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WTO ANALYTICAL INDEX: DISPUTE SETTLEMENT UNDERSTANDING

Understanding on Rules and Procedures Governing the Settlement of Disputes

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XXI. Article 21    back to top

A. Text of Article 21

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 arbitrator(13) 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.

 
B. Interpretation and Application of Article 21

1. Article 21.1

(a) “prompt compliance”

(i) Concept of compliance: withdrawal or modification

997.     The Arbitrator in Argentina — Hides and Leather (Article 21.3(c)) denned 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.”(1545)

 

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 …”(1546)

998.     In Argentina — Hides and Leather (Article 21.3(c)), 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.”(1547),(1548)

999.     In Japan — DRAMs (Korea) (Article 21.3(c)), the Arbitrator recalled that:

“[A] Member whose measure has been found to be inconsistent with the covered agreements may generally choose between two courses of action: withdrawal of the measure; or modification of the measure by remedial action. While withdrawal may be the preferred option to secure “prompt compliance”, a Member may, where withdrawal is deemed impracticable, choose to modify the measure, provided that this is done in the shortest time possible, and that such modification is permissible under the DSB’s recommendations and rulings.”(1549)

1000.     In Colombia — Ports of Entry (Article 21.3(c)), the Arbitrator observed that Article 3.7 of the DSU provides that the first objective of the dispute settlement mechanism is usually to secure withdrawal of the WTO-inconsistent measures, and therefore agreed with Panama that withdrawal of the inconsistent measures was the “preferred” means of implementation and certainly falls within the range of permissible actions. The Arbitrator stated:

“However, I do not exclude that Colombia could bring itself into conformity with the recommendations and rulings of the DSB by modifying both the indicative prices mechanism and the ports of entry measure in a manner that rectifies the particular WTO-inconsistencies identified by the Panel. In my view, modification of both the indicative prices mechanism and the ports of entry measure is within the “range of permissible actions” available for Colombia to implement the recommendations and rulings of the DSB in this dispute.”(1550)

(ii) Promptness of compliance

Flexibility

1001.     In Chile — Alcoholic Beverages (Article 21.3(c)), 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.”(1551)

1002.     In US — 1916 Act (Article 21.3(c)), the Arbitrator further indicated that an implementing Member “may reasonably be expected to use all the flexibility available within its normal legislative procedures to enact the required legislation as speedily as possible.”(1552)

1003.     In Colombia — Ports of Entry (Article 21.3(c)), the Arbitrator considered that the implementing Member “is expected to use whatever flexibility is available within its legal system to promptly implement the recommendations and rulings of the DSB.”(1553)

Time after adoption of report(s)

1004.     In US — Section 110(5) Copyright Act (Article 21.3 (c)), the Arbitrator further indicated that, in order to effect “prompt compliance”, an implementing Member must use the time after adoption of a panel and/or Appellate Body report to begin to implement the recommendations and rulings of the DSB:

“[A]n implementing Member must use the time after adoption of a panel and/or Appellate Body report to begin to implement the recommendations and rulings of the DSB. Arbitrators will scrutinize very carefully the actions an implementing Member takes in respect of implementation during the period after adoption of a panel and/or Appellate Body report and prior to any arbitration proceeding. If it is perceived by an arbitrator that an implementing Member has not adequately begun implementation after adoption so as to effect ‘prompt compliance’, it is to be expected that the arbitrator will take this into account in determining the ‘reasonable period of time’.”(1554)

1005.     In the same vein, the Arbitrator on Chile — Price Band System (Article 21.3(c)) considered that a Member’s obligation to implement the recommendations and rulings of the DSB is triggered by the adoption of the report(s) at issue and thus a Member “must at the very least promptly commence and continue concrete steps towards implementation”:

“A Member’s obligation to implement the recommendations and rulings of the DSB is triggered by the DSB’s adoption of the relevant panel and/or Appellate Body reports. Although Article 21.3 acknowledges circumstances where immediate implementation is “impracticable”, in my view the implementation process should not be prolonged through a Member’s inaction (or insufficient action) in the first months following adoption. In other words, whether or not a Member is able to complete implementation promptly, it must at the very least promptly commence and continue concrete steps towards implementation. Otherwise, inaction or dilatory conduct by the implementing Member would exacerbate the nullification or impairment of the rights of other Members caused by the inconsistent measure. It is for this reason that arbitral awards under Article 21.3(c) calculate “reasonable period[s] of time” as from the date of adoption of panel and/or Appellate Body reports.”(1555)

