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WTO ANALYTICAL INDEX: DISPUTE SETTLEMENT UNDERSTANDING

Understanding on Rules and Procedures Governing the Settlement of Disputes

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The texts reproduced here do not have the legal standing of the original documents which are entrusted and kept at the WTO Secretariat in Geneva.

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> Article 12
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> Article 14
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> Article 17
> Article 18
> Article 19
> Article 20
> Article 21
> Article 22
> Article 23
> Article 24
> Article 25
> Article 26
> Article 27
> Appendix 1
> Appendix 2
> Appendix 3
> Appendix 4
> Working Procedures for Appellate Review
> Rules of Conduct for the Understanding on Rules and Procedures Governing the Settlement of Disputes
> Principles and Concepts of General International Law Related to Dispute Settlement
> Articles of Covered Agreements Invoked in Panel and Appellate Body Proceedings

 

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I. Article 1    back to top

A. Text of Article 1

   Members hereby agree as follows:

Article 1: Coverage and Application

1.     The rules and procedures of this Understanding shall apply to disputes brought pursuant to the consultation and dispute settlement provisions of the agreements listed in Appendix 1 to this Understanding (referred to in this Understanding as the “covered agreements”). The rules and procedures of this Understanding shall also apply to consultations and the settlement of disputes between Members concerning their rights and obligations under the provisions of the Agreement Establishing the World Trade Organization (referred to in this Understanding as the “WTO Agreement”) and of this Understanding taken in isolation or in combination with any other covered agreement.

 

2.     The rules and procedures of this Understanding shall apply subject to such special or additional rules and procedures on dispute settlement contained in the covered agreements as are identified in Appendix 2 to this Understanding. To the extent that there is a difference between the rules and procedures of this Understanding and the special or additional rules and procedures set forth in Appendix 2, the special or additional rules and procedures in Appendix 2 shall prevail. In disputes involving rules and procedures under more than one covered agreement, if there is a conflict between special or additional rules and procedures of such agreements under review, and where the parties to the dispute cannot agree on rules and procedures within 20 days of the establishment of the panel, the Chairman of the Dispute Settlement Body provided for in paragraph 1 of Article 2 (referred to in this Understanding as the “DSB”), in consultation with the parties to the dispute, shall determine the rules and procedures to be followed within 10 days after a request by either Member. The Chairman shall be guided by the principle that special or additional rules and procedures should be used where possible, and the rules and procedures set out in this Understanding should be used to the extent necessary to avoid conflict.

 
B. Interpretation and Application of Article 1

1. Article 1.1: “covered agreements”

(a) General

1.     In Brazil — Desiccated Coconut, the Appellate Body defined the term “covered agreements” as follows:

“The ‘covered agreements’ include the WTO Agreement, the Agreements in Annexes 1 and 2, as well as any Plurilateral Trade Agreement in Annex 4 where its Committee of signatories has taken a decision to apply the DSU. In a dispute brought to the DSB, a panel may deal with all the relevant provisions of the covered agreements cited by the parties to the dispute in one proceeding.”(1)

2.     In Guatemala — Cement I, the Appellate Body examined the Panel’s interpretation of the relationship between Article 17 of the Anti-Dumping Agreement and the rules and procedures of the DSU. In this con text, the Appellate Body made the following general statement about Article 1.1 of the DSU:

Article 1.1 of the DSU establishes an integrated dispute settlement system which applies to all of the agreements listed in Appendix 1 to the DSU (the ‘covered agreements’). The DSU is a coherent system of rules and procedures for dispute settlement which applies to ‘disputes brought pursuant to the consultation and dispute settlement provisions of the covered agreements. The Anti-Dumping Agreement is a covered agreement listed in Appendix 1 of the DSU; the rules and procedures of the DSU, therefore, apply to disputes brought pursuant to the consultation and dispute settlement provisions contained in Article 17 of that Agreement.(2)

3.     In US — 1916 Act, the Appellate Body stated that:

“In examining the legal basis for the Panel’s jurisdiction to consider the claims of inconsistency made in respect of the 1916 Act as such, we begin with Article 1.1 of the DSU, which states, in relevant part:

 

The rules and procedures of this Understanding shall apply to disputes brought pursuant to the consultation and dispute settlement provisions of the agreements listed in Appendix 1 to this Understanding (referred to in this Understanding as the “covered agreements”), (emphasis added).

 

For the DSU to apply to claims that the 1916 Act as such is inconsistent with Article VI of the GATT 1994 and the Anti-Dumping Agreement, a legal basis to bring the claims must be found in the GATT 1994 and the Anti-Dumping Agreement, respectively. “(3)

(b) The DSU

4.     In India — Patents (US), the Appellate Body examined the Panel’s interpretation of various provisions of the TRIPS Agreement and noted that “as one of the covered agreements under the DSU, the TRIPS Agreement is subject to the dispute settlement rules and procedures of that Understanding”.(4) In India — Patents (EC), the Panel noted that “The DSU is not included in the definition of the “covered agreements” under Article 1.1, first sentence. However, the second sentence of Article 1.1 makes it clear that the rules and procedures of the DSU are applicable to disputes concerning Member’s rights and obligations under the DSU.”(5)

5.     In Argentina — Poultry Anti-Dumping Duties, Argentina objected to Brazil’s decision to make the entirely of its written submission available to the public. Argentina asked the Panel to express its view on whether doing so was consistent with Article 18.2 of the DSU. The United States, a third party in that case, argued that Article 18.2 of the DSU fell outside of the Panel’s terms of reference, and that the Panel should decline to provide views on the proper interpretation of that provision. The Panel disagreed:

“By virtue of Article 1.1 of the DSU, the provisions of the DSU apply to all WTO dispute settlement proceedings, subject to certain special or additional rules and procedures on dispute settlement identified in Appendix 2 to the DSU. The provisions of the DSU therefore apply in all cases, whether or not they are mentioned in a Member’s request for establishment of a panel. Indeed, we are not being asked to rule on whether a measure identified in the request for establishment is consistent with Article 18.2 of the DSU. Rather, we are being asked to make such rulings in respect of Article 18.2 of the DSU as are necessary to manage procedural aspects of these proceedings. By ruling in respect of Article 18.2 of the DSU, we are simply acting in conformity with Article 1.1 of the DSU. We are not purporting to make an interpretation within the meaning of Article IX:2 of the WTO Agreement. Accordingly, we reject the US argument that the Panel should decline to rule on the matter raised by Argentina.”(6)

(c) Bilateral agreements

6.     In EC — Poultry, the Appellate Body considered the relationship between Schedule LXXX of the European Communities and the so-called “Oilseeds Agreement”, which had been negotiated by the European Communities and ten other contracting parties, including Brazil. As a part of its agreement with Brazil, a “global” tariff-rate quota had been introduced by the European Communities and subsequently incorporated into the European Communities’ Schedule LXXX. Subsequently, in the context of the interpretation of the European Communities’ Schedule, the question of the relationship between Schedule LXXX and the Oilseeds Agreement arose. The European Communities argued that Schedule LXXX superseded and terminated the Oilseeds Agreement because the WTO Agreement was a later treaty relating to the same subject matter in accordance with Article 59(1) of the Vienna Convention; alternatively, the European Communities argued that the Oilseeds Agreement only applied to the extent compatible with Schedule LXXX, pursuant to Article 30(3) of the Vienna Convention. The Appellate Body stated:

“In our view, it is not necessary to have recourse to either Article 59.1 or Article 30.3 of the Vienna Convention, because the text of the WTO Agreement and the legal arrangements governing the transition from the GATT 1947 to the WTO resolve the issue of the relationship between Schedule LXXX and the Oilseeds Agreement in this case. Schedule LXXX is annexed to the Marrakesh Protocol to the General Agreement on Tariffs and Trade 1994 (the ‘Marrakesh Protocol’), and is an integral part of the GATT 1994. As such, it forms part of the multilateral obligations under the WTO Agreement. The Oilseeds Agreement, in contrast, is a bilateral agreement negotiated by the European Communities and Brazil under Article XXVIII of the GATT 1947, as part of the resolution of the dispute in EEC — Oilseeds. As such, the Oilseeds Agreement is not a ‘covered agreement’ within the meaning of Articles 1 and 2 of the DSU. Nor is the Oilseeds Agreement part of the multilateral obligations accepted by Brazil and the European Communities pursuant to the WTO Agreement, which came into effect on 1 January 1995. The Oilseeds Agreement is not cited in any Annex to the WTO Agreement. Although the provisions of certain legal instruments that entered into force under the GATT 1947 were made part of the GATT 1994 pursuant to the language in Annex 1A incorporating the GATT 1994 into the WTO Agreement, the Oilseeds Agreement is not one of those legal instruments.”(7)

7.     In EC — Commercial Vessels, the Panel examined a bilateral agreement between the European Communities and Korea referred to as the “Agreed Minutes”. The Panel noted the Agreed Minutes are not a “covered agreement” within the meaning of Articles 1 and 2 of the DSU. Citing the passage from the Appellate Body Report in EC — Poultry reproduced above, the Panel emphasized that:

“[l]ts review of the text of the Agreed Minutes only serves the purpose of enabling it to decide a factual issue on which the parties disagree and that it is not interpreting the Agreed Minutes in order to determine the rights and obligations of the parties under that bilateral agreement.”(8)

8.     In EC and certain member States — Large Civil Aircraft, the European Communities argued that, in its examination of the matter referred to it, the Panel should directly apply the provisions of a 1992 Agreement between the European Communities and the United States. The Panel stated that:

Article 7.2 of the DSU requires panels to “address the relevant provisions in any covered Agreement or Agreements cited by the parties to the dispute.” The ‘covered Agreements’ cited by the United States in document WT/DS316/2 include the DSU, the GATT 1994 and the SCM Agreement. As the 1992 Agreement is not a covered Agreement cited by the United States in document WT/ DS316/2, or contained in the list of covered Agreements in Appendix 1 to the DSU, or one of the instruments included in the GATT 1994, we do not have jurisdiction to determine of the rights and obligations of the parties under the 1992 Agreement.”(9)

2. Article 1.2: “special or additional rules and procedures”

(a) General

(i) Requirement to identify genuine “conflict” between DSU and special or additional rules and procedures

9.     In Guatemala — Cement I, the Appellate Body stated that special and additional rules within the meaning of Article 1.2 of the DSU apply only in the case of “inconsistency” or a “difference” between these rules and the provisions of the DSU:

Article 1.2 of the DSU provides that the ‘rules and procedures of this Understanding shall apply subject to such special or additional rules and procedures on dispute settlement contained in the covered agreements as are identified in Appendix 2 to this Understanding.’ (emphasis added) It states, furthermore, that these special or additional rules and procedures ‘shall prevail’ over the provisions of the DSU ‘[t]o the extent that there is a difference between’ the two sets of provisions (emphasis added) Accordingly, if there is no ‘difference’, then the rules and procedures of the DSU apply together with the special or additional provisions of the covered agreement. In our view, it is only where the provisions of the DSU and the special or additional rules and procedures of a covered agreement cannot be read as complementing each other that the special or additional provisions are to prevail. A special or additional provision should only be found to prevail over a provision of the DSU in a situation where adherence to the one provision will lead to a violation of the other provision, that is, in the case of a conflict between them. An interpreter must, therefore, identify an inconsistency or a difference between a provision of the DSU and a special or additional provision of a covered agreement before concluding that the latter prevails and that the provision of the DSU does not apply.”(10)

(ii) Agreements /provisions not included in Appendix 2 of the DSU

10.     In India — Quantitative Restrictions, India appealed the Panel’s conclusion that the Panel was competent to review the justification of India’s balance-of-payments (BOP) restrictions under Article XVIII:B of the GATT 1994. India argued that the Panel had erred by failing to give proper consideration to the “institutional balance” embodied in the WTO Agreement; according to India, BOP measures were within the exclusive competence of the BOP Committee and the General Council. India claimed that in view of the competence of the BOP Committee and the General Council with respect to balance-of-payments restrictions under Article XVIII: 12 of GATT 1994 and the BOP Understanding, the Panel erred in finding that the competence of panels to review the justification of balance-of-payments restrictions is “unlimited”. The Appellate Body ruled:

“We note that Appendix 1 to the DSU lists ‘Multilateral Agreements on Trade in Goods’, to which the GATT 1994 belongs, among the agreements covered by the DSU. A dispute concerning Article XVII:B is, therefore, covered by the DSU.

Appendix 2 does not identify any special or additional dispute settlement rules or procedures relating to balance-of-payments restrictions. It does not mention Article XVIII: B of the GATT 1994, or any of its paragraphs. The DSU is, therefore, fully applicable to the current dispute.”(11)

11.     In US — Upland Cotton, the Panel considered that the absence of any reference to any provision of the Agreement on Agriculture in Appendix 2 of the DSU had to be given meaning:

“[T]here is no special dispute settlement requirement foreseen in the covered agreements in respect of a panel’s consideration of the fulfilment of Article 13 conditions. The issue of fulfilment of the conditions of Article 13 of the Agreement on Agriculture is to be resolved using generally applicable DSU rules and procedures. The fact that certain very specific provisions are included in Appendix 2 of the DSU as special or additional rules indicates that, when the drafters intended to make a particular provision applicable as a special or additional dispute settlement rule, they did so explicitly. Therefore, their failure to include a reference to any provision of the Agreement on Agriculture in the text of Appendix 2 demonstrates that they did not intend to make any provision of that Agreement a special or additional dispute settlement rule. It is not necessary for us to look for any further interpretive guidance on this issue.”(12)

12.     In US — Oil Country Tubular Goods Sunset Reviews, the Panel noted that:

“Neither the provisions of Article 11 pertaining to reviews, nor the other provisions of the Agreement pertaining to investigations, are identified as such special or additional rules and procedures. Accordingly, we believe that the provisions of the DSU and the Antidumping Agreement must be read together in a coherent manner.”(13)

(b) Anti-Dumping Agreement

(i) General

13.     In examining the relationship between Article 17 of the Anti-Dumping Agreement and the rules and procedures of the DSU, the Panel in Guatemala — Cement I found that Article 17 of the Anti-Dumping Agreement “provides for a coherent set of rules for dispute settlement specific to anti-dumping cases … that replaces the more general approach of the DSU”. However, the Appellate Body disagreed with the Panel and held:

Article 17.3 of the Anti-Dumping Agreement is not listed in Appendix 2 of the DSU as a special or additional rule and procedure. It is not listed precisely because it provides the legal basis for consultations to be requested by a complaining Member under the Anti-Dumping Agreement. Indeed, it is the equivalent provision in the Anti-Dumping Agreement to Articles XXII and XXIII of the GATT 1994, which serve as the basis for consultations and dispute settlement under the GATT 1994, under most of the other agreements in Annex 1A of the Marrakesh Agreement Establishing the World Trade Organization (the ‘WTO Agreement), and under the Agreement on Trade-Related Aspects of intellectual Property Rights (the ‘TRIPS Agreement).

 Clearly, the consultation and dispute settlement provisions of a covered agreement are not meant to replace, as a coherent system of dispute settlement for that agreement, the rules and procedures of the DSU. To read Article 17 of the Anti-Dumping Agreement as replacing the DSU system as a whole is to deny the integrated nature of the WTO dispute settlement system established by Article 1.1 of the DSU.

