Dispute Resolution Panels of the U.S.-Canada Free Trade
Agreement: The First Two and One-Half Years
Gary N. Horlick & F. Amanda DeBusk*
The authors present an in-depth analysis of
the Chapter 18 and Chapter 19 panels of the
Canada-U.S. Free Trade Agreement (FTA) and
explore their integral role in the FTA. They
conclude that the panels have been successful
in achieving the FTA’s goals of timely and
impartial decisions. The authors also examine
the administrative feasibility of the panels as
well as the binding nature of their decisions.
The process underlying the Extraordinary
Challenge Committee is canvassed in light of
the recent jurisprudence and strict criteria
established for its use. Finally, the authors
investigate how the FTA panels operate as a
model for other negotiations, using the
U.S.-EC steel consensus arrangements of 1989
and the GATT as case studies.
Les auteurs font une analyse approfondie du
fonctionnement et de l’importance des m6ca-
nismes de r~glement des diff6rends prtvus par
les Chapitres 18 et 19 de rAccord de libre
ichange entre le Canada et les ttats-Unis.
Leur analyse les amine h conclure que ces
m6canismes ont atteint leur objectif de rendre
justice avec c~l&Mit et impartialitY. Les auteurs
examinent 6galement la nature des contraintes
administratives qui affectent ces m6canismes
et la force obligatoire de leurs d6cisions. Iis
6tudient les possibilit6s de recours , ]a proc6-
dure de contestation extraordinaire it In
lumi~re de ]a jurisprudence r6cente qui tend A
en restreindre l’accs. Les auteurs 6valuent
enfin l’impact de ‘Accord en tant que modle
de m6canisme de r~glement des diffdrends
relatifs aux 6changes commerciaux intematio-
naux dans ]a n6gociation d’ententes sem-
blables telles l’entente de 1989 entre les ttats-
Unis et ]a CEE sur le fer, et le GA7T.
*The authors are lawyers at O’Melveny & Myers, Washington, D.C. Mr. Horlick served as Dep-
uty Assistant Secretary of Commerce from 1981-83. The views in this article are those of the
authors, reflecting in large part their experience with six of the FTA panel decisions, and do not
necessarily reflect the views of their clients. The authors would like to thank Edward K. Kwakwa,
Esq., Kari L. Dohn, Esq., Robert S. Klein, Lucius B. Lau, Michael A. Meyer and Rebecca Stack
for their assistance in preparing this article.
McGill Law Journal 1992
Revue de droit de McGill
To be cited as: (1992) 37 McGill L.J 574
Mode de citation: (1992) 37 R.D. McGill 574
1992]
PANELS & THE FTA
Synopsis
Introduction
I.
A. Chapter 19 Panels
B. Chapter 18 Panels
Performance of the FTA Panels
A. Timeliness of Panel Decisions
B.
C. Quality of Decisions
D. Administrative Feasibility
E. Binding Nature of the Panel Decisions
Impartiality
II. The Extraordinary Challenge Committee
I. The FTA Dispute Resolution Panels as a Model for Other
Negotiations
A. Steel Consensus Arrangements of 1989
B. GATT
Conclusion
Introduction
The dispute resolution panels are an integral part of the Canada-U.S. Free
Trade Agreement.’ During the negotiation of the FTA, Canada and the United
States (the Parties) sought to negotiate common rules for dealing with subsidies
and dumping. However, they confronted political obstacles and a very short
time period for negotiations. Most importantly, the United States could not
agree to discipline its domestic subsidies on a bilateral basis. As a consequence,
the Parties were unable to reach an agreement on subsidy and dumping rules.
The dispute resolution mechanism of Chapter 19 represents the resulting com-
promise. Under Chapter 19, trade disputes concerning anti-dumping and coun-
tervailing duty investigations may be resolved by a panel of experts from both
nations as a substitute for judicial review.’
In addition to providing a dispute resolution mechanism for anti-dumping
and countervailing duty cases, the FTA provides in Chapter 18 a binding means
‘Canada-United States Free Trade Agreement, 22 December 1987, Can. T.S. 1989 No. 3, 27
I.L.M. 281 [hereinafter FTA] (Part A, Schedule to the Canada-United States Free Trade Agreement
Implementation Act, S.C. 1988, c.65; entered into force 1 January 1989).
2See 19 U.S.C. 1516a(g) (1988) concerning the review of countervailing duty and anti-
dumping duty determinations involving Canadian merchandise; see also Special Import Measures
Act, R.S.C. 1985, c. S-15, s. 77.11(2), as amended in Canada-United States Free Trade Agreement
Implementation Act, ibid., s. 42, concerning the review of countervailing duty and anti-dumping
duty determinations involving U.S. merchandise.
REVUE DE DROIT DE McGILL
(Vol. 37
for resolving disputes involving “safeguard” import relief. Chapter 18 also cov-
ers other types of disputes under the FTA and permits Canada and the United
States to use Chapter 18 as a substitute for dispute resolution under the General
Agreement on Tariffs and Trade? The Chapter 18 panels have broad jurisdic-
tion4 to consider disputes with two exceptions: they cannot be invoked for either
financial services issues (which are governed by Chapter 17 of the FTA) or for
final decisions in anti-dumping and countervailing duty cases (which are gov-
erned by Chapter 19 of the FTA).
This article explores how the Chapter 18 and Chapter 19 panel systems
have functioned over their first two and one-half years of operation.’ It con-
cludes that the panels have been quite successful in achieving the FTA goals of
timely and impartial decisions.6 Overall, the panel decisions have been well
written and thoughtful. The process for establishing the panels has functioned
smoothly, and both countries have given binding effect to the decisions. There
has been only one challenge of a Chapter 19 panel decision to date, and the deci-
sion issued in that case reinforces the conclusion that challenges should be truly
extraordinary. The Extraordinary Challenge Committee is functioning as the
Parties intended.
The FTA panels’ admirable performance makes them a model for other
types of dispute resolution. They provided the inspiration for the creation of the
binding arbitration panels established in the 1989 steel consensus agreements,
and could serve as a model for reform of the GATT panels.
A. Chapter 19 Panels
The volume of trade affected by Chapter 19 panels in the first two and one-
half years is quite large, totalling over $700 million (Cdn).7 Twenty cases have
3General Agreement on Tariffs and Trade, 30 October 1947, Can. T.S. 1947 No. 27, 55 U.N.T.S.
187, T.I.A.S. No. 1700, Ist supp. B.I.S.D. (1953) 6 [hereinafter GA7T1.
4Specifically, art. 1801(1) specifies that Chapter 18 panels have jurisdiction over “the avoidance
or settlement of all disputes regarding the interpretation or application of [the FTA] or whenever
a Party considers that an actual or proposed measure of the other Party is or would be inconsistent
with the obligations of [the FTA] or cause nullification or impairment in the sense of art. 2011,
unless the Parties agree to use another procedure in any particular case.” Art. 2011 provides that
if any measure causes nullification or impairment of any benefit reasonably expected to accrue to
Canada or the United States, either country can invoke the Chapter 18 dispute resolution process
even though the measure does not directly conflict with obligations under the FTA.
5There are other dispute resolution mechanisms in the FTA as well, such as those in Chapter 7
concerning agricultural disputes; but this article is limited to Chapters 18 and 19.
6Binational Panel Reviews and Extraordinary Challenge Committees[:] United States-Canada
Free-Trade Agreement, 53 Fed. Reg. 53212 (1988); see also House Comm. on the Judiciary, United
States-Canada Free-Trade Agreement Implementation Act of 1988, H.R. Rep. No. 816, 100th
Cong., 2d Sess., pt. 4, at 3 (1988) (the arbitral system’s advantages of quickness and low cost will
help the parties calculate the economic costs and benefits involved in appealing a case); testimony
of Charles F. Doran, Director, Centre of Canadian Studies, John Hopkins University, House Comm.
on Small Business, 100th Cong., 1st Sess., United States-Canada Free-Trade Agreement 9 (Comm.
Print 1987) (discussing the need to resolve disputes “in a quicker fashion” and “in a less expensive
way”).
7See Appendix I to this article.
