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WTO ANALYTICAL INDEX: DISPUTE SETTLEMENT UNDERSTANDING

Understanding on Rules and Procedures Governing the Settlement of Disputes

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XXIII. Article 23    back to top

A. Text of Article 23

Article 23: Strengthening of the Multilateral System

1.     When Members seek the redress of a violation of obligations or other nullification or impairment of benefits under the covered agreements or an impediment to the attainment of any objective of the covered agreements, they shall have recourse to, and abide by, the rules and procedures of this Understanding.

 

2.     In such cases, Members shall:

 

(a)     not make a determination to the effect that a violation has occurred, that benefits have been nullified or impaired or that the attainment of any objective of the covered agreements has been impeded, except through recourse to dispute settlement in accordance with the rules and procedures of this Understanding, and shall make any such determination consistent with the findings contained in the panel or Appellate Body report adopted by the DSB or an arbitration award rendered under this Understanding;

 

(b)     follow the procedures set forth in Article 21 to determine the reasonable period of time for the Member concerned to implement the recommendations and rulings; and

 

(c)     follow the procedures set forth in Article 22 to determine the level of suspension of concessions or other obligations and obtain DSB authorization in accordance with those procedures before suspending concessions or other obligations under the covered agreements in response to the failure of the Member concerned to implement the recommendations and rulings within that reasonable period of time.

 
B. Interpretation and Application of Article 23

1. General

(a) The goal of Article 23

1294.     In US — Shrimp, the Panel stated that “by its very nature, the WTO Agreement favours a multilateral approach to trade issues”. In that connection, the Panel stated that” [t] his approach is also expressed in Article 23.1 of the DSU which stresses the primacy of the multilateral system and rejects unilateralism as a substitute for the procedures foreseen in that agreement”.(2046)

1295.     In EC — Bananas III (United States) (Article 22.6 — EC), the Arbitrators stated that “the goal of Article 23” is the “multilateral determination” of whether WTO agreements have been violated and the extent of any nullification or impairment.(2047)

1296.     In Canada — Aircraft Credits and Guarantees, the Panel observed that “Article 23.1 of the DSU provides that Members shall resolve all disputes through the multilateral dispute system, to the exclusion of unilateral self-help.”(2048)

1297.     In Canada — Aircraft Credits and Guarantees (Article 22.6 — Canada), the Arbitrator suggested that Article 23 prevents a Member from “tak[ing] the law into its own hands”.(2049)

(b) Relationship between Article 23.1 and 23.2

1298.     The Panel in US — Section 301 Trade Act stated that Article 23.2 is “explicitly linked to, and has to be read together with and subject to, Article 23.1”.(2050)

1299.     In US — Certain EC Products, the Panel considered the European Communities argument that the United States unilaterally imposed trade sanctions and thereby violated Article 23 of the DSU. The Panel, in a finding not directly reviewed by the Appellate Body, held that both paragraphs of Article 23 provide a prohibition on “unilateral redress”, but that this prohibition is more directly provided for under the second paragraph of Article 23:

“The structure of Article 23 is that the first paragraph states the general prohibition or general obligation, i.e. when Members seek the redress of a WTO violation,(2051) they shall do so only through the DSU. This is a general obligation. Any attempt to seek ‘redress’ can take place only in the institutional framework of the WTO and pursuant to the rules and procedures of the DSU.

 

The prohibition against unilateral redress in the WTO sectors is more directly provided for in the second paragraph of Article 23. From the ordinary meaning of the terms used in the chapeau of Article 23.2 (‘in such cases, Members shall’), it is also clear that the second paragraph of Article 23 is ‘explicitly linked to, and has to be read together with and subject to, Article 23.1’.(2052) That is to say, the specific prohibitions of paragraph 2 of Article 23 have to be understood in the context of the first paragraph, i.e. when such action is performed by a WTO Member with a view to redressing a WTO violation.”(2053)

1300.     The Panel in US — Certain EC Products also agreed with the European Communities that Article 23.2 contains specific examples of conduct inconsistent with the rules of the DSU, but held that the first analytical step necessarily was to determine — before turning to Article 23.2 — whether the measure at issue falls under the scope of Article 23.1:

“We also agree with the US — Section 301 Trade Act Panel Report that Article 23.2 contains ‘egregious examples of conduct that contradict the rules of the DSU’(2054) and which constitute more specific forms of unilateral actions, otherwise generally prohibited by Article 23.1 of the DSU.

 

‘[t]hese rules and procedures [Article 23.1] clearly cover much more than the ones specifically mentioned in Article 23.2. There is a great deal more State conduct which can violate the general obligation in Article 23.1 to have recourse to, and abide by, the rules and procedures of the DSU than the instances especially singled out in Article 23.2.’ (Footnotes omitted)(2055)

 

The same Panel identified a few examples of such instances where the DSU could be violated(2056) contrary to the provisions of Article 23. Each time a Member seeking the redress of a WTO violation is not abiding by a rule of the DSU, it thus violates Article 23.1 of the DSU.

 

In order to verify whether individual provisions of Article 23.2 have been infringed (keeping in mind that the obligation to also observe other DSU provisions can be brought under the umbrella of Article 23.1), we must first determine whether the measure at issue comes under the coverage of Article 23.1. In other words, we need to determine whether Article 23 is applicable to the dispute before addressing the specific violations envisaged in the second paragraph of Article 23 of the DSU or elsewhere in the DSU.”(2057)

1301.     The Appellate Body agreed with the Panel. In US — Certain EC Products, the Appellate Body stated that:

Article 23.1 of the DSU imposes a general obligation of Members to redress a violation of obligations or other nullification or impairment of benefits under the covered agreements only by recourse to the rules and procedures of the DSU, and not through unilateral action. Subparagraphs (a), (b) and (c) of Article 23.2 articulate specific and clearly-defined forms of prohibited unilateral action contrary to Article 23.1 of the DSU. There is a close relationship between the obligations set out in paragraphs 1 and 2 of Article 23. They all concern the obligation of Members of the WTO not to have recourse to unilateral action. We therefore consider that, as the request for the establishment of a panel of the European Communities included a claim of inconsistency with Article 23, a claim of inconsistency with Article 23.2(a) is within the Panel’s terms of reference.”(2058)

1302.     In US/Canada — Continued Suspension, the Appellate Body offered the following observations on Article 23, and the relationship between the first and second paragraphs of this provision:

“As the Appellate Body has explained, Article 23.1 lays down the fundamental obligation of WTO Members to have recourse to the rules and procedures of the DSU when seeking redress of a violation of the covered agreements.(2059) Article 23 restricts WTO Members’ conduct in two respects. First, Article 23.1 establishes the WTO dispute settlement system as the exclusive forum for the resolution of such disputes and requires adherence to the rules of the DSU. Secondly, Article 23.2 prohibits certain unilateral action by a WTO Member. Thus, a Member cannot unilaterally: (i) determine that a violation has occurred, benefits have been nullified or impaired, or that the attainment of any objective of the covered agreements has been impeded; (ii) determine the duration of the reasonable period of time for implementation; or (iii) decide to suspend concessions and determine the level thereof.

 

The phrase “[i]n such cases, Members shall” with which Article 23.2 begins refers back to the situation described in Article 23.1, namely, when a Member is seeking the redress of, inter alia, a violation of obligations under the covered agreements. We share the view of the panel in US — Section 301 Trade Act that the terms “[i]n such cases, Members shall” used in the chapeau of Article 23.2 make clear that Article 23.2 is “explicitly linked to, and has to be read together with and subject to, Article 23.1”.(2060) Therefore, the specific prohibitions of unilateral actions in Article 23.2 must be understood in the context of the overarching provision of Article 23.1. In other words, the unilateral actions prohibited by Article 23.2 are those taken by a Member with a view to seeking redress of a violation. Moreover, the phrase “[i]n such cases, Members shall” at the beginning of Article 23.2 indicates that the specific obligations set forth in its subparagraphs clarify and illustrate the scope of the general and ongoing obligation in Article 23.1. This does not mean, however, that the scope of Article 23.1 is exhausted by the situations described in Article 23.2.”(2061),(2062)

(c) Article 23 as a right in addition to an obligation

1303.     In Mexico — Taxes on Soft Drinks, the Appellate Body upheld the Panel’s conclusion that under the DSU, it had no discretion to decline to exercise its jurisdiction in the case that had been brought before it. In the course of its reasoning, the Appellate Body stated that “[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”.(2063)

1304.     Along the same lines, the Panel in EC and certain member States — Large Civil Aircraft considered that Article 23 is a source or “rights”. In that case, the Panel concluded that in the absence of a reservation concerning the interpretation or application of Article 23 of the DSU, a Member cannot be considered to have “waived” it rights under Article 23 of the DSU to initiate a WTO dispute by means of an agreement that it entered into prior to entry into force of the DSU:

“We recall that Article 23 of the DSU states that Members shall have recourse to the rules and procedures of the DSU when they “seek the redress of a violation of obligations or other nullification or impairment of benefits under the covered Agreements.” As the Appellate Body has stated, the fact that a Member may initiate a WTO dispute whenever it considers that any benefits accruing to it are being impaired by measures taken by another Member implies that that Member is entitled to a ruling by a WTO panel.(2064) Assuming, for the sake of argument, that a Member can waive its rights under the WTO Agreements pursuant to a non-WTO Agreement, we cannot conceive that a Member can be considered to have waived such rights by means of an agreement which it entered into prior to entering into the WTO Agreements. The SCM Agreement, which came into effect on 1 January 1995, does not make any reference to the antecedent 1992 Agreement, and as the United States points out, the European Communities has not made any reservations regarding the application or interpretation of the SCM Agreement.”(2065)

2. Article 23.1

(a) “seek[ing] the redress of a WTO violation”

1305.     In US — Certain EC Products, the Panel considered whether the United States was “seeking to redress” what it perceived to be a WTO violation when it decided to withhold liquidation on imports from the European Communities of a list of products and impose a contingent liability for 100 per cent duties on each individual importation of affected products (“3 March Measure”).

“The term ‘seeking’ or ‘to seek’ is defined in the Webster New Encyclopaedic Dictionary as: ‘to resort to, … to make an attempt, try’…. The term ‘to redress’ is defined in the New Shorter Oxford English Dictionary as ‘repair (an action); atone for (a misdeed); remedy or remove; to set right or rectify (injury, a wrong, a grievance etc.); obtaining reparation or compensation’ The term ‘redress’ implies, therefore, a reaction by a Member against another Member, because of a perceived (or WTO determined) WTO violation, with a view to remedying the situation.