(b) “recommendations or rulings”

1006.     In Thailand — Cigarettes (Philippines), the Panel had, in its interim report, declined to make a recommendation under Article 19.1 in respect of certain measures that were no longer in force. At the interim review stage, the Philippines requested that the Panel make a recommendation. While the Panel agreed to make a recommendation, it disagreed with the premise that the Philippines’ right to pursue compliance proceedings under Article 21 was contingent upon the existence of a recommendation under Article 19.1. The Panel said the following about the terms “recommendations or rulings” in the context of Article 21.1:

“Before turning to the specific factual situation presented in this case based on our understanding of the nature of the panels’ obligation under Article 19.1 as set out in the previous paragraph, we will first address the premise of the Philippines’ position. The Philippines’ request for the Panel’s recommendation with respect to the three MRSP Notices found inconsistent with Article III:2 of the GATT 1994, appears to be based on the premise that the Philippines needs recommendations to pursue compliance proceedings, if necessary, under, inter alia, Articles 21.5 and 22.6 of the DSU as, in the absence of a recommendation under Article 19.1 of the DSU, the Philippines’ right to pursue compliance proceedings under Articles 21.5 and 22 would be undermined. The Philippines submits that only recommendations by the DSB would impose positive obligations in relation to the subject measures.

 

We do not however find any language in the relevant provisions of Articles 21 and 22 of the DSU indicating that an implementing Member’s compliance obligation arises only from panels’ recommendations. Rather, most of the provisions relating to compliance obligations under Articles 21 and 22 of the DSU refer to both recommendations and rulings.(1556) For example, Article 21.1 provides, “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”. In our view, the scope of the compliance requirement under these provisions is therefore broader than just “recommendations”. In any event, it is difficult to envision a situation where the Philippines will a priori be precluded from resorting to the compliance proceedings with respect to any future action taken by Thailand if it can be shown that such action is related to the Panel’s findings on the inconsistency of the concerned MRSP Notices with Thailand’s obligations under Article III:2 of the GATT 1994. As noted in paragraphs 7.42 and 7.43 of the Interim Panel Report, previous panels considered it necessary and important to make findings even with respect to measures that have expired at the time of making such findings in certain situations. Among those are situations where a measure was still impairing benefits accruing to a complaining Member or situations where there remained the prospect of reintroduction of the measure, and thus making findings with respect to expired measures would contribute to resolving a particular dispute. If only recommendations were to guarantee the complaining Member’s right, as granted under the DSU, to seek compliance proceedings, there would be no meaning in even making findings for expired measures, which has not been the view of the Appellate Body and previous panels.(1557) We also do not believe that such an understanding would serve the spirit and purpose of the WTO dispute settlement mechanism.”(1558)

2. Article 21.2

(a) “interests of developing country Members”

1007.     In Indonesia — Autos (Article 21.3(c)), 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.”(1559)

1008.     In Chile — Alcoholic Beverages (Article 21.3(c)), 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.”(1560)

1009.     In Chile — Price Band System (Article 21.3(c)), the Arbitrator while agreeing with the Arbitrator in Chile — Alcoholic Beverages (Article 21.3(c)) on the importance of being generally mindful of the difficulties that a developing country may face upon implementation of rulings and recommendations of the DSB (see paragraph 1008 above), noted that the current case differed from the latter since this was the first arbitration where both the complainant and the respondent were developing country Members. The Arbitrator concluded that given the unusual circumstances of this case, he was “not swayed towards either a longer or shorter period of time by the ‘[p] articular attention’ [to be paid] to the interests of developing countries”:

“I agree with the following statement by the arbitrator in Chile — Alcoholic Beverages that ‘an arbitrator functioning under Article 21.3(c) [must] he 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.’(1561) This arbitration is, however, the first arbitration under Article 21.3(c) to include developing countries as both complainant and respondent. The period of time for implementation of the recommendations and rulings of the DSB in this case is thus a ‘matter[] affecting the interests’ of both Members: the general difficulties facing Chile as a developing country in revising its longstanding PBS, and the burden imposed on Argentina as a developing country whose access to the Chilean agricultural market is impeded by the PBS, contrary to WTO rules.

