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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 21: Surveillance of Implementation of Recommendations and Rulings 1. Prompt compliance with recommendations or rulings of the DSB is essential in order to ensure effective resolution of disputes to the benefit of all Members.
2. Particular attention should be paid to matters affecting the interests of developing country Members with respect to measures which have been subject to dispute settlement.
3. At a DSB meeting held within 30 days(11) after the date of adoption of the panel or Appellate Body report, the Member concerned shall inform the DSB of its intentions in respect of implementation of the recommendations and rulings of the DSB. If it is impracticable to comply immediately with the recommendations and rulings, the Member concerned shall have a reasonable period of time in which to do so. The reasonable period of time shall be:
(footnote original) 11 If a meeting of the DSB is not scheduled during this period, such a meeting of the DSB shall be held for this purpose
(a) the period of time proposed by the Member concerned, provided that such period is approved by the DSB; or, in the absence of such approval,
(b) a period of time mutually agreed by the parties to the dispute within 45 days after the date of adoption of the recommendations and rulings; or, in the absence of such agreement,
(c) a period of time determined through binding arbitration within 90 days after the date of adoption of the recommendations and rulings.(12) In such arbitration, a guideline for the arbitrator13 should be that the reasonable period of time to implement panel or Appellate Body recommendations should not exceed 15 months from the date of adoption of a panel or Appellate Body report. However, that time may be shorter or longer, depending upon the particular circumstances.
(footnote original) 12 If the parties cannot agree on an arbitrator within ten days after referring the matter to arbitration, the arbitrator shall be appointed by the Director-General within ten days, after consulting the parties.
(footnote original) 13 The expression "arbitrator" shall be interpreted as referring either to an individual or a group.
4. Except where the panel or the Appellate Body has extended, pursuant to paragraph 9 of Article 12 or paragraph 5 of Article 17, the time of providing its report, the period from the date of establishment of the panel by the DSB until the date of determination of the reasonable period of time shall not exceed 15 months unless the parties to the dispute agree otherwise. Where either the panel or the Appellate Body has acted to extend the time of providing its report, the additional time taken shall be added to the 15-month period; provided that unless the parties to the dispute agree that there are exceptional circumstances, the total time shall not exceed 18 months.
5. Where there is disagreement as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings such dispute shall be decided through recourse to these dispute settlement procedures, including wherever possible resort to the original panel. The panel shall circulate its report within 90 days after the date of referral of the matter to it. When the panel considers that it cannot provide its report within this time frame, it shall inform the DSB in writing of the reasons for the delay together with an estimate of the period within which it will submit its report.
6. The DSB shall keep under surveillance the implementation of adopted recommendations or rulings. The issue of implementation of the recommendations or rulings may be raised at the DSB by any Member at any time following their adoption. Unless the DSB decides otherwise, the issue of implementation of the recommendations or rulings shall be placed on the agenda of the DSB meeting after six months following the date of establishment of the reasonable period of time pursuant to paragraph 3 and shall remain on the DSB's agenda until the issue is resolved. At least 10 days prior to each such DSB meeting, the Member concerned shall provide the DSB with a status report in writing of its progress in the implementation of the recommendations or rulings.
7. If the matter is one which has been raised by a developing country Member, the DSB shall consider what further action it might take which would be appropriate to the circumstances.
8. If the case is one brought by a developing country Member, in considering what appropriate action might be taken, the DSB shall take into account not only the trade coverage of measures complained of, but also their impact on the economy of developing country Members concerned.
421. The Arbitrator in Argentina - Hides and Leather (Article 21.3) defined the concept of "compliance" or "implementation" as a technical concept with a specific content: "the withdrawal or modification of a measure, or part of a measure, the establishment or application of which by a Member of the WTO constituted the violation of a provision of a covered agreement": "[T]he non-conforming measure is to be brought into a state of conformity with specified treaty provisions either by withdrawing such measure completely, or by modifying it by excising or correcting the offending portion of the measure involved. Where the non-conforming measure is a statute, a repealing or amendatory statute is commonly needed. Where the measure involved is an administrative regulation, a new statute may or may not be necessary, but a repealing or amendatory regulation is commonly required.(635) *
It thus appears that the concept of compliance or implementation prescribed in the DSU is a technical concept with a specific content: The withdrawal or modification of a measure, or part of a measure, the establishment or application of which by a Member of the WTO constituted the violation of a provision of a covered agreement ..."(636) 422. In Argentina - Hides and Leather (Article 21.3), the Arbitrator differentiated the concept of "compliance" within the meaning of the DSU from the removal or modification of the underlying economic/social/other conditions which may have caused the enactment or application of the WTO-inconsistent governmental measure: "Compliance within the meaning of the DSU is distinguishable from the removal or modification of the underlying economic or social or other conditions the existence of which might well have caused or contributed to the enactment or application of the WTO-inconsistent governmental measure in the first place. Those economic or other conditions might, in certain situations, survive the removal or modification of the non-conforming measure; nevertheless, the WTO Member concerned will have complied with the DSB recommendations and rulings and with its obligations under the relevant covered agreement. To my mind, it is inter alia for the above reason that the need for structural adjustment of the industry or industries in respect of which the WTO-inconsistent measure was promulgated and applied, has generally been regarded, in prior arbitrations under Article 21.3(c) of the DSU, as not bearing upon the determination of a "reasonable period of time" for implementation of DSB recommendations and rulings.(637)"(638) 423. The Arbitrator in EC - Hormones (Article 21.3) considered that "prompt compliance" read in context shows that the reasonable period of time, as determined under Article 21.3(c), should be the shortest period possible within the legal system of the Member to implement the recommendations and rulings of the DSB: "Article 21.3(c) also should be interpreted in its context and in light of the object and purpose of the DSU. Relevant considerations in this respect include other provisions of the DSU, including, in particular, Articles 21.1 and 3.3. Article 21.1 stipulates that: 'Prompt compliance with recommendations and rulings of the DSB is essential in order to ensure effective resolution of disputes to the benefit of all Members' (emphasis added). Article 3.3 states: 'The prompt settlement of situations in which a Member considers that any benefits accruing to it directly or indirectly under the covered agreements are being impaired by measures taken by another Member is essential to the effective functioning of the WTO and the maintenance of a proper balance between the rights and obligations of Members' (emphasis added). The Concise Oxford Dictionary defines the word, "prompt", as meaning "a. acting with alacrity; ready. b. made, done, etc. readily or at once".(639) Read in context, it is clear that the reasonable period of time, as determined under Article 21.3(c), should be the shortest period possible within the legal system of the Member to implement the recommendations and rulings of the DSB. In the usual case, this should not be greater than 15 months, but could also be less."(640) 424. In Chile - Alcoholic Beverages (Article 21.3), the Arbitrator considered that the existence of a certain element of flexibility in respect of time in complying with the recommendations and rulings of the DSB "would appear to be essential if "prompt" compliance, in a world of sovereign states, is to be a balanced conception and objective": "The DSU clearly stressed the systemic interest of all WTO Members in the Member concerned complying 'immediately' with the recommendations and rulings of the DSB. Reading Articles 21.1 and 21.3 together, 'prompt' compliance is, in principle, 'immediate' compliance. At the same time, however, should 'immediate' compliance be 'impracticable' - it may be noted that the DSU does not use the far more rigorous term 'impossible' - the Member concerned becomes entitled to a 'reasonable period of time' to bring itself into a state of conformity with its WTO obligations. Clearly, a certain element of flexibility in respect of time is built into the notion of compliance with the recommendations and rulings of the DSB. That element would appear to be essential if 'prompt' compliance, in a world of sovereign states, is to be a balanced conception and objective."