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

The Olivos Protocol for the Resolution of Controversies within the Mercosur was undersigned by the representatives of the governments of Uruguay, Paraguay, Brazil and Argentina on February 18, 2002 (the “Protocol”). Currently, the Protocol regulates the controversies regarding the interpretation, application or lack of compliance with the Treaty of Asuncion, the Protocol of Ouro Preto, the protocols and agreements celebrated 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 that may arise among the signatories of the Protocol.

Section 24 of the Protocol establishes that the Mercosur Board of the Common Market may establish a special procedure for the resolution of exceptionally urgent controversies which may cause irretrievable damage to the parties. By Decision No 23/04 (the “Decision”), the Mercosur Board of the Common Market has recently decided to establish 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 controversy concern perishable, seasonal goods, or any other kind of goods which may lose their qualities or commercial value in a short period of time, if they were unjustifiably retained in the territory of the country to which the claim is being made; or that the controversy concern goods destined to satisfy a crisis in the importer country; b) that the situation originate in actions or measures taken by a signatory state in violation of the regulations of the Mercosur in force; c) that the maintenance of such actions or measures could produce severe and irretrievable damages; d) that the criticized actions or measures are not the object of another controversy among the same parties.

In general lines, the Decision establishes that the signatory country which starts the procedure will need to file its claim in writing before the Secretary of the Permanent Review Tribunal (ST), and file a copy of its claim before the National Coordination of the defendant country and before the Mercosur Secretary (SM). The claim shall contain: 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 to claim the existence of the violation of or lack of compliance with the regulations of the Mercosur in force; d) elements of evidence; e) indication of the severe or irretrievable damages which are or may be caused by the maintenance of the situation; f) indication of the emergency measure requested from the Tribunal.

The signatory state against whom the emergency procedure is being held may file the allegations it deems convenient before the Tribunal within a 3 working-day term, as from the day on which the signatory state had been notified of the filing of the claim.

The Tribunal shall rule on the admissibility of the claim within a 6 day-term, as from the day the term established in the above paragraph has elapsed. Once the existence of all the requirements has been corroborated the Tribunal might order the pertinent emergency measure, within the same 6 day-term. The Tribunal shall seek that the ordered emergency measure is properly proportional to the evidenced damage.

If the ordered emergency measure is not observed, satisfied or complied with, Chapter IX of the Protocol will be applicable. Chapter IX establishes that the Tribunal will be able to administer temporary compensatory measures, such as the suspension of concession or other similar usually established to obtain compliance with an award.

If any of the parties feel damaged by the Tribunal’s decision, they may require the Tribunal to reconsider its decision, within a 15 day-term as from the date on which the party was notified of the decision. For reconsideration purposes, the Tribunal shall proceed as provided in Section 23 of the Protocol. This means that in these circumstances, the Tribunal’s awards shall be compulsory for all the parties of the controversy since 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 among the parties.

Whilst the reconsideration proceedings are taking place, the emergency measures ordered by the Tribunal shall 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 for any other measure regarding the same topic.

On the other hand, the claimant might start a regular procedure for the resolution of controversies according to the Protocol if the Tribunal dismissed the claim on the grounds that: a) the controversy did not concern perishable, seasonal goods, or any other kind of goods which may lose their qualities or commercial value in a short period of time, if they where unjustifiably retained in the territory of the country to which the claim is being made; or about goods destined to satisfy a crisis in the importer country; or b) the maintenance of such actions or measures could not produce severe or irretrievable damages.

If the Tribunal dismisses the claim on the grounds that no violation to the regulations of the Mercosur had taken place, the claimant will be unable to request a new resolution procedure for the same issue.

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