 On its face, this description of the 3 March Measure shows that, because of the US perceived WTO inconsistency of the 1998 Bananas regime put in place by the European Communities as a measure taken to implement the Panel and Appellate Body recommendations (the ‘EC implementing measure’), the United States imposed an increased contingent liability on EC listed imports only. This 3 March Measure was, therefore, discriminatory and aimed at the European Communities exclusively. The unilateral imposition of a liability for 100 per cent duty as of 3 March (well above the bound rates of tariffs) constitutes the imposition of a debt on such imports, and adds further obligations on such imports, even if the full effect of such liability is suspended until a future liquidation date. This debt, this liability, this additional obligation imposed on listed EC imports, is evidence that the United States wanted to remedy, was ‘seeking to redress’, what it perceived to be a WTO violation. “(2066)

1306.     In EC — Commercial Vessels, the Panel considered Korea’s argument that Article 23.1 of the DSU prohibits any form of remedial action of a Member in response to what that Member considers to be a violation by another Member of its WTO obligations that does not involve exclusive recourse to the DSU. The European Communities submitted that Article 23.1 of the DSU would be entirely procedural in nature and ensures the exclusivity of WTO jurisdiction over WTO law and the suspension of concessions. In addition, the European Communities argued that Article 23.1 does not apply generally to any kind of reaction by a Member to a measure of another Member that it considers to be in violation with that Member’s obligations under the WTO Agreement.

“Therefore, the Panel must first interpret the scope and nature of the requirement in Article 23.1 of the DSU that Members “have recourse” to the DSU when “seeking the redress of a violation…”. In so doing, the Panel must apply customary rules of interpretation of public international law(2067), as set out in Articles 31 and 32 of the Vienna Convention on the Law of Treaties (1969). As expressed in Article 31.1 of that Convention, the fundamental rule is that “[a]treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in light of its object and purpose”.(2068)

 To summarize, based on an interpretation of Article 23.1 in light of the ordinary meaning of its terms and in light of its context and object and purpose, and having regard to the reasoning of the Appellate Body and panels in previous disputes concerning Article 23, we consider that the requirement “to have recourse to” the DSU when Members “seek the redress of a violation…” is broader in scope than suggested by the expression “exclusive jurisdiction clause” used by the European Communities. This requirement is violated not only when Members submit a dispute concerning rights and obligations under the WTO Agreement to an international dispute settlement body outside the WTO framework but also when Members act unilaterally to seek to obtain the results that can be achieved through the remedies of the DSU.(2069)

As discussed above, the Panel considers that Article 23.1 must be interpreted to mean that Members may not seek to obtain results that can be achieved through the remedies of the DSU by means other than recourse to the DSU. The Panel in US-Certain EC-Products observed that the ‘remedial actions’ envisaged in the WTO system: ‘relate to restoring the balance of rights and obligations which form the basis of the WTO Agreement, and include the removal of the inconsistent measure, the possibility of (temporary) compensation and, in the last resort, the (temporary) suspension of concessions or other obligations authorised by the DSB (Articles 3.7 and 22.1 of the DSU). The latter remedy is essentially retaliatory in nature’.(2070) This statement is consistent with our view of what “seek the redress of a violation” means. Therefore, the phrase “seek the redress of a violation…” covers any act of a Member in response to what it considers to be a violation of a WTO obligation by another Member whereby the first Member attempts to restore the balance of rights and obligations by seeking the removal of the WTO inconsistent measure, by seeking compensation from the other Member, or by suspending concessions or obligations under the WTO Agreement in relation to that Member. In the case of actionable subsidies, seeking the removal of the WTO-inconsistent measure includes seeking the removal by the subsidizing Member of the adverse effects of the subsidy. In our view, any unilateral attempt to obtain these results would be a violation of Article 23.1 of the DSU.(2071)

1307.     The Panel in EC — Commercial Vessels also addressed the European Communities’ argument that the relationship between Article 23.1 and 23.2 and between Article 23.2(a) and (c) of the DSU provides contextual support for an interpretation of Article 23.1 according to which acts not involving a suspension of WTO concessions or other obligations cannot be covered by the phrase “seek the redress of a violation…” in Article 23.1 of the DSU. The European Communities refered in particular to the close textual link between Articles 23.1 and 23.2 of the DSU and cited the view of the Panel in US — Certain EC Products that the term “determination” in Article 23.2(a) must “bear consequences in WTO trade relations”. The European Communities inferred from this that a determination within the meaning of Article 23.2(a) must lead to the suspension of concessions or obligations within the meaning of Article 23.2(c) of the DSU and that “this confirms contextually that the general obligation not to seek redress of a WTO violation outside the WTO system cannot prohibit measures other than retaliatory measures in the form of suspension of WTO concessions or obligations”.(2072)

“In the Panel’s view, the close connection between the two paragraphs of Article 23 means that, as stated by the Appellate Body in US — Certain EC Products, ‘[subparagraphs (a), (b) and (c) of Article 23.2 articulate specific and clearly-defined forms of prohibited unilateral action contrary to Article 23.1’ and that there is a ‘close relationship between paragraphs 1 and 2 of Article 23 in that they all concern the obligation of Members of the WTO not to have recourse to unilateral action’.(2073) The Panel is not persuaded, however, by the argument of the European Communities that the relationship between Articles 23.1 and 23.2 means that acts not amounting to a suspension of obligations or concessions are not covered by the phrase “seek the redress of a violation” in Article 23.1, for the very reason that the Panel is not persuaded that a determination within the meaning of Article 23.2(a) must be linked to a suspension of concessions or other obligations within the meaning of Article 23.2(c). The wording of Article 23.2(a) does not support an interpretation according to which a unilateral determination that another Member has violated obligations under the WTO Agreement is only inconsistent with this provision if such a determination is made in connection with the application of a measure involving a suspension of concessions or other obligations under the WTO Agreement. If, as argued by the European Communities, Article 23.2(a) only covers determinations made for the purpose of suspending concessions or obligations under Article 23.2(c), the drafters of the DSU could easily have used a formulation to express that linkage. The fact that unilateral determinations are covered by a separate clause, without an explicit textual linkage to Article 23.2(c), as part of an article aimed at “strengthening the multilateral system” suggests that such determinations by themselves were viewed by the drafters as contrary to the multilateral system.”(2074)

1308.     In US/Canada — Continued Suspension, the Appellate Body noted that “[s]eeking the redress of a violation is of course not by itself prohibited by Article 23.1 of the DSU. Rather, to be in breach of Article 23.1, a Member must be seeking redress without having recourse to, or abiding by, the rules of the DSU.”(2075) The Appellate Body then considered the question of whether the continued suspension of concessions constitutes “seek[ing] the redress of a WTO violation” within the meaning of Article 23.1:

“An initial question that arises in this case is whether the continued application of a previously authorized suspension of concessions can be said to constitute the seeking of redress. On the one hand, the authorization to suspend concessions can be said to be the result of a previous act of seeking redress that involved initiating a dispute. On the other hand, the continued application of the suspension of concessions can be said to reflect a continuous act of seeking redress for a violation found by the DSB that has not yet been rectified. In any event, the suspension of concessions that has been duly authorized by the DSB will not constitute a violation of Article 23.1, as long as it is consistent with other rules of the DSU, including paragraphs 2 through 8 of Article 22, even if the continued application of the suspension of concessions is regarded as an action or part of a process of “seeking the redress”. This is because, before obtaining the DSB’s authorization to suspend concessions, a Member must initiate a dispute settlement process in which it challenges the consistency with the covered agreements of a measure taken by another Member. The Member initiating the process will only be authorized to suspend concessions when the measure is found by the panel (and the Appellate Body, if appealed) to be inconsistent with the covered agreements and the Member taking the measure fails to implement the panel’s (or Appellate Body’s) findings within a reasonable period of time or, if it takes a measure to comply, that measure is found by the panel (and the Appellate Body) in compliance proceedings not to have brought the Member concerned into compliance. In other words, the Member will only be able to suspend concessions pursuant to the DSB’s authorization after having had extensive recourse to, and abided by, the rules and procedures of the DSU, consistent with the requirements of Article 23.1.”(2076)

1309.     In US/Canada — Continued Suspension, the Appellate Body ultimately found that the Panel erred in concluding that the United States and Canada were “seeking redress of a violation” within the meaning of Article 23 by maintaining the suspension of concessions authorized by the DSB after the European Communities notified a Directive that allegedly brought its measure into conformity with its WTO obligations.(2077)

(b) “recourse to, and abide by”

1310.     In US — Section 301 Trade Act, the Panel held that Article 23.1 of the DSU prescribes “a general duty of a dual nature”:

Article 23.1 is not concerned only with specific instances of violation. It prescribes a general duty of a dual nature. First, it imposes on all Members to ‘have recourse to’ the multilateral process set out in the DSU when they seek the redress of a WTO inconsistency. In these circumstances, Members have to have recourse to the DSU dispute settlement system to the exclusion of any other system, in particular a system of unilateral enforcement of WTO rights and obligations. This, what one could call ‘exclusive dispute resolution clause’, is an important new element of Members’ rights and obligations under the DSU.”(2078)

1311.     In EC — Chicken Cuts, the Panel referred to Article 23.1 in the context of explaining that it lacked the authority to refer the dispute before it to the World Customs Organization:

“In the Panel’s view, Article 23.1 supports the view that, in the context of this dispute, which involves the question of whether the measures at issue result in treatment that is less favourable than that provided for in the EC Schedule in contravention of Article II of the GATT 1994, the complainants have a right to recourse to the WTO dispute settlement mechanism.

 

The Panel is mindful of the respective jurisdiction and competence of the WCO and the WTO and, in fact, we specifically raised this issue with the parties during the course of these proceedings. Nevertheless, we consider that we have been mandated by the DSB in this dispute to determine whether the European Communities has violated Article II of the GATT 1994 with respect to the products at issue. As mentioned above in paragraph 7.54, in so doing, we will need to interpret the WTO concession contained in heading 02.10 of the EC Schedule.”(2079)

3. Article 23.2

(a) Article 23.2(a)

1312.     The Panel in US — Section 301 Trade Act addressed the question whether Article 23 of the DSU may prohibit legislation with certain discretionary elements and therefore the very fact of having in the legislation such discretion could, in effect, preclude WTO consistency. The Panel held that a statute “which … reserves the right for the Member concerned to do something which it has promised not to do under Article 23.2(a)” is a violation of Article 23.2(a) read together with Article 23.1:

“The text of Article 23.1 is simple enough: Members are obligated generally to (a) have recourse to and (b) abide by DSU rules and procedures. These rules and procedures include most specifically in Article 23.2(a) a prohibition on making a unilateral determination of inconsistency prior to exhaustion of DSU proceedings.

