Key Issues in WTO Dispute Settlement: The First Ten Years

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KEY ISSUES IN WTO DISPUTE SET TLEMENT The first ten years

This book examines aspects of the operation of the WTO dispute settlement system during the first ten years of the WTO. It covers a representative cross-section of the issues and situations WTO Members have dealt with under the Dispute Settlement Understanding. The book is unique in that it includes contributions from virtually the entire gamut of actors involved in the day-to-day operation of the WTO dispute settlement system: Member government representatives, private lawyers who litigate on behalf of Member governments in the system, Appellate Body members, Appellate Body Secretariat staff, and WTO Secretariat staff. It also includes contributions from several academics who closely follow and carefully scrutinize all that goes on within the system. It therefore provides fascinating insights into how the system has operated in practice, and how the lessons of the first decade can be applied to make the system even more successful in the years to come.

KEY ISSUES IN WTO DISPUTE SET TLEMENT The first ten years

Edited by

RUFUS YERXA AND BRUCE WILSON

cambridge university press Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, São Paulo Cambridge University Press The Edinburgh Building, Cambridge cb2 2ru, UK Published in the United States of America by Cambridge University Press, New York www.cambridge.org Information on this title: www.cambridge.org/9780521861595 © World Trade Organization 2005 This publication is in copyright. Subject to statutory exception and to the provision of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. First published in print format isbn-13 isbn-10

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isbn-13 isbn-10

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Cambridge University Press has no responsibility for the persistence or accuracy of urls for external or third-party internet websites referred to in this publication, and does not guarantee that any content on such websites is, or will remain, accurate or appropriate.

CONTENTS

Notes on contributors page viii Preface xvii Table of cases xix Abbreviations xxxvii part i

Introduction and General Considerations

1

The power of the WTO dispute settlement system 3 Rufus Yerxa

2

The WTO dispute settlement and general international law 7 Georges Abi-Saab

part ii

1

The WTO Dispute Settlement System: Its Processes and Its Institutions 13

3

The WTO dispute settlement system and its operation: a brief overview of the first ten years 15 Bruce Wilson

4

The role of the Dispute Settlement Body in the dispute settlement process 25 Bozena Mueller-Holyst

5

Consultations and the panel process in the WTO dispute settlement system 29 Gabrielle Marceau

6

Contingent trade remedies and WTO dispute settlement: some particularities 46 Jesse Kreier v

vi

contents

7

The making of the ‘World Trade Court’: the origins and development of the Appellate Body of the World Trade Organization 63 Peter Van den Bossche

8

Special challenges at the appellate stage: a case study Valerie Hughes

9

The reasonable period of time for compliance with the rulings and recommendations adopted by the WTO Dispute Settlement Body 88 Werner Zdouc

80

10

Implementation of panel and Appellate Body rulings: an overview 98 Brendan McGivern

11

A brief introduction to countermeasures in the WTO dispute settlement system 110 Yves Renouf

part iii

The WTO Dispute Settlement System: Systemic and Other Issues 123

12

The role of lawyers in the WTO dispute settlement system 125 Giorgio Sacerdoti

13

Jurisdiction in WTO dispute settlement Joel Trachtman

14

Due process in WTO disputes Andrew Mitchell

15

Standards of review in WTO panel proceedings Matthias Oesch

16

Administration of evidence in WTO dispute settlement proceedings 177 Scott Andersen

17

Confidentiality issues under the DSU: fact-finding process versus confidentiality 190 Olivier Prost

132

144 161

contents

vii

18

Panels’ consultations with scientific experts Mireille Cossy

19

Amicus curiae participation in WTO dispute settlement: reflections on the past decade 221 James Durling and David Hardin

20

Suspension of concessions and retaliation under the Agreement on Safeguards: the recent US – Steel Safeguards case 232 Raimund Raith

21

Compliance with WTO dispute settlement decisions: is there a crisis? 242 John Magnus

22

DSU review: a view from the inside 251 David Evans and Celso de Tarso Pereira

part iv

Annexes 269 Annexes I–V Selected statistics: the first ten years of the WTO

204

271

NOTES ON CONTRIBUTORS

Georges Michel Abi-Saab was appointed to the Appellate Body of the World Trade Organization in June 2000 and became Chairman of the Appellate Body in 2003. Born in Egypt on 9 June 1933, Georges Michel Abi-Saab is Honorary Professor of International Law at the Graduate Institute of International Studies in Geneva (having taught there from 1963 to 2000); Honorary Professor at Cairo University’s Faculty of Law; and a Member of the Institute of International Law. Professor Abi-Saab has also served as consultant to the Secretary-General of the United Nations. He represented Egypt in the Diplomatic Conference on the Reaffirmation and Development of International Humanitarian Law (1974 to 1977), and acted as advocate and Counsel for several governments in cases before the International Court of Justice (ICJ) as well as in international arbitrations. He has also served twice as judge ad hoc on the ICJ and as Judge on the Appeals Chamber of the International Criminal Tribunals for the Former Yugoslavia and for Rwanda. He is a Commissioner of the United Nations Compensation Commission and a Member of the Administrative Tribunal of the International Monetary Fund and of various international arbitral tribunals. Scott Andersen is the Managing Partner of Sidley Austin Brown & Wood’s Geneva office. He focuses his practice on the use of WTO rules to resolve international trade disputes. Mr Andersen is also actively involved in the litigation and enforcement of matters submitted to WTO dispute settlement panels. Mr Andersen was recently lead counsel in the landmark Upland Cotton dispute challenging domestic and export agricultural subsidies causing serious prejudice. Between 1995 and 2000, Mr Andersen was the Legal Adviser to the US Mission to the WTO in Geneva, Switzerland where he represented the United States in more than 30 disputes before the WTO – both panels and the Appellate Body. In addition he was the Geneva USTR negotiator for environment, investment, balance of payments, fishing subsidies, and customs valuation issues between 1996 and viii

notes on contributors

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2000. Prior to his arrival in Geneva, Mr Andersen worked for five years at the US International Trade Commission, focusing on anti-dumping and intellectual property issues as well as participating in NAFTA investment negotiations. Mireille Cossy graduated in Law at the Universities of Lausanne and Geneva (Switzerland). In 1995, she joined the Trade and Environment Division of the World Trade Organization. Since 1999, she has been a Counsellor in the Trade in Services Division of the WTO, and currently focuses on issues related to environmental, energy and health services. She has also acted as Secretary to four WTO dispute panels. Before joining the WTO, she worked for the Swiss Ministry of Economic Affairs and for the International Committee of the Red Cross. James Durling is a partner in Willkie Farr & Gallagher LLP’s Washington DC office, where he specializes in international trade law. His practice focuses on trade remedy and WTO litigation, as well as trade policy advisory work. He has worked extensively on WTO dispute settlement proceedings, with a particular focus on WTO challenges to trade remedy measures. Mr Durling advised the foreign parties in the panel and Appellate Body proceedings on US – Steel Safeguards. He has also written extensively on the subject of WTO dispute settlement proceedings and trade remedies, including three books: Anatomy of a Trade Dispute (2000), Understanding the WTO Antidumping Agreement (2002), and Business Guide to Trade Remedies in the United States (2003). Mr Durling studied history at Haverford College (BA 1980), economics at Princeton University (MPA 1984), and law at New York University (JD 1984). David Evans is a Senior Legal Adviser at the Ministry of Foreign Affairs and Trade in New Zealand. He was First Secretary in charge of WTO legal matters at the New Zealand Permanent Mission to the WTO from 2002–2005. He chaired the WTO Committee on Anti-Dumping Practices in 2003–2004. He has worked actively on a number of disputes, including Canada – Dairy, US – Steel Safeguards, and US – Lamb. He has an LLB (Hons) and Bachelor of Arts (Political Science) from Auckland University. David Hardin is currently an associate attorney in Willkie Farr & Gallagher LLP’s Washington, DC office, where he specializes in international trade law. His practice focuses on trade remedy cases before the WTO and various US trade agencies. Prior to joining Willkie Farr & Gallagher, Mr Hardin clerked at the US Department of Commerce and the US International Trade Commission. Mr Hardin studied political science

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at George Mason University (BA 1999) and law at the George Washington University Law School (JD 2003). Valerie Hughes has been Director of the Appellate Body Secretariat of the World Trade Organization since August 2001. Previously, she was with a private law firm in Ottawa, Canada. She also spent 19 years with the Government of Canada, during which she held various positions, including Director of the Trade Law Division of the Department of Foreign Affairs and Trade, Director of the General Legal Services Division of the Department of Finance, and Senior Counsel of the International Law Section of the Department of Justice. Ms Hughes is an expert in international law and has litigated before various international courts and tribunals. Jesse Kreier is Counsellor and Chief Legal Officer in the Rules Division of the World Trade Organization. Since joining the WTO Secretariat in 1992, Mr Kreier has served as legal officer to numerous dispute settlement panels, and currently supervises Division staff servicing dispute settlement panels arising under the WTO Rules agreements (Agreements on Anti-Dumping, Subsidies and Countervailing Measures, Safeguards, and Trade in Civil Aircraft). He has also staffed a number of negotiations, and is at present the Secretary of the Negotiating Group on Rules From 1987 to 1992, Mr Kreier was in private legal practice in Washington, DC, where he specialized in international trade regulation. Mr Kreier holds a JD degree, magna cum laude, from Georgetown University Law Center, a Master of Science in Foreign Service from Georgetown University, and a Bachelor of Arts from Johns Hopkins University. He is admitted to the Bar in California and the District of Columbia, USA. John Magnus is President of TRADEWINS LLC, a trade law and policy consulting firm in Washington DC. He has been an active practitioner for 15 years, serving as external counsel to domestic and foreign firms and industry coalitions. His client work covers a wide variety of international issues, with an emphasis on WTO law and dispute settlement, trade remedy proceedings, market access initiatives involving goods and services, subsidy disputes, pending trade negotiations, US trade legislation and Congressional oversight activities, foreign governments’ trade regimes and industrial policy measures, customs/compliance issues, and the application of national and international competition rules. He also advises foreign governments on their trade regimes and implementation of WTO rules. Mr Magnus is a past Chair of the International Trade


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Law Committee of the American Bar Association, and presently serves as Policy/Government Affairs Officer for the ABA Section of International Law. He was with the law firm Dewey Ballantine LLP from 1990–2004, as a Partner from 2000–2004, and since 2003 has been an Adjunct Professor of Law at the University of Baltimore School of Law teaching ‘International Business Transactions’ and ‘International Trade Law and Policy’. Mr Magnus is a graduate of Stanford University (AB, International Relations) and the University of Chicago Law School. Gabrielle Marceau is a Canadian lawyer and, currently, Counsellor in the Legal Affairs Division of the World Trade Organization (WTO) in Geneva where she has been working since 1994. From 1983 to 1988, Ms Marceau worked in Quebec, Canada in private practice, where she specialized in litigation. She is a member of the Quebec Bar (1983), received her LL.M. from the London School of Economics (England) in 1990 and her Ph.D. from the University of London (England) in 1993. As well as working at the WTO, she is also Professor of WTO law at the University of Geneva and the Graduate Institute of International Studies (HEI) also in Geneva. Brendan McGivern is with White & Case International Trade (Geneva). He practices international trade law, particularly the law of the World Trade Organization (WTO). He advises companies, industry associations and sovereign governments on the full range of WTO disciplines, including anti-dumping, subsidies and countervailing measures, safeguards, state-trading enterprises, services, and intellectual property. He represents WTO Member states in dispute settlement proceedings, and is currently involved in three active WTO disputes before panels and the Appellate Body. In 2003–2004, he served as a member of the WTO arbitration panel in the US – Anti-Dumping Act of 1916 case. Prior to joining White & Case, Mr McGivern was the senior legal adviser and the head of the Dispute Settlement section at the Canadian Mission to the WTO in Geneva. He holds a B.A. and LL.B. from the University of British Columbia and an M.A. in International Affairs from Carleton University. He is a member of the Bar of Ontario. Andrew Mitchell is a Consultant to the International Monetary Fund (IMF) in Geneva, a Fellow of the Tim Fischer Centre for Global Trade & Finance at Bond University, and a Senior Fellow in the University of Melbourne Law School. He is also a Doctoral Candidate in Law at the University of Cambridge as a WM Tapp Scholar of Gonville & Caius College and a Cambridge Commonwealth Trust Scholar. Andrew Mitchell

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graduated from the University of Melbourne with First Class Honours in both his Bachelor of Laws and Bachelor of Commerce degrees. He subsequently obtained a Master of Laws from Harvard Law School and completed the requirements for a Graduate Diploma in International Law from the University of Melbourne. Mr Mitchell was previously a Solicitor with Allens Arthur Robinson in Australia, and worked briefly at Davis Polk & Wardwell in New York. He has also worked in the Trade Directorate of the OECD, the Intellectual Property Division of the WTO, and the Legal Department of the IMF. During 2003–2004, he was a Fellow at the Institute of International Economic Law at Georgetown University. Mr Mitchell has published in numerous journals and books on areas including WTO law, international law, international humanitarian law and constitutional law. He teaches WTO law at the University of Melbourne and the University of Western Ontario. Bozena Mueller-Holyst is a Counsellor in the Council and Trade Negotiations Committee Division of the WTO and has worked for the GATT and then the WTO, since 1993. She has been involved in the work of the Dispute Settlement Body since its inception. She graduated from the Graduate Institute of International Studies (HEI) in Geneva (Switzerland) with a Master’s degree in International Economics, and also from the Academy of Economics in Krakow (Poland) with a Master’s degree in International Economic Relations and International Trade. Matthias Oesch is Senior Research Fellow at the World Trade Institute (WTI) in Berne. Previously, he worked as Legal Counsel in the WTO Division of the Federal Department of Economics, Switzerland, having represented Switzerland before the Appellate Body in the US – Steel Safeguards case and in the DSU Review. He is a member of the Berne Bar (1999), received his LL.M. from the London School of Economics and Political Science (2000) and his Ph.D. from the University of Berne (2003). He has written extensively on WTO and EU trade matters, including two books: Standards of Review in WTO Dispute Resolution (2003) and International Trade Regulation: Law and Policy in the WTO, the European Union and Switzerland (co-authored with Thomas Cottier, 2005). Olivier Prost, member of the Paris Bar and associate member of the Brussels Bar, is a partner of the Brussels office of Gide Loyrette Nouel. He is leading the International Trade and Competition team, composed of Erwan Berthelot, Vassiliki Avgoustidi, Sven Ballschmiede, Maxime Baudouin and Guy Legras, the former Director-General of the European


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Commission (DG Agriculture and DG Relex) acting as senior adviser on trade and agriculture matters. He has been practising international trade and EC law in Brussels since 1991 and has been directly involved in major recent WTO dispute settlements such as Bananas (1998), Absestos (1999) and Sugar (2003). He advised the Chinese government in its first WTO case (US – Steel Safeguards, 2002). Recently the International Trade and Competition team has been selected by the ACP banana supplying countries for legal assistance in the WTO banana arbitration. Olivier Prost has advised both companies and governments before the EC authorities and foreign authorities in the areas of customs law, rules of origin, preferential trade agreements and instruments of commercial defence. He is particularly active in the field of anti-dumping, anti-subsidy and safeguard investigations for both the industrial and agricultural sectors. He has also been involved in cases dealing with the most recent aspects of WTO regulatory law, such as discriminatory, restrictive and anti-competitive practices, and free movement of goods and services. Raimund Raith is the Minister-Counsellor/Legal Adviser at the Permanent Delegation of the European Commission in Geneva. Previously Legal Adviser in the Legal Service of the European Commission, dealing with legal aspects of the Community’s external relations. Formerly Head of the Intellectual Property and Investment Section, Directorate General for External Relations. He participated in the GATT Uruguay Round negotiations on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and was representative of the Community and its Member States in the TRIPS Council of the WTO. Raimund Raith was a Community negotiator for the Agreement on Trade-Related Aspects of Investment Measures (TRIMs). Before joining the Commission staff, he was an assistant professor in the law department of the European University Institute in Florence, Italy. He studied law and economics at the Universitaet Tübingen (1st State Exam and Ph.D.), Université de Genève and Law School of the University of Michigan (LL.M.). He has been a member of the New York Bar since 1982 and is also a member of the American Bar Association. He served on the faculty of the Salzburg Seminar (1995) and, since 2000, has been a lecturer at the Universität des Saarlandes. Yves Renouf has been working in the WTO Secretariat since 1995 as legal adviser to panels and arbitrators. Previously, he was an associate in the law firm of Van Bale & Bellis and a member of the Legal Service of the EC Commission. In his current position, he has been involved in many of the arbitrations under Article 22.6 of the DSU and Article 4.10 of the SCM

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Agreement, as well as in the only Article 25 DSU arbitration so far. As early as 1995, in an article in the Annuaire Fran¸cais de Droit International, Mr Renouf underlined the fundamental role that countermeasures would have to play in a dispute settlement system where a panel report would be adopted automatically. Mr Renouf also teaches a course on WTO dispute settlement at the University of Rennes, France. Giorgio Sacerdoti, born on 2 March 1943, has been Professor of International Law and European Law at Bocconi University, Milan, Italy, since 1986. He was appointed Appellate Body Member in December 2001. Professor Sacerdoti has held various posts in the public sector including Vice-Chairman of the Organization for Economic Cooperation and Development (OECD) Working Group on Bribery in International Business Transactions until 2001. He has acted as consultant to the Council of Europe, UNCTAD and the World Bank in matters related to foreign investments, trade, bribery, development and good governance. In the private sector, he has often served as arbitrator in international commercial disputes and at the International Centre for Settlement of Investment Disputes. Professor Sacerdoti has published extensively on international trade law, investments, international contracts and arbitration. After graduating from the University of Milan with a law degree summa cum laude in 1965, Professor Sacerdoti gained a Master in Comparative Law from Columbia University Law School as a Fulbright Fellow in 1967. He was admitted to the Milan Bar in 1969 and to the Supreme Court of Italy in 1979. Celso de Tarso Pereira , currently Second Secretary at the Brazilian Embassy in Ottawa, was in charge of dispute settlement at the Brazilian Mission in Geneva between 2001–2005. He graduated in law in Brazil (UFPR – Curitiba) and gained his Master in International Law from Kiel, Germany. Professor de Tarso has previously worked in the Mercosul Division of Brazil’s Foreign Ministry, where he was also responsible for dispute settlement. He is Professor of International Law at the Universities of Curitiba and Bras´ılia and Assistant Professor at the Diplomatic Academy ‘Rio Branco’, in Bras´ılia. Joel Trachtman is Professor of International Law at The Fletcher School of Law and Diplomacy at Tufts University. From 1998 to 2001, he was Academic Dean of the Fletcher School, and during 2000 and 2001, he served as Dean ad interim. In 2002, he was Manley O. Hudson Visiting Professor of Law and in 2004 he was Nomura Visiting Professor of


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International Financial Systems at Harvard Law School. He has consulted for the United Nations, the OECD, APEC, the World Bank, the Organization of American States, the US Agency for International Development and the International Law Institute. Professor Trachtman is a member of the Boards of the American Journal of International law, the European Journal of International Law, and the Journal of International Economic Law. He is a member of the bar of the State of New York. Prior to joining the faculty of The Fletcher School in 1989, he spent nine years in the private practice of international commercial law in New York and Hong Kong. His practice included a wide variety of international and domestic financing, acquisition and commercial transactions. He graduated in 1980 from Harvard Law School, where he served as editor-in-chief of the Harvard International Law Journal. His undergraduate education was at the London School of Economics and Columbia College. Peter Van den Bossche is Professor of International Economic Law, Head of the Department of International and European Law and Academic Director of the Law and Language Studies master programme at Maastricht University, the Netherlands. Peter Van den Bossche studied law at the University of Antwerp (Lic. jur., 1982), the University of Michigan (LL.M., 1986) and the European University Institute, Florence (Dr. jur., 1990). From 1990 to 1992, he worked at the European Court of Justice, Luxembourg, as legal secretary to Advocate-General Walter van Gerven. From February 1997 to August 2001, Peter Van den Bossche was Counsellor to the Appellate Body of the World Trade Organization, Geneva. In 2001, he served as Acting Director of the Appellate Body Secretariat. Peter Van den Bossche is a member of the Editorial Board of the Journal of International Economic Law, a member of the international faculty of the World Trade Institute, Berne, and a visiting professor at the University of Amsterdam, the Université Libre de Bruxelles and at the International Trade Academy, Macau. He works as a consultant for the United Nations and law firms specialized in international trade issues. In recent years, Peter Van den Bossche has published primarily on issues of international economic law and dispute settlement. He is the author of The Law And Policy of the World Trade Organization: Text, Cases and Materials, published by Cambridge University Press in 2005. Bruce Wilson assumed the post of Director of the Legal Affairs Division of the World Trade Organization (WTO) Secretariat in Geneva, Switzerland on 16 September 2002. In this post, he serves as the principal legal officer of the organization, a post in which he spends much of his time on WTO

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dispute settlement matters. Prior to taking up this position, he held a number of different trade policy positions in the US Government at the Office of the United States Trade Representative and the Committee on Ways and Means of the US House of Representatives. Upon retirement from the US Government in early 1998, he practiced international trade and international public policy law for a major US law firm until joining the Secretariat. Mr Wilson holds a B.A. in history from Stanford University (1970), an M.A. in international relations (with a specialization in international economics) from Johns Hopkins School of Advanced International Studies (1972), and an M.B.A. (with a specialization in finance) (1979) and a J.D.(1986) from George Washington University. He is a member of the bars of Virginia and the District of Columbia in the United States. Rufus Yerxa has served as Deputy Director-General of the World Trade Organization (WTO) since 2002, responsible for dispute settlement. Mr Yerxa has an extensive record as a trade diplomat and lawyer. He served as US Ambassador to the GATT, the predecessor organization to the WTO and later as Deputy US Trade Representative in Washington – his government’s senior sub-cabinet trade official. Prior to this he was with the US House of Representatives, where he was Staff Director of the Trade Subcommittee. After leaving government service in 1995, he moved to Brussels as resident partner with a major US law firm. He subsequently served as European General Counsel for a major pharmaceuticals and agro-food company. Werner Zdouc obtained his Ph.D from the University of St. Gallen (Switzerland); his LL.M. from the University of Michigan (USA), Law School and his law degree from the University of Graz (Austria). Since 2001, Werner Zdouc has been a Counsellor, in the Appellate Body Secretariat of the World Trade Organization. He joined the WTO in 1995 as Legal Affairs Officer in the Legal Affairs Division and was also a lecturer for postgraduate studies in international economic law at the Universities of St. Gallen and Geneva. Mr Zdouc is currently lecturer and visiting professor for international trade law at Vienna Economic University and the University of Zürich. In 1989 he served as development aid project evaluator in South America and from 1987–1989 was Director of the Afro-Asian-Institute Graz (cultural centre for students from developing countries). He has contributed to a number of publications on international economic law and EU trade law.

PREFACE

As the WTO enters its second decade, it is only fitting for the WTO community at large to step back for a moment to reflect on how the organization and the many agreements it administers have functioned over the first decade and to determine whether there are any particular lessons to be learned and applied in the future. This publication attempts to assist in this regard with respect to the operation of the WTO dispute settlement system. While the material contained in this volume is far from exhaustive, it does cover a representative cross-section of the various issues and situations under the Dispute Settlement Understanding that WTO Members have had to deal with during the first decade. Most importantly, the publication is unique because it includes contributions from virtually the entire gamut of actors involved in the day-to-day operation of the WTO dispute settlement system – Member government representatives, private lawyers who litigate on behalf of Member governments in the system, Appellate Body members, Appellate Body Secretariat staff, and WTO Secretariat staff. It also includes contributions from several academic scholars who closely follow and carefully scrutinize all that goes on within the system. This book contains 21 relatively short and straightforward chapters on various aspects of the dispute settlement system. Each chapter is based largely on the individual author’s own personal experience with, or study of, the system. Consequently, the book should make for informative and even fascinating reading for those who wish to gain further insights into how the system has operated in practice since 1995. As those who even casually follow WTO affairs are aware, the WTO dispute settlement system has been well utilized by the Members, and thus has been an exceedingly active venue for disputes since its inception. As a result, hardly a day goes by without one WTO dispute or another being the subject of news headlines in one or more of the territories of the WTO’s 148 Members. This is because what happens under the WTO dispute settlement system can and does have important trade and xvii

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preface

economic consequences. Thus, understanding why and how the system operates and how it has evolved is more than just an intellectual exercise, particularly for those entrusted with formulating and implementing an individual Member’s trade policies and those whose economic interests are directly affected. Credit for this publication must go first and foremost to the contributing authors. Not only did they all produce excellent chapters, they also agreed to subject those chapters to the review and the suggestions of the book’s editors and their colleagues in the WTO Secretariat who worked on this project. The first decade of operation of the WTO dispute settlement system has truly been a fascinating period in the history of inter-governmental dispute resolution in the commercial arena. We are confident that this publication will assist in enhancing our collective understanding of the system and of how the lessons of the first decade can be applied to make the second decade even more successful with respect to the resolution of WTO disputes. Rufus Yerxa and Bruce Wilson WTO Secretariat Geneva, Switzerland June 2005

TABLE OF CASES

Short Title

Full Case Title and Citation

Argentina – Ceramic Tiles

Panel Report, Argentina – Definitive Anti-Dumping Measures on Imports of Ceramic Floor Tiles from Italy, WT/DS189/R, adopted 5 November 2001, DSR 2001:XII, 6241 Appellate Body Report, Argentina – Safeguard Measures on Imports of Footwear, WT/DS121/AB/R, adopted 12 January 2000, DSR 2000:I, 515 Panel Report, Argentina – Safeguard Measures on Imports of Footwear, WT/DS121/R, adopted 12 January 2000, as modified by the Appellate Body Report, WT/DS121/AB/R, DSR 2000:II, 575 Panel Report, Argentina – Definitive Anti-Dumping Duties on Poultry from Brazil, WT/DS241/R, adopted 19 May 2003 Panel Report, Argentina – Definitive Safeguard Measure on Imports of Preserved Peaches, WT/DS238/R, adopted 15 April 2003 Appellate Body Report, Argentina – Measures Affecting Imports of Footwear, Textiles, Apparel and Other Items, WT/DS56/AB/R and Corr.1, adopted 22 April 1998, DSR 1998:III, 1003 Appellate Body Report, Australia – Measures Affecting Importation of Salmon, WT/DS18/AB/R, adopted 6 November 1998, DSR 1998:VIII, 3327

Argentina – Footwear (EC)

Argentina – Footwear (EC)

Argentina – Poultry Anti-Dumping Duties Argentina – Preserved Peaches Argentina – Textiles and Apparel

Australia – Salmon

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xx

table of cases

Short Title


Australia – Salmon

Panel Report, Australia – Measures Affecting Importation of Salmon, WT/DS18/R and Corr.1, adopted 6 November 1998, as modified by the Appellate Body Report, WT/DS18/AB/R, DSR 1998:VIII, 3407 Panel Report, Australia – Measures Affecting Importation of Salmon – Recourse to Article 21.5 of the DSU by Canada, WT/DS18/RW, adopted 20 March 2000, DSR 2000:IV, 2031 Appellate Body Report, Brazil – Export Financing Programme for Aircraft, WT/DS46/AB/R, adopted 20 August 1999, DSR 1999:III, 1161 Panel Report, Brazil – Export Financing Programme for Aircraft, WT/DS46/R, adopted 20 August 1999, as modified by the Appellate Body Report, WT/DS46/AB/R, DSR 1999:III, 1221 Decision by the Arbitrators, Brazil – Export Financing Programme for Aircraft – Recourse to Arbitration by Brazil under Article 22.6 of the DSU and Article 4.11 of the SCM Agreement, WT/DS46/ARB, 28 August 2000, DSR 2002:I, 19 Appellate Body Report, Brazil – Measures Affecting Desiccated Coconut, WT/DS22/AB/R, adopted 20 March 1997, DSR 1997:I, 167 Appellate Body Report, Canada – Measures Affecting the Export of Civilian Aircraft, WT/DS70/AB/R, adopted 20 August 1999, DSR 1999:III, 1377 Panel Report, Canada – Measures Affecting the Export of Civilian Aircraft, WT/DS70/R, adopted 20 August 1999, as upheld by the Appellate Body Report, WT/DS70/AB/R, DSR 1999:IV, 1443 Panel Report, Canada – Export Credits and Loan Guarantees for Regional Aircraft, WT/DS222/R and Corr.1, adopted 19 February 2002

Australia – Salmon (Article 21.5 – Canada) Brazil – Aircraft

Brazil – Aircraft

Brazil – Aircraft (Article 22.6 – Brazil)

Brazil – Desiccated Coconut Canada – Aircraft

Canada – Aircraft

Canada – Aircraft Credits and Guarantees

table of cases

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Short Title


Canada – Aircraft Credits and Guarantees (Article 22.6 – Canada)

Decision by the Arbitrator, Canada – Export Credits and Loan Guarantees for Regional Aircraft – Recourse to Arbitration by Canada under Article 22.6 of the DSU and Article 4.11 of the SCM Agreement, WT/DS222/ARB, 17 February 2003 Panel Report, Canada – Measures Affecting the Importation of Milk and the Exportation of Dairy Products, WT/DS103/R, WT/DS113/R, adopted 27 October 1999, as modified by the Appellate Body Report, WT/DS103/AB/R, WT/DS113/AB/R, DSR 1999:VI, 2097 Appellate Body Report, Canada – Measures Affecting the Importation of Milk and the Exportation of Dairy Products – Recourse to Article 21.5 of the DSU by New Zealand and the United States, WT/DS103/AB/RW, WT/DS113/AB/RW, adopted 18 December 2001, DSR 2001:XIII, 6829 GATT Panel Report, Canada – Measures Affecting Exports of Unprocessed Herring and Salmon, adopted 22 March 1988, BISD 35S/98 Panel Report, Canada – Measures Relating to Exports of Wheat and Treatment of Imported Grain, WT/DS276/R, adopted 27 September 2004, as upheld by the Appellate Body Report, WT/DS276/AB/R Panel Report, Chile – Price Band System and Safeguard Measures Relating to Certain Agricultural Products, WT/DS207/R, 3 May 2002 adopted 23 October 2002, as modified by the Appellate Body Report, WT/DS207AB/R European Communities – Measures Affecting the Approval and Marketing of Biotech Products

Canada – Dairy

Canada – Dairy (Article 21.5 – New Zealand and US)

Canada – Herring and Salmon Canada – Wheat Exports and Grain Imports

Chile – Price Band System

EC – Approval and Marketing of Biotech Products

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table of cases

Short Title


EC – Asbestos

Appellate Body Report, European Communities – Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/AB/R, adopted 5 April 2001, DSR 2001:VII, 3243 Panel Report, European Communities – Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/R and Add.1, adopted 5 April 2001, as modified by the Appellate Body Report, WT/DS135/AB/R, DSR 2001:VIII, 3305 Appellate Body Report, European Communities – Regime for the Importation, Sale and Distribution of Bananas, WT/DS27/AB/R, adopted 25 September 1997, DSR 1997:II, 591 Panel Report, European Communities – Regime for the Importation, Sale and Distribution of Bananas, Complaint by the United States, WT/DS27/R/USA, adopted 25 September 1997, as modified by the Appellate Body Report, WT/DS27/AB/R, DSR 1997:II, 943 Decision by the Arbitrators, European Communities – Regime for the Importation, Sale and Distribution of Bananas – Recourse to Arbitration by the European Communities under Article 22.6 of the DSU, WT/DS27/ARB/ECU, 24 March 2000, DSR 2000:V, 2237 Decision by the Arbitrators, European Communities – Regime for the Importation, Sale and Distribution of Bananas – Recourse to Arbitration by the European Communities under Article 22.6 of the DSU, WT/DS27/ARB, 9 April 1999, DSR 1999:II, 725

EC – Asbestos

EC – Bananas III

EC – Bananas III (US)

EC – Bananas III (Ecuador) (Article 22.6 – EC)

EC – Bananas III (US) (Article 22.6 – EC)

table of cases

xxiii

Short Title


EC – Bed Linen

Appellate Body Report, European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India, WT/DS141/AB/R, adopted 12 March 2001, DSR 2001:V, 2049 Panel Report, European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India, WT/DS141/R, adopted 12 March 2001, as modified by the Appellate Body Report, WT/DS141/AB/R, DSR 2001:VI, 2077 Appellate Body Report, European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India – Recourse to Article 21.5 of the DSU by India, WT/DS141/AB/RW, adopted 24 April 2003 Panel Report, European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India – Recourse to Article 21.5 of the DSU by India, WT/DS141/RW, adopted 24 April 2003, as modified by the Appellate Body Report, WT/DS141/AB/RW Appellate Body Report, European Communities – Export Subsidies on Sugar, WT/DS265/AB/R, WT/DS266/AB/R, WT/DS283/AB/R, adopted 19 May 2005 Panel Report, European Communities – Export Subsidies on Sugar, Complaint by Australia, WT/DS265/R, adopted 19 May 2005, as modified by the Appellate Body Report, WT/DS265/AB/R, WT/DS266/AB/R, WT/DS283/AB/R Panel Report, European Communities – Export Subsidies on Sugar, Complaint by Brazil, WT/DS266/R, adopted 19 May 2005, as modified by the Appellate Body Report, WT/DS265/AB/R, WT/DS266/AB/R, WT/DS283/AB/R

EC – Bed Linen

EC – Bed Linen (Article 21.5 – India)

EC – Bed Linen (Article 21.5 – India)

EC – Export Subsidies on Sugar

EC – Export Subsidies on Sugar (Australia)

EC – Export Subsidies on Sugar (Brazil)

xxiv

table of cases

Short Title


EC – Export Subsidies on Sugar (Thailand)

Panel Report, European Communities – Export Subsidies on Sugar, Complaint by Thailand, WT/DS283/R, adopted 19 May 2005, as modified by the Appellate Body Report, WT/DS265/AB/R, WT/DS266/AB/R, WT/DS283/AB/R Appellate Body Report, EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998, DSR 1998:I, 135 Award of the Arbitrator, EC Measures Concerning Meat and Meat Products (Hormones) – Arbitration under Article 21.3(c) of the DSU, WT/DS26/15, WT/DS48/13, 29 May 1998, DSR 1998:V, 1833 Decision by the Arbitrators, European Communities – Measures Concerning Meat and Meat Products (Hormones), Original Complaint by Canada – Recourse to Arbitration by the European Communities under Article 22.6 of the DSU, WT/DS48/ARB, 12 July 1999, DSR 1999:III, 1135 Decision by the Arbitrators, European Communities – Measures Concerning Meat and Meat Products (Hormones), Original Complaint by the United States – Recourse to Arbitration by the European Communities under Article 22.6 of the DSU, WT/DS26/ARB, 12 July 1999, DSR 1999:III, 1105 Appellate Body Report, European Communities – Measures Affecting the Importation of Certain Poultry Products, WT/DS69/AB/R, adopted 23 July 1998, DSR 1998:V, 2031

EC – Hormones

EC – Hormones

EC – Hormones (Canada) (Article 22.6 – EC)

EC – Hormones (US) (Article 22.6 – EC)

EC – Poultry

table of cases

xxv

Short Title


EC – Sardines

Appellate Body Report, European Communities – Trade Description of Sardines, WT/DS231/AB/R, adopted 23 October 2002 Panel Report, European Communities – Trade Description of Sardines, WT/DS231/R and Corr.1, adopted 23 October 2002, as modified by the Appellate Body Report, WT/DS231/AB/R Appellate Body Report, European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil, WT/DS219/AB/R, adopted 18 August 2003 Panel Report, European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil, WT/DS219/R, adopted 18 August 2003, as modified by the Appellate Body Report, WT/DS219/AB/R Panel Report, Egypt – Definitive Anti-Dumping Measures on Steel Rebar from Turkey, WT/DS211/R, adopted 1 October 2002 Appellate Body Report, Guatemala – Anti-Dumping Investigation Regarding Portland Cement from Mexico, WT/DS60/AB/R, adopted 25 November 1998, DSR 1998:IX, 3767 Panel Report, Guatemala – Anti-Dumping Investigation Regarding Portland Cement from Mexico, WT/DS60/R, adopted 25 November 1998, as modified by the Appellate Body Report, WT/DS60/AB/R, DSR 1998:IX, 3797 Appellate Body Report, India – Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/AB/R, adopted 16 January 1998, DSR 1998:I, 9

EC – Sardines

EC – Tube or Pipe Fittings

EC – Tube or Pipe Fittings

Egypt – Steel Rebar

Guatemala – Cement I

Guatemala – Cement I

India – Patents (US)

xxvi

table of cases

Short Title


India – Patents (US)

Panel Report, India – Patent Protection for Pharmaceutical and Agricultural Chemical Products, Complaint by the United States, WT/DS50/R, adopted 16 January 1998, as modified by the Appellate Body Report, WT/DS50/AB/R, DSR 1998:I, 41 Appellate Body Report, India – Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products, WT/DS90/AB/R, adopted 22 September 1999, DSR 1999:IV, 1763 Panel Report, Indonesia – Certain Measures Affecting the Automobile Industry, WT/DS54/R, WT/DS55/R, WT/DS59/R, WT/DS64/R and Corr.1, 2, 3, and 4, adopted 23 July 1998, DSR 1998:VI, 2201 Appellate Body Report, Japan – Measures Affecting Agricultural Products, WT/DS76/AB/R, adopted 19 March 1999, DSR 1999:I, 277 Panel Report, Japan – Measures Affecting Agricultural Products, WT/DS76/R, adopted 19 March 1999, as modified by the Appellate Body Report, WT/DS76/AB/R, DSR 1999:I, 315 Appellate Body Report, Japan – Taxes on Alcoholic Beverages, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996, DSR 1996:I, 97 Appellate Body Report, Japan – Measures Affecting the Importation of Apples, WT/DS245/AB/R, adopted 10 December 2003 Panel Report, Japan – Measures Affecting the Importation of Apples, WT/DS245/R, adopted 10 December 2003, as upheld by the Appellate Body Report, WT/DS245/AB/R Panel Report, Japan – Measures Affecting Consumer Photographic Film and Paper, WT/DS44/R, adopted 22 April 1998, DSR 1998:IV, 1179

India – Quantitative Restrictions

Indonesia – Autos

Japan – Agricultural Products II

Japan – Agricultural Products II

Japan – Alcoholic Beverages II

Japan – Apples

Japan – Apples

Japan – Film

table of cases

xxvii

Short Title


Korea – Alcoholic Beverages

Panel Report, Korea – Taxes on Alcoholic Beverages, WT/DS75/R, WT/DS84/R, adopted 17 February 1999, as modified by the Appellate Body Report, WT/DS75/AB/R, WT/DS84/AB/R, DSR 1999:I, 44 Korea – Anti-Dumping Duties on Imports of Certain Paper from Korea Panel Report, Korea – Measures Affecting Trade in Commercial Vessels, WT/DS273/R, adopted 11 April 2005 Appellate Body Report, Korea – Definitive Safeguard Measure on Imports of Certain Dairy Products, WT/DS98/AB/R, adopted 12 January 2000, DSR 2000:I, 3 Panel Report, Korea – Definitive Safeguard Measure on Imports of Certain Dairy Products, WT/DS98/R and Corr.1, adopted 12 January 2000, as modified by the Appellate Body Report, WT/DS98/AB/R, DSR 2000:I, 49 Panel Report, Korea – Measures Affecting Government Procurement, WT/DS163/R, adopted 19 June 2000, DSR 2000:VIII, 3541 Appellate Body Report, Mexico – Anti-Dumping Investigation of High Fructose Corn Syrup (HFCS) from the United States – Recourse to Article 21.5 of the DSU by the United States, WT/DS132/AB/RW, adopted 21 November 2001, DSR 2001:XIII, 6675 Panel Report, Mexico – Anti-Dumping Investigation of High Fructose Corn Syrup (HFCS) from the United States – Recourse to Article 21.5 of the DSU by the United States, WT/DS132/RW, adopted 21 November 2001, as upheld by the Appellate Body Report, WT/DS132/AB/RW, DSR 2001:XIII, 6717 GATT Panel Report, New Zealand – Imports of Electrical Transformers from Finland, adopted 18 July 1985, BISD 32S/55

Korea – Certain Paper Korea – Commercial Vessels Korea – Dairy

Korea – Dairy

Korea – Procurement

Mexico – Corn Syrup (Article 21.5 – US)

Mexico – Corn Syrup (Article 21.5 – US)

New Zealand – Finnish Transformers

xxviii

table of cases

Short Title


Thailand – Cigarettes

GATT Panel Report, Thailand – Restrictions on Importation of and Internal Taxes on Cigarettes, adopted 7 November 1990, BISD 37S/200 Panel Report, Thailand – Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland, WT/DS122/R, adopted 5 April 2001, as modified by the Appellate Body Report, WT/DS122/AB/R, DSR 2001:VII, 2741 Appellate Body Report, United States – Anti-Dumping Act of 1916, WT/DS136/AB/R, WT/DS162/AB/R, adopted 26 September 2000, DSR 2000:X, 4793 Panel Report, United States – Anti-Dumping Act of 1916, Complaint by the European Communities, WT/DS136/R and Corr.1, adopted 26 September 2000, as upheld by the Appellate Body Report, WT/DS136/AB/R, WT/DS162/AB/R, DSR 2000:X, 4593 Panel Report, United States – Anti-Dumping Act of 1916, Complaint by Japan, WT/DS162/R and Add.1, adopted 26 September 2000, as upheld by the Appellate Body Report, WT/DS136/AB/R, WT/DS162/AB/R, DSR 2000:X, 4831 Decision by the Arbitrators, United States – Anti-Dumping Act of 1916, Original Complaint by the European Communities – Recourse to Arbitration by the United States under Article 22.6 of the DSU, WT/DS136/ARB, 24 February 2004 Appellate Body Report, United States – Sunset Review of Anti-Dumping Duties on Corrosion-Resistant Carbon Steel Flat Products from Japan, WT/DS244/AB/R, adopted 9 January 2004

Thailand – H-Beams

US – 1916 Act

US – 1916 Act (EC)

US – 1916 Act (Japan)

US – 1916 Act (EC) (Article 22.6 – US)

US – Corrosion-Resistant Steel Sunset Review

table of cases

xxix

Short Title


US – Cotton Yarn

Appellate Body Report, United States – Transitional Safeguard Measure on Combed Cotton Yarn from Pakistan, WT/DS192/AB/R, adopted 5 November 2001, DSR 2001:XII, 6027 Panel Report, United States – Countervailing Duty Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from Korea, WT/DS296/R, 21 February 2005 Appellate Body Report, United States – Countervailing Measures Concerning Certain Products from the European Communities, WT/DS212/AB/R, adopted 8 January 2003 Panel Report, United States – Countervailing Measures Concerning Certain Products from the European Communities, WT/DS212/R, adopted 8 January 2003, as modified by the Appellate Body Report, WT/DS212/AB/R Panel Report, United States – Anti-Dumping Duty on Dynamic Random Access Memory Semiconductors (DRAMS) of One Megabit or Above from Korea, WT/DS99/R, adopted 19 March 1999, DSR 1999:II, 521 Panel Report, United States – Measures Treating Exports Restraints as Subsidies, WT/DS194/R and Corr.2, adopted 23 August 2001, DSR 2001:XI, 5767 Appellate Body Report, United States – Tax Treatment for ‘Foreign Sales Corporations’, WT/DS108/AB/R, adopted 20 March 2000, DSR 2000:III, 1619 Panel Report, United States – Tax Treatment for ‘Foreign Sales Corporations’, WT/DS108/R, adopted 20 March 2000, as modified by the Appellate Body Report, WT/DS108/AB/R, DSR 2000:IV, 1675

US – Countervailing Duty Investigation on DRAMS US – Countervailing Measures on Certain EC Products US – Countervailing Measures on Certain EC Products

US – DRAMS

US – Export Restraints

US – FSC

US – FSC

xxx

table of cases

Short Title


US – FSC (Article 22.6 – US)

Decision by the Arbitrator, United States – Tax Treatment for ‘Foreign Sales Corporations’ – Recourse to Arbitration by the United States under Article 22.6 of the DSU and Article 4.11 of the SCM Agreement, WT/DS108/ARB, 30 August 2002 Panel Report, United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services, WT/DS285/R, adopted 20 April 2005, as modified by the Appellate Body Report, WT/DS285/AB/R Appellate Body Report, United States – Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, 3 Panel Report, United States – Standards for Reformulated and Conventional Gasoline, WT/DS2/R, adopted 20 May 1996, as modified by the Appellate Body Report, WT/DS2/AB/R, DSR 1996:I, 29 Appellate Body Report, United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/AB/R, adopted 23 August 2001, DSR 2001:X, 4697 Panel Report, United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/R, adopted 23 August 2001 as modified by the Appellate Body Report, WT/DS184/AB/R, DSR 2001:X, 4769 Appellate Body Report, United States – Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia, WT/DS177/AB/R, WT/DS178/AB/R, adopted 16 May 2001, DSR 2001:IX, 4051

US – Gambling

US – Gasoline

US – Gasoline

US – Hot-Rolled Steel

US – Hot-Rolled Steel

US – Lamb

table of cases

xxxi

Short Title


US – Lamb

Panel Report, United States – Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia, WT/DS177/R, WT/DS178/R, adopted 16 May 2001, as modified by the Appellate Body Report, WT/DS177/AB/R, WT/DS178/AB/R, DSR 2001:IX, 4107 Appellate Body Report, United States – Imposition of Countervailing Duties on Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom, WT/DS138/AB/R, adopted 7 June 2000, DSR 2000:V, 2595 Panel Report, United States – Imposition of Countervailing Duties on Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom, WT/DS138/R and Corr.2, adopted 7 June 2000, as upheld by the Appellate Body Report, WT/DS138/AB/R, DSR 2000:VI, 2623 Appellate Body Report, United States – Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea, WT/DS202/AB/R, adopted 8 March 2002 Panel Report, United States – Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea, WT/DS202/R, adopted 8 March 2002, as modified by the Appellate Body Report, WT/DS202/AB/R Appellate Body Report, United States – Continued Dumping and Subsidy Offset Act of 2000, WT/DS217/AB/R, WT/DS234/AB/R, adopted 27 January 2003

US – Lead and Bismuth II

US – Lead and Bismuth II

US – Line Pipe

US – Line Pipe

US – Offset Act (Byrd Amendment )

xxxii

table of cases

Short Title


US – Offset Act (Byrd Amendment)

Panel Report, United States – Continued Dumping and Subsidy Offset Act of 2000, WT/DS217/R, WT/DS234/R, adopted 27 January 2003, as modified by the Appellate Body Report, WT/DS217/AB/R, WT/DS234/AB/R Decision by the Arbitrator, United States – Continued Dumping and Subsidy Offset Act of 2000, Original Complaint by Brazil – Recourse to Arbitration by the United States under Article 22.6 of the DSU, WT/DS217/ARB/BRA, 31 August 2004 Decision by the Arbitrator, United States – Continued Dumping and Subsidy Offset Act of 2000, Original Complaint by Canada – Recourse to Arbitration by the United States under Article 22.6 of the DSU, WT/DS234/ARB/CAN, 31 August 2004 Decision by the Arbitrator, United States – Continued Dumping and Subsidy Offset Act of 2000, Original Complaint by Chile – Recourse to Arbitration by the United States under Article 22.6 of the DSU, WT/DS217/ARB/CHL, 31 August 2004 Decision by the Arbitrator, United States – Continued Dumping and Subsidy Offset Act of 2000, Original Complaint by the European Communities – Recourse to Arbitration by the United States under Article 22.6 of the DSU, WT/DS217/ARB/EEC, 31 August 2004 Decision by the Arbitrator, United States – Continued Dumping and Subsidy Offset Act of 2000, Original Complaint by India – Recourse to Arbitration by the United States under Article 22.6 of the DSU, WT/DS217/ARB/IND, 31 August 2004

US – Offset Act (Byrd Amendment) (Brazil) (Article 22.6 – US)

US – Offset Act (Byrd Amendment) (Canada) (Article 22.6 – US)

US – Offset Act (Byrd Amendment) (Chile) (Article 22.6 – US)

US – Offset Act (Byrd Amendment) (EC) (Article 22.6 – US)

US – Offset Act (Byrd Amendment) (India) (Article 22.6 – US)

table of cases

xxxiii

Short Title


US – Offset Act (Byrd Amendment) (Japan) (Article 22.6 – US)

Decision by the Arbitrator, United States – Continued Dumping and Subsidy Offset Act of 2000, Original Complaint by Japan – Recourse to Arbitration by the United States under Article 22.6 of the DSU, WT/DS217/ARB/JPN, 31 August 2004 Decision by the Arbitrator, United States – Continued Dumping and Subsidy Offset Act of 2000, Original Complaint by Korea – Recourse to Arbitration by the United States under Article 22.6 of the DSU, WT/DS217/ARB/KOR, 31 August 2004 Decision by the Arbitrator, United States – Continued Dumping and Subsidy Offset Act of 2000, Original Complaint by Mexico – Recourse to Arbitration by the United States under Article 22.6 of the DSU, WT/DS234/ARB/MEX, 31 August 2004 Panel Report, United States – Section 110(5) of the US Copyright Act, WT/DS160/R, adopted 27 July 2000, DSR 2000:VIII, 3769 Award of the Arbitrators, United States – Section 110(5) of the US Copyright Act – Recourse to Arbitration under Article 25 of the DSU, WT/DS160/ARB25/1, 9 November 2001, DSR 2001:II, 667 Appellate Body Report, United States – Section 211 Omnibus Appropriations Act of 1998, WT/DS176/AB/R, adopted 1 February 2002, DSR 2002:II, 589 Panel Report, United States – Section 211 Omnibus Appropriations Act of 1998, WT/DS176/R, adopted 1 February 2002, as modified by the Appellate Body Report, WT/DS176/AB/R, DSR 2002:II, 683 Panel Report, United States – Sections 301–310 of the Trade Act of 1974, WT/DS152/R, adopted 27 January 2000, DSR 2000:II, 815

US – Offset Act (Byrd Amendment) (Korea) (Article 22.6 – US)

US – Offset Act (Byrd Amendment) (Mexico) (Article 22.6 – US)

US – Section 110(5) Copyright Act US – Section 110(5) Copyright Act (Article 25.3)

US – Section 211 Appropriations Act

US – Section 211 Appropriations Act

US – Section 301 Trade Act

xxxiv

table of cases

Short Title


US – Shrimp

Appellate Body Report, United States – Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R, adopted 6 November 1998, DSR 1998:VII, 2755 Panel Report, United States – Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/R and Corr.1, adopted 6 November 1998, as modified by the Appellate Body Report, WT/DS58/AB/R, DSR 1998:VII, 2821 Appellate Body Report, United States – Import Prohibition of Certain Shrimp and Shrimp Products – Recourse to Article 21.5 of the DSU by Malaysia, WT/DS58/AB/RW, adopted 21 November 2001, DSR 2001:XIII, 6481 Panel Report, United States – Import Prohibition of Certain Shrimp and Shrimp Products – Recourse to Article 21.5 of the DSU by Malaysia, WT/DS58/RW, adopted 21 November 2001, as upheld by the Appellate Body Report, WT/DS58/AB/RW, DSR 2001:XIII, 6529 Panel Report, United States – Preliminary Determinations with Respect to Certain Softwood Lumber from Canada, WT/DS236/R, adopted 1 November 2002 Appellate Body Report, United States – Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada, WT/DS257/AB/R, adopted 17 February 2004 Panel Report, United States – Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada, WT/DS257/R and Corr.1, adopted 17 February 2004, as modified by the Appellate Body Report, WT/DS257/AB/R

US – Shrimp

US – Shrimp (Article 21.5 – Malaysia)

US – Shrimp (Article 21.5 – Malaysia)

US – Softwood Lumber III

US – Softwood Lumber IV

US – Softwood Lumber IV

table of cases

xxxv

Short Title


US – Softwood Lumber V

Appellate Body Report, United States – Final Dumping Determination on Softwood Lumber from Canada, WT/DS264/AB/R, adopted 31 August 2004 Panel Report, United States – Final Dumping Determination on Softwood Lumber from Canada, WT/DS264/R, adopted 31 August 2004, as modified by the Appellate Body Report, WT/DS264/AB/R Panel Report, United States – Investigation of the International Trade Commission in Softwood Lumber from Canada, WT/DS277/R, adopted 26 April 2004 Panel Report, United States – Anti-Dumping and Countervailing Measures on Steel Plate from India, WT/DS206/R and Corr.1, adopted 29 July 2002 Appellate Body Report, United States – Definitive Safeguard Measures on Imports of Certain Steel Products, WT/DS248AB/R, WT/DS249AB/R, WT/DS251AB/R, WT/DS252AB/R, WT/DS253AB/R, WT/DS254AB/R, WT/DS258AB/R, WT/DS259AB/R, adopted 10 December 2003 Panel Report, United States – Definitive Safeguard Measures on Imports of Certain Steel Products, WT/DS248, WT/DS249, WT/DS251, WT/DS252, WT/DS253, WT/DS254, WT/DS258, WT/DS259, adopted 10 December 2003, as modified by the Appellate Body Report, WT/DS248AB/R, WT/DS249AB/R, WT/DS251AB/R, WT/DS252AB/R, WT/DS253AB/R, WT/DS254AB/R, WT/DS258AB/R, WT/DS259AB/R

US – Softwood Lumber V

US – Softwood Lumber VI

US – Steel Plate

US – Steel Safeguards

US – Steel Safeguards

xxxvi

table of cases

Short Title


US – Underwear

Panel Report, United States – Restrictions on Imports of Cotton and Man-made Fibre Underwear, WT/DS24/R, adopted 25 February 1997, as modified by the Appellate Body Report, WT/DS24/AB/R, DSR 1997:I, 31 Appellate Body Report, United States – Subsidies on Upland Cotton, WT/DS267/AB/R, adopted 21 March 2005 Panel Report, United States – Subsidies on Upland Cotton, WT/DS267/R, and Corr.1, adopted 21 March 2005, as modified by the Appellate Body Report, WT/DS267/AB/R Appellate Body Report, United States – Definitive Safeguard Measures on Imports of Wheat Gluten from the European Communities, WT/DS166/AB/R, adopted 19 January 2001, DSR 2001:II, 717 Panel Report, United States – Definitive Safeguard Measures on Imports of Wheat Gluten from the European Communities, WT/DS166/R, adopted 19 January 2001, as modified by the Appellate Body Report, WT/DS166/AB/R, DSR 2001:III, 779 Appellate Body Report, United States – Measure Affecting Imports of Woven Wool Shirts and Blouses from India, WT/DS33/AB/R and Corr.1, adopted 23 May 1997, DSR 1997:I, 323

US – Upland Cotton

US – Upland Cotton

US – Wheat Gluten

US – Wheat Gluten

US – Wool Shirts and Blouses

ABBREVIATIONS

ACWL BCI BISD DSB DSR DSU

GATS GATT GATT 1947 GATT 1994 IBRD ICC ICJ ICSID IMF ITLoS ITO MFN NAFTA NGOs SCM Agreement SPS Agreement TBT Agreement

Advisory Centre on WTO Law Business Confidential Information Basic Instruments and Selected Documents Dispute Settlement Body Dispute Settlement Reports Understanding on Rules and Procedures Governing the Settlement of Disputes (also referred to as Dispute Settlement Understanding) General Agreement on Trade in Services General Agreement on Tariffs and Trade General Agreement on Tariffs and Trade 1947 General Agreement on Tariffs and Trade 1994 International Bank for Reconstruction and Development International Criminal Court International Court of Justice International Centre for Settlement of Investment Disputes International Monetary Fund International Tribunal for the Law of the Sea International Trade Organization Most Favoured Nation North American Free Trade Agreement Non-Governmental Organizations Agreement on Subsidies and Countervailing Measures Agreement on the Application of Sanitary and Phytosanitary Measures Agreement on Technical Barriers to Trade

xxxvii

xxxviii

list of abbreviations

TRIPS Agreement

Agreement on Trade-Related Aspects of Intellectual Property Rights United Nations Commission on International Trade Law Uruguay Round Agreements Act US Department of Commerce US International Trade Commission Vienna Convention on the Law of the Treaties World Trade Organization Marrakesh Agreement Establishing the World Trade Organization

UNCITRAL URAA USDOC USITC Vienna Convention WTO WTO Agreement

PART I Introduction and General Considerations

1 The power of the WTO dispute settlement system rufus yerxa 1 Deputy Director-General, WTO Secretariat

The dispute settlement system of the WTO is one of the most important elements of a rules-based multilateral trading system. By way of introduction to the very instructive chapters that follow, I would like to make several observations about the nature of dispute settlement in a trading system based on national sovereignty, followed by some comments on how the system is designed to ensure integrity and fairness in the WTO’s adjudicative process.

1 WTO dispute settlement and national sovereignty The unique feature of the WTO is that, unlike many international regimes, it has an adjudication process that is mandatory and binding. Yet what does that mean, given the fact that the WTO operates in a world where international rules do not override national sovereignty? Remember, most WTO Members do not give direct effect to WTO rules or decisions, and implementation of any ruling requires actions by the Member in question, often by a complex process of legislation. Furthermore, there is no WTO jail, and we have no power to levy fines or other monetary sanctions. In essence, sanctions, just like compliance, must come from sovereign actions of the WTO’s Members. Put another way, the GATT/WTO dispute settlement system has always had to deal with a basic paradox. On the one hand, it is unrealistic to expect Members to cede control over their borders to an international decision-making body. Yet the Members of the WTO clearly want the rules to mean something, and this cannot occur without some credible 1

The views expressed are those of the author and do not represent a position, official or unofficial, of the WTO Secretariat or WTO Members.

3

4

rufus yerxa

enforcement mechanism. (One needs to keep in mind that we are talking about a very lengthy and detailed set of rules and commitments. The WTO agreements themselves run to hundreds of pages, and the full set of schedules of Member commitments are 130,000 pages long.) So the trick here was to develop an adjudication process that respects national sovereignty yet gives Members a compelling reason to comply with its decisions.

2 A contract between governments How has the WTO solved this basic paradox? The answer goes back to the very origins of the GATT – the predecessor to the WTO, which came into effect in 1948. The GATT Agreement relied on the concept of mutually beneficial concessions exchanged among its members: in other words, a contractual arrangement. So the rights and obligations of the WTO – like the GATT before it – are contractual in nature. In fact, GATT members were called ‘contracting parties’. It therefore makes sense that the dispute settlement system works on the basis of contractual remedies. What this means is that the violation of WTO rules by one Member gives adversely affected Members the right to withdraw some equivalent value of commitments in order to rebalance their respective rights and obligations. Please note that I said it gives them the right! However, the decision to ‘retaliate’ is entirely up to the aggrieved Member itself, just as the decision to correct a violation rests on the sovereign decision of the violator. Thus, the dispute settlement process is merely a means of adjudicating whether a Member has acted contrary to its obligations, and if so, the extent to which other Members might be entitled to ‘withdraw equivalent concessions’ if the offending Member does not correct the violation. There are elaborate procedures designed to ensure that this ‘right’ they obtain from a WTO ruling is proportionate and fair. These are some of the basic realities one has to keep in mind when examining the WTO dispute settlement process. The WTO system works only to the extent Members want it to work, and only if they decide that compliance is in their overall economic interest. It therefore rests on the credibility of the rules, and also on the credibility of the dispute settlement decisions. In fact, we see a large number of cases where Members do comply, and retaliation for non-compliance has, in the past, been limited to a few disputes.

the power of the wto dispute settlement system

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3 Ensuring credibility A lot has been done to ensure credibility in the WTO dispute settlement system. For example, both the initial panels (which are like courts of first instance) and the Appellate Body are designed to be free-standing and independent, not subject to pressure from either Members or the WTO Secretariat. Secretariat officials do have some functions within the dispute settlement process. For example, the Director-General is required to appoint panelists in cases where the disputing parties cannot mutually agree on panel composition (this is regrettably becoming the case more often). And lawyers from the Secretariat do advise the panelists and the Appellate Body, although they operate under strict rules of confidentiality and standards of conduct. In fact, neither the Director-General nor any WTO official other than those assigned to assist a panel in a dispute have any idea what that panel decision is until after it is rendered. The same is true for appellate decisions. Only the Appellate Body members and the Appellate Body Secretariat staff assisting them know the content of a decision before it is made public. Most importantly, the Members and, where necessary the DirectorGeneral, take special care in assuring that panelists (who are appointed on an ad hoc basis for each case) and Appellate Body members (who are appointed for fixed terms) are individuals of high integrity and are without bias or conflicts of interest. The dispute settlement system has given rise to charges that WTO decisions are made by ‘faceless bureaucrats’, but when I hear this I often wonder what these critics would rather have: a system where decisions are made by well-known politicians? A coin toss? A system where might makes right? No dispute settlement system at all? The system may not operate perfectly but no one has yet been able to prescribe something better with respect to its basic fundamentals. And because the system is not perfect, Members are considering how to improve it. But for the time being it is the best we can do, and perhaps one could say that it is like Wagner’s music – it’s better than it sounds. It has led to a remarkably clear and elaborate body of decisions interpreting and applying WTO rules. During the first decade of the WTO, the Dispute Settlement Body adopted some 83 panel reports, 56 Appellate Body reports, 12 implementation review panel reports, 8 implementation review Appellate Body reports, and circulated 16 arbitration reports regarding retaliation. Some interesting statistics covering the first ten years are set forth in the Annexes to this volume.

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4 Conclusion Notwithstanding some criticism of certain panel and Appellate Body decisions, support for the WTO dispute settlement system is growing, and Members continue to view the Dispute Settlement Understanding (DSU) as crucial in providing security and guaranteeing that their substantive rights and obligations within the WTO can be enforced. But the principal reason that the DSU has worked reasonably well is the WTO Members themselves – both through their serious participation in the system and through their respect for the decisions being rendered by the WTO’s adjudicating bodies. In this regard, WTO Members are to be congratulated.

2 The WTO dispute settlement and general international law georges abi-saab 1 Appellate Body Member, World Trade Organization

I have been asked by way of introduction to the contributions that follow to address the subject ‘WTO Dispute Settlement and General International Law’. Such a topic needs volumes and to treat it here in a few words is well-nigh impossible. As some of the readers may not be familiar with the mechanics and the dynamics of the WTO system, I shall first describe briefly how the process of WTO dispute settlement looks from the outside to a lawyer who tries to classify it and where it can fit in the usual categories he has in mind. Then I will briefly comment on the substantive law which is applied. If we want to classify the process of dispute settlement in the WTO, where would we put it? Is it mediation? Is it conciliation? Is it arbitration? Is it judicial settlement? Where in these types does it fit best? Rufus Yerxa has described in the previous chapter how the system was created and developed, but I would like to add one or two observations to his. GATT was established under very peculiar circumstances, because there was supposed to be a third international economic organization in addition to the Bank (IBRD) and the Fund (IMF) that would deal with international trade: the International Trade Organization (ITO), not the WTO. Its constitution was adopted in 1947, the Havana Charter. But the Havana Charter was very heavily attacked in the United States, and had no possibility of passing the Senate. So the United States extracted some of the rules dealing basically with trade in goods and invited all the countries that had friendship commerce and navigation treaties with it, to adopt these rules as an interim measure, under the label of the General Agreement 1

The views expressed are those of the author and do not represent a position, official or unofficial, of the Appellate Body or WTO Members.

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on Tariffs and Trade (GATT). In order for the United States to adopt it, it had to take the form of an executive agreement and not a treaty, which would have been the necessary legal instrument for the charter of an international organization. But as a treaty, it would have needed the Senate advice and consent, which was politically unattainable. The founding myth of GATT ever since has been that it was a mere agreement; in other words norms without institutions, because if institutions were injected into it, it would have become an organization and would not have passed the American Senate. This idea is still deeply ingrained even in the WTO, more than 50 years later. The mantra of the WTO is that it is ‘a member-driven organization’. Everybody keeps reiterating it in a ritualistic way as if there are organizations which are not member-driven. But what it simply means is that the organs are not supposed either to be there or to have autonomous powers; that all decisions remain exclusively in the hands of the ‘Contracting Parties’. How does this reflect on a system of settlement of disputes? There was no system of settlement of disputes at the beginning. I am speaking roughly because we can argue on the details, but in fact when there was a dispute, the Contracting Parties started by creating a ‘study group’ and then it became a ‘special group’, and later on it was called a ‘panel’. This reflects unconsciously models or modalities of international dispute settlement. A ‘study group’ evokes the mildest type of intercession; a ‘special group’ a little bit of mediation; but when it comes to ‘panel’ the word evokes arbitration; though it was not arbitration. Why was it not arbitration? First, because the outcome, the ‘report’, was not binding. To be binding it had to be accepted by the ‘Contracting Parties’, meaning by the plenary political organ, by consensus; positive consensus. Everybody had to accept it, including the two or more parties to the dispute. If one of them did not agree, it did not pass. So, at best, from a technical legal point of view, it was a system of conciliation. Conciliation is almost like arbitration, in that the organ or third party takes a certain distance from the parties, and develops recommendations on the basis of applicable law, though taking into account other considerations as well. But the recommendations do not bind the parties, who can accept or reject them. What happened at the Marrakesh Ministerial Conference in 1994 creating the WTO was a very important qualitative change, and it was done by changing one word, one adjective. The consensus which was needed to adopt a report of a panel became that which is now needed for stopping

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its adoption; otherwise the adoption is automatic, i.e. it became a negative consensus. In other words, in order to stop the final outcome from becoming obligatory, all the members have to agree that the report be set aside. We suddenly move from a completely consensual system into a system which has a gridlock at the end, a legally inescapable outcome, unless all the members of the organization agree to set it aside; we suddenly move into something really jurisdictional in the full sense of the word. But in social physics, you cannot forget about history. Much of the inheritance from the GATT dispute settlement remains, at least in peoples’ minds. If we look at the dispute settlement system as it is – and I now come to the present system of the WTO – it goes through three stages, starting with political negotiation and conciliation in the political body, the Dispute Settlement Body (DSB). But the process functions as a juggernaut that cannot be stopped. If one party insists on going to a panel, it ends up getting a panel, and then the panel report will be adopted if presented to the DSB within the prescribed period, unless there is a negative consensus to set it aside, or if one of the parties appeals; and with the appeal, the result is the same: the report cannot be stopped from being adopted by the DSB unless there is a negative consensus by all the Members to set it aside. What is very interesting, again from a general international law point of view, is that if we look at the panel process, it is a process which is typical of arbitration. We speak of ‘terms of reference’ that have to be agreed by the parties; we speak of designation of panelists, which is done by the parties. It is true that there is a fallback position, because if they fail to agree, the Director-General of the WTO fills the gap; but that exists also in arbitration, for example in the International Centre for Settlement of Investment Disputes (ICSID) system. The procedures are confidential. Only the parties are privy to them. Even the other Members of the organization are not privy to the procedure, unless they intervene as third participants. That is very much arbitration; and there is even an intermediate stage, where the parties can negotiate, and even settle the case before it is finalized. Here we are really bathing in the arbitration model, leaving the process largely in the hands of the parties. (‘L’arbitrage est la chose des parties’.) When we come to the last stage, that of the Appellate Body, however, the model changes completely. It is a permanent body with permanent membership, which can only examine the points of law, not the points of fact. Points of fact are not appealable. So it is an appeal in the common law

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sense. In the civil law sense, it is ‘cassation’, not appeal, because an appeal in civil law reopens the whole case rather than only certain points of law. In sum, the Appellate Body has a kind of supreme court jurisdiction to control the interpretation and application of the law. Here, we are in the presence not only of a judicial system, but of a very developed judicial system of judicial control of legality. The procedure is that of a judicial body. However, a remnant of the heritage of the past, procedures are confidential, which leaves room for some people to criticize the system, in total ignorance of reality, as being run by faceless bureaucrats!! That brings me to the second part of my observations concerning substantive law. I have previously referred to the classification of the dispute settlement process according to general international law. But when it comes to the substantive law applicable in these processes, how does it relate to general international law? And does this relationship pose any particular problems? WTO law is conventional or treaty law. Article 3 of the DSU provides that the agreements have to be interpreted according to the customary principles of interpretation of general international law. Thus, the relationship as such poses no special problem. If there is a problem, it comes from the mantra that this is a member-driven organization and that the members control everything, which generates a tendency to consider that the agreements are legally self-sufficient, constituting a hermetic or ‘selfcontained regime’. This impression is reinforced by Article 3 of the DSU which provides that the dispute settlement system should not add to or diminish the rights and obligations of the parties. However, there is no treaty that can live in a vacuum and in ‘clinical isolation’ from general international law, to use a picturesque expression from the first report of the Appellate Body; for how can it live outside its legal environment? Suffice it to illustrate this proposition with the following three points. First, in terms of procedures, the definition of what is the judicial function, and what are the modalities of its exercise, is not provided in the DSU or the agreements. For example, there are no rules of evidence. Where are we going to get such rules? We have to go to the general principles of international procedural law which govern the exercise of the judicial function. Second, the WTO agreements themselves are treaties. A treaty is a legal instrument which has a life cycle; and this life cycle is regulated by general rules which have been codified by the famous Vienna Convention on the

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Law of Treaties of 1969. These rules have not been reproduced in the WTO agreements, but we have to refer to them and apply them all the time. Finally, there remain the substantive rules of general international law. In the GATT, Article XXI:3(c) says that the Agreement is subject to the compulsory decisions of the Security Council under Chapter VII of the Charter of the United Nations. In fact, this is only one application of international public policy or mandatory international law, the famous jus cogens. In the EC – Hormones case, the Appellate Body examined whether the precautionary principle had become crystallized into a general principle of customary international environment law. But if there is general agreement that a rule has acceded to the status of mandatory public policy (jus cogens), we have to apply it, because in such a case it overrides not only the WTO agreements, but even the Charter of the United Nations. Beyond that, can we refer to a rule of general international law such as good faith? Can we have a legal system without the rule of good faith? In one case, the Appellate Body referred to the principle of proportionality as a general principle. That gave rise to a lot of criticism. Can there be any system of law that can work without a reasonable concept of proportionality? I conclude with these open questions, without trying to answer them, as they are subject to controversy among the WTO membership.

