Ratification of the Olivos Protocol for the Resolution of Controversies in the Mercosur

In general terms the purpose of the Olivos Protocol for the Resolution of Controversies in the Mercosur (“the Protocol”) is to regulate controversies arising between member states in relation to the interpretation, application or non-compliance with the Treaty of Asunción, the protocol of Ouro Preto, the protocols and agreements entered into under the umbrella of the Treaty of Asunción, the Decisions of the Common Market Council, the Resolutions of the Common Market Group and the Directives of the Mercosur Trade Commission, setting the procedures that should be adopted in dealing with such controversies.

When it takes effect, the Protocol revokes the Brasilia Protocol for the Resolution of Controversies signed on December 17, 1991 and the Regulation of the Brasilia Protocol by CMC Decision No. 17/98, which had been applied to resolve controversies among member states. Therefore, until the controversies already raised under the Brasilia Protocol have been fully settled, and until the procedures for the appointment of arbitrators and experts as foreseen in the new Protocol have been completed, the Brasilia Protocol and its Regulations will continue to be applied where appropriate.

The Olivos Protocol preserves the institution of the Ad Hoc Arbitration Tribunal (“the Tribunal”) to analyze matters in dispute as determined from the written submissions and the replies submitted, which cannot be expanded upon subsequently. Analysis of the controversy by the Tribunal will be preceded by a direct negotiation stage between the parties that shall not extend more than 15 days from the date on which one of the parties notifies the other of the decision to bring proceedings for resolution of the controversy. Countries party to a controversy must inform the Common Market Group of the proceedings carried out during the negotiations and their outcome.

An alternative procedure subsequent to the direct negotiation stage consists of the parties agreeing to submit the controversy for consideration by the Common Market Group. This Group will evaluate the situation and provide the parties with the opportunity to outline their respective positions, advised by experts selected according to the procedures also laid down in the Protocol. The controversy could also be submitted to the consideration of the Common Market Group if another member country not a party to the controversy were to require so.

In such cases, within 30 days from the date on which the internal meeting is held to consider the controversy the Common Market Group shall make specific and detailed recommendations where possible, for the resolution of the dispute.

If the controversy cannot be resolved by following the above procedures, any of the member states involved in the controversy shall be able to notify the Administrative Secretariat of the Mercosur of the decision to resort to the arbitration procedure established in the Protocol. This body is responsible for the administrative actions required to carry out of the procedures established by the Protocol.

The Ad Hoc Arbitration Tribunal is to be formed by three arbitrators, nominated as follows: a) each member state shall name a full arbitrator and substitute from a list prepared as required by the Protocol, within 15 days of the Administrative Secretariat of the Mercosur having been notified of the decision to resort to the arbitration procedure; b) if any of the member states were to have failed to designate an arbitrator, the designation shall take place by drawing lots at the Administrative Secretariat of the Mercosur within two days of the above term having expired, from among the arbitrators included on the mentioned list. The President of the Tribunal, and his corresponding deputy, shall be appointed: a) as agreed by the member states, from the list indicated, within the same term of 15 days, as long as they are not citizens of the member states involved in the controversy; b) if agreement is not reached, the Secretariat shall at the request of any of the parties, proceed to appoint one by means of drawing lots as described above, excluding candidates from the member states involved in the controversy.

The Tribunal shall issue its ruling in a term of 60 days, extendable by the Tribunal for a further 30 days, counted as from notice by the Administrative Secretariat of the Mercosur to the parties and remaining arbitrators. The Tribunal will inform when the arbitrator named as President to rule on the controversy under consideration accepts his or her appointment.

Any of the parties to the controversy shall be able to submit a review appeal against the ruling of the Tribunal to the Permanent Review Tribunal (not foreseen under the Brasilia Protocol), formed by five arbitrators appointed in accordance with the Protocol, within fifteen days of the ruling having been notified. The remedy shall be limited to discussion of matters of law dealt with in the controversy and the legal interpretations developed in the ruling. The Permanent Review Tribunal shall be able to confirm, modify or revoke the legal grounds and the decisions of the Tribunal. The ruling of the former shall be final, and shall prevail over the ruling of the latter.

The Tribunal and the Permanent Review Tribunal must rule on the controversy on the basis of the Treaty of Asunción, the protocol of Ouro Preto, the protocols and agreements entered into under the umbrella of the Treaty of Asunción, the Decisions of the Common Market Council, the Resolutions of the Common Market Group and the Directives of the Mercosur Trade Commission, as well as according to the principles and rules of international law applicable to the matter.

The Ad Hoc Arbitration Tribunals shall be able to convene in any city of the Mercosur member states. The headquarters of the Permanent Review Tribunal shall be the city of Asunción, but it may exceptionally meet in other Mercosur cities.

In addition, the Protocol contains rules to be applied to the reply to review remedies, the corresponding terms, the conditions to which arbitration rules are subject, the power to impose compensating measures and their challenge and the awarding of costs.

Nevertheless, controversies can also be submitted to the system for the solution of controversies operated by the World Trade Organization if appropriate, as long as the parties agree on the competent venue. However, it should be noted that once the procedure for the solution of controversies at one of these venues has been initiated, none of the parties may resort to the mechanisms established in other venues for the same purpose.

It should be noted that Argentina is the first Mercosur member country to ratify the Protocol. At present the remaining countries have submitted the measure for approval to their respective Congresses for urgent approval. In practice, this means that the Protocol will only come into force thirty days after deposit of the fourth ratification instrument by member states with the Government of the Republic of Paraguay.