(641) (a) " interests of developing country Members " 425. In Indonesia - Autos (Article 21.3), the Arbitrator, in determining the "reasonable period of time" pursuant to Article 21.3(c) of the DSU, took into account not only Indonesia's status as a developing country in determining the "reasonable period of time", but also the fact that "it is a developing country that is currently in a dire economic and financial situation": "Although the language of this provision is rather general and does not provide a great deal of guidance, it is a provision that forms part of the context for Article 21.3(c) of the DSU and which I believe is important to take into account here. Indonesia has indicated that in a 'normal situation', a measure such as the one required to implement the recommendations and rulings of the DSB in this case would become effective on the date of issuance. However, this is not a 'normal situation'. Indonesia is not only a developing country; it is a developing country that is currently in a dire economic and financial situation. Indonesia itself states that its economy is 'near collapse'. In these very particular circumstances, I consider it appropriate to give full weight to matters affecting the interests of Indonesia as a developing country pursuant to the provisions of Article 21.2 of the DSU. I, therefore, conclude that an additional period of six months over and above the six-month period required for the completion of Indonesia's domestic rule-making process constitutes a reasonable period of time for implementation of the recommendations and rulings of the DSB in this case."(642) 426. In Chile - Alcoholic Beverages (Article 21.3), the Arbitrator held that taking into account the interests of developing countries in determining the "reasonable period of time" pursuant to Article 21.3(c), should not result in different "kinds of considerations that may be taken into account". However, the arbitrator stressed that "because Article 21.2 is in the DSU, it is not simply to be disregarded" and that it "usefully enjoins, inter alia, an arbitrator functioning under Article 21.3(c) to be generally mindful of the great difficulties that a developing country Member may, in a particular case, face as it proceeds to implement the recommendations and rulings of the DSB": "It is not necessary to assume that the operation of Article 21.2 will essentially result in the application of 'criteria' for the determination of 'the reasonable period of time' - understood as the kinds of considerations that may be taken into account - that would be 'qualitatively' different for developed and for developing country Members. I do not believe Chile is making such an assumption. Nevertheless, although cast in quite general terms, because Article 21.2 is in the DSU, it is not simply to be disregarded. As I read it, Article 21.2, whatever else it may signify, usefully enjoins, inter alia, an arbitrator functioning under Article 21.3(c) to be generally mindful of the great difficulties that a developing country Member may, in a particular case, face as it proceeds to implement the recommendations and rulings of the DSB."(643) 427. The Arbitrator defined his mandate in Korea - Alcoholic Beverages (Article 21.3) in the following terms: "My mandate in this arbitration relates exclusively to determining the reasonable period of time for implementation under Article 21.3(c) of the DSU. It is not within my mandate to suggest ways and means to implement the recommendations and rulings of the DSB. Choosing the means of implementation is, and should be, the prerogative of the implementing Member, as long as the means chosen are consistent with the recommendations and rulings of the DSB and the provisions of the covered agreements. I consider it, therefore, inappropriate to determine whether, and to what extent, amendments to various regulatory instruments are required before the new tax legislation comes into effect."(644) 428. In US - Hot-Rolled Steel (Article 21.3), the Arbitrator confirmed that it is for the implementing WTO Member to determine the proper scope and content of anticipated legislation. However, he also indicated that "the degree of complexity of the contemplated implementing legislation may be relevant for the arbitrator, to the extent that such complexity bears upon the length of time that may reasonably be allocated to the enactment of such legislation": "I do not believe that an arbitrator acting under Article 21.3(c) of the DSU is vested with jurisdiction to make any determination of the proper scope and content of implementing legislation, and hence do not propose to deal with it. The degree of complexity of the contemplated implementing legislation may be relevant for the arbitrator, to the extent that such complexity bears upon the length of time that may reasonably be allocated to the enactment of such legislation. But the proper scope and content of anticipated legislation are, in principle, left to the implementing WTO Member to determine."(645) (b) "reasonable period of time" (i) Concept of "reasonableness" 429. In US - Hot-Rolled Steel (Article 21.3), the Arbitrator considered that the essence of "reasonableness" as articulated by the Appellate Body in US - Hot-Rolled Steel in the context of the Anti-Dumping Agreement, was equally pertinent in the context of the Article 21.3(c) of the DSU: "In US - Hot-Rolled Steel, the implementation of which is involved here, the Appellate Body had occasion to interpret the phrase 'reasonable period' found in Article 6.8 of the Anti-Dumping Agreement and 'reasonable time' used in paragraph 1 of Annex II of that Agreement. 'The word "reasonable" ', the Appellate Body stated:
... implies a degree of flexibility that involves consideration of all of the circumstances of a particular case. What is 'reasonable' in one set of circumstances may prove to be less than 'reasonable' in different circumstances. This suggests that what constitutes a reasonable period or a reasonable time under Article 6.8 and Annex II of the Anti-Dumping Agreement, should be defined on a case-by-case basis, in the light of the specific circumstances of each investigation.
In sum, a 'reasonable period' must be interpreted consistently with the notions of flexibility and balance that are inherent in the concept of 'reasonableness', and in a manner that allows for account to be taken of the particular circumstances of each case.(646)
Although, in the above excerpt the Appellate Body dealt with the Anti-Dumping Agreement, and not the DSU, the essence of "reasonableness" so articulated is, in my view, equally pertinent for an arbitrator faced with the task of determining what constitutes 'a reasonable period of time' in the context of the DSU."(647) (ii) Length of the reasonable period of time The 15-month guideline 430. The Arbitrator in EC - Hormones (Article 21.3) considered that "the ordinary meaning of the terms of Article 21.3(c) indicates that 15 months is a 'guideline for the arbitrator', and not a rule".(648) 431. In Canada - Pharmaceutical Patents (Article 21.3), the Arbitrator noted: "[T]he 15-month period is a 'guideline', and not an average, or usual, period. It is expressed also as a maximum period, subject only to any 'particular circumstances' mentioned in the second sentence."(649) 432. In EC - Bananas III (Article 21.3), the European Communities requested a period of 15 months and one week based on the alleged complexity and difficulty of amending the then existing import regime for bananas. The Arbitrator confirmed that the 15-month period provided for in Article 21.3(c) is a guideline and that the "reasonable period of time" may be shorter or longer than 15 months, depending upon the "particular circumstances" (see paragraph 454 below): "When the 'reasonable period of time' is determined through binding arbitration, as provided for under Article 21.3(c) of the DSU, this provision states that a 'guideline' for the arbitrator should be that the 'reasonable period of time' should not exceed 15 months from the date of the adoption of a panel or Appellate Body report. Article 21.3(c) of the DSU also provides, however, that the 'reasonable period of time' may be shorter or longer than 15 months, depending upon the 'particular circumstances'.(650) The shortest period possible 433. In determining the reasonable period of time, the Arbitrator in EC - Hormones (Article 21.3) defined such a period as the "shortest period possible within the legal system of the Member to implement the recommendations and rulings of the DSB". The Arbitrator held, inter alia, that "when implementation can be effected by administrative means, the reasonable period of time should be considerably shorter than 15 months": "The ordinary meaning of the terms of Article 21.3(c) indicates that 15 months is a 'guideline for the arbitrator', and not a rule. This guideline is stated expressly to be that 'the reasonable period of time ... should not exceed 15 months from the date of adoption of a panel or Appellate Body report' (emphasis added). In other words, the 15-month guideline is an outer limit or a maximum in the usual case. For example, when implementation can be effected by administrative means, the reasonable period of time should be considerably shorter than 15 months. However, the reasonable period of time could be shorter or longer, depending upon the particular circumstances, as specified in Article 21.3(c).
