GAO

United States General Accounting Office

Report to the Chairman, Subcommittee 

on Trade, Committee on Ways and 

Means, House of Representatives

July 2001 NORTH AMERICAN 

FREE TRADE 

AGREEMENT

U.S. Experience With 

Environment, Labor, 

and Investment 

Dispute Settlement 

Cases

GAO-01-933

Page 1 GAO-01-933 North American Free Trade Agreement

Contents

Letter 3

Results in Brief 4

Agency Comments and Our Response 5

Briefing Section I: 

Environmental Side 

Agreement

7

Slide 2: Key Principles 9

Slides 3 and 4: Citizen Submission and Review Process 13

Slide 5: Citizen Submissions Filed and Status of Cases Against 

the United States 15

Slide 6: Key Citizen Submissions Filed Against the United States 17

Slide 7: Outcomes 19

Briefing Section II: 

Labor Side Agreement

21

Slide 9: Key Principles 23

Slide 10: Submission and Review Process 25

Slide 11: Citizen Submissions Filed and Status of Cases Against the

United States 27

Slide 12: Submissions Filed Against the United States and Labor

Principles Involved 29

Slide 13: Outcomes 31

Slide 14: Background 33

Slide 15: Key Principles and Structure 35

Slide 16: Investor-State Dispute Settlement Process 37

Slide 17: Claims Filed and Status of Claims Against the United States 41

Slides 18 and 19: Claims Filed Against the United States 45

Slide 20: Outcomes 47

Appendixes Appendix I: Monetary Enforcement Assessments and Trade 

Sanctions in the North American Free Trade 

Agreement’s Labor and Environment 48

Appendix II: Citizen Submissions Under the North American

Agreement on Environmental Cooperation 51

Appendix III: Submissions Under the North American Agreement 

on Labor Cooperation 55

Appendix IV: Cases Filed Under NAFTA's Chapter 11 Investor-State 

Dispute Settlement Mechanisms Through May 2001 60

Appendix V: Objectives, Scope, and Methodology 65

Appendix VI: GAO Contacts and Staff Acknowledgments 67
Contents

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Abbreviations

BITS bilateral investment treaties

ICSID International Centre for Settlement of Investment Disputes

NAFTA North American Free Trade Agreement

UNCITRAL United Nations Commission on International Trade Law
Page 3 GAO-01-933 North American Free Trade Agreement

United States General Accounting Office

Washington, D.C. 20548 Letr

July 20, 2001

The Honorable Philip M. Crane

Chairman, Subcommittee on Trade

Committee on Ways and Means

House of Representatives

Dear Mr. Chairman:

The North American Free Trade Agreement (NAFTA) went into effect on 

January 1, 1994, and was intended to facilitate trade and investment 

throughout North America. Separately, the three NAFTA countries—the 

United States, Canada, and Mexico—negotiated and entered into two side 

agreements, the North American Agreement on Environmental 

Cooperation and the North American Agreement on Labor Cooperation. 

The side agreements provide mechanisms that allow citizens and 

governments an opportunity to raise questions regarding failure to 

effectively enforce environmental or labor laws of any of the three 

countries. These mechanisms include both a submission process and a 

government-to-government dispute settlement process. NAFTA also 

provides protections for investors, such as nondiscriminatory treatment 

and the right to freely transfer funds related to an investment, as well as a 

mechanism to settle investor-state disputes through the agreement’s 

chapter 11. 

In preparation for considering future free trade agreements, we recently 

briefed your staff on the U.S. experience to date with cases brought under 

the environmental and labor side agreements and with chapter 11 investorstate dispute settlement. In this report, we provide information on the 

institutional structure, principles, process, cases, and outcomes associated 

with (1) the environmental side agreement’s submission process, (2) the 

labor side agreement’s submission process, and (3) NAFTA’s investor-state 

dispute settlement mechanism. In addition, this report includes 

information on fines and trade sanctions under the side agreements, as well 

as summary data on cases filed under both the side agreements and chapter 

11 (see app. I to IV). 

To address these objectives, we interviewed officials from eight U.S. 

agencies with program responsibility for environmental, labor, or trade 

issues. In conducting the work, we examined the institutional structure 

and principles of the side agreements and chapter 11 on investment, the 

processes that are used to investigate and settle disputes, the cases that 
Page 4 GAO-01-933 North American Free Trade Agreement

have been initiated under the side agreements and investment provisions, 

and the outcomes and disposition of these cases. We also talked to 

representatives from nongovernmental entities with knowledge of the 

environment and labor submission processes, as well as those familiar with 

NAFTA’s investor-state dispute settlement mechanism. A more detailed 

description of our scope and methodology is contained in appendix V.

Results in Brief The environmental side agreement created the Commission for 

Environmental Cooperation to implement that accord’s principles and 

includes a process whereby citizens or nongovernmental groups can raise 

questions regarding the failure to effectively enforce environmental laws in 

all three member countries. This process is coordinated at the Commission 

by the Secretariat, which receives submissions from individuals or groups 

raising such questions. To date, 31 submissions have been filed with the 

Secretariat. Of these submissions, 8 were against the United States, 13 

were against Mexico, and 10 were against Canada. These submissions have 

raised a wide range of concerns, from narrow questions of a government’s 

failure to effectively enforce environmental laws in a particular instance, to 

broader concerns about enforcement in general. The submission process 

can lead to the publication of a “factual record,” a report that outlines the 

history of the issue, a Party’s obligations under the law in question, and the 

facts relevant to assertions made in the submission. Of the submissions 

made to date, only two have resulted in completed factual records, and 

neither of those completed factual records has involved the United States. 

The Commission recently finalized a review of the submission process. 

More detailed information on the submissions and process can be found in 

briefing section I and appendix II. 

The labor side agreement established the North American Commission for 

Labor Cooperation to implement that accord’s principles and includes a 

process whereby citizens, groups, or governments can raise questions of 

labor law enforcement in all three member countries. The Commission, 

through a network of National Administrative Offices in each country, 

coordinates the submission process, which can, in some cases, directly 

result in initiation of the government-to-government dispute settlement 

mechanism. To date, 23 submissions have been filed, with 7 against the 

United States, 14 against Mexico, and 2 against Canada. Although these 

submissions have covered a broad range of issues, a majority of them have 

raised concerns about freedom of association. Thus far, no submission has 

reached the dispute settlement phase. A review of the entire labor side 

agreement is scheduled for 2002. Additional information on the labor 
Page 5 GAO-01-933 North American Free Trade Agreement

submissions and process can be found in briefing section II and appendix 

III.

NAFTA’s chapter 11 is based in large part on previous international 

agreements, such as U.S. bilateral investment treaties and U.S. domestic 

legal principles applicable to investment (foreign and domestic). Chapter 

11 includes specific protections of investor rights in the three NAFTA 

countries, as well as a mechanism for settling investor-state disputes. This 

dispute settlement process makes use of the international arbitration rules 

of the International Centre for Settlement of Investment Disputes (ICSID), 

ICSID Additional Facility, and the United Nations Commission on 

International Trade Law. The parties to the dispute are allowed to choose 

the arbitral tribunal. The process allows disputing parties to seek to revise, 

set aside, or annul an award on limited grounds. To date, 13 claims have 

been filed under this dispute settlement mechanism. Of those claims, four 

were against the United States, five were against Mexico, and four were 

against Canada. Only five cases have resulted in a final outcome—either 

settlement or award. Of these cases, two decisions were brought before 

Canadian courts for review of the arbitral panels’ decisions; one is still 

pending and the other was partially upheld. Further details on the cases 

and process are described in briefing section III and appendix IV. 

Agency Comments and 

Our Response 

We obtained comments on a draft of this report from the Department of 

Commerce, the Environmental Protection Agency, the Department of the 

Interior, the Department of Labor, the Department of State, the Department 

of Justice, the Department of the Treasury, and the United States Trade 

Representative. Their comments were predominately technical in nature, 

and we generally incorporated them as appropriate throughout this report. 

As arranged with your office, unless you publicly announce the contents 

earlier, we plan no further distribution of this report until 30 days after its 

issue date. At that time, we will send copies to interested congressional 

committees and the Secretary of Commerce; the Administrator, 

Environmental Protection Agency; the Secretary of the Interior; the 

Attorney General; the Secretary of Labor; the Secretary of State; the 

Secretary of Treasury; and the U.S. Trade Representative. Copies will also 

be made available to other interested parties upon request.
Page 6 GAO-01-933 North American Free Trade Agreement

If you or your staff have any questions about this report, please call me at 

(202) 512-4347. Additional contact and staff acknowledgments are listed in 

appendix VI.

Sincerely yours,

Loren Yager, Director

International Affairs and Trade
Page 7 GAO-01-933 North American Free Trade Agreement

Briefing Section I: Environmental Side 

Agreement

Environmental Side Agreement:

Institutional Structure

Briefing Section I

Commission for Environmental Cooperation

The Council

Minister of Environment - Canada

Environmental Protection

Agency (EPA)

Administrator - United States

Secretary of Environment and

Natural Resources - Mexico

Secretariat

Executive Director

50 professional and support staff

Joint Public Advisory Committee

15 members (5 appointed by

each country)
Briefing Section I: Environmental Side 

Agreement

Page 8 GAO-01-933 North American Free Trade Agreement

Environmental Side Agreement:

Key Principles

•Key principles

•Protect, conserve, and improve the environment

•Provide citizens and nongovernmental organizations an

opportunity to raise questions regarding a Party’s

enforcement of environmental laws

•Provide governments an opportunity to raise questions

regarding a Party’s enforcement of environmental laws

•Government-to-government process includes

provisions for fines and trade sanctions

Briefing Section I
Briefing Section I: Environmental Side 

Agreement

Page 9 GAO-01-933 North American Free Trade Agreement

Slide 2: Key Principles The environmental side agreement aims to protect, conserve, and improve 

the environment through increased cooperation and transparency among 

the three governments and greater public participation. Since the 

agreement’s first full year of operation in 1995, member governments have 

worked cooperatively on a number of projects--producing reports on 

environmental topics of common concern such as conservation of 

biodiversity, holding symposia on topics such as understanding the 

linkages between trade and the environment, and implementing the Sound 

Management of Chemicals Program.

In addition, the agreement provides citizens and nongovernmental 

organizations an opportunity to raise questions about and shed light on a 

Party government’s effective enforcement of its environmental laws 

through the submission process.1

 Party governments may also raise 

questions regarding another Party’s enforcement of its environmental laws 

through the government-to-government dispute settlement mechanism; 

however, no government-to-government disputes have been initiated to 

date. The latter process includes a provision for the assessment of fines 

and trade sanctions.2

1

For more information on the cooperative work programs of the Commission for 

Environmental Cooperation, as well as the citizen submission process, visit the 

Commission’s Web site at http://www.cec.org .

