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

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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

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ix

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

x

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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

notes on contributors

xi

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

notes on contributors

xiii

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 T¨ubingen (1st State Exam and Ph.D.), Universit´e de Gen`eve 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 Universit¨at 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

xiv

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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

notes on contributors

xv

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 Universit´e 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 Z¨urich. 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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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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table of cases

Short Title

Full Case Title and Citation

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

xxi

Short Title

Full Case Title and Citation

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

xxii

table of cases

Short Title

Full Case Title and Citation

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

Full Case Title and Citation

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

Full Case Title and Citation

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

Full Case Title and Citation

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

Full Case Title and Citation

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

Full Case Title and Citation

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

Full Case Title and Citation

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

Full Case Title and Citation

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

Full Case Title and Citation

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

Full Case Title and Citation

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

Full Case Title and Citation

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

Full Case Title and Citation

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

Full Case Title and Citation

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

Full Case Title and Citation

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

Full Case Title and Citation

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.

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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.

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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-`a-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

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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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

15

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

14 15

16

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

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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

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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

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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

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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

14 months and 11 days

11 months

14 months

N/A

15 months

12 months and 12 days

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-`a-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).

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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.

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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

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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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