BACKGROUND ON US AND EU APPROACHES TO LABOR AND ENVIRONMENT CHAPTERS IN FREE TRADE AGREEMENTS

Transcription

1 BACKGROUND ON US AND EU APPROACHES TO LABOR AND ENVIRONMENT S IN FREE TRADE AGREEMENTS Huma Muhaddisoglu & Mark Kantor Session 2.2.: The policy framework for investment: the social and environmental dimensions This paper was submitted in response to a call for papers conducted by the organisers of the OECD Global Forum on International Investment. It is distributed as part of the official conference documentation and serves as background material for the relevant sessions in the programme. The views contained within do not necessarily represent those of the OECD or its member governments. OECD Global Forum on International Investment OECD Investment Division

2 BACKGROUND ON US AND EU APPROACHES TO LABOR AND ENVIRONMENT S IN FREE TRADE AGREEMENTS by Huma Muhaddisoglu 1 and Mark Kantor 2 Among the most controversial aspects of free trade agreements and investment treaties is the extent to which issues of labor rights and environmental protection are covered by those agreements. For comparative purposes, we set out in tables below several examples of chapters from United States and European free trade agreements addressing those issues. We also set out at the end of this document excerpts of some of the continuing objections by U.S. labor unions and environmental activists as found in recent testimony before the U.S. Congress, to illustrate the gap that still exists between the positions of those interest groups and the current state of free trade agreements in the U.S. The authors do not express an opinion, pro or con, as to the legitimacy of those positions in this document the purpose of including that information is to show the current bid-and-ask in the United States about issues of labor rights and environmental protection in free trade agreements and investment treaties. With respect to the United States, we have chosen two examples; the Central America- Dominican Republic-United States Free Trade Agreement (the so-called Agreement) and the U.S.-Peru Trade Promotion Agreement (TPA). The Agreement was 1 Huma Muhaddisoglu is an attorney at law, admitted to Istanbul Bar and she was formerly an associate in the law firm of Herguner Bilgen Ozeke, specializing in mergers and acquisitions and international arbitration. Ms. Muhaddisoglu is currently a LL.M. candidate at Georgetown University Law Center in International Legal Studies. She can be contacted by at humamuhaddisoglu@gmail.com. 2 Mark Kantor is an independent arbitrator. He was formerly a partner in the international law firm of Milbank, Tweed, Hadley & McCloy LLC, specializing in international finance and investment transactions. Mr. Kantor teaches both international arbitration and international business transactions as an Adjunct Professor at Georgetown University Law Center and is a Fellow at the Columbia Program on International Investment (a joint undertaking of Columbia Law School and the Earth Institute at Columbia University). He can be contacted on the web at and by at mkantor@mark-kantor.com. 1

3 finalized in 2004 and ratified by the United States in After final approval of, though, differences between the Republican-controlled U.S. Administration and the Democraticcontrolled U.S. Congress led to a stalemate over ratification of new free trade agreements. In a bipartisan trade compromise between the Administration and Democratic leaders in Congress finally agreed in June 2007, that stalemate was partially unlocked, thereby enabling Congressional approval of the U.S.-Peru Trade Promotion Agreement. The bipartisan trade compromise specifically covered the content of chapters in free trade agreements about labor rights and environmental protection. As a result, those portions of the U.S.-Peru Trade Promotion Agreement were rewritten between the parties to incorporate the understandings reached in the bipartisan trade compromise. To help readers understand the differences in approach among free trade agreements, we set out below two charts. The first is a chart showing the differences between the Agreement (approved before the bipartisan trade compromise ) and the U.S.-Peru Trade Promotion Agreement (approved after the bipartisan trade compromise ). Additions resulting from the bipartisan trade compromise are colored in green and deletions resulting from the compromise are colored in blue and marked within square brackets. The second chart sets out how the issues of labor rights and environmental protection are addressed in four recent trade agreements between the European Union, on the one hand, and respectively Albania, Egypt, the Cotonou States and Russia. The contrasts among those four agreements, and between each of those four agreements and the two U.S. agreements in the first chart, are notable. Of course, labor rights and environmental protection issues are affected by far more than just the provisions of a free trade agreement entitled Labor Rights or Environment. A 2

4 number of provisions in an international trade and investment agreement may implicate those matters. In this background document, we focus solely one part of that issue whether the international agreement contains a specific chapter addressing labor rights or environmental protection and, if so, the content of that chapter. We do not address in this document the extent to which an investor-state arbitral tribunal or a State-State dispute resolution tribunal will incorporate public welfare objectives relating to protection of labor or environment into its consideration of disputes over investment or trade commitments undertaken by a State pursuant to other provisions of that agreement. Therefore, we do not consider the issue of (for example) the extent to which an arbitral tribunal will defer to the host State (i.e., grant regulatory space ) for public welfare regulatory conduct of a host State when presented by an injured investor with an allegation that the regulatory conduct in fact was an uncompensated expropriation or a breach of the fair & equitable treatment obligation contained in an investment agreement. We note, though, that recent U.S. investment treaties and investment chapters of free trade agreements expressly state: "Except in rare circumstances, non-discriminatory regulatory actions by a party that are designed and applied to protect legitimate public welfare objectives, such as public health, safety, and the environment, do not constitute indirect expropriations. 3

