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Developments in USMCA dispute settlement
Brookings
2024.03.19
Apart from a special mechanism for labor complaints (addressed elsewhere in this document) the USMCA contains three main kinds of dispute settlement mechanisms, all of them inherited from the NAFTA. State-to-state dispute settlement (Chapter 31) allows an USMCA member state to invoke the jurisdiction of an ad hoc arbitral panel to adjudicate its claim that another member state has violated a provision of the NAFTA. Binational panel review of antidumping and countervailing duty determinations replaces domestic judicial review of agency actions with review by a binational panel that applies, however, the administrative law of the country whose agency has made the determination. Finally, there is investor-state dispute settlement (ISDS), with International Centre for Settlement of Investment Disputes (ICSID) or New York Convention rules applicable. Under NAFTA, state-to-state dispute settlement was minimally used, largely because the state, which a claim was brought against, managed to block the formation of a panel. Technical changes in the USMCA should tighten up the process and preclude such blocking behavior. The binational panel review process in USMCA is unchanged from the NAFTA. ISDS has been greatly limited relative to NAFTA and is now only available between the U.S. and Mexico, and on narrow grounds (e.g., direct expropriation)― except in cases where there is a state contract in a few specific sectors such as oil and gas.