Chapter Twenty

Institutional Arrangements

and Dispute Settlement Procedures

Subchapter A - Institutions

Article 2001: The Free Trade Commission

1. The Parties hereby establish the Free Trade Commission,

comprising cabinet-level representatives of the Parties or their

designees.

2. The Commission shall:

(a) supervise the implementation of this Agreement;

(b) oversee its further elaboration;

(c) resolve disputes that may arise regarding its

interpretation or application;

(d) supervise the work of all committees and working groups

established under this Agreement, referred to in Annex

2001.2; and

(e) consider any other matter that may affect the operation

of this Agreement.

3. The Commission may:

(a) establish, and delegate responsibilities to, ad hoc or

standing committees, working groups or expert groups;

(b) seek the advice of non-governmental persons or groups;

and

(c) take such other action in the exercise of its functions

as the Parties may agree.

4. The Commission shall establish its rules and procedures.

All decisions of the Commission shall be taken by consensus,

except as the Commission may otherwise agree.

5. The Commission shall convene at least once a year in regular

session. Regular sessions of the Commission shall be chaired

successively by each Party.

Article 2002: The Secretariat

1. The Commission shall establish and oversee a Secretariat

comprising national Sections.

2. Each Party shall:

(a) establish a permanent office of its Section;

(b) be responsible for

(i) the operation and costs of its Section, and

(ii) the remuneration and payment of expenses of

panelists and members of committees and scientific

review boards established under this Agreement, as

set out in Annex 2002.2;

(c) designate an individual to serve as Secretary for its

Section, who shall be responsible for its

administration and management; and

(d) notify the Commission of the location of its Section's

office.

3. The Secretariat shall:

(a) provide assistance to the Commission;

(b) provide administrative assistance to:

(i) panels and committees established under Chapter

Nineteen (Review and Dispute Settlement in

Antidumping and Countervailing Duty Matters), in

accordance with the procedures established

pursuant to Article 1908, and

(ii) panels established under this Chapter, in

accordance with procedures established pursuant to

Article 2012; and

(c) as the Commission may direct:

(i) support the work of other committees and groups

established under this Agreement, and

(ii) otherwise facilitate the operation of this

Agreement.

Subchapter B - Dispute Settlement

Article 2003: Cooperation

The Parties shall at all times endeavor to agree on the

interpretation and application of this Agreement, and shall make

every attempt through cooperation and consultations to arrive at

a mutually satisfactory resolution of any matter that might

affect its operation.

Article 2004: Recourse to Dispute Settlement Procedures

Except as otherwise provided in this Agreement, the dispute

settlement provisions of this Chapter shall apply with respect to

the avoidance or settlement of all disputes between the Parties

regarding the interpretation or application of this Agreement or

wherever a Party considers that an actual or proposed measure of

another Party is or would be inconsistent with the obligations of

this Agreement or cause nullification or impairment in the sense

of Annex 2004.

Article 2005: GATT Dispute Settlement

1. Subject to paragraphs 2, 3 and 4, disputes regarding any

matter arising under both this Agreement and the General

Agreement on Tariffs and Trade, any agreement negotiated

thereunder, or any successor agreement (GATT), may be settled in

either forum at the discretion of the complaining Party.

2. Before a Party initiates a dispute settlement proceeding in

the GATT against another Party on grounds that are substantially

equivalent to those available to that Party under this Agreement,

that Party shall notify any third Party of its intention. If a

third Party wishes to have recourse to dispute settlement

procedures under this Agreement regarding the matter, it shall

inform promptly the notifying Party and those Parties shall

consult with a view to agreement on a single forum. If those

Parties cannot agree, the dispute normally shall be settled under

this Agreement.

3. In any dispute referred to in paragraph 1 where the

responding Party claims that its action is subject to Article 104

(Relation to Environmental and Conservation Agreements) and

requests in writing that the matter be considered under this

Agreement, the complaining Party may, in respect of that matter,

thereafter have recourse to dispute settlement procedures solely

under this Agreement.