 

Furthermore, Chile has not pointed to additional specific obstacles that it faces as a developing country under present circumstances. This is a matter which I should take into account in evaluating whether a longer period of time may be needed for implementation. The absence of presently-existing, concrete difficulties in Chile’s position as a developing country stands in contrast to previous arbitrations, wherein Members have identified, not simply their positions as developing countries, but also ‘severe’(1562) or ‘dire’(1563) economic and financial situations existing at the time of the proposed period of implementation. In contrast, the acuteness of Argentina’s burden as a developing country complainant that has been successful in establishing the WTO-inconsistency of a challenged measure, is amplified by Argentina’s daunting financial woes at present. Accordingly, I recognize that Chile may indeed face obstacles as a developing country in its implementation of the recommendations and rulings of the DSB, and that Argentina, likewise, faces continuing hardship as a developing country so long as the WTO-inconsistent PBS is maintained. In the unusual circumstances of this case, therefore, I am not swayed towards either a longer or shorter period of time by the ‘[particular attention’(1564) I pay to the interests of developing countries.”(1565)

1010.     In US — Offset Act (Byrd Amendment) (Article 21.3 (c)), the Arbitrator had difficulty in comprehending how the fact that various complainants were developing country Members could affect the determination of the reasonable period of time for the developed country Member to implement the DSB recommendations:

“I am, furthermore, mindful of my obligation, pursuant to Article 21.2, to pay ‘[particular attention … to matters affecting the interests of developing country Members’. I note that, by its wording, Article 21.2 does not distinguish between situations where the developing country Member concerned is an implementing or a complaining party. However, I also note that the Complaining Parties have not explained specifically how developing country Members’ interests should affect my determination of the reasonable period of time for implementation. It is useful to recall, once again, that the term ‘reasonable period of time’ has been consistently interpreted to signify the ‘shortest period possible within the legal system of the Member’. Therefore, I have some difficulty in seeing how the fact that several Complaining Parties are developing country Members should have an effect on the determination of the shortest period possible within the legal system of the United States to implement the recommendations and rulings of the DSB in this case.”(1566)

1011.     In EC — Tariff Preferences (Article 21.3(c)), the European Communities requested the Arbitrator to take into account the interests of the developing countries which were at the time beneficiaries of measures found to be inconsistent with WTO law (the Drug Arrangements). The Arbitrator recalled that some arbitrators had taken Article 21.2 of the DSU into account in assessing the difficulties faced by an implementing Member that was a developing country(1567), or where both parties were developing countries.(1568) The Arbitrator pointed out that until then no arbitrator had determined whether the reference to ‘developing country Members’ in Article 21.2 should be interpreted to include, in the context of an Article 21.3(c) arbitration, Members not party to the arbitration. The Arbitrator however decided that it was unnecessary for him to decide this issue.(1569)

1012.     In US — Gambling (Article 21.3(c)), the Arbitrator noted that, in absence of an express limitation, Article 21.2 may not be limited to implementing developing country Members. Further, the Arbitrator interpreted the context of Article 21.2 as requiring a clear demonstration of adverse effects of the measures at issue on the interests of developing countries invoking the article. The Arbitrator observed:

“[T]he text of Article 21.2 does not expressly limit its scope of application to developing country Members as implementing, rather than as complaining, parties to a dispute. Any such limitation, if it exists, must therefore be found in the context and/or object and purpose of this provision.(1570)

 

Before considering relevant context for the interpretation of Article 21.2 of the DSU, however, I consider it useful to examine in further detail the words that are used in this provision. The provision requires that “particular attention” be paid to: (i) matters; (ii) affecting the interests of developing country Members; (iii) with respect to the measure at issue. At first blush, it is not clear whether the words “matters” in Article 21.2 has the same meaning as elsewhere in the DSU,(1571) or whether it refers simply to the subject matter covered by Article 21. In any event, it seems to me that Article 21.2 contemplates a clear nexus between the interests of the developing country invoking the provision and the measures at issue in the dispute, as well as a demonstration of the adverse affects of such measures on the interests of the developing country Member(s) concerned.

