Since its implementation in October 2006, the Softwood Lumber Agreement (SLA) has worked well, providing certainty for industry and returning approximately C$ 5 billion in duties to Canadian softwood lumber producers. As differences are bound to occur in the implementation of complex international agreements such as the SLA, an international arbitration process was built into the Agreement to resolve these differences.
In the spring of 2007, such a dispute arose on diverging interpretations of the “adjustment factor”—a technical provision which may affect the way certain export measures under the Agreement are calculated. Canada argued that it properly interpreted and applied the “adjustment factor” as defined in the SLA. In a statement made on August 7, 2007, International Trade Minister David Emerson outlined Canada’s position.
On August 13, 2007, the U.S. government filed an arbitration request (ARCHIVED - PDF *, 100 KB) with the London Court of International Arbitration (LCIA), an internationally respected forum under which all SLA arbitrations will take place.
The arbitration process is initiated when an official request for arbitration is filed by either party with the LCIA.
A tribunal of three arbitrators must then be appointed. Each party has 30 days to nominate an arbitrator, and the two nominees must jointly select a chair. Citizens and residents of Canada and the United States cannot be appointed as arbitrators.
The SLA also requires that hearings be held in Canada or in the United States, and be open to the public. The venue is chosen by the arbitration panel.
The SLA calls for the tribunal to endeavour to issue a decision within six months of the formation of the arbitration panel.
The SLA provides that decisions of a tribunal are binding on Canada and the United States.
On September 12, 2007, Canada nominated Dr. Bernard Hanotiau, a Belgian lawyer actively involved and well-experienced in arbitration. The U.S. representative is V.V. (Johnny) Veeder. On September 19, 2007 Dr. Karl-Heinz Bockstiegel, a German lawyer was jointly-nominated to act as Chairperson of the Arbitral Panel.
October 28, 2007: Panel members issued a timeline that divides the process into two phases:
The first phase is restricted to the issue of liability.
A second phase will deal with remedies should liability be found by the Tribunal.
Panel members also indicated there would be no witnesses or any request for document disclosure during the liability phase.
It has properly interpreted the “adjustment factor” provision in the Softwood Lumber Agreement.
Surge levels are not subject to the adjustment factor while quotas are only subject to the adjustment factor beginning in July 2007.
Canada has complied with the Agreement according to its correct interpretation.
December 12, 2007: Tribunal held a one-day hearing on liability in New York City.
The adjustment factor does not apply to the B.C. interior, B.C. coast and Alberta.
The adjustment factor applies to Québec, Ontario, Manitoba and Saskatchewan as of January 1, 2007.
*A Rebuttal Memorial is an opportunity for each party to respond to the other party’s position in the arbitration process.
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