Posts Tagged ‘High-fructose corn syrup’

Standard of Review of NAFTA Tribunal Award is Correctness

October 4, 2011

Mexico v. Cargill, Incorporated2011 ONCA 622 is an Ontario Court of Appeal decision addressing the standard of review from a NAFTA trade tribunal arbitral decision.

After Mexico took measures to protect its sugar industry from competition from imported high fructose corn syrup (HFCS), Cargill, Incorporated, a U.S. producer of HFCS, and its Mexican subsidiary distributor, Cargill de Mexico S.A. de C.V. (CdM) sought arbitration for breaches of Chapter 11 of the North American Free Trade Agreement Between the Government of Canada, the Government of Mexico and the Government of the United States, 17 December 1992, Can. T.S. 1994 No. 2 (NAFTA), and an award of damages for those breaches.

The arbitration panel, acknowledging under Chapter 11 of the NAFTA that an award of damages could only encompass Cargill’s losses suffered “by reason of, or arising out of” Mexico’s breaches of Chapter 11 affecting Cargill’s Mexican investment, namely CdM, nevertheless awarded damages to include both CdM’s lost sales, as well as Cargill’s lost sales of HFCS to CdM. The application judge dismissed the application challenging the award.

The issues on appeal were the appropriate standard of review and whether the latter award to Cargill was subject to being set aside by the reviewing court on the basis that it “deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration”.  In lengthy reasons, the Court dismissed the appeal and held that the standard is correctness. Finlayson, J.A. writing for the appeal panel concludes:

[42]         I conclude that the standard of review of the award the court is to apply is correctness, in the sense that the tribunal had to be correct in its determination that it had the ability to make the decision it made.

[52]         To summarize my approach, the role of the reviewing court is to identify and narrowly define any true question of jurisdiction. Specifically, under Article 34(2)(a)(iiii), did the tribunal decide an issue that was not part of the submission to arbitration, or misinterpret its authority under the NAFTA? Another way to define the proper approach is to ask the following three questions:

·        What was the issue that the tribunal decided?

·        Was that issue within the submission to arbitration made under Chapter 11 of the NAFTA?

·        Is there anything in the NAFTA, properly interpreted, that precluded the tribunal from making the award it made?

[53]         The role of the reviewing court is to identify and narrowly define any true question of jurisdiction. The onus is on the party that challenges the award. Where the court is satisfied that there is an identified true question of jurisdiction, the tribunal had to be correct in its assumption of jurisdiction to decide the particular question it accepted and it is up to the court to determine whether it was. In assessing whether the tribunal exceeded the scope of the terms of jurisdiction, the court is to avoid a review of the merits.

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