 

Turning briefly to the context in the light of which Article 21.2 must be interpreted, I note that the provision is located within Article 21, which is entitled “Surveillance of Implementation of Recommendations and Rulings”. The second paragraph of Article 21, like the first,(1572) sets out a broad principle that guides and informs the more specific paragraphs that follow, including Article 21.3. Given that Article 21 contains a number of additional paragraphs dealing with different aspects of surveillance and implementation, it seems likely that Article 21.2 informs each of the subsequent paragraphs in a different manner. Arguably, for example, Article 21.2 could constitute a legislative expression of a factor that is to constitute a “particular circumstance” to be taken into account under Article 21.3(c). The last two paragraphs of Article 21 are also, as Antigua pointed out at the oral hearing, of potential use in interpreting the scope and role of Article 21.2. Each of those provisions also deals with developing country Members of the WTO at the stage of surveillance and implementation of DSB recommendations and rulings.(1573) Yet, contrary to Article 21.2, both Article 21.7 and Article 21.8 expressly apply to the developing country members that brought the case, that is, to developing countries as complaining parties.”(1574)

1013.     The Arbitrator in EC — Export Subsidies on Sugar (Article 21.3(c)) considered that the phrase “developing country Members” in Article 21.2 includes both implementing and complaining developing country Members:

“I find that previous arbitrators have not explicitly resolved the question whether the phrase ‘developing country Members’ in Article 21.2 refers exclusively to the implementing Member, or whether it also applies to developing country Members other than the implementing member such as, for instance, the complaining Member, third parties to the dispute, or any developing country Member of the WTO.(1575) I consider that Article 21.2 is to be interpreted as directing an arbitrator to pay ‘[particular attention’ to ‘matters affecting the interests’ of both an implementing and complaining developing country Member or Members.(1576) I note that Brazil, the European Communities and Thailand explicitly agree on this point.(1577) In arriving at this conclusion, I agree with the arbitrator in US — Gambling that the text of Article 21.2 does not limit its scope of application to an implementing developing country Member.(1578) I also note that Articles 21.7 and 21.8 refer to circumstances in which a ‘matter … has been raised by a developing country Member’ or the case is one brought by a developing country member’; this suggests that, where the drafters of the DSU wished to limit the scope of provision to a particular category or group of developing country Members, they did so expressly.”(1579),(1580)

3. Article 21.3: period of time for compliance

(a) General

1014.     The Arbitrator in Canada — Pharmaceutical Patents (Article 21.3(c)) considered that Members are not unconditionally entitled to any period of time to bring WTO-inconsistent measures into conformity:

“Further, and significantly, a “reasonable period of time” is not available unconditionally. Article 21.3 makes it clear that a reasonable period of time is available for implementation only “[i]f it is impracticable to comply immediately With the recommendations and rulings” of the DSB. Implicit in the wording of Article 21.3 seems to me to be the assumption that, ordinarily, Members will comply with recommendations and rulings of the DSB “immediately”. The “reasonable period of time” to which Article 21.3 refers is, thus, a period of time in what is implicitly not the ordinary circumstance, but a circumstance in which “it is impracticable to comply immediately…”.”(1581)

1015.     In US-Offset Act (Byrd Amendment) (Article21.3 (c)), the Arbitrator indicated that Article 21.3 “makes clear that ‘prompt compliance’, in principle, implies ‘immediate [ ]’ compliance” and, accordingly deduced that a “ ‘reasonable period of time’ for implementation is not available unconditionally to an implementing Member. Rather, an implementing Member is entitled to a reasonable period of time for implementation only where, pursuant to Article 21.3 , ‘it is impracticable to comply immediately with the recommendations and rulings’ of the DSB”.(1582)

(b) Article 21.3(b)

(i) Precedential value of Article 21.3(b) agreements

1016.     In US — Hot-Rolled Steel (Article 21.3(c)), 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(1583), 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.”(1584)

(ii) Table showing agreements pursuant to Article 21.3(b)

1017.     The following table provides information on agreements regarding the reasonable period of time pursuant to Article 21.3(b). It is updated to 30 September 2011.

