You are here:
Project on International Courts and Tribunals (PICT) Resources >>
 PICTRes 5
North American Free Trade Area dispute settlement procedures  PICTRes 5 (26 February 2004)
North American Free Trade Area dispute settlement procedures
North American Free Trade Area, comprising Canada, Mexico and the United
States, was established in 1992
by the North
American Free Trade Agreement (NAFTA). Like several other regional
economic integration agreements, such as the European Communities, the
Andean Community or the Mercosur, the objective of NAFTA is
to remove trade barriers, create a common market, and promote
cooperation between participating states. However, unlike most similar
agreements, NAFTA falls significantly
short of creating an integrated
legal system, much less a structured dispute settlement system.
While the EC, EFTA, Andean Community and COMESA, to cite a few, are endowed
with permanent international courts
to settle disputes between member
states, individuals and the organization's institutions on the implementation
of the basic agreements and legislation deriving therefrom, dispute settlement
under NAFTA is less institutionalized
and much more fragmented, relying
mostly on ad hoc arbitration.
The NAFTA Secretariat, comprised of the Canadian, U.S. and Mexican Sections,
is responsible for the administration
of the dispute settlement provisions
of the Agreement. The mandate of the NAFTA Secretariat also includes the
provision of assistance to the Commission and support for various non-dispute
related committees and working groups. More
specifically, the NAFTA Secretariat
administers the NAFTA dispute resolution processes under Chapters 14,
and 20 of the NAFTA and has certain responsibilities related to Chapter
11 dispute settlement provisions. Each national
Section maintains a court-like
registry relating to panel, committee and tribunal proceedings. The national
which are mirror-images of each other, are located
in Ottawa, Washington and Mexico City and are headed by the Canadian,
United States and Mexican Secretaries.
Under the NAFTA, there are four main dispute resolution processes, named
after corresponding chapters of the agreement:
Chapter 11, 14, 19 and
Chapter 20 (general dispute settlement procedure)
Chapter 20 applies to all disputes regarding the interpretation or application
of the NAFTA, except for matters
covered in Chapter 11 (Investment), Chapter
14 (Financial Services) and Chapter 19 (Antidumping and Countervailing
Duty final determinations).
When general disputes concerning the NAFTA are not resolved through consultation
within a specified period of
time, the matter may be referred at the request
of either Party first to the good offices of the Free Trade Commission,
and, if agreement is not reached within a fixed period of time, to ad
hoc arbitration. A panel comprises five
independent experts (each party
to select two and the chairperson by common agreement). The panels' procedure
follows closely that of WTO panels, and the awards are binding.
Chapter 20 also provides for scientific review boards which may be selected
by a panel, in consultation with the
disputing Party, to provide a written
report on any factual issue concerning environmental, health, safety or
other scientific matters to assist panels in rendering their decisions.
Moreover, a third Party that believes it has a
substantial interest in
a disputed matter, is entitled to join consultations or a proceeding as
Party on written notice. If a third Party does not join
as a complainant, upon written notice, it is entitled to attend
make written and oral submissions and receive written submissions of the
Chapter 19 (Anti-dumping and countervailing duties)
Chapter 19 provides for a system of bi-national panel review of decisions
by a Party authority on anti-dumping
and countervailing duty matters.
Article 1903, provides that a Party may request that amendments to the
Party's anti-dumping or countervailing duties statutes be referred
to a bi-national panel for a declaratory opinion on
whether the amendment
is consistent with the GATT and the NAFTA. Bi-national panels comprise
Panel Rules are designed to result in final panel decisions within 315
days of the date on which a request for
a panel is made. Within the 315-day
period, strict deadlines have been established relating to the selection
of panel members, the filing of briefs and reply briefs and the setting
of the date for Oral Argument.
In the event of failure to comply with decisions of a bi-national panel
on statutory amendments, the complaining
state is free to adopt comparable
legislation or equivalent executive action to the violating amendments,
even withdraw from NAFTA.
Article 1904 also provides for a sort of appeal process ( extraordinary
challenge procedure ). In certain cases,
a panel's decision can
be appealed to a three-member committee of judges or former judges. Moreover,
1905, provides a mechanism for safeguarding the panel system.
Under this article, a three-member special committee may
to review allegations of one Party that the application of another Party's
domestic law has interfered
with the proper functioning of the panel system.
Chapter 14 (financial services)
Chapter 14 providing that Section B of Chapter 20 shall apply, with modifications,
to the settlement of disputes
on financial services. A roster of experts
in financial services law or practice provides arbitrators to settle this
particular kind of dispute.
To date, Chapter Fourteen procedures have not been resorted to.
Chapter 11 (Investment Disputes)
Chapter 11 provides for a mechanism for the settlement of investment disputes
between one of the States party
to NAFTA and investors nationals of one
of the parties. In other words, while Chapters 20, 19 and 14 deal with
inter-state disputes, those under Chapter 11 are disputes between a private
party and a party to the NAFTA.
Investors who allege that a host government has breached its obligations
under Chapter 11 may, at its option,
have recourse to one of the following
" the World Bank's International Center for the Settlement of Investment
" ICSID's Additional Facility Rules;
" the rules of the United Nations Commission for International Trade
law (UNCITRAL rules).
Alternatively, the investor may choose the remedies available in the host
country's domestic courts.
Data obtained from the Project on International Courts and Tribunals (PICT)