4. In any dispute referred to in paragraph 1 that arises under

Subchapter Seven-B (Sanitary and Phytosanitary Measures) or

Chapter Nine (Standards-Related Measures).

(a) concerning a measure adopted or maintained by a Party

to protect its human, animal, or plant life or health,

or to protect its environment; and

(b) that raises factual issues concerning the environment,

health, safety or conservation, including directly

related scientific matters,

where the responding Party requests in writing that the matter be

considered under this Agreement, the complaining Party may, in

respect of that matter, thereafter have recourse to dispute

settlement procedures solely under this Agreement.

5. The responding Party shall deliver a copy of a request made

pursuant to paragraph 3 or 4 to the other Parties and to its

Section of the Secretariat. Where the complaining Party has

initiated dispute settlement proceedings regarding any matter

subject to paragraph 3 or 4, the responding Party shall deliver

its request no later than 15 days thereafter. Upon receipt of

such request, the complaining Party shall promptly withdraw from

participation in those proceedings and may initiate dispute

settlement procedures under Article 2007.

6. Once dispute settlement procedures have been initiated under

Article 2007 or dispute settlement proceedings have been

initiated under the GATT, the forum selected shall be used to the

exclusion of the other, unless a Party makes a request pursuant

to paragraph 3 or 4.

7. For purposes of this Article, dispute settlement proceedings

under the GATT are deemed to be initiated by a Party's request

for a panel, such as under Article XXIII:2 of the General

Agreement on Tariffs and Trade 1947, or for a committee

investigation, such as under Article 20.1 of the Customs

Valuation Code.

Consultations

Article 2006: Consultations

1. Any Party may request in writing consultations with any

other Party regarding any actual or proposed measure or any other

matter that it considers might affect the operation of this

Agreement.

2. The requesting Party shall deliver the request to the other

Parties and to its Section of the Secretariat.

3. Unless the Commission otherwise provides in its rules and

procedures established under Article 2001(4), a third Party that

considers it has a substantial interest in the matter shall be

entitled to participate in the consultations on delivery of

written notice to the other Parties and to its Section of the

Secretariat.

4. Consultations on matters regarding perishable agricultural

goods shall commence within 15 days of the date of delivery of

the request.

5. The consulting Parties shall make every attempt to arrive at

a mutually satisfactory resolution of any matter through

consultations under this Article or other consultative provisions

of this Agreement. To this end, the consulting Parties shall:

(a) provide sufficient information to enable a full

examination of how the actual or proposed measure or

other matter might affect the operation of this

Agreement;

(b) treat any confidential or proprietary information

exchanged in the course of consultations on the same

basis as the Party providing the information; and

(c) seek to avoid any resolution that adversely affects the

interests under this Agreement of any other Party.

Initiation of Procedures

Article 2007: Commission - Good Offices, Conciliation and

Mediation

1. If the consulting Parties fail to resolve a matter pursuant

to Article 2006 within:

(a) 30 days of delivery of a request for consultations;

(b) 45 days of delivery of such request if any other Party

has subsequently requested or has participated in

consultations regarding the same matter;

(c) 15 days of delivery of a request for consultations in

matters regarding perishable agricultural goods; or

(d) such other period as they may agree,

any such Party may request in writing a meeting of the

Commission.

2. A Party may also request in writing a meeting of the

Commission where:

(a) it has initiated dispute settlement proceedings under

the GATT regarding any matter subject to Article

2005(3) or (4), and has received a request pursuant to

Articles 2005(5) for recourse to dispute settlement

procedures under this Chapter; or

(b) consultations have been held pursuant to Article 513

(Working Group on Rules of Origin), Article 765

(Sanitary and Phytosanitary Measures - Technical

Consultations) and Article 914 (Standards-Related

Measures - Technical Consultations).

3. The requesting Party shall state in the request the measure

or other matter complained of and indicate the provisions of this

Agreement that it considers relevant, and shall deliver the

request to the other Parties and to its Section of the

Secretariat.

4. Unless it decides otherwise, the Commission shall convene

within 10 days of delivery of the request and shall endeavor to

resolve the dispute promptly.

