Chapter Twenty

                        Institutional Arrangements
                     and Dispute Settlement Procedures


                        Subchapter A - Institutions


Article 2001: The Free Trade Commission

1.   The Parties hereby establish the Free Trade Commission,
comprising cabinet-level representatives of the Parties or their
designees.

2.   The Commission shall:

     (a) supervise the implementation of this Agreement;

     (b) oversee its further elaboration;

     (c) resolve disputes that may arise regarding its
 interpretation or application;

     (d) supervise the work of all committees and working groups
 established under this Agreement, referred to in Annex
 2001.2; and 

     (e) consider any other matter that may affect the operation
 of this Agreement.

3.   The Commission may:

     (a) establish, and delegate responsibilities to, ad hoc or
 standing committees, working groups or expert groups; 

     (b) seek the advice of non-governmental persons or groups;
 and

     (c) take such other action in the exercise of its functions
 as the Parties may agree.

4.   The Commission shall establish its rules and procedures. 
All decisions of the Commission shall be taken by consensus,
except as the Commission may otherwise agree.

5.   The Commission shall convene at least once a year in regular
session.  Regular sessions of the Commission shall be chaired
successively by each Party.


Article 2002: The Secretariat

1.   The Commission shall establish and oversee a Secretariat
comprising national Sections.

2.   Each Party shall:

     (a) establish a permanent office of its Section;

     (b) be responsible for 

     (i) the operation and costs of its Section, and

     (ii) the remuneration and payment of expenses of
 panelists and members of committees and scientific
 review boards established under this Agreement, as
 set out in Annex 2002.2;

     (c) designate an individual to serve as Secretary for its
 Section, who shall be responsible for its
 administration and management; and 

     (d) notify the Commission of the location of its Section's
 office.

3.   The Secretariat shall:

     (a) provide assistance to the Commission;

     (b) provide administrative assistance to:  

     (i) panels and committees established under Chapter
 Nineteen (Review and Dispute Settlement in
 Antidumping and Countervailing Duty Matters), in
 accordance with the procedures established
 pursuant to Article 1908, and

     (ii) panels established under this Chapter, in
 accordance with procedures established pursuant to
 Article 2012; and

     (c) as the Commission may direct:

     (i) support the work of other committees and groups
 established under this Agreement, and

     (ii) otherwise facilitate the operation of this
 Agreement.



                     Subchapter B - Dispute Settlement


Article 2003: Cooperation

     The Parties shall at all times endeavor to agree on the
interpretation and application of this Agreement, and shall make
every attempt through cooperation and consultations to arrive at
a mutually satisfactory resolution of any matter that might
affect its operation.


Article 2004: Recourse to Dispute Settlement Procedures

     Except as otherwise provided in this Agreement, the dispute
settlement provisions of this Chapter shall apply with respect to
the avoidance or settlement of all disputes between the Parties
regarding the interpretation or application of this Agreement or
wherever a Party considers that an actual or proposed measure of
another Party is or would be inconsistent with the obligations of
this Agreement or cause nullification or impairment in the sense
of Annex 2004.


Article 2005: GATT Dispute Settlement

1.   Subject to paragraphs 2, 3 and 4, disputes regarding any
matter arising under both this Agreement and the General
Agreement on Tariffs and Trade, any agreement negotiated
thereunder, or any successor agreement (GATT), may be settled in
either forum at the discretion of the complaining Party.  

2.   Before a Party initiates a dispute settlement proceeding in
the GATT against another Party on grounds that are substantially
equivalent to those available to that Party under this Agreement,
that Party shall notify any third Party of its intention.  If a
third Party wishes to have recourse to dispute settlement
procedures under this Agreement regarding the matter, it shall
inform promptly the notifying Party and those Parties shall
consult with a view to agreement on a single forum.  If those
Parties cannot agree, the dispute normally shall be settled under
this Agreement.

3.   In any dispute referred to in paragraph 1 where the
responding Party claims that its action is subject to Article 104
(Relation to Environmental and Conservation Agreements) and
requests in writing that the matter be considered under this
Agreement, the complaining Party may, in respect of that matter,
thereafter have recourse to dispute settlement procedures solely
under this Agreement.

