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WTO ANALYTICAL INDEX: DISPUTE SETTLEMENT UNDERSTANDING Understanding on Rules and Procedures Governing the Settlement of Disputes |
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> Article 1 |
Article 6: Establishment of Panels 1. If the complaining party so requests, a panel shall be established at the latest at the DSB meeting following that at which the request first appears as an item on the DSB's agenda, unless at that meeting the DSB decides by consensus not to establish a panel.(5)
(footnote original) 5 If the complaining party so requests, a meeting of the DSB shall be convened for this purpose within 15 days of the request, provided that at least 10 days' advance notice of the meeting is given.
2. The request for the establishment of a panel shall be made in writing. It shall indicate whether consultations were held, identify the specific measures at issue and provide a brief summary of the legal basis of the complaint sufficient to present the problem clearly. In case the applicant requests the establishment of a panel with other than standard terms of reference, the written request shall include the proposed text of special terms of reference.
(a) Multiple panels involving the same parties and same claims 119. In Australia - Automotive Leather I, pursuant to a request made by the United States, a panel was established on 22 January 1998(154) and 22 June 1998(155) regarding the same matter. In the latter request for the establishment of a panel, the United States asked that its earlier request be withdrawn. At the DSB meeting held on 22 June 1998, the United States representative said that it had terminated the panel that had been established on 22 January 1998. Australia argued that the United States did not have the right to have a second panel established at the DSB meeting on 22 June 1998 and the DSB did not have the right under the DSU to establish such a panel against the wishes of Australia. Australia argued that the Panel was not properly established and, that therefore, the Panel should terminate its work immediately. The Panel examined Australia's arguments and stated: "The establishment of a panel is the task of the DSB. It is by no means clear that, once the DSB has established a panel, as it did in this case at its meeting of 22 June 1998, the panel so established has the authority to rule on the propriety of its own establishment. Nothing in our terms of reference expressly authorizes us to consider whether the DSB acted correctly in establishing this Panel. ... In our view, Australia is asking this Panel to read into the DSU an implicit prohibition on multiple panels between the same parties regarding the same matter that does not exist in the text of the DSU. Australia's arguments in support of its position arise out of policy considerations and address the object and purpose of the DSU. In light of the fundamental importance in the WTO dispute settlement system of the right to have a panel established to examine a matter, in the absence of a consensus not to do so, we do not consider it appropriate in this dispute to read such an implicit prohibition into the DSU. This is particularly true given that the policy concerns expressed by Australia are purely theoretical and do not arise in this case. Specifically, this is not a case where a complainant is actively pursuing two proceedings with respect to the same matter - the United States has made it very clear that it is not pursuing the first dispute. To the contrary, the United States has sought to terminate the first dispute, and it is Australia which has sought to prevent that result. Nor is this a case where a complainant has sought a second panel before a first panel has completed its work with respect to the same matter because it was dissatisfied with developments in the first panel. Although the first panel in this case was established, it was never composed and thus never began its work.
For the foregoing reasons, we deny Australia's request to terminate this Panel, and will continue our work in accordance with our terms of reference."(156) (i) Task of panels to examine requests for establishment 120. In EC - Bananas III, the Appellate Body "recognize[d] that a panel request will usually be approved automatically at the DSB meeting following the meeting at which the request first appears on the DSB's agenda.(157)". Thus, the Appellate Body concluded that "[a]s a panel request is normally not subjected to detailed scrutiny by the DSB, it is incumbent upon a panel to examine the request for the establishment of the panel very carefully to ensure its compliance with both the letter and the spirit of Article 6.2 of the DSU ...".(158) (ii) Request must be sufficiently precise 121. In EC - Bananas III, the Appellate Body held that there were two reasons why a panel request must be "sufficiently precise": "As a panel request is normally not subjected to detailed scrutiny by the DSB, it is incumbent upon a panel to examine the request for the establishment of the panel very carefully to ensure its compliance with both the letter and the spirit of Article 6.2 of the DSU. It is important that a panel request be sufficiently precise for two reasons: first, it often forms the basis for the terms of reference of the panel pursuant to Article 7 of the DSU; and, second, it informs the defending party and the third parties of the legal basis of the complaint."(159) 122. In US - Carbon Steel, the Appellate Body reiterated that the underlying requirements of Article 6.2 are first, to define the scope of a dispute, and second, to "serve the due process objective of notifying the parties and third parties of the nature of a complainant's case."(160) "As we have said previously, compliance with the requirements of Article 6.2 must be demonstrated on the face of the request for the establishment of a panel. Defects in the request for the establishment of a panel cannot be "cured" in the subsequent submissions of the parties during the panel proceedings.(161) Nevertheless, in considering the sufficiency of a panel request, submissions and statements made during the course of the panel proceedings, in particular the first written submission of the complaining party, may be consulted in order to confirm the meaning of the words used in the panel request and as part of the assessment of whether the ability of the respondent to defend itself was prejudiced.(162) Moreover, compliance with the requirements of Article 6.2 must be determined on the merits of each case, having considered the panel request as a whole, and in the light of attendant circumstances.(163)"(164) 123. In EC - Bananas III, the European Communities argued that a complaining party must normally have a legal right or interest in the claim it is pursuing. The Appellate Body stated that no provision of the DSU contains any such explicit requirement. The Appellate Body also held that "a Member has broad discretion in deciding whether to bring a case against another Member under the DSU". While the Appellate Body stressed that Members are "self-regulating" in their decisions whether to bring a case, it also added that "[t]he United States is a producer of bananas, and a potential export interest by the United States cannot be excluded. The internal market of the United States for bananas could be affected by the European Communities banana regime, in particular, by the effects of that regime on world supplies and world prices of bananas": "We agree with the Panel that 'neither Article 3.3 nor 3.7 of the DSU nor any other provision of the DSU contain any explicit requirement that a Member must have a 'legal interest' as a prerequisite for requesting a panel'. We do not accept that the need for a 'legal interest' is implied in the DSU or in any other provision of the WTO Agreement. It is true that under Article 4.11 of the DSU, a Member wishing to join in multiple consultations must have 'a substantial trade interest', and that under Article 10.2 of the DSU, a third party must have 'a substantial interest' in the matter before a panel. But neither of these provisions in the DSU, nor anything else in the WTO Agreement, provides a basis for asserting that parties to the dispute have to meet any similar standard. Yet, we do not believe that this is dispositive of whether, in this case, the United States has 'standing' to bring claims under the GATT 994."(165) 124. The Appellate Body went on to state: "[W]e believe that a Member has broad discretion in deciding whether to bring a case against another Member under the DSU. The language of Article XXIII:1 of the GATT 994 and of Article 3.7 of the DSU suggests, furthermore, that a Member is expected to be largely self-regulating in deciding whether any such action would be 'fruitful'.
We are satisfied that the United States was justified in bringing its claims under the GATT 994 in this case. The United States is a producer of bananas, and a potential export interest by the United States cannot be excluded. The internal market of the United States for bananas could be affected by the EC banana regime, in particular, by the effects of that regime on world supplies and world prices of bananas. We also agree with the Panel's statement that:
'... with the increased interdependence of the global economy, ... Members have a greater stake in enforcing WTO rules than in the past since any deviation from the negotiated balance of rights and obligations is more likely than ever to affect them, directly or indirectly.'
We note, too, that there is no challenge here to the standing of the United States under the GATS, and that the claims under the GATS and the GATT 1 994 relating to the EC import licensing regime are inextricably interwoven in this case.
