“INDIRECT EXPROPRIATION” IN U.S. FREE TRADE AGREEMENTS: THE U.S. TRADE ACT OF 2002 AND BEYOND

Resumo

This article addresses the debate regarding indirect expropriation in the US Free Trade Agreements (FTAs). Departing from NAFTA, this study presents the main arguments that provoked a change in the usual US FTAs takings provision in order to assure that foreign investors are not granted “greater rights” than those available to US local investors. This change, achieved through a set of guidelines contained in the US Trade Act of 2002, has been applied in subsequent negotiations of FTAs between the USA and eleven countries or regional groups. Although the adjustment to US domestic standards appears as an imposition over other alternatives, it seems to offer a sound approach to a topic that lacks coherence and symmetry at the international level.

The study presents a further analytical review of the relevant provisions of the U.S.-Chile and U.S.-Singapore FTAs, the first two treaties containing the new approach. It concludes that the problems of the expropriation provision of NAFTA have been confronted but only partly solved. This conclusion is reached after comparing the new provisions with the principles and standards of the Fifth Amendment of the US Constitution and its jurisprudential developments. Finally, this article advocates the process of enhancement of the norm in future negotiations while it presents a non-exhaustive list of domestic policies that might be considered by host states to strengthen their own institutions and legal systems before the entry into force of an FTA containing indirect expropriation protections.