Question

Case Study Pork from Canada Case Name and tribunal Fresh, chilled, or Frozen pork from Canada (ECC, 1991) Facts In 1990, the US International trade Commission found that the US domestic pork industry was threatened with material injury from imports of fresh, chilled, or frozen pork from Canada. In reviewing the decision of the U.S. International Trade Commission, the binational panel remanded the decision to the ITC with instructions to re-determine the matter. The panel had determined that the ITC erred in reviewing evidence outside the scope of what it ought to have reviewed.

Issue

Did the binational panel seriously depart from a fundamental rule of procedure or manifestly exceed its powers, authority or jurisdiction in instructing the ITC to re-determine the matter with a reduction in the evidence it should consider ?

Answer 1

The binational panel process of Chapter 19 will in many respects be the crucible

of the North American Free Trade Agreement (NAFTA). As the vehicle for

resolving antidumping and countervailing duty cases brought in any of the three

contracting countries, Chapter 19 panels will be required to deal with the types

of trade conflicts that have historically generated intense, sometimes passionate,

controversy.

The Chapter 19 binational panel process is not new. Chapter 19 panels were

introduced in 1988 in the U.S.-Canada Free Trade Agreement (CFTA). At the

time, some regarded them as insubstantial innovations: the Chapter 19 provisions

creating panels neither adopted new substantive law nor established a right of

review that would not otherwise exist. Rather, those provisions provided that

Chapter 19 panels would serve simply as surrogates for reviewing courts and

decide cases in accordance with the same legal standards that courts would apply.

The experience with CFTA binational panels suggests, however, that notwith-

standing numerous parallels with the domestic courts they supplant, five-member

panels are obviously different from courts and create different dynamics in the

review process. The following summary offers a partial snapshot of how the

Chapter 19 panel process has operated under the CFTA during its first four years.

That picture may shed some light on how binational panels will operate under the NAFTA, which replicates the binational panel provisions of Chapter 19 without

significant change.

I. Basic Features of Chapter 19 of the NAFTA

Chapter 19 of the NAFTA establishes a trilateral process for "review and

dispute settlement in antidumping and countervailing duty matters."' In the U.S.

context this provision means that panels will review final determinations of both

the U.S. Department of Commerce and the International Trade Commission.

Thus, the binational panel review provisions of the NAFTA apply to those types

of trade cases that have dominated U.S. trade litigation and that have been perhaps

the most common form of trade dispute between the United States and Canada

and between the United States and Mexico.

The vehicles for review are five-member binational panels composed of panel-

ists from the two countries (or Parties) involved in the dispute.2 Panelists will be

drawn from a seventy-five-person roster developed by the Parties.3 All candidates

must be citizens of the United States, Canada, or Mexico. Although panelists need

not be lawyers, a majority of each panel, including the chairman, must be lawyers

in good standing. The NAFTA states that the roster "should include judges or

former judges to the fullest extent practicable." 4

When a Party requests panel review, the NAFTA entitles each of the two Parties

involved in the case to choose two panelists. Choices are subject to challenge by

the opposing Party. The involved Parties either agree on a fifth panelist or, if

unable to agree, select the fifth panelist by lot.

In reviewing antidumping and countervailing duty determinations, panels stand

in the shoes of the domestic reviewing court that would otherwise decide the case.

Panels must apply the same domestic substantive law that the administering agency

applies. The NAFTA defines substantive law to include "the relevant statutes,

legislative history, regulations, administrative practice, and judicial precedents

to the extent that a court of the importing Party would rely on such materials in

reviewing a final determination of the competent investigating authority."' Chap-

ter 19 panels are also bound to apply the same standard of review and the general

legal principles as would the reviewing court of the importing Party.6

The NAFTA binational panels must meet specific deadlines. Chapter 19 re-

quires the Parties to adopt implementing rules of procedure that will "result in final decisions within 315 days of the date on which a request for a panel is

made." 7 For remands the NAFTA provides a less precise schedule, stating only

that "the panel shall establish as brief a time as is reasonable for compliance with