 

For these reasons, we conclude that the Panel erred in finding that Article 17 of the Anti-Dumping Agreement ‘provides for a coherent set of rules for dispute settlement specific to anti-dumping cases … that replaces the more general approach of the DSU’.”(14)

14.     In US — Corrosion Resistant Steel Sunset Review, the Appellate Body summed up the situation of Articles 17.4 to 17.7 of the Anti-Dumping Agreement as special or additional rules as follows:

“We recall, in this regard, that Article 1.1 of the DSU applies the rules and procedures contained in the DSU to “disputes brought pursuant to the consultation and dispute settlement provisions of the agreements listed in Appendix 1”, but that this general rule is, under Article 1.2 of the DSU, subject to the special or additional rules and procedures on dispute settlement identified in Appendix 2 of the DSU. The Anti-Dumping Agreement is listed as a covered agreement in Appendix 1 of the DSU. Articles 17.4 through 17.7 of the Anti-Dumping Agreement are listed as special or additional rules in Appendix 2 of the DSU.”(15)

(ii) Standard of review

15.     In US — Hot-Rolled Steel, the Appellate Body pointed out that Article 17.6 of the Anti-Dumping Agreement is identified in Article 1.2 and Appendix 2 of the DSU as one of the special or additional rules and procedures that prevail over the DSU to the extent that there is a difference between those provisions and the provisions of the DSU. Quoting its previous Report in Guatemala — Cement I, the Appellate Body considered the extent to which Article 17.6 of the Anti-Dumping Agreement can properly be read as “complementing” the rules and procedures of the DSU or, conversely, the extent to which Article 17.6 “conflicts” with the DSU. With respect to Article 17.6(i) and the first sentence of Article 17.6(ii), the Appellate Body saw no “conflict” between these provisions and the DSU.(16) With respect to the second sentence of Article 17.6(ii), the Appellate Body characterized it as “supplementing, rather than replacing” the DSU:

“[Although the second sentence of Article 17.6(ii) of the Anti-Dumping Agreement imposes obligations on panels which are not found in the DSU, we see Article 17.6(ii) as supplementing, rather than replacing, the DSU, and Article 11 in particular. Article 11 requires panels to make an “objective assessment of the matter” as a whole. Thus, under the DSU, in examining claims, panels must make an “objective assessment” of the legal provisions at issue, their “applicability” to the dispute, and the “conformity” of the measures at issue with the covered agreements. Nothing in Article 17.6(ii) of the Anti-Dumping Agreement suggests that panels examining claims under that Agreement should not conduct an “objective assessment” of the legal provisions of the Agreement, their applicability to the dispute, and the conformity of the measures at issue with the Agreement. Article 17.6(ii) simply adds that a panel shall find that a measure is in conformity with the Anti-Dumping Agreement if it rests upon one permissible interpretation of that Agreement.”(17)

(iii) Implementation

16.     In US — Zeroing (Japan) (Article 21.5 — Japan), a question arose as to whether actions or omissions that occur after the expiration of the reasonable period of time due to domestic judicial proceedings are excluded from the implementing Member’s compliance obligations. The Appellate Body stated that:

“According to the United States, the relevant provisions for purposes of deciding the question before us are Article 13 and footnote 20 to Article 9.3.1 of the Anti-Dumping Agreement. Japan, by contrast, refers to several provisions of the DSU that it considers indicate the actions that a respondent Member must take to implement the DSB’s recommendations and rulings. We note, in this regard, that neither provision of the Anti-Dumping Agreement to which the United States refers is listed in Appendix 2 of the DSU as a special or additional rule and procedure that would prevail in case of conflict, in accordance with Article 1.2 of the DSU. Accordingly, the rule in Article 1.2 is inapplicable in this case. Therefore, both the Anti-Dumping Agreement and the DSU should be taken into account in this dispute and should be interpreted harmoniously. We begin our analysis with the provisions of the Anti-Dumping Agreement that the United States considers relevant to the issue raised on appeal, after which we will turn to the provisions of the DSU.”(18)

(c) SCM Agreement

(i) General

17.     In Korea — Commercial Vessels, the Panel stated that:

“We begin our consideration of these issues by noting that Articles 4.2, 4.4, 7.2 and 7.4 of the SCM Agreement are identified as “special or additional rules and procedures” in Appendix 2 of the DSU. If possible, these provisions should therefore be read so as to complement the relevant provisions of the DSU, including Article 4.2-4.7.”(19)

(ii) Consultations

18.     In Brazil — Aircraft, Brazil objected that certain measures referenced in Canada’s panel request were not the subject of consultations. In considering this issue, the Panel began by noting that:

“[W]e must apply not only the relevant provisions of the DSU, but also the special or additional dispute settlement provisions found in Article 4.2 through 4.12 of the SCM Agreement, keeping in mind the injunction of Article 1.2 of the DSU that, ‘[t]o the extent there is a difference between the rules and procedures of the [DSU] and the special or additional rules and procedures set forth in Appendix 2, the special or additional rules and procedures in Appendix 2 shall prevail.’”(20)

19.     In US — FSC, the United States argued that the European Communities’ claim under Article 3 of the SCM Agreement should have been dismissed because the request for consultations did not include a “statement of available evidence” as required by Article 4.2 of the SCM Agreement. In the context of addressing this issue, the Appellate Body stated that:

Article 1.2 of the DSU states that “the rules and procedures of the DSU shall apply subject to the special or additional rules and procedures on dispute settlement contained in the covered agreements as are identified in Appendix 2 to this Understanding”. Article 4.2 of the SCM Agreement is listed as a “special or additional rule or procedure” in Appendix 2 of the DSU. In our Report in Guatemala — Cement, we said that “the rules and procedures of the DSU apply together with the special or additional provisions of the covered agreement” except that, “in the case of a conflict between them”, the special or additional provision prevails.(21) Article 4.4 of the DSU requires that all requests for consultations, under the covered agreements, “give reasons for the request, including identification of the measures at issue and an indication of the legal basis for the complaint.” (emphasis added) It is clear to us that Article 4.4 of the DSU and Article 4.2 of the SCM Agreement can and should be read and applied together, so that a request for consultations relating to a prohibited subsidy claim under the SCM Agreement must satisfy the requirements of both provisions.”(22)

(iii) Implementation

20.     In Australia — Automotive Leather II (Article 21.5 — US), both parties argued that Article 4.7 of the SCM Agreement should be read consistently with Article 19.1 of the DSU. The Panel concluded that Article 19.1 of the DSU is not the basis of the recommendation in a case involving prohibited subsidies. The Panel stated:

“Rather, the recommendation to ‘withdraw the subsidy’ is required by Article 4.7 of the SCM Agreement, which is a special or additional rule or procedure on dispute settlement, identified in Appendix 2 of the DSU. It is Article 4.7 which we must interpret and apply in this dispute. In this respect, we note Article 1.2 of the DSU … Thus, to the extent that ‘withdraw the subsidy’ requires some action that is different from ‘bring the measure into conformity’, it is that different action which prevails.”(23)

21.     In US — Upland Cotton (Article 21.5 — Brazil), the Appellate Body stated that:

“In cases like this one, involving a determination that subsidies have resulted in adverse effects to the interests of another WTO Member, Article 7.8 of the SCM Agreement provides that “the Member granting or maintaining” the subsidy “shall take appropriate steps to remove the adverse effects or shall withdraw the subsidy”. Article 7.8 is one of the “special or additional rules and procedures on dispute settlement contained in the covered agreements” that are identified in Article 1.2 and Appendix 2 of the DSU, which prevail over the general DSU rules and procedures to the extent that there is a difference between them. As we see it, Article 7.8 specifies the actions that the respondent Member must take when a subsidy granted or maintained by that Member is found to have resulted in adverse effects to the interests of another Member. This means that, in order to determine whether there is compliance with the DSB’s recommendations and rulings in a case involving such actionable subsidies, a panel would have to assess whether the Member concerned has taken one of the actions foreseen in Article 7.8 of the SCM Agreement. We agree, therefore, with the Panel that we must also take into account Article 7.8 of the SCM Agreement in order to determine the proper scope of these Article 21.5 proceedings.”(24)

(iv) Countermeasures

22.     In Brazil — Aircraft (Article 22.6 — Brazil), the Arbitrators noted that the provisions that established their mandate included under Article 4.11 and footnote 10 of the SCM Agreement, and Articles 22.6 and 22.7 of the DSU. The Arbitrators stated that:

“The Arbitrators are aware that Article 4.10 and 11 has the status of “special or additional rules and procedures”, within the meaning of Article 1.2 of the DSU. Having considered the views expressed by the parties, we follow the practice of the Appellate Body as defined more specifically in its report on Guatemala — Anti-Dumping Investigation Regarding Portland Cement from Mexico.”(25),(26)

23.     In US — FSC (Article 22.6 — United States), the Arbitrators stated that:

“As we have already noted in our analysis of the text of Article 4.10 of the SCM Agreement above, there is, by contrast, no such indication of an explicit quantitative benchmark in that provision. It should be recalled here that Articles 4.10 and 4.11 of the SCM Agreement are “special or additional rules” under Appendix 2 of the DSU, and that in accordance with Article 1.2 of the DSU, it is possible for such rules or procedures to prevail over those of the DSU. There can be no presumption, therefore, that the drafters intended the standard under Article 4.10 to be necessarily coextensive with that under Article 22.4 so that the notion of “appropriate counter-measures” under Article 4.10 would limit such counter-measures to an amount “equivalent to the level of nullification or impairment” suffered by the complaining Member. Rather, Articles 4.10 and 4.11 of the SCM Agreement use distinct language and that difference must be given meaning.”(27)

24.     In US — Upland Cotton (Article 22.6 — United States II), the Arbitrator observed that:

“The question before us in this case is whether Article 22.3 of the DSU and Article 7.9 and 7.10 of the SCM Agreement can be read as complementing each other, or whether adherence to the principles and procedures contained in Article 22.3 of the DSU would lead to a violation of Article 7.9 or 7.10 of the SCM Agreement, such that there is a conflict between the two provisions. In other words, we must clarify whether the special or additional rules of Article 7.9 and 7.10 of the SCM Agreement constitute the entirety of the applicable rules relating to the type and level of countermeasures that may be authorized in relation to actionable subsidies, or whether the principles and procedures of Article 22.3 of the DSU and these provisions may be read as complementing each other in defining the rules applicable to the suspension of concessions or other obligations in relation to actionable subsidies.”(28)

(d) TBT Agreement

25. In EC — Asbestos, the Panel decided to seek the opinion of individual scientific experts, rather than establishing an expert review group. The European Communities objected, arguing among other things that if the measure in question should be considered as coming under the TBT Agreement, Article 14.2 of the TBT Agreement would mean that a technical expert group would have to be consulted for any scientific or technical question. The European Communities argued that, pursuant to Article 1.2 of the Understanding, Article 14.2 of the TBT Agreement would prevail over the provisions in Article 13 of the DSU. The Panel responded that:

Article 14.2 of the TBT Agreement is one of the provisions mentioned in Appendix 2 to the Understanding and which, according to Article 1.2 of the Understanding, prevails over the latter if there is any difference between the two. We note, however, that it is only ‘if there is any difference’ between the rules and procedures in the Understanding and a special or additional rule or procedure covered by Appendix 2 to the Understanding that the latter would prevail. As the Appellate Body has already pointed out, it is only when the provisions in the Understanding and the special or additional rules and procedures in Appendix 2 cannot be construed as complementary that the special or additional rules will prevail over those in the Understanding, in other words, in a situation where the two provisions would be mutually incompatible.(29) In this particular case, Article 14.2 of the TBT Agreement provides that a panel ‘may’ establish a technical expert group. Like Article 13.2 of the Understanding, this text allows the possibility of establishing an expert group and determines the procedures applicable to it, where applicable. It does not however make the establishment of such a group mandatory and, in our view, this possibility is not incompatible with the overall possibility given in Article 13 of the Understanding of consulting experts individually. The two provisions can be seen as complementary.”(30)

 

II. Article 2     back to top

A. Text of Article 2

Article 2: Administration

1.     The Dispute Settlement Body is hereby established to administer these rules and procedures and, except as otherwise provided in a covered agreement, the consultation and dispute settlement provisions of the covered agreements. Accordingly, the DSB shall have the authority to establish panels, adopt panel and Appellate Body reports, maintain surveillance of implementation of rulings and recommendations, and authorize suspension of concessions and other obligations under the covered agreements. With respect to disputes arising under a covered agreement which is a Plurilateral Trade Agreement, the term “Member” as used herein shall refer only to those Members that are parties to the relevant Plurilateral Trade Agreement. Where the DSB administers the dispute settlement provisions of a Plurilateral Trade Agreement, only those Members that are parties to that Agreement may participate in decisions or actions taken by the DSB with respect to that dispute.

 

2.     The DSB shall inform the relevant WTO Councils and Committees of any developments in disputes related to provisions of the respective covered agreements.

 

3.     The DSB shall meet as often as necessary to carry out its functions within the time-frames provided in this Understanding.

 

4.     Where the rules and procedures of this Understanding provide for the DSB to take a decision, it shall do so by consensus.(1)

 

(footnote original) 1 The DSB shall be deemed to have decided by consensus on a matter submitted for its consideration, if no Member, present at the meeting of the DSB when the decision is taken, formally objects to the proposed decision.

 
B. Interpretation and Application of Article 2

1. General

(a) Legal effect of statements made by Members at DSB meetings

26.     In US — Gambling, the Panel suggested that the United States was “bound” by certain statements it had made at DSB meetings:

“During two successive DSB meetings, the United States stated that a prohibition on the “cross-border supply of gambling and betting services under US laws” exists in the United States.(31) The panel’s decision in US — Section 301 Trade Act appears to support the view that the United States should be bound by these statements.(32) The statements were made by representatives of the United States to express their understanding of US law. They were made in the context of a formal WTO meeting for the record. The United States has not argued that the representatives were acting outside the authority bestowed upon them in making these statements.”(33)

27.     In EC — Bananas III (Article 21.5 — US) / EC — Bananas III (Article 21.5 — Ecuador II), the European Communities argued that the Understandings on Bananas between the European Communities and Ecuador and the United States legally barred those Members from initiating Article 21.5 proceedings. The Panel rejected that argument for several reasons, one of which was that the parties had made conflicting statements to the DSB concerning the nature of the Bananas Understandings, and in particular whether they were properly characterized as a “mutually agreed solution” within the meaning of Article 3.6 of the DSU.(34) In this regard, the Appellate Body stated that:

“We consider that these statements may be taken into account where the interpretation of the Understandings is not clear from the language used in its context. However, where the text of the Understandings is clear, these statements have limited relevance, if any, for the purpose of interpreting the Understandings. The parties’ obligations must first and foremost be determined on the basis of the text of the Understandings. In any event, ex post communications of the parties concerning the Understandings have, at best, slight evidentiary value.

 [W]e conclude that the Panel erred in placing the relevance it did on the conflicting statements of the parties at the meeting of the DSB, because, what the Panel was required to do was to provide an interpretation of the text of the Understandings. Only once it had done so, could it then consider conflicting statements to the DSB for the limited purpose of either seeking confirmation of the Panel’s interpretation, or determining the meaning because the textual interpretation left the meaning ambiguous or led to manifestly absurd results. “(35)

28.     In the same case, the European Communities argued that even if the complainants were not legally barred from bringing a case, the complaint did not fall within the scope of Article 21.5 of the DSU because the measures being challenged were not “measures taken to comply” with the original DSB recommendations and rulings in EC — Bananas III. In this regard, the European Communities argued that the EC — Bananas III dispute had ended before the introduction of the new measures. The European Communities argued that this was evidenced, among other things, by the fact that EC — Bananas III was removed as a DSB agenda item in February 2002, and by the fact that the United States had terminated its suspension of concessions at that time. The Panel relied on certain contemporaneous statements made by the United States (and Ecuador and Honduras) at a DSB meeting held on 1 February 2002 for the purpose of demonstrating that the complainants did not consider these actions as amounting to a final solution to the dispute.(36) In this regard, the Appellate Body considered that “the Panel was correct in taking into account the United States’ statement at the DSB meeting held on 1 February 2002 in assessing whether the United States’ termination of the suspension of concessions could be regarded as a final solution to the dispute”.(37)

29.     In US/Canada — Continued Suspension, the Appellate Body concluded that the Panel in that case erred in its treatment of statements that the United States and Canada made at DSB meetings. The Panel had concluded — on the basis of the statements made by Canadian and United States delegates at two DSB meetings — that the United States and Canada had reached “a more or less final decision” that the EC measure at issue was inconsistent with the SPS Agreement and failed to implement the DSB’s recommendations and rulings in EC — Hormones. Such statements, in the Panel’s view, constituted a “determination” under Article 23.2(a) of the DSU and, because the determination was made unilaterally without recourse to the DSU, it breached Article 23.2(a). In the context of reversing the Panel’s finding and reasoning, the Appellate Body explained that:

“DSB statements are not intended to have legal effects and do not have the legal status of a definitive determination in themselves. Rather, they are views expressed by Members and should not be considered to prejudice Members’ position in the context of a dispute. As the United States rightly points out, “[statements made by Members at DSB meetings, especially those expressing a view as to the WTO consistency of another Member’s measures or actions, are generally diplomatic or political in nature” and “generally have no legal effect or status in and of themselves”.

 

The Panel’s finding that DSB statements could constitute a definitive determination concerning the WTO-inconsistency of a Member’s measure could adversely affect WTO Members’ ability to freely express their views on the potential compatibility with the covered agreements of measures adopted by other Members.(38) This would result in a “chilling” effect on those statements, because Members would refrain from expressing their views at DSB meetings regarding the WTO-inconsistency of other Members’ measures lest such statements be found to constitute a violation of Article 23. If this were the case, the DSB would be inhibited from properly carrying out its function, pursuant to Article 21.6 of the DSU, to keep under surveillance the implementation of its recommendations and rulings.”(39)

(b) Legal effect of DSB “taking note” of statements made at DSB meetings

30.     In EC — Bananas III (Article 21.5 — US), discussed above, the Panel stated that:

“As mentioned above, at its meeting of 1 February 2002 the DSB “took note of the statements” made in the context of the “Surveillance of implementation of recommendations adopted by the DSB” in the EC — Bananas III dispute. In this regard the United States argues that:

 

“The DSB simply ‘took note’ of the statements and did not take a decision on this issue. The fact that other Members did not request that this matter be on the agenda of subsequent meetings presumably reflects that little would have been gained by keeping this matter on the DSB agenda until the EC took the next step on January 1, 2006.”

 

The Panel notes that under the agenda item “Surveillance of implementation of recommendations adopted by the DSB”, the DSB would usually both “take note of the statements made” and explicitly “agree to revert to the matter at its following regular meeting” in situations where no Member contests that compliance has not yet been achieved by the complainant or the dispute is not yet settled.

 

Under the agenda item “Surveillance of implementation of recommendations adopted by the DSB”, the DSB would merely “take note of the statements made” without explicitly agreeing to revert to the matter in various types of situations. In some cases, it seems that the DSB would merely take note of the statements made because no Member contests that compliance has been achieved. However, there are also numerous instances where, under the agenda item “Surveillance of implementation of recommendations adopted by the DSB”, the DSB would merely take note of statements contesting whether compliance has been achieved, without explicitly agreeing to revert to the matter.

