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WTO NEWS: 1998 NEWS ITEMS

G/SCM/19
2 June 1998

Procedures for arbitration under article 8.5 of the agreement on subsidies and countervailing measures

Committee on Subsidies and Countervailing Measures

The Committee on Subsidies and Countervailing Measures has discussed at length the provisions contained in Article 8.5 of the Agreement on Subsidies and Countervailing Measures. In view of the importance of these provisions, the Committee has developed the following procedures 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. The Committee affirms that because arbitration under Article 8.5 determines the status of a notified programme or individual cases of subsidization under Article 8, the results of any such arbitration proceeding are equally applicable to all Members. This is without prejudice to the right of any Member to request arbitration.

The Committee notes that the provisions of Article 8.5 cannot be viewed strictly in isolation, insofar as they form an integrated part of the whole of Part IV of the Agreement. In this regard, the Committee recognizes the importance of the review procedure under Article 8.4 and the seriousness with which Members are expected to treat it. In particular, to the extent that Members may have questions about the consistency of a notified programme with the conditions and criteria provided for in the provisions of Article 8.2, the Committee would expect Members to make full and substantive use of the procedures under Article 8.4 in order to clarify all relevant questions regarding a notified programme. In the same vein, the Committee notes that, pursuant to Article 8.3, a Member which is notifying a programme is required to provide sufficiently precise information to enable other Members to evaluate the consistency of the programme with the relevant conditions and criteria of Article 8.2. The Committee would, therefore, expect notifying Members to cooperate as fully as possible in responding to the questions of other Members in the course of the Article 8.4 review procedure.

In short, the Committee exhorts all Members to participate constructively and in good faith in the notification and review process provided for in paragraphs 3 and 4 of Article 8 so as to resolve any questions and concerns about notified programmes at the earliest opportunity. Where appropriate, it is recognized that such efforts encompass the possibility of concerned Members consulting informally prior to requesting arbitration in order to avoid unnecessary arbitration requests. Finally, without prejudice to Members’ rights as provided for under Article 8.5, the Committee notes that: (i) the interests of clarity, predictability and greater legal certainty would be best served if arbitration requests involving Committee determinations under Article 8.4 (or the failure of the Committee to make a determination) were made as soon as practicable following the conclusion of the procedure set forth in Article 8.4; and (ii) arbitration procedures would be facilitated if requesting Members fully identify and describe those issues which were not raised during the Article 8.4 procedure.

Procedures

The Committee on Subsidies and Countervailing Measures hereby decides, pursuant to the decision of the General Council of 31 January 1995 (WT/GC/M/1), to adopt the following procedures for use in binding arbitration conducted pursuant to Article 8.5 of the Agreement on Subsidies and Countervailing Measures. These procedures shall not add to or detract from the existing rights and obligations of Members under the Agreement on Subsidies and Countervailing Measures or under any other WTO Agreement.

I. REQUESTS FOR ARBITRATION

1. Any Member wishing to request arbitration under Article 8.5 shall address a written request to that effect to the Chairman of the Committee on Subsidies and Countervailing Measures ("the Committee"). The request shall include:

(a) the basis for the request, i.e. a determination by the Committee under Article 8.4, a failure by the Committee to make such a determination, and/or the violation in individual cases of subsidization of the conditions set out in a subsidy programme notified under Article 8.3;

(b) the specific questions to be addressed by the arbitration body, as related to requirements under the provisions of Article 8.2, and a statement of the position taken by the Member requesting the arbitration with respect to each such question;

(c) a brief summary of the information on which the request is based.

2. Any request for arbitration shall be circulated immediately to the Members.

3. Without prejudice to the right of any Member to request arbitration, Members should take into account the need to avoid undue multiplication of arbitration proceedings in respect of the same programme, and should therefore avail themselves of the procedures under paragraph 4 for becoming Parties, or the procedures under paragraph 17 for becoming Third Parties, to an arbitration.

4. In order to become Parties to the arbitration proceeding, other Members shall have a period of 15 days after the date of circulation of the request for arbitration to provide the Chairman of the Committee with a communication which shall conform with the requirements for requests for arbitration set forth in paragraph 1. Any such communication shall be circulated immediately to the Members.

5. During the 30-day period referred to in paragraph 10, Parties also may agree, subject to the provisions of Section VI, to any supplemental or alternative procedures for arbitration under Article 8.5 to those specified herein, provided that such supplemental or alternative procedures are not incompatible with Article 8.5. Any such supplemental or alternative procedures shall be promptly notified to the Members. In the event that there is no agreement by all Parties on such supplemental or alternative procedures, the procedures specified herein shall apply exclusively and in full.

