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NORTH AMERICAN FREE TRADE AGREEMENT ARBITRAL PANEL
ESTABLISHED PURSUANT TO CHAPTER TWENTY



IN THE MATTER OF 
CROSS-BORDER TRUCKING SERVICES
(Secretariat File No. USA-MEX-98-2008-01)

Continuation



V. THE UNITED STATES' REQUEST FOR A SCIENTIFIC REVIEW BOARD
  1. In a submission dated May 16, 2000, the United States proposed "that the Panel request a written report of a scientific review board on the factual truck safety issues raised by the United States in this dispute."216 The United States also suggested, "The inclusion of Article 2015 in the NAFTA reflects the view of the NAFTA Parties that in cases involving health or safety issues, the informed opinions of independent technical experts can provide invaluable assistance to the dispute settlement Panel." 

  2. The United States asserted that "the disputing Parties appear to have conflicting views on a number of factual truck safety issues" unlikely to be clarified by the hearing.217 The United States referred to the following matters:  

    • the differences between the U.S. and Canadian truck safety regulatory regimes, on the one hand, and the Mexican regime, on the other;

    • the role that safety enforcement in a carrier's home country plays in ensuring truck safety in other countries where a carrier operates;

    • the practicability and effectiveness of using border inspections as the primary means of ensuring the safety of Mexican-domiciled carriers; and

    •  the significance of available data on out-of-service rates for Mexican domiciled trucking firms.218 

  3. The United States also asserted that "[s]uch issues involve technical and complex questions concerning the real-life operation of trucking firms and the effectiveness of various types of governmental safety regulation" and suggested that "[t]he Panel's establishment of a scientific review board would also have the benefit of promoting the credibility and public acceptance of NAFTA dispute settlement system." 219 

  4. At the hearing on May 17, 2000, after listening to both Parties on the U.S. request, the Panel invited the United States to submit a detailed and comprehensive list of the matters that it suggested might usefully be the subject of the terms of reference of a scientific review board ("SRB"). 220 

  5. In a letter dated May 24, 2000, the United States filed a more detailed list of factual issues which it suggests be submitted to a scientific review board:

    1. the differences between U.S. and Canadian government oversight of truck safety on the one hand, and the Mexican government oversight of truck safety, on the other;

    2. the importance of Mexican government oversight of truck safety in promoting safety for carriers operating both within Mexico and within the United States;

    3. in the absence of strong governmental oversight in Mexico, whether U.S. governmental safety regulations can be practicably or effectively enforced through border inspections;

    4. in the absence of strong governmental oversight in Mexico, whether U.S. governmental safety regulations can be practicably or effectively enforced through operating-authority application procedures for Mexican carriers;

    5. the significance of available data on out-of-service rates for Mexican motor carriers . . . [and] . . . whether it is significant to classify carriers as short-haul versus long-haul carriers;

    6. the role of intergovernmental cooperative programs, such as complete, real-time, interoperable databases, in effectively enforcing safety regulations with respect to trucks, drivers and carriers; and

    7. whether U.S. governmental safety regulations can be practicably or effectively enforced with respect to drivers, carriers, and trucks not subject to comprehensive, integrated safety oversight systems under their domestic laws. 221 

  6. In its post-hearing submission, the United States reiterated its view that "the [P]anel would find the advice of an SRB to be of substantial assistance in reaching a final decision in this case, and that the [P]anel should proceed with the SRB process."222 The United States believed that Mexico had mis-characterized the factual issues and that the main issues are not, according to the United States "features of the motor carrier regulatory regimes in the United States, Mexico and Canada."223 

  7. The United States rejected Mexico's criticism of the timing of the request for a SRB, pointing out that the request fell within the deadline specified by the Model Rules and reflects the absence of prior practice; any delays in the Panel proceeding resulting from the appointment of a SRB were negotiated by NAFTA Parties "with the full understanding that those procedures would entail additional time."224 Moreover, "establishing the SRB after the hearing promotes efficiency, because the hearing can help to identify and sharpen the factual issues in dispute."225
     
  8. The United States argued that, as this was at the time only the third NAFTA Chapter Twenty panel convened and the first relating to safety issues, the Panel's report would be important for all of NAFTA Parties, and for the public at large. The fact that a SRB proceeding would entail a "few more weeks" of time should not, and must not, play any role in the Panel's decision on whether or not to establish an SRB. Rather, the Panel's decision should be based solely on whether the views of an SRB would assist the Panel in preparing the best possible final report.226 

  9. In a separate submission dated May 31, 2000, Mexico opposed the U.S. proposal for the appointment of a Scientific Review Board. Mexico's opposition was based on the following considerations:

    1. the essential facts on which the United States was seeking a report . . . "were not issues in dispute;" 

