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This memorandum explores the viability of making use of third-party secretariat institutions to administer state-to-state disputes under Canada’s free trade agreements (“FTAs”) in order to respond to a range of difficulties faced by ad hoc panels constituted under FTAs. This memorandum examines the dispute settlement systems of five of Canada’s free trade agreements (“FTAs”): the North American Free Trade Agreement (“NAFTA”), the Comprehensive Economic and Trade Agreement (“CETA”), the Comprehensive and Progressive Trans-Pacific Partnership (“CPTPP”), the Canada-Korea Free Trade Agreement (“CKFTA”) and the Canada-Chile Free Trade Agreement (“CCFTA”).
In conducting a general overview of dispute settlement under FTAs and under the World Trade Organization (“WTO”), we note several factors that help to explain states’ preference for WTO dispute settlement to resolve trade disputes. State-to-state dispute settlement under Canada’s FTAs has been rare: to date, there have been no disputes under FTAs other than NAFTA and its predecessor, the Canada-United States Free Trade Agreement (“CUSFTA”). Since the early 2000s, NAFTA Chapter 20 has fallen out of use as well. In contrast, states have consistently and frequently submitted disputes to the WTO for adjudication, including some that could have been resolved under FTAs existing between the parties to the dispute. One of the main differences between WTO and FTA dispute settlement relates to secretariat support. A permanent WTO Secretariat, with demonstrated legal, administrative and logistical competence, assists WTO panels. Panels constituted under FTAs do not benefit from a comparable level of secretariat support and this has led to difficulties and inefficiencies. Dispute settlement at the WTO provides a number of other advantages, the most notable being the automaticity of panel composition. Panel composition under some FTAs can, and has, been blocked. Designating secretariats as appointing authorities could help respond to this issue. Improving the delivery and expanding the scope of secretariat services provided to panels could thus alleviate some of the potential weaknesses of dispute settlement mechanisms (“DSM”) under Canada’s FTAs.
However, establishing new or expanded permanent secretariats under each of Canada’s FTAs is unrealistic in light of cost considerations and the expected frequency of litigation. A potential solution is to refer the administration of disputes to third-party secretariat institutions. This memorandum provides an analysis of the viability of using three such institutions for this purpose: the WTO Secretariat, the International Centre for Settlement of Investment Disputes (“ICSID”), and the Permanent Court of Arbitration (“PCA”). This memorandum identifies the WTO Secretariat as the ideal body to support panels constituted under FTAs due to its unparalleled experience supporting panels hearing state-to-state trade disputes as well as its institutional knowledge of WTO jurisprudence and procedural issues. However, legal, political, and practical constraints will likely preclude it from fulfilling this function in the near future. ICSID offers a range of secretariat services to panels presiding over state-to-state disputes distinct from those it provides for tribunals constituted under the ICSID Convention and the Additional Facility Rules. However, ICSID’s expertise is largely limited to the field of investment. Similarly, the PCA also offers secretariat services to panels hearing state-to-state disputes and has broader experience outside of the investment context when compared to ICSID. Both ICSID and the PCA provide a variety of administrative services that could be accessed under Canada’s FTA and offer interested parties a great degree of flexibility when determining what services are needed to support a panel and when establishing timetables, rules of procedure, and the panel selection process, among other important considerations. We compare the relative strengths and weakness of the institutions and conclude that, on balance, the PCA offers the most advantageous package, closely followed by ICSID. While the WTO Secretariat possesses greater institutional knowledge and experience in international trade law and in administering state-to-state disputes, recourse to the PCA and ICSID is more practical based on the text of their governing treaties and taking into account political considerations.
Finally, the memorandum considers potential issues that could complicate retaining third party secretariat services arising from the text of the general state-to-state dispute settlement chapters of the NAFTA, CETA, CPTPP, CKFTA and CCFTA. Due to the flexible nature of the services provided by ICSID and the PCA, issues related to dispute settlement timetables, panel selection procedures and institutional provisions are not fatal to making use of those institutions for the administration of state-to-state trade disputes under the current language of Canada’s FTAs.
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