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FTAA - Free Trade Area of the Americas

Draft Agreement

Chapter on Dispute Settlement


(Continuation)


223. Article 39. Implementation of the Final Report

224. [ [Unless they agree otherwise,] The final report of the neutral panel shall be binding on the Parties to the dispute in the terms and time periods that the neutral panel orders] [, may not be appealed] [and shall have the force of res judicata]. [Clarifications may only be sought within fifteen (15) days of the notification of the ruling, which shall be given within a maximum period of up to fifteen (15) days.]

225. [The time period for implementing the final report shall not exceed six (6) months, calculated from the date on which the last of the Parties to the dispute [or of the third Parties] has been notified about the final report unless [they] [the Parties to the dispute] agree on a different period. [In a case involving a measure that requires a change in domestic legislation of the Party complained against, the period for implementing the final ruling shall not exceed nine (9) months.]

226. [On receipt of the final report of this neutral panel, the Parties to the dispute shall agree on the resolution to the dispute, which normally shall conform with the determinations and recommendations of the neutral panel, and shall notify [ the Secretariat] [the Parties to the FTAA] of any agreed resolution of any dispute. 

227. [Wherever possible, the resolution shall be non-implementation or removal of a measure not conforming with this Agreement or causing nullification or impairment in the sense of Article XX (Nullification or Impairment) or, failing such a resolution, compensation.]

228. When the final report determines that the measure is inconsistent with the FTAA Agreement or causes nullification or impairment, the Party complained against [wherever possible] shall refrain from applying the measure or shall remove it, unless the Parties to the dispute agree otherwise.

229. When the final report of the neutral panel determines that the measure is cause for nullification or impairment, it shall determine the level of nullification or impairment and may suggest [if the Parties to the dispute so request] adjustments it considers mutually satisfactory for the Parties to the dispute.

230. [When the final report determines that, based on a request made pursuant to Article XX (Terms of Reference of the Neutral Panel), the measure inconsistent with this Agreement or that causes nullification or impairment, adversely affects its trade interests, such party shall enter into negotiations with the other Party(ies)with a view to developing mutually acceptable compensation. If no mutually satisfactory solution is agreed, the complaining party may proceed in accordance with Article XX (Non-Implementation of the Final Report and Suspension of Benefits or Other Obligations).] ]

231. [Article 40. Appellate Body

232. A standing Appellate Body shall hear appeals to the panel rulings and shall be composed of seven persons, three of whom shall serve on any one case. Persons serving on the Appellate Body shall serve in rotation. Such rotation shall be determined in the working procedures of the Appellate Body.]

233. [Article 41. Constitution of the Appellate Body

234. The Commission shall appoint persons to serve on the Appellate Body for a four-year term, and each person may be re-appointed once. However, the terms of three of the seven persons appointed immediately after the entry into force of the FTAA Agreement shall expire at the end of two years, to be determined by lot. Vacancies shall be filled as they arise. A person appointed to replace a person whose term of office has not expired shall hold office for the remainder of the predecessor’s term. 

235. Members of the Appellate Body shall: 

a) have expertise or experience in law, international trade, other matters covered by the FTAA Agreement, and in the resolution of disputes arising from international trade agreements. 

b) be selected strictly on the basis of their objectivity, reliability, sound judgment, honesty and probity; 

c) be independent, and not be affiliated with or take instructions from any of the Parties; and 

d) comply with the Code of Conduct established by the Commission. 

236. Members of the Appellate Body shall, in general terms, be representative of the composition of the FTAA. 

237. All persons serving on the Appellate Body shall stay abreast of dispute settlement activities and other relevant FTAA activities. They shall not participate in the consideration of any disputes that would create a direct or indirect conflict of interest.]

238. [Article 42. Appeal Procedure

239. Parties may only appeal a panel report within 30 days following its adoption. 

240. Third parties which have notified the panel of a substantial commercial interest in the matter pursuant to Article 24 may make written submissions to, and be given an opportunity to be heard by, the Appellate Body. 

241. As a general rule, the proceedings shall not exceed 60 days from the date a Party to the dispute formally notifies its decision to appeal to the date the Appellate Body circulates its report. When the Appellate Body considers that it can not provide its report within 60 days, it shall inform the Secretariat in writing of the reasons for the delay together with an estimate of the period within which it will submit its report. In no case shall the proceedings exceed 90 days. 

