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CHAPTER TWENTY - Institutional Arrangements and Dispute Settlement Procedures

What is Chapter Twenty of the NAFTA and what does it do?

Who benefits from Chapter Twenty of the NAFTA?

How can Chapter Twenty of the NAFTA help me or my company?

What are NAFTA's Institutional Arrangements?

How do NAFTA's Dispute Settlement Procedures Work?

Can the U.S. Government help me if I have a problem?

How can I get more information?

What is Chapter Twenty of the NAFTA and what does it do?

In Chapter Twenty of the North American Free Trade Agreement (NAFTA), the Parties to the Agreement -- Canada, Mexico and the United States -- established procedures for the settlement of disputes over the interpretation or application of the Agreement. They also established the institutions that supervise implementation of the Agreement and administer the dispute settlement process.

The NAFTA entered into force on January 1, 1994. It has no expiration date.

Who benefits from Chapter Twenty of the NAFTA?

Any U.S. exporter or investor who believes that the Canadian or Mexican Government is not complying with its obligations under the NAFTA could benefit from the Agreement's dispute settlement procedures.

Companies or individuals cannot initiate NAFTA Chapter Twenty dispute settlement by themselves. They must work through their governments.

How can Chapter Twenty of the NAFTA help my company?

The NAFTA encourages its signatories to resolve disputes through cooperation and consultation. If such attempts fail, a NAFTA Party may then decide, if appropriate, to use the formal procedures of Chapter Twenty to resolve the dispute. If a dispute settlement claim is successful, the losing government is expected to remove the measure that has been the source of the dispute. If a government fails to do so, the winning government can suspend benefits accorded to the losing government under the NAFTA until a mutually satisfactory resolution has been reached. This serves as an incentive for governments to remove offending measures promptly.

The World Trade Organization (WTO) also has dispute settlement procedures, which are described in the Exporter's Guide to the WTO Dispute Settlement Understanding. Disputes arising under both the NAFTA and a WTO Agreement may be settled in either forum at the discretion of the complaining Party.

What are NAFTA's Institutional Arrangements?

A Free Trade Commission, comprised of representatives of the signatory governments, was established by Chapter Twenty. It is chaired by each signatory government on a rotating basis. The Commission supervises the NAFTA's implementation and oversees committees and working groups that deal with a variety of matters covered by the NAFTA (for example, trade, agriculture, textiles, standards, rules of origin). The Commission also plays an important role in the NAFTA's dispute settlement procedures.

The signatories also established a Secretariat whose mandate is to provide assistance to the Commission and to administer the NAFTA's dispute settlement procedures. The Secretariat is comprised of Canadian, Mexican and U.S. Sections, which are located in each country's capital. Its web site (offsite link) contains detailed information on the rules of procedure for NAFTA dispute settlement, recent decisions and reports of dispute settlement panels, and status reports on current proceedings. The address of the U.S. Section of the NAFTA Secretariat, which is located in the U.S. Department of Commerce, is:

NAFTA Secretariat, U.S. Section

14th Street & Constitution Avenue, N.W.

Washington, D.C. 20230

Phone: (202) 482-5438

Fax: (202) 482-0148

How do NAFTA's Dispute Settlement Procedures Work?

Consultations, Mediation by the Free Trade Commission

Any Party to the NAFTA may request consultations with another Party regarding any actual or proposed measure or any other matter that it believes might affect the operation of the NAFTA. The consulting Parties are expected to make every attempt to arrive at a mutually satisfactory resolution of the matter under consideration.

If the consultations fail to resolve the matter within 30 days (or 45 days if a third Party is involved, or 15 days if the matter involves perishable agricultural goods), any Party involved in the consultations may request a meeting of the Free Trade Commission. The Commission must meet within 10 days of delivery of the request and must try to resolve the dispute promptly.

Panel Proceedings

If the matter has not been resolved within 30 days of the Commission's meeting (or any other period mutually agreed upon by the disputing Parties), any consulting Party may submit a request to the Commission to establish an arbitral panel.

