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ON THIS PAGE:
> US — 1916 Act, paras. 60-61
> US — 1916 Act, paras. 88-91
> US — 1916 Act, para. 99
> US — 1916 Act, para. 100
> US — Section 211 Appropriations Act, para. 259
> US — Countervailing Measures on Certain EC Products, para. 159 and footnote 334
> US — Corrosion—Resistant Steel Sunset Review, para. 89
> US — Corrosion—Resistant Steel Sunset Review, para. 93 and footnote 94
> US — Corrosion-Resistant Steel Sunset Review, para. 98
> US — Upland Cotton, para. 706
> US — Zeroing (EC), para. 214
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M.1.1 US — 1916 Act, paras. 60-61 back to top
(WT/DS136/AB/R, WT/DS162/AB/R)
Prior to the entry into force of the WTO
Agreement, it was
firmly established that Article XXIII:1(a) of the GATT 1947 allowed a
Contracting Party to challenge legislation as such, independently from
the application of that legislation in specific instances. While the
text of Article XXIII does not expressly address the matter, panels
consistently considered that, under Article XXIII, they had the jurisdiction
to deal with claims against legislation as such. In examining such
claims, panels developed the concept that mandatory and discretionary
legislation should be distinguished from each other, reasoning that only
legislation that mandates a violation of GATT obligations can be found
as such to be inconsistent with those obligations. We consider the
application of this distinction to the present cases in section IV(B)
below.
Thus, that a Contracting Party could challenge legislation as such
before a panel was well settled under the GATT 1947. We consider that
the case law articulating and applying this practice forms part of the
GATT acquis which, under Article XVI:1 of the WTO Agreement,
provides guidance to the WTO and, therefore, to panels and the Appellate
Body. Furthermore, in Article 3.1 of the DSU, Members affirm “their
adherence to the principles for the management of disputes heretofore
applied under Articles XXII and XXIII of GATT 1947”. We note that,
since the entry into force of the WTO Agreement, a number of
panels have dealt with dispute settlement claims brought against a
Member on the basis of its legislation as such, independently from the
application of that legislation in specific instances.
M.1.2 US — 1916 Act, paras. 88-91 back to top
(WT/DS136/AB/R, WT/DS162/AB/R)
… the concept of mandatory as distinguished from discretionary
legislation was developed by a number of GATT panels as a threshold
consideration in determining when legislation as such — rather than a specific application of
that legislation — was inconsistent with a Contracting Party’s GATT
1947 obligations. The practice of GATT panels was summed up in United
States — Tobacco as follows:
… panels had consistently ruled
that legislation which mandated action inconsistent with the General
Agreement could be challenged as such, whereas legislation which merely
gave the discretion to the executive authority of a contracting
party to act inconsistently with the General Agreement could not be
challenged as such; only the actual application of such legislation
inconsistent with the General Agreement could be subject to challenge.
(emphasis added)
Thus, the relevant discretion, for purposes of
distinguishing between mandatory and discretionary legislation, is a
discretion vested in the executive branch of government.
The 1916 Act provides for two types of actions to be brought in a
United States federal court: a civil action initiated by private
parties, and a criminal action initiated by the United States Department
of Justice. Turning first to the civil action, we note that there is no
relevant discretion accorded to the executive branch of the United
States’ government with respect to such action. These civil actions
are brought by private parties. A judge faced with such proceedings must
simply apply the 1916 Act. In consequence, so far as the civil
actions that may be brought under the 1916 Act are concerned, the 1916
Act is clearly mandatory legislation as that term has been understood
for purposes of the distinction between mandatory and discretionary
legislation.
The Panel, however, examined that part of the 1916 Act that provides
for criminal prosecutions, and found that the discretion enjoyed by the
United States Department of Justice to initiate or not to initiate
criminal proceedings does not mean that the 1916 Act is a discretionary
law. In light of the case law developing and applying the distinction
between mandatory and discretionary legislation, we believe that the
discretion enjoyed by the United States Department of Justice is not
discretion of such a nature or of such breadth as to transform the 1916
Act into discretionary legislation, as this term has been understood for
purposes of distinguishing between mandatory and discretionary
legislation. We, therefore, agree with the Panel’s finding on this
point.
