Friends of the Earth: CAFTA and Foreign Investor Lawsuits: A Threat to Environmental Standards

By Friend's of the Earth

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The “investment” rules in the Central America Free Trade Agreement (CAFTA) grant broad privileges to multinational corporations and allow these companies to enforce their rights by bringing suits directly to international tribunals. These investor suit rules pose a significant threat to environmental standards – both in the U.S. and Central America – by allowing foreign companies to completely bypass domestic courts to challenge legitimate laws and regulations.

CAFTA’s foreign investor rules are similar to NAFTA’s Chapter 11, which has given foreign companies broad rights that do not exist under U.S. law. In bringing these cases, foreign companies can demand compensation for the impact of environmental and public interest laws on their business interests.

CAFTA also includes explicit language that would allow foreign investors to challenge government decisions about natural resource agreements, such as federal oil, gas, and mineral leases. As a result, foreign companies could challenge royalty payments and other requirements before international tribunals, not U.S. or Central American courts.