Taken together, these reasons are sufficient justification for the United States to have brought its claims against the EC banana import regime under the GATT 994. This does not mean, though, that one or more of the factors we have noted in this case would necessarily be dispositive in another case. We therefore uphold the Panel's conclusion that the United States had standing to bring claims under the GATT 1994."(166) 125. In Korea - Dairy, the Panel considered Korea's argument that there is a requirement for an economic interest to bring a matter to the Panel and that the European Communities had failed to meet that requirement: "In EC - Bananas, the Appellate Body stated that the need for a 'legal interest' could not be implied in the DSU or in any other provisions of the WTO Agreement and that Members were expected to be largely self-regulating in deciding whether any DSU procedure would be 'fruitful'. We cannot read in the DSU any requirement for an 'economic interest'. We also note the provisions of Article 3.8 of the DSU, pursuant to which nullification and impairment is presumed once violation is established."(167) (ii) Right to bring claims under Article 17.4 of the Anti-Dumping Agreement. 126. See the excerpts from the reports of the panels and Appellate Body referenced in Section XVII.B.5 of the Chapter on the Anti-Dumping Agreement. 3. Basic requirements for bringing a claim under Article 6.2 127. In Korea - Dairy, the Appellate Body analysed the requirements imposed by Article 6.2: "The request must: (i) be in writing; (ii) indicate whether consultations were held; (iii) identify the specific measures at issue; and (iv) provide a brief summary of the legal basis of the complaint sufficient to present the problem clearly. In its fourth requirement, Article 6.2 demands only a summary - and it may be a brief one - of the legal basis of the complaint; but the summary must, in any event, be one that is 'sufficient to present the problem clearly'. It is not enough, in other words, that 'the legal basis of the complaint' is summarily identified; the identification must 'present the problem clearly'."(168) 128. In US - Carbon Steel, the Appellate Body noted the importance of "two distinct requirements, namely, identification of the specific measures at issue, and the provision of a brief summary of the legal basis of the complaint (or the claims)."(169) The Appellate Body referring to Guatemala - Cement I, concluded that "together, they comprise the 'matter referred to the DSB', which forms the basis for a panel's terms of reference under Article 7.1 of the DSU."(170) 129. As regards the requirement that the request be sufficiently precise, see paragraphs 121-122 above. (a) "indicate whether consultations were held" 130. In Brazil - Desiccated Coconut, the Panel examined the request of the Philippines to make a finding that Brazil's refusal to hold consultations was inconsistent with Articles 4.1, 4.2 and 4.3 of the DSU. The Panel recalled that Article 6.2 of the DSU requires that a request for the establishment of a panel "shall indicate whether consultations were held, identify the specific measures at issue and provide a brief summary of the legal basis of the complaint sufficient to present the problem clearly". The Panel stated: "The Philippines' request for establishment of a panel clearly fulfils the first requirement of Article 6.2, by indicating the Philippines' view that consultations were not held because Brazil refused to consult....However, there is nothing in the request for establishment of a panel that would lead to the conclusion that the requested panel would be asked to make any finding regarding Brazil's failure to consult....We therefore conclude that the Philippines' claim regarding Brazil's failure to consult is not within our terms of reference."(171) 131. In Brazil - Aircraft, the Panel considered that a preliminary objection could properly be sustained if a party established that the required consultations had not been held with respect to a dispute: "A party is not entitled to request establishment of a panel unless consultations have been held. Specifically, Article 4.7 of the DSU provides that a complaining party may request establishment of a panel only if 'consultations fail to settle a dispute'. Similarly, Article 4.4 of the SCM Agreement allows a 'matter' to be referred to the DSB for establishment of a panel only if consultations have failed to lead to a mutually agreed solution. Given that Article 6.1 of the DSU and Article 4.4 of the SCM Agreement essentially require the DSB to establish a panel automatically upon request of a party, a panel cannot rely upon the DSB to ascertain that requisite consultations have been held and to establish a panel only in those cases.(172) Accordingly, we consider that a panel may consider whether consultations have been held with respect to a 'dispute', and that a preliminary objection may properly be sustained if a party can establish that the required consultations had not been held with respect to a dispute. We do not believe, however, that either Article 4.7 of the DSU or Article 4.4 of the SCM Agreement requires a precise identity between the matter with respect to which consultations were held and that with respect to which establishment of a panel was requested."(173) (b) "identify the specific measure at issue" (i) Standard for sufficient "identification" Identification of measure 132. In EC - Bananas III, the "basic EC regulation at issue" was identified in the request for establishment of the Panel. In addition, the request referred in general terms to "subsequent EC legislation, regulations and administrative measures ... which implement, supplement and amend [the EC banana] regime". The Panel found that for purposes of Article 6.2 this reference was sufficient to cover all European Communities legislation dealing with the importation, sale and distribution of bananas because the measures that the complainants were contesting were "adequately identified", even though they were not explicitly listed.(174) The Appellate Body agreed that the panel request "contains sufficient identification of the measures at issue to fulfil the requirements of Article 6.2".(175) 133. In Japan - Film, Japan requested the Panel to exclude eight measures from consideration because they were not set forth in either the request for consultations or the request for the establishment of a panel. Although the measures in question had not been "explicitly described" in the panel request, the Panel considered those measures to be within its terms of reference because they were 'implementing measures' based on a basic framework law, specifically identified in the Panel request, which specified the form and circumscribed the possible content and scope of such implementing measures. The Panel established a "clear relationship" standard: "The question thus becomes whether the ordinary meaning of the terms of Article 6.2, i.e., that "the specific measures at issue" be identified in the panel request, can be met if a "measure" is not explicitly described in the request. To fall within the terms of Article 6.2, it seems clear that a 'measure' not explicitly described in a panel request must have a clear relationship to a 'measure' that is specifically described therein, so that it can be said to be 'included' in the specified 'measure'. In our view, the requirements of Article 6.2 would be met in the case of a 'measure' that is subsidiary or so closely related to a 'measure' specifically identified, that the responding party can reasonably be found to have received adequate notice of the scope of the claims asserted by the complaining party. The two key elements - close relationship and notice - are inter-related: only if a 'measure' is subsidiary or closely related to a specifically identified 'measure' will notice be adequate. For example, we consider that where a basic framework law dealing with a narrow subject matter that provides for implementing 'measures' is specified in a panel request, implementing 'measures' might be considered in appropriate circumstances as effectively included in the panel request as well for purposes of Article 6.2. Such circumstances include the case of a basic framework law that specifies the form and circumscribes the possible content and scope of implementing 'measures'."(176) 134. The Panel on Argentina - Footwear (EC) found that "it is the identification of [the] measures (rather than merely the numbers of the resolutions and the places of their promulgation in the Official Journal) which is primarily relevant for the purposes of Article 6.2 of the DSU": "[W]e consider that the EC's request primarily and unambiguously identifies the provisional and definitive measures (rather than only the cited resolutions and promulgations as such). In our view, it is the identification of these measures (rather than merely the numbers of the resolutions and the places of their promulgation in the Official Journal) which is primarily relevant for purposes of Article 6.2 of the DSU. Therefore, we consider that it is the provisional and definitive measures in their substance rather than the legal acts in their original or modified legal forms that are most relevant for our terms of reference. In our view, this is consistent with the Appellate Body's findings in the Guatemala - Cement case."(177) 135. The Panel on US - Carbon Steel noted the above findings of the Panel on Japan - Film and indicated that the expedited review procedure concerned was not a "measure" that was "subsidiary" or "closely related" to "any of the measures specifically identified": "The United States explains that, upon automatic initiation by the DOC of a sunset review within five years of the date of publication of a CVD order, a review can follow one of three basic paths: (i) revocation of the order; (ii) an expedited sunset review; and (iii) a full sunset review.(178) We do not consider that the European Communities' general discussion of the automatic initiation of sunset reviews by the DOC is sufficient to put the United States - as well as other Members - on notice that the expedited review procedure was also under challenge. We note that the European Communities' request refers to 'certain aspects of the sunset review procedure which led to [the DOC decision not to revoke the CVDs on carbon steel]'. The challenge is thus apparently to those aspects of the sunset review procedure that have some relevance to the carbon steel case, which is not true of the expedited review procedure, because the carbon steel case involved a full, not expedited, review. We do not consider the expedited review procedure to be 'a "measure" that is subsidiary, or so closely related to' any of the measures specifically identified, 'that the responding party can reasonably be found to have received adequate notice of the scope of the claims asserted by the complaining party'. We, therefore, find that the expedited review procedure is not sufficiently related to a measure or measures that are specifically identified in the request for establishment as to properly bring it within our terms of reference."(179)(180) 136. As regards the identification of anti-dumping measures, see paragraphs 1 and 484-493 of the Chapter on the Anti-Dumping Agreement. Identification of products 137. The Appellate Body in EC - Computer Equipment considered whether the measures in dispute and the products affected by such measures were identified with sufficient specificity by the United States in its request for the establishment of a panel. The United States' request for the establishment of panel referred to "all types of LAN equipment" and "PCs with multimedia capability". The Appellate Body considered whether these terms sufficiently defined the products at issue: "... Article 6.2 of the DSU does not explicitly require that the products to which the 'specific measures at issue' apply be identified. However, with respect to certain WTO obligations, in order to identify 'the specific measures at issue', it may also be necessary to identify the products subject to the measures in dispute.
