Canada Sued More Than Mexico

By | August 17, 2013

Canada is being sued under the NAFTA investment arbitration regime (in NAFTA Chapter 11) more than Mexico and the US combined.

Today, there are eight active cases underway against Canada – all by American investors.

There are only two cases on the books against Mexico and only one underway against the United States.

Taking into account all these NAFTA investment disputes – active and completed – Canada has been the defendant in more arbitrations than the US and Mexico combined. While the claimants have usually lost, it’s puzzling that Canada has been taken before these arbitration panels so often.

Why is this? Why hasn’t Mexico been the most frequent defendant? After all, Chapter 11 was really designed to address Mexico where it was felt private American and Canadian investors needed a greater degree of protection from unfair, non-transparent and discriminatory laws.

There are some possible explanations for this. First, it’s a lot easier for American investors to sue Canada because of the common English language. Bringing a case against Mexico means working in Spanish.

Second, Canada has a common legal tradition with the US and an open and accessible governmental system where information is readily obtainable – either directly or through use of Access to Information legislation. Little can be hidden under the Canadian system. Not so with Mexico.

Third, US private investors have typically a bundle of available cash to spend on litigation and a long and abiding tradition of aggressive use of litigation as a commercial strategy. The intrinsic long-term value of a given investment may be considered greater in Canada than in Mexico.

While these points may not answer all the questions, the inference is that the fruits of a successful claim against Canada may be more cost-effective than a claim against Mexico. Whatever the reasons, it is interesting to see Canada being hauled before binding NAFTA arbitrations much more frequently than the other two countries.