1992]
PANELS & THE FTA
been docketed under Chapter 19, although some have been consolidated and
others terminated prior to issuance of a decision. Seventeen of the cases have
been appeals of U.S. government agency action; three have been appeals of
Canadian government agency action.
There are at least two reasons why more U.S. decisions have been chal-
lenged than Canadian decisions even though there are about the same number
of new cases in both countries! First, a government has a strong incentive to
challenge a countervailing duty decision, and the United States uses counter-
vailing duties far more often than Canada.9 A determination of countervailabi-
lity of a given subsidy program on one product could well affect investigations
of other products which might be involved in the same program. If the appeal
is successful, it will preclude the use of that subsidy finding against exports of
other products.
Second, concerning anti-dumping duty determinations, the U.S. system of
retrospective review creates an incentive for appeals not present under the Cana-
dian system of prospective duty collection. In somewhat over-simplified terms,
the U.S. requires cash deposits once an anti-dumping or countervailing duty
order has been issued. After collecting the deposits for a year, either party can
request a review to determine if the amount of the deposit was correct.’ Under
this system, the importer must make cash deposits, and then go through the
review to get the deposits back, even if the dumping has ceased. This serves as
a catalyst for appealing the initial determination; if the challenge is successful,
no more deposits need be made, and, as was the case in In the Matter of Red
Raspberries from Canada,” there is a chance to get some of the money back.
SDuring the period 1989-1990, the United States initiated two new anti-dumping cases, Fed.
Track Guide to Anti-Dumping Findings and Orders (Washington: Fed. Track Publications, 1991),
and three new countervailing duty cases against Canada, Fed. Track Guide to Countervailing Duty
Cases (Washington: Fed. Track Publications, 1991). This compares to four new anti-dumping cases
and no countervailing duty cases brought in Canada against the U.S. during the same period
(“International Trade: Use of the GATT Anti-Dumping Code” in Report of the U.S. General
Accounting Office, GAO/NSLAD-90-238FS (July 1990) at 26 [hereinafter GAO Report]). The four
anti-dumping cases involved liquid polyvinyl chloride dispersion, landing nets, transit concrete
mixers and small motors (ibid.).
9Five of the panels were appeals of U.S. countervailing duty determinations. Those five were
Live Swine from Canada, USA-91-1904-03 (Ch. 19 Panel) (decision pending at time of writing);
In the Matter of Fresh, Chilled or Frozen Pork from Canada (injury) (22 January 1991), 4 T.C.T.
7014 (Ch. 19 Panel) [hereinafter Pork (injury)]; In the Matter of Fresh, Chilled and Frozen Pork
from Canada (subsidies) (5 July 1991), USA-89-1904-06 (Ch. 19 Panel) [hereinafter Pork (subsi-
dies)]; New Steel Rails from Canada (injury) (13 August 1990), 3 T.T.R. 161 (Ch. 19 Panel) [here-
inafter New Steel Rails (injury)]; New Steel Rails from Canada (subsidies) (30 August 1990), 3
T.T.R. 316 (Ch. 19 Panel) [hereinafter New Steel Rails (subsidies)]. Only one panel request con-
cerned a subsidy finding by the Canadian International Trade Tribunal (CITr)
(see Polyphase
hduction Motors Exceeding 200 HP, CDA-89-1904-01 (Ch. 19 Panel); panel review terminated
because of a later finding of negative injury by the CIT, 10 January 1990, reported in 3 T.C.T.
2362). See also G. Horlick & D. Steger, “Subsidies and Countervailing Duties” in P. Morici, ed.,
Making Free Trade Work: The Canada-U.S. Agreement (New York: Council on Foreign Relations
Press, 1990) n. 10.
10G. Horlick, “The United States Anti-Dumping System” in J. Jackson & E. Vermulst, eds, Anti-
Dumping Law and Practice: A Comparative Study (Ann Arbor: U. of Michigan Press, 1989).
” Remand Opinion (2 April 1990), 3 T.C.T. 8175, 2 T.T.R. 214 (Ch. 19 Panel) [hereinafter Red
Raspberries].
McGILL LAW JOURNAL
[Vol. 37
By contrast, Canada allows the importation of goods previously found to
be dumped without the payment of a deposit or a duty, as long as the prices of
the goods have been raised above the “normal value” determined in the inves-
tigation. 2 While the normal value can be changed based on reviews, the new
normal value usually applies only to future entries.’ 3 As a result, most exporters
simply raise their prices above the normal value, and pay no duty. Consequently,
there is no pool of money to be fought over on review, although there remains
the possibility of reducing future duty levels.
Chapter 19 panels have dealt quite effectively with a heavy load of anti-
dumping and countervailing duty cases. The involvement of the Canadian and
U.S. governments with Chapter 19 panel review is much less extensive than
their involvement with Chapter 18 panels. FTA article 1904(2) provides for the
two governments to request Chapter 19 review and they, in turn, permit private
parties to make requests.
The Chapter 19 panels must apply the same test that a reviewing court of
the country whose decision is challenged would apply. 4 In the United States,
the test is whether the decision is unsupported by substantial evidence on the
record, or otherwise not in accordance with law. 5 In Canada, the test is whether
the agency (a) failed to observe a principle of natural justice or otherwise acted
beyond or refused to exercise its jurisdiction; (b) erred in law in making its deci-
sion or order, whether or not the error appears on the face of the record; or (c)
based its decision or order on an erroneous finding of fact that was made in a
perverse or capricious manner or without regard to the material before it.
Although the U.S. and Canadian tests appear similar, the Canadian test is
considerably more difficult to meet.’6 In American Farm Bureau Federation v.
Canadian Import Tribunal,7 the Supreme Court of Canada upheld a decision of
the Canadian Import Tribunal, stating that it would not interfere if there was
“any evidence” on which the Tribunal’s judgment could be based. On account
of the extraordinarily high standard used by Canadian courts, it is possible that
there will be more appeals of U.S. decisions than of Canadian decisions. It is
odd that the U.S. negotiators insisted on imposing a more onerous standard on
U.S. parties seeking to appeal a Canadian decision than on Canadian parties
seeking to appeal a U.S. decision. Just as judicial interpretations of the standard
of review are always evolving, perhaps FTA panel interpretations of the stand-
ard of review can be instrumental in bringing the U.S. and Canadian standards
closer to concordance. The statutes themselves are similar enough to permit
this. In addition, the working group established under FTA article 1907 might
12P. Magnus, “The Canadian Anti-Dumping System” in Jackson & Vermulst, supra, note 10.
131bid.
14Supra, note 1, art. 1904(3).
15See ibid. art. 1911 (definition of standard of review), which adopts the standard of s.
516A(b)(1)(B) of the Tariff Act of 1930.
161n the Matter of Certain Dumped Integral Horsepower Induction Motors (injury) (I 1 Septem-
ber 1991), 4 T.C.T. 7065 (Ch. 19 Panel) [hereinafter Induction Motors]. See supra, note 1, art. 1911
(definition of standard of review), which adopts the standard of s. 28(1) of the Federal Court Act,
R.S.C. 1985, c. F-7.
17[1990] 2 S.C.R. 1324, 3 T.C.T. 5303.
1992]
PANELS & THE FTA
consider creating an FTA standard of review to be imposed in lieu of the stand-
ard of each Party.
Both Canada and the United States have adopted procedural rules govern-
ing the panel review process. 8 Panel requests must be made within 30 days fol-
lowing the date of publication of the final determination in question. 9 The FTA
provides strict deadlines for the review process, usually leading to a final deci-
sion within 315 days after a request for panel review.20 The tight timetable
reflects the FTA’s objective of speedy decision-making.2 Parties submit briefs
to the panel, and the panels allow oral argument.22
B. Chapter 18 Panels
There have been far fewer Chapter 18′ panels than Chapter 19 panels.
Whereas nineteen Chapter 19 cases have been docketed, only two Chapter 18
panels have been formed.24
Chapter 18 panels operate similarly to Chapter 19 panels, although there
are some important distinctions. While the United States and Canada have del-
egated to private parties the right to request Chapter 19 reviews, only the two
In addition, under
national governments can request Chapter 18 reviews.’