2

While we do not provide specific information on the government-to-government dispute 

settlement mechanism in this report, appendix I provides a description of the monetary 

enforcement assessments and trade sanctions available under the North American 

Agreement on Environmental Cooperation.
Page 10 GAO-01-933 North American Free Trade Agreement
Briefing Section I: Environmental Side 

Agreement

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Environment: Citizen Submission and

Review Process

Briefing Section I

Submission filed with Secretariat

Secretariat evaluates submission

based on specific criteria

Meets criteria

Secretariat decides if response from

Party is warranted

Does not meet criteria

If yes, response requested

Secretariat decides if factual record

warranted

If yes, notification to Council

Submitter refiles submission

If no, process terminated
Briefing Section I: Environmental Side 

Agreement

Page 12 GAO-01-933 North American Free Trade Agreement

Environment: Citizen Submission and

Review Process

Briefing Section I

Decision by Council to prepare a

factual record

If yes, Secretariat drafts factual record

Comments from Parties

Secretariat prepares final factual record

Decision by Council whether to make

factual record public

If no, process terminated

If yes, publication of factual record
Briefing Section I: Environmental Side 

Agreement

Page 13 GAO-01-933 North American Free Trade Agreement

Slides 3 and 4: Citizen 

Submission and 

Review Process

The process for making a submission to the Commission for Environmental 

Cooperation begins when a citizen or nongovernmental group files a 

submission with the Secretariat. The process can then move through 

various decision points, which can culminate in the public release of a 

factual record on the issues raised in the initial submission. According to 

the Commission’s guidelines, a factual record outlines the history of an 

issue and the facts relevant to the assertions made in the submission. In 

the two factual records prepared to date, the Secretariat has also included 

information on the obligations of the Party under the law in question and 

the actions of the Party in fulfilling these obligations. 

Depending on the point of the process, the decision to proceed rests with 

either the Secretariat or the Council. The Secretariat is guided by criteria 

laid out in formal guidelines for implementing the submission process. 

Documentation of some of the Secretariat’s determinations, as well as a 

Party’s response to a submission, is generally available to the public.3

 For 

example, the Council recently resolved to amend the guidelines to reflect a 

requirement that the Secretariat make public its reason for recommending 

a factual record 5 working days after the Secretariat has notified the 

Council of such a recommendation. A vote of at least two-thirds of the 

Council is required to proceed at two key points of the process—whether 

to instruct the Secretariat to prepare a factual record and whether to 

publicly release the factual record. 

3

Making files on the citizen submissions and related documents public is subject to the 

confidentiality provisions of the environmental side agreement and of the guidelines. 
Briefing Section I: Environmental Side 

Agreement

Page 14 GAO-01-933 North American Free Trade Agreement

Environment: Citizen Submissions Filed and

Status of Cases Against the United States

•31 Total submissions

•8 against the United States

•13 against Mexico

•10 against Canada

•19 Submissions closed and 12 under review

•8 Submissions against the United States

•5 have been terminated or the process halted

•1 was withdrawn

•1 has been recommended for a factual record

•1 is under review

Briefing Section I
Briefing Section I: Environmental Side 

Agreement

Page 15 GAO-01-933 North American Free Trade Agreement

Slide 5: Citizen 

Submissions Filed and 

Status of Cases Against 

the United States

There have been a total of 31 citizen submissions filed with the 

Commission for Environmental Cooperation alleging violations of 

environmental laws against all 3 member governments. Of these 31 

submissions, 8 were against the United States, 13 were against Mexico, and 

10 were against Canada. Nineteen submissions have been closed. Of these 

closed submissions, 17 were closed for several reasons, including that the 

submission did not meet specific requirements; and two are considered 

closed because a factual record was prepared. Twelve are currently under 

review and in various stages of the process. 

Submissions have covered a broad range of concerns, from specific 

questions of a government’s failure to effectively enforce a particular law in 

a particular situation, to others alleging a more general failure to effectively 

enforce environmental laws. For example, an early submission, known as 

the Cozumel Pier case, alleged that in one instance, the Mexican 

government had failed, among other things, to effectively enforce its 

requirements for conducting an environmental impact assessment of the 

Cozumel pier project. A more recent submission, known as the Migratory 

Bird case, involves a complaint alleging that the U.S. government fails to 

effectively enforce a law that prohibits the taking of migratory birds 

without a permit with respect to loggers and the logging industry. 

Eight submissions were filed with the Commission alleging that the United 

States failed to effectively enforce its environmental laws. Of these eight 

submissions, one is currently being considered by the Council for 

preparation of a factual record, one is being reviewed in light of the U.S. 

government’s response and additional information provided by the United 

States at the request of the Secretariat, and six are no longer being 

considered. A summary of all citizen submissions made under the 

environmental side agreement can be found in appendix II.
Briefing Section I: Environmental Side 

Agreement

Page 16 GAO-01-933 North American Free Trade Agreement

Environment: Key Citizen Submissions

Filed Against the United States

Submitters:

Center for International Environmental

Law, et al.

Claim:

Migratory Bird Treaty Act (MBTA) not

effectively enforced as it relates to

loggers, logging companies, and

logging contractors; logging operations

exempted from the MBTA as a matter

of U.S. internal policy

U.S. Response:

•No policy to exempt logging

•Agency discretion allows for current

enforcement policy

•Resource allocation decision

Status:

•Preparation of a factual record

recommended by the Secretariat

•Council will consider whether to

approve preparation of a factual record

MIGRATORY BIRDS GREAT LAKES

Submitters:

Department of the Planet Earth Inc., et al.

Claim:

Regulations and programs adopted to

control airborne emissions of toxic

substances from solid and medical waste

incinerators violate and fail to effectively

enforce U.S. domestic laws and U.S.-

Canada Treaties

U.S. Response:

•Submission does not meet applicable

requirements

•Allegations inaccurate

•Section of Clean Air Act misunderstood

Status:

•Additional information requested and

received from United States

•Secretariat reviewing submission in light of

response and additional information

Briefing Section I
Briefing Section I: Environmental Side 

Agreement

Page 17 GAO-01-933 North American Free Trade Agreement

Slide 6: Key Citizen 

Submissions Filed 

Against the United 

States

The United States was named in eight submissions. However, two stand 

out as significant—the Migratory Birds and the Great Lakes submissions—

because they have gone the furthest in the submission process, resulting in 

a U.S. response, and, in the Migratory Birds case, a recommendation from 

the Secretariat to the Council to prepare a factual record.4

 Currently, both 

submissions are pending, and it is not known in either case whether a 

factual record will be prepared and made public. 

4

A third submission, the Fort Huachuca submission, also reached the point in the process 

where a response was prepared by the U.S. government and was submitted. However, the 

submitters withdrew their filing, and the process was terminated before the Secretariat 

made a decision about whether to recommend the preparation of a factual record. 
Briefing Section I: Environmental Side 

Agreement

Page 18 GAO-01-933 North American Free Trade Agreement

Environment: Outcomes

•Two factual records have been prepared and made public

•Submission against Mexico in Cozumel case

•Submission against Canada in BC Hydro case

•Another factual record is being prepared

•Secretariat recommended and is preparing a factual record

in a submission against Mexico (Metales y Derivados case)

•History of submissions and submission process reviewed

by the Joint Public Advisory Committee

Briefing Section I
Page 19 GAO-01-933 North American Free Trade Agreement

Slide 7: Outcomes Of the 31 submissions made, only 2 have resulted in the preparation of a 

factual record and its public release. One factual record involved Mexico, 

and the other involved Canada. The Secretariat is currently preparing 

another factual record that involves Mexico.

In June 2000, the Council passed a resolution to have the Joint Public 

Advisory Committee conduct a review of the history of submissions and 

the submission process. A final report covering the issues raised during this 

review was recently released by the Joint Public Advisory Committee.
Page 20 GAO-01-933 North American Free Trade Agreement
Page 21 GAO-01-933 North American Free Trade Agreement

Briefing Section II: Labor Side 

Agreement

Labor Side Agreement: Institutional

Structure

 Ministerial Council 

Permanent structure Temporary bodies

Briefing Section II

Secretariat

Executive Director

15-member support staff

Canada NAO Mexico NAO

Evaluation Committee

of Experts

Arbitral panel

U.S. NAO

North American

Commission for

Labor Cooperation
Briefing Section II: Labor Side Agreement

Page 22 GAO-01-933 North American Free Trade Agreement

Labor Side Agreement: Key Principles

•Key principles

•Improve working and living standards through compliance with,

and effective enforcement of, 11 labor principles

•Eleven labor principles fall into three categories: 

•Group I--union-related activities

•Group II--workers’ rights

•Group III--child labor and workplace safety

•Provide citizens and governments an opportunity to address

questions regarding enforcement of labor laws

•Includes provisions for fines and trade sanctions that only

apply to violations of Group III labor principles

Briefing Section II
Briefing Section II: Labor Side Agreement

Page 23 GAO-01-933 North American Free Trade Agreement

Slide 9: Key Principles The goals of the labor side agreement are to improve working conditions 

and living standards in each country, encourage the exchange of 

information regarding pertinent legal issues, foster transparency in 

administration of labor laws, and pursue cooperative labor-related 

activities among the three countries.1

In addition, under the labor side agreement, the three governments 

committed themselves to promote compliance with and effectively enforce 

(subject to domestic laws) 11 labor principles. These labor principles are 

generally grouped into three categories.

The agreement also allows citizens and groups to file submissions 

questioning implementation of labor laws. In addition, fines or trade 

sanctions may be imposed when a government is found to have failed to 

effectively enforce its labor laws related to group III principles.

1

For additional information see the U.S. Department of Labor's National Administrative 

Office Web site: http://www.dol.gov/dol/ilab/public/programs/nao/main.htm.

Group I •Freedom of association and right to organize,

•Right to bargain collectively, and

•Right to strike

Group II •Prohibition of forced labor,

•Elimination of employment discrimination,

•Equal pay,

•Compensation for occupational injuries and illnesses, and

•Protection of migrant workers

Group III •Child labor protections,

•Minimum wage technical standards, and

•Prevention of occupational injuries
Briefing Section II: Labor Side Agreement

Page 24 GAO-01-933 North American Free Trade Agreement

Labor: Submission and Review Process

If accepted:

Briefing Section II

Submission filed

with NAO

(Groups I, II, III)

Consultations

with other NAOs 

(Groups I, II, III)

Minister-to-minister

consultations

(Groups I, II, III)

Dispute Resolution

-Consultations

-Arbitral panel

-Initial report

-Action plan

-Final report

(Group III only)

Evaluation

Committee of

Experts

(Groups II, III)

Ministerial Council

Minister-to-minister

consultations

-Special council

(Groups II, III)

Public hearing Issue report

Fines and

sanctions

(Group III only)
Briefing Section II: Labor Side Agreement

Page 25 GAO-01-933 North American Free Trade Agreement

Slide 10: Submission 

and Review Process

Any person or group in a NAFTA country may file a submission with a 

National Administrative Office alleging that one of the other governments 

has failed to effectively enforce its labor laws. If the National 

Administrative Office decides to accept the submission, it may hold public 

hearings to gather information; and it may consult with the other National 

Administrative Offices. The Secretary of the National Administrative Office 

receiving the submission may then recommend that the Ministers consult 

on the submission. Depending on the nature of the allegation, ministerial 

consultations may be followed by formation of an evaluation committee of 

experts to further consider the submission. 