PART II The WTO Dispute Settlement System: Its Processes and Its Institutions

3 The WTO dispute settlement system and its operation: a brief overview of the first ten years1 bruce wilson 2 Director, Legal Affairs Division, WTO Secretariat

1 Introduction The WTO dispute settlement system plays a central role in clarifying and enforcing the legal obligations contained in the various WTO agreements. It is generally agreed among WTO Members that the WTO dispute settlement system has functioned reasonably well in its first ten years, although the jurisprudence emanating from this system has not been without its critics from both the public and private sectors of a large cross-section of the WTO membership. The purpose of this chapter, however, is not to analyse or comment on the jurisprudence that the system has produced; such analysis and commentary must be left to the Members themselves and to legal scholars and commentators. Rather, the purpose of this chapter is to provide a brief overview of the system and how it has operated in the first ten years of its existence (1995–2004), including the extent to which the system has been used by Members; the nature of the cases brought to the system; and Members’ compliance record with respect to adverse panel and Appellate Body reports. The WTO dispute settlement system is codified in the Understanding on Rules and Procedures Governing the Settlement of Disputes (Dispute Settlement Understanding or DSU), which was arguably one of the most important agreements negotiated during the Uruguay Round. The DSU is based on, but significantly expanded, GATT dispute settlement law and practice. It provides a single dispute settlement mechanism applicable 1

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A fuller explanation of the WTO dispute settlement system can be found in the WTO Secretariat publication entitled A Handbook on the WTO Dispute Settlement System (Cambridge University Press, 2004). The views expressed are those of the author and do not represent a position, official or unofficial, of the WTO Secretariat or WTO Members.

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to all current WTO agreements – the Agreement Establishing the World Trade Organization (the Marrakesh Agreement); the 12 WTO multilateral agreements on trade in goods (i.e. covering GATT 1994, agriculture, customs valuation, import licensing, anti-dumping, subsidies and countervailing measures, trade-related investment measures, product standards, sanitary and phytosanitary measures, preshipment inspection, rules of origin, and safeguards); the General Agreement on Trade in Services (GATS); the Agreement on Trade-Related Aspects of Intellectual Property (TRIPS); two plurilateral agreements (i.e. covering government procurement and trade in civil aircraft3 ); and the DSU itself.

2 WTO dispute settlement process and the key institutions involved in the operation of the system The WTO dispute settlement process and the WTO institutions involved in that process are the subjects of detailed discussion in subsequent chapters. Here, we merely give a brief, introductory description of how the process works and of the key institutions involved in the operation of the system. This will provide context for our subsequent discussion of how the system has operated during its first ten years.

3 The dispute settlement process – a four-stage procedure WTO dispute settlement is a government-to-government procedure in which only WTO Members themselves may invoke WTO rights and enforce WTO obligations vis-à-vis other Members, since such rights and obligations are only applicable as between the Members themselves. Consequently, if a private actor from a WTO Member (e.g. a company, labour union, trade association, etc.) wishes to activate the WTO dispute settlement system against another WTO Member government, it must first persuade its own government to prosecute a complaint on its behalf against such other WTO Member. The WTO dispute settlement process can be described as a four-stage procedure consisting of a mandatory consultation stage, a panel stage, an appellate stage, and an implementation/compliance stage. 3

Note, however, that the Committee on Civil Aircraft has not yet notified the DSB of the application of the DSU to that Agreement.

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Mandatory consultations If a WTO Member wishes to pursue formally a complaint against another Member under the DSU, it must do so by first notifying the other Member and the entire WTO membership of the nature of its complaint, including the measures at issue and any alleged WTO violations that may be the subject of the complaint. The notification of such complaint sets in motion a mandatory 60-day consultation period during which the complaining and responding Members are required to seek an amicable solution to the dispute.

Panels If consultations fail to produce a mutually satisfactory outcome, the complaining Member may then request and is entitled to have its complaint heard by a three-person ad hoc panel, which is formed specifically to adjudicate the dispute. Based on the complaining Member’s claims and arguments, and the responding Member’s defences and responses, the panel makes such findings of fact and law as will assist the parties in resolving the dispute. If the panel finds that there are WTO violations, it recommends to the responding party to bring its disputed measures into conformity with its WTO obligations. Panel proceedings are supposed to take no more than nine months but have sometimes taken longer in complex cases.

Appellate Body Once a panel has issued its report, the report or any part of it may be appealed by either party to a standing Appellate Body, which has 90 days to issue its own report. The Appellate Body may only review issues of law covered in the panel report and legal interpretations developed by the panel. Pursuant to Article 17 of the DSU, the Appellate Body may uphold, modify, or reverse the legal findings and conclusions of the panel, but may do no more.

Implementation/Compliance Upon completion of the panel and, if any, Appellate Body proceedings, the panel report and, if any, Appellate Body report are formally adopted

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by the Dispute Settlement Body (DSB) (unless there is a consensus not to adopt, which has so far never happened). Adoption by the DSB gives legal effect to the report or reports and a Member whose measures have been found in violation of its WTO obligations is expected to take such steps as necessary to bring the WTO-inconsistent measures into compliance with the relevant applicable WTO agreement. This sets off the fourth and final stage of the WTO dispute settlement process – the implementation phase. Generally, a Member whose measures have been found to be WTOinconsistent is given a reasonable period of time to comply. Such period can be decided by mutual agreement by the parties or pursuant to arbitration under Article 21.3 of the DSU. If the responding Member takes steps to comply and such steps are disputed by the complaining Member, a compliance panel consisting of the original panelists may be convened to determine whether the steps taken to comply are WTO-consistent. If a responding Member fails to comply, the complaining Member is entitled to take offsetting retaliatory measures until compliance is achieved. If there is a disagreement between the parties as to the appropriate level of offsetting retaliatory measures, such level is also subject to arbitration by the original panel members. In all instances where a Member has failed to comply in a case, the case remains under the surveillance of the WTO membership as a whole in the DSB until compliance is achieved.

4 Key institutions involved in the operation of the system The primary institutions involved in the operation of the WTO dispute settlement system are the DSB, panels, arbitral bodies, the Appellate Body and Appellate Body Secretariat, and the WTO Secretariat. The DSB is the political body comprised of all 148 WTO Members that oversees the operation of the dispute settlement system, including the establishment of panels, the adoption of panel and Appellate Body reports, the authorization of retaliatory measures, and the surveillance of cases for which compliance with panel and Appellate Body reports has not yet been achieved. Panels are ad hoc three-person bodies that are established to adjudicate disputes that have not been resolved at the consultation stage. A new and distinct panel is composed to hear each case for which a Member has requested a panel proceeding. Panels are often compared to trial courts within domestic legal systems. The Appellate Body is a permanent institution composed of seven individuals each of whom serves a four-year term, which is renewable once. As noted above, the Appellate Body may uphold, reverse, or modify panel findings, but only on issues of law and


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legal interpretation. The Appellate Body is assisted by its own Appellate Body Secretariat, which operates separately and independently from the WTO Secretariat. Subsequent chapters are devoted to each of these three institutions – the DSB, panels, and the Appellate Body. Consequently, with respect to the institutions involved in the operation of the WTO dispute settlement system, this chapter examines in more detail only the role of the WTO Secretariat in dispute settlement.

The role of the WTO Secretariat The DSU assigns specific functions to the WTO Secretariat regarding the operation of the WTO dispute settlement system. In particular, the DSU assigns to the Secretariat certain responsibilities in the panel composition process as well as certain responsibilities regarding assistance to panels and to Members. With respect to panel composition, Article 8 directs the Secretariat to maintain an indicative list of governmental and non-governmental individuals from which panelists might be drawn as appropriate. In addition, when panels are being composed, after they have been established by the DSB, the Secretariat is to propose nominations for the panel to the parties to the dispute. Moreover, if there is no agreement on the panelists within 20 days after the date of the establishment of a panel, at the request of either party, the Director-General, in consultation with the Chairman of the DSB and the Chairman of the relevant Council or Committee, shall appoint the individuals who shall serve on the panel, after consulting with the parties to the dispute. With respect to other dispute settlement responsibilities of the Secretariat, Article 27 provides that the Secretariat is to assist panels, especially on the legal, historical, and procedural aspects of panel proceedings, and also to provide secretarial and technical support. The Secretariat is also to provide legal advice and assistance of a general nature to Members with respect to dispute settlement, and also to make available to developing country Members a qualified legal expert from the technical cooperation services to assist developing countries in a manner that ensures the continued impartiality of the Secretariat. In order to carry out this mandate, the Secretariat has retained outside counsel for this purpose. Finally, the Secretariat is directed to conduct special training courses in dispute settlement for requesting Members. Within the Secretariat, there are a number of different divisions that are involved in the dispute settlement work of the WTO. The Council Division

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assists in the operation of the DSB. The Rules Division assists in panel composition and panel operation in rules cases (i.e. anti-dumping, subsidies and countervailing measures, safeguards). The Legal Affairs Division assists in panel composition and panel operation in all non-rules cases, in all arbitrations involving the appropriate level of retaliation, and in all other arbitrations and mediations (other than ‘reasonable period of time’ arbitrations, which are carried out by an Appellate Body member with the assistance of the Appellate Body Secretariat). The Legal Affairs Division also operates the Dispute Settlement Registry, which is the central repository and distribution centre for all documentation in panel proceedings (e.g. panel communications, party submissions, third party submissions, administrative records, etc.); maintains the Secretariat’s dispute settlement databases; and prepares the Secretariat’s regular legal publications on dispute settlement (e.g. Analytical Index, Dispute Settlement Reports). The Legal Affairs Division also provides ongoing training for Members on the DSU, in cooperation with the Secretariat’s Institute for Training and Technical Cooperation. Finally, other operational divisions of the Secretariat work with the Legal Affairs Division in assisting panels on those disputes involving subject matter for which those operational divisions have particular expertise (e.g. the Intellectual Property Division would assist with a panel considering TRIPS issues, the Agriculture and Commodities Division would assist with a panel considering issues arising under the Agreement on Agriculture, etc.).

5 WTO dispute settlement activity: a statistical snapshot of the first ten years As can be seen from the accompanying chart in Annex I on WTO dispute settlement activity for the first ten years of the WTO (1995–2004), the dispute settlement system has been used frequently by WTO Members. There were 324 cases formally initiated under the system during the period (i.e. formal consultations requested within the framework of Article 4 of the DSU and, as applicable, the consultation provisions of other WTO legal instruments). On average, a little over 30 new cases a year were initiated in the WTO, with a high of 50 cases in 1997 and a low of 19 cases in 2004. About one half of the complaints (159) resulted in the establishment of 129 panels by the DSB. (Note: Where there are multiple complaints dealing with the same subject matter, only one panel will be formed to


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adjudicate the complaints.) However, in not all instances where the DSB established a panel was the panel actually composed to adjudicate the complaint(s) since the disputing parties sometimes were able to resolve the matter after the panel had been established but before the panel had actually been composed. There were 107 panels actually composed during the period to rule on 137 complaints. The parties to the dispute were able to agree on the panelists in 49 panels but had recourse to the Director-General to compose, in whole or in part, 58 out of the 107 panels (or 54 per cent of the time). Of the 89 original panel reports that had been circulated by the end of 2004 (not including three for which a solution was agreed prior to issue of the final report), 59 were appealed. This means that roughly two out of every three original panel reports were appealed. About one out of every six original panel reports eventually led to the formation of an Article 21.5 compliance panel (14 out of 89). Of the 14 compliance panel reports issued, eight were appealed, or 58 per cent, which is a slightly lower percentage than that for the appeal of original panel reports. There were 19 Article 21.3 arbitrations (concerning the ‘reasonable period of time’) and nine Article 22.6 arbitrations covering 16 complaints (concerning the level of retaliation). Except in two isolated cases, Members did not resort to the good offices, mediation, or general arbitration provisions of the DSU. Annex II provides a case history for each of the 92 cases for which panel and/or Appellate Body reports were circulated to Members during the period 1995–2004.

6 Member participation in the WTO dispute settlement system The information contained in Annexes III and IV shows the extent to which WTO Members have been involved in WTO dispute settlement activities during the first ten years. Annex III lists for each WTO Member the number of cases in which such Member has been involved in formal consultations or panel proceedings – either as a complaining party, a responding party, or a third party. Annex IV lists the number of times a Member was involved in appellate proceedings, either as a complaining party or a responding party. As can be seen from Annex III, 40 Members initiated formal consultations under the DSU and 30 Members requested the establishment of panels. Forty-four Members were the target of formal consultation requests,

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but only 23 Members were the responding party in panel proceedings. Forty-four Members also joined formal consultations as third parties, while 65 Members joined panel proceedings as third parties. As can be seen from Annex IV, only 29 Members participated as either a complaining or responding party in an appellate proceeding. In addition, over half of all WTO Members participated as ‘third participants’ in appellate proceedings (although this information appears nowhere in the annexes). The United States was the WTO Member most involved in WTO dispute settlement activity during the first ten years. It was a complaining party or responding party in 62 per cent of all panel proceedings and an appellant or appellee in 66 per cent of all appellate proceedings (not including appeals under Article 21.5). The European Communities was the second most active as a party in panel and appellate proceedings. The other most frequent participants as complaining or responding parties were Argentina, Australia, Brazil, Canada, Chile, India, Japan, Korea, Mexico, and Thailand.

7 Substantive nature of WTO cases As can be seen from the information in the chart in Annex V, of the 89 cases through 31 December 2004 for which original panel and Appellate Body reports had been circulated to WTO Members, 42 per cent (37 out of 89) were trade remedy cases (i.e. anti-dumping, subsidy/countervailing measures, safeguards) while 58 per cent (52 out of 89) were non-trade remedy cases involving claims primarily under the other WTO agreements (e.g. GATT 1994, Agriculture/SPS, TRIPS, GATS, etc.). Although not illustrated in the annexes, the more recent trend in the substantive nature of WTO cases has indicated that a much higher percentage of cases now being litigated in the WTO are trade remedy cases than was historically the case during the first ten years.

8 Compliance/retaliation – experience in the first ten years Although there have been some high profile exceptions, the compliance record of WTO Members with adverse panel and Appellate Body reports has been very good. In virtually every case where panel and Appellate Body reports were adopted by the DSB, the losing party indicated to the DSB its intent to comply with panel and Appellate Body rulings and recommendations. As noted previously, in about one out of every six cases during the first ten years, there was a disagreement over whether the


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measures taken by a losing party to comply were sufficient and this led to further WTO litigation under an Article 21.5 compliance panel, and in some cases, eventually the authorization of retaliatory measures. Experience has indicated that in those cases where compliance could be achieved through administrative measures by the executive branch of a Member government, the compliance record of Members was nearly perfect. For example, the United States, which was the Member against whom the most cases were brought in the first ten years, was able to comply administratively with adverse panel and Appellate Body reports in some 20 cases. Compliance was more problematic in cases where legislative measures were needed to bring a Member into compliance. Here again, the US experience is illustrative. Although the US Administration was able to persuade the US Congress to pass remedial legislation for the first time in 2004 in two WTO cases (i.e. US – 1916 Act, US – FSC), the US Administration was still seeking remedial legislation from the Congress at the end of 2004 in four other WTO cases in order to bring itself into WTO compliance (i.e. US – Offset Act (Byrd Amendment), US – Section 211 Appropriations Act, US – Section 110(5) Copyright Act, US – Hot-Rolled Steel). Although retaliation is only used as a last resort in WTO dispute settlement and WTO Members generally seek to avoid recourse to retaliation, there were 16 requests (relating to seven panel/AB proceedings) for DSB authorization of retaliatory measures in the first ten years. All 16 of these requests subsequently led to arbitration under Article 22.6 regarding the proper level of retaliation. The cases in which retaliation was ultimately authorized by the DSB, at the level established by an arbitrator, were EC – Bananas III (at the request of the United States and Ecuador), EC – Hormones (at the request of the United States and Canada), Canada – Aircraft Credits and Guarantees (at the request of Brazil), Brazil – Aircraft (at the request of Canada), US – 1916 Act (at the request of the EC), US – FSC (at the request of the EC), and US – Offset Act (Byrd Amendment) (at the request of Brazil, Canada, Chile, EC, India, Japan, Korea and Mexico).

9 Some concluding observations The WTO dispute settlement system was able to retain a strong level of support from WTO Members during the first ten years of the WTO. WTO Members showed great respect for observing the rules of the DSU and the agreed practices that evolved in the first decade of operation of the system.

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WTO Members also showed great respect for the decisions emanating from panels and the Appellate Body, even where they strongly disagreed with those decisions. The Members’ continuing respect for the system resulted in a generally high level of compliance with adverse decisions from the adjudicating bodies. An extraordinarily large number of individuals – nearly 180 from 47 different Members – served as panelists on the 107 different panels composed during the ten-year period. Seventy-five per cent of these individuals were from Member governments, while 25 per cent were non-governmental. This brought a great deal of diverse expertise and experience to the WTO panel process. A number of WTO cases proved to be legally complex and highly factintensive, which placed burdens on the system perhaps not originally foreseen by the WTO membership. However, the system proved resilient enough still to be able to process these cases within reasonable time frames. There was a slowdown in the number of new cases filed during 2004. As a result, the level of new panel activity was expected to diminish in 2005 as compared with historical levels (particularly in the non-rules areas) as the existing panels concluded their work. On the other hand, based on what was in the pipeline, it was foreseen that 2005 would be more active than usual for the Appellate Body and compliance panels as compared with historic levels.

4 The role of the Dispute Settlement Body in the dispute settlement process bozena mueller-holyst 1 Counsellor, Council and TNC Division, WTO Secretariat

Let me start by describing exactly what the Dispute Settlement Body (DSB) is. The Dispute Settlement Body is in fact the General Council, the supreme decision-making body of the WTO in the absence of the Ministerial Conference, which convenes to discharge the responsibilities provided for in the Dispute Settlement Understanding (DSU). The DSB is composed of the representatives of all Members. It has its own Chairman, usually with the rank of ambassador, who is elected from among the representatives of Members at the beginning of the year to preside over the proceedings of DSB meetings. The DSB also has the power to establish rules of procedure as it deems necessary for the fulfilment of those responsibilities. To this effect, from the outset, the DSB developed working practices in order to handle practical matters such as submissions of notifications and circulation of dispute settlement documents at times when legal deadlines might fall on a WTO non-working day. However, it is important to note that the DSB’s main role is to provide a framework to enable WTO Members to express their views and to provide their comments on the legal interpretations and reasonings of panels and the Appellate Body. Members are also free to raise any procedural matters related to the operation of the DSU; in that way, they maintain a certain influence over the process and exercise a certain amount of control in relation to what is being done by panels and the Appellate Body. As the dispute settlement process is governed by strict deadlines within which the DSB must take action, the DSB meets as often as necessary in order to carry out its functions within the deadlines. There are two types of meetings: regular meetings and special meetings. Dates for regular 1


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meetings are set out at the beginning of each year and such meetings are scheduled once a month. Special meetings are convened at the request of a Member in order to meet a particular deadline in case no regular meeting is scheduled during that period of time. On average, there are two meetings of the DSB per month, one regular and one special. As a decision-making body, the DSB has the authority to establish dispute settlement panels, adopt panel and Appellate Body reports, maintain surveillance of implementation of the rulings and, finally, authorize retaliation when a country does not comply with the rulings. Thus, the DSB is central in the whole dispute settlement process and has different functions throughout this process. Let me illustrate this by expanding a bit more on the role of the DSB at different stages of the dispute settlement process. At the first stage, when the complaining party officially notifies its trade dispute to the DSB and requests consultations with another WTO Member, the DSB does not play an active role. Once a formal complaint is filed, countries have 60 days to talk to each other to see if they can resolve their differences. If consultations are not successful, the next step in the process is for the complaining party to request the DSB to establish a panel to examine the case. Upon request, the DSB has to establish a panel unless there is a consensus not to do so. This is because the DSB operates on a negative consensus principle. This means that, upon request, the DSB must decide automatically to take action within the framework of the DSU rules unless there is a consensus not to do so. In reality, however, it is difficult to have a consensus not to establish a panel. Thus, panels are established automatically upon the second request, since the responding party has the right to reject the establishment of the panel when the item appears on the DSB agenda for the first time. It is also possible for the complaining party to ask the DSB to hold a special meeting (as opposed to a regular meeting) to accelerate the process. The terms of reference of panels are normally standard as provided for in Article 7 of the DSU. However, if countries cannot agree on standard terms of reference, again upon request, the DSB may authorize its Chairman to draw up special terms of reference in consultation with the parties to a dispute. This has happened in the past at least once and as a result the DSB did indeed authorize its Chairman to proceed in this manner. Finally, at the stage of the establishment of a panel, Members often raise procedural issues, but the DSB does not deal with those issues and

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normally refers them for decision by the panel. Once a panel’s proceedings have begun, the DSB has no involvement, except that it has to be notified if the panel decides to suspend its proceedings as well as in situations where the panel cannot issue its report within six months. After a panel report is circulated as a WTO document, it must be adopted or appealed within 60 days from the date of circulation. Under current practice, a decision to place panel reports on the agenda of the DSB meeting for adoption rests with the parties to the dispute. If an appeal is filed, consideration of the panel report is postponed until the appellate review proceeding has concluded and, consequently, the item is removed from the DSB agenda. After an Appellate Body report is circulated, it must be adopted by the DSB within 30 days of its circulation. The DSB has the power to decide by consensus not to adopt the panel or Appellate Body reports. However, in reality, such reports are adopted automatically. Thus, to date every single panel and appellate body report submitted to the DSB has been adopted. As mentioned earlier, a practice has developed such that it is up to the parties to a dispute to place items on the DSB agenda; it is not the WTO Secretariat or the Chairman who determines the DSB’s agenda. If the parties to a dispute decide not to place a report for adoption within the prescribed time-period, some may argue that the legal status of such unadopted reports is unclear. To date, there has been only one unadopted panel report. Following adoption of the panel report (and, where applicable, the Appellate Body report), the party to the dispute whose measures are found to be WTO-inconsistent has to inform the DSB within 30 days of its intentions in respect of implementation of the DSB’s rulings and recommendations. A statement of intention is normally made at a DSB meeting. If there is no regular DSB meeting, the parties may agree – this is again practice – that this information may be circulated in writing. Subsequently, six months after the date of determination of the timeperiod for implementation, the next step is for the DSB to monitor progress in implementation. That means in practice that the party that is requested to bring its measure into compliance will have to provide a status report on the progress it is making in implementation. Such a status report appears on the agenda of a regular DSB meeting and remains on the agenda until implementation has occurred or the issue is resolved. The DSB only takes note of the reports and agrees to consider the matter at its next regular meeting.

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If a new WTO-consistent measure is put into place within the reasonable period of time for implementation, the DSB is informed that the implementation has been completed. However, if there is disagreement on whether a Member has brought its measure into compliance, upon request, the DSB can send the matter back to the original panel to determine if the measures taken are WTO-consistent. In addition, in case of non-compliance, the DSB has the power to authorize retaliation to induce compliance. Again the decision on this matter is taken by negative consensus, and thus such authorization is in fact granted automatically. As mentioned at the beginning, the DSB is central in the whole dispute settlement process and provides a strong institutional mechanism for the parties to the dispute to resolve their trade differences. As explained, the role of the DSB differs at various stages of the process. In areas such as implementation, some Members believe that the role of the DSB could even be strengthened. Indeed, proposals to this effect have been made in the context of the ongoing DSU negotiations.

5 Consultations and the panel process in the WTO dispute settlement system gabrielle marceau 1 Counsellor, Legal Affairs Division, WTO Secretariat

1 General features of the WTO dispute settlement system The WTO dispute settlement system is a rules-based system as opposed to a negotiation-conciliation-mediation type of dispute resolution mechanism. The system includes procedural steps that can be triggered by any WTO Member dissatisfied with another Member’s measure considered to be inconsistent with any provision of the WTO Agreement. The system allows the dissatisfied Member to obtain a legal ruling by an independent adjudicative body on its rights and obligations under the relevant agreements. The dispute settlement system of the WTO is thus quasi-judicial: independent and autonomous bodies are responsible for adjudication of disputes although formally subject to the overall authority of the Dispute Settlement Body (DSB). The jurisdiction of the DSB and therefore that of the adjudicating bodies (i.e. panels and the Appellate Body) operating under its authority has been accepted by all WTO Members through their ratification of the WTO treaty. Thus, a WTO Member cannot refuse to participate in a WTO dispute settlement procedure if a complaint is brought against it. The WTO dispute settlement system is quasi-automatic because it operates on the basis of ‘reverse, or negative, consensus’. WTO-related disputes once triggered, the process can only be stopped with the consent of all parties to the dispute. Application of the principle of automaticity to the legal steps of the dispute settlement system has evolved from the early days of the General Agreement on Tariffs and Trade (GATT). Except in the very early years where GATT contracting parties voted on decisions of 1


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the CONTRACTING PARTIES,2 GATT dispute settlement operated on the basis of a positive consensus rule. Thus, a party against whom a complaint was brought could frustrate the operation of the system by blocking a consensus to establish a panel or to adopt a panel report. This began to change with approval of the Montreal Mid-Term Review decision (1989) to improve the dispute settlement process, which provided for greater automaticity in the establishment, terms of reference and composition of panels, so that such actions would no longer depend on the consent of the defending party in a dispute. Building on the Montreal decision, the Dispute Settlement Understanding (DSU) (1995) strengthened further the system by extending the automaticity principle to the adoption of panel and Appellate Body reports and to the retaliation process. The DSU codified the GATT/WTO dispute settlement system and provides for a series of legal stages which are automatic unless the Members agree otherwise by consensus. This is ‘reverse, or negative, consensus’ because consensus is needed to ‘reverse or stop’ the automaticity of the legal steps of the dispute settlement process. The system is also binding since WTO Members have agreed to adopt panel and Appellate Body reports automatically (through the application of the reverse consensus rules, as explained below). The jurisdiction of the DSB is exclusive and limited: WTO-related disputes can only be litigated before WTO adjudicating bodies, and only WTO adjudicative bodies can decide if WTO violations exist. However, notwithstanding their significant power, while WTO adjudicating bodies can interpret the provisions of WTO agreements, they are explicitly prohibited from adding to or diminishing the rights and obligations of Members when assessing the WTO compatibility of the measures challenged. Moreover, the DSB may authorize sanctions in the case of noncompliance. The DSU also put an end to any unilateral determination by a Member of whether a violation of any WTO provision has occurred. Article 23 of the DSU provides that any dispute relating to any WTO matter can be addressed only in the WTO institutional framework. Pursuant to Article 23.1 of the DSU, no alleged WTO violation justifies resort to a unilateral retaliatory measure by a Member. If a Member believes a WTO violation has occurred, the only recourse available to it to resolve this issue is to initiate a DSU/WTO dispute settlement process and to obtain a 2

Article XXV:5 of the GATT 1947 provides that ‘where reference is made in this Agreement to the contracting parties acting jointly they are designated as the CONTRACTING PARTIES’.

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WTO determination on the matter. The DSU thus requires WTO Members to resort to the dispute settlement system of the WTO to determine if: (1) a violation of the WTO agreements has been committed; (2) the implementing measure adopted by the losing Member to comply with the recommendations of panels or Appellate Body (endorsed by the DSB) is compatible with the rules of the WTO; and (3) the level of any sanctions is in fact proportionate or ‘equivalent’ to the loss of trade benefits caused by the WTO-incompatible measure. The institutional structure of the system, which allows participation by all WTO Members in the various stages of the dispute resolution process either through the DSB or as a third party in a dispute, (even if in most cases the third parties to the dispute only have the right to make written and oral submissions, pose questions and comment on parties’ submissions) makes the WTO dispute settlement system a truly multilateral system where independent and impartial individuals adjudicate on disputes between Members. This confirms the systemic interest of the entire WTO membership in WTO law, institutions and disputes.

2 Consultations (a) The request for consultations The DSU emphasizes the importance of consultations in dispute resolution, requiring a Member to enter into consultations within 30 days of such a request from another Member. The request for consultations is made in the form of a letter identifying the basic facts and legal claims; such request is sent from one Member to another and copied to the DSB and the WTO Secretariat. If after 60 days from the request for consultations there is no settlement, the complaining party may request the establishment of a panel. In addition, if the defending party does not respond to the request for consultations within ten days of the receipt of the request or if consultations are not held within 30 days of the receipt of the request, the complaining party may request the DSB to establish a panel.

(b) Right of third parties during the consultation process Under the DSU, a third party requesting to join consultations must have a substantial trade interest. Moreover, the participation of such a third

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party at the consultation stage is only possible if consultations were requested pursuant to Article XXII of GATT 1994, and is always subject to the acceptance of the defending party. If a defending party refuses the request of another Member to join in the consultations as a third party, such other Member may always initiate its own dispute settlement procedure for the same or a similar matter. Participation of a Member as third party during the consultation process does not provide that Member with any automatic right to participate as third party in the panel process.

3 The panel process (a) Panel request After the period of consultations, if the matter is not resolved, the complaining Member can request the DSB to establish a panel. Such request for the establishment of a panel must be made in writing. It must also indicate whether consultations were held, identify the specific measures at issue and provide a brief summary of the legal basis of the complaint sufficient to present the problem clearly. In case the applicant requests the establishment of a panel with other than standard terms of reference, the written request will include the proposed text of special terms of reference. The mandate of the panel set forth in its ‘terms of reference’ is to provide a legal ruling on the claims of the complaining party contained in the panel request. The panel request is therefore crucial because it determines the ‘matters’ over which the panel has jurisdiction to rule. A ‘matter’ is generally defined to include both the measure at issue and the claim(s) of violation.

(i) The measures at issue This obligation to identify the measure and the legal basis of the complaint has been interpreted to mean that the complaining Member must specifically list all the measures being challenged and the specific WTO provisions that are claimed to be violated by each measure. Whether or not the ‘specific measures at issue’ can be said to be sufficiently identified in the Panel request will depend on whether the respondent is given proper opportunity to defend itself in light of the reference to the measure concerned. The respondent must be given adequate notice of the measure at issue.


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On several occasions panels have had to make preliminary rulings on whether a claim made by a complaining party in its written and/or oral submissions was (properly) identified in the complainant’s panel request.

(ii) Claims: legal basis Under the GATT, Article XXIII:1(a) recognized the right of any GATT contracting party to complain about a ‘violation’ of a provision of GATT by another contracting party.3 Article XXIII:1(b) and (c) also envisaged the possibility that a contracting party’s measure, action (or arguably its failure to act) or another ‘situation’ could still impair or nullify the benefits of another contracting party even if there was no violation. These are still the three bases for a complaint under the WTO dispute settlement system. Violation complaints Article 4.2 of the DSU which is based on the language of Article XXII:1 of the GATT 1994, provides that Members shall afford adequate opportunity for consultation regarding any representations made by another Member concerning ‘measures affecting the operation of any covered agreement’ taken within the territory of the former. Thus, a claim that a measure is ‘affecting’ or restricting the trade of another Member contrary to any provision of any covered agreement suffices to trigger the DSU mechanism. Article 6.2 of the DSU also requires the complaining Member specifically to identify the WTO provisions at issue, the violation of which affect that Member’s trade. Non-violation complaints The purpose of the GATT/WTO dispute settlement system is to ensure respect of the rights and obligations of the Members relating to their market access commitments and market competitive opportunities, including tariff concessions and related disciplines. In this context, Article XXIII:1(b) of the GATT allowed a party to challenge any measure that, although not in breach of the GATT 1947, had the effect of undermining the balance of rights and obligations inherent in the GATT (‘non-violation nullification or impairment’). Under the GATT, 3

Article XXIII:1 of GATT: ‘If any contracting party should consider that any benefit accruing to it directly or indirectly under this Agreement is being nullified or impaired or that the attainment of any objective of the Agreement is being impeded as the result of: (a) the failure of another contracting party to carry out its obligations under this Agreement, or (b) the application by another contracting party of any measure, whether or not it conflicts with the provisions of this Agreement, or (c) the existence of any other situation.’

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there were 13 non-violation cases addressed by panels, but only four panel reports containing conclusions on non-violation claims were eventually adopted. Under the GATT, the concept of non-violation nullification or impairment was mainly used when an otherwise GATT-consistent domestic subsidy was provided in an unexpected manner in favour of domestic goods for which tariff concessions had been negotiated. The complaining party had to prove that the subsidy measure in question was ‘unreasonable’ because a tariff concession had been negotiated on the relevant products and that such subsidy ‘nullified or impaired’ benefits accruing to the competing importing product because the value of the tariff concession had been diminished. Under Article 26 of the DSU, non-violation claims have been further regulated. Article 26 of the DSU applies when the provisions of Article XXIII:1(b) of the GATT 1994 are applicable to a covered agreement. In other words, unless explicitly excluded, non-violation claims are possible for any measures under any of the agreements of Annex 1A of the WTO Agreement (covering trade in goods). There are special provisions for non-violation claims under the TRIPS Agreement and the GATS. Situation complaints Article XXIII:1(c) of the GATT 1994 and Article 26.2 of the DSU provide for so-called ‘situation’ complaints, which have never been interpreted by either a GATT panel or a WTO panel. Some have argued that these situation complaints could be used for actions by the private sector of a Member that could not be imputed directly to the government; others believe that situation complaints could be used to avoid the argument that the situation could not have been reasonably expected. There are no situation complaints under the GATS.

(b) Presumed economic and legal interest WTO jurisprudence is clear that a complainant does not have to demonstrate any specific legal or economic interest in order to initiate WTO dispute settlement proceedings. All WTO Members are presumed to have the necessary legal and economic interests when any Member considers that its trade interests have been adversely affected by another Member’s measure. Therefore, the allegations contained in the panel requests suffice to trigger the WTO dispute settlement system, and such allegations will constitute the basis of the panel’s mandate and terms of reference.


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(c) Establishment of panels Where a dispute is not settled through consultations, the DSU requires the establishment of a panel, at the latest, at the DSB meeting following that at which a request is initially made, unless the DSB decides by consensus against establishment. Therefore, unless there is consensus not to establish a panel that has been requested, reverse consensus will operate so that a panel will automatically be established by no later than the second DSB meeting at which the panel has been requested. Article 9 of the DSU encourages multiple complaints related to the same matter to be examined by a single panel ‘whenever feasible’. The single panel should organize its examination and present its findings to the DSB in such a manner that the rights that the parties to the dispute would have enjoyed had separate panels examined the complaints, are in no way impaired. With regard to multiple complaints, the provisions of the DSU are more detailed due in part to the extensive membership of the WTO.

(d) Mandate of panels – terms of reference Under the DSU, panels usually have standard terms of reference, unless the parties to the dispute agree otherwise within 20 days from the date of establishment of the panel. The practice of the DSB, so far, has been to refer, in the standard terms of reference, to the document in which the complaining party(ies) has(ve) requested the establishment of the panel, and to leave it to the panel to decide on any jurisdictional issue, the applicable law and whether adequate consultations have taken place before the establishment of a panel. Under the DSU, the jurisdiction of panels is therefore determined with reference to the claims of violation listed by the complaining party in its panel request, as discussed above.

(e) Selection of panelists (i) Choosing panelists Once a panel has been established, the parties, with the assistance of the WTO Secretariat, will proceed to the selection of panelists. Panels normally consist of three persons of appropriate background and experience from countries not party to the dispute. Citizens of WTO Members whose governments are parties or third parties to the dispute cannot, unless the

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parties to the dispute agree otherwise, serve as panelists for that dispute. The process is usually initiated by the WTO Secretariat, which suggests names of possible panelists. To ensure the selection of qualified individuals and to facilitate the selection of panelists, the Members have established an ‘indicative list’ containing the names of potential governmental and non-governmental panelists recommended by WTO Members. Panelists do not have to be selected from the indicative list, but the list has been especially useful as a source of expertise for the new more specialized agreements under the WTO (e.g. TRIPS Agreement, GATS). Both parties have to agree on each of the three panelists. If parties do not agree on the three panelists, either party (but usually the complaining party) can request the Director-General of the WTO to nominate such panelists. The Director-General will only nominate the number of panelists that have not already been agreed by the parties. In practice, the Director-General has been called on to select panelists, either in whole or in part, in just over half the disputes.

(ii) Rules of conduct The NAFTA Code of Conduct served as the basis for the US proposal for a WTO Code of Conduct for individuals involved in WTO dispute settlement. The US proposal was submitted to the GATT contracting parties on 9 November 1994, during the work of the Preparatory Committee for the WTO. The DSU itself also includes provisions referring to the obligations of panelists, such as maintaining the confidentiality of the proceedings and deliberations (in Articles 14.1, 17.10 and 18.2); and, the necessity for panels to make objective assessments which presupposes some independence and the impartiality of panelists (Article 11 of the DSU, also mentioned in Articles 8.2 and 8.9). However, the DSU does not contain any disclosure obligation (concerning conflicts of interest) nor any challenge procedure to allow parties to contest a panelist who might have a conflict of interest. Such an obligation now exists in the DSU Rules of Conduct. The new DSU Rules of Conduct4 now cover three groups: (1) panelists (experts, arbitrators); (2) the Appellate Body members (and its support staff); and (3) WTO Secretariat staff. Those covered persons5 are required to be independent and impartial, to avoid direct or indirect conflicts 4 5

WT/DSB/RC. A covered person includes: (a) Appellate Body Members and staff; (b) panel members, experts and arbitrators; and (c) WTO staff assisting on panels.


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of interest, and to maintain confidentiality. To ensure respect for these obligations, each covered person must: (1) respect the provisions of the DSU; (2) disclose anything that may cause a party to question that person’s independence or impartiality; and (3) avoid conflict of interest. Once panelists have been selected and the terms of reference have been determined, the panel is deemed ‘composed’ and can proceed to its organizational meeting.

(f) Organizational meeting and timetable Within a week of the panel’s composition, the panel will usually meet with the parties to discuss the organization of its work. After these consultations with the parties, the panel will finalize its procedures and its timetable on the basis of the DSU and its Annexes, and the parties’ comments.

(g) Panel procedure and timetable Basic panel procedures and timetable are set out in the DSU and in its annex 3, although panels are free to modify these procedures as they deem appropriate, after consultations with the parties.

(i) Confidentiality Deliberations of the panel and documents submitted to it are confidential, but nothing in the DSU precludes a party to a dispute from disclosing statements of its own positions to the public. Members must treat as confidential information submitted by another Member to the panel which that Member has designated as confidential. Where a party to a dispute submits a confidential version of its written submissions to the panel, it must also, upon request of a Member, provide a non-confidential summary of the information contained in its submissions that could be disclosed to the public. (ii) Rules of procedure As noted above, the standard rules of procedures are those contained in the DSU regarding the dispute process together with those contained in Appendix 3 to the DSU. Under the DSU, each panel must adopt its rules of procedure but the DSU sets out maximum, minimum and standard timelimits within which various legal steps must be performed. Most panels’ rules of procedure now contain provisions on preliminary rulings; on experts, if relevant; on notification; and on any other matter relevant

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to the specific dispute. More recently, some panels have annexed their working procedures to their final report.

(iii) Use of experts The idea of using a ‘group of experts’ in panel proceedings was introduced into the DSU negotiations in November 1993, apparently in response to concerns of US environmentalists. The procedure was borrowed from NAFTA. Article 13.2 and Appendix 4 of the DSU provide that each panel has the right to seek information and technical advice from any individual or body it deems appropriate. Article 13.1 provides that panels also ‘may seek information from any relevant source and may consult experts to obtain their opinion on certain aspects of the matter’. Certain agreements (Agreement on Technical Barriers to Trade (TBT Agreement) and the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement)) encourage or even require that experts be consulted in dispute settlement proceedings. In practice, panels have not used the procedure for expert groups but rather have resorted to individual experts. In EC – Hormones the Appellate Body upheld the Panel’s decision to request the opinion of experts on certain scientific and other technical matters raised by the parties to the dispute rather than establish an expert review group, because ‘the Panel considered it more useful to leave open the possibility of receiving a range of opinions from the experts in their individual capacity’.6 So far, experts have been relied on primarily in the context of complaints relating to the SPS Agreement or involving an environmental protection defence under Article XX of the GATT 1994, though at times they have been called upon in other situations.7 A panel may, in fact, need additional information in order to evaluate evidence already before it in the course of determining whether the claiming or the defending Member, as the case may be, has established a prima facie case or defence. However, panels cannot use their investigating powers under Article 13 of the DSU to ‘make the case for the complaining party’.8 It is also on the basis of Article 13 of the DSU that panels may consider unsolicited amicus curiae briefs received from non-parties to a dispute. 6 7 8

Appellate Body Report on EC – Hormones, para. 146. Experts were also used for instance in the Panels on US – Shrimp; Japan – Agricultural Products II; Australia – Salmon; and Japan – Film. See Appellate Body Report on Japan – Agricultural Products II, para. 129.


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(iv) Rights of third parties Under the DSU, Members that have a ‘substantial interest’ in a matter before a panel and that have notified their interest to the DSB can become third parties. In practice a systemic interest suffices to constitute a substantial interest. Therefore, contrary to the situation at the consultation stage, third parties at the panel stage do not need to have a specific trade interest in the dispute or the consent of the respondent in order to participate as a third party. Third parties receive the first submissions of the parties, can make written submissions and are given an opportunity to participate in the first meeting of the panel – there is usually a special session for third parties during the first meeting of the panel with the parties, where they can make oral submissions to the panel. Although third parties generally are not given the right to attend the second panel meeting, some panels have provided enhanced third party rights in special circumstances. Only those Members that have been third parties during the panel process can become third parties before the Appellate Body. Third parties that have notified the DSB of their substantial interest in the matter, and that comply with the rules of procedure of the Appellate Body, can become third parties in a dispute before the Appellate Body. (h) Exchange of the written submissions Before the first substantive meeting of the panel with the parties, the panel receives written submissions from the parties in which they present the facts of the case and their arguments. Parties will exchange their first set of written submissions in a sequential manner according to the timetable determined at the organizational meeting. After the first panel meeting, parties will then exchange simultaneous rebuttals (second written submissions). Unless otherwise indicated, written submissions are confidential but any Member may request a non-confidential summary of a party’s written submission to a panel.

(i) Hearings before the panel (i) Oral presentations by the parties (and third parties) At the first substantive panel meeting, the complaining party will present its evidence and legal arguments orally. It will usually submit a written copy of its oral statement which often contains the complaining party’s first response to the first submission of the defending party. Subsequently,

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and still at the same meeting, the defending party will present its views. All third parties in the dispute will also be invited to present their views at the first substantive meeting of the panel during a session set aside for that purpose. After responding to the panel’s questions at the first meeting and filing their written rebuttals (second written submissions), the parties will meet with the panel for a second time. At the second meeting (which usually takes place four to six weeks after the first meeting), the defending party will usually take the floor first, followed by the complaining party.

(ii) Questions by the panel and the parties Traditionally, panels ask both factual and legal questions of the parties and third parties. Parties are invited to respond orally and are also given time to respond in writing in the days following the panel meeting. Indeed, between the first and the second meeting, parties will usually have to answer numerous questions posed by the panel as well as submitting their written rebuttals. As already mentioned above, Article 13 of the DSU also allows a panel to seek information and opinions from individual experts or to establish an expert review group, as it deems appropriate in a particular case. But in all cases panels must respect due process and cannot set aside the rules on allocation of the burden of proof. (iii) Burden of proof Neither the DSU nor the Working Procedures for panels contained in Appendix 3 of the DSU make reference to the burden of proof on parties to a dispute.9 Referring to the general practice of international tribunals, the Appellate Body addressed the issue at length in US – Wool Shirts and Blouses 10 , where it stated:11 ‘[I]t is a generally-accepted canon of evidence in civil law, common law and, in fact, most jurisdictions, that the burden of proof rests upon the party, whether complaining or defending, who asserts the affirmative of a particular claim or defence. If that party adduces evidence sufficient to raise a presumption that what is claimed is true, the burden then shifts to the other party, who will fail unless it adduces sufficient evidence to rebut the presumption . . . .’ 9 10 11

See J. Pauwelyn, J. ‘Evidence, Proof and Persuasion in WTO Dispute Settlement: Who Bears the Burden?’, Journal of International and Economic Law, Vol. 1 (1998), p. 227. Appellate Body Report on US – Wool Shirts and Blouses, pp. 12–16, DSR 1997:I, 323, at 333–338. Ibid., p. 14. The Appellate Body Report on US – Gasoline had already established that the burden of demonstrating that a measure falls under one of the justified exceptions to Article XX is on the country invoking the exception, p. 16, DSR 1996:I, 3, at 16.


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It is important to remember that the significant investigative authority given to panels under Article 13 of the DSU cannot be used by a panel to rule in favour of a complaining party that has not established a prima facie case of WTO-inconsistency based on specific legal claims asserted by it.12 A panel is entitled to seek information and advice from experts and from any other relevant source it chooses, pursuant to Article 13 of the DSU and, in an SPS case, Article 11.2 of the SPS Agreement, but only to help it to understand and evaluate the evidence submitted and the arguments made by the parties and not to make the case for a complaining party.

(iv) Legal interpretation by the panel Article 3.2 of the DSU mandates the use by panels and the Appellate Body of customary principles of interpretation of public international law in the determination of the WTO rights and obligations of parties to a dispute. Panels and the Appellate Body must also respect customary rules of international law when interpreting WTO provisions. In its first report, the Appellate Body stated: ‘[The] GATT is not to be read in clinical isolation from public international law.’13 In a subsequent early case, the Appellate Body also stated that certain general principles of international law such as good faith, due process, rules on the burden of proof and the right to adequate representation before WTO panels and the Appellate Body, to which no explicit reference is made in the DSU or the WTO Agreement, are applicable to DSU disputes and are to be taken into account when interpreting WTO provisions.14 (v) Standard of review In US – Underwear, the Appellate Body affirmed the Panel’s determination that the standard of review to be used in DSU proceedings is that described in Article 11 of the DSU: a panel is to make ‘an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements’.15 The Anti-Dumping Agreement contains a distinct though not entirely different standard of review in Article 17.6, but for all other cases the standard of review in Article 11 of the DSU is to be applied. 12 13 14

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Appellate Body Report on Australia – Salmon, para. 129. Appellate Body Report on US – Gasoline, p. 16, DSR 1996:I, 3, at 16. See Panel Report on Korea – Procurement: ‘Customary international law applies generally to the economic relations between WTO Members. Such international law applies to the extent that the WTO treaty agreements do not “contract out” from it.’ para. 7.96. Panel Report on US – Underwear, para. 5.50.

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(vi) Participation of private lawyers In general, a Member that is party to a dispute is free to determine the composition of its delegation in panel and Appellate Body proceedings. This includes the decision to enlist the services of private counsel. The question of the propriety of participation by private counsel first arose in EC – Bananas III, where the Appellate Body stated:16 ‘We can find nothing in the Marrakesh Agreement Establishing the World Trade Organization (the ‘WTO Agreement’), the DSU or the Working Procedures, nor in customary international law or the prevailing practice of international tribunals, which prevents a WTO Member from determining the composition of its delegation in Appellate Body proceedings. . . . we rule that it is for a WTO Member to decide who should represent it as members of its delegation in an oral hearing of the Appellate Body.’

This ruling, which applied to Appellate Body proceedings, was extended to panel proceedings in Indonesia – Autos. WTO Members are now regularly represented by private counsel at all stages of the panel and Appellate Body proceedings.

(j) Issuance of the descriptive part of the panel report Usually within four weeks after its second meeting, the panel will issue the draft descriptive part of its report, to which parties are invited to make comments within two weeks. The panel will then take into account the suggestions by the parties and modify its descriptive part accordingly.

(k) Issuance of the panel’s interim report Subsequently, the panel will issue an interim panel report, including the revised descriptive part and the interim findings and conclusions of the panel on the legal issues. Again the panel will invite the parties’ comments on this interim report. Parties are also entitled to request another meeting with the panel. A practice has developed whereby the parties forego their right to a review hearing with the panel, in exchange for the opportunity to submit a second set of comments on the written comments provided by the other party in the interim panel report. Subsequently, the final report of the panel will be issued to the parties before it is translated into the two other official languages of the WTO (usually Spanish and French since the working language of almost every panel is English) and then circulated to all Members. 16

Appellate Body Report on EC – Bananas III, para. 12.


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(l) Conclusions of a panel report (i) Standard conclusion and recommendation of panels Panel and Appellate Body reports will identify specific WTO violations where they are found to exist but leave to sovereign WTO Members the flexibility, during a reasonable period of time, to rectify the WTOviolative governmental measure(s) in a WTO-compatible manner. It has been argued that Article 19 of the DSU limits the scope of remedies available to a panel once it concludes that a challenged measure is inconsistent with the WTO Agreement. Article 19.1 reads as follows: ‘Where a panel or the Appellate Body concludes that a measure is inconsistent with a covered agreement, it shall recommend that the Member concerned bring the measure into conformity with that agreement. In addition to its recommendations, the panel or Appellate Body may suggest ways in which the Member concerned could implement the recommendations.’

In practice, panel and Appellate Body reports usually contain one general recommendation, which usually reads: ‘. . . recommends that the DSB request such Member to bring its measure(s) into conformity with the covered Agreements mentioned above’.

(ii) Suggestions by the panel In addition to its recommendations, the DSU panel or Appellate Body may suggest ways in which the Member concerned could implement the recommendations. But these suggestions are only suggested ways in which a Member ‘could’ decide to implement. It is, however, possible for parties to a WTO dispute to agree on any form of compensation to resolve the matter. (iii) Non-violation claims Under Article 26.1(b) of the DSU, the standard remedy for non-violation claims is compensation (usually, by providing increased market access by reducing tariffs for other products) since panels cannot recommend that the losing party withdraw the measure in question or bring the contested law into conformity with the WTO as the measure or law is already WTO compatible. (iv) Judicial economy Even though a complaining party is required to list all of the claims it wishes to have examined in its request for the establishment of a panel, the panel is under no obligation to examine and reach a finding on each and

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every listed claim. Rather, it may exercise judicial economy by declining to rule on successive claims after it has found WTO violations in response to one or more claims. The Appellate Body in Australia – Salmon, stated:17 ‘To provide only a partial resolution of the matter at issue would be false judicial economy. A panel has to address those claims on which a finding is necessary in order to enable the DSB to make sufficiently precise recommendations and rulings so as to allow for prompt compliance by a Member with those recommendations and rulings “in order to ensure effective resolution of disputes to the benefit of all Members”. ’

However, a panel’s decision to exercise judicial economy and not to address certain claims may result in the Appellate Body deciding, after overturning some of the panel’s legal findings, to adjudicate on claims that were not addressed in the panel report by a technique known as ‘completing the analysis’.

(m) Duration of the panel process It is envisaged that a panel should normally complete its work within six to nine months or, in cases of urgency, within three months.18 If a panel cannot complete its work within nine months from its establishment, it must notify the DSB accordingly. Most panels usually take around nine months from the date of their composition to complete their work.

(n) Adoption of the panel report After the final panel report is issued to the parties, it will be translated into the three official languages of the WTO (English, Spanish and French) before it is circulated to all Members. Article 16 of the DSU provides that the panel report, if not appealed within 60 days following its circulation to WTO Members, must be adopted unless Members, by consensus, decide not to do so. However, a panel report cannot be considered for adoption during the first 20 days after its circulation to WTO Members. Members having objections to a panel report must give written reasons for their objections at least ten days prior to the DSB meeting at which the panel report will be considered. The virtually automatic adoption of DSU panel reports is considered a dramatic change from GATT practice. The 17 18

Appellate Body Report on Australia – Salmon, para. 223. Articles 12.8 and 20 of the DSU.


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Members’ decision to make adoption virtually automatic was balanced by the creation of an appellate process to ensure that contested or controversial legal findings in panel reports could be reviewed and possibly reversed or modified, before they were given legal effect.

(o) Developing countries The DSU contains a number of provisions which take into account the specific interests of developing and least-developed countries.19 One such provision is Article 27, which allows developing countries to request the Secretariat to provide them with the services of legal experts. This provision has been used with growing frequency by developing countries which are now actively involved in most WTO panels, either as parties or third parties. Their participation in the WTO dispute settlement system is remarkable when compared with the old GATT, where disputes usually involved only developed countries.

(p) Alternative dispute resolution Article 5 of the DSU provides that the good offices of the Director-General of the WTO, conciliation or mediation may be requested at any time by any party to a dispute. If the parties to a dispute agree, procedures for good offices, conciliation or mediation may continue while the panel process proceeds. For this reason, there is an explicit provision that requires the confidentiality of any particular position taken by the parties during these good offices, conciliation or mediation. In addition, Article 25 of the DSU provides for arbitration as an alternative means of dispute resolution.20 Such arbitration procedure must be mutually agreed between the parties and notified to the DSB; it is not subject to appeal to the Appellate Body but remains subject to the provisions on implementation and suspension of concessions and obligations (Articles 21 and 22 of the DSU). 19 20

Article 27 and various provisions throughout the DSU. This type of arbitration is to be distinguished from the arbitration that may take place in the context of the surveillance, implementation and retaliation process under the DSU.

6 Contingent trade remedies and WTO Dispute Settlement: some particularities jesse kreier 1 Counsellor and Chief Legal Officer, Rules Division, WTO Secretariat

1 Introduction A great deal of attention has been given in recent years to WTO dispute settlement in respect of contingent trade remedies. Although the majority of the disputes have involved, and much of the interest has focused on, anti-dumping, there have been numerous disputes relating to countervailing and safeguard measures as well. Given the widespread use of contingent trade remedies by numerous WTO Members, the attention given to their treatment in dispute settlement is unlikely to diminish in the near-term. This chapter starts from the premise that contingent trade remedies are unusual in the WTO system, in that the relevant agreements assign to the Members the responsibility for conducting investigations to determine whether the conditions necessary in order to impose the measures in question are fulfilled. The paper examines the implications of this fact for WTO dispute settlement regarding contingent trade remedies in several contexts: the standard of review applied by panels and the Appellate Body; the factual basis on which dispute settlement is conducted; the treatment of confidential information gathered by Members’ investigating authorities; the nature of the claims brought to and of the findings made by the dispute settlement system; and the possible implications in terms of implementation of any recommendations of the Dispute Settlement Body. 1

The views expressed are those of the author and do not represent a position, official or unofficial, of the WTO Secretariat or WTO Members. The author wishes to express his appreciation to Judith Czako, Susan Hainsworth and Dominique Laporte for their useful comments.

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2 Background – the nature of contingent trade remedies Although the term ‘contingent trade remedies’ does not appear in the WTO Agreement, it is a useful shorthand for referring to three types of measures provided for in the Agreement: anti-dumping, countervailing (or ‘anti-subsidy’) and safeguard measures.2 Although these measures differ in many important respects, what they have in common is that in each case a WTO Member is authorized, where certain conditions – the ‘contingencies’ implied in the term ‘contingent trade remedies’ – are fulfilled, to impose measures that would otherwise be inconsistent with core obligations under the WTO Agreement. Thus, Article VI of the GATT 1994 and the Anti-Dumping Agreement authorize a WTO Member to impose anti-dumping duties on a non-MFN (MostFavoured-Nation) basis – indeed, on a producer or exporter-specific basis – and at levels which may be in excess of its WTO bindings, where dumped imports cause or threaten injury to a domestic industry in the importing Member or materially retard the establishment of such an industry. Article VI and the Agreement on Subsidies and Countervailing Measures similarly authorize countervailing measures where subsidized imports cause or threaten such injury. Finally Article XIX and the Agreement on Safeguards authorize a WTO Member to impose duties in excess of bound rates, or in the alternative quantitative restrictions, where, as a result of unforeseen developments, increased imports cause or threaten serious injury to a domestic industry in the importing Member. For the purposes of this paper, what is of interest is not the precise nature of the substantive conditions that must be fulfilled in order for a Member to impose a contingent trade remedy measure, but the question of who determines whether those conditions have been fulfilled and whether a measure may therefore be imposed. Although in principle the relevant agreements could have assigned the responsibility to make these determinations to GATT/WTO bodies, the drafters of the GATT 1947 and subsequently of the WTO Agreement did not do so. Rather, they tasked the importing Member itself with determining, in the first instance, whether those conditions were satisfied. Trade remedies can thus in some regards be viewed as ‘unilateral’ measures, in the limited sense that, although they are authorized by the WTO Agreement, they are imposed in the first 2

Other measures that arguably fall within the definition were transitional safeguard measures pursuant to the now-expired Agreement on Textiles and Clothing, and the product-specific special safeguards provided for in China’s Protocol of Accession.

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instance based on a decision by the importing Member itself and without the need to seek any form of advance authorization. One could argue that this situation is not unique to trade remedies. In some sense, after all, it is to be hoped that Members consider whether any measures they plan to take are permissible under the WTO Agreement before taking them. Thus, for example, a Member presumably considers whether a subsidy it plans to provide is allowed by the Agreement on Subsidies and Countervailing Measures or by the Agreement on Agriculture before granting it. In perhaps a more closely analogous case, the Agreement on the Application of Sanitary and Phytosanitary Measures requires a Member to base the application of a sanitary or phytosanitary measure on a risk assessment. That said, the manner in which the WTO rules on contingent trade remedies assign to Members responsibility for determining whether the conditions set out in the relevant WTO agreements are fulfilled is, to say the least, a rather particular feature which might be expected to have implications for dispute settlement in the area. This does not of course mean that contingent trade remedy measures are outside multilateral control. Determinations by Members that the conditions necessary to apply such a measure exist are subject to WTO dispute settlement, which is precisely the topic of this chapter. It is however evident, and it must have been evident to the drafters that, while dispute settlement would represent the final word on the WTO-consistency of a measure, systematic recourse to dispute settlement as the primary guarantor of such consistency was neither feasible nor desirable. The sheer number of trade remedy measures would, if regularly challenged in the WTO, promptly bring the dispute settlement system to its knees. At the same time, a protracted dispute settlement process spanning several years would be a poor substitute indeed for proper decisions made in the first instance by importing Members. For this reason, while GATT/WTO disciplines in respect of trade remedies identify the substantive conditions for the imposition of contingent trade remedy measures, they also regulate the process leading to the judgement whether to impose such measures. Uniquely, the agreements governing contingent trade remedies direct Members to make determinations on the basis of investigations and spell out detailed rules governing not only the content of these determinations but also how those investigations are to be conducted. Thus, the Anti-Dumping Agreement and Subsidies Agreements provide that anti-dumping/countervailing measures may only be applied pursuant to investigations initiated and conducted in


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accordance with the Agreement, and a very substantial portion of the Agreements are dedicated to ‘procedural’ issues relating to the investigation, such as the process by which investigations are initiated, transparency, due process and participatory rights of interested parties, public notice and explanation of determinations and judicial review. While the relevant provisions of the Agreement on Safeguards are less detailed, it does oblige Members to determine that the relevant conditions are met before applying a safeguard measure and sets forth rules governing the conduct of investigations. These disciplines seek to ensure that the investigating authorities in the importing Member reach proper results by considering the relevant evidence, hearing the views of interested parties, and explaining their conclusions.

3 Implications for dispute settlement (a) Standard of review A great deal has been said and written about the issue of the standard of review to be applied by panels and the Appellate Body when reviewing the factual determinations of Members, both in the general WTO dispute settlement context and specifically in the context of contingent trade remedies, including in this publication. This chapter will therefore touch only lightly on this important issue. As an initial matter, it is worth noting that the very question of the standard of review to be applied by panels when reviewing determinations of investigating authorities presupposes a division of labour between the Member and the WTO dispute settlement system which is particular to contingent trade remedies. In many types of disputes it is the panel which is the initial finder of fact. Thus, in a case under Article I or III of the GATT 1994, a panel may have to consider whether one product is ‘like’ another, while in a case under Part III of the Agreement on Subsidies and Countervailing Measures the panel may have to determine whether a subsidy has caused serious prejudice to the interests of another Member. In these situations, it is the panel which receives the evidence and makes the initial findings. As noted above, in contingent trade remedy cases, on the other hand, the relevant agreements task the domestic investigating authorities with the obligation to conduct an investigation and to make the relevant determinations in the first instance. A threshold issue presented in these cases is what role, if any, the determinations of investigating authorities should play in the panel process.

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Put differently, the question is whether the role of a panel is to review the determination of the investigating authorities on whether the substantive conditions for application of a contingent trade remedy are met, or whether its role is to itself decide whether those conditions are met.3 There has never been any serious doubt about the answer to this question, however. Given the functions assigned to investigating authorities by the relevant agreements, panels have consistently reviewed the determinations of investigating authorities in trade remedy cases. They have not sought to assume the role of initial finders of fact. This approach has never been seriously contested, and the Appellate Body’s repeated and unambiguous statements that the role of a panel is not to conduct a de novo review of the evidence confirm this approach.4 Thus, the issue of standard of review relates not to whether a panel should review investigating authorities’ determinations but to the degree of deference a panel should accord – or, put differently, the level of scrutiny that a panel should apply – when reviewing these determinations.5 The Appellate Body has found that Article 11 of the Dispute Settlement Understanding (DSU) provides the standard of review to be applied by WTO panels ‘in respect of both the ascertainment of the facts and the legal characterization of such facts’: that standard is to ‘make an assessment of the facts before it, including an objective examination of the facts of the case and the applicability of and conformity with the relevant covered agreements’.6 The Appellate Body summarized its approach to the application of Article 11 in the context of trade remedies as follows: 3

4 5

6

A third possibility – that a panel would be restricted to confirming that a determination was made, and could not examine the substance of the determination – was rejected early on. See GATT Panel Report on New Zealand – Imports of Electrical Transformers from Finland, L/5814 dated 19 June 1985, para. 4.4. See, e.g., Appellate Body Report on US – Cotton Yarn, para. 74. An interesting exception relates to the level of a safeguard measure. Article 5.1 of the Agreement on Safeguards provides that a Member shall apply a safeguard measure ‘only to the extent necessary to prevent or remedy serious injury and to facilitate adjustment’. In Korea – Dairy, the Appellate Body ruled that a Member was not generally required to justify in its determination the level of its safeguard measure. Appellate Body Report on Korea – Dairy, paras. 93–103. In the absence of such a determination, a panel presumably would be required to consider this issue de novo. In US – Line Pipe, the Appellate Body confirmed this ruling, but noted that compliance with the obligation to separate and distinguish the injurious effects of factors other than increased imports should provide a ‘benchmark’ against which the permissible extent of the measure could be determined. Appellate Body Report on US – Line Pipe, para. 236. Appellate Body Report on EC – Hormones, para. 118.


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‘[P]anels must examine whether the competent authority has evaluated all relevant factors; they must assess whether the competent authority has examined all the pertinent facts and assessed whether an adequate explanation has been provided as to how those facts support the determination; and they must also consider whether the competent authority’s explanation addresses fully the nature and complexities of the data and responds to other plausible interpretations of the data. However, panels must not conduct a de novo review of the evidence nor substitute their judgement for that of the competent authority.’7

It is evident that this standard does not flow out of Article 11 of the DSU in isolation, but is the product of the interaction between the general standard of review established by that article and the agreements on contingent trade remedies themselves, which task the Members with making the relevant determinations and thus identify what the panel is to review, i.e. the Members’ determinations. While Article 11 of the DSU is the general basis for a panel’s standard of review of factual determinations by investigating authorities, there is a specific provision governing the issue in the context of anti-dumping measures. Article 17.6(i) of the Anti-Dumping Agreement provides that: ‘[I]n its assessment of the facts of the matter, the panel shall determine whether the authorities’ establishment of the facts was proper and whether their evaluation of those facts was unbiased and objective. If the establishment of the facts was proper and the evaluation was unbiased and objective, even though the panel might have reached a different conclusion, the evaluation shall not be overturned.’

In its consideration of this provision, the Appellate Body has stated that ‘it is important to bear in mind the different roles of panels and investigating authorities. Investigating authorities are charged, under the AntiDumping Agreement, with making factual determinations relevant to their overall determination of dumping and injury. Under Article 17.6(i), the task of panels is simply to review the investigating authorities’ “establishment” and “evaluation” of the facts.’ That said, the Appellate Body noted that a panel must still perform an ‘assessment’ of the facts, that this closely reflected in the requirement under Article 11 of the DSU to perform an ‘objective assessment’ of the facts, that this requirement ‘clearly necessitated an active review or examination’ of the facts, and that it could 7

Appellate Body Report on US – Cotton Yarn, para. 74.

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see no ‘conflict’ between Article 11 of the DSU and Article 17.6(i) of the Anti-Dumping Agreement.8

(b) Factual basis for the review As we have seen, a panel’s assessment whether the conditions for the application of a contingent trade remedy have been fulfilled is based upon a review of the determination made by the domestic investigating authorities. The authorities’ determination will perforce be based upon the facts that the authorities had before it in the investigation underlying its determination. Given that the review by a panel of the investigating authorities’ determination focuses upon the authorities’ examination and evaluation of the facts, it follows as a matter of logic that the focus of the panel’s work will be the information that was before the authorities at the time the determination was made. This proposition, which seems on its face rather straightforward and commonsensical, is reflected in the AntiDumping Agreement in Article 17.5(ii), which provides that a panel shall examine a matter ‘based upon . . . the facts made available in conformity with appropriate domestic procedures to the authorities of the importing Member’. As is usually the case, however, even seemingly simple issues present complexities. One issue relates to distinguishing between efforts by a party to a dispute to present new facts, on one hand, as opposed to repackaging or presenting arguments related to facts that were before the investigating authorities on the other. Thus, panels have ruled that a party to a dispute is not prevented by Article 17.5(ii) from preparing new tables based upon data drawn from the investigating authorities’ record,9 nor from considering affidavits submitted by an expert witness and intended to demonstrate that data in the record could in fact have been corrected to serve as the basis for calculating dumping margins.10 Although in practice panels have performed their work on the basis of facts on the record before the investigating authorities, it is to be recalled that one aspect of the panel’s standard of review as elucidated by the Appellate Body is to consider whether the investigating authorities 8

9 10

Appellate Body Report on US – Hot-Rolled Steel, para. 55. The Appellate Body on EC – Hormones declined to generalize this standard of review (para. 114). In US – Lead and Bismuth II, the Appellate Body ruled that this standard was not applicable to panels’ reviews of countervailing measures, paras. 44–51. Panel Report on EC – Bed Linen, para. 6.43. Panel Report on US – Steel Plate, para. 7.13.


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‘evaluated all relevant factors’ and ‘examined all the pertinent facts’. Some commentators have read these requirements as suggesting that a panel might be required to consider non-record evidence for the limited purpose of showing that the investigating authorities had failed to consider certain facts or factors, and it is worth noting that the Appellate Body in US – Cotton Yarn declined to consider certain data offered by a party to the dispute, in effect, to impeach the import data relied on in the investigation not because the data was not put before the national authority, but because the data did not yet exist at the time of the investigation.11 That said, the author is aware of no case where a panel or the Appellate Body has, in a contingent trade remedy case, relied upon evidence not found in the record of the underlying investigation when assessing whether the investigating authorities made a proper determination on an issue of substance during the investigation.12

(c) Confidential information The WTO Agreements on Anti-Dumping, Subsidies and Countervailing Measures, and Safeguards contain specific provisions requiring WTO Members to protect confidential information submitted to them in an investigation. Members are specifically enjoined from disclosing this information without the consent of the party submitting it. The reasons for this rule are obvious – complainants should not bring trade remedy cases simply to uncover their competitors’ business secrets, nor should they be deterred from bringing cases by the fear that their own business secrets will be revealed; respondents should not be faced with the Hobson’s choice of revealing their business secrets to their competitors or accepting that trade remedy measures will be imposed against them on the basis of facts available. The need to protect confidential information is considered so important that the interested parties to an investigation are 11

12

See Appellate Body Report on US – Cotton Yarn, para. 78. It may however be relevant that this case involved a transitional safeguard measure under the Agreement on Textiles and Clothing. As the Appellate Body observed, Article 6 of the Agreement on Textiles and Clothing does not guarantee the participation of all interested parties in this type of investigation. (para. 76). In such cases, there is no mechanism to insure that the investigating authority includes relevant evidence in the record, and thus perhaps greater justification not to limit WTO review to the record. As of this writing, a Member has appealed a panel report on the grounds that the panel relied on extra-record evidence. See US – Countervailing Duty Investigation on DRAMs, Notification of an Appeal by the United States, WT/DS296/5.

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not allowed access to it,13 in spite of the obvious difficulties that interested parties may experience in vigorously presenting their cases. At the same time, the task of a panel is to review the adequacy of the investigating authorities’ determination, including whether the authorities have examined all the pertinent facts, and assess whether an adequate explanation has been provided as to how those facts support the determination and whether their explanation addresses fully the nature and complexities of the data and responds to other plausible interpretations of the data. It is difficult to imagine how a panel could perform those functions unless it has access to the relevant facts, including confidential information, that were before the investigating authorities. There is therefore a question as to the interaction between the provisions requiring the protection of confidential information on the one hand, and the need for panels to review that information on the other. This issue has been addressed specifically by at least one WTO Member in its trade remedy legislation. For the purposes of proceedings before a panel or the Appellate Body established under the DSU, Canada’s Special Import Measures Act specifically provides for an exception to the rule precluding the divulgation of confidential information submitted by a person in the context of the dumping or subsidy investigation phase. By contrast, the position of the United States in WTO dispute settlement has been that US law does not permit it to release information submitted to the investigating authorities, including to a WTO panel, without the consent of the party submitting it.14 It is likely that the legislation of most Members does not specifically address the issue. Not surprisingly, this issue has emerged in WTO dispute settlement. A number of observations can be made based on these cases. First, at least one panel has explicitly rejected the argument that a Member is precluded by the confidentiality provisions of a WTO agreement from submitting information to a WTO panel,15 while the Appellate Body appears to be of the same view.16 The Appellate Body has further made clear that the 13

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Except that, in a handful of WTO Members (most notably, Canada and the United States), as recognized in Anti-Dumping Agreement footnote 17 and Subsidies Agreement footnote 42, disclosure is required pursuant to a ‘narrowly-drawn protective order’. See Panel Reports on US – Lead and Bismuth II, para. 6.5 and US – Lamb, para. 5.59. See US – Lead and Bismuth II, Panel Report, para. 6.7 (Referring to the Article 13 of the DSU authorization to panels to seek information, and stating that ‘[w]e are not convinced that the proprietary nature of the information precludes us from requesting (or the United States from submitting) the information . . .’). In US – Wheat Gluten, the issue before the Appellate Body was whether the Panel violated Article 11 of the DSU in not drawing adverse inferences from the failure of the United


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failure to submit information can have serious consequences, in the sense that it may give rise to ‘appropriate’ inferences (US – Wheat Gluten). More fundamentally, the failure of a Member to submit the information on which it relied may simply preclude a panel from finding that an investigating authority properly established and evaluated the facts. At the same time, panels have shown an awareness of the need to exercise restraint in seeking confidential information, and have gone to substantial lengths to try to perform their functions on the basis of more limited disclosure.17 Finally, panels have repeatedly emphasized their willingness to create special procedures beyond the general rules in the DSU to protect ‘business confidential’ information (BCI).18 The question of the adequacy of protection for confidential information in the WTO dispute settlement system is of course a central issue in this discussion. It is difficult to seriously assert that the general provisions in Article 18 of the DSU and in the indicative Working Procedures in Annex 3 to the DSU are adequate to protect truly sensitive business information, taking into account the wide and un-monitored diffusion of panel submissions, the access of third parties to some submissions, the fact that parties are free to determine the composition of their own delegations (which often include the lawyers for affected private parties or even employees of the parties themselves), the absence of any procedures for handling confidential information and the lack of any sanctions for non-compliance. Panels have sought on an ad hoc basis to fill in lacunae through additional procedures. These procedures have included defining the universe of persons eligible to view confidential information (excluding employees of business competitors, for example), requiring these persons to sign a declaration of non-disclosure, limiting the number of copies and (in some cases) requiring that information be held only in the WTO Secretariat and in Geneva missions, requiring return or destruction of information at the

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States to submit information. The United States responded, inter alia, that the information was business confidential, and that under Article 3.2 of the Agreement on Safeguards it was entitled to withhold it from the Panel. Although the Appellate Body upheld the Panel’s decision not to draw adverse inferences in the case at hand, it emphasized a panel’s power to seek information under Article 11 of the DSU and the ‘duty’ and ‘obligation’ of parties to provide it, and ‘deplored’ the conduct of the United States. Paras. 168–176. E .g .,Panel Report in US – Line Pipe, para. 7.4 (ruling that a request for the full confidential record was unduly broad and could include information not necessary to an objective assessment); Panel Report in US – Lamb, para. 5.65 (accepting confidential information submitted in indexed form). See, e.g., Panel Report on Thailand –H-Beams, paras. 5.1–5.6.

