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A primer on NAFTA trade dispute resolution

A primer on NAFTA trade dispute resolution

When formulating the agreement, negotiators from the three signatory countries put several mechansims into place for NAFTA trade dispute resolution.

Trade disputes, while somewhat rare and undesirable across the board, nevertheless do occur on occasion within a trading bloc as large as all of North America. When they do arise from time to time possessing a rudimentary knowledge of the process by which parties that are in disagreement resolve any NAFTA trade dispute that may occur can be helpful.

When a NAFTA trade dispute evidences itself, the first phase in the resolution process is initiated by reviewing NAFTA guidelines that direct the governments that are involved to resolve their differences via Working Groups or Committees. If this is action is unsuccessful, panel procedures called for and implemented by NAFTA regulations are both effective and expeditious. The international agreement contains chapters devoted to the resolution of such disputes, detailing applicable rules and procedures for them in chapters 11, 14, 19, and 20 of the agreement.

Chapter Eleven

Chapter Eleven covers NAFTA trade dispute resolution realted to investment, and provides a mechanism for equal treatment before an impartial tribunal in accordance with the principle of international reciprocity and due process. A NAFTA investor who feels wronged may choose to pursue one of several means by which to settle disagreements:

  • The World Bank’s International Centre for the Settlement of Investment Disputes (ICSID)
  • ICSID’s Additional Facility Rules
  • The rules of the United Nations Commission for International Trade Law (UNCITRAL Rules)
  • Remedies available in the host country’s domestic courts

Chapter Fourteen

Chapter Fourteen makes provision for the NAFTA trade dispute resolution related to conflicts in financial service matters, following the procedures outlined in Chapter Twenty. However, in the case of Chapter-14 disputes, the panelists are chosen from a special roster of experts in the field of financial services. Chapter Fourteen is a little-known, and not-as-yet-needed provision of the agreement.

Chapter Nineteen
Review of Final Antidumping and Countervailing Duty Determinations

Article 1904

Article 1904 provides for an alternative to judicial review by domestic courts of final determinations of NAFTA trade disputes in antidumping and countervailing duty cases that are reviewed by independent, binational panels. In Canada, the relevant investigating authorities are the Canada Border Services Agency (CBSA), and Canadian International Trade Tribunal (CITT). In the US, they are the International Trade Administration of the Department of Commerce and the United States International Trade Commission. In Mexico, it is the Secretaría de Economía, Unidad de Prácticas Comerciales Internacionales. While decisions made by these authorities are binding, in extraordinary circumstances, a government may invoke review by a three-person, binational Extraordinary Challenge Committee, comprised of judges and former judges to review potential conflicts of interest or authority overreaches.

Article 1905

Article 1905 provides for the safeguarding of the panel review system by allowing for a three-member special committee to be established to review allegations that the application of domestic law of one Party has interfered with the proper functioning of the panel system.

Chapter Twenty

Chapter Twenty provides the procedures and processes for all NAFTA trade dispute resolution regarding the interpretation or application of the treaty as a whole. The first step in the process is government-to-government consultations. If these do not resolve the conflict in question, a NAFTA Free-Trade Commission meeting may be requested. If this measure does not settle the dispute, a five-member arbitration panel may be established. Additionally, this chapter provides for the creation of scientific review boards for consultation with the panels to provide reports on any factual issues concerning environmental, health, safety, etc. to assist panels in rendering their decisions.

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