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ISDS Case Study: Update on RDC v. Guatemala: Rebutting Misleading Industry Claims on Investor-State Case that Ignored CAFTA Annex

By Public Citizen's Global Trade Watch

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FR: Lori Wallach and Ben Beachy, Global Trade Watch
DT: November 17, 2012
RE: Rebutting Misleading Claims Made by Industry with Respect to RDC v. Guatemala Award: CAFTA Tribunal Rejected CAFTA Parties’ and CAFTA Annex 10-B’s Definition of CIL Based on State Practice, Imported Past Tribunal’s MST Standard

Various interests seeking to replicate the U.S. Free Trade Agreement (FTA) model for foreign investor protections and investor-state dispute resolution in the Trans-Pacific Partnership (TPP) have sought to rebut arguments in our July 19 memo, “CAFTA Investor-State Ruling: Annex on Minimum Standard of Treatment, Proposed for TPP, Proves Insufficient as Tribunal Ignores Customary International Law Standard, Applies MST Definition from Past NAFTA Award to Rule against Guatemala.” The crux of the rebuttal is that we erred by claiming that the tribunal in the Railroad Development Corporation (RDC) v. Guatemala case pronounced that Customary International Law (CIL) is not the basis for interpreting the Minimum Standard of Treatment (MST) and related Fair and Equitable Treatment (FET) provisions in the Central America Free Trade Agreement (CAFTA). We made no such claim.

Rather, what we said, which is accurate, is that the tribunal:
• rejected the view of four CAFTA signatory States contained in submissions that the relevant CIL
analysis of the MST standard must be based on State practice,

• imposed its own notion of the appropriate CIL analysis and what comprises CIL and thus imported
an MST standard fabricated by a tribunal in the North American Free Trade Agreement (NAFTA)
Waste Management II case,
• used this arbitrary MST interpretation to rule against Guatemala,
• and did so despite CAFTA’s CIL Annex 10-B, which the Office of the U.S. Trade Representative (USTR) has claimed foreclosed the problem of tribunals extending beyond CIL to create their own imaginative interpretations of MST obligations and impose them on signatory States.