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conclusion of the dispute, and ensuring that any confidential information would be redacted from the panel’s report.19 The DSU however imposes a number of constraints on these procedures. For example, panels have consistently declined requests that confidential information be provided only to the panel (and not to the other parties) on the grounds that this would be an ex parte communication prohibited by Article 18.1 of the DSU. Similarly, panels have declined to proscribe third party access, as this would be inconsistent with Article 10.3 of the DSU. In addition, none of these procedures contain or could be reasonably expected to contain real sanctions for non-compliance. Nor is there any way that a panel can ensure that information submitted to it under BCI procedures will receive comparable protection if the case is appealed.20 The Appellate Body in US – Wheat Gluten expressed its ‘strong agreement’ with the panel that there was a ‘serious systemic issue’ as to the procedures which should govern the protection of confidential information submitted to a panel.21 The issue has been put on the table in the current negotiations regarding the DSU, and is now in the hands of WTO Members to resolve.

(d) Nature of claims and findings The fact that it is the domestic investigating authorities that are tasked in the first instance with determining whether contingent trade remedy measures may be imposed has significant implications in terms of the nature of the claims brought to WTO dispute settlement and of the findings made by panels and the Appellate Body. First, and as previously emphasized, the relevant agreements contain numerous provisions that relate in the broad sense to ‘procedural’ issues. These provisions are intended to ensure, inter alia, that the determinations by investigating authorities are based upon the fullest and most 19

20

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All these elements were features of the first BCI procedures, which were developed for the aircraft subsidy disputes between Brazil and Canada and are probably the most stringent ever adopted. See Panel Report on Brazil – Aircraft, Annex 1; Panel Report on Canada – Aircraft, Annex 1. Although these procedures were not in the context of contingent trade remedies, they have been used as a starting point for subsequent disputes regarding trade remedies. In fact, the Appellate Body on Canada – Aircraft and Brazil – Aircraft rejected the joint request by Brazil and Canada to adopt BCI procedures for the purposes of their appeals, on the grounds that the existing rules in the DSU and the Rules of Conduct provided adequate protection. Appellate Body Report on US – Wheat Gluten, para. 170.


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reliable information, that the investigation process takes place in a transparent manner, that the parties have a full opportunity to protect their interests, and that the investigating authorities thoroughly motivate their determinations. It is therefore not surprising that the claims brought to WTO dispute settlement often relate to alleged violations of the procedural requirements of the relevant agreements, such as failure to notify the exporting government before initiating an anti-dumping investigation, failure to inform interested parties of the essential facts forming the basis for the decision whether to apply definitive anti-dumping measures, or failure to provide an adequate opportunity to interested Members for consultations prior to applying a safeguard measure. Even where the claims are ones of ‘substance’ – i.e., they relate directly to whether the substantive conditions for imposing a contingent trade remedy are fulfilled – they generally are expressed in terms of the failure of investigating authorities to make proper findings or to demonstrate that the conditions are fulfilled, rather than whether the conditions in fact exist. In fact, the distinction between ‘substance’ and ‘procedure’ in contingent trade remedy cases is blurry at best. By way of example, it is quite common for a complainant to allege that an anti-dumping duty was not properly imposed because a Member violated its obligation under Article 3.4 of the Anti-Dumping Agreement to evaluate all of the factors having a bearing on the state of the industry listed in that Article. That the claims take this form is not surprising given that it is the determination of the investigating authorities that the panel must review. Obviously, the role of the panel in reviewing determinations of domestic investigating authorities affects not only the nature of the claims brought but also that of the findings made. Panels do not find that the conditions for imposing contingent remedies do not exist, but rather that the domestic investigating authorities have failed in their national proceedings to establish that they exist. The treatment of the requirement of ‘unforeseen developments’ provides an example of this. In US – Lamb both the panel and the Appellate Body found that the United States acted inconsistently with Article XIX:1(a) of the GATT 1994 because it did not demonstrate before applying the safeguard measure the existence of unforeseen developments.22 Given that the United States investigating authorities simply had not addressed the issue of unforeseen developments in their determination, neither the panel nor the Appellate Body was prepared to address US arguments on 22

Appellate Body Report on US – Lamb, para. 75.

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the issue, even to the extent those arguments were based on facts on the record.23 This approach was consistent with the oft-stated position of panels in the contingent trade remedy area that they will not consider ex post facto rationalizations not reflected in the underlying determinations. In US – Steel Safeguards, the issue of unforeseen developments was again addressed. In that case, the Appellate Body upheld the finding of the panel that the United States ‘failed to provide a reasoned and adequate explanation’ demonstrating that unforeseen developments had resulted in increased imports causing serious injury to the relevant domestic producers.24 The panel remarked that ‘the weakness of the USITC report is that, although it describes a plausible set of unforeseen developments that may have resulted in increased imports, it falls short of demonstrating that such developments actually resulted in increased imports into the United States causing serious injury to the relevant domestic producers’.25 The findings of the WTO dispute settlement system in these cases were not that unforeseen developments did not exist. In fact, the panel in US – Steel Safeguards arguably implied that the USITC might well have been able to make a supported determination that unforeseen developments existed. Rather, the findings were simply that the investigating authorities had failed to actually demonstrate in the underlying investigation that they existed. Given the division of labour between the investigating authorities and the WTO dispute settlement system in the contingent trade remedy area, it was not for the panels in question to fill in the gaps and themselves determine whether unforeseen developments existed.26

(e) Implications for implementation Article 19.1 of the DSU provides that, where a panel or the Appellate Body find that a measure is inconsistent with a covered agreement, it shall 23

24 25 26

Panel Report on US – Lamb, paras. 7.37–7.43, Appellate Body Report on US – Lamb, para. 75. It is worth noting that the complainants had not alleged a ‘procedural’ violation of Article 3.1 of the Agreement on Safeguards, which requires the competent authorities to publish a report setting forth findings and reasoned conclusions on all pertinent issues of fact and law. Appellate Body Report on US – Steel Safeguards, para. 513(a). Panel Report on US – Steel Safeguards, para. 10.122. While the importing Member applying a contingent trade remedy measure is limited to the explanations it provided at the time it made its determination, a Member complaining before the WTO dispute settlement system is not by contrast restricted to the arguments it made before the investigating authority. See Wheat Gluten, para. 56 (overturning Panel ruling that an investigating authority need only consider ‘other factors’ that were ‘clearly raised’ by the parties).


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recommend that the Member concerned ‘bring the measure into conformity’ with that agreement. To the extent that a complainant challenges a determination, or some action of the importing Member taken in relation to a contingent trade remedy, the measure ultimately targeted will presumably be the duty or other measure affecting imports. As we have seen, however, the basis for the challenge to a contingent trade measure, and for any findings of inconsistency, will usually be a fault in the process or reasoning leading to and justifying the application of the measure, rather than in the nature of the measure itself.27 The nature of the violations found in contingent trade remedy cases can be expected to affect the ways in which implementation of the Article 19.1 recommendation is to be achieved. In most non-trade remedies cases, where a measure is found to be inconsistent with the WTO Agreement, implementation will be achieved by modifying the measure to remove the inconsistency, or by eliminating the measure altogether. Thus, where a Member is found to have imposed an internal tax that discriminates against imports in violation of Article III:2, that Member might be expected either to eliminate the discriminatory treatment or to eliminate the tax. Similarly, where a Member has been found to have provided domestic support in excess of its reduction commitments under the Agreement, it might be expected to reduce its levels of domestic support to bring them within its commitments. In the case of contingent trade remedies, where the problem rests with the justification for the measure, or the process leading to its imposition, rather than its inherent nature, implementation in practice has taken different forms. Of course, a Member’s response to a finding of inconsistency and recommendation to bring a measure into conformity may be simply to eliminate the measure. More frequently, however, a Member will perform some form of re-determination to comply with the recommendation of the DSB. In Mexico – Corn Syrup, for example, the panel found that the investigating authorities’ determination of threat of injury was flawed in several respects, and Mexico responded by requesting additional information from the parties and performing a re-determination which it considered to correct the errors identified by the panel.28 Similarly, in EC – Bed Linen, the European Communities implemented panel findings by 27

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This is however not necessarily always the case. For example, one could imagine a challenge based on the form or nature of the measure, such as a safeguard measure that was not applied on an MFN basis. Panel Report on Mexico – Corn Syrup (Article 21.5 – US), para. 6.3. Mexico’s redetermination did not, however, survive Article 21.5 review.

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performing a re-determination in which it calculated new (lower) dumping margins and made a new injury determination.29 In US – Hot-Rolled Steel, the United States also re-calculated the dumping margins in a manner designed to respond to the recommendations of the DSB.30 In Argentina – Ceramic Tiles, the re-determination resulted in the revocation of the anti-dumping measure on the grounds that no dumping was detected.31 While a re-determination could result in a finding that a measure is not justified, or that the level of a measure is too high, this is not however the inevitable result. It is entirely possible, for example, that an investigating authority, having evaluated in a re-determination an Article 3.4 Anti-Dumping Agreement factor that it had previously failed to consider, could determine that an affirmative finding of injury was still warranted.32 Similarly, while it may be likely that the re-calculation of dumping margins in a re-determination will result in lower margins, this is not inevitably the case, as was recently demonstrated in US – Softwood Lumber V.33 Thus, a victory in WTO dispute settlement on a contingent trade remedy matter may not always yield the results a complainant hoped for. The issue of implementation may be even more problematic where the fault is purely one of process. A good example involves the case of failure of Guatemala to notify Mexico pursuant to Article 5.5 of the Anti-Dumping Agreement before initiating an anti-dumping investigation regarding imports from Mexico. In Guatemala – Cement I, the panel rejected ‘harmless error’ as a defence to the claim of violation, and 29 30

31 32

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Panel Report on EC – Bed Linen (Article 21.5 – India), para. 2.6. Notice of Determination Under Section 129 of the Uruguay Round Agreements Act: AntiDumping Measures on Certain Hot-Rolled Flat-Rolled Carbon-Quality Steel Products from Japan, 67 Fed. Reg. 71936 (3 December 2003). The new margins were lower than those determined in the original investigation. Argentina – Ceramic Tiles, Status Report by Argentina, WT/DS189/8. This appears to have been the result of Egypt’s re-determination in Egypt –Steel Rebar. In response to findings relating to the dumping margin, on the other hand, Egypt found reduced margins for two exporters. See WT/DSB/M/155, paras. 17–20. The Appellate Body on US – Softwood Lumber V found that the United States had acted inconsistently with Article 2.4.2 of the Anti-Dumping Agreement by ‘zeroing’ when combining the results for different models when using a weighted-average to weighted-average comparison methodology. Appellate Body Report, paras. 76–117. The United States in its Section 129 re-determination re-calculated the margins using a transaction-to-transaction methodology, and the margins were higher than those determined in the original investigation. See Notice of Determination Under Section 129 of the Uruguay Round Agreement Act: Anti-Dumping Measures on Certain Softwood Lumber Products from Canada, 70 Fed. Reg. 22636 (2 May 2005). Canada has challenged the final results of the re-determination under Article 21.5 of the DSU. See WT/DS264/16.


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found that the presumption of nullification and impairment had not been rebutted, but noted that the notion of harmless error could be relevant to the question of what steps a Member should take in order to implement a panel’s recommendations.34 Indeed, how does a Member in fact bring an anti-dumping measure ‘into conformity’ when the flaw is a failure to consult before initiating the investigation? Unless one accepts the proposition that a procedural flaw invalidates a resulting measure and that the whole proceeding must therefore always be redone – an approach which would seem draconian and which would encourage Members to seek out the most minor procedural flaws – it may well be that in such a case no concrete steps are required for implementation.35 Of course, panels do have the authority under Article 19.1 of the DSU to ‘suggest ways in which the Member concerned could implement the recommendations’, and complainants frequently request that a panel suggest revocation of a trade remedy measure. Given the nature of the findings made in the area of contingent trade remedies, it is perhaps not surprising that panels have generally been reluctant to use that authority, and only rarely suggest that a Member revoke a measure.36

(f) Conclusion The WTO Agreement authorizes Members to determine whether the conditions for imposing contingent trade remedies are met. At the same time, it imposes on Members substantial obligations in terms of the process leading to and the rigour underlying those determinations. When brought before the WTO, this means that it is the process and the determination that are subject to dispute settlement, not directly the presence or absence 34 35

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Panel Report on Guatemala – Cement I, paras. 7.42–7.43. And yet the Panel on Guatemala – Cement I stated, in finding that the presumption of nullification and impairment was not rebutted, that ‘while it is possible that the investigation would have proceeded in the same manner had Guatemala timely notified Mexico before proceeding to initiate the investigation, we cannot say that the course of the investigation would not have been different’. Ibid, para. 7.42. Two exceptional cases were Guatemala – Cement I, para. 8.6 (where the Panel found, unusually, that an unbiased and objective investigating authority ‘could not properly have determined’ based on the evidence available to it at the time, that there was sufficient evidence to initiate an investigation, and that the entire investigation thus rested on an insufficient basis and should never have been conducted); Panel Report on Argentina – Poultry Anti-Dumping Duties, paras. 8.6–8.7 (Finding the violations – which included initiation flaws – to be of a ‘fundamental nature and pervasive’ and concluding that, in light of their extent and nature, ‘we do not perceive how Argentina could properly implement our recommendation without revoking the anti-dumping measure’).

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of the substantive conditions themselves, and that review in WTO dispute settlement is conducted on the basis of the record in the underlying investigation. While this allows complainants to challenge multiple aspects of the process followed in the investigation and the reasoning on which the determination is based, the nature of the findings will often leave substantial space for an importing Member to re-examine and perhaps maintain its measure.

7 The making of the ‘World Trade Court’: the origins and development of the Appellate Body of the World Trade Organization peter van den bossche 1 Professor of International Economic Law, Maastricht University

1 Introduction The Appellate Body of the World Trade Organization (WTO) heard and decided its first appeals case in 1996. By 1 January 2005, the Appellate Body had heard and decided 64 appeals from WTO panel reports. The body of case law generated by the Appellate Body over the past nine years is, both in quantitative and qualitative terms, impressive. The Appellate Body’s case law is highly authoritative and has made a significant contribution to the development of international trade law. The decisions of the Appellate Body in, for example, US – Shrimp and EC – Asbestos, have effectively put an end to complex and sensitive disputes between WTO Members. Both panels and parties in WTO disputes have shown, and continue to show, much deference to the case law of the Appellate Body. The Appellate Body 1

Professor of International Economic Law and Head of the Department of International and European Law, Maastricht University; former Counsellor and Acting Director, WTO Appellate Body Secretariat, Geneva. This contribution is an abstract of a paper entitled ‘From Afterthought to Centerpiece: The WTO Appellate Body and its Rise to Prominence in the World Trading System’, presented at the international conference on ‘The WTO at 10: The Role of the Dispute Settlement System’,held in Stresa, Italy, on 11–13 March 2005. The papers presented at this conference will be published by Cambridge University Press. For a detailed explanation of the WTO dispute settlement system and the role of the Appellate Body therein, see P. Van den Bossche, The Law and Policy of the World Trade Organization: Text, Cases and Materials (Cambridge University Press, 2005), 172–306. For the statistical data on WTO dispute settlement used in this contribution, see http://www.worldtradelaw.net. It was C.-D. Ehlermann, a former member and Chairman of the WTO Appellate Body, who referred in a 2002 article in the Journal of World Trade to the Appellate Body as the ‘World Trade Court’ (see C.-D. Ehlermann, ‘Six Years on the Bench of the “World Trade Court”: Some Personal Experiences as Member of the Appellate Body of the WTO’, Journal of World Trade, 2002, pp. 605–639).

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is undisputedly the most important organ of WTO dispute settlement. The Appellate Body is, all but in name, the ‘World Trade Court’. The key question addressed in this article is: what explains the prominent status, which the Appellate Body and its case law have achieved since 1996? Was the ‘success’ of the Appellate Body and its emergence as the World Trade Court ‘predetermined’ by its constituent instruments or is it primarily the result of other factors that have affected the Appellate Body and its case law in the past nine years?

2 The humble origins of the Appellate Body The Understanding on the Rules and Procedures for the Resolution of Disputes, commonly referred to as the Dispute Settlement Understanding (DSU), provided in Article 17.1 that ‘a standing Appellate Body shall be established by the [WTO Dispute Settlement Body]’. Pursuant to this mandate, the Dispute Settlement Body (DSB) established the Appellate Body by its Decision of 10 February 1995 (WT/DSB/1). The DSU was one of the principal achievements of the Uruguay Round of Multilateral Trade Negotiations (1986–1993). The DSU established a more effective system to resolve trade disputes. Compared to the dispute settlement system of the GATT, the most significant innovation provided for by the DSU concerned the introduction of the ‘reverse consensus’ requirement for the adoption of panel reports. For a panel report to become legally binding, it no longer has to be adopted by consensus as was required under the GATT dispute settlement rules. Under the DSU rules, adoption by ‘reverse consensus’ suffices. A panel report is adopted by ‘reverse consensus’ unless there is a consensus not to adopt the report. It is clear that the latter situation is very unlikely to occur. Under the new WTO dispute settlement system, the adoption of panel reports by the DSB is therefore quasi-automatic. The introduction of the ‘reverse consensus’ requirement for the adoption of panel reports resolved the problem of blockage and paralysis of the dispute settlement system which had existed under the GATT. However, the prospect of losing effective control over the adoption of panel reports made the negotiators quite apprehensive. It would no longer be possible to stop ‘bad’ panel reports from becoming legally binding. As a safety measure against such ‘bad’ panel reports, the negotiators provided for an appellate review mechanism. The introduction of appellate review was a quid pro quo for the quasi-automatic adoption of panel reports. When they agreed to the establishment of a standing Appellate Body to which

the making of the ‘world trade court’

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parties could appeal from panel reports, the ambitions of most, if not all, participants in the negotiations were, however, quite modest. They certainly did not intend to create a strong, international court at the apex of the new dispute settlement system. On the contrary, they only wanted to ensure that their biggest innovation, namely the quasi-automatic adoption of panel reports by the DSB, would not have the undesirable sideeffect of leaving WTO Members without protection from the occasional ‘bad’ panel report. The decision to establish a standing Appellate Body to provide such protection was an inspired afterthought, rather than the reflection of a grand design to create a strong, new international court.

3 The Appellate Body as established The proposition that the decision to establish a standing Appellate Body was an afterthought, rather than the reflection of a grand design to create a strong, new international court, finds support in the relevant provisions of the DSU as well as in the Decision of February 1995 on the establishment of the Appellate Body. As noted above, Article 17 of the DSU provides for the establishment of ‘a standing Appellate Body’. The choice of the unappealing, technical, non-descriptive term ‘Appellate Body’ as the name for this new institution, is telling for the aspirations of the negotiators. It is no coincidence that the new institution was not called the World (or International) Trade (Appeals) Court (or anything similar with the word ‘court’ in it). It is no coincidence either that Article 17 does not refer to the persons serving on the Appellate Body as ‘judges’, but merely as ‘persons’. Article 17 first defines the task of the Appellate Body in very general terms as hearing appeals from panel cases, but subsequently, narrows the scope of appellate review and the mandate of the Appellate Body considerably. Pursuant to Article 17.6 of the DSU, appeals are limited to issues of law covered in the panel report and legal interpretations adopted by the panel. Generally speaking, the panel’s findings on factual issues thus escape appellate review. The Appellate Body must address each of the legal issues raised during the appellate review proceeding but its mandate is – according to Article 17.13 of the DSU – ultimately limited to upholding, modifying or reversing the panel’s legal findings and conclusions. Access to appellate review is also limited. Only parties to the dispute can appeal a panel report; third parties or other WTO Members cannot appeal a panel report, even if their interests are clearly at stake. According to Article 17.1 of the DSU, the Appellate Body shall be composed of seven persons. Compared with international courts, such as the

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International Court of Justice (ICJ), the International Criminal Court (ICC) and the International Tribunal for the Law of the Sea (ITLoS), which comprise 15, 18 and 21 judges respectively, the small size of the WTO Appellate Body is striking. Moreover, Article 17.1 provides that appeals are never heard by the Appellate Body en banc, but always by only three of the seven persons serving on the Appellate Body. It is clear that the authority of rulings by the full Appellate Body would have been greater than the authority of rulings by three persons, a number which does not exceed the number of panelists who ‘produced’ the panel report under review. As to the qualifications required of persons serving on the Appellate Body, Article 17.3 of the DSU reflects rather limited expectations. Persons serving on the Appellate Body must be ‘persons of recognized authority, with demonstrated expertise in law, international trade and the subject matter of the covered agreements’. In comparison, the Statute of the ICJ requires that judges of the ICJ are ‘persons of high moral character, who possess the qualifications required in their respective countries for appointment to the highest judicial offices, or are jurisconsults of recognized competence in international law’ (emphasis added). Similarly high requirements exist for judges of, for example, the ICC and the ITLoS. As provided for in Article 17.2 of the DSU, persons serving on the Appellate Body are appointed for a term of four years, renewable only once. Judges of the ICJ, ICC and the ITLoS are appointed for a term of nine years, after which they can – at least in the case of the ICJ and ITLoS – be re-appointed. A term of four years is remarkably short and cannot but reflect the aspiration of Members to keep a certain degree of ‘control’ over the persons serving on the Appellate Body. Article 17.3 of the DSU requires of the persons serving on the Appellate Body that they are available at all times and on short notice and stay abreast of developments in WTO law and policy. No similar provision is found in the Statutes of the ICJ, the ICC and the ITLoS as it is undoubtedly considered to be self-evident that the judges on these courts are ‘available’ for work and remain well-informed. The negotiators of the DSU, however, did not view membership of the Appellate Body as a full-time activity and, therefore, considered it useful to ‘ensure’ the availability of persons serving on the Appellate Body to hear and decide appeals. The Appellate Body also distinguishes itself from international courts such as the ICJ, the ICC and the ITLoS with regard to the time frame for the proceedings. According to Article 17.5 of the DSU, the proceedings of the Appellate Body ‘shall in no case exceed 90 days’. For proceedings of


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the ICJ, the ICC and the ITLoS, such time constraints would undoubtedly be considered ‘unreasonable’ on the parties as well as the court, and likely to endanger proper consideration of the issues in the dispute. Article 17.10 of the DSU provides that the proceedings of the Appellate Body shall be confidential. This blanket requirement of ‘secrecy’ is clearly a legacy from the days when trade disputes were resolved through diplomacy rather than adjudication. Confidentiality of this nature is alien to international court proceedings. The proceedings of the ICJ, the ICC and the ITLoS are public, unless the court has reason to decide otherwise. Finally, Appellate Body reports must be adopted by the DSB; they are not legally binding on the parties to the dispute without such adoption. Although the DSB adopts Appellate Body reports by reverse consensus, and the adoption is thus quasi-automatic, this adoption is still a formal requirement. The legal power of decisions of international courts, such as the ICJ, the ICC and the ITLoS, is never subject to the approval of a political body. As noted above, Article 17.1 of the DSU left it to the DSB to establish the Appellate Body. The DSB did so at its very first meeting on 10 February 1995. In addition to formally establishing the Appellate Body, the Decision of the DSB of 10 February 1995, also clarified a number of issues relating to the composition of the Appellate Body, the conditions of employment of Appellate Body members, conflict of interest guidelines for Appellate Body members and supporting staff, and the administrative and other support to be given to the Appellate Body. The most revealing part of the Decision of 10 February 1995 concerns the conditions of employment of the members of the Appellate Body. While the DSB explicitly stated that ‘the contractual basis of members of the Appellate Body should reflect the overriding concern that candidates are of a high enough calibre’, it decided to appoint the members on a part-time basis. The DSB did not see a contradiction in this. In February 1995, WTO Members were still convinced that the Appellate Body would not be busy enough to warrant full-time employment. The Decision of 10 February 1995 referred to the need for Appellate Body members to undertake ‘sporadic trips to Geneva’ (emphasis added). From the above analysis of the relevant provisions of the DSU and the Decision of the DSB of 10 February 1995, it follows that the decision to establish a standing Appellate Body was certainly not the reflection of a grand design to create a strong, authoritative court that would be at the epicentre of the new WTO dispute settlement system.

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4 The emergence of the ‘World Trade Court’ While the Uruguay Round negotiators had limited ambitions when providing for a standing Appellate Body, it has now become the centrepiece of the WTO dispute settlement system and, in all but name, the ‘World Trade Court’. Several factors have contributed to this rise to prominence.

(a) Composition of the Appellate Body A first important factor contributing to the rise to prominence of the Appellate Body has been its first and subsequent compositions. The DSB definitely appointed the ‘right’ persons to serve on the Appellate Body. While Article 17.3 of the DSU requires members of the Appellate Body to have ‘demonstrated expertise in law, international trade and the subject matter of the covered agreements generally’ (emphasis added), few of the seven members appointed in November 1995 met this requirement. Four of the seven members had in fact no expertise in the field of GATT law at all. The extensive expertise of the Appellate Body members appointed in November 1995 was in international law in general, in European Community law, in competition law, in commercial law, in economics, and in national and international dispute resolution and adjudication. The breadth as well as the depth of this non-GATT expertise of the members appointed in November 1995 had an important impact on the early case law of the Appellate Body. As most members were not familiar with GATT practice and had not been involved in the Uruguay Round negotiations, they were not ‘burdened’ with preconceived ideas on WTO law. This made it easier for them, than it would have been for GATT veterans, to inject new ideas and approaches in the interpretation and application of WTO law. It is not surprising that an Appellate Body of this composition saw cause to state already in its very first case that the GATT 1994 ‘is not to be read in clinical isolation from public international law’.2 With the exception of Ambassador Lacarte (who had already been involved in GATT matters in the late 1940s), the members of the Appellate Body were, and remained, outsiders in Geneva. All members deliberately kept a low profile and, wisely, never engaged in a public debate on their rulings. They did not seek publicity. They would seldom, if ever, be seen at official diplomatic functions, partly because they did not permanently reside in Geneva, partly because they deliberately chose to keep their 2

Appellate Body Report on US – Gasoline, p. 16, DSR 1996:I, 3, at 16.


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distance. This ‘aloofness’ created a certain aura of mystique and charisma which served the Appellate Body well in establishing itself as the supreme organ of WTO dispute settlement. The DSB did not only appoint in November 1995 members lacking specific expertise in GATT law, it also appointed mainly members who had already retired and had few, if any, other professional activities or obligations. Ambassador Lacarte was 77 and Dr. El-Naggar 75 years old at the time of their appointments to the Appellate Body. Whether the DSB intentionally appointed persons with this profile is unclear but it definitely ensured a high degree of availability for the work on hand. Moreover, most, if not all, members appointed in November 1995 shared a nearly missionary belief in the importance of the task entrusted to them. None of the ‘original’ seven members still serves on the Appellate Body. New appointments to the Appellate Body took place in 1999, 2001 and 2003. While the average age of Appellate Body members is now somewhat lower, the DSB has continued to appoint members with no or little prior expertise in GATT or WTO law. Note that of the members appointed since November 1995, only Mr. A.V. Ganesan and Prof. M. Janow had experience as panelists prior to their appointment to the Appellate Body. However, the breadth and depth of the non-WTO expertise of members has served the Appellate Body well.

(b) Working procedures for appellate review A second important factor in the rise to prominence of the Appellate Body has been the Working Procedures for Appellate Review adopted by the Appellate Body in February 1996. The first task of the members of the Appellate Body after their appointment in November 1995 was to draw up detailed working procedures. In their Working Procedures, the members made fundamental choices with regard to the nature and the conduct of the appellate review proceedings. The two main characteristics of these proceedings are their judicial nature and the importance given to collegiality. As discussed above, Article 17.1 of the DSU provides that appeals are not heard and decided by the Appellate Body en banc but by a division of three members serving in rotation. This ‘rotating pattern of decision-making’ provided for by DSU negotiators, might well have created a significant obstacle to the development of a consistent body of case law. However, the Appellate Body recognized and addressed this danger in its Working Procedures. Rule 4 of the Working Procedures, entitled

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‘Collegiality’, requires of the division responsible for deciding an appeal ‘to exchange views with the other members before the division finalizes the appellate report’. This mechanism of ‘exchange of views’ – quite unique in national and international dispute settlement – has been, according to Prof. Claus-Dieter Ehlermann, a former member and Chairman of the Appellate Body, of ‘enormous benefit to the work of the Appellate Body’. While the responsibility for deciding the appeal remains with the division, the exchange of views actively involves the full Appellate Body in every single appeal. This has allowed the Appellate Body to ensure consistency and coherence in its case law. It has also allowed the Appellate Body to draw on the individual and collective expertise of all seven members. The mechanism of ‘exchange of views’ has thus significantly contributed to the quality and authority of the decisions of the Appellate Body. The Working Procedures for Appellate Review, as adopted by the Appellate Body in February 1996, also provides for judicial-type proceedings and a court-like appeals body. As noted by the late Bob Hudec, the preeminent expert on GATT/WTO dispute settlement, the Appellate Body made it clear from the outset that it expected a ‘fairly high standard of practice’, as compared with the ‘more easy-going standard of practice common to party-controlled panel proceedings’. Part I of the Working Procedures sets out the duties and responsibilities of the Appellate Body members and puts much emphasis on their independence and impartiality, as well as on the avoidance of conflicts of interest. The Appellate Body adopted on a provisional basis the Rules of Conduct for the Understanding on Rules and Procedures Governing the Settlement of Disputes and attached these Rules in Annex II to the Working Procedures. Almost a year later, in December 1996, the DSB approved these Rules of Conduct and made them applicable to all stages of WTO dispute settlement. The Rules of Conduct, as they apply to Appellate Body members and the Appellate Body Secretariat, are more elaborate than those of established international courts, such as the ICJ. Part I of the Working Procedures also sets out the rules on the composition and operation of divisions. It is remarkable that in the selection of the members constituting a division, the nationality of the members is of no importance. In international courts such as the ICJ, the ICC and the ITLoS, the nationality of the judges is still taken into account. While Appellate Body divisions often comprised members with the nationality of the appellant or appellee, and in some appeals such a member even presided over the division, there has been no criticism of national bias.


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Part II of the Working Procedures for Appellate Review describes, in great detail and with particular concern for due process, the appellate review process. It provides for specific rules on the commencement of an appeal, on the working schedule of an appeal, on the appellant’s and appellee’s submissions, on the rights of third participants, on the oral hearing, on the filing and circulation of documents, on the prohibition of ex parte communications, on multiple appeals, on the transmittal of the record to the Appellate Body, on additional memoranda, on the consequences of failure to appear and on the withdrawal of an appeal. Annex I of the Working Procedures contains a detailed timetable for appeals. To fit in the overall time frame of a maximum 90 days mandated by Article 17.5 of the DSU, this working schedule is dreadfully tight, with very short time periods in which the participants in the appeal must file their written submissions and in which the division of the Appellate Body hearing the appeal must conduct the oral hearing, deliberate, exchange views, deliberate again, draft, obtain translations and finally circulate the report. The Working Procedures leave no doubt that the Appellate Body division hearing the appeal (and not the participants) is firmly in control of the appellate process, just as one would expect from a court (as opposed to an arbitral body). At the request of the participants, the division could deviate from the time periods set out in the Working Procedures but it will only do so – and has only done so – in exceptional circumstances, where strict adherence to a time period set out in the Working Procedures would result in a manifest unfairness. Where in an appeal a procedural question arises that is not covered by the Working Procedures, the Appellate Body division hearing that appeal has the authority to adopt an additional procedural rule for the purposes of that appeal. The Working Procedures give this authority to the division ‘in the interests of fairness and orderly procedure in the conduct of an appeal’. The Working Procedures adopted in February 1996 have served the Appellate Body well and have allowed it to conduct its work in a fair, efficient and genuinely judicial manner. The Working Procedures were amended in 1997, 2002, 2003 and 2005. With each of these amendments specific deficiencies of the Working Procedures were remedied. This was in particular the case with the amendments effective as of 2002, which made it easier for third parties to participate in the oral hearing, and the amendments effective as of 2005, which: (a) elaborated on the content requirements for the notice of appeal; (b) introduced the requirement of notice of other appeal to be filed by other appellants; and (c) modified the timing of the oral hearing. These and other amendments further

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strengthened the court-like nature of the Appellate Body and the judicialtype nature of the appellate review proceedings.

(c) Embracing the Vienna Convention rules on treaty interpretation A third important factor in the rise to prominence of the Appellate Body has been the early use and consistent application of the rules of interpretation of the Vienna Convention of the Law on Treaties. Article 3.2 of the DSU stipulates in the relevant part that the dispute settlement system serves ‘to clarify the existing provisions of [the covered] agreements in accordance with customary rules of interpretation of public international law’. Already in its very first report, the Report in US – Gasoline, the Appellate Body ruled that the ‘general rule of interpretation’ set out in Article 31(1) of the Vienna Convention on the Law of Treaties forms part of the ‘customary rules of interpretation of public international law’ which the Appellate Body has been directed, by Article 3(2) of the DSU, to apply. In its second report, the Report in Japan – Alcoholic Beverages II, the Appellate Body added that Article 32 of the Vienna Convention, dealing with the role of supplementary means of interpretation, has also attained the same status of a customary rule of interpretation and must therefore be applied by the Appellate Body. From the very beginning, the Appellate Body has left no room for doubt regarding the basic rules of interpretation it would apply. As Article 31.1 of the Vienna Convention requires, the Appellate Body has consistently interpreted provisions of the covered agreements in accordance with the ordinary meaning of the words of the provision taken in their context and in the light of the object and purpose of the agreement involved. As the Appellate Body ruled in Japan – Alcoholic Beverages II, Article 31 of the Vienna Convention provides that the words of the treaty form the foundation for the interpretive process. Interpretation must be based above all upon the text of the treaty, which – as the Appellate Body repeatedly stressed – will often only reveal its true meaning when considered in its context and in the light of the object and purpose of the agreement at issue. The results of this interpretative approach, which gives primary importance to the wording actually used, are without doubt more easily accepted by the parties to the agreement than the often ‘surprising’ results of interpretative approaches that, for example, give relatively less importance to the text, but more to the object and purpose of the agreement. By opting for, and then consistently applying, a ‘text first’ approach to interpretation, the Appellate Body has given itself credibility and reliability in the eyes of WTO Members.


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While the Appellate Body has consistently followed the Vienna Convention rules of interpretation, this does not mean that it never strayed from its chosen method of interpretation. There are undoubtedly a number of instances in which the interpretation given by the Appellate Body to a specific term or provision does not appear to be the obvious result of a textual approach to interpretation. However, as the Appellate Body stated in its second report, Japan – Alcoholic Beverages II, WTO rules are to be interpreted having in mind that they ‘are not so rigid or so inflexible as not to leave room for reasoned judgements in confronting the endless and ever-changing ebb and flow of real facts in real cases in the real world’.

(d) Frequent and broad recourse to appellate review The Appellate Body would not have gained the prominence it has today if parties to disputes had not made such frequent use of the possibility to appeal panel reports and the recourse to, or involvement in, appellate review had been limited to a few WTO Members only. Likewise, the Appellate Body would not have gained its current prominence if only a few WTO agreements had been the subject of appellate review. A fourth important factor in the rise to prominence has therefore been the high number of appeals, the relatively high percentage of the WTO membership that has been involved in appellate review proceedings to date and the broad substantive scope of appeals. Between 1995 and 2004, a total of 67 notices of appeal were filed. When compared with the number of cases brought to the International Court of Justice or the International Tribunal for the Law of the Sea in this same period (respectively 37 and 13 cases), the true significance of the number of appeals cases brought to the Appellate Body becomes clear. Of all the panel reports circulated in the period from 1996 to 2004, 70 per cent have been appealed. This is undoubtedly a much higher percentage than the Uruguay Round negotiators had ever expected. Not only were many appeals filed, many WTO Members were also in some manner involved in appellate review proceedings. From 1996 to 2004, 17 Members, of which 11 developing country Members, have been an appellant in one or more appeals. The most active user of the appellate review mechanism has been the United States. It has been the appellant in 21 appeals, i.e., 31 per cent of all appeals. In distant second and third places come the European Communities and Canada, who have been appellants in respectively nine and eight appeals, i.e., 13 and 12 per cent of all appeals. Brazil and India have each been an appellant in five appeals. The United States has not only been the most active

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appellant, it has also been the most frequent appellee, again followed by the European Communities and Canada. In total, 26 Members were at least once an appellee in appellate review proceedings. This group includes both developed and developing countries. Between 1996 and 2004, a total of 50 Members were third participants in appellate review proceedings. Participation as a third participant is a useful experience, especially for developing country Members, to gain a better understanding of proceedings which are otherwise confidential and take place behind closed doors. In total, over 30 per cent of the WTO membership have been involved, as appellants, other appellants, appellees and/or third participants in appellate review proceedings. Note that in the same period only 21 per cent of the UN membership was involved in proceedings before the ICJ. Between 1996 and 2004, provisions of 13 of the 18 covered WTO agreements had been the subject of findings of the Appellate Body. The provisions of the DSU and the GATT 1994 have been most frequently the subject of Appellate Body findings. The Appellate Body made findings on provisions of the DSU and the GATT 1994 in respectively 36 and 34 of its 64 reports. The provisions of the Agreement on Subsidies and Countervailing Measures Agreement and of the Anti-Dumping Agreement were at issue in respectively 13 and 12 Appellate Body reports. In fact, only a few WTO agreements of lesser importance have not been subject to findings of the Appellate Body.

(e) Use made of the authority of appellate review A fifth factor that has contributed to the rise in prominence of the Appellate Body has been the manner in which it has used its authority of appellate review. As discussed above, the Appellate Body has, pursuant to Article 17.13 of the DSU, the authority ‘to uphold, modify or reverse’ legal findings and conclusions of a panel. In its 64 reports issued between 1996 and 2004, the Appellate Body made in total 414 different rulings. In 349 of these rulings (84 per cent), the Appellate Body upheld, modified or reversed legal findings of panels.3 In the remaining 65 rulings (16 per cent), the Appellate Body took an action not explicitly provided for in Article 17.13 of the DSU. Of the findings either upheld, modified or 3

In many instances the Appellate Body upheld or reversed findings of panels without using the very words ‘to uphold’ or ‘to reverse’. In these cases the Appellate Body usually stated that ‘the Panel did not fail to . . . ’, ‘the Panel did not err in its finding . . . ’ (upholding) or, on the contrary, that ‘the Panel failed to . . . ’, ‘the Panel erred in its finding . . . ’ (reversal).


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reversed, 66 per cent were upheld, 31 per cent were reversed and 3 per cent were modified. The share of the findings that were upheld by the Appellate Body is thus quite significant. This is an indication of the good work done by panels. However, these data, and in particular, the data relating to the number of panel findings upheld and modified, are to some extent misleading. Close reading of the rulings of the Appellate Body, in which it upheld a panel finding, reveals that in many instances the Appellate Body in fact did not agree with the reasoning of the panel and substituted its own reasoning for that of the panel. In a number of these instances, it would have been more correct for the Appellate Body to state that it modified the panel’s finding under appeal. On the other hand, by ‘upholding’ such a finding rather than ‘modifying’ it, the Appellate Body strengthened the authority of panels, which is beneficial for the operation of the WTO dispute settlement system as a whole. Especially in the early day of the Appellate Body, some observers argued that the Appellate Body was needlessly ‘harsh’ on panels. An example of such alleged ‘harshness’ was the rebuke in US – Wool Shirts and Blouses that the panel’s reasoning on one of the issues in that case was not ‘a model of clarity’. In later reports, the Appellate Body refrained from such sarcastic comments. In general, the tone of the Appellate Body reports of the first few years was often described as ‘schoolmasterish’. While intended as a criticism, the then Appellate Body members may not have seen it that way. It is clear from those reports that they considered it useful to explain their conclusions in a very careful and ‘pedagogic’ manner. With the years, the Appellate Body reports have become more technical and somewhat less accessible for the non-specialist, although when compared with panel reports they are still a ‘joy’ to read. Even when the Appellate Body agrees with the panel, it still wields a very sharp knife and often finds it useful to make the effort to say the same thing in a different, and hopefully, more comprehensible manner. The Appellate Body has been criticized for doing this, but wrongly so. An important reason for the ‘success’ of its case law has been that Members (while they may not agree) often find the reasoning in Appellate Body reports quite clear. As stated above, in 65, or 16 per cent, of its 414 rulings in reports between 1996 and 2004, the Appellate Body took an action other than upholding, modifying or reversing an appealed panel finding, i.e., the three types of action explicitly provided for in Article 17.13 of the DSU. This ‘other action’ took various forms, including rulings on the scope of the appellate review; rulings on procedural issues; and declining to

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rule on moot issues. The most surprising form of this ‘other action’ by the Appellate Body is undoubtedly an action usually referred to as ‘completing the legal analysis’ i.e., making findings on issues on which the panel had not made any findings. If the relevant facts are sufficiently clear, the Appellate Body may decide to complete the legal analysis in order not to leave a dispute unresolved. Some authors have strongly argued against the practice of ‘completing the legal analysis’. First of all, it is difficult to argue that this practice is within the mandate of Article 17.13 of the DSU to uphold, modify or reverse panel findings, as there are no findings by the panel. Second, by dealing with an issue not dealt with by a panel, the Appellate Body deprives parties of their right of appeal provided for in the DSU. Other authors have defended the Appellate Body’s practice of ‘completing of the legal analysis’ and have argued that in cases such as US – Shrimp and EC – Hormones this practice has contributed to the credibility of the WTO dispute settlement system. It is argued that, until the DSU is amended to address the problem of the absence of remand power, the Appellate Body’s practice of completing the legal analysis is preferred to leaving disputes unresolved. The Appellate Body had to make, and has made, a choice of the lesser of two evils. While the Appellate Body has in a number of instances been willing to complete the legal analysis and act as a first instance court, in many other instances the Appellate Body has shown great restraint not to go further than needed in the particular case. The Appellate Body has made a significant, albeit not always successful, effort to avoid ‘obiter dicta’. In fact, it has occasionally been criticized for not ‘taking the extra step’ to clarify the law and thus perhaps avoid related disputes in the future. The Appellate Body was, and is, well advised to show such restraint. A final observation with respect to the manner in which the Appellate Body has made use of its authority of appellate review relates to the fact that in only two reports to date has an Appellate Body member made use of the possibility, provided for in Article 17.11 of the DSU, to express an individual opinion in the report. The separate opinions in EC – Asbestos (2001) and US – Upland Cotton (2005) are thus far the only Reports in which the three members on the division were unable to show a united front. There have undoubtedly been other cases in which not all three members were in full agreement with the reasoning in the report, but the Appellate Body manifestly realized that (frequent) recourse to separate opinions would undermine the authority of its case law.


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(f) Case law of the Appellate Body The last but arguably most important factor in the rise to prominence of the Appellate Body has been its case law, and in particular the case law balancing free trade and other societal values as well as the case law ensuring the fairness and effectiveness of the WTO dispute settlement system. In general, the case law of the Appellate Body carefully balances free trade with other societal values, such as public health, the environment, or consumer protection. This balance is of course primarily set out in numerous provisions of the WTO agreements, but the Appellate Body has clarified this delicate balance and applied it in specific cases. Over the past nine years, the Appellate Body has not been the blind ‘champion’ of free trade. True to the common intentions of WTO Members, the Appellate Body – when called upon to interpret and apply provisions of, for example, the GATT 1994, the Sanitary and Phytosanitary (SPS) Agreement or the Technical Barriers to Trade (TBT) Agreement – balanced free trade with other societal values and interests and left WTO Members the largest degree of discretion possible to take measures for the protection and promotion of these societal values and interests. An excellent example of this is the Appellate Body’s approach to the General Exceptions of Article XX of the GATT 1994. While it could be argued that it is an accepted principle of interpretation that exceptions are to be construed narrowly and that Article XX should, therefore, be construed narrowly, the Appellate Body has not adopted this approach. Instead, it has advocated in US – Gasoline and US – Shrimp a kind of balancing between the general rule and the exception. The Appellate Body clearly considered a narrow interpretation of the exceptions of Article XX, (i.e., the exceptions allowing for, inter alia, trade restrictive measures to protect public health or the environment) to be inappropriate. The Appellate Body advocated a balance between trade liberalization and other societal values. It also stressed the scope for Members to enact trade-restrictive legislation and measures that pursue legitimate societal values or interests. As is reflected in its case law, the Appellate Body is a promoter of the balance between free trade and other societal values as well as the balance between international rules and national sovereignty set out in the WTO agreements. The eminent status of the Appellate Body and its case law is to a large extent due to the fact that the Appellate Body has struck these balances correctly. Finally, the Appellate Body also gained significant stature as a result of its case law ensuring the fairness and effectiveness of the WTO

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dispute settlement system. The agreement on the rules and procedures of WTO dispute settlement reached by the Uruguay Round negotiators and reflected in the DSU was undoubtedly a very significant achievement. However, when the WTO dispute settlement system was put in operation, it soon became clear that there were important gaps in the rules and procedures of WTO dispute settlement. As from the first disputes onwards, panels and the Appellate Body were confronted with these gaps in the system. The rulings of the Appellate Body on issues such as burden of proof, judicial economy, the use of experts, the submission and admission of evidence, standard of review, terms of reference, (extended) third party rights, good faith in dispute settlement proceedings, and representation by private counsel, have made an important contribution to the fair and effective functioning of the WTO dispute settlement system. These rulings have ‘completed’ the dispute settlement system. An excellent example of this are the rulings of the Appellate Body on representation by private counsel in Appellate Body hearings and panel meetings. The DSU does not address the issue of representation of the parties before the Appellate Body or panels. In EC – Bananas III, the issue arose whether private counsel, not employed by government, may represent a party or third party (such as Saint Lucia) before the Appellate Body. In its ruling, the Appellate Body noted that nothing in the WTO Agreement or the DSU, nor in customary international law or the prevailing practice of international tribunals, prevents a WTO Member from determining for itself the composition of its delegation in WTO dispute settlement proceedings. A party can, therefore, decide that private counsel forms part of its delegation and will represent it in WTO dispute settlement proceedings. While the ruling of the Appellate Body concerned its own proceedings, the reasoning of this ruling is equally relevant for panel proceedings. This was confirmed in the panel report in Indonesia – Autos, adopted one year after the Appellate Body Report in EC – Bananas III. Private counsel now routinely appear in panel as well as Appellate Body proceedings as part of the delegation of a party or third party. As the Appellate Body noted in EC – Bananas III ‘representation by counsel of a government’s own choice may well be a matter of particular significance – especially for developing country Members – to enable them to participate fully in dispute settlement proceedings’.4 WTO Members have of course not all or always agreed with the Appellate Body’s rulings on ‘procedural’ matters in particular cases. However, with the obvious 4

Appellate Body Report on EC – Bananas III, para. 12.


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exception of the rulings on the issue of amicus curiae briefs, this case law has found general acceptance. WTO Members appreciate the importance of the contribution of this case law to the proper functioning of the WTO dispute settlement system.

5 Conclusion The Appellate Body was not conceived by the Uruguay Round negotiators as the centrepiece of the WTO dispute settlement system. It was more an afterthought, linked to the introduction of the quasi-automatic adoption of panel reports under the new dispute settlement system. In little time, however, the Appellate Body grew into the most important and authoritative organ of WTO dispute settlement. The Appellate Body is now, in all but name, the ‘World Trade Court’. The significance of its contribution to the development of international trade law is generally recognized. The factors that have contributed to its rise to prominence over the last decade are multiple and often closely related. They include the first and subsequent compositions of the Appellate Body; the Working Procedures for Appellate Review; the early acceptance and consistent application of the rules of interpretation of the Vienna Convention; the frequent and broad recourse to appellate review; the manner in which the Appellate Body used its authority of appellate review; and, finally, the case law of the Appellate Body to date, and in particular the case law balancing free trade and other societal values and the case law ensuring the fairness and effectiveness of the WTO dispute settlement system. It is important to identify and correctly appreciate these factors because the Appellate Body will retain its current status and role in the world trading system only to the extent that these factors continue to be sufficiently present.

8 Special challenges at the appellate stage: a case study valerie hughes 1 Director, Appellate Body Secretariat, World Trade Organization

The appellate phase of the US – Steel Safeguards case presented certain challenges from a practical perspective that were unusual in nature. This chapter examines those special challenges after first explaining the appellate process in general terms.

1 WTO appellate procedure An appeal to the Appellate Body of the WTO may be filed by a disputing party any time within 60 days following the circulation of a panel report. An appeal is automatic: no leave is required. The Appellate Body is composed of seven persons appointed by the WTO Members, each of whom serves a four-year term, which is renewable once.2 The jurisdiction of the Appellate Body is limited to ‘issues of law covered in the panel report and legal interpretations developed by the panel’.3 Thus the Appellate Body is not authorized to make findings of fact. The WTO appellate phase is a 90-day process involving a written phase and an oral phase. According to the Working Procedures for Appellate Review, appellants must submit an appellant’s submission setting out their arguments within ten days after filing a Notice of Appeal, and appellees must submit their arguments in an appellee’s submission within 15 days thereafter (or 25 days after the filing of the Notice of Appeal).4 WTO 1 2 3 4

The views expressed are those of the author and do not represent a position, official or unofficial, of the Appellate Body Secretariat or WTO Members. More information about the Appellate Body and its current composition may be found at www.wto.org/appellatebody. See Understanding on Rules and Procedures Governing the Settlement of Disputes (referred to as the Dispute Settlement Understanding or the DSU), Article 17.6. The Working Procedures for Appellate Review (‘Working Procedures’) were amended subsequent to this presentation, such that the appellant’s submission is now due seven days after

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Members that were third parties during the panel phase may file third participants’ submissions setting out their positions within 25 days from the filing of the Notice of Appeal.5 The procedural rules also provide for an ‘other appellant’s submission’, to be filed 15 days after the filing of the notice of appeal;6 the appellee’s submission in response is filed ten days later.7 Another appellant’s submission is filed when a disputing party other than the original appellant wishes to appeal one or more issues in the panel report that were not appealed by the original appellant. This arises on a regular basis because panel reports often contain numerous findings, some of which are in favour of the complaining party, while others are in favour of the responding party. Hence both the complaining and responding parties may wish to appeal certain aspects of the panel report, although each will argue on different grounds. The procedural rules require the Appellate Body to hold a hearing.8 The proceedings are confidential;9 only WTO Members that are parties to the dispute are permitted to attend.10 The hearing usually takes place between 35 and 45 days following the filing of the Notice of Appeal. Three of the seven members of the Appellate Body, referred to as a Division, hear an appeal. The three are selected by the Appellate Body on the basis of rotation and taking into account the principles of random selection, unpredictability and opportunity for all members to serve, regardless of their nationality.11 Appellants and appellees are each given an opportunity, at the beginning of the hearing, to make an opening statement. The length of such statements is set by the Division hearing the appeal and varies depending on the issues and number of participants involved. Opening statements may be as short as 15 minutes, or as long as an hour; most often, they

5 6

7 9 10

11

the Notice of Appeal is filed, and the appellee’s submission is due 18 days thereafter, which remains 25 days following the filing of the Notice of Appeal. See Annex 1 to the Working Procedures for Appellate Review, WT/AB/WP/5, 4 January 2005, and Rules 21(1) and 22(1). There is a different timeline altogether for appeals addressing prohibited subsidies. Working Procedures, Rule 24(1). The amended Working Procedures introduced the requirement to file a Notice of Other Appeal 12 days after the filing of the Notice of Appeal: Working Procedures, Rule 23(1). The due date for filing the other appellant’s submission is still 15 days after the filing of the Notice of Appeal: Working Procedures, Rule 23(3). 8 Working Procedures, Rule 23(4). Working Procedures, Rule 27(1). Article 17.10 of the DSU. Although some WTO Members are of the view that panel and Appellate Body hearings should be open to the public, many WTO Members support the confidentiality requirement, arguing that it preserves the inter-governmental nature of WTO dispute settlement. Working Procedures, Rule 6(2).

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are 20 or 30 minutes in duration. Third parties that have filed a written submission or that have notified their intention to attend the hearing will also be given an opportunity to make opening statements, although their length is usually limited to five or ten minutes.12 Following the opening statements, the Division puts questions to the participants seeking to elicit clarifications or further comment on the issues raised on appeal. Unlike the panel phase, the questions are not provided in writing and must be answered immediately. There is no opportunity to provide additional written responses some days following the hearing, as there is after a panel hearing. At the end of the hearing, participants are given an opportunity to make brief closing statements of about ten minutes in length. The hearing usually lasts one to two days, although some have been longer. After the hearing, the Division meets with the other four Members of the Appellate Body to ‘exchange views’ on the issues raised on appeal.13 The four Appellate Body members who are not on the Division hearing the appeal receive copies of all submissions, as well as a copy of the transcript of the hearing. The purpose of the ‘exchange of views’ is to ‘ensure consistency and coherence in decision-making, and to draw on the individual and collective expertise of the members’.14 After the exchange of views, the Division deliberates and prepares its report. The Appellate Body report is circulated to all WTO Members in English, French and Spanish no later than 90 days following the filing of the Notice of Appeal.15

2 The appellate phase in US – Steel Safeguards: special challenges US – Steel Safeguards was the 57th appeal filed since the establishment of the WTO Appellate Body in 1995.16 The Appellate Body Division that heard the US – Steel Safeguards appeal was composed of James Bacchus as Presiding member, and Georges Abi-Saab and John Lockhart as members.17 The panel issued its reports on 11 July 2003. The United States 12 13 14 16

17

If a third party has neither filed a written submission nor notified its intention to attend the hearing, it may nevertheless make an opening statement at the discretion of the Division. Working Procedures, Rule 4(3). 15 Working Procedures, Rule 4, paras. (1) and (3). Article 17.5 of the DSU. The WTO Appellate Body is one of the most active international adjudicative bodies operating today. An interesting comparison is that the International Court of Justice issued 61 decisions and 23 advisory opinions in its first 50 years. By its tenth anniversary, the Appellate Body had circulated 64 reports. Mr Bacchus is from the United States, Mr Abi-Saab is from Egypt, and Mr Lockhart is from Australia.


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filed its Notice of Appeal on 11 August 2003. Eight WTO Members – namely, Brazil, China, the European Communities, Japan, Korea, New Zealand, Norway, and Switzerland – also appealed as ‘other appellants’. Nine Members filed appellees’ submissions – namely, the United States, Brazil, China, the European Communities, Japan, Korea, New Zealand, Norway, and Switzerland. Seven other WTO Members – namely, Canada, Cuba, Mexico, the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, Thailand, Turkey, and Venezuela – were third participants. An amicus curiae brief was filed by the American Institute for International Steel. The hearing took place on 29–30 September 2003. The Appellate Body issued its report on 10 November 2003, and the report was adopted by the Dispute Settlement Body on 10 December 2003. Most legal observers will recognize immediately that this was an extremely efficient process. There is no other international adjudicative body operating today that delivers results as quickly as the Appellate Body did in this appeal; indeed, one would have difficulty finding a domestic court or tribunal that would be able to comply with the 90day timeline imposed on the Appellate Body by the Dispute Settlement Understanding.18 This efficiency was all the more remarkable because the US – Steel Safeguards appeal presented several challenges. First, there was the factual complexity. The dispute arose following the imposition by the United States of safeguard measures on a number of steel products. The United States International Trade Commission had determined that these products were imported into the United States in such increased quantities as to be a substantial cause of serious injury, or threat of serious injury, to the domestic industries producing like or competitive products. The appeal concerned ten challenged measures relating to several different steel products19 from several different countries. The panel’s findings were different for different steel products and they also differed depending on the origin of the steel products, but the overall finding of the panel was that the United States measures were inconsistent with the United States’ WTO obligations. The panel record was extensive and the panel reports under appeal totalled 945 pages. Although, as noted earlier, the Appellate Body’s 18 19

Article 17.5 of the DSU. The products were: certain flat steel, hot-rolled bar, cold-finished bar, rebar, certain tubular products, carbon and alloy fittings, stainless steel bar, stainless steel rod, tin mill products, and stainless steel wire.

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jurisdiction is limited to issues of law and legal interpretations, the Appellate Body was nevertheless required to become thoroughly familiar with the complex factual record before it could begin to consider the legal issues on appeal. Given the very tight time constraints under which the Appellate Body must carry out its work, mastering the facts and understanding the challenged measures is a monumental task in any appeal. In US – Steel Safeguards, however, the challenge was particularly acute given the complexity of the facts, the multiplicity of the challenged measures and the products to which they were applied, the diversity of interests among the complaining parties, and the range of findings appealed. Naturally, the submissions of the participants covering this vast array of issues were extensive. Sixteen Members filed 987 pages of submissions to the Appellate Body (excluding annexes). All of these had to be examined carefully, in addition to the panel record and panel reports. There was also the amicus curiae brief, which, in turn, led to additional material being filed before the hearing. Brazil filed a request that the Appellate Body disregard the brief, and the European Communities sought a decision from the Appellate Body on whether or not it intended to take account of the brief. The Division responded to the requests before the hearing took place, indicating that it would decide on whether to accept the brief or take account of it after all submissions had been made, including oral submissions at the hearing. This already demanding mandate was exacerbated by the fact that the appeal in US – Steel Safeguards was ongoing at a time when the Appellate Body was considering three other appeals.20 Thus, Division members were involved in other appeals, and all seven Appellate Body members were seeking to contribute views and advice on all four appeals, consistent with the requirement for all members to exchange views on every appeal.21 The US – Steel Safeguards appeal would have been difficult to deal with on its own, but having three other contemporaneous appeals made the task all the more exigent. It must be borne in mind as well that the Appellate Body members serve on a part-time basis. Most of them have other jobs and all of them live outside of Geneva (where the WTO is based). Therefore, each time an appeal 20

21

Japan – Measures Affecting the Importation of Apples; United States – Sunset Review of Anti-Dumping Duties on Corrosion-Resistant Carbon Steel Flat Products from Japan; and United States – Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada. Working Procedures, Rule 4, paras. (1) and (3).


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is filed, Appellate Body members must make alternative arrangements with respect to their other obligations, both professional and personal. The complexity of the case and the large number of issues presented also meant that the legal team assigned to assist the Appellate Body members was larger than usual. The WTO Appellate Body Secretariat provides legal and administrative support to the Appellate Body, as provided for in the Dispute Settlement Understanding.22 The Appellate Body Secretariat includes ten lawyers, two legal interns and four support personnel. This Secretariat is separate and distinct from all other divisions in the WTO Secretariat, including the Legal Affairs Division and the Rules Division, which provide assistance to panels. For most appeals, the Appellate Body is assisted by one senior lawyer, one junior lawyer, an intern and a secretary. For the US – Steel Safeguards appeal, it was necessary to assign a larger team, composed of four lawyers, an intern and a secretary. All of this was going on in the shadow of the considerable political interest in the dispute. Moreover, the economic interests at stake were very substantial. For the European Communities alone, such interests were in excess of $2 billion. These matters, however, important as they are, do not have a role in the decision-making process on appeal. As noted above, the Appellate Body confines itself to issues of law and legal interpretations. The logistical arrangements for the hearing were also complicated. There were 16 delegations in attendance at the hearing, totalling 76 persons, in addition to the Appellate Body members, Secretariat staff, interpreters and court reporters. The Appellate Body does not have its own hearing room; it sets up in WTO meeting rooms where negotiators and WTO councils hold meetings. This is not ideal, but the WTO does not think it useful to fit up a hearing room that is used, on average, less than ten times per year. This means that each time there is to be a hearing, the Appellate Body Secretariat must find a suitable room on relatively short notice. This can be especially problematic during periods of intensive WTO negotiations. In the case of the US – Steel Safeguards appeal, it was necessary to find a room large enough to accommodate close to 100 persons with appropriate interpretation and court reporting facilities for the duration of the hearing. The hearing lasted two full days, starting both mornings at 9 a.m. and closing both evenings at 7 p.m. The opening statements alone took up the first three and one-half hours of the session, and it was only after they were delivered that the Appellate Body members could begin the 22

Article 17.7 of the DSU.

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questioning of participants. The United States’ opening statement lasted one hour, which is the length of time it usually takes to complete all of the opening statements in most appeals. The opening statements are prepared in advance and are read out loud, often by the ambassador of the WTO Member. The statements are, of course, very important for the participants because they set out the essence of the participant’s position on appeal. However, the statements usually cover the same ground as the written submissions. Therefore, the Appellate Body is most interested in proceeding to the questioning of the parties, for it is in this exercise that the Appellate Body is able to probe the issues more deeply than has been done in the written submissions. The Appellate Body members arrive with their prepared questions in hand, and they take turns putting them to the parties. They also add questions as the hearing proceeds, which arise out of answers that may be given by participants. Speaking from experience, an Appellate Body hearing can be a rather daunting affair. The questions are not provided in advance and it is sometimes difficult to tell where the questions are leading; some areas are, of course, less helpful than others to the case one is pleading and one is keen to avoid them. However, the one thing certain in a hearing is that the Appellate Body members expect answers, and they expect them immediately. There are only a handful of lawyers that have experience pleading before the Appellate Body. Unlike in the International Court of Justice, where disputing parties generally hire highly experienced international litigators, most WTO Members are represented by government lawyers, some of whom are appearing before the Appellate Body for the first time. Experience in pleading before the Appellate Body can be a highly valuable asset, because the process is quite unique. One’s performance will certainly be enhanced if one has done it before, or at least has seen it done. Remarkably, the Appellate Body issued its report within the 90-day deadline in the three official languages of the WTO (English, French and Spanish).23 The report was 170 pages long, the longest Appellate Body report ever at the time.24 The length of the report attests to the broad range of difficult issues that were addressed. Credit must also go to the translators as well as the printers, who also regularly feel the pressure of the 90-day treaty-imposed deadline. 23 24

Appellate Body Report on US – Steel Safeguards, adopted 10 December 2003. On 3 March 2005, the Appellate Body circulated a 300 page report in United States – Subsidies on Upland Cotton, WT/DS267/AB/R, adopted 21 March 2005.


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The Appellate Body essentially upheld the panel’s overall finding that all ten measures were inconsistent with the United States’ obligations under the GATT 1994 and the Agreement on Safeguards, although the Appellate Body’s findings and reasoning were different from the panel’s in some respects. The report was welcomed by a number of WTO Members, and, not surprisingly, criticized by the United States, which considered its measures to be WTO-consistent. The United States withdrew the measures a few days before the Appellate Body and panel reports were adopted by the Dispute Settlement Body on 10 December 2003.

9 The reasonable period of time for compliance with rulings and recommendations adopted by the WTO Dispute Settlement Body werner zdouc 1 Counsellor, Appellate Body Secretariat, World Trade Organization

1 Introduction The need for a reasonable period of time for the implementation of rulings and recommendations adopted by the Dispute Settlement Body (DSB) arises in two situations: first, when the responding party in a dispute settlement proceeding has been found to have violated WTO rules or otherwise nullified or impaired benefits accruing to the complaining party; and second, when the incriminated measure is still in existence at the time when the responding party that has ‘lost’ the case has to inform the DSB of its intentions in respect of implementation. For this purpose, a DSB meeting has to be held within 30 days after the adoption of the panel report and, if applicable, the Appellate Body report. According to the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), prompt compliance is the rule and the conferral of a reasonable period of time for implementation is supposed to be the exception. Article 21.1 of the DSU specifies that prompt compliance with recommendations or rulings of the DSB is essential for the effective functioning of the WTO dispute settlement system. Only if compliance without delay is ‘impracticable’ is a ‘losing’ party entitled to a reasonable period of time. The starting point for the calculation of a reasonable period of time is the date of adoption of recommendations or rulings by the DSB (in other words, the date when the DSB adopts the panel and Appellate Body reports). 1

The views expressed are those of the author and do not represent a position, official or unofficial, of the Appellate Body Secretariat or WTO Members.

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2 Ways to determine a reasonable period of time for implementation Under Article 21.3 of the DSU there are three ways to determine a reasonable period of time for implementation:2 (i) Under subparagraph (a), the implementing party may propose a reasonable period; however, this proposal is subject to DSB approval. (ii) According to subparagraph (b), a reasonable period may be set by mutual agreement between the parties within 45 days as of the date of adoption of the panel and Appellate Body reports by the DSB. (iii) Pursuant to subparagraph (c), a reasonable period is determined through binding arbitration within 90 days of the adoption of the panel and Appellate Body reports. Article 21.3(a) of the DSU has not been used to date. Obviously, no need for approval by the DSB arises when the implementing party withdraws or corrects the WTO-inconsistent measure before or briefly after adoption of the panel and Appellate Body reports by the DSB. Article 21.3(b) has been used in approximately two dozen cases (although reporting to the DSB is not necessarily complete). This procedure has been applied more often than the arbitration procedure under Article 21.3(c). In a number of cases, parties mutually agreed on a reasonable period of time after the 45-day period foreseen for that purpose had expired. To date, in disputes involving multiple complainants, the same reasonable period of time has always been agreed upon with respect to all such 2

Article 21.3 of the DSU provides: ‘At a DSB meeting held within 30 days after the date of adoption of the panel or Appellate Body report, the Member concerned shall inform the DSB of its intentions in respect of implementation of the recommendations and rulings of the DSB. If it is impracticable to comply immediately with the recommendations and rulings, the Member concerned shall have a reasonable period of time in which to do so. The reasonable period of time shall be: (a) the period of time proposed by the Member concerned, provided that such period is approved by the DSB; or, in the absence of such approval, (b) a period of time mutually agreed by the parties to the dispute within 45 days after the date of adoption of the recommendations and rulings; or, in the absence of such agreement, (c) a period of time determined through binding arbitration within 90 days after the date of adoption of the recommendations and rulings. In such arbitration, a guideline for the arbitrator should be that the reasonable period of time to implement panel or Appellate Body recommendations should not exceed 15 months from the date of adoption of a panel or Appellate Body report. However, that time may be shorter or longer, depending upon the particular circumstances.’

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complainants. However, Article 21.3(b) would not seem to exclude the possibility that different complainants might agree on different reasonable periods with the respondent. In cases involving multiple complainants it has occurred that some parties negotiated implementation periods under subparagraph (b) while others initiated arbitration proceedings under subparagraph (c). In several cases, parties negotiated ‘intermediate’ timetables, either step-by-step or measure-by-measure.

3 Arbitration on the length of the reasonable period of time for implementation So far, 19 arbitrations under Article 21.3(c) have been completed (see attached table). The following procedures apply and the following practice has evolved. According to footnote 13 to Article 21.3(c), the arbitrator may be an individual or a group. If the parties cannot agree within ten days after referring a matter to arbitration, pursuant to footnote 12 to Article 21.3(c), the Director-General appoints the arbitrator within ten additional days, after consulting with the parties. It is customary practice that the arbitrator is an Appellate Body member acting in an individual capacity. This practice is followed also in cases where the panel report was not appealed. In most – but not all – cases the arbitrator was an Appellate Body member who served on the division hearing the appeal in the case at hand. It is also customary practice for the arbitrator to draw up a working schedule in consultation with the parties, fixing dates for written submissions and an oral hearing. The arbitrator issues the decision to the parties and circulates it to all WTO Members. The DSU rules envisage no adoption by, or discussion, at a DSB meeting.

4 Factors and ‘particular circumstances’ relevant for determining the reasonable period of time A variety of questions have arisen in these arbitration proceedings and the decisions of the arbitrators reflect a number of principles and interpretations that have emerged in arbitration practice. The mandate of the arbitrator is limited to determining the duration of the reasonable period of time. By contrast, choosing the means of implementation is the prerogative of the implementing party (provided the means chosen are consistent with the rulings and recommendations adopted by the DSB and with the agreements covered by the WTO).