Chapter 18, the Parties have considerable input into the panel process through
the Canada-United States Trade Commission (Commission).26 The principal
18See Rules of Procedure for Article 1904 Binational Panel Reviews, C. Gaz. 1989.1.103, as
amended in C. Gaz. 1989.1.5398; Rules of Procedure for Article 1904 Binational Panel Reviews,
53 Fed. Reg. 53212 (1988) [hereinafter Rules of Procedure].
‘9FTA, supra, note I, art. 1904(4).
20Ibid. art. 1904(14); see Appendix II, Table 1.
21See supra, note 6.
22See FTA, supra, note 1, art. 1904(7). Interestingly, the panel rules only provide for French
translation where the case arises from a final determination made in Canada (Rule 28, Rules of Pro-
cedure, supra, note 18). Participants may use either English or French in any document or oral pro-
ceeding (Rule 29, ibiL). An opinion or order of the panel will only be translated (either from
English or from French) if the panel determines that the issue is of general interest or importance
or the proceedings which led to the order or opinion were conducted in whole or in part in English
or French (Rule 30, ibid.). Oral proceedings will be simultaneously interpreted upon request of a
party or if the panel chairman determines that there is a public interest in the panel review (Rule
31, ibid.).
23Chapter 18 panels draw from various elements of Chapter 19 of the Israel-United States Free
Trade Agreement (22 April 1985, 24 I.L.M. 653). The U.S.-Israel Free Trade dispute resolution
mechanism has been used only once, in a dispute involving machine tools from Israel (R. Berry,
“Panel Rules in Favour of Israeli FTA in Machine Tool Dispute Over VRA” 9 Inside U.S. Trade, No.
17 (3 May 1991) at 8). Israel claimed that the United States interfered with the FTA when Taiwan
ceased shipments of machine tool components to Israel after the United States counted the completed
machine tools against the quota established in the voluntary restraint agreement between the United
States and Taiwan on machine tools (Berry, ibid.). The Panel’s ruling has not yet been made public,
and there are conflicting claims whether the Panel ruled in favour of Israel (Berry, ibid.).
24Those two cases are: In the Matter of Canada’s Landing Requirementfor Pacific Coast Salmon
and Herring (1989), 2 T.C.T. 7162, 1 T.T.R. 237 (Ch. 18 Panel) [hereinafter Salmon]; In the Matter
of Lobsters from Canada (1990), 3 T.C.T. 8182, 2 T.T.R. 72 (Ch. 18 Panel) [hereinafter Lobsters].
25FTA, supra, note 1, art. 1803.
261bid. art. 1802(1). For instance, each Chapter 18 panel may establish its own rules of procedure
unless the Commission has agreed otherwise (ibid. art. 1807(4)).
REVUE DE DROIT DE McGILL
[Vol. 37
representative of each government on the Commission is the cabinet-level offi-
cer or Minister primarily responsible for international trade, or their designees.”
There is no equivalent to the Commission under Chapter 19.
In contrast to Chapter 19 panels that issue a single binding decision, Chap-
ter 18 panels produce an initial report, which includes recommendations for res-
olution of the dispute.2″ If the United States or Canada disagrees with the report,
it may present a written statement of its objections within 14 days after the
report is issued.29 The panel may reconsider the report and issue a final report.’
The final report is due within 30 days of issuance of the initial report.”
Whereas the Chapter 19 panel’s decision is binding, and must be enforced
absent an extraordinary challenge, the Commission can override a Chapter 18
panel’s report.32 If it fails to do so, the panel report, plus any separate opinions
and any written views of the Parties, are published unless the Commission
agrees otherwise.3 Upon receipt of the report, the Commission “shall agree” on
resolution of the dispute, which “normally” will conform with the panel’s rec-
ommendation.’ These provisions give the panel considerable “moral” influence
over resolution of the dispute.35
While the Chapter 19 panels may only affirm or remand agency decisions,
Chapter 18 provides for broader discretion in finding a remedy. The FTA expan-
sively defines potential remedies as the “non-implementation or removal of a
measure not conforming with this Agreement or causing nullification or impair-
ment in the sense of article 2011 or, failing such a resolution, compensation.”36
The FTA does not limit dispute resolution to these broadly defined remedies.
Rather, it provides that they are to be used “[w]here possible.”3
Chapter 18 explicitly authorizes retaliation. FTA article 1807(9) provides
that if the Commission “has not reached agreement or a mutually satisfactory
resolution … within 30 days of receiving the final report of the panel,” a
wronged party can “suspend the application to the other party of benefits of
equivalent effect until such time as the Parties have reached agreement on a res-
olution of the dispute. 3 s
27Ibid. art. 1802(2).
2SIbid. art. 1807(5).
29Ibid. art. 1807(6).
30Ibid. The panel may reconsider its report on its own motion, at the request of the Commission,
or at the request of either government. Reconsideration under Chapter 19 is limited to technical
errors (Rule 76 of the Rules of Procedure, supra, note 18).
311bid.
32Supra, note 1, art. 1807(7) provides that “[u]nless the Commission agrees otherwise,” the final
report of the panel is to be published. Safeguard decisions by Chapter 18 panels are binding (ibid.
art. 1806(l)).
331bid
341bid. art. 1807(8).
35Ibid.
361bid.
371bid.
3Sbid. art. 1807(9).
1992]
PANELS & THE FTA
Both Canada and the United States have adopted model rules for Chapter
18 proceedings. 9
I. Performance of the FTA Panels
A. Timeliness of Panel Decisions’
FTA dispute resolution is more than twice as fast as U.S. judicial review.4″
Whereas all but three FTA panels have met the FTA’s deadline of 315 days
(about 10/2 months),42 judicial review to the Court of International Trade (CIT)
typically takes about 27 months.43 Even considering the delays in two FTA pan-
els, since some panels have made their decisions before the deadline, the median
time for a panel decision is 1011 months.”
The reason why the panels issue such prompt decisions is that the FTA pro-
vides a tight timetable for filings and oral argument.45 While the language in the
FTA is worded broadly enough to permit a panel to exceed the 315 day dead-
line,46 the panels have not abused this discretion.
In addition to providing speedier initial decisions than the CIT, the FTA
panels also are faster than the CIT on remands. The median length of time for
a first remand to a binational panel is a little over 4 months47 compared to 6
months for a first CIT remand a.4 For a second remand, the median length of time
for a binational panel is 2V2 months49 whereas a second remand to the CIT takes
5 months.50
Another reason why FTA dispute resolution is faster than judicial review
is because ETA decisions are less likely to be reviewed than are CIT decisions.
39See Model Rules of Procedures for Chapter 18 Panels, C. Gaz. 1989.1.100, 54 Fed. Reg. 14372
(1989).
4The research on the timeliness of panel decisions spans from January 1989 through July 1991.
41Canadian judicial review is apparently faster than U.S. judicial review. L. Holland, “State-
ment” in Transcript of Administrative Conference of the United States Forum on Binational Dis-
pute Resolution Procedures Under the U.S.-Canada Free Trade Agreement (23 April 1991) at 67
[hereinafter Administrative Conference Transcript].
42See Appendix II, Table 1 at the end of this article. The failure to meet the deadlines occurred
in cases where a panelist had to be replaced, and where the U.S. Department of Commerce expe-
rienced technical difficulties with regard to its trade analysis.
43An examination of 131 CIT decisions showed that the median time from the date of docketing
to the date of court action was approximately 27 months and the mean time was 32 months. Source:
Lexis search of dumping and countervailing duty cases decided by the CIT from January 1989 –
July 1991. Decisions on what appeared to be technical, non-dispositive motions (such as admin-
istrative protective order issues) were excluded. Decisions on other motions were included.
44Supra, note 42.
45FTA, supra, note 1, art. 1904(14).
461bid. art. 1904(14) states that “rules shall be designed to result in final decisions within 315
days of the date on which a request for a panel is made.” [emphasis added]
47See Appendix II, Table 2 at the end of this article. The median time for the first remand is 130
days.48L. Shambon, “Accomplishing the Legislative Goals for the Court of International Trade: More
speed! More speed!” (1990) 14 Fordham Int’l L.J. 31.
49Supra, note 47. The median time for a second remand is 77 days.
50Shambon, supra, note 48 at 19.