4.   In any dispute referred to in paragraph 1 that arises under
Subchapter Seven-B (Sanitary and Phytosanitary Measures) or
Chapter Nine (Standards-Related Measures).

     (a) concerning a measure adopted or maintained by a Party
 to protect its human, animal, or plant life or health,
 or to protect its environment; and

     (b) that raises factual issues concerning the environment,
 health, safety or conservation, including directly
 related scientific matters,

where the responding Party requests in writing that the matter be
considered under this Agreement, the complaining Party may, in
respect of that matter, thereafter have recourse to dispute
settlement procedures solely under this Agreement.

5.   The responding Party shall deliver a copy of a request made
pursuant to paragraph 3 or 4 to the other Parties and to its
Section of the Secretariat.  Where the complaining Party has
initiated dispute settlement proceedings regarding any matter
subject to paragraph 3 or 4, the responding Party shall deliver
its request no later than 15 days thereafter.  Upon receipt of
such request, the complaining Party shall promptly withdraw from
participation in those proceedings and may initiate dispute
settlement procedures under Article 2007.

6.   Once dispute settlement procedures have been initiated under
Article 2007 or dispute settlement proceedings have been
initiated under the GATT, the forum selected shall be used to the
exclusion of the other, unless a Party makes a request pursuant
to paragraph 3 or 4.

7.   For purposes of this Article, dispute settlement proceedings
under the GATT are deemed to be initiated by a Party's request
for a panel, such as under Article XXIII:2 of the General
Agreement on Tariffs and Trade 1947, or for a committee
investigation, such as under Article 20.1 of the Customs
Valuation Code.


Consultations

Article 2006: Consultations

1.   Any Party may request in writing consultations with any
other Party regarding any actual or proposed measure or any other
matter that it considers might affect the operation of this
Agreement.

2.   The requesting Party shall deliver the request to the other
Parties and to its Section of the Secretariat.

3.   Unless the Commission otherwise provides in its rules and
procedures established under Article 2001(4), a third Party that
considers it has a substantial interest in the matter shall be
entitled to participate in the consultations on delivery of
written notice to the other Parties and to its Section of the
Secretariat.

4.   Consultations on matters regarding perishable agricultural
goods shall commence within 15 days of the date of delivery of
the request.

5.   The consulting Parties shall make every attempt to arrive at
a mutually satisfactory resolution of any matter through
consultations under this Article or other consultative provisions
of this Agreement.  To this end, the consulting Parties shall:

     (a) provide sufficient information to enable a full
 examination of how the actual or proposed measure or
 other matter might affect the operation of this
 Agreement;

     (b) treat any confidential or proprietary information
 exchanged in the course of consultations on the same
 basis as the Party providing the information; and

     (c) seek to avoid any resolution that adversely affects the
 interests under this Agreement of any other Party.


Initiation of Procedures

Article 2007: Commission - Good Offices, Conciliation and
 Mediation

1.   If the consulting Parties fail to resolve a matter pursuant
to Article 2006 within:

     (a) 30 days of delivery of a request for consultations;

     (b) 45 days of delivery of such request if any other Party
 has subsequently requested or has participated in
 consultations regarding the same matter; 

     (c) 15 days of delivery of a request for consultations in
 matters regarding perishable agricultural goods; or

     (d) such other period as they may agree,

any such Party may request in writing a meeting of the
Commission.

2.   A Party may also request in writing a meeting of the
Commission where:

     (a) it has initiated dispute settlement proceedings under
 the GATT regarding any matter subject to Article
 2005(3) or (4), and has received a request pursuant to
 Articles 2005(5) for recourse to dispute settlement
 procedures under this Chapter; or

     (b) consultations have been held pursuant to Article 513
 (Working Group on Rules of Origin), Article 765
 (Sanitary and Phytosanitary Measures - Technical
 Consultations) and Article 914 (Standards-Related
 Measures - Technical Consultations). 

3.   The requesting Party shall state in the request the measure
or other matter complained of and indicate the provisions of this
Agreement that it considers relevant, and shall deliver the
request to the other Parties and to its Section of the
Secretariat.