5. The Commission may:

(a) call on such technical advisers or create such working

groups or expert groups as it deems necessary;

(b) have recourse to good offices, conciliation, mediation

or such other dispute resolution procedures; or

(c) make recommendations,

as may assist the consulting Parties to reach a mutually

satisfactory resolution of the dispute.

6. Unless it decides otherwise, the Commission shall

consolidate two or more proceedings before it pursuant to this

Article regarding the same measure. The Commission may

consolidate two or more proceedings regarding other matters

before it pursuant to this Article that it determines are

appropriate to be considered jointly.

Panel Proceedings

Article 2008: Request for an Arbitral Panel

1. If the Commission has convened pursuant to Article 2007(4),

and the matter has not been resolved within:

(a) 30 days thereafter;

(b) 30 days after the Commission has convened in respect of

the matter most recently referred to it, where

proceedings have been consolidated pursuant to Article

2007(6); or

(c) such other period as the consulting Parties may agree,

any consulting Party may request in writing the establishment of

an arbitral panel. The requesting Party shall deliver the

request to the other Parties and to its Section of the

Secretariat.

2. Upon delivery of the request, the Commission shall establish

an arbitral panel.

3. A third Party that considers it has a substantial interest

in the matter shall be entitled to join as a complaining Party,

on delivery of written notice of its intention to participate to

the disputing Parties and its Section of the Secretariat. Such

notice shall be delivered at the earliest possible time, and in

any event no later than seven days after the date of delivery of

a request by a Party for the establishment of a panel.

4. If such Party does not join as a complaining Party in

accordance with paragraph 3, it normally shall refrain thereafter

from initiating or continuing:

(a) a dispute settlement procedure under this Agreement; or

(b) a dispute settlement proceeding in the GATT on grounds

that are substantially equivalent to those available to

that Party under this Agreement,

regarding the same matter in the absence of a significant change

in economic or commercial circumstances.

5. Unless otherwise agreed by the disputing Parties, the panel

shall be established and perform its functions in a manner

consistent with the provisions of this Chapter.

Article 2009: Roster

1. The Parties shall establish and maintain a roster of up to

30 individuals who are willing and able to serve as panelists.

The roster members shall be appointed by consensus for terms of

three years, and may be reappointed.

2. Roster members shall:

(a) have expertise or experience in law, international

trade, other matters covered by this Agreement, or the

resolution of disputes arising under international

trade agreements, and shall be chosen strictly on the

basis of objectivity, reliability and sound judgment;

(b) be independent of, and not be affiliated with or take

instructions from, any Party; and

(c) comply with a code of conduct to be established by the

Commission.

Article 2010: Qualifications of Panelists

1. All panelists shall meet the qualifications set out in

Article 2009(2).

2. Individuals may not serve as panelists for a dispute in

which they have participated pursuant to Article 2007(5).

Article 2011: Panel Selection

1. Where there are two disputing Parties, the following

procedures shall apply:

(a) The panel shall comprise five members.

(b) The disputing Parties shall endeavor to agree on the

chair of the panel within 15 days of the delivery of

the request for the establishment of the panel. If the

disputing Parties are unable to agree on the chair

within this period, the disputing Party chosen by lot

shall select within five days as chair an individual

who is not a citizen of that Party.

(c) Within 15 days of selection of the chair, each

disputing Party shall select two panelists who are

citizens of the other disputing Party.

(d) If a disputing Party fails to select its panelists

within such period, such panelists shall be selected by

lot from among the roster members who are citizens of

the other disputing Party.

2. Where there are more than two disputing Parties, the

following procedures shall apply:

(a) The panel shall comprise five members.

(b) The disputing Parties shall endeavor to agree on the

chair of the panel within 15 days of the delivery of

the request for the establishment of the panel. If the

disputing Parties are unable to agree on the chair

within this period, the Party or Parties on the side of

the dispute chosen by lot shall select within 10 days a

chair who is not a citizen of such Party or Parties.