M.1.3 US — 1916 Act, para. 99 back to top
(WT/DS136/AB/R, WT/DS162/AB/R)
We note that answering the question of the continuing relevance of
the distinction between mandatory and discretionary legislation for
claims brought under the Anti-Dumping Agreement would have no
impact upon the outcome of these appeals, because the 1916 Act is
clearly not discretionary legislation, as that term has been understood
for purposes of distinguishing between mandatory and discretionary
legislation. Therefore, we do not find it necessary to consider, in
these cases, whether Article 18.4, or any other provision of the Anti-Dumping
Agreement, has supplanted or modified the distinction between
mandatory and discretionary legislation. For the same reasons, the Panel did not, in the Japan
Panel Report, need to opine on this issue.
M.1.4 US — 1916 Act, para. 100 back to top
(WT/DS136/AB/R, WT/DS162/AB/R)
… we note that, before the Panel and before us, the United States
invoked the distinction between mandatory and discretionary legislation
to argue that the 1916 Act cannot be mandatory legislation because
United States’ courts have interpreted or may interpret the 1916 Act
in ways that would make it consistent with the WTO obligations of the
United States. As we have seen, in the case law developed under the GATT
1947, the distinction between mandatory and discretionary legislation
turns on whether there is relevant discretion vested in the executive
branch of government. The United States, however, does not rely upon
the discretion of the executive branch of the United States’
government, but on the interpretation of the 1916 Act by the United
States’ courts. In our view, this argument does not relate to the
distinction between mandatory and discretionary legislation.
M.1.5 US — Section 211 Appropriations Act, para. 259 back to top
(WT/DS176/AB/R)
… As the Panel rightly noted, in US —
1916
Act, we
stated that a distinction should be made between legislation that
mandates WTO-inconsistent behaviour, and legislation that gives rise to
executive authority that can be exercised with discretion. We quoted
with approval there the following statement of the panel in US —
Tobacco:
… panels had consistently ruled that legislation which mandated
action inconsistent with the General Agreement could be challenged as
such, whereas legislation which merely gave the discretion to the
executive authority of a contracting party to act inconsistently with
the General Agreement could not be challenged as such; only the actual
application of such legislation inconsistent with the General Agreement
could be subject to challenge.
Thus, where discretionary authority is vested in the executive branch
of a WTO Member, it cannot be assumed that the WTO Member will fail to
implement its obligations under the WTO Agreement in good faith.
Relying on these rulings, and interpreting them correctly, the Panel
concluded that it could not assume that OFAC would exercise its
discretionary executive authority inconsistently with the obligations of
the United States under the WTO Agreement. Here, too, we agree.
M.1.6 US — Countervailing Measures on Certain EC Products, para.
159 and footnote 334 back to top
(WT/DS212/AB/R)
There remains the question whether Section 1677(5)(F) is inconsistent
per se with the WTO obligations of the United States because it
mandates334 a particular method of determining the existence of
a “benefit” that is contrary to the SCM Agreement. We agree
with both the appellant and appellee that “Section 1677(5)(F) does not
… prescribe any specific methodology”, and, consequently, does not
mandate the USDOC to apply the “same person” method. …
M.1.7 US — Corrosion—Resistant Steel Sunset Review,
para. 89
(WT/DS244/AB/R) back to top
We observe, too, that allowing measures to be the subject of dispute
settlement proceedings, whether or not they are of a mandatory
character, is consistent with the comprehensive nature of the right of
Members to resort to dispute settlement to “preserve [their] rights
and obligations … under the covered agreements, and to clarify the
existing provisions of those agreements”. As long as a Member respects
the principles set forth in Articles 3.7 and 3.10 of the DSU, namely, to
exercise their “judgement as to whether action under these procedures
would be fruitful” and to engage in dispute settlement in good faith,
then that Member is entitled to request a panel to examine measures that
the Member considers nullify or impair its benefits. We do not think
that panels are obliged, as a preliminary jurisdictional matter, to
examine whether the challenged measure is mandatory. This issue is
relevant, if at all, only as part of the panel’s assessment of whether
the measure is, as such, inconsistent with particular obligations. It is
to this issue that we now turn.
M.1.8 US — Corrosion—Resistant Steel Sunset Review, para. 93
and footnote 94 back to top
(WT/DS244/AB/R)
In adopting this approach, the Panel was applying, as a preliminary
consideration, the so-called “mandatory/discretionary distinction”.