4.   Unless it decides otherwise, the Commission shall convene
within 10 days of delivery of the request and shall endeavor to
resolve the dispute promptly.

5.   The Commission may:

     (a) call on such technical advisers or create such working
 groups or expert groups as it deems necessary;

     (b) have recourse to good offices, conciliation, mediation
 or such other dispute resolution procedures; or

     (c) make recommendations, 

as may assist the consulting Parties to reach a mutually
satisfactory resolution of the dispute.

6.   Unless it decides otherwise, the Commission shall
consolidate two or more proceedings before it pursuant to this
Article regarding the same measure.  The Commission may
consolidate two or more proceedings regarding other matters
before it pursuant to this Article that it determines are
appropriate to be considered jointly.


Panel Proceedings

Article 2008:  Request for an Arbitral Panel

1.   If the Commission has convened pursuant to Article 2007(4),
and the matter has not been resolved within:

     (a) 30 days thereafter;

     (b) 30 days after the Commission has convened in respect of
 the matter most recently referred to it, where
 proceedings have been consolidated pursuant to Article
 2007(6); or

     (c) such other period as the consulting Parties may agree,

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. 

2.   Upon delivery of the request, the Commission shall establish
an arbitral panel. 

3.   A third Party that considers it has a substantial interest
in the matter shall be entitled to join as a complaining Party,
on delivery of written notice of its intention to participate to
the disputing Parties and its Section of the Secretariat.  Such
notice shall be delivered at the earliest possible time, and in
any event no later than seven days after the date of delivery of
a request by a Party for the establishment of a panel.

4.   If such Party does not join as a complaining Party in
accordance with paragraph 3, it normally shall refrain thereafter
from initiating or continuing:

     (a) a dispute settlement procedure under this Agreement; or
 

     (b) a dispute settlement proceeding in the GATT on grounds
 that are substantially equivalent to those available to
 that Party under this Agreement,

regarding the same matter in the absence of a significant change
in economic or commercial circumstances.

5.   Unless otherwise agreed by the disputing Parties, the panel
shall be established and perform its functions in a manner
consistent with the provisions of this Chapter.


Article 2009: Roster

1.   The Parties shall establish and maintain a roster of up to
30 individuals who are willing and able to serve as panelists. 
The roster members shall be appointed by consensus for terms of
three years, and may be reappointed.

2.   Roster members shall:

     (a) have expertise or experience in law, international
 trade, other matters covered by this Agreement, or the
 resolution of disputes arising under international
 trade agreements, and shall be chosen strictly on the
 basis of objectivity, reliability and sound judgment;

     (b) be independent of, and not be affiliated with or take
 instructions from, any Party; and

     (c) comply with a code of conduct to be established by the
 Commission.


Article 2010: Qualifications of Panelists

1.   All panelists shall meet the qualifications set out in
Article 2009(2).

2.   Individuals may not serve as panelists for a dispute in
which they have participated pursuant to Article 2007(5).


Article 2011: Panel Selection

1.   Where there are two disputing Parties, the following
procedures shall apply:

     (a) The panel shall comprise five members.

     (b) The disputing Parties shall endeavor to agree on the
 chair of the panel within 15 days of the delivery of
 the request for the establishment of the panel.  If the
 disputing Parties are unable to agree on the chair
 within this period, the disputing Party chosen by lot
 shall select within five days as chair an individual
 who is not a citizen of that Party.

     (c) Within 15 days of selection of the chair, each
 disputing Party shall select two panelists who are
 citizens of the other disputing Party.

     (d) If a disputing Party fails to select its panelists
 within such period, such panelists shall be selected by
 lot from among the roster members who are citizens of
 the other disputing Party.

2.   Where there are more than two disputing Parties, the
following procedures shall apply:

     (a) The panel shall comprise five members.

     (b) The disputing Parties shall endeavor to agree on the
 chair of the panel within 15 days of the delivery of
 the request for the establishment of the panel.  If the
 disputing Parties are unable to agree on the chair
 within this period, the Party or Parties on the side of
 the dispute chosen by lot shall select within 10 days a
 chair who is not a citizen of such Party or Parties.