WT/DS No. Short Title Reasonable period of time/Expiry date Reference
DS31 Canada — Periodicals 15 months
30 October 1998
WT/DSB/M/37
DS34 Turkey — Textiles 15 months
19 February 2001
WT/DS34/10
DS50 India — Patents (US) 15 months
16 April 1999
WT/DSB/M/45
DS56 Argentina — Textiles and Apparel 180 / 242
days 19 October 1998 / 1 January 1999
WT/DS56/14
DS58 US — Shrimp 13 months
6 December 1999
WT/DSB/M/54
DS69 EC — Poultry 8 months 8 days
31 March 1999
WT/DS69/9
DS76 Japan — Agriculutral Products II 9 months 12 days
31 December 1999
WT/DS76/9
DS90 India — Quantitative Restrictions 18 months 10 days
1 April 2001
WT/DS90/15
DS98 Korea — Dairy 4 months 8 day
 20 May 2000
WT/DS98/11
DS99 US — DRAMS 8 months
19 November 1999
WT/DS99/6
DS103 DS113 Canada — Dairy 14 months 4 days
31 December 2000
31 January 2001
WT/DS103/10
WT/DS113/10
WT/DS103/13
WT/DS113/13
DS122 Thailand — H-Beams 6 months 15 days
20 October 2001
WT/DS122/8
DS132 Mexico — Corn Syrup 6 months 29 days
22 September 2000
WT/DS132/5
DS141 EC — Bed Linen 5 months 2 days
14 August 2001
WT/DS141/10
DS146 DS175 India — Autos 5 months
5 September 2002
WT/DS146/13
WT/DS175/13
DS161 DS169 Korea — Various Measures on Beef 8 months
10 September 2001
WT/DS161/12
WT/DS169/12
DS166 US — Wheat Gluten 4 months 14 days
2 June 2001
WT/DS166/12
DS174 DS290 EC — Trademarks and Geographical Indications 11 months 2 weeks
3 April 2006
WT/DS174/24
WT/DS290/22
DS176 US — Section 211 Appropriations Act 11 months WT/DS176/10
    31 December 2002 WT/DS176/12
    30 June 2003 WT/DS176/13
    31 December 2003 WT/DS176/14
    31 December 2004
30 June 2005
WT/DS176/15
DS179 US — Stainless Steel 7 months 1
September 2001
WT/DS179/5
DS189 Argentina — Ceramic Tiles 5 months
5 April 2002
WT/DS189/7
DS202 US — Line Pipe 5 months 24 days 1
September 2002
WT/DS202/18
DS204 Mexico — Telecoms 13 months WT/DS204/7
1 July 2005 WT/DS204/10
15 July 2005 WT/DS204/11
29 July 2005
DS206 US — Steel Plate 5 months
29 December 2002
WT/DS206/7
DS211 Egypt — Steel Rebar 9 months
31 July 2003
WT/DS211/6
DS212 US — Countervailing Measures on Certain EC Products 10 months
8 November 2003
WT/DS212/12
DS219 EC — Tube or Pipe Fittings 7 months
19 March 2004
WT/DS219/12
DS231 EC — Sardines 6 months
23 April 2003
WT/DS231/16
DS238 Argentina — Preserved Peaches 8 months
16 days 31 December 2003
WT/DS238/7
DS245 Japan — Apples 6 months 20 days
30 June 2004
WT/DS245/9
DS257 US — Softwood Lumber TV 10 months
17 December 2004
WT/DS257/13
DS264 US — Softwood Lumber V 7 months 15 days WT/DS264/12
    15 April 2005
2 May 2005
WT/DS264/15
DS276 Canada — Wheat Exports and Grain Imports 10 months 5 days WT/DS276/19
    1 August 2005
DS277 US — Softwood Lumber VI 9 months
26 January 2005
WT/DS277/7
DS282 US — Anti-Dumping Measures on Oil Country Tubular Goods 6 months
28 May 2006
WT/DS282/11
DS291 EC — Approval and Marketing of Biotech Products (US) 12 months
