On February 23, the London Court of International Arbitration (LCIA) issued an Award on Remedies in a dispute filed by the US against Canada under the 2006 Softwood Lumber Agreement (SLA). In this first dispute under the SLA, the US has argued that between January and July 2007 Canada did not apply the export restrictions it had agreed to, leading to overshipment of lumber to the US. The Award on Liability upheld some of the US’s claims, leading to this second stage of arbitration on remedies.
The central dispute at the remedies stage concerned whether Canada had to retrospectively compensate for the overshipping that occurred in the period prior to the initiation of arbitration, or whether prospective rectification of its calculations after July 2007 would sufficiently remedy the violation. According to Article XIV:22 of the SLA, if the LCIA finds that a party has breached the Agreement, it shall identify a reasonable time period for curing the breach, up to 30 days from the Award. If the breaching party “fails to cure the breach within a reasonable period of time,” the SLA states that the LCIA shall determine “appropriate adjustments” to the export restrictions to compensate for the breach. According to Article XIV:24, these adjustments apply from the end of the reasonable time period until the breach has been cured.
The LCIA, approaching the SLA as a stand-alone agreement in international law rather than as an agreement made under the WTO Dispute Settlement Understanding (DSU), held that retrospective remedies were appropriate in this case. Although it referred to the WTO DSU for comparative purposes, it cited the ILC Draft Articles and the Chorzow Factory to establish a presumption in international law in favor of retrospective remedies and found nothing contrary to this in the SLA.
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