Chapter 1: Introduction
It is a truism that foreign investment creates a long-term relationship between aliens and host-states, which exposes the former to eventual shifts in the public policies of the latter. To encourage foreign investment within its borders, many states offer foreigners treaty-protections against potential interferences with their property. Because the main interference risked by the alien is the expropriation of his/hers/its property, it is not surprising that the protection against takings is at the centre of what is now called international investment law. Foreign investors require clarity in this regard, but not only them: treaty-protections may constrain the exercise of regulatory powers by the host-state. Foreign investors are highly sensitive concerning any interference against their property, just like host-states are concerning any restriction on their sovereignty. How to protect aliens without unduly limiting the exercise of state powers is today the prime challenge of international investment law. Two cases illustrate the difficulties of achieving this result, and the consequences of failing in the attempt. On 3 August 2005, an international arbitral tribunal concluded that the USA had not expropriated a substantial portion of Methanex's investment, as claimed by the Canadian investor who started this arbitration under Chapter 11 of the North American Free Trade Agreement (NAFTA).