The labor agreement also provides a government-to-government dispute 

settlement mechanism to be used where cooperative efforts to resolve the 

problems fail and where the submission alleges a persistent pattern of 

failure to effectively enforce prevention of occupational safety and health 

hazards, child labor protections, or minimum wage technical labor 

standards. While some submissions have been eligible to proceed to the 

government-to-government dispute settlement level, none has advanced 

this far. If a submission were to reach this stage, an arbitral panel would be 

formed to review the allegations and make recommendations for corrective 

action. Failure to fully implement the panel's recommendations could lead 

to monetary sanctions. Collected fines would be placed in a fund used to 

improve enforcement of labor law in the country found in violation. 

Failure to pay the fines could result in suspension of NAFTA benefits. See 

appendix I for more information regarding how fines and trade sanctions 

would be applied.
Briefing Section II: Labor Side Agreement

Page 26 GAO-01-933 North American Free Trade Agreement

Labor: Citizen Submissions Filed and Status

of Cases Against the United States

•23 Total submissions

•7 against the United States

•14 against Mexico

•2 against Canada

•7 Submissions against the

United States

•2 declined

•5 ministerial consultations

Labor principles addressed Labor principles addressed

in all submissions submissionsa

•15 Submissions closed

and 8 under review

aNumbers exceed 23 because a submission

can address multiple labor principles

Briefing Section II

Group I

Group II

Group III

15

20

9
Briefing Section II: Labor Side Agreement

Page 27 GAO-01-933 North American Free Trade Agreement

Slide 11: Citizen 

Submissions Filed and 

Status of Cases Against 

the United States

The three National Administrative Offices have received a total of 23 

submissions since 1994, with 7 submissions being filed between 1994 and 

1996; 13 between 1997 and 1998; 2 in 1999; and 1 in 2000. At the time of this 

report, no submissions had been filed in 2001. Of the 23 total submissions 

filed, 7 were against the United States, 14 were against Mexico, and 2 were 

against Canada. Of these submissions, 15 have been closed and 8 are still 

under review. Of the seven submissions filed against the United States, 

three were the subject of ministerial consultations, two were declined, and 

two are pending ministerial consultations. A more detailed description of 

the 23 submissions can be found in appendix III.

The graph depicts the labor principles, by group, cited collectively in all 23 

submissions. The number of labor principles cited exceeds 23 because 

more than 1 labor violation can be included in a submission. The majority 

of submissions have alleged group I violations, commonly citing freedom of 

association concerns. 
Briefing Section II: Labor Side Agreement

Page 28 GAO-01-933 North American Free Trade Agreement

Labor: Submissions Filed Against the United

States and Labor Principles Involved

•4 cases cited freedom of association

•3 cases cited prevention of occupational injuries

•3 cases cited compensation for occupational injuries and illnesses

•3 cases cited protection of migrant workers

•3 cases cited employment discrimination

•5 cases cited minimum employment standards, such as minimum

wages

Briefing Section II

Group I cases

Group II cases

Group III cases
Briefing Section II: Labor Side Agreement

Page 29 GAO-01-933 North American Free Trade Agreement

Slide 12: Submissions 

Filed Against the 

United States and 

Labor Principles 

Involved

Of the seven submissions filed against the United States, five were 

accepted for review. These submissions together claimed violations of 6 of 

the 11 labor principles, encompassing group I, II, and III labor principles. 

One of the five submissions alleged that the United States violated six labor 

principles.
Briefing Section II: Labor Side Agreement

Page 30 GAO-01-933 North American Free Trade Agreement

Labor: Outcomes

•No submission has progressed past the minister-tominister consultation stage of the process

•Submissions that have reached this phase have taken at

least 2 years to do so

•Labor commission held jointly sponsored public

seminars and forums and issued public reports

•Review of labor side agreement, including the

submission process, scheduled for 2002

Briefing Section II
Briefing Section II: Labor Side Agreement

Page 31 GAO-01-933 North American Free Trade Agreement

Slide 13: Outcomes To date no submission has advanced past the ministerial consultation 

phase, and those that have reached this stage have taken at least 2 years to 

do so. 

The labor submission process has resulted in conferences, seminars, and 

public reports. For example, in an effort to address concerns about genderbased discrimination that were raised in a submission to the U.S. National 

Administrative Office, the three NAFTA governments held a conference to 

discuss the laws and programs that protect employment rights of women in 

all three NAFTA countries. In another instance, a submission raising 

issues regarding the status of international treaties and constitutional 

provisions protecting freedom of association led the three Parties to hold a 

seminar on international treaties and constitutional provisions in each 

Party's labor laws. Furthermore, the Labor Commission initiated a variety 

of public outreach forums and conferences regarding workers' rights, as a 

result of issues raised in several submissions and published reports on the 

topics covered. 

A review of all the components of the labor side agreement is scheduled to 

be completed in 2002, but may not be finalized as scheduled, according to 

U.S. officials. The reason for the delay is primarily because of the recent 

change in the U.S. administration and as-yet unfilled staff positions.
Page 32 GAO-01-933 North American Free Trade Agreement

Briefing Section III: Investor-State 

Dispute Settlement

NAFTA Investor-State: Background

•Previous international agreements on

investment

•Friendship Commerce and Navigation Treaties

(post-WWII)

•Bilateral Investment Treaties (since the early 1980s)

Briefing Section III
Briefing Section III: Investor-State Dispute 

Settlement

Page 33 GAO-01-933 North American Free Trade Agreement

Slide 14: Background The provisions on investor rights and the dispute settlement mechanism 

found in NAFTA's chapter 11 are modeled on other U.S. international 

treaties, with the underlying investment policy based largely on U.S. 

domestic practice. For example, during the post-World War II era, the 

United States negotiated treaties of friendship, commerce, and navigation 

to protect U.S. investors abroad. These treaties included a state-to-state 

dispute settlement mechanism designed to resolve investment disputes 

through diplomatic channels or arbitration. By the early 1980s, the effort to 

protect investors overseas shifted to the negotiation of bilateral investment 

treaties (BITS). These BITS provided investors more specific investment 

protections (similar to those found in U.S. domestic practice) and also 

introduced investor-state arbitration rules—rules similar to those found in 

NAFTA's chapter 11. 
Briefing Section III: Investor-State Dispute 

Settlement

Page 34 GAO-01-933 North American Free Trade Agreement

NAFTA Investor-State: Key Principles

and Structure

•Key principles

•Provides investor protections that cover a broad range of issues,

including national treatment (art.1102), minimum standard of

treatment (art. 1105), performance requirements (art. 1106), and

expropriation (art. 1110)

•Provides an investor-state dispute settlement mechanism, which

includes authority to award monetary damages

•Uses existing international arbitration rules and

structure

•Cases against the United States generally overseen

by the Department of State

Briefing Section III
Briefing Section III: Investor-State Dispute 

Settlement

Page 35 GAO-01-933 North American Free Trade Agreement

Slide 15: Key 

Principles and 

Structure

NAFTA's chapter 11 on investment provides several basic protections 

for NAFTA investors and their investments including nondiscriminatory 

treatment,1 minimum standard of treatment, 2 freedom from 

performance requirements, 3

 free transfer of funds related to an 

investment, and expropriation only in conformity with international 

law. In addition, NAFTA's investment chapter allows investors and 

governments to use an investor-state dispute settlement mechanism 

when investors claim violations of the agreement's protections.

This mechanism relies on the use of three existing international 

commercial arbitration rules: the United Nations Commission on 

International Trade Law (UNCITRAL), the International Centre for 

Settlement of Investment Disputes (ICSID), and the ICSID Additional 

Facility. The Department of State is generally responsible for overseeing 

cases brought against the United States, but other agencies, such as the 

Department of Justice and the U.S. Trade Representative, as part of an 

interagency process, also play a significant role in supporting the U.S. 

position in chapter 11 cases.

1

Nondiscriminatory treatment requires each government to treat investors from another 

NAFTA country and their investments no less favorably than its own investors and their 

investments (national treatment), and no less favorably than investors of other countries 

and their investments (most-favored-nation (MFN) treatment). In addition, investors and 

their investments must be accorded the better of national treatment or MFN treatment 

(standard of treatment).

2

Minimum standard of treatment requires each government to accord investors from 

another NAFTA country treatment in accordance with international law, including fair 

and equitable treatment and full protection and security.

3

“Performance requirements” refers to a set of requirements that governments impose or 

enforce on investors or their investment either as a condition of establishment or operation, 

or as a condition for receipt of an advantage. Examples include requiring an investor to buy 

or use components from a local supplier or to export a specified level of goods or services.
Briefing Section III: Investor-State Dispute 

Settlement

Page 36 GAO-01-933 North American Free Trade Agreement

Investor-State: Dispute Settlement

Process

Briefing Section III

Investor may seek consultation and negotiation

If not satisfied with consultations, investor

files notice of intent to submit claim

Investor files notice and submits claim under

specific international arbitration rules

Tribunal is constituted (three arbitrators)

Tribunal convenes to hear arguments

Tribunal makes award

Parties can seek to set

aside, annul, or revise

award on

limited grounds

6 months since events

giving rise to claim

90 days since

notice of intent
Briefing Section III: Investor-State Dispute 

Settlement

Page 37 GAO-01-933 North American Free Trade Agreement

Slide 16: Investor-State 

Dispute Settlement 

Process

Chapter 11 encourages consultations and negotiations as the first steps in 

the dispute settlement process under the investor-state dispute settlement 

mechanism. Failing successful consultations, an investor may proceed to 

the formal steps under the dispute settlement process and seek monetary 

damages against the host government, including interest and costs, for 

actions taken by that government at all levels, e.g., local, state, and federal. 

Article 1123 of NAFTA provides for the establishment of an arbitral tribunal 

consisting of three arbitrators, one appointed by each of the disputing 

parties, and the third, to be the presiding arbitrator, appointed by 

agreement of those parties.4

 

The investor selects the international arbitration rules that will govern the 

arbitration from the available alternatives provided under the NAFTA.5

 

Generally, the tribunal receives formal written submissions from the 

disputing parties on the issues raised by the case and convenes to hear the 

parties' arguments. The extent of public access to proceedings, 

documents, or decisions is guided by the text of the NAFTA, the selected 

arbitration rules, and by the parties to the dispute. In addition, a panel can 

unilaterally issue a confidentiality order. These practices have limited the 

accessibility of information about investor-state cases.