McGILL LAW JOURNAL
[Vol. 37
FTA panel decisions can only be challenged by the Canadian or U.S. govern-
ment5e ‘ whereas any party can appeal a CIT decision as of right.” Further,
whereas the Court of Appeals for the Federal Circuit (CAFC) conducts a de
novo review,53 the Extraordinary Challenge Committee’s standard of review is
very narrow.’4 If a binational panel’s decision is challenged, it appears that the
time for a decision will be much quicker than for a CAFC decision. While there
has only been one extraordinary challenge to date,55 the entire challenge process
took only 22 months. 6 By comparison an appeal to the CAFC typically takes
over 10 months.”
B.
Impartiality
Each panel has five members consisting of either three Canadians and two
Americans or two Canadians and three Americans.”
A concern existed that panels would split along the lines of nationality,
whereby panels with a Canadian majority would favour the Canadian position
and panels with a U.S. majority would favour the U.S. position. However, this
has not occurred. There have been eight cases that resulted in written decisions
and in five of those cases, decisions of the Chapter 19 panels have been unan-
imous5 9
There is no correlation between the nationality of the panelists and the
result. In Pork (injury),6 U.S. panelists sided with Canadian panelists in reach-
ing a unanimous decision against the U.S. International Trade Commission
(ITC). In Red Raspberries,6′ two U.S. panelists sided with the Canadian major-
ity against the U.S. Department of Commerce (Commerce). Conversely, in New
5 1Supra, note I, art. 1904(13).
5219 U.S.C. 1516a(9) (1988).
53Matsushita Electric Indus. Co. v. United States, 929 F.2d 1577 at 1578 (Fed. Cir. 1991); Amer-
ican Pennac, Inc. v. United States, 831 F2d 269 at 273 (Fed. Cir. 1987) cert. dismissed, 485 U.S.
901 (1988).
5’The standard is discussed below in section 11.
551n the Matter of Fresh, Chilled or Frozen Pork from Canada (14 June 1991), 4 T.C.T. 7037
(Ex. Chall. Ctee) [hereinafter Pork].
on file with the authors.
56The process took 76 days from docketing to decision.
57More detailed information on the length of appeals to the CIT has been compiled by, and is
58Under Chapter 18, each panel must have two Canadian and two U.S. citizens who are
appointed by the Government of Canada and the Government of the United States, respectively.
The Commission appoints the fifth panelist. If the Commission cannot agree on the fifth panelist,
the four appointed panelists may select the fifth panelist. If the four appointed panelists cannot
agree, the fifth panelist is selected by lot from the roster of panelists (supra, note 1, art. 1807(3)).
Under Chapter 19, the two governments select the five panelists in consultation with each other.
If they cannot agree on the fifth panelist, the selection procedures are the same as under Chapter
18 except that candidates eliminated by peremptory challenge are excluded from the roster from
which the fifth panelist is selected by lot (ibid. annex 1901.2(2), annex 1901.2(3)).
59The three decisions that were not unanimous are Induction Motors, supra, note 16 (1 dissent);
New Steel Rails (injury), supra, note 9 (1 dissent) and New Steel Rails (subsidies), supra, note 9
(I dissent).
60Supra, note 9.
61Supra, note 11.
1992]
PANELS & THE FTA
Steel Rails (injury),6″ the Panel had a Canadian majority but it supported the
position of the ITC. In that case, the ITC found that Canadian rails did not pres-
ently injure U.S. rail producers, but that they threatened to do so in the future.
The ITC’s aff’trmative decision was based on a 3-3 split,63 the weakest possible
agency decision. Even so, the Canadian majority panel gave great deference to
the three-commissioner ITC “plurality” and upheld the decision.’
The results of the Chapter 18 panels have been different. There have been
only two panels, one with a Canadian majority, the other with a U.S. majority.
Both decisions were resolved in favour of the United States. However, the pan-
elists in Lobsters65 split on national lines. In Salmon,” some panelists dissented
on certain issues but it is unclear from the opinion whether the panelists’ deci-
sions correlate with nationality.
C. Quality of Decisions
Commentators agree that the quality of FTA panel decisions is quite high.
Professor Andreas F. Lowenfeld undertook an in-depth analysis of panel deci-
sions under the FTA. He concluded:
[T]he consideration given by panel members to the issues and the contentions of
the parties has been careful, and … the opinions have been well thought through
and well crafted. Though no one can be expected to agree with all of the opinions
in every detail …. as a whole the opinions are of high quality, and should leave
even losing parties –
confident
. 67
that they received a full and fair hearing.6,
including the government agencies concerned –
The Commerce Department’s legal advisor for the U.S. Secretariat also
commented on the high quality of panel decisions at a recent forum. 6 She noted
that “consensus reigns among … both private participants and [those] in govern-
ment, that panel decisions are of a relatively high calibre compared to CIT deci-
sions. 69
At oral argument, the panelists generally have been knowledgeable and
well prepared.70 Overall, the Canadian panelists have adeptly grasped U.S. trade
law issues and shown no hesitancy in quizzing counsel on their positions. The
questions of U.S. panelists have reflected their “informed experience.”‘”
62Supra, note 9.
63Tie votes by the ITC in U.S. AD/CVD cases are resolved in favour of the U.S. petitioning
industry (19 U.S.C. 1677(ii) (1988)).
64One of the three Canadian panelists dissented (supra, note 9 at 235).
6SSupra, note 24.
661bid.
67A.F. Lowenfeld, “Binational Dispute Settlement Under Chapters 18 and 19 of the Canada-
United States Free Trade Agreement: An Interim Appraisal” (Dec. 1990) (report prepared for the
consideration of the Administrative Conference of the United States). A.F Lowenfeld is the
Charles L. Denison Professor of Law at the New York University School of Law.
68L. Koteen, “Statement” in Administrative Conference Transcript, supra, note 41 at 56.
691bid.
70W.K. Ince & M.C. Sherman, “Binational Panel Reviews under Article [sic] 19 of the
U.S.-Canada Free Trade Agreement: A Novel Approach to International Dispute Resolution”
(1990) 37 Fed. Bar News & J. 136 at 139.
71Ibid.
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[Vol. 37
D. Administrative Feasibility
The administrative functioning of the dispute panels has been remarkably
72
smooth.
The panelist selection process is handled by the Office of the United States
Trade Representative (USTR) and the Canadian Ministry of External Affairs
and International Trade (Ministry). Under Chapter 19, the United States and
Canada must develop a roster of U.S. and Canadian citizens qualified to be
selected as panelists in individual cases. Within 30 days of a request for panel
review, the United States and Canada must each appoint two panelists, normally
from that roster.73
In the United States, USTR reviews the roster and eliminates candidates
with potential conflicts. USTR then instructs the U.S. Secretariat to contact can-
didates selected by USTR to determine availability and any conflicts of inter-
est.74 The Secretariat reports the results of its search to USTR which makes the
final selection of panelists.
Because of the significant number of panels established pursuant to Chap-
ter 19 since 1989 and the increasing number of instances in which candidates
have been unable to be appointed to panels due to potential conflicts of interest,
the United States recently announced that it will be preparing a new roster. In
October 1991, it invited U.S. citizens wishing to be included on the roster to
apply with USTR.75
In Canada, the panelist selection process is initiated by the Canadian Sec-
retariat. The Secretariat provides all roster members with detailed lists of inter-
ested parties (to determine conflicts of interest) and a timetable. Interested roster
members submit a statement of availability to the Secretariat, which then com-
piles a list of potential panelists and forwards it to the Ministry. The Canadian
Members of Panels Regulations provide for the appointment of panelists by a
board consisting of the Minister of Finance and other members designated by
the Prime Minister.76
Each country is allowed four peremptory challenges to be exercised simul-
taneously and in confidence.77 Officials from the Canadian and U.S. govern-
ments confirm that peremptory challenges are frequently exercised by both gov-
ernments mainly on the grounds of conflict of interest –
although a
72The focus of this section is on Chapter 19 panels because the administrative functioning of
Chapter 19 panels is more transparent than that of Chapter 18 panels. This is largely attributable
to the active participation of private parties in the Chapter 19 binational panel review process
whereas the opportunity for private parties to have input into the Chapter 18 binational panel
review process is more limited.