Article 21.3(c) also should be interpreted in its context and in light of the object and purpose of the DSU. Relevant considerations in this respect include other provisions of the DSU, including, in particular, Articles 21.1 and 3.3. Article 21.1 stipulates that: 'Prompt compliance with recommendations and rulings of the DSB is essential in order to ensure effective resolution of disputes to the benefit of all Members' (emphasis added). Article 3.3 states: 'The prompt settlement of situations in which a Member considers that any benefits accruing to it directly or indirectly under the covered agreements are being impaired by measures taken by another Member is essential to the effective functioning of the WTO and the maintenance of a proper balance between the rights and obligations of Members' (emphasis added). The Concise Oxford Dictionary defines the word, 'prompt', as meaning 'a. acting with alacrity; ready. b. made, done, etc. readily or at once'. Read in context, it is clear that the reasonable period of time, as determined under Article 21.3(c), should be the shortest period possible within the legal system of the Member to implement the recommendations and rulings of the DSB. In the usual case, this should not be greater than 15 months, but could also be less."(651) Normal versus extraordinary legislative procedure 434. In Korea - Alcoholic Beverages (Article 21.3), the Arbitrator stated that while the reasonable period of time should be the shortest period possible within the legal system of the Member concerned, the Member in question should not be required to utilize extraordinary legislative procedures to comply with the recommendations and rulings of the DSB: "Although the reasonable period of time should be the shortest period possible within the legal system of the Member to implement the recommendations and rulings of the DSB, this does not require a Member, in my view, to utilize an extraordinary legislative procedure, rather than the normal legislative procedure, in every case. Taking into account all of the circumstances of the present case, I believe that it is reasonable to allow Korea to follow its normal legislative procedure for the consideration and adoption of a tax bill with budgetary implications, that is, to submit the proposed amendments to the next regular session of the National Assembly. For the same reasons, I consider it reasonable that the new tax legislation should be enacted by the National Assembly in the course of the next regular session, and promulgated by the President before the end of this year."(652) Relevance of scientific studies or consultations 435. The Arbitrator in EC - Hormones (Article 21.3) went on to state that while scientific studies or consultations with experts may form part of the domestic implementation process, the time required to conduct such studies or consultations could not be included in the reasonable period of time: "An implementing Member ... has a measure of discretion in choosing the means of implementation, as long as the means chosen are consistent with the recommendations and rulings of the DSB and with the covered agreements.
It would not be in keeping with the requirement of prompt compliance to include in the reasonable period of time, time to conduct studies or to consult experts to demonstrate the consistency of a measure already judged to be inconsistent. That cannot be considered as 'particular circumstances' justifying a longer period than the guideline suggested in Article 21.3(c). This is not to say that the commissioning of scientific studies or consultations with experts cannot form part of a domestic implementation process in a particular case. However, such considerations are not pertinent to the determination of the reasonable period of time."(653) 436. In Australia - Salmon (Article 21.3), the Arbitrator held that in the case at issue, he saw several aspects "which persuade [him] that the reasonable period of time should be significantly less than 15 months". The Arbitrator noted that Australia had requested a significant part of that period for scientific risk assessments and recalled previous findings on the issue of administrative implementation of the DSB rulings and recommendations: "In the present case, there are certain considerations which persuade me that the reasonable period of time should be significantly less than 15 months. In the first place, Australia's request for 15 months was based on the assumption that a good part, if not most, of that period would be used to conduct a number of risk assessments. ... Since I have concluded that conducting risk assessments is not pertinent to the determination of the reasonable period of time, it follows that the reasonable period in this case should be considerably less than 15 months. In the second place, both parties agree with the arbitrator in European Communities - Hormones that the reasonable period of time, as determined under Article 21.3(c), should be the shortest period possible within the legal system of the Member to implement the recommendations and rulings of the DSB. Both parties also agree that the process involved in bringing the measure in dispute into conformity with Australia's obligations under the SPS Agreement is an administrative, not a legislative, process. As pointed out by the arbitrator in European Communities - Hormones, when implementation can be effected by administrative means, the reasonable period of time should be 'considerably shorter than 15 months.'
... I determine that the reasonable period of time for Australia to implement the recommendations and rulings of the DSB in this case is eight months from the date of adoption of the Appellate Body and Panel Reports by the DSB, i.e. eight months from 6 November 1998."(654) DSB actions as precedents 437. In US - Hot-Rolled Steel (Article 21.3), the United States referred to the extensions of the reasonable period of time agreed by the DSB in two previous disputes to take into account the adjournment of the United States Congress' legislative session(655), in order to support its position that the reasonable period of time should be longer than ten months. The Arbitrator noted that, on both occasions, the complaining parties had agreed to the extension and therefore did not consider that the actions of the DSB in those cases could have "any precedential value": "It appears to me that whether the actions of the DSB in those two instances have any precedential value in respect of the present arbitration proceedings, is open to substantial debate. The present proceedings have been precipitated precisely by the failure of the parties to the dispute to reach an agreement on a reasonable period of time to comply under Article 21.3(b) of the DSU."(656) Examples of amendment of the "reasonable period of time" 438. In the dispute Canada - Dairy, on 23 December 1999, Canada informed the Chairman of the DSB that it had reached an agreement with New Zealand and the United States on the reasonable period of time for the implementation of the DSB's rulings.(657) 439. Concerning the US - FSC dispute, at its meeting of 12 October 2000, the DSB accepted the United States' request to modify the time-period for compliance.(658) 440. In respect of the dispute US - Hot-Rolled Steel, at its meeting on 5 December 2002, the DSB accepted the request of the United States to modify the time period for compliance.(659) (iii) The application of WTO-inconsistent measures during the reasonable period of time 441. In US - Section 129(c)(1) URAA, the Panel considered that nothing suggests that Members are obliged, during the course of the reasonable period of time, to suspend application of the offending measure or to provide relief for the past effects of such measure: "Nothing in Article 21.3 suggests that Members are obliged, during the course of the reasonable period of time, to suspend application of the offending measure, much less to provide relief for past effects. Rather, in the case of antidumping and countervailing duty measures, entries that take place during the reasonable period of time may continue to be liable for the payment of duties. (...) When panels and the Appellate Body have been asked to make recommendations for retroactive relief, they have rejected those requests, recognizing that a Member's obligation under the DSU is to provide prospective relief in the form of withdrawing a measure inconsistent with a WTO agreement, or bringing that measure into conformity with the agreement by the end of the reasonable period of time. In the six years of dispute settlement under the WTO agreements, no panel or the Appellate Body has ever suggested that bringing a WTO-inconsistent antidumping or countervailing duty measure into conformity with a Member's WTO obligations requires the refund of antidumping or countervailing duties collected on merchandise that entered prior to the date of implementation."(660) 442. The Panel on US - Section 129(c)(1) URAA also added that Articles 22.1 and 22.2 of the DSU confirm not only that a Member may maintain the WTO-inconsistent measure until the end of the reasonable period of time for implementation, but also that neither compensation nor the suspension of concessions or other obligations are available to the complaining Member until the conclusion of that reasonable period of time.(661) (iv) Exception: prohibited subsidies 443. In Brazil -Aircraft, the Appellate Body noted that the provisions of Article 21.3 of the DSU are not relevant in determining the period of time for implementation of a finding of inconsistency with the prohibited subsidies provisions of the SCM Agreement: "With respect to implementation of the recommendations or rulings of the DSB in a dispute brought under Article 4 of the SCM Agreement, there is a significant difference between the relevant rules and procedures of the DSU and the special or additional rules and procedures set forth in Article 4.7 of the SCM Agreement. Therefore, the provisions of Article 21.3 of the DSU are not relevant in determining the period of time for implementation of a finding of inconsistency with the prohibited subsidies provisions of Part II of the SCM Agreement. Furthermore, we do not agree with Brazil that Article 4.12 of the SCM Agreement is applicable in this situation. In our view, the Panel was correct in its reasoning and conclusion on this issue. Article 4.7 of the SCM Agreement, which is applicable to this case, stipulates a time-period. It states that a subsidy must be withdrawn "without delay". That is the recommendation the Panel made."(662) 444. With respect to the period of implementation under Article 4.7 of the SCM Agreement, see Section IV.B.6(b) of the Chapter on that agreement. (c) "particular circumstances" (i) Concept of "particular circumstances" 445. In Canada - Pharmaceutical Patents (Article 21.3), the Arbitrator defined the term "particular circumstances" in Article 21.3 as "those that can influence what the shortest period possible for implementation may be within the legal system of the implementing Member".(663) (ii) Relevance of "particular circumstances" 446. In Chile - Alcoholic Beverages (Article 21.3), the Arbitrator pointed out that the shortest period of time theoretically possible for the completion of the legislative process ... is not the sole criterion that should be taken into account in determining the reasonable period of time. The Arbitrator further considered that Article 21.3(c) "contemplates a case-specific approach and authorizes the consideration of the "particular circumstances" of a given case, which may warrant a longer or shorter period": "The concept of reasonableness, which is, of course, built into the notion of 'a reasonable period of time' for implementation, inherently involves taking into account the relevant circumstances. In some cases these circumstances may be singular or few in number but in other cases they may be multiple. Determination of a 'reasonable period of time' is not, in principle, appropriately carried out by ascribing decisive or exclusive relevance to one single or even a few a priori factors and eschewing consideration of everything else as non-pertinent. Thus, the shortest period of time theoretically possible for the completion of the legislative process, even assuming the bill enjoys the necessary parliamentary majority from the beginning and is never the subject of serious debate, is not the sole criterion that I should take into account in determining the reasonable period. What Article 21.3(c) of the DSU provides arbitrators with is a 'guideline', not a fixed command, that the reasonable period should be not more than 15 months from the date of adoption by the DSB of the pertinent Panel and Appellate Body Reports. Article 21.3(c) evidently contemplates a case-specific approach and authorizes the consideration of the 'particular circumstances' of a given case, which may warrant a longer or shorter period."(664) (iii) Factors amounting to "particular circumstances" 447. In Chile - Alcoholic Beverages (Article 21.3), the Arbitrator considered that, "[s]ince compliance here means adoption of a law appropriately amending" the Chilean law at issue, the reference to particular circumstances in this case is to "circumstances which rationally bear upon the time necessary for enactment of such a law."(665) 448. In Canada - Pharmaceutical Patents (Article 21.3), the Arbitrator mentioned the implementation by administrative or legislative means, the complexity of the proposed implementation and the legally binding force of the component steps leading to implementation as relevant criteria for determining the existence of "particular circumstances": "[I]f implementation is by administrative means, such as through a regulation, then the 'reasonable period of time' will normally be shorter than for implementation through legislative means.
