State-to-state dispute settlement chapter summary
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The state-to-state dispute settlement system in the Canada-United States-Mexico Agreement (CUSMA) - an improvement on Chapter 20 of the original NAFTA - provides for a transparent and clear mechanism for the resolution of disputes between Canada, the United States and Mexico regarding the interpretation and application of the Agreement. Almost all of the obligations in the Agreement, including those related to labour and the environment, are subject to this dispute settlement system.
The state-to-state dispute settlement mechanism places emphasis on resolving disagreements through cooperative means (such as consultations), recognizing that formal dispute settlement processes can be time-consuming and resource-intensive. However, if these cooperative means fail, the chapter provides for the creation of arbitral panels, consisting of independent candidates having the appropriate qualifications, to assess whether a party has violated its obligations. If an arbitral panel finds that a party has failed to implement its obligations under the Agreement, that party must remove the violation. If the violation is not removed, the winning party is automatically entitled to suspend benefits of equivalent effect (such as increased import duties).
Technical summary of negotiated outcomes: State-to-state dispute settlement
- Sets out the mechanisms and processes for consultations and encourages other ways of more informally resolving the dispute (through the Commission, good offices, conciliation or mediation) before a formal panel process begins.
- Streamlines the dispute settlement process and ensures that panels are established automatically upon request.
- Requires the parties to agree on a roster of up to 30 independent and highly qualified experts to facilitate the creation of panels. Each party can nominate up to 10 candidates to the roster. If the roster is not formed by consensus within one month of entry into force of the Agreement, it will be established automatically based on the candidates put forward by each party.
- Provides a framework for transparent and open dispute settlement proceedings, including allowing non-governmental entities in CUSMA countries to express their views to the panel, making submissions public and modernizing litigation procedures by requiring electronic filing of documents.
- Sets out how benefits can be suspended by a winning party (trade retaliation), as well as a mechanism to ensure that a winning party does not go too far in its retaliation. It also requires that a winning party withdraw any retaliatory measures when a losing party conforms with the panel’s ruling.
- Includes additional clarity and transparency in the rules of procedure that provide guidance on the operation of panel hearings.
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