5 A. The Labor and Environmental Chapters of the Agreement and the U.S.- Peru Trade Promotion Agreement We summarize first some of the differences in the labor chapters. Then, we turn to a summary of some of the significant differences in the environmental chapters. 1. Labor Chapters The U.S.-Peru Trade Promotion Agreement (TPA) labor chapter requires that Peru and the U.S. adopt, maintain, and enforce in their own law and in practice the International Labor Organization (ILO) core labor standards. This language represents a significant change from the Agreement, which instead required that signatory countries enforce their own domestic labor laws and strive to ensure not to derogate from labor laws in order to increase trade. The Agreement further contained significantly different enforcement mechanisms for these labor commitments than for other commercial trade provisions. The U.S.- Peru Trade Promotion Agreement, however, provides that disputes over compliance with the commitments in the labor chapter is subject to State-State binding dispute in a manner very similar to the State-State binding dispute resolution provisions covering trade disputes. Affected labor is not entitled under the TPA, though, to initiate and control their own claims in the same manner as injured investors are entitled to initiate and control investor-state arbitration claims under the investment chapter of the TPA. The U.S.-Peru Trade Promotion Agreement labor chapter also makes several other changes from. The TPA limits governments from asserting prosecutorial discretion as a basis for justifying a decision whether or not to enforce a labor obligation in particular circumstances. The Agreement instead provides that any decisions with respect to allocation of enforcement resources must not undermine the State s TPA commitment to enforce the ILO core 4

6 labor standards. The U.S.-Peru Trade Promotion Agreement also replaces the commitment to strive to ensure not to derogate from labor laws in order to increase trade with a full prohibition against derogating from specified labor rights obligations in a manner affecting trade or investment. Moreover, the U.S.-Peru Trade Promotion Agreement expands the definition of domestic labor laws that a country must effectively enforce to include discrimination in employment and hiring, along with the other core ILO standards, and acceptable conditions of work. 2. Environmental Chapters Turning to the environmental chapter of U.S. free trade agreements, there too the U.S.- Peru Trade Promotion Agreement implements significant differences from the Agreement. Prior to the bipartisan trade compromise, environmental violations under a free trade agreement like were subject solely to a monetary assessment (capped at $15 million) that was to be used to improve environmental enforcement in the offending Party. Following the bipartisan trade compromise, a monetary assessment is no longer the default remedy (a monetary assessment is still available, but only if requested). Instead, under the U.S.- Peru Trade Promotion Agreement a State violating its environmental commitments is subject to a suspension of trade benefits, the same penalty included in free trade agreements for violations of commercial trade commitments. Contrary to the monetary assessment provisions of the DR- CAFTA Agreement, the suspension of benefits scheme does not always require the payment of assessments to be applied to correct the situation leading to the violation in the first place. Second, pursuant to the bipartisan trade compromise, the U.S.-Peru Trade Promotion Agreement obligates the U.S. and Peru to meet their obligations under seven specific multilateral environmental agreements by passing adequate domestic laws. Third, the U.S.-Peru Trade 5

7 Promotion Agreement also obligates its signatories to improve upon current environmental laws and policies. If either the U.S. or Peru intentionally disregards its laws intended to protect the environment, that State will be subject to possible dispute settlement. Under the TPA, moreover, the U.S. and Peru are required to establish an Environmental Affairs Council made up of senior level officials with expertise in the environment. The Council is required to attempt to resolve disputes referred to it by the TPA Secretariat when one Party requests consultations alleging a failure to effectively enforce environmental laws. With respect to State-State binding dispute resolution, the U.S.-Peru Trade Promotion Agreement provides each State with the right to request consultations regarding any matter arising under the environment chapter, including where one Party alleges that the other State is failing effectively to enforce its own environmental laws in sustained or recurring course of action or inaction in a manner that affects trade. If the dispute ultimately reaches a State-State dispute panel under the TPA, the Agreement allows for the selection of panelists in these circumstances with experience in environmental matters. The U.S.-Peru Trade Promotion Agreement also includes several provisions that permit the public and NGOs to participate in bringing environmental issues to the attention of the competent authorities in the U.S. and Peru. Illustratively, the TPA requires the U.S. and Peru to create procedures by which interested persons can request competent authorities to investigate alleged violations of their environmental laws. In addition, the U.S. and Peru are each to establish a national consultative or advisory committee, comprised of persons with knowledge of environmental issues, to provide views on the implementation of the TPA environmental chapter, as well as on issues raised by interested persons in submissions to a Party. The TPA also 6