21 November 2007 11 January 2008
WT/DS291/35 WT/DS291/36
DS292 EC — Approval and Marketing of Biotech Products (Canada) 12 months
21 November 2007
WT/DS292/29 WT/DS292/30
    11 January 2008 WT/DS292/32
    11 February 2008 WT/DS292/33
    30 June 2008 WT/DS292/34
    31 July 2008 WT/DS292/35
    31 December 2008 WT/DS292/36
    1 March 2009 WT/DS292/37
    1 May 2009 WT/DS292/38
    30 June 2009
31  July 2009
WT/DS292/39 + Corr.l
DS293 EC — Approval and Marketing of Biotech Products (Argentina) 12 months
21 November 2007
WT/DS293/29 WT/DS293/30
    11 January 2008 WT/DS293/32
    30 June 2008 WT/DS293/33
    31 July 2008 WT/DS293/34
    31 December 2008 WT/DS293/35
    1 March 2009 WT/DS293/36
    30 June 2009 WT/DS292/37
    31 December 2009 WT/DS293/38
    31 January 2010 WT/DS293/39
    28 February 2010
31 March 2010
WT/DS293/40
DS294 US — Zeroing (EC) 11 months
9 April 2007
WT/DS294/19
DS295 Mexico — Anti-Dumping Measures on Rice 8 months
20 August 2006
WT/DS295/12
DS296 US — Countervailing Duty Investigation on DRAMs 7 months 16 days
8 March 2006
WT/DS296/11
DS299 EC — Countervailing Measures on DRAM Chips 8 months
3 April 2006
WT/DS299/7
DS302 Dominican Republic — Import and Sale of Cigarettes 24 months
19 May 2007
WT/DS302/17
DS308 Mexico — Taxes on Soft Drinks 10 months 7 days
31 January 2007
WT/DS308/15
DS312 Korea — Certain Paper 8 months
28 July 2006
WT/DS312/6
DS322 US — Zeroing (Japan) 11 months
24 December 2007
WT/DS322/20
DS331 Mexico — Steel Pipes and Tubes 6 months
24 January 2008
WT/DS331/7
DS334 Turkey — Rice 6 months
22 April 2008
WT/DS334/12
DS335 US — Shrimp (Ecuador) 6 months
20 August 2007
WT/DS335/10
DS337 EC — Salmon (Norway) 10 months
15 November 2008
WT/DS337/8
DS339 China — Auto Parts (EC) 7 months 20 days
1 September 2009
WT/DS339/15
DS340 China — Auto Parts (US) 7 months 20 days
1 September 2009
WT/DS340/15
DS342 China — Auto Parts (Canada) 7 months 20 days
1 September 2009
WT/DS342/15
DS343 US — Shrimp (Thailand) 8 months
1 April 2009
WT/DS343/16
DS345 US — Customs Bond Directive 8 months
1 April 2009
WT/DS345/15
DS350 US — Continued Zeroing 10 months
19 December 2009
WT/DS350/17
DS362 China — Intellectual Property Rights 12 months
20 March 2010
WT/DS362/13
DS363 China — Publications and Audiovisual Products 14 months
19 March 2011
WT/DS363/16
DS367 Australia — Apples 8 months
17 August 2011
WT/DS367/19
DS375 EC — IT Products (US) 9 months 9 days
30 June 2011
WT/DS375/16
DS376 EC — IT Products (Japan) 9 months 9 days
30 June 2011
WT/DS376/16
DS377 EC — IT Products (Chinese Taipei) 9 months 9 days
30 June 2011
WT/DS377/14
DS379 US — Anti-Dumping and Countervailing Duties (China) 11 months
25 February 2012
WT/DS379/11
DS382 US — Orange Juice 9 months
17 March 2012
WT/DS382/8
DS383 US — Anti-Dumping Measures on PET Bags 6 months
18 August 2010
WT/DS383/6
DS402 US — Zeroing (Korea) 8 months and 9 months
24 October and 24 November 2011
WT/DS402/6

