Environmental Standards in U.S. Free Trade Agreements: Lessons from Chapter 11

The U.S. bipartisan trade compromise, concluded on May 10, 2007, was the first to create enforceable labor and environmental standards to be applied to the pending Free Trade Agreements (“FTAs”) with Peru, Panama, Colombia, and Korea. In 1994, the North American Free Trade Agreement (“NAFTA”), signed by the United States, Mexico, and Canada, broke new ground with the mention of sustainable development in its preamble. NAFTA was the first multilateral trade agreement to include environmental protection. While breaking new ground NAFTA also included a problematic clause, Chapter 11, which provides a “right of action to a foreign investor against the government of the country in which it invested, for a broad range of actions taken” by the government. This right of action, included in the new FTAs, proved to be without a proper mechanism to guard against claims brought against countries for passing legislation to protect the environment, which might affect the future profits of a company