Likewise, the complexity of the proposed implementation can be a relevant factor. If implementation is accomplished through extensive new regulations affecting many sectors of activity, then adequate time will be required to draft the changes, consult affected parties, and make any consequent modifications as needed. On the other hand, if the proposed implementation is the simple repeal of a single provision of perhaps a sentence or two, then, obviously, less time will be needed for drafting, consulting, and finalizing the procedure. To be sure, complexity is not merely a matter of the number of pages in a proposed regulation; yet it seems reasonable to assume that, in most cases, the shorter a proposed regulation, the less its likely complexity.
In addition, the legally binding, as opposed to the discretionary, nature of the component steps leading to implementation should be taken into account. If the law of a Member dictates a mandatory period of time for a mandatory part of the process needed to make a regulatory change, then that portion of a proposed period will, unless proven otherwise due to unusual circumstances in a given case, be reasonable. On the other hand, if there is no such mandate, then a Member asserting the need for a certain period of time must bear a much more imposing burden of proof. Something required by law must be done; something not required by law need not necessarily be done, depending on the facts and the circumstances in a particular case."(666) (iv) Factors not qualifying as "particular circumstances" General 449. In Canada - Pharmaceutical Patents (Article 21.3), the Arbitrator indicated that "the 'particular circumstances' ... do not include factors unrelated to an assessment of the shortest period possible for implementation within the legal system of a Member": [T]he 'particular circumstances' mentioned in Article 21.3 do not include factors unrelated to an assessment of the shortest period possible for implementation within the legal system of a Member. Any such unrelated factors are irrelevant to determining the 'reasonable period of time' for implementation. The determination of a 'reasonable period of time' must be a legal judgement based on an examination of relevant legal requirements."(667) 450. The Arbitrator in Argentina - Hides and Leather (Article 21.3) warned about the negative implications for the multilateral trading system of an interpretation of reasonable period of time that took into account "time or opportunity to control and manage economic or social conditions which antedate or are contemporaneous with the adoption of the WTO-inconsistent governmental measure": "[T]o build into the concept of a "reasonable period of time" to comply with DSB recommendations and rulings, time or opportunity to control and manage economic or social conditions which antedate or are contemporaneous with the adoption of the WTO-inconsistent governmental measure, may, in the generality of instances, be to defer to an indefinitely receding future the duty of compliance. The implications for the multilateral trading system as we know it today, of such an interpretation of "reasonable period of time" for compliance are clear and far-reaching and ominous. Such an interpretation would tend to reduce the fundamental duty of "immediate" or "prompt" compliance to a figure of speech."(668) Example of factors not qualifying as "particular circumstances" 451. In Indonesia - Autos (Article 21.3), the Arbitrator considered that "the structural adjustments of" a Member's "affected industries" was not "a "particular circumstance" to be taken into account under Article 21.3(c): "I do not view structural adjustments of Indonesia's affected industries as a 'particular circumstance' which may be taken into account under Article 21.3(c) of the DSU.(669) In virtually every case in which a measure has been found to be inconsistent with a Member's obligations under the GATT 1994 or any other covered agreement, and therefore, must be brought into conformity with that agreement, some degree of adjustment by the domestic industry of the Member concerned will be necessary. This will be the case regardless of whether the Member concerned is a developed or a developing country. Structural adjustment to the withdrawal or the modification of an inconsistent measure, therefore, is not a 'particular circumstance' that can be taken into account in determining the reasonable period of time under Article 21.3(c)."(670) 452. In Japan - Alcoholic Beverages II (Article 21.3), Japan argued that a period of 23 months was a "reasonable period of time" on the basis that there were "particular circumstances" justifying such an extension of the 15-month period. Japan claimed that the limited powers of the executive branch over tax matters and the need for a formal adoption of legislation by the parliament, the adverse effects of the tax increases on Japanese consumers of shochu, and the administrative constraints on the execution of taxation were "particular circumstances" justifying a 23-month period needed to implement the recommendations and rulings of the DSB. The Arbitrator was not persuaded that these circumstances were "particular circumstances" within the meaning of Article 21.3(c) and determined 15 months as the reasonable period of time.(671) 453. In Argentina - Hides and Leather (Article 21.3), Argentina had argued that it needed 46 months as the reasonable period of time for implementation in order to control and counter certain economic and financial consequences that would follow from the enactment of legislation implementing the recommendations of the DSB. See paragraph 450 above. 454. In EC - Bananas III (Article 21.3), the Arbitrator implicitly found that it was up to the complaining parties to persuade him "that there are 'particular circumstances' in this case to justify a shorter period of time than stipulated by the guideline in Article 21.3(c) of the DSU [15 months]." In the case at issue, the Arbitrator found that he had not been so persuaded by the complaining parties: "When the 'reasonable period of time' is determined through binding arbitration, as provided for under Article 21.3(c) of the DSU, this provision states that a 'guideline' for the arbitrator should be that the 'reasonable period of time' should not exceed 15 months from the date of the adoption of a panel or Appellate Body report. Article 21.3(c) of the DSU also provides, however, that the 'reasonable period of time' may be shorter or longer than 15 months, depending upon the 'particular circumstances'.
