Countermeasures defence rejected in NAFTA Chapter 11 arbitration

In Archer Daniels Midland Company and Tate & Lyle Ingredients Americas Inc v Mexico (ICSID Case No ARB (AF)/04/05), a tribunal has rejected a defence based upon the customary international law doctrine of countermeasures. The award was made in November 2007 but only recently published (in redacted form) on the ICSID website. The tribunal concluded that the defendant had failed to establish the customary international law defence of "countermeasures", and awarded damages to the claimants for breach of the NAFTA provisions relating to national treatment and performance standards.

The main interest of the award lies in the fact that the tribunal disagreed as to the availability, in principle, of the countermeasures defence. The majority appear to have accepted that, in principle, such a defence was available, but that it failed on the facts of the case. The third member, Mr Arthur Rovine, issued a separate "concurring opinion" on this issue, making clear that in his view, the defence was not even available in principle. The award is an interesting contribution to the ongoing debate about the nature of investors' rights under NAFTA, and the interrelationship between NAFTA and customary international law.