8 guarantees interested persons access to the competent authorities of each State to investigate alleged violations of domestic environmental laws. The TPA environment chapter, furthermore, requires the creation of an Environmental Affairs Council. That Council is to establish mechanisms to exchange information with the public, consider public submissions at Council meetings, and request public input on matters relevant to the Council s work. Moreover, the U.S.-Peru Trade Promotion Agreement requires the U.S. and Peru to cooperate in the creation of an independent Secretariat designed to receive submissions from private citizens and NGOs alleging that a Party is failing effectively to enforce an environmental law. In one further change of note, the U.S.-Peru Trade Promotion Agreement environment chapter contains a commitment to the promotion and encouragement of biodiversity, including plants, animals, and habitat. In addition, both Parties explicitly acknowledge their commitment under the Agreement to strive to continue the improvement of their individual levels of environmental protection. Finally, the Parties agree to enhance their cooperative efforts on issues affecting biodiversity through the Environmental Cooperation Agreement. The U.S.-Peru Trade Promotion Agreement is the first free trade agreement to contain express commitments related to biodiversity. The table comparing the Agreement Labor Rights and Environmental Chapters with the comparable chapters of the U.S. Peru Trade Promotion Agreement follows. 7

9 LABOR Fundamental Labor Rights Enforcement of Labor Laws N/A 1. (a) A Party shall not fail to effectively enforce its labor laws, through a sustained or recurring course of action or inaction, in a manner affecting trade between the Parties, after the date of entry into force of this Agreement. (b) Each Party retains the right to exercise discretion with respect to investigatory, prosecutorial, regulatory, and compliance matters and to make decisions regarding the allocation of resources to enforcement with respect to other labor matters determined to have higher priorities. Accordingly, the Parties understand that a Party is in compliance with subparagraph (a) where a course of action or inaction reflects a reasonable exercise of such discretion, or results from a bona fide decision regarding the allocation of resources. 1. Each Party shall adopt and maintain in its statutes and regulations, and practices thereunder, the following rights, as stated in the ILO Declaration on Fundamental Principles and Rights at Work and its Follow-Up (1998) (ILO Declaration): a) freedom of association; b) the effective recognition of the right to collective bargaining; c) the elimination of all forms of compulsory or forced labor; d)the effective abolition of child labor and, for purposes of this Agreement, a prohibition on the worst forms of child labor; and e) the elimination of discrimination in respect of employment and occupation. 2. Neither Party shall waive or otherwise derogate from, or offer to waive or otherwise derogate from, its statutes or regulations implementing paragraph 1 in a manner affecting trade or investment between the Parties, where the waiver or derogation would be inconsistent with a fundamental right set out in that paragraph. 1. (a) A Party shall not fail to effectively enforce its labor laws, including those it adopts or maintains in accordance with Article , through a sustained or recurring course of action or inaction, in a manner affecting trade or investment between the Parties, after the date of entry into force of this Agreement. (b) A decision a Party makes on the distribution of enforcement resources shall not be a reason for not complying with the provisions of this Chapter. Each Party retains the right to the reasonable exercise of discretion [with respect to investigatory, prosecutorial, regulatory, and compliance matters]and to bona fide[make] decisions with regard to [regarding]the allocation of resources between labor enforcement activities among the fundamental labor rights enumerated in Article , provided the exercise of [to enforcement with respect to other labor matters determined to have higher priorities. Accordingly, the Parties 8

10 LABOR Procedural Guarantees and Public Awareness 2. The Parties recognize that it is inappropriate to encourage trade or investment by weakening or reducing the protections afforded in domestic labor laws. Accordingly, each Party shall strive to ensure that it does not waive or otherwise derogate from, or offer to waive or otherwise derogate from, such laws in a manner that weakens or reduces adherence to the internationally recognized labor rights referred to in Article 16.8 as an encouragement for trade with another Party, or as an encouragement for the establishment, acquisition, expansion, or retention of an investment in its territory. 3. Nothing in this Chapter shall be construed to empower a Party s authorities to undertake labor law enforcement activities in the territory of another Party. 1. Each Party shall ensure that persons with a legally recognized interest under its law in a particular matter have appropriate access to tribunals for the enforcement of the Party s labor laws. Such tribunals may include administrative, quasi-judicial, judicial, or labor tribunals, as provided in the Party s domestic law. 2. Each Party shall ensure that proceedings before such tribunals for the enforcement of its labor laws are fair, equitable, and transparent and, to this end, each Party shall ensure that: a) such proceedings comply with due process of law; b) any hearings in such proceedings are open to the public, except where the administration of justice otherwise requires; c) the parties to such proceedings are entitled to support or defend their respective positions, including by presenting information or understand that a Party is in compliance with subparagraph (a) where a course of action or inaction reflects a reasonable exercise of] such discretion and [, or results from a bona fide decision regarding the allocation of resources. The Parties recognize that it is inappropriate to encourage trade or investment by weakening or reducing the protections afforded in domestic labor laws. Accordingly, each Party shall strive to ensure that it does not waive or otherwise derogate from, or offer to waive or otherwise derogate from,] such decisions are not inconsistent [laws in a manner that weakens or reduces adherence to the internationally recognized labor rights referred to in Article 16.8 as an encouragement for trade] with the obligations of this Chapter.[another Party, or as an encouragement for the establishment, acquisition, expansion, or retention of an investment in its territory.] 2. Nothing in this Chapter shall be construed to empower a Party s authorities to undertake labor law enforcement activities in the territory of another Party. 1. Each Party shall ensure that persons with a legally recognized interest [under its law] in a particular matter have appropriate access to tribunals for the enforcement of the Party s labor laws. Such tribunals may include administrative, quasi-judicial, judicial, or labor tribunals, as provided in the Party s [domestic] law. 2. Each Party shall ensure that proceedings before such tribunals for the enforcement of its labor laws are fair, equitable, and transparent and, to this end, each Party shall ensure that: a) such proceedings comply with due process of law; b) any hearings in such proceedings are open to the public, except where the administration of justice otherwise requires; c) the parties to such proceedings are entitled to support or defend their respective positions, including by presenting information or evidence; and 9