242. An appeal shall be limited to the issues of law covered in the panel report and legal interpretations developed by the panel. 

243. The Appellate Body shall be provided with appropriate administrative and legal support as it requires. 

244. The expenses of persons serving on the Appellate Body, including travel and subsistence allowance, shall be met from the budget of the FTAA Agreement in accordance with criteria adopted by the Commission.]

245. [Article 43. Adoption of the Decision of the Appellate Body

246. The Appellate Body, in its ruling, may uphold, modify or reverse the legal findings and conclusions of the panel.

247. Rulings of the Appellate Body shall be made by a majority vote of its members serving in the case being appealed. However, the opinions of the members of the Appellate Body shall be anonymous. 

248. The rulings of the Appellate Body shall be unconditionally accepted by the Parties.]

249. [Article 44. Procedures for Appellate Review

250. The Appellate Body, in consultation with the Secretariat, shall establish the working procedures and shall communicate them to the members for their information.]

251. [Article 45. Nature of Final Decision

252. Where a panel or the Appellate Body concludes that a measure is inconsistent with the FTAA Agreement, it shall recommend that the Party complained against bring the measure into conformity with the FTAA Agreement within a reasonable period of time, and shall suggest ways in which the Party could do so, giving special consideration to lower levels of development. 

253. The final ruling shall be binding on the Parties in dispute in the terms and within the time periods it mandates and, provided that it is possible, it shall consist of the non-implementation or removal of the measure that is inconsistent with this FTAA Agreement or that is the cause of nullification or impairment. 

254. The rulings of the panel and of the Appellate Body cannot add to or diminish the rights and obligations provided in this FTAA Agreement.]

255. [Any decision resolved by a neutral panel having jurisdiction under this chapter shall, subject to review by an appellate body, be final, and shall be complied with promptly by all the parties to the dispute. Any such decisions shall have no binding force except between the parties to the dispute and in respect of that particular dispute. The foregoing is without prejudice to other Contracting parties, and regional integration regimes in which they may be involved, analyzing such decisions with a view to their adoption with or without alteration.]

256. Article 46. Non-implementation of the Final Report and Suspension of Benefits or Other Obligations

257. [Compensation and the suspension of concessions are temporary measures available in the event that the rulings of a neutral panel or of the Appellate Body are not applied in the reasonable period of time referred to in the preceding article, and shall only be applied until the Party complained against [complies with the final report] [eliminates the measure inconsistent with the FTAA Agreement] pursuant to the ruling of the neutral panel or of the Appellate Body or offers a solution to the nullification or impairment that is satisfactory to the complaining Party. Compensation is voluntary and, if granted, shall be consistent with the FTAA Agreement.]

258. [Unless the Parties to the dispute have notified] [The Parties to the dispute shall notify] the Commission that to their satisfaction there has been implementation of the final report within [thirty (30)] [ten (10)] days after the expiry of the period set in the final report, the neutral panel shall determine whether the Party complained against has implemented said report.] [Where there is disagreement as to the existence or consistency with the FTAA Agreement of measures taken to comply with the final report, such dispute shall be decided through recourse to these dispute settlement procedures. Consultations between the complaining party and the party complained against are desirable but not required to request the establishment of an neutral panel.] [If it is not possible to resort to the original neutral panel, matters will proceed pursuant to Article XX (Establishment of the Neutral Panel).]

259. [If [within the period established pursuant to Article XX (Implementation of the Final Report) implementation of the final report has not be effected or if there has been partial implementation,] [after 20 days from the date of expiry of the period for complying with the final report, the Parties have not agreed on any satisfactory compensation] [within 30 days following the final ruling by the neutral panel determining that a measure is inconsistent with the obligations of this Agreement or causes nullification or impairment in the sense of Annex XX (Nullification or Impairment), the Party complained against has not reached an agreement with the complaining Party on a mutually satisfactory settlement, pursuant to Article XX] the complaining Party may [request authorization from the DSB to] [suspend the application] [communicate to the responding Party in writing its decision to temporarily suspend concessions or other equivalent obligations designed to secure implementation of the final report.] [to the Party complained against of benefits of equivalent effect until such time as they have reached agreement on a resolution to the dispute.

