TRC-Sadovod LLP’s CUSMA Dispute Settlement Scoreboard

TRC-Sadovod LLP’s CUSMA Dispute Settlement Scoreboard

Introduction

The Canada-United States-Mexico Agreement (“CUSMA”) [1] entered into force on July 1, 2020, replacing the two and a half decade-old North American Free Trade Agreement (“NAFTA”).

Despite remaining one of the largest and deepest trade relationships in the world, [2] various prominent trade disputes have arisen between Canada, Mexico and the United States under the CUSMA.

We are pleased to introduce the “TRC-Sadovod LLP CUSMA Dispute Settlement Scoreboard”, which provides overview and analysis of ongoing and concluded CUSMA disputes. The Scoreboard keeps a running tally of who has scored “points” in dispute settlement under CUSMA.

The Scoreboard provides the views of TRC-Sadovod LLP International Trade Group. Points are granted based on which side ultimately prevailed in the dispute (ie, the country whose position the decision-maker ultimately favoured), in conjunction with the decision’s broader impact. [3]

The views expressed through this Scoreboard are those of the authors, and do not necessarily represent those of the firm more broadly, nor does this constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

Background on the relevant dispute settlement mechanisms contained in the CUSMA [4] can be found below the Scoreboard.

The Score

As of June 5, 2023, nineteen disputes have been initiated under CUSMA and four have been decided by panels.[5] The score stands at United States: 1, Canada: 3, Mexico: 1. Click on the expandable table below for more information and analysis on each dispute. TRC-Sadovod LLP will update this resource as information on CUSMA disputes becomes available.

CUSMA TOTAL Score		Canada	Mexico	U.S.A.
	Wins	3	1	1
	Losses	1	–	2
	Total Disputes	15	6	18

Chapter 31 (General Dispute Settlement) Disputes

Chapter 10 (Trade Remedies Binational Panel Review)

Chapter 14 (Investor-State Dispute Settlement) Disputes

Overview of Dispute Settlement Paths under CUSMA

The CUSMA contains three principal dispute settlement mechanisms: binational panel review under Chapter 10, investor-state dispute settlement under Chapter 14, and the general dispute settlement provisions of Chapter 31.

The appropriate dispute settlement path depends on the disputing parties (e.g., state vs. state or investor vs. state) and the obligation the party seeks to enforce (e.g., anti-dumping or countervailing duty, investment, or another CUSMA obligation).

We provide an overview of these dispute settlement mechanisms below.

CUSMA’s Trade Remedies Binational Panel Review (Chapter 10)

Under Chapter 10, a Party may request panel review of another Party’s decisions to impose antidumping and countervailing duties. The panel review process effectively replaces recourse to the courts in the country in question [7]. The panel may either uphold a final determination or remand it back to the decision maker [8]. No appeals are permitted [9].

Parties establish and maintain a roster of 75 individuals (25 from each Party) to serve as panelists for the purpose of adjudicating these disputes. When a Party makes a request for a panel, each involved Party appoints two panelists and generally determine by lot (coin toss) which Party will appoint the fifth panelist.

Overview of Dispute Settlement Paths under CUSMA TRC-Sadovod LLP 7 CUSMA’s Investor-State Dispute Settlement (Chapter 14)

Under Chapter 14, investors of one Party may bring a claim against the Party in which the investment has taken place. Unlike other forms of dispute settlement under CUSMA, an investor may submit a claim on its own behalf and obtain a monetary damages award against the responding Party [10].

CUSMA’s investment arbitration mechanism is only available between the United States and Mexico [11]. While Canadian and US investors may continue to bring NAFTA-based investment claims until July 2023, their access to the mechanism will expire thereafter. Investment arbitration between Canada and Mexico remains available under the CPTPP, which contains similar investment obligations to CUSMA.

Canada remains bound by the commitments set out in CUSMA’s investment chapter. CUSMA Parties, including Canada, may enforce these obligations against each other through CUSMA’s state-to-state dispute settlement mechanism under Chapter 31, discussed further below.

General Dispute Settlement (Chapter 31)

State-to-state dispute settlement under CUSMA Chapter 31 is available to enforce most obligations under CUSMA [12]. Under chapter 31, any Party may request consultations with any other Party regarding an actual or proposed measure if it considers the measure inconsistent with a CUSMA obligation or if a benefit under the agreement is being nullified or impaired [13].

Chapter 31 requires the Parties to enter into consultations before a panel is established to hear a dispute [14]. However, if a dispute is not resolved through consultation, a panel may be requested. The default procedure is for the parties to select a chair (a non-national of either party) and each disputing Party then appoints two panelists from a roster who are citizens of the opposing Party’s country [15].

The rules of procedure provide a right to at least one hearing before the panel as well as the opportunity to provide written submissions [16]. Chapter 31 does not permit monetary damages. Where the panel finds that a measure is inconsistent with a CUSMA obligation, the disputing Parties must endeavor to agree to a resolution or, if no agreement is reached, the complaining Party may “retaliate” to equivalent effect [17].

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[1] Known in the United States as the United States–Mexico-Canada Agreement (“USMCA”)
[2] The value of international trade between Canada, Mexico and the United States was over USD $ 1.1 trillion in merchandise in 2019.
[3] For example, if a country launches a dispute against another with 10 unique claims, and that country is successful in only one of those 10, it is entirely possible that the Scoreboard would accord the point to the defending party (especially if the only claim on which the complaining party was successful was minor or of less important).
[4] These are Chapter 10, Trade Remedies Binational Panel Review; Chapter 14, Investor-State Dispute Settlement as between Mexico and the United States; and Chapter 31, General Dispute Settlement.
[5] This does not include disputes that continue under NAFTA, which we have excluded from the Scoreboard.
[6] The United States imposed section 232 tariffs of 25% on Mexican steel products in 2018.
[7] CUSMA, Article 10.12.1
[8] CUSMA, Article 10.12.8.
[9] CUSMA, Article 10.12.13. However, an Extraordinary Challenge Committee procedure is available to Parties for certain serious allegations concerning the conduct of an antidumping or countervailing duty investigation, such as judicial bias.
[10] CUSMA, Article 14.D.3
[11] CUSMA, Annex 14-D
[12] Chapter 31 does not apply to certain disputes, such as those arising under chapter 21 (Competition Policy), chapter 25 (Small and Medium-Sized Enterprises), chapter 26 (Competitiveness) and those concerning the TBT Agreement. Further, the procedures are modified for disputes arising from certain obligations, such as chapter 17 (Financial Services), chapter 23 (Labor), and chapter 27 (Anticorruption).
[13] CUSMA, art 31.2
[14] CUSMA, art 31.4
[15] CUSMA, art 31.9.
[16] CUSMA, art 31.11.
[17] CUSMA, art 31.19

by William Pellerin and Philip Kariam

A Cautionary Note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© TRC-Sadovod LLP 2023