11 LABOR evidence; and d) such proceedings do not entail unreasonable charges or time limits or unwarranted delays. 3. Each Party shall provide that final decisions on the merits of the case in such proceedings are: a) in writing and state the reasons on which the decisions are based; b) made available without undue delay to the parties to the proceedings and, consistent with its law, to the public; and c) based on information or evidence in respect of which the parties were offered the opportunity to be heard. 4. Each Party shall provide, as appropriate, that parties to such proceedings have the right to seek review and, where warranted, correction of final decisions issued in such proceedings. 5. Each Party shall ensure that tribunals that conduct or review such proceedings are impartial and independent and do not have any substantial interest in the outcome of the matter. 6. Each Party shall provide that the parties to such proceedings may seek remedies to ensure the enforcement of their rights under its labor laws. Such remedies may include measures such as orders, fines, penalties, or temporary workplace closures, as provided in the Party s laws. 7. Each Party shall promote public awareness of its labor laws, including by: a) ensuring the availability of public information related to its labor laws and enforcement and compliance procedures; and b) encouraging education of the public regarding its labor laws. 8. For greater certainty, decisions or pending decisions by each Party s administrative, quasi-judicial, judicial, or labor tribunals, as well as related proceedings, shall not be subject to revision or be reopened under the d) such proceedings do not entail unreasonable charges or time limits or unwarranted delays. 3. Each Party shall provide that final decisions on the merits of the case in such proceedings are: a) in writing and state the reasons on which the decisions are based; b) made available without undue delay to the parties to the proceedings and, consistent with its law, to the public; and c) based on information or evidence in respect of which the parties to the proceedings were offered the opportunity to be heard. 4. Each Party shall provide, as appropriate, that parties to such proceedings have the right to seek review and, where warranted, correction of final decisions issued in such proceedings. 5. Each Party shall ensure that tribunals that conduct or review such proceedings are impartial and independent and do not have any substantial interest in the outcome of the matter. 6. Each Party shall provide that the parties to such proceedings may seek remedies to ensure the enforcement of their rights under its labor laws. Such remedies may include measures such as orders, fines, penalties, or temporary workplace closures.[closures, as provided in the Party s laws.] 7. Each Party shall promote public awareness of its labor laws, including by: a) ensuring the availability of public information related to its labor laws and enforcement and compliance procedures; and b) encouraging education of the public regarding its labor laws. [8. For greater certainty, decisions or pending decisions by each Party s administrative, quasi-judicial, judicial, or labor tribunals, as well as related proceedings, shall not be subject to revision or be reopened under the provisions of this Chapter.] 10

12 LABOR Institutional Arrangements provisions of this Chapter. 1. The Parties hereby establish a Labor Affairs Council, comprising cabinet-level or equivalent representatives of the Parties, or their designees. 2. The Council shall meet within the first year after the date of entry into force of this Agreement and thereafter as often as it considers necessary to oversee the implementation of and review progress under this Chapter, including the activities of the Labor Cooperation and Capacity Building Mechanism established under Article 16.5, and to pursue the labor objectives of this Agreement. Unless the Parties otherwise agree, each meeting of the Council shall include a session at which members of the Council have an opportunity to meet with the public to discuss matters relating to the implementation of this Chapter. 3. Each Party shall designate an office within its labor ministry that shall serve as a contact point with the other Parties, and with the public, for purposes of carrying out the work of the Council, including coordination of the Labor Cooperation and Capacity Building Mechanism. Each Party s contact point shall provide for the submission, receipt, and consideration of communications from persons of a Party on matters related to the provisions of this Chapter, and shall make such communications available to the other Parties and, as appropriate, to the public. Each Party shall review such communications, as appropriate, in accordance with domestic procedures. The Council shall develop general guidelines for considering such communications. 4. Each Party may convene a new, or consult an existing, national labor advisory or consultative committee, comprising members of its public, including representatives of its labor and business organizations, to provide views on any issues related to this Chapter. 1. The Parties hereby establish a Labor Affairs Council (Council) comprising cabinet-level or equivalent representatives of the Parties, who may be represented on the Council by [or] their deputies or high-level designees. 2. The Council shall meet within the first year after the date of entry into force of this Agreement and thereafter as often as it considers necessary. The Council shall: a) [to] oversee the implementation of and review progress under this Chapter, including the activities of the Labor Cooperation and Capacity Building Mechanism established under Article 17.6; b) develop general guidelines for consideration of communications referred [16.5, and] to in paragraph 5(c); c) prepare reports, as appropriate, on matters related to[pursue] the implementation[labor objectives] of this Chapter and make such reports available to the public; d) endeavor to resolve matters referred to it under Article ; and e) perform any other functions as[agreement. Unless] the Parties may agree. 3. All decisions[otherwise agree, each meeting] of the Council shall be taken by consensus, and shall be made public unless the Council otherwise decides. 4. Unless the Council otherwise decides, each of its meetings shall include a session at which members of the Council have an opportunity to meet with the public to discuss matters relating to the implementation of this Chapter. 5. Each Party shall designate an office within its labor ministry or equivalent entity that shall serve as a contact point with the other Parties, and with the public. The contact points[public, for purposes] of each Party shall meet as often as they consider necessary or at the request of the Council. Each Party s contact point shall: a) assist the Council in carrying out its [the] work,[ 11