 

Therefore, the Panel cannot consider the mere fact that the DSB only took note of the statements made at its meeting of 1 February 2002 as an indication that the original DSB recommendations in the EC — Bananas III dispute were fully complied with, nor as an indication that those recommendations were not fully complied with.

 

The Panel notes in this context that, on at least one occasion, the DSB discussed the “Surveillance of implementation of recommendations adopted by the DSB” and merely took note of statements contesting whether compliance had been achieved, and subsequently agreed to establishing a compliance panel pursuant to Article 21.5 of the DSU. In EC — Bananas III, at the DSB meeting of 25 November 1998 the DSB Members expressed diverging opinions as to the first EC attempt to comply referred to in a status report of the European Communities achieves compliance. The DSB merely took note of the statements made, without explicitly agreeing to revert to the matter at its next regular meeting. This did not prevent the DSB from establishing, at a later meeting, the first compliance panel requested by Ecuador in EC-Bananas lll.”(40)

31.     In US — Large Civil Aircraft (2nd complaint), the European Communities requested the Panel to rule that the information-gathering procedure provided for in Annex V of the SCM Agreement had been initiated in this dispute, and that the United States was therefore under an obligation to respond to certain questions put to the United States by the European Communities. The Panel denied the European Communities’ request, and declined to rule that the Annex V procedure had been initiated. In the circumstances of that case, the fact that the DSB “merely ‘took note’” of the statements was highly significant:

“The Panel is unable to rule that an Annex V procedure was initiated in this dispute. Paragraph 2 of Annex V of the SCM Agreement provides that, in cases where matters are referred to the DSB under Article 7.4 of the SCM Agreement, and serious prejudice has to be demonstrated, “the DSB shall, upon request, initiate the procedure” envisaged in Annex V. In this case, the European Communities requested that an Annex V information-gathering process be initiated. However, the United States refused, for various reasons, to consent to the initiation of an Annex V procedure in this dispute. It is clear from the minutes of the DSB meetings where this matter was discussed that the DSB never took any action to initiate an Annex V procedure, or to designate a DSB representative pursuant to paragraph 4 of Annex V. Rather, the DSB merely “took note” of the statements made by Members at those meetings.”(41)

2. Article 2.1

(a) Relationship between first and second sentence of Article 2.1

32.     In US — Stainless Steel (Mexico), the Appellate Body explained the function of the term “accordingly” in the context of the second sentence of Article 11 of the DSU, and noted a parallel with the function of the term “accordingly” in the second sentence of Article 2.1 of the DSU:

“Mexico stated at the oral hearing that its claim focuses on the first sentence of Article 11 of the DSU. However, we observe that the second sentence of Article 11 begins with the term “accordingly”. This term creates a link between the first and the second sentence of Article 11(307); it ties the second sentence to the general description contained in the first sentence. The second sentence enunciates two specific “functions” of panels, namely, the duty “to make an objective assessment of the matter before it” and “to make such other findings as will assist the DSB in making the recommendations or in giving the rulings” under the covered agreements.

 

(footnote original) 307 The word “accordingly” is used in a similar way in Article 2 of the DSU. There, the first sentence establishes the DSB. In the second sentence, starting with the word “accordingly”, the DSB is provided with “the authority to establish panels, adopt panel and Appellate Body reports, maintain surveillance of implementation of rulings and recommendations, and authorize suspension of concessions and other obligations under the covered agreements.””(42)

3. Article 2.4

(a) Types of “decisions” covered by and subject to the consensus requirement

33.     In US — Large Civil Aircraft (2nd complaint), the European Communities requested the Panel to rule that the information-gathering procedure provided for in Annex V of the SCM Agreement had been initiated in this dispute, and that the United States was therefore under an obligation to respond to certain questions put to the United States by the European Communities. In support of that position, the European Communities argued that the initiation of an Annex V procedure is not a DSB “decision” within the meaning of Article 2.4 of the DSU that must be taken by consensus; rather, the European Communities argued, it is a DSB “action” which is not subject to the consensus rule in Article 2.4, and which “occurs automatically” upon request unless there is negative consensus not to take the action. The Panel declined the EC request on other grounds, without expressing a view on whether the initiation of an Annex V procedure is a “decision” subject to consensus within the meaning of Article 2.4:

“The Panel is not convinced by the European Communities’ argument. It may well be that the initiation of an Annex V procedure is not a “decision” that is subject to consensus within the meaning of Article 2.4 of the DSU. However, it does not follow that the initiation of an Annex V procedure “occurs automatically” in the absence of any action by the DSB to initiate the procedure. We see no basis for such an interpretation in the text of paragraph 2 of Annex V, which states that “the DSB shall, upon request, initiate the procedure” envisaged in Annex V. The term “initiate” means “[b]egin, introduce, set going, originate”. The ordinary meaning of the term “initiate”, used in the immediate context of a positive duty formulated in the active voice (“the DSB shall … initiate”), implies that some form of action is required on the part of the DSB. Furthermore, the European Communities’ interpretation of paragraph 2 of Annex V would effectively remove the DSB from having any role in the initiation of an Annex V procedure, which seems inconsistent with the ordinary meaning of the terms of that provision. Finally, accepting the European Communities’ argument that there are certain so-called DSB “actions” that may be deemed to “occur automatically” in the absence of any indication of agreement or actual action by the DSB could have far-reaching and potentially surprising systemic consequences that would be inconsistent with the object and purpose of providing “security and predictability” to the multilateral trading system. For these reasons, we conclude that, even though it may well be that the initiation of an Annex V procedure is not subject to consensus, the initiation of an Annex V procedure does not “occur automatically” upon request, in the absence of any action by the DSB to initiate the procedure.”(43)

4. Rules of Procedure for Meetings of the Dispute Settlement Body

(a) General

34.     At its meeting of 10 February 1995, the DSB in accordance with Article IV:3 of the WTO Agreement, adopted the Rules of Procedure contained in PC/IPL/9 with the exception of the rules concerning officers and the participation of international organisations as observers in the WTO which were at the time, open issues. Once agreement was reached on those pending issues, the rules of procedure were circulated in document WT/DSB/9. Further to WT/DSB/9, the DSB follows the rules of procedure for meetings of the General Council ( WT/L/161), except as otherwise provided in the DSU or in document WT/DSB/9.

35.     The Rules of Procedure for DSB meetings are reproduced below:

Rules of Procedure for Meetings of the Dispute Settlement Body

1.     When the General Council convenes as the Dispute Settlement Body (DSB), it shall follow the rules of procedure for meetings of the General Council, except as provided otherwise in the Dispute Settlement Understanding (DSU) or below.

Chapter IV — Observers

2.     Observership at meetings of the DSB shall be governed by paragraphs 9 to 11 of Annex 2 and paragraph 3, including footnote 5 of Annex 3 to these Rules.(1)

 

(footnote original) 1 WT/L/161.

Chapter V-Officers

3.     The DSB shall elect its own Chairperson(*) from among the representatives of Members. The election shall take place at the first meeting of the year and shall take effect at the end of the meeting. The Chairperson shall hold office until the end of the first meeting of the following year.

 

(footnote original) * The Dispute Settlement Body shall apply the relevant guidelines contained in the “Guidelines for Appointment of Officers to WTO Bodies” (WT/L731).

 

4.     If the Chairperson is absent from any meeting or part thereof, the Chairperson of the General Council or in the latter’s absence, the Chairperson of the Trade Policy Review Body, shall perform the functions of the Chairperson. If the Chairpersons of the General Council and of the Trade Policy Review Body are also not present, the DSB shall elect an interim Chairperson for that meeting or that part of the meeting.

 

5.     If the Chairperson can no longer perform the functions of the office, the DSB shall designate a Chairperson in accordance with paragraph 4 to perform those functions pending the election of a new Chairperson.

(b) Procedure for communications to the DSB Chairman

36.     At its meeting on 31 May 1995, the DSB agreed that:

“Where there is a requirement under the DSU or any other covered agreements that communications by delegations be addressed to the DSB Chairman such communications should always be sent to the WTO Secretariat with a copy to the DSB Chairman. Members are invited to contact the Council Division in the WTO Secretariat, to inform it that a communication is being sent in order to enable an expeditious processing and circulation of communications.”(44)

5. DSB decisions on computation of time-periods under the DSU

(a) DSB decision concerning “date of circulation” in the DSU and its additional and special rules

37.     At its meeting of 29 March 1995, the DSB agreed to the following practice:

“When there is a reference to the terms “date of circulation” or “issuance to all Members” or “issuance to the Members” in the DSU and its additional and special rules, the date to be used is the date printed on the WTO document to be circulated with the assurance of the Secretariat that the date printed on the document is the date on which this document is effectively put in the pigeon holes of delegations in all three working languages. This practice will be used on a trial basis and be subject to revision when necessary.”(45)

(b) DSB decision concerning time-periods expiring on a weekend or holiday

38.     At its meeting of 27 September 1995, the DSB agreed to the following practice concerning the expiration of time-periods:

“When, under the DSU (and its special or additional rules and procedures), a time-period within which a communication must be made or action taken by a Member to exercise or preserve its rights expires on a non-working day of the WTO Secretariat, any such communication or action will be deemed to have been made or taken on the WTO non-working day if lodged on the first working day of the WTO Secretariat following the day on which such time-period would normally expire.”(46)

(c) Computation of time-periods in appellate proceedings

39.     See Rule 17 of the Working Procedures for Appellate Review.

 

III. Article 3     back to top

A. Text of Article 3

Article 3: General Provisions

1.     Members affirm their adherence to the principles for the management of disputes heretofore applied under Articles XXII and XXIII of GATT 1947, and the rules and procedures as further elaborated and modified herein.

 

2.     The dispute settlement system of the WTO is a central element in providing security and predictability to the multilateral trading system. The Members recognize that it serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law. Recommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreements.

 

3.     The prompt settlement of situations in which a Member considers that any benefits accruing to it directly or indirectly under the covered agreements are being impaired by measures taken by another Member is essential to the effective functioning of the WTO and the maintenance of a proper balance between the rights and obligations of Members.

 

4.     Recommendations or rulings made by the DSB shall be aimed at achieving a satisfactory settlement of the matter in accordance with the rights and obligations under this Understanding and under the covered agreements.

 

5.     All solutions to matters formally raised under the consultation and dispute settlement provisions of the covered agreements, including arbitration awards, shall be consistent with those agreements and shall not nullify or impair benefits accruing to any Member under those agreements, nor impede the attainment of any objective of those agreements.

 

6.     Mutually agreed solutions to matters formally raised under the consultation and dispute settlement provisions of the covered agreements shall be notified to the DSB and the relevant Councils and Committees, where any Member may raise any point relating thereto.

 

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

 

8.     In cases where there is an infringement of the obligations assumed under a covered agreement, the action is considered prima facie to constitute a case of nullification or impairment. This means that there is normally a presumption that a breach of the rules has an adverse impact on other Members parties to that covered agreement, and in such cases, it shall be up to the Member against whom the complaint has been brought to rebut the charge.

 

9.     The provisions of this Understanding are without prejudice to the rights of Members to seek authoritative interpretation of provisions of a covered agreement through decision-making under the WTO Agreement or a covered agreement which is a Plurilateral Trade Agreement.

 

10.     It is understood that requests for conciliation and the use of the dispute settlement procedures should not be intended or considered as contentious acts and that, if a dispute arises, all Members will engage in these procedures in good faith in an effort to resolve the dispute. It is also understood that complaints and counter-complaints in regard to distinct matters should not be linked.

 

11.     This Understanding shall be applied only with respect to new requests for consultations under the consultation provisions of the covered agreements made on or after the date of entry into force of the WTO Agreement. With respect to disputes for which the request for consultations was made under GATT 1947 or under any other predecessor agreement to the covered agreements before the date of entry into force of the WTO Agreement, the relevant dispute settlement rules and procedures in effect immediately prior to the date of entry into force of the WTO Agreement shall continue to apply.(2)

 

(footnote original) 2 This paragraph shall also be applied to disputes on which panel reports have not been adopted or fully implemented.

 

12.     Notwithstanding paragraph 11, if a complaint based on any of the covered agreements is brought by a developing country Member against a developed country Member, the complaining party shall have the right to invoke, as an alternative to the provisions contained in Articles 4, 5, 6 and 12 of this Understanding, the corresponding provisions of the Decision of 5 April 1966 (BISD 14S/18), except that where the Panel considers that the time-frame provided for in paragraph 7 of that Decision is insufficient to provide its report and with the agreement of the complaining party, that time-frame may be extended. To the extent that there is a difference between the rules and procedures of Articles 4, 5, 6 and 12 and the corresponding rules and procedures of the Decision, the latter shall prevail.

 
B. Interpretation and Application of Article 3

1. Article 3.1

40.     In US — 1916 Act, the Appellate Body found that legislation may be challenged “as such”, and not merely as applied, in WTO dispute settlement proceedings. In support of this conclusion, the Appellate Body referred to GATT practice and Article 3.1:

“Thus, that a Contracting Party could challenge legislation as such before a panel was well-settled under the GATT 1947. We consider that the case law articulating and applying this practice forms part of the GATT acquis which, under Article XVI: 1 of the WTO Agreement, provides guidance to the WTO and, therefore, to panels and the Appellate Body. Furthermore, in Article 3.1 of the DSU, Members affirm “their adherence to the principles for the management of disputes heretofore applied under Articles XXII and XXIII of GATT 1947”. “(47)

2. Article 3.2

(a) “security and predictability”

(i) General

41.     Panels and the Appellate Body have referred to the principle of “security and predictability” in numerous cases, and in the context of a variety of issues.

42.     In Japan — Alcoholic Beverages II, the Appellate Body examined whether the Japanese tax measure governing the taxation of alcoholic beverages violated Article III:2 of GATT 1994. After concurring with the Panel’s finding that the Liquor Tax Law was not in compliance with Article III:2, the Appellate Body made the following general statement about WTO rules and the concept of “security and predictability”:

“WTO rules are reliable, comprehensible and enforceable. WTO rules 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. They will serve the multilateral trading system best if they are interpreted with that in mind. In that way, we will achieve the ‘security and predictability’ sought for the multilateral trading system by the Members of the WTO through the establishment of the dispute settlement system.”(48)

43.     In EC — Computer Equipment, the Appellate Body referred to “security and predictability” as an object and purpose of the WTO Agreement generally, stating that “the security and predictability of the reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other trade barriers to trade’ is an object and purpose of the WTO Agreement, generally, as well as of the GATT 1994.”(49)

44.     In US — Section 301 Trade Act, the Panel examined the European Communities’ argument that Section 301 was inconsistent with Article 23 of the DSU as well as various articles of GATT 1994. In its examination, the Panel discussed the importance of the concept of “security and predictability” and stated:

“Providing security and predictability to the multilateral trading system is another central object and purpose of the system which could be instrumental to achieving the broad objectives of the Preamble. Of all WTO disciplines, the DSU is one of the most important instruments to protect the security and predictability of the multilateral trading system and through it that of the market-place and its different operators. DSU provisions must, thus, be interpreted in the light of this object and purpose and in a manner which would most effectively enhance it. In this respect we are referring not only to preambular language but also to positive law provisions in the DSU itself.”(50)

45.     In US — Corrosion-Resistant Steel Sunset Review, the Appellate Body considered that excluding claims against legislation “as such” would frustrate the objective of security and predictability:

“In addition, in GATT and WTO dispute settlement practice, panels have frequently examined measures consisting not only of particular acts applied only to a specific situation, but also of acts setting forth rules or norms that are intended to have general and prospective application. In other words, instruments of a Member containing rules or norms could constitute a “measure”, irrespective of how or whether those rules or norms are applied in a particular instance. This is so because the disciplines of the GATT and the WTO, as well as the dispute settlement system, are intended to protect not only existing trade but also the security and predictability needed to conduct future trade. This objective would be frustrated if instruments setting out rules or norms inconsistent with a Member’s obligations could not be brought before a panel once they have been adopted and irrespective of any particular instance of application of such rules or norms. It would also lead to a multiplicity of litigation if instruments embodying rules or norms could not be challenged as such, but only in the instances of their application. Thus, allowing claims against measures, as such, serves the purpose of preventing future disputes by allowing the root of WTO-inconsistent behaviour to be eliminated.”(51)

46.     In US — Stainless Steel (Mexico), the Appellate Body concluded that ensuring security and predictability in the dispute settlement system, as contemplated in Article 3.2 of the DSU, implies that, absent cogent reasons, an adjudicatory body will resolve the same legal question in the same way in a subsequent case.(52)

47.     In US — Continued Suspension I Canada — Continued Suspension, the Appellate Body stated that:

“Requiring termination of the suspension of concessions simply because a Member declares that it has removed the inconsistent measure, without a multilateral determination that substantive compliance has indeed been achieved, would undermine the important function of the suspension of concessions in inducing compliance. This would significantly weaken the effectiveness of the WTO dispute settlement system and its ability to provide security and predictability to the multilateral trading system.”(53)

48.     In the same case, the Appellate Body also observed that:

“[W]ithout a proper identification of the time at which the continued suspension of concessions would be found to constitute a unilateral determination inconsistent with the DSU, WTO Members would be unsure as to when or for how long they could properly rely on a DSB authorization to suspend concessions. Such an outcome is contrary to the DSU’s objective of providing security and predictability.”(54)

49.     In China — Publications and Audiovisual Products, the Appellate Body offered the following guidance on the use of arguendo assumptions by panels:

“We observe that reliance upon an assumption arguendo is a legal technique that an adjudicator may use in order to enhance simplicity and efficiency in decision-making. Although panels and the Appellate Body may choose to employ this technique in particular circumstances, it may not always provide a solid foundation upon which to rest legal conclusions. Use of the technique may detract from a clear enunciation of the relevant WTO law and create difficulties for implementation. Recourse to this technique may also be problematic for certain types of legal issues, for example, issues that go to the jurisdiction of a panel or preliminary questions on which the substance of a subsequent analysis depends. The purpose of WTO dispute settlement is to resolve disputes in a manner that preserves the rights and obligations of WTO Members and clarifies existing provisions of the covered agreements in accordance with the customary rules of interpretation of public international law. In doing so, panels and the Appellate Body are not bound to favour the most expedient approach or that suggested by one or more of the parties to the dispute. Rather, panels and the Appellate Body must adopt an analytical methodology or structure appropriate for resolution of the matters before them, and which enables them to make an objective assessment of the relevant matters and make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in the covered agreements.”(55)

50.     In that case, the Appellate Body concluded that it was not appropriate to proceed on the basis of an arguendo assumption on the question of whether the defence in Article XX(a) of the GATT 1994 could be invoked in respect of paragraph 5.1 of China’s Accession Protocol:

“In our view, assuming arguendo that China can invoke Article XX(a) could be at odds with the objective of promoting security and predictability through dispute settlement, and may not assist in the resolution of this dispute, in particular because such an approach risks creating uncertainty with respect to China’s implementation obligations.”(56)

(ii) Relationship to Article 12.7

51.     In Mexico — Corn Syrup (Article 21.5 — US), the Appellate Body connected the duty to provide reasons in Article 12.7 with the objective of security and predictability in Article 3.2:

Article 12.7 also furthers the objectives, expressed in Article 3.2 of the DSU, of promoting security and predictability in the multilateral trading system and of clarifying the existing provisions of the covered agreements, because the requirement to provide “basic” reasons contributes to other WTO Members’ understanding of the nature and scope of the rights and obligations in the covered agreements.”(57)

(b) “clarify the existing provisions”

52.     In US — Wool Shirts and Blouses, the Appellate Body examined whether a complaining party is entitled to a finding on each of the legal claims it makes to a panel. The Appellate Body stated:

“Given the explicit aim of dispute settlement that permeates the DSU, we do not consider that Article 3.2 of the DSU is meant to encourage either panels or the Appellate Body to ‘make law’ by clarifying existing provisions of the WTO Agreement outside the context of resolving a particular dispute. A panel need only address those claims which must be addressed in order to resolve the matter in issue in the dispute.”(58)

53.     In US — Stainless Steel (Mexico), the Appellate Body found that failure by the Panel in that case to follow previously adopted Appellate Body reports addressing the same issues undermined the development of a coherent and predictable body of jurisprudence clarifying Members’ rights and obligations under the covered agreements as contemplated under the DSU. The Appellate Body added that:

“Clarification, as envisaged in Article 3.2 of the DSU, elucidates the scope and meaning of the provisions of the covered agreements in accordance with customary rules of interpretation of public international law. While the application of a provision may be regarded as confined to the context in which it takes place, the relevance of clarification contained in adopted Appellate Body reports is not limited to the application of a particular provision in a specific case.”(59)

(c) “customary rules of interpretation of public international law”

(i) Meaning of “customary rules of interpretation of public international law”

54.     The Appellate Body in US — Gasoline stated that the “general rule of interpretation”, contained in Article 31 of the Vienna Convention had attained the status of “customary or general international law”:

“The ‘general rule of interpretation’ set out above has been relied upon by all of the participants and third participants, although not always in relation to the same issue. That general rule of interpretation has attained the status of a rule of customary or general international law.(60) As such, it 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 seeking to clarify the provisions of the General Agreement and the other ‘covered agreements’ of the Marrakesh Agreement Establishing the World Trade Organization (the ’WTO Agreement). That direction reflects a measure of recognition that the General Agreement is not to be read in clinical isolation from public international law.”(61)

55.     In Japan — Alcoholic Beverages II, the Appellate Body confirmed that Article 32 of the Vienna Convention has also attained the status of a rule of “customary or general international law”:

Article 3.2 of the DSU directs the Appellate Body to clarify the provisions of GATT 1994 and the other “covered agreements” of the WTO Agreement “in accordance with customary rules of interpretation of public international law”. Following this mandate, in United States — Standards for Reformulated and Conventional Gasoline, we stressed the need to achieve such clarification by reference to the fundamental rule of treaty interpretation set out in Article 31(1) of the Vienna Convention. We stressed there that this general rule of interpretation “has attained the status of a rule of customary or general international law”. There can be no doubt that Article 32 of the Vienna Convention, dealing with the role of supplementary means of interpretation, has also attained the same status.”(62), (63)

56.     For more information on Articles 31-33 of the Vienna Convention, see the Section of this Chapter on Principles and Concepts of General International Law related to Dispute Settlement.

(ii) Extent to which recourse may be had to principles and concepts of general international law other than “customary rules of interpretation”

57.     Divergent views have been expressed on the question of whether recourse may be had to principles and concepts of general international law other than “customary rules of interpretation”. In Korea — Procurement, the Panel stated that the non-violation remedy as it has developed in GATT/WTO jurisprudence should not be viewed in isolation from general principles of customary international law, and that:

“We take note that Article 3.2 of the DSU requires that we seek within the context of a particular dispute to clarify the existing provisions of the WTO agreements in accordance with customary rules of interpretation of public international law. However, the relationship of the WTO Agreements to customary international law is broader than this. Customary international law applies generally to the economic relations between the WTO Members. Such international law applies to the extent that the WTO treaty agreements do not “contract out” from it. To put it another way, to the extent there is no conflict or inconsistency, or an expression in a covered WTO agreement that implies differently, we are of the view that the customary rules of international law apply to the WTO treaties and to the process of treaty formation under the WTO.”(64)

58.     The Panel added that:

“We should also note that we can see no basis here for an a contrario implication that rules of international law other than rules of interpretation do not apply. The language of 3.2 in this regard applies to a specific problem that had arisen under the GATT to the effect that, among other things, reliance on negotiating history was being utilized in a manner arguably inconsistent with the requirements of the rules of treaty interpretation of customary international law.” (65)

59.     The Panel in EC and certain member States — Large Civil Aircraft considered it unnecessary to resolve the disagreement between on the parties on whether the principle of non-retroactivity reflected in Article 28 of the Vienna Convention can only be given effect as a rule of interpretation through Article 31.3 (c), or whether it may be applied as a general principle of international law independently of Article 31.3(c) of the VCLT:

“The principle of non-retroactivity embodied in Article 28 of the VCLT has been recognized by the Appellate Body to be a “general principle of international law” relevant to the interpretation of obligations contained in the WTO Agreements in many disputes. The United States’ comment appears to have given rise to a disagreement between the parties as to the basis on which Article 28 of the VCLT may be applied by the Panel. The United States maintains that Article 28 can only be given effect as a rule of interpretation through Article 31.3(c) of the VCLT, while the European Communities appears to consider this approach too narrow and suggests that Article 28 of the VCLT may be given effect as a general principle of international law, independently of Article 31.3(c) of the VCLT. In our view, it is unnecessary to engage in this debate, as neither party disputes that the interpretation of Article 5 of the SCM Agreement should be consistent with the principle of non-retroactivity embodied in Article 28 of the VCLT. We therefore have made revisions … to clarify that we interpret Article 5 of the SCM Agreement consistently with the principle of non-retroactivity embodied in Article 28 of the VCLT, in accordance with the approach taken by the Appellate Body in prior disputes.”(66)

(d) “add to or diminish the rights and obligations”

60.     In Chile — Alcoholic Beverages, Chile claimed that through its findings, the Panel had added to the rights and obligations of WTO Members under the WTO Agreement, contrary to Articles 3.2 and 19.2 of the DSU. The Appellate Body rejected this argument:

“Chile claims that the Panel’s findings on the issues of “not similarly taxed” and “so as to afford protection” compromise the “security and predictability” of the multilateral trading system, provided for in Article 3.2 of the DSU, and “add to … the rights and obligations of Members” under Article III:2, second sentence, of the GATT 1994, in contravention of Articles 3.2 and 19.2 of the DSU. In this dispute, while we have rejected certain of the factors relied upon by the Panel, we have found that the Panel’s legal conclusions are not tainted by any reversible error of law. In these circumstances, we do not consider that the Panel has added to the rights or obligations of any Member of the WTO. Moreover, we have difficulty in envisaging circumstances in which a panel could add to the rights and obligations of a Member of the WTO if its conclusions reflected a correct interpretation and application of provisions of the covered agreements. Chile’s appeal under Articles 3.2 and 19.2 of the DSU must, therefore, be denied.”(67)

61.     In Mexico — Taxes on Soft Drinks, Mexico argued that the Panel should have declined to exercise jurisdiction. In the context of addressing this issue, the Appellate Body observed that doing so would be contrary to Articles 3.2 and 19.2:

“A decision by a panel to decline to exercise validly established jurisdiction would seem to “diminish” the right of a complaining Member to “seek the redress of a violation of obligations” within the meaning of Article 23 of the DSU, and to bring a dispute pursuant to Article 3.3 of the DSU. This would not be consistent with a panel’s obligations under Articles 3.2 and 19.2 of the DSU. We see no reason, therefore, to disagree with the Panel’s statement that a WTO panel “would seem … not to be in a position to choose freely whether or not to exercise its jurisdiction.”(68)

(e) Relationship with other Agreements

(i) Article 17.6(H) of the Anti-Dumping Agreement

62.     See Article 17.6(ii) of the Chapter on the Anti-Dumping Agreement.

2. Article 3.3

(a) “prompt settlement of situations”

63.     Panels and the Appellate Body have referred to the principle of “prompt settlement” of disputes in numerous cases.

64.     For example, in EC — Asbestos, the Appellate Body recalled that “[i]n previous appeals, we have, on occasion, completed the legal analysis with a view to facilitating the prompt settlement of the dispute, pursuant to Article 3.3 of the DSU”.(69)

65.     In US — Offset Act (Byrd Amendment), the Appellate Body referred to the principle of “prompt settlement” of disputes in the context of finding that the right to separate panel reports (in disputes involving multiple complaints) is not unqualified:

“Having made these observations, we note that Article 9.2 must not be read in isolation from other provisions of the DSU, and without taking into account the overall object and purpose of that Agreement. The overall object and purpose of the DSU is expressed in Article 3.3 of that Agreement which provides, relevantly, that the “prompt settlement” of disputes is “essential to the effective functioning of the WTO.” If the right to a separate panel report under Article 9.2 were “unqualified”, this would mean that a panel would have the obligation to submit a separate panel report, pursuant to the request of a party to the dispute, at any time during the panel proceedings. Moreover, a request for such a report could be made for whatever reason — or indeed, without any reason — even on the day that immediately precedes the day the panel report is due to be circulated to WTO Members at large. Such an interpretation would clearly undermine the overall object and purpose of the DSU to ensure the “prompt settlement” of disputes.”(70)

66.     The Appellate Body has in several instances referred to the principle of the “prompt settlement” of disputes in the context of rejecting interpretations of procedural requirements that would lead to a complainant having to initiate multiple proceedings in respect of the same dispute. For example, in US — Zeroing (Japan) (Article 21.5 — Japan), the Appellate Body found that a measure should not be excluded from an Article 21.5 panel’s terms of reference merely because the measure was not completed at the time of the panel request, and stated:

“To exclude such a measure from an Article 21.5 panel’s terms of reference because the measure was not completed at the time of the panel request but, rather, was completed during the Article 21.5 proceedings, would mean that the disagreement “as to the existence or consistency with a covered agreement of measures taken to comply” would not be fully resolved by that Article 21.5 panel. New Article 21.5 proceedings would therefore be required to resolve the disagreement and establish whether there is compliance. Thus, an a priori exclusion of measures completed during Article 21.5 proceedings could frustrate the function of compliance proceedings. It would also be inconsistent with the objectives of the DSU to provide for the “prompt settlement of situations in which a Member considers that any benefits accruing to it directly or indirectly under the covered agreements are being impaired”, as reflected in Article 3.3, and to “secure a positive solution to a dispute”, as contemplated in Article 3.7.”(71)

67.     Along the same lines, in US — Upland Cotton (Article 21.5 — Brazil) the Appellate Body stated that “[requiring a WTO Member to initiate new proceedings to challenge the same type of recurrent subsidies that were found to result in adverse effects, simply because the subsidies were provided subsequent to the original proceedings, does not promote ‘prompt settlement’ nor ‘prompt compliance’”.(72)

68.     In US — Stainless Steel (Mexico), the Appellate Body referred to the principle of “prompt settlement” of disputes in the context of emphasizing the importance of panels following well-established Appellate Body jurisprudence and the importance of consistency and stability in the interpretation of their rights and obligations under the covered agreements. The Appellate Body stated that “[t]his is essential to promote ‘security and predictability’ in the dispute settlement system, and to ensure the ‘prompt settlement’ of disputes”.(73)

(b) “in which a Member considers”

69.     In US — Upland Cotton, the Appellate Body observed that “Article 3.3 envisages that disputes arise when a Member “considers” that benefits accruing to it are being impaired by measures taken by another Member. By using the word “considers”, Article 3.3 focuses on the perception or understanding of an aggrieved Member.”(74)

70.     In US — Continued Zeroing, the Appellate Body addressed the relationship between Article 3.3 and certain provisions of the Anti-Dumping Agreement, namely Articles 17.3 and 17.4 of the Anti-Dumping Agreement. These articles are also relevant with respect to the question of the types of measures that can be submitted to dispute settlement under the Anti-Dumping Agreement:

“Closely resembling Article 3.3 of the DSU, Article 17.3 provides that,” [i]f any Member considers that any benefit accruing to it, directly or indirectly, under [the Anti-Dumping Agreement] is being nullified or impaired … by another Member or Members, it may, with a view to reaching a mutually satisfactory resolution of the matter, request in writing consultations with the Member or Members in question.” Article 17.4 of the Anti-Dumping Agreement further specifies that a Member may refer a matter to the DSB if it considers that the consultations have failed to achieve a mutually agreed solution “and if final action has been taken by the administering authorities of the importing Member to”, inter alia, “levy definitive anti-dumping duties”.”(75)

(c) “measures taken by another Member”

71.     For information on the concept of “measures taken by another Member”, see generally the Section of this Chapter on Article 6.2 of the DSU.

72.     As regards the attribution of acts or omissions to a Member, see the Section in this Chapter on Principles and Concepts of General International Law related to Dispute Settlement.

3. Article 3.4

73.     In EC — Chicken Cuts, the Appellate Body observed that:

“Brazil and Thailand also refer to Articles 3.4 and 3.7 of the DSU and argue that the principle of “satisfactory settlement of the matter” and of “secur[ing] a positive solution to the dispute” supports the inclusion of the two subsequent measures in the Panel’s terms of reference in this case. We agree that a positive and effective resolution of a dispute is one of the key objectives of the WTO dispute settlement system. However, this objective cannot be pursued at the expense of complying with the specific requirements and obligations of Article 6.2. Moreover, in this case, we believe that the non-inclusion of the two subsequent measures in the Panel’s terms of reference would not hinder a positive resolution of this dispute.”(76)

4. Article 3.6

(a) Notification of mutually agreed solutions

74.     The following table provides information on mutually agreed solutions notified pursuant to Article 3.6 of the DSU. It is updated to 30 September 2011.