260. [The complaining Party [or a third Party] may pursuant to this article suspend the application of benefits [or other obligations] to the Party complained against arising from the FTAA Agreement of equivalent effect to the benefits [or other obligations] no longer being received if the neutral panel resolves: 

a) that a measure is inconsistent with the obligations of the FTAA Agreement and the Party complained against is not complying with the final report in the terms and within [the period that the neutral panel has set; or] [30 days after receiving the final report;] [the period agreed by the Parties to the dispute;] or

b) that a measure causes nullification or impairment, in the sense of Annex XX (Nullification or Impairment) and the Party complained against has not reached a mutually satisfactory agreement on the dispute with the complaining Party [or with the third Party] within the period [that the neutral panel has set] [of 30 days after receiving the final report;]

261. [The measures for suspension of concessions may only be modified in the event that an adjustment of an entirely technical nature is required.]

262. The suspension of benefits [or other obligations] are temporary measures and shall last until such time as the Party complained against [, in the judgment of the neutral panel,] complies with the final report or until [this Party and the complaining Party] the Parties [to the dispute] [or the Party complained against and a third Party] reach a mutually satisfactory agreement on the dispute, as appropriate.] However, if there are two or more Parties complained against, and one or more of these has complied with the final report or reaches a mutually satisfactory agreement with the complaining Party, [or with a third Party] they shall lift the suspension of benefits [or other obligations] to those Parties that have complied. [Likewise, the complaining Party may suspend benefits of equivalent effect to the degree of adverse trade effects caused by the measure that is inconsistent with this Treaty or that has caused nullification or impairment.]

263. [In considering what concessions or other obligations are to be suspended, the complaining Party shall apply the following principles and procedures: 

(a) [The complaining Party shall take into account, when appropriate, the conclusions of the neutral panel on the adverse effects on trade of the measure adopted.] 

(b) the complaining Party [or a third Party] shall first attempt to suspend the concessions or other obligations with respect to the sector or sectors affected by the measure or other matter that the neutral panel [or the Appellate Body] has found to be inconsistent with the obligations of the FTAA Agreement, or to have caused nullification or impairment in the sense of Annex XX (Nullification or Impairment).

(c) if the complaining Party [or a third Party] considers that it is not practicable or effective to suspend benefits [or other obligations] in the same sector or sectors, it may suspend benefits [or other benefits] in other sectors [within the same chapter] [and shall indicate the reasons that form the basis of the communication in which its decision to carry out the suspension is announced] [or other obligations].

(d) if the complaining Party [or a third Party] considers that it is not practicable or effective to suspend benefits [or other obligations] with respect to other sectors within the same chapter, and that circumstances are sufficiently serious, it may suspend benefits [or other obligations] in another chapter within the FTAA Agreement. 

264. [In applying [the above principles] [the suspension of benefits or other obligations] the complaining Party shall take into account: 

a) the trade in the sector [in which the neutral panel or Appellate Body has found a violation or other nullification or impairment,] and the importance of such trade to that Party. 

b) the broader economic elements related to the nullification or impairment and the broader economic consequences of the suspension of concessions or other obligations;]

265. [For purposes of this article, "sector" means:

266 with respect to goods, all goods; 

267. with respect to services…]

268. [If the complaining Party decides to suspend concessions or other obligations, it shall state to the neutral panel or to the Appellate Body the reasons for doing so. 

269. The level of the suspension of concessions or other obligations shall be equivalent to the level of the nullification or impairment and may even consider the injury that would be caused by complying with the measures established in the following article of this FTAA Agreement.]

270. [On the written request of a Party an neutral panel shall be established [within [twenty-five (25)] [thirty (30)] days to determine whether [there is compliance with the final report or] the level of benefits suspended by the complaining Party [or a third Party] pursuant to this article is manifestly excessive [or there has been compliance with the principles for applying the suspension of benefits or other obligations contained in this Article]. Wherever possible, the original neutral panel shall be reconvened for this purpose. If it cannot be constituted with the same members, matters shall proceed pursuant to Article XX (Establishment of the Neutral Panel). [During this procedure, the complaining Party may continue with the suspension of benefits or other obligations.]