 [T]he very discretion granted under Section 304, which under the US argument absolves the legislation, is what, in our eyes, creates the presumptive violation. The statutory language which gives the USTR this discretion on its face precludes the US from abiding by its obligations under the WTO. In each and every case when a determination is made whilst DSU proceedings are not yet exhausted, Members locked in a dispute with the US will be subject to a mandatory determination by the USTR under a statute which explicitly puts them in that very danger which Article 23 was intended to remove.

 Trade legislation, important or positive as it may be, which statutorily reserves the right for the Member concerned to do something which it has promised not to do under Article 23.2(a), goes, in our view, against the ordinary meaning of Article 23.2(a) read together with Article 23.1.”(2080)

1313.     In US/Canada — Continued Suspension, the Appellate Body concluded that the Panel erred in finding that the United States and Canada made a “determination” within the meaning of Article 23.2(a) on the basis of statements made at DSB meetings, and on the basis of the fact that the suspension of concessions continued subsequent to the notification of Directive 2003/74/EC. In the course of its analysis, the Appellate Body stated that:

“We share the view of the panel in US — Section 301 Trade Act that a “determination” within the meaning of Article 23.2(a) “implies a high degree of firmness or immutability, i.e. a more or less final decision by a Member in respect of the WTO consistency of a measure taken by another Member”.(2081) Moreover, preliminary opinions or views expressed without a clear intention to seek redress are not covered by Article 23.2(a). The statements made by delegates of the United States and Canada, on which the Panel focused its attention, were made shortly after the European Communities notified Directive 2003/74/EC to the DSB. The statements were made at the two DSB meetings held, respectively, two weeks and five weeks from the DSB meeting at which Directive 2003/74/EC was notified by the European Communities. These statements, therefore, seem no more than initial reactions to the European Communities’ self-proclaimed compliance with the DSB’s recommendations and rulings in EC — Hormones. Considering the complexity of the issues that arise with respect to the consistency of Directive 2003/74/EC (as demonstrated in sections VI and VII of the Report), it is reasonable to assume that the United States and Canada needed some time before forming a definitive view regarding whether the European Communities had brought itself into compliance. We thus share the United States’ and Canada’s view that the statements at the DSB meetings lack sufficient amount of “firmness or immutability” for them to constitute a determination within the meaning of Article 23.2(a).

 

In their statements, the United States and Canada indicated that they would be willing to engage in further bilateral discussions regarding the alleged scientific justification for Directive 2003/74/EC. This readiness to discuss Directive 2003/74/EC is difficult to reconcile with a finding that the DSB statements constituted a “determination” with the type of firmness and immutability required by its ordinary meaning and the relevant context of Article 23, as interpreted by the panel in US — Section 301 Trade Act. The Panel recognized this intention to engage in bilateral discussions evidenced in the DSB statements, but found that the consultations that took place after the notification of Directive 2003/74/EC “largely related to procedural issues”. Simply because subsequent consultations related largely to procedural issues does not mean that, at the time the DSB statements were made, the United States and Canada had made a unilateral determination without recourse to the DSU within the meaning of Article 23.2(a).

 

Moreover, 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. 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.”(2082)

(b) Article 23.2(b)

1314.     In US — Section 301 Trade Act, the Panel paraphrased the obligation in Article 23.2(b):

“It is for the WTO or both of the disputing parties, through the procedures set forth in Article 21 — not for an individual WTO Member — to determine the reasonable period of time for the Member concerned to implement DSB recommendations and rulings (Article 23.2(b)).”(2083)

(c) Article 23.2(c)

1315.     In US — Section 301 Trade Act, the Panel para phrased the obligation in Article 23.2(c):

“ It is for the WTO through the procedures set forth in Article 22 — not for an individual WTO Member — to determine, in the event of disagreement, the level of suspension of concessions or other obligations that can be imposed as a result of a WTO inconsistency, as well as to grant authorization for the actual implementation of these suspensions.”(2084)

1316.     The Panel in US — Section 301 Trade Act considered that Article 23.2(c) includes two cumulative obligations:

Article 23.2(c) thus includes two cumulative obligations:

 

(a)     the US has to “follow the procedures set forth in Article 22 to determine the level of suspension of concessions or other obligations” (emphasis added); and

 

(b)     the US has to “obtain DSB authorization in accordance with those procedures before suspending concessions or other obligations under the covered agreements in response to the failure of the Member concerned to implement the recommendations and rulings within that reasonable period of time “(emphasis added).”(2085)

 

1317.     After determining that the so-called 3 March Measure, which imposed an increased bonding requirement upon goods from the European Communities, constituted a measure taken to redress a WTO violation (see the excerpt referenced in paragraph 1305 above), the Panel in US — Certain EC Products examined whether the 3 March Measure violated Article 23.2(c) of the DSU. The Panel held that “any WTO suspension of concessions or other obligations without prior DSB authorization is explicitly prohibited”:

Article 23.2(c) prohibits any suspensions of concessions or other obligations (taken as measures seeking to redress a WTO violation), prior to a relevant DSB authorization. Article 3.7 provides that suspension of concessions or other obligations should be used as a last resort, and subject to a DSB authorization. In Article 22.6, the suspension of concessions or other obligations is prohibited during the arbitration process which can only take place before the DSB authorization.

 In the context of these provisions, any WTO suspension of concessions or other obligations without prior DSB authorization is explicitly prohibited. On 3 March there was no relevant DSB authorization of any sort. “(2086)

4. Relationship with other provisions of the DSU

(a) Article 3.7

1318.     In US — Certain EC Products, the Appellate Body clarified that “[t]he 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 “consider [ed], 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.”(2087)

(b) Article 22.8

1319.     In US/Canada — Continued Suspension, the Appellate Body concluded that the Panel erred in finding that the United States and Canada were seeking the redress of a violation with respect to Directive 2003/74/ EC, within the meaning of Article 23.1 of the DSU, and had made a determination in relation to that Directive to the effect that a violation had occurred, within the meaning of Article 23.2(a) of the DSU. In the course of its analysis, the Appellate Body addressed the relationship between Article 23 and Article 22.8 of the DSU:

“This does not mean that Article 23.1 ceases to apply once the suspension of concessions has been authorized by the DSB. Article 23.2(c) specifically refers to Article 22 of the DSU. Paragraph 8 of this provision states that the suspension of concessions shall only be applied until the inconsistent measure has been removed or one of the other two conditions in Article 22.8 is met. Thus, if the Member subject to the suspension of concessions takes an implementing measure and that measure is found in WTO dispute settlement proceedings to bring this Member into substantive compliance, the suspension of concessions would no longer be consistent with Article 22.8 of the DSU, and, as a result, would become a unilateral action prohibited by Articles 23.1 and 23.2. In other words, the requirements in Article 22.8 and Article 23 apply and must be read together in the post-suspension stage of a dispute. Therefore, Article 23 must be seen as containing an ongoing obligation and continues to apply even after the suspension of concessions has been duly authorized by the DSB.

 We note that the suspension of concessions maintained by the United States and Canada were duly authorized by the DSB subsequent to its adoption of the recommendations and rulings in EC — Hormones and an arbitration award resulting from proceedings under Article 22.6 regarding the level of the suspension of concessions. As discussed above, where the suspension of concessions has been duly authorized by the DSB and is applied consistently with the rules of the DSU, including Article 22.8, it does not constitute a violation of Article 23.1, because it is not imposed without recourse to or without abiding by the DSU. The requirements in Article 22 and those in Article 23 must be read together, in the post-suspension stage of the dispute, to determine the legality of the continued suspension when an implementing measure has been taken. Thus, we share the view of the United States and Canada that, in order to determine whether they acted inconsistently with Article 23 by continuing the suspension of concessions subsequent to the notification of Directive 2003/74/EC, the Panel had to first determine whether the suspension of concessions was being applied consistently with Article 22.8 of the DSU.

 The DSB’s authorization does not mean that Article 23 becomes irrelevant. Rather, as Article 23.2(c) specifies, the suspension of concessions is subject to Article 22, including the requirement in Article 22.8 that it shall only be applied until such time as the measure found to be inconsistent with the covered agreements has been removed. Therefore, the suspension of concessions by the United States and Canada would be in breach of Article 23.2(c), and consequently Article 23.1, if it were established in WTO dispute settlement that the inconsistent measure has indeed been removed within the meaning of Article 22.8 and the suspension is not immediately terminated. Article 22.8 thus provides relevant context for the analysis of the issues appealed under Article 23. Moreover, the application of DSB-authorized suspension of concessions is temporary and subject to the objective conditions laid down in Article 22.8. The United States, Canada, as well as the European Communities, have the shared responsibility to ensure that the suspension of concessions is not applied beyond the time foreseen in Article 22.8. Consequently, the United States and Canada have a duty to engage actively in dispute settlement proceedings concerning whether the suspension of concessions is applied consistently with such conditions. Failing to do so could be contrary to the overarching principle in Article 23.1 prohibiting Members from seeking redress without having recourse to, or abiding by the rules of, the DSU. Nonetheless, this is not currently the case, because both the United States and Canada are actively engaged in these proceedings initiated by the European Communities to determine whether the measure found to be inconsistent with a covered agreement in EC — Hormones has been removed within the meaning of Article 22.8.”(2088)

(c) Relationship to general international law

1320.     In EC — Commercial Vessels, the Panel concluded that even measures not involving a suspension of WTO concessions or other obligations may be covered by Article 23.1. In the course of its analysis, the Panel said the following:

“While the Panel realizes that in a number of WTO dispute settlement and arbitration cases reference has been made to the public international law concepts invoked by the European Communities, the Panel can see no basis for using these concepts to read into Article 23.1a limitation that is unsupported by an interpretation based on its text, context and object and purpose.”(2089)

 

XXIV. Article 24     back to top

A. Text of Article 24

Article 24: Special Procedures Involving Least-Developed Country Members

1.     At all stages of the determination of the causes of a dispute and of dispute settlement procedures involving a least-developed country Member, particular consideration shall be given to the special situation of least-developed country Members. In this regard, Members shall exercise due restraint in raising matters under these procedures involving a least-developed country Member. If nullification or impairment is found to result from a measure taken by a least-developed country Member, complaining parties shall exercise due restraint in asking for compensation or seeking authorization to suspend the application of concessions or other obligations pursuant to these procedures.

