Koch Industries, Inc. and Koch Supply & Trading, LP v Canada: Emissions Allowances as 'Investment'?

The article focuses on the dismissal of an investment claim by Koch Industries Incorporated and Koch Supply & Trading LP against Canada under the United States-Mexico-Canada Agreement (USMCA) legacy investments provision related to the North American Free Trade Agreement (NAFTA). The claim concerned the cancellation without compensation of emission allowances acquired under Ontario’s Cap and Trade Program, which the claimants argued constituted an expropriation and breach of NAFTA’s fair and equitable treatment clause. The tribunal ruled that the emission allowances did not qualify as “property” or “investment” under NAFTA’s definitions, emphasizing that the allowances were subject to strict government regulation without exclusive control by the claimants, who were speculative traders without regulatory obligations under the cap and trade scheme. The decision highlights the importance of host state law in defining property and investment and suggests that only participants with underlying regulated economic activities may have protected investment interests in emission allowances, leaving open broader debates on the nature of such allowances in international investment law.