jurisdiction to decide, in addition to claims arising out of "expropriations," claims arising out of "other measures affecting property rights."6 The NAFTA tribunal denied Pope & Talbot, Inc's expropriation claim. In reaching this decision, the NAFTA tribunal rejected Pope & Talbot, Inc's interpretation of the phrase "measure tantamount to expropriation" in NAFTA Article 1110, paragraph 1. In the NAFTA tribunal's view, "tantamount" meant no more than equivalent, and "[r]eferences to the decisions of the Iran-US Claims Tribunal ignored] the fact that that tribunal's mandate expressly[ed] beyond expropriation to include `other measures affecting property rights."'7 It is not entirely clear what the NAFTA tribunal meant by the latter statement. If it meant that, because the jurisdiction of the Iran-United States Claims Tribunal over "other measures affecting property rights" extends beyond customary international law of expropriation, its decisions concerning "other measures" represent lex specialis-that is, they have no relevance outside the context of that Tribunal then the NAFTA tribunal might have been right! If, however, it was implying that all the decisions of the Iran-United States Claims Tribunal represent lex specialis, then the NAFTA tribunal was wrong. As the following survey of the Iran-United States Claims Tribunal's expropriation jurisprudence demonstrates, the Tribunal nearly always relied on customary international law for its conclusions, and its awards have practical relevance to a wide variety of factual situations that will arise under NAFTA. Thus, the Iran-United States Claims Tribunal's jurisprudence with respect to expropriation may be a relevant body of knowledge from which arbitral tribunals established under Chapter 11 of NAFTA may draw. II. The Iran-United States Claims Tribunal ("Tribunal") first began deciding claims for takings of property in 1983, and to date it has rendered approximately sixty awards on this subject. …