(c) Within 15 days of selection of the chair, the Party

complained against shall select two panelists, one of

whom is a citizen of a complaining Party, and the other

of whom is a citizen of another complaining Party. The

complaining Parties shall select two panelists who are

citizens of the Party complained against.

(d) If any disputing Party fails to select a panelist

within such period, such panelist shall be selected by

lot in accordance with the citizenship criteria of

subparagraph (c).

3. Panelists shall normally be selected from the roster. Any

disputing Party may exercise a peremptory challenge against any

individual not on the roster who is proposed as a panelist by a

disputing Party within 15 days after the individual has been

proposed.

4. If a disputing Party believes that a panelist is in

violation of the code of conduct, the disputing Parties shall

consult and if they agree, the panelist shall be removed and a

new panelist shall be selected in accordance with this Article.

Article 2012: Rules of Procedure

1. The Commission shall establish Model Rules of Procedure, in

accordance with the following principles:

(a) The procedures shall assure a right to at least one

hearing before the panel as well as the opportunity to

provide initial and rebuttal written submissions.

(b) The panel's hearings, deliberations and initial report,

and all written submissions to and communications with

the panel shall be confidential.

2. Unless the disputing Parties otherwise agree, the panel

shall conduct its proceedings in accordance with the Model Rules

of Procedure.

3. Unless the disputing Parties otherwise agree within 20 days

from the date of the delivery of the request for the

establishment of the panel, the terms of reference shall be:

"To examine, in the light of the relevant provisions of

the NAFTA, the matter referred to the Commission (as

set out in the request for a Commission meeting) and to

make findings, determinations and recommendations as

provided in Article 2016(2)."

4. If a complaining Party wishes to argue that a matter has

nullified or impaired benefits, the terms of reference shall so

indicate.

5. If a disputing Party wishes the panel to make findings as to

the degree of adverse trade effects on any Party of any measure

found not to conform with the obligations of the Agreement or to

have caused nullification or impairment in the sense of Annex

2004, the terms of reference shall so indicate.

Article 2013: Third Party Participation

A Party that is not a disputing Party, on delivery of a

written notice to the disputing Parties and to its Section of the

Secretariat, shall be entitled to attend all hearings, to make

written and oral submissions to the panel and to receive written

submissions of the disputing Parties.

Article 2014: Role of Experts

At the request of a disputing Party, or on its own

initiative, the panel may seek information and technical advice

from any person or body that it deems appropriate, provided that

the disputing Parties so agree and subject to such terms and

conditions as such Parties may agree.

Article 2015: Scientific Review Boards

1. At the request of a disputing Party or, unless the disputing

Parties disapprove, on its own initiative, the panel may request

a written report of a scientific review board on any factual

issue concerning environmental, health, safety or other

scientific matters raised by a disputing Party in a proceeding,

subject to such terms and conditions as such Parties may agree.

2. The board shall be selected by the panel from among highly

qualified, independent experts in the scientific matters, after

consultations with the disputing Parties and the scientific

bodies set out in the Model Rules of Procedure established

pursuant to Article 2012(1).

3. The participating Parties shall be provided:

(a) advance notice of, and an opportunity to provide

comments to the panel on, the proposed factual issues

to be referred to the board; and

(b) a copy of the board's report and an opportunity to

provide comments on the report to the panel.

4. The panel shall take the board's report and any comments by

the Parties thereon into account in the preparation of its

report.

Article 2016: Initial Report

1. Unless the disputing Parties otherwise agree, the panel

shall base its report on the submissions and arguments of the

Parties and on any information before it pursuant to Article 2014

or 2015.

2. Unless the disputing Parties otherwise agree, the panel

shall, within 90 days after the last panelist is selected or such

other period as the Model Rules of Procedure established pursuant

to Article 2012(1) may provide, present to the disputing Parties

an initial report containing:

(a) findings of fact, including any findings pursuant to a

request under Article 2012(5);

(b) its determination as to whether the measure at issue is

or would be inconsistent with the obligations of this

Agreement or cause nullification or impairment in the

sense of Annex 2004, or any other determination

requested in the terms of reference; and

(c) its recommendations, if any, for resolution of the

dispute.

