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IV. Article 4 back to top
A. Text of Article 4
Article 4: Remedies
4.1 Whenever a Member has
reason to believe that a prohibited subsidy is being granted or
maintained by another Member, such Member may request consultations with
such other Member.
4.2 A request for
consultations under paragraph 1 shall include a statement of available
evidence with regard to the existence and nature of the subsidy in
question.
4.3 Upon request for
consultations under paragraph 1, the Member believed to be granting or
maintaining the subsidy in question shall enter into such consultations
as quickly as possible. The purpose of the consultations shall be to
clarify the facts of the situation and to arrive at a mutually agreed
solution.
4.4 If no mutually agreed
solution has been reached within 30 days(6) of the request for
consultations, any Member party to such consultations may refer the
matter to the Dispute Settlement Body (“DSB”) for the immediate
establishment of a panel, unless the DSB decides by consensus not to
establish a panel.
(footnote original)
6 Any time-periods mentioned in
this Article may be extended by mutual agreement.
4.5 Upon its
establishment, the panel may request the assistance of the Permanent
Group of Experts(7) (referred to in this Agreement as the “PGE”) with
regard to whether the measure in question is a prohibited subsidy. If so
requested, the PGE shall immediately review the evidence with regard to
the existence and nature of the measure in question and shall provide an
opportunity for the Member applying or maintaining the measure to
demonstrate that the measure in question is not a prohibited subsidy.
The PGE shall report its conclusions to the panel within a time-limit
determined by the panel. The PGE’s conclusions on the issue of whether
or not the measure in question is a prohibited subsidy shall be accepted
by the panel without modification.
(footnote original)
7 As established in
Article 24.
4.6 The panel shall submit
its final report to the parties to the dispute. The report shall be
circulated to all Members within 90 days of the date of the composition
and the establishment of the panel’s terms of reference.
4.7 If the measure in
question is found to be a prohibited subsidy, the panel shall recommend
that the subsidizing Member withdraw the subsidy without delay. In this
regard, the panel shall specify in its recommendation the time-period
within which the measure must be withdrawn.
4.8 Within 30 days of the
issuance of the panel’s report to all Members, the report shall be
adopted by the DSB unless one of the parties to the dispute formally
notifies the DSB of its decision to appeal or the DSB decides by
consensus not to adopt the report.
4.9 Where a panel report
is appealed, the Appellate Body shall issue its decision within 30 days
from the date when the party to the dispute formally notifies its
intention to appeal. When the Appellate Body considers that it cannot
provide its report within 30 days, it shall inform the DSB in writing of
the reasons for the delay together with an estimate of the period within
which it will submit its report. In no case shall the proceedings exceed
60 days. The appellate report shall be adopted by the DSB and
unconditionally accepted by the parties to the dispute unless the DSB
decides by consensus not to adopt the appellate report within 20 days
following its issuance to the Members.(8)
(footnote original)
8 If a meeting of the DSB is
not scheduled during this period, such a meeting shall be held for this
purpose.
4.10 In the event the
recommendation of the DSB is not followed within the time-period
specified by the panel, which shall commence from the date of adoption
of the panel’s report or the Appellate Body’s report, the DSB shall
grant authorization to the complaining Member to take appropriate(9)
countermeasures, unless the DSB decides by consensus to reject the
request.
(footnote original)
9 This expression is not meant
to allow countermeasures that are disproportionate in light of the fact
that the subsidies dealt with under these provisions are prohibited.
4.11 In the event a party
to the dispute requests arbitration under paragraph 6 of Article 22 of
the Dispute Settlement Understanding (“DSU”), the arbitrator shall
determine whether the countermeasures are appropriate.(10)
(footnote original)
10 This expression is not meant
to allow countermeasures that are disproportionate in light of the fact
that the subsidies dealt with under these provisions are
prohibited.
4.12 For purposes of
disputes conducted pursuant to this Article, except for time-periods
specifically prescribed in this Article, time-periods applicable under
the DSU for the conduct of such disputes shall be half the time
prescribed therein.
B. Interpretation and Application of Article 4
1. General
(a) Accelerated procedure and the deadline for
the submission of new evidence, allegations and affirmative defences
142. The Panel on
Canada — Aircraft rejected the request for a preliminary ruling that the
complaining party may not adduce new evidence or allegations after the
end of the first substantive meeting of the panel with the parties.
Canada had argued that given the accelerated procedure under Article 4
of the SCM Agreement, the late submission of allegations or evidence by
Brazil, the other party in the dispute, would be prejudicial to Canada’s
position, as Canada would effectively be denied an adequate opportunity
to respond to these allegations or evidence.(189) The Panel referred to
the Appellate Body’s finding in Argentina — Textiles and Apparel that
“neither Article 11 of the DSU, nor the Working Procedures in
Appendix 3 of the DSU, establish precise deadlines for the presentation of
evidence by parties to a dispute”,(190) and concluded that “[t]here is
nothing in the DSU, or in the Appendix 3 Working
Procedures, to suggest
that a different approach should be taken in ‘fast-track’ cases
under Article 4 of the SCM Agreement”.(191)
143. The Panel on
Canada — Aircraft followed the reasoning set out in the previous paragraph
regarding the submission of new allegations and stated that “[w]e can
see nothing in the DSU, or in the Appendix 3 Working
Procedures, that
would require the submission of new allegations to be treated any
differently than the submission of new evidence”.(192)
144. In the Panel proceedings in
Canada — Aircraft, Brazil requested the Panel not to accept any
affirmative defences by Canada, the responding party, which had not been
submitted prior to the end of the first substantive meeting,(193) on the
basis that “this is particularly important in this fast-track
proceeding”.(194) The Panel stated that “there is nothing in the DSU,
or in Appendix 3 Working Procedures, to prevent a party submitting new
evidence or allegations after the first substantive meeting. We can see
no basis in the DSU to treat the submission of affirmative defences
after the first substantive meeting any differently.”(195) However, the
Panel added that “Brazil’s due process rights would not be respected
if Canada were able to submit an affirmative defence … after the
second substantive meeting with the Panel.”(196)
145. The Panel on
US — FSC had
found that the European Communities’ request for consultations under
Article 4.1 of the SCM Agreement contained a sufficient statement of
available evidence within the meaning of Article 4.2, and, consequently,
rejected the United States’ request that the Panel dismiss the
European Communities’ claim as not properly before it as a result of
the alleged insufficiency of the statement of available evidence. Upon
appeal, the Appellate Body rejected the United States’ appeal with
respect to the second point and, as a result, declined to rule on the
United States’ appeal on the first point, i.e. whether the European
Communities had given a sufficient statement of available evidence
within the meaning of Article 4.2. In its analysis, the Appellate Body
distinguished between the requirements imposed on the complaining party
under Article 4.4 of the DSU and
Article 4.2 of the SCM Agreement and
held that the Panel had not differentiated between these requirements
carefully enough:
“Article 1.2 of the DSU states that ‘the rules
and procedures of the DSU shall apply subject to the special or
additional rules and procedures on dispute settlement contained in the
covered agreements as are identified in Appendix 2 to this Understanding’.
Article 4.2 of the SCM Agreement is listed as a ‘special or additional
rule or procedure’ in Appendix 2 to the DSU. In our Report in
Guatemala — Cement, we said that ‘the rules and procedures of the DSU
apply together with the special or additional provisions of the covered
agreement’ except that, ‘in the case of a conflict between them’,
the special or additional provision prevails.(197)
Article 4.4 of the DSU
requires that all requests for consultations, under the covered
agreements, ‘give reasons for the request, including identification of
the measures at issue and an indication of the legal basis for the
complaint.’ (emphasis added) It is clear to us that Article 4.4 of the
DSU and Article 4.2 of the SCM Agreement can and should be read and
applied together, so that a request for consultations relating to a
prohibited subsidy claim under the SCM Agreement must satisfy the
requirements of both provisions.
Article 4 of the SCM Agreement provides for
accelerated dispute settlement procedures for claims involving
prohibited subsidies under Article 3 of the SCM Agreement. The
determination of whether a prohibited subsidy is being granted or
maintained under Article 3 of the SCM Agreement raises complex factual
questions, particularly in the case of subsidies that are claimed to be
de facto contingent upon export performance. Also, Article 4.5 of the
SCM Agreement allows a panel to request the assistance of the Permanent
Group of Experts on whether the measure is a prohibited subsidy. Given
the accelerated timeframes for disputes involving claims of prohibited
subsidies, and given that the issue of whether a measure is a prohibited
subsidy often requires a detailed examination of facts, it is important
to stress the requirement of Article 4.2 that there be ‘a statement of
available evidence with regard to the existence and nature of the
subsidy in question’ at the consultation stage in a dispute.
We emphasize that this additional requirement of
‘a statement of available evidence’ under Article 4.2 of the SCM
Agreement is distinct from — and not satisfied by compliance with
— the
requirements of Article 4.4 of the DSU. Thus, as well as giving the
reasons for the request for consultations and identifying the measure
and the legal basis for the complaint under Article 4.4 of the DSU, a
complaining Member must also indicate, in its request for consultations,
the evidence that it has available to it, at that time, ‘with regard
to the existence and nature of the subsidy in question’. In this
respect, it is available evidence of the character of the measure as a
‘subsidy’ that must be indicated, and not merely evidence of the
existence of the measure. We would have preferred that the panel give
less relaxed treatment to this important distinction.”(198)
2. Article 4.2
(a) “include a statement of available
evidence”
(i) Concept of statement of available evidence
146. The Panel on
US — FSC, in a
finding confirmed by the Appellate Body,(199) considered the ordinary
meaning of the terms “statement of available evidence” and indicated
that a complainant must identify but need not annex available evidence
to its request for consultations. It also considered that there is no
need to use explicitly the words “statement of available evidence”
provided that the relevant evidence is itself referred to. The Panel
considered:
“We note that the word ‘evidence’ has been
defined as ‘available facts, circumstances, etc., supporting or
otherwise a belief, proposition, etc.’, the word ‘available’ has
been defined as ‘at one’s disposal’, and the word ‘statement’
has been defined as ‘expression in words’.(200) Thus, in its ordinary
meaning Article 4.2 requires that a Member include in its request for
consultations an expression in words of the facts at its disposal at the
time it requests consultations in support of its view that it has, in
the words of Article 4.1, ‘reason to believe that a prohibited subsidy
is being granted or maintained’. On the basis of the ordinary meaning
of Article 4.2, it is evident that a complainant must identify, but need
not annex, available evidence to its request for consultations.
… Although the European Communities did not
recite the formulation ‘statement of available evidence’ when
referring to these materials, we do not consider that the explicit use
of that descriptive term is necessary provided that the relevant
evidence is itself referred to. It is true, of course, that the European
Communities in its first submission referred to a variety of additional
materials, primarily in the form of secondary sources,(201) and that these
additional materials were not identified in the request for
consultations. Even assuming that these materials represent “evidence”
and that a Member is required to identify all available evidence in its
request for consultations, we are not in a position to determine whether
as a factual matter these materials were at the disposal of the European
Communities at the time it made its request for consultations and that
the European Communities knew at that time that it would rely on those
materials. In short, it may well be that the European Communities’
request for consultations does contain a statement of available
evidence.”(202)
147. In US
— FSC, the Appellate
Body rejected the United States’ argument that a complaint should be
dismissed because the complainant failed to “include a statement of
available evidence” in its request for consultations. The Appellate
Body pointed out a variety of facts, for example, that “[f]ollowing
the European Communities’ request for consultations, the United States
and the European Communities held three separate sets of consultations
over a period of nearly five months”.(203) The Appellate Body also
invoked Article 3.10 of the DSU and the principle of good faith:
“Article 3.10 of the DSU commits Members of the
WTO, if a dispute arises, to engage in dispute settlement procedures ‘in
good faith in an effort to resolve the dispute’. This is another
specific manifestation of the principle of good faith which, we have
pointed out, is at once a general principle of law and a principle of
general international law.(204) This pervasive principle requires both
complaining and responding Members to comply with the requirements of
the DSU (and related requirements in other covered agreements) in good
faith. By good faith compliance, complaining Members accord to the
responding Members the full measure of protection and opportunity to
defend, contemplated by the letter and spirit of the procedural rules.
The same principle of good faith requires that responding Members
seasonably and promptly bring claimed procedural deficiencies to the
attention of the complaining Member, and to the DSB or the panel, so
that corrections, if needed, can be made to resolve disputes. The
procedural rules of WTO dispute settlement are designed to promote, not
the development of litigation techniques, but simply the fair, prompt
and effective resolution of trade disputes.”(205)
148. Rejecting the argument that
Article 4.2 “imposes an obligation on the complainant to disclose in
its request for consultations, not only facts, but also the
argumentation why such facts lead the complainant to believe there is a
violation of Article 3.1”,(206) the Panel on Australia — Automotive
Leather II (a case which was not appealed) stated that “[t]he ordinary
meaning of the phrase ‘include a statement of available evidence’
does not, on its face, require disclosure of arguments in the request
for consultations. Nothing in the context or object and purpose of
Article 4.2 … suggests a different conclusion.”(207) The Panel on
Australia — Automotive Leather II then addressed the claim that Article
4.2 requires the disclosure of all facts and evidence upon which the
complaining Member intends to rely in the course of the dispute
settlement proceedings:
“Turning to the question of what is required as
a ‘statement of available evidence’, we note that Australia reads
this to require disclosure of all facts and evidence on which the
complaining Member will rely in the course of the dispute. Indeed,
Australia asserts that any exhibits should have been provided at the
time consultations were requested. The ordinary meaning of the phrase
‘statement of available evidence’ does not support Australia’s
position. The word ‘evidence’ is defined as ‘available facts,
circumstances, etc., supporting or otherwise a belief, proposition, etc.’
‘Available’ is defined as ‘at one’s disposal’, and ‘statement’
is defined as ‘expression in words’. Thus, based on the ordinary
meaning of the terms, Article 4.2 requires a complaining Member to
include in the request for consultations an expression in words of the
facts at its disposal at the time it requests consultations in support
of the conclusion that it has, in the words of Article
4.1, ‘reason to
believe that a prohibited subsidy is being granted or maintained’….
Moreover, nothing in the context or object and
purpose of Article 4.2 suggests to us that the statement of available
evidence must be as comprehensive as Australia would require. The mere
fact that proceedings under Article 4 of the SCM Agreement are
accelerated by comparison to dispute settlement proceedings under the
DSU does not, in our view, require us to read into Article 4.2 a
requirement that the complainant disclose all facts and arguments in its
request for consultations…. To the extent that the additional
requirement of Article 4.2 can be linked to the expedited nature of the
proceedings, the additional requirement of a statement of available
evidence satisfies the need adequately to apprise the responding Member
of the information upon which the complaining Member bases its request
for consultations, and serves in addition to inform the resulting
consultations.”(208)
149. The Panel on
Australia — Automotive Leather II also rejected the arguments that “the
requirement of Article 4.2, that a request for consultations ‘include
a statement of available evidence’, in conjunction with the expedited
nature of the proceedings, [requires] a panel to limit the complaining
Member to using the evidence and arguments set forth in the request for
consultations”,(209) and “that to allow a complainant to come forward
with additional facts and arguments in its first submission is
inconsistent with Article 4 of the SCM Agreement”.(210) In so holding,
the Panel referred to its obligation under Article 11 of the DSU to
conduct an objective assessment of the matter before it; specifically,
the Panel held that “a decision to limit the facts and arguments that
the United States may present during the course of this proceeding to
those set forth in the request for consultations would make it
difficult, if not impossible, for us to fulfill our obligation to
conduct an ‘objective assessment’ of the matter before us”.(211)
150. In rejecting Australia’s
claim that in the light of the requirement under Article 4.2 to make a
“statement of available evidence”, a complainant was disallowed from
coming forward with additional facts and arguments in its first
submission, the Panel did not rely exclusively on Article 11 of the DSU
(see paragraph 149 above). The Panel on Australia — Automotive Leather
II also referred to the right of panels, under Article 13.2 of the DSU,
to seek information from any relevant source, a right which, in the
opinion of the Panel, is in no way curtailed by Article 4 of the SCM
Agreement. Finally, the Panel also considered the requirements with
respect to the request for consultations:
“Article 4.2 does contain a requirement, not
present in the DSU, that a complainant include a ‘statement of
available evidence’ in its request for consultations. However, we do
not consider that the scope of the evidence that a panel may consider is
limited in any way by such a statement of available evidence. In this
respect, we note Article 4.3 of the SCM
Agreement, which explicitly
states that one of the purposes of consultations ‘shall be to clarify
the facts of the situation…’. (emphasis added) This provision
implies that additional facts or evidence will be developed during
consultations. Moreover, the Appellate Body has recognized that
consultations play a significant role in developing the facts in a
dispute settlement proceeding. For example, in India — Patents, the
Appellate Body observed that ‘the claims that are made and the facts
that are established during consultations do much to shape the substance
and the scope of subsequent panel proceedings’. (emphasis added) This
is consistent with the view that a central purpose of consultations in
general, and of consultations under Article 4 of the SCM Agreement in
particular, is to clarify and develop the facts of the situation.
