One month into 2018, the future of NAFTA continues to hang in the balance. The negotiating parties will reportedly convene in Ottawa for the sixth of seven planned negotiating sessions from January 23 – 29th. The parties initially hoped to conclude the negotiations before the end of 2017, but US President Donald Trump indicated on January 11, 2018 that there was “no rush” in the negotiations. In the same interview, Mr. Trump said that it may be difficult to reach an agreement before the July 1, 2018 federal election in Mexico, suggesting that the negotiations may continue for months. The parties’ agreement to keep the negotiations confidential means that few concrete details about the negotiating texts and parties’ proposals have been made public.
For more analysis of the NAFTA renegotiations, see our previous updates:
What is the significance of Mexico signing the ICSID Convention?
In parallel with the NAFTA negotiations, on January 11, 2018, Mexico signed the ICSID Convention. The next step will be for the Mexican Senate to ratify the Convention, following which it will enter into force 30 days after Mexico deposits its instrument of ratification, acceptance or approval. Mexico’s move to sign the ICSID Convention comes at a notable moment in light of the uncertainty of the future of NAFTA, and may be aimed, in part, at reassuring foreign investors with investments in Mexico.
Signature of the ICSID Convention also coincided with the seventh round of negotiations between Mexico and the European Union regarding updates to the instruments governing their trading relationship, which are founded on the 1997 “Global Agreement.” In April 2017, the European Union circulated to Mexico the draft text of a proposed chapter on investment and trade in services, which included the possibility of claims by investors under the ICSID Convention, as well as the now-familiar EU proposal to constitute tribunals to hear such claims from the ranks of a standing investment court. If the final text of the proposed Mexico-European Union FTA provides a role for ICSID, Mexico’s accession to the ICSID Convention may move the parties closer to the conclusion of a new trade agreement. The EU indicated in a statement, published January 15, 2018, that “investment protection” remained among issues needing “further work” before a new trade agreement is reached.
Any new EU-Mexico FTA is likely to be consistent with the European Union’s recent push to replace investor-state arbitration in all of its trade negotiations with its proposal for a multilateral investment court (referred to as “ICS“). The European Commission published a July 2017 factsheet concerning the negotiation of the EU-Japan FTA, in which the Commission noted that “[f]or the EU ISDS is dead”, and that an ICS is being pursued in all of its trade agreements. The European Union-Canada Comprehensive Economic and Trade Agreement (“CETA“), which entered into force provisionally on September 21, 2017, and the EU-Vietnam FTA concluded on December 2, 2015 (but not yet in force), both included provisions to refer investment disputes to a standing multilateral investment court rather than to traditional arbitration, albeit with a role for the ICSID Convention and Rules within that new ICS system.
For ISDS observers and companies with multinational investments, though, it is important to note that the multilateral investment court system is the subject of a pending challenge. On September 6, 2017, Belgium submitted a request to the Court of Justice of the European Union for an opinion on the compatibility of the ICS in the CETA with the European Treaties. Depending on the court’s opinion, which is not expected for some time, the investment courts that have been negotiated and agreed to date may be unworkable under EU law. In due course, we will report on related developments in future posts on this blog.
If you have specific questions about how these developments may affect your international investments or supply chains, please contact Christian Leathley, Partner, Timothy Hughes, Associate, or your usual Herbert Smith Freehills contact.
 Next NAFTA round to be extended by a day, Mexico spars with U.S., Reuters, January 18, 2018, available at https://www.reuters.com/article/us-trade-nafta-montreal/montreal-round-of-nafta-talks-extended-until-jan-29-sources-idUSKBN1F72O2?il=0.
 Transcript of Donald Trump Interview, January 11, 2018, The Wall Street Journal, available at https://www.wsj.com/articles/transcript-of-donald-trump-interview-with-the-wall-street-journal-1515715481.
 Agreement on Confidentiality, 1 August 2017, available at https://ustr.gov/sites/default/files/files/agreements/nafta/NAFTA%20Confidentiality%20Agreement.pdf
 The 1965 Convention on the Settlement of Investment Disputes between States and Nationals of other States (the “ICSID Convention“) is a broadly-adopted multilateral treaty which provides a framework and rules to facilitate the peaceful and nonpolitical resolution of “any legal dispute arising directly out of an investment, between a Contracting State […] and a national of another Contracting State, which the parties to the dispute consent in writing to submit to [ICSID].” ICSID Convention, Art. 25(1).
 The Economic Partnership, Political Coordination and Cooperation Agreement between the European Community and its Member States, of the one part, and the United Mexican States, of the other part”, which entered into force in 2000.
 See draft Article 2.24, Submission of a Claim, and draft Article 2.27, Tribunal of First Instance, available at http://trade.ec.europa.eu/doclib/docs/2017/may/tradoc_155521.pdf.
 The EU and Mexico make progress in bridging remaining gaps in latest trade talks, January 15, 2018, available at http://trade.ec.europa.eu/doclib/press/index.cfm?id=1778.
 See A new EU trade agreement with Japan, July 1, 2017, available at http://trade.ec.europa.eu/doclib/docs/2017/july/tradoc_155684.PDF; see also A Multilateral Investment Court, September 13, 2017, available at http://trade.ec.europa.eu/doclib/docs/2017/september/tradoc_156042.pdf.