LAN equipment and PCs with multimedia capacity are both generic terms. Whether these terms are sufficiently precise to 'identify the specific measure at issue' under Article 6.2 of the DSU depends, in our view, upon whether they satisfy the purposes of the requirements of that provision. ... The European Communities argues that the lack of precision of the term, LAN equipment, resulted in a violation of its right to due process which is implicit in the DSU. We note, however, that the European Communities does not contest that the term, LAN equipment, is a commercial term which is readily understandable in the trade. The disagreement between the European Communities and the United States concerns its exact definition and its precise product coverage. We also note that the term, LAN equipment, was used in the consultations between the European Communities and the United States prior to the submission of the request for the establishment of a panel and, in particular, in an 'Information Fiche' provided by the European Communities to the United States during informal consultations in Geneva in March 1997. We do not see how the alleged lack of precision of the terms, LAN equipment and PCs with multimedia capability, in the request for the establishment of a panel affected the rights of defence of the European Communities in the course of the panel proceedings. As the ability of the European Communities to defend itself was not prejudiced by a lack of knowing the measures at issue, we do not believe that the fundamental rule of due process was violated by the Panel.(181)"(182) 138. In Korea - Alcoholic Beverages, Korea requested the Panel to issue a preliminary ruling with respect to the specificity of the panel requests of the complainants, in this case, the European Communities and the United States. Korea considered that the phrases used by the European Communities ("certain alcoholic beverages falling within HS heading 2208") and the United States ("other distilled spirits such as whisky, brandy, vodka, gin and ad-mixtures") were not specific enough to satisfy Article 6.2. Korea sought this preliminary ruling in order to limit the products at issue in the dispute. The Panel disagreed with Korea: "The question of whether a panel request satisfies the requirements of Article 6.2 is to be determined on a case by case basis with due regard to the wording of Article 6.2..., the question is whether Korea is put on sufficient notice as to the parameters of the case it is defending... ... Korea argues that each imported product must be specifically identified in order to be within the scope of the panel proceeding. The complainants argue that the appropriate imported product is all distilled beverages. They claim, in fact, that for purposes of Article III, there is only one category in issue. They claim to have identified specific examples of such distilled alcoholic beverages for purposes of illustration, not as limits to the category.
The issue of the appropriate categories of products to compare is important to this case. In our view, however, it is one that requires a weighing of evidence. As such it is not an issue appropriate for a preliminary ruling in this case. This is particularly so in light of the Appellate Body's opinion in Japan - Taxes on Alcoholic Beverages II,(183) that all imported distilled alcoholic beverages were discriminated against. That element of the decision is not controlling on the ultimate resolution of other cases involving other facts; however, it cannot be considered inappropriate for complainants to follow it in framing their request for a panel in a dispute involving distilled alcoholic beverages. While it is possible that in some cases, the complaint could be considered so vague and broad that a respondent would not have adequate notice of the actual nature of the alleged discrimination, it is difficult to argue that such notice was not provided here in light of the identified tariff heading and the Appellate Body decision in the Japan - Taxes on Alcoholic Beverages II. Furthermore, we note that the Appellate Body recently found that a panel request based on a broader grouping of products was sufficiently specific for purposes of Article 6.2.(184) We find therefore, that the complainants' requests for a panel satisfied the requirements of Article 6.2 of the DSU."(185) 139. In US - FSC, the United States argued that the European Communities request for the establishment of a panel failed to identify specific measures at issue because the European Communities did not identify the specific products in question as "the nature of export subsidy obligations imposed by the Agreement on Agriculture differ depending on the products at issue and commitments made by the United States thereunder."(186) The Panel found that the request for the establishment satisfied the requirements of Article 6.2 of the DSU and stated: "In its request for establishment of a panel, the European Communities states that in its view the FSC is an export subsidy and that 'the United States has declared that the [FSC] Scheme is not taken into account for the purpose of compliance with their commitments under the AA ... .' Accordingly, given the inherently all-encompassing nature of this claim, it constitutes a claim that the FSC could give rise to violations of the Agreement on Agriculture with respect to any agricultural product. Consequently, and in the absence of any specification as to the products at issue, this request puts the United States and third parties on notice that the European Communities asserts the existence of violations of the Agreement on Agriculture with respect to all agricultural products."(187) Identification of industry 140. In Canada - Aircraft, Canada asserted before the Panel that the term "civil aircraft industry" was too broad for the purposes of Article 6.2 of the DSU because "[i]t includes firms ranging from machine shops and metal treatment facilities to those involved in advanced instrumentation and communications equipment."(188) The Panel ruled: "We do not consider that the mere fact that the scope of a measure is identified in the request for establishment by reference to a broad product or industry grouping necessarily renders that request for establishment inconsistent with Article 6.2 of the DSU. We believe that the Appellate Body was of a similar opinion in LAN Equipment, where it shared the US concern that:
'if the EC arguments on specificity of product definition are accepted, there will inevitably be long, drawn-out procedural battles at the early stage of the panel process in every proceeding. The parties will contest every product definition, and the defending party in each case will seek to exclude all products that the complaining parties may have identified by grouping, but not spelled out in 'sufficient' detail.'(189)
Although the Appellate Body's remarks were made in the context of a reference to a broad product grouping in the complaining party's request for establishment, we can see no basis for not adopting a similar approach when the request for establishment refers to a broad industry sector, such as the 'civil aircraft industry'. If a complaining party believes that a measure affects a broad industry sector, in our view that complaining party should be entitled to challenge that measure insofar as it affects the totality of the industry concerned, without having to spell out the individual components of that industry, and without running afoul of Article 6.2 of the DSU."(190) (ii) Government legislation per se as a "measure" General rule - Discretionary versus mandatory legislation 141. In US - 1916 Act (EC), the United States argued, inter alia, that, according to established GATT practice, the measure at issue, the so-called 1916 Act, could not be challenged "as such", i.e. independently of its application in a specific case, because it was "discretionary legislation". Specifically, the United States argued that the 1916 Act was non-mandatory because "(i) with respect to both civil and criminal proceedings, United States' courts had in the past interpreted and/or could in the future interpret the 1916 Act in a manner consistent with the WTO obligations of the United States and (ii) the United States Department of Justice had discretion whether to initiate criminal proceedings under the 1916 Act."(191) The Appellate Body recalled GATT practice in respect of this subject-matter: "Prior to the entry into force of the WTO Agreement, it was firmly established that Article XXIII:1(a) of the GATT 947 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.(192) 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."(193) Relevant type of discretion for distinguishing between discretionary and mandatory legislation 142. Referring to the GATT Panel Report on US - Tobacco, the Appellate Body in US - 1916 Act emphasized that the type of discretion relevant for the distinction between discretionary and mandatory legislation was discretion vested with the executive branch. Also, the Appellate Body agreed with the Panel on US - 1916 Act in rejecting the argument that the United States Department of Justice enjoyed discretion within the meaning of established GATT practice: "The practice of GATT panels was summed up in United States - Tobacco(194) 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.(195)' (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(196), 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."