4

 NAFTA chapter 11 also includes specific provisions regarding the parties' failure to appoint 

arbitrators or agree on a presiding arbitrator.

5

Currently, only the ICSID Additional Facility and the UNCITRAL Arbitration Rules are 

available.
Briefing Section III: Investor-State Dispute 

Settlement

Page 38 GAO-01-933 North American Free Trade Agreement

The tribunal may make interim orders and final awards, which are binding 

on the parties. Under article 1136, which sets out rules governing 

enforcement of final awards, each NAFTA Party is obligated to abide by 

and comply with a final award and provide for enforcement of that award 

in its own country. In addition, this article allows a disputing party to seek 

enforcement of an award only where certain time requirements related to 

the applicable arbitration rules have elapsed and neither party has 

requested revision, set-aside, or annulment of the award; or where a 

revision, annulment, or set-aside application proceeding has been 

dismissed or completed by a court and there is no further appeal.6

 A 

government's failure to pay the award could result in the imposition of 

trade sanctions if the government of the investor seeks further resolution 

of the matter under NAFTA chapter 20's dispute settlement procedures.

6

Article 1136 allows a disputing party, under the law governing the arbitration, to commence 

proceedings to revise, set aside, or annul an award of the arbitral tribunal. Mexico and 

Canada have both initiated such proceedings in Canadian courts. Both countries sought to 

have awards in favor of the investor set aside under Canadian enactments of the UNCITRAL 

Model Law on International Commercial Arbitration, which allow decisions of arbitral 

tribunals, such as NAFTA chapter 11 tribunals, to be subject to action to set aside the award 

on limited grounds, including a tribunal exceeding its jurisdiction. Such a proceeding is not 

a judicial review of the merits of an underlying arbitration.
Page 39 GAO-01-933 North American Free Trade Agreement
Briefing Section III: Investor-State Dispute 

Settlement

Page 40 GAO-01-933 North American Free Trade Agreement

Investor-State: Claims Filed and Status of

Claims Against the United States

•13 Total claims filed

•4 by U.S. investors against Canada

•5 by U.S. investors against Mexico

•4 by Canadian investors against the United States

•4 Claims against the United States

•All pending and in various stages of the dispute

settlement process

Briefing Section III
Briefing Section III: Investor-State Dispute 

Settlement

Page 41 GAO-01-933 North American Free Trade Agreement

Slide 17: Claims Filed 

and Status of Claims 

Against the United 

States

To date, 13 investor-state claims have been made under NAFTA's chapter 

11.7

 Of these claims, nine have been filed by U.S. investors against Canada 

or Mexico. Canadian investors have filed four claims against the United 

States. All four cases filed against the United States are pending and in 

various stages of the dispute settlement process. For example, in one case, 

Loewen, a hearing was held in 2000 on jurisdictional issues. The next 

hearing, which involves the Methanex case, is scheduled for mid-summer 

2001. 

7

Thirteen refers to the number of formal claims submitted to arbitration. In some cases, a 

notice of intent to claim may have been submitted by an investor but was never followed up 

with a formal notice of claim or notice of arbitration. A case only becomes an official claim 

when it is submitted to arbitration under the applicable rules. 
Page 42 GAO-01-933 North American Free Trade Agreement
Briefing Section III: Investor-State Dispute 

Settlement

Page 43 GAO-01-933 North American Free Trade Agreement

Investor-State: Cases Filed Against the

United States

Briefing Section III

Loewen: $725 million

Claim:

Mississippi jury awarded $500 million in compensatory

and punitive damages against Canadian-owned

funeral home chain in civil proceeding for fraudulent

and malicious business practices. To stay

execution of the judgment pending appeal, company

was required to post $625 million appeal bond, a

state statutory requirement upheld by the

Mississippi Supreme Court. Company claims jury

award and court action, among other things, amount

to a denial of justice.

NAFTA provisions: Arts. 1102, 1105,

and 1110

Methanex: $1 billion

Claim:

California regulations ban use of MTBE, a gasoline

additive that can contaminate drinking water, by end

of 2002. Canadian firm Methanex, which produces

methanol, a feedstock for MTBE, claims regulations

illegally expropriate firm’s U.S. investment and

discriminate against it in favor of the U.S. ethanol

industry.

NAFTA provisions: Arts. 1102, 1105,

and 1110
Briefing Section III: Investor-State Dispute 

Settlement

Page 44 GAO-01-933 North American Free Trade Agreement

Investor-State: Cases Filed Against the

United States

Briefing Section III

Mondev: $50 million

Claim:

Canadian-owned real estate company that contracted

with city of Boston and local agency to construct

buildings won $16 million award (reduced to $9.6

million) for breach of contract and tort. Award was

reversed by Supreme Judicial Court of Massachusetts,

which ruled that Boston did not breach contract and

agency was immune from suit under state law from

tort liability. Firm claims that the city of Boston’s 

alleged breach of contract and the court’s ruling

involve expropriation of Mondev’s interest and a

denial of justice.

NAFTA provisions: Arts. 1102, 1103,

1105, and 1110

ADF: $90 million

Claim:

Canadian company’s U.S. subsidiary subcontracted

with U.S. firm to supply steel for a federally-aided

highway construction project in Virginia. Canadian

company’s U.S. subsidiary wanted to fabricate U.S.-

manufactured steel in Canada for use in the project.

Buy America requirements prohibit use of Canadianfabricated steel in the construction project. ADF claims

Buy America requirements discriminate against and

prohibited performance requirements on ADF.

NAFTA provisions: Arts. 1102, 1105,

and 1106
Briefing Section III: Investor-State Dispute 

Settlement

Page 45 GAO-01-933 North American Free Trade Agreement

Slides 18 and 19: 

Claims Filed Against 

the United States

Two claims, one filed by the Loewen Group and one by Methanex, together 

seek total monetary damages against the United States of approximately 

$1.7 billion. While each case presents arguments unique on the facts, they 

both essentially assert that actions taken in the United States violated the 

national treatment and minimum standard of treatment provisions of 

chapter 11. In addition, they both claim that the U.S. actions (through 

Mississippi's justice system and California's regulations, respectively) 

amounted to an expropriation of their property, in violation of another key 

provision of NAFTA's investment chapter. The Department of Justice is the 

lead agency in the Loewen case, while the Department of State is leading 

the defense in the Methanex case. 

The Mondev and ADF claims together call for $140 million in monetary 

damages against the U.S. government. Both claims cite violations of 

NAFTA's national treatment and minimum standard of treatment 

provisions. The Mondev claim also cites violations of NAFTA's mostfavored-nation provision, and further alleges that U.S. actions amount to an 

expropriation of its investment in Massachusetts. The ADF claim asserts 

that U.S. Buy America requirements impose performance requirements on 

ADF in violation of NAFTA's chapter 11. The Department of State is the 

lead agency defending the U.S. government position in both of these cases.

There have been interagency discussions among the U.S. Trade 

Representative, the Department of State, the Department of Justice, the 

Department of Commerce, and the Department of the Treasury on how the 

damages would be paid if awarded. However, no agreement has been 

reached, and no awards have had to be paid. One possible source for 

payment considered in interagency discussions is the permanent, indefinite 

appropriation in 31 U.S.C. 1304, known as the Judgment Fund, which is 

legally available to pay final judgments and comprise settlements against 

the United States. The Fund is administered by the Department of the 

Treasury, which certifies and disburses actual payments from the Fund. 

Before payments can be made, however, the Department of Justice must 

first certify that a judgment is final and payment is in the interest of the 

United States. In addition, the judgment must be for an actual sum of 

money, and there must be no other source of funds legally available to pay 

the judgment.
Briefing Section III: Investor-State Dispute 

Settlement

Page 46 GAO-01-933 North American Free Trade Agreement

Investor-State: Outcomes

•5 Cases brought by U.S. investors have resulted in

settlement or award

•Ethyl Corporation vs. Canada--settled for $13 million

•S.D. Myers vs. Canada--partial award for investor; case under

review in Canadian courts

•Pope & Talbot vs. Canada--partial award in favor of investor on

one aspect of case

•Azinian, et al. (DESONA) vs. Mexico--award in Mexico’s favor

•Metalclad Corporation vs. Mexico--$16.7 million award for

investor; Canadian courts upheld award in part

•Experience with investor-state disputes is limited and few

cases finalized

Briefing Section III
Briefing Section III: Investor-State Dispute 

Settlement

Page 47 GAO-01-933 North American Free Trade Agreement

Slide 20: Outcomes To date, U.S. investors have made nine claims under NAFTA's investor-state 

dispute settlement mechanism, with results, so far, of settlement or award 

in five of those cases. Canada settled with a U.S. investor in one case in 

which a Canadian court, in an unrelated case, called for the federal 

government of Canada to reverse the actions that gave rise to the claim.8

 In 

two other cases involving Canada, arbitral tribunals found in favor of U.S. 

investors. In the S.D. Myers case, Canada is seeking to have the partial 

award against it set aside in its domestic courts. 

Outcomes for U.S. investors in two cases involving Mexico have been 

split—with one arbitral tribunal's decision in favor of Mexico and another 

in favor of the U.S. investor. In the Metalclad case, Mexico sought to have 

the award against it set aside in Canadian courts. A Canadian court ruling 

denied Mexico's application to set aside the award in its entirety, but did 

set aside part of the award. 

More investor-state dispute settlement cases are currently progressing 

through chapter 11's arbitral system. According to a schedule of deadlines 

for investor-state arbitration, a hearing will be held in four cases involving 

the United States or a U.S. investor before the end of 2001.

8

 The provincial government of Alberta sued the Canadian federal government on the same 

measure raised in the Ethyl case and won.
Page 48 GAO-01-933 North American Free Trade Agreement

Appendix I

Monetary Enforcement Assessments and Apendxies

Trade Sanctions in the North American Free 

Trade Agreement’s Labor and Environment ApendxiI

The structure for monetary enforcement assessments (fines) and trade 

sanctions in the North American Free Trade Agreement's (NAFTA) labor 

and environmental side accords follows distinct processes. For labor, 

there is a single, continuous process that begins with a citizen submission 

on a labor law enforcement matter and could lead, in some cases, to fines 

or suspension of NAFTA tariff benefits. For environment, there are two 

processes. One specifically addresses citizen submissions on 

environmental law enforcement matters and can, at most, result in the 

publication of a “factual record” by the Secretariat of the Commission for 

Environmental Cooperation. The other, a Party-to-Party dispute settlement 

process, could lead to fines or suspension of NAFTA tariff benefits. 

Aside from these distinct processes, the way monetary fines are assessed 

and what happens if a Party fails to pay a fine are handled the same under 

both side accords. How the United States pays fines assessed against it, 

while not addressed in either side accord, has been the subject of 

interagency discussion.

