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Regulatory Takings and Environmental Regulation in NAFTA's Chapter 11

  • Author(s): Aisbett, Emma
  • Karp, Larry
  • McAusland, Carol
  • et al.
Abstract

NAFTA’s investment treaty has led to several expropriation compensation claims from investors hurt by new environmental regulations. Expropriation clauses in international treaties solve post-investment moral hazard problems such as hold-ups. However, these clauses can interact with National Treatment clauses in a manner that hinders investment. A police powers carve-out from the definition of expropriation can be Pareto-improving and can increase the level of foreign investment.

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