The principal dispute settlement mechanisms of the NAFTA are found in:

Settlement of Disputes between a Party and an Investor of Another Party

Chapter 11 

Chapter 11 establishes a mechanism for the settlement of investment disputes that assures both equal treatment among investors of the Parties to the Agreement in accordance with the principle of international reciprocity and due process before an impartial tribunal. A NAFTA investor who alleges that a host government has breached its investment obligations under Chapter 11 may, at its option, have recourse to one of the following arbitral mechanisms:

  • the World Bank's International Centre for the Settlement of Investment Disputes (ICSID);
  • ICSID's Additional Facility Rules; and
  • 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. An important feature of the Chapter 11 arbitral provisions is the enforceability in domestic courts of final awards by arbitration tribunals.

View Chapter 11 Disputes:

Review of Final Antidumping and Countervailing Duty Determinations

Chapter 19, Article 1904

Article 1904 establishes a mechanism to provide an alternative to judicial review by domestic courts of final determinations in antidumping and countervailing duty cases, with review by independent binational panels. A Panel is established when a Request for Panel Review is filed with the NAFTA Secretariat by an industry asking for a review of an investigating authority's decision involving imports from a NAFTA country.

In Canada, it is the Canada Border Services Agency (CBSA), which makes dumping and subsidy determinations, while the Canadian International Trade Tribunal (CITT) conducts injury inquiries as to whether or not the dumping or subsidy has caused injury or retardation (material retardation of the establishment of a domestic industry) or is threatening to cause injury to the domestic industry.

In the United States of America, it is the Department of Commerce, International Trade Administration, which makes dumping and subsidy determinations, while the United States International Trade Commission conducts injury inquiries.

In Mexico, it is the Secretaría de Economía, Unidad de Prácticas Comerciales Internacionales that makes both the dumping /subsidy and injury determinations.

These agencies are referred to as investigating authorities. The dumping, subsidy and injury determinations of the investigating authorities can also be appealed, in Canada to the Federal Court of Canada, in the United States to the Court of International Trade and in Mexico to the Tribunal Fiscal de la Federación.

Extraordinary Challenge Procedure

Chapter 19, Annex 1904.13

Although Chapter 19 panel decisions are binding, there is one level of review of binational panel decisions that a NAFTA government may initiate in extraordinary circumstances. This is known as the Extraordinary Challenge Committee (ECC) procedure. The challenge is not an appeal of right but a safeguard to preserve the integrity of the panel process. If either government believes that a decision has been materially affected, by either a panel member having a serious conflict of interest, or the panel having departed from a fundamental rule of procedure or having exceeded its authority under the Agreement, either government may invoke review by a three-person, binational Extraordinary Challenge Committee, comprised of judges and former judges. ECC decisions, like Chapter 19 binational panel decisions, are binding as to the particular matter addressed.

Safeguarding the Panel Review System

Chapter 19, Article 1905

Article 1905 provides a mechanism for safeguarding the panel review system. Under this article, a three-member special committee may be established 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.

Institutional Arrangements and Dispute Settlement Procedures

Chapter 20

The dispute settlement provisions of Chapter 20 are applicable to all disputes regarding the interpretation or application of the NAFTA. The steps set out in Chapter 20 are intended to resolve disputes by agreement, if at all possible. The process begins with government-to-government (the Parties) consultations. If the dispute is not resolved, a Party may request a meeting of the NAFTA Free-Trade Commission (comprised of the Trade Ministers of the Parties). If the Commission is unable to resolve the dispute, a consulting Party may call for the establishment of a five-member arbitral panel.

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. As well, disputes relating to the following chapters may be referred to dispute settlement procedures under Chapter 20:

  • Chapter 7 (Agriculture and Sanitary and Phytosanitary Measures);
  • Chapter 10 (Government Procurement);
  • Chapter 11 (Non-compliance of a Party with a final award); and
  • Chapter 14 (Financial Services).

Rosters

Pursuant to the NAFTA, the Parties have established several rosters of individuals from which panelists are appointed to settle disputes. Members of these rosters are of good character, high standing and repute and have been chosen strictly on the basis of objectivity, reliability, sound judgement and with a general familiarity with international trade law. Currently, there are NAFTA rosters (one per country) for Chapter 11 (Investment), Chapter 14 (Financial Services), Chapter 19 (Antidumping and Countervailing Duty Matters and Extraordinary Challenge Procedure) and Chapter 20 (Institutional Arrangements and Dispute Settlement Procedures).

View Rosters

Panel Selection

When a dispute arises under Chapter 19, a panel of five members is selected from the national Roster lists. Each government in the dispute (through its trade minister) appoints two panelists, in consultation with the other involved government (Chapter 19 panels are always binational in composition). The fifth panelist is from one of the two countries and generally alternates with each dispute.