Environmental Process Fines are called for in the Party-to-Party Consultation and Resolution of 

Disputes Section (part V) of the North American Agreement on 

Environmental Cooperation. Fines may be assessed if an arbitral panel 

determines that one Party has exhibited a persistent pattern of failure to 

effectively enforce its environmental law, Parties have not been able to 

agree on an action plan, or an action plan designed to correct a failure to 

effectively enforce a Party's environmental law has not been fully 

implemented. Even if a fine is assessed, the original plan for corrective 

action required by the arbitrage panel must still be fully implemented.

Labor Process A citizen submission can evolve into a Party-to-Party Ministerial 

Consultation, which in turn can lead to the utilization of the dispute 

resolution mechanism for 3 of the 11 labor principles listed in the North 

American Agreement on Labor Cooperation: child labor, minimum wage 

technical labor standards, and occupational safety and health. An arbitral 

panel determines whether the Party complained against showed a 

persistent pattern of nonenforcement of one of the three labor principles 

and prepares a final report on the complaint. If the disputing parties have 

not agreed on a final report or cannot agree on full implementation of an 

action plan, then the panel can impose a monetary enforcement 
Appendix I

Monetary Enforcement Assessments and 

Trade Sanctions in the North American Free 

Trade Agreement’s Labor and Environment

Page 49 GAO-01-933 North American Free Trade Agreement

assessment. Even if a fine is assessed, the original plan for corrective 

action required by the arbitral panel must still be fully implemented

Amount of Monetary 

Fines Under the Side 

Accords

A fine cannot exceed $20 million or its equivalent in the currency of the 

Party paying the fine in the first year of NAFTA implementation or be no 

more than .007 percent of total trade in goods between the parties during 

the most recent year for which data are available. The fine must be paid 

into a fund directed by the Council of the Commission established under 

each side accord. The monies must be used as the Council directs to either 

improve the environment or labor conditions or the enforcement of 

environmental or labor laws in the territory of the Party complained 

against, consistent with the law of that Party.

How the United States 

Would Pay

There have been interagency discussions among the Department of Labor, 

the U.S. Trade Representative, the Department of State, the Department of 

Justice, and the Environmental Protection Agency on exactly how the fines 

would be paid. However, no agreement has been reached, and no fines have 

been assessed.

One possible source for payments considered in interagency discussions is 

the permanent, indefinite appropriation in 31 U.S.C. 1304, known as the 

Judgment Fund, which is legally available to pay final judgments and 

comprise settlements against the United States. The Fund is administered 

by the Treasury Department, which certifies and disburses actual payments 

from the Fund. Before payments can be made, however, the Department of 

Justice must first certify that a judgment is final and payment is in the 

interest of the United States. In addition, the judgment must be for an 

actual sum of money, and there must be no other source of funds legally 

available to pay the judgment.

If Fines Fail If Mexico or the United States fails to pay a fine within 180 days, the 

complaining Party (or Parties) may suspend NAFTA tariff benefits, in an 

amount no greater than that sufficient to collect the fine. The rates of duty 

on goods originating in the Party complained against shall not exceed the 

lessor of (a) the rate that was applicable to those goods just prior to 

NAFTA's entry into force, or (b) the most-favored nation rate applicable to 

those goods on the date the Party suspends tariff benefits. To the extent 

practicable or effective, the sector that is impacted (i.e., that sector against 
Appendix I

Monetary Enforcement Assessments and 

Trade Sanctions in the North American Free 

Trade Agreement’s Labor and Environment

Page 50 GAO-01-933 North American Free Trade Agreement

which NAFTA benefits are suspended) shall be the same sector or sectors 

as those involved in a complaint.

In the case of Canada, 1

 the respective Commissions may file the arbitral 

panel's determination (that a fine be paid or that an action plan be fully 

implemented) in a court of competent jurisdiction in Canada and may take 

legal measures for enforcement of the panel's determination. Neither the 

panel's determination nor a court order to enforce a panel determination is 

subject to review or appeal.

1

Both the environment and labor side agreements contain special rules that apply to 

Canada, which establish that trade sanctions are not applicable to Canada where 

Canada fails to pay an assessed fine or fully comply with an action plan. 
Page 51 GAO-01-933 North American Free Trade Agreement

Appendix II

Citizen Submissions Under the North 

American Agreement on Environmental 

Cooperation ApendxiI

Case no.

and name Submitted by Issue Status Against country

95-001

Spotted Owl

Biodiversity Legal 

Foundation, et al.

Alleged failure to effectively enforce 

selected provisions of the Endangered 

Species Act 

Process terminated −

Secretariat determined 

government response not 

merited

United States

95-002

Logging Rider

Sierra Club, et al.

(1995)

Alleged failure to effectively enforce all 

applicable federal environmental laws 

by eliminating private remedies for 

salvage timber sales

Process terminated −

Secretariat determined 

submission criteria not met

United States

 96-01 

Cozumel

Comité para Comité para la 

Protección de los Recursos 

Naturales, A.C., et al, 

(1996)

Alleged failure to conduct an 

environmental impact assessment 

before building a public harbor 

terminal for tourist cruises on the 

island of Cozumel 

Factual record prepared and 

made public

Mexico

96-002

Aage Tottrup

Mr. Aage Tottrup, P. Eng 

(1996)

Alleged failure to effectively enforce 

Canadian and Alberta environmental 

laws resulting in the pollution of 

wetlands impacting fish and migratory 

bird habitats 

Process terminated −

Secretariat determined 

government response not 

merited

Canada

96-003

Old Man 

River I

Friends of the Old Man River 

(1996)

Alleged failure to effectively enforce 

habitat protection sections of 

Canada's Fisheries Act and the 

Canadian Environmental Assessment 

Act; charge of a de facto abdication of 

legal responsibility by the Canadian 

and provincial governments

Process terminated −

Secretariat determined factual 

record not warranted

Canada

96-004

Fort 

Huachuca

The Southwest Center for 

Biological Diversity, et al. 

(1996)

Alleged failure of the U.S. Army to 

uphold the National Environmental 

Policy Act and produce an 

environmental impact assessment of 

Fort Huachuca base expansion 

Process terminated − Submitter 

withdrew after U.S. 

government response

United States

97-001

BC Hydro 

British Columbia Aboriginal 

Fisheries Commission, et al. 

(1997)

Alleged failure to effectively enforce 

the Canadian Fisheries Act and failure 

to protect fish and fish habitat in 

British Columbia from hydroelectric 

dam

Factual record prepared and 

made public

Canada

97-002

Rio 

Magdalena

Comite Pro Limpieza del Rio 

Magdalena (1997)

Alleged failure to effectively enforce 

environmental legislation governing 

the disposal of wastewater into the 

Magdalena River in the state of 

Sonora

Secretariat reviewing in light of 

Mexican response to 

determine if factual record 

warranted; Mexico has not 

responded to the Secretariat's 

September 1999 request for 

additional information 

Mexico
Appendix II

Citizen Submissions Under the North 

American Agreement on Environmental 

Cooperation

Page 52 GAO-01-933 North American Free Trade Agreement

97-003

Quebec Hog 

Farms

Centre Quebecois du Droit 

de L'environnement, et al. 

(1997)

Alleged failure to effectively enforce 

environmental standards related to 

agricultural pollution originating from 

animal production facilities, mainly 

from hog farms 

Council, by two-thirds majority, 

decided not to direct the 

Secretariat to prepare a factual 

record; process was 

terminated

Canada

97-004

Canadian 

Environmental 

Defense Fund

Canadian Environmental 

Defense Fund (1997)

Alleged failure to conduct an 

environmental assessment of “The 

Atlantic Groundfish Strategy” that 

could jeopardize the future of 

Canada's East Coast fisheries

Process terminated—

Secretariat determined 

submission criteria not met

Canada

97-005

Biodiversity

Animal Alliance of Canada, 

Council of Canadians, 

Greenpeace Canada (1997)

Alleged failure to effectively enforce 

regulations ratifying the Convention on 

Biological Diversity signed at the Rio 

Earth Summit; claim that such 

ratification, under Canadian Law, is a 

legally binding “regulation”

Process terminated −

Secretariat determined 

submission criteria not met

Canada

97-006

Old Man 

River II

The Friends of the Oldman 

River

(1997)

Alleged failure to effectively enforce 

habitat protection sections of the 

Fisheries Act and the Canadian 

Environmental Assessment Act; 

charge of a de facto abdication of 

legal responsibility by the Canadian 

and provincial governments

Council decided to defer 

consideration of the 

Secretariat's notification 

recommending preparation of 

a factual record

Canada

97-007

Lake Chapala

Instituto de Derecho 

Ambiental

(1997)

Alleged failure to effectively enforce 

environmental legislation regarding 

the hydrological basin of Lake 

Chapala

Process terminated −

Secretariat is prevented, for 

procedural reasons, from 

considering the submission

Mexico

98-001 

Guadalajara

Instituto de Derecho 

Ambiental, A.C., et al.

(1998)

Alleged failure to effectively enforce 

the General Law on Ecological 

Balance and Environmental 

Protection in relation to explosions 

occurring in the Reforma area of the 

city of Guadalajara

Process terminated −

Secretariat determined 

submission criteria not met

Mexico

98-002

Ortiz 

Martinez 

Hector Gregorio Ortiz 

Martínez (1997)

Alleged failure to effectively enforce 

environmental legislation in relation to 

lumbering operations at the "El Taray" 

site in the state of Jalisco

Process terminated −

Secretariat determined 

submission criteria not met 

Mexico

98-003

Great Lakes

Department of the Planet 

Earth, et al. (1998)

 

Alleged violation of and failure to 

effectively enforce both U.S. domestic 

laws and ratified U.S.-Canada treaties 

designed to protect the Great Lakes

Secretariat reviewing 

submission in light of U.S. 

response and additional 

information to determine if 

factual record warranted

United States

98-004

BC Mining

Sierra Club of British 

Columbia, et al. 

(1998)

Alleged failure to enforce section 

36(3) of the Fisheries Act to protect 

fish and fish habitat from the 

environmental impacts of the mining 

industry in British Columbia

Secretariat reviewing 

submission in light of 

Canadian response to 

determine if factual record 

warranted

Canada

Case no.

and name Submitted by Issue Status Against country
Appendix II

Citizen Submissions Under the North 

American Agreement on Environmental 

Cooperation

Page 53 GAO-01-933 North American Free Trade Agreement

98-005

Cytrar

Academia Sonorense de 

Derechos Humanos, A.C., 

Lic. Domingo Gutiérrez 

Mendívil

(1998)

Alleged failure to effectively enforce 

environmental legislation by having 

authorized the operation of a 

hazardous waste landfill (Cytrar) less 

than 6 kilometers away from

Hermosillo, Sonora, in violation of 

official standards

Process terminated −

Secretariat determined factual 

record not warranted

Mexico

98-006

Aquanova

Grupo Ecológico Manglar, 

A.C.