(197) Challenging legislation allegedly taken by a customs union 143. The Panel on Turkey - Textiles considered, inter alia, whether measures involving quantitative restrictions on imports from India should be properly regarded as measures imposed by Turkey or rather as measures taken collectively by the customs union between the European Communities and Turkey. In its analysis, the Panel made the following statement: "We also note that the measures are applied by Turkey and that they are mandatory, i.e. they leave no discretion to Turkish authorities but to enforce the measure. It is customary practice of GATT/WTO dispute settlement procedures to address applied measures. In addition, previous adopted GATT panels have always considered that mandatory legislation of a Member, even if not yet in force or not applied(198), can be challenged by another WTO Member."(199) Assessment of whether or not legislation "mandates" action 144. In US - DRAMS, Korea challenged certain certification requirements under the United States' anti-dumping law. The provision challenged by Korea required exporters to certify, upon removal of anti-dumping duties, that they agree to the reinstatement of the anti-dumping duties on the products of their company if, after revocation of the original anti-dumping duties, the United States' authorities find dumping. The Panel rejected the Korean arguments, noting that the certification requirement was not a mandatory requirement for revocation under United States' anti-dumping law in general. The Panel held that other provisions of United States anti-dumping law and regulations of the United States authorities make revocation of an anti-dumping order possible contingent upon a different set of requirements, not including the certification requirement: "We note section 751(b) of the 1930 Tariff Act (as amended) and section 353.25(d) of the DOC's regulations, whereby an anti-dumping order may be revoked on the basis of "changed circumstances". We note that neither of these provisions imposes a certification requirement. In other words, an anti-dumping order may be revoked under these provisions absent fulfilment of the section 353.25(a)(2)(iii) certification requirement. We also note that Korea has not challenged the consistency of these provisions with the WTO Agreement. Thus, because of the existence of legislative avenues for Article 11.2-type reviews that do not impose a certification requirement, and which have not been found inconsistent with the WTO Agreement, we are precluded from finding that the section 353.25(a)(2)(iii) certification requirement in and of itself amounts to a mandatory requirement inconsistent with Article 11.2 of the AD Agreement."(200) 145. In Canada - Aircraft, Brazil argued that a programme of the so-called Export Development Corporation (EDC) mandated the grant of subsidies and challenged the programme as such, rather than merely specific applications of this programme. The Panel noted the fact that Brazil had claimed that the EDC programme had been interpreted so as to grant export subsidies and rejected Brazil's claim: "[W]e find nothing in Brazil's various submissions in support of this argument. The only factual evidence proffered by Brazil in support of its argument is the quote from EDC's mandate that EDC was established 'for the purposes of supporting and developing, directly or indirectly, Canada's export trade and Canadian capacity to engage in that trade and to respond to international business opportunities.' This statement by itself clearly cannot be viewed as a requirement to provide prohibited export subsidies. Nor has Brazil demonstrated otherwise that such support and development necessarily involves subsidization. Although such support and development might conceivably take the form of subsidization, there is nothing to suggest that this will necessarily be the case. In our view, a mandate to support and develop Canada's export trade does not amount to a mandate to grant subsidies, since such support and development could be provided in a broad variety of ways.
We consider that Brazil effectively concedes that the EDC mandate does not require the grant of export subsidies when it states that the EDC mandate has been interpreted to require the EDC to fund projects that give 'Canadian exporters an edge when they bid on overseas projects.' For Brazil, this 'edge' necessarily refers to subsidization. Even if the grant of an 'edge' did imply the grant of subsidies, and even if in practice the EDC programme were applied so as to grant subsidies, this would not mean that, in law, the EDC mandate requires the grant of subsidies. Rather, in such circumstances the grant of subsidies would be the result of the exercise of the administering authority's discretion in interpreting its mandate. We again recall that the panel in US - Tobacco recollected 'that 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 ... to act inconsistently with the General Agreement could not be challenged as such...'" (201), Rejection of the mandatory versus discretionary distinction 146. The Panel on US - Section 301 Trade Act did not accept the distinction between discretionary and mandatory legislation in the context of a claim made pursuant to Article 23 of the DSU. In this case, the United States was defending the measure at issue with reference to the traditional doctrine that only mandatory laws can violate GATT law "as such". In contrast, the European Communities argued that certain discretionary legislation could also violate GATT law "as such". The Panel did not accept the United States' argument: "[W]e believe that resolving the dispute as to which type of legislation, in abstract, is capable of violating WTO obligations is not germane to the resolution of the type of claims before us. In our view the appropriate method in cases such as this is to examine with care the nature of the WTO obligation at issue and to evaluate the Measure in question in the light of such examination. The question is then whether, on the correct interpretation of the specific WTO obligation at issue, only mandatory or also discretionary national laws are prohibited. We do not accept the legal logic that there has to be one fast and hard rule covering all domestic legislation. After all, is it so implausible that the framers of the WTO Agreement, in their wisdom, would have crafted some obligations which would render illegal even discretionary legislation and crafted other obligations prohibiting only mandatory legislation?(202) Whether or not Section 304 violates Article 23 depends, thus, first and foremost on the precise obligations contained in Article 23.
We can express this view in a different way:
(a) Even if we were to operate on the legal assumption that, as argued by the US, only legislation mandating a WTO inconsistency or precluding WTO consistency, can violate WTO provisions; and
(b) confirm our earlier factual finding in paragraph 7.31(c) that the USTR enjoys full discretion to decide on the content of the determination,
we would still disagree with the US that the combination of (a) and (b) necessarily renders Section 304 compatible with Article 23, since Article 23 may prohibit legislation with certain discretionary elements and therefore the very fact of having in the legislation such discretion could, in effect, preclude WTO consistency. In other words, rejecting, as we have, the presumption implicit in the US argument that no WTO provision ever prohibits discretionary legislation does not imply a reversal of the classical test in the pre-existing jurisprudence that only legislation mandating a WTO inconsistency or precluding WTO consistency, could, as such, violate WTO provisions.(203) Indeed that is the very test we shall apply in our analysis. It simply does not follow from this test, as sometimes has been argued, that legislation with discretion could never violate the WTO. If, for example, it is found that the specific obligations in Article 23 prohibit a certain type of legislative discretion, the existence of such discretion in the statutory language of Section 304 would presumptively preclude WTO consistency."(204) Should the mandatory or discretionary question be determined before a substantive finding? 147. In US - Export Restraints, the question arose whether the Panel should first determine whether the measure at issue was mandatory or discretionary, and then make a substantive finding only if it found the measure to be mandatory. The Panel declined to consider the mandatory/discretionary distinction as a threshold question. In the Panel's view, identifying and addressing the relevant WTO obligations first would facilitate its assessment of the manner in which the legislation addresses those obligations, and whether any violation is involved. In its analysis the Panel referred to the test developed by the GATT Panel on US - Tobacco: "We are not aware of any GATT/WTO precedent that would require a panel to consider whether legislation is mandatory or discretionary before examining the substance of the provisions at issue. To the contrary, we note that a number of panels, in disputes concerning the consistency of legislation, have not considered the mandatory/discretionary question in the abstract and as a necessarily threshold issue. Rather, the panels in those cases first resolved any controversy as to the requirements of the GATT/WTO obligations at issue, and only then considered in light of those findings whether the defending party had demonstrated adequately that it had sufficient discretion to conform with those rules. That is, the mandatory/discretionary distinction was applied in a given substantive context.(205)
We consider such an approach to be appropriate in this case. In particular, identifying and addressing the relevant WTO obligations first will facilitate our assessment of the manner in which the legislation addresses those obligations, and whether any violation is involved. That is, it is after we have considered both the substance of the claims in respect of WTO provisions and the relevant provisions of the legislation at issue that we will be in the best position to determine whether the legislation requires a treatment of export restraints that violates those provisions.