Moreover, we note that panels have, under Article
13.2 of the DSU, a general right to seek information ‘from any
relevant source’. Indeed, it is a common feature of panel proceedings
for panelists to question parties about the facts and arguments
underlying their positions. There is nothing in Article 4 of the SCM
Agreement to suggest that this right is somehow limited by the expedited
nature of dispute settlement proceedings conducted under that provision.
If Australia’s position were correct, a panel might be constrained
from seeking out replacement information from the party … that was
limited to reliance on the facts set forth in its request for
consultations. Similarly, under Australia’s view, the defending party
might introduce information during the panel proceedings, which the
complaining party … would not be able to rebut, as it would be limited
to reliance on the facts set forth in its request for consultations. We
do not believe Article 4.2 requires this result.”(212)
151. Finally, the Panel on
Australia — Automotive Leather II pointed out that a complaining Member
is not required to include facts and arguments in its request for the
establishment of a panel, noting that such request comes considerably
later in the dispute settlement process than the request for
consultations.(213)
(ii) Relation with request for establishment
of a Panel
152. Evaluating the suggestion
that “any impact on Canada’s due process rights caused by the
alleged absence of specificity in Brazil’s request for establishment
is compounded in an accelerated timetable”,(214) the Panel on Canada
— Aircraft, in a statement subsequently not addressed by the Appellate
Body, noted that “although Article 4.2 of the SCM Agreement requires
the Member requesting consultations to provide a ‘statement of
available evidence’, there is nothing in either the DSU or the SCM
Agreement to suggest that requests for establishment of panels for ‘fast-track’
cases should be any more precise than requests for establishment of
panels in ‘standard’ WTO dispute settlement cases.”(215)
(b) Relationship with other WTO Agreements
(i) DSU
153. With respect to the different
evidence to be submitted in the course of consultations under Article
4.4 of the DSU and Article 4.2 of the SCM Agreement, respectively, see
paragraph 145 above.
3. Article 4.3
(a) “shall be to clarify the facts of the
situation”
154. With respect to this phrase,
see paragraph 150 above.
4. Article 4.4
(a) Relationship between the matter before a
panel as defined by its terms of reference and the matter consulted upon
155. In Brazil
— Aircraft, the
Panel was presented with the issue regarding “the relationship between
the matter before a panel as defined by its terms of reference and the
matter consulted upon.”(216) Specifically, the Panel had to consider “whether
and to what extent a panel is limited in its consideration of the matter
identified in its terms of reference by the scope of the matter with
respect to which consultations were held”.(217) The Appellate Body
agreed with the Panel’s finding in this regard and stated as follows:
“In our view, Articles 4 and
6 of the DSU, as
well as paragraphs 1 to 4 of Article 4 of the SCM Agreement, set forth a
process by which a complaining party must request consultations, and
consultations must be held, before a matter may be referred to the DSB
for the establishment of a panel. Under Article 4.3 of the SCM
Agreement, moreover, the purpose of consultations is ‘to clarify the
facts of the situation and to arrive at a mutually agreed solution.’
We do not believe, however, that Articles 4 and
6
of the DSU, or paragraphs 1 to 4 of Article 4 of the SCM Agreement,
require a precise and exact identity between the specific measures that
were the subject of consultations and the specific measures identified
in the request for the establishment of a panel.”(218)
156. The Panel on
Canada — Aircraft adopted a very similar approach to the relationship between a
panel’s terms of reference and the matter consulted upon:
“In our view, a panel’s terms of reference
would only fail to be determinative of a panel’s jurisdiction if, in
light of Article 4.1 — 4.4 of the SCM Agreement applied together with
Article 4.2 — 4.7 of the DSU, the complaining party’s request for
establishment were found to cover a ‘dispute’ that had not been the
subject of a request for consultations. Article 4.4 of the SCM Agreement
permits a Member to refer a ‘matter’ to the DSB if ‘no mutually
agreed solution’ is reached during consultations. In our view, this
provision complements Article 4.7 of the DSU, which allows a Member to
refer a ‘matter’ to the DSB if ‘consultations fail to settle a
dispute’. Read together, these provisions prevent a Member from
requesting the establishment of a panel with regard to a ‘dispute’
on which no consultations were requested. In our view, this approach
seeks to preserve due process while also recognising that the ‘matter’
on which consultations are requested will not necessarily be identical
to the ‘matter’ identified in the request for establishment of a
panel. The two ‘matters’ may not be identical because, as noted by
the Appellate Body in India — Patents, ‘the claims that are made and
the facts that are established during consultations do much to shape the
substance and the scope of subsequent panel proceedings’.”(219)
(b) Relationship with other WTO Agreements
157. With respect to the
relationship between Article 4 of the SCM Agreement on the one hand and
Articles 4 and 6 of the DSU on the other, see
paragraphs 155-156 above.
Concerning differences between the request for consultations and the
establishment of a panel, see Section VI.B.3(d) in the Chapter on the DSU.
5. Article 4.5
(a) Relationship with other Articles
158. As regards the establishment
of the Permanent Group of Experts by Article
24.3, see paragraph 325
below.
6. Article 4.7
(a) “withdraw the subsidy”
159. The Appellate Body on
Brazil — Aircraft (Article 21.5 — Canada) analysed the meaning of the word “withdraw”:
“[W]e observe first that this word has been defined as ‘remove’,
or ‘take away’, and as ‘to take away what has been enjoyed; to
take from.’ This definition suggests that ‘withdrawal’ of a
subsidy, under Article 4.7 of the SCM Agreement, refers to the ‘removal’
or ‘taking away’ of that subsidy.”(220) Applied to the facts of the
dispute, the Appellate Body stated: “In our view, to continue to make
payments under an export subsidy measure found to be prohibited is not
consistent with the obligation to ‘withdraw’ prohibited export
subsidies, in the sense of ‘removing’ or ‘taking away’.”(221)
160. The Appellate Body on
Brazil — Aircraft (Article 21.5 — Canada) considered the argument by Brazil
that Brazil had a contractual obligation under domestic law to issue
PROEX bonds pursuant to commitments that had already been made, and that
Brazil could be liable for damages for breach of contract under
Brazilian law if it failed to respect its contractual obligations. The
Appellate Body considered that these issues were not relevant to the “issue
of whether the DSB’s recommendation to ‘withdraw’ the prohibited
export subsidies permitted the continued issuance of NTN-I bonds under
letters of commitment issued before [the date set by the Panel for the
withdrawal of the prohibited subsidies]”.(222)
161. In contrast to the findings
of the Panel on Brazil — Aircraft (Article 21.5 — Canada), the Panel on
Australia — Automotive Leather II (Article 21.5 — US) did not limit its
findings to a situation in which a Member continues to grant a
prohibited subsidy. Rather, the Panel addressed the issue whether the
term “withdraw the subsidy” is limited to a recommendation with
purely prospective effect, or whether it also encompasses repayment:
“Turning first to the ordinary meaning of the
term, the word ‘withdraw’ has been defined as: ‘pull aside or back
…; take away, remove …; retract …’ This definition does not
suggest that ‘withdraw the subsidy’ necessarily requires only some
prospective action. To the contrary, it suggests that the ordinary
meaning of ‘withdraw the subsidy’ may encompass ‘taking away’ or
‘removing’ the financial contribution found to give rise to a
prohibited subsidy. Consequently, an interpretation of ‘withdraw the
subsidy’ that encompasses repayment of the prohibited subsidy seems a
straightforward reading of the text of the provision.
… In the case of ‘actionable’ subsidies,
Members whose trade interests are adversely affected may, under Part III
of the SCM Agreement, pursue multilateral dispute settlement in order to
establish whether the subsidy in question has resulted in adverse
effects to the interests of the complaining Member. If such a finding is
made, the subsidizing Member ‘shall take appropriate steps to remove
the adverse effects or shall withdraw the subsidy’. Alternatively, a
Member whose domestic industry is injured by subsidized imports may
impose a countervailing measure under Part V of the SCM
Agreement, ‘unless
the subsidy or subsidies are withdrawn’. In both cases, withdrawal of
the subsidy is an alternative, available to the subsidizing Member, to
some other action. Repayment of the subsidy would certainly effectuate
withdrawal of the subsidy by a subsidizing Member so as to allow it to
avoid action by the complaining Member. … Thus, the use of the term ‘withdraw’
elsewhere in the SCM Agreement further supports the suggestion that it
may encompass repayment. (original emphasis)
…
… An interpretation of Article 4.7 of the SCM
Agreement which would allow exclusively ‘prospective’ action would
make the recommendation to ‘withdraw the subsidy’ under Article 4.7
indistinguishable from the recommendation to ‘bring the measure into
conformity’ under Article 19.1 of the DSU, thus rendering
Article 4.7
redundant.”(223)
162. After rejecting the argument
that the phrase “withdraw the subsidy” under Article 4.7 of the SCM
Agreement refers to a recommendation with exclusively “prospective
effect”,(224) the Panel on Australia — Automotive Leather II (Article
21.5 — US) also rejected the notion that a repayment of portions of a
subsidy which are deemed allocated over future periods of time should be
considered a “prospective” remedy:
“[W]e do not find meaningful the distinction
proposed … between repayment of ‘prospective’ and ‘retrospective’
portions of past subsidies in the context of Article 4.7 of the SCM
Agreement. We do not agree that it is possible to conclude that
repayment of the ‘prospective portion’ of prohibited subsidies paid
in the past is a remedy having only prospective effect. In our view,
where any repayment of any amount of a past subsidy is required or made,
this by its very nature is not a purely prospective remedy. No
theoretical construct allocating the subsidy over time can alter this
fact. In our view, if the term ‘withdraw the subsidy’ can properly
be understood to encompass repayment of any portion of a prohibited
subsidy, ‘retroactive effect’ exists.”(225)
163. The Panel on
Brazil — Aircraft (Article 21.5 — Canada) rejected Brazil’s contention that
requiring Brazil to cease issuing bonds pursuant to commitments made
prior to the withdrawal date amounted to a retroactive remedy. Rather,
the Panel opined that “the obligation to cease performing illegal acts
in the future is a fundamentally prospective remedy”.(226)
164. Addressing the question
whether partial repayment can be sufficient, if repayment is necessary
to “withdraw the subsidy”, the Panel on Australia — Automotive
Leather II (Article 21.5 — US) stated: “Having concluded that Article
4.7 of the SCM Agreement encompasses repayment, we can find no basis for
concluding that anything less than full repayment would suffice to
satisfy the requirement to ‘withdraw the subsidy’ in a case where
repayment is necessary.” (227) The Panel, however, rejected the
inclusion of interest in the repayment of prohibited subsidies, opining
that the remedy under Article 4.7 was not designed to fully restore the
status quo ante nor was it a remedy intended to provide for reparation
or compensation.(228)
(b) Time-period for withdrawal of measures
165. The Panel on
Brazil — Aircraft determined that “taking into account the nature of the
measures and the procedures which may be required to implement our
recommendation, on the one hand, and the requirement that Brazil
withdraw its subsidies ‘without delay’ on the other, we conclude
that Brazil shall withdraw the subsidies within 90 days”.(229) Agreeing
with the Panel’s conclusion and recommendation, the Appellate Body in
Brazil — Aircraft noted that “there is a significant difference
between the relevant rules and procedures of the DSU and the special or
additional rules and procedures set forth in Article 4.7 of the SCM
Agreement. Therefore, the provisions of Article 21.3 of the DSU are not
relevant in determining the period of time for implementation of a
finding of inconsistency with the prohibited subsidies provisions of
Part II of the SCM Agreement.”(230) See
paragraph 171 below.
166. In Australia
— Automotive
Leather II, Australia suggested seven and a half months (half of what
Australia considered the “normal” period of time for implementation
of panel decisions) as the time-period for withdrawal under Article
4.7.
The Panel disagreed:
“Even assuming Australia is correct in its
consideration of fifteen months as the ‘normal’ period of time for
implementation of panel decisions, a question we do not reach, we do not
agree that one-half of that period is appropriate in a dispute involving
export subsidies. In the first place, Article 4.12 specifically provides
that ‘except for time periods specifically prescribed in this Article’
the time periods otherwise provided for in the DSU should be halved in
export subsidy disputes. Article 4.7, which provides that the subsidy
shall be withdrawn ‘without delay’, and that the panel shall specify
the time-period for withdrawal of the measure in its recommendation, in
our view establishes that the time-period for withdrawal is ‘specifically
prescribed in this Article’, that is, in Article 4 of the SCM
Agreement itself. Moreover, we do not, as a factual matter, believe that
a period of seven and one-half months can reasonably be described as
corresponding to the requirement that the measure must be withdrawn ‘without
delay’.”(231)
167. In US
— FSC (Article 21.5 — EC), the Appellate Body clarified that the text of
Article 4.7 requires
withdrawal “without delay”. The Appellate Body considered there was
“no basis” for extending the time-period prescribed for withdrawal:
(1) either to protect the contractual interests of private parties, or
(2) to ensure an orderly transition to the regime of the new measure.
The Appellate Body recalled that it had rejected similar arguments in
Brazil — Aircraft (Article 21.5 — Canada), because the obligation to
withdraw prohibited subsidies “without delay” is “unaffected by
contractual obligations that the Member itself may have assumed under
municipal law”. The Appellate Body stated:
“Article 4.7 of the SCM Agreement requires
prohibited subsidies to be withdrawn ‘without delay’, and provides
that a time-period for such withdrawal shall be specified by the panel.
We can see no basis in Article 4.7 of the SCM Agreement for extending
the time-period prescribed for withdrawal of prohibited subsidies for
the reasons cited by the United States. In that respect, we recall that,
in Brazil — Aircraft (Article 21.5 — Canada), Brazil made a similar
argument to the one made by the United States in these proceedings.
