Thank you, Tomer, for informing us about the Softwood Lumber award issued on June 6 under NAFTA Chapter 11. http://worldtradelaw.typepad.com/ielpblog/2006/06/the_sound_of_a_.html
The (170+ pages!) NAFTA award offers an interesting contrast to the WTO Appellate Body's recent ruling in Mexico - Soft Drinks.
In Soft Drinks, the AB bluntly refused to check whether the US had violated NAFTA (even if only to check whether Mexico could invoke GATT Art. XX(d) or a general principle allegedly set out in the PCIJ Chorzow Factory case). For the AB, deciding on such NAFTA question fell outside its jurisdiction (see AB report paras. 56 and 78).
In Softwood Lumber, however, the NAFTA Chapter 11 tribunal saw no problem with deciding that the US Byrd Amendment failed the notification and other requirements (including a requirement of WTO consistency!) in NAFTA Art. 1902(2)(d) (see award, para. 301). It was on that basis that the tribunal found that the Byrd Amendment was NOT part of "a Party's antidumping law" and, as a result, NOT carved out from Chapter 11 disciplines (pursuant to NAFTA Article 1901(3)). In contrast, all other claims were found to be so carved out. As a result, the tribunal accepted jurisdiction ONLY for the Byrd amendment.
Now, even though breach of a Chapter 19 provision (here Article 1902(2)(d)) rests exclusively with a Chapter 19 bi-national panel, and not with a Chapter 11 investment tribunal, the Chapter 11 tribunal went ahead with its decision under Art. 1902(2)(d) because, in its view, it was required to do so in order to interpret the carve out in Article 1901(3). In para. 333, the tribunal even confirmed that Byrd violates WTO law in support of dis-applying the Article 1901(3) carve-out (see also para. 327 in this respect).
In other words, to decide on ITS OWN jurisdiction, the NAFTA tribunal felt compelled (and empowered) to decide on whether or not certain rules OUTSIDE its jurisdiction (here Art. 1902(2)(d) and, to some extent, WTO law) were complied with.
Even if this tribunal largely made the jump only from one NAFTA chapter to the other (ie from NAFTA Chapter 11 to Chapter 19), in strict jurisdictional terms, it is the same as the AB deciding on NAFTA compliance (NAFTA being OUTSIDE its jurisdiction) in order to decide a question of WTO law (which is, obviously, WITHIN the AB's jurisdiction, such as, in Soft Drinks, GATT Art. XX(d)).
Some will be quick to point out that the applicable law in NAFTA explicitly includes all of NAFTA and other international law (see NAFTA Arts. 102(2) and 1131(1)). Yet, what matters here is the question of whether a limit on jurisdiction (as in NAFTA Arts. 1116-7, or in DSU Art. 7) categorically prevents a decision on violation of rules outside one’s jurisdiction. The AB answered: yes. The NAFTA Chapter 11 tribunal in Softwood Lumber answered: no.
Remember, however, that in another Chapter 11 case, Metalclad v. Mexico, the award was partly set aside (by a Canadian judge) because it referred to transparency in NAFTA Article 1802, a provision which, according to that judge, fell outside the jurisdiction of a NAFTA Chapter 11 tribunal.
Perhaps the US will want to seek review of the Softwood lumber award on similar grounds?