Under Chapter 20, an arbitral panel is established using a reverse selection process. Under this process, each disputing Party selects two panelists who are citizens of the other disputing Party. The chair of the panel is selected by the disputing Parties and may be a citizen of a NAFTA Party or any other country.

To serve on a specific panel, roster candidates must complete Disclosure Statements pursuant to a NAFTA Code of Conduct. The Code is fundamental to the process. The governing principle is that a roster candidate and panel member must disclose any interest, relationship or matter that is likely to affect his/her independence or impartiality or that might create an appearance of impropriety or bias.

NAFTA panelists and committee members are not permanent arbitrators, but are established on ad hoc basis.

Remuneration and Payment of Expenses

The amounts of remuneration and expenses that will be paid to the panelists, committee members and members of scientific review boards are established by the NAFTA Free Trade Commission.

The remuneration of panelists or committee members and their assistants, members of scientific review boards, their travel and lodging expenses, and all general expenses of panels, committees or scientific review boards are borne equally by:

Rules of Procedure

Chapter 19 binational panel review process is guided by detailed rules of procedure. Very tight deadlines are prescribed by the legislation, regulations, and the NAFTA for filing of pleadings and all other procedures to assure that panels reach final decisions within 315 days of the filing of the Request for Panel Review (see Figure 1 for an ideal timeline).

Chapter 20 is also guided by model rules of procedure and the process is scheduled to take approximately five months (see Figure 2 for an ideal timeline). Under both of these processes, the participants may submit written submissions to the panel and at least one hearing will take place.

For further information, consult the "Legal Texts".

Panel Decisions and Reports

Chapter 19 panels review final antidumping (AD) and countervailing duty (CVD) determinations solely to determine, based on the administrative record, whether the relevant administrative agency applied its national AD/CVD laws correctly. The panels will employ the same standard of review and the same general legal principles, as would a domestic court in the country where the determination was made.

The decision of a panel under Chapter 19 is binding. In its decision, a panel may do one of two things. It may uphold the final determination, or it may remand it - i.e. send it back - to the investigating authority. In the later case, the panel may issue a second decision on the agency's determination on remand.

An arbitral panel report under Chapter 20 contains findings of fact, a determination of whether the measure at issue is or would be inconsistent with a Party's obligations under the Agreement or nullifies or impairs benefits that complaining government or governments could reasonably have expected under the Agreement, and any recommendations that panel might offer to resolve the dispute.

View "Panel Decisions and Reports".

 

Figure 1:

Ideal Timeline for a NAFTA Chapter 19 Panel Review as per the Rules of Procedure

R. 34

Request for Panel Review filed

Day 0

R. 39

Complaints to be filed

Within 30 days after Request for Panel Review

R. 40

Notices of Appearance to be filed

Within 45 days after Request for Panel Review

Annex 1901.2(3)

Panel Selection to be completed by the Parties by

Day 55

R. 41

Final Determination, Reasons, Index and Administrative Record to be filed

Within 15 days after filing of Notice of Appearance

Annex 1901.2(3)

Parties to select 5th Panelist by

Day 61

R. 57 (1)

Briefs by Complainants to be filed

Within 60 days after filing of Administrative Record

R. 57(2)

Briefs by Investigating Authority or Participants in support to be filed

Within 60 days after Complainants' Briefs

R. 57(3)

Reply Briefs to be filed

Within 15 days after Authority's Briefs

R. 57(4)

Appendix to the Briefs to be filed

Within 10 days after Reply Briefs

R. 67(1)

Oral Argument to begin

Within 30 days after Reply Briefs

Article 1904.14

PANEL DECISION DUE

315 days after Request for Panel Review

Figure 2:

Ideal Timeline for NAFTA Chapter 20 Arbitral Panel as per the Model Rules of Procedure (Two Disputing Parties)

Article 2008

Request for Arbitral Panel filed on

Day 0

Article 2011.1(b)

Selection of Chair to be completed

Within 15 days after Request for Arbitral Panel

Rule 5 & Article 2012(3)

Terms of Reference may be filed by the Parties

Within 20 days after filing of Request

Article 2011.1(c)

Panel Selection to be completed

15 days after selection of Chair

Rule 7

Initial Written Submission (Complaining Party) to be filed

No later than 10 days after Panel selection is completed

Rule 7

Written Counter-Submission (Party Complained Against) to be filed

No later than 20 days after Initial Written Submission

Rule 26

List of deliberators and others attending the hearing to be delivered

5 days before the hearing

Rule 21

Hearing to be held by

To be determined by Chair

Rule 32

Supplementary Written Submission to be filed by

Within 10 days of hearing

Rule 38

Request for Scientific Review Board to be filed

No later than 15 days after the hearing

Article 2016(2)

Initial Report to be filed

Within 90 days after Panel selection is completed

Article 2016(4)

Comments on Initial Report to be filed

Within 14 days after presentation of Initial Report

Article 2017(1)

FINAL REPORT DUE

Within 30 days after Initial Report