Brazil argued that, after the expiration of the time period for
withdrawal of the prohibited export subsidies, it should be permitted to
continue to grant certain of these subsidies because it had assumed
contractual obligations, under municipal law, to do so.(232) We rejected
this argument, and observed that:
… to continue to make payments under an export
subsidy measure found to be prohibited is not consistent with the
obligation to ‘withdraw’ prohibited export subsidies, in the sense
of ‘removing’ or ‘taking away’.(233)
[A] Member’s obligation under Article 4.7 of the
SCM Agreement to withdraw prohibited subsidies “without delay” is
unaffected by contractual obligations that the Member itself may have
assumed under municipal law. Likewise, a Member’s obligation to
withdraw prohibited export subsidies, under Article 4.7 of the SCM
Agreement, cannot be affected by contractual obligations which private
parties may have assumed inter se in reliance on laws conferring
prohibited export subsidies. Accordingly, we see no legal basis for
extending the time-period for the United States to withdraw fully the
prohibited FSC subsidies.”(234)
168. In the same vein, with regard
to the concept of “without delay” in Article
4.7, the Panel on
Canada — Aircraft Credits and Guarantees took the view that because it
“[is] required to make the recommendation provided for in Article 4.7
of the SCM Agreement, … [it] recommend[s] that Canada withdraw the
subsidies identified above without delay”(235) and further clarified
that Article 4.7
“[P]rovides that ‘the panel shall specify in
its recommendation the time-period within which the measure must be
withdrawn’. In other words, we are required to specify what period
would represent withdrawal ‘without delay’. Taking into account the
procedures that may be required to implement our recommendation on the
one hand, and the requirement that Canada withdraw its subsidies “without
delay” on the other, we conclude that Canada shall withdraw the
subsidies identified in sub-paragraphs (e), (f), and (g) of paragraph
within 90 days.”(236)
(c) Relationship with other Articles
(i) Article 7.8
169. The Panel on
Australia — Automotive Leather II (Article 21.5 — US) referred to
Article 7.8 in
support of its finding in relation to the phrase “withdraw the subsidy”
under Article 4.7. The Panel noted the wording of
Article 7.8 that in
case of a finding of adverse effects to the interests of another Member
within the meaning of Article 5 of the SCM Agreement, the subsidizing
Member “shall take appropriate steps to remove the adverse effects or
shall withdraw the subsidy”. The Panel drew the conclusion that “withdrawal
of the subsidy is an alternative, available to the subsidizing Member,
to some other action. Repayment of the subsidy would certainly
effectuate withdrawal of the subsidy by a subsidizing Member so as to
allow it to avoid action by the complaining Member.”(237)
(ii) Article 19.1
170. The Panel on
Australia — Automotive Leather II (Article 21.5 — US), in the context of considering
whether Article 4.7 allowed “retroactive” remedies, rejected the
argument that “Article 19.1 of the DSU, even in conjunction with
Article 3.7 of the DSU, requires the limitation of the specific remedy
provided for in Article 4.7 of the SCM Agreement to purely prospective
action. An interpretation of Article 4.7 of the SCM Agreement which
would allow exclusively ‘prospective’ action would make the
recommendation to ‘withdraw the subsidy’ under Article 4.7
indistinguishable from the recommendation to ‘bring the measure into
conformity’ under Article 19.1 of the DSU, thus rendering
Article 4.7
redundant.”(238)
(d) Relationship with other WTO Agreements
(i) DSU
171. In Brazil
— Aircraft, the
Appellate Body noted that “the provisions of Article 21.3 of the DSU
are not relevant in determining the period of time for implementation of
a finding of inconsistency with the prohibited subsidies provisions of
Part II of the SCM Agreement”. See paragraph 165 above.
172. The Panel on
US — FSC
(Article 21.5 — EC) found that since the Member failed to comply with
the required recommendations under Article 4.7 of the SCM
Agreement, it
had also “failed to comply with Article 21 of the DSU”. The Panel
stated:
“Having found that the United States has not
fully withdrawn the FSC subsidies as required by the recommendations and
rulings of the DSB made pursuant to Article 4.7 SCM Agreement, we do not
believe that it is necessary to also determine whether the United States
‘failed to comply with the DSB recommendations and rulings within the
period of time specified by the DSB and has therefore also failed to
comply with Article 21 DSU’.”(239)
(ii) Agreement on Agriculture
173. Regarding the relationship
between the Agreement on Agriculture and Article 4.7 of the SCM
Agreement, see paragraph 113 above.
7. Article 4.10
(a) “appropriate countermeasures”
(i) Countermeasure
174. In Brazil
— Aircraft (Article
22.6 — Brazil), the Arbitrators looked at the word “countermeasure”
as context for finding a meaning for the word “appropriate”. The
Arbitrators disregarded the dictionary meaning of the word and preferred
to refer to its general meaning in international law and to the work of
the International Law Commission on state responsibility:
“While the parties have referred to dictionary
definitions for the term ‘countermeasures’, we find it more
appropriate to refer to its meaning in general international law(240) and
to the work of the International Law Commission (ILC) on state
responsibility, which addresses the notion of countermeasures.(241) We
note that the ILC work is based on relevant state practice as well as on
judicial decisions and doctrinal writings, which constitute recognized
sources of international law.(242) When considering the definition of ‘countermeasures’
in Article 47 of the Draft Articles,(243) we note that countermeasures are
meant to ‘induce [the State which has committed an internationally
wrongful act] to comply with its obligations under articles 41 to 46’.
We note in this respect that the Article 22.6 arbitrators in the EC — Bananas (1999) arbitration made a similar
statement.(244) We conclude that
a countermeasure is ‘appropriate’ inter alia if it effectively
induces compliance.”(245)
175. In US
— FSC (Article 22.6 — US), the Arbitrators looked into the ordinary meaning of the word “countermeasure”:
“Dictionary definitions of ‘countermeasure’
suggest that a countermeasure is essentially defined by reference to the
wrongful action to which it is intended to respond. The New Oxford
Dictionary defines ‘countermeasure’ as ‘an action taken to
counteract a danger, threat, etc’.(246) The meaning of ‘counteract’
is to ‘hinder or defeat by contrary action; neutralize the action or
effect of’.(247) Likewise, the term ‘counter’ used as a prefix is
defined inter alia as: ‘opposing, retaliatory’.(248) The ordinary
meaning of the term thus suggests that a countermeasure bears a
relationship with the action to be counteracted, or with its effects
(cf. ‘hinder or defeat by contrary action; neutralize the action or
effect of’).(249)
In the context of Article 4 of the SCM
Agreement,
the term ‘countermeasures’ is used to define temporary measures
which a prevailing Member may be authorized to take in response to a
persisting violation of Article 3 of the SCM Agreement, pending full
compliance with the DSB’s recommendations. This use of the term is in
line with its ordinary dictionary meaning as described above: these
measures are authorized to counteract, in this context, a wrongful
action in the form of an export subsidy that is prohibited per se, or
the effects thereof.
It would be consistent with a reading of the plain
meaning of the concept of countermeasure to say that it can be directed
either at countering the measure at issue (in this case, at effectively
neutralizing the export subsidy) or at counteracting its effects on the
affected party, or both.
We need, however, to broaden our textual analysis
in order to see whether we can find more precision in how
countermeasures are to be construed in this context. We thus turn to an
examination of the expression ‘appropriate’ countermeasures with a
view to clarifying what level of countermeasures may be legitimately
authorized.”(250)
(ii) “appropriate”
176. In Brazil
— Aircraft (Article
22.6 — Brazil), Canada had proposed adopting countermeasures based on
the amount of subsidy per aircraft granted by Brazil instead of basing
them on the level of nullification or impairment suffered. The
Arbitrators examined the meaning of the term appropriate and concluded
that “a countermeasure is ‘appropriate’ inter alia if it
effectively induces compliance”:
“In accordance with Article 3.2 of the DSU, we
proceed with an analysis of the meaning of the term ‘appropriate’
based on Article 31 of the Vienna Convention.
Examining only the ordinary meaning of the term
‘appropriate’ does not allow us to reply to the question before us,
since dictionary definitions are insufficiently specific. Indeed, the
relevant dictionary definitions of the word ‘appropriate’ are ‘specially
suitable; proper’.(251) However, they point in the direction of meeting
a particular objective.
The first context of the term ‘appropriate’ is
the word ‘countermeasures’, of which it is an adjective. While the
parties have referred to dictionary definitions for the term ‘countermeasures’,
we find it more appropriate to refer to its meaning in general
international law(252) and to the work of the International Law Commission
(ILC) on state responsibility, which addresses the notion of
countermeasures.(253) We note that the ILC work is based on relevant state
practice as well as on judicial decisions and doctrinal writings, which
constitute recognized sources of international law.(254) When considering
the definition of ‘countermeasures’ in Article 47 of the Draft
Articles,(255) we note that countermeasures are meant to ‘induce [the
State which has committed an internationally wrongful act] to comply
with its obligations under articles 41 to 46’. We note in this respect
that the Article 22.6 arbitrators in the EC — Bananas (1999) arbitration
made a similar statement. (256) We conclude that a countermeasure is ‘appropriate’
inter alia if it effectively induces compliance.”(257)
177. Applying their general
finding referenced in paragraph 176 above that a countermeasure is
appropriate inter alia if it effectively induces compliance, the
Arbitrators in Brazil — Aircraft (Article 22.6 — Brazil) found that in
the case of Article 4.7 of the SCM Agreement, “inducing compliance”
meant “inducing the withdrawal of the prohibited subsidy”:
“In this respect, we recall that the measure in
respect of which the right to take countermeasures has been requested is
a prohibited export subsidy falling under Article 3.1(a) of the SCM
Agreement. Article 4.7 of the SCM Agreement provides in this respect
that if a measure is found to be a prohibited subsidy, it shall be
withdrawn without delay. In such a case, effectively ‘inducing
compliance’ means inducing the withdrawal of the prohibited subsidy.
In contrast, other illegal measures do not have to
be withdrawn without delay. As specified in Article 3.8 of the DSU, if a
measure violates a provision of a covered agreement, the measure is
considered prima facie to cause nullification or impairment. However, if
the defendant succeeds in rebutting the charge, no nullification or
impairment will be found in spite of the violation. Such a rebuttal may
be impossible to make in a number of cases. Yet, this does not change
the fact that the concept of nullification or impairment is not found in
Articles 3 and 4 of the SCM Agreement. The Arbitrators are of the view
that meaning must be given to the fact that the negotiators did not
include the concept of nullification or impairment in those articles,
whilst it is expressly mentioned in Article 5 of the SCM
Agreement,
which deals with the adverse effects of actionable subsidies.”(258)
178. The Arbitrators in
US — FSC
(Article 22.6 — US) considered the dictionary meaning of the word “appropriate”
and concluded that, as far as the amount or level of countermeasures is
concerned, the expression “appropriate” does not in and of itself
predefine the precise and exhaustive conditions for the application of
countermeasures.(259) According to them,
Article 4.10 and 4.11 are not
designed to lay down a precise formula or otherwise quantified benchmark
or amount of countermeasures which might be legitimately authorized in
each and every instance.(260) The Arbitrators indicated:
“Based on the plain meaning of the word, this
means that countermeasures should be adapted to the particular case at
hand. The term is consistent with an intent not to prejudge what the
circumstances might be in the specific context of dispute settlement in
a given case. To that extent, there is an element of flexibility, in the
sense that there is thereby an eschewal of any rigid a priori
quantitative formula. But it is also clear that there is, nevertheless,
an objective relationship which must be absolutely respected: the
countermeasures must be suitable or fitting by way of response to the
case at hand.”(261)
(iii) Footnote 9 of the SCM Agreement
179. In US
— FSC (Article 22.6 — US), the Arbitrators considered that the term “appropriate”
countermeasures in Article 4.10 is informed by
footnote 9, which
provides guidance as to what the expression “appropriate” should be
understood to mean. In the Arbitrators’ view, “these two elements
are part of a single assessment and … the meaning of the expression
‘appropriate countermeasures’ should result from a combined
examination of these terms of the text in light of its footnote”.(262)
The Arbitrators thus concluded that “[t]his footnote effectively
clarifies further how the term ‘appropriate’ is to be interpreted.
We understand it to mean that countermeasures that would be ‘disproportionate
in light of the fact that the subsidies dealt with under these
provisions are prohibited’ could not be considered “appropriate”
within the meaning of Article 4.10 of the SCM
Agreement.”(263) Further
to analysing the dictionary meaning of the word “disproportionate”
in footnote 9, the Arbitrators considered that
footnote 9 “confirms
that, while the notion of ‘appropriate countermeasures’ is intended
to ensure sufficient flexibility of response to a particular case, it is
a flexibility that is distinctly bounded” and that “[t]hose bounds
are set by the relationship of appropriateness”. In their view, “[t]hat
appropriateness, in turn, entails an avoidance of disproportion between
the proposed countermeasures and, as our analysis to this point has
brought us, either the actual violating measure itself, the effects
thereof on the affected Member, or both”.(264)
180. In US
— FSC (Article 22.6 — US), the Arbitrators further looked at the text of the final part of
footnote 9 and considered that this text directed them “to consider
the ‘appropriateness’ of countermeasures under Article 4.10 from
this perspective of countering a wrongful act and taking into account
its essential nature as an upsetting of the rights and obligations as
between Members”.(265) The Arbitrators further noted that “the
negative formulation of the requirement under footnote 9 is consistent
with a greater degree of latitude than a positive requirement may have
entailed: footnote 9 clarifies that Article 4.10 is not intended to
allow countermeasures that would be ‘disproportionate’. It does not
require strict proportionality. (266)”(267)
(b) Amount of subsidy as the basis for the
calculation of countermeasures
(i) Exception to the requirement of
equivalence to level of nullification or impairment
181. The Arbitrators in
Brazil — Aircraft (Article 22.6 — Brazil) rejected Brazil’s argument that the
countermeasures must be equivalent to the level of nullification or
impairment pursuant to Article 22.4 of the DSU, noting that the concept
of nullification or impairment is not found in Articles 3 and
4 of the
SCM Agreement. The Arbitrators explained:
“A first approach would be to consider that the
concept of nullification or impairment does not apply to Article 4 of
the SCM Agreement. We note in this respect that, in relation to
actionable subsidies, Article 5 refers to nullification or impairment as
only one of the three categories of adverse effects. This could mean
that another test than nullification or impairment could also apply in
the context of Article 4 of the SCM Agreement.
That said, we note that the Original Panel
concluded that, since a violation had been found, a prima facie case of
nullification or impairment had been made within the meaning of Article
3.8 of the DSU, which Brazil had not rebutted. In that context, we are
more inclined to consider that no reference was expressly made to
nullification or impairment in Article 4 of the SCM Agreement for the
following reasons:
(a) a violation of Article 3 of the SCM Agreement
entails an irrebuttable presumption of nullification or impairment. It
is therefore not necessary to refer to it;
(b) the purpose of Article 4 is to achieve the
withdrawal of the prohibited subsidy. In this respect, we consider that
the requirement to withdraw a prohibited subsidy is of a different
nature than removal of the specific nullification or impairment caused
to a Member by the measure.(268) The former aims at removing a measure
which is presumed under the WTO Agreement to cause negative trade
effects, irrespective of who suffers those trade effects and to what
extent. The latter aims at eliminating the effects of a measure on the
trade of a given Member;
(c) the fact that nullification or impairment is
established with respect to a measure does not necessarily mean that, in
the presence of an obligation to withdraw that measure, the level of
appropriate countermeasures should be based only on the level of
nullification or impairment suffered by the Member requesting the
authorisation to take countermeasures.”(269)
182. In their finding that the
concept of nullification or impairment is not found in Articles 3 and
4
of the SCM Agreement, the Arbitrators in Brazil — Aircraft (Article 22.6
— Brazil) also noted that a different term than “appropriate
countermeasures” was being used in a comparable context in Articles
7.9 and 10 of the SCM Agreement:
“We also note that, when the negotiators have
intended to limit countermeasures to the effect caused by the subsidy on
a Member’s trade, they have used different terms than ‘appropriate
countermeasures’. Article 7.9 and 10, which is the provision
equivalent for actionable subsidies to Article 4.9 and
10 for prohibited
subsidies, uses the terms ‘commensurate with the degree and nature of
the adverse effects determined to exist’. In that context, we do not
consider the arguments made by Brazil in its oral presentation and based
on the central position of the notion of nullification in the GATT to be
compelling. As we have seen above, the term ‘appropriate
countermeasures’ does not impose similar constraints.”(270)
183. Further, the Arbitrators in
Brazil — Aircraft (Article 22.6 — Brazil) addressed the relevance of
footnotes 9 and 10 to Article 4.10 and 4.11, respectively:
“We agree that, as those footnotes are drafted,
it seems difficult to clearly identify how the second part of the
sentence (‘in light of the fact that the subsidies dealt with under
these provisions are prohibited’) relates to the first part of the
sentence (‘This expression is not meant to allow countermeasures that
are disproportionate’). This is probably due to the use of the words
‘in light of the fact that’. However, since the text of the treaty
is supposed to be the most achieved expression of the intent of the
parties, we should refrain from second guessing the negotiators at this
point. We can nonetheless note that the reference to the fact that the
subsidies dealt with are prohibited can most probably be considered more
as an aggravating factor than as a mitigating factor. We also find the
use of the word ‘disproportionate’ to be interesting in light of the
term ‘out of proportion’ used in Article 49 of the Draft Articles.