 

2.     In dispute settlement cases involving a least-developed country Member, where a satisfactory solution has not been found in the course of consultations the Director-General or the Chairman of the DSB shall, upon request by a least-developed country Member offer their good offices, conciliation and mediation with a view to assisting the parties to settle the dispute, before a request for a panel is made. The Director-General or the Chairman of the DSB, in providing the above assistance, may consult any source which either deems appropriate.


B. Interpretation and Application of Article 24

1. Article 24.1

(a) Scope of Panel’s duty to give consideration to the special situation of LDC Members

1321.     In US — Upland Cotton, Benin and Chad, two least-developed country Members, were involved in the proceedings as third parties. The Panel stated that “[i]n accordance with Article 24.1 of the DSU, particular consideration was given to the special situation of these two Members.”(2090)

1322.     However, in the context of examining Brazil’s claim of “serious prejudice to the interests of another Member” under Article 5(c) of the SCM Agreement, the Panel in US — Upland Cotton concluded that the serious prejudice under examination by a WTO panel is the serious prejudice allegedly suffered by the complaining Member only, and that it would take into account the serious prejudice allegations of other Members (including Benin and Chad) only to the extent these constitute evidence of the serious prejudice suffered by Brazil. The Panel considered that Article 24.1 of the DSU provided no basis for adopting a different approach:

“While this provision seems to us primarily to address a situation where a least-developed country Member would be the Member complained against in a particular WTO dispute settlement proceeding, the first sentence of the provision is sufficiently generally worded to encompass the situation where least-developed country Members are involved as third parties in a Panel proceeding. This requires that at all stages of the dispute settlement procedures, which includes this Panel process, particular consideration shall be given to the situation of least-developed countries. We understand this direction, contained in the DSU, to address the procedural aspects of the dispute settlement process, rather than our substantive examination under the covered agreements….

 

As we have already observed, by the terms of Article 10.1 of the DSU, we are already bound to take the interest of all WTO Members — naturally including least-developed country Members — fully into account in our substantive examination under Part III of the SCM Agreement. In taking such full account of all Members’ interests, we do not view it as conceptually or practically possible to take certain Members’ interests more fully into account than those of other Members.

 

Nor, in the course of our substantive examination of the merits of Brazil’s claims in this dispute, do we believe that this full “taking into account” of all Members’ interests would entitle us to alter the terms of the treaty text which determines the substantive rights and obligations of Members. …”(2091)

1323.     As third participants in the appeal in US — Upland Cotton, Benin and Chad asked the Appellate Body to give meaning to Article 24.1 of the DSU by acknowledging that the increase in the United States’ world market share caused serious prejudice to Benin and Chad by reducing their market share. After referring to Article 24.1, the Appellate Body explained that it was not in a position to grant Benin and Chad’s request:

“We fully recognize the importance of this provision. However, we recall that Benin and Chad request us to find that their interests have suffered serious prejudice in the sense of Article 5(c) of the SCM Agreement, if we find Brazil has suffered serious prejudice as a result of an increase in the United States’ world market share in upland cotton in the sense of Article 6.3(d) of the SCM Agreement. As we do not find it necessary to rule on Brazil’s appeal regarding the interpretation of the phrase “world market share” in Article 6.3(d), we therefore are not in a position to accede to Benin and Chad’s request to complete the analysis and to find that, in addition to Brazil, Benin and Chad also have suffered serious prejudice to their interests in the sense of Articles 6.3(d) and 5(c) of the SCM Agreement. We note that Benin and Chad’s request to complete the analysis was predicated upon us reversing the Panel’s interpretation of the phrase “world market share” in Article 6.3(d) of the SCM Agreement. This condition is not met.”(2092)

(b) Members’ duty to exercise due restraint

1324.     In US — Upland Cotton, the Panel stated that a Member’s “comprehensive right to bring dispute settlement actions” is “subject to Articles 3.7, 3.10 and 24.1 of the DSU”.(2093)

1325.     As of 31 October 2011, no WTO Member has invoked dispute settlement procedures against a least-developed country (LDC) Member.(2094) However, several LDC Members have participated in proceedings as third parties.(2095) To date, one LDC Member has invoked dispute settlement procedures against another Member; that case was settled through a mutually agreed solution.(2096)

 

XXV. Article 25    back to top

A. Text of Article 25

Article 25: Arbitration

1.     Expeditious arbitration within the WTO as an alternative means of dispute settlement can facilitate the solution of certain disputes that concern issues that are clearly defined by both parties.

 

2.     Except as otherwise provided in this Understanding, resort to arbitration shall be subject to mutual agreement of the parties which shall agree on the procedures to be followed. Agreements to resort to arbitration shall be notified to all Members sufficiently in advance of the actual commencement of the arbitration process.

 

3.     Other Members may become party to an arbitration proceeding only upon the agreement of the parties which have agreed to have recourse to arbitration. The parties to the proceeding shall agree to abide by the arbitration award. Arbitration awards shall be notified to the DSB and the Council or Committee of any relevant agreement where any Member may raise any point relating thereto.

 

4.     Articles 21 and 22 of this Understanding shall apply mutatis mutandis to arbitration awards.

 
B. Interpretation and Application of Article 25

1. General

(a) Scope of the Arbitrators’ mandate under Article 25

1326.     In US — Section 110(5) Copyright Act (Article 25), the first time since the inception of the WTO that Members have had recourse to arbitration pursuant to Article 25 of the DSU, the Arbitrators observed that such recourse is not subject to multilateral control and that, accordingly, “it is incumbent on the Arbitrators them selves to ensure that it is applied in accordance with the rules and principles governing the WTO system”:

“The Arbitrators note that this is the first time since the establishment of the WTO that Members have had recourse to arbitration pursuant to Article 25 of the DSU.(2097) Whereas the DSB establishes panels or refers matters to other arbitration bodies, Article 25 provides for a different procedure. The parties to this dispute only had to notify the DSB of their recourse to arbitration. No decision is required from the DSB for a matter to be referred to arbitration under Article 25. In the absence of a multilateral control over recourse to that provision, it is incumbent on the Arbitrators themselves to ensure that it is applied in accordance with the rules and principles governing the WTO system….”(2098),(2099)

(b) Jurisdiction of the Arbitrators under Article 25

1327.     In US — Section 110(5) Copyright Act (Article 25), the Arbitrators were called upon to determine the level of nullification or impairment of benefits to the European Communities as a result of Section 110(5)B of the US Copyright Act. The Arbitrators considered that it was for them to determine whether they had jurisdiction to consider this issue; they concluded that they did have jurisdiction:

“As recalled by the Appellate Body in United States — Anti-Dumping Act of /9/6,(2100) it is a widely accepted rule that an international tribunal is entitled to consider the issue of its own jurisdiction on its own initiative. The Arbitrators believe that this principle applies also to arbitration bodies.”(2101),(2102)

(c) Burden of proof in Article 25 arbitrations

1328.     In US — Section 110(5) Copyright Act (Article 25), the Arbitrators followed the rules on burden of proof applicable in Article 22.6 arbitrations as stipulated in the agreed procedures submitted by the parties. Therefore, it was for the United States, the respondent in the original panel proceedings, to provide a prima facie case that the methodology and estimates proposed by the European Communities did not accurately reflect the European Communities benefits being nullified or impaired:

“The Arbitrators carefully examined the claims, arguments and evidence submitted by the parties in light of the rules on burden of proof applicable in the context of arbitrations under Article 22.6 of the DSU, as instructed by the parties. The Arbitrators were mindful of the fact that, in arbitration proceedings under Article 22.6, a party contests the level of countermeasures which the other intends to take under paragraphs 2, 3 and 4 of Article 22. It is therefore understandable that the burden be on the party that contests the level of countermeasures to make a prima facie demonstration that the methodology and the calculations submitted by the party intending to apply countermeasures are inconsistent with the requirements of Article 22 of the DSU. For instance, in the European Communities — Hormones cases, the initial burden was on the European Communities. The present case, however, was referred to the Arbitrators by both parties “by mutual agreement”. It is arguable whether or not there is a complainant and a defendant. This said, we note that the agreed procedures submitted by the parties(2103) expressly instruct us to follow the allocation of the burden of proof applied in arbitrations under Article 22.6. We also note that the parties agreed that the European Communities would submit a methodology paper ahead of the first written submissions, as in proceedings under Article 22.6. As a result, the Arbitrators decided to allocate the burden of proof accordingly, as in an Article 22.6 case.”(2104)

(d) Matters dealt under Article 25 arbitrations

(i) Nullification or impairment of benefits

General

1329.     In US — Section 110(5) Copyright Act (Article 25), the Arbitrators were called to determine the level of nullification or impairment of benefits to the European Communities as a result of Section 110(5)B of the US Copyright Act. As indicated in paragraph 1327 above, the Arbitrators concluded that they did have jurisdiction. The first step in their reasoning was to compare the panel procedure under the DSU with the Article 25 arbitration. The Arbitrators concluded that the procedure provided for in Article 25 may be considered an alternative to a panel procedure:

“The Arbitrators first note that, pursuant to the text of Article 25.1, arbitration under Article 25 is an “alternative means of dispute settlement”.(2105) The term “dispute settlement” is generally used in the WTO Agreement to refer to the complete process of dispute(2106) resolution under the DSU, not to one aspect of it, such as the determination of the level of benefits nullified or impaired as a result of a violation. It may be argued that the procedure provided for in Article 25 is actually an alternative to a panel procedure. This would seem to be confirmed by the terms of Article 25.4, which provides that “Articles 21 and 22 of this Understanding shall apply mutatis mutandis to arbitration awards.”(2107) Article 22.2 itself, unlike Article 21.3(c), does not refer to arbitration as an alternative to the negotiation of mutually acceptable compensation. It could then be argued that arbitration under Article 25 is not intended for “determin [ing] the level of nullification or impairment of benefits to the European Communities as a result of Section 110(5) (B) of the US Copyright Act.”(2108)

1330.     Despite their acknowledgement that an argument may be made whereby arbitration pursuant to Article 25 would be considered as not being intended for determining the level of nullification or impairment of benefits, the Arbitrators in US — Section 110(5) Copyright Act (Article 25) considered that the elements sustaining such an argument are outweighed by other elements of interpretation. The Arbitrators therefore concluded that, “pending further interpretation by the Members”, they did have jurisdiction under Article 25 to determine the level of European Communities’ benefits that were nullified or impaired in this case:

“While being mindful of these elements of interpretation, the Arbitrators are of the view that they are outweighed by other elements, based on the fact that none of the provisions concerned expressly excludes recourse to arbitration under Article 25 in the particular context in which they apply. Article 25.2 itself provides that resort to arbitration shall be subject to mutual agreement of the parties which shall agree on the procedures to be followed “except as otherwise provided in this Understanding”. Article 25 itself does not specify that recourse to Article 25 arbitration should be excluded when determining the level of nullification or impairment suffered by a Member. On the contrary, the terms of Article 25.1 referring to “the solution of certain disputes that concern issues that are clearly defined by the parties” may support the view that Article 25 should be understood as an arbitration mechanism to which Members may have recourse whenever necessary within the WTO framework. We also note that Article 22.2 refers to “negotiations […] with a view to developing mutually acceptable compensation.” There is no language in that provision which would make it impossible to consider arbitration as a means of reaching a mutually acceptable compensation.

