Misappropriation of Institutions: Some Lessons from the Environmental Dimension of the NAFTA Investor-State Dispute Settlement Process

Abstract

Trade regimes at all levels have confronted the dual challenge of rapidly expanding foreign direct investment, and the vigorous growth of international environmental regimes. Attempts to develop a global investment regime have encountered resistance, not least from environmental interests. At the same time, regional trade regimes have sought to address both the environmental and the investment agenda but in a very different manner. This article looks at problems encountered with the investor-state dispute settlement process established by the North American Free Trade Agreement (NAFTA). The institutional dimension of this process is largely drawn from the General Agreement on Tariffs and Trade (GATT), and existing international institutions for commercial arbitration. The article traces some of the difficulties encountered in attempting to use institutions designed for a specific purpose and implemented in one organizational context, to achieve a different purpose in another organizational context. It discusses the problems that arise when institutions appropriate for settling commercial disputes between private actors are used as the basis for balancing private interests and public goods, the environment in particular. It highlights the importance of a more developed understanding of the interplay between institutions and organizations at the international level so as to avoid undesired outcomes.