Dispute body notes US-EU understanding in ‘FSC’ case, adopts Canada patent rulings

Case DS108 US — Tax treatment for “foreign sales corporations”

The DSB approved the US request to extend until 1 November 2000, its 1 October 2000 deadline for implementing the panel and Appellate Body rulings. The US said this is necessary since a new law is in its final stages in Congress. The delay would also allow the EU to examine the new law, the US said.

The EU presented the solution which the two sides agreed on how to proceed (document WT/DS/108/12). The bilateral understanding sorts out what some consider to be an ambiguity in the rules (the Dispute Settlement Understanding) over procedure when the two sides in a dispute disagree over whether a ruling has been implemented properly, and when retaliation might be involved.

For this particular case, it would allow a swift panel ruling (and if relevant, appellate ruling) should the EU seek a decision on whether the new law complies with WTO agreements. It would also allow the EU to ask the Dispute Settlement Body to authorize retaliation afterwards, if the ruling is in its favour.

India welcomed the understanding and said it expects the US and EU to behave similarly in other disputes since they use the dispute system to its “maximum” and are therefore responsible for ensuring the system is predictable and secure.

Japan also welcomed the understanding but said it cannot be applied to disputes involving other members. The understanding confirms that Articles 21 and 22 of the Dispute Settlement Understanding need to be clarified, Japan said.

Case DS170: Canada — Term of patent protection

The Dispute Settlement Body adopted the panel and Appellate Body reports. The case deals with the 17-year term of patent protection (from the date of patent approval) for patents filed before 1 October 1989. (Patents filed after that are given 20 years protection from the date of filing and were not at issue in this case.)

Canada said its interpretation of these reports is different from the rulings, but accepted the ruling and would inform the DSB about implementation at the next meeting on 23 October. The US urged Canada to comply quickly because one-third of the 17-year patents expired before 1 January this year and another 13,639 would expire this year.