73Supra, note 1, annex 1901.2(2).
74AII potential panelists (Canadian and U.S.) must submit a statement disclosing conflicts of
interest.
7556 Fed. Reg. 51682 (1991).
76Rules of Procedure for Article 1904 Extraordinary Challenge Committees, C. Gaz. 1989.1.132
771bid.
at 134.
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PANELS & THE FTA
government need not provide a reason for its challenge. The fifth panelist is
jointly chosen by both countries.7″ If the countries cannot agree on a fifth pan-
elist, the four previously selected panelists choose the fifth panelist from the
roster.79 If the panelists cannot agree, the fifth panelist is chosen by lot from the
roster.80
By all reports, the process of selecting the fifth panelist has been fairly
amicable. An informal practice has evolved whereby the nationality of the fifth
panelist alternates between an American and a Canadian. To date, there have
been no reported challenges to panelists by parties to the proceedings.
Both the United States and Canada have established Secretariats pursuant
to FTA article 1909. The Secretariats receive and file all requests, briefs and
other papers.”‘ They assist the panel members in coordinating schedules and
making the necessary arrangements for hearings. They have been extremely
helpful in providing guidance to the parties concerning panel rules and
procedures.
Chapter 18 provides for the “settlement of all disputes regarding the inter-
pretation or application of this Agreement” except for financial services covered
in Chapter 17 and anti-dumping and countervailing duty cases as discussed
above.” A dispute panel is established only after failed attempts to negotiate the
differences at a more informal level. The procedures for establishing a panel are
similar to that described above for Chapter 19. However, there is no Extraordi-
nary Challenge Committee for Chapter 18 panels. If the two Parties’ interna-
tional trade ministers do not agree with the recommendation of a panel and can-
not come to a resolution of a dispute, then the final recourse for the Party that
considers its rights or benefits to be impaired is “to suspend the application to
the other Party of benefits of equivalent effect.” 3
E. Binding Nature of the Panel Decisions
Not all decisions of Chapter 18 panels are binding, whereas by the terms
of the FTA every Chapter 19 decision is binding.” Article 1904(9) provides:
‘”The decision of a panel under this article shall be binding on the Parties with
respect to the particular matter between the Parties that is before the panel.”‘
78Supra, note 1, annex 1901.2(3).
7 91bid.
8OIbid.
81Ibid. art. 1909(9).
S2Ibid. art. 1801(1). See above, section entitled “Introduction. A.”
3Ibid. art. 1807(9).
841bid. art. 1806(1) provides that reviews of safeguard actions are binding and that Canada and
the United States may agree to make other Chapter 18 reviews binding.
85When the PTA was being negotiated, there was considerable debate as to whether art. III of
the U.S. Constitution required judicial review of anti-dumping and countervailing duty cases, mak-
ing FTA panel review unconstitutional. In our opinion, the preponderance of legal scholarship sug-
gests that this is not the case. However, to ensure that the binational panel review system would
withstand a constitutional challenge, the U.S. implementing legislation amended s. 516A of the
Thriff Act of 1930 to provide for a fast-track procedure (albeit with potentially discouraging bond-
ing requirements) for the U.S. Court of Appeals to consider any challenge to the constitutionality
McGILL LAW JOURNAL
[Vol. 37
The binding effect of a panel’s decision has been tested twice already. In
the very first case appealed to a Chapter 19 panel, Red Raspberries from Can-
ada,86 the Panel analyzed the Commerce Department’s methodology for calcu-
lating a dumping margin. As the Panel observed, under 19 U.S.C. section
1677b(a), Commerce can calculate a dumping margin by comparing U.S. sales
to, in order of priority, home market sales, third country sales and constructed
value.’ Commerce did not use home market sales.” The Panel held defective
and remanded Commerce’s findings that the home market sales of the two com-
panies were inadequate to use as a basis for foreign market value. 9 On remand,
Commerce simply gave a better explanation for its decision.” The parties again
asked for panel review and, this time, the Panel directed Commerce to use home
market sales as a basis for comparison.9′ On the second remand, Commerce
complied with the Panel’s directive and calculated the margins based on the
home market prices of the two companies.’ The dumping margins vanished.
The Panel was able to change the result of the case because the U.S. government
was bound by the Panel’s decision.
The second occasion on which the binding nature of a panel’s decision was
tested involved Pork (injury).93 In that case, the Panel reviewed the ITC’s deci-
sion that the U.S. industry was threatened with material injury by reason of sub-
sidized pork imports from Canada. The Panel found that several of the ITC’s
findings “rely heavily or flow directly from faulty use of statistics.” 4 It
remanded for the ITC to reconsider its findings.95
The ITC, realizing the weakness of its position on remand, reopened the
record.96 It attempted to strengthen the basis for its findings and then reissued
the same decision. 7 The Canadian parties asked the Panel to consider the ITC’s
of Chapter 19 binational panel review (H.R. Doc. No. 216, 100th Cong., 2d Sess. 264 (1988)).
Also, the implementing legislation created an exception for binational panel review for any con-
stitutional challenges of the anti-dumping or countervailing duty laws (ibid.)
s6USA-89-1904-01 (Ch. 19 Panel) (on file with authors).
871bid. at 15-16.
88lbid. at 2.
891bid. at 25.
9 Department of Commerce Determination on Remand, Red Raspberries from Canada (26 Jan-
uary 1990), USA-89-1904-01.
91Red Raspberries from Canada, supra, note 86.
92Red Raspberries from Canada: Amended Final Results of Antidumping Duty Administrative
Review in accordance with Decision upon Remand, 55 Fed. Reg. 28074 (1990).
93Supra, note 9.
941bid.
951bid. Specifically, the Panel stated “that the ITC’s findings on the nature of Canadian subsidies,
the likelihood of increased Canadian pork exports, the likelihood of an increase in market pene-
tration ratios, price suppression, distribution channels, the imminence of threat of material injury
due to the counter-cyclical nature of the pork cycle and the vulnerability of the U.S. domestic
industry are all coloured by the questionable finding of greatly increased Canadian pork
production.”
96Fresh, Chilled, or Frozen Pork from Canada, 55 Fed. Reg. 39073 (1990).
97Fresh, Chilled, or Frozen Pork from Canada, Inv. No. 701-TA-298, USITC Pub. 2330 (Octo-
ber 1990).
1992]
PANELS & THE FTA
decision on remand, and the Panel did so.9″ This time, the Panel was explicit.
It noted that “the ITC’s record has been combed not once but twice in the search
for substantial evidence of material injury.”99 It found none, stating “that
the majority Commissioners’ findings of a threat of imminent material injury
are not supported by substantial evidence.””‘ The ITC then reversed its finding
of threat of injury, declaring that it was required to do so by the Panel’s direc-
tive.10’
Although the ITC reversal in the Pork (injury) case indicates that the U.S.
government honoured its commitment under FTA article 1904.9 to be bound by
the decisions of Chapter 19 panels, its statements and actions suggest that it was
doing so reluctantly. In the majority opinion on second remand, Commissioners
Rohr and Newquist repeatedly criticized the Panel’s decision and warned that
the decision would not impact their future practice.0 2 The U.S. Government, at
the urging of the ITC, requested an extraordinary challenge committee (ECC or
Committee) to review the Panel’s second remand to the ITC. The ECC upheld
the Panel decision. The United States then revoked the countervailing duty
order and refunded the duties deposited. 3
II. The Extraordinary Challenge Committee
FTA article 1904.13 allows a Party to challenge the decision of a binational
Panel in the following limited circumstances:
a) i) a member of the panel was guilty of gross misconduct, bias, or a serious
conflict of interest, or otherwise materially violated the rules of conduct,
ii) the panel seriously departed from a fundamental rule of procedure, or
iii) the panel manifestly exceeded its powers, authority or jurisdiction set
forth in this Article. [emphasis added] ‘”
In addition, the Party must show that the situation is so serious that at least
one of the actions in subparagraph (a) materially affected the panel’s decision
and poses a continued threat to the integrity of the binational panel review proc-
If an ECC finds that the narrow
ess should the decision be allowed to stand.”
grounds for an extraordinary challenge have been established, the ECC may
vacate or remand the binational panel decision.”