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Arbitrators refuse to rehear arguments whether the measures challenged in the original dispute or the proposed implementation measures are consistent or inconsistent with WTO law. This is so because parties must unconditionally accept the panel and Appellate Body rulings and recommendations in the original dispute once the DSB has adopted them. Furthermore, it is the exclusive task of compliance panels established pursuant to Article 21.5 of the DSU to examine alleged inconsistencies of implementation measures taken by the ‘losing’ party with specific DSB rulings and recommendations or WTO law in general. As regards the length of the reasonable period of time, Article 21.3(c) provides that: ‘[A] guideline for the arbitrator should be that the reasonable period of time to implement the panel or Appellate Body recommendations should not exceed 15 months from the date of adoption of a panel or Appellate Body report. However, that time may be shorter or longer, depending on the particular circumstances.’ (emphasis added, footnote omitted)

It appears that the meaning of the ‘guideline’ that the reasonable period of time to implement should not exceed 15 months has changed over time. In early arbitration practice, arbitrators actually granted reasonable periods that were only slightly shorter or even longer than 15 months depending on the particular circumstances of each case. Arbitrators have seemed to put more emphasis on the third sentence of Article 21.3(c), which recognizes that the period ‘may be shorter or longer, depending upon the particular circumstances’. In more recent arbitration practice, the guideline of 15 months seems to have been regarded rather as the maximum permissible period. Arbitrators have ruled that the reasonable period should be the ‘shortest period of time possible’ within the legal system of the implementing party. This interpretation places more weight on the second sentence of Article 21.3(c), which states that the period ‘should not exceed 15 months from the date of adoption of the panel or Appellate Body report’. Arbitrators have recognized a number of factors as ‘particular circumstances’ when determining the length of the reasonable period of time. Among those factors is the ‘complexity’ of the means of implementation. When only administrative action by the executive branch is required for implementation, the reasonable period actually granted tends to be shorter. When there is a need for legislative action by the relevant legislative body, the reasonable period actually granted is likely to be longer. A closely related parameter is the complexity of the implementation process.

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Arbitrators have held that the implementing Member may follow the normal legislative process and is not required to resort to extraordinary administrative or legislative procedures even if this could speed up the implementation process. The need for pre-legislative consultations has been accepted by arbitrators unless the periods foreseen for such consultations are excessive. The complexity and volume of implementation measures have also been accepted as relevant for the determination of the reasonable period. The more detailed and lengthy the nature or wording of the draft legislation the more likely a longer period will be granted. Article 21.2 of the DSU provides that ‘[p]articular attention should be paid to matters affecting the interests of developing country Members with respect to measures which have been subject to dispute settlement’. This general rule also applies to Article 21.3(c) arbitrations. In that vein, ‘threat of economic and financial collapse’ has been accepted as a justification for an extended reasonable period of time for implementation. Arbitrators have found other ‘particular circumstances’ advanced by the parties less relevant or not relevant at all for their determination of the reasonable period of time. A frequently mentioned consideration is the extent to which the ‘losing’ party has taken steps towards implementation or failed to do so since the adoption of the panel and Appellate Body reports by the DSB. Arbitrators have avoided relying on this consideration even though it seems that from a policy perspective the implementing party should not be rewarded for ‘dragging its feet’. In some cases, the implementing party had proposed that the arbitrator take into consideration the contentiousness of compliance measures in its country. In this regard, parties have stressed the serious economic impact of implementation measures in their country, the need for structural adjustment of industries affected by those measures and administrative difficulties arising in the implementation process. Arbitrators have been hesitant to accept peculiar features of legislative bodies as justification for granting a longer reasonable period of time for implementation. Such special features include the calendar of work and recess periods of legislative bodies, the large volume of bills introduced and the small percentage of laws actually passed, the distribution of seats between parties supporting and those opposing the government, and periods of transition for a new administration to take office or legislative bodies to convene.


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5 Burden of proof in arbitration proceedings Article 21.3(c) provides no express rule on which side bears the burden of proof in arbitration proceedings on the length of the reasonable period of time. In most cases, the arbitrators seem to have expected each party to establish the reasonableness of the period it proposes. In recent years, arbitrators seemed more often to proceed from the assumption that the implementing party bears the burden of showing that the time period it proposes is the ‘shortest period possible’ for implementation in its domestic legal system.

6 Special rules applicable to prohibited subsidies The Agreement on Subsidies and Countervailing Measures (SCM Agreement) provides in its Article 4.7 for special and additional rules regarding the implementation period. These rules prevail over the provisions of Article 21.3(c) of the DSU pursuant to Article 1.2 of that Understanding. Article 4.7 of the SCM Agreement states, on the one hand, that prohibited subsidies should be withdrawn ‘without delay’.3 On the other hand, the same Article provides that ‘the panel shall specify in its recommendation the time-period within which the measure must be withdrawn’. This somewhat ambiguous Article does not unequivocally require immediate removal of prohibited export and import substitution subsidies ‘without delay’, as its first sentence seems to suggest. Arguably the first sentence has to be read in the light of the second sentence of Article 4.7, which gives panels a certain degree of discretion to set a time-period for withdrawal; however, that time-period would still have to be short enough to be considered compatible with the obligation to act ‘without delay’. One could also argue that the 15-month period be halved in accordance with Article 4.12 of the SCM Agreement4 when the panel specifies the time-period within which the subsidy must be withdrawn. 3

Article 4.7 of the SCM Agreement reads: ‘If the measure in question has been found to be a prohibited subsidy, the panel shall recommend that the subsidizing Member withdraw the subsidy without delay. In this regard, the panel shall specify in its recommendation the time-period within which the measure must be withdrawn.’

4

Article 4.12 of the SCM Agreement provides: ‘For purposes of disputes conducted pursuant to this Article, except for timeperiods specifically prescribed in this Article, time-periods applicable under the DSU for the conduct of such disputes shall be half the time prescribed therein.’

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7 DSU review negotiations regarding arbitrations on the determination of the reasonable period In the course of the negotiations on DSU review, Members have proposed a couple of improvements and amendments of Article 21.3 of the DSU. Currently, the starting point for the calculation of the reasonable period of time is the date of adoption of the panel and Appellate Body reports by the DSB. Article 21.3(c) provides that the reasonable period of time be determined by arbitration within 90 days from that date. However, in many cases, a request for arbitration is made towards the end of that period or even after the deadline has passed. Therefore, in practice arbitrators issue their decision on average more than four months after the date when the DSB has adopted the panel and Appellate Body reports – although the average working time of arbitrators does not often exceed one month. The remaining time is used for efforts by the parties to negotiate a mutually agreed reasonable period of time, the process of selecting the arbitrator and the translation of the decision into official WTO languages. In the DSU review negotiations, the European Communities and the Republic of Korea have proposed to set a deadline of 30 days from adoption of the DSB rulings for requesting arbitration on the reasonable period of time to implement. The European Communities also proposes to give arbitrators a period of 45 days for the completion of their work (counted from the date of appointment rather than from the date of adoption of DSB rulings). In the event that parties cannot agree on an arbitrator and request the Director-General to make the appointment, the European Communities proposes to select the arbitrator from a roster of panelists (serving on a proposed standing panel body). The Kingdom of Jordan suggests selecting the arbitrator from the existing indicative list of panelists. A number of DSU review proposals seek to strengthen special and differential treatment accorded to developing country Members of the WTO. In the view of the Republic of India, if the respondent is a developing country Member, the reasonable period of time should be no less than 15 months. The period should be no less than two years if legislative action or changes in long-standing practice or policy is necessary for implementation. However, in the event that the complainant is a developing country challenging a developed country, the Republic of India proposes that the reasonable period of time should be no more than 15 months; in the case of delays in the implementation process, the developed country should offer to the developing country monetary compensation for continuing trade losses. The amount of the compensation would be set by mutual agreement between the parties.


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8 Summary and conclusion It is possible to discern a trend in the arbitration practice under Article 21.3(c) of the DSU on the determination of the reasonable period of time for implementation. Initially, arbitrators seemed to consider the 15-month period as a benchmark – the reasonable period of time actually granted being shorter or even longer in the light of the particular circumstances of each case. In recent years, arbitrators seem to regard prompt compliance as the guiding principle and the 15-month period as a maximum permissible limit. Some DSU review proposals address the arbitration procedures for the determination of the reasonable period of time for implementation. A couple of proposals seek to adjust applicable time frames to those that have emerged in Article 21.3(c) arbitration practice. Other proposals are geared towards strengthening special and differential treatment in arbitration proceedings and decisions on the length of the reasonable period, to the benefit of developing country Members.

Agreed by Parties or Appointed by DG DG

DG

DG

Parties

Parties

Parties

Parties

Parties Parties

Parties

Arbitrator Julio Lacarte-Muro´

Said El-Naggar

Julio Lacarte-Muro´

Christopher Beeby

Said El-Naggar

Claus-Dieter Ehlermann Florentino P. Feliciano James Bacchus Julio Lacarte-Muro´

Julio Lacarte-Muro´

Case

Japan – Taxes on Alcoholic Beverages WT/DS8/15, WT/DS10/15 WT/DS11/13 (DSR 1997:I, 3) European Communities – Regime for the Importation, Sale and Distribution of Bananas WT/DS27/15 (DSR 1998:I, 3) EC Measures Concerning Meat and Meat Products (Hormones) WT/DS26/15, WT/DS48/13 (DSR 1998:V, 1833) Indonesia – Certain Measures Affecting the Automobile Industry WT/DS54/15, WT/DS55/14 WT/DS59/13, WT/DS64/12 (DSR 1998:IX, 4029) Australia – Measures Affecting Importation of Salmon WT/DS18/9 (DSR 1999:I, 267) Korea – Taxes on Alcoholic Beverages WT/DS75/16, WT/DS84/14 (DSR 1999:II, 937) Chile – Taxes on Alcoholic Beverages WT/DS87/15, WT/DS110/14 (DSR 2000:V, 2583) Canada – Patent Protection of Pharmaceutical Products WT/DS114/13 Canada – Certain Measures Affecting the Automotive Industry WT/DS139/12, WT/DS142/12 (DSR 2000:X, 5079) United States – Section 110(5) of the US Copyright Act WT/DS160/12 (DSR 2001:II, 657)

Arbitration awards under Article 21.3(c) of the DSU

27/07/2000

19/06/2000

07/04/2000

12/01/2000

17/02/1999

06/11/1998

23/07/1998

13/02/1998

25/09/1997

01/11/1996

Date of Adoption of Report

15/01/2001

06/10/2000

18/08/2000

23/05/2000

04/06/1999

23/02/1999

07/12/1998

29/05/1998

07/01/1998

14/02/1997

Date of Circulation of Award

Legislative

Regulatory

Regulatory

Legislative

Legislative

Regulatory

Legislative

Legislative

Legislative

Legislative

Nature of change proposed

12 months

8 months

6 months

14 months and 9 days

11 months and 2 weeks

8 months

12 months

15 months

15 months and 1 week

15 months

Reasonable Period of Time

∗

Parties

DG

Parties

DG

DG

Parties

Yasuhei Taniguchi

John Lockhart

Yasuhei Taniguchi

John Lockhart

A. V. Ganesan

17/12/04

20/04/04

27/01/2003

23/10/2002

8/03/2002

23/08/2001

16/02/2001

Parties

Florentino P. Feliciano

12/10/2000

Parties

Claus-Dieter Ehlermann Florentino P. Feliciano

26/09/2000

Parties

A. V. Ganesan

7/06/05

20/09/04

13/06/2003

17/03/2003

26/07/2002∗

19/02/2002

31/08/2001

28/02/2001

28/02/2001

Regulatory

Legislative

Legislative

Legislative

N/A

Administrative/ Legislative

Administrative/ Legislative

Legislative

Legislative

12 months


11 months

14 months

N/A

15 months


12 months

10 months

Parties reached an agreement on the reasonable period of time for compliance during the proceedings. Therefore, the Arbitrator issued a brief report noting that it was not necessary to issue an award.

United States – Anti-Dumping Act of 1916 WT/DS136/11, WT/DS162/14 (DSR 2001:V, 2017) Canada – Term of Patent Protection WT/DS170/10 (DSR 2001:V, 2031) Argentina – Measures Affecting the Export of Bovine Hides and the Import of Finished Leather WT/DS155/10 (DSR 2001:XII, 6013) United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan WT/DS184/13 United States – Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea WT/DS202/17 Chile – Price Band System and Safeguard Measures Relating to Certain Agricultural Products WT/DS207/13 United States – Continued Dumping and Subsidy Offset Act of 2000 WT/DS217/14, WT/DS234/22 European Communities – Conditions for the Granting of Tariff Preferences to Developing Countries WT/DS246/14 United States – Sunset Reviews of Anti-dumping Measures on Oil Country Tubular Goods from Argentina WT/DS268/12

10 Implementation of panel and Appellate Body rulings: an overview brendan m c givern White & Case International Trade (Geneva)

1 Introduction This chapter provides a brief overview of the rules governing the implementation of WTO panel and Appellate Body reports. It focuses on the steps that a prevailing complaining party needs to take to secure the implementation of the rulings and recommendations of the panel and the Appellate Body, as adopted by the WTO Dispute Settlement Body (DSB). It is written for the non-specialist who is interested in the general principles of implementation.1 The Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) was negotiated during the Uruguay Round, and entered into force with the WTO on 1 January 1995. It sets out the rules and procedures for WTO dispute resolution. It provides for automatic panel establishment, and for the automatic adoption of panel and Appellate Body reports. Many of the DSU provisions codify the practices that had been developed in dispute settlement proceedings under the General Agreement on Tariffs and Trade (GATT). However, the DSU also includes new provisions regarding implementation and compensation that had no parallel in the GATT. It has been these new provisions – that did not have the benefit of being previously tested in practice – that have been the most controversial and problematic in the first ten years of the WTO.

1

Readers who are already familiar with WTO dispute settlement may wish to consult Brendan P. McGivern, ‘Seeking Compliance with WTO Rulings: Theory, Practice and Alternatives’, The International Lawyer (Spring 2002).

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2 Seeking compliance with WTO rulings (a) General principles Article 3.7 of the DSU makes clear that the settlement of a dispute is clearly to be preferred over recourse to the dispute settlement system: ‘Before bringing a case, a Member shall exercise its judgement as to whether action under these procedures would be fruitful. The aim of the dispute settlement mechanism is to secure a positive solution to a dispute. A solution mutually acceptable to the parties to a dispute and consistent with the covered agreements is clearly to be preferred. In the absence of a mutually agreed solution, the first objective of the dispute settlement mechanism is usually to secure the withdrawal of the measures concerned if these are found to be inconsistent with the provisions of any of the covered agreements. The provision of compensation should be resorted to only if the immediate withdrawal of the measure is impracticable and as a temporary measure pending the withdrawal of the measure which is inconsistent with a covered agreement. The last resort which this Understanding provides to the Member invoking the dispute settlement procedures is the possibility of suspending the application of concessions or other obligations under the covered agreements on a discriminatory basis vis-à-vis the other Member, subject to authorization by the DSB of such measures.’

In the absence of a settlement, therefore, the DSU establishes a hierarchy of options. It notes that ‘the first objective of the dispute settlement mechanism is usually to secure the withdrawal of the measures concerned if these are found to be inconsistent with the provisions of any of the covered agreements’. Therefore, the withdrawal of the WTO-inconsistent measure is the preferred option, as it is the best means by which to rebalance the original trade concessions negotiated among Members. In the event that the ‘immediate withdrawal of the measure is not practicable’, then compensation may be sought. Some commentators have described compensation as one item that is available from a ‘menu’ of options for the implementing Member. However, the DSU makes clear that compensation is only a ‘temporary measure’ pending the withdrawal of the WTO-inconsistent measure. Article 22.1 of the DSU provides that ‘neither compensation nor the suspension of concessions or other obligations is preferred to full implementation of a recommendation to bring a measure into conformity with the covered agreements’. As a ‘last resort’, the complaining Member may seek to suspend concessions or other obligations – in other words, to ‘retaliate’ – against the

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non-implementing responding Member. This involves the imposition of retaliatory trade sanctions after the complainant has received authorization to do so from the DSB. It is important to note that WTO rulings are by no means self-executing. The implementation of a panel or Appellate Body report is not automatic. The complaining party must initiate and engage in the procedural stages available under the DSU to bring about the implementation of the report. The DSU sets out these procedural stages in Articles 21 and 22. In addition, unlike the domestic systems of many WTO Members, the WTO does not award monetary damages for past harm that has been incurred as a result of the illegal measure. In the overwhelming majority of cases in the GATT and the WTO in which a Member’s measure has been found to be WTO-inconsistent, the panel has recommended that the Member bring its measure into conformity with its obligations. Therefore, a Member has the obligation to withdraw its WTO-inconsistent measure on a prospective basis, following the expiry of the reasonable period of time for compliance. As a consequence of this ex nunc (perspective) approach, the WTO unfortunately provides a relatively long period – namely from the date of adoption of the measure to the end of the reasonable period of time – during which a WTO Member can maintain a WTO-inconsistent measure without consequences.

(b) Article 21.3 – Determination of the ‘reasonable period of time’ for the responding party to bring its measures into compliance Article 21.1 of the DSU provides that ‘[p]rompt compliance with recommendations or rulings of the DSB is essential in order to ensure effective resolution of disputes to the benefit of all Members’. However, prompt compliance is a principle that is respected far more in the breach than in its observance. A complaining party that has won a WTO dispute settlement proceeding is rarely afforded ‘prompt compliance’ by the respondent. Article 21.3 provides that if it is ‘impracticable’ to comply immediately, the responding Member will be given ‘a reasonable period of time’ to do so. In practice, most Members find it ‘impracticable’ to comply immediately, often because they need a certain amount of time to pass the necessary legislative or regulatory amendments to bring about compliance. This is a legitimate reason to seek a reasonable period of time. However, there are often unstated – and unacceptable – reasons for which responding Members seek a reasonable period of time, such as a desire to maintain a WTO-inconsistent measure for as long as possible, or to give

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their domestic industry additional time to adjust to the eventual removal of the protection brought about by the illegal measure. The complaining and responding Members may agree on the reasonable period of time required to bring the WTO-inconsistent measure into conformity. However, if the parties cannot agree on the reasonable period of time, then Article 21.3(c) provides that they can have the compliance period established through binding arbitration. Although the DSU does not specify the background of the persons who are to serve as arbitrators, in practice, all arbitrations to date2 have been conducted by a member of the Appellate Body. Article 21.3(c) further provides that, in such arbitrations: ‘[A] guideline for the arbitrator should be that the reasonable period of time to implement panel or Appellate Body recommendations should not exceed 15 months from the date of adoption of a panel or Appellate Body report. However, that time may be shorter or longer, depending upon the particular circumstances.’

The first few Article 21.3 arbitrations relied on the 15-month guideline in the award of the reasonable period of time. However, it was later thought that 15 months would not be an appropriate reasonable period of time in all cases, as the length of time required to bring a measure into conformity would depend on the particular legal system of the responding Member, and whether the measure would have to be brought into conformity by legislative or administrative means. Therefore, the arbitrators began focussing less on the 15-month guideline in the first sentence, and more on the flexibility provided in the subsequent sentence, i.e., that the reasonable period of time could be shorter or longer, depending on the particular circumstances. The Arbitrator in EC – Hormones stated: ‘[I]t is clear that the reasonable period of time, as determined under Article 21.3(c), should be the shortest period possible within the legal system of the Member to implement the recommendations and rulings of the DSB.’3

This line of reasoning has been followed in virtually every arbitral award since then. In other words, the arbitrators have determined the reasonable period of time based on the length of time required in the responding Member’s legal system to bring its measure into conformity, whether by legislative, regulatory or administrative means. 2

As of May 2005.

3

Award of the Arbitrator, EC – Hormones, para. 26.

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(c) Article 21.5 – The compliance panel If the responding party has done nothing to implement by the end of the reasonable period of time – and does not claim otherwise – then the complaining Member could move directly to seek the suspension of concession or other obligations.4 However, this is unusual. In most compliance disputes, the responding party argues that it has implemented the DSB’s recommendations and rulings, but the complaining party disagrees that the actions taken constitute compliance. The question of whether the measure constitutes implementation is a matter for an Article 21.5 compliance panel. Article 21.5 provides: ‘Where there is disagreement as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings such dispute shall be decided through recourse to these dispute settlement procedures, including wherever possible resort to the original panel. The panel shall circulate its report within 90 days after the date of referral of the matter to it. When the panel considers that it cannot provide its report within this time frame, it shall inform the DSB in writing of the reasons for the delay together with an estimate of the period within which it will submit its report.’

Therefore, when the complaining and responding parties disagree as to whether an implementing measure has been taken (‘the existence’) or whether the implementing measure actually brings the responding Member into compliance (‘consistency with the covered agreement’), the matter is resolved through the expedited compliance panel process, usually by the original panel. The phrase ‘measures taken to comply’ has been construed broadly. The Appellate Body has made clear that compliance panels are not limited to assessing the consistency of the implementing measures with the original DSB recommendations and rulings: ‘We addressed the function and scope of Article 21.5 proceedings for the first time in Canada – Aircraft (Article 21.5 – Brazil). There, we found that Article 21.5 panels are not merely called upon to assess whether “measures taken to comply” implement specific “recommendations and rulings” adopted by 4

This is what happened in the case of EC – Hormones. At the end of the reasonable period of time, the European Communities did not claim that it had implemented the DSB rulings. As a result, the two complaining parties, the United States and Canada, did not request a compliance panel, but proceeded directly to seek suspension of concessions under Article 22.2.

implementation of panel and appellate body rulings 103 the DSB in the original dispute. We explained there that the mandate of Article 21.5 panels is to examine either the “existence” of “measures taken to comply” or, more frequently, the “consistency with a covered agreement” of implementing measures. This implies that an Article 21.5 panel is not confined to examining the “measures taken to comply” from the perspective of the claims, arguments, and factual circumstances relating to the measure that was the subject of the original proceedings. Moreover, the relevant facts bearing upon the “measure taken to comply” may be different from the facts relevant to the measure at issue in the original proceedings. It is to be expected, therefore, that the claims, arguments, and factual circumstances relating to the “measure taken to comply” will not, necessarily, be the same as those relating to the measure in the original dispute. Indeed, a complainant in Article 21.5 proceedings may well raise new claims, arguments, and factual circumstances different from those raised in the original proceedings, because a “measure taken to comply” may be inconsistent with WTO obligations in ways different from the original measure. In our view, therefore, an Article 21.5 panel could not properly carry out its mandate to assess whether a “measure taken to comply” is fully consistent with WTO obligations if it were precluded from examining claims additional to, and different from, the claims raised in the original proceedings.’5

Article 21.5 does not specifically provide that such decisions may be appealed, but in practice the Appellate Body has accepted appeals from compliance panels in numerous cases to date. Appeals from Article 21.5 panels have therefore become a routine and unquestioned practice.

(d) Article 22.2 – Compensation If the compliance panel process determines that the responding Member has not implemented, then the complaining party may wish to seek compensation. Article 22.1 of the DSU provides that ‘[c]ompensation is voluntary and, if granted, shall be consistent with the covered agreements’. Just as the responding Member is under no obligation to provide compensation, complaining Members are under no obligation to seek it, if they wish to resort directly to retaliation. Article 22.2 provides in part that: 5

Appellate Body Report on EC – Bed Linen (Article 21.5 – India), para. 79. (Emphasis original.)

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brendan m c givern If the Member concerned fails to bring the measure found to be inconsistent with a covered agreement into compliance therewith or otherwise comply with the recommendations and rulings within the reasonable period of time . . . such Member shall, if so requested, and no later than the expiry of the reasonable period of time, enter into negotiations with any party having invoked the dispute settlement procedures, with a view to developing mutually acceptable compensation.

As drafted, Article 22.2 appears to require compensation negotiations to begin prior to the expiration of the reasonable period of time. However, as compensation is ‘voluntary’, there is no reason why compensation negotiations could not take place after that time, such as during or after the compliance panel process. Indeed, the compliance panel process would normally not even begin until after the expiration of the reasonable period of time. Compensation could take a variety of forms, including the provision of enhanced access to the market of the responding Member (either in the same or an unrelated sector) or cash compensation. However, as noted above, compensation must be ‘consistent with the covered agreements’. This means that a responding Member would not be able to offer enhanced market access to the products of the complaining Member alone. Under the most-favoured-nation principle, it would be required to offer this additional market access to all WTO Members. Thus, for compensation to be worthwhile for the complainant, it would likely need to secure additional access for sectors or products in which it is the main supplier to the responding Member. This would reduce, although not eliminate, the ‘free rider’ problem. Even cash compensation has its problems. For example, in the US – Section 110(5) Copyright Act dispute, the United States agreed to pay cash compensation to the European Communities in accordance with the level of nullification or impairment as determined by an arbitrator.6 However, Australia has argued that this form of cash compensation was discriminatory. Australia asserted that its artists continued to sustain losses as a result of the WTO-inconsistent US legislation, and yet it remained uncompensated. Compensation is widely regarded in the WTO as preferable to retaliation. Additional market access is often compared favourably to retaliation as it is seen as ‘trade-enhancing, not trade-restricting’. Yet the use of compensation in WTO dispute settlement is rare. In addition to the ‘free rider’ 6

Award of the Arbitrators, US – Section 110(5) Copyright Act (Article 25.3).


problem, discussed above, compensation does not resolve the core issue in the dispute, which is the continuing existence of the WTO-inconsistent measure. Moreover, in the absence of a panel ruling, negotiating parties often have difficulty reaching agreement on an appropriate level of compensation.7

(e) The relationship between Article 21.5 and Article 22.6 – The ‘sequencing’ issue As noted above, Article 21.5 provides for a 90-day period to determine compliance, although many compliance panels have taken longer than that. Moreover, as noted above, the rulings of Article 21.5 panels are subject to appeal. However, the United States and some other Members interpret Article 22 as establishing a deadline to submit a retaliation request of no later than 30 days following the expiration of the reasonable period of time. They read Article 22.2 and 22.6 of the DSU as providing a complaining party with a 10-day ‘window of opportunity’ to seek authorization to retaliate. They note that Article 22.2 allows a prevailing party to request authorization from the DSB to suspend concessions 20 days after expiration of the reasonable period of time. Article 22.6 requires the DSB to grant authorization within 30 days of the expiry of that period, unless there is a consensus to reject the request (which in reality will never happen, as the consensus would have to include the complainant), or the responding Member requests arbitration. If this is correct, then a complaining Member going through the compliance panel process (which takes a minimum of 90 days) could lose its right to retaliate by negative consensus, as it would miss the 10-day ‘window’. On the other hand, if a retaliation request is made before the compliance panel process has been completed, the complainant would be making a unilateral determination of non-compliance, rather than having this issue adjudicated through the multilateral process, as required under Article 23 of the DSU.8 This problem has arisen as a result of bad drafting, and it caused a major crisis in the WTO during the 7 8

This is why the United States and the European Communities established an ad hoc arbitration in the US – Section 110(5) Copyright Act dispute, as noted above. Article 23 of the DSU provides in part that: ‘When Members seek the redress of a violation of obligations or other nullification or impairment of benefits under the covered agreements or an impediment to the attainment of any objective of the covered agreements, they shall have recourse to, and abide by, the rules and procedures of this Understanding.’

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EC – Bananas III dispute, when the United States made a retaliation request before an Article 21.5 panel had determined whether the European Communities had complied with the DSB rulings.9 Since EC – Bananas III, WTO Members have resolved this problem in an ad hoc but highly effective manner. Complaining and responding Members have entered into stand-alone ‘sequencing’ agreements, preserving the complaining Member’s right to seek retaliation at the end of the compliance panel process. Efforts to amend the DSU to provide a textual solution to the sequencing problem have not to date been successful.

(f) Article 22.2 – The ‘last resort’: retaliation If compensation negotiations fail, or if the complaining Member chooses not to seek compensation, it can request authorization from the DSB to suspend concessions or other obligations (‘retaliate’) against the nonimplementing responding party. The word ‘retaliation’ is not used in the DSU. Article 22.2 uses more anodyne phrasing, stating that a complaining party may request authorization from the DSB ‘to suspend the application to the Member concerned of concessions or other obligations under the covered agreements’. In other words, once authorized by the DSB to do so, the complaining Member may raise bound tariffs on the products of the responding Member (i.e., it can ‘suspend concessions’) or it can deny other treaty benefits to the respondent (‘suspend . . . other obligations’). It retaliates against the responding Member alone. For example, if the complaining Member raised bound tariffs on the imports of the responding Member, it would do so on a non-most-favoured-nation basis. Yet the complaining Member can only retaliate within clearly defined limits. The most important limit is set out in Article 22.4 of the DSU: ‘The level of the suspension of concessions or other obligations authorized by the DSB shall be equivalent to the level of the nullification or impairment.’

Thus, the amount of authorized retaliation cannot exceed the level of ‘nullification or impairment’ of WTO benefits to the complainant caused by the responding Member’s WTO-inconsistent measure. The responding Member is entitled to refer the retaliation request to arbitration, usually on 9

For a more detailed analysis of the sequencing issue, see C. M. Valles and B. McGivern, ‘The Right to Retaliate under the WTO Agreement: The “Sequencing” Problem’, Journal of World Trade, Vol. 34, No. 2 (2000), pp. 63–84.


the grounds that the retaliation sought is excessive. The arbitrators determine, among other things, whether there is ‘equivalence’ between the level of retaliation sought and the level of nullification or impairment sustained by the complainant. If the arbitrators determine that the retaliation sought is not equivalent, then they must determine what level would be equivalent. The arbitrators’ decision is final, binding, and not subject to appeal. Following release of the decision, the complainant must make a second request to the DSB to be granted authority to retaliate in a manner that is ‘consistent with the decision of the arbitrator’. At that stage, the DSB’s approval of the retaliation request is virtually automatic. Of course, retaliation is no panacea, and certainly provides no guarantee of compliance. If the complaining party retaliates by imposing higher tariffs on consumer products of the responding party, its own consumers will pay more. Similarly, if it increases tariffs on intermediate goods used in the manufacturing process, its manufacturers will pay more. Thus, for a complaining Member, the challenge is to retaliate in a commercially meaningful way while not hurting its own economy. This has proven to be an extremely difficult – and at times impossible – task. Indeed, retaliatory measures work backwards: although the WTOinconsistent measure of the responding Member has hurt the complainant’s exports, the complainant hits back at imports from the respondent. This may do little or nothing to resolve the dispute, as the WTO-inconsistent measure remains in place. The affected industry of the complaining Member still has its market access impaired as a result of an illegal measure, and it may have little interest in striking back at imports from the respondent, particularly imports in an unrelated sector. Its real interest – indeed, its only interest – is the removal of the illegal measure. Thus, despite retaliation, the core problem giving rise to the dispute may remain unresolved.

(g) Article 22.8 – Ending retaliation The DSU provision on the lifting of retaliation is skeletal. Article 22.8 provides in part that: ‘The suspension of concessions or other obligations shall be temporary and shall only be applied until such time as the measure found to be inconsistent with a covered agreement has been removed, or the Member that must implement recommendations or rulings provides a solution to the nullification or impairment of benefits, or a mutually satisfactory solution is reached.’

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Thus, the ‘temporary’ retaliation should end when one of three things happens: r the WTO-inconsistent measure ‘has been removed’, which is reasonably

clear;

r the responding Member ‘provides a solution to the nullification or

impairment of benefits’, presumably through compensation; or

r an agreement is reached between the disputing parties.

The DSU provides no specific mechanism to lift the retaliation. It similarly does not specify any procedure to resolve disputes over whether implementation has actually occurred, i.e., whether the WTOinconsistent measure indeed ‘has been removed’. This could be resolved through a compliance panel under Article 21.5 of the DSU, although the text of the DSU does not say this. Alternatively, the responding Member could commence new proceedings against the retaliating Member. Some of these issues may be clarified by the panel in United States – Continued Suspension of Obligations in the EC – Hormones Dispute (WT/DS320) and Canada – Continued Suspension of Obligations in the EC – Hormones Dispute (WT/DS321). In these proceedings, the European Communities is challenging the continued application of sanctions by the United States and Canada, which were imposed in 1999 after the European Communities failed to implement the original DSB recommendations and rulings. The European Communities has now claimed to have complied, an assertion contested by the United States and Canada. These original complainants also refused to agree to an Article 21.5 procedure to adjudicate EC compliance. Therefore, the European Communities has commenced new panel proceedings against the United States and Canada, alleging that the continued application of the sanctions is WTO-inconsistent. As of the date of writing, this panel has been established, but the panelists have not yet been selected.

(h) Article 22.8 – The surveillance function of the DSB: an unfulfilled promise Article 22.8 of the DSU provides that ‘the DSB shall keep under surveillance the implementation of adopted recommendations or rulings’. Such ‘surveillance’ comprises a number of elements:

implementation of panel and appellate body rulings 109 r The issue of implementation may be raised at the DSB by any Member

at any time following adoption.10

r The issue of implementation of the DSB rulings is automatically placed

on the DSB agenda six months following the date of establishment of the reasonable period of time, and it remains on the DSB’s agenda ‘until the issue is resolved’.11 r Ten days prior to each such DSB meeting, the implementing Member must provide the DSB with a written status report on its progress in implementing the rulings.12 In practice, the DSB surveillance function has proven to be a disappointment. The status reports on progress in implementation tend to be short, uninformative, and highly repetitive. Some Members – notably the United States – file virtually identical status reports month after month. Similarly, the DSB discussions on implementation have not fulfilled their objective of applying multilateral pressure on the non-implementing Member to comply with its obligations. Instead, in many disputes, when the same discussions on implementation take place month after month, the exchanges tend to become rote. Thus, the surveillance function of the DSB can lapse into ritual rather than any meaningful surveillance by the collective body of the DSB.

3 Conclusion As noted above, there is nothing automatic about the implementation of WTO rulings. Indeed, the implementation of panel and Appellate Body reports has given rise to some of the most difficult and contentious issues in the WTO. Moreover, the tools available to the complaining party to secure compliance – including the rather blunt tool of retaliation – are far from ideal. In certain circumstances, therefore, the adoption of a panel or Appellate Body report may not be the end of the case, but only one (albeit important) step in the long process towards the resolution of the dispute. 10

Article 21.6 of the DSU.

11

Ibid.

12

Ibid.

11 A brief introduction to countermeasures in the WTO dispute settlement system yves renouf 1 Counsellor, Legal Affairs Division, WTO Secretariat, Geneva

1 Introduction The Scandinavian sagas of the early Middle Ages portrayed Iceland as a state without central coercive authority where judgements or awards were often enforced through mediation and, ultimately, the taking of hostages. In this respect, today’s WTO community still very much looks like Iceland ten centuries ago. There is no ‘WTO police’ to send trade ministers to jail if they do not comply with recommendations and rulings of the Dispute Settlement Body (DSB), the political entity supervising the WTO dispute settlement system. From the point of view of international law, the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes (the Dispute Settlement Understanding or DSU, as it is more commonly known) provides for a unique system of dispute resolution. However, as sophisticated as it may be on other accounts, the system still relies on a conceptually primitive mechanism of countermeasures when it comes to securing compliance by a reluctant Member found in violation of its WTO obligations. Under such mechanism, if a WTO Member does not comply with DSB rulings, the Member that brought the complaint (and nobody else) may suspend the application of certain of its own WTO obligations so as to limit access to its market for products or services from the Member found in breach. The purpose of this contribution is not to provide an exhaustive analysis of the ‘countermeasure’ mechanism under the dispute settlement system set up by the Marrakesh Agreement establishing the World Trade 1


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Organization (WTO Agreement). Rather, it is to give a general idea of its nature and functions by presenting: (a) a brief introduction on the nature and role of countermeasures in the DSU; and (b) some non-exhaustive remarks on how the WTO system of countermeasures has so far functioned in practice.

2 ‘Countermeasures’ in the WTO Agreement (a) The relevant provisions The main provisions on countermeasures are found in Article 22 of the DSU. The introduction of specific and more detailed procedures on countermeasures represents an improvement compared with Article XXIII:2 of the GATT 1947, the only provision on countermeasures in the GATT system for 50 years. In spite of the length of Article 22 of the DSU, the WTO provisions on countermeasures remain quite sketchy if one considers how essential an enforcement mechanism is in an international system where adjudicatory decisions are automatically adopted. Indeed, one of the most significant modifications introduced by the Uruguay Round compared with the GATT 1947 dispute settlement systems was that panel and Appellate Body reports would be adopted unless the DSB decided by consensus not to adopt those reports. Since Article 22 does not provide for a ‘centralized’ enforcement system (a ‘WTO police’), it is for individual Members to enforce rulings. This is in line with a ‘contractual’ approach to general international law where states look after their own interests and remain for the most part the exclusive agents of coercion. In addition to Article 22 of the DSU, special or additional provisions can be found in paragraphs 10 and 11 of Article 4 and paragraph 10 of Article 7 of the Agreement on Subsidies and Countervailing Measures (SCM Agreement), which deal respectively with the particular situation of prohibited and actionable subsidies. The terms of Articles 4.10, 4.11 and 7.10 are quite different from those of Article 22. However, as recalled in US – FSC (Article 22.6 – US), they have to be applied in conjunction with the relevant paragraphs of Article 22.

(b) Nature of countermeasures Countermeasures in the WTO are unilateral actions in the way they are imposed, because only Members involved in the original dispute can take

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such countermeasures in the absence of compliance by the Member found in breach of its WTO obligations. However, countermeasures must be authorized by the DSB, a multilateral body, before they can be put in place. The fact that the request to take countermeasures must be adopted by the DSB unless there is consensus against it nevertheless makes such an authorization virtually automatic if all the other relevant conditions of Article 22 have been fulfilled. In these circumstances, the actual control over countermeasures is mainly exercised by arbitrators who may be called upon to review the appropriate level and value of the proposed countermeasures. Countermeasures are normally temporary under the DSU. In this respect, it has been said that the DSU goes beyond a mere rebalancing of rights and obligations. The foremost principle is that the party found in breach of its WTO obligations must ultimately comply. Countermeasures are not a legally acceptable substitute for compliance under the DSU (see Article 22.1). Countermeasures may apply only as of the end of the ‘reasonable period of time’ given to the losing party to comply. The WTO system does not provide for ‘reparations’ for any damage caused before the end of the reasonable period of time and a fortiori, before the adoption of the panel and Appellate Body reports. This is a significant difference compared with general international law where the principle of status quo ante justifies not only the imposition of countermeasures for damages caused pending compliance, but also reparation for past injuries suffered from the date of application of the internationally illegal act. The DSU allows ‘cross-retaliations’, i.e. the possibility to take countermeasures in another ‘sector’ (e.g., trade in goods, or a category of intellectual property rights under the TRIPS Agreement) or under another covered agreement than the one under which the original violation took place. As innovative and essential as this possibility may seem for some members – inter alia for developing country Members – it has been in fact used only once, by Ecuador, in the EC – Bananas III case. Pursuant to Article 22 of the DSU, countermeasures take the form of suspension of ‘concessions or other obligations’. The broader term ‘countermeasure’, which is also found in the UN Articles on State Responsibility, is only used in Articles 4.10, 4.11 and 7.10 of the SCM Agreement. This difference in wording does not have an impact on what type of countermeasures can be taken. Indeed, the term ‘concessions’ covers all that is negotiated besides the treaty itself (e.g. tariff rates and other commitments in the field of goods and services) and the term ‘other obligations’

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is broad enough to cover any provision of the WTO Agreement. However, Article 22.5 provides that the DSB shall not authorize suspension of concessions or other obligations if a covered agreement prohibits such suspension. The difference in language between Article 22.6 of the DSU and Articles 4.10/11 and 7.10 of the SCM Agreement was deemed to leave a broader margin of interpretation to arbitrators who reviewed cases under Article 4 of the SCM Agreement (Brazil – Aircraft; Canada – Aircraft Credits and Guarantees; US – FSC). As in general international law, countermeasures under the DSU have to be proportionate to the damage caused by non-compliance. Under Article 22.4 of the DSU, there must be equivalence between the countermeasures and the level of nullification or impairment caused. Likewise, under Articles 4.10 and 4.11 of the SCM Agreement, countermeasures need to be appropriate, keeping in mind, as specified in footnotes 9 and 10 that ‘this expression is not meant to allow countermeasures that are disproportionate in light of the fact that the subsidies dealt with under these provisions [Article 4 of the SCM Agreement] are prohibited’. Under Article 7.10 of the SCM Agreement, the countermeasures must be ‘commensurate with the degree and nature of the adverse effect’. It is this relation between the damage caused by the WTO-inconsistent measure and the proposed countermeasures that may be subject to arbitration, respectively under Article 22.6 of the DSU, Article 4.11 of the SCM Agreement and 7.10 of the SCM Agreement.

(c) Recourse to countermeasures There are four phases in the recourse by a WTO Member to countermeasures: (a) Recourse to countermeasures takes place at the end of the dispute settlement process, once the DSB has issued recommendations and rulings and the losing party has failed to comply with those recommendations and rulings within a reasonable period of time. If no compliance has taken place and if no compensation has been offered or accepted, a complainant may formally request authorization from the DSB to take countermeasures. This possibility is offered only to the complainant(s) in the original case, to the exclusion of any other WTO Member.

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(b) If the losing party disagrees, it may seek arbitration. In the meantime, no authorization to take countermeasures will be granted by the DSB until the arbitrator issues its award. (c) The arbitrator will determine whether the level of proposed countermeasures – i.e. the concessions or other obligations which the complaining Member proposes to suspend – is equivalent to the level of nullification or impairment under Article 22.4 of the DSU, appropriate under Article 4.11 of the SCM Agreement in relation to a prohibited subsidy, or commensurate with the degree or nature of the adverse effect caused by an actionable subsidy (Article 7.10 of the SCM Agreement). (d) The award of the arbitrator is final. It cannot be appealed before the Appellate Body. Once the arbitrator issues its award, the complaining party(ies) that originally requested authorization to take countermeasures may make a new request for authorization to the DSB, which will have to be compatible with the arbitrator’s award.

(d) Observations A couple of observations are appropriate at this stage: (a) Recourse to countermeasures is indicative of a likely failure by a Member to comply with the DSB’s recommendations and rulings. However, the countermeasure system under the WTO is, unlike under GATT 1947, fully part of the functioning of the system; a Member subject to countermeasures cannot leave the WTO simply because it is subject to countermeasures, unlike under GATT 1947. (b) The WTO system of countermeasures is not very sophisticated even by general international law standards. For instance, it purports to ensure market access by allowing the very type of measures – trade restrictions – that the system is supposed to prevent. Moreover, it does not provide any reparation for past harm, which raises questions about the actual purpose of countermeasures in the WTO.

3 Operation of the countermeasure system in practice In order to illustrate how WTO countermeasures operate in practice, we address hereafter two aspects of the system: (1) the request for authorization to adopt countermeasures; and (2) arbitration.


(a) Request for authorization to take countermeasures In most cases to date, proposed countermeasures have taken the form of a 100 per cent tariff surcharge on a defined list of products attached to the request submitted to the DSB. Such list often includes the value of imports for each of the products listed during the most recent year. The assumption behind the 100 per cent tariff was apparently that a prohibitive duty would either stop imports or generate tariff revenue equivalent to the value of the import if the products subject to the additional tariff surcharge continued to be imported. The products subject to countermeasures are generally selected so that the value of the trade blocked by the prohibitive tariff equals the value of the nullification or impairment caused by the WTO-inconsistent measure. Under this approach, countermeasures have generally been based on the ‘trade loss’ or ‘trade effect’ of the measure found in violation of the WTO Agreement. Products are also sometimes selected so as to primarily affect producers enjoying some political leverage with the government of the losing Member. The expectation in such cases is that the producers affected by the countermeasures will lobby their government to bring the WTO-inconsistent measures giving rise to the countermeasures into compliance with the WTO. More recently, some Members have proposed other types of countermeasures. For example, in 2003, in the context of the US – 1916 Act case, the European Communities proposed to apply ‘mirror legislation’, arguing that it would set the level of ‘illegal effect’ of its mirror legislation at that of the measure originally found to be illegal (the US Anti-Dumping Act of 1916). Subsequently, in US – Offset Act (Byrd Amendment), the requesting parties sought authorization to take countermeasures equal to the amount of money transferred by the US authorities to complainants in US antidumping or countervailing duty cases under the Continued Dumping and Subsidy Offset Act (the Byrd Amendment). In both instances, the countermeasures were not directly linked to the trade or economic effect of the measure subject to the recommendations and rulings of the DSB. Moreover, in some cases, requesting parties have sought authorization to suspend ‘other obligations’ than tariff concessions, such as obligations under the TRIPS Agreement (e.g. Ecuador in EC – Bananas III), or under the Anti-Dumping Agreement, the SCM Agreement or the Import Licensing Agreement (e.g. Brazil – Aircraft, Canada – Aircraft Credits and Guarantees). A common problem in all instances where requesting parties proposed to suspend obligations other than tariff concessions was how to quantify

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these types of countermeasure so as to be able to compare them with the level of nullification of impairment caused by the WTO-inconsistent measure in the original dispute. Previously, such nullification or impairment had usually been measured in terms of its economic or trade effect.

(b) Arbitrations It is necessary to examine the arbitration mechanism provided by Articles 22.6 and 22.7 of the DSU to understand how countermeasures operate in the WTO because all requests for the authorization of countermeasures so far have led to arbitration. In spite of their limited mandates, arbitrators have had to interpret extensively the provisions of Article 22 of the DSU and Article 4 of the SCM Agreement in order to carry out their functions. In reviewing proposed countermeasures, arbitrators are constrained by several factors. For instance, pursuant to Article 22.7 of the DSU, they can only look at the level of countermeasure, not at the nature of the countermeasure (EC – Hormones) even though the actual impact of countermeasures may often depend on the type of obligations suspended and the products concerned (e.g. suspending tariff concessions on imports of widgets will obviously have a higher impact if the Member concerned exports a large part of its production to the Member planning to adopt countermeasures than if such Member only exports a limited number of widgets to the requesting Member). In addition, the terms of Articles 22.6 and 22.7 of the DSU and of Articles 4.10 and 4.11 of the SCM Agreement have given rise to a number of issues that arbitrators have had to address. For example, the notion of ‘nullification or impairment’ of a ‘benefit’ may be difficult to interpret when a certain ‘value’ has to be attached to it. In this regard, does the violation of a WTO obligation equate exactly with nullification or impairment? If so, one would presume it inappropriate to calculate the level of nullification or impairment only on the basis of the effect of the illegal measure. Rather, it may be necessary to give a value per se to the illegal measure itself and not limit it to the trade or economic effect of the measure. The term ‘level’ has also given rise to extensive argumentation, particularly in US – 1916 Act and US – Offset Act (Byrd Amendment). Does the term ‘level’ imply an obligation to always quantify countermeasures ‘in dollars and cents’? The notions of ‘equivalence’ (Article 22.6 of the DSU) and ‘appropriateness’ (Articles 4.10 and 4.11 of the SCM Agreement), and more


generally, the object or purpose of countermeasures have also been subject to interpretation by arbitrators (see, e.g., EC – Hormones and EC – Bananas III for the term ‘equivalent’ in Articles 22.4 and 22.7; Brazil – Aircraft; US – FSC for the term ‘appropriate’ in Articles 4.10 and 4.11 of the SCM Agreement). When reviewing these concepts, arbitrators have been confronted with a number of systemic questions. For instance, are countermeasures supposed to induce compliance? If so, this could justify a higher level of countermeasures. If not, are countermeasures simply a form of self-applied compensation (because of the advantage given to certain domestic producers) to be maintained until the Member found in breach of its obligations deems it appropriate to comply? With some exceptions, Article 22.6 arbitrators have adopted relatively conservative positions on these questions. For example, the arbitrator in US – Offset Act (Byrd Amendment) had to address the issue of the relation between ‘violation’ and ‘nullification or impairment’ and concluded that a WTO violation does not equate to nullification or impairment of a benefit. In general, nullification or impairment has been assessed in terms of quantifiable economic or trade effects (in line with the general GATT practice to calculate benefits in terms of trade loss or gains). In cases where arbitrators have used other criteria, such as the amount of subsidy (arbitrations under Articles 4.10 and 4.11 of the SCM Agreement), it was either because the parties agreed to it and/or because it was felt that the text of the SCM Agreement allowed such a possibility (Brazil – Aircraft; US – FSC; Canada – Aircraft Credits and Guarantees). The process of quantification of the level of nullification or impairment and of the countermeasures themselves has also varied from case to case. Arbitrators under Article 22.6 of the DSU have often relied on ‘counterfactuals’, i.e. an estimate of the level of trade that would have existed but for the measure found to be illegal (see, e.g., EC – Hormones). In contrast, in arbitrations relating to export subsidies, such as Brazil – Aircraft and Canada – Aircraft Credits and Guarantees, the arbitrators relied on the amount of subsidy in the price of each aircraft. This has to do, inter alia, with the irrebuttable presumption of trade effect attached to prohibited subsidies. In US – Offset Act (Byrd Amendment), the arbitrator also decided to follow an approach based on the trade effect of the measure. In that case, an arbitrator for the first time relied on an economic model to quantify both the trade effect of a measure and the appropriate amount of the countermeasures, and not only to confirm another solution (as in US – FSC).

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It has been argued that the use of economic models gives an additional advantage to developed countries, since they have the relevant expertise to design such models more readily available. While it is correct that use of economic models implies additional work for the parties, such use also creates an incentive for the parties to cooperate with the arbitrator, because a lack of cooperation may force the arbitrator to use figures available, which may not always accurately reflect the reality of the case. Moreover, economic models provide a scientific basis for the analysis of arbitrators in complex cases. This said, economic models are also an incentive for arbitrators to follow the trade effect approach because such effect is in principle quantifiable and because, as mentioned above, economic models provide a scientific basis for the calculation of trade or economic effects. Finally, arbitrators have acknowledged that one of the purposes of countermeasures is to ‘induce compliance’, or ‘effectively induce compliance’, relying in this respect on Articles 22.1 and 22.3 of the DSU, as well as on the footnotes to Articles 4.10 and 4.11 of the SCM Agreement. The impact of this conclusion is nevertheless limited in Article 22.6 cases by the term ‘equivalent’ and more generally by the requirement in international law that countermeasures not be punitive (see UN Articles on State Responsibility), a principle regularly invoked by WTO Members in arbitrations. Arbitrators have, however, sometimes exercised discretion by relying on the term ‘appropriate’ in Article 4.10 of the SCM Agreement, particularly in situations where a Member was obviously not willing to comply in good faith with the recommendations and rulings of the DSB by symbolically adjusting the amount of countermeasures based on the subsidy by a certain percentage (Canada – Aircraft Credits and Guarantees).

4 Concluding remarks The WTO countermeasure system has been criticized by economists and lawyers alike as not adequately serving its purpose. From an economist’s point of view, countermeasures in the form of higher tariffs or other types of import restrictions make limited sense, since they actually penalize the economy of the Member taking such countermeasures. As a practical matter, they can probably be adopted only by developed country Members, or large, advanced developing Members which are better able to absorb their negative economic effect. Their impact on the domestic economy of a developing country Member taking


them may be too significant, since developing countries are often dependent on imports for their economic development. It is also not clear whether countermeasures adopted by a small country against a much bigger one would have any meaningful effect (see, for instance, the countermeasures adopted by the Netherlands against the United States under GATT 1947 in the 1950s). The application of countermeasures may also lead to trade diversion as importers of products subject to trade sanctions shift to other, possibly less competitive, sources of supply. From a lawyer’s point of view, WTO countermeasures fail to compensate the companies that are actually the victims of the illegal action targeted by the countermeasures. However, this criticism seems to be misdirected. The WTO is an agreement between subjects of international law (i.e. essentially states). Countermeasures are designed to be applied by subjects of international law against each other. As such it is logical that the companies affected by the illegal action could not draw immediate benefits from the imposition of countermeasures, even though it is in practice the amount of trade lost by these companies that generally serves as a basis for the calculation of the amount of countermeasures. Another criticism is that the concept of countermeasure is as old as jus gentium itself (or even older) and a very primitive way of enforcing one’s rights at that (see introductory remarks). Academics, practitioners and even negotiators in the Uruguay Round have suggested possible alternatives to the current system of WTO countermeasures. However, most other options, such as monetary fines, suffer from a different defect: they require the cooperation of the Member in breach of its obligations in order to be enforced (e.g., that Member must agree to pay the fine to the complaining party, or to some trust fund). In the absence of a ‘WTO police’ or of a more advanced international structure, the only effective option available still remains unilaterally imposed retaliatory countermeasures by one Member against another, provided that the DSB gives its imprimatur to such action. In the current negotiations to improve the WTO dispute settlement system within the framework of the Doha Development Agenda, some Members have offered new proposals on the subject of the enforcement of DSB recommendations and rulings. However, the solutions proposed so far do not seem to significantly alter the current system, which remains ultimately based on countermeasures when the parties to a dispute cannot agree to any settlement or compensation. In spite of the continuing uncertainties about the object and purpose of countermeasures in the WTO dispute settlement system and despite the

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inherently primitive nature of the mechanism, Article 22.6 arbitrators have generally approached the issue of countermeasure in a consistent fashion. In particular, even though arbitrators have almost always reduced the amount of countermeasures that the winning Member requested authorization to adopt, they have consistently assessed countermeasures from the perspective of ‘inducing compliance’. Yet, the term ‘inducing compliance’ (EC – Bananas III) or ‘inducing effective compliance’ (Brazil – Aircraft) is nowhere to be found in the DSU. This concept has apparently been developed by linking countermeasures to the ultimate obligation under Article 22.1 of the DSU for Members to bring their domestic laws and regulations into conformity with their obligations under the WTO Agreement. Given the narrow scope of their mandate, arbitrators have rather limited means of enforcing compliance with WTO adjudicating decisions. One option may be to award a higher level of countermeasures. However, in the WTO system, the effectiveness of countermeasures does not necessarily result from a higher level of sanctions. ‘Punitive’ countermeasures, even if they were authorized, would not necessarily lead to compliance. For instance, very high countermeasures may not induce a Member to modify its legislation if such a modification is politically unacceptable for its constituencies. On the contrary, even minimal trade sanctions could lead to compliance if the right political conditions exist. Thus, arbitrators seem to have tried, through the use of different approaches in determining awards, to create the political conditions that would contribute to, rather than discourage, compliance. For instance, in US – FSC, the arbitrator granted the highest level of countermeasures ever awarded in the WTO system (more than US$4 billion). Taken in absolute terms, this amount dwarfed all other amounts awarded in all other cases. However, this large award must be put in context since it merely matched the amount of the subsidy given by the United States on a yearly basis, was much less than the trade effect of the US subsidy calculated through an economic model (US$16 billion) and represented only a small percentage of the overall value of the EC–US trade in goods. On the other hand, the US$247 million awarded to Brazil in the Canada – Aircraft Credits and Guarantees arbitration was very close to the amount awarded to Canada in the Brazil – Aircraft Article 22.6 arbitration. Both cases dealt with the same issue – the subsidization of regional passenger aircraft. Data suggest that the amount awarded to Brazil was almost equivalent to the total yearly value of Canadian goods imported by


Brazil. Thus, if Brazil had actually imposed countermeasures on Canadian imports based on this award, it might have completely closed its market to Canadian goods. However, the Canada – Aircraft Credits and Guarantees arbitration award also had another interesting feature. In concluding remarks, the arbitrator suggested that parties try to find a global solution to their problem of regional aircraft subsidization. It is likely that, by awarding to Brazil an amount of countermeasures close to the amount of countermeasures awarded to Canada in the Brazil – Aircraft Article 22.6 arbitration, the arbitrator was attempting to create an incentive for parties to go back to the negotiating table. Finally, in US – Offset Act (Byrd Amendment), the arbitrator concluded that Article 22 did not prohibit varying levels of countermeasures, which allowed the arbitrator to authorize an amount of countermeasures which could vary every year, based on the actual disbursements made by the United States under the Byrd Amendment during the immediately preceding year. As explained by the arbitrator, the link between the variable amount of countermeasures and the yearly disbursements by US authorities under the Byrd Amendment was supposed to create an additional incentive for the United States to bring its legislation into conformity. By contrast, in previous arbitrations, only one fixed level of countermeasures to be applied each year was set and only a decision that such countermeasures were no longer justified could lead to their removal. The US – Offset Act (Byrd Amendment) arbitration, however, allowed the party found in breach of its obligations to avoid the imposition of countermeasures against it simply by not granting any disbursement. Experience with the use of countermeasures in the WTO is very much in line with the record of WTO dispute settlement in general, since it shows a nuanced picture. Some cases remain ‘blocked’ and countermeasures do not seem to have helped in finding a solution. In other cases, countermeasures have been removed as part of a negotiated solution and arbitrators awards seem to have played a useful role as ‘bargaining chips’. In still other cases, where revised requests for authorizations to take countermeasures have been submitted to the DSB after arbitration, such authorizations have resulted in the actual imposition of trade sanctions, but others have not. Lawyers accustomed to domestic legal proceedings may be frustrated by the WTO system of enforcement through countermeasures, but should not forget that even municipal enforcement procedures also sometimes fail to deliver results. International law experts may be disappointed by the

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use of a rather simplistic mechanism to enforce an extensive and complicated body of international trade law. Perhaps this discrepancy between the law and the means to enforce it will appear less striking if one considers that the WTO system of countermeasures operates within a treaty framework that, from the point of view of its institutions and decision-making process, is itself not particularly advanced or sophisticated.

PART III The WTO Dispute Settlement System: Systemic and Other Issues

12 The role of lawyers in the WTO dispute settlement system giorgio sacerdoti 1 Appellate Body Member, World Trade Organization

1 Lawyers as advocates: from international tribunals to the WTO dispute settlements organs Before entering the subject matter a terminological specification is necessary. By ‘lawyers’ one can refer both to advocates and more generally to ‘jurists’. In this chapter I will refer to lawyers as advocates in their capacity as representatives of parties in proceedings before the WTO dispute settlement organs (the panels and the Appellate Body). I will also focus on their role as legal advisers to interested private parties; these are first of all enterprises de facto involved and directly affected by the outcome of these proceedings. Other private parties have also to be considered, such as Non-Governmental Organizations (NGOs) when they have an interest of a general nature in the result of a given case in the light of the interest they pursue. The role of advocates in international litigation is well known. If we take as a classical example proceedings before the International Court of Justice, the distinction between ‘agents’ of a government and lawyers that argue, both orally and in writing on their behalf, is recognized in the relevant rules. Most governments are not equipped with the legal expertise necessary to submit and carry on a case before an international court, be it as claimants or respondents or third parties. Lawyers have stepped in in their specific capacity. Experts in public international law, mostly academics, have been relied upon and some well-known experts in this field have established a reputation for appearing on behalf of governments. 1

Professor at Bocconi University and Member of the Bar, Milan, Italy. This contribution is made by the author as an academic and does not represent a position, official or unofficial, of the Appellate Body or WTO Members.

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Many international law firms have increasingly specialized in such litigation and some of their members also appear regularly before international courts.2 The multiplication of permanent international courts, regional and specialized, and the increased recourse to interstate arbitration for the settlement of disputes between states based on the rule of law has expanded this type of practice. The practice itself has become diversified following the specialization of the bodies entrusted with the settlement of these disputes. Lawyers in those various capacities are also required by, and before, bodies that decide issues based on law through adversary proceedings, where due process is required, but that are not strictly tribunals. The UN Compensation Commission established after the Gulf war is a foremost example. Besides traditional interstate disputes, the pluralism of international justice involves currently claims of human rights infringements by individuals against states before human rights tribunals, such as the European Court of Human Rights in Strasbourg. Individuals are normally represented by lawyers although this may not be strictly required. The international criminal courts offer a different type of international justice where individuals are parties both as respondents accused of crimes and as victims; the role of advocates, predominantly criminal lawyers, in these courts is essential also in discovery and investigation. Private parties, mostly enterprises and companies, have become parties as claimants in a recent growing sector of international adjudication, namely in direct investment arbitration based on arbitration clauses but also, more and more, based on treaty clauses allowing such direct litigation, as found in regional agreements (such as NAFTA or the European Energy Charter), and in Bilateral investment treaties. Although this arbitration has been modelled on traditional international commercial arbitration, this type of dispute settlement presents increasingly features which are typical of interstate litigation, especially within the framework of the ICSID Convention.3 Lawyers, both academics and experts in international commercial arbitration are also called upon here as arbitrators. 2 3

See C.P. Romano, ‘The Americanization of International Litigation’, Ohio State Journal Disputes Resolution, Vol. 19 (2003), p. 89. G. Sacerdoti, Investment Arbitration under ICSID and UNCITRAL Rules: Prerequisites, Applicable Law, Review of Awards, 19 ICSID Rev.-FILJ, 1 (2004).

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Where does the WTO dispute settlement system stand in this constellation of international adjudication? Two features are relevant in this respect. First, the WTO panels and the Appellate Body are not formally endowed with an adjudicative function: they do not issue ‘judgements’ endowed with res judicata effect; their reports are recommendations to the parties and to the WTO Member governments, not per se binding and final. At the same time, they have to apply the various WTO agreements, interpreting them in order to conclude whether the measure of a WTO Member challenged by another Member is or is not consistent, in law, with such agreements. Second, as to content, the standard recommendation in the reports of panels and of the Appellate Body is ‘that the Member concerned bring the measure into conformity with that agreement’.4 Legal reasoning and legal findings are the typical content of their reports, in order to determine which party is right and which is wrong. It is well known moreover that the system is framed in a way such that their reports are ‘automatically’ adopted as a rule by the political organ of the WTO (the Dispute Settlement Body (DSB)) and that Members involved in a dispute are expected to comply promptly with those recommendations adopted by the DSB.5 We can follow the dominant view therefore that the function performed by panels and by the Appellate Body is typical of adjudication by international arbitration panels and permanent tribunals. This function is even enhanced by being the central element of a larger, innovative framework that starts with compulsory consultation in the first phase, before adjudication based on law, and is concluded by multilateral surveillance of implementation with a view to ensuring that the findings, rulings and recommendation(s) do not remain a dead letter. This reflects the general statement of Article 3.2 of the DSU: ‘The dispute settlement system of the WTO is a central element in providing security and predictability to the multilateral trading system’. Compliance is meant accordingly to ‘ensure effective resolution of disputes’ not just in the interest of the litigants but ‘to the benefit of all Members’.6 There is an additional feature which is of paramount importance for our subject here. Proceedings are conducted both at the panel level and before the Appellate Body with full respect and application of the principles of due process and adversary proceedings. This is implied by various 4 5

See Articles 3.2 and 19.1 of the DSU. See Articles 21.1 and 21.3 of the DSU.

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See Article 21.1 of the DSU.

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provisions of the DSU, especially Articles 11 and 19;7 is specified by the Working Procedures of the Appellate Body; and has been repeatedly underlined in the latter’s reports. Confidentiality of the proceedings, which is spelled out in various articles of the DSU,8 reflects the GATT tradition and is typical of arbitration rather than of international tribunals; it does not affect however the strict respect due to those procedural principles. It is not surprising therefore that early on the Appellate Body ruled explicitly that a government could be represented by private lawyers before it, including in appearing and orally pleading at hearings on its behalf.9 This ruling reflects moreover the freedom of sovereign states to be represented generally by persons of their choice and trust. It enables small countries to seek competent legal services, when they do not possess them internally, in order to protect their interests on an equal footing with any other country. Since that ruling many, possibly most countries, have resorted to private lawyers to counsel and represent them. The accumulation of case law and the intricacy of the WTO agreements and of WTO proceedings has made this practice more and more common. In turn, private lawyers, as experts in litigation, have contributed to the emphasis on the procedural correctness of proceedings. The Appellate Body has not encouraged reliance on procedural niceties per se, that is when they would not serve the requirements of due process and the proper reaching of an objective decision. The requirement of a speedy resolution of the dispute has not been sacrificed to formalities. This development has in turn encouraged legal professionalism in addressing the features of WTO dispute settlement and the specialization of many lawyers, not only in big international law firms, in this new field of international law and litigation. Young private practitioners of diverse nationality and backgrounds have found here, and will undoubtedly find in the future, a challenging field in which to apply their legal abilities internationally. A new specialized international bar has emerged, comprising specialists in WTO law and litigation, parallel to the specialists in international investment law and litigation, which has been also a hitherto almost non-existent bar. 7 8 9

See also the prohibition of ex parte communications, Article 18.1. See Articles 14, 17.10, 18.2. Appellate Body Report on EC – Bananas III, one of the first disputes submitted to the Appellate Body.


2 Lawyers as counsellors of private firms in international trade litigation WTO law and litigation involves yet another dimension of interest to private lawyers. WTO disputes are between sovereign governments: there is no ius standi for private parties before panels and the Appellate Body, the cautious admission of amicus curiae briefs by judicial interpretation of the DSU notwithstanding.10 Still, disputes usually concern economic sectors of WTO Members, as importers or exporters, and often specifically individual firms. This is especially the case in the so-called trade remedy cases, where the issue is the legality under the WTO of domestic safeguards measures, countervailing duties or anti-dumping proceedings, enacted in order to protect a domestic sector, possibly specific enterprises. In these instances the claimant state pursues the interest of a specific export sector, or of a distinct group of enterprises, if not of a named company. Indeed some disputes are generally known by the names of the firms de facto involved or directly affected. One reads of the Fuji – Kodak and of the Havana Club cases, not to speak of the current Boeing – Airbus dispute between the US and the European Community.11 In these instances one may view WTO dispute settlement as being, in substance, an example of espousal of a private claim by means of diplomatic protection; indeed it is up to the national government of the affected domestic enterprise to decide whether to pursue the case within the WTO system. But with one peculiarity, namely, that there is no requirement of previous exhaustion of local remedies. As an example, an enterprise that is the object of an anti-dumping proceeding in a foreign country may elect to seek judicial review of the substantive and procedural legality of the measure in that country, under local law, or may instead or even at the same time request its government to challenge the same measure within the WTO for lack of conformity with the relevant WTO trade agreement.12 Indeed the fact that WTO agreements cannot as a rule be 10 11

12

Also these briefs are normally drafted by lawyers, sometimes acting pro bono, as they put forth legal arguments. See generally A. Alemanno, Private Parties and WTO Dispute Settlement System, Cornell Law School LLM Paper Series 1 (2004); Giulio Peroni, La tutela degli interessi privati nel sistema OMC e il possibile concorso di giurisdizione con altri sistemi ad esso estranei, 18 Diritto Commercio Internazionale 723 (2004). In US – Countervailing Duties on Certain EC Products, proceedings against the same US countervailing duties were pending before the US Court of International Trade, see Report fn.334. In EC – Tube and Pipe Fittings, Brazil challenged the conformity with the AntiDumping Agreement of the application of an anti-dumping measure by the European Communities in respect of a specific Brazilian exporter.

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invoked domestically to challenge domestic implementing legislation13 increases the likelihood that an alleged WTO-inconsistency of the latter as applied in a given case will be brought to the WTO dispute settlement system. In such a case, proceedings at the WTO appear as a kind of continuation of the domestic dispute in the multilateral framework. The WTO challenge may be viewed, and may have been resorted to, as a kind of ‘international appeal’ in the same dispute. The lawyers who have handled the case before the domestic authorities and courts may well be the same that prepare the challenge in Geneva. Knowledge of the features of the WTO system and the ability to handle it may be essential, even more so since the government may well leave to the private enterprise or company the responsibility to carry on the case at the WTO. Another instance where private parties may be affected by WTO dispute settlement mechanisms is in case of non-compliance by a state with a panel or Appellate Body report that requires it to remove measures found in breach of that state’s WTO obligations. The other WTO Member bringing the complaint may be authorized by the DSB to impose countermeasures, in the form of suspension of tariff concessions normally resulting in additional duties against exports from the non-complying WTO Member into the territory of the ‘winning party’. ‘Innocent exporters’ or ‘innocent importers’ will thus be affected and will need to protect themselves as far as possible, by also using the services of lawyers in both countries.14 Thus WTO litigation becomes, directly or indirectly, an integral part of the legal services that international trade lawyers are expected to offer to their clients. This may involve handling a case not only before domestic authorities and courts, but also in international fora, and finally presenting it to the national authorities in order to convince them to pursue WTO remedies. It is worth recalling that in many countries the latter aspect is not left to expediency and lobbying but is governed by specific provisions. This is the case of EC Regulation 3286/94 of 22 December 1994 on obstacles 13

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This is the situation in the European Community law; see the ECJ decisions in the Biret and Van Parys cases (C-93/02 of 30 September 2003 and C-377/02 of 1 March 2005 respectively) notwithstanding the contrary suggestions of Advocates General Jacobs and Tizzano respectively. Also importers of affected products in the country considering the imposition of additional duties may be adversely affected and may be granted procedural rights in the procedure leading to such imposition in that country; see for instance the ‘Notice seeking comments on possible trade retaliation against the United States in response to the US failure to repeal the Byrd Amendment’, Canada Gazette, Part I, Extra Vol. 138, No. 19 (23 November 2004).


to trade – enacted in order to enforce the rights accruing to the European Communities under the Uruguay Round – which regulates the submission of European industry claims against the alleged non-respect of these rights by other WTO Members.15 International trade lawyers may find in this area new directions for their practice. 15

See generally H. Lesguillons, ‘Origines et développements du Règlement sur les obstacles au commerce (ROC)’, Rev. de droit des affaires internationales/International Business Law Journal, Vol. No. 8 (2000), p. 959.