13 LABOR 5. All decisions of the Council shall be taken by consensus. All decisions of the Council shall be made public, unless otherwise provided in this Agreement, or unless the Council otherwise decides. 6. The Council may prepare reports on matters related to the implementation of this Chapter, and shall make such reports public. of the Council], including coordination of the Labor Cooperation and Capacity Building Mechanism; b) cooperate with the other Parties contact points and with relevant government organizations and agencies to: (i) establish priorities, with a particular emphasis on the issues identified in paragraph 2 of Annex 17.6, regarding cooperative activities on labor matters, (ii) develop specific cooperative and capacity-building activities according to such priorities, (iii) exchange information on the labor laws and practices of each Party, including best practices and ways to improve them, and (iv) seek support, as appropriate, from international organizations such as the ILO, the Inter-American Development Bank, the World Bank, and the Organization of American States, to advance common commitments regarding labor matters; c. [Mechanism. Each Party s contact point shall] provide for the submission, receipt, and consideration of communications from persons of a Party on matters related to [the provisions of] this Chapter, and [shall] make such communications available to the other Party [Parties] and, as appropriate, to the public; and[public. Each Party shall review such communications, as appropriate, in accordance with domestic procedures. The Council shall develop general guidelines for considering such communications.] d. provide for the receipt of cooperative consultation requests referred to in Article and Each Party shall review communications received under paragraph 5(c) in accordance with domestic procedures. 7. Each Party may convene a new, or consult an existing, national labor advisory or consultative committee, comprising [members of its public, including] representatives of its labor and business organizations and other members of its public, to 12

14 LABOR Cooperative Labor Consultations 1. A Party may request consultations with another Party regarding any matter arising under this Chapter by delivering a written request to the contact point that the other Party has designated under Article The consultations shall begin promptly after delivery of the request. The request shall contain information that is specific and sufficient to enable the Party receiving the request to respond. 3. The consulting Parties shall make every attempt to arrive at a mutually satisfactory resolution of the matter, taking into account opportunities for cooperation relating to the matter, and may seek advice or assistance from any person or body they deem appropriate in order to fully examine the matter at issue. 4. If the consulting Parties fail to resolve the matter pursuant to paragraph 3, a consulting Party may request that the Council be convened to consider the matter by delivering a written request to the contact point of each of the other Parties. 5. The Council shall promptly convene and shall endeavor to resolve the matter, including, where appropriate, by consulting outside experts and having recourse to such procedures as good offices, conciliation, or mediation. 6. If the matter concerns whether a Party is conforming to its obligations under Article (a), and the consulting Parties have failed to resolve the matter within 60 days of a request under paragraph 1, the complaining provide views on any issues related to this Chapter. [All decisions of the Council shall be taken by consensus. All decisions of the Council shall be made public, unless otherwise provided in this Agreement, or unless the Council otherwise decides. The Council may prepare reports on matters related to the implementation of this Chapter, and shall make such reports public.] 1. A Party may request cooperative labor consultations with another Party regarding any matter arising under this Chapter by delivering a written request to the contact point that the other Party has designated under Article [ ] 2. The cooperative labor consultations shall begin promptly after delivery of the request. The request shall contain information that is specific and sufficient to enable the Party receiving the request to respond. 3. The consulting Parties shall make every attempt to arrive at a mutually satisfactory resolution of the matter, taking into account opportunities for cooperation related[relating] to the matter, and may seek advice or assistance from any person or body they deem appropriate in order to fully examine the matter at issue. 4. If the consulting Parties fail to resolve the matter pursuant to paragraph 3, a consulting Party may request that the Council be convened to consider the matter by delivering a written request to the contact point of each of the Parties.[other Parties.] 5. The Council shall promptly convene and shall endeavor to resolve the matter, including, where appropriate, by consulting outside experts and having recourse to such procedures as good offices, conciliation, or mediation. 6. If[If the matter concerns whether a Party is conforming to its obligations under Article (a), and] the consulting Parties have failed to resolve the matter within 60 days of a request under paragraph 1, the complaining Party may 13