271. The proceedings of the neutral panel shall be conducted in accordance with the Model Rules of Procedure. The neutral panel shall present its report within [sixty (60)] [ninety (90)] days after [the last member is selected,] [meeting to establish the Group.] [or other such period as the Parties [to the dispute] may agree.] [If such neutral panel has been established with the same members who heard the dispute, it shall present its final report within thirty (30) days of the presentation of the request referred to in the previous paragraph.]

272. [Article 47. Damages

273. If in the final ruling the Appellate Body or the neutral panel also concludes that the violation or the nullification or impairment has caused material injury to the complaining Party, it shall authorize the country, if a mutually satisfactory compensation has not been agreed upon, to suspend benefits designed to balance the situation of inequality caused by the violation or by the nullification or impairment, even if the measure has been removed by the Party complained against. 

274. Material injury shall be understood to exist if it is demonstrated that the violation or the nullification or impairment affects a material volume of trade in relation to the total exports of the complaining Party or to the effects on the economy of a country based on its special circumstances.]

275. [Article 48. Strengthening of the FTAA Agreement

276. When Parties seek the redress of a violation of obligations or other nullification or impairment of benefits under the FTAA Agreement, they shall have recourse to, and abide by, the rules and procedures of this Agreement.

277. In such cases, Parties:

a) shall not make a determination to the effect that a violation has occurred, or that benefits have been nullified or impaired, except through recourse to dispute settlement in accordance with the rules and procedures of this Agreement, and shall make any such determination consistent with the findings contained in the neutral panel. In this sense, prior to the conclusions of the procedures established in this Agreement, a Party may not issue a “unilateral” declaration on whether another Party has infringed its rights under the provisions of the FTAA Agreement; and

b) shall follow the procedures set forth in Article XX of this Agreement to determine the level of suspension of concessions or other obligations and before suspending concessions or other obligations under the FTAA Agreement in response to the failure of the Party concerned to implement the recommendations and rulings within the reasonable period of time fixed in Article XX.]

278. [Article 49. Responsibility or Compensation.]

279. Article 50. [Confidentiality] [Transparency]

280. [All documents and actions related to the procedure established in this chapter, including the hearings before the neutral panel, deliberations [, the initial report,] and all written submissions and communications made to the group, as well as meetings of the neutral panel [and of the Appellate Body], shall be confidential, [except for the final reports].]

281. [In no case may an organization, individual or groups of individuals, on its/their own initiative, make during any stage of the proceeding, a presentation or written submission, or attend the hearings of the neutral panel.] 

282. [All notifications provided for in this Chapter, all documents submitted in connection with proceedings under this Chapter, and the final reports and procedural rulings of neutral panels shall be made available to the public, except to the extent such documents contain business confidential information as defined in this Article. Moreover, public notice shall be provided immediately upon establishment of the neutral panel. The neutral panel shall conduct its internal deliberations in private. Neutral panel hearings shall be open to the public, except to the extent necessary to prevent the disclosure of confidential information as defined in this Article. The written submissions of disputing Parties and of other Parties participating in a dispute and any submissions made under paragraph XX shall be made immediately available to the public.]

283. [The neutral panel and the Parties shall treat as confidential the information submitted by another Party to the neutral panel that the Party has designated as confidential pursuant to this Article.]

284. Article 51. Calculation of Time Periods

285. The periods referred to in this chapter shall be understood to be in calendar days and shall be calculated starting from the day after the relevant act or occurrence. For these purposes, when the period is calculated from the delivery of a document to a Party, it shall begin the day following the date of receipt of the corresponding communication. [The communications referred to in this instrument shall be valid provided that they are issued and received by the competent bodies. If the last day of the period falls on a non-business day, the term shall expire on the following business day.]

286. When a Party receives a document on a date different from that on which the same document was received by another Party, the period shall begin to run as of the date of receipt of the last of said documents.

287. [Art. 52. Special Procedures Involving Member States with Different Level of Development

288. At all stages of a dispute settlement procedure in which a developing country participates as a Party, particular consideration shall be given to its level of development. In such case, the Parties shall exercise due restraint in raising the dispute. 

289. If nullification or impairment is found to result from a measure taken by a developing country, the complaining Party shall exercise due restraint in asking for compensation from the Party complained against or in seeking to suspend the application of concessions.]

