Most arguments presented by applicants against CAFTA on national sovereignty and social justice were not accepted by the Constitutional Chamber of the Supreme Court.
Nine years after the first challenge was launched, the Free Trade Agreement between the US, Central America and the Dominican Republic (CAFTA-DR) was virtually declared constitutional by the Constitutional Chamber of the Salvadorean Supreme Court, except for two articles, one that banned El Salvador from issuing patents and other that automatically ratified the International Convention for the Protection of New Plant Varieties.
The ruling, issued yesterday and signed by all five magistrates, indicates that the two articles declared unconstitutional took away power from the legislature to ratify international conventions or abolish existing laws, referred to in Articles 86, paragraphs 1 and 2, 131 section 5 and 7 and Article 146 of the Constitution of the Republic.
The Chamber analysed 21 grounds of unconstitutionality presented, rejected six for considering that they were poorly raised and dismissed 13 concluding that there was no alleged unconstitutionality.
The objections, mainly from left leaning organizations, against CAFTA-DR focused on the approval process which took place with no discussion in the Legislative Assembly and the disadvantage it created for local entrepreneurs and investors, or even Central American investors in relation to those from the US. The Chamber dismissed all challenges on those grounds.
The Chamber did not accept arguments that supported the existence of violation of judicial independence, labour rights, national sovereignty and legislative power to issue tax legislation (tariff decisions).
The first constitutional challenge was filed in 2006 by Salvador Sanchez Ceren, Hugo Martinez, Manuel Melgar and Salvador Arias. In 2007 three more were presented: one by Julian Ernesto Salinas and Jose Luis Flores, the second by Ricardo Nunez and the third one by Raul Moreno. All argued faults in form and content. NAFTA was approved on December 17, 2004.
The applicants stated that there was a "procedural fault" by the December 17, 2004 Decree 555 published in the Official Gazette No. 17, Vol 366 in January 25, 2005. "The alleged failure by the legislature to study and debate the decree is not properly argued" read the ruling.
The plaintiffs argued that the official text of the treaty, 30 volumes and 2,500 pages, was ratified by 49 votes, 16 days after being released by the Ministry of Economy and was approved at an ordinary session of the Legislative Assembly that lasted 19 hours. This, according to the applicants, violated Article 135 of the Constitution which states that "any bill, after discussed and approved, will be sent to the president within 10 working days." The chamber deemed that no proper argument was presented to merit this grounds.
The Chamber found as constitutional Article 10.4.1 of CAFTA, while the plaintiffs had argued involved the automatic granting of benefits to companies and investors of the States party to the treaty, against the intention of the Salvadoran constitution.
This article, of "most favored nation treatment" given to investors of another country "is no less favorable treatment" than the treatment given to "investors of any" other country. The Chamber found that there is no unconstitutional grounds because under the Constitution the government of El Salvador can, according to its internal needs and priorities, adopt economic policies that exclude productive sectors or trade activities from national treatment and most favoured nation status.
The Chamber dismissed the grounds of unconstitutionality due to "procedural requirement" because "the alleged lack of legislative discussion, study and debate before the approval of the decree was not adequately argued." The plaintiffs argued that the FTA was approved at an ordinary session of the Legislative Assembly that lasted 19 hours.
Legislative power to enact tariffs
The plaintiffs argued that the article on "tariff elimination" of CAFTA violated the legislative power to enact tax regulations. The Chamber held that the taxing power of the legislative branch is not renounced, the state may start any such "initiative", but it must submit it the Legislative Assembly for ratification.
The plaintiffs objected to Article 16.2.1 which reduced the state's responsibility in the implementation of labour laws, because it limited the list of rights. The Chamber noted that the catalogue of rights in CAFTA "does not leave workers defenceless," because there are other existing rights in domestic law.
The plaintiffs argued that the exclusive power of the judiciary to interpret the treaty was violated.
The Chamber concludes that CAFTA is not binding on any judge to hear a controversy because the judicial authority maintains the power to waive any statute or provision contrary to the Constitution.
Subsidies to productive sectors
The Chamber did not consider unconstitutional Articles 3.14.1 and 3.14.2 of CAFTA, which eliminate a policy of subsidies for agricultural products. The Chamber said that it is not unconstitutional because no measure, as subsidies, can be considered part of the constitutional principle of promoting the productive sectors.
Supposed advantage in arbitration
The plaintiffs objected to Article 10.28 of CAFTA because it gives advantage to foreign investors to initiate arbitration, without endorsement of the host State, undermining local sovereignty. The Chamber concluded that CAFTA does not oblige the state to international arbitration, but under the treaty it can agree on appropriate mechanisms for resolving disputes.