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Tribunal decision on damages

A NAFTA arbitration panel may enforce its judgment by requiring the national government to pay money damages. NAFTA art. 1135. NAFTA allows an investor to enforce a tribunal’s damage award under the New York Convention of the United Nations, which gives the investor access to domestic courts to secure payment of damage awards. There is no cap on the size of damage awards.

Tribunal awards are automatically appropriated. Congress has created a “judgment fund,” a standing appropriation to pay damages resulting from the judgments of the U.S. Court of Claims, federal district courts, and international tribunals. It is a permanent and indefinite appropriation similar to that available to pay interest on the national debt. Payment of a judgment is automatic. 31 U.S.C. §1304 (1997); see U.S. General Accounting Office, Office of the General Counsel, Principles of Federal Appropriations Law (Nov. 1994) (GAO/OGC-94-33). (Seehttp://www.gao.gov/special.pubs/og94033.pdf [3MB file].)

Potential Review by Courts. UNCITRAL and ICSID Additional Facility rules authorize domestic courts to review an arbitration award. Domestic courts may decline to enforce the award if it is found to be contrary to public policy. In addition, a party may ask the courts of the “seat” of the arbitration to set aside an award because of a violation of the law of the “seat” related to arbital awards (See discussion above. The New York Convention was implemented in U.S. law by the United States Arbitration Act, 9 U.S.C. §§201-209 (1994). See 9 U.S.C. §202 regarding the “contrary to public policy standard.”)

U.S. Protection or Preemption of State or Local Law.
A NAFTA panel ruling does not automatically result in preemption of a non-conforming state or local measure. There is no right of action for private parties to enforce panel rulings in U.S. courts. 19 U.S.C. §3312(c); 19 U.S.C. §102(c).

If state or local officials are unwilling to amend policies that are popular with the public, federal officials may simply leave the state policy in place, pay damages to the investor, and hope the issue does not arise again as a NAFTA case. At the same time, the federal government may seek to quietly resolve the issue. Federal officials acting behind the scenes might apply political or economic pressure on state or local officials to “voluntarily” bring state policy in line with the panel ruling.

Federal action may also be much more overt. If the investor plaintiff wins, the United States has the option of suing to preempt the non-conforming state or local measure. Unlike private investors, the federal government can sue a state or locality at any time and seek the preemption of state or local measures that do not comply with NAFTA. 19 U.S.C. §3312(c); 19 U.S.C. §102(c). By contrast, if a dispute resolution panel finds that a federal law violates NAFTA’s investment chapter, an act of Congress is required to comply with the ruling. North American Free Trade Agreement Implementation Act, Title I, §102 (a), 19 U.S.C.§3312 (1993). Thus, state law is in an inferior position to federal law under NAFTA.

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