(1998)

Alleged failure to effectively enforce 

environmental laws with respect to the 

establishment and operation of a 

shrimp farm located in Isla del Conde, 

Nayarit 

Secretariat recommended 

preparation of a factual record; 

Council considering whether to 

approve preparation of factual 

record

Mexico

98-007

Metales y 

Derivados

Environmental Health 

Coalition, Comité

Ciudadano Pro 

Restauración del Cañón del 

Padre y Servicios 

Comunitarios, A.C.

(1998)

Alleged failure to effectively enforce 

environmental law in connection with 

an abandoned lead smelter in Tijuana, 

Baja California, that poses serious 

threats to the health of the 

neighboring community and to the 

environment

Council unanimously decided 

to instruct the Secretariat to 

prepare a factual record 

Mexico

99-001

Methanex

Methanex Corporation

(1999)

Alleged failure to effectively enforce 

California's environmental laws and 

regulations related to water resource 

protection and to the regulation of 

underground storage tanks 

Secretariat determined not to 

proceed further because the 

matter raised by the 

submission is the subject of a 

pending arbitration proceeding 

initiated by Methanex under 

chapter 11 of NAFTA

United States

99-002

Migratory 

Birds

Center for International 

Environmental Law, et al. 

(1999)

Alleged failure to effectively enforce 

Section 703 of the Migratory Bird 

Treaty Act, which prohibits the killing 

of migratory birds without a permit

Secretariat recommended 

preparation of a factual record; 

Council considering whether to 

approve preparation of factual 

record

United States

00-001

Molymex I

Rosa María Escalante de 

Fernández

(2000)

Alleged failure to effectively enforce 

environmental law regarding air 

quality and to limit pollution from the 

Molymex plant 

Process terminated −

Secretariat determined 

submission criteria not met

Mexico

00-002

Neste 

Canada

Neste Canada Inc.

(2000)

Alleged failure to effectively enforce 

environmental laws, as defined in the 

environmental side agreement, 

relating to underground storage tanks 

Secretariat determined not to 

proceed further because the 

matter raised by the 

submission is the subject of 

pending 

arbitration proceeding initiated 

by Methanex under chapter 11 

of NAFTA

United States

Case no.

and name Submitted by Issue Status Against country
Appendix II

Citizen Submissions Under the North 

American Agreement on Environmental 

Cooperation

Page 54 GAO-01-933 North American Free Trade Agreement

00-003

Jamaica Bay

Hudson River Audubon 

Society of Westchester, Inc., 

Save Our Sanctuary 

Committee

(2000)

Alleged failure to effectively enforce 

Section 703 of the Migratory Bird 

Treaty Act and sections of the 

Endangered Species Act with the 

proposal of a bicycle path through the 

Jamaica Bay Wildlife Refuge, in 

Queens, New York

Process terminated −

Secretariat determined 

submission criteria not met

United States

00-004

BC Logging

David Suzuki Foundation, et 

al.

(2000) 

Alleged failure to effectively enforce 

sections of Canada's Fisheries Act 

against logging on private land in 

British Columbia

Secretariat reviewing 

submission in light of 

Canadian response to 

determine if factual record 

warranted

Canada

00-005

Molymex II

Academia Sonorense de 

Derechos Humanos, 

Domingo Gutiérrez Mendívil 

(2000)

Alleged failure to effectively enforce 

environmental law in relation to the 

operation of the Company Molymex, 

including operation without 

environmental impact authorization 

Secretariat reviewing 

submission in light of Mexican 

response to determine if 

factual record warranted

Mexico

00-006

Tarahumara

Comisión de Solidaridad y 

Defensa de los Derechos 

Humanos, AC 

(COSYDDAC) (2000)

Alleged failure to effectively enforce 

environmental laws by denying 

environmental justice to indigenous 

communities in the Sierra Tarahumara 

in the state of Chihuahua 

Secretariat reviewing 

submission

Mexico

01-001

Cytrar II

Academia Sonorense de 

Derechos Humanos, A.C., 

Lic. Domingo Gutiérrez 

Mendívil

(2001)

Alleged failure to effectively enforce 

environmental laws in relation to the 

establishment and operation of the 

Cytrar hazardous waste landfill

Secretariat requested and is 

awaiting Mexican response 

Mexico

01-002

AAA 

Packaging

Names withheld pursuant to 

Article 11(8)(a) (2001)

Alleged failure to effectively enforce 

obligations in the environmental side 

agreement to prohibit export to the 

territories of the other Parties of a 

pesticide or toxic substance

Process terminated −

Secretariat determined criteria 

not met

Canada

01-003 

Dermet

Mercerizados y Tenidos de 

Guadalajara

(2001)

Alleged failure to effectively enforce 

part of Mexico's environmental laws 

and failure to effectively enforce 

obligations in the environmental side 

agreement to provide procedural 

guarantees and private 

access to remedies

Secretariat reviewing 

submission 

Mexico

Case no.

and name Submitted by Issue Status Against country
Page 55 GAO-01-933 North American Free Trade Agreement

Appendix III

Submissions Under the North American 

Agreement on Labor Cooperation ApendxiI

Case no. 

and NAO 

identifier Submitted by 

Against 

country Issue Status Time frame 

U.S. NAO

940001 and 

940002

Honeywell 

and 

General 

Electric

International 

Brotherhood of 

Teamsters, United 

Electrical, Radio and 

Machine Workers of 

America 

Mexico Alleged violations of workers' 

rights to freely organize into the 

unions of their choice

Submission accepted -- U.S. 

National Administrative Office 

concluded that the information was 

insufficient to establish that Mexico 

failed to enforce its labor laws. 

However, acknowledging the strong 

concerns raised by the submission, 

the United States proposed that all 

three NAFTA parties develop a 

comprehensive cooperative program 

to address these issues

2/14/1994-

10/12/1994

U.S. NAO 

940003

Sony

International Labor 

Rights Education and 

Research Fund, 

National Association of 

Democratic Lawyers of 

Mexico, Coalition for 

Justice in the 

Maquiladoras, et al.

Mexico Alleged intimidation and 

pressure then dismissal by the 

company when workers 

attempted to organize a union

Ministerial consultations 

recommended -- a series of 

seminars and other activities 

addressed issues of union 

registration. Follow-up review 

included issues stemming from a 

related Mexican Supreme Court 

decision

8/16/1994-

12/4/1996

U.S. NAO 

940004

General 

Electric

United Electrical, 

Radio, and Machine 

Workers of America

Mexico Alleged violations of freedom of 

association and the right to 

organize at a subsidiary in 

Mexico

Process terminated − the union 

withdrew the submission prior to 

completion of the review process

1/25/1995 

U.S. NAO 

9601

SUTSP

Human Rights 

Watch/Americas, 

International Labor 

Rights Fund, and the 

National Association of 

Democratic Lawyers of 

Mexico

Mexico Alleged violations of freedom of 

association and the right to 

organize when employees of the 

Mexican government's Single 

Trade Union Workers of the 

Fishing Ministry attempted to 

receive recognition for their 

union

Ministerial consultations 

recommended -- on relations among 

international treaties, constitutional 

provisions, and domestic law 

protecting freedom of association. A 

related seminar was held in 

Baltimore, MD

6/13/1996-

12/4/1997

U.S. NAO 

9602

Maxi -

Switch

Communications 

Workers of America, 

Union of Telephone 

Workers of Mexico, 

and the Federation of 

Unions of Goods and 

Services Companies 

of Mexico

Mexico Alleged threats and intimidation 

by company management 

against workers trying to 

organize a union

Process terminated − submitters 

withdrew submission after resolving 

the dispute to their satisfaction

10/11/1996-

4/16/1997

U.S. NAO 

9701

Gender 

Discrimination

Human Rights Watch/ 

American, 

International Labor 

Rights Fund and the 

National Association of 

Democratic Lawyers of 

Mexico

Mexico Alleged mistreatment or 

discharging of pregnant 

employees at a maquiladora 

plant to avoid paying maternity 

benefits

Ministerial agreement reached -- one 

conference and two outreach 

sessions held to discuss and 

educate workers on their rights

5/16/1997-

5/30/2000
Appendix III

Submissions Under the North American 

Agreement on Labor Cooperation

Page 56 GAO-01-933 North American Free Trade Agreement

U.S. NAO 

9702

Han Young

Support Committee for 

Maquiladora Workers, 

the International Labor 

Rights Fund, and the 

National Association of 

Democratic Lawyers of 

Mexico, et al.

Mexico Alleged violations of health and 

safety, freedom of association, 

and the right to bargain 

collectively

Ministerial agreement reached, 

which resulted in: Mexico's 

agreement to promote the use of 

secret ballots in union representation 

elections and that workers be 

provided information pertaining to 

collective bargaining agreements; 

seminars on freedom of association 

issues and the structure and role of 

labor boards; and governmental 

exchange of information on 

techniques and policies to promote 

compliance with safety and health 

laws.

(The ministerial consultations with 

submissions 9702 and 9703 

regarding freedom of association 

and safety and health issues were 

held congruent to one another)

10/30/1997-

pending

U.S. NAO 

9703

ITAPSA

Echlin Workers 

Alliance, the 

Teamsters, and 26 

additional 

organizations including 

nongovernmental 

organizations, human 

rights groups and 

unions

Mexico Alleged violations of freedom of 

association and occupational 

health and safety. Alleged 

worker exposure to asbestos 

and other toxic substances.

Ministerial agreement reached which 

resulted in: Mexico's agreement to 

promote the use of secret ballots in 

union representation elections and 

that workers be provided information 

pertaining to collective bargaining 

agreements; seminars on freedom of 

association issues and the structure 

and role of labor boards; and 

governmental exchange of 

information on techniques and 

policies to promote compliance with 

safety and health laws.

The ministerial consultations with 

submissions 9702 and 9703 

regarding freedom of association 

and safety and health issues were 

held congruent to one another)

12/15/1997-

pending

U.S. NAO 

9801

Flight 

Attendants

Association of Flight 

Attendants, and the 

AFL-CIO

Mexico Alleged violation of freedom of 

association for flight attendants 

employed by Aerovias de 

Mexico, S.A. de C.V. 

(Aeromexico). When workers 

tried to strike, the government of 

Mexico took over the company's 

operations. 

Submission declined -- the U.S. 

National Administrative Office 

agreed to undertake a research 

project with the three Parties on 

freedom of association

8/17/1998-

10/19/1998

Case no. 

and NAO 

identifier Submitted by 

Against 

country Issue Status Time frame 
Appendix III

Submissions Under the North American 

Agreement on Labor Cooperation

Page 57 GAO-01-933 North American Free Trade Agreement

U.S. NAO

9802

Tomato/ 

Child Labor

Florida Tomato 

Exchange

Mexico Alleged child labor violations in 

the production of fruit and 

vegetables in Mexico

Submission closed -- U.S. National 

Administrative Office requested 

additional information − but received 

nothing in a year

9/28/1998-

10/4/1999

U.S. NAO 

9803

McDonald's

International 

Brotherhood of 

Teamsters, Teamsters 

of Canada, the 

International Labor 

Rights Fund, et al.