(iii) Parties’ agreement after appointment of Arbitrator

1018.     Parties may enter into agreements under Article 21.3(b) following the appointment of an Arbitrator to determine the reasonable period of time under Article 21.3(c). For example, in US — Zeroing (Japan) (Article 21.3(c)), after the appointment of an Arbitrator under the procedures in Article 21.3(c), the parties reached an agreement on the reasonable period of time for implementation. Since Japan no longer sought to have the period at issue determined by binding arbitration, the Arbitrator decided not to issue an award in these proceedings.(1585)

(c) Article 21.3(c)

(i) Table showing the reasonable period of time awarded in Article 21.3(c) arbitrations to date

1019.     The following table provides information on the reasonable period of time awarded in Article 21.3(c) arbitrations to date.(1586) It is updated to 30 September 2011.

Guideline in Article 21.3(c) 15 months
Average to Date 11.5 months
Longest to Date 15 months
Shortest to Date 1 week 6 months
WT/DS No. Case Reasonable Period of Time (RPT) Proposed by Respondent RPT Proposed by Complainant(s) RPT Awarded by the Arbitrator
WT/DS8, WT/DS 10, WT/DS 11 Japan — Alcoholic Beverages II 23 months 5 months 15 months
WT/DS 18 Australia — Salmon 15 months Less than 15 months 8 months
WT/DS26, WT/DS48 EC — Hormones 39 months 10 months 15 months
WT/DS27 EC — Bananas III 15 months 1 week EC not entitled to RPT to implement; in the alternative, 6 months 15 months 1 week
WT/DS54, WT/DS55, WT/DS59, WT/DS64 Indonesia — Autos 15 months 1-6 months 12 months
WT/DS75, WT/DS84 Korea — Alcoholic Beverages 15 months 6 months 11 months 2 weeks
WT/DS87, WT/DS 110 Chile — Alcoholic Beverages 18 months 8 months 9 days 14 months 9 days
WT/DS 114 Canada — Pharmaceutical Patents 11 months 3 months 6 months
WT/DS 136, WT/DS 162 US — 1916 Act 15 months 6 months 10 months
WT/DS 139, WT/DS 142 Canada — Autos 11 months 12 days 3 months 8 months
WT/DS 155 Argentina — Hides and Leather 46 months 15 days 8 months 12 months
WT/DS 160 US-Section 110(5) Copyright Act 15 months 10 months 12 months
WT/DS 170 Canada — Patent Term 14 months 2 days 6 months 10 months
WT/DS 184 US — Hot-Rolled Steel 18 months 10 months 15 months
WT/DS207 Chile — Price Band System 18 months 9 months 6 days 14 months
WT/DS217, WT/DS234 US — Offset Act (Byrd Amendment) 15 months 6 months 11 months
WT/DS246 EC — Tariff Preferences 20 months 10 days 6 months 2 weeks 14 months 11 days
WT/DS268 US — Oil Country Tubular Goods Sunset Reviews 15 months 7 months 12 months
WT/DS285 US — Gambling 15 months 1-6 months 11 months 2 weeks
WT/DS265, WT/DS266, WT/DS283 EC — Export Subsidies on Sugar 19 months 12 days 6-7 months 12 months 3 days
WT/DS269, WT/DS286 EC — Chicken Cuts 26 months 5 months 10 days 9 months
WT/DS336 Japan — DRAMs (Korea) 15 months 5 months 8 months 2 weeks
WT/DS332 Brazil — Retreaded Tyres 21 months 10 months 12 months
WT/DS344 US — Stainless Steel (Mexico) 15 months 7 months 11 months
WT/ DS366 Colombia — Ports of Entry 15 months 4 months 19 days 8 months 15 days

(ii) Limited mandate of the arbitrator under Article 21.3(c)

Not the role of an arbitrator under Article 21.3(c) to identify a particular method of implementation

1020.     The Arbitrator in EC — Hormones (Article 21.3(c)) defined his mandate as determining the reasonable period of time within which implementation must be completed and not as suggesting means of implementation. The Arbitrator stated:

“It is not within my mandate under Article 21.3(c) of the DSU, to suggest ways or means to the European Communities to implement the recommendations and rulings of the Appellate Body Report and Panel Reports. My task is to determine the reasonable period of time within which implementation must be completed. Article 3.7 of the DSU provides, in relevant part, that ‘the first objective of the dispute settlement mechanism is usually to secure the withdrawal of the measures concerned if these are found to be inconsistent with the provisions of any of the covered agreements’ (emphasis added). Although withdrawal of an inconsistent measure is the preferred means of complying with the recommendations and rulings of the DSB in a violation case(1587), it is not necessarily the only means of implementation consistent with the covered agreements. An implementing Member, therefore, 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.”(1588)

1021.     In US — Hot-Rolled Steel (Article 21.3(c)), the Arbitrator indicated that although it is for the implementing Member to determine the proper scope and content of anticipated legislation, 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.”(1589)

1022.     In Chile — Price Band System (Article 21.3(c)), the Arbitrator further explained that, although the manner of implementation is up to the Member concerned, the more information provided on the details of the implementing measure, the greater the guidance to an Arbitrator in selecting a reasonable period of time:

“The fact that an Article 21.3(c) arbitration focuses on the period of time for implementation, however, does not render the substance of the implementation, that is, the precise means or manner of implementation, immaterial from the perspective of the arbitrator. In fact, the more information that is known about the details of the implementing measure, the greater the guidance to an arbitrator in selecting a reasonable period of time, and the more likely that such period of time will fairly balance the legitimate needs of the implementing Member against those of the complaining Member. Nevertheless, the arbitrator should still avoid deciding what a Member must do for proper implementation… .”(1590),(1591)

1023.     The Arbitrator in EC — Chicken Cuts (Article 21.3 (c)), stressed that his mandate was limited to determining the reasonable period of time and that, therefore, his task was focused on the ‘when’ and not the ‘what’. The Arbitrator further summarized previous awards regarding his mandate under Article 21.3(c):