290. [Art. 53. Effective Access

291. Effective access of all Member States to the dispute settlement system set forth in this chapter shall be ensured. For such purpose, the Secretariat shall provide legal advice and assistance in respect of dispute settlement to developing country members. To this end, the Secretariat shall make available a qualified legal expert to any developing country member which so requests, that shall assist it in a manner ensuring the continued impartiality of the Secretariat. The Secretariat shall also conduct on a permanent basis special training courses on dispute settlement, so as to enable members’ experts to be better informed in this regard. 

292. In addition, the Secretariat shall present annually to the Commission a report on the use of the dispute settlement mechanism during the previous year, as well as the budget of own resources or of technical cooperation from various sources, among which multilateral organizations could be included. Such report shall also contain the activities through which effective participation, particularly of developing countries, would be sought.]

293. [Article 54. Interpretation of the FTAA Agreement in Judicial or Administrative Proceedings

294. If an issue of interpretation or application of the FTAA Agreement arises, in a domestic judicial or administrative proceeding of a Party, that either Party considers would merit its intervention, or if a judicial or administrative body solicits the views of one of the Parties, that Party shall notify the Secretariat, which shall notify the other Parties. The Commission shall endeavor to agree, [by consensus, in its next session] on an appropriate non-binding response [as expeditiously as possible].

295. The Party in whose territory the judicial or administrative body is located shall submit the interpretation of the Commission to the judicial or administrative body in accordance with the rules of that body.

296. If the Commission is unable to agree on an interpretation any of the Parties may submit its own views to the judicial or administrative body in accordance with the rules of that body.]

297. [Article 55. Private Rights

298. No Party may provide for a right of action under its legislation against another Party on the ground that a measure of that other Party is inconsistent with the FTAA Agreement.]

299. [Article 56. Alternative Dispute Resolution Between Private Parties

300. Each Party shall, to the [maximum] extent possible, encourage and facilitate the use of arbitration and other means of alternative dispute resolution for the settlement of international commercial disputes between private parties [that are nationals of the Parties as well as between nationals of Parties and nationals of third States.]

301. [To this end, each Party shall provide for appropriate procedures to ensure observance of [international arbitration conventions] [agreements to arbitrate] [that have been ratified] and the recognition and enforcement of arbitral awards granted in those disputes. [A Party shall be deemed to be in compliance with this paragraph if it is party to [and is in compliance with] [the 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards] [or the 1975 Inter-American Convention on International Commercial Arbitration] [or the Arbitration Rules of the United Nations Commission on International Trade Law].]

302. [The Parties [shall] [may] establish] [The Commission [shall] [may] establish] an Advisory Committee on Private Commercial Disputes, comprising persons with expertise or experience in the resolution of international private commercial disputes. The Committee shall present reports and recommendations of a general nature respecting the availability, use and effectiveness of arbitration and other procedures for the resolution of these disputes in the FTAA.

303. [Contracting Parties shall refrain from taking measures of diplomatic protection in private commercial disputes arising between their nationals.] ]

304. [Annex XX. Nullification and Impairment

305. If a Party considers that any benefit it could reasonably have expected to accrue to it under the following provisions

a) …

is being nullified or impaired or a result of the application of any measure that is not inconsistent with this Agreement, the Party may have recourse to dispute settlement under this Chapter

306. A Party may not invoke:

a)…

307. [To determine the elements of nullification or impairment, the Parties may take into account the principles deriving from case law on paragraph 1(b) of GATT 1994 Article XXIII.]]

308. [Annex XX. Supplementary Rules of Procedure to Article XX (Rules of Procedure)

309. The Chair of the neutral panel shall be authorized to make administrative and procedural decisions. 

310. The neutral panel may allow assistants or staff from the FTAA Secretariat to be present during its deliberations. 

311. If a member of a neutral panel dies, withdraws or is removed, a replacement shall be selected as expeditiously as possible in accordance with the selection procedure followed to select the member. 

312. Any time period applicable to the neutral panel proceeding shall be suspended for a period beginning on the date the member of the neutral panel dies, withdraws or is removed and ending on the date the replacement is selected.

313. A neutral panel may, in consultation with the disputing Parties, modify any time period applicable in the neutral panel proceeding and make such other procedural or administrative adjustments as may be required in the proceeding.

314. The Chair of the neutral panel shall fix the date and time of the hearing in consultation with the disputing Parties, the other members of the neutral panel and the FTAA Secretariat.