Finally, we note that, whether or not a panel sees the mandatory/discretionary question as a necessarily threshold issue or, as suggested by Canada, as an issue that may arise as part of a panel's examination of the legal claims, it remains true - at least under the classical test which we shall be employing - that legislation as such cannot be found to be inconsistent with a Member's WTO obligations unless it is mandatory in nature. Thus, in any event, the order in which the two issues - the question of the type of legislation and the substance of the case - are addressed would not alter any eventual finding of consistency or lack thereof."(206) 148. In US - Section 129(c)(1) URAA, the Panel did not follow the approach of the Panel on US - Export Restraints(207) and preferred to analyse first whether the US legislation at issue was mandatory, before analysing whether the behaviour mandated would be inconsistent with the relevant WTO provisions.(208) The relevance of the distinction between mandatory and discretionary legislation in the context of an affirmative defence 149. In Brazil - Aircraft (Article 21.5 - Canada II), the Panel was confronted with the preliminary issue of whether the distinction between mandatory and discretionary legislation was applicable in the context of an affirmative defence. In this particular case, the question presented was whether Brazil was required to apply the financing programme in question, PROEX III, which confers benefits to buyers of Brazilian regional aircraft, in a manner that gives rise to a prohibited export subsidy.(209) Brazil presented an affirmative defence. The Panel actually considered that the distinction between mandatory and discretionary legislation was applicable in this context, although being faced not with a question of conformity with a WTO obligation, but of conformity with conditions attached to a WTO exception. In its view, this fact alone does not render the GATT/WTO distinction between mandatory and discretionary legislation inapplicable or inappropriate. The Panel recalled that: "The rationale underpinning the traditional GATT/WTO distinction between mandatory and discretionary legislation is that, when the executive branch of a Member is not required to act inconsistently with requirements of WTO law, it should be entitled to a presumption of good faith compliance with those requirements. We consider that that rationale is no less valid in the context of WTO exceptions than it is in the context of WTO obligations. Indeed, were we to take the opposite view, we would, in effect, create a situation where Members would be entitled to a presumption of good faith compliance with their WTO obligations, but not with the conditions attached to WTO exceptions. Such a situation would, in our view, be unwarranted and contrary to logic.
(...) the Member invoking an exception as an affirmative defence has the burden of establishing it. In our view, the allocation of the burden of proof is a procedural issue(210) which is distinct from the substantive standard to be applied in assessing the conformity of legislation with a particular provision of the WTO Agreement. Simply put, the allocation of the burden of proof determines who must show something. On the other hand, the GATT/WTO distinction between mandatory and discretionary legislation determines what somebody must show. We believe the standard to be applied in judging the conformity of a piece of legislation with WTO requirements should be the same irrespective of who has the burden of adducing argument and evidence sufficient to establish a prima facie case of conformity."(211) 150. In that respect, see also paragraphs 274-275 below. (iii) Scope of the term "measure" Governmental action Legal instruments as measures 151. In Japan - Agricultural Products II, the Appellate Body interpreted the term "measure" as within the meaning of Annex B of the SPS Agreement. According to its terms, Annex B applies to all "measures" and lists "laws, decrees and ordinances" as three examples of such measures. The Appellate Body held that this term also included "other instruments which are applicable generally and are similar in character to the instruments explicitly referred to". In the case before it, the Appellate Body found that the Japanese "varietal testing requirement" was a "measure" within the meaning of Annex B of the SPS Agreement. See Chapter on SPS Agreement, paragraph 194. Independent operational status test 152. In US - Export Restraints, Canada had argued that each of the elements that it cited in its request for establishment of a panel (a US Statute, a Statement of Administrative Action, a Preamble, and a US practice) individually constituted a measure that was susceptible to dispute settlement, and that, "taken together" as well, they constituted a measure.(212) The Panel enunciated the independent operational status test: "In considering whether any or all of the measures individually can give rise to a violation of WTO obligations, the central question that must be answered is whether each measure operates in some concrete way in its own right. By this we mean that each measure would have to constitute an instrument with a functional life of its own, i.e., that it would have to do something concrete, independently of any other instruments, for it to be able to give rise independently to a violation of WTO obligations. To determine whether each measure is operational on its own, we consider the status of each under US law."(213) General practice as a measure 153. In US - Export Restraints, Canada claimed that the United States "practice" of treating export restraints as meeting the "financial contribution" requirement of Article 1.1(a)(1)(iv) of the SCM Agreement was a measure and could be challenged as such. Canada defined the United States' "practice" as "an institutional commitment to follow declared interpretations or methodologies that is reflected in cumulative determinations" and claimed that this "practice" has an "operational existence in and of itself".(214) The Panel considered whether the alleged United States practice required the United States' authorities to treat export restraints in a certain way and therefore had "independent operational status". The Panel, which concluded that there was no measure in the form of a United States practice, indicated: "[W]hile Canada may be right that under US law, "practice must normally be followed, and those affected by US [CVD] law . . . therefore have reason to expect that it will be"(215), past practice can be departed from as long as a reasoned explanation, which prevents such practice from achieving independent operational status in the sense of doing something or requiring some particular action. The argument that expectations are created on the part of foreign governments, exporters, consumers, and petitioners as a result of any particular practice that the DOC 'normally' follows would not be sufficient to accord such a practice an independent operational existence. Nor do we see how the DOC's references in its determinations to its practice gives 'legal effect to that "practice" as determinative of the interpretations and methodologies it applies'(216). US 'practice' therefore does not appear to have independent operational status such that it could independently give rise to a WTO violation as alleged by Canada."(217) 154. In US - Steel Plate, the United States, in reference to the Panel Report in US - Export Restraints (see paragraph 153 above), argued that United States "practice" (in this case its practice as regards total facts available)(218) could not be the subject of a claim because it did not have "independent operational status" and therefore it was not a "measure".(219) India, on the contrary, claimed that a "practice" becomes a "measure" through repeated similar responses to the same situation.(220) The Panel concluded: "That a particular response to a particular set of circumstances has been repeated, and may be predicted to be repeated in the future, does not, in our view transform it into a measure. Such a conclusion would leave the question of what is a measure vague and subject to dispute itself, which we consider an unacceptable outcome. Moreover, we do not consider that merely by repetition, a Member becomes obligated to follow its past practice...(221)
[T]he challenged practice in this case is, in our view, no different from that considered in the US - Export Restraints case. It can be departed from so long as a reasoned explanation is given. It therefore lacks independent operational status, as it cannot require USDOC to do something, or refrain from doing something."(222) Application of tariffs as a measure 155. The Appellate Body in EC - Computer Equipment opined that not only measures of general application, but also the application of tariffs by customs authorities were "measures" within the meaning of Article 6.2. The Appellate Body agreed that the request for establishment of the Panel did identify the measures properly: "We consider that 'measures' within the meaning of Article 6.2 of the DSU are not only measures of general application, i.e., normative rules, but also can be the application of tariffs by customs authorities. Since the request for the establishment of a panel explicitly refers to the application of tariffs on LAN equipment and PCs with multimedia capability by customs authorities in the European Communities, we agree with the Panel that the measures in dispute were properly identified in accordance with the requirements of Article 6.2 of the DSU."(223) Attribution of private action as a "measure" 156. The Panel on Japan - Film characterized the problem of classifying private action as a governmental "measure" in the following terms: "As the WTO Agreement is an international agreement, in respect of which only national governments and separate customs territories are directly subject to obligations, it follows by implication that the term measure in Article XXIII:1(b) and Article 26.1 of the DSU, as elsewhere in the WTO Agreement, refers only to policies or actions of governments, not those of private parties. But while this "truth" may not be open to question, there have been a number of trade disputes in relation to which panels have been faced with making sometimes difficult judgments as to the extent to which what appear on their face to be private actions may nonetheless be attributable to a government because of some governmental connection to or endorsement of those actions."(224) 157. Within the context referred to in paragraph 156 above, the Panel on Japan - Film had to determine whether so-called "administrative guidance" in Japan amounted to a governmental "measure". The Panel began by considering the ordinary meaning of the term "measure": "The ordinary meaning of measure as it is used in Article XXIII:1(b) certainly encompasses a law or regulation enacted by a government. But in our view, it is broader than that and includes other governmental actions short of legally enforceable enactments.(225) At the same time, it is also true that not every utterance by a government official or study prepared by a non-governmental body at the request of the government or with some degree of government support can be viewed as a measure of a Member government.
