By Davy Karkason
Founding Attorney

Evictions: A Ground for Investor-State Dispute Settlement?

Miami Seaquarium received a notice of eviction, where it has been located for more than 50 years. The notice was sent due to an alleged breach of a lease agreement and alleged violations. The Miami Seaquarium is an iconic attraction in South Florida, known for its entertaining and educational marine life shows. However, recent developments have put the future of this beloved destination into question. The city of Miami and the county have served a notice of eviction to the sea park. This comes as a shock to many, as the Seaquarium has been a staple in the community for over six decades. See Miami Seaquarium gets eviction notice several months after death of Lolita the orca – WSVN 7News | Miami News, Weather, Sports | Fort Lauderdale

The intersection between government actions like evictions and the rules of origin of international investors has increasingly become a contentious issue, stirring debates and legal battles across the globe.

At the heart of these disputes is the Investor-State Dispute Settlement (ISDS) mechanism, a critical but often misunderstood tool designed to protect international investment against government actions that can adversely affect their value or operation. Trade agreements are crucial for ensuring market access and fair treatment of investments.

Cases of expropriation, where governments take over private assets, frequently serve as a flashpoint in the arena of international investment arbitration, illuminating the complexities and stakes involved in protecting investments while respecting sovereign actions.

Keep reading to navigate the nuanced landscape of eviction-related disputes through the lens of ISDS.

Key Takeaways

• Investor-State Dispute Settlement Offers a Neutral Platform for Resolving Property Disputes, Including Eviction and Expropriation
• The United States-Mexico-Canada Agreement (USMCA) Supports Arbitration for Investors Against Government Actions Affecting Their Investments
• Preparation and Presentation of a Comprehensive Claim Is Crucial in ISDS Arbitration Processes
• A Favorable Tribunal Decision in ISDS Typically Involves Compensation for the Investor’s Losses
• Strategic Investment Planning and Community Engagement Can Minimize the Risk of Disputes Escalating to ISDS Arbitration

Understanding Investor-State Dispute Settlement (ISDS)

The realm of Investor-State Dispute Settlement (ISDS) serves as a crucial pathway for businesses seeking redress in the face of property disputes, including cases of eviction or expropriation. The office of the United States Trade Representative plays a key role in overseeing trade agreements.

Rooted in international agreements, ISDS allows investors to initiate arbitration against governments if they believe their investments, including real estate or other assets, have been adversely affected by government actions.

This mechanism is especially relevant for entities operating in foreign jurisdictions where traditional legal avenues may either be unavailable or ineffective.

Businesses’ turn towards ISDS stems from its promise of a neutral forum where claims can be adjudicated based on established international law.

Moreover, the resolution through arbitration under ISDS provides a degree of predictability and security, encouraging foreign investment by offering a safeguard against arbitrary state actions.

However, the use of ISDS has also been met with criticism, with some arguing that it gives too much power to foreign corporations and undermines national sovereignty.

Critics argue that ISDS can lead to a chilling effect on government regulations and policies, as they may be more hesitant to implement necessary measures for fear of facing costly arbitration cases in Mexico.

Additionally, there are concerns about transparency and accountability in the ISDS process, as well as potential conflicts of interest with arbitrators being chosen by the parties involved.

Despite these criticisms, ISDS continues to be a popular mechanism for investors seeking protection against government actions. In fact, according to data from the United Nations Conference on Trade and Development (UNCTAD), there were nearly 1,000 known investor-state arbitration cases by the end of 2019.

However, there have been efforts to reform and modernize ISDS. Some countries have included provisions for transparency and accountability in their trade agreements, while others have established permanent international investment courts to handle disputes.

Furthermore, some critics argue that instead of relying on ISDS, governments should focus on creating strong domestic legal systems and institutions to protect foreign investments. This would not only address concerns about sovereignty and democracy but also improve the overall rule of law in a country.

The Basics of ISDS and How It Functions

The foundational principle of ISDS rests upon providing a formal procedure for resolving disputes between foreign investors and sovereign states. It does so by establishing a tribunal, typically consisting of arbitration experts from the International Centre for Settlement of Investment Disputes to review claims and render decisions that are binding on both parties. The process is governed by rules of origin and trade agreements, such as the North American Free Trade Agreement.