315. The hearing shall be held in the capital city of the Party complained against.

316. The neutral panel may convene additional hearings if the disputing Parties so agree.

317. All members of the neutral panel shall be present at hearings. The following may also attend a hearing:

a) representatives of the Parties to the dispute;

b) FTAA Secretariat personnel and stenographers; and 

c) assistants to the members of the neutral panel.

318. No later than five days before the date of a hearing, each Party to the dispute shall deliver to the FTAA Secretariat a list of the names of those persons who will make oral arguments or presentations at the hearing on behalf of that Party and of other representatives or advisers who will be attending the hearing. 

319. The neutral panel shall conduct the hearing in the following manner, ensuring that the Parties to the dispute and the Party complained against are afforded equal time:

a) Argument

i) Argument of the complaining Party 

ii) Argument of the Party complained against.

b) Rebuttal Argument 

i) Reply of the complaining Party

ii) Counter-reply of the Party complained against.

320. The neutral panel may direct questions to any Party to the dispute at any time during a hearing. 

321. The FTAA Secretariat shall arrange for a transcript of each hearing to be prepared and shall, as soon as possible after it is prepared, deliver a copy of the transcript to the Parties to the dispute and the neutral panel.

322. The neutral panel may at any time during a proceeding address questions in writing to one or more of the Parties to the dispute. The neutral panel shall deliver the written questions to the Party or Parties to whom the questions are addressed through the FTAA Secretariat.

323. A Party to the dispute to whom the neutral panel addresses written questions shall deliver its written reply through the FTAA Secretariat. Each Party to the dispute shall be given the opportunity to provide written comments on the reply within five days after the date of delivery.

324. Within 10 days after the date of the hearing, each Party to the dispute may deliver to the FTAA Secretariat a supplementary written submission responding to any matter that arose during the hearing.

325. A Party asserting that a measure of another Party is inconsistent with the provisions of the FTAA Agreement shall have the burden of establishing such inconsistency.

326. A Party asserting that a measure is subject to an exception under the FTAA Agreement shall have the burden of establishing that the exception applies.

327. The neutral panel shall not meet with one participating Party to the dispute in the absence of the other Parties to the dispute.

328. No member of a neutral panel may discuss any aspect of the subject matter of the proceeding with a Party or Parties to the dispute in the absence of the other members.

329. No neutral panel may decide to request a written report of a person or group of experts any later than 15 days after the date of the hearing, whether on its own initiative or at the request of a disputing Party.

330. Regarding procedural questions not covered in these rules, the neutral panel may adopt an appropriate procedure that is not inconsistent with the FTAA Agreement.]

331. [Annex XX. Preliminary Proceedings

332. Any neutral panel having jurisdiction under this Chapter to which a dispute has been referred in accordance with Article...., shall determine at the request of a party to the dispute, a Party with legitimate third party rights, or propio motu, whether the claim constitutes an abuse of legal process or whether, prima facie, it is well founded. If the neutral panel determines that the claim constitutes an abuse of legal process or is prima facie, unfounded, it shall take no further action in the case.

333. The neutral panel shall establish reasonable time-limits within which determinations of applications shall be made, but at all events, upon receipt of an application, it shall notify the other party or parties to the dispute.

334. Nothing in this Article affects the right of any party to a dispute to make preliminary objections in accordance with the applicable rules of procedure.]

335. [Annex XX. Remuneration and Payment of Expenses

336. [The fees and expenses of a conciliation commission shall be borne by the Parties to the dispute.]

337. [The remuneration and expenses of the neutral panel, including the fees, travel and lodging expenses, and subsistence allowances of the members of the neutral panel, experts and assistants, engaged for the purposes of a dispute, and all general expenses of neutral panels shall be borne equally by the Parties to the dispute [, unless the neutral panel, taking into consideration the circumstances of the case, determines otherwise.] ]

338. [The Commission shall establish the amounts of remuneration and expenses that will be paid to the members of neutral panels, committee members and members of scientific review boards.]

339. [Each member of a neutral panel or committee shall keep a record and render a final account of the person's time and expenses, and the neutral panel, committee or scientific review board shall keep a record and render a final account of all general expenses.]

340. [Where a third party intervenes in the proceedings, the party shall bear the costs associated with the intervention.] ]

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