15 LABOR Definitions Party may request consultations under Article 20.4 (Consultations) or a meeting of the Commission under Article 20.5 (Commission Good Offices, Conciliation, and Mediation) and, as provided in Chapter Twenty (Dispute Settlement), thereafter have recourse to the other provisions of that Chapter. The Council may, as appropriate, provide information to the Commission on consultations held on the matter. 7. No Party may have recourse to dispute settlement under this Agreement for any matter arising under any provision of this Chapter other than Article (a). 8. No Party may have recourse to dispute settlement under this Agreement for a matter arising under Article (a) without first pursuing resolution of the matter in accordance with this Article. 9. In cases where the consulting Parties agree that a matter arising under this Chapter would be more appropriately addressed under another agreement to which the consulting Parties are party, they shall refer the matter for appropriate action in accordance with that agreement. For purposes of this Chapter: labor laws means a Party s statutes or regulations, or provisions thereof, that are directly related to the following internationally recognized labor rights: a) the right of association; b) the right to organize and bargain collectively; c) a prohibition on the use of any form of forced or compulsory labor; d) a minimum age for the employment of children and the prohibition and elimination of the worst forms of child labor; and e) acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health. request consultations under Article 21.4[20.4] (Consultations) or a meeting of the Commission under Article (Intervention of the (Commission)[ Good Offices, Conciliation, and Mediation)] and, as provided in Chapter Twenty- One (Dispute Settlement), thereafter have recourse to the other provisions of that Chapter. The Council may inform [, as appropriate, provide information to ]the Commission of how the Council has endeavored to resolve the matter through[on] consultations.[ held on the matter.] 7. No Party may have recourse to dispute settlement under this Agreement for [any] matter arising under [any provision of this Chapter other than Article (a).No Party may have recourse to dispute settlement under this Agreement for a matter arising under Article (a)] without first seeking to resolve[pursuing resolution of] the matter in accordance with this Article. [9.In cases where the consulting Parties agree that a matter arising under this Chapter would be more appropriately addressed under another agreement to which the consulting Parties are party, they shall refer the matter for appropriate action in accordance with that agreement.] For purposes of this Chapter: labor laws means a Party s statutes and regulations, or provisions thereof, that are directly related to the following internationally recognized labor rights: a) freedom of association; b) the effective recognition of the right to collective bargaining; c) the elimination of all forms of forced or compulsory labor; d) the effective abolition of child labor, a prohibition on the worst forms of child labor, and other labor protections for children and minors; e) the elimination of discrimination in respect of employment and occupation; and f) acceptable conditions of work with respect to 14

16 LABOR Annex / Labor Cooperation and Capacity Building For greater certainty, the setting of standards and levels in respect of minimum wages by each Party shall not be subject to obligations under this Chapter. Each Party s obligations under this Chapter pertain to enforcing the level of the general minimum wage established by that Party. statutes or regulations means: a) for Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua, laws of its legislative body or regulations promulgated pursuant to an act of its legislative body that are enforceable by action of the executive body; and b) for the United States, acts of Congress or regulations promulgated pursuant to an act of Congress that are enforceable by action of the federal government. Mechanism Organization and Principal Functions 1. The Labor Affairs Council working through each Party s contact point shall coordinate the activities of the Labor Cooperation and Capacity Building Mechanism. The contact points shall meet within six months after the date of entry into force of this Agreement and thereafter as often as they consider necessary. 2. The contact points, together with representatives of other appropriate agencies and ministries, shall cooperate to: (a) establish priorities, with particular emphasis on those subjects identified in paragraph 3 of this Annex, for cooperation and capacity building activities on labor issues; minimum wages, hours of work, and occupational safety and health. For greater certainty, the setting of standards and levels in respect of minimum wages by each Party shall not be subject to obligations under this Chapter. Each Party s obligations under this Chapter pertain to enforcing the level of the general minimum wage established by that Party; and statutes and regulations and statutes or regulations means: [(a) for Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua, laws of its legislative body or regulations promulgated pursuant to an act of its legislative body that are enforceable by action of the executive body; and] for the United States, acts of Congress or regulations promulgated pursuant to acts[an act ]of Congress that are enforceable by action of the central level of[federal] government and, for purposes of this Chapter, includes the Constitution of the United States. Labor Cooperation and Capacity Building Mechanism[ Organization and Principal Functions] 1. Coordination and Oversight 1. The [Labor Affairs] Council shall oversee the implementation of the Mechanism and,[working] through each Party s contact point designated pursuant to Article , [shall] coordinate its [the] activities.[ of the Labor Cooperation and Capacity Building Mechanism. The contact points shall meet within six months after the date of entry into force of this Agreement and thereafter as often as they consider necessary. The contact points, together with representatives of other appropriate agencies and ministries, shall cooperate to: establish priorities, with particular emphasis on those subjects identified in paragraph 3 of this Annex, for cooperation and capacity 15

