FINAL REPORT OF THE PANEL UNDER CHAPTER 18 OF THE CANADA-UNITED STATES FREE TRADE AGREEMENT

VIII Summary Of Conclusions

8.01 The Panel was asked "whether the landing requirement is incompatible with Article 407 of the FTA and, if so, whether the requirement is a measure subject to an exception applicable under Article 1201".

8.02 The Panel's response is as follows:

Respectfully Submitted:

Jim H. Branson

Robert E. Hudec

Donald M. McRae (Chair)

Donald D. Tansley

Frank Stone

October 16, 1989

Background

By conference call on September 21, 1989, the Parties requested that the Chair rule on whether in view of the death of Dr. Waldo Johnson Canada had the right to appoint a replacement panelist. Written submissions were filed with the Canadian Secretary of the Binational Secretariat on the same day. The Chair consulted the members of the Panel to whom copies of the Parties' submissions had been sent. The Parties were advised by conference call late on September 21, of the Chair's ruling. A written statement of that ruling and reasons were to follow.

Arguments

Canada argued that the matter was determined by Article 1807:3 of the Free Trade Agreement and Part II of the Model Rules of Procedure for Chapter 18 Panels. Article 1807:3 provides that the Panel shall be composed of five members and Part II of the Model Rules provides that in the case of the death of a panel member the place is to be filled in the manner in which the original panel member was appointed. Thus, Canada concluded, pursuant to the Model Rules of Procedure Canada had an obligation to appoint a replacement panelist.

The United States argued that while Canada would have the right to appoint a replacement if a Panel member dies before the Panel has completed its deliberations, the rules should not be read to permit the appointment of a replacement Panel member after the Initial Report of the Panel has been filed. Part II of the Model Rules, in the United States view, deals with the manner of appointing a replacement member, not with the question of whether one is to be appointed. The United States further argued that if in the negotiation of the rules the Parties had put their minds to the particular circumstance that had arisen in this case, they would have concluded that the remaining members of the panel were competent to receive the Parties objections and complete the Final Report. The United States also referred to the potential disruption of a process, which at this stage in its view should be limited to the consideration of the objections of the Parties, by the introduction of a new Panel member and to the delay that this would occasion.

Ruling

That Canada has the right to appoint a new panel member to replace Dr. Waldo Johnson.

Reasons

While neither the Free Trade Agreement itself nor the Model Rules of Procedure deal specifically with the case of the death of a panel member after the filing of the Initial Report of the panel, Part II of the Model Rules does provide for the appointment of a replacement member in the event of death. However, the United States argues that this provision refers only to the manner of appointment and not to whether an appointment should be made at all. In effect, the United States position is that the Agreement is silent on the matter and therefore the ruling should be based on what it is believed that the Parties would have agreed to if they had addressed their minds during the negotiation of the Free Trade Agreement to the particular circumstances that have arisen here and what makes practical sense.

To view the situation as the United States does would, however, leave a number of unanswered questions about the circumstances in which it would be appropriate to appoint a replacement panel member. The United States appears to draw the line at the filing of the Initial Report, arguing that there should be no replacement of a panel member who dies after that date. Yet even that approach might not be appropriate in all circumstances, for example where the deceased panel member was a member of the majority in a three-two Initial Report. Thus, to adopt the United States view might entail a separate decision in each case on whether a new panel member should be appointed.

In any event, in my view the matter is to be resolved by reference to Article 1807:3 of the Agreement which provides that the Panel shall be composed of five members. There is no provision in the Agreement authorizing the Panel to operate with less than five members and since Part II of the Model Rules does provide for the appointment of a replacement in the event of death, the replacement of a panel member who dies was obviously contemplated. Since the Panel is no longer composed of five members, then, unless the Parties agree otherwise, a new member must be appointed. Accordingly, Canada has the right to appoint a new panel member to replace Dr. Waldo Johnson in accordance with the procedure set out in Part II of the Model Rules.

Donald M. McRae

Chair

26 September 1989

³¹ One Panel member was not prepared to make a decision on this issue; see the last two sentences of paragraph 6.14.

³² One Panel member disagreed; see paragraph 7.38, footnote 29.