13 Jurisdiction in WTO dispute settlement joel trachtman Professor of International Law, The Fletcher School of Law and Diplomacy, Tufts University

1 Introduction This chapter addresses jurisdiction of the WTO rules and procedures under the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). At the start, we must concede that the DSU itself does not refer to the jurisdiction per se of the DSU, or of any bodies formed pursuant to the DSU. Furthermore, ‘jurisdiction’ may require some definition in connection with the DSU, and the WTO more broadly. The WTO, as an international organization, does not exercise jurisdiction the way that a state does. For a state, we would divide jurisdiction in terms of jurisdiction to legislate or to make applicable law, jurisdiction to adjudicate and jurisdiction to enforce. We do not deal here with jurisdiction to legislate per se, but focus on jurisdiction to adjudicate, including jurisdiction to apply law. Of course, the power of the bodies formed under the DSU emanates from the language of a treaty: the WTO treaty , including the DSU. At the level of international law, tribunals have limited and specified jurisdiction. That is, they only have power accorded them by the treaty that creates them. Thus, this chapter focuses on the interpretation of the DSU and other parts of WTO law – on the treaty that empowers WTO adjudicating bodies. This point is important, because in the WTO, as in the rest of the international legal order, there is no centralized sovereign whose implicit and more or less absolute power is exercised through a court. Therefore, in this chapter, we will interpret the DSU and other WTO law with respect to the authority of certain WTO bodies to make legal determinations. The main function of the DSU is not to exercise power per se, but to preserve the rights and obligations of Members and to clarify the existing 132

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provisions of the WTO agreements. This is a jurisdiction to clarify, not a jurisdiction to make law or in any way to add to or subtract from the rights and duties of states. It is even said that it is not the task of panels or the Appellate Body to adopt interpretations within the meaning of Article IX:21 of the WTO Agreement. However, it is clear that in order to clarify WTO law, it is inevitable that panels and the Appellate Body interpret WTO law in accordance with the customary rules of interpretation of public international law.2 Within the DSU, a number of bodies are established and, in the sense described above, have jurisdiction over certain matters. These bodies include (i) the Dispute Settlement Body (DSB), (ii) ad hoc dispute settlement panels established by the DSB to examine the matters referred to the DSB by state complainants, (iii) a standing Appellate Body that may hear appeals from panel cases, and (iv) arbitrators that may be apprised of particular issues under circumstances specified in the DSU. It is important to point out that decisions by the panels and Appellate Body are not per se definitive, but rather only acquire legal effect upon adoption by the DSB. The function of panels is to assist the DSB. The fact that the DSU specifies that the DSB adopts panel and Appellate Body reports unless there is a consensus not to do so results in de facto automatic adoption, and therefore de facto automatic legal effect. There are a number of issues that are relevant to the question of jurisdiction under the DSU. First, the basic dispute settlement process includes specification of jurisdiction over certain types of claims. Second, it also includes specification of the law to be applied to these claims. Third, it includes the question of possible authority or requirements to defer to other fora that may be apprised of issues that are significant to WTO dispute settlement. Fourth, it includes jurisdiction over certain persons. Fifth, the Appellate Body has jurisdiction over appeals brought by states from panel cases. Finally, certain types of arbitrators have jurisdiction 1

Article IX:2 reads: ‘The Ministerial Conference and the General Council shall have the exclusive authority to adopt interpretations of this Agreement and of the Multilateral Trade Agreements. In the case of an interpretation of a Multilateral Trade Agreement in Annex 1, they shall exercise their authority on the basis of a recommendation by the Council overseeing the functioning of that Agreement. The decision to adopt an interpretation shall be taken by a three-fourths majority of the Members. This paragraph shall not be used in a manner that would undermine the amendment provisions in Article X.’

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This is understood to refer to the Vienna Convention on the Law of Treaties.

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over certain aspects of remedies in these cases. This chapter will describe these types of jurisdiction. The Appellate Body confirmed that WTO panels have la competence de la competence in US – 1916 Act, where it referred to the ‘widely accepted rule that an international tribunal is entitled to consider the issue of its own jurisdiction on its own initiative, and to satisfy itself that it has jurisdiction in any case that comes before it’.3

2 Jurisdiction over claims The DSU applies to disputes brought pursuant to the consultation and dispute settlement provisions of the ‘covered agreements’,4 which includes most WTO law. The DSU also applies to dispute settlement concerning rights and obligations under the WTO Charter and the DSU itself. There are many consultation and dispute settlement provisions in the covered agreements. For example, the DSU applies to disputes brought under Article XXIII of the GATT 1994. Article XXIII applies where any Member considers that any benefit accruing to it directly or indirectly under the GATT 1994 is being nullified or impaired or that the attainment of any objective of the GATT 1994 is being impeded as the result of violation by another Member of its obligations, other measures that may not conflict with the provisions of GATT, or any other situation. The critical component is nullification or impairment of benefits accruing to a Member under the GATT 1994. Under the GATS, the scope of claims covered is similar: Article XXIII:1 of the GATS provides for dispute settlement where a Member considers that another Member fails to carry out its obligations under the GATS, or considers that any benefit it could reasonably have expected to accrue to it under another Member’s specific commitment is being nullified or impaired as the result of other measures that do not conflict with the GATS. In its decision in EC – Bananas III, the Appellate Body found no requirement for ‘legal interest’ as a predicate for standing to bring a case under the DSU.5 The Appellate Body found that Members have broad discretion to bring cases. 3 4 5

Appellate Body Report on US – 1916 Act, para. 54, footnote 30. Listed in Appendix I of the DSU. Appellate Body Report on EC – Bananas III, para. 132.


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As a procedural matter, the jurisdiction of a panel is limited to the claims specified in the request for the establishment of a panel, pursuant to Article 6.2 of the DSU.6 Thus, panels have limited terms of reference. These terms of reference determine the jurisdiction of the panel by defining the precise claims at issue in the dispute.7 Furthermore, under Article 4.7 of the DSU, a request for consultations is a prerequisite to establishment of a panel. In the event that there is no reply within a specified period, the requesting Member may proceed directly to request establishment of a panel. It should be noted that after the normal 60-day consultation period, ‘a panel shall be established at the latest at the DSB meeting following that at which the request first appears as an item on the DSB’s agenda, unless at that meeting the DSB decided by consensus not to establish a panel’. Thus, under the DSU, Members have a de facto ‘right’ to a panel. In other words, the WTO legal system is a system of de facto mandatory jurisdiction.

3 Jurisdiction to apply law The most important jurisdictional question regarding WTO dispute settlement is that of applicable law. The most prominent question here is the extent to which other international law is applicable within WTO dispute settlement. In order to make analytical progress in this area, it is useful to make several distinctions: (a) First, we must distinguish between the use of general international law in connection with interpretation and construction of WTO law, and the use of general international law as applicable law. It cannot be gainsaid that general international law may be used in interpretation and construction of WTO law, in appropriate circumstances. (b) It is also necessary to distinguish between jurisdiction over claims and jurisdiction to apply law. As explained above, the WTO dispute settlement system only deals with claims of violation of WTO law. So the critical question is whether WTO dispute settlement includes jurisdiction to apply other international law in cases based on claims of violation of WTO law. The main point is whether WTO dispute settlement can bring in non-WTO law as a substantive defence against a claim of violation of WTO law. 6 7

Appellate Body Report on EC – Bananas III, para. 143. Appellate Body Report on Brazil – Desiccated Coconut, p. 22, DSR 1997:I, 167, at 186.

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(c) Most importantly, we must distinguish the question of the applicable law within WTO dispute settlement from the question of the law that applies generally to certain conduct. The WTO dispute settlement system is a court of limited jurisdiction in two relevant senses: (i) the claims that it can consider, and (ii) the law that it can apply. It is also worthwhile at the outset to distinguish WTO dispute settlement from adjudication before the International Court of Justice (ICJ). The ICJ’s default applicable law is set forth in Article 38(1) of its statute, which is taken as an authoritative statement of the content of international law as a whole. Against this background, one must be very careful about drawing analogies between applicable law at the ICJ and applicable law at the WTO. Nevertheless, it is important that even the ICJ is conscientious in respecting the limits of the compromissory clauses that give it jurisdiction under Article 36(1) of its statute. Where its jurisdiction relates to a dispute regarding the ‘application and interpretation’ of a particular treaty, as it often does, it is careful not to apply other law. There is overwhelming evidence that the mandate to WTO dispute settlement panels and the Appellate Body is to apply as substantive law only WTO law: the covered agreements. In fact, the only argument to the contrary8 asks that we ignore the textual evidence and infer jurisdiction to apply other law. Yet international tribunals do not have implicit jurisdiction. Rather, they are courts of limited jurisdiction that are not permitted to exceed their mandates. It is also clear that other international law may in appropriate circumstances be used by panels and the Appellate Body in interpretation, where specifically incorporated, and as fact. Furthermore, other international law may be used in construction in order to complete the procedural structure of the DSU itself and to ensure an ‘objective assessment of the matter’ under Article 11 of the DSU. An example is the decision in US – Wool Shirts and Blouses regarding the allocation of the burden of proof. When the Appellate Body said in US – Gasoline that WTO dispute settlement is not clinically separate from general international law, it did not mean that general international law is fully integrated into WTO dispute settlement. While it is correct to say that the WTO is a part of the international law system, it is an error of logic, a non-sequitur, to 8

J. Pauwelyn, Conflict of Norms in Public International Law, How WTO Law Relates to Other Rules of International Law (Cambridge University Press, 2003), p. 40. See also Panel Report on Korea – Procurement.


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draw from this proposition the conclusion that general international law is applicable in WTO dispute settlement. This is not a terrible problem for the values advanced by other international law, like human rights and environmental protection. Most problems we can imagine can be addressed by virtue of the fact that other values, and sometimes other law, are specifically referenced or incorporated in WTO law, or may be referenced to interpret WTO law. This is the situation inside the WTO legal system. Of course, outside the WTO dispute settlement system, general international law has the range and effect that it was intended to have. None of it was written with the expectation or intent that it would be applicable law within the WTO. It would be dangerous to disregard states’ intent and expectations in order to force general international law into the WTO dispute settlement system. It is clear that for the WTO, general international law as applicable law would be an unwelcome guest, and for many exponents of environmental protection and human rights, the WTO dispute settlement system would be a Procrustean bed indeed. Many negotiators of the WTO treaties assumed a separation between WTO law and other international law. It is also clear that under the GATT 1947, other international law was not considered applicable in GATT dispute settlement.9 And in Article 3.1 of the DSU, and Article XVI:1 of the WTO Charter, the Members confirmed that they wished continuity with the GATT period. It therefore seems contrary to the intent of the parties to suggest that other law is applicable in WTO dispute settlement. But more saliently, there is much evidence within the DSU text itself that the only law intended to be applied as substantive law (as distinguished from used in interpretation) is WTO law. Article 3.2 of the DSU specifies that the dispute settlement system serves to preserve the rights and obligations of Members under the covered agreements. If it was intended to extend jurisdiction to qualify these rights and obligations by application of rights and obligations derived from other law, the draftsmen were negligent. The draftsmen would have been negligent a second time in Article 3.2, where they specify that the vocation of dispute settlement is to clarify the existing provisions of the covered agreements ‘in accordance with customary rules of interpretation of public international law’ (emphasis added). This was their concession to the general international law system: they opened up to the rules of 9

GATT Panel Report on Canada – Measures Affecting Exports of Unprocessed Herring and Salmon Canada – Herring and Salmon.

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interpretation. If they had intended to also admit other rules, they should have deleted the restrictive reference to ‘rules of interpretation’. The reference in Article 3.2 only to customary rules of interpretation must be understood in light of a standard rule of interpretation: expressio unius. The reference to one of a group, by implication, excludes other members of the group. Thus, while it might well be argued that the customary rules of interpretation would apply without express invocation, this would not change the fact that the drafters demonstrated an intent to exclude other international law by virtue of their decision not to mention it. Article 3.2 adds that ‘Recommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreements.’ This also suggests the limited scope of applicable law in WTO dispute settlement. The references to respect for the covered agreements, and consistency with the covered agreements and their objectives in Articles 3.4, 3.5, 3.7, 3.8, 19.1, 22.2 and 22.9 of the DSU would be absurd if other international law were applicable. For example, Article 3.7 says that the first objective is to secure withdrawal of measures inconsistent with the covered agreements. It leaves no room for defences based on other law: it does not say, for example, ‘unless such inconsistent measures are justified by other international law’. Article 3.8 establishes a prima facie case of nullification or impairment based on infringement of obligations assumed under a covered agreement. Again, it leaves no room for defences based on other law. Of course, the most important jurisdictional provision is the mandate to panels in Article 7.1. This mandate is to examine the matter in light of the relevant provisions of the covered agreements, and nothing more. Recall that international tribunals are courts of limited jurisdiction: they have no power to apply law beyond their mandate. Therefore, it was not necessary for the Members to specifically exclude other law. This is well understood by all international tribunals, from the World Court down. The recent Oil Platforms decision is but the most recent statement of this principle.10 In that case, the ICJ scrupulously avoided applying general international law, and instead portrayed its examination of the laws of armed warfare as interpretation of the Iran–US Friendship, Commerce and Navigation treaty. 10

International Court of Justice, Oil Platforms (Iran v. US), paras. 39–41, 2003, 42 International Legal Materials 1334, 1334.


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The default rule for international law is auto-interpretation, and states are not held to have accepted mandatory jurisdiction to apply law without their consent. If other international law were applicable, the Appellate Body decision in the EC – Hormones case not to determine whether or not the precautionary principle is part of customary international law would be negligent. For if the obligation of the panels and Appellate Body is to apply all international law, surely this obligation includes the requirement to determine whether an asserted rule of international law exists or not? The only answer is that there is no obligation, or authority, to apply other international law. The text-based interpretation of Article 7.1 suggested above is confirmed by Article 7.2, which requires panels to address relevant provisions of covered agreements cited by the parties. Again, if other international law could be cited for purposes of application, why would panels not be required to address also the other international law? The interpretation of Article 7.1 suggested above is further confirmed by Article 11. The second sentence of Article 11 is worth quoting in full: ‘Accordingly, a panel should make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements, and make such other findings as will assist the DSB in making the recommendations or in giving the rulings provided for in the covered agreements.’

Thus, an objective assessment of the matter before the panel consists of two things: first, an objective assessment of the facts, and second, an assessment of the applicability of and conformity with the relevant covered agreements. The reference to other findings is to assist the DSB, but is not part of the objective assessment of the matter before the panel. Thus, again, other international law is clearly excluded. There is much textual and contextual evidence of the intent of the Members that only WTO law would be applicable in WTO dispute settlement. Arguments to the contrary face an overwhelming barrage of inconsistent textual evidence. Lest there be any doubt, the international community knows how to provide broad jurisdiction to tribunals to apply a wide variety of law. For example, Article 293(1) of the United Nations Convention on the Law of the Sea requires the International Tribunal on the Law of the Sea to apply ‘other rules of international law not incompatible with this convention’. The point made above is modest. It is that only WTO law, and not general international law, constitutes substantive applicable law capable

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of application in WTO dispute settlement. General international law remains available and applicable outside WTO dispute settlement. And as noted above, general international law can affect WTO dispute settlement (i) through interpretation and construction in accordance with the customary rules of international law in accordance with Article 3.2 of the DSU; (ii) when it is incorporated by reference in WTO law; and (iii) where it constitutes facts that are relevant under WTO law. After US – Shrimp, we can expect multilateral environmental agreements to form the basis for an exception to other WTO law requirements pursuant to Article XX of the GATT 1994 or similar provisions.11 Finally, it is clear that the Appellate Body views its mandate, and that of panels, to be limited to the covered agreements as applicable law. This was clear in the EC – Poultry decision, and it was implicit in the EC – Hormones decision. In EC – Poultry, the Appellate Body simply refused to apply the bilateral Oilseeds Agreement, as it was not a covered agreement.

4 Deference to other fora Nothing in the DSU instructs or authorizes panels to reject claims, or to delay dispute settlement under the DSU, in deference to proceedings in another forum. However, in some cases, specific provisions of WTO law may refer to determinations made in other fora. For example, footnote 59 of the Agreement on Subsidies and Countervailing Measures refers certain matters relating to transfer pricing to ‘the facilities of existing bilateral tax treaties or other specific international mechanisms, without prejudice to the rights and obligations of Members under GATT 1994’. In the US – FSC case, the panel found that even this specific provision ‘does not provide that the right to resort to WTO dispute settlement at any time is circumscribed by that alleged requirement’.12 The panel stated that ‘we believe that a panel should not lightly infer a restriction on this right [to resort to WTO dispute settlement] into the WTO Agreement; rather, there should be a clear and unambiguous basis in the relevant legal instruments for concluding that such a restriction exists’.13 Thus, it does not seem that a WTO panel would defer to other non-WTO adjudicating bodies in any circumstance where it was not clearly instructed by WTO law to do so. 11 12

Appellate Body Report on US – Shrimp. Panel Report on US – FSC, para. 7.18.

13

Ibid., para. 7.17.


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The GATT 1994 refers to certain balance of payments-related determinations to be made by the International Monetary Fund (IMF), specifying that the Members shall accept all findings of statistical and other facts presented by the IMF in certain areas. Within the WTO system, there is an important question of the relationship between the DSB, on the one hand, and other WTO organs, on the other hand. This question has come up, for example, in the context of balance of payments determinations by the WTO Committee on Balanceof-Payments Restrictions. In that case, the Appellate Body upheld a panel decision to respect an explicit treaty mandate that WTO dispute settlement would be available in the event of disputes regarding compliance with these provisions.14 The Appellate Body saw no conflict between the competence of the Committee on Balance-of-Payments Restrictions and the General Council with respect to balance of payments restrictions, on the one hand, and that of panels, on the other.

5 Ripeness, mandatory and discretionary legislation, claims against legislation ‘as such’, and exhaustion of local remedies In WTO dispute settlement, it is possible for a Member to challenge the legislation of another Member, prior to, or separate from, actions that violate GATT or WTO law pursuant to such legislation, provided that the legislation mandates the violation. Thus, mandatory legislation, as such, may violate WTO law, even if the specific action pursuant to the violation that would violate a specific provision of WTO law has not yet occurred.15 Legislation can be challenged ‘as such’, and independently of the specific application of that legislation in specific instances. There is no requirement in WTO law that a private person, or the Member espousing the private person’s concerns, exhaust local remedies prior to the commencement of a case in the WTO dispute settlement system. Rather, the question is whether the complaint relates to a measure by a Member that allegedly violates WTO law. Thus, when Argentina claimed that its legal system would apply WTO law on appeal in order to invalidate an administrative measure that violated WTO law, and that therefore it was not in violation of WTO law, the panel rejected this argument.16 The 14 15 16

Appellate Body Report on India – Quantitative Restrictions, paras. 87–88, 109, referring to footnote 1 of the BOP Understanding. Appellate Body Report on US – 1916 Act, paras. 60–61. Appellate Body Report on Argentina – Textiles and Apparel.

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WTO obligations are absolute, and cannot be conditioned on a lawsuit, even if it is certain that the lawsuit will succeed.

6 Jurisdiction over persons Technically speaking, the WTO DSB does not have jurisdiction ‘over’ Members. Rather, it merely has the authority to make ‘findings’ and ‘recommendations’, although it is clear that these have legal consequences. In any event, the only persons for whom DSB actions have direct legal consequences are Members. Moreover, panels, the Appellate Body, and the DSB have only the discrete authority allocated them under the DSU. This authority, as stated above, relates to the preservation and clarification of the rights and obligations of Members under the covered agreements. It does not extend to the rights or obligations of non-Members, including states that are not Members, corporations, NGOs, or individuals. Of course, the decisions of panels, the Appellate Body and the DSB may have important ramifications for non-Members, but there is no jurisdiction per se over non-Members.

7 Jurisdiction of the Appellate Body Under Article 17.6 of the DSU, appeals are limited to issues of law covered in the panel report and legal interpretations developed by the panel. Of course, the Appellate Body’s appellate jurisdiction is limited to claims that were properly before the panel in the relevant case. Appellate review may consider, as a matter of law, whether or not the panel made an objective assessment of the facts before it as required by Article 11 of the DSU.17 However, the Appellate Body has otherwise declined to review panel determinations of facts. Perhaps surprisingly, the Appellate Body has characterized the determination of municipal law ‘not only as evidence of facts, but also as evidence of compliance or non-compliance with international obligations’.18 Where a panel examines municipal law for the purpose of determining compliance with WTO obligations, the Appellate Body states, such an assessment is a legal characterization by a panel. It is thus subject to judicial review by the Appellate Body. 17 18

Appellate Body Report on EC – Hormones, para. 132. Appellate Body Report on US – Section 211 Appropriations Act, paras. 105–106.


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Where the legal theory applied by the panel has been reversed by the Appellate Body, and the Appellate Body determines that additional assessment of facts is needed in order to apply the correct legal theory, the Appellate Body has often ‘completed the analysis’. However, the Appellate Body has no authority to seek new facts on appeal.19 Rather, it ‘completes the analysis’ to the extent possible on the basis of factual findings of the panel or undisputed facts in the panel record, where these are sufficient to form a basis for the completed analysis.20

8 Jurisdiction over compliance and remedies Article 19.1 of the DSU states that where a panel or the Appellate Body concludes that a measure is inconsistent with a covered agreement, it shall recommend that the Member concerned bring the measure into conformity. The DSB retains jurisdiction to monitor compliance. Under Article 21.5, where there is disagreement as to the consistency with a covered agreement of measures taken to comply with the recommendation or rulings, that dispute is decided through recourse to the DSU, including wherever possible resort to the original panel. Appeal of the panel decision under Article 21.5 may be made to the Appellate Body. If the Member concerned fails to comply, it is required to negotiate compensation under Article 22.2, but if no satisfactory compensation is agreed, the complaining Member may request authorization from the DSB to suspend the application to the Member concerned of concessions under the covered agreements. The level of suspension of concessions is required to be equivalent to the level of the nullification or impairment resulting from the violation. Where there is disagreement regarding this equivalence, an arbitrator is appointed pursuant to Article 22.6 of the DSU. This arbitration is carried out by the original panel, if its members are available. There is no provision for appeal from this arbitration. 19 20

Appellate Body Report on US – Offset Act (Byrd Amendment), para. 222. Appellate Body Report on Australia – Salmon, paras. 117–118.

14 Due process in WTO disputes andrew mitchell 1 Barrister and Solicitor of the Supreme Court of Victoria, Australia

1 Introduction The principle of ‘due process’ (also called ‘fundamental fairness’, ‘procedural fairness’ or ‘natural justice’) broadly requires administrative and judicial proceedings to be fair. Administrative and judicial systems attempt to achieve due process by exercising their discretion in a fair manner and by developing procedural or evidentiary rules explaining how rights, duties, powers and liabilities are administered. As will be seen in this chapter, the principle of due process is difficult to define precisely, because the demands of fairness depend on the circumstances. For example, it may be necessary to balance an individual’s interest in additional procedures with the value and cost of such procedures. Thus, in particular circumstances, due process might require a full trial, whereas in other circumstances, basic notice and the right to speak might be sufficient. Considerations of due process might also conflict. For instance, parties’ rights to be heard and give evidence might weigh in favour of the last minute introduction of evidence. On the other hand, the need for equality between the parties and their right to have sufficient time to respond and challenge evidence might weigh against its introduction. Discretion is required to resolve such conflicts. Due process is a necessary component of any legal system seeking legitimacy and effectiveness. The dispute settlement system of the WTO is 1

LLM (Harv); LLB (Hons) (Melb); BCom (Hons) (Melb). Consultant, International Monetary Fund; Senior Fellow, Faculty of Law, University of Melbourne, Australia; Fellow, Tim Fischer Centre for Global Trade & Finance, Bond University, Australia; WM Tapp Scholar, Gonville & Caius College, University of Cambridge. Email: [email protected]. I would like to thank Tania Voon and Arun Venkataraman for their helpful comments on an earlier draft of this chapter. The views expressed here, and any errors or omissions, are mine.

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no exception. Indeed, the potentially vast political and economic effects of trade liberalization and protectionism, the opportunity for Members to challenge domestic regulations of sovereign governments using WTO rules, and the power differences between WTO Members all heighten the need for fair rule enforcement in the WTO. WTO due process obligations are of two types. The first are obligations imposed within the WTO dispute settlement system, such as the rules that protect fairness between the parties in panel proceedings. The second are obligations imposed on WTO Members to ensure due process in their domestic legal systems, such as Article X:3(a) of the GATT 1994, which requires that all ‘laws, regulations, decisions and rulings’ of the kind described in Article X:1 be administered ‘in a uniform, impartial and reasonable manner’. While both types of due process obligations are important and could be the subject of a WTO dispute settlement proceeding, for reasons of space, this chapter is restricted to the first type. This chapter begins by examining the content of the principle of due process and its justification, placing the specific meaning of the principle in the WTO within its wider context in domestic law and international law generally. Although the obligations discussed in this section relate primarily to the provision of due process in domestic legal systems, they also assist in understanding the nature of due process in the WTO dispute settlement system. Next I examine the WTO provisions that can be seen as imposing due process obligations in relation to the dispute settlement system, taking into account the interpretation of these provisions to date by WTO panels and the Appellate Body (described for convenience as WTO adjudicating bodies in this chapter). Finally, I consider the inherent powers of WTO adjudicating bodies to protect due process in disputes, independent of any specific WTO provisions. This chapter does not address the WTO obligations imposed on Members to ensure due process in their domestic legal systems, such as through Article X:3(a) of the GATT 1994, which requires that all ‘laws, regulations, decisions and rulings’ of the kind described in Article X:1 be administered ‘in a uniform, impartial and reasonable manner’.

2 The principle of due process and its justification (a) Due process in domestic law The principle of due process has its origins in domestic law. Due process was embedded in English common law and was expressed in Article 39

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of the Magna Carta, whereby the King promised that ‘[n]o freemen shall be taken or imprisoned or disseised or exiled or in any way destroyed . . . except by the legal judgment of his peers or by the law of the land’. The concept of ‘the law of the land’ as used in this provision incorporated the notion of due process. In the context of English criminal law, Walker defines due process as ‘[t]he conduct of legal proceedings according to established principles and rules which safeguard the position of the individual charged’.2 The common law scope of due process has expanded well beyond criminal law, to other court proceedings (such as civil proceedings), as well as to proceedings of other tribunals, and administrative and arbitral bodies. A broader Australian definition reflecting the potential scope of due process is ‘[p]rinciples developed at common law to ensure the fairness of the decision-making procedure of courts and administrators’.3 In the United States, due process is similarly broadly defined as the ‘conduct of legal proceedings according to established rules and principles for the protection and enforcement of private rights’.4 Due process is often protected in particular tribunals by written rules of procedure, which the decisionmaker typically interprets in light of the objective of fairness. Where the rules are silent on a particular procedural issue, the decision-maker must decide it in light of that same objective. The objective of the principle of due process in the domestic context has been described in the United States as follows: ‘[T]o prevent arbitrary government, avoid mistaken deprivations, allow persons to know about and respond to charges against them, and promote a sense of the legitimacy of official behaviour.’5

In the United States, the Fifth and Fourteenth Amendments of the United States Constitution incorporate the principle of due process. The jurisprudence on those amendments draws a distinction between procedural due process (which concerns the rights to notice, a hearing, counsel, appeal, and a fair and objective trial) and substantive due process (which requires ‘legislation to be fair and reasonable in content and further a legitimate governmental objective’). 2 3 4 5

D. Walker, The Oxford Companion to Law (Oxford University Press, 1980), p. 381. P. Nygh and P. Butt (eds), Australian Legal Dictionary (Butterworths, 1997), p. 928. Black’s Law Dictionary, 7th ed., B.A. Garner (ed.) (West Group 1999), pp. 516–517. Oxford Companion to the Supreme Court of the United States, K. Hall (ed.) (Oxford University Press, 1992), p. 236.


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Commonwealth legal systems often consider that due process involves at least two basic rules: the ‘hearing rule’, and the ‘bias rule’. These rules concern procedural due process, according to the United States framework. That is, they are concerned with how the decision is made rather than its substance. The bias rule precludes a decision-maker from acting in circumstances in which a fair-minded observer would have a reasonable apprehension of bias, arising for example from the decision-maker’s interest in the outcome. This rule is based on the maxim nemo debet esse judex in propria sua causa (no one can be a judge in his own cause). The hearing rule requires a decision-maker to provide to persons whose interests may be adversely affected by a decision an opportunity to present their case. This rule encompasses requirements such as: providing reasonable notice of the decision; informing affected persons of the case to be met; disclosing adverse material so that it may be challenged; and permitting representation at hearings. The hearing rule is based on the maxim audi alteram partem (to hear the other side). More recently, a third rule has been suggested as a basic component of due process. Under this ‘no evidence’ rule, decision-makers must base their decisions on ‘logically probative evidence’. Therefore, decisionmakers must provide reasons that are adequate, intelligible and that deal with the substantial points raised by the parties. In addition, decisionmakers must base their findings on material that shows the existence or non-existence of facts consistent with the finding, and decision-makers’ reasons must not be internally contradictory. This rule is more clearly directed towards the fairness of the decision itself (in other words, substantive due process) than the hearing and bias rules. However, it is arguably a logical consequence or extension of the other two rules. As Deane J stated in Australian Broadcasting Tribunal v Bond: ‘If the decision were determined by the toss of a coin or some other arbitrary procedure, the “right” to a hearing would be illusory. If the decision could be based on unreasoned prejudice, the audi alteram partem rule would be pointless.’

The circumstances in which due process must be accorded and the specific requirements of due process vary considerably between different municipal legal systems. Even within a given municipal legal system, the need for and content of due process depend on the context and may vary, for example, between judicial, quasi-judicial, and administrative decision-makers, and between criminal and other cases. The flexibility in due process and its ‘undefined boundaries . . . make it a legal chameleon.

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It straddles the divide between legislative and judicial power, between executive discretion and judicial values.’6

(b) Due process in international law The principle of due process has long been recognized in international law. In relation to the bias rule, Cheng states in his classic study of general principles of law that the principle that no one can be a judge in his own cause is firmly established and extends beyond purely judicial proceedings. He considers that the hearing rule has similar acceptance and requires notice and full opportunity to be heard. In relation to the no-evidence rule, Cheng states that the decision-maker ‘must not neglect the examination of any relevant point of fact or law. The decision must be based on the law applicable, and should be a proper judgment.’7 All of these rules are aspects of what is sometimes described as the duty of a court or tribunal to follow ‘judicial procedure’ or ‘act judicially’. Under customary international law, the doctrine of denial of justice requires states to administer justice relating to aliens according to a minimum standard. Denial of justice incorporates the principle of due process to some extent, including substantive and procedural aspects of due process. Procedurally, denial of justice can take a number of forms and arise at any stage of the legal process. Put simply, ‘[i]f the courts or other appropriate tribunals of a state refuse to entertain proceedings for the redress of injury suffered by an alien, or if the proceedings are subject to undue delay, or if there are serious inadequacies in the administration of justice . . . there will be a “denial of justice” for which the state is responsible’.8 Substantively, the state will be held responsible if an alien is injured by ‘gross defects in the substance of the judgment itself ’ or by a ‘manifestly unjust judgment’.9 However, an error that does not rise to the level of manifest injustice is not a denial of justice. Generally, a denial of justice will require a ‘serious and intentional perversion of justice’ as a result of 6 7 8 9

T. Blackshield, M. Coper and G. Williams (eds.), Oxford Companion to the High Court of Australia (Oxford University Press, 2001), p. 498. B. Cheng, General Principles of Law as Applied by International Courts and Tribunals (Cambridge: Grotius Publication, 1987), pp. 258, 279, 291. R. Jennings & A. Watts (eds.), Oppenheim’s International Law, 9th ed (Longman, 1992), Vol. 1, pp. 543–44. A. Freeman, The International Responsibility of States for Denial of Justice (1938, reprinted 1970) 309; Harvard Research in International Law, ‘The Law of Responsibility of States for Damage Done in Their Territory to the Person or Property of Foreigners’ (Special Supplement 1929) 23 American Journal of International Law 131, 173 (Article 9).


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bad faith. Discrimination against the alien or obvious maliciousness will be particularly probative of this bad faith. Several human rights treaties contain due process protections, including the International Covenant on Civil and Political Rights, the European Convention for the Protection of Human Rights and Fundamental Freedoms and the American Convention on Human Rights. In addition, a number of bilateral trade or investment treaties contain standards regarding the treatment for aliens, and these often include due process requirements. One of the most common standards included in such treaties is ‘fair and equitable treatment’. According to Sacerdoti, this requires a state ‘to attain a certain result by whatever appropriate means: it requires that the State acts in such a way in all circumstances and instances so that the foreigner be always treated in a fair and equitable manner’.10 Commentators disagree as to whether this standard provides protection beyond that imposed under customary international law. Article 1105(1) of the North American Free Trade Agreement (NAFTA) requires a NAFTA state to accord ‘investments of investors of another Party treatment in accordance with international law, including fair and equitable treatment and full protection and security’. Several claims have been made under this provision. In Mondev, the investor claimed that ‘flagrant procedural deficiencies’ in proceedings before the Massachusetts Supreme Judicial Court and ‘gross defects in the substance of the judgment itself ’ constituted a denial of justice. The NAFTA tribunal set out the following standard for assessing whether a particular decision regarding a NAFTA investment involves a denial of justice: ‘[T]he question is whether, at an international level and having regard to generally accepted standards of the administration of justice, a tribunal can conclude in the light of all the available facts that the impugned decision was clearly improper and discreditable, with the result that the investment has been subjected to unfair and inequitable treatment.’

In Loewen, the NAFTA tribunal found that the conduct of a Mississippi trial ‘was so flawed that it constituted a miscarriage of justice amounting to a manifest injustice as that expression is understood in international law’. It considered that the NAFTA and general international law standards are breached where there is a ‘[m]anifest injustice in the sense of a lack 10

G. Sacerdoti, ‘Bilateral Treaties and Multilateral Instruments on Investment Protection’ (1997) 269 Hague Academy, Recueil des Cours 251, p. 341.

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of due process leading to an outcome which offends a sense of judicial propriety’.

3 Due process provisions in the DSU and related instruments (a) Introduction This section considers how certain provisions in the DSU and related instruments protect due process, using the framework commonly employed in national law: the bias, hearing and no evidence rules. As the Appellate Body pointed out in US – FSC, the ‘procedural rules of WTO dispute settlement are designed to promote . . . the fair, prompt and effective resolution of trade disputes’. This section focuses on how these rules promote the fair resolution of trade disputes, primarily by protecting the procedural interests of the disputing parties. In most instances, these interests take precedence over the interests of other stakeholders, such as WTO Members that are not party to the dispute, states that are not WTO Members, NGOs, and corporations. This explains certain aspects of WTO disputes that may not be strictly required in achieving due process, such as the secrecy of panel and Appellate Body proceedings (Articles 14.1 and 17.10 of the DSU) and the confidentiality of submissions (Article 18.2 of the DSU). In several early appeals (EC – Bananas III, India – Patents (US), and Argentina – Textiles and Apparel), the Appellate Body lamented the lack of detailed working procedures for panels to resolve procedural issues. However, the relevant provisions of the DSU and related instruments, in conjunction with the inherent jurisdiction of WTO adjudicating bodies as discussed further below, have proved adequate to resolve most procedural matters arising to date.

(b) Bias rule Several provisions in the DSU incorporate due process by imposing some form of the bias rule, which precludes decision-makers from acting where there is a reasonable apprehension that they may be biased, for example because they have an interest in the outcome. In particular, the DSU makes clear that panelists should be free of any actual or perceived bias. Article 8.2 of the DSU states that panelists should be selected with a view to ensuring their independence, and Article 8.3 states that citizens of Members involved in the dispute (as parties or third parties) should not serve as panelists unless the parties agree otherwise. Article 9 states that


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panelists serve in their individual capacity and that Members shall ‘not give them instructions nor seek to influence them as individuals with regard to matters before a panel’. However, it is interesting to note that persons who are currently servants of their governments may nevertheless be panelists (Article 8.8). Prevention of bias may be achieved, in practice, through the opportunity afforded to disputing parties to object to proposed panelists for compelling reasons (Article 8.6). At the appellate level, a similar but not identical version of the bias rule applies. Article 17.3 of the DSU states that members of the Appellate Body ‘shall be unaffiliated with any government’ and that they ‘shall not participate in the consideration of any disputes that would create a direct or indirect conflict of interest’. However, unlike at the panel stage, a member of the Appellate Body who is a citizen of a disputing party is not prevented from serving on the division hearing the appeal. Nevertheless, the apprehension of bias may be diminished through the appointment of Appellate Body members for terms of four years (Article 17.2) and through the requirement that the Appellate Body membership be broadly representative of WTO membership (Article 17.3). Communications between a decision-maker and a party or witness without the knowledge or consent of other parties may create a reasonable apprehension of bias (and may also breach the decision-maker’s duty to afford a fair hearing). Accordingly, Article 18.1 of the DSU prohibits ex parte communications with WTO adjudicating bodies concerning matters under consideration by them. In addition, paragraph 10 of the panel working procedures in Appendix 3 requires presentations, rebuttals and statements made in the first and second substantive meetings to be made in the presence of the parties. The DSB has also adopted rules of conduct to maintain the integrity and impartiality of dispute settlement proceedings in the WTO (‘Rules of Conduct for the Understanding on Rules and Procedures Governing the Settlement of Disputes’). These rules also reflect the bias rule. They apply to panelists, Appellate Body members, arbitrators, experts, members of the Secretariat assisting panels or arbitrations, and members of the Appellate Body Secretariat (Rule IV). According to Rule II, the governing principle of these rules is that these persons should be ‘independent and impartial, [and] shall avoid direct or indirect conflicts of interest’. Accordingly, they should ‘disclose the existence or development of any interest, relationship or matter that that person could reasonably be expected to know and that is likely to affect, or give rise to justifiable doubts as to, that person’s independence or impartiality’ (Rule III.1). An illustrative list of

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the information to be disclosed is contained in Annex 2 of the rules and includes financial, professional and other active interests. Any material violation may be challenged and may result in disqualification of the person from the proceedings, or other appropriate action. This provides a way of enforcing the bias rule. The Working Procedures for Appellate Review, which are issued by the Appellate Body pursuant to Article 17.9 of the DSU, reiterate some of these aspects of the bias rule. In particular, Appellate Body members are prohibited from: accepting employment or pursuing activities inconsistent with their duties and responsibilities (Rule 2(2)); accepting or seeking instructions from any organization or private source (Rule 2(3)); and participating in decision-making or an exchange of views when a material violation of an obligation of independence or impartiality has occurred (Rule 11).

(c) Hearing rule (i) Prior notice The hearing rule requires the decision-maker to give to those people who may be directly affected by the decision prior notice of the case they have to answer, and the time and place of the hearing. The DSU contains a number of provisions reflecting this requirement. For example, the complainant must give sufficient notice to the respondent of the basis of its claim, the key facts it alleges, and the legal principles on which it relies. This is achieved through the request for consultations (Article 4.4 of the DSU), the request for the establishment of a panel (Article 6.2), and written submissions to the panel (Articles 12.6 and 15.1). The Appellate Body has held in India – Patents (US) and Korea – Dairy that, pursuant to Article 6.2, a panel request must specifically identify the relevant WTO provisions and, in some cases, the relevant sub-provisions. The panel request must also clearly ‘identify the specific measures at issue’. As the panel’s terms of reference typically incorporate the panel request (Article 7), the Appellate Body in Brazil – Desiccated Coconut stated that terms of reference also ‘fulfil an important due process objective – they give the parties and third parties sufficient information concerning the claims at issue in the dispute in order to allow them an opportunity to respond to the complainant’s case’. Similarly, at the appellate level, the appellant must make clear the alleged errors of the panel in the Notice of Appeal (Working Procedures for Appellate Review, Rule 20(2)(d)), and support its position through arguments contained in a written submission (Working Procedures for Appellate Review, Rule 21). Again, the Appellate Body has made clear (in


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US – Upland Cotton, EC – Bananas III and US – Countervailing Measures on Certain EC Products) that it will dismiss claims that are not properly set out in the Notice of Appeal, on the basis that the respondent did not receive sufficient notice of the case it had to meet.

(ii) Opportunity to be heard The hearing rule also encompasses, unsurprisingly, a requirement that the decision-maker give interested parties an opportunity to be heard, including an opportunity to respond to adverse evidence. In the WTO dispute settlement system, parties are given an extensive opportunity to be heard. Particularly at the level of panels, the opportunities provided appear greater than in many other domestic or international tribunals. The standard working procedures of panels set out in Appendix 3 of the DSU provide for the panel to conduct two substantive meetings with the parties, who are asked to provide written submissions and also to present their case orally. Panels also frequently provide questions to the parties (which may offer parties a chance to respond to adverse material), and parties typically provide written replies after due deliberation. More unusually, panels submit to the parties in advance not only the descriptive parts of their reports but also the entire reasoning and conclusions. Parties then have an opportunity to comment on the report before it is finalized and circulated to Members (Article 15 of the DSU). On appeal, the parties make written submissions and also represent their views at an oral hearing (Rules 21, 22, 27). The Appellate Body has also held that Article 11 of the DSU includes the right to be heard (and perhaps the requirement of prior notice). Article 11 requires a panel ‘to make an objective assessment of the matter before it, including an objective assessment of the facts of the case’. In Chile – Price Band System, the Appellate Body agreed with Chile’s claim that the panel violated Article 11 in ruling on claims that were not made or argued by Argentina, as it failed to accord Chile ‘a fair right of response’. The Appellate Body saw the right to be heard as part of the duty to respect due process inherent in making ‘an objective assessment of the matter before it’. More generally, the Appellate Body suggested that making ‘an objective assessment of the matter before it’ requires panels ‘to ensure that due process is respected’, which is ‘an obligation inherent in the WTO dispute settlement system’. In US – Gambling, the Appellate Body considered whether the panel’s consideration of a defence submitted by the United States in its second written submission violated Article 11 by depriving Antigua and Barbuda of a full and fair opportunity to respond. The Appellate Body held that the principle of due process ‘obliges a responding party to

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articulate its defence promptly and clearly’ and may also oblige a panel either to refuse to consider a defence to which ‘the complaining party had no meaningful opportunity to respond’, or to adjust its timetables to allow additional time to respond. However, the Appellate Body found no breach of Article 11 in this case given that Antigua was aware of the possibility that the United States would make such a defence, raised no objection when it was made, and acknowledged that it did have an opportunity to respond. Another aspect of providing an adequate opportunity to be heard is the right to representation at hearings. Neither the DSU nor the related WTO dispute settlement instruments set forth expressly the right to representation by private counsel as opposed to solely government officials. In EC – Bananas III, the panel refused to admit private lawyers to the panel meeting, on grounds including that their presence could give rise to confidentiality concerns, some parties objected to their presence, and the panel had already indicated that it expected only members of government to attend. This decision was not appealed. However, at the appellate stage of the same dispute, taking into account ‘customary international law [and] the prevailing practice of international tribunals’, the Appellate Body ruled that WTO Members may choose the members of their delegation appearing in oral hearings on appeal. The Appellate Body also stated that the right to representation by counsel ‘may well be a matter of particular significance – especially for developing-country Members – to enable them to participate fully in dispute settlement proceedings’. In two subsequent proceedings (Indonesia – Autos and Korea – Alcoholic Beverages), panels have allowed private counsel to attend panel meetings as representatives of parties, while emphasizing that all parties’ representatives are subject to the provisions of the DSU, including those regarding confidentiality. Permission has been granted in order to ensure that each party ‘has every opportunity to fully defend its interests’.

(d) No evidence rule A number of DSU provisions concern the requirement under the no evidence rule that a decision-maker deal with the substantial points raised by the parties. In particular, Article 7.2 of the DSU states: ‘Panels shall address the relevant provisions in any covered agreement or agreements cited by the parties to the dispute.’ In addition, Article 12.7 of the DSU requires panels to ‘set out the findings of fact, the applicability of relevant provisions and the basic rationale behind any findings and recommendations that it makes’. Finally, Article 17.12 of the DSU provides that the ‘Appellate Body shall address each of the issues raised in accordance with


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[Article 17.6] during the appellate proceeding’, i.e. ‘issues of law covered in the panel report and legal interpretations developed by the panel’ raised by the parties. In Mexico – Corn Syrup (Article 21.5 – US), the Appellate Body stated that the duty to provide a ‘basic rationale’ in Article 12.7: ‘[R]eflects and conforms with the principles of fundamental fairness and due process that underlie and inform the provisions of the DSU. In particular, in cases where a Member has been found to have acted inconsistently with its obligations under the covered agreements, that Member is entitled to know the reasons for such finding as a matter of due process.’

The Appellate Body suggested that a panel’s obligation to address issues raised by the parties could derive from Article 7.2 of the DSU and ‘the requirements of due process’, in addition to Article 12.7. In US – Lamb, the Appellate Body treated as a violation of Article 11 the panel’s failure to address arguments by Australia and New Zealand regarding the adequacy of an ITC explanation. Other aspects of the no evidence rule also appear to be reflected in Article 11 of the DSU, as interpreted by the Appellate Body. In the appeal in EC – Hormones, the European Communities claimed that the panel ‘disregarded or distorted’ evidence it had submitted, as well as that of scientific experts, and therefore did not make an objective assessment as required by Article 11. For example, the European Communities claimed that, in its Report, the panel did not refer to the opinion of particular experts, misquoted some statements, and mischaracterized others. The Appellate Body found that an Article 11 violation involves more than ‘simply an error of judgment’. Rather, it involves ‘an egregious error that calls into question the good faith of the panel’. The requirement under Article 11 that panels make an objective assessment of the facts of the case includes ‘an obligation to consider the evidence presented to a panel and to make factual findings on the basis of that evidence’. A panel that deliberately disregards or wilfully distorts or misrepresents evidence will therefore fail to make an objective assessment, causing a denial of ‘fundamental fairness, . . . due process of law or natural justice’. In the case at hand, the Appellate Body found that the panel had misinterpreted some evidence, but that this did not rise to the level of arbitrarily ignoring or manifesting distorting evidence in violation of Article 11. The Appellate Body’s interpretation of Article 11 in EC – Hormones accords with the ordinary meaning of ‘objective’ and suggests a high threshold for appellate review of panels’ factual findings, similar to the standard required to demonstrate a denial of justice in international law.

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Although the Appellate Body did not say so explicitly, its concern related primarily to the fairness of the panel’s decision itself (substantive due process as in the no evidence rule), rather than the fairness of the panel proceedings (procedural due fairness as in the bias and hearing rules). This is reflected in the fact that the Appellate Body examined whether errors in the panel report amounted to an Article 11 violation. In US – Wheat Gluten, the European Communities claimed that, contrary to Article 11, the panel ‘did not have sufficient facts before it to justify its conclusion’ that a report by the United States International Trade Commission (ITC) provided ‘an adequate, reasoned and reasonable explanation with respect to “profits and losses”’. In this regard, the European Communities challenged the panel’s ‘appreciation of the evidence’ rather than the legal standard it applied. The Appellate Body found that the panel’s requests for clarification of the report, and its reliance on these clarifications in making its decision, were ‘at odds’ with its conclusion that the ITC report itself adequately explained its assessment of profits and losses. Accordingly, the Appellate Body found that the panel acted inconsistently with its obligations under Article 11. Therefore, it reversed the panel’s finding that the ITC report provided an adequate explanation with respect to profits and losses. Unfortunately, the Appellate Body failed to explain its conclusion in US – Wheat Gluten in terms of its earlier discussion in EC – Hormones about the nature of Article 11 violations. Did the panel deliberately disregard, refuse to consider, wilfully distort or misrepresent the evidence before it? Did it commit an egregious error calling into question its good faith? It is far from evident that the panel’s error reached this level. Therefore, perhaps the Appellate Body read EC – Hormones as providing an example of what kind of conduct might constitute an Article 11 violation, rather than setting a minimum threshold for Article 11 violations. Alternatively, perhaps Article 11 applies differently to panels when reviewing determinations by domestic authorities rather than engaging in primary fact-finding themselves. In any case, in US – Wheat Gluten, the panel’s error seems to have been that its reasons were internally contradictory, which is closer to the no evidence rule recognized in some domestic common law jurisdictions than to the higher denial of justice standard under international law.

(e) Additional procedures In addition to the specific due process rules contained in the DSU and related instruments, WTO adjudicating bodies have the ability to establish


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additional procedural rules where none are provided. In the case of panels, this ability is created by Article 12.1 of the DSU, which provides for the panel to follow the working procedures in Appendix 3 of the DSU unless it ‘decides otherwise after consulting the parties to the dispute’, and by paragraph 11 of Appendix 3, which allows panels to follow ‘[a]ny additional procedures specific to the panel’. The Appellate Body in EC – Hormones read the DSU, and Appendix 3 in particular, as granting to ‘panels a margin of discretion to deal, always in accordance with due process, with specific situations that may arise in a particular case and that are not explicitly regulated’. Similarly, in Australia – Salmon, the Appellate Body stated in connection with Article 12.1 that panels must ‘be careful to observe due process, which entails providing the parties adequate opportunity to respond to the evidence submitted’. In that case, the Appellate Body found that the panel had done so, by granting Australia an additional week to respond to allegedly fundamental changes to Canada’s claims. In the case of the Appellate Body itself, Rule 16(1) of the Working Procedures for Appellate Review is even more explicit in according additional discretion linked to the requirements of due process. That rule states: ‘In the interests of fairness and orderly procedure in the conduct of an appeal, where a procedural question arises that is not covered by these Rules, a division may adopt an appropriate procedure for the purposes of that appeal only, provided that it is not inconsistent with the DSU, the other covered agreements and these Rules.’

Pursuant to this provision, the Appellate Body in one appeal held two oral hearings instead of one because one member of the Division hearing the appeal passed away after the first oral hearing. The Appellate Body in US – Lead and Bismuth II decided to hold the second hearing ‘in the interests of fairness and orderly procedure in the conduct of this appeal’. In EC – Asbestos, the Appellate Body used Rule 16(1) to adopt detailed additional procedures for the receipt and consideration of amicus curiae briefs.

4 The inherent jurisdiction of WTO adjudicating bodies to protect due process The power of WTO adjudicating bodies to protect due process is not limited to the express provisions described in the previous section. In this

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section, I explain how WTO adjudicating bodies have inherent jurisdiction to protect the due process interests of disputing parties. In determining claims, WTO adjudicating bodies act independently, much like courts. They fix the bounds of the dispute before them, marshal the evidence, determine the appropriate legal principles, apply that law to the facts, and reach a decision. However, some features of WTO dispute settlement are not typical of judicial bodies. First, panels are established on an ad hoc basis by the DSB, which is a political body comprising representatives of all WTO Members. Second, panels and the Appellate Body merely issue recommendations, which the DSB must adopt if they are to have any legal effect. Nevertheless, neither of these features significantly weakens the characterization of WTO adjudicating bodies as judicial. Primarily, this is because the exceptional rule of decision-making through negative consensus in Articles 6.1, 16.4 and 17.14 of the DSU renders the establishment of panels and the adoption of reports essentially automatic.11 Like all judicial tribunals, WTO panels and the Appellate Body have an inherent jurisdiction (also known as incidental or implied jurisdiction). Inherent jurisdiction flows from the nature of the judicial function and does not depend on specific provisions in the instrument establishing the court or tribunal. Thus, the ICJ in the Nuclear Tests Case has explained that its inherent jurisdiction ‘derives from the mere existence of the Court as a judicial organ established by the consent of States, and is conferred upon it in order that its basic judicial functions may be safeguarded’. Similarly, in the Kupreskic Case, the Trial Chamber of the International Criminal Tribunal for the former Yugoslavia stated the requirement that ‘the International Tribunal be in a position to exercise all the powers expressly or implicitly deriving from the Statute, or inherent in their functions, that are necessary for them to fulfil their mission efficiently and in the interests of justice’. In some ways, inherent jurisdiction is analogous to the implied powers of international organizations. According to the ICJ in the Reparation for Injuries Case, under international law, an organization such as the United Nations is ‘deemed to have those powers which, though not expressly provided in the Charter, are conferred upon it by necessary implication as being essential for the performance of its duties’. The Appellate Body has recognized that WTO adjudicating bodies may have certain inherent powers that are necessary to carry out their tasks 11

See generally: J. Pauwelyn, ‘The Role of Public International Law in the WTO: How Far Can We Go?’, American Journal of International Law, Vol. 95 (2001), p. 535, at p. 553.


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under the DSU, even though that agreement does not specifically mention such powers. In particular, the Appellate Body held in US – 1916 Act that a panel has the power to examine a jurisdictional objection even if not raised in a timely manner, because the ‘vesting of jurisdiction in a panel is a fundamental prerequisite for lawful panel proceedings’. Moreover, in Mexico – Corn Syrup (Article 21.5 – US), it held that a panel may be required to address jurisdictional issues even if no party raises them. Similarly, in US – Offset Act (Byrd Amendment) the Appellate Body held that it has the power to consider a claim that a panel exceeded its jurisdiction, even if the appellant failed to include this claim in the Notice of Appeal. Inherent jurisdiction gives a court or tribunal the incidental powers that it needs to exercise its subject-matter jurisdiction and judicial function. For example, in the Nuclear Tests Case the ICJ has described its inherent jurisdiction as providing it with the power to: take such action as might be required to ensure that the exercise of its subject-matter jurisdiction is not frustrated; ‘provide for the orderly settlement of all matters in dispute’; and ‘maintain its judicial character’. In addition, Pauwelyn identifies as an element of inherent jurisdiction the ability of a court or tribunal to decide all issues concerning the exercise of its substantive jurisdiction, including ‘claims under rules on . . . due process’.12 Also in relation to due process, some commentators have suggested that international tribunals must exercise their inherent jurisdiction by applying general principles of law that protect fundamental procedural norms. Carlston has stated: ‘Express provisions are usually made in rules of procedure with a view to safeguarding fundamental procedural rights . . . While observing the provisions of the instrument – which is the basic law for the tribunal – the tribunal is also expected to conform its operations to the basic procedural norms. Accordingly, the fundamental procedural norms, whether or not expressly provided for, comprise (1) “certain fundamental rules of procedure” (2) which are “inherent in the judicial process,” and (3) generally recognized in all procedure.’13

The Appellate Body has also suggested that panels may be required to exercise their inherent jurisdiction in a manner consistent with procedural 12

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J. Pauwelyn, Conflict of Norms in Public International Law – How WTO Law Relates to other Rules of International Law (Cambridge University Press, 2003), pp. 447–448; J. Pauwelyn, ‘The Role of Public International Law in the WTO: How Far Can We Go?’, American Journal of International Law, Vol. 95 (2001), 535, at 555. K. Carlston, The Process of International Arbitration, Vol. 34 (1946), quoted in N. Affolder, ‘Tadic, the Anonymous Witness and the Sources of International Procedural Law’, Michigan Journal of International Law, Vol. 19 (1998), 445, at 490.

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norms. For example, in Mexico – Corn Syrup (Article 21.5 – US), the Appellate Body stated that, ‘as a matter of due process, and the proper exercise of the judicial function, panels are required to address issues that are put before them by the parties to a dispute’.

5 Conclusion It has been claimed that due process ‘is probably the greatest contribution ever made to modern civilization by lawyers or perhaps any other professional group’.14 Certainly due process plays an important role in the WTO and makes an important contribution to the legitimacy of WTO dispute settlement. The concept is necessarily broad but unnecessarily vague in current WTO jurisprudence. Significant differences exist between notions of due process under different domestic systems and under domestic as opposed to international law. Therefore, it would add to the stability and predictability of the multilateral trading system if the Appellate Body gave more guidance on the scope of the doctrine and its constituent elements. This chapter has used a common law framework to understand due process. While transferring a framework from a particular system of law is not ideal, there is much to be said for WTO adjudicating bodies developing or adopting some sort of framework for their approach to due process. Panel and Appellate Body reports frequently bundle together concepts such as good faith, due process, and fundamental fairness. Good faith and due process are clearly related but distinct concepts, so merging them is unhelpful. To the extent that due process and fundamental fairness can be said to have different meanings, the difference is unclear. The full potential for the principle of due process in WTO disputes is still waiting to be realized. 14

P. Atiyah, Law and Modern Society (Oxford University Press, 1983), p. 42.

15 Standards of review in WTO panel proceedings matthias oesch 1 Attorney-at-Law, Senior Research Fellow, World Trade Institute, Berne

1 Introduction Whenever WTO panels are called upon to examine a WTO Member’s measure or law, the question of the applicable standard of review arises. In some cases, the issue is clear and not argued by the parties. In other cases, the substantive outcome of the dispute may well depend on the standard of review applied by the panel. Not surprisingly, a routine criticism by WTO Members who have lost disputes in Geneva has been that panels have applied the wrong standard of review because it was either too intrusive or too deferential. Claus-Dieter Ehlermann, who served as member and Chairman of the Appellate Body from 1995 until 2002, noted at the end of his term in office that ‘the question of standard of review has become one of the most controversial areas of Appellate Body jurisprudence’.2 The issue of standard of review is very much part of procedural law in general. It plays an important role in the judicial review of administrative 1

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Dr. iur., Attorney-at-Law, LL.M.; Senior Research Fellow, World Trade Institute (WTI), Berne; formerly Legal Adviser, Federal Government of Economic Affairs, Switzerland, having represented Switzerland before the Appellate Body in the US – Steel Safeguards case. C.-D. Ehlermann, ‘Some Personal Experiences as Member of the Appellate Body of the WTO’, Policy Paper RSC No. 02/9 (2002), para. 64; see on standards of review S.P. Croley/ J.H. Jackson, ‘WTO Dispute Settlement Panel Deference to National Government Decisions: The Misplaced Analogy to the US Chevron Standard-Of-Review Doctrine’, in: E.-U. Petersmann (ed.), International Trade Law and the GATT/WTO Dispute Settlement System (London/The Hague/Boston, 1997), 187; T. Cottier/M. Oesch, International Trade Regulation: Law and Policy in the WTO, the European Union and Switzerland – Cases, Materials and Comments (London/Berne, 2005), at 163–69; C.-D. Ehlermann/J. Lockhart, ‘Standard of Review in WTO Law’, Journal of International Economic Law 7 (2004), 491; H. Spamann, ‘Standard of Review for World Trade Organization Panels in Trade Remedy Cases: A Critical Review’, Journal of World Trade 38 (2004), 509; J. Waincymer, WTO Litigation: Procedural Aspects of Formal Dispute Settlement (London, 2002), at 347–60; S. Zlepting, ‘The Standard of Review in WTO Law’, EBLRev. 2002, 427; this chapter is based on the author’s book Standards of Review in WTO Dispute Resolution (Oxford, 2003).

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authorities’ measures in both domestic and international jurisdictions. However, standards of review fulfil not only a procedural function but can also represent a deliberate allocation of power between an authority taking a measure and a judicial organ reviewing it. In the context of the WTO, the political and systemic significance of standards of review is self-evident. They are an important factor in determining the appropriate relationship between WTO legal obligations and national sovereignty. In essence, standards of review subtly reflect the delicate conflict over legal and political authority between panels and national authorities in trade and trade-related matters subject to WTO agreements. They can often determine, though not exclusively, which body – a WTO adjudicating body or a national authority – has the ultimate authority to decide controversial matters of fact and law. Given their importance in the operation of the WTO dispute settlement system, this chapter examines which standards of review have been used in WTO panel proceedings.

2 Definition The issue of standard of review arises whenever a panel is called upon to review the consistency of a WTO Member’s measure or law with WTO law. When the examination of a domestic measure falls within the panel’s jurisdiction, the question is with what depth or intensity the national policy determination should be reviewed. The standard of review applied in a specific case usually defines the degree to which a panel can ‘second guess’ the measure in order to determine whether it is consistent with WTO law or not. Conversely, the standard of review applied also defines whether, and to what extent, panels should respect a WTO Member’s measure even if they would prefer a different factual conclusion or legal interpretation than that of the competent domestic authority. In fact, it can be concluded from the GATT 1947/WTO acquis, and is frequently argued in legal writings, that panels should respect national government determinations up to a certain point and, in so doing, should not substitute their own findings for those of the national authority even if a different reading of the matter might be equally possible. The standard of review applied in a particular case, while procedural in nature, shapes, in addition to substantive treaty rules and other procedural techniques, the jurisdictional competence of the WTO adjudicating bodies vis-à-vis Members. It seems obvious that the proper standards of review in any panel proceeding may differ depending on the WTO agreement involved and the particular circumstances of a case. It is therefore

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inevitable that there is a context-dependent spectrum of appropriate levels of deference. De novo review and ‘total deference’ are commonly referred to as the two most extreme standards at each end of the spectrum. The former entails a completely new and independent examination of the domestic measure in question by the panel. Indeed, a policy of full de novo review allows a panel to substitute completely its own findings for those of the national authority and thus to arrive at totally new and different factual as well as legal conclusions. A standard of review of ‘total deference’ means that a panel shall not review in substance the outcome of an investigation conducted by the national authority. Rather under such a standard, judicial review is limited to an examination of whether the relevant procedural requirements for the adoption of a measure in question had been followed by the national authority. On the spectrum between these two most extreme forms of standards of review – totally de novo or totally deferential – are possible variants as to where the benchmark of panel intrusiveness or deference should be set. Whereas domestic legal systems have usually developed a carefully defined set of different standards of review with varying levels of deference, dispute settlement in international law in general lacks such precision. This holds equally true for WTO dispute resolution.

3 Rationales for panel deference In the WTO legal framework, the issue of standard of review is related to the two basic categories of fact and law. The distinction between fact and law is an institutional convention rooted in general legal theory and shaped by legal tradition, and it is indeed embodied in the WTO legal texts themselves (see Article 17.6 of the Anti-Dumping Agreement and Article 17.6 of the DSU). At the same time, such distinction serves as a useful analytical tool for the systematic examination of standard of review questions in WTO panel proceedings.

(a) Questions of fact The standard of review applied to facts is twofold. It relates both to the process of fact-finding in the sense of ‘raw’ evidence and to the factual conclusions subsequently drawn from the ‘raw’ evidence. The former concerns the issue of how meticulously a panel should examine the scope and appropriateness of the relevant factual evidence. It is closely related to the role which panels play in undertaking and controlling the process

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of fact-finding; such role can be either adversarial or inquisitorial in technique. The latter focuses on the plausibility of the factual conclusion which is subsequently drawn from the relevant evidence. It is obvious that panels need to be comprehensively informed about the relevant facts of a case. Therefore, from a functionalist perspective, an active role in the process of fact-finding and an intrusive standard of review would be favoured. However, a series of rationales – apart from general allocation of power considerations – would favour a certain degree of deference by the panel. As for panel review of ‘raw’ evidence, purely practical considerations such as resource allocation problems and a panel’s dependence on the cooperation of the responding party’s authorities, as well as that of the private industries and other actors involved, in submitting the relevant evidence might suggest a certain degree of panel deference. Greater expertise of national authorities in fact-finding and their familiarity with the factual surroundings of a case might lead panels to adopt a less intrusive approach in the process of fact-finding. Moreover, the principle of judicial economy might favour panel deference. Frequently, WTO agreements require domestic authorities to guarantee procedural fairness and the participation of all interested parties during proceedings before them. Consequently, panels could refrain from de novo review of factual records and only interfere if a preliminary examination discloses an egregious error in the procedure followed to establish the facts. By contrast with determining the relevant factual record (in the sense of ‘raw’ evidence), factual conclusions and ultimate decisions by WTO Members’ authorities to adopt trade-restrictive policies and measures may well involve political, economic, ethical, and other societal considerations. Therefore, there might be circumstances in which more than only one factual conclusion could reasonably be drawn from the ‘raw’ evidence. In such cases, panels and the Appellate Body are well advised not to try to prioritize diverse political and societal values. Rather they should leave some room for domestic regulatory decision-making and be sensitive to the greater legitimacy which domestic institutions of governance might have in deciding substantive trade-offs between competing policy considerations. Judicial deference towards a factual record established by a national authority has the advantage of avoiding a uniform and possibly rigid approach to fact-finding as between panels. Since factual determinations are by nature case-specific, they are capable of being generally and prospectively applicable only in exceptional circumstances.


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(b) Questions of WTO law The standard of review of WTO law addresses how a panel should assess the consistency or inconsistency of a Member’s measure or law with the relevant provisions of the covered agreements. At issue here is the extent to which panels should review legal interpretations of WTO law made by domestic authorities. While it seems clear from the terms of Article 3.2 of the DSU that it is, in principle, within the competence of panels and the Appellate Body to interpret the provisions of the WTO agreements, however, it is far from settled whether such adjudicating bodies should accord a certain degree of deference to legal interpretations made by domestic authorities. One systemic concern of the WTO dispute settlement system is to find the proper balance between the Members’ interest in protecting their sovereignty and the general interest of all WTO Members in achieving a uniform interpretation and consistent application of WTO law. The authority and legitimacy of WTO adjudicating bodies vis-à-vis the Members continues to evolve. Consequently, the acceptability of, and compliance with, their reports depends in part on whether they succeed in achieving a persuasively justified balance between appropriate deference to important national policy values and the need to strengthen the multilateral trading system and its disciplines. That being said, there are two important arguments against panel deference to domestic authorities with respect to questions of law. First, it is agreed that the application of the rules of treaty interpretation applied by WTO adjudicating bodies, namely Articles 31 and 32 of the Vienna Convention on the Law of the Treaties (Vienna Convention), will lead to a single, consistent interpretation of a treaty provision. Such a view, albeit not uncontested, is based on the closed set of interpretative tools stipulated in the Vienna Convention and the prominent role attributed to the wording of a provision.3 Articles 31 and 32 of the Vienna Convention, taken together, do not easily provide for a flexible, and thus potentially deferential, approach to treaty interpretation, nor do they allow for the application of inherent unwritten principles and exceptions to a particular wording, as is often the case in domestic constitutional settings. Therefore, any kind of WTO judicial restraint towards a Member’s own legal interpretations must be based on an explicit treaty provision to this effect. 3

Similarly Croley/Jackson, above footnote 2, at 196; D. Palmeter/P.C. Mavroidis, Dispute Settlement in the World Trade Organization, 2nd ed. (Cambridge University Press, 2004), at pp. 80–84; to the contrary see I. Sinclair, The Vienna Convention on the Law of Treaties, 2nd ed. (Cambridge University Press, 1984), at p. 153.

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Second, it is argued that the expertise of WTO panels and the Appellate Body means that they should not readily defer to the legal interpretation of domestic authorities. WTO adjudicating bodies possess greater experience and institutional knowledge in WTO law and practice than do domestic authorities, be they administrative agencies or courts, even though Members are interested in building up domestic capacity and expertise in the field of WTO law to their own advantage. Notwithstanding this, it is argued that WTO panelists and members of the Appellate Body understand the principles and limitations of the multilateral trading regime, and thus the correct meaning and legal ramifications of WTO provisions, better and from a less subjective perspective than do national authorities. This argument corresponds with the principle of iura novit curia, implying that panels and the Appellate Body are the appropriate fora for the interpretation of WTO law. Therefore, for judicial deference to be exercised, persuasive rationales must be put forward to justify such deference. From a policy perspective, legal norms serve a multilateral and essentially contractual system best if they are uniformly interpreted. Unlike questions of fact which are by nature case-specific, a policy of panel deference to domestic authorities on questions of legal interpretation could easily lead to problems in the uniform interpretation of WTO law.

4 ‘Article 11 of the DSU bears directly on this matter’ In the Uruguay Round, the issue of standard of review became very important during the endgame of the negotiations. However, the only agreement for which a specific standard of review could finally be adopted was the Anti-Dumping Agreement where Article 17.6 stipulates particular standards of review for both findings of fact and legal interpretations of the agreement. As a result, the job of defining the appropriate level of panel intrusiveness or deference in specific circumstances has been left for the most part to the WTO adjudicating bodies themselves. In this regard, in EC – Hormones, the Appellate Body established early on that Article 11 of the DSU stipulates a general standard of review applying to all cases for which the relevant agreements contain no specific provision on standards of review. The Appellate Body noted that ‘Article 11 of the DSU bears directly on this matter and, in effect, articulates with great succinctness but with sufficient clarity the appropriate standard of review for panels in respect of both the ascertainment of facts and the legal characterization of such facts under the relevant agreements.’ With respect to panel review of


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factual findings, the Appellate Body stated: ‘the applicable standard is neither de novo review as such, nor “total deference”, but rather the “objective assessment of the facts”’. With respect to the standard of review of legal interpretations, it held: ‘In so far as legal questions are concerned, . . . it is appropriate to stress that here again Article 11 of the DSU is directly on point, requiring a panel to “make an objective assessment of the matter before it”. ’4 Ever since, panels and the Appellate Body itself have religiously repeated that Article 11 of the DSU sets forth the appropriate standard of review for panel proceedings. Notwithstanding, it remains doubtful whether a textual interpretation of the term ‘objective assessment of the matter’ does much to clarify its exact meaning. At a minimum, it can be deduced from the wording of Article 11 of the DSU that it does not clearly promote judicial restraint. In contrast to Article 17.6 of the Anti-Dumping Agreement which is clearly designed to preclude, under certain conditions, de novo panel review of both factual findings and legal interpretations of the Anti-Dumping Agreement, Article 11 of the DSU does not discernibly limit the authority of panels to examine comprehensively national measures.

5 Standards of review of facts In US – Cotton Yarn, the Appellate Body summarized the key elements of a panel’s standard of review of facts pursuant to Article 11 of the DSU. It did so in the context of safeguard measures (thus the reference to data). The following paragraph from this case describes the approach to be taken by a panel in assessing the factual evidence presented by a responding party: ‘[P]anels must examine whether the competent authority has evaluated all relevant factors, they must assess whether the competent authority has examined all the pertinent facts and assessed whether an adequate explanation has been provided as to how those facts support the determination, and they must also consider whether the competent authority’s explanation addresses fully the nature and complexities of the data and responds to other plausible interpretations of the data. However, panels must not conduct a de novo review of the evidence nor substitute their judgement for that of the competent authority.’5 4 5

Appellate Body Report on EC – Hormones, paras. 116–118. Appellate Body Report on US – Cotton Yarn, para. 74; see also Appellate Body Report on US – Lamb, para. 103.

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According to this report, two elements are crucial. Panels need to make an objective assessment of whether the competent national authorities: first, examined all relevant facts and second, provided an adequate explanation of how those facts support the factual determination. The first element corresponds to the formal aspect and the second element to the substantive aspect of the panels’ duty to make an objective assessment of the facts. In substance, one of the few constants in case law has traditionally been, as regards the standard of review of facts, the rejection of both de novo panel review and ‘total deference’.6 Moreover, throughout panel reports, and consistently confirmed by the Appellate Body, a deferential standard of review has been advocated on grounds of policy rationales, and equally emphasis has been put on resource allocation problems faced by WTO panels. At the same time, the case law reveals a quite intrusive engagement by panels. The benchmark on the spectrum between de novo review and ‘total deference’ tends in practice rather towards the former than towards the latter. Interestingly, this holds true not only for Article 11 of the DSU but also for the application of Article 17.6(i) of the Anti-Dumping Agreement. Overall, the different drafting of the two provisions has, in practice, not yet resulted in different standards of review.7

(a) ‘Raw’ evidence and factual conclusions An intrusive engagement by panels holds true in particular for the process of fact-finding itself. Panels have consistently and thoroughly examined the scope and appropriateness of the relevant facts, in the sense of ‘raw’ evidence. Overall, panels have chosen as the appropriate fact-finding method an inquisitorial technique rather than one which is adversarial. In this regard, Article 13 of the DSU and the right of panels, as the triers of facts, to seek information from any source which they deem appropriate has been crucial in allowing panels to engage in an inquiry of the ‘raw’ evidence as intrusively and comprehensively as possible. Particularly in cases involving scientific disputes, but also in others, panels have relied heavily on the expertise and knowledge of outside experts. The Appellate 6

7

The landmark case being Appellate Body Report on EC – Hormones, para. 117; further references in panel reports are numerous, see Panel Report on Argentina – Footwear (EC), para. 8.117; Panel Report on Australia – Salmon, para. 8.41; Panel Report on US – Wheat Gluten, para. 8.5; Panel Report on Korea – Dairy, para. 7.30. Similarly C.-D. Ehlermann, above footnote 2, para. 59; C.-D.Ehlermann/J. Lockhart, above footnote 2, at 510; Spamann, above footnote 2, at 538–42; see Panel Report on US – HotRolled Steel, para. 7.235 and Appellate Body Report on US – Hot-Rolled Steel, para. 55.