WT/DS No. Dispute Date of Notification Reference
DS5 Korea — Measures Concerning the Shelf-Life of Products 20.7.1995 WT/DS5/5
DS7 European Communities — Trade Description of Scallops (Canada) 5.7.1996 WT/DS7/12 WT/DSB/M/20
DS12 European Communities — Trade Description of Scallops (Peru) 5.7.1996 WT/DS12/12 WT/DSB/M/20
DS14 European Communities — Trade Description of Scallops (Chile) 5.7.1996 WT/DS14/11 WT/DSB/M/20
DS19 Poland — Import Regime for Automobiles 26.8.1996 WT/DS19/2
DS20 Korea — Measures Concerning Bottled Water 24.4.1996 WT/DS20/6
DS21 Australia — Measures Affecting the Importation of Salmonids 27.10.2000 WT/DS21/10
DS28 Japan — Measures Concerning Sound Recordings 24.1.1997 WT/DS28/4
DS36 Pakistan — Patent Protection for Pharmaceutical and Agricultural Chemical Products 28.2.1997 WT/DS36/4
DS37 Portugal — Patent Protection under the Industrial Property Act 3.10.1996 WT/DS37/2
DS40 Korea — Laws, Regulations and Practices in the Telecommunications Sector 22.10.1997 WT/DS40/2
DS42 Japan — Measures Concerning Sound Recordings 7.11.1997 WT/DS42/4
DS43 Turkey — Taxation of Foreign Film Revenues 14.7.1997 WT/DS43/3
DS72 European Communities — Measures Affecting Butter Products 11.11.1999 WT/DS72/7
DS73 Japan — Procurement of a Navigation Satellite 31.7.1997 WT/DS73/4/Rev.1
DS74 Philippines — Measures Affecting Pork and Poultry 13.1.1998 WT/DS74/5
DS82 Ireland — Measures Affecting the Grant of Copyright and Neighbouring Rights 6.11.2000 WT/DS82/3
DS83 Denmark — Measures Affecting the Enforcement of Intellectual Property Rights 7.6.2001 WT/DS83/2
DS85 United States — Measures Affecting Textiles and Apparel Products 11.2.1998 WT/DS85/9
DS86 Sweden — Measures Affecting the Enforcement of Intellectual Property Rights 2.12.1998 WT/DS86/2
DS91 India — Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products (Australia) 17.3.1998 WT/DS91/8
DS92 India — Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products (Canada) 18.3.1998 WT/DS92/8
DS93 India — Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products 14.9.1998 WT/DS93/8
DS94 India — Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products (Switzerland) 23.2.1998 WT/DS94/9
DS96 India — Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products (EC) 7.4.1998 WT/DS96/8
DS99 United States — Anti-Dumping Duty on Dynamic Random Access Memory Semiconductors (DRAMs) of One Megabit or Above from Korea 20.10.2000 WT/DS99/12
DS102 Philippines — Measures Affecting Pork and Poultry 13.1.1998 WT/DS102/6
DS103 Canada — Measures Affecting the Importation of Milk and the Exportation of Dairy Products 9.5.2003 WT/DS103/33
DS113 Canada — Measures Affecting Dairy Exports 9.5.2003 WT/DS113/33
DS115 European Communities — Measures Affecting the Grant of Copyright and Neighbouring Rights 6.11.2000 WT/DS115/3
DS119 Australia — Anti-Dumping Measures on Imports of Coated Woodfree Paper Sheets 13.5.1998 WT/DS119/4
DS124 European Communities — Enforcement of Intellectual Property Rights for Motion Pictures and Television Programs 20.3.2001 WT/DS124/2
DS125 Greece — Enforcement of Intellectual Property Rights for Motion Pictures and Television Programs 20.3.2001 WT/DS125/2
DS126 Australia — Subsidies Provided to Producers and Exporters of Automotive Leather 24.7.2000 WT/DS126/11
DS151 United States — Measures Affecting Textiles and Apparel Products 24.7.2000 WT/DS151/10
DS171 Argentina — Patent Protection for Pharmaceuticals and Test Data Protection for Agricultural Chemicals 31.5.2002 WT/DS171/3
DS190 Argentina — Transitional Safeguard Measures on Certain Imports of Woven Fabrics of Cotton and Cotton Mixtures Originating in Brazil 27.6.2000 WT/DS190/2
DS196 Argentina — Certain Measures on the Protection of Patents and Test Data 31.5.2002 WT/DS196/4
DS198 Romania — Measures on Minimum Import Prices 26.9.2001 WT/DS198/2
DS199 Brazil — Measures Affecting Patent Protection 5.7.2001 WT/DS199/4
DS210 Belgium — Administration of Measures Establishing Customs Duties for Rice 18.12.2001 WT/DS210/6
DS231 European Communities — Trade Description of Sardines 25.7.2003 WT/DS231/18
DS235 Slovakia — Safeguard Measure on Imports of Sugar 11.1.2002 WT/DS235/2
DS236 United States — Preliminary Determinations with respect to certain Softwood Lumber from Canada 12.10.2006
23.2.2007
WT/DS236/5 + Add.1
DS237 Turkey — Certain Import Procedures for Fresh Fruit 22.11.2002 WT/DS237/4
DS245 Japan — Measures Affecting the Importation of Apples 30.8.2005 WT/DS245/21
DS247 United States — Provisional Anti-Dumping Measure on Imports of Certain Softwood lumber from Canada 12.10.2006
23.2.2007
WT/DS247/2
+ Add.1
DS250 United States — Equalizing Excise Tax Imposed by Florida on Processed Orange and Grapefruit Products 28.5.2004 WT/DS250/3
DS257 United States — Final Countervailing Duty Determination with respect to certain Softwood lumber from Canada 12.10.2006
23.2.2007
WT/DS257/26
+ Add.1
DS261 Uruguay — Tax Treatment on Certain Products 8.1.2004 WT/DS261/7
DS264 United States — Final Dumping Determination on Softwood lumber from Canada 12.10.2006
23.2.2007
WT/DS264/29
+ Add.1
DS277 United States — Investigation of the International Trade Commission in Softwood lumber from Canada 12.10.2006
23.2.2007
WT/DS277/20
+ Add.1
DS281 United States — Anti-Dumping Measures on Cement from Mexico 16.5.2007 WT/DS281/8
DS287 Australia — Quarantine Regime for Imports 9.3.2007 WT/DS287/8
DS292 European Communities — Measures Affecting the Approval and Marketing of Biotech Products 15.7.2009 WT/DS292/40
DS293 European Communities — Measures Affecting the Approval and Marketing of Biotech Products 19.3.2010 WT/DS293/41
DS297 Croatia — Measure Affecting Imports of live Animals and Meat Products 30.1.2009 WT/DS297/2
DS305 Egypt — Measures Affecting Imports of Textile and Apparel Products 20.5.2005 WT/DS305/4
DS309 China — Value Added Tax on Integrated Circuits 5.10.2005 WT/DS309/8
DS311 United States — Reviews of Countervailing Duty on Softwood lumber from Canada 12.10.2006
23.2.2007
WT/DS311/2
+ Add.1
DS313 European Communities — Anti-Dumping Duties on Certain Flat Rolled Iron or Non-Alloy Steel Products from India 22.10.2004 WT/DS313/2
DS323 Japan — Import Quotas on Dried laver and Seasoned laver 23.1.2006 WT/DS323/5
DS327 Egypt — Anti-Dumping Duties on Matches from Pakistan 27.3.2006 WT/DS327/3
DS329 Panama — Tariff Classification of Certain Milk Products 6.10.2005 WT/DS329/2
DS348 Colombia — Customs Measures on Importation of Certain Goods from Panama 1.12.2006 WT/DS348/10
DS354 Canada — Tax Exemptions and Reductions for Wine And Beer 17.12.2008 WT/DS354/2

5. Article 3.7

(a) “a Member shall exercise its judgement as to whether action under these procedures would be fruitful”

75.     In the context of a discussion on legal interest, the Appellate Body in EC — Bananas III, agreed with the Panel that “neither Article 3.3 nor 3.7 of the DSU nor any other provision of the DSU contain any explicit requirement that a Member must have a ‘legal interest’ as a prerequisite for requesting a panel”. In this regard, see paragraph 83 below.

76.     In EC — Bananas III, the Appellate Body further interpreted the phrase “a Member shall exercise its judgement as to whether action under these procedures would be fruitful” as indicating that a Member is “expected to be largely self-regulating in deciding whether any such action would be ‘fruitful’”.(77)

77.     In Mexico — Corn Syrup (Article 21.5 — US), Mexico challenged on appeal the Panel’s silence regarding the alleged failure of the United States to satisfy its obligation under the first sentence of Article 3.7 of the DSU to exercise its judgement as to whether dispute settlement proceedings would be “fruitful”. The Appellate Body then examined whether a failure to comply with the first sentence of Article 3.7 of the DSU would deprive a panel of its authority to deal with and dispose of a matter. The Appellate Body first indicated that “this sentence reflects a basic principle that Members should have recourse to WTO dispute settlement in good faith, and not frivolously set in motion the procedures contemplated in the DSU”.(78) It went on to point out the self-regulating nature of that sentence and concluded that the Panel was not obliged to consider this issue on its own motion:

“Given the ‘largely self-regulating’ nature of the requirement in the first sentence of Article 3.7, panels and the Appellate Body must presume, whenever a Member submits a request for establishment of a panel, that such Member does so in good faith, having duly exercised its judgement as to whether recourse to that panel would be ‘fruitful’. Article 3.7 neither requires nor authorizes a panel to look behind that Member’s decision and to question its exercise of judgement. Therefore, the Panel was not obliged to consider this issue on its own motion.”(79)

(b) “aim of the dispute settlement mechanism is to secure a positive solution to a dispute”

78.     In US — Wool Shirts and Blouses, the Appellate Body referred to Article 3.7 of the DSU and emphasized that a requirement to address all legal claims raised by a party is not consistent with the aim of the WTO dispute settlement system, which is to settle disputes.(80)

(c) Legal effect of mutually agreed solutions

79.     In EC — Bananas III (Article 21.5 — Ecuador II) / EC — Bananas III (Article 21.5 — US), the Appellate Body addressed the question of whether the Understandings on Bananas(81), which the European Communities had concluded with the United States and with Ecuador, prevented the complainants from subsequently initiating compliance proceedings pursuant to Article 21.5 of the DSU with respect to the European Communities’ regime for the importation of bananas introduced by Council Regulation (EC) No. 1964/2005 of 29 November 2005.(82) The Appellate Body stated that:

“[N]othing in Article 3.7 establishes a condition under which a party would be prevented from initiating compliance proceedings or, indeed, dictates that the only kind of settlement envisaged in that provision is one that bars recourse to compliance proceedings under Article 21.5. Article 3.7 is not prescriptive as to the content of a mutually agreed solution, save that it must be consistent with the covered agreements. The only express limitation referred to in Article 3.7 is that ‘a Member shall exercise its judgement as to whether action under these procedures would be fruitful’. The Appellate Body has interpreted this phrase to indicate that a Member is “expected to be largely self-regulating in deciding whether any such action would be ‘fruitful’”.(83) This is also borne out by Article 3.3, which provides that the prompt settlement of situations in which a Member, in its own judgement, considers that a benefit accruing to it under the covered agreements is being impaired by a measure taken by another Member is essential to the effective functioning of the WTO.(84)

80.     The Appellate Body in EC — Bananas III (Article 21.5 — Ecuador II) / EC — Bananas III (Article 21.5 — US) went on to examine the concept of “solution” in Article 3.7 and described it as “the act of solving a problem”. In the Appellate Body’s view, the mere agreement to a “solution” does not necessarily imply that parties waive their right to have recourse to compliance panel proceedings. The Appellate Body concluded that the Panel’s requirement that the Understandings must constitute a “positive solution and effective settlement” to the dispute in question to preclude recourse to Article 21.5 proceedings was not a correct interpretation of what the DSU requires:

“The term “solution” employed in Article 3.7 refers to the “act of solving a problem”.(85) There are usually different ways of solving any given problem. Pursuant to Article 19.1 of the DSU, when 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. Accordingly, it is, in principle, within the Member’s discretion to choose the means of implementation and to decide in which way it will seek to achieve compliance. The DSU thus recognizes that a solution leading to compliance can be implemented in various ways. Similarly, a mutually agreed solution pursuant to Article 3.7 may encompass an agreement to forego the right to initiate compliance proceedings. Or it may provide for the suspension of the right of recourse to Article 21.5 until the steps agreed upon in a mutually agreed solution have been implemented. Yet, this need not always be so. We therefore do not consider that the mere agreement to a “solution” necessarily implies that parties waive their right to have recourse to the dispute settlement system in the event of a disagreement as to the existence or consistency with the covered agreements of a measure taken to comply. Instead, we consider that there must be a clear indication in the agreement between the parties of a relinquishment of the right to have recourse to Article 21.5. In our view, the Panel’s requirement that the Understandings must constitute a “positive solution and effective settlement” to the dispute in question to preclude recourse to Article 21.5 proceedings was not a correct interpretation of what the DSU requires.”(86)

81.     The Appellate Body further stated that:

“The second reason relied upon by the Panel in support of its finding that the Understandings could not legally bar the complainants from bringing these compliance proceedings is that these Understandings were agreed upon subsequent to the adoption of recommendations, rulings, and suggestions by the DSB. We disagree with the Panel’s reasoning. We see nothing in Article 3.7 or elsewhere in the DSU that prevents parties to a dispute from reaching a settlement that would preclude recourse to Article 21.5 proceedings after the adoption of recommendations and rulings by the DSB. In fact, Article 22.8 of the DSU stipulates that suspension of concessions shall only be applied until such time as a mutually satisfactory solution is reached. Thus, the DSU itself clearly envisages the possibility of entering into mutually agreed solutions after recommendations and rulings are made by the DSB. We do not consider that the factor that the Understandings were concluded only after the DSB made recommendations and rulings assists to determine whether the Understandings precluded the parties from initiating Article 21.5 proceedings.”(87)

(d) Interpretation of mutually agreed solutions

82.     In EC — Bananas III (Article 21.5 — Ecuador II) / EC — Bananas III (Article 21.5 — US), the Appellate Body emphasized that when interpreting the mutually agreed solution at issue in that case, the parties’ obligations had to be determined first and foremost on the basis of the text of the Understandings at issue:

“The third reason relied upon by the Panel [in support of its interpretation of the Understandings at issue] is that the parties had made conflicting statements at the DSB meeting as to the legal nature of the Understandings after they were signed. We consider that these statements may be taken into account where the interpretation of the Understandings is not clear from the language used in its context. However, where the text of the Understandings is clear, these statements have limited relevance, if any, for the purpose of interpreting the Understandings. The parties’ obligations must first and foremost be determined on the basis of the text of the Understandings. In any event, ex post communications of the parties concerning the Understandings have, at best, slight evidentiary value.”(88)

(e) Standing to bring dispute / legal interest

(i) General

83.     In EC — Bananas III, the European Communities argued that a complaining party must normally have a “legal right or interest” in the claim it is pursuing. The Appellate Body stated that no provision of the DSU contains any such explicit requirement. The Appellate Body also held that “a Member has broad discretion in deciding whether to bring a case against another Member under the DSU”. While the Appellate Body stressed that Members are “self-regulating” in their decisions whether to bring a case, it also added that “[t]he United States is a producer of bananas, and a potential export interest by the United States cannot be excluded. The internal market of the United States for bananas could be affected by the European Communities banana regime, in particular, by the effects of that regime on world supplies and world prices of bananas”:

“We agree with the Panel that ’neither Article 3.3 nor 3.7 of the DSU nor any other provision of the DSU contain any explicit requirement that a Member must have a ‘legal interest’ as a prerequisite for requesting a panel’. We do not accept that the need for a ‘legal interest’ is implied in the DSU or in any other provision of the WTO Agreement. It is true that under Article 4.11 of the DSU, a Member wishing to join in multiple consultations must have ‘a substantial trade interest’, and that under Article 10.2 of the DSU, a third party must have ‘a substantial interest’ in the matter before a panel. But neither of these provisions in the DSU, nor anything else in the WTO Agreement, provides a basis for asserting that parties to the dispute have to meet any similar standard. Yet, we do not believe that this is dispositive of whether, in this case, the United States has ‘standing’ to bring claims under the GATT 1994.”(89)

84.     The Appellate Body in EC — Bananas III went on to declare the wide discretion that Members enjoy in deciding on whether to bring a case under the DSU:

“[W]e believe that a Member has broad discretion in deciding whether to bring a case against another Member under the DSU. The language of Article XXIII:1 of the GATT 1994 and of Article 3.7 of the DSU suggests, furthermore, that a Member is expected to be largely self-regulating in deciding whether any such action would be ‘fruitful’.

 

We are satisfied that the United States was justified in bringing its claims under the GATT 1994 in this case. The United States is a producer of bananas, and a potential export interest by the United States cannot be excluded. The internal market of the United States for bananas could be affected by the EC banana regime, in particular, by the effects of that regime on world supplies and world prices of bananas. We also agree with the Panel’s statement that:

 

‘… with the increased interdependence of the global economy,… Members have a greater stake in enforcing WTO rules than in the past since any deviation from the negotiated balance of rights and obligations is more likely than ever to affect them, directly or indirectly.’

  

We note, too, that there is no challenge here to the standing of the United States under the GATS, and that the claims under the GATS and the GATT 1994 relating to the EC import licensing regime are inextricably interwoven in this case.

 

Taken together, these reasons are sufficient justification for the United States to have brought its claims against the EC banana import regime under the GATT 1994. This does not mean, though, that one or more of the factors we have noted in this case would necessarily be dispositive in another case. We therefore uphold the Panel’s conclusion that the United States had standing to bring claims under the GATT 1994.”(90)

85.     In Korea — Dairy, the Panel rejected Korea’s argument that there is a requirement for an economic interest to bring a matter to the Panel and that the European Communities had failed to meet that requirement:

“In EC — Bananas, the Appellate Body stated that the need for a ‘legal interest’ could not be implied in the DSU or in any other provisions of the WTO Agreement and that Members were expected to be largely self-regulating in deciding whether any DSU procedure would be ‘fruitful’. We cannot read in the DSU any requirement for an ‘economic interest’. We also note the provisions of Article 3.8 of the DSU, pursuant to which nullification and impairment is presumed once violation is established.”(91)

86.     In EC — Bananas III (Article 21.5 — US), the European Communities asked the Panel to determine whether the United States had standing to commence the proceedings. The Panel started by noting that current proceedings involved a “compliance” case under Article 21.5 of the DSU and commented that “by their nature, compliance cases are linked with the original proceedings in the dispute”. Having noted that the United States was a complaining party in the original proceedings in which the European Communities’ bananas regime was found to be inconsistent with the WTO covered agreements, the Panel went on to state:

“[T]he United States, as an original complainant, holds a particular interest in ensuring that the measure in question is brought into conformity with the WTO agreements. The European Communities has failed to rebut the existence of that particular interest. Accordingly, the Panel does not need to conduct, under the current compliance proceedings, a separate analysis of whether, in the words of the European Communities, ‘the alleged violation of a WTO rule sufficiently “touches” upon the interests of the [United States] so as to justify [that] party’s “standing” to commence dispute settlement proceedings’.