The Complaining Parties have not persuaded me that there are 'particular circumstances' in this case to justify a shorter period of time than stipulated by the guideline in Article 21.3(c) of the DSU. At the same time, the complexity of the implementation process, demonstrated by the European Communities, would suggest adherence to the guideline, with a slight modification, so that the 'reasonable period' of time for implementation would expire by 1 January 1999."(672) 455. In EC - Hormones (Article 21.3), the Arbitrator held that the burden of proof concerning the existence of particular circumstances falls on any party arguing for a period longer or shorter than 15 months: "In my view, the party seeking to prove that there are 'particular circumstances' justifying a shorter or a longer time has the burden of proof under Article 21.3(c). In this arbitration, therefore, the onus is on the European Communities to demonstrate that there are particular circumstances which call for a reasonable period of time of 39 months, and it is likewise up to the United States and Canada to demonstrate that there are particular circumstances which lead to the conclusion that 10 months is reasonable."(673) 456. The Arbitrator in Canada - Pharmaceutical Patents (Article 21.3) applied the burden of proof differently. He held that it was for the implementing Member to bear the burden of proof in showing that the duration of any proposed period of implementation is a "reasonable period of time": "Based on the wording of Articles 21.3, and on the context provided in Articles 3.3, 21.1 and 21.4 of the DSU, I agree with the arbitrator in European Communities - Hormones that "the reasonable period of time, as determined under Article 21.3(c), should be the shortest period possible within the legal system of the Member to implement the recommendations and rulings of the DSB."(674) Moreover, as immediate compliance is clearly the preferred option under Article 21.3, it is, in my view, for the implementing Member to bear the burden of proof in showing - "[i]f it is impracticable to comply immediately" - that the duration of any proposed period of implementation, including its supposed component steps, constitutes a "reasonable period of time". And the longer the proposed period of implementation, the greater this burden will be."(675) (d) Relationship with Article 22 of the DSU 457. In Chile - Alcoholic Beverages (Article 21.3), the Arbitrator considered that when fixing the reasonable period of time one should take into account that, pursuant to Article 22.1, "full and effective implementation is 'preferred'": "In assessing the duration of the reasonable period, the provisions of Article 22 of the DSU are also noteworthy. Under Article 22.1, although 'a reasonable period of time' may have elapsed without compliance with the recommendations and rulings of the DSB, neither compensation nor suspension of concessions or other obligations is to be "preferred to full implementation", by bringing the measure concerned into conformity with WTO obligations. Thus, in fixing the reasonable period, I should take account of the fact that full and effective implementation is 'preferred'."(676) (e) Participation by all the original parties 458. In Japan - Alcoholic Beverages II (Article 21.3), it was agreed that all the original parties to the dispute could participate in the arbitration process even though only the United States had requested binding arbitration pursuant to Article 21.3.(677) (f) Relationship with other Agreements 459. As regards the relationship with Article 4.7 of the SCM Agreement, see paragraphs 443-444 above. (a) "measures taken to comply" (i) Measures concerned by Article 21.5 panel proceedings 460. In Canada - Aircraft (Article 21.5 - Brazil), Brazil argued in its appeal that the Panel had erred by not reviewing its "specific targeting" argument. The Appellate Body noted that the Article 21.5 Panel had stated that the DSB "cannot have required Canada to take implementation action to ensure that TPC [Technology Partnership Canada] assistance is not 'specifically targeted' at the aerospace and regional aircraft industries, because such alleged 'specific targeting' did not form part of the basis for the finding of de facto export contingency that gave rise to that recommendation."(678) The Appellate Body held that proceedings under Article 21.5 concern only measures "taken to comply" with the recommendations and rulings of the DSB and interpreted this concept as referring to " measures which have been, or which should be, adopted by a Member to bring about compliance with the recommendations and rulings of the DSB": "Proceedings under Article 21.5 do not concern just any measure of a Member of the WTO; rather, Article 21.5 proceedings are limited to those 'measures taken to comply with the recommendations and rulings' of the DSB. In our view, the phrase 'measures taken to comply' refers to measures which have been, or which should be, adopted by a Member to bring about compliance with the recommendations and rulings of the DSB. In principle, a measure which has been 'taken to comply with the recommendations and rulings' of the DSB will not be the same measure as the measure which was the subject of the original dispute, so that, in principle, there would be two separate and distinct measures(679): the original measure which gave rise to the recommendations and rulings of the DSB, and the 'measures taken to comply' which are - or should be - adopted to implement those recommendations and rulings. In these Article 21.5 proceedings, the measure at issue is a new measure, the revised TPC programme, which became effective on 18 November 1999 and which Canada presents as a 'measure taken to comply with the recommendations and rulings' of the DSB."(680) (ii) Extent of the examination by the panel 461. The Appellate Body in Canada - Aircraft (Article 21.5 - Brazil) disagreed with the Panel that the scope of Article 21.5 dispute settlement proceedings was limited to the issue of whether or not the defendant had implemented the DSB recommendations. In its view, under Article 21.5, a panel is obliged to examine the consistency of the "measures taken to comply" with WTO law: "We have already noted that these proceedings, under Article 21.5 of the DSU, concern the 'consistency' of the revised TPC programme with Article 3.1(a) of the SCM Agreement. Therefore, we disagree with the Article 21.5 Panel that the scope of these Article 21.5 dispute settlement proceedings is limited to 'the issue of whether or not Canada has implemented the DSB recommendation'. The recommendation of the DSB was that the measure found to be a prohibited export subsidy must be withdrawn within 90 days of the adoption of the Appellate Body Report and the original panel report, as modified - that is, by 18 November 1999. That recommendation to 'withdraw' the prohibited export subsidy did not, of course, cover the new measure - because the new measure did not exist when the DSB made its recommendation. It follows then that the task of the Article 21.5 Panel in this case is, in fact, to determine whether the new measure - the revised TPC programme - is consistent with Article 3.1(a) of the SCM Agreement.
Accordingly, in carrying out its review under Article 21.5 of the DSU, a panel is not confined to examining the 'measures taken to comply' from the perspective of the claims, arguments and factual circumstances that related to the measure that was the subject of the original proceedings. Although these may have some relevance in proceedings under Article 21.5 of the DSU, Article 21.5 proceedings involve, in principle, not the original measure, but rather a new and different measure which was not before the original panel. In addition, the relevant facts bearing upon the 'measure taken to comply' may be different from the relevant facts relating to the measure at issue in the original proceedings. It is natural, therefore, that the claims, arguments and factual circumstances which are pertinent to the 'measure taken to comply' will not, necessarily, be the same as those which were pertinent in the original dispute. Indeed, the utility of the review envisaged under Article 21.5 of the DSU would be seriously undermined if a panel were restricted to examining the new measure from the perspective of the claims, arguments and factual circumstances that related to the original measure, because an Article 21.5 panel would then be unable to examine fully the 'consistency with a covered agreement of the measures taken to comply', as required by Article 21.5 of the DSU."(681) 462. In US - Shrimp (Article 21.5 - Malaysia), the Appellate Body further explained that, when the issue concerns the consistency of a new measure "taken to comply", the task of a 21.5 panel is to consider that new measure in its totality, meaning the measure itself and its application, but only in respect of the claims included in the request for establishment of that 21.5 panel: "As we ruled in our Report in Canada - Aircraft (21.5), panel proceedings pursuant to Article 21.5 of the DSU involve, in principle, not the original measure, but a new and different measure that was not before the original panel. Therefore, 'in carrying out its review under Article 21.5 of the DSU, a panel is not confined to examining the 'measure[] taken to comply' from the perspective of the claims, arguments and factual circumstances that related to the measure that was the subject of the original proceedings.'
When the issue concerns the consistency of a new measure 'taken to comply', the task of a panel in a matter referred to it by the DSB for an Article 21.5 proceeding is to consider that new measure in its totality. The fulfilment of this task requires that a panel consider both the measure itself and the measure's application. As the title of Article 21 makes clear, the task of panels under Article 21.5 forms part of the process of the "Surveillance of Implementation of the Recommendations and Rulings" of the DSB. Toward that end, the task of a panel under Article 21.5 is to examine the "consistency with a covered agreement of measures taken to comply with the recommendations and rulings" of the DSB. That task is circumscribed by the specific claims made by the complainant when the matter is referred by the DSB for an Article 21.5 proceeding. It is not part of the task of a panel under Article 21.5 to address a claim that has not been made.