     (c) Within 15 days of selection of the chair, the Party
 complained against shall select two panelists, one of
 whom is a citizen of a complaining Party, and the other
 of whom is a citizen of another complaining Party.  The
 complaining Parties shall select two panelists who are
 citizens of the Party complained against.

     (d) If any disputing Party fails to select a panelist
 within such period, such panelist shall be selected by
 lot in accordance with the citizenship criteria of
 subparagraph (c).

3.   Panelists shall normally be selected from the roster.  Any
disputing Party may exercise a peremptory challenge against any
individual not on the roster who is proposed as a panelist by a
disputing Party within 15 days after the individual has been
proposed.

4.   If a disputing Party believes that a panelist is in
violation of the code of conduct, the disputing Parties shall
consult and if they agree, the panelist shall be removed and a
new panelist shall be selected in accordance with this Article.


Article 2012: Rules of Procedure

1.   The Commission shall establish Model Rules of Procedure, in
accordance with the following principles:

     (a) The procedures shall assure a right to at least one
 hearing before the panel as well as the opportunity to
 provide initial and rebuttal written submissions.

     (b) The panel's hearings, deliberations and initial report,
 and all written submissions to and communications with
 the panel shall be confidential.  

2.   Unless the disputing Parties otherwise agree, the panel
shall conduct its proceedings in accordance with the Model Rules
of Procedure.

3.   Unless the disputing Parties otherwise agree within 20 days
from the date of the delivery of the request for the
establishment of the panel, the terms of reference shall be:  

     "To examine, in the light of the relevant provisions of
     the NAFTA, the matter referred to the Commission (as
     set out in the request for a Commission meeting) and to
     make findings, determinations and recommendations as
     provided in Article 2016(2)."

4.   If a complaining Party wishes to argue that a matter has
nullified or impaired benefits, the terms of reference shall so
indicate.

5.   If a disputing Party wishes the panel to make findings as to
the degree of adverse trade effects on any Party of any measure
found not to conform with the obligations of the Agreement or to
have caused nullification or impairment in the sense of Annex
2004, the terms of reference shall so indicate.

Article 2013: Third Party Participation

     A Party that is not a disputing Party, on delivery of a
written notice to the disputing Parties and to its Section of the
Secretariat, shall be entitled to attend all hearings, to make
written and oral submissions to the panel and to receive written
submissions of the disputing Parties.


Article 2014: Role of Experts

     At the request of a disputing Party, or on its own
initiative, the panel may seek information and technical advice
from any person or body that it deems appropriate, provided that
the disputing Parties so agree and subject to such terms and
conditions as such Parties may agree.


Article 2015: Scientific Review Boards

1.   At the request of a disputing Party or, unless the disputing
Parties disapprove, on its own initiative, the panel may request
a written report of a scientific review board on any factual
issue concerning environmental, health, safety or other
scientific matters raised by a disputing Party in a proceeding,
subject to such terms and conditions as such Parties may agree.

2.   The board shall be selected by the panel from among highly
qualified, independent experts in the scientific matters, after
consultations with the disputing Parties and the scientific
bodies set out in the Model Rules of Procedure established
pursuant to Article 2012(1). 

3.   The participating Parties shall be provided: 

     (a) advance notice of, and an opportunity to provide
 comments to the panel on, the proposed factual issues
 to be referred to the board; and

     (b) a copy of the board's report and an opportunity to
 provide comments on the report to the panel.

4.   The panel shall take the board's report and any comments by
the Parties thereon into account in the preparation of its
report.


Article 2016: Initial Report

1.   Unless the disputing Parties otherwise agree, the panel
shall base its report on the submissions and arguments of the
Parties and on any information before it pursuant to Article 2014
or 2015.

2.   Unless the disputing Parties otherwise agree, the panel
shall, within 90 days after the last panelist is selected or such
other period as the Model Rules of Procedure established pursuant
to Article 2012(1) may provide, present to the disputing Parties
an initial report containing:

     (a) findings of fact, including any findings pursuant to a
 request under Article 2012(5); 

     (b) its determination as to whether the measure at issue is
 or would be inconsistent with the obligations of this
 Agreement or cause nullification or impairment in the
 sense of Annex 2004, or any other determination
 requested in the terms of reference; and

     (c) its recommendations, if any, for resolution of the
 dispute.