98Pork (injury), supra, note 9 at 7016-17.
991bid. at 7017.
10Ibid at 7025-26.
“”Fresh, Chilled or Frozen Pork from Canada: Second Remand, Inv. No. 701-TA-298, USITC
Pub. 2362 (February 1991).
‘0 2Ibid.
103Fresh, Chilled and Frozen Pork from Canada: Revocation of Countervailing Duty Order and
Tenninating of Administrative Review, 56 Fed. Reg. 29464 (1991). A separate Chapter 19 Panel
had overruled the Department of Commerce on several aspects of the subsidy finding, but the rev-
ocation of the order made further compliance unnecessary.
“‘4Supra, note 1, art. 1904.13.
’05Ibid. art. 1904.13(b).
“61bid. annex 1904.13.
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[Vol. 37
The drafters of the extraordinary challenge process expected that it would
be used infrequently,”‘ and, in fact, it has been invoked in only one case: the
Pork case. 8 The Committee’s decision makes it likely that challenges will con-
tinue to be infrequent.
On 29 March 1991, the Government of the United States, at the urging of
the petitioner, requested the formation of an ECC to review the issues raised by
the Panel’s second remand decision. The ECC consisted of two retired Canadian
justices and one retired United States judge.” Although FTA annex 1904.13(2)
provides that decisions should typically be rendered within 30 days, the ECC
announced that it would require 60 days to make its decision. It also arranged
to hear oral arguments in the case although FTA Annex 1904.13 contains no
express provision for oral argument.
Those challenging the Panel’s decision argued, inter alia, that the Panel
failed to apply U.S. law because it relied on FTA –
prin-
ciples of due process and issued a more restrictive remand than would be
allowed under U.S. law.”‘ Respondents argued that the Panel correctly applied
the PTA and U.S. law, and that the panel review process would be threatened
if appeals became politicized and routine.”‘
rather than U.S. –
Political pressure played a major role in the Pork case because the deadline
for the USTR’s decision to invoke the ECC process fell at the same time Con-
gress was deciding whether to extend fast-track legislation”2 for an additional
two years. In light of its ambitious trade agenda, including the North American
Free Trade Agreement and Uruguay Round negotiations, the Administration
was anxious for Congress to extend fast-track authority. The National Pork Pro-
ducers Council (NPPC) filed its petition urging an extraordinary challenge on
11 March 1991, and between 11 March and 29 March, United States Trade Rep-
resentative Carla Hills received a series of multiple signature letters from
approximately 90 Members of Congress encouraging her to request an ECC.”3
The implicit message of the letters was that support for fast-track extension was
dependent on a request for an ECC. Although Ambassador Hills had stated at
a House Agriculture hearing on 13 March 1991 her belief that the Extraordinary
‘TTestimony of M. J. Anderson, Chief Counsel for International Trade, U.S. Dept. of Commerce
Subcommittee on Courts, Civil Liberties and the Administration of Justice of the Committee on
the Judiciary, U.S. H.R., 100th Cong., 2d Sess. 69 at 75-76 (1988).
‘Supra, note 55.
“39Sitting U.S. judges cannot serve as arbitrators, so retired judges sit on the ECCs (Code of
Judicial Conduct, Canon 4F (1991)).
0See Brief of the International Trade Commission before the ECC (19 April 1991) at 72 [here-
inafter ITC Brief].
“‘See Brief of the Government of Canada before the ECC (19 April 1991) at 57.
2Under the U.S. Constitution, the President of the United States has the power to negotiate trade
1
agreements, but Congressional legislation is required to implement them. Congress’ power of amend-
ment encourages special interest groups to tinker with negotiated agreements and thereby undermines
the President’s credibility at the bargaining table. Therefore, Congress approved, in the Trade Act of
1974, an alternative method of approval: the fast-track process. With fast-track, the House and Senate
have limited periods of time during which they may approve or reject legislation implementing a
negotiated trade agreement. The legislation cannot be amended (19 U.S.C. 2191 (1988)).
” 3Brief of the Government of Canada, supra, note 111 at 11.
19921
PANELS & THE FTA
Challenge Procedure was aimed at improprieties,” 4 she succumbed to the polit-
ical pressure (specifically, a promise of three Senate votes in favour of fast-
track) on 29 March 1991 and requested formation of an ECC based on the less
serious ground of failure to correctly apply United States law.
On 14 June 1991, the ECC issued a unanimous decision in favour of the
Canadian interests.”‘ In doing so, the Committee upheld the binational Panel’s
decision. The Panel had found that a decision by the ITC was unsupported. 16
As a consequence of the Committee’s ruling, countervailing duties on Canadian
pork imports were refunded and no further duties can be imposed.
The Committee’s decision strengthens the FTA’s binational panel review
process. The Committee emphasized the extremely narrow three-prong standard
of review for challenges.” 7 It stated that the three-prong requirement “provides
explicit, narrow grounds for extraordinary challenges and makes clear that an
extraordinary challenge is not intended to function as a routine appeal.””‘ The
‘mate-
Committee noted that words “such as ‘gross,’ ‘serious,’
rially,’ ‘manifestly,’ and ‘threatens,’ which appear in the statute, highlight the
Committee’s formidable standard of review.”9 Further, the Committee opined
that an ECC was not like an appellate court 2′ and that the short 30-day “typical”
period for a challenge makes it “clear that a committee is not intended to con-
duct an in-depth review regarding the merits of the investigation within such a
short time frame.””
‘fundamental,’
The Committee came close to reprimanding the USTR for bringing the
challenge. In dismissing the challenge, the Committee stated that “the allega-
tions do not meet the threshold for an extraordinary challenge.”‘2
The Committee’s decision also affirms that binational panels have broad
authority. The ITC had argued that the panels could only give open-ended
remands and that the Panel went too far in creating a rule of finality.”z The
Committee disagreed. It held that “there are no restrictions on the Panel’s power
to remand with or without instructions to the competent investigating author-
ity.”’24 By upholding the Panel’s authority to limit remands, the Committee re-
“4See statement of Ambassador Carla Hills, United States Trade Representative, Hearing on
Fast Track Trade Negotiation Authority before the House Committee on Agriculture, 102d Cong.,
1st Sess. (13 March 1991).
lsPork, supra, note 55.
116 Ibid. at 7041.
17 Ibid. The criteria for invoking an ECC are the same as those for a decision on the merits
(supra, note 1, art. 1904(13)).
“‘Pork, ibid. at 7041 (citing statement of Administrative Action, United States-Canada Free Trade
Agreement at 116, reprinted in H.R. Doc. No. 216, 100th Cong., 2d Sess. at 163, 278 (1988)).
“glbid.
12OIbid.
12’Ibid. at 7042.
12’bid. at 7038-39.
123The ITC and the petitioner both argued that an infinite number of remands are required (ITC
Brief, supra, note 110); see also Brief of the National Pork Producers Council (19 april 1991) at
32, 34.
124Pork, supra, note 55 at 7043.
McGILL LAW JOURNAL
[Vol. 37
cognized the FTA’s goals of speedy and inexpensive review, which it cited in the
decision.”z
In sum, the Committee’s decision should have the effect of making chal-
lenges to panel decisions very infrequent. The challenge process is functioning
as intended by both countries.
I. The FTA Dispute Resolution Panels as a Model for Other Negotiations
The FTA binational panels have been one of the most successful compo-
nents of the FTA. They already have served as an impetus for other agreements,
specifically the steel consensus agreements of 1989. It is possible that some ele-
ments of the panels could be adopted by the GAiT.
A. Steel Consensus Arrangements of 1989
In 1989, the United States entered into steel consensus agreements with the
major exporters of steel to the United States.’26
The purpose of the agreements was to eliminate or restrict subsidies and
reduce both tariff and non-tariff barriers affecting steel trade. As part of each of
those agreements there is a dispute settlement agreement that draws on the FTA
panels (as well as the World Bank’s International Centre for the Settlement of
Investment Disputes) 27 as a model.
The steel consensus agreements all adopt the basic dispute resolution struc-
ture of the FTA panels. It is useful to compare the U.S.-European Economic
Community Consensus Agreement” (U.S.-EC Agreement), which is typical of
the steel consensus arrangements, with the FTA.