3. Panelists may furnish separate opinions on matters not

unanimously agreed.

4. A disputing Party may submit written comments to the panel

on its initial report within 14 days of presentation of the

report.

5. In such an event, and after considering such written

comments, the panel, on its own initiative or at the request of

any disputing Party, may:

(a) request the views of any participating Party;

(b) reconsider its report; and

(c) make any further examination that it considers

appropriate.

Article 2017: Final Report

1. The panel shall present to the disputing Parties a final

report, including any separate opinions on matters not

unanimously agreed, within 30 days of presentation of the initial

report, unless the disputing Parties otherwise agree.

2. No panel may, either in its initial report or its final

report, disclose which panelists are associated with majority or

minority opinions.

3. The disputing Parties shall transmit to the Commission the

final report of the panel, including any report of a scientific

review board established under Article 2015, as well as any

written views that a disputing Party desires to be appended, on a

confidential basis within a reasonable period of time after it is

presented to them.

4. Unless the Commission decides otherwise, the final report of

the panel shall be published 15 days after it is transmitted to

the Commission.

Implementation of Panel Reports

Article 2018: Implementation of Final Report

1. On receipt of the final report of a panel, the disputing

Parties shall agree on the resolution of the dispute, which

normally shall conform with the determinations and

recommendations of the panel, and shall notify their Sections of

the Secretariat of any agreed resolution of any dispute.

2. Whenever possible, such resolution shall be

non-implementation or removal of a measure not conforming with

this Agreement or causing nullification or impairment in the

sense of Annex 2004 or, failing such a resolution, compensation.

Article 2019: Non-Implementation - Suspension of Benefits

1. If in its final report a panel has determined that a measure

is inconsistent with the obligations of this Agreement or causes

nullification or impairment in the sense of Annex 2004 and the

Party complained against has not reached agreement with any

complaining Party on a mutually satisfactory resolution pursuant

to Article 2018(1) within 30 days of receiving the final report,

such complaining Party may suspend the application to the Party

complained against of benefits of equivalent effect until such

time as they have reached agreement on a resolution of the

dispute.

2. In considering what benefits to suspend pursuant to

paragraph 1:

(a) a complaining Party should first seek to suspend

benefits in the same sector or sectors as that affected

by the measure or other matter that the panel has found

to be inconsistent with the obligations of this

Agreement or to have caused nullification or impairment

by the non-complying Party in the sense of Annex 2004;

and

(b) a complaining Party that considers it is not

practicable or effective to suspend benefits in the

same sector or sectors may suspend benefits in other

sectors.

3. On the written request of any disputing Party delivered to

the other Parties and its Section of the Secretariat, the

Commission shall establish a panel to determine whether the level

of benefits suspended by a Party pursuant to paragraph 1 is

manifestly excessive.

4. The panel proceedings shall be conducted in accordance with

the Model Rules of Procedure. The panel shall present its

determination within 60 days after the last panelist is selected

or such other period as the disputing Parties may agree.

Subchapter C - Domestic Proceedings

and Private Commercial Dispute Settlement

Article 2020: Referrals of Matters from Judicial or

Administrative Proceedings

1. If an issue of interpretation or application of this

Agreement arises in any domestic judicial or administrative

proceeding of a Party that any Party considers would merit its

intervention, or if a court or administrative body solicits the

views of a Party, that Party shall notify the other Parties and

its Section of the Secretariat. The Commission shall endeavor to

agree on an appropriate response as expeditiously as possible.

2. The Party in whose territory the court or administrative

body is located shall submit any agreed interpretation of the

Commission to the court or administrative body in accordance with

the rules of that forum.

3. If the Commission is unable to agree, any Party may submit

its own views to the court or administrative body in accordance

with the rules of that forum.

Article 2021: Private Rights

No Party may provide for a right of action under its

domestic law against any other Party on the ground that a measure

of another Party is inconsistent with this Agreement.