In Japan, it is accepted that the government sometimes acts through what is referred to as administrative guidance. In such a case, the company receiving guidance from the Government of Japan may not be legally bound to act in accordance with it, but compliance may be expected in light of the power of the government and a system of government incentives and disincentives arising from the wide array of government activities and involvement in the Japanese economy. As noted by the parties, administrative guidance in Japan takes various forms. Japan, for example, refers to what it calls 'regulatory administrative guidance', which it concedes effectively substitutes for formal government action.(226) It also refers to promotional administrative guidance, where companies are urged to do things that are in their interest to do in any event. In Japan's view, this sort of guidance should not be assimilated to a measure in the sense of Article XXIII:1(b). For our purposes, these categories inform, but do not determine the issue before us. Thus, it is not useful for us to try to place specific instances of administrative guidance into one general category or another. It will be necessary for us, as it has been for GATT panels in the past, to examine each alleged "measure" to see whether it has the particular attributes required of a measure for Article XXIII:1(b) purposes."(227) 158. The Panel on Japan - Film subsequently reviewed GATT practice with respect to this subject-matter and defined "sufficient government involvement" as the decisive criterion for whether a private action may be deemed to be a governmental "measure": "[P]ast GATT cases demonstrate that the fact that an action is taken by private parties does not rule out the possibility that it may be deemed to be governmental if there is sufficient government involvement with it. It is difficult to establish bright-line rules in this regard, however. Thus, that possibility will need to be examined on a case-by-case basis."(228) 159. In Argentina - Hides and Leather, the European Communities claimed that an Argentine resolution, which authorized the presence of representatives of the Argentine domestic leather tanning industry during customs clearance of exports of hides and leather, operated as a de facto export restriction in violation of Article XI:1 of GATT 1994. The European Communities admitted that the Argentine measure did not expressly limit exports; however, the European Communities claimed that the presence of the industry associations during the export clearance process allowed access to exporters' confidential business information, which was subsequently used - by virtue of the existence of a tanners cartel in the Argentine market - to exercise pressure on hides and leather producers not to export their products. The Panel ultimately rejected the European Communities' arguments on the basis of a lack of evidence: "We agree with the view expressed by the panel in Japan - Film. However, we do not think that it follows either from that panel's statement or from the text or context of Article XI:1 that Members are under an obligation to exclude any possibility that governmental measures may enable private parties, directly or indirectly, to restrict trade, where those measures themselves are not trade-restrictive(229). ... The European Communities acknowledges that the representatives of the tanning industry do not have the de jure ability to halt bovine hide exports. However, according to the European Communities, having such representatives present during the export clearance process in itself restricts exports in the context of the facts of the case. The European Communities has advanced several reasons why this might be so. The European Communities refers to the GATT dispute of Japan - Semiconductors for the proposition that there can be export restrictions without overt actions by the government to physically stop exports. According to the European Communities, in that case it was sufficient for the government to set up a system where peer pressure was used to discourage exports. ... ... [I]t is possible that a government could implement a measure which operated to restrict exports because of its interaction with a private cartel. Other points would need to be argued and proved (such as whether there was or needed to be knowledge of the cartel practices on the part of the government) or, to put it as mentioned above, it would need to be established that the actions are properly attributed to the Argentinean government under the rules of state responsibility".(230) Anti-dumping measures 160. As regards the scope of a "measure" under the Anti-Dumping Agreement, see paragraphs 1 and 490-493 of the Chapter on the Anti-Dumping Agreement. (iv) Distinction to be drawn between laws and the specific application of laws when assessing measures 161. The Appellate Body in US - Carbon Steel indicated that a complaining Member is entitled to use various types of evidence to display how a measure violates a WTO provision. Such evidence is to be distinguished from a law itself: "We note, first, that, in dispute settlement proceedings, Members may challenge the consistency with the covered agreements of another Member's laws, as such, as distinguished from any specific application of those laws...
Thus, a responding Member's law will be treated as WTO-consistent until proven otherwise. The party asserting that another party's municipal law, as such, is inconsistent with relevant treaty obligations bears the burden of introducing evidence as to the scope and meaning of such law to substantiate that assertion.(231) Such evidence will typically be produced in the form of the text of the relevant legislation or legal instruments, which may be supported, as appropriate, by evidence of the consistent application of such laws, the pronouncements of domestic courts on the meaning of such laws, the opinions of legal experts and the writings of recognized scholars. The nature and extent of the evidence required to satisfy the burden of proof will vary from case to case."(232) (c) "a brief summary of the legal basis of the complaint ... sufficient to present the problem clearly" (i) Identification of the claims 162. In EC - Bananas III, the Panel indicated that references to a WTO agreement without mentioning any provisions or to unidentified "other" provisions would be insufficient to meet the requirements of Article 6.2: "The panel request alleges an inconsistency with the requirements of the Agreement on Agriculture, without specifying any provision thereof. It also states that "the EC's measures are inconsistent with the following Agreements and provisions among others", suggesting that there may be inconsistencies with unspecified agreements and inconsistencies with unspecified provisions of the specified agreements. In these two situations, it is not possible at the panel request stage, even in the broadest generic terms, to describe what legal "problem" is asserted. While a reference to a specific provision of a specific agreement may not be essential if the problem or legal claim is otherwise clearly described, in the absence of some description of the problem, a mere reference to an entire agreement or simply to "other" unspecified agreements or provisions is inadequate under the terms of Article 6.2. Accordingly, we find that references to a WTO agreement without mentioning any provisions or to unidentified "other" provisions are too vague to meet the standards of Article 6.2 of the DSU."(233) 163. The Panel on EC - Bananas III also held that "[a] request [for the establishment of a panel] is sufficiently specific to comply with the minimum standards established by the terms of Article 6.2 of the DSU", if it lists the provisions of the specific agreements which the complaining party alleges to have been violated. The Appellate Body agreed: "We accept the Panel's view that it was sufficient for the Complaining Parties to list the provisions of the specific agreements alleged to have been violated without setting out detailed arguments as to which specific aspects of the measures at issue relate to which specific provisions of those agreements. In our view, there is a significant difference between the claims identified in the request for the establishment of a panel, which establish the panel's terms of reference under Article 7 of the DSU, and the arguments supporting those claims, which are set out and progressively clarified in the first written submissions, the rebuttal submissions, the rebuttal submissions and the first and second panel meetings with the parties."(234) 164. In India - Patents (US), India argued that the Panel exceeded its authority under the DSU by ruling on the United States' subsidiary claim under Article 63 of the TRIPS Agreement after having first accepted the principal claim by the United States of a violation of Article 70.8 of the TRIPS Agreement. The request for the establishment of the panel by the United States reads in pertinent part: "India's legal regime appears to be inconsistent with the obligations of the TRIPS Agreement, including but not necessarily limited to Articles 27, 65 and 70." The Appellate Body accepted India's claim that the phrase "including but not necessarily limited to" could not "identify the specific measures at issue", as required by Article 6.2 of the DSU: "[A] claim must be included in the request for establishment of a panel in order to come within a panel's terms of reference in a given case.