Notably, ISDS functions under the aegis of several international agreements, such as the United States-Mexico-Canada Agreement (USMCA), which embed provisions enabling investors to seek arbitration. This mechanism fosters an environment where grievances can be addressed promptly and impartially:

Why Businesses Turn to ISDS in Property Disputes

When land or property is unjustly seized, or regulations significantly alter the value of an investment, businesses often find themselves at a crossroads: accept the loss or fight back. The choice of the International Centre for Settlement of Investment Disputes (ICSID) emerges as a beacon of hope, offering an avenue for redress outside the often capricious rules of origin and protracted processes of domestic courts.

The recourse to ISDS in cases of eviction or expropriation underscores the need for a resolution mechanism that transcends local legal limitations and biases. This path ensures that decisions are grounded in the principles of international law, providing a level playing field for both investors and states in the North American Free Trade Agreement:

• An investor perceives an act of eviction or expropriation as detrimental to their investment.
• ISDS is identified as a suitable mechanism for dispute resolution due to its neutrality and adherence to international law.
• The investor initiates arbitration, seeking remedy and compensation for the losses incurred.

Analyzing the Role of Evictions in ISDS Claims

The thrust of evictions in the landscape of Investor-State Dispute Settlement (ISDS) illuminates a complex battleground where property rights clash with sovereign actions.

This segment sheds light on the nuanced interplay through case studies of eviction-related disputes, unraveling the intricacies of how these confrontations unfold within the ISDS framework.

Moving beyond the abstract, it navigates through the rules of origin that govern evictions in the sphere of international investments, setting the stage for a deeper understanding of the legal underpinnings and precedents that mold the ISDS process in such scenarios.

Case Studies Highlighting Eviction-Related Disputes

The Miami Seaquarium case stands out as a notable example where the dynamics of eviction played a pivotal role in triggering an ISDS claim. Here, the government has provided an eviction notice to the Miami Seaquarium due to alleged breaches of the lease agreement. Suppose Miami Seaquarium feels that it was treated unfairly, or the government’s action can be found inappropriate, and the eviction occurs. In that case, it can constitute an unjust expropriation of their investment under the terms of international agreements, thereby propelling the dispute into the international investment arbitration arena.

Within the NAFTA framework, another dispute emerged when a foreign investor initiated an arbitration process against a local government’s decision to evict and demolish a property housing a major manufacturing plant. This action was claimed to violate fair and equitable treatment provisions, highlighting how evictions can form the basis of complex legal challenges under trade agreement dispute resolution mechanisms. It is important to note that Canada has opt-out from arbitration in USMCA.

CAN MIAMI SEAQUARIUM OR DOLPHIN COMPANY, AS A COMPANY FROM MEXICO, FILE FOR ARBITRATION?

Arbitration is a method of alternative dispute resolution that allows parties to resolve their conflicts outside of the courtroom. While arbitration is a popular choice for international disputes due to its efficiency and confidentiality, it is essential to consider the jurisdictional and procedural requirements of the specific case.

When a company from Mexico wishes to file for arbitration, it must ensure that the arbitration agreement governing the dispute allows for such action. This agreement could be included in the company’s contracts, terms of service, or other legal documents. Additionally, the company must identify a suitable arbitration forum and comply with any procedural requirements set forth by that forum. In the case of Mexico, the country is a signatory to the New York Convention, which facilitates the enforcement of arbitration agreements and awards internationally.

Furthermore, the company must consider the applicable laws and regulations governing international arbitration, as well as any specific requirements related to the dispute at hand. Seeking legal counsel experienced in international arbitration proceedings can help ensure that the company follows the correct procedures and maximizes its chances of a favorable outcome. Overall, while a company from Mexico is subject to protection under the USMCA treaty, it is still important to carefully navigate the free trade agreement to determine the basis of jurisdiction.

Potential Claim that Miami Seaquarium may have

There are several claims that the dolphin company, as a Mexican national, may have under the USMCA. Mexican national companies, such as Dolphin Company, may have under the United States-Mexico-Canada Agreement (USMCA). The USMCA is a trilateral trade agreement aimed at modernizing and enhancing economic relationships between the three North American countries. One significant aspect of the USMCA is its provisions on investment protection and dispute settlement mechanisms that offer opportunities for companies to bring claims against other member states for violations of the agreement. Dolphin Company, being a Mexican entity, could leverage these provisions in the event of trade disputes or discriminatory practices by the United States.