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Body has repeatedly confirmed that the DSU accords to panels ample and extensive authority to undertake and control the process of fact-finding on which they base their final decisions.8 Corresponding with the panels’ active and intrusive approach to fact-finding, the standard of review of the ‘raw’ evidence has been quite close to de novo review. In essence, no particular deference has been in theory advocated, nor in fact applied, at the formal stage of a panel’s mandate under Article 11 of the DSU. However, there are two limitations to an apparently comprehensive and unlimited standard of review of the ‘raw’ evidence. First, a certain degree of deference has, time and again, been accorded in view of the panels’ limited fact-finding capabilities and resource allocation problems. Second, the case law seems to indicate – although it is by no means totally consistent – that panels tend to limit the evidence to those factual elements which were realistically available at the time of the national authority’s determination and thus could have been taken into account in the domestic proceedings.9 The standard of review used by panels to date for factual conclusions, the substantive aspect of a panel’s mandate under Article 11 of the DSU, is more difficult to assess. It has been an issue mostly in trade remedy and, arguably, sanitary and phytosanitary cases where panels have been typically called upon to review factual determinations drawn from the ‘raw’ evidence. Panels and the Appellate Body have consistently emphasized the significance of a ‘reasoned and adequate explanation’ of whether a policy determination is based on an ‘acceptable’ evaluation of the relevant facts.10 The requirement to issue an adequate explanation forms the starting point for a panel’s analysis of whether the national measure in question is based on an ‘acceptable’ evaluation of the relevant facts. Thus, generally speaking, panels have not been engaged in a de novo review. At 8

9

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See, for the panels’ active role and their reliance on external expertise, Panel Report on EC – Hormones, paras. 8.5–8.11; Panel Report on Australia – Salmon, paras. 6.1–6.157; Appellate Body Report on US – Shrimp, para. 106. Moreover, the right of panels to draw adverse inferences was established under Article 13 of the DSU, see Appellate Body Report on Canada – Aircraft, para. 198. See Panel Report on US – Wheat Gluten, para. 8.6; Appellate Body Report on US – Cotton Yarn, para. 78; Panel Report on US – Hot-Rolled Steel, para. 7.7 and the references in footnote 24 thereto. See Panel Report on US – Cotton Yarn, para. 7.29; Appellate Body Report on US – Cotton Yarn, para. 74; Panel Report on Korea – Dairy, para. 7.30; Panel Report on Argentina – Footwear (EC), para. 7.12; Appellate Body Report on Argentina – Footwear (EC), para. 121; Panel Report on US – Wheat Gluten, para. 8.5; Appellate Body Report on US – Wheat Gluten, para. 161; Appellate Body Report on US – Lamb, para. 103.

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the same time, as the Appellate Body explained in US – Lamb, this does not mean that panels must simply accept the factual conclusions arrived at by domestic authorities: ‘[A] panel can assess whether the competent authorities’ explanation for its determination is reasoned and adequate only if the panel critically examines that explanation, in depth, and in the light of the facts before the panel. Panels must, therefore, review whether the competent authorities’ explanation fully addresses the nature, and, especially, the complexities, of the data, and responds to other plausible interpretations of that data. A panel must find, in particular, that an explanation is not reasoned, or is not adequate, if some alternative explanation of the facts is plausible, and if the competent authorities’ explanation does not seem adequate in the light of that alternative explanation.’11

Thus, Appellate Body jurisprudence requires a panel to thoroughly and critically examine a domestic authority’s explanation of how the ‘raw’ evidence supports its overall factual conclusion. The scrutiny with which panels must review national authorities’ determinations comes close to a de novo review and the degree of deference given to national authorities has in general been small, although panels have clearly refrained from substituting their own evaluations of the facts for those of the competent national authorities. As long as a Member’s conclusion has been ‘reasonable’, and, in the case of a scientific assessment, based on a ‘qualified and respected opinion’, it has not been reversed by a panel even if another conclusion would have been perfectly possible. In cases turning on the evaluation of economic data, Members have in general been granted a margin of discretion in deciding upon the choice of methodology for collecting economic data and weighting the various factors in an injury determination.12

(b) Domestic law The issue of standard of review relates not only to factual aspects and interpretations of WTO law but also to domestic legal norms administered 11 12

Appellate Body Report on US – Lamb, para. 106; see also Panel Report on US – Cotton Yarn, para. 7.35. See Panel Report on EC – Asbestos, para. 8.193; Appellate Body Report on EC – Asbestos, para. 178; Appellate Body Report on EC – Hormones, paras. 186, 193–194; Panel Report on US – Cotton Yarn, para. 7.97; Panel Report on Korea – Dairy, para. 7.31; Appellate Body Report on US – Lamb, paras. 106–107; Panel Report on US – Wheat Gluten, para. 8.6; Panel Report on Argentina – Footwear (EC), para. 7.17.


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and applied by national authorities. With the advent of extensive normsetting within the WTO system, going far beyond such general principles as most favoured nation, national treatment and other general obligations stipulating the scope of correct national conduct, the examination of allegedly WTO-inconsistent domestic laws and practices has moved centre stage in many panel and Appellate Body proceedings. In the first dispute in this respect, India – Patents (US), both the panel and the Appellate Body struggled to find an appropriate way to deal with the interaction between the relevant Indian statute and partly divergent administrative practice. In essence, particularly the Appellate Body appeared to review the Indian legal system as if it were reviewing WTO law; no discernible deference was applied.13 It was not until US – Section 301 Trade Act that a panel set the fundamental course and established that the interpretation of domestic legal rules should be conceptually treated, for the purpose of judicial review by WTO adjudicating bodies, as a question of fact.14 The panel held: ‘[W]e do not, as noted by the Appellate Body in India – Patents (US), interpret US law “as such”, the way we would, say, interpret provisions of the covered agreements. We are, instead, called upon to establish the meaning of Sections 301–310 as factual elements and to check whether these factual elements constitute conduct by the US contrary to its WTO obligations. The rules on burden of proof for the establishment of facts referred to above also apply in this respect. It follows that in making factual findings concerning the meaning of Sections 301-310 we are not bound to accept the interpretation presented by the US. That said, any Member can reasonably expect that considerable deference be given to its views on the meaning of its own law.’15

The subsequent WTO case law reveals that the principle of treating municipal law as a matter of evidence of state practice has been followed in most panel and Appellate Body reports. Thus, panel review of domestic law is dependent on, and linked to, the collection and subsequent weighting of factual rather than legal elements. Similar to the inquisitorial approach of panels in general fact-finding, they have consistently 13 14

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Appellate Body Report on India – Patents (US). Approving of this qualification T. Cottier/K. Nadakavukaren Schefer, ‘The Relationship between World Trade Organization Law, National and Regional Law’, Journal of International Economic Law, Vol. 1 (1998), p. 83, at p. 86; D. Palmeter/P.C. Mavroidis, above footnote 3, at 129–33; J. Waincymer, above footnote 2, at 525. Panel Report on US – Section 301 Trade Act, paras. 7.18–7.19.

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engaged in a thorough investigation into the elements which could potentially shed light on the meaning of the relevant domestic law and practice. At the same time, the characterization of domestic law as a question of fact and, consequently, its treatment as a matter of evidence has gone hand-in-hand with the evolution of a deferential standard of review. The case law indicates that panels and the Appellate Body have usually not imposed a de novo interpretation of the relevant domestic rules on the Member concerned. In US – 1916 Act, the panel unequivocally stated that it is not the role of panels: ‘[T]o develop our own independent interpretation of US law, but simply to select among the relevant judgements the interpretation most in conformity with the US law, as necessary in order to resolve the matter before us. . . . If, after having applied the above methodology, we could not reach certainty as to the most appropriate court interpretation, i.e. if the evidence remains in equipoise, we shall follow the interpretation that favours the party against which the claim has been made, considering that the claimant did not convincingly support its claim.’16

Such an approach is supported by policy concerns. Adjudicating bodies at the level of WTO dispute resolution have no jurisdiction to construe and interpret domestic rules ‘as such’. The principle of iura novit curia as a general principle of law does not apply to the interpretation by international adjudicating bodies of domestic law. This holds true as a matter of principle as well as from a purely practical perspective. It is not realistic to expect that WTO panelists would have sufficient expertise for each of the different domestic laws which might be subject to panel review. The ambit and effect of domestic legal norms depend to a great extent upon the way domestic tribunals and courts interpret possibly ambiguous provisions and administrative guidelines and practice. The expertise argument allocates interpretative power to domestic agencies and courts, which possess greater expertise and familiarity in the field of their ‘own’ law and administrative practice than WTO panels are expected to possess. Moreover, since the interpretation of domestic law is by definition state-specific, there can be no problems of uniform interpretation as could arise in the case of diverging interpretations of WTO law. 16

Panel Report on US – 1916 Act (EC), paras. 6.53, 6.58.


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6 Standards of review of WTO law The issue of standard of review of WTO law has apparently caused no difficulties so far. In the panel and Appellate Body reports to date, very few statements concerning the standard of review of legal interpretations pursuant to Article 11 of the DSU can be found. The parties to disputes have usually not explicitly raised the issue before panels nor have they brought it before the Appellate Body. This is remarkable against the background that the correct interpretation of the WTO provisions in question, and thus the appropriate methods of interpretation, has been a crucial issue in most disputes. In Argentina – Footwear (EC), one of the rare statements can be found in which the Appellate Body expressly addressed the issue of standard of review of WTO law: ‘In addition to “an objective assessment of the facts”, we note, too, that part of the “objective assessment of the matter” required of the panel by Article 11 of the DSU is an assessment of “the applicability of and conformity with the relevant covered agreements”. Consequently, we must also examine whether the Panel correctly interpreted and applied the substantive provisions of Articles 2 and 4 of the Agreement on Safeguards.’17

The Appellate Body thus required the panel to ‘correctly interpret’ the relevant provisions in question. This choice of terms does not suggest that the Appellate Body considered a certain degree of deference appropriate towards the interpretation presented by the responding party. Rather, it implies that panels are called upon to de novo examine interpretations of WTO law by the disputing parties and not to defer to any Member’s interpretative conclusions. Irrespective of the lack of clear statements, the actual interpretative approaches of panels and the Appellate Body leave no doubt about their view on the issue. In substance, both panels and the Appellate Body have constantly engaged in a de novo standard of review of WTO law.18 They have consistently interpreted WTO provisions pursuant to the methods provided for in the Vienna Convention and have not deferred to legal interpretations of national authorities. Article 17.6(ii) of the Anti-Dumping Agreement excludes on its face a policy of full de novo review towards Members’ interpretations of the 17 18

Appellate Body Report on Argentina – Footwear (EC), para. 122; see also Panel Report on US – Section 301 Trade Act, para. 7.16. Similarly C.-D.Ehlermann/J. Lockhart, above footnote 2, at 497–98; Spamann, above footnote 2, at 511, 518; J. Waincymer, above footnote 2, at 405.

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Anti-Dumping Agreement by explicitly recognizing the possible coexistence of more than one permissible interpretation. In fact, responding parties several times argued their case, inter alia, on the grounds that their interpretation was ‘permissible’. In US – Hot-Rolled Steel, the Appellate Body elaborated on the meaning of Article 17.6(ii): ‘A permissible interpretation is one which is found to be appropriate after application of the pertinent rules of the Vienna Convention . . . . We cannot, of course, examine here which provisions of the Anti-Dumping Agreement do admit of more than one “permissible interpretation”. Those interpretive questions can only be addressed within the context of particular disputes, involving particular provisions of the Anti-Dumping Agreement invoked in particular claims, and after application of the rules of treaty interpretation in Articles 31 and 32 of the Vienna Convention.’19

To date, however, neither a panel nor the Appellate Body has ever found in explicit terms that a provision of the Anti-Dumping Agreement has given rise to more than one permissible interpretation. They have consistently concluded that the application of Articles 31 and 32 of the Vienna Convention has led to one single interpretative meaning of the provision in question and has not left room for additional ‘permissible’ interpretations. The matter was most controversially discussed in US – Softwood Lumber V where one panelist made a dissenting opinion and considered the United States’ interpretation of Article 2.4.2 of the Anti-Dumping Agreement as not prohibiting zeroing ‘a permissible one’. The Appellate Body confirmed, however, the reading of the majority of that panel that such an interpretation was not permissible.20 In practice, the second sentence of Article 17.6(ii) has never become an issue in WTO litigation. The reluctance of panels and the Appellate Body to accept more than one permissible interpretation has given rise to criticism by some that they have excessively limited the Members’ prerogative to choose among a range of possible interpretations of the Anti-Dumping Agreement. Article 17.6(ii) does matter-of-factly require panels and the Appellate Body to defer to Members’ interpretations to a certain degree. However, panels and the Appellate Body have not generally construed the provisions of the AntiDumping Agreement in a diverging and potentially conflicting manner and seem reluctant to enter unknown territory and to open a Pandora’s Box. Against this background, it is not surprising that the legal ambiguity 19 20

Appellate Body Report on US – Hot-Rolled Steel, paras. 59–61. Panel Report on US – Softwood Lumber V, paras. 9.1–9.24, and Appellate Body Report on US – Softwood Lumber V, paras. 113–116.


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that may be necessary for a provision to be susceptible to more than one permissible interpretation has not yet been adequately developed.

7 Epilogue In conclusion, panels and the Appellate Body have applied generally intrusive standards of review during the WTO’s first ten years of dispute resolution. This holds in particular true for the interpretation of legal issues. The interpretation of WTO law has been perceived by WTO adjudicating bodies to fall entirely within their domain and has consistently been reviewed de novo. Undeferential panel practice also has developed with regard to questions of fact. Usually, panels have examined the scope and appropriateness of the relevant facts searchingly and thoroughly. The only category towards which a policy of deference has evolved is that of panel review of factual conclusions. Here, panels have usually refrained from substituting their own conclusions for those of the competent national authorities and have granted some margin of discretion for the evaluation of the ‘raw’ evidence by domestic authorities. This conclusion of a generally intrusive practice regarding standards of review corresponds with the general perception of panel reports by both parties and the public. In most cases in which the Appellate Body has been called upon to rule on a claim that a panel had misinterpreted or misapplied the relevant standard of review, the appellant claimed that the panel had failed to accord sufficient deference to the appellant’s own factual findings or legal interpretations in domestic proceedings. Moreover, comments by national authorities and non-governmental observers often centres on the contention that panels and the Appellate Body are not giving appropriate deference to domestic policy determinations. As one illustration, criticism as to allegedly too intrusive standards of review has emerged in the powerful Senate Finance Committee of the US Congress, which has jurisdiction in the US Senate over international trade matters: ‘WTO panels and the Appellate Body have ignored their obligation to afford an appropriate level of deference to the technical expertise, factual findings, and permissible legal interpretations of national investigating authorities.’21 In my view, such criticism is unfounded. Overall, panels have remained well within the boundaries of their authority. Appropriate consideration of, and deference to, national sensitivities and political preferences in 21

Bipartisan Trade Promotion Authority Act of 2002, Senate Report of February 2002, at 6.

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sensitive subject matters has in general been given by WTO adjudicating bodies through a variety of procedural techniques, most prominently through deferential methods of interpretation, if not through overtly deferential standards of review. From a legal perspective, this practice so far conforms to the apparent intention of the drafters of the WTO agreements. The generally intrusive standards of review are consistent with the legal texts. The judicial branch within the WTO has been, so far, aware of the proper role assigned to it within the current contractually based WTO system. Arguably, only the (similarly) undeferential approach followed in anti-dumping matters might have caused raised eyebrows but with some justification. After all, Article 17.6(ii) of the Anti-Dumping Agreement explicitly requires panels and the Appellate Body to defer to the Members’ interpretations to a certain degree, but so far WTO adjudicating bodies have been reluctant to do so.

16 Administration of evidence in WTO dispute settlement proceedings scott andersen Managing Partner Geneva Office, Sidley Austin Brown & Wood

1 Introduction I would like to discuss the use of evidence in a changing WTO dispute settlement landscape shaped by increasingly fact-intensive cases. The recent US – Upland Cotton and Korea – Commercial Vessels disputes brought under Articles 5 and 6 of the Agreement on Subsidies and Countervailing Measures (SCM Agreement) and the numerous sanitary and phytosanitary (SPS) cases are prominent examples of this trend, which is likely to increase. In such cases, WTO panelists demand and request from the parties (and even third parties) detailed factual information. I want to provide you with a sense of the means by which such facts are produced. I will start by describing how parties have a relatively free hand to produce multiple types of evidence because there are no WTO ‘rules of evidence’. I then discuss how panels have used their freedom to accept and consider – but not always use – multiple types of evidence in making factual findings. I will highlight new – at least for traditionalists of the General Agreement on Tariffs and Trade (GATT) – forms of establishing facts, such as affidavits, expert testimony, and live witnesses appearing before panels. I suggest ways that Members faced with such new types of evidence can raise objections and call into question their reliability. Finally, I will address the situation how, when one Member faces difficulty in securing information from a non-cooperating Member, adverse inferences or best information available could or have been used by panels.

2 Burdens of proof Every WTO dispute starts with an alleged fact-based trade-related problem. WTO litigating parties must establish the facts sufficient to meet 177

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their legal burden of proof or to rebut the other party’s attempt to rebut that evidence. In the most general sense,1 the primary burden in a dispute is the requirement of a complaining party to establish an initial prima facie case. This requires presentation of evidence ‘sufficient to establish a presumption’ that the challenged measures are inconsistent with WTO obligations.2 If the prima facie case is made, then the responding Member is required to rebut that evidence or face the consequences of a finding of non-compliance with WTO rules. A burden of proof also arises for a responding Member normally in situations where it asserts affirmative defences such as in Articles IX:2, XX, and XXI of the GATT 1994, Articles 4.1 and 6.3 of the SPS Agreement, or in cases involving export subsidies for scheduled agriculture products under Article 10.3 of the Agreement on Agriculture. A burden of proof exists more generally for any fact that either party asserts – described by the Appellate Body as the principle that the party that asserts a fact is responsible for providing proof thereof.3 Responding Members rebutting factual evidence presented by complaining parties (attempting to meet their prima facie burden) will normally have this burden of proof with respect to the facts they assert. Burdens of proof also exist in implementation of adverse WTO rulings, with the burden on the responding/implementing party to demonstrate that its proposed period of time is reasonable for implementation. The responding/implementing party must also meet the burden of establishing in Article 22 proceedings that the opposing party’s proposal to suspend concessions is not in conformity with the Dispute Settlement Understanding (DSU) or the SCM Agreement. Finally, the Member challenging the WTO-consistency of the implementation measures taken by the responding/implementing Member has the burden to demonstrate the non-compliance of those measures with the WTO agreements. Thus, there are ‘burdens of proof ’ that exist throughout WTO dispute settlement proceedings. While the theory may appear relatively simple, in practice meeting the burdens of proof can be a very dynamic process, similar to a tennis game, with each side presenting and rebutting evidence multiple times during the long course of the panel proceeding. Panels will 1

2 3

This chapter does not purport to address or attempt to tackle the multitude of issues relating to the ‘burden of proof ’. For a useful discussion regarding the burden of proof in relation to evidence, see J. Pauwelyn, ‘Evidence, Proof and Persuasion in WTO Dispute Settlement’, Journal of International Economic Law 1 (1998), pp. 227–258. Appellate Body Report on US – Wool Shirts and Blouses, p. 13, DSR 1997:I, 323 at 334. Appellate Body Report on US – Wool Shirts and Blouses, p. 15, DSR 1997:I, 323 at 335.

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examine initially whether a complaining Member has met its prima facie burden, and then whether the responding Member has rebutted it; and then examine later in the panel process whether the complaining Member has yet again established its burden. When the evidentiary dust settles, burdens of proof will only be deemed fulfilled if and when the panel is satisfied with the quantum and quality of the evidence produced.4

3 Current WTO rules and procedures governing the admissibility and submission of evidence There are no DSU rules governing the admissibility, production or sufficiency of evidence. This provides great flexibility to both litigating parties and to panels in the type of evidence that can be used. This flexibility is consistent with the absence of any specific rules of evidence in the International Court of Justice as well as other international tribunals.5 The absence of any specific WTO rules governing admissibility means that Members submitting evidence are relieved of the burden of proving that the evidence is admissible. Rather, it is the burden of the Member challenging the evidence to demonstrate, for various reasons, why the evidence should not be considered or given any weight by the panel. Similarly, there are only minimal procedures governing the timing of presentation of evidence to WTO panels. Current versions6 of panel working procedures state that all factual evidence shall be submitted to the panel no later than the first substantive meeting, except rebuttal evidence which is permitted upon a showing of good cause or in answers to questions. It has understandably proven very difficult for panels to differentiate what is ‘factual evidence’ and what is ‘rebuttal evidence’ in the typical WTO burden of proof tennis volley. A leading panel report in Canada – Aircraft rejected Canada’s attempt to impose a strict rule excluding evidence after the first submission reasoning that ‘there may be circumstances in which a complaining party is required to adduce new evidence in order to address rebuttal arguments made by the respondent’.7 The Appellate Body has 4 5 6

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See M. Kazazi, Burden of Proof and Related Issues: A Study on Evidence Before International Tribunals (Kluwer Law International, 1996), p. 220. M. Kazazi, Burden of Proof and Related Issues: A Study on Evidence Before International Tribunals (Kluwer Law International, 1996), p. 184. Not all panel working procedures contain the same text. For example, some working procedures do not make explicit provision for new evidence to be produced pursuant to the panel’s questions. This has not, however, prevented panels in such cases from requesting and receiving evidence in questions well after the filing of the first submission. Panel Report on Canada – Aircraft, para. 9.73.

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emphasized this flexibility noting the fact that there are no deadlines in the DSU for the submission of evidence, and that working procedures are intended to be flexible.8 The most important working procedure related to ‘evidence’ is a due process requirement found in many panel working procedures that ‘the other party shall be accorded a period of time for comment, as appropriate, on any new factual evidence submitted after the first substantive meeting’. This working procedure provides panels and the parties with the flexible procedures allowing the maximum amount of factual evidence to be presented while protecting each party’s due process rights. Given the lack of any effective discovery mechanism prior to the composition of the panel,9 this flexible approach properly reflects the reality of the ‘give and take’ in WTO dispute settlement.10 It should be emphasized that in the special case of disputes involving review of trade remedy decisions in anti-dumping, safeguards, and countervailing cases, there are greater restrictions on new evidence that can be presented that was not before (or should have been before) the investigating authorities. The Appellate Body has held that WTO panels are not to engage in de novo examinations of the facts before investigating authorities in such cases.11 However, the Appellate Body has also held in the US – Wheat Gluten case that investigating authorities have an obligation to investigate all relevant factors to determine the causal relationship between imports and serious injury to a domestic industry in a safeguards investigation – even if the interested parties did not make arguments or present evidence regarding those issues.12 This suggests 8 9

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Appellate Body Report on Australia – Salmon, para. 272. Outside of the Annex V procedure for collecting evidence for serious prejudice cases under the SCM Agreement, the organizational meeting is normally the first opportunity a complaining Member has to request a WTO body to request the production of evidence from another Member pursuant to Article 13.1 of the DSU. See Panel Report on Canada – Aircraft Credits and Guarantees, para. 7.134. Of course it is also possible for one Member to request information from another Member in WTO Committees as well as during formal DSU consultations. Other rules prohibit ex parte delivery of documents to only the panel (Appendix 3 of the DSU, para. 10), or the revealing of confidential information without the formal authorization of the entity designating it as confidential (Article 13.1 of the DSU). See, e.g., Appellate Body Report on US – Cotton Yarn, paras. 74, 76–79; Appellate Body Report on Argentina – Footwear (EC), para. 121. Appellate Body Report on US – Wheat Gluten, para. 54 (‘In such cases, where the competent authorities do not have sufficient information before them to evaluate the possible relevance of such an “other factor”, they must investigate fully that “other factor”, so that they can fulfill their obligations of evaluation under Article 4.2(a). In that respect, we


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there is some room for the introduction of evidence not in the administrative record if it is used solely for the limited purpose of showing that the investigating authorities had reasonable access to relevant information concerning additional factors, and did not conduct an objective and reasonable examination of the relevant facts.13 In addition, the US – Steel Plate case teaches that there is also room for expert witnesses to testify before WTO panels concerning data and evidence in the record before investigating authorities. The flexibility of panels to use a wide variety of evidence demands that panels also exercise the responsibility to analyse critically the weight that should be given to different forms of evidence. However, a WTO panel is not a jury and does not need to be protected by rules of evidence from hearsay evidence. WTO panelists, while functioning in an ad hoc capacity, appear more than capable of sifting through evidence, including hearsay, to determine whether it is credible or not. Nor are there any rules governing the authenticity of documents, the competency of witnesses or of experts, or rules governing facts of which the panels can take note without any evidence being made by the parties. Of course, if a Member challenges the authenticity of a copy of an original document or the competence of a witness, then the failure of the submitting Member to authenticate the document or sustain the expertise or relevance of the witness may be grounds for the panel to disregard the evidence.14 The absence of any rules governing the admissibility of certain ‘types’ of evidence is based on the rationale that ‘for obvious diplomatic reasons, international tribunals are especially reluctant to spurn anything proffered by a sovereign’.15 The presumption that WTO Members act in good faith including, inter alia, in the submission of evidence also

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note that the competent authorities’ “investigation” under Article 3.1 is not limited to the investigative steps mentioned in that provision, but must simply “include” these steps. Therefore, the competent authorities must undertake additional investigative steps, when the circumstances so require, in order to fulfill their obligation to evaluate all relevant factors.’). See C.-D. Ehlermann and N. Lockhart, ‘Standard of Review in WTO Law’, Journal of International Economic Law 7(3), (2004), pp. 491–521. See Dissenting Opinion of Richard M. Mosk to Final Award (7 December 1983) Ultrasystems Incorporated v. Iran, p. 2 cited in: M. Kazazi, Burden of Proof and Related Issues: A Study on Evidence Before International Tribunals (Kluwer Law International, 1996), pp. 218–219. C. N. Brower, ‘The Anatomy of Fact-Finding Before International Tribunals, An Analysis and a Proposal Concerning the Evaluation of Evidence’, in Fact-Finding by International Tribunals, R. Lillich (ed.) (1991), p. 148.

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diminishes the requirement for detailed evidentiary rules.16 The absence of any evidentiary rules in the WTO is also consistent with the absence of any mandatory discovery rules for the collection of evidence before a dispute begins (Annex V of the SCM Agreement relating to adverse effects cases being the sole exception). Without the right to compel the production of information from the other Member, a party may well have to use whatever evidence is available – including newspaper articles and statements of witnesses to fill the factual gaps. Further, flexible evidentiary rules may well be required given the lack of transparency of many Members’ measures. Multiple hearsay and other less credible evidence such as media reports may well be the only available evidence for certain facts. In addition, the lack of rules regarding admissibility is consistent with the historical diplomatic nature of WTO proceedings. And finally, establishing detailed evidentiary rules may well increase the cost of WTO litigation if witnesses were required to appear before WTO panels. Lastly, from the historical perspective, the absence of evidentiary rules in the WTO is consistent with the fact that many GATT disputes dealt with the consistency of ‘measures’ of Member governments. Such disputes focused on primarily legal arguments based on the undisputed factual text of the measure at issue.17 However, recent highly fact-intensive cases such as US – Upland Cotton, Korea – Commercial Vessels, Canada – Aircraft and Brazil – Aircraft, as well as the SPS cases, have required panels to make a considerable number of factual findings based on a wide variety of evidence. This trend is likely to continue. In sum, as one WTO panel has stated, WTO panels ‘are generally free to admit and evaluate evidence of every kind, and to ascribe to it the weight that they see fit’.18 A review of many WTO panel decisions suggests that panels have been successful at sifting through evidence and properly assigning weight to it. But, as disputes become more fact-intensive, considerable burdens will fall on both panels and parties to address 16

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For example, when a Member produces evidence such as a signed statement of a government official, or a copy of an internal undated government memorandum, it is presumed that this Member did not fabricate the evidence. Of course, panels need not give much weight to written statements of government officials where the government refuses to produce the official in a meeting with the panel. Nor does a panel have to give any weight to an undated internal government memorandum. It is up to the party confronted with such evidence to point out these shortcomings to the panel. See P. Palmeter and P. Mavroidis, Dispute Settlement in the World Trade Organization, Practice and Procedure, 2nd ed. (Cambridge University Press, 2004), section 4.09[1]. Panel Report on EC – Bed Linen, para. 6.34.


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and consider a variety of evidence with considerably varying degrees of credibility. This will challenge not only panelists but the opposing parties who must respond to such evidence. Some of this evidence is discussed below.

4 Presentation of different types of factual evidence to WTO panels In fact-intensive WTO disputes, the collection, discovery, and use of factual and expert evidence is one of the most challenging and creative aspects of preparing a case, negotiating a solution, and if necessary, litigating before a WTO panel. Powerful factual evidence can make the difference between forcing the settlement of the dispute or not. Litigants and their counsel should be creative and persistent in their search for evidence. No WTO Member should assume that all the information that can help its case has been collected by the time it submits its first submission. Rather, the practice has been that panels insist that parties provide additional evidence in response to their questions. It is not unusual in fact-intensive cases for more exhibits to be filed by the complaining party after it files its first submission than were included in its first submission. Indeed, as noted, the working procedures of many panels anticipate that factual evidence can and should be provided in response to the panel’s questions – questions that can be submitted well after the last meeting of the panel with the parties. The search for and discovery of evidence means requesting information in WTO committees, during informal consultations, during formal consultations, at the organizational meeting, at the time of the filing of the first submission, at the first and second panel meetings, and even after the second panel meeting. Only a few panels have strictly interpreted the working procedures to prohibit the introduction of non-rebuttal evidence after the first submission.19 But most panels have liberally allowed evidence to be introduced as long as the opposing party has sufficient time to evaluate and comment on the evidence.20 For example, in the US – Upland Cotton dispute, the panel requested information from the United 19

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See e.g., Panel Report on Korea – Dairy, paras. 7.18–7.20 (refused to extend the deadline to permit Korea to submit a translation of a report); Panel Report on Canada – Wheat Exports and Grain Imports, para. 6.140 (rejected scholarly article submitted by the United States in an untimely manner disagreeing that it was ‘rebuttal’ evidence). See e.g., Panel Report on US – Offset Act (Byrd Amendment), para. 7.2 (accepted evidence submitted after the first submission deadline, stating that ‘good cause’ existed).

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States three and a half months after the third panel meeting. That is the limit however, since no new evidence is permitted to be introduced at the interim review or the appellate stage of WTO proceedings.21

(a) Summary of types of evidence used in WTO proceedings The type of evidence that can be used in WTO dispute settlement, like other types of domestic and international litigation, is limited only by the resources and imagination of the litigants. However, there are practical limitations in the type of evidence that can be used in WTO dispute settlement litigation involving the review of an investigating authority’s decisions in trade remedy disputes – anti-dumping, safeguard, and countervailing proceedings (as opposed to all other types of disputes). In the trade remedy disputes, WTO panels essentially function in an appellate capacity. WTO panels in such cases are prohibited from making de novo findings of fact and generally must only examine the evidence that was in the record before the investigating authorities. However, as noted above, evidence not in the record could be used for the limited purpose of showing that investigating authorities had access to evidence bearing on a relevant causation factor.22 Further, because the investigating record in these cases can be very large, this still leaves considerable room for the selection of evidence from the investigating record to use in WTO proceedings. But even in trade remedy cases, expert testimony can be used. For example, in the US – Steel Plate dispute, the panel permitted expert testimony analysing the data to present new calculations of dumping margins using information supplied by India during the investigation but which was not used by US Department of Commerce (USDOC) in its calculations of very high margins of dumping.23 Expert testimony could also be used to assist panels in understanding whether the investigating authorities objectively considered the facts and whether they addressed facts that should have been obvious to them but which were never reported or discussed in the report. In non-trade remedy disputes, WTO panels must make original factual findings. And it is the evidence proffered to panels in those types of proceedings that is discussed below. Factual evidence can be organized 21 22 23

Appellate Body Report on US – Cotton Yarn, para. 78. Appellate Body Report on US – Wheat Gluten, para. 54. Panel Report on US – Steel Plate, para. 7.10.


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into five basic types: (1) government and non-government documents, (2) affidavits and witness statements, (3) experts appearing before panels, (4) non-governmental fact witnesses appearing before panels, and (5) physical and demonstration evidence. Many WTO panels, like GATT panels, make factual findings largely based on written documentation submitted by Member governments. This documentation can take many forms, but can be roughly divided between government documents, which can constitute ‘admissions’, and non-government documents that have varying degrees of credibility and reliability. Obviously, every dispute is distinct, and the proof required or available in one dispute may be totally different than that existing in another dispute. Nevertheless, it is hoped that this catalogue of different types of evidence can be used as a ‘checklist’ in searching for or evaluating different types of evidence. Among the most important documents are those produced by the complaining and responding governments. These include published government laws, regulations, policy bulletins, government press releases, WTO notifications, adopted interpretations of legislation, official government statistics, official studies and reports or studies commissioned by governments, statements of government officials in the legislative process, judicial decisions, and arguments of government attorneys in litigation submissions. Another key group of documents are those produced by non-parties, which is extremely broad and the potential documents that could be collected are almost limitless. Among the most important such documents in WTO dispute settlement are analysis, opinions, or trade studies of IGOs such as the World Bank, IMF and WHO; published standards of international organizations; academic studies, reports and articles; industry research reports and statistics; industry statements and testimony, transactional documents (such as original trading documents and contracts); newspaper articles; negotiating history documents; and international judicial decisions. A newer but very important form of evidence includes affidavits and witness statements. Panels have relied on factual evidence in the form of sworn affidavits or signed statements of witnesses who do not appear before the panel. Affidavits or notarized statements offer very useful tools for presenting information to a panel which may not be readily available in a document. The affidavit can be tailored directly to the facts of the case by a person either working for the particular delegation, or an independent witness. Of course, the credibility of such affidavits is greatly increased if

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the affiant is present before the panel for questioning by the panel and the opposing party. Expert testimony is important evidence that has played a leading evidentiary role in factually complex cases. To date, this expert evidence takes two basic forms – the advice and assistance of experts appointed by the panel pursuant to the first sentence of Article 13.2 of the DSU (‘Panels may . . . consult experts to obtain their opinion on certain aspects of the matter.’), and second, experts appearing on the delegations of Members who provide their opinions to the panel. Panels have relied heavily on experts in every SPS dispute, including EC – Hormones, Japan – Apples, Japan – Agricultural Products II, Australia – Salmon, and EC – Asbestos. The records of these disputes clearly show the leading role that the experts have played in assisting panels to sift through the complex facts and in providing panels with their opinions regarding the validity and credibility of the scientific evidence at issue in the dispute. In addition, the panel in Japan – Agricultural Products II found that experts on the US delegation provided convincing evidence. Experts have also been used in non-SPS cases. In US – Shrimp, the panel appointed a panel of experts to assist them in making factual findings concerning the link between shrimp fishing and sea turtle drownings. In US – Steel Plate, India presented live expert testimony from a former USDOC employee to contest USDOC’s calculations of anti-dumping duties. In Japan – Film, the panel used experts in resolving disputes regarding the translation of Japanese terms into English. In US – Exports Restraints, the panel relied on the Group of Experts established under Article 24.3 of the SCM Agreement. In India – Quantitative Restrictions, the panel sought the expert assistance of the IMF and relied heavily on the IMF information and statements in its factual findings. In Brazil – Aircraft, Brazil presented an expert to the panel to testify that the Brazilian programme did not provide a material advantage to the Brazilian aircraft manufacturer. Experts could also be used in trade remedy cases in other ways. A panel reviewing an anti-dumping determination relating to an industry producing highly complex products may need expert assistance in understanding the industry. A panelist may have little ability to determine whether the investigating authorities have properly established the facts or examined facts that were highly relevant and readily available to the investigating authorities. An expert can be crucial to assist the panel in understanding the market and industry at issue, and thus, in determining whether the investigation was unbiased and objective. There would appear to be room


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for experts to assist the panel in those situations – not to act as finders of new fact – but rather to assist the panel in understanding and interpreting the facts before the investigating authorities. Another relatively little-used type of evidence are the statements of factual witnesses appearing directly before panelists. In many cases, government employees from the relevant government agency make statements to panels which have been used as the basis for fact-finding by panels. What is more unusual is to have non-governmental non-expert fact witnesses appear. Evidence provided by witnesses appearing before panels allows for great flexibility in meeting factual burdens. Live witnesses can describe facts, events and effects, and more importantly, they can answer questions and be interactive with the panel. This allows the panel to judge the credibility of their testimony and give it the appropriate weight. Finally, there is increasing use of physical and demonstration evidence, which allows the presentation of complex data by summarizing and illustrating it in charts and graphs. Panels frequently are presented with charts and graphs that show trends of data. Panels have also received physical evidence such as a number of physical samples of alcoholic beverage containers, samples of various types of raw and processed hides, and stamped cigarette packages.

(b) Right of parties under existing rules to object to evidence Members opposing certain evidence can raise procedural objections to the use of certain types of evidence. First, they can assert that the panel working procedures have been violated. Various versions of a WTO panel working procedure require that all factual evidence shall be submitted to the panel no later than the first substantive meeting, except rebuttal evidence, which is permitted upon a showing of good cause, and evidence in response to answers to questions. In reality, as already mentioned above, it can be very difficult to differentiate what is ‘factual evidence’ and what is ‘rebuttal evidence’. On several occasions, panels have rejected factual evidence because it was submitted after the working procedure deadline but before the interim review. However, most panels have properly been very flexible in allowing additional factual evidence to be submitted after the first meeting provided that the other Member gets a chance to react to important new pieces of evidence. Any challenge to a panel’s use of questionable evidence or the improper weighing of evidence would appear to be founded in Article 11 of the

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DSU.24 But for a responding Member to be in a position to assert such a claim, it would appear to be necessary to raise doubts and questions concerning the particular evidence in a timely fashion. Of course, the panel would be well within its rights to pose questions to the Member relying on the out-of-panel statement or affidavit concerning the expertise of the witness, how the document came to be produced, and the factual basis for the conclusions. The panel may also wish to give the objecting Member the right to pose as many written questions as needed to the Member relying on the statement.

5 Meeting the burden of proof when evidence is not produced by an opposing Member: adverse inferences and use of available information Meeting the burden of proof frequently requires the production and use of factual information that is exclusively within the control of the responding Member. The Appellate Body has repeatedly affirmed that all WTO Members are required to cooperate in the production of information requested by the panels, and by the complaining Members during consultations and thereafter. In many cases, Members exchange factual information and documents during consultations. In other cases, Members provide factual information in response to the panel’s or the other Member’s questions. But unfortunately, from time to time, Members do not provide information requested by either panels or complaining Members. There are basically two options a panel has when a Member fails to provide requested information within its exclusive control. First, the panel may draw adverse inferences, i.e., determine that the information, if provided, would have been adverse to the interests of the Member withholding it. Second, another option open to a panel when Members have refused to produce requested information is to make its fact-finding based on available information. This is analogous in the trade remedy context to using the ‘best information available’. While the Appellate Body has clearly ruled that adverse inferences are the ultimate remedy a panel can take against a Member refusing to cooperate, panels properly have been reluctant to draw such inferences explicitly. Instead, they have gone to great lengths to provide the non-cooperating Member with numerous opportunities to produce the evidence. Thus, 24

A detailed discussion of the multitude of Article 11 issues and decisions is beyond the scope of this chapter.


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while panels may not make explicit adverse effects findings, they are not reluctant to use their discretion to make findings of fact against the noncooperating Member based on the evidence in the record. Such de facto adverse effects findings are obviously easier where there is a great deal of other evidence in the record supporting a finding.

6 Conclusions The following conclusions about the administration of evidence in WTO proceedings are noteworthy: r First, despite the absence of any rules limiting the type of evidence intro-

r

r

r

r

r

duced (particularly in non-trade remedy cases), WTO panels appear to have effectively sorted through reliable and unreliable evidence and generally have based their determinations on credible documentary and expert testimony. Second, documentary evidence generated by governments remains a primary basis for a panel’s fact finding. The ‘admissions’ of governments are properly treated as the most reliable and accurate evidence and will continue to be a key source of factual information in the future. But non-governmental evidence, including that of IGOs and business groups, can be highly relevant and credible in particular cases. Third, WTO Members and WTO panels are increasing their reliance on out-of-panel affidavits and statements of witnesses, which can be tailored to fill particular evidentiary gaps in the burden of proof. Fourth, expert testimony and use of experts by WTO panels in nonSPS cases is on the increase in more complex WTO disputes. It could be used more frequently by advocates for Members in future WTO negotiations and litigation and is a highly effective evidentiary tool for assisting panels in sorting through complex facts and information about industrial and service sectors. Fifth, responding WTO Members have generally raised few evidentiaryrelated objections to out-of-panel hearsay witness statements and documents generated by Members for the purposes of the dispute. Sixth, panels have properly been reluctant to make explicit adverse inference findings against Members refusing to produce information, but instead have based findings against such non-cooperating Members on the available record evidence.

17 Confidentiality issues under the DSU: fact-finding process versus confidentiality olivier prost 1 Attorney-at-Law, Gide Loyrette Nouel

The Dispute Settlement Understanding (DSU) is one of the fundamental achievements2 of the Uruguay Round. The new dispute settlement system has been sometimes called the ‘crown jewel’ of the WTO.3 Indeed, the DSU modified the world trading system significantly, by offering a system of binding dispute settlement based on legal rules and procedures. Such a transformation was a welcome change from the diplomatically based dispute system under the GATT 1947,4 which was textually weak and seriously flawed.5 According to Article 3.2 of the DSU the dispute settlement mechanism is the central element in providing security and predictability of the multilateral trading system. So far this efficient, predictable and reliable rules-based dispute system has been widely hailed as an improvement over 1

2

3 4

5

Partner in charge of Gide Loyrette Nouel’s International Trade Practice Group in Brussels. The author would like to thank Sven Ballschmiede, Associate in Gide Loyrette Nouel’s International Trade Practice Group in Brussels, for his helpful assistance and valuable comments with respect to this article. According to Hernandez, the dispute settlement mechanism exists as a permanent interpreter and final word on dispute resolution for complaints and challenges concerning WTO obligations. By resolving disputes, the DSU is vital to the WTO trade law. E. HernandezLopez, ‘Recent Trends and Perspectives for Non-State Actor Participation in World Trade Organisation Disputes’, Journal of World Trade 35 (3), (2001), p. 471. C.-D. Ehlermann, ‘Six Years on the “Bench of the World Trade Court”’, Journal of World Trade 36 (4), (2002), p. 639. According to Ehlermann (see footnote 3) despite some reforms, the dispute settlement under the GATT 1947 remained governed by elements of diplomacy and consensus, which allowed the contracting parties to block the process, thus rendering it occasionally ineffective. B. Mercurio, ‘Improving Dispute Settlement in the World Trade Organization: The Dispute Settlement Understanding Review – Making it Work?’, Journal of World Trade 38 (5), (2004).

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the rules and procedures of the GATT,6 and has earned its appellation as a ‘crown jewel’. Nevertheless, issues arose early on with regard to the need to improve the DSU.7 In this respect a review of the DSU (DSU review) had been provided by WTO Members at an early stage for completion by October 1998, which presented them with an opportunity to amend the rules regulating international trade disputes. However, despite numerous extensions of the deadlines, WTO Members have been unable to complete and conclude these negotiations up to now.8 Among the issues within the DSU review process are, inter alia, the improvement of transparency of the dispute settlement system and the implementation process following WTO rulings.9 But for businesses that have to collaborate with governments in the context of WTO disputes, the possible improvement in the protection of confidential information is of particular interest. However, addressing this legitimate concern is not a simple task within the DSU framework as it may conflict with the fact-finding process of WTO panels.

1 The ‘dilemma’ between fact-finding and confidentiality There is indeed a ‘dilemma’ between the fact-finding process and confidentiality issues that regularly arise during WTO proceedings. This dilemma results from the necessity to satisfy five sometimes contradictory principles. The first principle is that Members have an obligation to supply information allowing the panel to make an objective assessment of facts. Most legal systems give each party the right to fully present its case. This includes presentation of evidence as well as arguments. The task of the adjudicator is then to identify relevant evidence, evaluate it and finally weigh it against conflicting evidence. The WTO has not developed a substantial body of rules dealing with methods of proof, fact-finding, admissibility 6 7

8 9

Mercurio, see footnote 5, p. 795. According to Mercurio (see footnote 4, p. 826) especially regarding the implementation process, some parties to the dispute have, to the consternation of the winning party and the international community, abused the system by delaying implementation of the ruling and recommendations of the DSB. Mercurio, see footnote 5, p. 795. W. Weiss/C. Herrmann, Welthandelsrecht (Verlag C.H. Beck, 2003), §10, p. 154.

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and weight of evidence.10 Despite a lack of specific provisions in this regard, the DSU imposes on WTO adjudicating bodies the obligation to undertake an ‘objective assessment’ of the disputes through the following articles: Article 11 of the DSU provides that: ‘The function of the panels is to assist the DSB in discharging its responsibilities under this Understanding and the covered agreements. Accordingly, a panel should make an objective assessment of the matter before it, including an objective assessment of the facts’.

Moreover, according to Article 13 of the DSU: ‘[E]ach panel shall have the right to seek information and technical advice from any individual or body which it deems appropriate. A Member should respond promptly and fully to any request by a panel for such information as the panel considers necessary and appropriate.’

The Appellate Body clarified in Canada – Aircraft that: ‘[T]he thrust of Articles 12 and 13, taken together, is that the DSU accords to a panel established by the DSB, and engaged in a dispute settlement proceeding, ample and extensive authority to undertake and to control the process by which it informs itself both of the relevant facts of the dispute and of the legal norms and principles applicable to such facts. The authority, and the breadth thereof, is indispensably necessary to enable a panel to discharge its duty imposed by Article 11 of the DSU to “make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements . . . ”.’11

It is obvious that the broad powers to seek information, conferred on panels by these two articles, would be of little use if the Members of the WTO had no legal duty to respond by providing the requested information pursuant to Article 13 of the DSU. Although, one could have argued that the wording of Article 13 (‘should respond promptly and fully’) could lead to the conclusion that there is no obligation for the Members to provide the panel with the requested information, the Appellate Body has, however, clarified that in context 10 11

J. Waincymer, WTO Litigation Procedural Aspects of Formal Dispute Settlement (Cameron May, 2002), p. 530. J. Waincymer see footnote 10, p. 547, citing the report of the Appellate Body, Canada – Aircraft, para. 184.


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and in view of the object and purpose of Article 13 of the DSU, ‘should’ expresses a legal duty, stating that: ‘If Members that were requested by a panel to provide information had no legal duty to ‘respond’ by providing such information, that panel’s undoubted legal right to seek information . . . would be rendered meaningless. A Member party to a dispute could, at will, thwart the panel’s fact-finding powers and take control itself of the information-gathering process that Articles 12 and 13 of the DSU place in the hands of the panel. A Member could, in other words, prevent a panel from carrying out its task of finding the facts constituting the dispute before it and, inevitably, from going forward with the legal characterization of those facts’.12

The Appellate Body further justified this conclusion drawing on Article 3.10 of the DSU, which states, inter alia, that ‘disputes settlement procedures should not be intended or considered as contentious acts and that, if a dispute arises, all Members will engage in this procedures in good faith in an effort to resolve the dispute’. However, as the dispute settlement system evolves towards a ‘quasi-contentious’ mechanism, it appears that ‘good faith’ may not be sufficient to guarantee Members’ full cooperation. This situation may be exacerbated if business confidential information (BCI) is involved in the proceeding and requires specific protection. The second principle involved in the ‘dilemma’ between the fact-finding process and the need for confidentiality is the one as defined by the Appellate Body in Canada –Aircraft 13 ‘a refusal to provide information requested by the Panel may lead to inferences being drawn about the inculpatory character of the information withheld’. Thus, the Appellate Body has pronounced that a panel may consider that when the requested information is not provided by a party, such information should be treated as favourable to the adverse party, and draw conclusions from this refusal. Previously, panels had been hesitant to draw negative inferences in cases of refusal by WTO Members to provide the requested information. The third principle is that Members cannot invoke confidentiality as a justification for their failure to submit the positive evidence requested. It seems that, occasionally, governments have chosen to ignore a panel’s request for documents, arguing that BCI was not appropriately protected 12 13

J. Waincymer see footnote 9, p. 547, citing the report of the Appellate Body, Canada – Aircraft, para. 188. See footnotes 10 and 11; Appellate Body Report on Canada – Aircraft, para. 204.

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by the existing DSU provisions. In Indonesia – Autos,14 the panel warned the parties that even though complainants could not be required to submit BCI to WTO dispute settlement panels, they should not invoke confidentiality as a basis for their failure to submit the positive evidence required. At the same time, parties to a dispute may and can consider that specific confidential information is worthy of such protection and should therefore not be disclosed, despite the consequences. The fourth principle is due process and equal access to information, which requires that the information available and used by one party should be made accessible to the other party, resulting in a level of unavoidable disclosure.15 However, neither the DSU nor any other of the covered agreements seems to give a satisfactory answer to the question of how to protect confidentiality, while at the same time guaranteeing equal access to information and due process. The fifth principle is that Members cannot be required to submit confidential business information to WTO dispute settlement panels without some guarantees.

2 Current DSU provisions on confidentiality Although the DSU contains several provisions dealing with the protection of confidential information supplied by a party to a dispute, whether before a panel or the Appellate Body, such provisions apparently do not seem to provide panels with tools adequate to ‘manage’ the abovementioned dilemma. It should be noted that these provisions were negotiated in 1994 at a time when the only reference for the Contracting Parties were disputes under GATT 1947. Many of these disputes were about relatively simple and clear breaches of international obligations. It is evident that the relevant provisions of the current DSU on confidentiality do not themselves establish procedures to ensure the protection of such information but are just, in many cases, a declaration of principles. First, Article 18.2 of the DSU provides in a general manner that: ‘Written submissions to the panel or the Appellate Body shall be treated as confidential, but shall be made available to the parties to the dispute. Nothing in this Understanding shall preclude a party to a dispute from disclosing statements of its own positions to the public. Members shall treat 14 15

Panel Report on Indonesia – Autos, para. 14.235. C.-D. Ehlermann, see footnote 3, p. 605.


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as confidential information submitted by another Member to a panel or the Appellate Body which that Member has designated as confidential. A party to a dispute shall also, upon request of a Member, provide a non-confidential summary of the information contained in its written submissions that could be disclosed to the public.’

As far as panels are concerned, paragraph 3 of the Working Procedures16 provides that: ‘The deliberations of the panels and the documents submitted to it shall be kept confidential. Nothing in this Understanding shall preclude a party to a dispute from disclosing statements of its own positions to the public. Members shall treat as confidential information submitted by another Member to the panel which that Member has designated as confidential. Where a party to a dispute submits a confidential version of its written submissions to the panel, it shall also, upon request of a Member provide a non-confidential summary of the information contained in its submissions that could be disclosed to the public.’

For appeal proceedings Article 17.10 of the DSU provides that: ‘The proceedings of the Appellate Body shall be confidential.’ Confidentiality obligations are also to be found in the Rules of Conduct for the Understanding on Rules and Procedures Governing the Settlement of Disputes (Rules of Conduct). Article VII:1 of the Rules of Conduct provides that ‘each covered person shall at all times maintain the confidentiality of dispute settlement deliberations and proceedings together with any information identified by a party as confidential’.17 It can be argued that this section in the Rules of Conduct on confidentiality clarifies existing provisions of the DSU by providing that no covered person shall make any statements on WTO proceedings or the issues in dispute in which that person is participating, until the report of the panels or of the standing Appellate Body has been derestricted.18 It seems that, in the end, the ‘dilemma’ between making an objective assessment of the facts of the dispute, which is fundamental for effective due process, and protecting confidential information remains unresolved by the existing provisions of the DSU. 16 17 18

Appendix 3 of the DSU. A covered person includes: (a) Appellate Body Members and staff; (b) panel members, experts and arbitrators; and (c) WTO staff assisting on panels. G. Marceau, ‘Rules on Ethics for the New World Trade Organisation Dispute Settlement Mechanism’, Journal of World Trade 32 (3) (1998), p. 84.

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3 Panels’ use of additional procedures to supplement DSU provisions on confidentiality Conscious of this problem, some panels, like the Appellate Body, have allowed parties to a dispute to request that additional procedures be adopted to safeguard the integrity of BCI and have granted such requests. Indeed, Article 12:1 of the DSU gives the panels the power to adopt additional working procedures. This is a power which may be exercised according to an assessment of the circumstances of the case, considering but not limited to, the highly sensitive nature of the information concerned. It also requires a consultation with the parties to the dispute. Consultations or procedures between the parties and the panel is routine, and a demand for additional procedures on confidentiality normally comes from one of the parties. The adoption of such procedures therefore results from ‘discussions’ between the parties to the dispute and the panel. A smooth conclusion to such discussions can overcome obstacles arising from both parties trying to promote their respective interests regarding the level of protection and the design of the additional procedures while the panel tries to preserve the effectiveness of any additional procedures. Several examples will illustrate how previous panels have dealt with requests for additional procedures on confidentiality. Parties may propose additional procedures, but panels are in no way bound by those proposals. In the Canada – Wheat Exports and Grain Imports 19 case, for example, the panel rejected additional procedures on confidentiality proposed by Canada because they were too burdensome. At the same time, the panel did adopt some additional procedures for the protection of BCI, acknowledging the need for such protection in order that third parties would agree to provide BCI. The same has occurred in WTO arbitration proceedings. In the EC – Bananas III20 arbitration at the retaliation stage, the United States asked the arbitrators to adopt BCI procedures similar to those that had been adopted by several previous panels. The United States’ proposal provided for two levels of BCI (including a ‘Super BCI’ with highly restricted access) and many, very restrictive provisions. The arbitrators adopted, in principle, the United States’ proposal but rejected others such as the ‘Super BCI’ level and other provisions considered too restrictive (such as

19 20

Panel Report on Canada – Wheat Exports and Grain Imports, para. 11. Decision by the Arbitrators, EC – Bananas III (US) (Article 22.6 – EC), para. 2.1 and following paragraphs.


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specific sanctions, limitation on the identity of persons having access to the information). In Canada – Dairy,21 the panel clarified the role of the parties during the ‘discussion’ on parties’ proposals to adopt additional procedures on confidentiality. Following the United States’ position, the panel agreed that the party asking for additional protection for BCI had to provide sufficient indications of the nature of the information for which it requested further protection, as well as an explanation of the reasons why existing procedures were insufficient. It can be concluded from these examples that the requesting parties carry the burden of proving to panels the need for additional procedures for BCI protection; but once again, this is without prejudice to the panels being able to choose whether to adopt or not the proposed procedures, or other procedures. As the previous examples also illustrate, the parties sometimes try to obtain from panels a very high level of protection and to pressure a panel in this regard even beyond the stage of proposals and consultations. In Canada – Aircraft,22 the panel had adopted BCI protection procedures pursuant to Canada’s proposal and after consultations with the parties. However, Canada subsequently declared that the procedures adopted were not protective enough, and that they would therefore not be in a position to submit all the BCI needed by the panel.

4 Concerns about how the DSU has evolved on issues of confidentiality In the light of these examples and of practitioners’ experience, the process of a case-by-case adoption of BCI procedures by panels gives rise to certain concerns. The whole process of adopting additional procedures on confidentiality is neither as transparent nor predictable as it should be and is often not satisfactory for the parties, which rarely have the same position on the matter. Furthermore, some Members may use this process in order to delay the proceedings. It appears from experience to date under the DSU that both the existing confidentiality rules of the DSU and the ad hoc procedures on confidentiality adopted by panels provide an unsatisfactory framework which could threaten the credibility of the WTO dispute settlement system. 21 22

Panel Report on Canada – Dairy, para. 2.19. Panel Report on Canada – Aircraft, para. 9.62.

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Recently in its report US – Gambling, the panel emphasized that the disregard for the confidentiality requirement contained in the DSU affected the credibility and the integrity of the WTO dispute settlement process, of the WTO and of WTO Members and was, therefore, unacceptable.23 In short, the current situation under the DSU regarding issues of confidentiality give rise to a number of specific concerns for each group involved, directly or not, in a WTO dispute as discussed further below:

(a) Parties As mentioned before, parties to a dispute are under a duty and an obligation to ‘respond promptly and fully’ to requests made by panels for information under Article 13.1 of the DSU. If a party to a dispute refuses to provide the information requested – possibly for confidentiality reasons – the panel has the authority to draw adverse inferences from that refusal.

(b) Companies A Member may, when it believes it necessary to support its case, need to disclose evidence to the panel or Appellate Body which contains BCI obtained from private companies. This situation arose for the first time in a dispute regarding the Agreement on Subsidies and Countervailing Measures (SCM Agreement).24 The United States indicated that it had information to support its allegations that American car manufacturers had suffered ‘serious damage’ as a result of the subsidies granted by Indonesia to its domestic automobile industry. This evidence was in the form of a plan of action drawn up by the American automobile industry. However, the US delegation was hesitant in disclosing this information because of its sensitivity. It is true that the cases likely to be examined under the SCM Agreement almost always involve information from private parties, which explains why the problem of confidential business information has arisen in similar disputes. Indeed, in recent years the number of subsidy disputes is still increasing, and the related confidentiality issues will also increase and both panels and the Members of the WTO will have to continue to deal with this problem. Moreover, it is not unlikely that this situation may repeat itself in other types of disputes involving the WTO agreements. 23 24

Panel Report on US – Gambling, para. 5.5. Panel Report on Indonesia – Autos, para. 14.5.


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Although the civil servants of WTO Members involved in a dispute are the only individuals supposed to receive full copies of the written submissions of the parties (with BCI), this may not afford private interests sufficient protection of their BCI even though such civil servants are under a duty of confidentiality. A party to a dispute generally involves three groups of individuals: the first group comprises the party’s civil servants; the second group comprises the relevant party’s ‘representatives’ (e.g. lawyers, auditors, experts, etc.); and the third and final group comprises private companies who may be in direct competition with those companies providing the information. Such companies are called upon increasingly in WTO cases to work together with their country’s civil servants. Although the duty of confidentiality applicable to individuals in the first group is clearly defined and enforceable as regards the Member to which a company has provided its confidential information, the situation becomes more difficult when a private company that has provided BCI in WTO proceedings, wishes to obtain relief for damage suffered as a result of the disclosure of this information to competing companies by a third party state. Legal action against the authorities of the guilty third party Member would appear difficult, even impossible. The same problem arises when it is the ‘representatives’, instead of the authorities of the third party Members, who are responsible for the ‘leak’ of BCI, since their legal relationship with the authorities of the relevant WTO Member, as regards protection of BCI, may well not be clearly defined. Members must be able to disclose and receive the evidence necessary to defend or challenge the measure at dispute. Such evidence may include proprietary or commercially sensitive information of private parties. The latter will not consent to their BCI being disclosed by Members unless they have sufficient assurance that the confidentiality of the information will be maintained.25

(c) Lawyers The duty of confidentiality extends to all governments that are parties to a dispute and to all their advisers, regardless of whether they are designated as members of delegations and whether they appear at a panel meeting.26 25 26

See the communication from Canada, Contribution of Canada to the improvement of the WTO Dispute Settlement Understanding, TN/DS/W/41. Panel Report on Korea – Alcoholic Beverages, para. 10.31.

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In this respect, the Appellate Body repeated in its report on Canada – Aircraft a declaration of the panel on Indonesia – Autos that read: ‘We would like to emphasise that all members of parties’ delegations – whether or not they are government employees – are present as representatives of their governments, and as such are subject to the provisions of the DSU and the standard working procedures, including Article 18.1 and 18.2 of the DSU paragraphs 2 and 3 of those procedures. In particular, parties are required to treat as confidential all submissions to the Panel and all information so designated by other Members [. . . ]. Accordingly, we expect that all delegations will fully respect those obligations and will treat these proceedings with the utmost circumspection and discretion.’27

5 Further considerations, including the Canadian proposal on BCI As mentioned before, the general provisions of the DSU governing confidentiality issues are not satisfactory. Moreover the ad hoc procedures adopted by panels, in the absence of specific procedures to protect BCI, have occasionally failed to satisfy the specific concerns of disputing parties and other participants. In some cases disputing parties have refused panel requests for BCI where they have considered the procedures adopted by the panel inadequate to ensure appropriate protection of the BCI. On the other hand, it is also worth noting the case of Canada – Aircraft, where the Appellate Body refused a joint request from the disputing parties to adopt additional procedures to protect BCI in the appellate proceedings. The Appellate Body considering the protection of confidential information as a ‘serious systemic issue’, has called for the adoption of standard rules of procedures for panels to structure and regulate the panel process with more precision and greater detail. Such rules should also better organize the fact-finding process, guaranteeing the full respect of the principle of due process. The fact that the Appellate Body has repeatedly called for the adoption of standard rules of procedure is a clear indication that the current provisions under the DSU need to be reviewed in order to address the growing complexity of WTO disputes, particularly within cases under the SCM Agreement and the Anti-Dumping Agreement. Canada, which has often expressed concerns with regard to the protection of BCI in dispute settlement proceedings, submitted in 2003 a 27

See footnote 13.


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contribution on BCI to the DSU review discussions.28 It is the only major proposal in the DSU review as far as confidentiality is concerned. The Canadian proposal includes a proposed appendix on BCI to be incorporated in the DSU. Canada’s submission summarizes the case law regarding the confidentiality issues and provides a coherent set of rules applicable to the various situations which can occur during a dispute. The Canadian proposal is based on the designation by the parties of information they consider as business confidential. It provides that if another party considers such BCI designation as inappropriate, the panel may request justification for the BCI designation from the requesting party. If the panel finds that the information does not meet the criteria for qualifying as BCI, it may decide not to take the information into account. The suggested criteria for qualifying information as business confidential is ‘information that is proprietary or commercially sensitive and not in the public domain’. If the information is designated as ‘business confidential’, several provisions are proposed for its protection. Notably, Canada has proposed the following: r Access to BCI should be limited to persons satisfying two cumulative

conditions: (i) persons having signed a declaration of non-disclosure; and (ii) persons that are members of the panel, or experts appointed by the panel, or members of the Secretariat staff, or representatives of the disputing parties (whether government employees or not); except that representatives who could reasonably be expected to benefit commercially from the receipt of the BCI. are excluded from the access to such information; and that the party submitting BCI may object to the designation of an approved person, in which case, the panel would have the authority to decide on the matter. r BCI would be securely stored and the WTO Secretariat or the parties will have to destroy or return them within a fixed period after the end of all the proceedings on the dispute. r In order to avoid having BCI matters disrupt the normal course of the proceedings, parties must identify all documents referring to BCI and within these documents which information is business confidential. Moreover, the party submitting BCI will have to provide a nonconfidential version of documents containing BCI. 28

See footnote 25.

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r A panel should be permitted to draw conclusions from submitted BCI,

even though BCI is not to be disclosed in panel reports.

r Finally, a panel should have the power to adopt ad hoc procedures for

even further protection of BCI, or to modify or waive these procedures if parties so request or agree, in order to efficiently and appropriately handle specific disputes. Members have been reviewing the DSU since 1998. So far they have been unable to complete this task.29 After having twice missed established deadlines for the completion of the review (in 2003 and 2004), the deadline has again been extended by Members and the negotiations are currently active.30 However, no new deadline has been set and it is difficult to make a prediction as to when Members will complete the DSU review.31 Despite this uncertainty, it is important that private stakeholders, such as companies, get more involved in the debate over the treatment of BCI in WTO dispute settlement proceedings. Indeed, companies are the ‘real players’ in WTO disputes since they directly suffer or benefit from the DSB decisions and their consequences. Companies are also increasingly active actors behind the parties to the proceedings. Frequently, the decision by a WTO Member to lodge a complaint in the WTO originates from requests and lobbying by companies. Cases increasingly involve information obtained from companies, which is usually essential to the resolution of the disputes,32 and which therefore has two consequences: first, it adds an element to companies’ participation in disputes; and second, it involves numerous BCI protection issues.

6 Conclusion In conclusion, companies should actively engage their governments on the ongoing discussions on BCI in the current negotiations on the DSU review. If BCI is protected in a satisfactory manner for companies, they will be better able to provide information in future WTO dispute proceedings. 29

30 31 32

The mandate for these negotiations was established within the Doha mandate, but is not part of the single undertaking and therefore its achievement is independent from the other negotiations. Bridges Weekly, Vol. 9 No. 7, 2 March 2005; and Vol. 8 No. 19 of June 2004. For a comprehensive analysis of the ongoing DSU review, see Mercurio’s paper (footnote 5). Cases are increasingly more complex, and as subsidies or anti-dumping disputes become a major part of the disputes, information detained by private or public companies becomes essential to the resolution of the dispute. See the recent Panel Report on Korea – Commercial Vessels.


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If panels (and to some extent the adverse parties) have access to all requested information in a particular dispute, their assessment of the facts and therefore their decisions will be of greater quality and predictability. This may well benefit in return the companies themselves. Even though companies or other private or independent public bodies cannot directly participate in the DSU review debates, they can still submit briefs and proposals to their governments and carry on lobbying actions so that their interests and needs are taken into account.

18 Panels’ consultations with scientific experts: the right to seek information under Article 13 of the DSU mireille cossy 1 Counsellor, Trade in Services Division, WTO Secretariat

1 Introduction Commercial disputes brought under the auspices of the WTO are becoming more and more complex. As a consequence of the increasingly judicial nature of the WTO dispute settlement system, parties submit increasingly sophisticated legal, but also – and this is a relatively new trend – factual arguments. By their very nature, instruments such as the Agreement on Sanitary and Phytosanitary Measures (SPS Agreement) or the Agreement on Technical Barriers to Trade (TBT Agreement) mean that WTO panels have to adjudicate disputes entailing scientific issues. But disputes brought under the GATT 1994 have also raised contested scientific issues relating to human health and to the conservation of natural resources. Moreover, in the new ‘legalized’ WTO dispute settlement system, as opposed to the more ‘diplomatic’ procedures used under the GATT 1947, parties tend to increasingly dispute factual evidence. Pursuant to Article 11of the Dispute Settlement Understanding (DSU), panels are called upon to ‘make an objective assessment of the matter before it, including an objective assessment of the facts of the case’. As we shall see, WTO panels enjoy a broad margin of discretion in the collection and appreciation of the evidence. This entails a corresponding responsibility to analyse this evidence in a critical and credible manner. Moreover, the Appellate Body does not review the facts of the case since appeals are limited to issues of law. In disputes involving technical and scientific issues, the factual record is often voluminous. Both the complaining and the responding parties 1


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present detailed technical and scientific arguments, supported by dozens of annexes containing specialized publications. It may also happen that parties produce the same publications to support contradictory arguments. At panel meetings, parties also bring their own experts as part of their delegations. WTO panels, which are mostly composed of economists and lawyers, may feel uncomfortable when confronted with an avalanche of controversial scientific arguments. In this context, consulting an ‘external’ source, such as scientific experts, helps the panel to understand and to assess the evidence submitted by the parties. Panels may also feel that ‘external’ individuals they have appointed and who are not linked to the parties to the dispute represent a more reliable source of information. Involving external experts can also contribute to enhancing the credibility of the panel’s final decision and aid public confidence in the outcome of the dispute. Another incentive may be to disarm NGOs’ criticism that panels do not have the necessary expertise to reach a decision on matters related to public health or the protection of the environment. Article 13 of the DSU gives panels a broad right to ‘seek information’. Panels have invoked this provision in several disputes to seek advice from individual scientific experts.2 (In disputes involving food safety issues, it was invoked jointly with Article 11 of the SPS Agreement.) Article 13 was also used to consult with other international organizations, such as the International Monetary Fund and the World Intellectual Property Organization. In one case, the panel resorted to Article 13 to appoint translation experts. Panels can also use this provision to consider amicus curiae briefs, whether solicited or not.3 This chapter concentrates on cases where panels have appointed scientific experts to seek technical and other scientific advice pursuant to Article 13 of the DSU. In these cases, the process is more complex and panels have had to develop their own procedures where the DSU was silent. A rather consistent practice has emerged. 2

3

See panel reports on EC – Hormones, complaints by Canada and by the United States; US – Shrimp, complaint by India, Malaysia, Pakistan and Thailand; Australia – Salmon, complaint by Canada and Recourse to Article 21.5 by Canada; Japan – Agricultural Products II, complaint by the United States; EC – Asbestos, complaint by Canada; and Japan – Apples, complaint by the United States and Recourse to Article 21.5 by the United States. Moreover, the Panel in EC – Approval and Marketing of Biotech Products has announced that it has decided to seek scientific and technical expert advice (see Communication from the Chairman of the Panel, WT/DS291/26, 20 August 2004). Appellate Body Report on US – Shrimp.

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2 The right to seek information – Article 13 of the DSU and other relevant provisions Article 13 of the DSU, entitled ‘right to seek information’, establishes the right for panels to seek any technical or scientific information relevant for the resolution of the dispute. This provision reads: ‘1. Each panel shall have the right to seek information and technical advice from any individual or body which it deems appropriate. However, before a panel seeks such information or advice from any individual or body within the jurisdiction of a Member, it shall inform the authorities of that Member. A Member should respond promptly and fully to any request by a panel for such information as the panel considers necessary and appropriate. Confidential information which is provided shall not be revealed without formal authorization from the individual body, or authorities of the Member providing the information. 2. Panels may seek information from any relevant source and may consult experts to obtain their opinion on certain aspects of the matter. With respect to a factual issue concerning a scientific or other technical matter raised by a party to a dispute, a panel may request an advisory report in writing from an expert review group. Rules for the establishment of such a group and its procedures are set forth in Appendix 4.’