3.   Panelists may furnish separate opinions on matters not
unanimously agreed. 

4.   A disputing Party may submit written comments to the panel
on its initial report within 14 days of presentation of the
report.

5.   In such an event, and after considering such written
comments, the panel, on its own initiative or at the request of
any disputing Party, may:

     (a) request the views of any participating Party;

     (b) reconsider its report; and

     (c) make any further examination that it considers
 appropriate.


Article 2017: Final Report

1.   The panel shall present to the disputing Parties a final
report, including any separate opinions on matters not
unanimously agreed, within 30 days of presentation of the initial
report, unless the disputing Parties otherwise agree.

2.    No panel may, either in its initial report or its final
report, disclose which panelists are associated with majority or
minority opinions.

3.   The disputing Parties shall transmit to the Commission the
final report of the panel, including any report of a scientific
review board established under Article 2015, as well as any
written views that a disputing Party desires to be appended, on a
confidential basis within a reasonable period of time after it is
presented to them.

4.   Unless the Commission decides otherwise, the final report of
the panel shall be published 15 days after it is transmitted to
the Commission.


Implementation of Panel Reports

Article 2018: Implementation of Final Report

1.   On receipt of the final report of a panel, the disputing
Parties shall agree on the resolution of the dispute, which
normally shall conform with the determinations and
recommendations of the panel, and shall notify their Sections of
the Secretariat of any agreed resolution of any dispute.

2.   Whenever possible, such resolution shall be
non-implementation or removal of a measure not conforming with
this Agreement or causing nullification or impairment in the
sense of Annex 2004 or, failing such a resolution, compensation.


Article 2019: Non-Implementation - Suspension of Benefits

1.   If in its final report a panel has determined that a measure
is inconsistent with the obligations of this Agreement or causes
nullification or impairment in the sense of Annex 2004 and the
Party complained against has not reached agreement with any
complaining Party on a mutually satisfactory resolution pursuant
to Article 2018(1) within 30 days of receiving the final report,
such complaining Party may suspend the application to the Party
complained against of benefits of equivalent effect until such
time as they have reached agreement on a resolution of the
dispute.

2.   In considering what benefits to suspend pursuant to
paragraph 1:

     (a) a complaining Party should first seek to suspend
 benefits in the same sector or sectors as that affected
 by the measure or other matter that the panel has found
 to be inconsistent with the obligations of this
 Agreement or to have caused nullification or impairment
 by the non-complying Party in the sense of Annex 2004;
 and 

     (b) a complaining Party that considers it is not
 practicable or effective to suspend benefits in the
 same sector or sectors may suspend benefits in other
 sectors.

3.   On the written request of any disputing Party delivered to
the other Parties and its Section of the Secretariat, the
Commission shall establish a panel to determine whether the level
of benefits suspended by a Party pursuant to paragraph 1 is
manifestly excessive.

4.   The panel proceedings shall be conducted in accordance with
the Model Rules of Procedure.  The panel shall present its
determination within 60 days after the last panelist is selected
or such other period as the disputing Parties may agree.  



                    Subchapter C - Domestic Proceedings
                 and Private Commercial Dispute Settlement


Article 2020: Referrals of Matters from Judicial or
 Administrative Proceedings

1.   If an issue of interpretation or application of this
Agreement arises in any domestic judicial or administrative
proceeding of a Party that any Party considers would merit its
intervention, or if a court or administrative body solicits the
views of a Party, that Party shall notify the other Parties and
its Section of the Secretariat.  The Commission shall endeavor to
agree on an appropriate response as expeditiously as possible.

2.   The Party in whose territory the court or administrative
body is located shall submit any agreed interpretation of the
Commission to the court or administrative body in accordance with
the rules of that forum.

3.   If the Commission is unable to agree, any Party may submit
its own views to the court or administrative body in accordance
with the rules of that forum.


Article 2021: Private Rights

     No Party may provide for a right of action under its
domestic law against any other Party on the ground that a measure
of another Party is inconsistent with this Agreement.


Article 2022:  Alternative Dispute Resolution of Commercial
Disputes

1.   Each Party shall, to the maximum extent possible, encourage
and facilitate the use of arbitration and other means of
alternative dispute resolution for the settlement of
international commercial disputes between private parties in the
free trade area.