Canada Alleged violations relating to 

freedom of association, and 

delays in union certification

Submission accepted and later 

withdrawn − Canadian government 

and corporation held consultations, 

and the two sides reached an 

agreement

10/19/1998-

4/21/1999

U.S. NAO 

9804

Rural Mail 

Couriers

Organization of Rural 

Mail Couriers, 

Canadian Union of 

Postal Workers, 

National Association of 

Letter Carriers, et al. 

Canada Alleged denial of workers' right 

to bargain collectively. Alleged 

violation of occupational health 

and safety issues, and 

protection against discrimination

Submission declined 12/2/1998-

2/1/1999

U.S. NAO

9901

TAESA

Association of Flight 

Attendants, and the 

Association of Flight 

Attendants of Mexico 

Mexico Alleged violations of freedom of 

association, minimum 

employment standards, and 

occupational health standards 

Submission accepted -- public report 

issued recommending ministeriallevel consultations

11/10/1999-

pending

U.S. NAO 

2000-01

Auto-Trim/ 

Custom 

Trim

Coalition for Justice in 

the Maquiladoras, 

current and former 

workers, and 22 other 

unions and 

nongovernmental 

organizations

Mexico Alleged violations concerning 

occupational health and safety 

and compensation in cases of 

occupational injuries

Submission accepted -- site visit 

conducted, and ministerial-level 

consultation recommended

7/3/2000-

pending

Case no. 

and NAO 

identifier Submitted by 

Against 

country Issue Status Time frame 
Appendix III

Submissions Under the North American 

Agreement on Labor Cooperation

Page 58 GAO-01-933 North American Free Trade Agreement

Case no. 

and NAO 

identifier Submitted by 

Against 

country Issue Status Time frame 

Mexico 

NAO 9501

Sprint

Telephone Workers 

Union of the Republic 

of Mexico

United 

States

Alleged violation of freedom of 

association when a corporation 

subsidiary closed prior to a 

scheduled election on union 

representation 

Ministerial consultations requested −

Commission for Labor Cooperation 

issued report on the effects of 

sudden plant closings on freedom of 

association in each NAFTA country

2/9/1995-

11/25/1997

Mexico 

NAO 9801

SOLEC

Local 1-675 of the Oil, 

Chemical and Atomic 

Workers International 

Union (“October 6”), et 

al.

United 

States

Alleged violations of freedom of 

association and minimum 

employment standards. Also, 

allegations of employment 

discrimination and health and 

safety violations

Submission accepted -- public report 

issued and ministerial agreement 

signed in May 2000 on freedom of 

association and health and safety 

issues 

(The ministerial agreement signed in 

May 2000 covered issues raised in 

NAO 9801, 9802 and 9803.) 

4/13/1998-

pending per 

implementatio

n of the 

agreement

Mexico 

NAO 9802

Apple 

Growers

National Union of 

Workers, the Authentic 

Workers' Front, the 

Metal, Steel, Iron and 

Allied Industrial 

Worker's Union, and 

the Democratic Farm 

Workers Front

United 

States

Alleged violations of freedom of 

association, right to organize, 

and minimum conditions of 

work. Also, allegations of 

employment discrimination, 

failure to prevent occupational 

injuries and illnesses, and 

protection of migrant workers

Submission accepted -- a ministerial 

agreement was signed on May 

2000, which included plans for 

public outreach seminars for migrant 

workers, and government-togovernment meetings to discuss 

migrant workers' rights

(The ministerial agreement signed in 

May 2000 covered issues raised in 

NAO 9801, 9802 and 9803.)

5/27/1998-

pending per 

implementatio

n of the 

agreement

Mexico

NAO 9803

Decoster 

Egg

Mexican 

Confederation of Labor

United 

States

Alleged violations of freedom of 

association, protection for 

migrant workers, safety and 

health, and workers' 

compensation. Also, allegations 

of employment discrimination

Submission accepted --a ministerial 

agreement was signed on May 

2000, which included plans for 

public outreach seminars for migrant 

workers, and government-togovernment meetings to discuss 

migrant workers' rights

(The ministerial agreement signed in 

May 2000 covered issues raised in 

NAO 9801, 9802 and 9803.)

8/4/1998-

Pending per 

implementatio

n of the 

agreement

Mexico 

NAO 9804

Yale/INS

Yale Law School 

Worker's Rights 

Project

United 

States

Alleged failure to effectively 

enforce the U.S. existing 

minimum wage and overtime 

protections

Submission accepted -- U.S. 

Department of Labor issued a new 

Memorandum of Understanding and 

Mexico issued report on U.S. labor 

violations. Ministerial consultation 

was recommended

9/22/1998-

pending
Appendix III

Submissions Under the North American 

Agreement on Labor Cooperation

Page 59 GAO-01-933 North American Free Trade Agreement

Case no. 

and NAO 

identifier Submitted by 

Against 

country Issue Status Time frame 

Canada 

NAO 98-1

ITAPSA

Canadian Office of the 

United Steelworkers of 

America, in concert 

with 31 concerned 

organizations from the 

three NAFTA countries

Mexico Alleged failure to effectively 

enforce labor legislation 

covering occupational health 

and safety and freedom of 

association of workers at a 

processing plant

Submission accepted −two reports 

issued − the first addressed freedom 

of association; the second covered 

occupation health and safety issues. 

Ministerial consultations pending

4/6/1998-

pending

Canada 

NAO 98-2

Yale/INS

Yale Law School 

Worker's Rights 

Project

United 

States

Alleged failure to effectively 

enforce the U.S. existing 

minimum wage and overtime 

protections

Submission closed -- Canadian 

National Administrative Office 

considered the review inappropriate 

and closed the file in light of new 

Memorandum of Understanding

9/28/1998-

4/27/1999

U.S. NAO 

9804

Rural Mail 

Couriers

Organization of Rural 

Mail Couriers, 

Canadian Union of 

Postal Workers, 

National Association of 

Letter Carriers, et al. 

Canada Alleged denial of workers' right 

to bargain collectively. Alleged 

violation of occupational health 

and safety issues, and 

protection against discrimination

Submission declined 12/2/1998-

2/1/1999

Canada 

99-1

LPA

Labor Policy 

Association and EFCO 

Corporation

United 

States

Alleged failure to effectively 

enforce section 8(a)(2) of the 

U.S. National Labor Relations 

Act

Submission declined -- submitters 

filed an appeal on June 15, 1999

4/14/1999-

6/15/1999

appeal 

pending
Page 60 GAO-01-933 North American Free Trade Agreement

Appendix IV

Cases Filed Under NAFTA's Chapter 11 

Investor-State Dispute Settlement 

Mechanisms Through May 2001 ApendxIVi

Petitioner

Arbitration 

rules Respondent Action and Claim Status

Ethyl Corp.

(U.S. company)

UNCITRAL Canada Action: Canadian passage of MMT Act in April 

1997 prohibits the importation or interprovincial 

trade of MMT without ministerial authorization.

Claim: Claim filed by Ethyl in April, 1997 states 

that Canadian actions through implementation of 

the MMT Act discriminated against it in violation 

of national treatment, imposed prohibited 

performance requirements, and unfairly 

expropriated its property. Ethyl sought $250 

million in damages.

Canadian court decision called for 

Canada to reverse its actions 

giving rise to the claim. Canada 

settled with Ethyl for $13 million in 

August 1998.

S.D. Myers

(U.S. company)

UNCITRAL Canada Action: A ban on the export of polychlorinated 

biphenyl (PCB) waste from Canada to the United 

States was passed in late 1995.

Claim: S.D. Myers' October 1998 claim states 

that Canadian actions through PCB export ban 

discriminated against it in violation of national 

treatment and did not afford it a minimum 

standard of treatment. Furthermore, the ban 

imposed prohibited performance requirements 

and had the effect of expropriating S.D. Myers 

property. S.D. Myers sought $20 million in 

damages.

A partial award was issued in 

November 2000 in favor of S.D. 

Myers with respect to claims 

involving national treatment and 

minimum standard of treatment 

violations. However, the arbitral 

panel found in Canada's favor in 

all other respects. Canada has 

applied to a Canadian federal 

court to have the partial award 

against it set aside; that 

proceeding is ongoing.

Pope and Talbot

(U.S. company)

UNCITRAL Canada Action: The Softwood Lumber Agreement 

between the United States and Canada allows a 

portion of Canadian timber sales to enter duty 

free into the United States. 

Claim: Pope and Talbot filed a notice of 

arbitration on March 25, 1999, claiming that 

Canada's implementation of the U.S.-Canada 

Softwood Lumber Agreement breached 

Canada's obligations under chapter 11, including 

national treatment, minimum standard of 

treatment, performance requirements, and 

expropriation. Pope and Talbot sought damages 

of $507 million.

The tribunal rejected jurisdictional 

challenges by Canada on January 

26, 2000. The tribunal issued a 

partial award on June 26, 2000, 

dismissing the investor's claims 

regarding performance 

requirements and expropriation. 

On April 10, 2001, the tribunal 

found that Canada did not violate 

the national treatment 

requirements. However, it found 

that Canada partially violated the 

minimum standard of treatment 

provision in connection with the 

verification review process it 

imposed on the investor. 
Appendix IV

Cases Filed Under NAFTA's Chapter 11 

Investor-State Dispute Settlement 

Mechanisms Through May 2001

Page 61 GAO-01-933 North American Free Trade Agreement

United Parcel 

Service (UPS)

(U.S. company)

UNCITRAL Canada Action: Canada Post, a state enterprise and 

government monopoly, operates Canada's postal 

system.

Claim: In April 1999, UPS claimed that Canada 

Post abused its authority to run a postal 

monopoly by engaging in anticompetitive 

practices involving its nonmonopoly courier and 

parcel services in violation of Canada's national 

treatment and minimum standard of treatment 

obligations and the requirement that it supervise 

a ‘government monopoly' and ‘state entity.' UPS 

seeks $160 million in damages.

The tribunal has been formed and 

some procedural decisions have 

been made.

Azinian, et al.

(U.S. company)

ICSID 

Additional 

Facility

Mexico Action: A Mexican municipality dissolved its 

contract with Azinian after a Mexican federal 

court found that the waste disposal company was 

not complying with the terms of the contract. 

Claim: Azinian (a.k.a. DESONA) claimed that 

Mexico's cancellation of the contract violated the 

minimum standard of treatment and 

expropriation provisions of chapter 11. Azinian 

sought damages of $14 million in connection with 

this claim.

The tribunal issued an award on 

November 1, 1999, in favor of 

Mexico on all counts, finding that 

the U.S. company misrepresented 

its qualifications. 

