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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
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M.1.1 US — 1916 Act, paras. 60-61
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(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
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(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
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(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
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(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)
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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)
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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
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(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”.
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.
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