2.   To this end, each Party shall provide appropriate procedures
to ensure observance of agreements to arbitrate and for the
recognition and enforcement of arbitral awards in such disputes.

3.   A Party shall be deemed to be in compliance with paragraph 2
if it is a party to and is in compliance with the 1958 United
Nations Convention on the Recognition and Enforcement of Foreign
Arbitral Awards or the 1975 Inter-American Convention on
International Commercial Arbitration.

4.   The Commission shall establish an Advisory Committee on
Private Commercial Disputes comprising persons with expertise or
experience in the resolution of private international commercial
disputes.  The Committee shall report and provide recommendations
to the Commission on general issues referred to it by the
Commission respecting the availability, use and effectiveness of
arbitration and other procedures for the resolution of such
disputes in the free trade area.

=============================================================================

                                ANNEX 2001.2

                       Committees and Working Groups


A.   Committees:

     1. Committee on Trade in Goods (Article 317)

     2. Committee on Trade in Worn Clothing (Annex 300-B,
 Section 9.1)

     3. Committee on Agricultural Trade (Article 708)

     4. Committee on Sanitary and Phytosanitary Measures
 (Article 764)

     5. Committee on Standards-Related Measures (Article 913)

     (a) Land Transportation Services Standards
 Subcommittee (Article 913(5))

     (b) Telecommunications Standards Subcommittee (Article
 913(5)) 

     (c) Automotive Standards Council (Article 913(5))

     (d) Subcommittee on Labelling of Textile and Apparel
 Goods (Article 913(5))

     6. Committee on NAFTA Small Business (Article  1021)

     7. Financial Services Committee (Article 1414)

     8. Advisory Committee on Private Commercial Disputes
 (Article 2022)


B.   Working Groups:

     1. Working Group on Rules of Origin (Article 513)

     (a) Customs Subgroup (Article 513(5))

     2. Working Group on Agricultural Subsidies (Article
 706(6))

     3. Mexican-American Working Group (Article 704(3), Section
 I)

     4. Mexican-Canadian Working Group (Article 704(3), Section
 II)

     5. Working Group on Trade and Competition (Article 1504)

     6. Temporary Entry Working Group (Article 1605)


C.   Other Committees and Working Groups established under this
   Agreement

=============================================================================

                               ANNEX 2002.2

                   Remuneration and Payment of Expenses


1.   The Commission shall establish the amounts of remuneration
and expenses that will be paid to the panelists, committee
members and members of scientific review boards.

2    The remuneration of panelists or committee members and their
assistants, members of scientific review boards, their travel and
lodging expenses, and all general expenses of panels, committees
or scientific review boards shall be borne equally by:

     (a) in the case of panels or committees established under
 Chapter Nineteen (Review and Dispute Settlement in
 Antidumping and Countervailing Duty Matters), the
 involved Parties, as they are defined in Article 1911;
 or

     (b) in the case of panels and scientific review boards
 established under this Chapter, the disputing Parties.

3.   Each panelist shall keep a record and render a final account
of the person's time and expenses, and the panel, committee or
scientific review board shall keep a record and render a final
account of all general expenses.

=============================================================================

                                ANNEX 2004

                       Nullification and Impairment


1.  If any Party considers that any benefit it could reasonably
have expected to accrue to it under any provision of:

     (a) Part Two (Trade in Goods), except for those provisions
 of Annex 300-A (Automotive Sector) or Chapter Six
 (Energy) relating to investment,

     (b) Part Three (Technical Barriers to Trade),

     (c) Chapter Twelve (Cross-Border Trade in Services), or

     (d) Part Six (Intellectual Property),

is being nullified or impaired as a result of the application of
any measure that is not inconsistent with this Agreement, the
Party may have recourse to dispute settlement under this Chapter.

2.   A Party may not invoke:

     (a) paragraph (1)(a) or (b), to the extent that the benefit
 arises from any cross-border trade in services
 provision of Part Two, or

     (b) paragraph (1)(c) or (d), 

with respect to any measure subject to an exception under Article
2101 (General Exceptions).