 

Moreover, recourse to Article 25 arbitration in the present situation is fully consistent with the object and purpose of the DSU. Arbitration is likely to contribute to the prompt settlement of a dispute between Members, as commanded by Article 3.3 of the DSU. Indeed, it may facilitate the resolution of a divergence in the context of a negotiation of compensations, thus paving the way to implementation without suspension of concessions or other obligations.

 

In general, recourse to arbitration under Article 25 strengthens the dispute resolution system by complementing negotiation under Article 22.2. The possibility for the parties to a dispute to seek arbitration in relation to the negotiation of compensation operates to increase the effectiveness of that option under Article 22.2. Incidentally, the Arbitrators note that compensation, in their opinion, is always to be preferred to countermeasures of any sort, since it enhances trade instead of restricting or diverting it. Finally, such an application of Article 25 does not, at least in the case at hand, affect the rights of other Members under the DSU.(2109)

 

Having regard to the object of the arbitration requested by the parties and the fact that the rights of other Members under the DSU are not affected by the decision of the European Communities and the United States to seek arbitration under Article 25, the Arbitrators are of the view that, pending further interpretation by the Members, they should declare that they have jurisdiction under Article 25 to determine the level of EC benefits which are being nullified or impaired in this case.”(2110),(2111)

Nature of the benefits nullified or impaired

1331.     In US — Section 110(5) Copyright Act (Article 25), the Arbitrators agreed with the parties that, for the purpose of the arbitration proceeding, the relevant benefits were those which were economic in nature:

“In their submissions to the Arbitrators, the parties have focused on this type of benefit accruing to copyright holders. The Arbitrators concur with the parties that, for purposes of these arbitration proceedings, the relevant benefits are those which are economic in nature.(2112) This is consistent with previous decisions of arbitrators acting under Article 22.6 of the DSU.(2113) Moreover, like the parties to this dispute, the Arbitrators will proceed on the assumption that the licensing royalties realizable by copyright holders constitute an adequate measure of the economic benefits arising from Articles 11bis(1)(iii) and 11(1)(ii).”(2114)

Benefits denied to a WTO Member

1332.     The Arbitrators in US — Section 110(5) Copyright Act (Article 25) stated that their task was to assess the level of nullification or impairment of the benefits denied to the European Communities rather than determining the benefits denied to European Communities’ right holders:

“Accordingly, the Arbitrators will, in this case, assess the level of EC benefits which Section 110(5)(B) is nullifying or impairing in terms of the royalty income foregone by EC right holders. In making this observation, the Arbitrators are aware that their task in this case is to determine the benefits which are denied to the European Communities rather than determining the benefits which are denied to EC right holders. However, there can be no question that the benefits which are denied to the European Communities include the benefits which are denied to EC right holders.(2115) What is more, the European Communities has not made out a claim to the effect that Section 110(5)(B) is nullifying or impairing benefits additional to those which EC right holders could otherwise derive from Articles 11bis(1)(iii) and 11 (1 )(ii). As a result, it is appropriate, for the purposes of these proceedings, to determine the level of EC benefits which Section 110(5)(B) is nullifying or impairing in terms of the benefits foregone by EC right holders.”(2116)

Point in time to assess the level of nullification or impairment

1333.     In US — Section 110(5) Copyright Act (Article 25), the Arbitrators assumed that the parties wanted an assessment of the level of benefits nullified or impaired on the date the matter was referred to arbitration, disregarding the rules established in Article 22.6 of the DSU:

“The Arbitrators note that they have been appointed under Article 25 of the DSU. As a result, they do not feel constrained by a number of obligations imposed on arbitrators in Article 22.6 proceedings. Unlike Article 22.6, which closely relates to compliance (or absence thereof) at the end of the reasonable period of time, Article 25 is silent as to the date on which a matter referred to arbitration should be assessed. However, the Arbitrators are aware that they are not called upon to consider the level of EC benefits which may still be nullified or impaired after the end of the implementation period, but to consider the level of EC benefits which are being nullified or impaired as a result of the current application of Section 110(5)(B)(2117) General practice under the DSU has been to consider the facts of a case as at the date of establishment of the panel. In the absence of any specification in our mandate, we believe that it should be assumed that the parties wanted us to assess the level of benefits nullified or impaired on the date the matter was referred to us. In other words, we must determine the level of nullification or impairment of EC benefits over a one-year period ending as closely as possible to 23 July 2001. “(2118),(2119)

(e) Right to seek and disregard information

1334.     In US — Section 110(5) Copyright Act (Article 25), the Arbitrators disregarded the information they had requested from a United States’ collective management organization because certain unacceptable conditions were attached to the use of such information.(2120)

(f) Treatment of confidential information

1335.     In US — Section 110(5) Copyright Act (Article 25), the Arbitrators decided that, in the absence of specific requests from the parties as to how confidentiality of business confidential information should be preserved, they would, in general, rely on the relevant practice of the Appellate Body:

“In the absence of specific requests from the parties as to how confidentiality of business confidential information should be preserved, the Arbitrators will rely generally on the practice of the Appellate Body on this matter.(2121) To the extent that confidential information may appear as such in the award in order to support the findings of the Arbitrators, the Arbitrators decided that two versions of the award would be prepared. One, for the parties, would contain all the information used in support of the determinations of the Arbitrators. The other, which would be circulated to all Members, would be edited so as not to include the information for which, after consultation with the parties, the Arbitrators would conclude that confidentiality for business reasons was sufficiently warranted. The information which the Arbitrators would consider to be business confidential would be replaced by ‘x’.”(2122),(2123)

2. Article 25.1

(a) “expeditious arbitration … as an alternative means of dispute settlement”

1336.     In US — Certain EC Products, the Panel noted that Article 25 of the DSU provides for arbitration as a means of adjudicating WTO related disputes. The Panel stated that:

“[Although the panel (and Appellate Body) process is the most commonly used WTO dispute settlement procedure, Article 25 of the DSU, for example, explicitly provides for arbitration as a means of adjudicating WTO related disputes. Article 25.4 provides for the applicability of Articles 21 and 22 of the DSU to the results of such arbitration. There is no reason why the WTO assessment of the compatibility of an implementing measure could not be determined by an Article 25 arbitration, as one of the WTO dispute settlement procedures.”(2124)

1337.     In US — Section 110(5) Copyright Act (Article 25), the Arbitrators noted that an Article 25 arbitration is an alternative means of dispute settlement and considered that an Article 25 arbitration procedure arguable “is actually an alternative to a panel procedure”.(2125) See paragraph 1326 above.

(b) Differences compared with panel proceedings

1338.     Also in US — Section 110(5) Copyright Act (Article 25), the Arbitrators observed that whereas the DSB establishes panels or refers matters to other arbitration bodies, under Article 25 proceedings, the parties only had to notify the DSB of their recourse to arbitration. See paragraph 1326 above.

1339.     In US/Canada — Continued Suspension, the Appellate Body distinguished the “consensual” or “alternative” means of dispute resolution provided for in Article 25 of the DSU (and in Article 5 of the DSU) from “adjudication” through panel proceedings:

“Certainly, parties to a dispute are not precluded from pursuing consensual or alternative means of dispute settlement foreseen in the DSU. Article 3.7 of the DSU provides that “[a] solution mutually acceptable to the parties to a dispute and consistent with the covered agreements is clearly to be preferred.” To reach a mutually acceptable solution, Members can engage in consultations or resort to mediation and good offices. Moreover, Article 25 provides for arbitration as an alternative to panel proceedings for dispute resolution. Consultations, mediation, good offices, and arbitration are, however, alternatives to compulsory adjudication and require the consent of the parties. In the absence of such consent, they cannot lead to a binding decision. Thus, it is important to distinguish between these consensual means of dispute resolution, which are always at the Members’ disposal, and adjudication through panel proceedings, which are compulsory….”(2126)

3. Article 25.2

(a) Arbitration under Article 25 should only be excluded when expressly provided

1340.     In US — Section 110(5) Copyright Act, the Arbitrators, when deciding whether they were competent to asses the level of nullification or impairment (see paragraphs 1329-1333 above), noted that “none of the provisions concerned expressly excludes recourse to arbitration under Article 25 in the particular context in which they apply. Article 25.2 itself provides that resort to arbitration shall be subject to mutual agreement of the parties which shall agree on the procedures to be followed ‘except as otherwise provided in this Understanding’.”(2127)

4. Article 25.4

(a) General

1341.     In US — Section 110(5) Copyright Act (Article 25), the Arbitrators noted that the nature of an Article 25 arbitration as an alternative to the panel procedure (see paragraph 1337 above), “would seem to be confirmed by the terms of Article 25.4, which provides that ‘Articles 21 and 22 of this Understanding shall apply mutatis mutandis to arbitration awards’.”(2128),(2129)

(b) “Articles 21 and 22 … shall apply mutatis mutandi

1342.     In US — Section 110(5) Copyright Act (Article 25), the Arbitrators indicated that “they [did] not feel con strained by a number of obligations imposed on arbitrators in Article 22.6 proceedings”. See paragraph 1333 above.