Malaysia relies in this appeal on our ruling in Canada - Aircraft (21.5). We understand Malaysia to argue, based in part on our ruling in Canada - Aircraft (21.5), that the Panel in this case had a duty to review the totality of the United States measure, and to assess it for its consistency with the relevant provisions of the GATT 1994. That is indeed a panel's task under Article 21.5 of the DSU. Yet, as we have said, it is not part of a panel's task to go beyond the particular claims that have been made with respect to the consistency of a new measure with a covered agreement when a matter is referred to it by the DSB for an Article 21.5 proceeding. Thus, it would not have been appropriate in this case for the Panel to address a claim that was not made by Malaysia when requesting that this matter be referred by the DSB for an Article 21.5 proceeding."(682) With respect to the relationship between "measures taken to comply" and a panel's terms of reference, see paragraph 189 above. See also the excerpts from the reports of the panels and Appellate Body referenced in the Chapter on the SCM Agreement, Section V.B.6. 463. The Appellate Body in Canada - Aircraft (Article 21.5 - Brazil) ruled that the examination of "measures taken to comply" is based on the relevant facts proved, by the complainant, to the Article 21.5 panel, during the panel proceedings: "We add also that the examination of "measures taken to comply" is based on the relevant facts proved, by the complainant, to the Article 21.5 panel, during the panel proceedings. Therefore, the "minimum implementation standard" that the Article 21.5 Panel expressed and which, it said, was "effectively" agreed between the parties, should be viewed with caution. The Article 21.5 Panel said that Canada's implementation should " 'ensure' that future TPC assistance to the Canadian regional aircraft industry will not be de facto contingent on export performance." (emphasis added) The use in this standard of the words "ensure" and "future", if taken too literally, might be read to mean that the Panel was seeking a strict guarantee or absolute assurance as to the future application of the revised TPC programme. A standard which, if so read, would, however, be very difficult, if not impossible, to satisfy since no one can predict how unknown administrators would apply, in the unknowable future, even the most conscientiously crafted compliance measure."(683) 464. In Brazil - Aircraft (Article 21.5 - Canada), Brazil argued that the Article 21.5 Panel erred in placing upon Brazil the burden of proving that its implementation measure complied with the recommendations and rulings of the DSB. Brazil claimed that Canada must bear the burden of proving that Brazil's measure does not implement the DSB recommendations and rulings. The Appellate Body stated: "[T]he fact that the measure at issue was 'taken to comply' with the 'recommendations and rulings' of the DSB does not alter the allocation of the burden of proving Brazil's 'defence' under item (k). In this respect, we note that Brazil concedes that the revised PROEX measure is, in principle, prohibited under Article 3.1(a) of the SCM Agreement; yet Brazil asserts nonetheless that the PROEX measure is justified, under the first paragraph of item (k). Thus, in our view, Brazil is, clearly, using item (k) to make an affirmative claim in its defence. In United States - Measure Affecting Imports of Woven Wool Shirts and Blouses from India, we said: 'It is only reasonable that the burden of establishing [an affirmative] defence should rest on the party asserting it.' As it is Brazil that is asserting this 'defence' using item (k) in these proceedings, we agree with the Article 21.5 Panel that Brazil has the burden of proving that the revised PROEX is justified under the first paragraph of item (k), including the burden of proving that payments under the revised PROEX are not 'used to secure a material advantage in the field of export credit terms.'"(684) 5. Relationship with other Articles of the DSU (a) Bilateral agreements: Articles 21 and 22 465. In Brazil - Aircraft (Article 22.6 - Brazil), the Arbitrators indicated that they were "aware of the question of 'sequencing' recourses to Article 21.5 and Article 22.6 of the DSU". The Arbitrators noted that one of the effects of the bilateral agreement concluded by the parties (see paragraph 468 below) "was to establish such a 'sequencing'". The Arbitrators thus considered that by issuing their report after the Appellate Body Article 21.5 report, they had respected the intention of the parties. The Arbitrators concluded that "the question of whether such a sequencing is actually required under the DSU is not part of the mandate of the Arbitrators".(685) (ii) Examples of ad hoc procedural agreements 466. In US - Shrimp, following consultation between the Governments of Malaysia and the United States on the implementation of the DSB recommendations and rulings in US - Shrimp two communications, dated 22 December 1999, from the Permanent Missions of Malaysia and the United States to the Chairman of the Dispute Settlement Body, were circulated at the request of these delegations, confirming the understanding reached between the two Governments regarding possible proceedings pursuant to Articles 21 and 22 of the DSU concerning that implementation. The relevant part of the Understanding reads as follows: "1. Malaysia will not at this stage initiate proceedings under Article 21.5 or Article 22 of the DSU.
2. If Malaysia at some future date decides that it may wish to initiate proceedings under Articles 21.5 and Article 22 of the DSU, Malaysia will initiate proceedings under Article 21.5 prior to any proceedings under Article 22. Malaysia will provide the United States advance notice of any proposal to initiate proceedings under Article 21.5 and will consult with the United States before requesting the establishment of a panel under Article 21.5. Malaysia will not request authorization to suspend concessions or other obligations under Article 22 until the adoption of the Article 21.5 panel report. If on the basis of the proceedings under Article 21.5 Malaysia decides to initiate proceedings under Article 22, the United States will not assert that Malaysia is precluded from obtaining DSB authorization because Malaysia's request was made outside the 30-day time period specified in the first sentence of Article 22.6. This is without prejudice to the rights of the United States to have the matter referred to arbitration in accordance with Article 22.6.
3. In light of the fact that the DSB recommendations and rulings in this dispute were based on a report of the Appellate Body, if Malaysia at some future date initiates proceedings under Article 21.5 of the DSU, either Malaysia or the United States may appeal the report of the panel established under Article 21.5; and Article 16.4 of the DSU, which provides in part that the DSB shall not consider the report of that panel for adoption until after the completion of the appeal, shall apply."(686) 467. In Australia - Automotive Leather II, Australia and the United States agreed to refrain from appealing the forthcoming panel report under Article 21.5 in that matter. In the proceedings, the European Communities commented that "it is not possible to exclude a right of appeal in panel proceedings under Article 21.5 DSU", "that the fact that the parties have agreed not to appeal, and have apparently taken the view that other rules of the DSU (such as those relating to third parties) may be dispensed with or varied, means that this proceeding is in fact an arbitration under Article 25 DSU" and that "these circumstances, and the absence of the discipline of a potential appeal in these proceedings, should be taken into account by any future panel which is considering whether the reasoning of the report arising out of these proceedings is of any guidance in resolving similar questions with which it may be confronted."(687) 468. In Brazil - Aircraft and Canada - Aircraft, with regard to the two proceedings under Article 21.5 brought by Canada and Brazil against each other in relation to their respective aircraft export subsidies, Canada and Brazil reached two identical agreements (though the names of the parties were swapped) on the conduct of proceedings.(688) The agreements obliged the parties not to object to certain actions taken by the other party, and also specified certain deadlines. The agreements read as follows: "The Panel and Appellate Body reports in this dispute were adopted by the Dispute Settlement Body on 20 August 1999.
The DSB recommendations and rulings included the recommendation that Brazil bring its measures found to be inconsistent with the Agreement on Subsidies and Countervailing Measures (the SCM Agreement) into conformity with the provisions of that Agreement and that Brazil withdraw the export subsidies for regional aircraft under PROEX within 90 days, or by 18 November 1999.
There is disagreement between Canada and Brazil as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings of the DSB, within the meaning of Article 21.5 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (the DSU).
Canada and Brazil have reached an agreement concerning the procedures to be applicable for proceedings in this case pursuant to Articles 21 and 22 of the DSU and Article 4 of the SCM Agreement, as follows:
'1. On 23 November 1999, Canada will request that this matter be referred to the original panel pursuant to Article 21.5 of the DSU. Canada will also request the convening of a DSB meeting on 3 December 1999 and Brazil will not object to the holding of such a meeting.
2. At the DSB meeting convened in response to the request by Canada, Brazil will accept the establishment of a review panel under Article 21.5 of the DSU and will not pose any procedural objection to the establishment of such a panel.
3. Brazil and Canada shall cooperate to ensure that the review panel convened under Article 21.5 of the DSU will be able to circulate its report within 60 days of its establishment. Canada will not request authorization to suspend concessions until after circulation of the Article 21.5 report.
4. Neither Brazil nor Canada will object to a request that the DSB be convened to consider the report that may be submitted to it under Article 21.5 for adoption. In the event that such report finds that Brazil has not complied with the recommendations or rulings of the DSB, neither party will object to DSB consideration of a request by Canada for authorization to suspend concessions pursuant to Article 22.2 of the DSU and/or Article 4.10 of the SCM Agreement; provided, however, that Brazil may request that the matter be referred to arbitration pursuant to Article 22.6 of the DSU.