We do not draw any firm conclusions as to the meaning of footnotes 9 and
10. However, we note that footnotes 9 and
10 at least confirm that the
term ‘appropriate’ in Articles 4.10 and
4.11 of the SCM Agreement
should not be given the same meaning as the term ‘equivalent’ in
Article 22 of the DSU.(271)”(272)
184. The Arbitrators in
US — FSC
(Article 22.6 — US) found that an assessment of the proposed
countermeasures in relation to the initial violating measures was
sufficient to conclude that the countermeasures were appropriate. In
this regard, they compared Articles 7.9 and 9.4 of the SCM Agreement
with Article 10 and concluded that the clear reference to trade effects
in Article 7.9 “highlights” the lack of any such indication in
Article 4.10. The Arbitrators then concluded that Article 4.10 does not
“require” that trade effects be the standard by which “appropriateness”
is determined. However, they found that Article 4.10 does not “preclude”
a Member from adopting countermeasures that are “tailored” to offset
adverse “trade effects”:
“Recourse to countermeasures is foreseen in
three provisions of the SCM Agreement: Article
4.10, which we are
concerned with here, Article 7.9 and Article
9.(273) As regards actionable
subsidies, Article 7.9 provides for authorization of countermeasures ‘commensurate
with the degree and nature of the adverse effects determined to exist
…’. In a similar vein, Article 9.4 provides, in relation to
non-actionable subsidies, for the authorization of countermeasures ‘commensurate
with the nature and degree of the effects determined to exist’. The
explicit precision of these indications clearly highlights the lack of
any analogous explicit textual indication in Article 4.10 and contrasts
with the broader and more general test of ‘appropriateness’ found in
Articles 4.10 and 4.11.
In short, as far as prohibited subsidies are
concerned, there is no reference whatsoever in remedies foreseen under
Article 4 to such concepts as ‘trade effects’, ‘adverse effects’
or ‘trade impact’. Yet, by contrast, such a concept is to be found
very clearly in the context of remedies under Article
7, through the
notion of ‘adverse effects’.
We believe that this difference must be given a
meaning and that we should give due consideration to the fact that the
drafters — who obviously could have used other terms in order to
quantify precisely the permissible amount of countermeasures in the
context of Article 4.10 — chose not to do so. It is not our task to read
into the treaty text words that are not there.(274) We are also cognizant
that the terms that do appear in the text of the treaty must be presumed
to have meaning and must be read effectively.(275) The implications of the
use of the term ‘appropriate’ must therefore be acknowledged and we
must give this expression in Article 4.10 its full meaning.(276)
…
This reading of the text in its context confirms
us in our view that, rather than there being any requirement to confine
‘appropriate countermeasures’ to offsetting the effects of the
measure on the relevant Member, there is a clear rationale exhibited
that reinforces our textual interpretation that the Member concerned is
entitled to take countermeasures that are tailored to neutralizing the
offending measure qua measure as a wrongful act. The expression ‘appropriate
countermeasures’, in our view, would entitle the complaining Member to
countermeasures which would at least counter the injurious effect of the
persisting illegal measure on it. However, it does not require trade
effects to be the effective standard by which the appropriateness of
countermeasures should be ascertained. Nor can the relevant provisions
be interpreted to limit the assessment to this standard. Members may
take countermeasures that are not disproportionate in light of the
gravity of the initial wrongful act and the objective of securing the
withdrawal of a prohibited export subsidy, so as to restore the balance
of rights and obligations upset by that wrongful act.”(277)
185. In US
— FSC (Article 22.6 — US), the Arbitrators considered that, since
Articles 4.10 and 4.11 of
the SCM Agreement may prevail over those of the DSU, there can be no
presumption that the drafters intended the standard under Article 4.10
to be necessarily coextensive with that under Article
22.4:
“It should be recalled here that Articles 4.10
and 4.11 of the SCM Agreement are ‘special or additional rules’
under Appendix 2 of the DSU, and that in accordance with
Article 1.2 of
the DSU, it is possible for such rules or procedures to prevail over
those of the DSU. There can be no presumption, therefore, that the
drafters intended the standard under Article 4.10 to be necessarily
coextensive with that under Article 22.4 so that the notion of ‘appropriate
countermeasures’ under Article 4.10 would limit such countermeasures
to an amount ‘equivalent to the level of nullification or impairment’
suffered by the complaining Member. Rather, Articles 4.10 and
4.11 of
the SCM Agreement use distinct language and that difference must be
given meaning.
Indeed, reading the text of Article 4.10 in its
context, one might reasonably observe that if the drafters had intended
the provision to be construed in this way, they could certainly have
made it clear. Indeed, relevant provisions both elsewhere in the SCM
Agreement and in the DSU use distinct terms to convey precisely such a
standard as described by the United States, in so many words. Yet the
drafters chose terms for this provision in the SCM Agreement different
from those found in Article 22.4 of the DSU. It would not be consistent
with effective treaty interpretation to simply read away such
differences in terminology.
We therefore find no basis in the language itself
or in the context of Article 4.10 of the SCM Agreement to conclude that
it can or should be read as amounting to a ‘trade effect-oriented’
provision where explicitly alternative language is to be read away in
order to conform it to a different wording to be found in Article 22.4
of the DSU.
We would simply add that, while we consider that
the precise difference in language must be given proper meaning, this
goes no further than that. Our interpretation of Article 4.10 of the SCM
Agreement as embodying a different rule from Article 22.4 of the DSU
does not make the DSU otherwise inapplicable or redundant.”(278)
186. Finally, the Arbitrators in
US — FSC (Article 22.6 — US) considered that under Article
4.10, a
Member is entitled to act with countermeasures that properly take into
account the seriousness and nature of the breach. However, they warned
that Article 4.10 “does not amount to a blank cheque”. The
Arbitrators concluded that from the perspective of the measures’ trade
effects on the part of the complainant there was no reason to reach a
different conclusion from that already reached:(279)
“Thus, as we interpret Article 4.10 of the SCM
Agreement, a Member is entitled to act with countermeasures that
properly take into account the gravity of the breach and the nature of
the upset in the balance of rights and obligations in question. This
cannot be reduced to a requirement that constrains countermeasures to
trade effects, for the reasons we have set out above.
At the same time, Article 4.10 of the SCM
Agreement does not amount to a blank cheque. There is nothing in the
text or in its context which suggests an entitlement to manifestly
punitive measures. On the contrary, footnote 9 specifically guards us
against such an unbounded interpretation by clarifying that the
expression ‘appropriate’ cannot be understood to allow ‘disproportionate’
countermeasures. However, to read this indication as effectively
reintroducing into that provision a quantitative limit equivalent to
that found in other provisions of the SCM Agreement or Article 22.4 of
the DSU would effectively read the specific language of Article 4.10 of
the SCM Agreement out of the text. Countermeasures under Article 4.10 of
the SCM Agreement are not even, strictly speaking, obliged to be ‘proportionate’
but not to be ‘disproportionate’. Not only is a Member entitled to
take countermeasures that are tailored to offset the original wrongful
act and the upset of the balancing of rights and obligations which that
wrongful act entails, but in assessing the ‘appropriateness’ of such
countermeasures — in light of the gravity of the breach — a margin of
appreciation is to be granted, due to the severity of that breach.”(280)
(ii) Factors relevant for the calculation of
countermeasures
187. Further, the Arbitrators on
Brazil — Aircraft (Article 22.6 — Brazil) addressed Brazil’s argument
that certain sales should be excluded because competition was based upon
factors other than price, or that there was no competition with the
Canadian manufacturer:
“Since we selected the amount of the subsidy as
the basis for the countermeasures and not the level of nullification or
impairment suffered by Canada, it is appropriate and logical to include
in our calculation all the sales of subsidised aircraft, whether they
compete or not with Bombardier’s production. However, consistent with
our approach on the burden of proof, we excluded all the sales where
Brazil demonstrated that no PROEX interest rate equalization payments
had been made and we assumed that future sales of the xxx xxxxxxx and
xxx would not benefit from the PROEX interest rate equalization
payments.”(281)
188. The Arbitrators on
Brazil — Aircraft (Article 22.6 — Brazil) also rejected Brazil’s argument that
only sales of aircraft subsequent to the implementation period should be
considered although they were delivered after that period:
“We note that, in its report within the
framework of the proceedings under Article 21.5 of the DSU, the
Appellate Body made the following findings:
‘[the Appellate Body] upholds the conclusion of
the Article 21.5 Panel that as a result of the continued issuance by
Brazil of NTN-I bonds, after 18 November 1999, pursuant to letters of
commitment issued before 18 November 1999, Brazil has failed to
implement the recommendation of the DSB that it withdraw the prohibited
export subsidies under PROEX within 90 days’(282)
We, therefore, consider that we have to include in
the calculation of the appropriate countermeasures the firm sales for
which PROEX letters of commitment were issued before 18 November 1999
and which had not yet been delivered (since the NTN-I bonds are issued
at the time of the delivery of the aircraft).(283) We do not consider the
arguments based on Brazil’s contractual obligations to be compelling.
Obligations under internal law are no justification for not performing
international obligations.(284)”(285)
(b) Relationship with other Articles
189. With respect to the
relationship with Article 7.9, see paragraph 184 above.
(c) Relationship with other WTO Agreements
(i) DSU
190. As regards the requirement of
equivalence of the suspension of concessions to the level of
nullification or impairment in Article 22.6 arbitrations, see
Section
XXII.B.9 of the Chapter on the DSU. See also paragraphs
197-198 below.
8. Article 4.11
(a) Task of the Arbitrators under Article 4.11
191. In Brazil
— Aircraft (Article
22.6 — Brazil), a case which dealt with Canada’s request for
authorization to take “appropriate countermeasures” under Article
4.10 of the SCM Agreement, the Arbitrators described their task under
Article 4.11 of the SCM Agreement in the following terms:
“As to our task, we follow the approach adopted
by previous arbitrators under Article 22.6 of the DSU.(286) We will have
not only to determine whether Canada’s proposal constitutes ‘appropriate
countermeasures’, but also to determine the level of countermeasures
we consider to be appropriate in case we find that Canada’s level of
countermeasures is not appropriate, if necessary by applying our own
methodology.”(287)
(b) Article 4.11 provisions as special or
additional rules
192. In Brazil
— Aircraft (Article
22.6 — Brazil), the Arbitrators indicated that they read the provisions
of Article 4.11 of the SCM Agreement as special or additional rules:
“We read the provisions of Article 4.11 of the
SCM Agreement as special or additional rules. In accordance with the
reasoning of the Appellate Body in Guatemala — Cement,(288) we must read
the provisions of the DSU and the special or additional rules in the SCM
Agreement so as to give meaning to all of them, except if there is a
conflict or a difference …”(289)
193. In US
— FSC (Article 22.6 — US), the Arbitrators recalled Article 30 of the
SCM Agreement and
concluded that Article 22.6 of the DSU applies to arbitrations pursuant
to Article 4.11 of the SCM Agreement although this latter provision
would prevail in case of conflict:
“We also recall the terms of Article 30 of the
SCM Agreement, which clarifies that the provisions of the DSU are
applicable to proceedings concerning measures covered by the SCM
Agreement. Article 22.6 of the DSU therefore remains relevant to
arbitral proceedings under Article 4.11 of the SCM Agreement, as
illustrated by the textual reference made to Article 22.6 of the DSU in
that provision. However, the special or additional rules and procedures
of the SCM Agreement, including Articles 4.10 and
4.11, would prevail to
the extent of any difference between them.(290)”(291)
194. With respect to arbitration
under Article 22.6 of the DSU in general, see Chapter on the DSU,
Section XXII.B.8.
(c) Burden of proof
195. In Brazil
— Aircraft (Article
22.6 — Brazil), Canada requested that the DSB authorize it to take
appropriate “countermeasures” pursuant to Article 4.10 of the SCM
Agreement, and Article 22.2 of the DSU, in the amount of Can$700
million, in relation to Brazil’s subsidy granted to its domestic
producer of aircraft. In response to Brazil’s request, the DSB
referred the matter to an arbitrator in accordance with Article 22.6 of
the DSU. With respect to the burden of proof, the Arbitrators held that
it was up to Brazil to demonstrate that the countermeasures that Canada
was proposing to take were not “appropriate”:
“In application of the well-established WTO
practice on the burden of proof in dispute resolution, it is for the
Member claiming that another has acted inconsistently with the WTO rules
to prove that inconsistency.(292) In the present case, the action at issue
is the Canadian proposal to suspend concessions and other obligations in
the amount of C$700 million as ‘appropriate countermeasures’ within
the meaning of Article 4.10 of the SCM
Agreement.(293) Brazil challenges
the conformity of this proposal with Article 22 of the DSU and
Article
4.10 of the SCM Agreement. It is therefore up to Brazil to submit
evidence sufficient to establish a prima facie case or ‘presumption’
that the countermeasures that Canada proposes to take are not ‘appropriate’.
Once Brazil has done so, it is for Canada to submit evidence sufficient
to rebut that ‘presumption’. Should the evidence remain in equipoise
on a particular claim, the Arbitrators would conclude that the claim has
not been established. Should all evidence remain in equipoise, Brazil,
as the party bearing the original burden of proof, would lose the case.
An issue to be distinguished from the question of
who bears the burden of proof is that of the duty that rests on both
parties to produce evidence and to collaborate in presenting evidence to
the Arbitrators. This is why, even though Brazil bears the original
burden of proof, we expected Canada to come forward with evidence
explaining why its proposal constitutes appropriate countermeasures and
we requested it to submit a ‘methodology paper’ describing how it
arrived at the level of countermeasures it proposes.(294)”(295)
(d) Treatment of data supplied by private
entities
196. In Brazil
— Aircraft (Article
22.6 — Brazil), the Arbitrators evaluated the trustworthiness of data
supplied by Brazil, and stated that they “could not treat statements
from that company as [they] would have if [the statements] had
originated from a subject of international law”:
“A related problem faced by the Arbitrators in
this case was that, in many instances, the original data necessary for
the calculations or assessments was solely in the hands of Brazil. When
this information originated in the Brazilian government, we assumed good
faith and accepted the information and the supporting evidence provided
by Brazil to the extent Canada also accepted it or did not provide
sufficient evidence to put in doubt the accuracy of Brazil’s
statements and/or evidence.
However, since this case relates to subsidies
granted for the purchase of aircraft produced by the Brazilian aircraft
manufacturer, Embraer, a large number of data essential for the
resolution of our task is only available to that company. We assumed
that Embraer was independent from the Brazilian government and, for that
reason, we could not treat statements from that company as we would have
if they had originated from a subject of international law.(296) When
Brazil only provided statements regarding information available solely
to Embraer, we requested that Brazil support those statements with
materials usually regarded as evidence, such as articles or statements
reproduced in the specialized press, company annual reports or any other
certified information originating in Embraer or other reliable sources.
When Brazil was not in a position to provide documentary evidence, we
requested a detailed explanation of the reasons why such evidence was
not available and expressed our willingness to consider written
declarations from authorised Embraer officials, if duly certified. We
then weighed this evidence against the evidence submitted by Canada.”(297)
(e) Relationship with other WTO Agreements
(i) DSU
Article 22.4
197. In Brazil
— Aircraft (Article
22.6 — Brazil), the Arbitrators addressed Canada’s request for
authorization to take “appropriate countermeasures” under Article
4.10 of the SCM Agreement. Referring to Article 22.4 of the DSU, Brazil
argued that the “countermeasures” must be equivalent to the level of
nullification or impairment (which argument was rejected by the
Arbitrators as referenced in paragraph 178 above). The Arbitrators
explained the relationship between Article 4.11 of the SCM Agreement and
Article 22.4 of the DSU by characterizing Article 4.11 of the SCM
Agreement as “special or additional rules” and held that the concept
of “nullification or impairment” was absent from Articles 3 and
4 of
the SCM Agreement and that the principle of effectiveness would be
counteracted if the “appropriate countermeasures” had to be
necessarily limited to the level of nullification or impairment:
“We read the provisions of Article 4.11 of the
SCM Agreement as special or additional rules. In accordance with the
reasoning of the Appellate Body in Guatemala — Cement,(298) we must read
the provisions of the DSU and the special or additional rules in the SCM
Agreement so as to give meaning to all of them, except if there is a
conflict or a difference. While we agree that in practice there may be
situations where countermeasures equivalent to the level of
nullification of impairment will be appropriate, we recall that the
concept of nullification or impairment is absent from Articles 3 and
4
of the SCM Agreement. In that framework, there is no legal obligation
that countermeasures in the form of suspension of concessions or other
obligations be equivalent to the level of nullification or impairment.
