Secretariat Support for Ad Hoc Panels under Canada's Free Trade Agreements: Challenges and Options

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Executive Summary


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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