The U.S.-EC Agreement mirrors the FTA in establishing firm dates by
which various types of action must occur. The time period for the United States
and the EC to settle a dispute under the U.S.-EC Agreement by consultation is
15 days compared to the 30 days allowed by Chapter 18.I2″ Thereafter, as under
Chapter 18, either party can refer a matter to arbitration and appoint an arbitra-
tor. ‘3 The other party then has 15 days to appoint its arbitrator. Thus, within 15
days of the request for arbitration, two of the three arbitrators are appointed.
Similarly, under Chapter 18, four of the five panelists are appointed by day
15. 13 In contrast, Chapter 19 of the ETA provides for the appointment of four
panelists within 30 days.3 2
121bid. at 7042.
126Specifically, the United States concluded steel agreements with Australia, Austria, Brazil,
Czechoslovakia, the European Community, Finland, Hungary, Japan, Mexico, the People’s Repub-
lic of China, Poland, the Republic of Korea, Romania, Sweden, Trinidad and Tobago, Venezuela,
and Yugoslavia.
127As established under the Convention on the Settlement of Investment Disputes, 18 March
1965, 17 U.S.T. 1270, T.I.A.S. No. 6090, 575 U.N.T.S. 159 (in force 14 October 1966), art. 1.
128EC, O.J. Legislation (1989) No. L1368 at 139 [hereinafter U.S.-EC Agreement].
129Supra, note I, art. 1807(l).
130Compare U.S.-EC Agreement, supra, note 128, art. 5(2) with FTA, ibid. art. 1807(2).
’31FTA, ibid. art. 1807(3).
‘321bid, annex 1901.2(2).
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PANELS & THE FTA
The length of time for selection of the third arbitrator is shorter than for the
selection of the fifth FTA panelist. The two arbitrators have 15 days to appoint
a third arbitrator,’33 whereas under Chapter 19 of the FTA Parties have an addi-
tional 25 days to select the fifth panelist, 1″ and under Chapter 18 of the FTA,
if the Parties fail to agree on the fifth panelist, the other panelists must select
the fifth panelist within 30 days of the establishment of the panel.’35
The U.S.-EC Agreement follows Chapter 19 of the FTA in providing for a
random selection process in the event there is no agreement on the swing vote
arbitrator.’36 One major distinction between the FTA and the U.S. -EC Agreement
is that under the former, the swing vote is a national of either Canada or the
United States, 37 whereas under the latter, the swing vote is not a national of
either party. 3’
Both the PTA and the U.S.-EC Agreement provide that the panelists (or
arbitrators) cannot “take instructions” from either Party. 139 While the FTA
merely points out that the panelists shall be objective, the U.S.-EC Agreement
goes a step further and directs that the arbitrators “shall not have a financial
interest in the dispute.”‘”‘ However, the FTA does provide for the establishment
of a code of conduct, 14′ and that code provides that a panelist shall not have a
financial interest in the case. 42
The U.S.-EC Agreement follows Chapter 18 of the FTA in the method for
appointing a chairman. The U.S.-EC Agreement provides that the neutral person
shall be the chairman.Y3 The FTA provides in Chapter 18 that the fifth panelist
shall chair the panel.’ 4 In contrast, Chapter 19 of the FTA provides that the pan-
elists shall elect a chairman from among the lawyers on the panel.’ 4
1
While Chapter 19 of the FTA requires that a majority of the panelists on
each panel be lawyers,'” the U.S.-EC Agreement mirrors Chapter 18 of the FTA
and does not specify that any arbitrators need be lawyers. Since Chapter 18 pan-
elists and the U.S.-EC Agreement arbitrators do not have to grapple with the
intricate anti-dumping and countervailing duty laws, they may have less of a
need for a legal background than Chapter 19 panelists. 47
133Supra, note 128, art. 5(2).
134Supra, note 1, annex 1901.2(3).
135Ibid. art. 1807(3).
136Supra, note 128, art. 5; FTA, ibid. annex 1901.2(3).
137The fifth panelist is selected from the roster of panelists. FTA, ibid., annex 1901.2(1). Each
of the candidates on the roster must be a citizen of Canada or the United States.
138Supra, note 128, art. 5.
139FTA, supra, note 1, art. 1807(1), annex 1901.2(1); U.S.-EC Agreement, supra, note 128, art.
5(2).
140Ibid.
141Supra, note 1, art. 1910, annex 1901.2(6).
‘4 2Code of Conduct for Proceedings under Chapters 18 and 19 of the United States-Canada
Free-Trade Agreement, 54 Fed. Reg. 14371 (1989), C. Gaz. 1989.1.96.
143Supra, note 128, art. 5.
‘4Supra, note 1, art. 1807(4).
1451bid. annex 1901.2(4).
461bid annex 1901.2(2).
147Interestingly, only three of the six present ITC commissioners, whose decisions the Chapter
19 panelists examine, are lawyers.
REVUE DE DROIT DE McGILL
[Vol. 37
The U.S.-EC Agreement also follows the FTA in that it provides for the
establishment of rules of procedure. 4 Similarly, both the U.S.-EC Agreement
and the FTA provide for written submissions and oral argument. 49 The U.S.-EC
Agreement follows Chapter 18 in leaving the time frame for written submissions
and oral argument to the rules of procedure. 5 In contrast, Chapter 19 sets expli-
cit guidelines.’
The U.S.-EC Agreement differs from the FTA concerning costs associated
with the panels. Chapter 19 of the FTA provides that the costs of panelists are
to be borne equally by the Parties,’52 and Chapter 18 is silent as to the costs. In
comparison, under the U.S.-EC Agreement, each party bears the cost of its own
arbitrator and the parties split the Chairperson’s costs and remaining costs.’
The FTA’s approach seems more even-handed. By providing that the costs are
divided equally for all panelists, the FTA makes it less likely that the panelists
consider themselves U.S. panelists and more likely that they consider them-
selves panelists for the Parties.”M In any event, one party should not be allowed
to pay “its” arbitrator more than the other party’s arbitrator.
The U.S.-EC Agreement, like Chapter 19 of the FTA, provides a deadline
for the decision and requires that decisions be made by majority vote. 5 Only
Chapter 18 specifies that panelists may furnish separate opinions on matters not
unanimously agreed upon.’56 The deadline for the arbitrators’ decision (three
months from the appointment of the chairperson), is identical for the U.S.-EC
Agreement and Chapter 18 of the FTA. 57 This deadline is much shorter than that
for the panelists’ decision under Chapter 19 (315 days after the request for panel
review is filed). 5
The U.S.-EC Agreement provides for a preliminary remedy to offset the
effects of a violation of the agreement. 9 Similarly, Chapter 18 provides for the
issuance of an initial report.”6
Both the U.S.-EC Agreement and Chapter 19 of the FTA require that the
panel’s decision be binding. 6′ However, the U.S.-EC Agreement, like Chapter
18, provides for situations where the parties do not implement the panel’s deci-
sion. The U.S.-EC Agreement provides that if the United States or the EC fails
148U.S.-EC Agreement, supra, note 128, art. 5; FTA, supra, note 1, art. 1807(4), art. 1904(14).
149U.S.-EC Agreement, ibid.; FTA, ibid.
150U.S.-EC Agreement, ibid.; FTA, ibid. art. 1807(4).
1511bid. art. 1904(14).
1521bid. annex 1901.2(13).
153Supra, note 128, art. 5.
‘4In addition, since most Chapter 19 panels have been convened in the United States, requiring
each Party to bear expenses for its selections could disadvantage Canada. Its panelists have to
travel to Washington, D.C. whereas most of the U.S. panelists reside in the Washington, D.C. area.
155Supra, note 128, art. 5; FTA, supra, note 1, art. 1904(14), annex 1901.2(5).
1561bid. art. 1807(5).
157Compare U.S.-EC Agreement, supra, note 128, art. 5(4) with FTA, ibid. art. 1807(5).
158Art. 5 of the U.S.-ECAgreement, ibid., permits the 30-day deadline to be extended if”extraor-
dinary circumstances” prevent the panel from meeting the deadline.