5. Relationship with other Articles

(a) Article 3.3

1343.     In US — Section 110(5) Copyright Act (Article 25), the Arbitrators considered that the recourse to Article 25 arbitration in that case was fully consistent with the object and purpose of the DSU since the arbitration at issue was likely to contribute to the prompt settlement of a dispute between the European Communities and the United States, as commanded by Article 3.3 of the DSU:

“Moreover, recourse to Article 25 arbitration in the present situation is fully consistent with the object and purpose of the DSU. Arbitration is likely to contribute to the prompt settlement of a dispute between Members, as commanded by Article 3.3 of the DSU. Indeed, it may facilitate the resolution of a divergence in the context of a negotiation of compensations, thus paving the way to implementation without suspension of concessions or other obligations. “(2130)

(b) Article 21

1344.     With respect to the relationship with Article 21, see paragraphs 1329, 1336, and 1341 above.

(c) Article 22.2

1345.     With respect to the relationship with Article 22.2, see paragraphs 1329, 1330, 1336, and 1341 above.

(d) Article 22.6

1346.     With respect to the relationship between Article 25 arbitrations and Article 22.6, see paragraphs 1328, 1331, 1333 and 1342 above

 

XXVI. Article 26    back to top

A. Text of Article 26

Article 26:

1.       Non-Violation Complaints of the Type Described in Paragraph 1(b) of Article XXIII of GATT 1994

 

       Where the provisions of paragraph 1(b) of Article XXIII of GATT 1994 are applicable to a covered agreement, a panel or the Appellate Body may only make rulings and recommendations where a party to the dispute considers that any benefit accruing to it directly or indirectly under the relevant covered agreement is being nullified or impaired or the attainment of any objective of that Agreement is being impeded as a result of the application by a Member of any measure, whether or not it conflicts with the provisions of that Agreement. Where and to the extent that such party considers and a panel or the Appellate Body determines that a case concerns a measure that does not conflict with the provisions of a covered agreement to which the provisions of paragraph 1(b) of Article XXIII of GATT 1994 are applicable, the procedures in this Understanding shall apply, subject to the following:

 

(a)     the complaining party shall present a detailed justification in support of any complaint relating to a measure which does not conflict with the relevant covered agreement;

 

(b)     where a measure has been found to nullify or impair benefits under, or impede the attainment of objectives, of the relevant covered agreement without violation thereof, there is no obligation to withdraw the measure. However, in such cases, the panel or the Appellate Body shall recommend that the Member concerned make a mutually satisfactory adjustment;

 

(c)     notwithstanding the provisions of Article 21, the arbitration provided for in paragraph 3 of Article 21, upon request of either party, may include a determination of the level of benefits which have been nullified or impaired, and may also suggest ways and means of reaching a mutually satisfactory adjustment; such suggestions shall not be binding upon the parties to the dispute;

 

(d)     notwithstanding the provisions of paragraph 1 of Article 22, compensation may be part of a mutually satisfactory adjustment as final settlement of the dispute.

 

2.            Complaints of the Type Described in Paragraph 1(c) of Article XXIII of GATT 1994

 

Where the provisions of paragraph 1(c) of Article XXIII of GATT 1994 are applicable to a covered agreement, a panel may only make rulings and recommendations where a party considers that any benefit accruing to it directly or indirectly under the relevant covered agreement is being nullified or impaired or the attainment of any objective of that Agreement is being impeded as a result of the existence of any situation other than those to which the provisions of paragraphs 1(a) and 1(b) of Article XXIII of GATT 1994 are applicable. Where and to the extent that such party considers and a panel determines that the matter is covered by this paragraph, the procedures of this Understanding shall apply only up to and including the point in the proceedings where the panel report has been circulated to the Members. The dispute settlement rules and procedures contained in the Decision of 12 April 1989 (BISD 36S/61-67) shall apply to consideration for adoption, and surveillance and implementation of recommendations and rulings. The following shall also apply:

 

(a)     the complaining party shall present a detailed justification in support of any argument made with respect to issues covered under this paragraph;

 

(b)     in cases involving matters covered by this paragraph, if a panel finds that cases also involve dispute settlement matters other than those covered by this paragraph, the panel shall circulate a report to the DSB addressing any such matters and a separate report on matters falling under this paragraph.

 
B. Interpretation and Application of Article 26

1. Article 26.1: non-violation complaints of the type described in Article XXIII: 1(b) of the GATT 1994

(a) General

1347.     For further information on panel and Appellate Body reports on claims brought under Article XXIII: 1(b), see the Section on Article XXIII: 1(b) in the Chapter on the GATT 1994.

(b) Table of non-violation nullification and impairment disputes under the WTO dispute settlement system

1348.     Under the Dispute Settlement System of the WTO, there have been seven disputes in which a non violation nullification and impairment (NVNI) claim was substantively considered by a panel. The following table provides information on these disputes. It is updated to 30 September 2011.

WT/DS No. Dispute Outcome
DS2 US — Gasoline Conditional NVNI claim rejected — failure to meet conditions
DS26, DS48 EC — Hormones Conditional NVNI claim rejected — failure to meet conditions
DS44 Japan — Film NVNI claim rejected — failure to meet burden of proof
DS135 EC — Asbestos NVNI claim rejected — failure to meet burden of proof
DS163 Korea — Procurement NVNI claim rejected — failure to meet burden of proof
DS234 US — Offset Act (Byrd Amendment) NVNI claim rejected — failure to meet burden of proof
DS339, DS340, DS342 China — Auto Parts Conditional NVNI claim rejected — failure to meet conditions

(c) Article 26.1(a): “detailed justification in support of any complaint”

1349.     In Japan — Film, the Panel examined the issue of which party bears the burden of proof in a claim involving non-violation under Article 26.1 of the DSU. The Panel stated:

“In a case of non-violation nullification or impairment pursuant to Article XXIII: 1(b), Article 26.1(a) of the DSU and GATT jurisprudence confirm that this is an exceptional remedy for which the complaining party bears the burden of providing a detailed justification to back up its allegations.

 Consistent with the explicit terms of the DSU and established WTO/GATT jurisprudence, and recalling the Appellate Body ruling that ‘precisely how much and precisely what kind of evidence will be required to establish … a presumption [that what is claimed is true] will necessarily vary from … provision to provision’, we thus consider that the United States, with respect to its claim of non-violation nullification or impairment under Article XXIII: 1(b), bears the burden of providing a detailed justification for its claim in order to establish a presumption that what is claimed is true. It will be for Japan to rebut any such presumption.”(2131)

1350.     In EC — Asbestos, the Panel confirmed that:

“Where the application of Article XXIII: 1(b) is concerned, Article 26.1(a) of the Understanding and panel practice in the context of the WTO Agreement and the GATT 1947 confirm that this is an exceptional course of action requiring the complaining party to carry the burden of presenting a detailed justification in support of its complaint.”(2132)

1351.     The Panel further stated that:

“[B]ecause of the importance conferred on them a priori by the GATT 1994, as compared with the rules governing international trade, situations that fall under Article XX justify a stricter burden of proof being applied in this context to the party invoking Article XXIII: 1 (b), particularly with regard to the existence of legitimate expectations and whether or not the initial Decree could be reasonably anticipated.”(2133)

(d) Article 26.1(b): remedies in the context of non-violation nullification or impairment

1352.     In India — Patents (US), the Appellate Body explained that, in the context of non-violation complaints, the “ultimate goal is not the withdrawal of the measure concerned, but rather achieving a mutually satisfactory adjustment, usually by means of compensation” and noted that “[t]his is codified in Article 21.1(b) of the DSU”.(2134)

1353.     In EC — Asbestos, the panel and Appellate Body rejected the European Communities’ argument that the rules on non-violation nullification or impairment cannot apply to measures justified under Article XX of the GATT 1994. In that context, the Panel stated that:

“The application of Article XXIII: 1(b) does not prevent either the adoption or the enforcement of the Decree concerned. Article 26:1(b) stipulates that even where a measure has been found to nullify or impair benefits under, or impede the attainment of objectives, of the GATT 1994 without violation thereof, there is no obligation to withdraw the measure. Accordingly, there is no contradiction between the invocation of Article XX and the application of Article XXIII: 1(b). However, that Article must be applied in such a way as to protect the balance of rights and duties negotiated.

 A finding based on Article XXIII: 1(b) of the GATT 1994 and Article 26.1 of the Understanding never results in an obligation not to apply or to withdraw the measure in question. The Member concerned can only be asked to make “a mutually satisfactory adjustment”. Article 26:1 (b) also specifies that compensation may be part of a mutually satisfactory adjustment as final settlement of the dispute.216 The Member adopting a public health protection measure is totally free to continue to apply the measure concerned as it stands while offering in exchange compensation for the benefits nullified or impaired.”(2135)

1354.     The Panel in US — Gambling (Article 21.5 — Antigua and Barbuda) explained that compliance in cases involving measures found to be inconsistent with the covered agreements requires a change that eliminates the inconsistency with the covered agreements. The Panel then stated that:

“This can be contrasted with a recommendation that the Member concerned make a “mutually satisfactory adjustment”, applicable in so-called “non-violation” cases under Article 26.1(b) of the DSU. In such cases, there is no obligation to make any change to bring the measure at issue into conformity with the Member’s obligations because the measure is already in conformity, or consistent, with those obligations.”(2136)

2. Article 26.2: situation complaints of the type described in Article XXIII:l(c) of the GATT 1994

1355.     The Panel in US — Gambling (Article 21.5 — Antigua and Barbuda) contrasted the situation under the WTO dispute settlement system with prior GATT practice, according to which Members were able to block adoption of panel reports. In that context, the Panel noted:

“The previous GATT practice was to adopt panel reports by consensus, without prejudice to the GATT provisions on decision-making: see the Decision of 12 April 1989 on improvements to the GATT dispute settlement rules and procedures, para. G.3 (BISD 36S/61-67). This practice remains applicable to so-called “situation complaints” under Article 26.2 of the DSU.”(2137)

 

XXVII. Article 27    back to top

A. Text of Article 27

Article 27: Responsibilities of the Secretariat

1.     The Secretariat shall have the responsibility of assisting panels, especially on the legal, historical and procedural aspects of the matters dealt with, and of providing secretarial and technical support.

 

2.     While the Secretariat assists Members in respect of dispute settlement at their request, there may also be a need to provide additional legal advice and assistance in respect of dispute settlement to developing country Members. To this end, the Secretariat shall make available a qualified legal expert from the WTO technical cooperation services to any developing country Member which so requests. This expert shall assist the developing country Member in a manner ensuring the continued impartiality of the Secretariat.