With respect to Article 63, the convenient phrase, 'including but not necessarily limited to', is simply not adequate to 'identify the specific measures at issue and provide a brief summary of the legal basis of the complaint sufficient to present the problem clearly' as required by Article 6.2 of the DSU. If this phrase incorporates Article 63, what Article of the TRIPS Agreement does it not incorporate? Therefore, this phrase is not sufficient to bring a claim relating to Article 63 within the terms of reference of the Panel."(235) 165. In India - Patents (US), the Appellate Body stressed the importance of the parties' duty to be "fully forthcoming" and to clearly state their claims: "All parties engaged in dispute settlement under the DSU must be fully forthcoming from the very beginning both as to the claims involved in a dispute and as to the facts relating to those claims. Claims must be stated clearly.(236)" 166. In Korea - Dairy, Korea argued before the Appellate Body in its appeal that the mere listing of four articles of the Agreement on Safeguards alleged to have been breached does not provide a brief summary of the legal basis of the complaint sufficient to present the problem clearly. The Appellate Body confirmed its finding in EC - Bananas III, but augmented it by establishing the standard of whether "the ability of the respondent to defend itself was prejudiced, given the actual course of the panel proceedings, by the fact that the panel request simply listed the provisions claimed to have been violated". In its analysis, the Appellate Body identified the necessary requirements for providing a "summary" under Article 6.2: "Article 6.2 demands only a summary - and it may be a brief one - of the legal basis of the complaint; but the summary must, in any event, be one that is 'sufficient to present the problem clearly'. It is not enough, in other words, that 'the legal basis of the complaint' is summarily identified; the identification must 'present the problem clearly'."(237) 167. The Appellate Body in Korea - Dairy confirmed its finding in EC - Bananas III, but cautioned that this finding represented only the minimum requirements under Article 6.2 and that the "mere listing of the articles of an agreement alleged to have been breached" may not necessarily be sufficient for the purposes of Article 6.2. The Appellate Body opined that the latter case may arise "where the articles listed establish not one single, distinct obligation, but rather multiple obligations. In such a situation, the listing of articles of an agreement, in and of itself, may fall short of the standard of Article 6.2". Ultimately, the Appellate Body set forth the standard of "ability of the respondent to defend itself": "[W]e did not purport in European Communities - Bananas to establish the mere listing of the articles of an agreement alleged to have been breached as a standard of precision, observance of which would always constitute sufficient compliance with the requirements of Article 6.2, in each and every case, without regard to the particular circumstances of such cases. If we were in fact attempting to construct such a rule in that case, there would have been little point to our enjoining panels to examine a request for a panel 'very carefully to ensure its compliance with both the letter and the spirit of Article 6.2 of the DSU'. Close scrutiny of what we in fact said in European Communities - Bananas shows that we, firstly, restated the reasons why precision is necessary in a request for a panel; secondly, we stressed that claims, not detailed arguments, are what need to be set out with sufficient clarity; and thirdly, we agreed with the conclusion of the panel that, in that case, the listing of the articles of the agreements claimed to have been violated satisfied the minimum requirements of Article 6.2 of the DSU. In view of all the circumstances surrounding that case, we concurred with the panel that the European Communities had not been misled as to what claims were in fact being asserted against it as respondent.
Identification of the treaty provisions claimed to have been violated by the respondent is always necessary both for purposes of defining the terms of reference of a panel and for informing the respondent and the third parties of the claims made by the complainant; such identification is a minimum prerequisite if the legal basis of the complaint is to be presented at all.(238) But it may not always be enough. There may be situations where the simple listing of the articles of the agreement or agreements involved may, in the light of attendant circumstances, suffice to meet the standard of clarity in the statement of the legal basis of the complaint. However, there may also be situations in which the circumstances are such that the mere listing of treaty articles would not satisfy the standard of Article 6.2. This may be the case, for instance, where the articles listed establish not one single, distinct obligation, but rather multiple obligations. In such a situation, the listing of Articles of an agreement, in and of itself, may fall short of the standard of Article 6.2. ... ... we consider that whether the mere listing of the articles claimed to have been violated meets the standard of Article 6.2 must be examined on a case-by-case basis. In resolving that question, we take into account whether the ability of the respondent to defend itself was prejudiced, given the actual course of the panel proceedings, by the fact that the panel request simply listed the provisions claimed to have been violated."(239) 168. In EC - Bed Linen, the Panel analysed the above conclusions of the Appellate Body in Korea - Dairy (see paragraphs 166-167 above) and considered that they seemed to set "a two-stage test to determine the sufficiency of a panel request under Article 6.2 of the DSU: first, examination of the text of the request for establishment itself, in light of the nature of the legal provisions in question; secondly, an assessment of whether the respondent has been prejudiced by the formulation of claims in the request for establishment, given the actual course of the panel proceedings."(240) 169. In Thailand - H-Beams, the Appellate Body explained further how claims of prejudice should be assessed (commenting particularly on the timing of challenging the sufficiency of a Panel request): "Thailand argues that it was prejudiced by the lack of clarity of Poland's panel request. The fundamental issue in assessing claims of prejudice is whether a defending party was made aware of the claims presented by the complaining party, sufficient to allow it to defend itself. In assessing Thailand's claims of prejudice, we consider it relevant that, although Thailand asked the Panel for a preliminary ruling on the sufficiency of Poland's panel request with respect to Articles 5 and 6 of the Anti-Dumping Agreement at the time of filing of its first written submission, it did not do so at that time with respect to Poland's claims under Articles 2 and 3 of that Agreement. We must, therefore, conclude that Thailand did not feel at that time that it required additional clarity with respect to these claims, particularly as we note that Poland had further clarified its claims in its first written submission. This is a strong indication to us that Thailand did not suffer any prejudice on account of any lack of clarity in the panel request."(241) 170. In Chile - Price Band System, the Appellate Body ruled that "[t]he requirements of due process and orderly procedure dictate that claims must be made explicitly in WTO dispute settlement": "Argentina appears to suggest that a claim may be made implicitly, and need not be made explicitly. We do not agree. The requirements of due process and orderly procedure dictate that claims must be made explicitly in WTO dispute settlement. Only in this way will the panel, other parties, and third parties understand that a specific claim has been made, be aware of its dimensions, and have an adequate opportunity to address and respond to it. WTO Members must not be left to wonder what specific claims have been made against them in dispute settlement..."(242) (ii) Distinction between claims and arguments 171. After agreeing with the Panel that the request for the establishment of the panel contained sufficient identification of the specific measures at issue to fulfil the requirements of Article 6.2 of the DSU, the Appellate Body in EC - Bananas III set out the difference between claims and arguments, and furthermore rejected the notion of "curing" a faulty panel request where claims had not been included in the panel request: "In our view, there is a significant difference between the claims identified in the request for the establishment of a panel, which establish the panel's terms of reference under Article 7 of the DSU, and the arguments supporting those claims, which are set out and progressively clarified in the first written submissions, the rebuttal submissions and the first and second panel meetings with the parties.