 

… For the reasons indicated above, and especially in view of the particular interest of the United States in the current compliance proceedings, the Panel finds that the United States had, under the DSU, the right to request the initiation of such proceedings.”(92)

(ii) Difference with Article 3.8 (nullification or impairment) standard

87.     In EC — Bananas III (Article 21.5 — US), the Appellate Body stressed the broader nature of the notion of standing as compared to the notion of “nullification or impairment”:

“We consider that the notion of ’standing’, as interpreted by the Appellate Body in the original proceedings, is broader than the notion of ‘nullification or impairment’. In other words, if there is nullification or impairment, there will also be standing to bring a complaint. However, standing may also exist in cases that result in no finding of nullification or impairment. In the original EC — Bananas III proceedings, the Appellate Body found that ‘a Member has broad discretion in deciding whether to bring a case against another Member under the DSU’, and that ‘a Member is expected to be largely self-regulating in deciding whether any such action would be ‘fruitful”.(93) The Appellate Body further concluded that, considering that the United States was a producer and potential exporter of bananas, it was justified in bringing its claims under the GATT 1994.(94) The Appellate Body then used this same argument to find that the United States had suffered nullification or impairment of benefits.”(95), (96)

(iii) Standing under Article 17.4 of the Anti-Dumping Agreement

88.     See Article 17.4 of the Chapter on the Anti-Dumping Agreement.

(f) “suspending the application of concessions or other obligations”

89.     In US — Certain EC Products, the Panel had found that the measure at issue constituted an unauthorized suspension of concessions and thus violated Article 3.7 (and Articles 22.6 and 23.2(c)) of the DSU.(97) After describing Article 3.7, the Appellate Body agreed with the Panel that if a Member has acted in breach of Articles 22.6 and 23.2(c) of the DSU, this entails a consequential violation of Article 3.7:

Article 3.7 is part of Article 3 of the DSU, which is entitled ‘General Provisions’ and sets out the basic principles and characteristics of the WTO dispute settlement system. Article 3.7 itself lists and describes the possible temporary and definitive outcomes of a dispute, one of which is the suspension of concessions or other obligations to which the last sentence of Article 3.7 refers. The last sentence of Article 3.7 provides that the suspension of concessions or other obligations is a ‘last resort’ that is subject to DSB authorization.

 

The obligation of WTO Members not to suspend concessions or other obligations without prior DSB authorization is explicitly set out in Articles 22.6 and 23.2(c), not in Article 3.7 of the DSU. It is, therefore, not surprising that the European Communities did not explicitly claim, or advance arguments in support of, a violation of Article 3.7, last sentence. The European Communities argued that the 3 March Measure is inconsistent with Articles 22.6 and 23.2(c) of the DSU. We consider, however, that if a Member has acted in breach of Articles 22.6 and 23.2 (c) of the DSU, that Member has also, in view of the nature and content of Article 3.7, last sentence, necessarily acted contrary to the latter provision.

 

Although we do not believe that it was necessary or incumbent upon the Panel to find that the United States violated Articles 3.7 of the DSU, we find no reason to disturb the Panel’s finding that, by adopting the 3 March Measure, the United States acted inconsistently with ‘Articles 23.2(c), 3.7 and 22.6 of the DSU’.”(98)’(99)

6. Article 3.8

(a) Presumption of “nullification or impairment”

(i) General

90.     In EC — Bananas III, the European Communities appealed the Panel’s finding that “the infringement of obligations by the European Communities under a number of WTO agreements, are a prima facie case of nullification or impairment of benefits in the meaning of Article 3.8 of the DSU”. The Appellate Body observed that the European Communities, in its appeal, attempted to “rebut the presumption of nullification or impairment on the basis that the United States has never exported a single banana to the European Community, and therefore, could not possibly suffer any trade damage.” The Appellate Body stated:

“[W]e note that the two issues of nullification or impairment and of the standing of the United States are closely related [T]wo points are made that the Panel may well have had in mind in reaching its conclusions on nullification or impairment. One is that the United States is a producer of bananas and that a potential export interest by the United States cannot be excluded; the other is that the internal market of the United States for bananas could be affected by the EC bananas regime and by its effects on world supplies and world prices of bananas They are… relevant to the question whether the European Communities has rebutted the presumption of nullification or impairment.

 

So, too, is the panel report in United States — Superfund, to which the Panel referred. In that case, the panel examined whether measures with ‘only an insignificant effect on the volume of exports do nullify or impair benefits under Article III:2 …’. The panel concluded (and in so doing, confirmed the views of previous panels) that:

 

Article 111:2, first sentence, cannot be interpreted to protect expectations on export volumes; it protects expectations on the competitive relationship between imported and domestic products. A change in the competitive relationship contrary to that provision must consequently be regarded ipso facto as a nullification or impairment of benefits accruing under the General Agreement. A demonstration that a measure inconsistent with Article III:2, first sentence, has no or insignificant effects would therefore in the view of the Panel not be a sufficient demonstration that the benefits accruing under that provision had not been nullified or impaired even if such a rebuttal were in principle permitted.’(100)

 

The panel in United States — Superfund subsequently decided ‘not to examine the submissions of the parties on the trade effects of the tax differential’ on the basis of the legal grounds it had enunciated. The reasoning in United States — Superfund applies equally in this case. “(101)

91.     While upholding the finding of the Panel in EC — Bananas III that the European Communities had not succeeded in rebutting the presumption that its breaches of the GATT 1994 nullified or impaired the benefits of the United States, the Appellate Body did modify the Panel’s finding. It considered that the Panel had erred in extending its findings on the presumption in Article 3.8 to claims made under the GATS and to claims made by complaining parties other than the United States.(102)

92.     In Turkey — Textiles, Turkey argued that even if its quantitative restrictions on imports of textile and clothing products from India were in violation of WTO law, India had not suffered any nullification or impairment of its WTO benefits within the meaning of Article 3.8 of the DSU. Turkey pointed out that that imports of textile and clothing from India had actually increased since the Turkish measures at issue had entered into force. The Panel rejected this argument:

“We are of the view that it is not possible to segregate the impact of the quantitative restrictions from the impact of other factors. While recognizing Turkey’s efforts to liberalize its import regime on the occasion of the formation of its customs union with the European Communities, it appears to us that even if Turkey were to demonstrate that India’s overall exports of clothing and textile products to Turkey have increased from their levels of previous years, is would not be sufficient to rebut the presumption of nullification and impairment caused by the existence of WTO incompatible import restrictions. Rather, at minimum, the question is whether exports have been what they would otherwise have been, were there no WTO incompatible quantitative restrictions against imports from India. Consequently, we consider that even if the presumption in Article 3.8 of the DSU were rebuttable, Turkey has not provided us with sufficient information to set aside the presumption that the introduction of these import restrictions on 19 categories of textile and clothing products has nullified and impaired the benefits accruing to India under GATT/WTO.”(103)

93.     In Guatemala — Cement II, Guatemala argued that its alleged failure to issue proper notifications and its failure to provide the Mexican interested party with the full text of the application for anti-dumping investigations had not nullified or impaired Mexico’s benefits accruing under the Anti-Dumping Agreement. The Panel declined to consider this preliminary objection by Guatemala, stating that “we will address the issue of nullification or impairment after we have considered whether Guatemala has acted consistently with its obligations under the AD Agreement.”(104) Subsequently, the Panel held:

“Guatemala argues that in the case of the Article 5.5 notification it did not initiate the investigation until after Mexico had been notified and that it granted Cruz Azul an extension to respond to the questionnaire and thus Mexico was not impaired in the defence of its interests. We have already found that the initiation date was 11 January 1996 and thus notification under Article 5.5 was not provided until after initiation. There is no way to ascertain what Mexico might have done if it had received a timely notification. The extension of time for response to the questionnaire granted to Cruz Azul has no bearing on the fact that Mexico was not informed in time. Thus, we do not consider that Guatemala has rebutted the presumption of nullification or impairment with respect to violations of Article 5.5. ”(105)

94.     In Argentina — Ceramic Tiles, Argentina argued that the European Communities failed to demonstrate that Italian tile exporters were prejudiced by the failure of the Argentine anti-dumping authority to calculate individual anti-dumping margins. In this context, Argentina relied on the Appellate Body’s findings in Korea — Dairy.(106) The Panel rejected Argentina’s argument:

“We note, however, that the Appellate Body Report in the Korea — Dairy Safeguards case, to which Argentina refers in support of its argument, dealt with the question of whether the request for establishment met the requirements of Article 6.2 of the DSU. The issue before the Appellate Body was whether Article 6.2 of the DSU was complied with or not. The Appellate Body, in deciding that question, concluded that one element to be considered was whether the defending Member was prejudiced in its ability to defend itself by a lack of clarity or specificity in the request for establishment. The Appellate Body did not address the question whether, once it had been established that a provision of the Agreement is violated, it needs in addition to be demonstrated that this violation had prejudiced the rights of the complaining party.(107) Thus, we do not agree that this Appellate Body decision supports Argentina’s argument that the concept of harmless error has been accepted in WTO law.

 Article 3.8 of the DSU thus provides that there is a presumption that benefits are nullified or impaired — i.e., there is a presumption of ‘harm’ — where a provision of the Agreement has been violated. Article 3.8 of the DSU also provides for the possibility that the Member found to have violated a provision may rebut the presumption. In light of the presumption of Article 3.8 of the DSU, the EC having established that Argentina has acted in a manner inconsistent with the AD Agreement, it is up to Argentina to show that the failure to determine an individual dumping margin has not nullified or impaired benefits accruing to the EC under the Agreement. Argentina has failed to adduce any evidence in this respect. Accordingly, we find that the presumption of nullification or impairment of benefits caused by the violation of Article 6.10 of the AD Agreement has not been rebutted by Argentina.”(108) ,(109)

95.     In US — Offset Act (Byrd Amendment), and in respect to adverse effects under Article 5(b) of the SCM Agreement, Mexico made arguments of both violation and non-violation nullification or impairment. In relation to the claims of violation nullification or impairment, the Panel stated that any presumption arising under Article 3.8 of the DSU stemming from these violations would relate to nullification or impairment caused “by the violation at issue” (emphasis in original). The Panel rejected the argument by Mexico on the grounds that, for the purpose of Article 5(b) of the SCM Agreement, Mexico must demonstrate that “the use of a subsidy” caused nullification or impairment.(110)

96.     In EC — Export Subsidies on Sugar, the Appellate Body upheld the Panel’s finding that a complaining Member’s expectations were not relevant to a finding pursuant to Article 3.8:

“The text of Article 3.8 of the DSU suggests that a Member may rebut the presumption of nullification or impairment by demonstrating that its breach of WTO rules has no adverse impact on other Members. Trade losses represent an obvious example of adverse impact under Article 3.8. Unless a Member demonstrates that there are no adverse trade effects arising as a consequence of WTO-inconsistent export subsidies, we do not believe that a complaining Member’s expectations would have a bearing on a finding pursuant to Article 3.8 of the DSU. Therefore, the European Communities has failed to rebut the presumption of nullification or impairment pursuant to Article 3.8 of the DSU.”(111)

97.     In EC — Bananas III (Article 21.5 — US), the Appellate Body rejected the European Communities’ argument that the Panel had confused the notion of “nullification or impairment” in Article 3.8 of the DSU with the ‘interest’ that a complaining party must have in order to have ‘standing’ to commence dispute settlement proceedings:

“We note that Article 3.8 of the DSU places the burden on the respondent of rebutting the presumption that the inconsistent measure nullifies or impairs the benefits accruing to the complainant under the WTO agreement concerned. Article 3.8 provides:

 In these proceedings, as in the original proceedings, the contested measure may not have actual trade effects because, at present, there are no exports of bananas from the United States to the European Communities. However, in order to determine whether the United States has suffered nullification or impairment, “competitive opportunities” and, in particular, any potential export interest of the United States must be taken into account. We do not consider that the European Communities’ argument — that, as a net importer of bananas, the United States could not credibly have a “potential” interest in exporting bananas to the European Communities — is sufficient to rebut the presumption of nullification or impairment under Article 3.8. As noted by the panel and the Appellate Body in the original proceedings, while present production in the United States is minimal, it could at any time start exporting the few bananas it produces to the European Communities. That this may be unlikely does not disprove that the United States is a potential exporter of bananas to the European Communities. In this respect, we recall the conclusion of the GATT panel in US — Superfund:

 

Article III:2, first sentence, cannot be interpreted to protect expectations on export volumes; it protects expectations on the competitive relationship between imported and domestic products. A change in the competitive relationship contrary to that provision must consequently be regarded ipso facto as a nullification or impairment of benefits accruing under the General Agreement. A demonstration that a measure inconsistent with Article III:2, first sentence, has no or insignificant effects would therefore in the view of the Panel not be a sufficient demonstration that the benefits accruing under that provision had not been nullified or impaired even if such a rebuttal were in principle permitted.(112)

 

We do not consider it sufficient for the European Communities to allege that the Panel failed to explain what could be the effect of the inconsistent measure on the United States’ internal market. In fact, it is the European Communities that bears the burden of rebutting the presumption that the measure found to be inconsistent with the GATT 1994 nullifies or impairs benefits accruing directly or indirectly to the United States under the covered agreements.

 

Furthermore, we recall that the DSB adopted recommendations and rulings in the original proceedings for the European Communities to bring itself into compliance with the GATT 1994 and the GATS. The measure at issue in these compliance proceedings was found to be in breach of the same provisions of the covered agreements as in the original proceedings. The Panel’s mandate was to examine whether the European Communities had complied with the DSB’s recommendations and rulings in the original proceedings. We agree with the Panel that “[t]he arguments advanced by the European Communities on the alleged lack of nullification or impairment have not rendered irrelevant the considerations made by the panel and by the Appellate Body in the course of the original proceedings, regarding the actual and potential trade interests of the United States in the dispute’.”(113)’(114)

98.     In EC — Bananas III (Article 21.5 — US), the Appellate Body agreed with the arbitrators in EC — Bananas III (US) (Article 22.6 — EC) “that the question whether nullification or impairment exists within the meaning of Article 3.8 of the DSU, and the question of what level of suspension of concessions is equivalent to the level of nullification or impairment under Article 22.6, are distinct.(115) Therefore, the question how the arbitrators calculated the level of nullification or impairment under Article 22.6 arises in a different procedural context in WTO dispute settlement.”(116)

(b) Relationship with other WTO Agreements

(i) Article XXIII: 1 of the GA TS

99.     In EC — Bananas III, the Appellate Body suggested that the Panel may have erred in extending the scope of the presumption of nullification or impairment in Article 3.8 of the DSU to violation claims made under the GATS:

“We observe, first of all, that the European Communities attempts to rebut the presumption of nullification or impairment with respect to the Panel’s findings of violations of the GATT 1994 on the basis that the United States has never exported a single banana to the European Community, and therefore, could not possibly suffer any trade damage. The attempted rebuttal by the European Communities applies only to one complainant, the United States, and to only one agreement, the GATT 1994. In our view, the Panel erred in extending the scope of the presumption in Article 3.8 of the DSU to claims made under the GATS as well as to claims made by the Complaining Parties other than the United States.”(117)

100.     The Panel in Mexico — Telecoms understood these statements by the Appellate Body to mean that the GATS does not require that, in the case of a violation complaint (Article XXIII:1 of the GATS), “nullification or impairment” of treaty benefits has to be claimed by the complaining WTO Member and examined by a Panel:

“Unlike some other covered agreements (e.g. GATT Article XXIII:1 in connection with Article 3.8 of the DSU), the GATS does not require that, in the case of a violation complaint (GATS Article XXIII: 1), ‘nullification or impairment’ of treaty benefits has to be claimed by the complaining WTO Member and examined by a Panel. Whereas Article XXIII: 1 of the GATT specifically conditions access to WTO dispute settlement procedures on an allegation that a ‘benefit’ or the ‘attainment of an objective’ under that agreement are being ‘nullified or impaired’, the corresponding provision in the GATS (Article XXIII: 1) permits access to dispute settlement procedures if a Member “fails to carry out its obligations or specific commitments” under the GATS. In this respect, we note that the Appellate Body in EC — Bananas III stated that the panel in that case “erred in extending the scope of the presumption in Article 3.8 of the DSU to claims made under the GATS”.(118) Having found that Mexico has violated certain provisions of the GATS, we are therefore bound by Article 19 of the DSU to proceed directly to the recommendation set out in that provision.”(119)

(ii) Article 5(b) of the SCM Agreement

101.     In this respect, see paragraph 95 above.

7. Article 3.10

(a) Non-contentious dispute settlement

102.     In EC — Bananas III (Article 21.5 — Ecuador II), the European Communities argued that using Article 21.5 of the DSU to question a mutually agreed solution between the Parties went against Article 3.10 of the DSU as it would seriously compromise the effectiveness of such mutually agreed solutions and thus foster the ‘contentious’ character of the dispute resolution system. The Panel held that Article 3.10 of the DSU excludes the very possibility of a contentious dispute settlement proceeding:

“As regards the contentious nature of disputes, the Panel reads Article 3.10 of the DSU to exclude on its plain terms the interpretation accorded to it by the European Communities. In particular, in the light of the language of Article 3.10 of the DSU, the Panel does not see how the European Communities could consider the current dispute settlement proceeding as a contentious act.”(120)

