The Evolving American Policy on Investment Protection: Evidence from Recent FTAs and the 2004 Model BIT

Twelve years after the inception of the North American FreeTrade Agreement (NAFTA), the US policy on the protection offoreign investment is evolving. This article compares the provisionson investment in the recent US free trade agreements (FTAs)and the 2004 model bilateral investment treaty (BIT) with NAFTA’s.While most of the provisions are similar, some differences canbe identified, both in substantive and procedural forms. Weexplain this evolution by a learning process of the US administrationfrom the NAFTA experience. We argue that the new features ofthe FTAs and of the revised model BIT result from the US interestin reaching a better balance between the protection of investmentand the protection of state sovereignty. This American concernstems from a reaction to the claims filed by foreign investorsunder NAFTA Chapter 11, at least some of which were perceivedas ‘frivolous’ by the US government. However, therecent US FTAs and model BIT do not reveal a thorough policyreorientation but rather adjustments to the policy at the basisof NAFTA’s investment chapter.