17 LABOR (b) develop specific cooperative and capacity building activities in accordance with such priorities; (c) exchange information regarding each Party s labor laws and practices, including best practices, as well as ways to strengthen them; and (d) seek support, as appropriate, from international organizations such as the International Labor Organization, the Inter-American Development Bank, the World Bank, and the Organization of American States, to advance common commitments regarding labor matters. Cooperation and Capacity Building Priorities 3. The Mechanism may initiate bilateral or regional cooperative activities on labor issues, which may include, but need not be limited to: (a) fundamental rights and their effective application: legislation and practice related to the core elements of the ILO Declaration (freedom of association and the effective recognition of the right to collective bargaining, elimination of all forms of forced or compulsory labor, the effective abolition of child labor, and the elimination of discrimination in respect of employment and occupation); (c) worst forms of child labor: legislation and practice related to compliance with ILO Convention 182; (d) labor administration: institutional capacity of labor administrations and tribunals, especially training and professionalization of human resources, including career civil service; (e) labor inspectorates and inspection systems: methods and training to improve the level and efficiency of labor law enforcement, building activities on labor issues; develop specific cooperative and capacity building activities in accordance with such priorities; exchange information regarding each Party s labor laws and practices, including best practices, as well as ways to strengthen them; and seek support, as appropriate, from international organizations such as the International Labor Organization, the Inter- American Development Bank, the World Bank, and the Organization of American States, to advance common commitments regarding labor matters.] 2. Cooperation and Capacity Building Priorities [3. ]The Parties contact points shall carry out the work of the Mechanism by developing and pursuing[may initiate] bilateral or regional cooperation[cooperative] activities on labor issues, which may include, but need not be limited to: a) fundamental rights at work and their effective application: cooperation on law[legislation] and practice related to implementation and public awareness of the principles and rights contained in the [the core elements of the] ILO Declaration: (i) freedom of association and the effective recognition of the right to collective bargaining, (ii) elimination of all forms of forced or compulsory labor, (iii) the effective abolition of child labor, and (iv) the elimination of discrimination in respect of employment and occupation;[ occupation);] (b) worst forms of child labor: programs or other cooperation[legislation and practice related] to promote compliance with ILO Convention 182 on the Prohibition and Immediate Action for the Elimination of the Worst Forms of Child Labor; c) labor administration: activities aimed at strengthening the institutional capacity of labor 16

18 LABOR strengthen labor inspection systems, and help ensure compliance with labor laws; (f) alternative dispute resolution: initiatives aimed at establishing alternative dispute resolution mechanisms for labor disputes; (g) labor relations: forms of cooperation and dispute resolution to ensure productive labor relations among workers, employers, and governments; (h) working conditions: mechanisms for supervising compliance with statutes and regulations pertaining to hours of work, minimum wages and overtime, occupational safety and health, and employment conditions; (i) migrant workers: dissemination of information regarding labor rights of migrant workers in each Party s territory; (j) social assistance programs: human resource development and employee training, among other programs; (k) labor statistics: development of methods for the Parties to generate comparable labor market statistics in a timely manner; (l) employment opportunities: promotion of new employment opportunities and workforce modernization; (m) gender: gender issues, including the elimination of discrimination in respect of employment and occupation; and (m) technical issues: programs, methodologies, and experiences regarding productivity improvement, encouragement of best labor practices, and the effective use of technologies, including those that are Internet-based. Implementation of Cooperative Activities 4. Pursuant to the Mechanism, the Parties may cooperate on labor issues using administrations and labor tribunals, especially [training and] professionalization of personnel and training,[human resources,] including with respect to technological skills;[career civil service;] d) labor inspectorates: activities to improve labor law enforcement and compliance, including [inspection systems: methods and] training and initiatives to strengthen[to improve the level] and improve the efficiency of labor inspection systems;[law enforcement, strengthen labor inspection systems, and help ensure compliance with labor laws;] e) alternative dispute resolution: initiatives aimed at establishing and strengthening alternative dispute resolution mechanisms for labor disputes; f) labor relations: forms of cooperation to improve social dialogue[and dispute resolution to ensure productive labor relations] among workers, employers, and governments, ensure productive labor relations, and contribute to efficiency and productivity in the workplace;[governments;] g) occupational safety and health: forms of cooperation to improve preventive measures and reduce hazardous conditions in the workplace and measures to promote best practices and compliance with statutes and regulations; h) working conditions: forms of cooperation to increase public awareness and develop innovative methods for [mechanisms for] supervising compliance with statutes and regulations pertaining to hours of work, minimum wages, and overtime, [occupational safety] and other[health, and employment] conditions of work; i) migrant workers: mechanisms and best practices to protect and promote the rights and welfare of migrant workers of the Parties, including joint efforts with relevant organizations and dissemination of information regarding labor rights of migrant workers in each Party s territory; j) social assistance and training: programs for social assistance, skills [: human resource] 17