On the contrary, requiring that countermeasures in
the form of suspension of concessions or other obligations be equivalent
to the level of nullification or impairment would be contrary to the
principle of effectiveness by significantly limiting the efficacy of
countermeasures in the case of prohibited subsidies. Indeed, as shown in
the present case,(299) other countermeasures than suspension of
concessions or obligations may not always be feasible because of their
potential effects on other Members. This would be the case of a
counter-subsidy granted in a sector where other Members than the parties
compete with the products of the parties. In such a case, the Member
taking the countermeasure may not be in a position to induce compliance.
We are mindful that our interpretation may, at a
first glance, seem to cause some risk of disproportionality in case of
multiple complainants. However, in such a case, the arbitrator could
allocate the amount of appropriate countermeasures among the
complainants in proportion to their trade in the product concerned. The
‘inducing’ effect would most probably be very similar.”(300)
Article 22.6 and 22.7
198. With respect to the
relationship with Article 22.6 of the DSU, see
paragraphs 192-194 above.
For more information on the suspension of concessions under the DSU, see
Section XXII.B of the Chapter on the DSU.
Part III: Actionable
Subsidies
V. Article 5
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A. Text of Article 5
Article 5: Adverse Effects
No Member should cause, through the use of any subsidy referred to in
paragraphs 1 and 2 of Article
1, adverse effects to the interests of
other Members, i.e.:
(a) injury to the domestic
industry of another Member;(11)
(footnote original)
11 The term “injury to the
domestic industry” is used here in the same sense as it is used in
Part V.
(b)
nullification or impairment of benefits
accruing directly or indirectly to other Members under GATT 1994, in
particular the benefits of concessions bound under Article II of GATT
1994;(12)
(footnote original)
12 The term “nullification or
impairment” is used in this Agreement in the same sense as it is used
in the relevant provisions of GATT 1994, and the existence of such
nullification or impairment shall be established in accordance with the
practice of application of these provisions.
(c)
serious prejudice to the interests of another
Member.(13)
(footnote original)
13 The term “serious
prejudice to the interests of another Member” is used in this
Agreement in the same sense as it is used in paragraph 1 of Article XVI
of GATT 1994, and includes threat of serious prejudice.
This Article does not apply to subsidies
maintained on agricultural products as provided in Article 13 of the
Agreement on Agriculture.
B. Interpretation and Application of Article 5
1. General
199. In US
— Offset Act (Byrd Amendment), the Panel explained that “a measure constitutes an
actionable subsidy if it is a subsidy, if it is “specific”, and if
its use causes “adverse effects”.(301)
2. Article 5(b)
(a) “nullification or impairment”
(i) General
200. In US
— Offset Act (Byrd Amendment), with respect to “adverse effects”, Mexico made arguments
of both violation and non-violation nullification or impairment. In
relation to claims of violation nullification or impairment, the Panel
stated that any presumption arising under Article 3.8 of the DSU
stemming from these violations would relate to nullification or
impairment caused “by the violation at issue” (emphasis in
original). The Panel rejected the argument by Mexico on the grounds
that, for the purpose of Article 5(b) of the SCM Agreement, Mexico must
demonstrate that “the use of a subsidy” caused nullification or
impairment (emphasis in original).(302)
(ii) Application of a measure
201. In US
— Offset Act (Byrd Amendment), the Panel clarified that the drafters of
Article 5 of the
SCM Agreement had envisaged the possibility of nullification or
impairment resulting from the “use” of a subsidy. Furthermore, the
Panel noted that Article 7.1 of the SCM Agreement provides useful
context by clarifying that the “use” of a subsidy is to be equated
with the grant or maintaining of a subsidy. In this sense, the Panel
stated “[e]ven if disbursements have not been granted under the
[Offset Act], the maintenance of the [offset programme] constitutes ‘application’
of a measure for the purpose of a ‘non-violation’ nullification or
impairment claim under SCM Article 5(b)”.(303) The Panel went on to find
that the existence of a subsidy programme, and the potential use of that
subsidy programme, is sufficient for that programme to “apply”.(304)
(iii) Existence of a benefit
202. The Panel on
US — Offset Act
(Byrd Amendment) explained that there was no reason why the Panel should
not find that the requirement of existence of a benefit had been met,
since the United States had not disputed that benefits resulting from
the negotiated tariff concessions accrued to Mexico under Articles II
and VI of the GATT 1994.(305)
(iv) Nullification or impairment of a benefit
203. The Panel on
US — Offset Act
(Byrd Amendment) recalled one adopted GATT panel report, namely EEC
— Oilseeds, where the panel “considered that non-violation nullification
or impairment would arise when the effect of a tariff concession is
systematically offset or counteracted by a subsidy programme”.(306) The
Panel found the approach of the panel on EEC — Oilseeds to be
reasonable.
3. Relationship with other Articles
(a) Article 6.3(c)
204. The Panel on
Indonesia — Autos determined the existence of serious prejudice within the meaning
of Article 5(c) upon finding a significant price undercutting under
Article 6.3(c):
“We note that under Article 6.3(c) serious
prejudice may arise only where the price undercutting is ‘significant.’
Although the term ‘significant’ is not defined, the inclusion of
this qualifier in Article 6.3(c) presumably was intended to ensure that
margins of undercutting so small that they could not meaningfully affect
suppliers of the imported product whose price was being undercut are not
considered to give rise to serious prejudice. This clearly is not an
issue here. To the contrary, it is our view that, even taking into
account the possible effects of these physical differences on price
comparability, the price undercutting by the Timor of the Optima and 306
cannot reasonably be deemed to be other than significant.
For the foregoing reasons, we find that the effect
of the subsidies to the Timor pursuant to the National Car programme is
to cause serious prejudice to the interests of the European Communities
in the sense of Article 5(c) of the SCM Agreement through a significant
price undercutting as compared with the price of EC-origin like products
in the Indonesian market.”(307)
(b) Article 7.1
205. See paragraph 201 above.
VI. Article 6
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A. Text of Article 6
Article 6: Serious Prejudice
6.1 Serious prejudice in
the sense of paragraph (c) of Article 5 shall be deemed to exist in the
case of:
(a) the total ad valorem
subsidization(14) of a product exceeding 5 per cent;(15)
(footnote original)
14 The total ad valorem
subsidization shall be calculated in accordance with the provisions of
Annex IV.
(footnote original)
15 Since it is anticipated that
civil aircraft will be subject to specific multilateral rules, the
threshold in this subparagraph does not apply to civil aircraft.
(b) subsidies to cover operating losses sustained
by an industry;
(c) subsidies to cover operating losses sustained
by an enterprise, other than one-time measures which are non-recurrent
and cannot be repeated for that enterprise and which are given merely to
provide time for the development of long-term solutions and to avoid
acute social problems;
(d)
direct forgiveness of debt, i.e. forgiveness
of government-held debt, and grants to cover debt repayment.(16)
(footnote original) 16 Members recognize that
where royaltybased financing for a civil aircraft programme is not being
fully repaid due to the level of actual sales falling below the level of
forecast sales, this does not in itself constitute serious prejudice for
the purposes of this subparagraph.
6.2 Notwithstanding the provisions of paragraph
1,
serious prejudice shall not be found if the subsidizing Member
demonstrates that the subsidy in question has not resulted in any of the
effects enumerated in paragraph 3.
6.3
Serious prejudice in the sense of
paragraph
(c) of Article 5 may arise in any case where one or several of the
following apply:
(a)
the effect of the subsidy is to displace or
impede the imports of a like product of another Member into the market
of the subsidizing Member;
(b)
the effect of the subsidy is to displace or
impede the exports of a like product of another Member from a third
country market;
(c)
the effect of the subsidy is a significant
price undercutting by the subsidized product as compared with the price
of a like product of another Member in the same market or significant
price suppression, price depression or lost sales in the same market;
(d) the effect of the subsidy is an increase in
the world market share of the subsidizing Member in a particular
subsidized primary product or commodity(17) as compared to the average
share it had during the previous period of three years and this increase
follows a consistent trend over a period when subsidies have been
granted.
(footnote original)
17 Unless other multilaterally
agreed specific rules apply to the trade in the product or commodity in
question.
6.4 For the purpose of
paragraph 3(b), the displacement or impeding of exports shall include
any case in which, subject to the provisions of paragraph
7, it has been
demonstrated that there has been a change in relative shares of the
market to the disadvantage of the non-subsidized like product (over an
appropriately representative period sufficient to demonstrate clear
trends in the development of the market for the product concerned,
which, in normal circumstances, shall be at least one year). “Change
in relative shares of the market” shall include any of the following
situations: (a) there is an increase in the market share of the
subsidized product; (b) the market share of the subsidized product
remains constant in circumstances in which, in the absence of the
subsidy, it would have declined; (c) the market share of the subsidized
product declines, but at a slower rate than would have been the case in
the absence of the subsidy.
6.5 For the purpose of
paragraph 3(c), price undercutting shall include any case in which such
price undercutting has been demonstrated through a comparison of prices
of the subsidized product with prices of a non-subsidized like product
supplied to the same market. The comparison shall be made at the same
level of trade and at comparable times, due account being taken of any
other factor affecting price comparability. However, if such a direct
comparison is not possible, the existence of price undercutting may be
demonstrated on the basis of export unit values.
6.6 Each Member in the
market of which serious prejudice is alleged to have arisen shall,
subject to the provisions of paragraph 3 of Annex
V, make available to
the parties to a dispute arising under Article 7, and to the panel
established pursuant to paragraph 4 of Article 7, all relevant
information that can be obtained as to the changes in market shares of
the parties to the dispute as well as concerning prices of the products
involved.
6.7 Displacement or
impediment resulting in serious prejudice shall not arise under
paragraph 3 where any of the following circumstances exist(18) during the
relevant period:
(footnote original) 18 The fact that certain
circumstances are referred to in this paragraph does not, in itself,
confer upon them any legal status in terms of either GATT 1994 or this
Agreement. These circumstances must not be isolated, sporadic or
otherwise insignificant.
(a) prohibition or
restriction on exports of the like product from the complaining Member
or on imports from the complaining Member into the third country market
concerned;
(b) decision by an
importing government operating a monopoly of trade or state trading in
the product concerned to shift, for non-commercial reasons, imports from
the complaining Member to another country or countries;
(c) natural disasters,
strikes, transport disruptions or other force majeure substantially
affecting production, qualities, quantities or prices of the product
available for export from the complaining Member;
(d) existence of
arrangements limiting exports from the complaining Member;
(e) voluntary decrease in
the availability for export of the product concerned from the
complaining Member (including, inter alia, a situation where firms in
the complaining Member have been autonomously reallocating exports of
this product to new markets);
(f) failure to conform to
standards and other regulatory requirements in the importing country.
6.8 In the absence of
circumstances referred to in paragraph 7, the existence of serious
prejudice should be determined on the basis of the information submitted
to or obtained by the panel, including information submitted in
accordance with the provisions of Annex
V.
6.9 This Article does not
apply to subsidies maintained on agricultural products as provided in
Article 13 of the Agreement on Agriculture.
B. Interpretation and Application of Article 6
1. Article 6.1
(a) Expiry of Article 6.1
206. This provision has lapsed
pursuant to Article 31. In this respect, see
paragraph 391 below.
(b) Relationship with other Articles
(i) Article 27
207. With regard to the
relationship between Article 6.1 and Article
27, see paragraph 382 below.
(ii) Article 31
208. With regard to the
relationship between Article 6.1 and Article
31, see paragraph 391 below.
2. Article 6.3
(a) “The effect of the subsidy”
209. The Panel on
Indonesia — Autos rejected the argument that it was precluded from considering the
effects of a subsidy programme which had expired when analysing whether
the subsidies caused serious prejudice to the interests of the
complainants.(308) The Panel stated:
“[W]e must assess the ‘effect of the subsidies’
on the interests of another Member to determine whether serious
prejudice exists, not the effect of ‘subsidy programmers’. We note
that at any given moment in time some payments of subsidies have
occurred in the past while others have yet to occur in the future. If we
were to consider that past subsidies were not relevant to our serious
prejudice analysis as they were ‘expired measures’ while future
measures could not yet have caused actual serious prejudice, it is hard
to imagine any situation where a panel would be able to determine the
existence of actual serious prejudice.”(309)
(b) “like product”
210. See paragraphs
270-274 below.
With respect to the burden of proof regarding the determination of “like
product”, see paragraph 382 below.
3. Article 6.3(a)
(a) Standing as claimant
211. The Panel on
Indonesia — Autos considered whether “the United States may claim that it has
suffered serious prejudice as a result of displacement/ impedance or of
price undercutting with respect to a product which does not originate in
the United States solely on the basis that the producer of that product
is a ‘US company’”.(310) The Panel drew a distinction between United
States products and United States companies/producers and rejected the
claim that the nationality of producers is relevant to establishing the
existence of serious prejudice:
“In our view, the text of Article XVI [of the
GATT 1994] and of Part III of the SCM Agreement make clear that serious
prejudice may arise where a Member’s trade interests have been
affected by subsidization. We see nothing in Article XVI or in
Part III
that would suggest that the United States may claim that it has suffered
adverse effects merely because it believes that the interests of US
companies have been harmed where US products are not involved. The
United States has cited no language in Article XVI:1 or
Part III
suggesting that the nationality of producers is relevant to establishing
the existence of serious prejudice. Accordingly, given that serious
prejudice may only arise in the case at hand where there is ‘displacement
or impedance of imports of a like product from another Member’ or
price undercutting ‘as compared with the like product of another
Member’, we do not consider that the United States can convert such
effects on products from the European Communities into serious prejudice
to US interests merely by alleging that the products affected were
produced by US companies.”(311) (emphasis original)
(b) Demonstration of displacement or impedance
212. The Panel on
Indonesia — Autos explored the meaning of the terms “displacement” and “impedance”
and considered that:
“[A] complainant need not demonstrate a decline
in sales in order to demonstrate displacement or impedance. This is
inherent in the ordinary meaning of those terms. Thus, displacement
relates to a situation where sales volume has declined, while impedance
relates to a situation where sales which otherwise would have occurred
were impeded….”(312)
(c) Relationship with other Articles
(i) Article 6.4
213. The Panel on
Indonesia — Autos addressed the argument that “there is no reason why the type of
analysis set forth in Article 6.4 should not be appropriate also in the
case of claims of displacement and impedance of imports from the market
of the subsidizing country”.(313) The Panel rejected this argument, but
nevertheless agreed that market share data may be “highly relevant”
for an analysis pursuant to Article 6.3(a):
“Article 6.4 is not relevant in this case. The
drafting of the provision is unambiguous, and the specific reference to
Article 6.3(b) creates a strong inference that an Article 6.4 type of
analysis is not appropriate in the case of Article 6.3(a) claims. The
complainants have identified nothing in the context of the provision or
the object and purpose of the SCM Agreement that would suggest a
different conclusion.
Our conclusion does not of course mean that market
share data are irrelevant to the analysis of displacement or impedance
into a subsidizing Member’s market. To the contrary, market share data
may be highly relevant evidence for the analysis of such a claim.
However, such data are no more than evidence of displacement and
impedance caused by subsidization, and a demonstration that the market
share of the subsidized product in the subsidizing Member has increased
does not ipso facto satisfy the requirements of Article 6.3(a).”(314)
4. Article 6.3(c)
(a) Standing as claimant
214. With respect to what interest
is necessary for standing as claimants under Article
6.3(c), see
paragraph 211 above.
(b) “significant price undercutting”
215. The Panel on
Indonesia — Autos stated the following on the use of the term ‘significant’ in
connection with the term “price undercutting” in Article
6.3(c): “Although the term ‘significant’ is not
defined, the inclusion of this qualifier in Article 6.3(c) presumably
was intended to ensure that margins of undercutting so small that they
could not meaningfully affect suppliers of the imported product whose
price was being undercut are not considered to give rise to serious
prejudice.”(315)
(c) Relationship with other Articles
216. With respect to the
relationship with Article 5(c), see paragraph 204 above.
