ODR for NAFTA

Back in June of this year, the Cyberjustice Laboratory played host to the NAFTA Advisory Committee on Private Commercial Disputes, commonly referred to as the NAFTA 2022 committee since its creation stems from article 2022 of the agreement:

1. Each Party shall, to the maximum extent possible, encourage and facilitate the use of arbitration and other means of alternative dispute resolution for the settlement of international commercial disputes between private parties in the free trade area.
2. To this end, each Party shall provide appropriate procedures to ensure observance of agreements to arbitrate and for the recognition and enforcement of arbitral awards in such disputes.
3. A Party shall be deemed to be in compliance with paragraph 2 if it is a party to and is in compliance with the 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards or the 1975 InterAmerican Convention on International Commercial Arbitration.
4. The Commission shall establish an Advisory Committee on Private Commercial Disputes comprising persons with expertise or experience in the resolution of private international commercial disputes. The Committee shall report and provide recommendations to the Commission on general issues referred to it by the Commission respecting the availability, use and effectiveness of arbitration and other procedures for the resolution of such disputes in the free trade area.

As described on the NAFTA website, the committee’s roles can be described as such:

• identify sectors and types of businesses that would particularly benefit from the use of alternative dispute resolution (ADR);
• promote and facilitate the use of such procedures in the NAFTA region;
• increase private sector awareness of their benefits;
• identify opportunities for expanded cooperation between institutions with an interest or involvement in ADR in the NAFTA region; and
• report and provide recommendations on issues relating to the enforcement of arbitration agreements and awards, and other litigation issues related to ADR.

Obviously, ADR has percolated negotiations leading to, and is integrated in, certain sections of the agreement since its adoption in 1992. “NAFTA tribunals”, as created under chapter 11 of the agreement, although somewhat controversial as to their jurisdiction and implementation (see Council of Canadians v. Canada (Attorney General), 2006 CanLII 40222), are established under the UNCITRAL Arbitration Rules, and their legitimacy has been recognized by Canadian courts:

There is a clear and well-known distinction between parliamentary approval of a treaty on the one hand, and incorporation of that treaty into Canadian domestic law on the other. See Canada (A.G.) v. Ontario (A.G.), 1937 CanLII 362 (UK JCPC), [1937] A.C. 326 (P.C.) (Labour Conventions). The NAFTA Implementation Act clearly does the former, and just as clearly does not purport to do the latter. The provision in the Commercial Arbitration Act that makes decisions, once rendered by NAFTA tribunals, enforceable in Canadian courts, goes no further than just that. That legislation cannot be seen as a determination by Parliament to incorporate into Canadian domestic law the entire investor–state adjudication process, including the tribunal’s makeup, its procedures, its governing law and the defined limits within which it can act. Only the decision it has made is incorporated into domestic law. The Commercial Arbitration Act says no more than this, and it is not necessary to read any broader meaning into that legislation to make the resulting decisions enforceable in Canadian courts.

Therefore, at this junction, the committee’s role isn’t as much to incorporate ADR into NAFTA, as it is “to offer helpful information and advice on dispute resolution options available to those who may be faced with or are involved in transnational commercial or domestic private commercial disputes”. Hence their interest in the Cyberjustice Laboratory’s work on online dispute resolution (ODR), as well as other ODR experiences around the country and the world.

So why would NAFTA tribunals or other NAFTA-related ADR processes benefit from ODR? Simply put, because for every softwood lumber dispute, there are hundreds of low intensity disagreements stemming from NAFTA-enabled transactions between international partners. Theses disputes mostly implicate small and medium-sized businesses (SMBs). Therefore, although they do not get much media coverage, the stakes surrounding these disputes couldn’t be higher for the involved corporations and their employees’ livelihoods. In 2008, the 2022 committee drafted Guidance Notes on Arbitrator Conduct for Private Commercial Disputes in the NAFTA Region. Said notes put forth the guiding principles for an arbitrator’s conduct such as insuring the integrity and fairness of the process; impartiality and disclosure of conflicts on interest; avoiding impropriety in communications with the parties; conducting the proceedings fairly and diligently; deciding in a just, independent, and deliberate manner; being faithful to the relationship of trust and confidence inherent to his or her office; etc.

Although all of these principles are pertinent and valid, one – which appears in the UNCITRAL notes on ODR – is unfortunately absent: the obligation to “not impose costs, delays and burdens that are disproportionate to the economic value at stake”. Granted, the Guidance notes do refer to diligence, but costs are unfortunately not mentioned other than in note 7 were it is stated that arbitrators “should adhere to standards of integrity and fairness when making arrangements for compensation and reimbursement of expenses”. Shouldn’t arbitrators also have a duty to limit costs for both parties? Wouldn’t that increase the fairness of the process when one party is financially less secure than the other?

This is where ODR could be extremely useful to help settle NAFTA-related disputes. Since, by definition, the parties reside in two different countries, online arbitration platforms could help greatly reduce travel costs and loss of income stemming from the time taken to settle the dispute rather than finding new business ventures. They could also help in improving fairness in another way by framing the case using technological tools and therefore insuring equality of weapons and treatment. The NAFTA 2022 committee seems wise to these possibilities, and we can only hope that they can move practices into this direction.

Of course, with the current political climate surrounding the USA’s continuing participation in NAFTA, it’s too early to tell if and how ODR can better be incorporated within the agreement’s existing structures. That being said, the possible renegotiation of NAFTA could actually be a blessing in disguise for SMSs if it allows for stronger wording favouring ODR practices and tools.