II. REFERRAL TO ARBITRATION

6. As soon as the composition of the arbitration body has been decided, a notice to that effect shall be circulated promptly to the Members.

7. For purposes of Article 8.5, the date of circulation of the notice under paragraph 6 shall be deemed to be the date on which the matter is referred to the arbitration body.

III. PARTIES TO THE ARBITRATION PROCEEDING

8. The Parties to the arbitration proceeding shall be the Member which has notified the subsidy programme in question, the Member which requests the arbitration, and any other Member which has become a Party to the arbitration in accordance with paragraph 4.

IV. COMPOSITION OF THE ARBITRATION BODY

9. The arbitration body shall consist of three arbitrators, unless the Parties agree to a different uneven number.

10. The members of the arbitration body and its president shall be appointed by agreement of the Parties. If the Parties do not reach agreement within 30 days after the date of circulation of the request for arbitration, unless the Parties agree on a longer period, any Party may request the Director-General of the WTO to appoint, in consultation with the Chairman of the Committee, the arbitrator or arbitrators not yet appointed. Such appointment shall be made, after consultation with the Parties, within 10 days of the request to the Director-General.

11. Except as the Parties otherwise agree, the arbitrators shall not be citizens of any of the Parties or Third Parties to the arbitration proceeding.

12. The arbitrators shall be chosen from among persons with relevant legal, economic, financial or technical expertise, including expertise in the Agreement on Subsidies and Countervailing Measures, with respect to the matter referred to the arbitration body.

13. Based upon nominations put forward by delegations and approved by the Committee, the Secretariat shall maintain an indicative list of qualified persons from which arbitrators may be selected. This list shall include an identification of each person's academic and/or professional background and qualifications.

14. Where a Party to an arbitration is a developing country Member, the arbitration body shall, if the developing country Member so requests, include at least one arbitrator from a developing country Member.

V. TERMS OF REFERENCE OF THE ARBITRATION BODY

15. If a request for arbitration pertains to a determination of the Committee under Article 8.4, or a failure of the Committee to make such a determination, the arbitration body shall determine, in light of the specific questions raised under paragraphs 1 and 4 by the Parties to the arbitration, whether the subsidy programme notified under Article 8.3 does not meet the conditions and criteria of Article 8.2.

16. If a request for arbitration pertains to alleged violation in individual cases of the conditions set out in a subsidy programme notified under Article 8.3, the arbitration body shall determine, in light of the specific questions raised under paragraphs 1 and 4 by the Parties to the arbitration, whether or not individual cases of subsidization violate the conditions set out in the subsidy programme notified under Article 8.3. If a Party so requested under paragraph 1 or 4, the arbitration body also shall determine whether the programme in question does not meet the conditions and criteria of Article 8.2.

VI. THIRD PARTIES

17. A Member not wishing to become a Party to the arbitration, but wishing instead to participate in the arbitration on a limited basis, shall have a period of 20 days after the date of circulation of the request for arbitration to inform the Chairman of the Committee in writing that it wishes to become a Third Party to the arbitration proceeding. A Third Party may intervene only with respect to specific questions raised by Parties.

18. A Member that has informed the Committee under paragraph 17 of its interest to participate as a Third Party in the arbitration proceeding shall have the right to make a written submission to the arbitration body and to receive copies of written submissions of the Parties to the arbitration proceeding, shall have an opportunity to be heard at meetings of the arbitration body, and shall otherwise have the right to participate in the arbitration proceeding as specified elsewhere in these procedures. A Third Party may not participate in the selection of arbitrators or in the establishment of the arbitration body's working procedures.

VII. WORKING PROCEDURES

19. The arbitration proceedings shall be conducted on the basis of written submissions and documents. The Parties and Third Parties to the arbitration proceedings shall make written submissions within time periods to be determined by the arbitration body after consultation with the Parties. The arbitration body shall decide whether further written submissions are necessary and shall fix a period of time for such submissions after consulting the Parties.

20. The arbitration body also may hold meetings with the Parties and shall hold one such meeting if any Party so requests at an appropriate stage of the proceedings. Any such meeting normally shall include Third Parties. If in exceptional circumstances the arbitration body holds a meeting with Parties only, the arbitration body also shall, upon request of a Third Party, hold one session for Third Parties to present their views, at which Parties shall have the right to be present. Written texts of the oral statements made by Parties and Third Parties shall be submitted to the arbitration body, and shall consist only of the information and views actually presented orally.