the remand, taking into account the complexity of the factual and legal issues

involved and the nature of the panel's decision." 8 A panel "shall normally issue

a final decision within 90 days of the date on which such remand action is submitted

to it." 9

Panel decisions on a particular matter are nonreviewable and binding as a matter

of law. The narrow exception to this principle, the "extraordinary challenge,"

is available only under unusual circumstances of gross misconduct, bias, breach

of fundamental procedures, or action that manifestly exceeds the authority panels

have been given.' 0

Beyond the review of antidumping and countervailing duty determinations,

Chapter 19 contains additional provisions, a few of which differ from those in

the CFTA." Both the NAFTA and the CFTA provide that a Party may change

its antidumping or countervailing duty law as it applies to the other Parties, but

only if the statutory change is expressly applicable to the other Parties, the Parties

are notified in advance of the enactment of the changed law, and the statutory

change is consistent with the General Agreement on Tariffs and Trade (GATT),

the GATT Subsidies Code, or the GATT Antidumping Code, and "the object and

purpose of' the agreement. 2 Both agreements also provide for the establishment

of a binational panel to issue a declaratory opinion determining whether the

statutory change is inconsistent with the requirements of article 1902(2) or has

the function and effect of overturning a prior panel decision.' 3

II. Extrapolating from the CFTA Experience

Because Chapter 19 of the NAFTA is nearly identical to Chapter 19 of the

CFTA, the brief history of binational panel review under the CFTA may provide

some basis for anticipating how the NAFTA panels will operate. Such extrapola-

tion, however, is subject to some important limitations.

One caution is that the CFTA experience has been strikingly asymmetrical

in that CFTA panel decisions have overwhelmingly involved reviews of final

determinations made by U.S., not Canadian, agencies. In the first four and one-

half years of the CFTA thirty-one Chapter 19 panels and two extraordinary challenge committees were constituted. 14 Of those thirty-one panels, twenty-three

were formed to hear appeals from determinations of either the U.S. Department

of Commerce or the U.S. International Trade Commission.

The lopsided incidence of panel reviews simply reflects the relative number of

cases brought in the United States and Canada, respectively. Nonetheless, this

imbalance complicates any objective evaluation of Chapter 19 panels. For exam-

ple, some observers may attribute to the process factors that may more fairly be

attributable to particular cases or to the conduct of a particular agency. Similarly,

for those inclined to evaluate the process by tallying wins and losses for foreign

or domestic interests, a brief history dominated by cases from just one country may

be more susceptible to simplistic generalizations. Even a limited and asymmetrical

database, however, makes speculating about the NAFTA Chapter 19 panels less

daring than venturing predictions about the new NAFTA chapters that have no

CFTA predecessors.

ml. Are Chapter 19 NAFTA Panels Constitutional?

A threshold question now, as with CFTA, is whether the NAFTA structure of

entrusting the review of final antidumping and countervailing duty determinations

to binational panels is constitutional. At the time of the CFTA's implementation

the chair of the House Judiciary subcommittee posed the issues as follows:

One, does the bill violate Article III of the Constitution by failing to authorize judicial review, and second, does the bill violate the appointments clause. Also, does the

due process clause of the Fifth Amendment require that some form of judicial review

be available to claimants in these countervailing duty cases and these antidumping

cases. 15

Some opponents of the CFTA argued that Chapter 19 is constitutionally infirm. IS

However, administration officials, constitutional scholars, and various represen-

tatives of the international trade bar all concluded that Chapter 19 offends no

provision of the United States Constitution. Following this debate, both Houses

of Congress approved the CFTA and adopted implementing legislation.17 The legislation contains, however, special procedures to be followed in the event of

a successful constitutional challenge.18

Two constitutional questions have been the most persistent.' 9 The first is

whether replacing judicial review with Chapter 19 panel review violates Article

III, Section 1 of the U.S. Constitution, which vests "judicial power of the United

