Is this alternative dispute resolution�or a new way to turn up the heat when a big battle starts to look bad? That’s what American companies doing business in Mexico or Canada should be asking themselves about a little-known arbitration mechanism available under the North American Free Trade Agreement (NAFTA).
Traditional arbitration under the treaty was easy enough to understand: An investor abroad could force a foreign government to enter into binding arbitration before a neutral tribunal to settle disputes about improper treatment by the host government. But recent decisions of NAFTA tribunals suggest that savvy companies could use NAFTA’s alternative dispute resolution mechanism in rather unorthodox ways: to pressure hostile foreign regulators into changing or abandoning legislation, for example, or even to ignore an adverse judicial decision.
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