 

3.     The Secretariat shall conduct special training courses for interested Members concerning these dispute settlement procedures and practices so as to enable Members’ experts to be better informed in this regard.

 
B. Interpretation and Application of Article 27

1. Article 27.1

1356.     In Mexico — Telecoms, the Panel noted that the diverse backgrounds of the panellists “and the assistance granted by the Secretariat pursuant to Article 27.1 of the DSU” ensured that it was fully aware of the legal and technical complexity of the regulation of telecommunications services, including their rapid technological evolution, and the drafting history of GATS provisions to which the disputing parties had referred extensively.(2138)

2. Article 27.2

1357.     The WTO Secretariat has, since the conclusion of the Uruguay Round, provided legal advice in accordance with the requirement in Article 27.2 to any developing country which requests it in the event of that country being involved in the dispute settlement process. The Institute for Training and Technical Cooperation, a division in the WTO Secretariat, presently employs two independent consultants on a permanent part-time basis for this purpose.(2139)

3. Article 27.3

1358.     Detailed information on all of the WTO Secretariat’s training courses, including courses concerning dispute settlement procedures and practices, is available at www.wto.org.

 

XXVIII. Appendix 1    back to top

A. Text of Appendix 1

Appendix 1: Agreements Covered by the Understanding

(A)      Agreement Establishing the World Trade Organization

 

(B)      Multilateral Trade Agreements

 

Annex 1A:      Multilateral Agreements on Trade in Goods

Annex 1B:      General Agreement on Trade in Services

Annex 1C:      Agreement on Trade-Related Aspects of Intellectual Property Rights

 

Annex 2:         Understanding on Rules and Procedures Governing the Settlement of Disputes

 

(C)      Plurilateral Trade Agreements

 

Annex 4:     Agreement on Trade in Civil Aircraft

                    Agreement on Government Procurement

                    International Dairy Agreement

                    International Bovine Meat Agreement

 

     The applicability of this Understanding to the Plurilateral Trade Agreements shall be subject to the adoption of a decision by the parties to each agreement setting out the terms for the application of the Understanding to the individual agreement, including any special or additional rules or procedures for inclusion in Appendix 2, as notified to the DSB.

 
B. Interpretation and Application of Appendix 1

1359.     See Article 1.1 of the DSU.

 

XXIX. Appendix 2    back to top

A. Text of Appendix 2

Appendix 2: Special or Additional Rules and Procedures Contained in the Covered Agreements

Agreement Rules and Procedures
Agreement on the Application of Sanitary and Phytosanitary Measures 11.2
Agreement on Textiles and Clothing 2.14,2.21,4.4,5.2,5.4,5.6, 6.9,6.10,6.11,8.1 through 8.12
Agreement on Technical Barriers to Trade 14.2 through 14.4, Annex 2
Agreement on Implementation of Article VI of GATT 1994 17.4 through 17.7
Agreement on Implementation of Article VII of GATT 1994 19.3 through 19.5, Annex 11.2(f), 3, 9, 21
Agreement on Subsidies and Countervailing Measures 4.2 through 4.12, 6.6, 7.2 through 7.10, 8.5, footnote 35, 24.4, 27.7, Annex V
General Agreement on Trade in Services XXII:3, XXIII:3
Annex on Financial Services 4
Annex on Air Transport Services 4
Decision on Certain Dispute Settlement 1 through 5
Procedures for the GATS

 

     The list of rules and procedures in this Appendix includes provisions where only a part of the provision may be relevant in this context.

 

     Any special or additional rules or procedures in the Plurilateral Trade Agreements as determined by the competent bodies of each agreement and as notified to the DSB.


B. Interpretation and Application of Appendix 2

1360.     See Article 1.2 of the DSU.

 

Footnotes:

2046. Panel Report, US — Shrimp, para. 7.43. back to text
2047. Decision by the Arbitrators, EC — Bananas III (United States) (Article 22.6 — EC), para. 4.12. back to text
2048. Panel Report, Canada — Aircraft Credits and Guarantees, para. 7.170. back to text
2049. Decision by the Arbitrator, Canada — Aircraft Credits and Guarantees (Article 22.6 — Canada), para. 398. back to text
2050. Panel Report, US — Section 301 Trade Act, para. 7.44. back to text
2051. (footnote original) Article 23.1 of the DSU refers more accurately to “seek the redress of a violation of obligations or other nullification or impairment of benefits under the covered agreements or an impediment to the attainment of any objective of the covered agreements”, i.e. the three causes of actions under WTO. In this Panel Report, the expression “WTO violation(s)” refers to all three causes of actions mentioned in Article 23.1 of the DSU. back to text
2052. (footnote original) Panel Report on US — Section 301 Trade Act, para. 7.44. back to text
2053. Panel Report, US — Certain EC products, paras 6.19-6.20. This was upheld by the Appellate Body at para. 111. back to text
2054. (footnote original) Panel Report on US — Section 301 Trade Act, para. 7.45. back to text
2055. (footnote original) Panel Report on US — Section 301 Trade Act, para. 7.45. back to text
2056. (footnote original) See Panel Report on US — Section 301 Trade Act, fns. 655 and 656. back to text
2057. Panel Report, US — Certain EC products, paras. 6.17-6.20. back to text
2058. Appellate Body Report, US — Certain EC Products, para. 111. back to text
2059. (footnote original) Appellate Body Report, US — Certain EC Products, para. 111. back to text
2060. (footnote original) Panel Report, US — Section 301 Trade Act, para. 7.44. back to text
2061. (footnote original) As the panel in US — Section 301 Trade Act pointed out, the prohibitions mentioned in Article 23.2 are examples of conduct that contradicts the rules and procedures of the DSU which, under the obligation in Article 23.1 to “abide by the rules and procedures” of the DSU, Members are obligated to follow. These rules and procedures cover more than those specifically mentioned in Article 23.2 and “[t]here is a great deal more State conduct which can violate the general obligation in Article 23.1 to have recourse to, and abide by, the rules and procedures of the DSU than the instances especially singled out in Article 23.2.” (Panel Report, US — Section 301 Trade Act, para. 7.45) (footnote omitted) back to text
2062. Appellate Body Reports, US/Canada — Continued Suspension, paras. 371-372. back to text
2063. Appellate Body Report, Mexico — Taxes on Soft Drinks, para. 53. back to text
2064. (footnote original) Appellate Body Report, Mexico — Tax Measures on Soft Drinks and Other Beverages (“Mexico — Taxes on Soft Drinks”), WT/DS308/AB/R, adopted 24 March 2006, DSR 2006:1, 3, para. 52. back to text
2065. Panel Report, EC and certain member States — Large Civil Aircraft, para. 7.92. back to text
2066. Panel Report, US — Certain EC products, paras. 6.22 and 6.26. back to text
2067. (footnote original) Art. 3.2 of the DSU. back to text
2068. Panel Report, EC — Commercial Vessels, para. 7.186. back to text
2069. Panel Report, EC — Commercial Vessels, para. 7.195. back to text
2070. (footnote original) Panel Report, US — Certain EC products, para. 6.23. back to text
2071. Panel Report, EC — Commercial Vessels, para. 7.196. back to text
2072. Panel Report, EC — Commercial Vessels, para. 7.198. back to text
2073. {footnote original) Appellate Body Report, US — Certain EC Products, para. 111. The need to read Article 23.2 together with Article 23.1 was also highlighted by the Panel Report in US — Section 301 Trade Act, paras. 7.44-7.45. back to text
2074. Panel Report, EC — Commercial Vessels, para. 7.200. back to text
2075. Appellate Body Reports, US/Canada — Continued Suspension, para. 373. back to text
2076. Appellate Body Reports, US/Canada — Continued Suspension, para. 374. back to text
2077. Appellate Body Reports, US/Canada — Continued Suspension, para. 393. back to text
2078. Panel Report, US — Section 301 Trade Act, para. 7.43. back to text
2079. Panel Reports, EC — Chicken Cuts, paras. 7.58-7.59. back to text
2080. Panel Report, US — Section 301 Trade Act, paras. 7.59, 7.61 and 7.63. back to text
2081. (footnote original) Panel Report, US — Section 301 Trade Act, footnote 657 to para. 7.50. back to text
2082. Appellate Body Reports, US/Canada — Continued Suspension, paras. 396-399. back to text
2083. Panel Report, US — Section 301 Trade Act, para. 7.38. back to text
2084. Panel Report, US — Section 301 Trade Act, para. 7.38. back to text
2085. Panel Report, US — Section 301 Trade Act, para. 7.172. back to text
2086. Panel Report, US — Certain EC products, paras. 6.37-6.38. back to text
2087. Appellate Body Report, US — Certain EC Products, para. 120. back to text
2088. Appellate Body Reports, US/Canada — Continued Suspension, paras. 375, 378, 384. back to text
2089. Panel Report, EC — Commercial Vessels, para. 7.205. back to text
2090. Panel Report, US — Upland Cotton, para. 7.54. See also Panel Report, US — Upland Cotton (Article 21.5 — Brazil), para. 8.29. back to text
2091. Panel Report, US — Upland Cotton, paras. 7.1410-7.1412. back to text
2092. Appellate Body Report, US — Upland Cotton, para. 512. back to text
2093. Panel Report, US — Upland Cotton, paragraph 7.318 and footnote 440. back to text
2094. As of 30 September 2011, there are 31 LDC Members: Angola, Bangladesh, Benin, Burkina Faso, Burundi, Cambodia, Central African Republic, Chad, Democratic Republic of the Congo, Djibouti, Gambia, Guinea, Guinea Bissau, Haiti, Lesotho, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Nepal, Niger, Rwanda, Senegal, Sierra Leone, Solomon Islands, Tanzania, Togo, Uganda, and Zambia. An up to date list of LDC Members can be found at www.wto.org. back to text
2095. As of 30 September 2011, the following LDC Members have participated as third parties in disputes: Bangladesh (DS243); Benin (DS267); Chad (DS267); Madagascar (DS27, DS265, DS266, DS283); Malawi (DS265, DS266, DS283); Tanzania ((DS265, DS266, DS283)). back to text
2096. India — Anti-Dumping Measure on Batteries from Bangladesh, WT/DS306/3, dated 23 February 2006. back to text
2097. (footnote original) The Arbitrators recall that arbitration was seldom used under GATT 1947. back to text
2098. (footnote original) In particular, the Arbitrators believe that this arbitration should not be applied so as to circumvent the provisions of Article 22.6 of the DSU (See Article 23.2(c) of the DSU). back to text
2099. Award of the Arbitrators, US — Section 110(5) Copyright Act (Article 25), para. 2.1. back to text
2100. (footnote original) See the Appellate Body Report on United States — Anti-Dumping Act of 1916, WT/DS136/AB/R and WT7 DS162/AB/R, adopted 26 September 2000, para. 54, footnote 30. back to text
2101. (footnote original) This is evidenced by Article 21 of the Optional Rules of the Permanent Court of Arbitration for arbitrations involving international organizations and States. See, Permanent Court of Arbitration: Optional Rules for Arbitration involving International Organizations and States, effective 1 July 1996, International Bureau of the Permanent Court of Arbitration, The Hague, The Netherlands. back to text
2102. Award of the Arbitrators, US — Section 110(5) Copyright Act (Article 25), para. 2.1. back to text
2103. (footnote original) See WT/DS160/15. back to text
2104. Award of the Arbitrators, US — Section 110(5) Copyright Act (Article 25), para. 4.4. back to text
2105. (footnote original) Emphasis added. back to text
2106. (footnote original) In a note by the GATT Secretariat on Concept, Forms and Effects of Arbitration (MTN.GNG/NG13/W/20, 22 February 1988), the term “dispute” is defined as a specific disagreement concerning a matter of fact, law or policy in which a claim or assertion by one party is met with refusal, counter-claim or denial by another. back to text
2107. (footnote original) The text of Article 25 of the DSU is essentially identical to that of paragraphs 1, 2 and 3 of Section E of the 1989 Decision on improvements to the GATT dispute settlement procedures (BISD 36S/63). It is worth noting that, in that Decision, Section E follows other sections on means of resolution of disputes, such as consultations (Section C) and good offices, conciliation and mediation (Section D). Moreover, GATT 1947 did not provide for the sophisticated means of enforcement found in the DSU. The note MTN.GNG/NG13/W/20 of 22 February 1988, referred to above, also presents arbitration “as an alternative to the normal dispute settlement process” (para. 12) or “as an alternative to panel proceedings” (para. 17). back to text
2108. Award of the Arbitrators, US — Section 110(5) Copyright Act (Article 25), para. 2.3. back to text
2109. (footnote original) As a matter of fact, it may affect them positively, given the erga omnes character of compensation. back to text
2110. (footnote original) The Arbitrators’ recognition of their jurisdiction in this case is not a unilateral extension of WTO jurisdiction, since it is dependent on the agreement of the parties to a dispute to have recourse to Article 25 of the DSU. This decision is without prejudice to the DSU compatibility of the decision of the parties to accept this award as the level of nullification or impairment for the purpose of any further proceedings under Article 22 of the DSU in relation to this case. It is also without prejudice to any interpretation of the provisions of Articles 22 and 25 of the DSU by the Ministerial Conference or the General Council. back to text
2111. Award of the Arbitrators, US — Section 110(5) Copyright Act (Article 25), paras. 2.4-2.7. back to text
2112. (footnote original) This view is based on the object of the present proceedings, which is to quantify the economic harm suffered by the European Communities as a consequence of the continued application of Section 110(5)(B). It does not necessarily follow that Members having recourse to Article 64 of the TRIPS Agreement need to establish nullification or impairment of economic benefits accruing to them under the TRIPS Agreement. The Arbitrators find support for their view in the following statement by the arbitrators in European Communities — Regime for the Importation, Sale and Distribution of Bananas — Recourse to Arbitration by the European Communities under Article 22.6 of the DSU: “[A] Member’s potential interests in trade in goods or services and its interest in a determination of rights and obligations under the WTO Agreements are each sufficient to establish a right to pursue a WTO dispute settlement proceeding. However, a Member’s legal interest in compliance by other Members does not, in our view, automatically imply that it is entitled to obtain authorization to suspend concessions under Article 22 of the DSU.” See the Decision by the Arbitrators on European Communities — Regime for the Importation, Sale and Distribution of Bananas — Recourse to Arbitration by the European Communities under Article 22.6 of the DSU (hereafter “EC — Bananas III (22.6) (US)”, WT/DS27/ARB, 9 April 1999, para. 6.10. back to text
2113. (footnote original) See, e.g., the Decisions by the Arbitrators on EC — Bananas III (22.6) (US), supra, para. 6.12 (benefits nullified or impaired: losses in US exports of goods and losses by US service suppliers in services supply); European Communities — Regime for the Importation, Sale and Distribution of Bananas — Recourse to Arbitration by the European Communities under Article 22.6 of the DSU, WT/DS27/ARB/ECU, 24 March 2000, footnote 52 (benefits nullified or impaired: losses by Ecuador of actual trade and of potential trade opportunities in bananas and the loss of actual and potential distribution service supply); European Communities — Measures Concerning Meat and Meat Products (Hormones) — Original Complaint by the United States — Recourse to Arbitration by the European Communities under Article 22.6 of the DSU (hereafter “EC — Hormones (22.6) (US)”), WT/DS26/ARB, 12 July 1999, para. 41 (benefits nullified or impaired: foregone US exports of hormone-treated beef and beef products); European Communities — Measures Concerning Meat and Meat Products (Hormones) — Original Complaint by Canada — Recourse to Arbitration by the European Communities under Article 22.6 of the DSU (hereafter “EC — Hormones (22.6) (Canada)”), WT/DS48/ARB, 12 July 1999, para. 40 (benefits nullified or impaired: foregone Canadian exports of hormone-treated beef and beef products). back to text
2114. Award of the Arbitrators, US — Section 110(5) Copyright Act (Article 25), para. 3.18. back to text
2115. (footnote original) Indeed, as already pointed out, the rights set forth in Articles 11bis(1)(iii) and 11(1)(ii) must, in conformity with the provisions of Article 1.3 of the TRIPS Agreement, be granted to EC right holders. back to text
2116. Award of the Arbitrators, US — Section 110(5) Copyright Act (Article 25), para. 3.19. back to text
2117. (footnote original) This seems to imply that the level of nullification or impairment that the Arbitrators will assess in this case may be different from that which may exist after the end of the reasonable period of time. This implies further that the amount which will be determined by the Arbitrators may not dispense the parties from an Article 22.6 arbitration. back to text
2118. (footnote original) The reason for the choice of a yearly basis is essentially because compensations or suspensions of concessions or other obligations have been so far calculated on a twelve month basis. back to text
2119. Award of the Arbitrators, US — Section 110(5) Copyright Act (Article 25), para. 4.19. back to text
2120. Award of the Arbitrators, US — Section 110(5) Copyright Act (Article 25), para. 1.10. back to text
2121. (footnote original) See, in particular, the Appellate Body Report on Canada — Measures Affecting the Export of Civilian Aircraft, WT/DS70/AB/R, adopted 20 August 1999, paras. 141-147. back to text
2122. (footnote original) This approach was used in one Article 22.6 arbitration and does not seem to have met with objections in the DSB. See the Decision by the Arbitrators on Brazil — Export Financing Programme for Aircraft — Recourse to Arbitration by Brazil under Article 22.6 of the DSU and Article 4.11 of the SCM Agreement (hereafter “Brazil — Aircraft (22.6)”), WT/DS46/ARB, 28 August 2000, para. 2.14. back to text
2123. Award of the Arbitrators, US — Section 110(5) Copyright Act (Article 25), para. 1.24. back to text
2124. Panel Report, US — Certain EC products, para. 6.119. The elaboration made by the Panel in this case regarding the mandate of arbitrators appointed under Article 22.6 of the DSU based upon its interpretation of Articles 21.5 and 25 of the DSU was later dismissed by the Appellate Body on the grounds that the Panels statements relate to a measure which was outside its terms of reference. Appellate Body Report, US — Certain EC Products, paras. 89-90 back to text
2125. Award of the Arbitrators, US — Section 110(5) Copyright Act (Article 25), para. 2.3. back to text
2126. Appellate Body Reports, US/Canada — Continued Suspension, para. 340. back to text
2127. Award of the Arbitrators, US — Section 110(5) Copyright Act (Article 25), para. 2.4. back to text
2128. (footnote original) The text of Article 25 of the DSU is essentially identical to that of paragraphs 1, 2 and 3 of Section E of the 1989 Decision on improvements to the GATT dispute settlement procedures (BISD 36S/63). It is worth noting that, in that Decision, Section E follows other sections on means of resolution of disputes, such as consultations (Section C) and good offices, conciliation and mediation (Section D). Moreover, GATT 1947 did not provide for the sophisticated means of enforcement found in the DSU. The note MTN.GNG/NG13/W/20 of 22 February 1988, referred to above, also presents arbitration “as an alternative to the normal dispute settlement process” (para. 12) or “as an alternative to panel proceedings” (para. 17). back to text
2129. Award of the Arbitrators, US — Section 110(5) Copyright Act (Article 25), para. 2.3. back to text
2130. Award of the Arbitrators, US — Section 110(5) Copyright Act (Article 25), para. 2.5. back to text
2131. Panel Report, Japan — Film, paras. 10.30 and 10.32. back to text
2132. Panel Report, EC — Asbestos, para. 8.275. back to text
2133. Panel Report, EC — Asbestos, para. 8.282. back to text
2134. Appellate Body Report, India — Patents (US), para. 41 and footnote 29. back to text
2135. Panel Report, EC — Asbestos, paras. 8.263 and 8.270. back to text
2136. Panel Report, US — Gambling (Article 21.5 — Antigua and Barbuda), footnote 35. back to text
2137. Panel Report, US — Gambling (Article 21.5 — Antigua and Barbuda), footnote 68. back to text
2138. Panel Report, Mexico — Telecoms, para. 7.2. back to text
2139. WT/COMTD/W/170, 29 September 2009, pages 14, 51. The Advisory Centre on WTO Law was established in 2001 as an organisation independent of the WTO. Article 2.1 of the Agreement Establishing the Advisory Centre on WTO Law provides that the purpose of the Centre is to provide legal training, support and advice on WTO law and dispute settlement procedures to developing countries, in particular to the least developed among them, and to countries with economies in transition. Article 2.2 provides that the Centre shall, inter alia, provide legal advice on WTO law and provide support to parties and third parties in WTO dispute settlement proceedings. back to text

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