5. Pursuant to footnote 6 to Article 4 of the SCM Agreement, Brazil and Canada agree that the deadline for DSB action under the first sentence of Article 22.6 of the DSU shall be 15 days after the circulation of the report under Article 21.5 of the DSU, and that the deadline specified in the third sentence of Article 22.6 of the DSU for completion of arbitration shall be 30 days after the matter is referred to arbitration.'"(689) 469. In US - FSC, the following information was provided by the European Communities with regard to the agreed procedures in the follow-up to the FSC dispute: "The representative of the European Communities, speaking under 'Other Business', said that by a joint letter of 2 October 2000, the EC and the US had informed the DSB of the procedures agreed by the parties in the follow-up to the Foreign Sales Corporations (FSC) dispute (WT/DS108/12). The objective of the agreed procedures was to deal with the so-called 'sequencing issue' in a way that would allow for a multilateral determination regarding WTO-compatibility of the US legislation while fully protecting the EC's rights to suspend concessions and adopt countermeasures if the US legislation was found to be WTO-incompatible. The US reading of the DSU provisions as applied in the banana dispute had left the EC with two options on the procedures to follow in this case: (i) either to go directly to Article 22.6 of the DSU and request authorization to suspend concessions, as the United States had done in the banana dispute; (ii) or to agree on procedures like those contained in the agreement that combined legal security for the EC with the fundamental WTO principle that prohibited unilateral determinations. In this respect, the parties had agreed to simultaneously start Articles 21.5 and 22.6 of DSU procedures, but to suspend the work of the Arbitrators until the reports of the compliance panel and Appellate Body, in case of appeal, had been adopted. The agreed procedures were also designed to apply in case the United States failed to adopt any FSC replacement legislation, in which case the EC could have direct recourse to Article 22.6 of the DSU. Finally, he wished to reiterate the point made under item 1 with respect to the issue of sequencing and the hope that he had expressed thereunder."(690) 470. The relevant part of the Understanding between the European Communities and the United States Regarding Procedures under Articles 21 and 22 of the DSU and Article 4 of the SCM Agreement in US - FSC reads as follow: "The European Communities and the United States would like to inform the Dispute Settlement Body that they have agreed on the following 'Agreed procedures under Articles 21 and 22 of the Dispute Settlement Understanding and Article 4 of the SCM Agreement applicable in the follow-up to the United States - Tax Treatment of 'Foreign Sales Corporations' WTO dispute' (WT/DS108).
Agreed procedures under Articles 21 and 22 of the Dispute Settlement Understanding and Article 4 of the SCM Agreement applicable in the follow-up to the United States - Tax Treatment of 'Foreign Sales Corporations' WTO Dispute
The Panel and Appellate Body reports in the WTO dispute United States - Tax Treatment for 'Foreign Sales Corporations' (WT/DS108/R and WT/DS108/AB/R) between the European Communities (EC) and the United States of America (US) were adopted by the Dispute Settlement Body (DSB) on 20 March 2000.
The parties, in reaching this agreement, contemplate that the US Congress will pass legislation this Congressional session to replace the foreign sales corporation provisions of the Internal Revenue Code.
This agreement does not prejudice the parties' rights to take any action or procedural step to protect their rights or interests, including the activation of any aspect of dispute settlement proceedings.
The EC and the US have agreed on the following procedures:
1. Should the European Communities consider that the situation described in Article 21.5 of the DSU exists, the EC will request consultations which the parties agree to hold within 12 days from the date of circulation of the request so as to allow third parties to request to join the consultations. The EC and the US agree that at the end of this round of consultations, should either party so state, the parties will jointly consider that the consultations have failed to settle the dispute.
2. Consequently, the EC will be entitled to request immediately the establishment of a panel pursuant to Article 21.5 of the DSU (the Article 21.5 compliance panel).
3. At the first DSB meeting in which the EC request appears as an item on the agenda, the US will accept the establishment of the Article 21.5 compliance panel.
4. The EC and the US will cooperate to enable the Article 21.5 compliance panel to circulate its report within 90 days of its establishment, excluding any time during which the panel's work may be suspended pursuant to Article 12.12 of the DSU.
5. Either party may request the DSB to adopt the report of the Article 21.5 compliance panel in a meeting at least 20 days after the circulation of the report unless either party appeals the report.
6. In case of an appeal of the Article 21.5 compliance panel report, the EC and the US will cooperate to enable the Appellate Body to circulate its report within 60 days from the date of notification of the appeal.
7. In the event of an appeal, either party may request the DSB to adopt the reports of the Appellate Body and the Article 21.5 compliance panel (as modified by the Appellate Body report) in a meeting within 15 days after the circulation of the Appellate Body report.
8. Where the EC has requested consultations under paragraph 1, and after the end of the period (the implementation period) available to the US to implement the DSB recommendations and rulings in the WTO dispute United States - Tax Treatment of 'Foreign Sales Corporations', the European Communities may request authorization to suspend concessions or other obligations pursuant to Article 22.2 of the DSU and to adopt countermeasures pursuant to Article 4.10 of the Agreement on Subsidies and Countervailing Measures (SCM Agreement).
9. Where there exist no measures taken to comply with the DSB recommendations and rulings by the end of the implementation period, the EC may request authorization to suspend concessions or other obligations pursuant to Article 22.2 of the DSU and to adopt countermeasures pursuant to Article 4.10 of the SCM Agreement, without having recourse to Article 21.5 of the DSU.
10. Under Article 22.6 of the DSU including Article 4.11 of the SCM Agreement, the US will object to the appropriateness of the countermeasures and/or the level of the suspension of concessions or other obligations and/or make an Article 22.3 claim, before the date of the DSB meeting considering the EC request, and the matter will be referred to arbitration pursuant to Article 22.6 of the DSU. The European Communities will not pose any objection to referral of the matter to such arbitration.
11. Where the EC has requested the establishment of a panel under paragraph 2, both the EC and the US agree to request the arbitrator, at the earliest possible moment, to suspend its work until either (a) adoption of the Article 21.5 compliance panel report or (b) if there is an appeal, adoption of the Appellate Body report.
12. In the event that the DSB finds that measures taken by the US to comply with the recommendations and rulings of the DSB are inconsistent with the covered agreements referred to in the Article 21.5 compliance panel request, the arbitrator will automatically resume its work. In the event that the DSB finds that the measures taken by the US to comply with the recommendations and rulings of the DSB are not inconsistent with the covered agreements referred to in the Article 21.5 compliance panel request, the EC will withdraw its request under Article 22.2 of the DSU, thereby terminating the arbitration procedure.
13. The EC and the US will cooperate to enable the arbitrator to circulate its report within 60 days of the resumption of its work.
14. If any of the original panelists are not available for either the Article 21.5 compliance panel or the Article 22.6 arbitration (or both), the EC and the US agree to request the Director-General of the WTO to appoint as soon as possible a replacement for the proceeding or proceedings in which this is required. If an original panelist is unavailable to serve in both proceedings, the parties will further request that in making this appointment the Director-General seek a person who will be available to act in both proceedings.
15. As this dispute has been conducted under the SCM Agreement and the Agreement on Agriculture, the parties agree that the timeframes under the DSU will continue to apply to the proceedings covered by this agreement, except as otherwise agreed herein.
16. The parties agree to continue to cooperate in all matters related to this agreement and not to raise any procedural objections to any of the steps set out in this agreement. If during the application of this agreement the parties consider that a procedural aspect has not been properly covered by this agreement, they will endeavour to find a solution within the shortest time possible that will not affect the other aspects and steps therein agreed."(691) 471. In Australia - Salmon, Canada requested authorization to suspend concessions and obligations. Immediately after, Canada also requested the establishment of a panel pursuant to Article 21.5. The DSB established the panel and, upon request by Australia, an arbitration panel to determine the level of suspension of concessions pursuant to Article 22.6.(692) Canada and Australia subsequently agreed that the arbitration panel would be suspended until the report of the panel pursuant to Article 21.5 had been circulated.(693) 472. In Canada - Dairy, the relevant part of the Understanding between Canada and New Zealand Regarding Procedures under Articles 21 and 22 of the DSU reads as follows: "Canada and New Zealand would like to inform the Dispute Settlement Body that they have agreed on the attached 'Agreed Procedures between Canada and New Zealand under Articles 21 and 22 of the Dispute Settlement Understanding in the follow-up to the dispute in Canada - Measures Affecting the Importation of Milk and the Exportation of Dairy Products (WT/DS113)'.
Agreed Procedures between Canada and New Zealand under Articles 21 and 22 of the Dispute Settlement Understanding in the follow-up to the dispute in Canada - Measures Affecting the Importation of Milk and the Exportation of Dairy Products (WT/DS113)
The Panel and Appellate Body reports in this dispute were adopted by the Dispute Settlement Body (DSB) on October 27, 1999.