5. Article 6.7
(a) “imports from the complaining Member”
and “exports from the complaining Member”
217. The Panel on
Indonesia — Autos addressed the question whether the SCM Agreement allows a Member
to bring a claim that another Member has “suffered serious prejudice
as a result of subsidization”.(316) The Panel stated the following:
“It is clear from Article 7.2 that the dispute
settlement procedures set forth in Article 7 may only be invoked by a
Member where that Member believes that it has itself suffered serious
prejudice as a result of subsidization.
Our view on these issues is confirmed by Article
6.4, which allows a subsidising Member to raise a defence to a
displacement/impedance claim where “imports from the complaining
Member” or “exports from the complaining Member” are affected by
such factors as export prohibitions or restrictions, natural disasters,
and arrangements limiting exports. These provisions or restrictions of
Article 6.7 assume that the product subject to a claim of serious
prejudice arising from displacement or impedance originates in the
complaining Member.”(317)
VII. Article 7
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A. Text of Article 7
Article 7: Remedies
7.1 Except as provided in
Article 13 of the Agreement on Agriculture, whenever a Member has reason
to believe that any subsidy referred to in Article
1, granted or
maintained by another Member, results in injury to its domestic
industry, nullification or impairment or serious prejudice, such Member
may request consultations with such other Member.
7.2 A request for
consultations under paragraph 1 shall include a statement of available
evidence with regard to (a) the existence and nature of the subsidy in
question, and (b) the injury caused to the domestic industry, or the
nullification or impairment, or serious prejudice(19) caused to the
interests of the Member requesting consultations.
(footnote original) 19 In the event that the
request relates to a subsidy deemed to result in serious prejudice in
terms of paragraph 1 of Article 6, the available evidence of serious
prejudice may be limited to the available evidence as to whether the
conditions of paragraph 1 of Article 6 have been met or not.
7.3 Upon request for
consultations under paragraph 1, the Member believed to be granting or
maintaining the subsidy practice in question shall enter into such
consultations as quickly as possible. The purpose of the consultations
shall be to clarify the facts of the situation and to arrive at a
mutually agreed solution.
7.4 If consultations do
not result in a mutually agreed solution within 60 days,(20) any Member
party to such consultations may refer the matter to the DSB for the
establishment of a panel, unless the DSB decides by consensus not to
establish a panel. The composition of the panel and its terms of
reference shall be established within 15 days from the date when it is
established.
(footnote original) 20 Any time-periods mentioned
in this Article may be extended by mutual agreement.
7.5 The panel shall review
the matter and shall submit its final report to the parties to the
dispute. The report shall be circulated to all Members within 120 days
of the date of the composition and establishment of the panel’s terms
of reference.
7.6 Within 30 days of the
issuance of the panel’s report to all Members, the report shall be
adopted by the DSB(21) unless one of the parties to the dispute formally
notifies the DSB of its decision to appeal or the DSB decides by
consensus not to adopt the report.
(footnote original) 21 If a meeting of the DSB is
not scheduled during this period, such a meeting shall be held for this
purpose.
7.7 Where a panel report
is appealed, the Appellate Body shall issue its decision within 60 days
from the date when the party to the dispute formally notifies its
intention to appeal. When the Appellate Body considers that it cannot
provide its report within 60 days, it shall inform the DSB in writing of
the reasons for the delay together with an estimate of the period within
which it will submit its report. In no case shall the proceedings exceed
90 days. The appellate report shall be adopted by the DSB and
unconditionally accepted by the parties to the dispute unless the DSB
decides by consensus not to adopt the appellate report within 20 days
following its issuance to the Members.(22)
(footnote original) 22 If a meeting of the DSB is
not scheduled during this period, such a meeting shall be held for this
purpose.
7.8 Where a panel report
or an Appellate Body report is adopted in which it is determined that
any subsidy has resulted in adverse effects to the interests of another
Member within the meaning of Article 5, the Member granting or
maintaining such subsidy shall take appropriate steps to remove the
adverse effects or shall withdraw the subsidy.
7.9 In the event the
Member has not taken appropriate steps to remove the adverse effects of
the subsidy or withdraw the subsidy within six months from the date when
the DSB adopts the panel report or the Appellate Body report, and in the
absence of agreement on compensation, the DSB shall grant authorization
to the complaining Member to take countermeasures, commensurate with the
degree and nature of the adverse effects determined to exist, unless the
DSB decides by consensus to reject the request.
7.10 In the event that a
party to the dispute requests arbitration under paragraph 6 of Article
22 of the DSU, the arbitrator shall determine whether the
countermeasures are commensurate with the degree and nature of the
adverse effects determined to exist.
B. Interpretation and Application of Article 7
1. Article 7.8
(a) General
218. The Panel on
Indonesia — Autos referred in its conclusions and recommendations to the remedy in
Article 7.8 as follows:
“With respect to the conclusion of serious
prejudice to the interests of the European Communities, Article 7.8 of
the SCM Agreement provides that, ‘[W]here a panel report or an
Appellate Body report is adopted in which it is determined that any
subsidy has resulted in adverse effects to the interests of another
Member within the meaning of Article 5, the Member granting or
maintaining the subsidy shall take appropriate steps to remove the
adverse effects or shall withdraw the subsidy.’”(318)
(b) Relationship with other Articles
(i) Article 4.7
219. In the context of its finding
that the phrase “withdraw the subsidy” under Article 4.7 referred to
retroactive remedies (repayment), the Panel on Australia — Automotive
Leather II (Article 21.5 — US) considered Article 7.8 and the phrase “shall
take appropriate steps to remove the adverse effects or shall withdraw
the subsidy” therein. See paragraph 161 above.
2. Article 7.9
(a) “commensurate with the degree and nature
of the adverse effects determined to exist”
220. In the context of determining
the meaning of the term “appropriate countermeasures” under Article
4.10 of the SCM Agreement, the Arbitrators in Brazil — Aircraft (Article
22.6 — Brazil) referred to Article 7.9 and the phrase “commensurate
with the degree and nature of the adverse effects determined to exist”.
See paragraph 182 above.
221. The Arbitrators in
US — FSC
(Article 22.6 — US) also referred to this phrase in Article 7.9 (as well
as to Article 9) as context for the interpretation of
Article 4.10 and
considered that “the explicit precision of these indications clearly
highlights the lack of any analogous explicit textual indication in
Article 4.10 and contrasts with the broader and more general test of ‘appropriateness’
found in Articles 4.10 and 4.11”. For the Arbitrators, such a
difference in the text “must be given a meaning”.(319) See also
paragraph 184 above.
(b) Relationship with other Articles
222. With respect to the
relationship with Article 4.10, see paragraph 184 above.
Part IV: Non-Actionable
Subsidies
VIII. Article 8
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A. Text of Article 8
Article 8: Identification of Non-Actionable Subsidies
8.1 The following
subsidies shall be considered as non-actionable:(23)
(footnote original) 23 It is recognized that
government assistance for various purposes is widely provided by Members
and that the mere fact that such assistance may not qualify for
non-actionable treatment under the provisions of this Article does not
in itself restrict the ability of Members to provide such assistance.
(a) subsidies which are
not specific within the meaning of Article
2;
(b) subsidies which are
specific within the meaning of Article 2 but which meet all of the
conditions provided for in paragraphs 2(a),
2(b) or 2(c) below.
8.2 Notwithstanding the
provisions of Parts III and V, the following subsidies shall be
non-actionable:
(a) assistance for
research activities conducted by firms or by higher education or
research establishments on a contract basis with firms if:(24),(25),(26)
(footnote original) 24 Since it is anticipated
that civil aircraft will be subject to specific multilateral rules, the
provisions of this subparagraph do not apply to that product.
(footnote original) 25 Not later than 18 months
after the date of entry into force of the WTO Agreement, the Committee
on Subsidies and Countervailing Measures provided for in Article 24
(referred to in this Agreement as “the Committee”) shall review the
operation of the provisions of subparagraph 2(a) with a view to making
all necessary modifications to improve the operation of these
provisions. In its consideration of possible modifications, the
Committee shall carefully review the definitions of the categories set
forth in this subparagraph in the light of the experience of Members in
the operation of research programmes and the work in other relevant
international institutions.
(footnote original) 26 The provisions of this
Agreement do not apply to fundamental research activities independently
conducted by higher education or research establishments. The term “fundamental
research” means an enlargement of general scientific and technical
knowledge not linked to industrial or commercial objectives.
the assistance covers(27) not more than 75 per cent
of the costs of industrial research(28) or 50 per cent of the costs of
pre-competitive development activity;(29),(30)
(footnote original) 27 The allowable levels of
non-actionable assistance referred to in this subparagraph shall be
established by reference to the total eligible costs incurred over the
duration of an individual project.
(footnote original) 28 The term “industrial
research” means planned search or critical investigation aimed at
discovery of new knowledge, with the objective that such knowledge may
be useful in developing new products, processes or services, or in
bringing about a significant improvement to existing products, processes
or services.
(footnote original) 29 The term “pre-competitive
development activity” means the translation of industrial research
findings into a plan, blueprint or design for new, modified or improved
products, processes or services whether intended for sale or use,
including the creation of a first prototype which would not be capable
of commercial use. It may further include the conceptual formulation and
design of products, processes or services alternatives and initial
demonstration or pilot projects, provided that these same projects
cannot be converted or used for industrial application or commercial
exploitation. It does not include routine or periodic alterations to
existing products, production lines, manufacturing processes, services,
and other on-going operations even though those alterations may
represent improvements.
(footnote original) 30 In the case of programmes
which span industrial research and pre-competitive development activity,
the allowable level of non-actionable assistance shall not exceed the
simple average of the allowable levels of non-actionable assistance
applicable to the above two categories, calculated on the basis of all
eligible costs as set forth in items (i) to
(v) of this subparagraph.
and provided that such assistance is limited
exclusively to:
(i) costs of personnel (researchers, technicians
and other supporting staff employed exclusively in the research
activity);
(ii) costs of instruments, equipment, land and
buildings used exclusively and permanently (except when disposed of on a
commercial basis) for the research activity;
(iii) costs of consultancy and equivalent
services used exclusively for the research activity, including bought-in
research, technical knowledge, patents, etc.;
(iv) additional overhead costs incurred directly
as a result of the research activity;
(v) other running costs (such as those of
materials, supplies and the like), incurred directly as a result of the
research activity.
(b) assistance to disadvantaged regions within the
territory of a Member given pursuant to a general framework of regional
development(31) and non-specific (within the meaning of Article
2) within
eligible regions provided that:
(footnote original) 31 A “general framework of
regional development” means that regional subsidy programmes are part
of an internally consistent and generally applicable regional
development policy and that regional development subsidies are not
granted in isolated geographical points having no, or virtually no,
influence on the development of a region.
(i) each disadvantaged region must be a clearly
designated contiguous geographical area with a definable economic and
administrative identity;
(ii) the region is considered as disadvantaged on
the basis of neutral and objective criteria, (32) indicating that the
region’s difficulties arise out of more than temporary circumstances;
such criteria must be clearly spelled out in law, regulation, or other
official document, so as to be capable of verification;
(footnote original) 32 “Neutral and objective
criteria” means criteria which do not favour certain regions beyond
what is appropriate for the elimination or reduction of regional
disparities within the framework of the regional development policy. In
this regard, regional subsidy programmes shall include ceilings on the
amount of assistance which can be granted to each subsidized project.
Such ceilings must be differentiated according to the different levels
of development of assisted regions and must be expressed in terms of
investment costs or cost of job creation. Within such ceilings, the
distribution of assistance shall be sufficiently broad and even to avoid
the predominant use of a subsidy by, or the granting of
disproportionately large amounts of subsidy to, certain enterprises as
provided for in Article 2.
(iii) the criteria shall include a measurement of
economic development which shall be based on at least one of the
following factors:
-
one of either income per capita or
household income per capita, or GDP per capita, which must not be
above 85 per cent of the average for the territory concerned;
-
unemployment rate, which must be at least
110 per cent of the average for the territory concerned;
as measured over a three-year period; such
measurement, however, may be a composite one and may include other
factors.
(c) assistance to promote adaptation of
existing facilities(33) to new environmental requirements imposed by law
and/or regulations which result in greater constraints and financial
burden on firms, provided that the assistance:
(footnote original)
33 The term “existing
facilities” means facilities which have been in operation for at least
two years at the time when new environmental requirements are imposed.
(i) is a one-time non-recurring measure; and
(ii) is limited to 20 per cent of the cost of
adaptation; and
(iii) does not cover the cost of replacing and
operating the assisted investment, which must be fully borne by firms;
and
(iv) is directly linked to and proportionate
to a firm’s planned reduction of nuisances and pollution, and does not
cover any manufacturing cost savings which may be achieved; and
(v) is available to all firms which can adopt
the new equipment and/or production processes.
8.3 A subsidy programme for which the
provisions of paragraph 2 are invoked shall be notified in advance of
its implementation to the Committee in accordance with the provisions of
Part VII. Any such notification shall be sufficiently precise to enable
other Members to evaluate the consistency of the programme with the
conditions and criteria provided for in the relevant provisions of
paragraph 2. Members shall also provide the Committee with yearly
updates of such notifications, in particular by supplying information on
global expenditure for each programme, and on any modification of the
programme. Other Members shall have the right to request information
about individual cases of subsidization under a notified programme.(34)
(footnote original) 34 It is recognized that
nothing in this notification provision requires the provision of
confidential information, including confidential business information.
8.4 Upon request of a Member, the Secretariat
shall review a notification made pursuant to paragraph 3 and, where
necessary, may require additional information from the subsidizing
Member concerning the notified programme under review. The Secretariat
shall report its findings to the Committee. The Committee shall, upon
request, promptly review the findings of the Secretariat (or, if a
review by the Secretariat has not been requested, the notification
itself ), with a view to determining whether the conditions and criteria
laid down in paragraph 2 have not been met. The procedure provided for
in this paragraph shall be completed at the latest at the first regular
meeting of the Committee following the notification of a subsidy
programme, provided that at least two months have elapsed between such
notification and the regular meeting of the Committee. The review
procedure described in this paragraph shall also apply, upon request, to
substantial modifications of a programme notified in the yearly updates
referred to in paragraph 3.
8.5 Upon the request of a Member, the
determination by the Committee referred to in paragraph
4, or a failure
by the Committee to make such a determination, as well as the violation,
in individual cases, of the conditions set out in a notified programme,
shall be submitted to binding arbitration. The arbitration body shall
present its conclusions to the Members within 120 days from the date
when the matter was referred to the arbitration body. Except as
otherwise provided in this paragraph, the DSU shall apply to
arbitrations conducted under this paragraph.
B. Interpretation and Application of
Article 8
1. General
(a) Expiry of Article 8
223. This provision has lapsed pursuant to
Article 31. In this regard, see paragraph 391 below.
(b) The Doha Round
224. Paragraph 10.2 of the Doha Ministerial
Decision on Implementation-Related Issues and Concerns(320) provides that
the Doha Ministerial Conference take note of the proposal to treat
certain measures by developing countries with a view to achieving
legitimate development goals as non-actionable subsidies:
“Takes note of the proposal to treat
measures implemented by developing countries with a view to achieving
legitimate development goals, such as regional growth, technology
research and development funding, production diversification and
development and implementation of environmentally sound methods of
production as non-actionable subsidies, and agrees that this issue be
addressed in accordance with paragraph 13 below.(321) During the course of
the negotiations, Members are urged to exercise due restraint with
respect to challenging such measures.”
2. Article 8.2
(a) Relationship with other Articles
(i) Article 8.3
225. Referring to the Format for Notifications
under Article 8.3 of the Agreement on Subsidies and Countervailing
Measures, issued by the SCM Committee,(322) the SCM Committee stated that
“With regard to the questions in this standard format on arrangements
which may exist for monitoring, auditing and evaluation of assistance
under a notified programme, it should be stressed that this standard
format does not add to or detract from the relevant legal requirements
in Article 8.2 of the SCM Agreement.”(323)
3. Article 8.3
(a) “notified”
226. At its meeting of 22 February 1995, the
Committee on Subsidies and Countervailing Measures adopted a Format for
Notifications under Article 8.3 of the Agreement on Subsidies and
Countervailing Measures,(324) to “assist WTO Members in making
notifications under the first sentence of Article 8.3”.(325)
(b) “updates of … notifications”
227. At its meeting of 23 October 1997, the
Committee on Subsidies and Countervailing Measures adopted a Format for
Updates of Notifications under Article 8.3 of the Agreement on Subsidies
and Countervailing Measures,(326) which sets out the information which
should be provided for each programme notified under Article
8.3.(327)
(c) Relationship with other Articles
228. With respect to the relationship with
Article 8.2, see paragraph 225 above.