The procedures contained in Appendix 4 of the DSU concern exclusively expert review groups. They stipulate that such groups are under the authority of the panel, which establishes their terms of reference and working procedures, in consultation with the parties to the dispute. The procedures in Appendix 4 also set up various requirements concerning the qualification of the experts and their independence. Expert review groups can themselves seek information and technical advice ‘from any source they deem appropriate’. The procedures further guarantee that the parties to the dispute have access to all information provided to an expert review group. Finally, the expert review group shall submit a draft report to the parties, which will be allowed to comment on it. The final expert report is submitted to the panel and to the parties at the same time; it is of an advisory nature only. Other relevant rules concerning the possible use of scientific experts are contained in the SPS Agreement (Article 11.2 stipulates that: ‘In a dispute under this Agreement involving scientific or technical issues, a panel should seek advice from experts chosen by the panel in consultation with the parties to the dispute. To this end, the panel may, when it deems appropriate, establish an advisory technical expert group, or consult the


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relevant international organizations, at the request of either party to the dispute or on its own initiative.’) and in the TBT Agreement (Article 14.2 reads: ‘At the request of a party to a dispute, or at its own initiative, a panel may establish a technical expert group to assist in questions of a technical nature, requiring detailed consideration by experts’). The procedures governing technical expert groups contained in Annex 2 of the TBT Agreement are largely similar to those established for expert review groups in Appendix 4 of the DSU. The possibility for panels to seek outside expertise is not entirely new. Under the GATT 1947, dispute settlement procedures adopted at the end of the Tokyo Round contained a reference to the need for panels to seek information and technical opinion. The Agreed Description of the Customary Practice of the GATT in the Field of Dispute Settlement (Article XXIII:2) contained in the 1979 Understanding Regarding Notification, Consultation, Dispute Settlement and Surveillance indicated, as a ‘customary element of the procedures regarding working parties and panels’ that ‘Panels often consult with and seek information from any relevant source they deem appropriate and they sometimes consult experts to obtain their technical opinion on certain aspects of the matter.’ Moreover, the Tokyo Round TBT Agreement already contained the possibility for panels to establish ‘technical expert groups’; the procedures governing such groups, in Annex 2 of the Agreement, already contained the main elements which are in the current TBT Agreement and in Appendix 4 of the DSU. Before the entry into force of the WTO in 1995, little use was made of external expertise in dispute settlement. Only one GATT panel sought scientific opinion. In the Thailand – Cigarettes case, the panel consulted the World Health Organization at the request of Thailand (whose request was not objected to by the United States) on ‘technical aspects of the case, such as the health effects of cigarettes use and consumption, and on related issues for which the WHO was competent’. The panel took note of the submission presented by the WHO, but considered that nothing in this submission nor in relevant WHO instruments concerning tobacco justified the use of measures discriminating against foreign cigarettes.

3 Consulting with scientific experts – how it has worked in practice (a) Who decides whether experts should be consulted? The DSU does not indicate when panels should seek expert advice. The SPS Agreement is slightly more specific; its Article 11.2 states that:

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mireille cossy ‘[I]n a dispute under this Agreement involving scientific or technical issues, a panel should seek advice from experts chosen by the panel in consultation with the parties to the dispute. To this end, the panel may, when it deems appropriate, establish an advisory technical expert group, or consult the relevant international organizations, at the request of either party to the dispute or on its own initiative’ (emphasis added).

Panels thus have a large margin of discretion in deciding whether to seek scientific advice during a dispute, but also what type of advice. Panels are free to decide whether or not they want to seek expert advice at all. They can decide to seek scientific advice on issues under dispute even if no party requests so, as has been the case in the disputes on Australia – Salmon and US – Shrimp, for instance. Conversely, a panel also enjoys discretion not to seek information from external sources. For instance, in EC – Sardines, the European Communities appealed the decision of the panel not to seek information from the Codex Commission. The Appellate Body, recalling previous jurisprudence, found that, under Article 13.2 of the DSU: ‘[P]anels enjoy discretion as to whether or not to seek information from external sources. [footnote omitted] [. . .] A contravention of the duty under Article 11 of the DSU to make an objective assessment of the facts of the case cannot result from the due exercise of the discretion permitted by another provision of the DSU, in this instance Article 13.2 of the DSU.’4

The experts are placed under the authority of the panel, which also determines the procedure it intends to follow to consult them.5 In practice, however, parties have been consulted throughout the procedure and have been offered opportunities to express their views at the various stages of the proceedings. Stressing the ‘comprehensive nature’ of a panel’s authority to seek information during a dispute, the Appellate Body explained that: ‘The thrust of Articles 12 and 13, taken together, is that the DSU accords to a panel [. . .] ample and extensive authority to undertake and to control the process by which it informs itself both of the relevant facts of the dispute and of the legal norms and principles applicable to such facts. The authority, 4 5

Appellate Body Report on EC – Sardines, para. 302. Paragraph 1 of Appendix 4 applies mutatis mutandis to the consultation of individual experts: ‘Expert review groups are under the panel’s authority. Their terms of reference and detailed working procedures shall be decided by the panel, and they shall report to the panel.’


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and the breadth thereof, is indispensably necessary to enable a panel to discharge its duty imposed by Article 11 of the DSU to ‘make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements [. . .].’6 (emphasis original)

In practice, a panel will inform the parties of its intention to seek expert advice, normally at the first substantive meeting at the latest. In some cases, panels have notified their intention at the organizational meeting, i.e. before even seeing the evidence submitted by the parties. Panels do not justify at great length their decision to seek scientific expertise; most of the time, they are content with noting that ‘the dispute raises scientific and technical issues’. In the US – Shrimp case, the panel explained it wanted to consult experts because the parties ‘often quoted the same scientific documents to support opposite views’.7 When informing the parties that it intends to seek scientific advice, the panel normally also indicates the main scientific and/or technical areas on which it wants to consult experts. Parties are then invited to make comment on these issues and, more generally, on the procedure that the panel should follow. For instance, as in the EC – Asbestos case, the panel invited the parties to express their views on the ‘areas on which the experts were to be consulted, the possible approaches to such a procedure and the international or other bodies that could usefully be consulted in order to identify suitable experts’.8 So far, parties have never opposed the decision of a panel to resort to outside expertise, including in cases where the panel was acting on its own initiative. Controversies concerned rather the fact that panels preferred resorting to individual experts while some parties wanted the panel to establish an expert review group (see following section).

(b) Individual experts or expert review groups? So far, panels have preferred consulting experts on an individual basis and have never established an expert review group. Panels have based their choice on paragraphs 1 and 2, first sentence, of Article 13 of the DSU, considering that these provisions allowed the appointment of individual experts. This choice has been criticized, however. In the EC – Hormones dispute, the European Communities appealed the decision by the panel to 6 7

Appellate Body Report on US – Shrimp, paras. 104 and 106. 8 Panel Report on US – Shrimp, para. 5.1. Panel Report on EC – Asbestos, para. 5.1.

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consult individual experts rather than establishing an expert review group. The Appellate Body confirmed, however, that panels can choose between consulting experts on an individual basis or establishing an expert review group: ‘Both Article 11.2 of the SPS Agreement and Article 13 of the DSU enable panels to seek information and advice as they deem appropriate in a particular case. [. . .] We find that in disputes involving scientific or technical issues, neither Article 11.2 of the SPS Agreement, nor Article 13 of the DSU prevents panels from consulting with individual experts. Rather, both the SPS Agreement and the DSU leave to the sound discretion of a panel the determination of whether the establishment of an expert review group is necessary or appropriate. [. . .] once the panel has decided to request the opinion of individual scientific experts, there is no legal obstacle to the panel drawing up, in consultation with the parties to the dispute, ad hoc rules for those particular proceedings.’9

In the subsequent EC – Asbestos dispute, the European Communities had another try. After the panel announced its intention to consult experts on an individual basis, the European Communities objected on the ground that the establishment of an expert review group was ‘the only option’ provided for under Article 13:2 of the DSU for panels wishing to obtain information on scientific matters (as opposed to other factual or technical information). Nevertheless, the panel confirmed its intention to consult experts on an individual basis. Referring in particular to the Appellate Body’s jurisprudence, the panel was of the view that the text of Article 13, paragraphs 1 and 2, first sentence, ‘allow[ed] for the establishment of such an expert group, while not ruling out consultation of experts on an individual basis, both with regard to a scientific matter “or other technical matter”’.10 Panels have never spelt out clearly their preference for consulting individual experts rather than establishing expert groups (beyond saying they found this ‘appropriate’ for the case at hand). The main reason, however, may relate to time pressure. Panels work under very tight deadlines (normally, no more than six to nine months from the date that the composition and terms of reference of the panel are agreed until the issuance of the final report). A consultation with individual scientific experts already adds several months to the process. In the EC – Asbestos case, for instance, it took six months between the first substantive meeting – at which the panel informed the parties that it intended to seek expert opinion – and 9 10

Appellate Body Report on EC – Hormones, paras. 147–148. Panel Report on EC – Asbestos, paras. 5.3 and 5.17.


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the meeting with the experts and the parties, which normally concludes the consultation. Appointing an expert review group may take even longer since these groups have the right to ‘consult and seek information and technical advice from any source they deem appropriate’ and have to produce first a draft report on which parties will comment, and then a final report (Appendix 4 of the DSU, paragraphs 4 and 6). An expert review group would be somehow like a panel within the panel.11 In addition to time considerations, panels may feel that the consultation of individual experts gives them more flexibility, especially when it comes to assessing the end result. Panelists may feel that a common report, especially if it expresses a consensus position, will tie their hands in terms of the final findings. Conversely, individual reports submitted by various experts may leave the panel more flexibility to ‘examine and weigh’ all the evidence submitted to it. In fact, this is how panels see their role. For instance, in Japan – Agricultural Products II, the panel stated: ‘In deciding whether a fact or claim can thus be accepted, we consider that we are called upon to examine and weigh all the evidence validly submitted to us, including the opinions we received from the experts advising the Panel in accordance with Article 13 of the DSU’.12

The fact that panels may prefer consulting individual experts in order to be able to ‘weigh’ the scientific evidence submitted to them is precisely what may have motivated parties – often the respondent – to request the establishment of an expert review group. In EC – Hormones, the European Communities was of the view that the panel had committed a ‘legal procedural error’ when consulting individual experts and that: ‘[T]he Panel’s decision to receive a range of opinions from individual experts [footnote omitted] deprived the European Communities of the procedural guarantees provided for experts review groups in the DSU. By following this procedure, the Panel put itself in a position to choose freely between different scientific opinions.’13 (emphasis added)

The idea that panels may ‘consider themselves capable of verifying the basis of the scientific views and taking a position on the substance of 11 12

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See, in the same sense, J. Pauwelyn, ‘The Use of Experts in WTO Dispute Settlement’, International & Comparative Law Quarterly, Vol. 51 (2002), pp. 325–364. Panel Report on Japan – Agricultural Products II, para. 7.10. On appeal, this finding was upheld by the Appellate Body. See Appellate Body Report on Japan – Agricultural Products II, para. 127. Appellate Body Report on EC – Hormones, para. 37.

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the evidence presented’ is questionable to some.14 There is admittedly some sort of paradox in the fact that, on the one hand, a panel decides to consult scientific experts because it may feel uncomfortable choosing between contradictory evidence put forward by the parties, and, on the other hand, the fact the same panel is of the view that it can ‘weigh’ different and possibly conflicting views expressed by ‘its’ experts. Those favouring expert review groups are of the view that this would be a way to reduce the panel’s discretion in the evaluation of scientific evidence: although the DSU does not require that an expert review group come up with a consensus report, the collective decision-making process inherent in such a group may make it more likely that the report will ‘converge on a substantial number of questions, and the role of the panel in addressing and deciding on scientific questions is likely to be reduced accordingly’.15 While one may agree that a consensus report by an expert review group may carry substantial weight in the final assessment of the evidence, the assumption that experts participating in such groups can easily and systematically come out with a consensus report, or even will water down their possible divergences, seems to be wishful thinking. In the field of science, it is doubtful that the form of the consultation will remedy a lack of agreement on the substantial issues at stake. There is nothing that guarantees that the report of an expert review group will not contain diverging views. On the other hand, individual reports may have a strong impact on the panel when they express converging views. In the EC – Asbestos case, for instance, the views of the four individual experts converged substantially, and the panel relied heavily on them.

(c) How are experts selected? The DSU does not contain specific rules on how individual experts should be appointed. Appendix 4 of the DSU applies only to expert review groups, but panels have used whenever possible the relevant elements of these procedures in their selection of individual experts. As for the SPS Agreement, it only indicates that the experts should be ‘chosen by the panel in consultation with the parties to the dispute’. In practice, parties have always 14

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See, for instance, Th. Christoforou, ‘Settlement of Science-Based Trade Disputes in the WTO: A Critical Review of the Developing Case Law in the Face of Scientific Uncertainty’, New York University Environmental Law Journal, Vol. 8, 2000, pp. 622–648, at p. 643. Th. Christoforou, ‘Settlement of Science-Based Trade Disputes in the WTO: A Critical Review of the Developing Case Law in the Face of Scientific Uncertainty’, New York University Environmental Law Journal, Vol. 8, 2000, pp. 622–648, at p. 639.


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been closely associated with the selection process, even though the last word belongs to the panel. For the identification of possible expert names, panels have often requested the help of relevant international organizations or other bodies. For instance, in the EC – Asbestos dispute, the panel, after consulting with the parties regarding the bodies that could usefully be consulted in order to identify suitable individuals, requested names from the World Health Organization (WHO), the International Labour Organization (ILO), the International Programme on Chemical Safety (IPCS), the International Agency for Research on Cancer (IARC) and the International Organization for Standardization (ISO). In addition, the parties may also be invited to submit names. In the US – Shrimp dispute, the panel got names only from the parties because it was unable to identify relevant international institutions. Once the panel has established a list of names, the WTO Secretariat (in general the panel secretary) will contact the proposed experts and invite those who are ready to assist to submit a curriculum vitae (CV). All the CVs are transmitted to the parties which are given an opportunity to comment on them and state any major objection they might have to any expert under consideration. The need to ensure that experts are neutral is a key consideration in order to ensure the credibility of the process. Following paragraph 3 of Appendix 4, panels normally try to avoid selecting nationals of the parties to the dispute, unless the parties jointly agree or if the need for specialized expertise cannot be fulfilled otherwise. In the EC – Hormones and US – Shrimp disputes, however, the panel appointed nationals of both parties to the dispute (which was another way of respecting neutrality). In the appeal procedure of the EC – Hormones dispute, the European Communities objected to the selection of two experts, in particular on the ground that one of them was a national of a party. The Appellate Body rejected the European Communities’ arguments, because the experts had been selected ‘in accordance with procedures on which all the participants have previously agreed’, and not on the basis of Appendix 4 of the DSU: ‘[O]nce the panel has decided to request the opinion of individual scientific experts, there is no legal obstacle to the panel drawing up, in consultation with the parties to the dispute, ad hoc rules for those particular proceedings.’16 16

Appellate Body Report on EC – Hormones, para. 148. This reasoning of the Appellate Body is odd since even Appendix 4 of the DSU does not contain an outright prohibition to appoint nationals of the parties.

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Concerning the profile of the potential experts, paragraph 3 of Appendix 4 further stipulates that ‘[g]overnment officials of parties to the dispute shall not serve on an expert review group’. The same prohibition should arguably apply to individual experts (in fact, panels have never appointed such individuals). Experts are consulted on a personal basis and not as representatives of a government or organization; here again, panel practice echoes the rules contained in Appendix 4 which stipulate (paragraph 3) that ‘Members of expert review groups shall serve in their individual capacities and not as government representative, nor as representatives of any organization. Governments or organizations shall therefore not give them instructions with regard to matters before an expert review group.’ Moreover, the parties to the dispute are often explicitly requested not to contact the proposed experts. The qualifications of potential experts is an important criteria to ensure the credibility of the process. The need to ensure that experts be ‘persons of professional standing and experience in the field in question’ (paragraph 2 of Appendix 4) is stressed by panels and parties. Detailed CVs and recommendations by international institutions help to identify the most suitable persons. Experts are always appointed by the panel (except in the EC – Hormones case, where the panel allowed the parties to appoint one expert each). The number of experts to be chosen depends normally on the number and type of issues on which advice is sought by the panel. In practice, panels have consulted between three to six experts. Like panel members, selected experts must read and sign the Rules of Conduct for the Understanding on Rules and Procedures Governing the Settlement of Disputes,17 confirming that they do not have any potential conflict of interest. The fact that an expert discloses a potential source of a conflict of interest does not necessarily lead to his/her eviction. The disclosed information will be transmitted to the parties for their information and comment. Taking into account the nature of the disclosed information, but also the comments of the parties, the panel may nevertheless decide to confirm the persons concerned. In the US – Shrimp case, for instance, three of the proposed experts disclosed ‘what might be a potential conflict of interest’. The panel decided, however, to confirm their appointments ‘being of the view that the disclosed information was not of such a nature as to prevent the individuals concerned from being impartial in providing the scientific information expected of them’. The 17

WT/DSB/RC/1, 11 December 1996.


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panel also indicated that it had ‘taken into account the disclosed information when evaluating the answers provided’.18 The costs incurred by the participation of scientific or other experts in the panel process are borne by the WTO budget. Experts get a fee for each day worked on the preparation of their report and for their participation in any meeting in Geneva. The WTO also covers their travel and accommodation costs.

(d) What are scientific experts consulted on? At this stage of the proceedings, parties are again closely associated to the process. The description that follows is based on the EC – Asbestos case, but mirrors the process in other disputes where scientific experts were consulted. The selected experts receive all relevant communications contained in the panel file (written and oral submissions by the parties and third parties, all annexes, etc.) on a confidential basis. The panel, with the help of the Secretariat, prepares draft questions for the experts. Scientific experts are consulted on factual issues arising from the evidence submitted to the parties and the panel will obviously focus its questions on areas where the parties disagree or present contradictory evidence. Experts cannot be consulted on issues relating to the legal interpretation of WTO agreements. Parties have an opportunity to comment on these draft questions or to suggest additional questions before they are sent to the experts. After receiving the comments from the parties, the panel draws up a definitive list of questions which is sent simultaneously to the experts and to the parties. These detailed questions may cover substantial ground, as in the EC – Asbestos dispute, where the panel submitted to the experts some 26 questions, structured around six main themes. Each expert receives all the questions but is requested to reply only to those questions falling within his/her sphere of competence. Parties receive copies of the written replies as soon as they are submitted to the panel and are given the possibility to submit written comments. Each expert receives the report submitted by the other experts, as well as the parties’ written comments. Last but not least, comes the meeting with the panel, the parties and the experts. In all disputes where the panel has sought scientific advice, the experts were invited to Geneva to meet with the panel and the parties. 18

Panel Report on US – Shrimp, para. 5.7.

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The holding of these meetings is an ‘invention’ by panels since even Appendix 4 of the DSU is silent on this point; they are now a wellestablished practice. In general, this meeting is held just before the second substantive meeting with the parties. Its stated objective is to allow the experts to expand on their written answers so that the panel can be as fully informed as possible about the scientific and technical issues at stake. As stated by the Chairman of the EC – Asbestos panel at the beginning of the meeting, ‘[t]he focus . . . is on the experts and on questions to them . . . the priority of the meeting . . . is to hear the experts’.19 The information provided must relate to evidence already submitted and the parties cannot take advantage of such a meeting to submit new evidence. The meeting normally starts with each expert making general comments and reacting to their colleagues’ reports, as well as to the written comments received from the parties. Panelists also ask questions. However, the records show that these meetings give the parties an opportunity to undertake a tight cross-examination of the experts, especially when the experts have expressed views contradicting the parties’ own arguments. The various records show that written reports of the experts are rarely neutral; they tend to lend support to the views expressed by one party or the other. The meeting is then the last chance for the party which is ‘in the minority’ to convince the panel of its views. The complete file relating to the expert consultation is included in the final panel report: determination of the procedure, including comments made by the parties; questions by the panel and written comments submitted by the experts; comments by the parties on the responses from the experts; and a verbatim transcript of the meeting with the experts, the panel and the parties. This ensures that consultations with scientific experts benefit from a high level of transparency, which enhances their credibility. Tribute should be paid to scientific experts assisting in WTO disputes because accepting such an assignment can be demanding. Experts have to work under very tight time constraints and are asked to respond to a number of different and complex questions, which may oblige them to put aside part of their own work. Soon after their appointment, they receive the complete panel file, which tends to be voluminous, especially in cases involving scientific issues. They have to acquaint themselves with this material, in particular the scientific arguments put forward by the parties, but also, at a later stage, with the reports presented by their 19

Panel Report on EC – Asbestos, Annex VI, para. 11.


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co-experts and the comments of the parties. During the meeting with the panel and the parties, experts who have expressed views going against those of a party to the dispute may be subject to a series of questions from the lawyers of that party or its own experts, who will do their best to corner them (see, for instance, the transcript of the meeting with the experts in the EC – Asbestos case). And all this for a rather modest remuneration (600 Swiss francs per day of work).

(e) How do panels deal with scientific advice in their legal findings? The opinions given by individual scientific experts in their written reports and orally during the meeting are advisory only and, thus, do not bind the panel. The same principle would apply to an expert review group (see Appendix 4 of the DSU, paragraph 6). Although the panel is not bound by the opinion of experts, in practice, it would be difficult for a panel to go against an opinion shared by all experts, or a majority of them. On the other hand, it is not the panel’s function to settle a scientific debate nor to set itself up as an arbiter of the opinions expressed by the scientific community.20 The Appellate Body confirmed the broad discretion of panels in the handling of the information which is submitted to them: ‘It is particularly within the province and the authority of a panel to determine the need for information and advice in a specific case, to ascertain the acceptability and relevancy of information or advice received, and to decide what weight to ascribe to that information or advice or to conclude that no weight at all should be given to what has been received.’21 (emphasis added)

Thus, a panel has ample discretion in discharging its mandate to ‘make an objective assessment of the facts’ (Article 11 of the DSU). The Appellate Body, whose mandate is to review issues of law, cannot undertake a factual finding exercise (Article 17.6 of the DSU); this means also that it will not review the relative weight that a panel has ascribed to the evidence submitted.22 However, the Appellate Body can be asked to review whether the panel has made an objective assessment of the facts pursuant to 20

21 22

See for instance the comment made by the panel in EC – Asbestos (paras. 8.181–8.182) concerning the approach it intended to adopt in assessing the scientific information submitted by the parties and the experts. Appellate Body Report on US – Shrimp, para. 104. Appellate Body Report on Korea – Alcoholic Beverages, para. 161.

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Article 11 of the DSU. In US – Wheat Gluten, the Appellate Body clarified its role vis-à-vis the role of the panel: ‘[A] panel’s appreciation of the evidence falls, in principle, “within the scope of the panel’s discretion as the trier of facts”. [footnote omitted] . . . In assessing the panel’s appreciation of the evidence, we cannot base a finding of inconsistency under Article 11 simply on the conclusion that we might have reached a different factual finding from the one the panel reached. Rather, we must be satisfied that the panel has exceeded the bounds of its discretion, as the trier of facts, in its appreciation of the evidence . . . . we will not interfere lightly with the panel’s exercise of its discretion.’23 (emphasis in the original)

In the EC – Asbestos dispute, the Appellate Body confirmed that, as the ‘trier of facts’, the panel enjoyed a margin of discretion in assessing the value of the evidence, and the weight to be ascribed to that evidence. In particular, the panel was entitled, ‘in the exercise of its discretion, to determine that certain elements of evidence should be accorded more weight than other elements – that is the essence of the task of appreciating the evidence’.24 In Japan – Agricultural Products II, Japan contended, on appeal, that the panel had cited the views of the experts in an arbitrary manner and that its evaluation of the evidence was contradictory. The Appellate Body replied that ‘[o]nly egregious errors constitute a failure to make an objective assessment of the facts as required by Article 11 of the DSU’.25 What use does a panel effectively make of the information submitted to it by the scientific experts? In the US – Shrimp case, the panel referred only in a few instances to the reports provided by the experts; it made a general reference to them to conclude that conservation measures should be adapted, inter alia, to the environmental, social and economic conditions prevailing where they are to be applied. In contrast, the panel in the EC – Asbestos dispute referred extensively to the comments submitted by the experts. It did so in its analysis of ‘likeness’ under Article III of the GATT 1994, but even more so in its findings under Article XX of the GATT 1994: the panel’s findings relating to the ‘necessity’ of the measure under Article XX(b) systematically refer to the experts’ comments, to confirm – or infirm – the scientific arguments put forward by the parties. 23 24 25

Appellate Body Report on US – Wheat Gluten, para. 151. Appellate Body Report on EC – Asbestos, para. 161. Appellate Body Report on Japan – Agricultural Products II, paras. 140–141.


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There are limits to the use that a panel can make of experts’ findings, however. According to the Appellate Body, a panel cannot use its fact-finding authority, including expert advice, to relieve the complaining party of its burden of proof. In Japan – Agricultural Products II, the Appellate Body ruled that panels cannot use their investigative authority ‘to rule in favour of a complaining party which has not established a prima facie case of inconsistency based on specific legal claims asserted by it. A panel is entitled to seek information and advice from experts and from any other relevant source [. . .] to help it understand and evaluate the evidence submitted and the arguments made by the parties, but not to make the case for a complaining party.’26 As argued by Pauwelyn, the distinction drawn by the Appellate Body between, on the one hand, advice on what has been submitted by the parties and, on the other hand, ‘new’ evidence, may be difficult to make in practice. Advice and information submitted by experts may confirm, or contradict, evidence submitted by the parties, but may also add to it. In practice, when the experts assess and explain contested facts submitted by a party, they will inevitably ‘take side’ (see above). As put by Pauwelyn, ‘[n]ot to allow panels to take account of obvious alternatives that make scientific sense, would achieve the required level of protection and allow for trade to flow, would prevent panels from making an “objective assessment of the matter” (Article 11 of the DSU) and be against the basic purpose of WTO dispute settlement, namely to offer a positive resolution to disputes (Article 3.7 of the DSU)’.27

4 Conclusion Panels have ample discretion in deciding whether or not they want to consult scientific experts, in drawing up the proceedings for that purpose, and in assessing scientific opinion submitted. Procedural rules on the appointment of, and consultation with, scientific experts in a WTO dispute are rudimentary. While expressing a clear preference for consulting individual experts rather than expert review groups, panels have followed nevertheless the rules contained in Appendix 4 of the DSU to the extent possible. When necessary, they have

26 27

Appellate Body Report on Japan – Agricultural Products II, para. 129. J. Pauwelyn, ‘The Use of Experts in WTO Dispute Settlement’, International & Comparative Law Quarterly, Vol. 51, (2002), pp. 352–354.

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also devised additional rules and principles, which have begun to crystallize in consistent practice. Even though the approach of some panels in using experts has been criticized (in particular the preference for consulting experts on an individual basis), the overall assessment concerning the use by panels of scientific experts appears to be positive. The fact that, in the ongoing DSU review, no proposal addresses the use by panels of scientific experts may be a sign that Members are satisfied with the way panels have made use of this ‘external’ source of information so far.

19 Amicus curiae participation in WTO dispute settlement: reflections on the past decade james durling and david hardin 1 Attorneys-at-Law, Willkie Farr and Gallagher LLP

1 Introduction The advent of the WTO has triggered countless debates regarding sovereignty. The process of conforming domestic laws for the purpose of WTO accession and the obligation to comply with a dispute panel or Appellate Body decision have both fuelled fears that an international organization such as the WTO compromises Members’ domestic authority and international sovereignty. Amicus curiae participation in WTO disputes has been evolving against this context. Amicus curiae participation has been described by critics as inappropriately elevating the status of private actors – no matter how big or small – to that of a government. In contrast, proponents of amicus curiae participation argue that transparency and participation will strengthen public support for the WTO, and thus ultimately strengthen the institution. As we review this issue at the tenth anniversary of the WTO, the jurisprudence and experience to date should silence the initial fears. The nightmare scenarios simply have not become reality. Like other international tribunals, WTO dispute panels and the Appellate Body have displayed active restraint in accepting and considering amicus curiae briefs. The WTO adjudicative bodies have respected the pre-eminence of the WTO Members themselves, quieting the fear that the sovereignty and 1

Durling: Partner with the International Trade Law practice of Willkie Farr & Gallagher LLP. JD, New York University (1984); MPA, Princeton University (1984); BA, Haverford College (1980). He can be reached at [email protected]. Hardin: Associate with the International Trade Law practice of Willkie Farr & Gallagher. JD, George Washington University (2003); BA, George Mason University (1999). He can be reached at [email protected]. This article presents the personal views of the authors, and those views should not be attributed to Willkie Farr & Gallagher, or any of the firm’s clients.

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interests of each Member will be hijacked by the views of private actors through the medium of amicus briefs. The emerging jurisprudence should not, however, encourage those in favour of completely severing the limited access that private actors currently have to the WTO dispute settlement system. Private actors play an important role in multilateral trade and should not be completely denied any avenue for expressing their views. In our view, the existing jurisprudence has struck an appropriate balance that serves as a useful framework going forward. Accordingly, WTO adjudicative bodies should continue to accept and consider amicus briefs when the views contained therein contribute to the effective adjudication of the dispute, or otherwise offer a useful perspective that should be heard.

2 Amicus curiae in the first decade of the WTO and DSU The enactment of the landmark Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), and the early disputes governed by the DSU triggered the question of whether a WTO adjudicative body can accept and consider amicus briefs. A debate among WTO Members ignited in 1995 when a private actor made the first attempt to submit an amicus brief to the panel that handled the US – Gasoline dispute. That panel, however, did not confront or address the issue, and remained silent about the amicus brief. But silence did not make the issue go away. A few years later the Appellate Body in US – Shrimp directly confronted the question. The Appellate Body confirmed the authority of a WTO adjudicative body to accept and consider amicus briefs attached to submissions of parties in a dispute. The Appellate Body in that case held that such material is ‘prima facie an integral part of [the] participant’s submission’.2 In accepting the briefs, the Appellate Body relied upon Article 13 of the DSU, which not only grants to a dispute panel the right to seek information but implicitly allows them to ‘accept or reject any information or advice which it may have sought and received’ from the parties.3 The Appellate Body also reasoned that Article 12.1 of the DSU accords dispute panels the discretion to create procedures by which it receives and considers relevant information.4 The Appellate Body viewed this as authority for a panel ‘to 2 3 4

Appellate Body Report on US – Shrimp, para. 89. Appellate Body Report on US – Shrimp, para. 104. Appellate Body Report on US – Shrimp, para. 105.

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accept and consider or to reject information and advice submitted to it, whether requested by a panel or not’.5 Indeed, in the Appellate Body’s view, exercise of that authority is indispensable to a dispute panel’s mandate under Article 11 of the DSU to ‘make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements’.6 More significantly, the Appellate Body’s discussion in US – Shrimp left open the possibility for private actors to submit amicus briefs without attaching them to participant submissions. This hypothetical option became reality in Australia – Salmon, where the panel accepted a letter submitted by a private actor on the grounds that, consistent with the Appellate Body’s decision in US – Shrimp, nothing in the DSU or its Working Procedures prohibited acceptance and/or consideration of amicus briefs.7 Naturally, the debate regarding the proper role, if any, for amicus participation intensified. The fear surrounding amicus participation reached an apex in 2000. In EC – Asbestos,8 the Appellate Body went so far as to set up its own ad hoc procedures for the acceptance of amicus briefs.9 As part of its procedures, amici were required to first apply for leave from the Appellate Body to submit a brief. In effect, the Appellate Body was taking the practice one step further by inviting outside participation. This move jolted the WTO community given that it was a departure from the Appellate Body’s prior practice of accepting amicus briefs unsolicited or as attachments to participant submissions. Although the Appellate Body ultimately rejected each application for leave, its actions reinvigorated the attacks on amicus participation as well as the accusation that it was exceeding its authority under the DSU. Shortly after the Appellate Body instituted its procedures in EC – Asbestos, the WTO General Council held a special session to specifically address the Appellate Body’s actions. As expected, many WTO Members expressed concern with what they viewed as a threat to the integrity of an exclusively inter-governmental organization. As a result of that meeting, the Chair of the General Council concluded that ‘the Appellate Body

5 6 7 8 9

Appellate Body Report on US – Shrimp, para. 108. Appellate Body Report on US – Shrimp, para. 106 (emphasis added). Appellate Body Report on Australia – Salmon, para. 7.9. Appellate Body Report on EC – Asbestos. See EC –Asbestos ; Communication from the Appellate Body, WT/DS135/9 (8 November 2000).

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should exercise extreme caution in future cases until Members had considered what rules were needed’.10 That statement essentially describes the subsequent state of amicus participation in WTO disputes. A review of panel and Appellate Body reports through 200411 demonstrates that panelists and Appellate Body members have not taken the watershed decisions in US – Shrimp and EC – Asbestos as a licence to accept any and all amicus submissions. Instead, caution and self-restraint have been the rule. The numbers alone speak for themselves, and confirm the degree of restraint by all the relevant actors. In the first decade of WTO dispute settlement: r Amicus briefs (or requests to file an amicus brief) were filed in only 1312

of 113 dispute panel proceedings.13 r An amicus brief was accepted by a panel in only nine of those proceedings.14 r In four of those proceeding, the panels explicitly stated that the amicus briefs were not of assistance in rendering a decision.15 The panels in the remaining five proceedings were silent as to whether the amicus briefs were of any assistance in rendering its decision. 10 11

12

13

14

15

WTO General Council, Minutes of WTO General Council Meeting, WT/GC/M/60 (22 November 2000). This chapter undertakes a review of all dispute settlement reports issued through dispute number WT/DS277. The facts contained herein are limited to dispute settlement proceedings in which an amicus submission was known to be filed by a private actor. US – Gasoline, Australia – Salmon (Article 21.5 – Canada), US – Shrimp, US – Shrimp (Article 21.5 – Malaysia), EC – Asbestos, US – Lead and Bismuth II, EC – Bed Linen, US – Section 110(5) Copyright Act, US – Countervailing Measures on Certain EC Products, US – Softwood Lumber III, US – Softwood Lumber IV, EC – Export Subsidies on Sugar, US – Softwood Lumber VI. A dispute panel proceeding is one in which a completed report was issued. Use of the term ‘proceeding’ should be distinguished from the term ‘dispute.’ A single dispute may have involved two or more proceedings. For instance, the US – Shrimp dispute involved four proceedings in which an amicus brief was filed (i.e., the dispute panel proceeding, the Appellate Body proceeding, the Article 21.5 dispute panel proceeding, and the Article 21.5 Appellate Body proceeding). Australia – Salmon (Article 21.5 – Canada), US – Shrimp, US – Shrimp (Article 21.5 – Malaysia), EC – Asbestos, EC – Bed Linen, US – Section 110(5) Copyright Act, US – Countervailing Measures on Certain EC Products, US – Softwood Lumber III, US – Softwood Lumber IV. EC – Bed Linen, US – Section 110(5) Copyright Act, US – Countervailing Measures on Certain EC Products, US – Softwood Lumber IV.


The same pattern emerges when one turns to the record of Appellate Body consideration of amicus briefs. r Amicus briefs (or requests to file an amicus brief) were filed in only

nine16 of 66 total Appellate Body proceedings.

r An amicus brief was accepted by the Appellate Body in only six of those

proceedings.17 r In four of those proceedings, the Appellate Body explicitly stated that the amicus briefs were not of assistance in rendering a decision.18 The Appellate Body in the remaining two proceedings was silent on whether the amicus briefs were of any assistance in rendering its decision. The above figures confirm that amicus briefs have not emerged as a prominent feature of the WTO dispute settlement system.19 Moreover, amicus briefs appear not to have played a significant role in the outcome of disputes. Indeed, based on the text of each relevant decision, an amicus brief has never had an acknowledged effect on the decision of a dispute panel or the Appellate Body. Perhaps reflecting what they view to be a narrow legal mandate under the DSU, WTO adjudicative bodies have resisted allowing private actors to impose their views, much less transpose their interests, on the adjudication of the rights and obligations of WTO Members. Until now, the initial fears regarding amicus briefs have not come to fruition. Several other principles can be discerned from the existing cases. First, WTO adjudicative bodies are more likely to accept and consider amicus briefs when they are attached to a party’s (i.e., WTO Member’s) submission. WTO adjudicative bodies have accepted amicus briefs in each instance that the brief was attached to a party submission. In the eight proceedings involving acceptance but explicit non-consideration of an amicus brief, each was submitted as an individual, stand-alone brief. In 16

17 18 19

EC – Hormones, US – Shrimp, US – Shrimp (Article 21.5 – Malaysia), Thailand – H-Beams, EC – Asbestos, US – Lead and Bismuth II, EC – Sardines, US – Steel Safeguards, US – Softwood Lumber IV. US – Shrimp, US – Shrimp (Article 21.5 – Malaysia), US – Lead and Bismuth II, EC – Sardines, US – Steel Safeguards, US – Softwood Lumber IV. US – Lead and Bismuth II, EC – Sardines, US – Steel Safeguards, US – Softwood Lumber IV. In terms of the actual number of submissions, WTO adjudicative bodies (both dispute panels and the Appellate Body) have accepted only 23 amicus briefs. Nine of those briefs were filed as an attachment to a participant’s submission as opposed to a stand-alone submission. A WTO adjudicative body has never received more than five amicus briefs in a single proceeding. In most proceedings, only one or two amicus briefs were filed.

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the seven proceedings involving ambiguity about the role of the amicus brief, almost all of the briefs were submitted as an attachment to a participant submission. In EC – Asbestos, the panel rejected outright two briefs that were not attached to party submissions, while accepting those that were attached to party submissions. Indeed, in several disputes, the adjudicative body explicitly stated that it would consider arguments only to the extent that they have been adopted by the parties. Second, consistent with the case-by-case approach established by the Appellate Body, WTO adjudicative bodies seem more receptive to amicus participation in disputes involving issues that raise broader policy concerns. Of the seven proceedings (five panel, two Appellate Body) in which an amicus brief was accepted and not explicitly ignored, almost all involved issues regarding health or the environment. These examples support the notion that amicus participation is more favoured in the context of issues that call for specialized knowledge that private actors might possess. On the other hand, there seems to be open hostility toward amicus submissions in the context of trade remedies. At both the panel and Appellate Body stages, most of those amicus submissions accepted but then specifically dismissed as not being useful involved disputes about trade remedies. Perhaps sensing the potential for such amicus submissions to mushroom out of control if encouraged in any way, panels and the Appellate Body have consistently refused to consider amicus submissions in this particular area. Finally, it is worth noting a pattern over time. The cases in which the adjudicative bodies accepted an amicus submission but then said nothing about how it was used occurred much earlier in time. In the most recent cases, the new pattern seems to be accepting certain submissions, but then explicitly stating that the amicus submission was not considered in reaching a decision. These statements, however, need to be viewed in proper context. In WTO disputes, there is a strong desire to focus on the arguments raised by the parties (i.e., WTO Members). The perspectives of others – whether they are third parties exercising their formal rights to join the dispute, or amicus participants trying to have their submission accepted – have the most impact when those views have been embraced by one of the parties. In some cases, these other perspectives shape the arguments of the formal parties to the dispute. When the complaining or responding party embraces an argument first suggested by a third party or an amicus submission, that idea matters to the dispute. Even if the panel or Appellate Body states that they did not consider the


views in the amicus submission, that submission could still have some impact. As we embark on the second decade of dispute settlement under the WTO, amicus participation remains a topic of debate, most often pitting the United States (which fully supports amicus participation) against most of the WTO community. The continuing dialogue may be due in large part to the rise of the private actor as an active participant in today’s global dynamics, commanding a status that can no longer go unnoticed. Even more far-reaching, some view the ongoing debate as a sign that the global influence of the nation state is decreasing in relation to the increasing power of the private actor. The desire of private actors to participate in WTO disputes will only increase as decisions begin to have a greater impact on their behaviour, ultimately intensifying the debate.

3 Private actor arguments: to heed or not to heed? Any discussion of amicus participation raises a key question: whether private actor participation within the WTO dispute settlement system is appropriate and serves any useful purpose. Although this essay does not seek to examine this issue exhaustively, we would like to offer some thoughts. At the risk of stating the obvious, private actors are not governments. The WTO is an inter-governmental organization. Its legitimacy and efficacy rests upon the willingness of national governments to collaborate and adhere to the WTO rules in good faith. Doing so, however, naturally leads to the abrogation of a certain amount of domestic sovereignty. This is where the arguments in opposition to amicus participation come into play. Since private actors are not sovereign governments and cannot be WTO Members, they can never be formal parties to a dispute. Private actors do not pay the same price as governments to participate in the global trade regime, and they are in no way held accountable to the obligations that WTO rules or decisions impose. These arguments have particular relevance in the context of the WTO, which involves the creation of rules and implementation of decisions that have a direct impact on the citizens of each Member country or customs territory. Hence, as some would argue, the recognition of private actor views inappropriately raises them to the same status as a WTO Member. Furthermore, private actors have very different concerns than national governments. The narrow (and oftentimes unpopular) interests of private actors myopically lie within a small and defined constituency, as opposed

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to the broader interests of the government, which presumably selects a course that best reflects the collective interests of its citizens. Although the interests of private actors may transcend national boundaries and capture a large audience on a global scale, the interests of national governments are tied most often with their own constituency. The disconnect between private actor and national government interests is even greater when they conflict. Thus, as the argument goes, the participation of private actors at its extreme may unfairly displace the interests of the masses by those of a few. On the other hand, dispute settlement in the WTO should not be conducted in an inter-governmental vacuum, devoid of other perspectives. Some private actors have perspectives relevant to the development of the WTO as a legal institution. Some even argue that private actors are capable of strengthening Members’ commitments to WTO rules and encouraging further liberalization at the domestic level. No less significant, private actors often possess unique knowledge and expertise in areas that intersect with trade. Therefore, hearing the voices of private actors is potentially in the interest of both the WTO and its Members. As long as the governmental actors make the ultimate decisions, one has to wonder why there are any problems with adding other helpful and informative perspectives to the decision-making process. But are these latter justifications sufficient to embrace the views of private actors in a WTO dispute? Should they serve as a broader licence for private actors to intervene in a dispute between two sovereign Members? We believe the answer is yes, but within limits. The justifications support giving private actors limited participation in WTO dispute settlement. Although, few would support the notion of a WTO panel or the Appellate Body directing a Member to bring its domestic laws in line with WTO rules based solely on the argument of a private body, such fears are misplaced, particularly now that the Appellate Body rulings and WTO practice have confirmed the limited role for amicus submissions.

4 Amicus briefs: a contributing perspective Respect for sovereignty does not require a blind eye towards the views of private actors in the dispute settlement context. In our view, there are several strong arguments favouring amicus submissions. First, the perspectives of private actors can contribute to the efficient and effective adjudication of disputes. They possess a wealth of knowledge that can be as useful to adjudicative bodies as the views of WTO Members. Hence,


they serve as a repository of factual information that governments may be unwilling or unable to provide to a dispute panel. Although the legal arguments of private actors are oftentimes already put forth by the relevant government, private actors can provide a perspective that may be omitted. In addition, allegedly WTO-inconsistent trade measures potentially affect an infinite number of private actors across a multitude of countries. Private actors can identify these broader concerns. Second, these entities serve a legitimate interest that WTO Members are frequently unable to fulfil: to serve as a voice for those that may otherwise go unheard on the global stage. Indeed, for many private actors seeking to participate in a WTO dispute, the primary purpose is to present factual information or express an argument left ignored by governments. Third, the less-noticed function of such submissions is to appease the sentiments of those without formal status in the WTO. Oftentimes the ability to be heard is largely sufficient in itself to address the concerns of private actors. In this regard, the amicus brief serves its intended purpose by the simple fact that they are admitted and considered. This chance to be heard can help build broader based support for the WTO as an institution. Against this background, WTO adjudicative bodies should at least consider the information provided by private actors, particularly if the actors are the very same ones potentially affected by the issues being addressed. It bears mention that the amicus brief should contribute to the adjudication of a dispute in order to be considered by a panel or the Appellate Body. Given the administrative constraints on those bodies and their obligation to resolve trade disputes in a ‘fair, prompt and effective’20 manner, WTO adjudicative bodies should require amicus briefs to provide information that is not repetitive of the factual and legal arguments made by the parties themselves but relevant to the issues before the bodies. This argument was presumably adopted by the Appellate Body in EC – Asbestos when it sought, as part of its directives for filing leave, to state how the amicus would ‘make a contribution to the resolution of the dispute that is not likely to be repetitive of what has been already submitted by a party or third party to [the] dispute’.21 And in one or more cases, the adjudicative body rejected an amicus submission because the information contained therein was duplicative of the parties’ views, did not ‘assist’ the body in resolving the dispute, or pertained to a claim not before the body. Indeed, this approach is consistent with the notion that private actors provide 20

Appellate Body Report on EC – Sardines.

21

EC – Asbestos, WT/DS135/9 at para. 3(f).

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a wealth of factual knowledge that Members do not necessarily possess. However, this approach is to some extent contradictory to the recent trend of adjudicative bodies to accept amicus briefs only when they have been attached to the submission of the parties and/or only to the extent that the amicus arguments have been adopted by the parties. Moreover, the requirement to provide new information is complicated by the normal practice of keeping party submissions confidential. Nevertheless, in the interest of controlling the flow of amicus briefs and preserving the sanctity of the dispute settlement system, the Appellate Body should resolve this apparent discrepancy and require amici to bring a different perspective to the table.

5 The continued pre-eminence of the WTO Member government None of this is to advocate opening the floodgates to amicus briefs. WTO adjudicative bodies have rightly guarded each Member’s sovereignty and the function of the WTO dispute settlement system as a forum intended solely for Member governments. This observation is supported by the limited acceptance of amicus briefs and the increased likelihood of adjudicative bodies to consider amicus briefs when they are attached to party submissions. Although providing an avenue – albeit very limited – to advance the interests of private actors, WTO adjudicative bodies have precluded private actors from free-riding on the WTO dispute settlement system and withheld private actors privileges reserved for Members. Rather than opening the floodgates, their actions have struck the delicate balance necessary for an inter-governmental organization such as the WTO. Dispute panels and the Appellate Body should continue to exercise caution and discretion in considering the views of outside parties. Despite the WTO’s limited acceptance of amicus briefs, the foundation of the organization remains the collective sovereignty of its Members. A continued adherence to the current approach also reinforces the notion of sovereignty. It is the Members that dictate the terms by which outside actors may participate in the WTO. They have, and always will, remain in control of an outside actor’s accessibility to the dispute settlement system. As aptly noted by one commentator: ‘The general consent of states creating rules of general application remains the operating principle of the international legal order. By treaty or by practice, it is states whose conduct determines the rules of international law. What has changed is that states have opened the door to allow others

amicus curiae participation in wto dispute settlement 231 some limited level of international sovereignty. Modern states recognize the ability of other actors to have rights and duties on the international place, a status that, while certainly not equal to states, is sufficient for those actors to participate in the formation, implementation, and even the enforcement of international law. . . . It would be a mistake to see this situation as a zerosum game – the notion that new subjects of international law mean that the old subjects, states, lose their status or have it eroded in some way. They have not.’22

By tacitly accepting the Appellate Body’s current practice regarding amicus briefs, the Members effectively wield that power, reinforcing the very source of authority that they are fearful of losing.

6 Conclusion Amicus participation in the inaugural decade of the WTO has not been free of controversy. As with all challenges a new organization faces, the issue will continue to evolve, creating new fears and demanding new solutions. As WTO jurisprudence continues to develop and its effects are felt in all corners of the world, private actors will continue to demand a louder voice in the dispute settlement context. A place should remain for private actors in the dispute settlement system. Nevertheless, the continued legitimacy of the WTO requires respect for the inter-governmental nature of the institution. Therefore, WTO adjudicative bodies should continue to guard the sovereignty of each Member by taking a measured approach to the acceptance of amicus briefs, as they have successfully done thus far. Amicus briefs should be accepted and considered when they contribute to the resolution of a dispute. The WTO dispute settlement system can hear other perspectives without compromising the fundamental inter-governmental nature of the process. 22

Duncan B. Hollis, Symposium: Globalization & The Erosion of Sovereignty in Honor of Professor Lichtenstein: Private Actors in Public International Law: Amicus Curiae and the Case for the Retention of State Sovereignty, Boston College International & Comparative Law Review, Vol. 25, No. 2 (2002), pp. 235–256, at p. 235.

20 Suspension of concessions and retaliation under the Agreement on Safeguards: the recent US – Steel Safeguards case raimund raith Minister-Counsellor/Legal Adviser, Permanent Delegation of the European Commission, Geneva1

1 Procedural background of the US – Steel Safeguards case The United States, by Presidential Proclamation of 5 March 2002, adopted far-reaching safeguard measures on ten steel product groupings in the form of additional tariffs of up to 30 per cent for a duration of three years, becoming effective 20 March 2002.2 From the outset a great number of WTO Members voiced their concerns on the compatibility of these measures with US obligations under the WTO agreements and in particular the Agreement on Safeguards and GATT 1994. The European Communities requested formal consultations with the United States under Article 4.1 of the DSU shortly after the issuance of the proclamation. A significant number of other WTO Members (Norway, Switzerland, China, Korea, Brazil, Japan and New Zealand) did likewise. Joint consultations were held in mid-April 2002, but did not yield any solution of the dispute. The eight Members referred to above subsequently sought the establishment of a panel under Article 6 of the DSU. The panels were eventually established3 and composed and the panel issued its reports in July 2003.4 1 2 3 4

Dr.jur., LL.M. (U. of Mich.), Member of the New York Bar. The views expressed are those of the author and not those of the EC institutions. A detailed description of the content of the proclamation and the related course of events are contained in the factual part of the panel report, paras. 1.1–1.47. The originally separate panels were subsequently merged by a procedural agreement between the parties. Panel Report on US – Steel Safeguards.

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the recent us – steel safeguards case

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The panel reports found largely in favour of the complainants. This result, which was appealed by the United States, was essentially confirmed by the Appellate Body in its report of 10 November 2003.5 The Appellate Body found that all ten US safeguard measures suffered essentially from two WTO incompatibilities, i.e. (1) that ‘the United States failed to provide a reasoned and adequate explanation demonstrating that unforeseen developments had resulted in increased imports causing serious injury to the relevant domestic producers’6 which constituted violations of Article XIX:1(a) of the GATT 1994 and Article 3.1 of the Agreement on Safeguards, and (2) that the United States failed to comply with the requirement of ‘parallelism’7, 8 which was inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards. The panel reports, as modified by the Appellate Body report, and the Appellate Body report were adopted by the Dispute Settlement Body (DSB) on 10 December 2003.9,10

2 DSU compliance procedures Given that rulings and recommendations by the DSB are not selfexecutory, (i.e. they do not rectify the illegal situation by themselves as is the case with judicial decisions in most national legal systems) it is up to the losing respondent party to take appropriate action. In this regard, a losing respondent party has in essence three options: r It can repeal the measures found to be WTO-incompatible.11 r It can modify the measures found to be WTO-incompatible in order to

bring them into conformity. In this scenario the possibility of a compliance panel pursuant to Article 21.5 of the DSU arises when the prevailing party contests the WTO-conformity of the modified measures.12 5 6 7 8

9 10

11 12

Appellate Body Report on US – Steel Safeguards. Appellate Body Report on US – Steel Safeguards, para. 513(a). Appellate Body Report on US – Steel Safeguards, para. 513(e). The parallelism requirement is in essence a reflection of the MFN principle and requires that, at least as a general rule, safeguard measures have to cover imports of the relevant products from all WTO Members. See minutes of the meeting WT/DSB/M/160 of 27 January 2004. In the WTO dispute system panel/AB reports have to be adopted by the DSB in order to gain legal status; this is of course a significant difference to domestic courts where the judgements obtain legal status through promulgation or similar acts by the courts themselves. In the case at hand this would mean the annulment of the Proclamation of 5 March 2002 by the US President by another Presidential Proclamation. This can even lead to subsequent compliance panels, such as in the recent second recourse to Article 21.5 of the DSU by the European Communities in the US – FSC case.

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r Finally, the losing respondent party can decide, at least for an interim

period, not to implement. In this scenario the losing respondent party has to provide compensation to the prevailing party (Article 22 of the DSU)13 or be prepared to suffer retaliatory measures for which the prevailing party may obtain authorization from the DSB pursuant to Article 22.2 of the DSU.14 On the timing of implementation (i.e., if the losing respondent pursues the first or second option pointed out above), the principle set out in Article 21.1 of the DSU is ‘prompt compliance’. In practice ‘prompt’ does not mean immediate, but the losing party will benefit from a reasonable period of time to adopt the necessary implementation measure. Pursuant to Article 21.3 of the DSU, the length of the reasonable period of time is essentially related to the nature of the measure to be taken (obviously more time is needed if a Member’s constitution has to be modified than if a customs official’s decision has to be modified). In practice, the reasonable period of time, which can either be agreed (and extended) by the parties pursuant to Article 21.3(b) or be stipulated by an arbitrator pursuant to Article 21.3(c), varies between some four and some 15 months.15,16 In the case at hand, the United States, between the date of issuance of the Appellate Body report17 and the date of the adoption of the Appellate Body and panel reports by the DSB18 , repealed the illegal safeguard measures on 4 December 2003 through a Presidential Proclamation.19,20 This repeal terminated the additional tariffs with immediate effect. Originally the safeguard measures would have remained in place until March 2005. 13

14 15

16 17 19 20

Such compensation has in principle to be provided on an MFN basis. For example a tariff reduction granted on a product of interest to the prevailing party by the losing respondent would apply erga omnes. Examples where retaliatory measures were effectively applied following DSB approval pursuant to Article 22.2 of the DSU include EC – Hormones and US – FSC. See Background Note by the Secretariat on Statistical Information on Recourse to Dispute Settlement Procedures (1 January 1995–30 September 2004) of 22 October 2004, JOB(03)/225/Rev.1. These periods do not apply to the reasonable period of time under Article 4.7 of the SCM Agreement. 18 10 November 2003. 10 December 2003. Statement by the President of 4 December 2003 (www.whitehouse-gov/news/releases/ 2003/12/2003/204-5). The co-complainants did indeed help this sequence to happen, by agreeing to have the adoption of the Appellate Body report by the DSB, which was originally scheduled before 4 December 2003, postponed to 10 December 2003.


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This timing of events was quite extraordinary. A fortiori so for the United States, which tends to be able to implement recommendations or rulings of the DSB in the area of commercial defence measures only after lengthy reasonable periods of time.21

3 Compliance under the Agreement on Safeguards While it was of course very difficult for the outside world to understand completely the reasons that made the United States act in this extraordinarily expeditious way, the so-called ‘rebalancing’ mechanism contained in Article 8 of the Agreement on Safeguards had, in all likelihood, significantly contributed to the expediency of the US action. Article 8 of the Agreement on Safeguards reads as follows:

(a) Rebalancing mechanism ‘1. A Member proposing to apply a safeguard measure or seeking an extension of a safeguard measure shall endeavour to maintain a substantially equivalent level of concessions and other obligations to that existing under GATT 1994 between it and the exporting Members which would be affected by such a measure, in accordance with the provisions of paragraph 3 of Article 12. To achieve this objective, the Members concerned may agree on any adequate means of trade compensation for the adverse effects of the measure on their trade. 2. If no agreement is reached within 30 days in the consultations under paragraph 3 of Article 12, then the affected exporting Members shall be free, not later than 90 days after the measure is applied, to suspend, upon the expiration of 30 days from the day on which written notice of such suspension is received by the Council for Trade in Goods, the application of substantially equivalent concessions or other obligations under GATT 1994, to the Trade of the Member applying the safeguard measure, the suspension of which the Council for Trade in Goods does not disapprove. 3. The right of suspension referred to in paragraph 2 shall not be exercised for the first three years that a safeguard measure is in effect, provided that the safeguard measure has been taken as a result of an absolute increase in imports and that such a measure conforms to the provisions of this Agreement.’ 21

Such reasonable periods of time are frequently extended by the parties, e.g. US – Section 211 Appropriations Act, US – Section 110(5) Copyright Act, US – Hot-Rolled Steel.

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While this Article may appear complicated at first sight, its objective and practical operation would appear to be reasonably straightforward. Paragraph 1 requires the party taking safeguard measures to endeavour to provide adequate trade compensation for the adverse effects other Members may suffer from the safeguard measures. In other words, upsetting the balance of rights and obligations caused by a Member taking safeguard measures shall be offset by compensation this Member shall provide to other affected Members. Such a provision does not exist in the other WTO agreements concerning commercial defence measures (Anti-Dumping Agreement (AD), and Subsidies and Countervailing Measures Agreement (SCM)). The reason for this particularity of the Agreement on Safeguards is because safeguard measures are measures that are imposed against perfectly legitimate trade, while AD/SCM measures are imposed against unfair trade. Such rebalancing provisions outside the DSU system also exist in Article XXVIII (covering modification of schedules) and Article XXIV (covering customs unions and free trade agreements) of the GATT 1994. The common characteristic of these two GATT Articles with the safeguard provision is that a Member unilaterally, but legally, modifies a pre-existing balance of rights and obligations. In the case at hand, the United States never made any offer for compensation during the consultation process under Article 12.3 of the Agreement on Safeguards.22 As a result, the European Communities notified to the WTO on 14 May 2002,23 pursuant to Article 12.5 and Article 8.2 of the Agreement on Safeguards, its proposed rebalancing measures vis-à-vis the United States.24 Another requirement for taking rebalancing measures is contained in the last sentence of paragraph 2 of Article 8. A rebalancing measure can only be applied if not disapproved of by the Council for Trade in Goods. In the case under discussion, the Council for Trade in Goods did not express any such disapproval. Another set of restrictions on the rebalancing action is contained in paragraph 3 of Article 8 of the Agreement on Safeguards. Here, first of 22

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The extensive discussions held with the United States on so-called exclusions have nothing to do with compensation, but refer exclusively to the product scope to which the United States applied at a given point in time its safeguard measures. The required timing is set out in a rather convoluted way in Article 8.2 of the Agreement on Safeguards. In simpler terms this means within the window of 90 days after the application of the safeguard measures (in the case at hand 20 March 2002) 30 days notice has to be given before the suspension can be applied. This means in turn that such suspensive measures can at the earliest be applied 30 days after the safeguard measures became applicable. Distributed as WTO document G/C/10, G/SG/43 of 15 May 2002.


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all, a grace period of three years is stipulated during which, under certain conditions, no rebalancing measures can be taken. However this grace period is only applicable if the safeguard measure has been taken as a result of an absolute increase in imports and such measure conforms to the provisions of the Agreement on Safeguards. In other words the grace period does not apply when the measure is based on relative increases in imports or, alternatively, does not conform to the provisions of the Agreement on Safeguards.

(b) Absolute versus relative increases in imports As to the existence of absolute import increases, the question arises who decides on the existence or absence thereof. It would appear that if a safeguard measure is, according to the reasons given by the adopting Member, based only on relative increases in imports, the reply to this question is reasonably clear and the grace period would not be applicable and the Member adopting such safeguard measures would of course be fully aware of this consequence from the outset. Let’s now turn to the situation where a Member taking a safeguard measure bases it, according to its own assessment, on absolute increases in imports, while another Member contemplating rebalancing measures, considers that the increases in imports were only relative. Here as well as in the subsequent scenario of the WTO-compatibility of the safeguard measures as a whole, there exists a possible disagreement between the Member who has adopted a safeguard measure and the Member contemplating rebalancing measures. One could try to distinguish these scenarios by arguing that the issue of relative/absolute increases in imports constitutes an issue of fact, while the question of WTO-compatibility of the safeguard measures represents a question of legal interpretation. To this author, it would appear that such a distinction is not completely convincing because the existence or absence of an absolute increase in imports as defined in Article 2 of the Agreement on Safeguards and Article XIX of the GATT 1994 is equally a question of legal interpretation and is in reality a preliminary question. Therefore this situation should be dealt with in the same way as the situation where the WTO-compatibility of the safeguard measure is in question.

(c) WTO-consistency of the measure Let’s now look at the scenario where the WTO-consistency of the safeguard measure is at issue. To start with it could be argued that the assessment of

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the Member taking the safeguard measure is controlling until such time as a dispute settlement proceeding has found otherwise.25 A useful starting point for such an analysis could be Article 23 of the DSU, which stipulates that a WTO Member may only seek redress against a violation of obligations or other nullification or impairment of benefits by having recourse to the procedures set out in the DSU. This principle of ‘Strengthening of the Multilateral System’ as the title of this provision states, is one of the fundamental, if not the fundamental, pillars of the whole WTO system. In order to pursue the analysis it would be useful to assess the systemic place of Article 8 of the Agreement on Safeguards in the WTO system, whereby historical developments in relation to Article XIX of the GATT 1947 have also to be taken into consideration. Historically, the provision of Article 8 of the Agreement on Safeguards has to be read together with Article XIX:3 of the GATT 1947. Under Article XIX:3 of the GATT 1947, it was quite clear that the rebalancing measures foreseen therein had nothing to do with dispute settlement under the GATT and could be freely taken by a Member to respond to a safeguard measure taken by another Member. The introduction of Article 8.3 of the Agreement on Safeguards during the Uruguay Round negotiations was indeed intended to reduce the freedom to take unilateral rebalancing measures, but it seems improbable that this freedom should be entirely excluded. Another systemic argument can be found when comparing a safeguard measure with other unilateral measures directly affecting a Member’s tariff concessions. The taking of a safeguard measure, which represents an increase of duties, albeit temporary, above bound rates, can be compared with unilateral modifications of schedules under Articles XXVIII and XXIV of the GATT 1994. In both cases, in the absence of agreed compensation for a unilateral tariff increase, a Member can unilaterally take rebalancing measures without first going through WTO dispute settlement. Given the significant similarities between safeguard measures on the one hand and these GATT 1994 procedures on the other hand, a systematic interpretation of Article 8.3 of the Agreement on Safeguards suggests that rebalancing measures can be taken unilaterally without recourse to dispute settlement and that the Member contemplating rebalancing measures has 25

It goes without saying that, the Member taking a safeguard measure considers, at least implicitly, that such measure is perfectly WTO-compatible.


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to assess for itself if the necessary conditions are met, just as is the case under Articles XXVIII:3 and XXIV of the GATT 1994. Finally, a teleological argument equally supports such a result. If indeed the conditions which make rebalancing within the three-year grace period permissible would have to be established through the dispute settlement process, this would deprive Article 8 of the Agreement on Safeguards, at least largely, of its effet utile (effective interpretation)26 or in other terms, make it, at least largely, redundant. The three year grace period in the US – Steel Safeguards case would have lasted until March 2005, when the safeguard measures would have lapsed in any event, according to the terms of the Presidential Proclamation. As pointed out above, the Appellate Body and panel reports were adopted by the DSB in December 2003. If rebalancing under Article 8 of the Agreement on Safeguards were only permissible from this moment, its effects would be limited to one year and some months. If one were also to add a reasonable period of time for implementation under Article 21.3 of the DSU27 the effet utile of this provision would be reduced to a few months. In sum, in the view of this author, rebalancing measures can be taken under Article 8.3 of the Agreement on Safeguards without the need to have the lack of absolute increase in imports or the WTO-incompatibility of the safeguard previously established in a WTO dispute settlement proceeding. Of course all action taken under the Agreement on Safeguards is still subject to DSU scrutiny, both the taking of safeguard measures and the taking of rebalancing measures. In this context, it is also noteworthy that Article 8 of the Agreement on Safeguards is not referred to in Appendix 2 to the DSU which lists ‘Special or Additional Rules and Procedures Contained in the Covered Agreements’.

4 The implementation of the US – Steel Safeguards reports: rebalancing by the European Communities The European Communities, after notifying its intention to take rebalancing measures,28 took such measures in the form of a Council 26

27 28

The Appellate Body has throughout attached great importance to the principle of effective treaty interpretation, by requiring to give meaning to each WTO provision; see for example Appellate Body Report on US – Gasoline, p. 17, DSR 1996:I, 3, at 21. Reasonable periods of time range generally from about 4 to about 15 months, compare also footnote 15 above. See footnote 24.

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Regulation29 imposing additional duties on certain products originating in the United States. In relation to the US safeguard measures designated in the Presidential Proclamation as ‘certain flat steel products’ the European Communities imposed additional duties as from 18 June 2002 although such duties were never collected.30 As far as this product category was concerned, it is noteworthy that the United States had indeed argued the presence of absolute increases in imports and the European Communities had, on the basis of the US figures, concluded that no absolute increase in imports had been demonstrated.31 The same Regulation also imposed additional duties on certain products originating in the US in order to rebalance against the US steel safeguard measures concerning all product groupings other than ‘certain flat steel products’. However, for those products, the effective application of these additional duties was delayed until 20 March 2005,32 i.e. three years after the entry into force of the US safeguard measures or on the fifth day following the date of a decision by the WTO dispute settlement system that the safeguard measures imposed by the United States were incompatible with the Agreement on Safeguards, if that was earlier.33 This course of action demonstrates that the European Communities was hesitant to make a unilateral assessment on compatibility of the US safeguard measures with the Agreement on Safeguards and preferred to have this question sorted out in the dispute settlement system. However, given the withdrawal of the US safeguard measures before the DSB adopted its recommendations and rulings, the additional duties imposed by the European Communities were, as noted above, never collected.

5 Conclusion As stated at the outset, it is difficult to assess the precise impact of the European Communities’ rebalancing measures pursuant to Article 8 of the Agreement on Safeguards on the decision by the President of the United States to completely and promptly revoke the US safeguard measures. 29 30 31 32

Council Regulation (EC) No 1031/2002, OJ No L157 of 15.6.2002, pp. 8 et seq. See also Report from the Commission to the Council on Steel rebalancing action, COM(2002) 532 final of 24 September 2002. For the underlying facts and arguments see para. 10.178 of the Panel Report. 33 Article 4(a) of the Regulation. Article 4(b) of the Regulation.


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However, in the light of the US history of implementation of adverse decisions by the dispute settlement system, this case stands out as an example of full and prompt implementation of an adverse DSB ruling and recommendation to which the more ‘conservative’ application of Article 8 of the Agreement on Safeguards by the European Communities has doubtlessly significantly contributed.

21 Compliance with WTO dispute settlement decisions: is there a crisis? john magnus TRADEWINS LLC

Conferences and symposia on the World Trade Organization (WTO) have been proliferating in connection with the organization’s tenth anniversary, with a particular focus on the WTO dispute settlement system – how it is working, what difficulties have arisen, how its rules might evolve, etc. These events typically feature a certain amount of hand-wringing over the fact that adopted WTO dispute settlement decisions have only a limited, indirect influence on the subsequent behaviour of losing respondents, and sometimes are not implemented promptly or at all. Some observers have gone so far as to proclaim the existence of a ‘compliance crisis’, with potentially ruinous consequences for the WTO and the trading system more generally. This chapter contains observations on the compliance issue in four sections. Section 1 gives an overall perspective on the compliance record. Section 2 discusses factors that may underlie occasional non-compliance. Section 3 argues that non-compliance on the scale and of the type observed so far does not qualify as a ‘crisis’. Section 4 briefly suggests some criteria for how one might expect WTO Members to behave if they conclude in the future that a real compliance crisis has arisen.

1 Overall record of compliance, including US compliance Several quantitative analyses have been done in this area, and I will not seek to repeat or improve on them here. The story they tell is not calamitous. The adoption rate for panel and Appellate Body reports has of course increased compared to the GATT 1947 system – from wherever it was to 100 per cent. Compliance with adopted decisions, meanwhile, seems to be running roughly at or slightly above the previous rate – that is, it occurs usually but not always. 242

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As with the broader conundrum that most trade is frictionless but commentators focus disproportionately on the trouble spots, so it is true here that, while implementation of decisions adopted by the WTO Dispute Settlement Body (DSB) usually proceeds smoothly, the exceptions attract a lot of attention. The EC – Hormones, Brazil – Aircraft, Canada – Aircraft and Canada – Aircraft Credits and Guarantees cases are sometimes cited in this regard, but the favourite ‘poster child’ is a group of cases in which the United States was a losing respondent, and which call for changes requiring action by the US Congress. This group of cases includes, in no particular order: (a) ‘all others’ – statutory provision governing the calculation of ‘all others’ dumping margins found ‘as such’ to violate the WTO AntiDumping Agreement (sole remaining implementation item from US – Hot-Rolled Steel); (b) Continued Dumping/Subsidy Offset Act (the ‘Byrd Amendment’) – legislation ‘as such’ found to violate limitations in WTO AntiDumping and SCM Agreements (still on the books); (c) 1916 Act – legislation ‘as such’ found to violate limitations in WTO the Anti-Dumping Agreement (recently repealed, but long after the reasonable period of time had expired); (d) Section 211 – statutory provision involving trademarks and expropriated Cuban property, challenged in connection with a dispute over the ‘Havana Club’ rum trademark (still on the books); and (e) Section 110(5)(b) – statutory provision involving, inter alia, royalties paid to foreign artists whose music is played in US restaurants (still on the books). Before addressing these cases individually, a brief comment is in order about the overall US compliance record, which despite the five cases cited above is quite good.1 Leaving opinions aside, the facts are these: (1) The US Government has always announced an intention to bring measures found to be WTO-inconsistent into conformity either immediately or within a reasonable period of time.2 (2) The United States has almost always in fact brought measures found to be WTO-inconsistent into conformity on schedule,3 with the only exceptions being items requiring legislative 1 2 3

I would actually say this record is too good, given that it includes the implementation of some decisions which I felt should have been rejected. Even in US – Upland Cotton. The US – Gambling case reportedly would have been the first exception, had the appeal turned out differently. Reasonable periods of time have been consensually extended here and there.

