Department of Agricultural and Resource Economics
Regulatory Takings and Environmental Regulation in NAFTA's Chapter 11
- Author(s): Aisbett, Emma
- Karp, Larry
- McAusland, Carol
- et al.
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.