Under the USMCA, Mexican companies like the Dolphin Company may have grounds to bring claims related to investment protections, intellectual property rights, and market access issues. For instance, if Dolphin Company faces unfair treatment, such as discriminatory tariffs or regulations, it could seek redress through the dispute settlement mechanisms outlined in the agreement. Additionally, the USMCA includes provisions to protect intellectual property rights, which could benefit companies like Dolphin Company that rely on innovation and technology for their business operations. By understanding and utilizing the provisions of the USMCA effectively, Mexican national companies can navigate cross-border trade challenges and protect their interests in the North American market.

Another potential claim can fall under the Fair and Equitable treatment or expropriation without just compensation. In cases where Dolphin Company’s investments in the US or Canada are subject to discriminatory treatment, such as unfair eviction compared to local companies, it can seek protection under this provision. This not only creates a level playing field for Mexican companies but also promotes fair competition and prevents market distortions.

Legal Frameworks Governing Evictions in International Investments

The legal frameworks governing evictions in the context of international investments are contingent upon the intricate web of bilateral and multilateral agreements, including treaties such as the United States-Mexico-Canada Agreement (USMCA). These agreements generally contain provisions that protect investors from direct or indirect expropriation without fair compensation, thereby laying the groundwork for arbitration in instances where investors perceive their property rights have been infringed upon due to USMCA trade agreement.

Central to the adjudication of these disputes is the principle of fair and equitable treatment, which mandates that investors should not be subjected to arbitrary or discriminatory measures by the host state. In scenarios where evictions are enforced without adherence to these North American Free Trade Agreement standards, the aggrieved party has the latitude to escalate the matter to an International Centre for Settlement of Investment Disputes arbitration tribunal for resolution:

How Evictions Trigger International Investment Arbitrations

Evictions stand as a pivotal juncture in the sphere of Investor-State Dispute Settlement (ISDS), marking the transition from a mere property dispute to a potential international Marine life claim.

This evolution unveils a process that commences with the issuance of an eviction notice and can culminate in the drafting of an arbitration claim, challenging the eviction’s legality on the grounds of international investment agreements.

The narrative further unfolds as investors marshal their arguments, often invoking breaches of fair and equitable treatment or unlawful expropriation to fortify their stance.

These preparatory steps lay the foundation for navigating the intricate corridors of ISDS, setting the stage for an arbitration tribunal to deliberate on the merits of the trade agreement brought forth by the aggrieved investor.

The Process From Eviction Notice to Arbitration Claim

The journey from receiving an eviction notice to initiating an arbitration claim is marked by a series of pivotal steps: an investor, upon receipt of an eviction notice, weighs the impact on their investment against the backdrop of international law rules of origin. This critical analysis forms the cornerstone of their decision to escalate the dispute, transcending beyond international investment jurisdictions.

A narrative unfolds as the investor meticulously compiles evidence and constructs a legal argument aimed at substantiating the claim that the eviction contravenes stipulations of a relevant international agreement, such as the United States-Mexico-Canada Agreement (USMCA). This preparation is instrumental in transitioning from a state of contention to a formal arbitration process involving trade agreement:

• Receipt of eviction notice by the investor.
• Assessment of eviction’s impact and its alignment with international law violations.
• Compilation of evidence and construction of a legal argument against the eviction.
• Initiation of the arbitration process under the auspices of an international agreement.

Key Arguments Used by Investors in Eviction Cases

Investors invoke the principle of fair and equitable treatment as a key argument in eviction cases, asserting that the host state’s actions were arbitrary or lacked due process, adversely affecting the investment’s stability and predictability. This stance is rooted in international law’s mandate that foreign international investment should not suffer from capricious government interventions.

The breach of protection against expropriation forms another cornerstone of arguments put forth by investors. They argue that an eviction without appropriate compensation or conducted in a manner that effectively strips them of their investment equates to indirect expropriation, a violation under most free trade agreements, including the North American Free Trade Agreement and the office of the United States Trade Representative:

• The investor’s focus shifts towards the fairness and legality of the eviction notice.
• Gathering of evidence to demonstrate how the eviction undermines the investment.
• Formulation of a legal strategy leveraging breaches of international investment agreements.

Government Actions That Can Lead to Investor-State Disputes

Evictions represent a significant trigger for initiating Investor-State Dispute Settlement (ISDS) claims, underscoring the complex relationship between government interventions and foreign investments in international trade.

A myriad of government actions, from direct property seizures to the introduction of new rules of origin that adversely affect the economic viability of investments in North America, can precipitate these disputes regarding trade.

By examining the types of government measures often disputed by investors alongside strategies for preemptive investment planning, a broader understanding of how to navigate and mitigate potential conflicts becomes apparent. NAFTA v USMCA is a key point of reference.