19 LABOR any means they deem appropriate, including, but not limited to: (a) technical assistance programs, including by providing human, technical, and material resources, as appropriate; (b) exchange of official delegations, professionals, and specialists, including through study visits and other technical exchanges; (c) exchange of information on standards, regulations, and procedures, and best practices, including pertinent publications and monographs; (d) joint conferences, seminars, workshops, meetings, training sessions, and outreach and education programs; (e) collaborative projects or demonstrations; and (f) joint research projects, studies, and reports, including by engaging independent specialists with recognized expertise. Public Participation 5. In identifying areas for labor cooperation and capacity building, and in carrying out cooperative activities, each Party shall consider the views of its worker and employer representatives, as well as those of other members of the public. development[ and] employee training, and worker adjustment, as well as[among] other relevant programs; k) technology and information exchange: programs to exchange information and share experiences on methods to improve productivity, on the promotion of best labor practices, and on the effective use of technologies, including those that are Internet-based; l) labor statistics: development of methods for the Parties to generate comparable labor market statistics in a timely manner, including improvement of data collection systems;[manner;] m) employment opportunities: development[promotion] of programs to promote new employment opportunities and workforce modernization, including employment services;[modernization;] n) gender: development of programs on gender issues, including the elimination of discrimination in respect of employment and occupation; o) best labor practices: dissemination of information and promotion of best labor practices, including corporate social responsibility, that enhance competitiveness and worker welfare; and p) issues related to small, medium, and microenterprises, and artisans: promotion of fundamental rights at work, improvement of working conditions, competitiveness, and productivity levels, and public awareness of relevant laws. [(m) technical issues: programs, methodologies, and experiences regarding productivity improvement, encouragement of best labor practices, and the effective use of technologies, including those that are Internetbased.] 3. Implementation of Cooperative Activities The[4. Pursuant to the Mechanism, the] Parties shall use [may cooperate on labor issues using] any means they deem appropriate to carry out activities pursued under paragraph 2, including:[, 18

20 LABOR including, but not limited to:] a) technical assistance programs, including by providing human, technical, and material resources, as appropriate; b) exchange of official delegations, professionals, and specialists, including through study visits and other technical exchanges; c) exchange of information on standards, regulations, [and] procedures, and best practices; d) exchange or development of[practices, including] pertinent studies, publications, and monographs; e) joint conferences, seminars, workshops, meetings, training sessions, and outreach and education programs; f) development of [collaborative projects or demonstrations; and] joint research projects, studies, and reports, whereby expertise from[including by engaging] independent specialists may be solicited;[with recognized expertise.] g) exchanges on technical labor matters, including through the use of expertise from academic institutions and other similar entities; and h) exchanges on technology issues, including information systems. 4. Public Participation [5.] In identifying areas for labor cooperation and capacity building, and in carrying out cooperative activities, each Party shall consider the views of its worker and employer representatives, as well as the views[those] of other members of the public. 19

21 ENVIRONMENT Environmental Agreements N/A A Party shall adopt, maintain, and implement laws, regulations, and all other measures to fulfill its obligations under the multilateral environmental agreements listed in Annex 18.2 ( Covered Agreements ). Enforcement Environmental Laws of 1. (a) A Party shall not fail to effectively enforce its environmental laws, through a sustained or recurring course of action or inaction, in a manner affecting trade between the Parties, after the date of entry into force of this Agreement. (b) The Parties recognize that each Party retains the right to exercise discretion with respect to investigatory, prosecutorial, regulatory, and compliance matters and to make decisions regarding the allocation of resources to enforcement with respect to other environmental matters determined to have higher priorities. Accordingly, the Parties understand that a Party is in compliance with subparagraph (a) where a course of action or inaction reflects a reasonable exercise of such discretion, or results from a bona fide decision regarding the allocation of resources. 2. The Parties recognize that it is inappropriate to encourage trade or investment by weakening or reducing the protections afforded in domestic environmental laws. Accordingly, each Party shall strive to ensure that it does not waive or otherwise derogate from, or offer to waive or otherwise derogate from, such laws in a manner that weakens or reduces the protections afforded in those laws as an encouragement for trade with another Party, or as an encouragement for the establishment, acquisition, expansion, or retention of an investment in its territory. 3. Nothing in this Chapter shall be construed to empower a Party s authorities to undertake environmental law enforcement activities in the territory of another Party. 1. (a) A Party shall not fail to effectively enforce its environmental laws, and its laws, regulations, and other measures to fulfill its obligations under the covered agreements, through a sustained or recurring course of action or inaction, in a manner affecting trade or investment between the Parties, after the date of entry into force of this Agreement. (b) (i) The Parties recognize that each Party retains the right to exercise [discretion with respect to investigatory,] prosecutorial discretion, [regulatory, and compliance matters] and to make decisions regarding the allocation of environmental [resources to] enforcement resources with respect to other environmental laws[matters] determined to have higher priorities. Accordingly, the Parties understand that with respect to the enforcement of environmental laws and all laws, regulations, and other measures to fulfill a Party s obligations under the covered agreements, a Party is in compliance with subparagraph (a) where a course of action or inaction reflects a reasonable, articulable, bona fide exercise of such discretion, or results from a reasonable, articulable, bona fide decision regarding the allocation of such resources. (ii) The Parties recognize the importance of the covered agreements. Accordingly, where a course of action or inaction relates to laws, regulations, and other measures to fulfill its obligations under covered agreements, that shall be relevant to a determination under clause (i) regarding whether an allocation of resources is reasonable and bona fide. The Parties recognize that it is inappropriate to encourage trade or investment by weakening or reducing the protections afforded in their respective[domestic] environmental laws. 20