News regarding the Olivos Protocol for the Resolution of Controversies within Mercosur

The Olivos Protocol for the Resolution of Controversies within Mercosur (the “Protocol”) was undersigned by the representatives of the governments of Uruguay, Paraguay, Brazil and Argentina on February 18, 2002. Currently, the Protocol regulates any disputes that may arise among the signatories of the Protocol regarding the interpretation of, application of or lack of compliance with the Treaty of Asuncion, the Protocol of Ouro Preto, the protocols and agreements entered into under the Treaty of Asuncion, the decisions of the Mercosur Board of the Common Market, the Resolutions of the Mercosur Group of the Common Market and the Directives of the Mercosur Commerce Commission.

Section 24 of the Protocol provides that the Mercosur Board of the Common Market may set up a special procedure for the resolution of any exceptionally urgent disputes which may cause irretrievable damage to the parties. In this respect, the Argentine Government has recently incorporated into Argentine law Decision No 23/2004 of the Mercosur Board of the Common Market (the “Decision”) that sets up the special procedure referred to in section 24 of the Protocol.

The Decision establishes that any of the parties may have recourse to the Permanent Review Tribunal (created by the Protocol) under the procedure established in the Decision, whenever the following requirements are present:

a)    that the dispute concerns goods which are perishable, seasonal, or of any other kind which may lose their qualities or commercial value within a short period of time, if they were unjustifiably retained in the territory of the country against which the claim is being made; or that the dispute concerns goods destined to resolve a crisis in the importer country;

b)    that the situation arose through actions or measures taken by a signatory state in violation of Mercosur regulations in force;

c)    that the continuance of such actions or measures could produce severe and irretrievable damage;

d)    that the criticized actions or measures are not the object of another dispute between the same parties.

In general terms, the Decision establishes that the signatory country which starts the procedure must file its claim in writing with the Secretary of the Permanent Review Tribunal (ST), and file a copy of its claim with the National Coordination of the defendant country and with the Mercosur Secretary (SM). The claim must set out:

a)    the identification of the relevant goods;

b)    a description of the circumstances of fact which evidence the existence of the above-mentioned requirements;

c)    a description of the grounds relied upon for claiming the violation of or lack of compliance with Mercosur regulations in force;

d)    the elements of evidence;

e)    a statement as to the severe or irretrievable damages which are, or may be, caused by the continuance of the situation; and

f)     a statement as to the emergency measure requested from the Tribunal.

The signatory state against which the emergency procedure is sought may file such arguments as it deems appropriate before the Tribunal within 3 working days of the day on which it had been notified of the filing of the claim.

The Tribunal shall rule on the admissibility of the claim within 6 days of the expiry of the 3 day period referred to in the above paragraph. Once the existence of all the requirements has been corroborated, the Tribunal may order the appropriate emergency measure, within the same 6 day period. The Tribunal must ensure that emergency measure ordered is properly proportional to the evidenced damage.

If the order for the emergency measure is not observed, satisfied or complied with, Chapter IX of the Protocol will be applicable. Chapter IX establishes that the Tribunal may administer temporary compensatory measures, such as the suspension of a concession or another similar measure of the sort generally employed to ensure compliance with an award.

If either party feels aggrieved by the Tribunal’s decision, it may request the Tribunal to reconsider its decision, within 15 days of the date on which such party was notified of the decision. The Tribunal’s awards shall be binding upon all the parties to the dispute from the day on which they received the notification. The Tribunal’s awards will not be subject to further appeals and will have the effect of res judicata as between the parties.

Whilst the reconsideration proceedings are taking place, the emergency measures ordered by the Tribunal must be complied with.

If the claimant waives the emergency measure, the claim shall expire without any further requirements and the claimant will be unable to request any other measure relating to the same matter.

Alternatively, the claimant may commence a regular dispute resolution procedure under the Protocol if the Tribunal dismissed the claim on the grounds that:

a)    the controversy did not concern perishable goods, seasonal goods, or any other kind of goods which may lose their qualities or commercial value within a short period of time if they were unjustifiably retained in the territory of the country against which the claim is being made; or did not concern goods destined to resolve a crisis in the importer country; or

b)    the continuance of such actions or measures could not result in severe or irretrievable damage.

However, if the Tribunal has dismissed the claim on the grounds that there had been no violation of the Mercosur regulations, the claimant will be unable to request new resolution proceedings for the same issue.

In practice, the Decision is still pending on enforcement because, so far, only Uruguay and Argentina have incorporated it into their domestic laws. It should occur once the period of 30 days from the last notification is made by Brazil and Paraguay, according to article 40 of the Ouro Preto Protocol.

For more details on the proceedings and the legal framework provided by the Protocol, see “Ratification of the Olivos Protocol for the Resolution of Controversies in the Mercosur” in Marval News # 11 of October 31, 2002.