Judicialization and Globalization in the North American Free Trade Agreement

I. INTRODUCTION The North American Free Trade Agreement (NAFTA) creates a new set of international tribunals with significant powers in areas traditionally reserved to domestic law. However, the experience under NAFTA has been one of globalization with only limited judicialization. The international tribunals created by NAFTA display significant differences from tribunals established under other agreements, including the European Union, and even the World Trade Organization. Moreover, although NAFTA has certainly aroused considerable interest in the judiciaries of the three NAFTA countries, each country has adopted provisions designed to limit the role of domestic courts in interpreting and applying that agreement. Significant questions are now being raised about the extent of these limits. NAFTA was ratified by the United States, Canada, and Mexico in 1993, in order to promote trade and investment between these three countries.1 However, in contrast with the European Union, NAFTA is not a customs union, does not provide for the free movement of persons, and does not create any significant institutional infrastructure. Responsibility for implementing the agreement lies with the Free Trade Commission, which consists of cabinet-level representatives of the parties or their designees.2 Although the Commission is assisted by a secretariat, the secretariat actually consists of separate national Sections in each of the NAFTA countries.3 NAFTA does not create any legislative or institutions. However, it does establish three separate mechanisms for the resolution of disputes by international tribunals: a general mechanism for resolution of disputes between the NAFTA countries;4 a special mechanism replacing review of national decisions regarding antidumping and countervailing duties; and a third mechanism allowing NAFTA citizens that invest in other NAFTA countries to submit claims for monetary damages against their host government to binding arbitration.6 Additional dispute settlement mechanisms are set forth in two side agreements environmental and labor issues. However, my remarks will focus only the provisions set forth in NAFTA itself.7 II. NAFTA's GENERAL DISPUTE SETTLEMENT PROVISIONS NAFTA's general dispute settlement procedures resemble those of the 1947 General Agreement Tariffs and Trade (GATT) in that participation is limited to states that are parties to the agreement, and disputes are decided by ad hoc panels composed of independent experts.8 However, NAFTA contains a number of provisions that combine to make the panel process appear more judicial than the GATT dispute settlement process. Unlike GATT, NAFTA does not permit either of the disputing parties to block the formation of a panel. A panel must be established on delivery of a request by any NAFTA country.9 Moreover, if the panel determines that there has been a violation of the agreement, NAFTA authorizes the prevailing party in the dispute to impose economic sanctions against the other party unless a mutually satisfactory agreement is reached within thirty days after the final report is received.10 The NAFTA parties have also established Rules of Procedure assuring a right to at least one hearing, as well as the opportunity to provide initial and rebuttal written submissions.11 Finally, decisions of NAFTA panels are to be published within fifteen days, unless the Free Trade Commission decides otherwise.12 Many of these changes have also been incorporated into the dispute settlement process in the World Trade Organization (WTO). However, the NAFTA dispute settlement process is significantly less judicial than its WTO counterpart. Unlike the decisions of WTO panels, the decisions of NAFTA panels may not be appealed to any permanent appellate body. Moreover, the decisions of NAFTA panels are not binding either of the disputing parties. Instead, NAFTA provides that the disputing parties agree the resolution of the dispute, which normally shall conform with the panel's determinations and recommendations. …

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