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Guatemala and the United States commence arbitration

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Prensa Libre | 3-11-14

Guatemala and the United States commence arbitration

Freely translated by Anoosha Boralessa; neither nor any organization or person has reviewed or revised this translation.

By Urías Gamarro

45 days after putting into motion an arbitral panel for violation of labour rights, the Office of US Trade Representative (USTR) will today present the basis for its claims against Guatemala under CAFTA-DR.

Yesterday Carlos Contreras, the labour minister, explained to the Prensa Libre that once the USTR has informed the arbitrator of the evidence it would present, Guatemala will proceed to outline the defense strategy in the case. This could unfold in 2015.

Contreras explained that as the Ministry of Economy is managing CAFTA, it will receive notification and that this notice will set out the claims. He added:

"a multi institutional team has been established which will study the basis for the allegations set out in the claim. It is on the basis of these allegations that we will proceed to work out its defence action.”

Contreras explained that Guatemala will have to respond to the US claim within 30 days of the date of receipt of notice. Its reply would have to set out its explanations and its defence.

The minister added that international law firms that specialize in arbitration shall be hired that will work along side the national team.

On 18 September 2014 in Washington, the head of the USTR, Michael Froman and Thomas E. Pérez, the US Labour Secretary announced the decision to bring an arbitral claim against Guatemala because it was not complying with the action plan that had been established which set out the improvements to labour laws that the two governments had agreed on.

Adolfo Lacs Palomo, of the Federación Sindical de Empleados Bancarios, said that in his opinion this proceeding could result in Guatemala being sanctioned for failing to comply with labour laws. He highlighted:

"Although Guatemala is clarifying its position to the US, it is in the wrong because there is evidence of violations."

Under Chapter 16 of CAFTA-DR that Guatemala signed with the US in 2006, an economic sanction of up to US$15 million (Q 115 million) can be applied for non compliance with labour laws.

The United States is demanding compliance with several recommendations before it desists from activating an arbitral tribunal. These are:
 To reform the Labour Code to authorize a General Labour Inspection and to sanction enterprises for non-compliance with the law.
 To regulate tax benefits for enterprises that are subject to Decree 29 – 89.
 To fix time limits to process claims and to review infringements identified following employer compliance verification.
 To revoke benefits for companies that failed to comply with established labour law.

Arbitration: a process whereby the parties agree to submit a dispute to a tribunal that renders a decision binding on the parties involved.

In 2012 arbitration was suspended so that friendly settlement, which is permitted under CAFTA-DR, could take place. The Arbitrator for Guatemala will be a lawyer, Mario Fuentes Destarac.

The Leading Trade Partner
The United States is Guatemala’s leading trade partner. Last August, Guatemala exported goods that will generate foreign exchange of US$2 thousand 624 million (Q 20 thousand 204 million). This represents a 36% increase compared with the previous year.

Furthermore, according to data from Guatemala’s Central Bank, Banquat, US imports to Guatemala totalled US$ 4 thousand 884 million.

Translator’s note

Useful links:

United States Department Of Labor Press Release:

Guatemalan Submission under CAFTA-DR:

Guatemalan Enforcement plan:
 English version:
 Spanish version:

Press release on labor consultations:

Request for labor consultations:
 English version:

PDF version of labour chapter, CAFTA available at

 source: Prensa Libre