    2. "[i]t was extraordinary that the United States should make its request at such a late date [May 16, 2000], after giving no hint in its prior written submissions that it believed the Panel had any need for advice from an SRB;" 

    3. "the United States itself has never undertaken the type of evaluation it was seeking from an SRB, and its decision not to implement NAFTA therefore could not have been based on such an evaluation;" and 

    4. "NAFTA's deadlines for this dispute settlement procedure have already been exceeded, and creation of an SRB would lead to further extensive delays." 227 

  10. Mexico further argued that the principal topics that would be studied, according to the U.S. proposal, relate either to information that is readily available, not available at all, or are inappropriately broad.228 

  11. After reviewing the various time limits specified in Rules 38-48 of the Model Rules, Mexico submitted that convening a SRB would "lead to a further delay of at least seventy-nine days and probably longer."229 Nor, according to Mexico, has the United States identified any reason why "[the United States] could not have made its request earlier in the proceedings -  especially in this case, in which the factual and legal issues have already been exhaustively addressed in the written submissions of the Parties."230 

  12. Finally, Mexico observed that none of the U.S. topics for a SRB proposed by the United States relates to the investment issue, arguing that the United States conceded at the hearing that "its continuing restriction on Mexican investment in U.S. carriers was not based on safety concerns."231 

  13. After deliberation, the Panel has concluded that the relatively minor differences in the relevant facts as viewed by the two Parties were not material, since they affected neither the likely outcome of the matter nor the reasons for the Panel's Findings, Determinations or Recommendations. Further, the primary factual assertion upon which the United States relied was that Mexican laws and regulations relating to truck and driver safety were less comprehensive and much less effectively enforced in Mexico than similar safety laws and regulations in the United States. For purposes of its evaluation, the Panel assumed that this factual analysis was correct, without making findings on the issue.

  14. Accordingly, the Panel determined that it was not necessary to establish a Scientific Review Board and, on July 10, 2000, issued the following procedural order:
    Upon consideration of the request by the United States for a Scientific Review Board and Mexico's response to that request, the Panel determines that there shall be no Scientific Review Board constituted at this stage.
    There have been no developments in the proceeding since July 10, 2000 that have caused the Panel to reconsider its decision.


VI. ANALYSIS OF THE ISSUES
  1. In this analysis, the Panel declines to examine the motivation for the U.S. decision to continue the moratorium on cross-border trucking services and investment; it confines its analysis to the consistency or inconsistency of that action with NAFTA. The Panel notes that this approach is fully consistent with the practice of the WTO Appellate Body, which in Japan - Taxes on Alcoholic Beverages, at 28, and in Chile - Taxes on Alcoholic Beverages, para. 62, has declined to inquire into the subjective motivations of government decision-makers, or examine their intent. As the Appellate Body observed in analogous circumstances, in Chile-Alcoholic Beverages, "The subjective intentions inhabiting the minds of individual legislators or regulators do not bear upon the inquiry, if only because they are not accessible to treaty interpreters." 232 

  2. It should be also noted that the Panel has duly considered all of the arguments raised by the Parties and Canada in the various submissions, including the Parties' comments on the Initial Report, even if some such arguments are not explicitly addressed in this Final Report.


A. Interpretation of NAFTA

  1. The Panel sets out in this section the general legal framework for the interpretation of the Parties' claims. In the following sections, the Panel analyzes and interprets provisions on land transportation in NAFTA concerning Reservations for existing Measures and Liberalization Commitments (Section VII), Services (Section VIII) and Investment (Section IX).

  2. The objectives of NAFTA are proclaimed in Article 102(1):

    The objectives of this Agreement, as elaborated more specifically through its principles and rules, including national treatment, most-favored-nation [sic] treatment and transparency, are to: 

    1. eliminate barriers to trade in, and facilitate the cross-border movement of, goods and services between the territories of the Parties; 

    2. promote conditions of fair competition in the free trade area;

    3. increase substantially investment opportunities in the territories of the Parties;

    4. provide adequate and effective protection and enforcement of intellectual property rights in each Party's territory; 

    5. create effective procedures for the implementation and application of this Agreement, for its joint administration and for the resolution of disputes; and 

    6. establish a framework for further trilateral, regional and multilateral cooperation to expand and enhance the benefits of this Agreement.

  3. Article 102(2) provides a mandatory standard for the interpretation of the detailed provisions of NAFTA: AThe Parties shall interpret and apply the provisions of this Agreement in the light of its objectives set out in paragraph 1 and in accordance with applicable rules of international law."