4. Article 8.5
(a) Procedures for arbitration
229. At its meeting of 2 June 1998, the SCM
Committee adopted procedures for arbitration under Article 8.5 “with
the aim of facilitating the operation of arbitration proceedings and
enhancing transparency and predictability for all Members with respect
to the Application of Article 8 of the Agreement”.(328)
5. Relationship with other Articles
230. With respect to the relationship with
Article 31, see paragraph 391 below.
IX. Article 9
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A. Text of Article 9
Article 9: Consultations and Authorized Remedies
9.1 If, in the course of implementation of a
programme referred to in paragraph 2 of Article
8, notwithstanding the
fact that the programme is consistent with the criteria laid down in
that paragraph, a Member has reasons to believe that this programme has
resulted in serious adverse effects to the domestic industry of that
Member, such as to cause damage which would be difficult to repair, such
Member may request consultations with the Member granting or maintaining
the subsidy.
9.2 Upon request for consultations under
paragraph 1, the Member granting or maintaining the subsidy programme in
question shall enter into such consultations as quickly as possible. The
purpose of the consultations shall be to clarify the facts of the
situation and to arrive at a mutually acceptable solution.
9.3 If no mutually acceptable solution has
been reached in consultations under paragraph 2 within 60 days of the
request for such consultations, the requesting Member may refer the
matter to the Committee.
9.4 Where a matter is referred to the
Committee, the Committee shall immediately review the facts involved and
the evidence of the effects referred to in paragraph
1. If the Committee
determines that such effects exist, it may recommend to the subsidizing
Member to modify this programme in such a way as to remove these
effects. The Committee shall present its conclusions within 120 days
from the date when the matter is referred to it under paragraph
3. In
the event the recommendation is not followed within six months, the
Committee shall authorize the requesting Member to take appropriate
countermeasures commensurate with the nature and degree of the effects
determined to exist.
B. Interpretation and Application of
Article 9
1. Expiry of Article 9
231. This provision has lapsed pursuant to
Article 31. See paragraph 391 below.
2. Relationship with other Articles
232. With respect to the relationship with
Article 31, see paragraph 391 below.
Part V: Countervailing
Measures
X. Article 10
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A. Text of Article 10
Article 10: Application of Article VI of GATT
1994(35)
(footnote original) 35 The provisions of
Part
II or III may be invoked in parallel with the provisions of
Part V;
however, with regard to the effects of a particular subsidy in the
domestic market of the importing Member, only one form of relief (either
a countervailing duty, if the requirements of Part V are met, or a
countermeasure under Articles 4 or 7) shall be available. The provisions
of Parts III and V shall not be invoked regarding measures considered
non-actionable in accordance with the provisions of Part
IV. However,
measures referred to in paragraph 1(a) of Article 8 may be investigated
in order to determine whether or not they are specific within the
meaning of Article 2. In addition, in the case of a subsidy referred to
in paragraph 2 of Article 8 conferred pursuant to a programme which has
not been notified in accordance with paragraph 3 of Article 8, the
provisions of Part III or V may be invoked, but such subsidy shall be
treated as non-actionable if it is found to conform to the standards set
forth in paragraph 2 of Article 8.
Members shall take all necessary steps to
ensure that the imposition of a countervailing duty(36) on any product of
the territory of any Member imported into the territory of another
Member is in accordance with the provisions of Article VI of GATT 1994
and the terms of this Agreement. Countervailing duties may only be
imposed pursuant to investigations initiated(37) and conducted in
accordance with the provisions of this Agreement and the Agreement on
Agriculture.
(footnote original) 36 The term “countervailing
duty” shall be understood to mean a special duty levied for the
purpose of offsetting any subsidy bestowed directly or indirectly upon
the manufacture, production or export of any merchandise, as provided
for in paragraph 3 of Article VI of GATT
1994.
(footnote original) 37 The term “initiated”
as used hereinafter means procedural action by which a Member formally
commences an investigation as provided in Article
11.
B. Interpretation and Application of
Article 10
1. The Doha review mandate
233. Paragraph 10.3 of the Doha Ministerial
Decision on Implementation Related Issues and Concerns(329) mandates the
SCM Committee to continue the review of the countervailing duty
provision of the SCM Agreement and requests that the Committee report to
the General Council by 31 July 2002:
“Agrees that the Committee on Subsidies and
Countervailing Measures shall continue its review of the provisions of
the Agreement on Subsidies and Countervailing Measures regarding
countervailing duty investigations and report to the General Council by
31 July 2002.”
234. As regards the above requirement to
report to the General Council, the Chairman of the SCM Committee
submitted a report(330) on 30 July 2002. The General Council took note of
the report at its meeting on 8 and 31 July 2002.(331)
2. Footnote 36
(a) “offsetting”
235. Discussing the premise that “no
countervailing duty may be imposed absent (countervailable)
subsidization”,(332) the Panel on US — Lead and Bismuth II considered
that this premise “underlies the very purpose of the countervailing
measures envisaged by Part V of the SCM Agreement”.(333) The Panel
continued with the statement that “footnote 36 to Article 10 does not
envisage the imposition of countervailing duties when no (countervailable)
subsidy is found to exist, for in such cases there would be no (countervailable)
subsidy to ‘offset’”.(334)
236. In US
— Countervailing Measures on
Certain EC Products, the Panel noted that Article VI:3 of the GATT and
Article 10, footnote 36 of the SCM Agreement refer to countervailing
duties as “special duties” levied for the purpose of “offsetting”
a subsidy. Furthermore, the Panel found that countervailing duties are
not designed to counteract all market distortions or resource
misallocations which might have been caused by subsidization.(335)
(b) “any subsidy bestowed directly or
indirectly upon the manufacture”
237. In US
— Softwood Lumber IV, in examining
the “pass-through” issue, the Appellate Body quoted inter alia
Article 10, footnote 36 of the SCM Agreement as one of the relevant
legal provisions. In the view of the Appellate Body, the claims under
the SCM Agreement are “largely derivative” of those under Article
VI:3 of the GATT 1994.(336) Furthermore, the Appellate Body stated that
the phrase “subsid[ies] bestowed … indirectly”, as used in
Article
VI:3 of the GATT 1994, implies “that financial contributions by the
government to the production of inputs used in manufacturing products
subject to an investigation are not, in principle, excluded from the
amount of subsidies that may be offset through the imposition of
countervailing duties on the processed product”.(337) Moreover, the
Appellate Body stated:
“In our view, it would not be possible to
determine whether countervailing duties levied on the processed product
are in excess of the amount of the total subsidy accruing to that
product, without establishing whether, and in what amount, subsidies
bestowed on the producer of the input flowed through, downstream, to the
producer of the product processed from that input. Because Article VI:3
permits offsetting through countervailing duties no more than the
subsidy determined to have been granted … directly or indirectly, on
the manufacture [or] production … of such products, it follows that
Members must not impose duties to offset an amount of the input subsidy
that has not passed through to the countervailed processed products.
Rather, “[i]t is only the amount by which an indirect subsidy granted
to producers of inputs flows through to the processed product, together
with the amount of subsidy bestowed directly on producers of the
processed product, that may be offset through the imposition of
countervailing duties.”(338)
3. Relationship with Article VI of the GATT
1994
238. In its analysis of the relationship
between Article VI of the GATT 1994 and the SCM Agreement, the Appellate
Body on Brazil — Desiccated Coconut relied primarily on Article 10 and
stated that “From reading Article 10, it is clear that countervailing
duties may only be imposed in accordance with Article VI of the GATT
1994 and the SCM Agreement.”(339) In this determination, the
Appellate Body relied also on Articles 32.1 and
32.3 of the SCM
Agreement; see paragraph 392 below for Article 32.1 and
paragraphs 399-400 below for Article 32.3 below.
239. In US
— Softwood Lumber IV, the Appellate
Body concluded that “in cases where logs are sold by a
harvester/sawmill in arm’s-length transactions to unrelated sawmills,
it may not be assumed that benefits attaching to the logs (non-subject
products) automatically pass through to the lumber (the subject product)
produced by the harvester/sawmill”. Therefore, a pass-through analysis
is required in such situations.(340) It was on this basis that the
Appellate Body upheld the Panel’s finding that the Department of
Commerce’s failure to conduct a pass-through analysis in respect of
arm’s length sales of logs by tenured harvesters/sawmills to unrelated
sawmills is inconsistent with Articles 10 and 32.1 of the SCM Agreement
and Article VI of the GATT 1994.(341)
240. Furthermore, in relation to the
pass-through analysis in respect of arm’s-length sales of lumber by
tenured harvesters/sawmills to unrelated remanufacturers, the Appellate
Body reversed the Panel’s findings and stated that the Department of
Commerce’s failure to conduct such analysis is not inconsistent with
Article 10 of the SCM Agreement and Article VI:3 of the GATT
1994.(342)
241. For a further discussion on the
relationship between Article VI of the GATT 1994 and the SCM
Agreement,
see also paragraphs 412-414 below.
4. Relationship with other Articles
242. With respect to the relationship with
Article 32.1 and 32.3, see
paragraph 392 below.
Footnotes:
189. Panel Report on Canada —
Aircraft, para. 9.70. back to text
190. Panel Report on Canada — Aircraft, para. 9.72. back to text
191. Panel Report on Canada — Aircraft, para. 9.72. back to text
192. Panel Report on Canada — Aircraft, para. 9.74. back to text
193. Panel Report on Canada — Aircraft, para. 9.75. back to text
194. Panel Report on Canada — Aircraft, para. 9.75. back to text
195. Panel Report on Canada — Aircraft, para. 9.77. back to text
196. Panel Report on Canada — Aircraft, para. 9.78. back to text
197. (footnote original) Appellate Body Report on Guatemala
— Cement, fn. 55. back to text
198. Appellate Body Report on US — FSC, paras. 159-161.
See discussion of adverse inferences in the Chapter on the DSU,
Section XI.B.3(c). back to text
199. Appellate Body Report on US — FSC, paras. 155-166. back to text
200. (footnote original) Concise Oxford Dictionary, Ninth
edition, 1995. back to text
201. (footnote original) The materials in questions were
comprised of testimony before the US Congress, reports and other
descriptive materials relating to the FSC prepared by US government
officials, articles in tax, legal and business publications about the
FSC, copies of the requests for consultations and establishment of a
panel in this dispute, and excerpts from OECD Transfer Pricing
Guidelines for Multinational Enterprises and Tax Administrations.
All of these materials are explanatory of the FSC except for the OECD Guidelines,
which were submitted in support of the European Communities’ view of
the meaning of the concept of the “arm’s length” principle
referred to in footnote 59 to the SCM
Agreement. back to text
202. Panel Report on US — FSC, paras. 7.5-7.6. back to text
203. Appellate Body Report on US — FSC, para. 162. back to text
204. (footnote original) Appellate Body Report on US
— Shrimp, fn, 99. In that report, we addressed the issue of good
faith in the context of the chapeau of Article XX of the GATT
1994. back to text
205. Appellate Body Report on US — FSC, para. 166. back to text
206. Panel Report on Australia — Automotive Leather II,
para. 9.17. back to text
207. Panel Report on Australia — Automotive Leather II,
para. 9.18. back to text
208. Panel Report on Australia — Automotive Leather II,
paras. 9.19-9.20. back to text
209. Panel Report on Australia — Automotive Leather II,
para. 9.24. back to text
210. Panel Report on Australia — Automotive Leather II,
para. 9.24. back to text
211. Panel Report on Australia — Automotive Leather II,
para. 9.25. back to text
212. Panel Report on Australia — Automotive Leather II,
para. 9.29. back to text
213. Panel Report on Australia — Automotive Leather II,
para. 9.29. back to text
214. Panel Report on Canada — Aircraft, para. 9.29. back to text
215. Panel Report on Canada — Aircraft, para. 9.29. back to text
216. Panel Report on Brazil — Aircraft, para. 7.6. back to text
217. Panel Report on Brazil — Aircraft, para. 7.6. back to text
218. Appellate Body Report on Brazil — Aircraft, paras.
131-132. See also Panel Report on Brazil — Aircraft, paras.
7.9-7.11. back to text
219. Panel Report on Canada — Aircraft, para. 9.12. back to text
220. Appellate Body Report on Brazil — Aircraft (Article
21.5 — Canada), para. 45. back to text
221. Appellate Body Report on Brazil — Aircraft (Article
21.5 — Canada), para. 45. See also Panel Report on US — FSC
(Article 21.5 — EC), para. 8.170. back to text
222. Appellate Body Report on Brazil — Aircraft (Article
21.5 — Canada), para. 45. back to text
223. Panel Report on Australia — Automotive Leather II
(Article 21.5 — US), paras. 6.27-6.28 and 6.31. back to text
224. Panel Report on Australia — Automotive Leather II
(Article 21.5 — US), para. 6.20. back to text
225. Panel Report on Australia — Automotive Leather II
(Article 21.5 — US), para. 6.22. back to text
226. Panel Report on Brazil — Aircraft (Article 21.5 —
Canada), para. 6.15. back to text
227. Panel Report on Australia — Automotive Leather II
(Article 21.5 — US), para. 6.45. back to text
228. Panel Report on Australia — Automotive Leather II
(Article 21.5 — US), para. 6.49. With respect to the issue of
repayment of anti-dumping duties, see Panel Report on Guatemala —
Cement II, paras. 9.4-9.7. back to text
229. Panel Report on Brazil — Aircraft, para. 8.5. See
also Panel Report on Canada — Aircraft, para. 10.4. back to text
230. Appellate Body Report on Brazil — Aircraft, para.
192. back to text
231. Panel Report on Australia — Automotive Leather II,
para. 10.6. back to text
232. (footnote original) Appellate Body Report, Brazil
— Aircraft (Article 21.5 — Canada), supra, footnote 86, para.
46. back to text
233. (footnote original) Appellate Body Report, Brazil
— Aircraft (Article 21.5 — Canada), para. 45. back to text
234. Appellate Body Report on US — FSC (Article 21.5 — EC),
paras. 229-230. back to text
235. Panel Report on Canada — Aircraft Credits and
Guarantees, para. 8.3. back to text
236. Panel Report on Canada — Aircraft Credits and
Guarantees, para. 8.4. back to text
237. Panel Report on Australia — Automotive Leather II
(Article 21.5 — US), para. 6.28. back to text
238. Panel Report on Australia — Automotive Leather II
(Article 21.5 — US), para. 6.31. back to text
239. Panel Report on US — FSC (Article 21.5 — EC),
para. 8.171. back to text
240. (footnote original) See, e.g., the Naulilaa
arbitral award (1928), UN Reports of International Arbitral Awards, Vol.
II, p. 1028 and Case Concerning the Air Services Agreement of 27
March 1946 (France v. United States of America) (1978) International
Law Reports, Vol. 54 (1979), p. 338. See also, inter alia, the Draft
Articles on State Responsibility With Commentaries Thereto Adopted by
the International Law Commission on First Reading (January 1997),
hereinafter the “Draft Articles” and the draft articles
provisionally adopted by the Drafting Committee on second reading,
A/CN.4/L 600, 11 August 2000. Even though the latter modify a number of
provisions of the Draft Articles, they do not affect the terms to which
we refer in this report. back to text
241. (footnote original) We also note that, on the basis
of the definition of “countermeasures” in the Draft Articles, the
notion of “appropriate countermeasures” would be more general than
the term “equivalent to the level of nullification or impairment”.