Article 6.2 of the DSU requires that the claims, but not the arguments, must all be specified sufficiently in the request for the establishment of a panel in order to allow the defending party and any third parties to know the legal basis of the complaint. If a claim is not specified in the request for the establishment of a panel, then a faulty request cannot be subsequently 'cured' by a complaining party's argumentation in its first written submission to the panel or in any other submission or statement made later in the panel proceeding."(243) 172. In EC - Hormones, the European Communities argued on appeal that since the Panel was not entitled to make findings beyond what has been requested by the parties, it had erred by basing the main part of its reasoning on Article 5.5 of the SPS Agreement on a claim that the complainants had not made. The Appellate Body rejected the European Communities' argument and emphasised the distinction between claims and arguments: "Considering that in its request for the establishment of a panel in the proceeding initiated by the United States, as well as in the proceeding started by Canada, both complainants have included a claim that the European Communities ban is inconsistent with Article 5 of the SPS Agreement, we believe that the objection of the European Communities overlooks the distinction between legal claims made by the complainant and arguments used by the complainant to sustain its legal claims.... Panels are inhibited from addressing legal claims falling outside their terms of reference. However, nothing in the DSU limits the faculty of a panel freely to use arguments submitted by any of the parties - or to develop its own legal reasoning - to support its own findings and conclusions on the matter under its consideration. A panel might well be unable to carry out an objective assessment of the matter, as mandated by Article 11 of the DSU, if in its reasoning it had to restrict itself solely to arguments presented by the parties to the dispute. Given that in this particular case both complainants claimed that the European Communities measures were inconsistent with Article 5.5 of the SPS Agreement, we conclude that the Panel did not make any legal finding beyond those requested by the parties."(244) 173. In India - Patents (US), on the issue of claims and arguments, the Appellate Body stated: "[T]here is a significant difference between the claims identified in the request for the establishment of a panel, which establish the panel's terms of reference under Article 7 of the DSU, and the arguments supporting those claims, which are set out and progressively clarified in the first written submissions, the rebuttal submissions, and the first and second panel meetings with the parties as a case proceeds."(245) 174. In Korea - Dairy, Korea argued in its appeal that the Panel had erred by failing to consider Korea's argument that parties to a dispute settlement procedure cannot introduce new claims at, or subsequent to, the rebuttal stage. The Appellate Body stated: "[W]e agree with Korea that a party to a dispute settlement proceeding may not introduce a new claim during or after the rebuttal stage. Indeed, any claim that is not asserted in the request for the establishment of a panel may not be submitted at any time after submission and acceptance of that request.(246) By 'claim' we mean a claim that the respondent party has violated, or nullified or impaired the benefits arising from, an identified provision of a particular agreement. Such a claim of violation must, as we have already noted, be distinguished from the arguments adduced by a complaining party to demonstrate that the responding party's measure does indeed infringe upon the identified treaty provision.(247) Arguments supporting a claim are set out and progressively clarified in the first written submissions, the rebuttal submissions and the first and second panel meetings with the parties.(248) In European Communities - Hormones, we emphasized the substantial latitude enjoyed by panels in treating the arguments presented by either of the parties and said:
'... Panels are inhibited from addressing legal claims falling outside their terms of reference. However, nothing in the DSU limits the faculty of a panel freely to use arguments submitted by any of the parties - or to develop its own legal reasoning - to support its own findings and conclusions on the matter under its consideration.(249)'
Both 'claims' and 'arguments' are distinct from the 'evidence' which the complainant or respondent presents to support its assertions of fact and arguments."(250) 175. In Canada - Autos, the Panel considered whether Japan's claim that it could "[reserve] its right to elaborate during the course of the panel deliberations" had prejudiced Canada's ability to defend itself. The Panel indicated that Canada had suffered no prejudice: "First, the Panel does not consider that this is a situation where, as argued by Canada, the complaining party is permitted 'to eke out its claims incrementally during the various stages of the case'. In making this argument, Canada refers to the Appellate Body decision in European Communities - Regime for the Importation, Sale and Distribution of Bananas (EC - Bananas III). However, the situation here is unlike that in EC - Bananas III, where the Appellate Body stated that "Article 6.2 of the DSU requires that the claims, but not the arguments, must all be specified sufficiently in the request for the establishment of a panel in order to allow the defending party and any third parties to know the legal basis of the complaint" (WT/DS27/AB/R, para. 143). In the case before us there is no Article 6.2 issue of specificity of the measures identified in the panel request. Japan in this dispute has not attempted to reserve a right to present a new claim at a later stage of the proceedings; rather, it appears that Japan has simply indicated that it may wish to further elaborate its arguments as to claims already set out in the panel request and in its initial arguments. As such, the Panel does not consider, at this stage, that Canada is likely to be prejudiced in its ability to defend itself in this action.(251)
Second, to the extent any issue of procedural fairness should arise, for example, as to the right of rebuttal by Canada should Japan wait until a later stage of these proceedings to develop its arguments as to its GATT Article III:4 and TRIMS Article 2.1 claims with respect to the "manufacturing requirement" (production-to-sales ratio requirement), the Panel will ensure such procedural fairness by providing Canada with adequate opportunity to respond to any such further elaboration by Japan of its arguments under these claims.
Third, in addition to ensuring procedural fairness, it is of course necessary to set a cut-off date beyond which no new argumentation as to the claims in issue may be accepted, except upon a showing of good cause. In the instant case, the Panel considers that no new argumentation should be introduced beyond the second panel meeting with the parties, except in response to any questions posed by the Panel or otherwise upon a showing of good cause."(252) 176. The Panel on EC - Bed Linen (Article 21.5 - India) noted the distinction drawn by the Appellate Body between claims and arguments and indicated that there existed "no obligation on a party to limit its arguments to only those treaty provisions about which claims have been identified in the request for establishment."(253) (iii) Importance of timing of specificity objection 177. In EC - Bananas III, the Appellate Body considered the panel request specificity issue was a matter which could be dealt with early on in a case: "[T]his kind of issue could be decided early in panel proceedings, without causing prejudice or unfairness to any party or third party, if panels had detailed, standard working procedures that allowed, inter alia, for preliminary rulings."(254) (iv) Distinction between sufficiency of a panel request and establishing a prima facie case of violation 178. The Panel on Thailand - H-Beams stressed the importance of this distinction when dealing with Thailand's arguments concerning the alleged insufficiency of a panel request: "Thailand argues that 'a panel may only accept the mere listing of a particular article as sufficient if absolutely no prejudice was possible during the course of the proceedings.' According to Thailand, 'this would be the case only where (1) a panel found that the complainant had failed to present a prima facie case and thus the adequacy of the defence was irrelevant or (2) a panel did not reach the claims under the listed articles because it decided the case solely on claims properly described in the request.'(255) We are concerned here that Thailand is blurring the distinction between, on the one hand, the sufficiency of the panel request and, on the other, the issue of whether or not the complaining party establishes a prima facie case of violation of an obligation imposed by the covered agreements. We recall that 'there is a significant difference between the claims identified in the request for the establishment of a panel, which establish the panel's terms of reference under Article 7 of the DSU, and the arguments supporting those claims, which are set out and progressively clarified in the first written submissions, the rebuttal submissions and the first and second panel meetings with the parties.'(256) Article 6.2 DSU does not relate directly to the sufficiency of the subsequent written and oral submissions of the parties in the course of the proceedings, which may develop the arguments in support of the claims set out in the panel request. Nor does it determine whether or not the complaining party will manage to establish a prima facie case of violation of an obligation under a covered agreement in the actual course of the panel proceedings ..."(257) (d) Relevance of the principle of good faith 179. As regards the principle of good faith, see paragraphs 41-45 above and 84-86 above.
180. With respect to the relationship between Article 6 and Article 4, see paragraph 111 above. 2. Articles 6.2 and 21.5 of the DSU 181. For the relationship of Article 6.2 of the DSU with Article 21.5 |
