USMCA Deadline to File Legacy Investment Arbitrations Approaches

The United States-Mexico-Canada Agreement (USMCA) went into effect on July 1, 2020, replacing the North American Free Trade Agreement (NAFTA).

Access to investment arbitration in the USMCA is subject to more restrictive rules, new requirements and prior steps that did not exist in NAFTA.

However, these new requirements can still be avoided for those claims submitted in accordance with USMCA Annex 14-C, which allows access to the NAFTA investment dispute resolution system for "legacy investments" up to July 1, 2020 (three years after NAFTA's termination date). For an investment to be considered a legacy investment, it must have been made between Jan. 1, 1994, and July 1, 2020.

Even though the USMCA allows legacy investment claims until July 1,2023, according to Article 1119 of NAFTA, a notice of intent has to be submitted at least 90 days before a claim is filed. In other words, the deadline to file a notice of intent and trigger the start of a NAFTA legacy investment dispute is April 1, 2023, at the latest.

Legacy investment claims may be particularly relevant for Canadian investors since Canada is not a part of the USMCA investment dispute resolution mechanism. Canadian investors and their investments are protected by the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). However, the investment protection provisions under the CPTPP are arguably also less beneficial than NAFTA. 

Legacy claims will also be relevant for United States investments that do not comply with all the requirements set out in the USMCA to have access to the full breadth of investment protections, since only investments that have a written agreement in the form of a government contract and are part of a covered sector will have access to all the protections.

These concepts are all specifically defined in the USMCA and require careful consideration. For example, government contracts are written agreements with a national authority in the covered sector. In turn, covered sectors include activities in certain areas, such as oil and natural gas, power generation, transportation, etc. Importantly, however, permits or licenses, as well as judicial or administrative orders and decrees, are not considered written agreements. 

Investors should weigh their options carefully depending on the date of their investment, as well as the specific nature of their business.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.