(b) Good faith engagement in dispute settlement procedures

(i) Presumption of good faith engagement in dispute settlement procedures

103.     The Panel in Korea — Certain Paper found that “we have to assume that WTO Members engage in dispute settlement in good faith, as required under Article 3.10 of the DSU.”(121)

104.     The Panel in China — Auto Parts exercised its discretion in accepting late evidence “on the assumption that Canada acted in good faith without the intention to deliberately withhold the evidence until the later stage of the proceeding.”(122)

105.     The Appellate Body in US/Canada — Continued Suspension explained that Article 3.10 of the DSU does not specifically address the question of whether a Member enjoys a presumption of good faith in respect of measures taken to implement DSB recommendations and rulings:

“The DSU makes reference to “good faith” in two provisions, namely, Article 4.3, which relates to consultations, and Article 3.10, which provides that, “if a dispute arises, all Members will engage in these procedures in good faith in an effort to resolve the dispute.” These provisions require Members to act in good faith with respect to the initiation of a dispute and in their conduct during a dispute settlement proceedings. Neither provision specifically addresses the question of whether a Member enjoys a presumption of good faith compliance in respect of measures taken to implement.”(123)

(ii) Good faith is a limit on use of WTO dispute settlement

106.     Article 3.10 of the DSU has been recognized as one of a very limited number of explicit limitations on the right of WTO Members to bring an action under the DSU.(124)

107.     In EC — Sardines the Appellate Body found that the right to withdraw an appeal must be exercised subject to the limitations in Article 3.10 of the DSU.(125)

108.     In US — Carbon Steel the Appellate Body found that:

“As long as a Member respects the principles set forth in Articles 3.7 and 3.10 of the DSU, namely, to exercise their “judgement as to whether action under these procedures would be fruitful” and to engage in dispute settlement in good faith, then that Member is entitled to request a panel to examine measures that the Member considers nullify or impair its benefits.”(126)

109.     The Appellate Body in EC — Export Subsidies on Sugar explained that there is:

”… little in the DSU that explicitly limits the rights of WTO Members to bring an action; WTO Members must exercise their “judgement as to whether action under these procedures would be fruitful”, by virtue of Article 3.7 of the DSU, and they must engage in dispute settlement procedures in good faith, by virtue of Article 3.10 of the DSU.”(127)

(iii) Estoppel and good faith

110.     In EC — Export Subsidies on Sugar the Appellate Body found an overlap between good faith under Article 3.10 of the DSU and estoppel:

“We understand the Panel to have addressed the European Communities’ arguments on Article 3.10 of the DSU and good faith together with the European Communities’ arguments regarding estoppel. We note, for instance, that, at the outset of its analysis, the Panel referred to the “parties’ arguments in respect to good faith and estoppel”. In summarizing those arguments, the Panel referred, inter alia, to the European Communities’ contention that “the Complainants were acting inconsistently with the general principle of good faith and with their obligation[s] under Article 3.10 of the DSU”.”(128)

111.     In the same report the Appellate Body later commented on the possibility of estoppel in WTO dispute settlement proceedings:

“The principle of estoppel has never been applied by the Appellate Body. Moreover, the notion of estoppel, as advanced by the European Communities, would appear to inhibit the ability of WTO Members to initiate a WTO dispute settlement proceeding. We see little in the DSU that explicitly limits the rights of WTO Members to bring an action; WTO Members must exercise their “judgement as to whether action under these procedures would be fruitful”, by virtue of Article 3.7 of the DSU, and they must engage in dispute settlement procedures in good faith, by virtue of Article 3.10 of the DSU. This latter obligation covers, in our view, the entire spectrum of dispute settlement, from the point of initiation of a case through implementation. Thus, even assuming arguendo that the principle of estoppel could apply in the WTO, its application would fall within these narrow parameters set out in the DSU.”(129)

112.     The Panel in EC and certain member States — Large Civil Aircraft considered the European Communities’ argument “that the good faith obligation contained in Article 3.10 of the DSU, can reasonably be analysed “in the light of the general international law principle of estoppel.””(130)

(iv) Resolution of trade disputes excludes tactics and manoeuvres

113.     In US — FSC, the Appellate Body laid down the general principle that “[t]he procedural rules of WTO dispute settlement are designed to promote, not the development of litigation techniques, but simply the fair, prompt and effective resolution of trade disputes.” The Appellate Body stated that:

Article 3.10 of the DSU commits Members of the WTO, if a dispute arises, to engage in dispute settlement procedures “in good faith in an effort to resolve the dispute”. This is another specific manifestation of the principle of good faith which, we have pointed out, is at once a general principle of law and a principle of general international law.(131) This pervasive principle requires both complaining and responding Members to comply with the requirements of the DSU (and related requirements in other covered agreements) in good faith. By good faith compliance, complaining Members accord to the responding Members the full measure of protection and opportunity to defend, contemplated by the letter and spirit of the procedural rules. The same principle of good faith requires that responding Members seasonably and promptly bring claimed procedural deficiencies to the attention of the complaining Member, and to the DSB or the Panel, so that corrections, if needed, can be made to resolve disputes. The procedural rules of WTO dispute settlement are designed to promote, not the development of litigation techniques, but simply the fair, prompt and effective resolution of trade disputes.”(132)

114.     Panels and the Appellate Body have consistently made use of the above cited statement from US — FSC.(133) An illustration of this principle is provided by the Panel in US — Upland Cotton, which explained that a Member cannot rely on uncertainly attributable to its own inattention to avoid dispute settlement:

“If a Member is uncertain as to the scope of the measures referred to by another Member in a request for consultations, and chooses not to seek clarification, it cannot rely on its own uncertainty as a jurisdictional bar to a Panel finding on the measures. Members have an obligation under Article 3.10 of the DSU to engage in WTO dispute settlement procedures in good faith in an effort to resolve the dispute.”(134)

115.     The Panel in EC — Fasteners (China) followed the general principle laid down by the Appellate Body in US — FSC that “[t]he procedural rules of WTO dispute settlement are designed to promote, not the development of litigation techniques, but simply the fair, prompt and effective resolution of trade disputes”, and also found that Article 3.10 of the DSU was inconsistent with “inappropriate legal manoeuvres to avoid dispute settlement.”(135)

(v) Questions from Panel should be fully answered

116.     In Canada — Aircraft the Appellate Body suggested that failure to comply with the Panel’s request for information could amount to a lack of good faith under Article 3.10 of the DSU. The Appellate Body stated that:

“We believe also that the duty of a Member party to a dispute to comply with a request from the panel to provide information under Article 13.1 of the DSU is but one specific manifestation of the broader duties of Members under Article 3.1O of the DSU not to consider the “use of the dispute settlement procedures…as contentious acts”, and, when a dispute does arise, to “engage in these procedures in good faith in an effort to resolve the dispute.”(136)

117.     The Panel in Canada — Aircraft Credit and Loan Guarantees relied on Article 3.10 of the DSU in finding that although not obligated to do so “one might hope that Canada would be more forthcoming” with certain information so as to more fully answer questions from the Panel.(137)

(vi) Arguments to be developed at earliest possible stage and in clearest possible fashion

118.     In US — 1916 Act (EC), the Panel stated that:

Article 3.10 provides that parties must engage in dispute settlement in good faith. This implies that they should not withhold until the interim review stage arguments that they could be legitimately expected to have raised at a much earlier stage of the proceedings, in light of the claims developed in the first submissions.”(138)

119.     In Thailand — H-Beams, the Appellate Body, faced with the objection that the legal basis of the complaint had not been precisely identified, noted that “nothing in the DSU prevents a defending party from requesting further clarification on the claims raised in a panel request from the complaining party, even before the filing of the first written submission.” According to the Appellate Body such pre-emptive clarification would be consistent with Article 3.10 of the DSU.(139)

120.     The Panel in EC — Tube or Pipe Fittings considered that the nature of the panel process is that the claims made by a party may be progressively clarified and refined throughout the proceeding:

“[I]t is in the nature of the Panel process that the claims made by a party may be progressively clarified and refined throughout the proceeding. This may occur through the submission of supporting evidence and argumentation by the parties, commencing with their first written submission, and followed by a round of rebuttal submissions, supplemented by oral statements and answers to questions. It is, of course, clear that this process of progressive clarification would not allow a party to add additional claims (which were not included in the request for establishment of the Panel) during the course of the proceedings. The fundamental due process rights of the parties are thereby preserved.”(140)

121.     The Appellate Body in EC — Tariff Preferences found that it followed from Article 3.10 of the DSU that “India, as the complaining party, should reasonably have articulated its claims of inconsistency with specific provisions of the Enabling Clause at the outset of this dispute…”(141)

122.     The Appellate Body in US — Gambling explained that the language of Article 3.10 of the DSU “implies the identification by each party of relevant legal and factual issues at the earliest opportunity so as to provide other parties, including third parties, an opportunity to respond.”(142)

123.     In EC — Fasteners (China) the Panel criticized China for failing to make a clear and timely claim:

“We note that the way in which China has pursued this claim in this dispute is far from ideal. We are particularly troubled by the fact that the claim was not developed at all in China’s first written submission. In that sense, we share the European Union’s due process concerns. It seems to us that, by failing to put forward a fuller explanation of and argument in support of its claim with respect to the Indian producer’s questionnaire response at the first opportunity, that is, in the first written submission, China left the European Union in a difficult position in attempting to respond to a claim that was unclear. Indeed, this lack of clarity led us to pose questions to China in this regard, and China subsequently provided, in its second written submission and its answer to our question, a sufficiently clear argument in support of its claim to allow the European Union an adequate opportunity to respond, as it did, up to its final submission, with comments on China’s answers to questions from the Panel concerning this claim. Moreover, we recall that one of the purposes of the DSU is to provide for the “prompt settlement of situations in which a Member considers that benefits accruing to it” under a covered Agreement are being impaired by another Member’s measure, as provided for in Article 3.3 of the DSU. In this regard, we recall the statement of the Appellate Body in US — FSC that:

 

“Article 3.10 of the DSU commits Members of the WTO … to engage in dispute settlement procedures “in good faith in an effort to resolve the dispute”… .The procedural rules of WTO dispute settlement are designed to promote, not the development of litigation techniques, but simply the fair, prompt and effective resolution of trade disputes.”

  

[…] We would, however, urge complaining parties to make every effort to pursue their claims with the fullest possible exposition of their arguments in their first written submissions. In our view, this would help ensure that responding parties have a sufficient opportunity to respond to those claims, and demonstrate that Members are engaging in dispute settlement “in good faith in an effort to resolve the dispute”, as provided for in Article 3.10 of the DSU.”(143)

(vii) Correction of factual errors and procedural deficiencies

124.     The Panel in US — 1916 Act (Japan) also found that:

“It could be argued that for a party not to inform the Panel of a factual error in its findings may be contrary to the obligation laid down in Article 3.10 of the DSU, which provides inter alia that “all Members will engage in these [DSU] procedures in good faith in an effort to resolve the dispute”.”(144)

125.     The Panel in EC — Asbestos found that:

”… in the letter attached to Canada’s comments, the latter indicates that its request for review “is without prejudice to Canada’s position on all the aspects of the Panel’s Report”. In this connection, the Panel considers that, if it had misunderstood or misrepresented some of the factual aspects of the case in its findings, the parties would need the interim review stage in order to make the necessary corrections or clarifications because, unlike errors of law, errors of fact cannot usually be modified on appeal. The parties should take advantage of this last opportunity to rectify the factual assessments of the Panel otherwise the Panel could unnecessarily be at risk of being accused of not having made an objective evaluation of the facts. It might be claimed that the fact that a party does not inform the Panel of a factual error in its findings may be contrary to the obligation in Article 3.10 of the Understanding, which provides inter alia that “all Members will engage in these procedures [settlement of disputes] in good faith in an effort to resolve the dispute”.”(145)

126.     The Appellate Body in US — Carbon Steel held that “in the interests of due process, parties should bring alleged procedural deficiencies to the attention of a panel at the earliest possible opportunity.”(146)

(viii) Breach of Confidentiality

127.     In EC — Export Subsidies on Sugar (Thailand/Australia/Brazil) the Panel referred to Article 3.10 of the DSU in reporting a breach of confidentiality whereby confidential information appeared in an amicus curiae submission.(147)

(ix) Temporal scope

128.     The Panel in Turkey — Textiles considered India’s argument that Article 3.10 of the DSU was relevant to a situation where consultations had not been successful.(148)

129.     The Panel in Canada — Exports of Wheat and Imports of Grain found that the obligation to engage in dispute resolution in good faith extended to the possibility of establishing a new panel to address the substance of a particular claim while the present Panel prepared a preliminary ruling.(149)

130.     In EC — Exports Subsidies on Sugar the Appellate Body found that the obligation to engage in dispute settlement in good faith under Article 3.10 of the DSU covers “the entire spectrum of dispute settlement, from the point of initiation of a case through implementation.”(150)

131.     Furthermore, the Arbitrators in EC — Bananas III (US) (Article 22.6 — EC) “required the continuing cooperation of the parties, acting in good faith in accordance with Article 3.10 of the DSU” in light of the number, complexity and scope of tasks to be performed.(151)

132.     The Appellate Body in US/Canada — Continued Suspension found that Article 3.10 of the DSU and Article 4.3 of the DSU require Members to act in good faith with respect to the initiation of a dispute.(152)

(x) Good faith in the performance of treaty obligations and in treaty interpretation

133.     As regards the principle of good faith in the performance of treaty obligations, and in the context of treaty interpretation, see the Section of this Chapter on Principles and Concepts of General International Law related to Dispute Settlement.

(c) Complaints and counter-complaints should not be linked

134.     The Panel in Mexico — Soft Drinks noted that complaints and counter-complaints should not be linked.

“The Panel was mindful that, under Article 3.10 of the DSU, Members should not link ‘complaints and counter-complaints in regard to distinct matters’. In other words, even conceding that there seems to be an unresolved dispute between Mexico and the United States under the NAFTA, the resolution of the present WTO case cannot be linked to the NAFTA dispute. In turn, any findings made by this Panel, as well as its conclusions and recommendations in the present case, only relate to Mexico’s rights and obligations under the WTO covered agreements, and not to its rights and obligations under other international agreements, such as the NAFTA, or other rules of international law.”(153)

135.     The same Panel elaborated on the issue:

“Both parties acknowledge that there is a dispute between them concerning the United States’ commitments under the NAFTA regarding the access of Mexican sugar to the United States market. However, that is a separate dispute from the one that has been brought before this Panel. First, it is a dispute regarding obligations under a different international agreement, the NAFTA. Second, the DSU and the terms of reference approved by the DSB define the limits of the matter that is before of this Panel. Article 3.10 of the DSU states that WTO Members understand that “complaints and counter-complaints in regard to distinct matters should not be linked”. Consequently, even if, arguendo, the dispute between Mexico and the United States regarding access of Mexican sugar in the United States market were a matter under the WTO covered agreements, a Panel could not link the complaints and counter-complaints related to distinct matters in one single case.”

