Here's more from the Cargill NAFTA Chapter 11 Award:
Conclusion of the Tribunal with respect to the Scope of Loss to Claimant to be Included in the Model: Whether Cargill, Inc.'s Loss of Sales to Cargill de Mexico is a Separate Export Loss or a Part of the Investment
519. To evaluate the damages claimed, the Tribunal has found it helpful to look at the lost profits claimed as divided at the United States-Mexican border, with those lost profits attributed to Cargill's inability to sell HFCS to CdM as "up-stream losses" and the direct losses of CdM as "down-stream losses."
520. According to Article 1139 and the Tribunal's previous conclusions, the down-stream losses are clearly compensable due to the violations of Articles 1102, 1105, and 1106 of the NAFTA. The issue, therefore, is whether those up-stream damages claimed by Claimant, and objected to by Respondent, are also compensable.
521. With respect to this disagreement, the Tribunal is aware that Chapter 11 applies only to measures relating to investments that are in the territory of the State Party enacting the measures. It was for this reason that the ADM tribunal determined that it lacked jurisdiction to award compensation for "lost profits on HFCS [the claimants] would have produced in the United States and exported to Mexico 'but for' the Tax, as these losses were not suffered in their capacity as investors in Mexico.
522. This Tribunal notes, however, that as it stated at paragraphs 147 and 352 above, Article 1139's definition of investment is "broad and inclusive." This Tribunal therefore has little difficulty in determining that business income, particularly business income so closely associated with a physical asset in the host country and not mere trade in goods, is both an element of a larger investment and an investment in and of itself. (See supra 353).
523. With respect to the particular facts of this case, the Tribunal finds that the profits generated by Cargill's sales of HFCS to its subsidiary, Cargill de Mexico, for CdM's marketing, distribution and re-sale of that HFCS, were so associated with the claimed investment, CdM, as to be compensable under the NAFTA. Cargill's investment in Mexico involved importing HFCS and then selling it to domestic users, principally the soft drink industry. Thus, supplying HFCS to Cargill de Mexico was an inextricable part of Cargill's investment. As a result, in the view of the Tribunal, losses resulting from the inability of Cargill to supply its investment Cargill de Mexico with HFCS are just as much losses to Cargill in respect of its investment in Mexico as losses resulting from the inability of Cargill de Mexico to sell HFCS in Mexico.
525. Claimant's intent was to enter the Mexican HFCS market and attain a significant share of that market; thus its investment included everything that it took to achieve such a result. Viewed holistically, Claimant was prevented from operating an investment that involved the sale into and distribution of HFCS within the Mexican market. The inability of the parent to export product to its investment is just the other side of the coin of the inability of the investment, Cargill de Mexico, to operate as it was intended to import HFCS into Mexico.
526. The Tribunal therefore determines that Claimant is to be compensated for its net lost profits as determined for both Cargill de Mexico's lost sales to the Mexican market and Cargill, Inc.'s lost sales to Cargill de Mexico.
To me, this seems like one of the most important issues in the case. In essence, the Tribunal says that Cargill's investment in U.S. production of HFCS, to be sold through a Mexican subsdiary acting as a distributor, is covered by NAFTA Chapter 11.
This issue was the subject of an application to set aside the Award before the Ontario Superior Court of Justice. The Ontario Court rejected the application. As I understand it, that decision is now on appeal.