Article 2022: Alternative Dispute Resolution of Commercial

Disputes

1. Each Party shall, to the maximum extent possible, encourage

and facilitate the use of arbitration and other means of

alternative dispute resolution for the settlement of

international commercial disputes between private parties in the

free trade area.

2. To this end, each Party shall provide appropriate procedures

to ensure observance of agreements to arbitrate and for the

recognition and enforcement of arbitral awards in such disputes.

3. A Party shall be deemed to be in compliance with paragraph 2

if it is a party to and is in compliance with the 1958 United

Nations Convention on the Recognition and Enforcement of Foreign

Arbitral Awards or the 1975 Inter-American Convention on

International Commercial Arbitration.

4. The Commission shall establish an Advisory Committee on

Private Commercial Disputes comprising persons with expertise or

experience in the resolution of private international commercial

disputes. The Committee shall report and provide recommendations

to the Commission on general issues referred to it by the

Commission respecting the availability, use and effectiveness of

arbitration and other procedures for the resolution of such

disputes in the free trade area.

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ANNEX 2001.2

Committees and Working Groups

A. Committees:

1. Committee on Trade in Goods (Article 317)

2. Committee on Trade in Worn Clothing (Annex 300-B,

Section 9.1)

3. Committee on Agricultural Trade (Article 708)

4. Committee on Sanitary and Phytosanitary Measures

(Article 764)

5. Committee on Standards-Related Measures (Article 913)

(a) Land Transportation Services Standards

Subcommittee (Article 913(5))

(b) Telecommunications Standards Subcommittee (Article

913(5))

(c) Automotive Standards Council (Article 913(5))

(d) Subcommittee on Labelling of Textile and Apparel

Goods (Article 913(5))

6. Committee on NAFTA Small Business (Article 1021)

7. Financial Services Committee (Article 1414)

8. Advisory Committee on Private Commercial Disputes

(Article 2022)

B. Working Groups:

1. Working Group on Rules of Origin (Article 513)

(a) Customs Subgroup (Article 513(5))

2. Working Group on Agricultural Subsidies (Article

706(6))

3. Mexican-American Working Group (Article 704(3), Section

I)

4. Mexican-Canadian Working Group (Article 704(3), Section

II)

5. Working Group on Trade and Competition (Article 1504)

6. Temporary Entry Working Group (Article 1605)

C. Other Committees and Working Groups established under this

Agreement

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ANNEX 2002.2

Remuneration and Payment of Expenses

1. The Commission shall establish the amounts of remuneration

and expenses that will be paid to the panelists, committee

members and members of scientific review boards.

2 The remuneration of panelists or committee members and their

assistants, members of scientific review boards, their travel and

lodging expenses, and all general expenses of panels, committees

or scientific review boards shall be borne equally by:

(a) in the case of panels or committees established under

Chapter Nineteen (Review and Dispute Settlement in

Antidumping and Countervailing Duty Matters), the

involved Parties, as they are defined in Article 1911;

or

(b) in the case of panels and scientific review boards

established under this Chapter, the disputing Parties.

3. Each panelist shall keep a record and render a final account

of the person's time and expenses, and the panel, committee or

scientific review board shall keep a record and render a final

account of all general expenses.

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ANNEX 2004

Nullification and Impairment

1. If any Party considers that any benefit it could reasonably

have expected to accrue to it under any provision of:

(a) Part Two (Trade in Goods), except for those provisions

of Annex 300-A (Automotive Sector) or Chapter Six

(Energy) relating to investment,

(b) Part Three (Technical Barriers to Trade),

(c) Chapter Twelve (Cross-Border Trade in Services), or

(d) Part Six (Intellectual Property),

is being nullified or impaired as a result of the application of

any measure that is not inconsistent with this Agreement, the

Party may have recourse to dispute settlement under this Chapter.

2. A Party may not invoke:

(a) paragraph (1)(a) or (b), to the extent that the benefit

arises from any cross-border trade in services

provision of Part Two, or

(b) paragraph (1)(c) or (d),

with respect to any measure subject to an exception under Article

2101 (General Exceptions).