Marvin Roy 

Feldman

(U.S. investor)

ICSID 

Additional 

Facility

Mexico Action: The Mexican government reversed its 

policy of allowing Feldman (a.k.a. CEMSA) tax 

rebates on cigarette exports as contemplated by 

Mexican legislation and confirmed by Mexico's 

Supreme Court

Claim: Feldman filed a formal notice of 

arbitration in April 1999 claiming that Mexico took 

actions, including refusing to allow CEMSA to 

export cigarettes with rebates of excise taxes as 

provided by law, which resulted in expropriation 

of his investment. Later, he also cited violation of 

chapter 11's national treatment provisions. He 

seeks $40 million in damages.

The finance ministers from Mexico 

and the United States rejected 

one of the proposed expropriation 

claims and allowed the others to 

proceed under chapter 11.The 

tribunal issued an interim decision 

on preliminary jurisdictional issues 

on December 6, 2000, and will 

hold a hearing on liability and 

damages in July 2001.

Petitioner

Arbitration 

rules Respondent Action and Claim Status
Appendix IV

Cases Filed Under NAFTA's Chapter 11 

Investor-State Dispute Settlement 

Mechanisms Through May 2001

Page 62 GAO-01-933 North American Free Trade Agreement

Metalclad 

Corporation 

(U.S. company)

ICSID 

Additional 

Facility

Mexico Action: Mexican municipality of Guadalcazar in 

the state of San Luis Potosi refused to grant 

Metalclad a municipal license to operate a 

hazardous waste treatment facility and landfill 

site and designated the Metalclad site as part of 

an ecological preserve. 

Claims: Metalclad claimed in January 1997 that 

Mexico's refusal to grant a municipal license and 

the creation of an ecological preserve that 

included its facilities violated several provisions 

of NAFTA chapter 11: national treatment, mostfavored-nation treatment, minimum standard of 

treatment, performance requirements, and 

expropriation. Metalclad sought $90 million in 

damages.

On August 30, 2000, the tribunal 

upheld claims by Metalclad that 

Mexico breached its obligations 

under two sections of NAFTA 

chapter 11—expropriation and 

minimum standard of treatment—

and ordered Mexico to pay the 

investor $16.7 million. Mexico 

petitioned Canada's Supreme 

Court of British Columbia to set 

aside the award. On May 2, 2001, 

the court partially upheld the 

award but also set aside the ruling 

that the transparency provisions in 

the NAFTA preamble could be 

read into the obligation to provide 

fair and equitable treatment under 

chapter 11's minimum standard of 

treatment provision. 

Waste 

Management 

(U.S. company)

ICSID 

Additional 

Facility

Mexico Action: State of Guerrero and city of Acapulco 

granted a 15-year concession to Waste 

Management (through Acaverde) in early 1995. 

Acapulco agreed to pay Waste Management for 

waste collection and disposal services and 

guaranteed that payment through Banobras, a 

Mexican state-owned bank and Guerrero.

Claim: Waste Management filed a notice of 

arbitration on September 29, 1998, asserting 

Acapulco, Banobras, and Guerrero failed to meet 

their contract obligations, including payment for 

services rendered. The claim states that these 

actions violated the minimum standard of 

treatment and expropriation obligations of 

NAFTA chapter 11. The U.S. investor is seeking 

$60 million in damages. 

The tribunal dismissed the case 

against Mexico on jurisdictional 

grounds, stating in its award that 

the U.S. investor had not met the 

waiver requirements of chapter 

11. The U.S. investor resubmitted 

the claim on September 27, 2000. 

The new tribunal is not yet 

constituted.

Petitioner

Arbitration 

rules Respondent Action and Claim Status
Appendix IV

Cases Filed Under NAFTA's Chapter 11 

Investor-State Dispute Settlement 

Mechanisms Through May 2001

Page 63 GAO-01-933 North American Free Trade Agreement

Adams, et al.

(U.S. investors)

UNCITRAL Mexico Action: Mexican federal district court decision in 

1995 and its enforcement beginning in 1998 

delivered possession of disputed property to 

individuals claiming to be the original Mexican 

landowners and evicted the U.S. investors by 

October 2000.

Claim: Adams, et al., filed a notice of arbitration 

on February 16, 2001, claiming that Mexican 

government actions to exclude them from 

participating in legal proceedings to determine 

ownership and possession of the disputed land 

violated the national treatment and minimum 

standard of treatment provisions of chapter 11. 

Furthermore, they claimed the Mexican federal 

court decision caused actions that resulted in the 

expropriation of the investors' possessions. 

Adams, et al., is seeking $75 million in damages.

No arbitral panel has been 

constituted.

ADF Group Inc.

(Canadian 

company)

ICSID 

Additional 

Facility

United States Action: The Virginia Department of 

Transportation determined that ADF's proposal 

to fabricate U.S. manufactured steel in Canada 

would not meet the Buy America requirements of 

its contract with the Virginia Department of 

Transportation.

Claim: ADF filed a notice of arbitration in July 

2000 claiming that the U.S. requirements that 

federally funded state highway projects use only 

domestically produced steel violate NAFTA 

chapter 11's prohibition against performance 

requirements. In addition, ADF claims that Buy 

America requirements violate both the national 

treatment and minimum standard of treatment 

provisions of chapter 11. ADF is seeking 

damages of $90 million.

The parties agreed to join, or 

combine, the jurisdictional and 

merits claims. The hearing will 

likely be scheduled for spring 

2002.

The Loewen 

Group

(Canadian 

Company)

ICSID 

Additional 

Facility

United States Action: A jury awarded $500 million in 

compensatory and punitive damages in a civil 

suit against Loewen. Mississippi law requires, 

and the Mississippi Supreme Court ruled, that 

an appeals bond equaling 125 percent of the 

award must be posted. Loewen settled the 

case for $175 million. 

Claim: Loewen filed a claim in October 1998 

alleging that the jury award and the Mississippi 

Supreme Court action amounted to a denial of 

justice and violated the national treatment, 

minimum standard of treatment, and 

expropriation provisions of NAFTA chapter 11. 

Loewen is seeking more than $600 million in 

damages.

A hearing on jurisdiction was held 

in 2000 and the tribunal issued a 

decision in favor of the claimants, 

holding that the United States can 

be held liable under NAFTA 

chapter 11 for decisions of state 

courts, even in litigation between 

purely private parties.

Another hearing on competence 

and merits is scheduled for 

October 2001. 

Petitioner

Arbitration 

rules Respondent Action and Claim Status
Appendix IV

Cases Filed Under NAFTA's Chapter 11 

Investor-State Dispute Settlement 

Mechanisms Through May 2001

Page 64 GAO-01-933 North American Free Trade Agreement

Methanex Corp.

(Canadian 

company)

UNCITRAL United States Action: California banned the use of MTBE, a 

gasoline additive, by the end of 2002. 

Claim: Methanex submitted a claim in July 1999 

alleging that the ban illegally expropriates the 

firm's U.S. investment, discriminates against it in 

favor of the U.S. ethanol industry, and denies it 

fair and equitable treatment. Methanex is seeking 

nearly $1 billion in damages.

A jurisdictional hearing is 

scheduled for July 2001.

Mondev 

International, 

Ltd.

(Canadian 

company)

ICSID 

Additional 

Facility

United States Action: Mondev sued the city of Boston and the 

Boston Redevelopment Authority for breach of 

and interference with a real estate contract. The 

jury found for Mondev and the court entered a 

$9.6 million judgment. The Massachusetts 

Supreme Judicial Court overturned the ruling. 

Claims: Mondev filed a notice of arbitration in 

September 1999 claiming that municipal 

authorities' actions and the court ruling 

amounted to an expropriation of Mondev's 

interest and a denial of justice, thus violating 

NAFTA obligations to provide a minimum 

standard of treatment to foreign investors. 

Mondev is seeking no less than $50 million.

The jurisdictional and merits 

phases were joined. A tribunal 

order regarding confidentiality was 

filed on February 27, 2001. A 

hearing will likely take place in late 

2001 or early 2002. 

Petitioner

Arbitration 

rules Respondent Action and Claim Status
Page 65 GAO-01-933 North American Free Trade Agreement

Appendix V

Objectives, Scope, and Methodology ApendxVi

In preparation for considering future free trade agreements, the Chairman 

of the Subcommittee on Trade, House Committee on Ways and Means 

requested that we review the U.S. experience to date with cases brought 

under NAFTA's environment and labor side agreements and the treaty's 

chapter 11 investor-state dispute settlement provisions. In performing this 

work, we studied the institutional structure and principles of the side 

agreements and chapter 11 on investment. We also examined the 

processes that are used to investigate and settle disputes. Finally, we 

reviewed the cases that have been initiated under the side agreements and 

investment provisions, as well as the outcomes and disposition of these 

cases.

To obtain information on the institutional structures and principles, we 

relied on our previous work in this area, and interviewed officials from the 

U.S. Trade Representative, the Environmental Protection Agency, and the 

Departments of Commerce, Justice, Labor, State, and Treasury. In addition, 

we reviewed the NAFTA agreement and the labor and environment side 

agreements. 

To obtain information on the submission process of the side agreements 

and chapter 11's investor-state dispute settlement process, we interviewed 

agency officials at EPA, the Departments of Interior, Labor, State, Justice, 

Commerce, Treasury, and the USTR. To further understand the 

environmental and labor submission processes, we reviewed procedural 

guidelines issued by the Commission for Environmental Cooperation and 

the Department of Labor's National Administrative Office. To gain greater 

insight into the investor-state dispute settlement process, we also 

interviewed representatives from nongovernmental entities and reviewed 

the United Nation's and World Bank's commercial arbitration rules 

referenced in the NAFTA.

To obtain information on the cases initiated and their outcomes, we 

interviewed agency officials from the EPA, the Departments of Interior, 

Labor, State, Justice, Commerce, Treasury, the USTR, and the Commission 

for Environmental Cooperation. We also reviewed case information 

provided by the Department of Labor's National Administrative Office, the 

State Department, and the Web sites of the Commission for Environmental 

Cooperation, the World Bank, and Canada's Department of Foreign Affairs 

and International Trade. Finally, we interviewed representatives of 

nongovernmental entities with knowledge of the environment and labor 

submissions, as well as those familiar with cases brought under NAFTA's 

investor-state dispute settlement mechanism.
Appendix V

Objectives, Scope, and Methodology

Page 66 GAO-01-933 North American Free Trade Agreement

We conducted our work from February to June 2001 in accordance with 

generally accepted government auditing standards.
Page 67 GAO-01-933 North American Free Trade Agreement

Appendix VI

GAO Contacts and Staff Acknowledgments ApendxViI

GAO Contacts Phillip Herr (202) 512-8509

Patricia Cazares-Chao (213) 830-1021

Acknowledgments In addition to those listed above, Janey Cohen, Kim Frankena, Ernie 

Jackson, and Julia Souder made key contributions to this report.

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