1591bid. art. 5.
16’Supra, note 1, art. 1807(6).
161ETA, ibid. art. 1904(9); U.S.-EC Agreement, supra, note 128, art. 5(7).
1992]
PANELS & THE FTA
to implement the panel’s decision and the two parties are unable to agree on
appropriate compensation or other remedial action, “then the other party may
propose to the panel suspension of equivalent benefits under the Agreement to
the non-complying party.”‘ 62 Likewise, Chapter 18 provides that if the matter is
not satisfactorily resolved, a Party “shall be free to suspend the application to
the other Party of benefits of equivalent effect until such time as the Parties have
reached agreement on a resolution of the dispute.”’63 Thus, under both the
U.S.-EC Agreement and Chapter 18, if the parties do not implement the panel’s
decision, they can agree on compensation or some other remedy. If this fails, the
injured party can retaliate.”6
B. GATT
GATT panel dispute resolution could be improved by incorporating some
aspects of FTA panels into the GATT system.
One of the past criticisms made against GATT dispute resolution was that
the process was too lengthy. The Montreal Understanding of 1989 165 provided
for firm deadlines, but proceedings can still be longer than under Chapter 19.
To cure this problem of delay, GATT could adopt time limits such as those in
the FTA.
Another major weakness of the GATT panels is that a member State can
block the decision.”6 The FTA panels have shown that member States can
accept binding dispute resolution and not suffer dreadful consequences when
agreeing to be bound by a panel’s decision. GATT members, too, could agree
to give binding effect in a timely manner to panel decisions. 67
Conclusion
FTA panels deserve high marks for their successful performance to date.
They have issued timely, well crafted, and impartial decisions. The panelist
selection process has been amicable, and the Parties have given the panel deci-
sions binding effect. The ECC process is working well. There has been only one
challenge, and the decision in that case (upholding the Panel’s decision) estab-
lishes that challenges should be infrequent.
The efficiency of the FTA panels is widely acknowledged in the intema-
tional legal community. They have already served as an inspiration for other
agreements. They also provide useful precedents for reform of the GATT dis-
pute resolution processes.
162U.S.-EC Agreement, ibid.
‘ 63Supra, note 1, art. 1807(9).
164Ibid.
165GATr C.P. Dec. L/6489, 45th sess., 36th supp. B.I.S.D. (1990) 61.
166See, for example, Canada – Imposition of Countervailing Duties on Inputs of Manufacturing
Beef from the EEC (13 October 1987) (blocked by the Government of Canada); United States –
Definition of Industry Concerning Wine and Grape Products (24 March 1986) (blocked by the
United States).
167See Draft Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Nego-
tiations, MTN.TNC/W/35 at 296-97 (26 November 1990).
McGILL LAW JOURNAL
[Vol. 37
APPENDIX ONE
Value of U.S./Canada Trade Affected by the Dispute Panel Appeals
(US$ 1,000 Dollars)
Product
Dried Salted Codfish
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 Last Year
Reported
27,798
35.115 32,917 26.370 27,798
364,216 428,000 352,510
352,510
1,800
2,228
7,009
Fresh, Chilled or
Frozen Pork
New Steel Rails
Oil Country Tubular Goods
117,000 22,000 104,000
Red Raspberries (1)
4.136
7.548
9.535
5.382
Steel Piling
980
Integral Horsepower
Induction Motors (2)
Polyphase Induction
Motors (2)
8,398
8,398
8.398
8.398
8,398
1,427
7.009
104,000
5.382
980
8,398
1,427
9,732
52,137
Iron Construction Castings
5,916
9.732
Live Swine
Beer
14.747 18.790 66,101 52.137
Source: 1) USITC Publications 1212, 1565. 1711. 1747, 2135, 2518, 1811. 1733.
Since the information is drawn from the ITC Reports, it does not include data
from years not reviewed by the ITC. The information does not account for
inflation.
Value of the trade affected by the panel decision, Parts forSelf-PropelledBitu-
minous Paving Equipment from Canada,
malion is confidential and not available to the public.
2) Report EM-545, “US Exports of Domestic & Foreign Merchandise”
is not included. The necessary Infor-
Note (1): Import value is the product of the quantity of U.S. imported red raspberries
for consumption from Canada and the average U.S. market price for frozen
red raspberries.
(2): Figures are approximate values collected through informal discussions with
Canadian government officials.
29.243
29,243
Total Last Year Reported
In US Dollars
Total Last Year Reported
in Canadian Dollars
(Exchange Rate = 0.8398)
~88
1992]
PANELS & THE FTA
APPENDIX TWO
Table 1
LENGTH OF CHAPTER
JANUARY 1989-JULY 1991
19 PANEL REVIEW –
Date of
Panel Request
3/15/89
Date of
Panel Action
12/15/89 (r)
Days from Panel Request
to Panel Action
275
12/15/89 (t)
3/07/90 (a)
9/28/90 (r)
6/08/90 (r)
3/16/89
4/26/89
4/26/89
6/07/89
8/22/89
9/01/89
9/01/89
1/24/90 (a)
3/07/90 (a)
Case
USA-89-1904-01
Red Raspberries from Canada
USA-89-1904-02
Replacement Parts for Self-
Propelled Bituminous Paving
Equipment from Canada
USA-89-1904-03
Replacement Parts for Self-
Propelled Bituminous Paving
Equipment from Canada
USA-89-1904-04
Dried, Heavy, Salted Codfish
from Canada
USA-89-1904-05
Replacement Parts for Self-
Propelled Bituminous Paving
Equipment From Canada
USA-89-1904-06
Fresh, Chilled and Frozen Pork
from Canada
USA-89-1904-07
New Steel Rail, Except Light
Rail, from Canada
USA-89-1904-08
New Steel Rail, Except Light
Rail, from Canada
USA-89-1904-09
New Steel Rail, Except Light
Rail, from Canada
USA-89-1904-10
New Steel Rails from Canada
USA-89-1904-11
Fresh, Chilled or Frozen Pork
from Canada
CDA-89-1904-01
Polyphase Induction Motors
from the U.S.
USA-90-1904-02
Oil Country Tubular Goods
from Canada
USA-90-1904-01
Replacement Parts for Self-
Propelled Bituminous Paving
Equipment from Canada
(r) = remand; (a) = affirmed; (t) = terminated.
Mean time to panel action = 319 days.
Median time to panel action = 315 days.
– Terminated cases not included in calculation of mean and median.
* Two cases were delayed due to the replacement of a panelist. A conflict of interest was cited in each of
these two cases. The third case was delayed due to technical problems the U.S. Department of Commerce
experienced with regard to its trade analysis.
Source: United States-Canada FTA Binational Secretariat Caseload Report, June 1991.
8/13/90 (a)
8/13/90 (a)
10/02/89
10/13/89
11/05/90
1/22/91 (t)
6/14/90
5/24/91 (r)
5/01/89
3/12/90 (t)
8/30/90 (a)
8/24/90 (r)
10/02/89
596
REVUE DE DROIT DE McGILL
[Vol. 37
APPENDIX TWO
Table 2
LENGTH OF BINATIONAL PANEL REMANDS
JANUARY 1989-JULY 1991
Days from
Second Remand
to Date of
Completion
Review
Date of
Panel
Remand
Date of
First
Decision
Date of
Second
Panel
Decision
Days from
First Remand
to Second
Panel Review
108
158
9/28/90
3/7/91
12/15/89
4/2/90
6/18/90
Completion
of Case
89-1904-01
Red Raspberries
from Canada
89-1904-06
Fresh, Chilled and
Frozen Pork
from Canada
89-1904-11
Fresh, Chilled and
Frozen Pork
from Canada
89-1904-07
New Steel Rail,
Except Light Rail,
from Canada
Source: United States-Canada FIA Binational Secretariat Caseload Report, June 1991.
Mean time for first remand = 125 days.
Median time for first remand = 130 days.
Mean time for second remand = 88 days.
Median time for second remand = 77 days.
* USTR requested that the Extraordinary Challenge Committee review the case on this date.
3/29/91 *
8/27/90
8/24/90
1/22/91
152
6/8/90
80
N/A
7/5/91
77
120
66
N/A
