Establishing the dispute resolution mechanism

4. Establishing the dispute resolution mechanism

Based on the general characteristics of NAFTA, which include peaceful, prompt, fair and pragmatic resolution, and the differences between CEPA and NAFTA, CEPA should establish a dispute resolution mechanism of its own. Before discussing how to establish a dispute resolution mechanism under CEPA, the differences between CEPA and other FTAs should be emphasized.

The basic difference is that CEPA is under one sovereignty. Some Chinese commentators state that the dispute resolution of CEPA should not suspend benefits to the non-complaining party. Such resolution methods will destroy the development of the economy between Mainland and Hong Kong. But in my opinion, this technique is a reasonable method to solve problems arising from different countries (areas). From the perspective of international law, there is no super power above country. It is difficult and not suitable to enforce the actions of one country, especially when dealing with economic disputes. The easiest way is to take action to “stop it,”, but it must be the last step. There is a special relationship between the Mainland and Hong Kong—no super power above Mainland and Hong Kong—therefore to “stop it” is the only method that can be chosen. From an economic perspective, stopping the trade between two areas will lower the profits in this trade, but for the long-term view, it will build an ordered market and give more confidence to the businessmen of Mainland China and Hong Kong. Therefore, it is a good choice to suspend the controversial trade until the dispute can be solved. The

three-step proceedings used by NAFTA to solve disputes are an ideal technique. Some Chinese scholars point out that this proceeding is combining the political method and judicial method together. In one aspect, it maximizes the possibility of solving problems through a political method; on the other hand, the judicial method assures the enforcement of the mechanism.

There is no need to establish new institutions for this new dispute resolution mechanism. The function of some institutions, however, should be modified. First of all, the function of the Steering Committee and the Liaison Offices should be defined. The Steering Committee should be set up like the Free Trade Commission under NAFTA. It should work as the mediator under the mediation step. The Liaison Offices should be set up like the secretariat under NAFTA. They should consist of two sections, set up respectively in the Ministry of Commerce of the Central People’s Government and the Commerce, Industry and Technology Bureau of the Hong Kong Special Administrative Region Government. There should be a permanent office under the section. Each party should be responsible for the operation and costs of its agencies, as well as the remuneration and payment of expenses of panelists; each should designate an individual to serve as secretary for its Section, who shall be

responsible for its administration and management. 90

4.1 The consultation step

The requesting party shall deliver a request to the other parties and to its Section of the Liaison Office. In this step, the consulting parties shall make every attempt to arrive at a mutually satisfactory resolution.

4.2 The mediation step

If consultation fails, each party may request in writing a meeting of the Steering Committee, and the Steering

See id. 90 Cf. id., art. 2006.

A study of NAFTA: Establishing a better dispute resolution mechanism under CEPA

Committee “special meeting” should be scheduled within thirty days. 91 The Steering Committee may use all kinds of resource to assist the consulting parties to reach a mutually satisfactory resolution of the dispute. It can

call on technical advisers or create such working groups as it deems necessary.

4.3 The arbitral panel step

To establishing the non-binding arbitration must be built from ground zero under CEPA, for there are no procedures or institutions readily employed to serve that function. The chair and panelists should be selected, the procedure should be set up, and the decision should be performed. The provisions under NAFTA can be used to establish the arbitral panel proceedings. Under NAFTA, if the Commission has not resolved a dispute after convening, “any consulting party may request in writing the establishment of an arbitral panel. The requesting

party shall deliver the request to the other Parties and to its Section of the Secretariat” 92 . “On delivery of the request, the Commission shall establish an arbitral panel.” 93 Under CEPA, the Steering Committee should

establish an arbitral panel. This panel should consist of five panelists. The panelists would be drawn from a preformed roster. So it is necessary to choose twenty experts to be the members of the roster: ten from Mainland China and the other ten from Hong Kong. To be fair, each party should choose panelists from the roster of the other party. In addition, the initial report and final report techniques can also be used. And suspending the benefit is also suitable to CEPA as a method to encourage the fulfillment of the panel’s final report.

4.4 Other provisions

The conflict that one matter be regulated by both WTO and CEPA can also solved as under NAFTA, which states that the dispute “may be settled in either forum at the discretion of the complaining Party,” and “the forum

selected shall be used to the exclusion of the other” 94 . CEPA should also follow the provisions as under NAFTA to limit the time used in each step, to avoid the

parties’ intentional postponement of the resolution of the dispute. In addition, CEPA should set up different proceedings to solve different disputes. Disputes regarding anti-dumping and countervailing duty can be reviewed by the arbitral panel. Private commercial disputes can be solved through the alternative dispute resolution (ADR)

in Mainland China or Hong Kong. 95

A peaceful, fair, prompt mechanism of dispute resolution is important for this new type of FTAs like CEPA. Although differences exist between the eastern and western countries, the successful experience of NAFTA is still

a good example to be followed. In the next ten years, there might be a free trade agreement among Mainland, Hong Kong, Macao, and Taiwan. At that time, the dispute resolution would become even more important. Therefore, research and study of dispute resolution under NAFTA, and it’s applicability to such FTAs as CEPA should go further, in anticipation of such developments.

(Edited by Anney)

See CEPA, supra note 2, art. 19. 92 NAFTA, supra note 1, art. 2008.

94 Id. art. 2008. Id. art. 2005. 95 See id. art. 2021.

Jun. 2008, Volume 5, No.6 (Serial No.43) US -China Law Review, ISSN1548-6605, U S A