A Comparative Research On Investment Dispute Settlement Mechanisms Between USMCA And NAFTA

The development of the investor-state dispute settlement(ISDS)mechanism at the regional level began with the North American Free Trade Agreement(NAFTA),which came into force in 1994.The US-Mexico-Canada Agreement(USMCA)is an updated version of NAFTA in the current complex and changing international trading environment.The updates are mainly reflected in the extensive revision of some of the original clauses and the addition of some new chapters.Among them,USMCA has made significant changes in the construction of ISDS mechanism on the basis of NAFTA.First of all,Canada has withdrawn from the ISDS mechanism,which is only applicable between the United States and Mexico.Second,the ISDS mechanism applied between the United States and Mexico defines “qualified investors” and excludes investors from non-market economy countries.Finally,the mechanism divides investment disputes into general investment disputes and investment disputes related to “covered government contracts”,and sets up strict preprocedures for general investment disputes,requiring investors to exhaust local judicial remedies before submitting to international arbitration.In fact,this is the result of the development and evolution of the investment dispute resolution mechanism of the three North American countries from the 1990 s to the 21 st century.Such development and evolution have not only promoted the disadvantages brought by the specific practice of the ISDS mechanism under NAFTA,but also promoted by the change of the negotiation positions of the three countries.From the development and evolution of the ISDS mechanism,the changes of USMCA relative to NAFTA clearly reflect some development trends and value orientations.On the one hand,the agreement leaves blank in the settlement of investment disputes between Canada and American investors(or America and Canadian investors),Canada and Mexican investors(or Mexico and Canadian investors),which will result in the application of an investment disputesettlement mechanism between two parties instead of one unified on a regional basis in North America.In addition,the same country may adopt different investment dispute settlement mechanisms.This will aggravate the “fragmentation” tendency of the application and reform of the investment dispute settlement mechanism in the international community.On the other hand,the ISDS mechanism under the USMCA excludes investors from non-market economy countries,as well as the famous “poison pill” provisions of the USMCA,which undoubtedly limits and discriminates against non-market economy countries.Finally,the USMCA stipulates that investors must exhaust local judicial remedies in general investment disputes,which obviously reflects the tendency of state remedies return.In fact,discrimination against nonmarket economy countries will also further promote the return of state remedies.USMCA is a trade agreement signed under the leadership of the United States.According to the official attitude of the United States,the agreement will become the blueprint for its external negotiations and signing of trade agreements.Therefore,these development trends and value orientations will have a huge impact on the international community,especially developing countries.Clearly,China,which is a big investment country,bears the brunt.The newly constructed ISDS mechanism discriminates against non-market economy countries,which also means that China and North America will face huge challenges in negotiating free trade agreements.But at the same time,the USMCA is a more complete and mature text of the trade agreement,which summarizes many reform proposals in the field of international trade and investment,which also means reference and enlightenment for the construction of investment dispute settlement mechanism when China negotiates trade agreements with foreign countries.