 

Footnotes:

1. Appellate Body Report, Brazil — Desiccated Coconut, p. 13. back to text
2. Appellate Body Report, Guatemala — Cement I, para. 64. back to text
3. Appellate Body Report, US — 1916 Act, para. 57. back to text
4. Appellate Body Report, India — Patents (US), para. 29. See also Panel Report, China — Intellectual Property Rights, paragraph 7.500. back to text
5. Panel Report, India — Patents (EC), footnote 96. See also Panel Report, EC — Commercial Vessels, para. 7.206. back to text
6. Panel Report, Argentina — Poultry Anti-Dumping Duties, para. 7.12. back to text
7. Appellate Body Report, EC — Poultry, para. 79. back to text
8. Panel Report, EC — Commercial Vessels, para. 7.131. back to text
9. Panel Report, EC and certain member States — Large Civil Aircraft, para. 7.89. back to text
10. Appellate Body Report, Guatemala — Cement I, para. 65. See also Appellate Body Report, US — FSC, para. 159. back to text
11. Appellate Body Report, India — Quantitative Restrictions, paras. 85-86. back to text
12. Panel Report, US — Upland Cotton, para. 7.5. back to text
13. Panel Report, US — Oil Country Tubular Goods Sunset Reviews, footnote 39. back to text
14. Appellate Body Report, Guatemala — Cement I, paras. 64 and 67-68. See also Appellate Body Reports, US — Lead and Bismuth II, para. 45, and US — 1916 Act, para. 70. back to text
15. Appellate Body Report, US — Corrosion Resistant Steel Sunset Review, footnote 82 to para. 83. back to text
16. Appellate Body Report, US — Hot-Rolled Steel, paras. 51 and 56-57. back to text
17. Appellate Body Report, US — Hot-Rolled Steel, para. 62. back to text
18. Appellate Body Report, US — Zeroing (Japan) (Article 21.5 — Japan), para. 172. back to text
19. Panel Report, Korea — Commercial Vessels, para. 7.2. back to text
20. Panel Report, Brazil — Aircraft, para. 7.6. back to text
21. (footnote original) Guatemala — Cement, supra, footnote 55, para. 65. back to text
22. Appellate Body Report, US — FSC, para. 160. See also Panel Report, US — Upland Cotton, para. 7.82. back to text
23. Panel Report, Australia — Automotive Leather II (Article 21.5 — US), para. 6.41. back to text
24. Appellate Body Report, US — Upland Cotton (Article 21.5 — Brazil), para. 235. back to text
25. (footnote original) Adopted on 25 November 1998, WT/DS60/AB/R (hereinafter “Guatemala — Cement”). See, in particular, paras. 65 and 66, where the Appellate Body stated that special or additional rules and procedures referred to in Article 1.2 of the DSU fit together with the generally applicable rules and procedures of the DSU to form a comprehensive, integrated dispute settlement system (para. 66). Special or additional rules and procedures shall prevail over the provisions of the DSU to the extent there is a difference between the two sets of provisions. If there is no “difference”, the rules and procedures of the DSU apply together with the special or additional provisions of the covered agreement. A special or additional rule or procedure should only be found to prevail over a provision of the DSU in a situation where adherence to one provision will lead to a violation of the other provision, that is, in case of conflict between them (para. 65); see also Appellate Body Report in Brazil — Measures Affecting Desiccated Coconut, adopted on 20 March 1997, WT/DS22/AB/R, p. 14. We therefore read these provisions as a whole and give a useful meaning to all, in application of the principle of effective interpretation (ut res magis valeat quam pereat). back to text
26. Decision of the Arbitrator, Brazil — Aircraft (Article 22.6 — Brazil), para. 3.5. back to text
27. Decision of the Arbitrator, US — FSC (Article 22.6 — United States), para. 5.47. back to text
28. Decision of the Arbitrator, US — Upland Cotton (Article 22.6 — United States II), para., 5.18. See also Decision of the Arbitrator, US — Upland Cotton (Article 22.6 — United States I), para. 5.18. back to text
29. (footnote original) See the Report of the Appellate Body in Guatemala — Anti-Dumping Investigation Regarding Portland Cement from Mexico (WT/DS60/AB/R), paras. 65 and 66. back to text
30. Panel Report, EC — Asbestos, para. 8.10. back to text
31. (footnote original) WT/DSB/M/151, para. 47 (24 June 2003); WT/DSB/M/153, para. 47 (21-23 July 2003). back to text
32. (footnote original) Panel Report on US — Section 301 Trade Act, paras. 7.118-7.125. back to text
33. Panel Report, US — Gambling, para. 6.161. back to text
34. Panel Report, EC — Bananas III (Article 21.5 — US), paras. 7.136-7.137. back to text
35. Appellate Body Reports, EC — Bananas III (Article 21.5 — US) I EC — Bananas III (Article 21.5 — Ecuador II), paras. 216 and 222. back to text
36. Panel Report, EC — Bananas III (Article 21.5 — US), para. 7.417. back to text
37. Appellate Body Reports, EC — Bananas III (Article 21.5 — US) I EC — Bananas III (Article 21.5 — Ecuador II), para. 250. back to text
38. (footnote original) We note the United States’ concern that “[t]he Panel has thereby made the bold and novel move of transforming the minutes of DSB, other WTO committee meetings, and even Trade Policy Review meetings into a fertile source of comments that… could constitute ‘determinations’ actionable under Article 23.2(a).” (Ibid., para. 94) back to text
39. Appellate Body Reports, US/Canada — Continued Suspension, paras. 398-399. back to text
40. Panel Report, EC — Bananas III (Article 21.5 — US), paras. 7.425-7.429. back to text
41. Panel Report, US — Large Civil Aircraft (2nd complaint), para. 7.21. back to text
42. Panel Reports, US — Stainless Steel (Mexico), para. 156 and footnote 307. back to text
43. Panel Report, US — Large Civil Aircraft (2nd complaint), para. 7.21. back to text
44. WT/DSB/6. See also WT/DSB/M/5. back to text
45. WT/DSB/6. See also WT/DSB/M/2. back to text
46. WT/DSB/6. See also WT/DSB/M/7. back to text
47. Appellate Body Report, US — 1916 Act, para. 61. back to text
48. Appellate Body Report, Japan — Alcoholic Beverages II, p. 31. back to text
49. Appellate Body Report, EC — Computer Equipment, para. 82. back to text
50. Panel Report, US — Section 301 Trade Act, para. 7.75. back to text
51. Appellate Body Report, US — Corrosion-Resistant Steel Sunset Review, para. 82. back to text
52. Appellate Body Report, US — Stainless Steel (Mexico), para. 160. back to text
53. Appellate Body Reports, US — Continued Suspension I Canada — Continued Suspension, para. 381. back to text
54. Appellate Body Reports, US — Continued Suspension I Canada — Continued Suspension, para. 404. back to text
55. Appellate Body Report, China — Publications and Audiovisual Products, para. 213. back to text
56. Appellate Body Report, China — Publications and Audiovisual Products, para. 215. back to text
57. Appellate Body Report, Mexico — Corn Syrup (Article 21.5 — US), para. 107. back to text
58. Appellate Body Report, US — Wool Shirts and Blouses, p. 19. back to text
59. Appellate Body Report, US — Stainless Steel (Mexico), para. 161. back to text
60.  (footnote original) See, e.g., Territorial Dispute Case (Libyan Arab Jamahiriya v. Chad), (1994), I.C.J. Reports p. 6 (International Court of Justice); Colder v. United Kingdom, ECHR, Series A, (1995) no. 18 (European Court of Human Rights); Restrictions to the Death Penalty Cases, (1986) 70 International Law Reports 449 (Inter-American Court of Human Rights); Jimenez de Arechaga, “International Law in the Past Third of a Century” (1978-1) 159 Recueil des Cours 1, p. 42; D. Carreau, Droit International (3e ed., 1991) p. 140; Oppenheim’s International Law (9th ed., Jennings and Watts, eds. 1992) Vol. 1, pp. 1271-1275. back to text
61. Appellate Body Report, US — Gasoline, p. 17. back to text
62. (footnote original) See e.g.: Jimenez de Arechaga, “International Law in the Past Third of a Century” (1978-1) 159 Recueil des Cours p. 1 at 42; Territorial Dispute (Libyan Arab Jamahiriya/Chad), Judgment, (1994), I.C.J. Reports, p. 6 at 20; Maritime Delimitation and Territorial Questions between Qatar and Bahrain, Jurisdiction and Admissibility, Judgment, (1995), I.C.J.Reports, p. 6 at 18; Interpretation of the Convention of 1919 Concerning Employment of Women during the Night (1932), P.C.I.J., Series A/B, No. 50, p. 365 at 380; cf. the Serbian and Brazilian Loans Cases (1929), P.C.I.J., Series A, Nos. 20-21, p. 5 at 30; Constitution of the Maritime Safety Committee of the IMCO (1960), I.C.J. Reports, p. 150 at 161; Air Transport Services Agreement Arbitration (United States of America v. France) (1963), International Law Reports, 38, p. 182 at 235-43. back to text
63. Appellate Body Report, Japan — Alcoholic Beverages II, p. 10. back to text
64. Panel Report, Korea — Procurement, para. 7.96. back to text
65. Panel Report, Korea — Procurement, footnote 753. back to text
66. Panel Report, EC and certain member States — Large Civil Aircraft, para. 6.23. back to text
67. Appellate Body Report, Chile — Alcoholic Beverages, para. 79. back to text
68. Appellate Body Report, Mexico — Taxes on Soft Drinks, para. 53. back to text
69. Appellate Body Report, EC — Asbestos, para. 78. back to text
70. Appellate Body Report, US — Offset Act (Byrd Amendment), para. 311. back to text
71. Appellate Body Report, US — Zeroing (Japan) (Article 21.5 — Japan), para. 122. back to text
72. Appellate Body Report, US — Upland Cotton (Article 21.5 — Brazil), para. 246. back to text
73. Appellate Body Report, US — Stainless Steel (Mexico), para. 161. back to text
74. Appellate Body Report, US — Upland Cotton, para. 264. back to text
75. Appellate Body Report, US — Continued Zeroing, para. 177. back to text
76. Appellate Body Report, EC — Chicken Cuts, para. 161. back to text
77. (footnote original) Appellate Body Report, EC — Bananas III, para. 135. back to text
78. Appellate Body Report, Mexico — Corn Syrup (Article 21.5 — US), para. 73. back to text
79. Appellate Body Report, Mexico — Corn Syrup (Article 21.5 — US), para. 74. back to text
80. Appellate Body Report, US — Wool Shirts and Blouses, p. 19. back to text
81. Understanding on Bananas between the European Communities and the United States signed on 11 April 2001 (WT/DS27/59, G/C/W/270; WT/DS27/58, Enclosure 1), and Understanding on Bananas between the European Communities and Ecuador signed on 30 April 2001 (WT/DS27/60, G/C/W/274; WT/DS27/58, Enclosure 2). back to text
82. Council Regulation (EC) No. 1964/2005 of 29 November 2005 on the tariff rates for bananas, Official Journal of the European Union, L Series, No. 316 (2 December 2005). back to text
83. (footnote original) Appellate Body Report, EC — Bananas III, para. 135. back to text
84. Appellate Body Reports, EC — Bananas III (Article 21.5 — Ecuador II) I EC — Bananas III (Article 21.5 — US), para. 211. back to text
85. (footnote original) Shorter Oxford English Dictionary, 5th edn, W. R. Trumble, A. Stevenson (eds) (Oxford University Press, 2002), Vol. 2, p. 2917. back to text
86. Appellate Body Reports, EC — Bananas III (Article 21.5 — Ecuador II) I EC — Bananas III (Article 21.5 — US), para. 212. back to text
87. Appellate Body Reports, EC — Bananas III (Article 21.5 — Ecuador II) I EC — Bananas III (Article 21.5 — US), para. 215. back to text
88. Appellate Body Reports, EC — Bananas III (Article 21.5 — Ecuador II) I EC — Bananas III (Article 21.5 — US), para. 216. back to text
89. Appellate Body Report, EC — Bananas III, para. 132. back to text
90. Appellate Body Report, EC — Bananas III, paras. 135-138. back to text
91. Panel Report, Korea — Dairy, para. 7.13. back to text
92. Panel Report, EC — Bananas III (Article 21.5 — US), paras. 7.34-7.35. back to text
93. (footnote original) Appellate Body Report, EC — Bananas III, para. 135. back to text
94. (footnote original) The panel and the Appellate Body in the original proceedings used the same argument to conclude that the United States had “standing” to bring the case and that it had suffered nullification or impairment of benefits (that is, that the United States is a potential exporter of bananas to the European Communities and that there could be effects on its internal market). However, the fact that nullification or impairment implies a higher standard than “legal standing” does not mean that “standing” cannot be found based on such higher standard. back to text
95. (footnote original) Appellate Body Report, EC — Bananas III, para. 251. back to text
96. Appellate Body Report, EC — Bananas III (Article 21.5 US), paras. 463-464. back to text
97. Panel Report, US — Certain EC Products, para. 6.73. back to text
98. (footnote original) Panel Report, para. 6.87. back to text
99. Appellate Body Report, US — Certain EC Products, paras. 119-121. back to text
100. (footnote original) GATT Panel Report on US — Superfund, para. 5.1.9. back to text
101. Appellate Body Report, EC — Bananas III, paras. 251-253. back to text
102. Appellate Body Report, EC — Bananas III, para. 250. back to text
103. Panel Report, Turkey — Textiles, para. 9.204. back to text
104. Panel Report, Guatemala — Cement II, para. 8.25. back to text
105. Panel Report, Guatemala — Cement II, para. 8.109. back to text
106. Appellate Body Report, Korea — Dairy, paras. 114-131. back to text
107. (footnote original) Appellate Body Report, Korea — Dairy Safeguards, para. 127: “Along the same lines, we consider that whether the mere listing of the articles claimed to have been violated meets the standard of Article 6.2 must be examined on a case-by-case basis. In resolving that question, we take into account whether the ability of the respondent to defend itself was prejudiced, given the actual course of the panel proceedings, by the fact that the panel request simply listed the provisions claimed to have been violated.” back to text
108. (footnote original) We note that our view is similar to that of the Panel in the case of Guatemala — Cement (II), (Panel Report, Guatemala — Cement (II), paras. 8.22 and 8.111-112), and Panel Report, Guatemala — Anti-Dumping Investigation Regarding Portland Cement from Mexico (“Guatemala — Cement (I)”), WT/DS60/R, adopted as reversed on other grounds by WT/DS60/AB/R, 25 November 1998, para. 7.42. back to text
109. Panel Report, Argentina — Ceramic Tiles, paras. 6.103 and 6.105. back to text
110. Panel Report, US — Offset Act (Byrd Amendment), paras. 7.118-119. back to text
111. Appellate Body Report, EC — Export Subsidies on Sugar, para. 300. back to text
112. Appellate Body Report in EC — Bananas III, para. 252 (referring to GATT Panel Report, US — Superfund, para. 5.1.9.) back to text
113. (footnote original) US Panel Report, para. 8.10. back to text
114. Appellate Body Report, EC — Bananas III (Article 21.5 US), paras. 463-471. back to text
115.(footnote original) The Article 22.6 arbitrators found that:
     [t]he presumption of nullification or impairment in the case of an infringement of a GATT provision as set forth by Article 3.8 of the DSU cannot in and of itself be taken simultaneously as evidence proving a particular level of nullification or impairment allegedly suffered by a Member requesting authorization to suspend concessions under Article 22 of the DSU at a much later stage of the WTO dispute settlement system.
     (Decision by the Arbitrators, EC — Bananas III (US) (Article 22.6 — EC), para. 6.10). back to text
116. Appellate Body Report, EC — Bananas III (Article 21.5 US), para. 475. back to text
117. Appellate Body Report, EC — Bananas III, para. 250. back to text
118. (footnote original) See Appellate Body Report, European Communities — Regime for the Importation, Sale and Distribution of Bananas (“EC — Bananas III), WT/DS27/AB/R, adopted 25 September 1997, DSR 1997:11, 591, at paragraph 250. back to text
119. Panel Report, Mexico — Telecoms, para. 8.4. back to text
120. Panel Report, EC — Bananas III (Article 21.5 — Ecuador II), paras. 7.123-7.126. back to text
121. Panel Report, Korea — Certain Paper, para. 6.97. back to text
122. Panel Report, China — Auto Parts, para. 6.21. back to text
123. Appellate Body Report, US/Canada — Continued Suspension, para. 313. back to text
124. Appellate Body Report, Mexico — Soft Drinks, fn. 101. back to text
125. Appellate Body Report, EC — Sardines, para. 140. back to text
126. Appellate Body Report, US — Carbon Steel, para. 89. back to text
127. Appellate Body Report, EC — Export Subsidies on Sugar, para. 312. back to text
128. Appellate Body, EC — Export Subsidies on Sugar, para. 304. back to text
129. Appellate Body Report, EC — Export Subisidies on Sugar, para. 312. back to text
130. Panel Report, EC and certain member States — Large Civil Aircraft, para. 7.101. back to text
131. (footnote original) United States — Shrimp, supra, footnote 99, para. 158. In that report, we addressed the issue of good faith in the context of the chapeau of Article XX of the GATT 1994. back to text
132. Appellate Body Report, US — FSC, para. 166. back to text
133. Appellate Body Report, Canada — Wheat Export and Grain Imports, para. 205; Appellate Body Report, EC — Tariff Preferences, fn. 247; Appellate Body Report, Thailand — H-Beams (Poland), para. 97. Other Panels have made similar findings, see: Panel Report, EC — Bed Linen, fn. 60; Panel Report, Canada — Aircraft Credit and Loan Guarantees, fn. 311. back to text
134. Panel Report, US — Upland Cotton, para. 7.67. back to text
135. Panel Report, EC — Fasteners (China), fn. 205. back to text
136. Appellate Body Report, Canada — Aircraft, para. 190. back to text
137. Panel Report, Canada — Aircraft Credit and Loan Guarantees, para. 7.384. back to text
138. Panel Report, US — 1916 Act (EC), para. 5.18. back to text
139. Appellate Body Report, Thailand — H-Beams, para. 97. back to text
140. Panel Report, EC — Tube or Pipe Fittings, para. 7.10 back to text
141. Appellate Body Report, EC — Tariff Preferences, para. 117. back to text
142. Appellate Body Report, US — Gambling, para. 269. back to text
143. Panel Report, EC — Fasteners (China), para. 7.522. See also Appellate Body Report, EC — Fasteners (China), paras. 567-574. back to text
144. Panel Report, US — 1916 Act (Japan), fh. 422. back to text
145. Panel Report, EC — Asbestos, fn. 3, Section VII. back to text
146. Appellate Body Report, US — Carbon Steel, para. 123. This has been followed in Appellate Body Report, Canada — Wheat Exports and Grain Imports, para. 205. back to text
147. Panel Report, EC — Export Subsidies on Sugar (Thailand/Australia/Brazil), paras. 7.89, 7.98-7.99. back to text
148. Panel Report, Turkey — Textiles, para. 9.21. back to text
149. Panel Report, Canada — Exports of Wheat and Imports of Grain, para. 6.10, sub 65. back to text
150. Appellate Body Report, EC — Exports Subsidies on Sugar, para. 312. back to text
151. Decision by the Arbitrators, EC — Bananas III (US) (Article 22.6 — EC), para. 2.13. back to text
152. Appellate Body Report, US/Canada — Continued Suspension, para. 313. back to text
153. Panel Report, Mexico — Soft Drinks, paras. 7.15 and 8.232. back to text

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