NAFTA panels have five members selected from rosters maintained by each signatory government. Roster members are expected to have expertise or experience in law, international trade, other matters covered by the NAFTA, or the resolution of disputes arising under international trade agreements. Panelists must be objective, reliable, independent and have sound judgement.

Panels examine the matter that has been referred to the Commission in the light of relevant provisions of the NAFTA, and make findings, determinations and recommendations on whether the measure in dispute conforms to the NAFTA, and, in some cases, whether the measure nullifies or impairs benefits which the complaining Party expected to receive from the NAFTA. Parties to a dispute have the right to at least one hearing before the panel, as well as the opportunity to provide initial and rebuttal submissions in writing. The panel must issue an initial confidential report to the Parties setting out its findings and determinations 90 days after the last panelist is selected.

Final Report, Implementation, Non-Implementation

When the panel issues its final report, normally within 30 days of its initial report, the disputing Parties transmit it to the Commission, along with written comments if they so desire. Unless it decides otherwise, the Commission publishes the final report within 15 days. Upon receipt of the final report, and if the panel has determined that the measure at issue is inconsistent with the obligations of the NAFTA, or causes nullification or impairment of one of the NAFTA's provisions, the Parties must agree on a resolution to the dispute, which normally entails the non-implementation or removal of the offending measure. If within 30 days from the receipt of the final report the Parties have not agreed on a mutually satisfactory remedy, the complaining Party may suspend the application of benefits of equivalent effect to the other Party until the dispute is resolved.

Other Dispute Settlement Procedures

Chapter Eleven of the NAFTA establishes a mechanism through which a NAFTA investor can seek the settlement of an investment dispute directly with a host government, without having to go through its own government. If an investor believes that a host government has breached its NAFTA obligations, it can also have recourse to arbitration through the World Bank's International Center for the Settlement of Investment Disputes (ICSID), or the UN Commission for International Trade Law (UNCITRAL), or choose to avail itself of the host government's domestic courts. Chapter Fourteen provides that Chapter Twenty will apply to financial services disputes, but specifies that panel members must have expertise or experience in financial services law or practice. Chapter Nineteen provides for binational panel review of final determinations in anti-dumping and countervailing duty cases.

Can the U.S. Government help me if I have a problem?

Yes. If you believe, in the course of conducting business with Canada or Mexico, that the Canadian or Mexican government has failed to comply with its obligations under the NAFTA, contact the Office of Trade Agreements Negotiations and Compliance's hotline at the U.S. Department of Commerce. The Center can help you understand your rights and the other government's obligations under the NAFTA, and it can alert the appropriate U.S. Government officials to help you resolve your problem. The U.S. Government can, if appropriate, raise the particular facts of your situation with Canadian or Mexican authorities and ask them to review the matter. It can also consider whether it would be appropriate to use the NAFTA's dispute settlement procedures to resolve the problem.

How can I get more information?

The complete text of Chapter Twenty of the NAFTA (Institutional Arrangements and Dispute Settlement Procedures) is available on the Office of Trade Agreements Negotiations and Compliance's web site.

If you have questions about Chapter Twenty or how to use it, you can e-mail the Office of Trade Agreements Negotiations and Compliance, which will forward your message to the Commerce Department's Designated Monitoring Officer for this NAFTA Chapter. You can also contact the Designated Monitoring Officer at the following address:

Designated Monitoring Officer --

NAFTA Chapter 20 (Dispute Settlement)

Office of the Chief Counsel for International Commerce

U.S. Department of Commerce

14th Street & Constitution Avenue, N.W.

Washington, D.C. 20230

Phone: (202) 482 - 1321

Fax: (202) 482 - 2111

Other useful information on the NAFTA and its dispute settlement procedures is available on the following web sites:

The NAFTA Facts web site of the Office of NAFTA and Inter-American Affairs at the U.S. Department of Commerce contains documents and background information on the NAFTA and on doing business in Canada and Mexico.

The NAFTA Secretariat's web site (offsite link) contains detailed information on the rules of procedure for NAFTA dispute settlement, recent decisions and reports of dispute settlement panels. and status reports on current proceedings.