We explained in US — 1916 Act that this analytical tool existed
prior to the establishment of the WTO, and that a number of GATT panels
had used it as a technique for evaluating claims brought against
legislation as such. As the Panel seemed to acknowledge, we have not, as
yet, been required to pronounce generally upon the continuing relevance
or significance of the mandatory/discretionary distinction.94
Nor do we
consider that this appeal calls for us to undertake a comprehensive
examination of this distinction. We do, nevertheless, wish to observe
that, as with any such analytical tool, the import of the “mandatory/discretionary
distinction” may vary from case to case. For this reason, we also wish
to caution against the application of this distinction in a mechanistic
fashion.
M.1.9 US — Corrosion-Resistant Steel Sunset Review, para. 98
(WT/DS244/AB/R) back to top
The Panel adopted a similar narrow approach in finding that the
Sunset Policy Bulletin is not an “administrative procedure” within
the meaning of Article 18.4 of the Anti-Dumping Agreement. Having
adopted the view that an administrative procedure is “a
pre-established rule for the conduct of an anti-dumping investigation”,
the Panel assumed that a “rule” means a “mandatory rule” and
used its previous finding that the Sunset Policy Bulletin is not a
mandatory legal instrument to come to the conclusion that it therefore
cannot be an administrative procedure. Again, the Panel did not consider
the normative nature of the provisions of the Sunset Policy Bulletin,
nor compare the type of norms that USDOC is required to publish in
formal regulations with the type of norms it may set out in policy
statements. These inquiries would have assisted the Panel in determining
whether the Sunset Policy Bulletin is, in fact, an “administrative
procedure” within the meaning of Article 18.4 of the Anti-Dumping
Agreement.
M.1.10 US — Upland Cotton, para. 706 back to top
(WT/DS267/AB/R)
The Panel explained that, in its view, “threat” of circumvention
under Article 10.1 requires that there be “an unconditional legal
entitlement”. We see no basis for this requirement in Article 10.1.
The Panel also stated that “[i]n order to pose a ‘threat’ within
the meaning of Article 10.1 of the Agreement on Agriculture, [it
did] not believe that it is sufficient that an export credit guarantee
programme might possibly, or theoretically, be used in a manner which
threatens to lead to circumvention of export subsidy commitments”. In
both of these statements, the Panel seems to conflate the phrase “threaten
to lead to … circumvention” with certainty that the circumvention
will happen. We find it difficult, moreover, to reconcile the Panel’s
interpretation with the ordinary meaning of the term “threaten”,
which, as we indicated earlier, connotes that something is “likely”
to happen. We also find it difficult to reconcile these statements of
the Panel with its own view that it did “not believe that the ‘mandatory/discretionary’
distinction is the sole legally determinative one for our examination of
whether or not ‘threat’ of circumvention of export subsidy commitments within the meaning of Article 10.1 of
the Agreement on Agriculture has been proven to the required
standard”.
M.1.11 US — Zeroing (EC), para. 214 back to top
(WT/DS294/AB/R, WT/DS294/AB/R/Corr.1)
We … do not agree with the United States that the Panel erred
simply because it did not apply the mandatory/discretionary distinction
in analysing and finding a violation of Article 2.4.2 of the Anti-Dumping
Agreement. As the Appellate Body has said [in US — Corrosion-Resistant Steel Sunset Review, paragraph 93], “the
import of the ‘mandatory/discretionary distinction’ may vary from
case to case”. …
334. We are not, by implication, precluding the possibility that a
Member could violate its WTO obligations by enacting legislation
granting discretion to its authorities to act in violation of its WTO
obligation. We make no finding in this respect. back to text
94. In our Report in US — 1916 Act, we examined the
challenged legislation and found that the alleged “discretionary”
elements of that legislation were not of a type that, even under the
mandatory/discretionary distinction, would have led to the measure
being classified as “discretionary” and therefore consistent with the Anti-Dumping
Agreement. In other words, we assumed that the distinction
could be applied because it did not, in any event, affect the outcome of
our analysis. We specifically indicated that it was not necessary, in
that appeal, for us to answer “the question of the continuing
relevance of the distinction between mandatory and discretionary
legislation for claims brought under the Anti-Dumping Agreement”
(Appellate Body Report, US — 1916 Act, para. 99). We also
expressly declined to answer this question in footnote 334 to paragraph
159 of our Report in US — Countervailing Measures on Certain EC
Products. Furthermore, the appeal in US — Section 211
Appropriations Act presented a unique set of circumstances. In that
case, in defending the measure challenged by the European Communities,
the United States unsuccessfully argued that discretionary regulations,
issued under a separate law, cured the discriminatory aspects of the
measure at issue. back to text
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