States . . .in one Supreme Court, and in such inferior Courts as the Congress

may from time to time ordain and establish." This question turns on whether the

cases heard by Chapter 19 panels are ones required by the Constitution to be heard

by an Article III tribunal. Such inquiry implicates a separation of powers analysis

that distinguishes adjudication of "private rights," which requires an Article III

court, from adjudication of "public rights," which does not. 2

0

A second constitutional question is whether replacing judicial review with

review by a panel consisting of persons who have not been appointed by the

President and confirmed by the Senate violates the Appointments Clause, Article

II, Section 2 of the U.S. Constitution.2

" Those who fault Chapter 19 on this score

argue that the U.S. Supreme Court's decision in Buckley v. Valeo22 requires that

all persons "exercising significant authority pursuant to the laws of the United

States' '-including, they argue, Chapter 19 panelists-function as officers of the

United States, who must be appointed in accordance with the requirements of the

Appointments Clause.23 In response the CFTA's defenders contend that: (1) the

Appointments Clause does not apply because panels act pursuant to international law (the CFTA), not U.S. law;24 (2) U.S. panelists qualify as "inferior officers"

under the Appointments Clause and Canadian panelists need not qualify because

they act pursuant to Canadian law; 25 (3) the Supreme Court historically has not

subjected international arbitration to the requirements of the Appointments

Clause;26 and (4) U.S. courts traditionally defer to the President in the conduct

of foreign relations.27

Chapter 19 had been in operation for over four years when its constitutionality

was first challenged. The challenge came from an unexpected direction. In

August 1992, two U.S. trade associations with ties to organized labor filed

suit in U.S. district court against Chapter 19.2" Although neither plaintiff had

ever been involved in a Chapter 19 review, they argued that their members

were threatened by the process because it (1) gave panels composed of U.S.

and foreign private practitioners the power to reverse decisions of U.S. agencies

and (2) deprived U.S. victims of alleged Canadian unfair trade practices access

to U.S. courts. 29 The United States Government responded with a motion to

dismiss for lack of jurisdiction, lack of standing, or both. 30 As of March 1,1993, the case has been briefed and is now awaiting decision on the U.S.

motion to dismiss.31

Many observers, this author included, believe that the constitutionality of Chap-

ter 19 will be upheld.32 At their core, constitutional challenges are based on

considerations of separation of powers-whether one branch of government im-

permissibly encroached on the designated prerogatives or functions of another.

The predicate for such concerns does not come into play, however, in the context

of the CFTA or the NAFTA, because both agreements were the result of collabora-

tive or joint action by the executive and legislative branches under section 102

of the Trade Act of 1974. 33 If the underlying balance of powers concerns do not

apply, or are muted, the strength of any constitutional challenge is significantly

weakened. 3

IV. The Dynamics of Binational Panel Decision Making

Although Chapter 19 panels simply "stand in the shoes" of domestic reviewing

courts, differences exist between five-member binational panels and the courts

they supplant. These differences do not affect the substantive or procedural law

that is applicable in panel proceedings-that law is the domestic law of the im-

porting Party. Not surprisingly, however, other differences do distinguish Chap-

ter 19 panels as unique fora with their own distinctive characteristics. With the addition of a third legal tradition under the NAFTA some of the distinguishing

features will become even more pronounced.

First, when a panel stands in the shoes of a court, one obvious difference is

that there are considerably more feet. A panel of five judges is not the same as

a single judge. Like arguments before panels of three or more judges, the dynamics

of hearings before five-member panels frequently differ from single-judge hear-

ings. Five-member binational panels tend to be inquisitive. CFTA panel hearings

commonly last several hours or more. 3 5 Presumably the deliberative and decision-

making process of panels likewise reflects both the advantages and complications

of adjudicating as a panel.

Second, panels are heterogeneous, typically bringing together a variety of

perspectives. By definition, panels include two nationals of one country and

three of another. Since the NAFTA does not limit panel rosters to lawyers,

panels sometimes include economists or scholars. Because of a change to Annex

1901.2, NAFTA panels will also likely include judges. The results, sometimes

evident during hearings, reflect diverse interests that focus on different aspects

of a case.