  4. The objectives develop the principal purpose of NAFTA, as proclaimed in its Preamble, wherein the Parties undertake, inter alia, to "create an expanded and secure market for the goods and services produced in their territories."233 Given these clearly stated objectives and the language of the Preamble, the Panel must recognize this trade liberalization background. As the Panel in Dairy Products observed:

    [A]s a free trade agreement, NAFTA has the specific objective of eliminating barriers to trade among the three contracting Parties. The principles and rules through which the objectives of NAFTA are elaborated are identified in NAFTA Article 102(1) as including national treatment, most-favored-nation treatment, and transparency. Any interpretation adopted by the Panel must, therefore, promote rather than inhibit NAFTA's objectives. Exceptions to obligations of trade liberalization must perforce be viewed with caution.234 
    The Panel also notes, however, that the Preamble of NAFTA reflects a recognition that the Parties intended to "preserve their flexibility to safeguard the public welfare." 


  5. In identifying the rules of interpretation of international law referred to in Article 102(2), the Panel need go no further than the 1969 Vienna Convention on the Law of Treaties.235  Both Parties agree that the Vienna Convention is appropriate for this purpose,236 as NAFTA Parties have agreed in the past.237 The guiding rule of the Vienna Convention is Article 31(1), which provides in pertinent part, "A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose."  

  6. Thus, in addition to the ordinary meaning of the terms, interpretation must take into account the context, object and purpose of the treaty.238 The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes, any agreement relating to the treaty.239 If necessary, there shall be taken into account, together with the context, any subsequent practice and any relevant rules of international law applicable in the relations between the parties.240 

  7. If these criteria are insufficient, there may then be recourse to supplementary means of interpretation, as provided under Article 32 of the Vienna Convention.241 The Panel must therefore commence with the identification of the plain and ordinary meaning of the words, in the context in which the words appear and considering them in the light of the object and purpose of the treaty.242 Only if the ordinary meaning of the words established through the study and analysis of the context, seems to contradict the object and purpose of the treaty, may other international rules on interpretation be resorted to for the interpretation of the provision.243 In this proceeding, the Panel has found it unnecessary to go beyond the dictates of Article 31 of the Vienna Convention.

  8. Article 31, like other provisions of the Convention, must be applied in conjunction with Article 26, which provides that "Every treaty in force is binding upon the parties to it and must be performed by them in good faith," i.e., Pacta sunt servanda. The Panel must interpret the treaty provisions in dispute with the understanding that the Parties accept the binding nature of NAFTA and that its obligations shall be performed in good faith. 

  9. Finally, in light of the fact that both Parties have made references to their national legislation on land transportation, the Panel deems it appropriate to refer to Article 27 of the Vienna Convention, which states that "A party may not invoke the provisions of its internal law as justification for its failure to perform a treaty."244 This provision directs the Panel not to examine national laws but the applicable international law. Thus, neither the internal law of the United States nor the Mexican law should be utilized for the interpretation of NAFTA.245 To do so would be to apply an inappropriate legal framework.246 


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Continue with  B. Reservations for Existing Measures and Liberalization Commitments