It would basically include it. Limiting its meaning to that given to the
term “equivalent to the level of nullification or impairment” would
be contrary to the principle of effectiveness in interpretation of
treaties. back to text
242. (footnote original) See Article 38 of the Statute of
the ICJ. back to text
243. (footnote original) We note that Canada objects to us
using the Draft Articles in this interpretation process. Canada argues
that the Draft Articles are not “relevant rules of international law
applicable to the relations between the parties” within the meaning of
Article 31.3(c) of the Vienna Convention. As already mentioned, we use
the Draft Articles as an indication of the agreed meaning of certain
terms in general international law. back to text
244. (footnote original) Op. cit., para. 6.3. In
that case, the arbitrators had to determine the level of nullification
or impairment. Since the Article 22.6 arbitrators in the EC —
Bananas case considered that measures equivalent to the level of
nullification or impairment can induce compliance, it could be argued
that in the present case too, countermeasures equivalent to the level of
nullification or impairment should be sufficient to induce compliance.
However, the arbitrators in EC — Bananas were instructed by
Article 22.7 to determine whether the proposed measures were equivalent
to the level of nullification or impairment. back to text
245. Decision by the Arbitrators on Brazil — Aircraft
(Article 22.6 — Brazil), para. 3.44. back to text
246. (footnote original) The New Shorter Oxford English
Dictionary (1993). back to text
247. (footnote original) Ibid. back to text
248. (footnote original) Webster’s New Encyclopedic
Dictionary (1994). back to text
249. (footnote original) The New Shorter Oxford English
Dictionary (1993). back to text
250. Decision by the Arbitrators on US — FSC (Article 22.6
— US), paras. 5.4-5.7. back to text
251. (footnote original) The New Shorter Oxford English
Dictionary (1993), p. 103; Webster’s New Encyclopedic Dictionary
(1994), p. 48. back to text
252. (footnote original) See, e.g., the Naulilaa
arbitral award (1928), UN Reports of International Arbitral Awards, Vol.
II, p. 1028 and Case Concerning the Air Services Agreement of 27
March 1946 (France v. United States of America) (1978) International
Law Reports, Vol. 54 (1979), p. 338. See also, inter alia, the Draft
Articles on State Responsibility With Commentaries Thereto Adopted by
the International Law Commission on First Reading (January 1997),
hereinafter the “Draft Articles” and the draft articles
provisionally adopted by the Drafting Committee on second reading,
A/CN.4/L 600, 11 August 2000. Even though the latter modify a number of
provisions of the Draft Articles, they do not affect the terms to which
we refer in this report. back to text
253. (footnote original) We also note that, on the basis
of the definition of “countermeasures” in the Draft Articles, the
notion of “appropriate countermeasures” would be more general than
the term “equivalent to the level of nullification or impairment”.
It would basically include it. Limiting its meaning to that given to the
term “equivalent to the level of nullification or impairment” would
be contrary to the principle of effectiveness in interpretation of
treaties. back to text
254. (footnote original) See Article 38 of the Statute of
the ICJ. back to text
255. (footnote original) We note that Canada objects to us
using the Draft Articles in this interpretation process. Canada argues
that the Draft Articles are not “relevant rules of international law
applicable to the relations between the parties” within the meaning of
Article 31.3(c) of the Vienna Convention. As already mentioned, we use
the Draft Articles as an indication of the agreed meaning of certain
terms in general international law. back to text
256. (footnote original) Op. cit., para. 6.3. In
that case, the arbitrators had to determine the level of nullification
or impairment. Since the Article 22.6 arbitrators in the EC —
Bananas case considered that measures equivalent to the level of
nullification or impairment can induce compliance, it could be argued
that in the present case too, countermeasures equivalent to the level of
nullification or impairment should be sufficient to induce compliance.
However, the arbitrators in EC — Bananas were instructed by
Article 22.7 to determine whether the proposed measures were equivalent
to the level of nullification or impairment. back to text
257. Decision by the Arbitrators on Brazil — Aircraft
(Article 22.6 — Brazil), paras. 3.42-3.44. back to text
258. Decision by the Arbitrators on Brazil — Aircraft
(Article 22.6 — Brazil), paras. 3.45-3.46. back to text
259. Decision by the Arbitrators on US — FSC (Article 22.6
— US), para. 5.10. back to text
260. Decision by the Arbitrators on US — FSC (Article 22.6
— US), para. 5.11. back to text
261. Decision by the Arbitrators on US — FSC (Article 22.6
— US), para. 5.12. back to text
262. Decision by the Arbitrators on US — FSC (Article 22.6
— US), para. 5.8. back to text
263. Decision by the Arbitrators on US — FSC (Article 22.6
— US), para. 5.16. back to text
264. Decision by the Arbitrators on US — FSC (Article 22.6
— US), para. 5.19. back to text
265. Decision by the Arbitrators on US — FSC (Article 22.6
— US), para. 5.23. back to text
266. (footnote original) We note in this regard the view
of the commentator, Sir James Crawford, on the relevant Article of the
ILC text on State Responsibility, reflected in a resolution adopted on
12 December 2001 by the UN General Assembly (A/RES/56/83), which
expresses — but only in positive terms — a requirement of
proportionality for countermeasures:
“the positive formulation of the
proportionality requirement is adopted in Article 51. A negative
formulation might allow too much latitude.” (J. Crawford, The ILC’s
Articles on State Responsibility, Introduction, Text and Commentaries
2002, CUP, para. 5 on Article 51).
Article 51 of the ILC Articles on State
responsibility (entitled “Proportionality”) reads as follows:
“countermeasures must be commensurate with
the injury suffered, taking into account the gravity of the
internationally wrongful act and the rights in question”. (emphasis
added)
We also note in this respect that, while that
provision expressly refers — contrary to footnote 9 of the SCM
Agreement — to the injury suffered, it also requires the gravity
of the wrongful act and the right in question to be taken into account.
This has been understood to entail a qualitative element to the
assessment, even where commensurateness with the injury suffered is at
stake. We note the view of Sir James Crawford on this point in his
Commentaries to the ILC Articles:
“Considering the need to ensure that the
adoption of countermeasures does not lead to inequitable results,
proportionality must be assessed taking into account not only the purely
‘quantitative’ element of the injury suffered, but also ‘qualitative’
factors such as the importance of the interest protected by the rule
infringed and the seriousness of the breach. Article 51 relates
proportionality primarily to the injury suffered but ‘taking into
account’ two further criteria: the gravity of the internationally
wrongful act, and the rights in question. The reference to ‘the rights
in question’ has a broad meaning, and includes not only the effect of
a wrongful act on the injured State but also on the rights of the
responsible State. Furthermore, the position of other States which may
be affected may also be taken into consideration.” (op. cit.,
para. 6 of the commentaries on Article 51). back to text
267. Decision by the Arbitrators on US — FSC (Article 22.6
— US), para. 5.27. back to text
268. (footnote original) We note that
Article 3.7 of the
DSU refers to the “withdrawal of the measures concerned” as a first
objective. However, we also note that, contrary to Article 3.7 of the
DSU, Article 4.7 of the SCM Agreement does not provide for any
alternative than the withdrawal of the measure once it has been found to
be a prohibited subsidy. back to text
269. Decision by the Arbitrators on Brazil — Aircraft
(Article 22.6 — Brazil), paras. 3.47-3.48. back to text
270. Decision by the Arbitrators on Brazil — Aircraft
(Article 22.6 — Brazil), para. 3.49. back to text
271. (footnote original) We are mindful of the fact that,
from the point of view of a textual interpretation, “equivalent” and
“appropriate” should not be given the same meaning. Interpreters are
not permitted to assume such a thing. What we mean is that the term “appropriate”,
read in the light of footnotes 9 and 10, may allow for more leeway than
the word “equivalent” in terms of assessing the appropriate level of
countermeasures. A countermeasure remains “appropriate” as long as
it is not disproportionate, having also regard to the fact that
the measure at issue is a prohibited subsidy. back to text
272. Decision by the Arbitrators on Brazil — Aircraft
(Article 22.6 — Brazil), para. 3.51. back to text
273. (footnote original) We are aware of the provisions of
Article 31 of the SCM Agreement and that Members took no action
to extend the application of the provisions of Articles 8 and
9 of the
Agreement concerning non-actionable subsidies beyond the period of five
years from the date of entry into force of the WTO Agreement.
However, these provisions can nevertheless be helpful, in our view, in
understanding the overall architecture of the Agreement with respect to
the different types of subsidies it sought and seeks to address. back to text
274. (footnote original) See for example the reports of
the Appellate Body in India — Quantitative Restrictions,
WT/DS90/AB/R, DSR 1999:IV, 1763, para 94; EC — Hormones,
WT/DS26/AB/R, and WT/DS48/AB/R, DSR 1998:I, 135, para. 181; India
— Patents (US), WT/DS50/AB/R, DSR, 1998:I, 9, para. 45. back to text
275. (footnote original) See for example the reports of
the Appellate Body on US — Gasoline, WT/DS2/AB/R, DSR 1996:I,
3, at 21 and Korea — Dairy,
WT/DS98/AB/R, DSR 2000:I, 3, para.
81. back to text
276. (footnote original) See paras. 4.24-4.26 above. back to text
277. Decision by the Arbitrators on US — FSC (Article 22.6
— US), paras 5.32-5.34 and 5.41. back to text
278. Decision by the Arbitrators on US — FSC (Article 22.6
— US), paras. 5.47-5.50. back to text
279. Decision by the Arbitrators on US — FSC (Article 22.6
— US), paras. 6.31 and 6.60. back to text
280. Decision by the Arbitrators on US — FSC (Article 22.6
— US), paras. 5.61-5.62. back to text
281. Decision by the Arbitrators on Brazil — Aircraft
(Article 22.6 — Brazil), para. 3.62. xxx indicates confidential
information. back to text
282. (footnote original) Appellate Body Report on Brazil
— Aircraft (Article 21.5 — Canada), para. 82(a). back to text
283. (footnote original) This clarification is made in
relation to the use by the Arbitrators of the delivery data provided by
Brazil rather than on information relating specifically to the issuance
of the NTN-I bonds. Our choice is consistent with the factual finding of
the Original Panel (op. cit., para. 7.71) and the Appellate Body
report in the original proceedings (op. cit. para. 154). back to text
284. (footnote original) See Article 27 of the Vienna
Convention:
“A party may not invoke the provisions of its
internal law as justification for the failure to perform a treaty. […]”
back to text
285. Decision by the Arbitrators on Brazil — Aircraft
(Article 22.6 — Brazil), paras. 3.64-3.65. back to text
286. (footnote original) See Article 22.6 arbitrations in EC
— Hormones (Article 22.6 — EC), para. 12. back to text
287. Decision by the Arbitrators on Brazil — Aircraft
(Article 22.6 — Brazil), para. 3.18. back to text
288. (footnote original) Op. cit., para. 65. back to text
289. Decision by the Arbitrators on Brazil — Aircraft
(Article 22.6 — Brazil), para. 3.57. back to text
290. (footnote original) On the notion of “difference”,
see Report of the Appellate Body on Guatemala — Anti-Dumping
Investigation Regarding Portland Cement from Mexico (“Guatemala —
Cement I”), WT/DS60/AB/R, adopted 25 November 1998, DSR 1998:IX,
paras. 65 and 66. back to text
291. Decision by the Arbitrators on US — FSC (Article 22.6
— US), para. 2.6. back to text
292. (footnote original) See also how this issue is
addressed in the decisions by the arbitrators in EC — Hormones
(Article 22.6 — EC), paras. 8 to 11. back to text
293. (footnote original) See WT/DS/46/16. back to text
294. (footnote original) This approach is similar to those
followed in the arbitrators’ decisions in EC — Bananas (1999)
and EC — Hormones (Article 22.6 — EC). back to text
295. Decision by the Arbitrators on Brazil — Aircraft
(Article 22.6 — Brazil), paras. 2.8-2.9. back to text
296. (footnote original) See preceding paragraph, where we
apply a presumption of good faith to statements and evidence originating
in subjects of international law (on production and appraisal of
evidence, see, inter alia, International Court of Justice (“ICJ”)
judgement of 9 April 1949 Corfu Channel Case, ICJ Reports 1949,
p. 32; ICJ judgement of 11 September 1992 Land, Island and Maritime
Frontier Dispute (El Salvador v. Honduras, Nicaragua intervening),
ICJ Reports 1992, p. 399, para. 63; ICJ judgement on merits Military
and Paramilitary Activities in and Against Nicaragua (Nicaragua v.
United States of America), ICJ Reports 1986, p. 40, para. 60). back to text
297. Decision by the Arbitrators on Brazil — Aircraft
(Article 22.6 — Brazil), paras. 2.10-2.11. back to text
298. (footnote original) Appellate Body on Guatemala
— Cement I, para. 65. back to text
299. (footnote original) Canada mentioned that it could
have applied a counter-subsidy but refrained from doing so for a number
of reasons. back to text
300. Decision by the Arbitrators on Brazil — Aircraft
(Article 22.6 — Brazil), paras. 3.57-3.59. back to text
301. Panel Report on US — Offset Act (Byrd Amendment),
para. 7.106. back to text
302. Panel Report on US — Offset Act (Byrd Amendment),
paras. 7.118-119. back to text
303. Panel Report on US — Offset Act (Byrd Amendment),
para. 7.122. back to text
304. Panel Report on US — Offset Act (Byrd Amendment),
para. 7.123. back to text
305. Panel Report on US — Offset Act (Byrd Amendment),
para. 7.124. back to text
306. Panel Report on US — Offset Act (Byrd Amendment),
para. 7.127. back to text
307. Panel Report on Indonesia — Autos, paras.
14.254-14.255. back to text
308. With respect to the treatment of expired measures in
general, see Chapter on the DSU, Section
VII.B.2. back to text
309. Panel Report on Indonesia — Autos, para. 14.206. back to text
310. Panel Report on Indonesia — Autos, para. 14.198. back to text
311. Panel Report on Indonesia — Autos, para. 14.201. back to text
312. Panel Report on Indonesia — Autos, para. 14.218. back to text
313. Panel Report on Indonesia — Autos, para. 14.208. back to text
314. Panel Report on Indonesia — Autos, paras.
14.210-14.211. back to text
315. Panel Report on Indonesia — Autos, para. 14.254. back to text
316. Panel Report on Indonesia — Autos, para. 14.202. back to text
317. Panel Report on Indonesia — Autos, paras.
14.202-14.203. back to text
318. Panel Report on Indonesia — Autos, para. 15.3. back to text
319. Panel Report on US — FSC (Article 22.6 — US),
paras. 5.32-5.34. back to text
320. WT/MIN(01)/17. back to text
321. (footnote original) Paragraph 13 of the Doha
Ministerial Decision on Implementation reads as follows:
“13. Outstanding Implementation Issues Agrees
that outstanding implementation issues be addressed in accordance with
paragraph 12 of the Ministerial Declaration (WT/MIN(01)/DEC/1).” back to text
322. G/SCM/14. back to text
323. G/SCM/14, para. 3. back to text
324. G/SCM/14. back to text
325. G/SCM/14, para. 1. back to text
326. G/SCM/13. back to text
327. G/SCM/13, para. 1. back to text
328. Procedures for Arbitration under Article 8.5 of the
SCM
Agreement, G/SCM/19, para. 1. back to text
329. WT/MIN(01)/17. back to text
330. G/SCM/45. See also relevant sections of prior Chairman’s
reports in G/SCM/36 and G/SCM/38. back to text
331. WT/GC/M/75, Item 16. back to text
332. Panel Report on US — Lead and Bismuth II, para.
6.56. back to text
333. Panel Report on US — Lead and Bismuth II, para.
6.56. back to text
334. Panel Report on US — Lead and Bismuth II, para.
6.56. back to text
335. Panel Report on US — Countervailing Measures on Certain
EC Products, paras. 7.41-7.43. back to text
336. Appellate Body Report on US — Softwood Lumber IV,
paras. 134-137. back to text
337. Appellate Body Report on US — Softwood Lumber IV,
para. 140. back to text
338. Appellate Body Report on US — Softwood Lumber IV,
para. 141. back to text
339. Appellate Body Report on Brazil — Desiccated Coconut,
p. 15. back to text
340. Appellate Body Report on US — Softwood Lumber IV,
paras. 156-157. back to text
341. Appellate Body Report on US — Softwood Lumber IV,
para. 159. back to text
342. Appellate Body Report on US — Softwood Lumber IV,
para. 165. back to text
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