VIII. PROCESS

21. The proceedings of the arbitration body shall be confidential. Written submissions to the arbitration body shall be treated as confidential. The arbitration body and all Parties and Third Parties to a proceeding shall treat as confidential any information submitted to the arbitration body which the submitter has designated as confidential. Nothing in these procedures shall preclude a Party or a Third Party to an arbitration from disclosing statements of its own positions to the public.

22. A Party or Third Party to an arbitration shall make available to all other Parties and Third Parties its written submissions. A Party or a Third Party shall also, upon request of a Member, provide a non-confidential summary of the information contained in its written submissions that could be disclosed to the public. When providing a non-confidential summary, a Party or Third Party will duly take into account the expeditious nature of these proceedings.

23. There shall be no ex parte communications with the arbitration body concerning matters under consideration by the arbitration body.

24. Before presenting its conclusions, the arbitration body shall provide to the Parties and Third Parties a written summary of the information on which it intends to base its conclusions. The arbitration body shall provide an opportunity for the Parties and Third Parties to comment, within a time period to be established by the arbitration body, on the written summary. Each Third Party shall have the right to comment only on those sections of the written summary which pertain to the specific questions that that Third Party has addressed.

25. The arbitration proceedings shall take place at the seat of the World Trade Organization.

26. The WTO Secretariat shall act as Secretariat to the arbitration body, and shall perform all administrative functions necessary to assist the arbitration body, including the receipt and circulation of communications related to arbitration requests, and the maintenance of an organized permanent record for each arbitration proceeding.

IX. INFORMATION BEFORE THE ARBITRATION BODY

27. The arbitration body shall proceed on the basis of the information before it, to include such of the following as exist and are relevant:

(a) the notifications of the subsidy programme in question, and any yearly updates of such notifications;

(b) the findings of the Secretariat, the minutes of the Committee and the determination by the Committee, as recorded during the procedure under Article 8.4;

(c) the documents and arguments submitted to the Secretariat and the Committee in the procedure under Article 8.4;

(d) the record(s) of any previous arbitration(s) related to the same programme;

(e) any information provided to the arbitration body by the Parties and Third Parties under these procedures;

(f) any information or technical advice obtained by the arbitration body under the provisions of paragraphs 28, 29, and 30.

28. A Member should respond promptly and fully to any request by an arbitration body for such information as the arbitration body considers necessary and appropriate.

29. The arbitration body shall have the right to seek information and technical advice from any individual or body which it deems appropriate. However, before an arbitration body seeks such information or technical advice from any individual or body within the jurisdiction of a Member it shall inform the authorities of that Member.

30. The Parties and Third Parties shall have full access to any requests for information or technical advice under this or the preceding two paragraphs, as well as to any information or technical advice obtained thereby. At the time that it requests information or technical advice under this or the preceding two paragraphs, the arbitration body shall obtain the agreement of the individual, body or Member to disclose to the Parties and Third Parties all such information or technical advice. The Parties and Third Parties shall treat as confidential any information or technical advice that an individual, body or Member has designated as confidential. The arbitration body shall provide an opportunity to the Parties and Third Parties to comment upon any information or technical advice obtained under this or the preceding two paragraphs.

X. RULES OF CONDUCT

31. As provided in paragraph IV:1 of the Rules of Conduct for the Understanding on Rules and Procedures Governing the Settlement of Disputes, the Rules of Conduct apply to arbitrators acting pursuant to Article 8.5, and to those members of the Secretariat called upon to assist in arbitration proceedings pursuant to Article 8.5. In addition, the Rules of Conduct shall apply to any individual from whom any information or technical advice is sought under paragraphs 28, 29 and 30 of these procedures.

XI. CONCLUSIONS OF THE ARBITRATION BODY

32. The conclusions of the arbitration body shall consist of a determination, in light of the specific questions raised under paragraphs 1 and 4 by the Parties to the arbitration, of whether the subsidy programme notified under Article 8.3 does not meet the conditions and criteria of Article 8.2, and/or whether or not the individual cases of subsidization violate the conditions set out in the subsidy programme notified under Article 8.3.

33. The arbitration body shall present to the Members its conclusions and the reasons on which those conclusions are based in the form of a single, collegial decision, within 120 days from the date of circulation of the notice under paragraph 6.

34. These conclusions shall be binding in accordance with Article 8.5.

XII. REVIEW OF THESE PROCEDURES

35. Without prejudice to Article 31 of the Agreement on Subsidies and Countervailing Measures, the Committee shall, no later than five years after the adoption of these procedures, review their operation, and may decide at that time on any modifications to them.

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