This approach not only highlights the reactive pathways available through ISDS but also emphasizes the importance of proactive measures in securing investments against unforeseen governmental actions in Mexico.

Types of Government Measures Often Disputed by Investors

Investors often raise disputes over a range of government actions that they claim infringe upon their rights or diminish the value of their investments. High on this list are uncompensated expropriations, where a government seizes an asset without providing fair compensation, and regulatory changes that materially impact the profitability or operation of an investment, effectively undermining its underlying value, particularly in the context of international trade.

Another contentious area is the imposition of arbitrary or discriminatory taxes specifically designed to target foreign investments, which can create a hostile and unstable environment for international stakeholders. Such measures, perceived as direct attacks on the integrity and viability of an investor’s asset, frequently become the focus of arbitration proceedings under the North American Free Trade Agreement framework.

Preventing Disputes Through Strategic Investment Planning

Strategic investment planning emerges as a pivotal approach in the realm of investor-state relations, effectively curtailing the likelihood of disputes. By conducting a comprehensive risk assessment that anticipates potential governmental actions, such as evictions or regulatory changes, investors can structure their investments to withstand legal and political fluctuations in international investment.

This pre-emptive strategy involves not only understanding the legal landscape of the host country but also fostering robust relationships with local communities and stakeholders. Enhanced due diligence and the integration of social and animal welfare considerations into investment decisions serve as the bedrock for resilient and dispute-averse marine life investments:

Navigating the Resolution Process of Eviction-Related Disputes

The resolution of eviction-related disputes within the Investor-State Dispute Settlement (ISDS) framework often begins with the meticulous preparation of a claim. Investors must gather compelling evidence and construct a legal argument that clearly demonstrates how the eviction violates specific provisions of international agreements, such as the North American Free Trade Agreement. This preparatory work is crucial, as it forms the foundation of the case to be presented before an arbitration tribunal.

Upon submission of the claim, the ISDS process advances to the arbitration stage, where a tribunal of experts in international law convenes to assess the merits of the case. The tribunal scrutinizes the presented evidence, evaluates the legal arguments, and determines whether the eviction indeed constitutes a breach of the investor’s rights under the applicable North American Free Trade Agreement on the recognition and enforcement of foreign arbitral awards.

If the tribunal decides in favor of the investor, the resolution typically involves the awarding of compensation for the losses incurred due to the eviction. The ruling serves as a corrective measure, aiming to restore the investor to the position they would have been in had the eviction not occurred. This outcome underscores the ISDS mechanism’s role in providing a remedy for grievances stemming from state actions perceived as unfair or arbitrary.

Throughout this process, both the investor and the government party have the opportunity to present their case, respond to each other’s arguments, and even seek annulment of the tribunal’s decision if they believe it was flawed. Arbitration under ISDS embodies a balanced approach, ensuring that both parties are heard and that decisions are rendered based on an objective assessment of the facts and applicable law.

Conclusion

Evictions emerge as a significant trigger for invoking Investor-State Dispute Settlement (ISDS), highlighting the intricate balance between safeguarding property rights and respecting sovereign actions.

Through ISDS, investors gain a crucial mechanism to seek redress when faced with eviction or expropriation that they perceive as unjust or detrimental to their investments.

By enabling arbitration based on international agreements like the USMCA, ISDS provides a neutral and legally grounded forum for resolving such disputes.

This not only ensures that investors can contest actions perceived as arbitrary or discriminatory but also promotes a stable and predictable environment for foreign investment.

In essence, ISDS functions as a vital tool in protecting investments against unfair government actions, ensuring that issues like evictions are addressed fairly and equitably within a framework of international law.

Therefore, The Dolphin Company can file for arbitration against the United States if it finds that there are jurisdictional grounds that the United States and Florida have failed in their responsibility to safeguard their investment or operations, that the eviction was unjust, or that there were subject to national treatment (unfair and inequitable treatment) under the trilateral investment treaty.

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About the Author

As a lawyer and the founder of Transnational Matters, Davy Aaron Karkason represents numerous international companies and a wide variety of industries in Florida, the U.S., and abroad. He is dedicated to fighting against unjust expropriation and unfair treatment of any individual or entity involved in an international matter. Mr. Karason received his B.A. in Political Science & International Relations with a Minor in Criminal Justice from Nova Southeastern University. If you have any questions about this article you can contact Davy Karkason through our contact page.