216 SRB Request at 1.
217 SRB Request at 2.
218 SRB Request at 2.
219 SRB Request at 3.
220 TR at 250.
221 Letter at 1-2.
222 USPHS at 19.
223 USPHS at 19, quoting Mexico. 
224 USPHS at 20-21.
225 USPHS at 20.
226 USPHS at 21.
227 MSRB.
228 MSRB at 5-6.
229 MSRB at 8-9.
230 MSRB at 9.
231 MSRB at 9.
232 See also HERSH LAUTERPACHT, THE DEVELOPMENT OF INTERNATIONAL LAW BY THE INTERNATIONAL COURT 52 (1958) ("Interpretation as a juristic process is concerned with the sense of the word used, and not with the will to use that particular word."); CHARLES C. HYDE, INTERNATIONAL LAW 531 (1945) ("The final purpose of seeking the intention of the contracting states is to ascertain the sense in which terms are employed. It is the contract which is the subject of interpretation, rather than the volition of the parties"). 
233 International tribunals have not hesitated to resort to the preamble of a treaty in order to discover the principal object of the treaty, as is contemplated in Article 31 of the Vienna Convention, discussed infra, note 231, 235. See also The Lotus, P.C.I.J., (1927) Ser.A, No.10, 17; Free Zones of Upper Savoy and the District of Gex (Order) (1929), P.C.I.J., Ser. A, No. 22, 12; Asylum (Colombia, Perú), I.C.J, (1950) Rep. 266 at 276, 282. Rights of U.S. Nationals at 196; D.P. O'CONNELL, INTERNATIONAL LAW 260 (2d ed. 1970).
234 In the Matter of Tariffs Applied by Canada to Certain United States Origin Agricultural Products. CDA 95-2008-01, Final Panel, para. 122 (Dec. 2, 1996). The principle that exceptions to general obligations are to be construed narrowly is well accepted in the interpretation of the GATT and WTO. See Tuna (Report of the Panel adopted on Feb. 22, 1982, L/5198-29S/91); Reformulated Gasoline, WTO Appellate Body (WT/DS/9, May 20, 1996); Shrimp WTO Appellate Body (WT/DS58/AB/R, Oct. 12, 1998); Thailand-Restrictions on Importation of and Internal Taxes on Cigarettes, Report of the Panel adopted on Nov. 7, 1990 (DS10/R-37S/200), at 87. 
235 "International tribunals have not hesitated to resort to the preamble of a treaty in order to discover the principal objectives of a treaty, and Article 31 of the Vienna Convention treats the preamble as part of the 'context' for purpose of interpretation." For documentation and summary sessions of the Vienna Conference, see A/CONF.39/11. For official documents, see A/CONF.39/11/Add.2. Text of the Vienna Convention can be found at http://www.un.org/law/ilc/texts/treatfra.htm 
236 "The United States considers the Vienna Convention on the Law of Treaties 1969 to be a valid source of law for this purpose of [interpreting NAFTA]." USCS at 37, note 92; "[T]his Panel should apply the rules for interpretation of public international law as set out in Articles 31 and 32 of the Vienna Convention on the Law of Treaties." MIS at 67.
237 Dairy Products, at paras. 118-121 (applying NAFTA Article 102(2) and Articles 31 and 32 of the Vienna Convention).
238 Case Concerning the Application of the Convention of 1902 Governing the Guardianship of Infants (Netherlands v. Sweden) I.C.J. Rep., 1958, 55 at 67.
239 Article 31:2 provides: 
"The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes: (a) any agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty; (b) any instrument which was made by one or more parties in connection with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty."
240 Article 31:3 provides: 
There shall be taken into account, together with the context: (a) any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions; (b) any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation; (c) any relevant rules of international law applicable in the relations between the parties.
Article 31:4 states: "A special meaning shall be given to a term if it is established that the parties so intended."
241 Article 32 provides: 
"Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31: (a) leaves the meaning ambiguous or obscure; or b) leads to a result which is manifestly absurd or unreasonable."
242 "It is impossible to say that an article is clear before its object and end is determined. Only when the object is established can one ascertain that the natural sense of the terms used remains within or exceeds the intention as disclosed." Judge Anzilotti in Interpretation of the Convention of 1919 Concerning the Employment of Women during the Night, P.C.I.J., Ser. A/B, No. 50 (1932). Ambatielos Case, I.C.J. Rep., 1952, 28 at 60. "Hence the idea that there is a natural meaning to words is delusive". D.P. O' Connell, op.cit., 254. Anglo-Iranian Oil Case, I.C.J. Rep., 1952, 104. Lord McNair, The Law of Treaties, 1961, 364. HERBERT W. BRIGGS, THE LAW OF NATIONS 877-899 (2d ed.); CHARLES G. FENWICK, INTERNATIONAL LAW 535-540 (4th ed.).
243 This approach has been clearly endorsed by the International Court of Justice:
The Court considers it necessary to say that the first duty of a tribunal which is called upon to interpret and apply the provisions of a treaty, is to endeavour to give effect to them in their natural and ordinary meaning in the context in which they occur. If the relevant words in their natural and ordinary meaning make sense in their context, that is an end of the matter.  Competence of the General Assembly for the Admission of a State to the United Nations, Advisory Opinion, March 1950, I.C.J. Rep., 4 at 8.
244 The proposition contained in this Article has been affirmed since the Alabama Arbitration, MOORE, HISTORY AND DIGEST OF THE INTERNATIONAL ARBITRATIONS TO WHICH THE UNITED STATES HAS BEEN A PARTY 653 (vol. 1 1898); Wimbledon, P.C.I.J. Rep., Ser., A. No. 1 Greco-Bulgarian Communities, P.C.I.J. Rep. Ser., B, No. 17. Polish Nationals, Treatment in Danzig, P.C.I.J. Rep., Ser., A/B, No. 44. The International Court of Justice adopted the same view in Reparation for Injuries suffered in the Service of the United Nations, I.C.J. Reports 1949, 180.
245 The Panel does not intend to suggest that issues of "internal" law are necessarily irrelevant to international law since national law may be relevant in a variety of ways, including as a fact in an international tribunal. ELSI Case (U.S. v. Italy), I.C.J. Reports 1989, 15.
246 International precedents and authorities supporting this proposition may be found in Roberto Ago, Third Report on State Responsibility, 89-105 (A/CN.4/246, 1971).