On December 23, 1999, pursuant to Article 21.3(b) of the DSU, Canada, the United States and New Zealand agreed on the reasonable period of time for implementation of the DSB's recommendations and rulings (WT/DS103/10; WT/DS113/10). According to the terms of the December 23, 1999 agreement, as amended on December 11, 2000, the staged implementation process is to be completed by January 31, 2001.
Pursuant to this implementation process, Canada has undertaken certain measures, including the development of new mechanisms for the export of dairy products replacing the measures found to be inconsistent with Canada's obligations under the WTO Agreement.
Canada and New Zealand (the 'parties') have agreed on the following procedures:
1. After the end of the period available to Canada to implement the DSB recommendations and rulings in Canada - Measures Affecting the Importation of Milk and the Exportation of Dairy Products, as extended by the December 11 agreement, should New Zealand consider that the situation described in Article 21.5 of the DSU exists, New Zealand will request consultations which the parties agree to hold within 10 days from the date of the request. Canada and New Zealand agree that at the end of such consultations, should either party so state, the parties will jointly consider that the consultations have failed to settle the dispute. Thenceforward New Zealand will be entitled to request the establishment of a panel pursuant to Article 21.5 of the DSU (the "Article 21.5 compliance panel").
2. At the first DSB meeting at which the New Zealand request for the establishment of an Article 21.5 compliance panel appears as an item on the agenda, Canada will accept the establishment of that panel.
3. New Zealand and Canada will cooperate to enable the Article 21.5 panel to circulate its report within 90 days of the panel's composition, excluding such time as the panel's work may be suspended pursuant to Article 12.12 of the DSU.
4. Either party may request the DSB to adopt the report of the Article 21.5 compliance panel at a DSB meeting that is held at least 20 days after the circulation of the report, unless either party appeals the report.
5. In case of an appeal of the Article 21.5 compliance panel report, the parties will cooperate to enable the Appellate Body to circulate its report within no more than 90 days from the date of notification of the appeal to the DSB.
6. In the event of an appeal, either party may request the DSB to adopt the reports of the Appellate Body and the Article 21.5 compliance panel (as modified by the Appellate Body report) at a DSB meeting held within 30 days of the circulation of the Appellate Body report.
7. New Zealand may request authorization to suspend concessions or other obligations pursuant to Article 22.2 of the DSU simultaneously with or after any New Zealand request for the establishment of a panel pursuant to paragraph 1.
8. Under Article 22.6 of the DSU, Canada will object to the level of suspension of concessions or other obligations and/or make a claim under DSU Article 22.3 before the date of the DSB meeting considering the New Zealand request and the matter shall be referred to arbitration pursuant to DSU Article 22.6. New Zealand will not pose any objection to the referral of the matter to such arbitration.
9. Where the matter has been referred to arbitration, the parties agree to request the Article 22.6 arbitrator, at the earliest possible moment, to suspend its work until either (a) the adoption of the Article 21.5 compliance panel report; or (b) if there is an appeal, the adoption of the Appellate Body report.
10. In the event that the DSB finds that Canada has failed to comply with the recommendations and rulings of the DSB or that the measures taken by Canada to comply with the recommendations and rulings of the DSB are inconsistent with the covered agreements as referred to in the Article 21.5 compliance panel request, the arbitrator will automatically resume its work. The parties will cooperate to enable the arbitrator to circulate its report within 60 days of the resumption of its work.
11. In the event that the DSB finds that Canada has complied with the recommendations and rulings of the DSB and that the measures taken by Canada to comply with the recommendations and rulings of the DSB are not inconsistent with the covered agreements as referred to in the Article 21.5 compliance panel request, New Zealand will withdraw its request under Article 22.2 of the DSU, thereby terminating the arbitration procedure.
12. The parties will cooperate to facilitate the participation of the original panelists in the Article 21.5 compliance panel and the Article 22.6 arbitration.
13. If any of the original panelists are not available within a reasonable period of time for either the Article 21.5 compliance panel or the Article 22.6 arbitration, or both, the parties agree to request the Director-General of the WTO to appoint, as soon as possible, a replacement for the proceeding or proceedings in which such a replacement is required. If an original panelist is unavailable to serve in the Article 21.5 proceedings, the parties will further request that in making this appointment, the Director-General seek a person who will also be available to act in the Article 22.6 arbitration.
14. The parties agree to continue to cooperate in all matters related to these agreed procedures and not to raise any procedural objection to any of the steps set out herein. If, during the application of these procedures, the parties consider that a procedural aspect has not been properly addressed, they will endeavour to find a solution within the shortest time possible that will not affect the other aspects and steps herein agreed.
15. These agreed procedures do not prejudice either party's rights to take any action or procedural step to protect its rights or interests, including the activation of any aspect of the provisions of the DSU."(694) 473. In EC - Bed Linen, India and the European Communities agreed that if India decided to initiate proceedings under Article 22 of the DSU, the European Communities would not assert that India was precluded from obtaining DSB authorization for suspension of concessions on the basis that its request was made outside the 30-day time-period specified in the first sentence of Article 22.6 of the DSU.(695) (iii) Panel's scope of review of procedural agreements 474. In Brazil - Aircraft and Canada - Aircraft, with regard to the two proceedings under Article 21.5 brought by Canada and Brazil against each other in relation to their respective aircraft export subsidies, Canada and Brazil reached two identical agreements (though the names of the parties were swapped) on the conduct of proceedings (see paragraph 468 above). Brazil however stated at a hearing during the Article 22.6 Arbitration proceedings that the recourse by Canada to Article 22.2 of the DSU before the completion of the Article 21.5 proceedings was a material breach of the bilateral agreement. Referring to Article 60 of the Vienna Convention, Brazil declared that it was terminating the bilateral agreement. Brazil thus stated that, pursuant to Article 22.7 of the DSU, the Arbitrators should determine that the proposed countermeasures are not allowed under the SCM Agreement on the grounds that the time within which they may be authorized has expired. Canada considered that the Arbitrators did not have authority to interpret the bilateral agreement.(696) The Arbitrators considered that they did not need to discuss the question of whether they could interpret the bilateral agreement or whether it ceased to apply to the Arbitrators' tasks after Brazil's alleged application of Article 60 of the Vienna Convention.(697) 475. The Appellate Body in Mexico - Corn Syrup assumed that "the same procedures apply in Article 21.5 proceedings as in original panel proceedings"(698) when considering the alleged failure of the United States to comply with Article 6.2 of the DSU because the United States' communication seeking recourse to Article 21.5 of the DSU did not indicate whether consultations had been held. The Appellate Body considered that the requirement under Article 6.2 of the DSU "to indicate whether consultations were held" is satisfied by the inclusion in the Panel request, of a statement as to whether or not consultations occurred: "In assessing the importance of the obligation 'to indicate whether consultations were held', we observe that the requirement will be satisfied by the inclusion, in the request for establishment of a panel, of a statement as to whether consultations occurred or not. The purpose of the requirement seems to be primarily informational - to inform the DSB and Members as to whether consultations took place. We also recall that the DSU expressly contemplates that, in certain circumstances, a panel can deal with and dispose of the matter referred to it even if no consultations took place. Similarly, the authority of the panel cannot be invalidated by the absence, in the request for establishment of the panel, of an indication 'whether consultations were held'. Indeed, it would be curious if the requirement in Article 6.2 to inform the DSB whether consultations were held was accorded more importance in the dispute settlement process than the requirement actually to hold those consultations."(699)
XXII. Article 22 back to top Article 22: Compensation and the Suspension of Concessions 1. Compensation and the suspension of concessions or other obligations are temporary measures available in the event that the recommendations and rulings are not implemented within a reasonable period of time. However, neither compensation nor the suspension of concessions or other obligations is preferred to full implementation of a recommendation to bring a measure into conformity with the covered agreements. Compensation is voluntary and, if granted, shall be consistent with the covered agreements.
2. If the Member concerned fails to bring the measure found to be inconsistent with a covered agreement into compliance therewith or otherwise comply with the recommendations and rulings within the reasonable period of time determined pursuant to paragraph 3 of Article 21, such Member shall, if so requested, and no later than the expiry of the reasonable period of time, enter into negotiations with any party having invoked the dispute set |
