Tuesday, April 16, 2013

U.S. and Guatemala settle first labor-related arbitration filed under CAFTA-DR

On April 11, 2013, Acting U.S. Trade Representative Demetrios Marantis and Acting U.S. Secretary of Labor Seth Harris announced that the first labor-related arbitration requested under the labor chapter of a U.S. free trade agreement (CAFTA-DR) had been settled informally without an arbitration decision.  In a March 19 2013 open National Advisory Committee meeting, U.S. DOL officials indicated that arbitrators had been selected, which may have been a tactical move in pressing the Government of Guatemala to take action on U.S. demands to improve labor law enforcement pursuant to Chapter 16 labor provisions in the CAFTA-DR.

The text of the settlement agreement itself has not been made public, although both the U.S. DOL and USTR issued press releases and a fact sheet on the comprehensive labor enforcement plan agreed to by the Government of Guatemala to settle the arbitration process.  Under the comprehensive labor enforcement plan, the Guatemalan administration committed itself to propose laws to the legislature to expedite the process for levying fines on employers who violate labor laws, increase resources to the labor inspectorate, ensure workers receive legally mandated payments when plants close, improve enforcement of court orders through a newly created "Verification" unit within the Judiciary, prosecute non-compliant employers with fines and other enforcement measures, take steps to ensure that export companies comply with labor laws and improve the transparency of labor law enforcement.  The fact sheet indicates that in 2012, the Guatemalan labor ministry increased its staff by 100 inspectors and 5 lawyers.  The USTR also indicated that arbitration proceedings will recommence should the Government of Guatemala fail to implement the comprehensive plan within a certain amount of time.  The specific time frame for implementation of the plan was not included in the public fact sheet, however.  Nor does the fact sheet indicate whether any steps were taken by the Government of Guatemala with regard to the particular cases raised in the petition.

Although the Guatemala petition had been pending for exactly 5 years (it was submitted on April 12, 2008) and the arbitration process itself has been pending since August 2011, one wonders if the settlement of the CAFTA-DR Chapter petition last week was premature, since the U.S. Senate has yet to confirm President Obama's nominee to replace Hilda Solis as Secretary of Labor (with a contentious lead-up to the nomination hearing) and President Obama has yet to nominate a replacement for USTR Ron Kirk.  New administration officials will come into office with the Guatemala arbitration settlement as a fait accomplit, without room to maneuver to address some of the other matters raised in the 2008 petition, including the fate of individual workers whose cases were raised in the petition and the ongoing violence against workers and trade union advocates in Guatemala.  At least 10 trade unionists were murdered in Guatemala in 2011 alone.  According to Human Rights Watch, in 2012 violent attacks against trade union offices and trade unionists continued unabated and continues to rise as reported by the International Trade Union Confederation.  British trade union officials point out that Guatemala is second only to Colombia in the physical danger posed to trade unionists.

Determining whether settlement of the Guatemala CAFTA-DR labor petition was a positive development in Trade and Labor jurisprudence and practice will depend on the effectiveness of implementation of the comprehensive plan by the Government of Guatemala.  If the overall goals of improving implementation of workers' rights and increasing workers' standards of living are achieved, the lack of an arbitral decision may be less important than actual outcomes attained through Guatemalan legislative, executive and judicial action taken pursuant to the comprehensive plan.  Settlement of the dispute could reflect the desire of U.S. authorities to encourage improvement of labor law enforcement through both positive assistance and the threat of economic sanctions under the CAFTA-DR, especially in a country where capacity and budget are major factors in hampering effective labor law enforcement.  If the Government of Guatemala has demonstrated tangible commitment and willingness to improve labor law enforcement, U.S. insistence on pursuing arbitration might be viewed as boorishness or bullying behavior.

As expressed by trade union officials at the March 19, 2013 National Advisory Committee at U.S. DOL, however, the U.S. government sends a powerful message through its action, inaction and delay with regard to labor petitions filed under FTAs. Settlement of the Guatemala labor arbitration process contrasts with the Railroad Development Corp. (RDC) v. Guatemala case brought under the CAFTA-DR investor dispute resolution mechanism, which resulted in a $64 million arbitration award in favor of the private company RDC in June 2012.  What message does it send that a trade partner will be held accountable for investor disputes but not for failing to comply with its FTA-mandated labor-related obligations?  In addition to calls for action made by the the U.S. and Guatemalan trade unions that filed the petition, a number of multi-national enterprises that source goods in Guatemala called for action on improved labor law enforcement by Guatemalan authorities, demonstrating that a positive Rule of Law environment benefits both workers and companies.  Moreover, the absence of any text in USTR's fact sheet on the Guatemala settlement addressing the violence Guatemalan trade unionists face every day appears to be a big step backward from positive developments in the recent 2012 report on the 2011 petition filed under the U.S.-Bahrain FTA, which outlines how social dialogue resulted in the reinstatement of Bahraini workers who lost their jobs as a result of participating in public protests, and the 2011 Action Plan on Labor Rights in Colombia, which outlines steps that must be taken not only by labor authorities in Colombia, but Police and Ministry of Interior and Justice authorities, to prevent violence against trade unionists and to prosecute and punish the perpetrators of that violence.

Settlement of the Guatemala CAFTA-DR labor arbitration process raises more questions than it answers, especially in light of the fact that the settlement agreement has not been made public.  It will be interesting to see what the AFL-CIO, SITRABI and other Central American and Guatemalan unions think of the settlement agreement and whether they - or employers - were consulted in the final stages of the negotiation process - and whether settlement of the arbitration will lead not only to improvements in Guatemala's labor enforcement procedures and outcomes but to the reduction of violence against Guatemala's trade unionists.