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action. (3) The decisions adverse to the United States have included cases touching on the most fundamental sovereign prerogatives – e.g., how to raise money (US – FSC), and how to spend money (US – Offset Act (Byrd Amendment), US – Upland Cotton). Some other factors that may help put the US compliance record into perspective are discussed in Section 2 below. Perspective can be an elusive goal where evaluating US behaviour on the international stage is concerned.4 It will come as no surprise to learn that the US Government also regards its overall compliance record as good.5

2 What might underlie occasional delayed compliance or non-compliance? A meaningful assessment requires considering not only the quantity but also the nature of observed non-compliance, including what seems to be causing it and what (if anything) the exceptional cases have in common. It is easy enough to identify factors that might push a losing respondent toward complying: mainly, concerns about the ‘three Rs’ of reputation 4

See Colin Picker, ‘Reputational Fallacies in International law: A Comparative Review of United States and Canadian Trade Actions,’ 30 Brook L. Int’l L. 67, 72 n. 14 (2004): ‘Indeed, while it is common to claim that the US behaviour within the international system shows that the United States does not respect or comply with international law, the truth is that the United States, through its officials, diplomats, soldiers, citizens and so on, obeys international law thousands of times each day – from customs compliance with international standards to the rules of engagement of soldiers in combat zones. A few high profile examples of non-compliance should not mar the otherwise stellar US record of international law compliance – this despite the fact that world attention will likely focus on the occasional example of US conflict with international law and draw the inaccurate conclusion that the United States is regularly non-compliant.’

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See, e.g., Statement by the US representative at the meeting of the WTO Dispute Settlement Body (DSB), Geneva, 17 February 2005: ‘I would also like to take this opportunity to comment on the suggestion made by a number of Members this morning that the US compliance record is poor. I would like to make the following points. ‘The United States has been involved in quite a large number of disputes, and our compliance record overall is quite good. ‘No WTO Member has been asked to undertake the changes to its tax system which the United States was called on to make as a result of the FSC/ETI dispute. Yet last year the US Congress repealed ETI. ‘It also repealed the 1916 Act. ‘We have indicated that we will comply in other disputes, and we will. Indeed, as noted earlier, we have already taken most steps necessary to comply in the Hot-Rolled dispute.’


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(desire not to be seen as a scofflaw), retaliation (authorized by the DSB), and possible role reversal (i.e., ability to demand implementation as a victorious complainant in future cases). The more interesting question is how to predict or explain non-compliance. Following is a list of four factors potentially relevant to decision-making by any losing respondent, and one additional factor that as far as I know is specific to the United States: (a) Attachment to measure. A losing respondent might prefer to compensate or accept suspension of concessions, given its strong attachment to the measure found to be WTO-inconsistent. (b) Disagreement with adopted decision. A losing respondent’s senior officials might consider the adverse decision to be poorly reasoned or unpersuasive – particularly if the decision featured ‘gap-filling’ by the WTO panel or Appellate Body.6 (c) Information gap. The losing respondent’s political authorities might lack certain information relevant to a decision on whether to seek to comply – particularly information about the offending measure’s trade effects, which could significantly influence a cost-benefit analysis. (d) Systemic concerns. Challenging measures that cannot readily be shown to affect trade is arguably a misuse of the WTO dispute settlement system, even if permitted by DSU rules. A losing respondent may balk at rewarding such behaviour, out of concern about encouraging more of it. With a potential retaliation ‘price tag’ of zero, the cost of keeping a WTO-inconsistent measure is mainly reputational, which may not be decisive in a cost-benefit analysis or may be outweighed by the desire to send a message that dispute settlement proceedings should be reserved for matters of fundamental interest with a significant effect on current trade flows. (e) US front-loaded compliance system. Trade agreement implementing bills in the United States typically deny legal effect to the agreements themselves and exclude any domestic judicial role in policing US 6

In the United States at least, the Appellate Body’s view of its gap-filling authority, which it bases on the Vienna Convention of the Law of Treaties and certain cross references thereto in the WTO agreements, has exactly zero public acceptance. The WTO’s greatest US champions are unwilling to endorse, cultivate public appreciation of, or even defend privately the Appellate Body’s view on gap-filling. The absence of gap-filling authority was an important part of the basis on which the US Congress agreed to implement the Uruguay Round Results, and updated assurances on this point were a very important part of the basis on which the Congress (barely) approved the Trade Promotion Authority in effect at present.

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compliance. Instead, the US Government seeks to ensure compliance by promptly amending, before new international obligations take effect, any laws which it believes violate, or require agencies to violate, those new obligations. An implementing bill represents the collective judgement of the US Executive Branch and Congress concerning what statutory provisions and agency practices, if left unchanged, would put the United States in breach. This ‘front-loaded’ procedure helps to explain why adverse WTO decisions are greeted sceptically. If implementing legislation makes all legitimately required changes – a condition which both political branches of the government routinely certify is met by the implementing bills they craft, including the Uruguay Round Agreements Act of 1994 – then by definition the amended laws conform to the new agreement, and any contrary decision must be based on an expansion rather than mere enforcement of the United States’ negotiated commitments. All of these factors are represented in the US cases where legislative action has been or is still required to bring the United States into compliance with adverse WTO decisions. Category (a) applies, for example, to US – Section 110(5) Copyright Act, where the attractions of the US measure at issue are apparently viewed as more than justifying the cost of a cash settlement acceptable to the European Communities.7 Category (b) is involved in several of the pending cases, although cases like US – FSC and US – Countervailing Measures on Certain EC Products seem to show that even strong disagreement on the merits will not alone prevent implementation indefinitely. Category (e) applies across the whole range of US defensive cases, but especially to those where statutory provisions have been found WTO-inconsistent ‘as such’ even though they were scrutinized during Uruguay Round Agreements Act (URAA) debate in 1994 and deemed by the government’s leading trade experts to be WTO-consistent.8 And I would put the US – 1916 Act case, during the 7

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The same is true of the various US measures at issue in the Internet Gambling case – law enforcement measures to which the US Government is apparently quite attached. In light of the changes made by the Appellate Body, however, it now seems plausible that the United States will attempt to implement the adopted decision. For another category (a) case, see EC – Hormones, where the WTO-inconsistent measures are valued more highly than the export opportunities lost to US and Canadian retaliation. It is worthwhile to recall, at this remove, who some of those individuals were. They included, for example, Deputy US Trade Representative (now WTO Deputy Director-General) Rufus Yerxa; Senate Finance Committee Chief International Trade Counsel (now USITC Commissioner) Marcia Miller; House Ways & Means Committee Trade Counsel (now WTO


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lengthy period of US non-implementation, into category (d) (systemic concerns).9 Arguably of greatest importance to the outstanding US legislative cases, however, is category (c). In the ‘all others’ and US – Section 211 Appropriation Act cases, for example, Congress is contemplating whether to repeal or alter legislation which has not, so far, been shown to cause adverse effects to anyone. The amount of such adverse effects would translate into DSB-authorized retaliation, a key determinant of the potential ‘cost’ of keeping the offending legislation on the books. But Congress has no idea what that cost might be. Perhaps no trade effects have been shown in these particular matters because none can be shown. Intuitively, it seems doubtful that trade flows in the next 12 months would differ if the United States had a different statutory provision on ‘all others’ dumping margins, or if the Section 211 trademark provision were not sitting atop a pile of multiply-redundant measures preventing Pernod

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Legal Affairs Division Director) Bruce Wilson; House Ways & Means Trade Subcommittee Republican Staff Director (now US Trade & Development Agency Director) Thelma Askey; and dozens of other careful, expert lawyers. Taking as a whole the body of WTO decisions reviewing this group’s handiwork, and especially some items that received detailed attention during the URAA debate like zeroing, non-attribution, privatization, 1916 Act, and a few others, one could get the impression that they must have been a ‘gang that couldn’t shoot straight’ in 1994. My own view is that they accurately implemented the Uruguay Round Results. Of course, some of the WTO decisions adverse to the United States have involved legislation enacted after the URAA (e.g., CDSOA, Section 211). And the US implementers did voluntarily accept a WTO dispute settlement system authorized to second-guess their handiwork; they would not contend, and neither do I, that they were incapable of making a mistake. But they have been found in error with remarkable frequency, both in absolute terms and as a percentage of the challenges filed. See, e.g., 2004 Miscellaneous Tariff Bill, House Judiciary Committee Report at 20 (dissenting views): ‘The mere fact that the WTO says the US is in violation of our WTO obligations does not mean that Congress should ignore its duty to gather the facts and do an analysis of the costs and benefits of having {the 1916 Act} on the books. . . . [T]here are a group of cases involving statutory provisions that not only fall well within any reasonable interpretation of our WTO obligations but, equally important, have no demonstrable negative trade effects on our trade partners. The most recent spate of cases – including challenges to the 1916 act and the Byrd Amendment[ ], as well as Canada’s challenge to the rules for refunding antidumping and countervailing duties – would seem to be an abuse of the dispute settlement system, and may well further weaken support for the WTO. In our view, our allies have little business dragging the United States through time-consuming proceedings to pursue claims about measures that have little if any effect on actual trade. The dispute settlement system exists to help resolve actual commercial problems. The United States limits its use of the DS system on this basis, but other Members do not.’

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Ricard from selling Cuban-made Havana Club rum in the United States. But whatever the reason, Congress is being asked to make an important legislative decision using only partial data relevant to a cost-benefit analysis. With a caveat borrowed from the American comedian Dennis Miller (‘I don’t want to get off on a rant here, but . . .’), the WTO dispute settlement system itself is responsible for this data shortage, and bears some responsibility for whatever implementation delays result. Unlike virtually every other system on earth for adjudicating economic rights and remedies, the WTO dispute settlement system allows complaints to go forward without any need to plead, much less prove, economic damages flowing from an alleged breach. Leaving aside cases filed under Part III of the Subsidies and Countervailing Measures Agreement (SCM Agreement), an actual WTO ruling on the existence and amount of trade effects is available only in the ‘train wreck’ scenario where the DSB adopts an adverse decision, the respondent fails to implement within the reasonable period of time, and the complainant requests authorization to suspend concessions at a level disputed by the respondent. This means that essential information can come into existence months or even years after DSB adoption of a decision on the merits – months and years during which the losing respondent’s decision-makers will have been continuously berated for ‘dragging their heels’. The US – Offset Act (Byrd Amendment) case was arguably a category (c) case for many months until we learned, late in 2004, what the potential ‘price tag’ would be (roughly 70 per cent of certain Continued Dumping and Subsidy Offset Act (CDSOA) outlays). Now, that case fits better into category (a), with Congress seemingly attached to the measure regardless of its WTO-inconsistency and convinced that its benefits outweigh the modest level of authorized retaliation. Category (b) (substantive disagreement with adopted decision) is pertinent to the US – Offset Act (Byrd Amendment) case as well.10 10

The US – Steel Safeguards case, regularly cited for a time as an example of scofflaw US behaviour, was not a ‘compliance’ case in the sense discussed here. The adverse decision adopted by the DSB was in the nature of a ‘failure to explain’ decision, and the United States did not seek to bring the challenged measure into conformity by providing an improved explanation. But neither did the United States stall beyond the RPT, which would have moved the case into the non-compliance category. Rather, President Bush abruptly lifted the safeguard measure altogether – noting, as he did so, that his action was based on the measure having met its objectives ahead of schedule. As far as the record reveals, this move had nothing to do, one way or the other, with the adverse decision adopted by the DSB.


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3 Grounds for alarm? The United States paid money to settle the US – Section 110(5) Copyright Act case, compensating in the crassest possible fashion rather than seeking to comply. More recently, senior officials said the United States would not even attempt to comply with an adverse ruling on US –Gambling along the lines laid out by the lower panel. In neither instance did I notice the earth stop spinning. Neither case changes the fact that the United States – despite having many reasons to behave otherwise – always seeks to comply with adverse decisions, and almost always does in fact comply with those decisions. That doesn’t sound like a compliance crisis to me. Nor do I see, in the occasional instances of delayed or refused compliance by other Members, anything truly alarming. Some would say that the very idea of considering the persuasiveness of a WTO decision, and/or its ‘price tag,’ as opposed to just cheerfully doing what the DSB says, is destructive of the rule of law. One might as easily say that unpersuasive decisions and challenges of measures with no detectible trade effects are destructive of the rule of law. But there is also a question of which of the fundamental goals identified in Article 3.2 of the DSU – predictability or not expanding obligations – one prefers to emphasize. In the Uruguay Round, negotiators changed the rules governing panel establishment and DSB adoption of decisions, but did not meaningfully change the rules on what happens next (compliance/compensation/retaliation). They left this essentially a bilateral affair between complainant and respondent based on relative economic and political leverage – exercised in the shadow cast by the adopted decision, and informed by an aspirational ‘preference’ for implementation. Compliance – both ‘whether’ and ‘how’ – is up to the respondent, and requires a political decision by officials whose job is to make cost-benefit judgements. One can disagree with the way they value certain costs, including reputational and rule-of-law harms, but one cannot seriously object to the principle that a political decision is involved. And in that context, how can a decision’s perceived soundness, and its price tag, be ignored?

4 How will we know if a real compliance crisis arises? My final reason for remaining calm is that I do not see WTO Members behaving as if they believe a compliance crisis exists. When and if they do perceive a crisis, it is a safe bet that they will begin proposing stronger compliance incentives. Some Members say they want stronger incentives

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now, but the dispute settlement reform negotiations have seen only a small handful of very narrowly-tailored proposals. Not even proposed, for example, are items like the following: (a) Direct legal effect. ‘Members shall provide for decisions adopted by the DSB to have automatic and conclusive effect in domestic legal proceedings of all types, constraining the behaviour of administrative/executive agencies to the same extent as would decisions issued by domestic courts.’ (b) Retaliation exceeding trade effects. ‘The authorized suspension of concessions shall be calculated to have twice the commercial effect of the measure(s) found to be WTO-inconsistent.’ (c) Collective security. ‘The DSB may/shall authorize suspension of concessions by any and all Members requesting such authorization, each in an amount equal to the adverse trade effects found to be suffered by the complaining Member(s).’ Commentators have discussed (and some have advocated) such reforms, but so far no WTO Member has done so. I suspect this is because stronger compliance incentives are a ‘double-edged sword,’ and it would take some courage for any sovereign government to contemplate putting them in place. In the meanwhile, WTO Members who lose cases – and in particular the sceptical, slow-moving and much-maligned US Congress – will do what they will do. I don’t think those who posit a compliance ‘crisis’ have carried their burden of persuasion. But I do agree that greater compliance is desirable. Non-compliance based on sheer scepticism could be diminished by improvements that would bolster the WTO dispute settlement system’s credibility – open hearings and less reliance on Members’ incumbent trade officials as panelists would be a good start. But unfortunately these items are beginning to be overshadowed by one that will be even harder to address – a storm brewing over gap-filling, the Vienna Convention on the Law of Treaties, and the (much-disputed) relevance of general international law principles in WTO dispute settlement. If that storm is as rough as now appears possible, we may find out what a real compliance crisis looks like.

22 DSU review: a view from the inside david evans and celso de tarso pereira 1 ‘For the most part we settle things first and understand them afterwards’ 2

1 The origins of the DSU From the 1950s through to the 1970s the process for settling disputes under the GATT was ‘wrapped in layers of diplomatic vagueness and indirection’.3 What has been characterized as a ‘diplomat’s jurisprudence’4 emerged and was directed at promoting negotiated outcomes to trade disputes. The story since the end of the 1970s has been one of a disputes system in evolution from this ‘diplomatic’ model, where the emphasis was on facilitating a negotiated outcome, to a more ‘judicial’ model. A decisive step in this evolution was taken during the Uruguay Round. At the launch of the Uruguay Round in 1986 there was a general recognition that the GATT system for settling disputes needed strengthening.5 Although the system had worked well in its earlier years,6 during the 1980s problems began to emerge. As a lead negotiator for the United 1

2

3 4 5 6

David Evans was First Secretary at the Permanent Mission of New Zealand in Geneva from 2002–2005. He is currently a Senior Legal Adviser at the Ministry of Foreign Affairs and Trade in New Zealand. Celso de Tarso Pereira was Second Secretary at the Permanent Mission of Brazil in Geneva from 2001–2005, in charge of dispute settlement. He is currently at the Brazilian Embassy in Ottawa. Views expressed in this article are the personal views of the authors alone. M. Arnold, ‘Culture and Anarchy. An Essay in Political and Social Criticism’ (London, Smith Elder, 1869), p. 233, reproduced in Philip Allott, The Health of Nations: Society and Law beyond the State (Cambridge University Press, 2002), para. 1.26, n. 30. R.E. Hudec, A New WTO Dispute Settlement Procedure: An Overview of the First Three Years, PSIO Occasional Paper, WTO Series Number 11, p. 10. R.E. Hudec, ‘The GATT Legal System: A Diplomat’s Jurisprudence’, 4 Journal of World Trade Law (1970) 615–665. GATT Secretariat, Ministerial Declaration, Punta del Este, September 1986, para. 20. See footnote 2 above, at p. 10.

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States during the Uruguay Round has noted, by the end of the 1980s ‘the United States’ frustration with the lack of progress in settling agricultural trade disputes . . . had led to increased threats by the United States Trade Representative (USTR) to take unilateral trade action under Section 301 of the Trade Act of 1974’.7 The response of the international community was to work towards developing a more robust and expedited multilateral disputes procedure. The result was the Understanding on Rules and Procedures Governing the Settlement of Disputes (the DSU), which was adopted in 1994 at the end of the Uruguay Round and as part of the single undertaking. It would not be an exaggeration to state that the changes undertaken at that juncture mark a momentous turning point in the evolution of international trade law and of multilateral trade relations. The establishment of a single compulsory mechanism of dispute settlement for all WTO agreements, of the reverse-consensus rule for the establishment of panel and the adoption of reports, and of a standing Appellate Body, all introduced new and innovative features into multilateral trade relations, with legal and political consequences that probably went beyond what even those ‘present at creation’ had foreseen. But the changes were made in the light of 40 years of GATT experience, and the Uruguay Round single-undertaking negotiations in the early 1990s provided the right international political environment for the changes to be made. Experience and timing mattered. We will argue in this article that they matter still.

2 Why review the DSU? Ten years on and the majority of WTO Members believe that ‘the system is working well’.8 In its first ten years of operation the DSU has dealt with over 300 cases – more than in the entire 40 years of dispute settlement under the GATT. And it continues to do so, day in, day out. A Report commissioned by the Director General entitled the Future of the WTO concluded that ‘the operation of the dispute settlement system in the WTO has been a remarkable success’ and that the most important principle for reforming the DSU should be to not ‘do any harm’.9 And at a recent conference celebrating ten years of dispute settlement under 7 8 9

A.L. Stoler, ‘The WTO dispute settlement process: did the negotiators get what they wanted?’ World Trade Review, Vol. 3, No. 1 (March 2004), pp. 102–103. Report by the Chairman to the Trade Negotiations Committee, 6 June 2003 (TN/DS/9). The Future of the WTO, Addressing institutional challenges in the new millennium, Report by the Consultative Board to the Director-General Supachai Panitchpakdi, para. 254.

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the WTO the Director of the Appellate Body Secretariat had a two-word answer to the question, what needs improvement? ‘Not much.’10 And yet, as observed at the same conference by the current Chairman of the review process, the DSU has been under review for about half of its life. A natural initial question is therefore, why? In part the answer is historical. The establishment of the Dispute Settlement Understanding (DSU) at the conclusion of the Uruguay Round was recognized as a watershed in the resolution of international trade disputes. The original drafters therefore thought it prudent to establish a built-in review mechanism. A decision was taken to review the DSU within four years of its establishment.11 Early practice under the new DSU confirmed the desirability of such a review. While the system was widely regarded as having made an excellent start, certain unforeseen problems emerged. The issue of the sequencing of compliance procedures and retaliation rights, which first arose in the high profile EC – Bananas III 12 case, gave urgency to the early review process. Over time other issues arose with the operation of the DSU, more questions were asked about ways that it could be improved, and more alternatives were explored. Experience also showed that the issues put to panels could be incredibly complex, and the corresponding panel decisions became incrementally longer and more technical. If the decision in the first GATT dispute in 1948 – the consular taxes case between the Netherlands and Cuba – was contained in exactly four lines, more and more reports today consist of hundreds of sometimes highly technical and legally dense pages. So while the majority of Members agree that the system is working well, many also feel that there is room for improvement. Many of the proposals on the table are aimed at streamlining the current procedures or clarifying and fixing problems that have emerged from the DSU text itself. Others seek to examine issues of a more fundamental nature – such as whether hearings should be open to the public, whether there is a major problem with lack of implementation of rulings and if so how to address it, and whether it is necessary to re-assert more Member control over panel and Appellate Body decisions. 10

11 12

V. Hughes, From Initiating Procedures to Ensuring Implementation: What needs Improvement?, Draft Report, presented at the Conference ‘The WTO at 10: The Role of the Dispute Settlement System’, Stresa, Italy, 11–13 March 2005, p. 1. Ministerial Decision on the Application and Review of the Understanding on the Rules and Procedures Governing the Settlement of Disputes. See, e.g. Decisions by the Arbitrators, EC – Bananas III (US) (Article 22.6 – EC).

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Review of the DSU, then, can perhaps best be described as not absolutely necessary but certainly desirable. But if this is so, why has an outcome so far eluded negotiators? To answer this, it is worth reflecting briefly on the history of the DSU review, as the past provides some important lessons for the future.

3 Lessons from the past (a) The ‘Seattle death rattle’ According to the Ministerial Decision adopted at Marrakesh, the builtin review of the DSU was to be completed within four years (i.e. by January 1999), after which ministers would decide whether to ‘continue, modify, or terminate’ the DSU.13 This was subsequently extended to July 1999 at which time no recommendation was made. However, the process continued and as the Seattle Ministerial Conference drew near it began to gather momentum. Early informal consultations conducted by the Chairman of the DSB revealed that no delegation favoured the termination of the DSU, that almost all delegations were of the view that the DSU was working effectively, and that a careful approach to the review was warranted. During 1998 a number of informal papers were circulated mostly focused on minor refinements and fine-tuning.14 While some more far-reaching proposals were floated (foreshadowing the events following Doha),15 delegations were generally reluctant to open up the DSU for textual amendment unless a clear problem had been identified. The EC – Bananas III case had highlighted one particular problem area. In that case it became clear that the implementation and enforcement provisions contained in Articles 21.5 and 22 of the DSU were not a model of clarity, in particular with respect to the sequencing of Article 21.5 13 14

15

Ministerial Decision on the Application and Review of the Understanding on the Rules and Procedures Governing the Settlement of Disputes. For example, improving notifications of mutually agreed solutions, clarifying when interested Members can join consultations, developing procedures for admittance of evidence, improving the specificity and precision of consultation and panel requests, clarification of aspects of panel procedures including the panel timetable, issues relating to multiplecomplainant cases, and elaboration of procedures to be applied under Article 21.5. For example, proposals for professional panelists, transparency in panel procedures, acceptance of amicus submissions, remand, enhancing third party rights, and special and differential treatment proposals including the establishment of an Advisory Centre On WTO Law (now established), enhancing the capacity of the Secretariat to assist developing countries, increasing timeframes in cases involving developing countries, and introducing a levy on the use of the DSU by developed countries.


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compliance proceedings, and the right to retaliate under Article 22. In the lead up to the Seattle Ministerial these implementation issues became the main focus of work in the review process. A proposal co-sponsored by 15 delegations was submitted on the eve of the Seattle meeting, dealing primarily with these implementation issues, together with some minor amendments aimed at streamlining consultation and panel procedures. A draft Ministerial Decision for amending the DSU was drawn up by the Secretariat, and this was to be considered for adoption at the Seattle Ministerial. As is well known, however, attempts to launch a new round of negotiations collapsed in Seattle, and with it the first attempts to conclude the DSU review. The fate of the DSU review was clearly and inextricably linked to the fate of the wider negotiating process. This is a point we will return to below.

(b) The Doha deadlines Fast-forward two years to the launch of a new round of negotiations at Doha. The Ministerial Declaration adopted in November 2001 mandated ‘negotiations on improvements and clarifications of the Dispute Settlement Understanding’,16 and a Special Session of the DSB was established to conduct the negotiations. The DSU review was singled out and expressly excluded from the Doha Round’s ‘single undertaking’ in recognition that improving the DSU was a systemic issue that should not be part of the political give and take of the wider negotiation.17 Negotiators were tasked to conclude the DSU review by May 2003, well in advance of the overall deadline for the Doha Round. ‘Improvement’ and ‘clarification’ certainly does not mean an overhaul of the whole mechanism. However, if some Members believed that the focus should again be on those few issues that had been before ministers in Seattle, another reality was about to present itself. In the very first meeting of the Special Session in March 2002 the European Communities tabled a broad-ranging proposal.18 It covered 16 issues ranging from very technical proposals such as codifying the ten-day time frame for notifying third-party interest, to more far-reaching changes such as moving from ad hoc to permanent panelists, provision for opening panel hearings to the public, and prohibiting so-called ‘carousel’.19 16 17 19

Doha Ministerial Declaration, 14 November 2001, para. 30. 18 Doha Ministerial Declaration, 14 November 2001, para. 47. TN/DS/W/1. ‘Carousel’ refers to the practice of unilaterally modifying lists of concessions or other obligations for which DSB authorization has been granted under Article 22.7 of the DSU.

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This EC proposal created the dynamic for the negotiation to follow. Through 2002 and the beginning of 2003, 42 formal proposals were submitted to the Special Session, many of which covered more than one issue. The situation had ‘snowballed’ to the extent that, with the May 2003 deadline looming, almost every paragraph of the DSU was subject to a proposal for amendment. With numerous proposals (even from countries that had never participated in the dispute settlement mechanism before) being submitted at a fast pace and with varying levels of elaboration and feasibility, Members found themselves engaged in extended debates of every single paragraph of each proposal. While such debates were certainly interesting conceptually and academically, they lacked the focus and pragmatism needed to deliver on the ‘early harvest’ deadline. As the number of formal and informal meetings (and ‘off-campus’ sub-meetings) increased, alarm bells began to ring. From March until May 2003, a hectic scenario played out: week-long (formal and informal) meetings were convened, uncountable paragraphs and alternatives were suggested, while fundamental questions about the nature and direction of the exercise were left unanswered (the methodological approach taken, for example). In April and May of 2003 the pace accelerated further, evening and weekend meetings became common, with Geneva pizza deliveries and Japanese sushi (generously provided by the Government of Japan) serving as the sole distractions. If a better understanding of the proposals was acquired and comradeships were born, firmly rooted national positions remained largely unchanged. No one involved in this process was surprised when, in May 2003, it was not possible to conclude the negotiations and fulfil the mandate. Likewise, many were unsurprised when the new year-long extension of the mandate suffered the same fate in May 2004. In the middle now (2005) of a third extension of the mandate, the question that could be posed is: why negotiate further, if the recent attempts show that the odds are against the successful conclusion of the exercise? Trial and error are an intrinsic part of any negotiation and sometimes it is only after hitting the wall several times that the right path can finally be found. Past failed attempts, more than a burden, may therefore constitute an asset, providing negotiators with a valuable roadmap. This experience is similar to Coleridge’s ‘lantern on the stern’, which, by shedding light


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on the waters left behind, can also indicate (through a learning process) more clearly the way ahead.20 Perhaps the clearest and most important lesson from the past is that the DSU review negotiation, for better or for worse, cannot take place in clinical isolation from the rest of the Doha Round. Attempts to partition off the negotiation and achieve an ‘early harvest’, though noble in intent, proved unrealistic in practice. Seattle showed that the fate of DSU review negotiations can be negatively linked to wider negotiations – but there is a positive flip side to that story. If Seattle had succeeded it is quite possible that agreement on amending the DSU would also have been reached. Although a successful conclusion of the review before – or even after – the end of the Doha round can never be completely ruled out, experience pre-Seattle, during Seattle, and post-Doha all suggest that it is only in the context of a wider political negotiating process, such as the launching or conclusion of a Round, that the political dynamic necessary to complete the DSU review negotiations is likely to exist. And this lesson appears to have been learned. The latest extension of the DSU review mandate contained no new deadline.21 The process is, in effect, aligned with the wider Round. The DSU review remains, appropriately, outside the ‘single undertaking’, but is undeniably part of the Doha Round. Lessons have also been learned about useful working methods. The Chair of the DSU review has advocated a ‘bottom up’ approach where delegations are encouraged to work with each other in expanding ‘concentric circles’ in an effort to develop areas of convergence before tabling proposals in the negotiating group. In this way it is hoped that the ‘avalanche effect’ of many narrowly focused proposals reflecting individual national interests may be avoided. The working methods of the so-called ‘G7’ group of countries have provided an example in this regard. As an informal grouping composed of four developing and three developed countries, the group selected seven 20

21

The full quote from Samuel Taylor Coleridge (1772–1834) is: ‘If men could learn from history, what lessons it might teach us! But passion and party blind our eyes, and the light which experience gives us is a lantern on the stern, which shines only on the waves behind us!’ TN/DS/10, Report by the Chairman, Ambassador David Spencer, to the Trade Negotiations Committee, 21 June 2004. On 1 August, as part of the July Package, the General Council adopted a recommendation by the TNC that work in the Special Session should continue on the basis set out in TN/DS/10.

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items for discussion based on their ‘feasibility’ and ‘do-ability’, and tried to formulate textual proposals that were broadly acceptable to all seven members.22 Recent meetings of the DSB Special Session have shown a good level of constructive technical engagement based on the proposals of the group.23 Delegations seem to have started this new phase of negotiations with a welcome sense of pragmatism and purpose. So, despite the history of past failures, and because of the lessons learned from these failures – the lantern on the stern – there are reasons to be cautiously optimistic about the current DSU review negotiations. For the first time since Seattle, negotiators are working within a realistic time frame, and according to a pragmatic working method.

4 The issues We will only attempt a very brief overview of the main issues currently on the negotiating table. For this purpose we have divided the proposals, somewhat artificially, into three broad categories: proposals aimed primarily at streamlining the existing process, proposals that fill in the gaps or deal with inconsistencies in the current DSU, and proposals that are in some way more fundamental. Finally we will also consider proposals aimed at enhancing access to the system by developing countries.

(a) General streamlining and time saving Many of these proposals involve fine-tuning and housekeeping matters, such as amending the DSU to allow for the establishment of a panel at first request, and procedures for the suspension or termination of proceedings.24 While technical details remain to be resolved, many of these proposals are uncontroversial. 22

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The G7 consists of Argentina, Brazil, Canada, India, Mexico, New Zealand and Norway. The items selected were sequencing, remand, post-retaliation, third-party rights, transparency, compliance and developing country issues. Mexico did not co-sponsor the first proposal on sequencing, remand and post-retaliation. See the Report by the Chairman to the Trade Negotiations Committee, 9 December 2004, para. 3. Many of these issues were included (in some form) in the so-called ‘Balas text’ of 2003 named after the Chairman of the DSU review at the time. The ‘Balas text’ included draft proposals, among other things, on: enhanced notification procedures for mutually agreed solutions, provision for the extension of timeframes by mutual agreement, provision for the expiry of consultation requests, provisions on suspension and termination of panel proceedings, and provision for the modification of the number of Appellate Body members


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One exception to this is proposals aimed at streamlining panel selection procedures, which could represent a more significant departure from existing practice. The European Communities in particular advocates moving from ad hoc to more permanent panelists. An early proposal called for the establishment of a roster of 15–24 full-time ‘permanent panelists’.25 While many delegations have experienced the frustrations that can arise under current panel selection procedures (under which panelists are often appointed by the Director-General rather than by agreement between the parties) many also remain unconvinced that the system is ready for a full transition to permanent panelists. In light of this the European Communities has recently floated the idea of a hybrid system establishing a roster of around 20 part-time panelists, from which at least one panel member would be chosen in a given case.

(b) Filling in gaps, dealing with inconsistencies, and clarifying what is currently unclear in the DSU Subsequent practice has revealed a number of gaps or inconsistencies in the text of the DSU itself. While some of these issues have been dealt with adequately through the jurisprudence,26 others have not, or have found only interim solutions through ad hoc arrangements. These issues include sequencing, remand, and post-retaliation. In many ways sequencing can be regarded as the ‘classical’ DSU review issue. It all started with the detection of a sequencing problem between Articles 21.5 and 22 of the DSU during the EC – Bananas III dispute in 1998–1999. In short, the current DSU permits a Member to request authorization to suspend concessions under Article 22.6 while lack of compliance under Article 21.5 has not yet been established. Furthermore, the text of Article 21.5 leaves a number of procedural issues relating to the compliance procedure unclear, such as who may trigger the procedure (any disputing party or only the original complainant), whether consultations must be held, whether and how third parties can join the proceedings,

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by decision of the DSB. The ‘Balas text’ is annexed to document TN/DS/9 and can be downloaded from the WTO’s website. TN/DS/W/1. For example, one of the issues raised in the pre-Seattle review process was the role that private counsel could play in WTO dispute proceedings. However in EC – Bananas III, the Appellate Body clarified that it was up to each Member to determine for itself how best to be represented, and this has been applied in panel proceedings since. The issue appears to be satisfactorily resolved.

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and whether the findings of a compliance panel may be appealed. While ad hoc bilateral arrangements governing sequencing in individual cases has taken away some of the urgency, a multilateral solution is still desirable. Several solutions have been put forward. Arguably, one reason why a solution has not yet been found is that, under the ‘sequencing umbrella’ Members have tried to solve a number of other ‘related’ issues. One more recent proposal, by focusing exclusively on the sequencing issue, perhaps came closer to a viable solution.27 The need for a remand mechanism arises from the fact that the Appellate Body can only address issues of law, not issues of fact.28 Cases have arisen where the Appellate Body has been unable to complete the legal analysis with respect to a particular issue because there are insufficient factual findings by the panel, or uncontested facts on the panel record.29 At present the only way to have such issues resolved is to start an entirely new case, including consultations, and a full panel and appellate process. While there is a fairly broad recognition of the need for some kind of remand mechanism, a number of conceptual issues require further discussion, such as whether the decision to remand an issue should be in the hands of the parties to the dispute or the Appellate Body, and whether the original panel and Appellate Body reports should be adopted while the remand procedure takes place. Post-retaliation issues arise only in cases where retaliatory measures have been authorized by the DSB in respect of a breach of WTO rules. If the respondent in the original proceedings claims it has brought itself into compliance, but the complaining party disagrees, questions arise as to how to resolve such disagreement, and how a DSB authorization to retaliate can be revoked. The current rules in the DSU are not clear on this point. The issue has arisen in practice recently in the context of the EC – Hormones dispute;30 however, the issue is of broader application 27

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The G7 paper proposes that consultations are not required, that any party may initiate the implementation panel (arguably the most controversial part of the proposal), that an appeal is possible, and that a party may only request authorization to retaliate if one of several requirements has been met. These ensure that where there is a disagreement as to the consistency of measures taken to comply, compliance procedures under Article 21.5 must be completed prior to a request for authorization to suspend concessions. Article 17.6 of the DSU states, ‘An appeal shall be limited to issues of law covered in the panel report and legal interpretations developed by the panel.’ See, for example, Appellate Body Report on Canada – Dairy (Article 21.5 – New Zealand and US); Appellate Body Report on US – Corrosion-Resistant Steel Sunset Review; Appellate Body Report on US –Softwood Lumber IV. See US – Continued Suspension of Obligations in the EC – Hormones Dispute, WT/DS320/6, 14 January 2005, Request for the Establishment of a Panel by the European Communities


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and can be expected to arise more frequently as the DSU matures, and more cases reach this ‘post-retaliation’ phase. Again there is widespread support for finding a solution to this issue, although views vary as to the best way to achieve this. Some proposals would shift the procedural burden on to the original respondent to initiate an Article 21.5 proceeding, in recognition of the significant and lengthy previous litigation and the potential for abuse. Other proposals would place the procedural burden on the original complainants to initiate Article 21.5 procedures, while enhancing requirements with respect to the notification of measures taken to comply.

(c) Proposals for more fundamental change Other proposals are more fundamental in that they go beyond simply streamlining current procedures, filling in gaps, or clarifying inconsistencies. Rather they seek, to varying degrees, to change the DSU in some more fundamental way. Under this heading we consider third party rights, transparency and amicus briefs, Member control, and compliance. There appears to be fairly broad support for enhancing third-party rights to some degree. To date, third parties have requested – and obtained – different degrees of ‘enhanced’ rights in a number of cases: EC – Bananas III, EC – Tariff Preferences and EC – Export Subsidies on Sugar. Undoubtedly, these disputes had characteristics that made them of relevance beyond the immediate parties to the dispute.31 The challenge for negotiators is to achieve the right balance, and to maintain a distinction, between additional rights for interested third parties and the rights of the primary parties.32 The enhanced rights being considered include a greater level of participation in panel hearings,33 greater access to submissions and related documents, and the possibility of third parties joining a dispute at the appellate stage. One question that has been raised in

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and Canada – Continued Suspension of Obligations in the EC – Hormones Dispute, WT/DS321/6, 14 January 2005, Request for the Establishment of a Panel by the European Communities. Requests for enhanced third-party rights have been rejected in two other cases, see Panel Report on US – 1916 Act, and Panel Report on Australia – Salmon (Article 21.5 – Canada). Bearing in mind that the aim of the DSU is to ‘secure a positive solution to the dispute’, Article 3.7 of the DSU. Under current rules, third parties only attend a special session of the first panel hearing set aside specifically for that purpose. They do not attend the rest of the first panel hearing or any subsequent meetings of the panel. Proposals tabled to date generally increase thirdparty access to panel hearings, though views differ on the degree to which third parties should be permitted to actively participate.

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this context is whether, or how, developing countries would benefit from enhanced third-party rights, since effective participation in disputes, even as a third party, requires the availability of resources. Although proposals on transparency and amicus briefs are often grouped together, in fact there are important differences. Whereas proposals to improve transparency relate to observation of the proceedings, proposals on amicus briefs relate to participation in the proceedings. However, both issues do touch on a deeper debate about the appropriate nature of the disputes system and the relationship of the WTO with civil society (see next section). Although a number of discrete proposals fall under the rubric ‘improving transparency’34 the big-ticket item is undoubtedly the US proposal to open panel and appellate hearings to the public.35 Those in favour of open hearings argue that they would significantly improve the credibility of the WTO disputes system, and bring it into line with the practices of other international dispute settlement bodies such as the International Court of Justice. While this proposal has support from some Members,36 it has also met with strong opposition from others who emphasize the government-to-government nature of the WTO, and that interaction between government authorities and their civil societies can be adequately dealt with domestically. Some argue further that imbalances could be created between developing and developed countries in terms of being able to take advantage of, and of access to, open hearings. One interesting question, yet to be fully explored, is whether the current DSU rules allow for open panel procedures in the event that both parties to the dispute request it. Even more divisive are issues surrounding the acceptance of unsolicited amicus curiae submissions filed by private individuals or NGOs. In a series of highly controversial decisions, the Appellate Body held that both they and panels have the authority to accept unsolicited amicus briefs, and in one case even established an additional procedure for leave to file such briefs.37 At a special meeting of the General Council called specifically to 34 35 36

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For example, proposals to provide for timely access to submissions, and timely access to the final panel reports. TN/DS/W/13 and TN/DS/W/46. It also found support in The Future of the WTO, Addressing Institutional Challenges in the New Millennium, Report by the Consultative Board to the Director-General Supachai Panitchpakdi, p. 58. Appellate Body Report on EC – Asbestos. See also the Panel and Appellate Body Reports on US – Lead and Bismuth II.


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discuss the issue, most Members signalled that the Appellate Body had gone too far, and that the issue should be dealt with through the clear guidance of the WTO membership.38 However, to date the membership has not been able to provide such clear guidance. Proposals range from those that would seek to develop procedures for the acceptance of amicus submissions,39 to those that would prohibit them altogether.40 In the meantime amicus submissions continue to be filed, though to date it appears that they have not played a significant part in any case. Another set of proposals argue for greater ‘Member control’ over the dispute settlement process.41 With a view to limiting what is seen as the ‘judicial activism’ of panels and the Appellate Body and emphasizing the importance of flexibility to allow parties to resolve disputes, the proposals introduce concepts such as the partial adoption of reports, interim review at the appellate stage, and the development of guidelines on the use of judicial economy and the application of principles of public international law. Given the far-reaching consequences of such ideas, one may imagine that much discussion and time will be needed in order to assess their feasibility. Finally, a number of proposals aim to improve compliance or implementation of rulings. These range from some fairly revolutionary proposals such as collective retaliation and transferable retaliatory rights, to more evolutionary proposals such as removing restrictions on cross-retaliation, allowing earlier arbitration of the level of nullification and impairment, and enhancing the provisions relating to compensation. Underlying these proposals is a perception that there is a problem with lack of implementation of DSB rulings. Certainly a number of high profile cases such as EC – Hormones and US – FSC have contributed to creating such an impression. However some recent research suggests that implementation rates might be better than it first appears.42 In any event, there seems to be fairly widespread recognition that suspension of concessions is not always the most effective or optimal way to induce compliance with DSB rulings. Given that effective implementation of decisions is crucial to the 38 39 40 41 42

General Council, Minutes of the Meeting held on 22 November 2000, WT/GC/M/60, 23 January 2001, paras. 113–132. See for example, TN/DS/W/1 and TN/DS/W/13. See for example TN/DS/W/42 and TN/DS/W/47. See TN/DS/W/28 and TN/DS/W/74. See W.J. Davey, ‘The WTO Dispute Settlement System: The First Ten Years’, Journal of International Economic Law, Vol. 8, No. 1 (2005), p. 47. According to Davey, the information available on the 181 disputes started with consultations requested prior to 1 July 2002 ‘suggest a successful implementation rate of 83 per cent’.

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credibility of the DSU and the WTO as a whole, alternatives do need to be explored, bearing in mind that certain limits may be inherent in the nature of the system itself (see next section).

(d) Access of developing countries Participation of developing countries in disputes has been increasing over time.43 However this is true for only a limited number of developing countries. While the creation of the Advisory Centre on WTO Law (ACWL) has certainly helped,44 many developing countries claim that they currently face almost insurmountable obstacles to participating actively in the system. This is usually attributed to lack of financial and human resources, both in capitals and in Geneva, insufficient knowledge of the applicable rules, and uncertainty about gains to be obtained from use of the system. Thus the problem is centred much more on effective access to the dispute settlement mechanism rather than in simply rephrasing the traditional ‘special and differential treatment’ provisions already contained in the DSU. Some of the ideas circulated, therefore, aim at providing developing countries with litigation costs, with more technical advice from the WTO Secretariat, with a longer ‘reasonable period of time’ (RPT) to implement decisions, and with the possibility of holding consultations in their own capitals. A more inclusive dispute settlement mechanism would help improve the legitimacy of the DSU and contribute to levelling the playing field. Some negotiators in Geneva also wonder whether a strengthened ACWL might be an alternative solution, and whether some of the proposals might be better dealt with in other negotiating bodies of the WTO.

5 Analysis of proposals: some broad considerations This is clearly not the place for an in-depth analysis of all the various proposals on the table. Instead, below are some broad considerations that may assist both negotiators and commentators in assessing and making sense of the broad range of proposals for reform. 43

44

In W.J. Davey, ‘The WTO Dispute Settlement System: The First Ten Years’, Journal of International Economic Law Vol. 8, No. 1 (2005), p. 24, Davey notes that from 2000–2004 ‘developing country use of the system increased dramatically’ initiating 62 per cent of the consultation requests in that period. For information on the ACWL see www.acwl.ch, see also above at footnote 15.


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(a) The nature of law: balancing ‘great expectations’ with legal and political realism Judgements whether or not the WTO dispute settlement system is working well, and therefore on how it should be improved, depend critically on the reference point or benchmark used. Answers to questions such as ‘is the process fast enough’ or ‘are implementation rates satisfactory’ will vary depending on whether the point of comparison is other international legal tribunals, experience under the GATT, domestic legal systems, or something else again. While negotiating the review, one may too easily put too much expectation on what international trade law may realistically deliver. It may be tempting, for example, to draw comparisons with domestic systems and suggest changes according to national experience and legislation. But by doing so, the fundamental nature of international law is forgotten. Whereas national law is based on a relation of subordination between the state power and its subjects, international law relies on coordination among all members of the state society, which are, at least as a formal concept, ‘par inter pares’. The absence of a superior instance (a supranational body or power) precludes the existence of many of the features typical of the domestic legal domain. International law, in fact, has no fixed and defined nature. It is in constant oscillation between two poles: in order to affirm itself as ‘law’, as traditionally understood, it must lean towards normativity and enforcement, irrespective of the wishes, threats and demands of specific state entities and of the realities and disparities of the state society. On the other hand, in order to remain viable as a useful regulator of international relations, it also must take into account the existence of power politics; of the wishes, threats and demands of single players; and of disparities among the actors in the international arena of ‘Realpolitik’, in short. It must become ‘concrete’. According to the image used by Martii Koskeniemi,45 international law slides permanently between ‘utopia’ – when it endeavours to prevail as enforceable norm – and ‘apology’ – when it concedes to be a mere element of the legal discourse among nations. In order to avoid these extremes, it must, under changing external circumstances, strike the right balance. The lack of this perspective may sometimes lead, during the DSU review exercise, to efforts being made to overcome perceived ‘failures’ or 45

M. Koskenniemi, From Apology to Utopia: The Structure of International Legal Argument (Coronet Books, 1989).

266


‘shortcomings’ of international rules that in reality simply reflect the distinct nature and features of international law, as compared to national law. In the DSU negotiations this becomes clear when some of the proposals concerning ‘implementation’ or ‘compliance’, for example, are scrutinized. When international law is expected to deliver compliance exactly as it is achieved within the subordination structure of national law, a false assimilation is engendered and ‘great expectations’ are created, which are bound to remain unfulfilled. Some realism can do no harm. But then again, international law, and especially international trade law, is in constant evolution, and a certain degree of ‘utopia’, or forward thinking, will be vital to achieving progress. Moreover, it is quite possible that DSU rules regarding ‘compliance/implementation’ (to continue the example) do not currently strike the right balance, and that improvements could well be desirable. The point is that problems must be assessed, and solutions crafted, with the appropriate benchmarks in mind.

(b) The nature of the system – balancing the ‘judicial’ and the ‘diplomatic’ As noted above, a decisive step was taken in the Uruguay Round in the direction of a more judicial process. Some proposals such as those for increased transparency and opening hearings to the public would take a further step in this direction.46 Other proposals, for example those aimed at reasserting more Member control over the proceedings, tend to work in the other direction. While the discussion still rages about the correct nature of the dispute settlement mechanism of the WTO, the answer is quite clear to those that have found themselves in the middle of a panel or Appellate Body proceeding, especially in the hearings themselves: it looks like a court, it works much like a court, and one litigates as in a court. Although still evolving and still with some features atypical for judicial bodies (‘recommendations’ and not ‘judgements’ are passed, formal adoption of reports is required and performed by the DSB, a political body, and the panel ‘report’ can be seen and commented on at its ‘interim’ stage), the direction of this evolution is clear: a ‘thickening’ of legality and of procedural standards/rules. Of course, considerable room remains for ‘diplomatic flexibility’, particularly at the consultation phases (both formal and 46

As noted above, however, for a number of delegations this is seen as a step too far.


267

informal), in parallel to the quasi-judicial proceedings, and in the aftermath of the reports. During the panel and appeal stages, however, the nature of the game is quite clear. It is undeniable, on the other hand, that the formulation of many proposals for reform, and the positions taken on these, depend to a great extent on the (almost philosophical) underlying views taken by individual delegations in relation to the appropriate legal nature of the system, and on the correct balance between the ‘judicial’ and the ‘diplomatic’.

(c) The nature of the DSU – balancing the ‘specific’ with the ‘systemic’ The DSU itself has a number of different objectives that need to be balanced. For example, one of the primary objectives of the DSU is to promote the prompt resolution of disputes.47 In doing so, however, panels and the Appellate Body must ‘clarify the existing provisions’48 of the WTO, a further objective of the DSU. And these provisions apply to all WTO Members. While panel and Appellate Body interpretations are not formally binding, there has been ‘an elaborate use of precedent’49 which helps to secure another of the DSU’s fundamental objectives – ‘security and predictability to the international trading system’.50 It will be important to keep these various objectives and balances in mind when assessing proposals for change.

(d) The nature of change – balancing ‘evolution’ with ‘revolution’ Finally, the DSU is still young. Certainly, it has had its share of teething problems, but it hasn’t even entered its ‘troubled teens’ let alone truly come of age. There may be wisdom in allowing the system to evolve further before drawing definitive conclusions about either its successes or its failures. This may in turn have implications for what negotiators ought to try to achieve in the current process for review. It is worth recalling that the GATT was given 40 years to evolve before anything more ‘revolutionary’ was experimented with. The success of that eventual experiment is perhaps a testament to the value of patience and experience. 47 49 50

48 Article 3.3 of the DSU. Article 3.2 of the DSU. The Future of the WTO, Addressing Institutional Challenges in the New Millennium, Report by the Consultative Board to the Director-General Supachai Panitchpakdi, p. 52. Article 3.2 of the DSU.

268


6 Conclusion: never say never In light of the situation described above, where do we stand? At first sight it may seem that there are reasons to be pessimistic. The track record of failed negotiations is not encouraging. If compared to other Doha negotiations one may also wonder at the feasibility of a review where no clear ‘demandeurs’ are visible. If the initial phase of negotiations was characterized by an avalanche of proposals and entrenched national positions, the negotiations in 2003 and 2004 at times appeared to take place in a political vacuum with no real sense of engagement. So does the DSU live on, only to die another day? We do not think so. From a broader perspective, there are reasons to be optimistic: we now have a realistic deadline, i.e. no deadline; the ‘failures’ of the past can serve as a powerful ‘acquis’ illuminating the appropriate conduct of the current exercise; and the lack of clear demandeurs may not be fatal given the systemic importance of the issues being negotiated. Furthermore, the dynamics of the DSU review may well be influenced by the dynamics of the wider Doha round. However the present alignment of the DSU review process with the wider Doha round is an opportunity; it is not a guarantee. It will require hard work, political commitment, and above all a pragmatic assessment of what can and should be achieved in order to arrive at a successful conclusion.

PART IV Annexes

39 11 11 9 9 3 7 6 2 5 4 2

25 5 9 4 8 – 3 – – – – –

Requests for consultations Panels established by DSB1 Number of disputes covered by panels established2 Panels composed3 Number of disputes covered by panels composed DG composition4 Mutually agreed solutions or withdrawals notified Panel Reports circulated5 Panel Reports adopted Number of disputes covered by panel reports adopted Appeals notified6 (not including 21.5 appeals) Appellate Body Reports adopted

1996

1995

Action

WTO dispute settlement statistics (1995–2004)

6 5

13 20 7 8 7 5 5

50 15 22

1997

Annex I

8 8

11 12 4 12 10 12 17

41 13 15

1998

9 7

19 22 9 1 14 9 11

30 20 23

1999

11 8

7 8 4 7 18 15 17

34 11 12

2000

5 9

12 13 9 9 7 13 15

23 15 16

2001

6 6

8 15 6 5 10 11 12

37 11 18

2002

5 5

10 12 8 2 9 8 16

26 19 25

2003

5 6

14 18 8 6 11 8 8

19 7 7

2004

59 56 (cont.)

107 137 58 60 92 83 106

324 127 158

TOTAL

– – – – – – – –

Article 21.3 Awards circulated Article 21.5 Compliance Panel Reports circulated Article 21.5 Compliance Panel Reports adopted Article 21.5 appeals notified Article 21.5 Appellate Body reports adopted Article 22.6 Arbitration Decisions circulated Article 25 Arbitration Awards circulated Mediation

– – – – – – – –

1996 1 – – – – – – –

1997 3 – – – – – – –

1998 2 2 1 – – 3 – –

1999 3 5 4 2 2 2 – –

2000 4 5 4 4 3 0 1 –

2001 2 2 1 1 1 1 0 1

2002 2 0 2 1 2 1 0 0

2003 2 0 0 0 0 9 0 0

2004

19 14 12 8 8 16 1 1

TOTAL

As the dates of the establishment of a panel and the constitution of a panel may be in two different years, the date of establishment of a panel is taken as the base for these statistics. 2 In some cases, several similar disputes were consolidated into one panel proceeding; thus, the number of disputes that have gone to a panel exceed the number of panels established; e.g. in the US – Steel Safeguards case there was one panel that dealt with eight complaints. 3 In some cases where there have been decisions by the DSB to establish a panel, the dispute has been settled before the actual constitution of the panel; in other cases, panels are still in the composition stage. 4 Pursuant to Article 8.7 of the DSU, if, within 20 days after the establishment of a panel, the parties cannot decide on the selection of the panelists either party can request the Director-General to determine panel composition, either in its entirety or partially in those cases where the parties have agreed on some but not all of the panelists. 5 In three instances, the parties notified a mutually agreed solution before the issuance of the final panel report. Therefore, a short panel report was circulated but was not adopted (i.e. WT/DS7/R and WT/DS12/R, WT/DS14/R in 1996; and WT/DS72/R in 1999). 6 In the disputes EC – Hormones and US – 1916 Act, there were separate panel reports but they were joined at the appeal stage.

1

1995

Action

(cont.)

Costa Rica US Canada Ecuador, Guatemala, Honduras, Mexico, US US India

India

7 8 9 10

11 DS31 12 DS33

13 DS34

DS24 DS26 DS48 DS27

Venezuela Brazil Canada EC Canada US Peru Chile Canada Philippines

1 DS2 DS4 2 DS7 3 DS8 DS10 DS11 4 DS12 DS14 5 DS18 6 DS22

Canada – Periodicals US – Wool Shirts and Blouses Turkey – Textiles

EC – Bananas III

EC – Scallops (Peru and Chile) Australia – Salmon Brazil – Desiccated Coconut US – Underwear EC – Hormones

EC – Scallops (Canada) Japan – Alcoholic Beverages II

US – Gasoline

WT/ DS No. Complainant Short Name

13.3.98

19.6.96 17.4.96

5.3.96 20.5.96 16.10.96 8.5.96

31.5.99

14.3.97 6.1.97

8.11.96 18.8.97 18.8.97 22.5.97 (x 4)

22.10.99

30.6.97 25.4.97

9.9.97

10.2.97 16.1.98

20.10.98 21.2.97

12.6.98 17.10.96

10.4.97 5.3.96

– 4.10.96

29.4.96

–

5.8.96 11.7.96

29.1.96

11.10.95 5.8.96

10.4.95 31.5.95 19.7.95 27.9.95

Panel estblhd

19.11.99

30.7.00 23.5.97

25.9.97

25.2.97 13.2.98

6.11.98 20.3.97

MAS

MAS 1.11.96

20.5.96

Panel Panel/AB report AB report report(s) circulated circulated adopted

WTO Disputes – reports circulated and/or adopted (1995–2004)

Annex II

12.4.99(EEC) 12.4.99(ECU)

18.2.00

Art. 21.5 report circulated

Art. 21.5 AB report circulated

– 6.5.99

20.3.00

Art. 21.5 reports adopted

23.2.99

14.2.97

Art. 21.3(c) Art. 25

12.7.99 29.5.98 12.7.99 9.4.99(ARB) 7.1.98 24.3.00(ECU)

Art. 22.6

Arbitrations

(cont.)

26.7.99 26.7.99 19.4.99 18.5.00

Athrztn DSB

US EC Japan US Japan US

India, Malaysia, Pakistan, Thailand Mexico US US US Brazil Brazil New Zealand EC US

16 DS50 17 DS54 DS55 DS59 DS64 18 DS56

19 DS58

20 DS60 21 DS62 DS67 DS68 22 DS69 23 DS70 24 DS72 25 DS75 DS84

US Canada

14 DS44 15 DS46

12.3.98 14.4.99 24.11.99 17.9.98

EC – Poultry Canada – Aircraft EC – Butter Korea – Alcoholic Beverages

30.7.97 23.7.98 18.11.97 16.10.97

19.6.98 5.2.8

Guatemala – Cement I 20.3.97 EC – Computer Equip- 25.2.97 ment 13.7.98 2.8.99 – 18.1.99

2.11.98 5.6.98

23.7.98 20.8.99 MAS 17.2.99

25.11.98 22.6.98

6.11.98

22.4.98

27.3.98 12.10.98

16.1.98 23.7.98

22.4.98 20.8.99

19.12.97 –

– 2.8.99


16.10.96 31.3.98 23.7.98 14.4.99

Panel estblhd

20.11.96 5.9.97 12.6.97 2.7.98 12.6.97 30.7.97 12.6.97 Argentina – Textiles and 25.2.97 25.11.97 Apparel US – Shrimp 25.2.97 15.5.98

India – Patents (US) Indonesia – Autos

Japan – Film Brazil – Aircraft


(cont.)

9.5.00

15.6.01

9.5.00 26.7.01


21.7.00

22.10.01

21.7.00


4.8.00

21.11.01

4.8.00 23.8.01

Art. 21.5 reports adopted

28.8.00

Art. 22.6

4.6.99

7.12.98

Art. 21.3(c) Art. 25

Arbitrations

12.12.00

Athrztn DSB

EC

Japan EC

42 DS138

43 DS139 DS142

38 39 40 41

DS132 DS135 DS136 DS162

36 DS122 37 DS126

US – Lead and Bismuth II Canada – Autos

EC Korea US New Zealand EC US – FSC EC Canada – Pharmaceutical Patents EC Argentina – Footwear (EC) Poland Thailand – H-Beams US Australia – Automotive Leather II US Mexico – Corn Syrup Canada EC – Asbestos EC US – 1916 Act Japan

30 DS98 31 DS99 32 DS103 DS113 33 DS108 34 DS114

35 DS121

EC EC EC US

27 DS79 28 DS87 DS110 29 DS90

Japan – Agricultural Products II India – Patents (EC) Chile – Alcoholic Beverages India – Quantitative Restrictions Korea – Dairy US – DRAMS Canada – Dairy

US

26 DS76

1.2.99

17.2.99

25.11.98 25.11.98 1.2.99 26.7.99

11.2.00

23.12.99

28.1.00 18.9.00 31.3.00 29.5.00

19.11.99 28.9.00 22.6.98 25.5.99

25.6.99

8.10.99 17.3.00

22.9.98 1.2.99 23.7.98

21.6.99 29.1.99 17.5.99

23.7.98 16.1.98 25.3.98

16.10.97 24.8.98 18.11.97 15.6.99 25.3.98 18.11.97 6.4.99

18.11.97 27.10.98

31.5.00

10.5.00

– 12.3.01 28.8.00

12.3.01 –

14.12.99

24.2.00 –

19.6.00

7.6.00

24.2.00 5.4.01 26.9.00

5.4.01 16.6.99

12.1.00

20.3.00 7.4.00

12.1.00 19.3.99 27.10.99

22.9.99

23.8.99 14.12.99 – 13.10.99

22.9.98 12.1.00

19.3.99

– 13.12.99

22.2.99

22.6.01

21.1.00

7.11.00 11.7.01 26.7.02 20.8.01

22.10.01

– 3.12.01 20.12.02 14.1.02

21.11.01

11.2.00

MAS 18.12.01 17.1.03 29.1.02

24.2.04 (DS136 only)

30.8.02

4.10.00

28.2.01

18.8.00

23.5.00

(cont.)

7.5.03

EC

Mexico EC

US Australia US EC

EC US US Australia

47 DS155

48 DS156 49 DS160

50 DS161 DS169 51 DS163 52 DS165

53 54 55 56

EC

New Zealand Australia

57 DS176

58 DS177 DS178

DS166 DS170 DS174, DS290

India EC US EC

44 DS141 45 DS146 DS175 46 DS152

Panel estblhd

1.5.01

2.1.02

16.5.01

1.2.02

19.1.01 12.10.00 20.4.05 20.4.05

19.6.00 10.1.01

– 11.12.00 22.12.00 18.9.00

10.1.01

17.11.00 27.7.00

11.12.00

– –

16.2.01

27.1.00

– –

12.3.01 5.4.02

1.3.01 19.3.02


27.10.99 30.10.00 17.11.00 21.12.01 27.7.00 US – Section 301 Trade 2.3.99 22.12.99 Act Argentina – Hides and 26.7.99 19.12.00 Leather Guatemala – Cement II 22.9.99 24.10.00 US – Section 110(5) 26.5.99 15.6.00 Copyright Act Korea – Various Mea- 26.5.99 31.7.00 sures on Beef 26.7.99 Korea – Procurement 16.6.99 1.5.00 US – Certain EC 16.6.99 17.7.00 Products US – Wheat Gluten 26.7.99 31.7.00 Canada – Patent Term 22.9.99 5.5.00 EC – Trademarks 2.10.03 15.3.05 and Geographical Indications US – Section 211 26.9.00 6.8.01 Appropriations Act US – Lamb 19.11.99 21.12.00

EC – Bed Linen India – Autos


(cont.)

29.11.02

Art. 21.5 report circulated 8.4.03

Art. 21.5 AB report circulated 24.4.03

Art. 21.5 reports adopted Art. 22.6

28.2.01

15.1.01

31.8.01

9.11.01

Art. 21.3(c) Art. 25

Arbitrations Athrztn DSB

Korea Japan EC

US – Stainless Steel US – Hot-Rolled Steel Argentina – Ceramic Tiles 62 DS192 Pakistan US – Cotton Yarn 63 DS194 Canada US – Export Restraints 64 DS202 Korea US – Line Pipe 65 DS204 US Mexico – Telecoms 66 DS206 India US – Steel Plate 67 DS207 Argentina Chile – Price Band System 68 DS211 Turkey Egypt – Steel Rebar 69 DS212 EC US – Countervailing Measures on Certain EC Products 70 DS213 EC US – Carbon Steel 71 DS217, Australia, US – Offset Act (Byrd DS234 Brazil, Chile, Amendment) EC, India, Indonesia, Japan, Korea, Thailand Canada, Mexico 72 DS219 Brazil EC – Tube or Pipe Fittings 73 DS221 Canada US – Section 129(c)(1) URAA 74 DS222 Brazil Canada –Aircraft Credits and Guarantees

59 DS179 60 DS184 61 DS189 8.10.01 – 15.2.02 – – 23.9.02

31.5.01 29.6.01 29.10.01 2.4.2004 28.6.02 3.5.02 8.8.02 31.7.02

3.7.02 16.9.02

7.3.03 15.7.02 28.1.02

19.6.00 11.9.00 23.10.00 17.4.02 24.7.01 12.3.01 20.6.01 10.9.01

10.9.01 23.8.01 10.9.01

24.7.01 23.8.01 12.3.01

–

–

22.7.03

28.11.02 16.1.03

– 9.12.02

– 24.7.01 –

19.11.99 22.12.00 20.3.00 28.2.01 17.11.00 28.9.01

19.2.02

30.8.02

18.8.03

19.12.02 27.1.03

1.10.02 8.1.03

5.11.01 23.8.01 8.3.02 1.6.04 29.7.02 23.10.02

1.2.01 23.8.01 5.11.01

17.2.03

31.8.04 (x 8)

13.6.03

17.3.03

26.7.02

19.2.02

(cont.)

18.3.03

26.11.04 (x7) 17.12.04 (x1)

Brazil

India

Japan

US India EC Japan Korea China Switzerland Norway New Zealand Brazil Canada US – Softwood Lumber IV Canada US – Softwood Lumber V

78 DS241

79 DS243

80 DS244

81 DS245 82 DS246 83 DS248, DS249, DS251, DS252, DS253, DS254, DS258, DS259 84 DS257

85 DS264

Chile

77 DS238

EC – Sardines US – Softwood Lumber III Argentina – Preserved Peaches Argentina – Poultry Anti-Dumping Duties US – Textiles Rules of Origin US – CorrosionResistant Steel Sunset Review Japan – Apples EC – Tariff Preferences US – Steel Safeguards

Peru Canada

75 DS231 76 DS236


(cont.)

29.8.03

1.10.02 8.1.2003 13.4.04

15.7.03 1.12.03 11.7.03

14.8.03

20.6.03

22.4.03

14.2.03

29.5.02 27.9.02

11.8.04

19.1.04

26.11.03 7.4.2004 10.11.03

15.12.03

–

–

–

26.9.02 –

31.8.04

17.2.04

10.12.03 20.4.04 10.12.03

9.1.04

21.7.03

19.5.03

15.4.03

23.10.02 1.11.02


3.6.02 27.1.03 3.6.02, ...

3.6.02

24.6.02

17.4.02

18.1.02

24.7.01 5.12.01

Panel estblhd



Art. 21.5 reports adopted Art. 22.6

13.12.04

20.9.04

Art. 21.3(c) Art. 25

Arbitrations Athrztn DSB

DS265 DS266 DS283 DS267

94 DS302

93 DS285

92 DS277

91 DS276

90 DS268

86 87 88 89

9.1.2004 26.11.04

21.7.2003 10.11.04

7.5.2003 22.3.04

31.3.2003 6.4..04

19.5.2003 16.7.04

19.5.2003 8.9.04

EC – Export Subsidies 29.8.2003 15.10.04 on Sugar

US – Subsidies on Upland Cotton Argentina US – Oil Country Tubular Goods Sunset Reviews US Canada – Wheat Exports and Grain Imports Canada US – Softwood Lumber VI Antigua and US – Gambling Barbuda Honduras Dominican Republic – Import and Sale of Cigarettes

Australia Brazil Thailand Brazil

–

30.8.04

29.11.04

26.4.04

27.9.04

17.12.04

Albania Angola Antigua and Barbuda Argentina Armenia Australia Austria Bahrain Bangladesh Barbados Belgium Belize Benin Bolivia

Member

1 2 1 3

1

1

32

7

–

9

Request to Join Consultations

1 9

Requested Consultations (Complainant)

3

9

15

Requested to Consult (Respondent)

6

1 4

Complaining Party in Panel/Disputes

WTO Dispute settlement – by Members (1 January 1995–31 December 2004) (Not Including Appellate Body Proceedings)

Annex III

2/4 1 1

1 2/4

25/30

8/12

Third Party in Panel/Disputes

1

5

8

Respondent in Panel/Disputes

Botswana Brazil Brunei Darussalam Bulgaria Burkina Faso Burundi Cambodia Cameroon Canada Central African Rep. Chad Chile China Colombia Congo Costa Rica Coˆ te d’Ivoire Croatia Cuba Cyprus Czech Rep. Dem. Rep. of Congo

1

2 2 2

7 4 12 2 7 4

9 1 4

3

48

2

12

26

22

2

1

10 1 1

13

12

1

4 1 1

16

12

6/12

8/9 2/4

1 14/16 26/37 11/16

1 39/55

20/31

3/4

8/10

3

(cont.)

Denmark Djibouti Dominica Dominican Rep. Ecuador Egypt El Salvador Estonia European Communities Fiji Finland Former Yugoslav Rep. of Macedonia France Gabon Gambia Georgia

Member

(cont.)

68

2


2

57

2

1 7 8


2

51

1 3 3

1


32/33

2


1/3

59/66

3 3 8 2 7/9


21/28

1

1


Germany Ghana Greece Grenada Guatemala Guinea Guinea Bissau Guyana Haiti Honduras Hong Kong, China Hungary Iceland India Indonesia Ireland Israel Italy Jamaica Japan Jordan Kenya

11

16 3

5 1 5

5

2

13

8/9

1/3

6/8 55/66

8/10 6/7 2 4/6 33/42 4

1/3

5 52

9 2

2

1

3/4

17 4 3

2

2

1 8/9

1

8 4 3 1 22 1

2

10

2

1

4/6

4/5 1/4 1

1

2

(cont.)

Korea, Rep. of Kuwait Kyrgyz Rep. Latvia Lesotho Liechtenstein Lithuania Luxembourg Macao, China Madagascar Malawi Malaysia Maldives Mali Malta Mauritania Mauritius Mexico

Member

(cont.)

2 25

12

1

13

1

2 2 1

2

13


14


12


7

1

8


3/5 23/34

1/3 1/3 2

17/29


4

6/8


Moldova Mongolia Morocco Mozambique Myanmar Namibia Nepal Netherlands New Zealand Nicaragua Niger Nigeria Norway Oman Pakistan Panama Papua New Guinea Paraguay Peru Philippines Poland Portugal 22 5

8 4 4

7 2

6 1

1

2 2

2 4 3

4 4 1 1

2

2

1

2 2 1

2

1

5

10/14 4/7 5 1

7 1

1 14/22

11/22 6

1 1

1

(cont.)

Qatar Romania Rwanda Saint Kitts and Nevis Saint Lucia Saint Vincent and the Grenadines Senegal Sierra Leone Singapore Slovak Rep. Slovenia Solomon Islands South Africa Spain Sri Lanka Suriname Swaziland

Member

(cont.)

1

1


2

1

2 2

2 2

2


2

3

2



3 1 1/3

2/4

2

1/3 3 1



Sweden Switzerland Chinese Taipei Tanzania Thailand Togo Trinidad and Tobago Tunisia Turkey Uganda United Arab Emirates United Kingdom United States Uruguay Venezuela Zambia Zimbabwe 6

3

41

11

2

80 1 1 3

4

14 4

4 2

1 88 1 2

7

2

1

1

1

33/35

1

5

1

1

50/60 3/5 8/15

8/16

1/3

3/8 17/27 1/3 13/23

1 46/57 1

2

1

Annex IV WTO Members’ participation in Appellate Body proceedings (either as an appellant or an appellee) ∗ (56 appeals to date of panel reports) (as of 31 December 2004)

r r r r r r r r r r r r r r ∗

r r r r r r r r r r r r r r

United States – 39 EU – 26 Canada – 13 India – 9 Japan – 8 Brazil – 7 Korea – 6 Australia – 4 Mexico – 4 Argentina – 3 Chile – 3 New Zealand – 3 Thailand – 3 Guatemala – 2 Does not include 21.5 compliance appeals

288

Pakistan – 2 Venezuela – 1 Philippines – 1 Costa Rica – 1 Ecuador – 1 Honduras – 1 Turkey – 1 Malaysia – 1 Poland – 1 Indonesia – 1 Peru – 1 China – 1 Switzerland – 1 Norway – 1

Annex V Substantive nature of cases litigated in WTO (according to preponderance of claims, by WTO agreement, raised in the case) (1995–2004)

Cases for Which Original Panel/AB Reports Have Been ∗ Circulated to Members (89) Trade Remedy Cases, of which: r Antidumping – 19 r Subsidies/CVD – 11 r Safeguards – 7 r Total

37

Non-Trade Remedy Cases, of which: r r r r r r

GATT 94 – 32 TRIPS – 7 AG/SPS – 6 ATC – 4 Services – 2 Rules of Origin – 1

r Total ∗

52

Does not include Article 21.5 compliance panel reports or appeals

289

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