13. Enforcement and Dispute Resolution

Background

The rules and standards proposed in this document govern the conduct of nations, companies and individuals doing business in the hemisphere. They include specific regulations for investors and financial institutions; they ensure standards of environmental quality and the use of energy and natural resources; they specify the rights of workers, women, indigenous peoples, Black peoples, and basic human rights of all peoples.

To make these rules and standards meaningful, it is critical that agreements include strong mechanisms for dispute resolution and rules enforcement. However, the development of such mechanisms raises complex issues. Hence, the formulation of such mechanisms must involve a process beyond the scope of the present document. To finalize such machinery will require continued multi-national discussions.

The present chapter is intended to be a starting point for such discussions. It includes some general principles discussed at the Peoples' Summit that serve as the foundation for future discussions leading to more specific rules and enforcement machinery.² These principles reflect the consensus that dispute resolution and enforcement mechanisms should be focused on reducing inequalities and based on fair and democratic processes. The chapter also raises the issue of whether agreements should include special safeguards for countries suffering as the result of surges in imports.

Overarching Principle

Labour and human rights and environmental quality controls cannot simply be tacked on to economic agreements through weak side-agreements or simply through the addition of a social clause. They must be integral to the agreements themselves.

INTERNATIONAL EQUITY ISSUES

Guiding Principles

The key objective of enforcement and the use of the rules discussed in this document should be to lessen development gaps among nations through a process in which all standards are harmonized upwards. Such a process must consider different levels of development in establishing the following:

• terms for the use of safeguards or other emergency measures;
• rules regarding the application of capital controls, performance standards and intellectual property rights limitations; and
• timelines for implementing rules and standards proposed in this document.

Less developed nations should not necessarily be held to the same standards as more developed nations, as long as their actions reduce asymmetries between nations.

Specific Objectives

• In terms of standards, there are some basic rights that can be universally defined and do not vary with levels of development. International Labour Organization (ILO) rules that give such status to freedom of association is an example. An initial task would be to identify all of the standards and rules we address in this document that can be considered to be universally defined human rights.

• Other standards such as minimum wages may vary with levels of development. A second task would be to identify such standards in general terms and define them in such a way that they can have region-wide applicability. For example, it would be possible to define minimum wage standards in terms of what is required to avoid poverty—"a living wage." The specific amount will then vary from one nation to another.

• In some instances, the development process itself may cause hardships due to dislocations as resources are re-allocated and people lose jobs. In such cases, development through economic integration must be accompanied by compensation mechanisms for the losers. Thus, part of the process of constructing an agreement for hemispheric development must include the establishment of mechanisms for adjustment assistance. In more developed nations, adjustment may come from general tax revenues, but for less developed nations a multi-national adjustment institution will be required.

• Specific measures must be developed to prevent safeguard rules from being applied to the detriment of other nations. Safeguards or "escape clauses" are designed to allow countries to obtain relief when a surge of imports reduces output or employment, or otherwise causes injury to a domestic industry. These rules allow countries to temporarily restrict imports to provide relief to domestic industries which are suffering as a result of import surges. However, it is important to deter the use of emergency measures by developed nations in ways that run counter to the objective of reducing development gaps in the hemisphere.

• Finally, nations without resources to enforce rules should be provided with funds for this purpose. Such funding can be implemented through the same mechanism developed for dislocation compensation.

ENFORCEMENT AND PENALTIES

Guiding Principles

A critical aspect of the process of enforcement and the imposition of penalties for non-compliance is to institute a democratic and open process. Specific measures must be developed to ensure transparency and proper representation for civil society.

Some key issues:

• One issue is the locale of adjudication. In general, this process should be the province of national governments and proceed to international arbitration only after recourse to national processes has been exhausted. Further dialogue is needed to determine the composition of the international forum.

• This raises the issue of representativeness, which also presents some difficulties. Corporations and organized labour have well-established organizations through which representatives can be appointed or elected. But there are no comparable entities that can represent all environmental organizations or the spectrum of other NGOs with a stake in this process. Therefore, some effort must be made to develop representative institutions for various interests.

Specific Objectives

• Compliance with the rules and standards agreed upon should be a pre-condition for participation on the part of both governments and corporations in any hemispheric agreement. There is thus a need to review the laws and practices of nations prior to membership. The review can be conducted by a multi-national panel of experts, followed by open public hearings and discussions on recommendations. Governments that are not in compliance with the agreement should be put on a probationary status and a plan for compliance should be developed.

• There will also need to be ongoing audits of companies which operate within the hemisphere and thus enjoy the fruits of the agreement. Similarly, there must be a mechanism for responding to complaints about corporate conduct. Each government should have primary responsibility for the audits and response to complaints. But a hemispheric funding mechanism must be created for this purpose.

• All processes involving enforcement must be fully transparent. That includes a written public record of all proceedings and open hearings. There also needs to be a clear appeals process. Also, this agreement must give standing to all stakeholders for participation in the process. Governments (including local governments), labour organizations, and NGOs should all have standing to bring complaints if they feel that they have an interest in the outcome of deliberations at both national and multi-national levels.

• Penalties for non-compliance should be imposed on both governments and companies. Prior to the imposition of such penalties, adequate notice should be given to provide opportunity for response and/or compliance. There should be stiff penalties available that can be directed at corporations and enforced by national governments.

² There have been a number of discussion papers produced that can offer background for continuing discussions. Readers can get copies from the authors. These include the following: Jorge A. Calderon Salazar and Alberto Arroyo Picard, America del Norte: Analisis, Critica y Propuesta, Ch VIII y XIX, Mexico: Red Mexicana de Accion Frente al Libere Comercio, Noviembre, 1993 (aarroyop@infosel.net.mx). Robert E. Scott, "Safeguards," Economic Policy Institute, 1660 L Street, NW, Washington D.C. 20036 (rscott@epinet.org). This paper is also available in Spanish. Terry Collingsworth, "A Proposal for an Enforcement Mechanism for the Social Clause," International Labor Rights Fund, 733 15th Street N.W. #920, Washington D.C. 20005 (terry.collingsworth@erols.com). Lance Compa "Democratizing Trade Authority, Implementation, and the Trade Debate." Cornell University (lac24@cornell.edu).