“My role as arbitrator in this dispute is limited. My sole mandate under Article 21.3 of the DSU is to determine the ‘reasonable period of time’ needed for implementation of the recommendations and rulings of the DSB in this dispute. Thus, in fulfilling this limited mandate, I acknowledge that the implementing Member has a measure of discretion in selecting the means of implementation that it deems most appropriate; in other words, with respect to the implementing measure, my task focuses on the when, not the what.(1592) My concern is with time, not technique. Furthermore, I agree with previous arbitrators who have carried out like mandates under Article 21.3 that I should base my determination on the shortest period of time possible within the legal system of the implementing Member,(1593) and that in doing so I should bear in mind that the implementing Member is expected to use whatever flexibility is available within its legal system in its efforts to fulfil its WTO obligations.(1594) Such flexibility, however, need not necessarily include recourse to “extraordinary” procedures.(1595) As is made clear by Article 21.3(c), the particular circumstances of this dispute may also affect my calculation of the reasonable period of time, and may make it “shorter or longer”. All three parties to this dispute agree that these general principles should guide me in making my determination.”(1596)

1024.     In US — Gambling (Article 21.3(c)), the Arbitrator reiterated that the choice of the method of implementation was the implementing Member’s right and not the arbitrator’s. The Arbitrator stated:

“It is not the role of an arbitrator under Article 21.3(c) to identify a particular method of implementation and to determine the “reasonable period of time” on the basis of that method. Rather, the implementing Member retains the discretion to choose its preferred method of implementation.(1597) Nevertheless, it will be necessary for me to consider certain aspects of the means of implementation proposed by each of the parties, as explained in more detail below.”(1598)

1025.     The Arbitrator in Colombia — Ports of Entry (Article 21.3(c)) considered that it fell within an arbitrator’s mandate to consider the WTO-consistency of proposed means of implementation:

“While an implementing Member has discretion in selecting the means of implementation, this discretion is not “an unfettered right to choose any method of implementation”. In my view, implementation of the recommendations and rulings of the DSB in this case is an “obligation of result”, and therefore the means of implementation chosen must be apt in form, nature, and content to effect compliance, and should otherwise be consistent with the covered agreements. Thus, although I am mindful that it falls within the scope of Article 21.5 proceedings to assess whether the measures eventually taken to comply are WTO-consistent, in making my determination under Article 21.3(c) I must consider “whether the implementing action falls within the range of permissible actions that can be taken in order to implement the DSB’s recommendations and rulings.”(1599)

Limits on implementing Member’s discretion to choose the means of implementation

1026.     In EC — Export Subsidies on Sugar ( Article 21.3(c)), the Arbitrator reiterated that the implementing Member has a right to choose the means of implementation, but proceeded to highlight the limitations that applied to said right:

“[T]he choice of the method of implementation rests with the implementing Member. However, the implementing Member does not have an unfettered right to choose any method of implementation. Besides being consistent with the Member’s WTO obligations, the chosen method must be such that it could be implemented within a reasonable period of time in accordance with guidelines contained in Article 21.3(c). Objectives that are extraneous to the recommendations and rulings of the DSB in the dispute concerned may not be included in the method if such inclusion were to prolong the implementation period. Above all, it is assumed that the implementing Member will act in “good faith” in the selection of the method that it deems most appropriate for implementation of the recommendations and rulings of the DSB.”(1600)

1027.     In EC — Chicken Cuts (Article 21.3(c)), the Arbitrator stated that an implementing Member does not have an unlimited right to choose its means of implementation and, under the circumstances of the dispute, required the implementing Member to demonstrate that its first step of implementation was a requirement under its domestic law:

“Although Members generally have discretion to determine their means of implementation, this discretion is not without bounds.(1601) Saying that selecting the means of implementing the recommendations and rulings of the DSB is the prerogative of the implementing member is not at all the same as saying that “anything goes”. To declare otherwise would be to allow implementing Members the discretion also to pursue implementation measures that needlessly and unduly extend the reasonable period of time needed for implementation. And this would be contrary to the objective of Article 21.3 of the DSU. Therefore, under these specific circumstances, I cannot accept recourse to the WCO as an element of the European Communities’ proposed implementation that I must factor into my calculation of the reasonable period of time simply because the European Communities has proposed it.(1602) Instead, the European Communities must demonstrate that this first step of implementation is a requirement under Community law. I cannot just take their word for it; the European Communities must establish that it is so.”(1603)

Arbitrator bound by factual and legal findings in the panel and Appellate Body Reports that have been adopted as the recommendations and rulings of the DSB

1028.     In EC — Chicken Cuts (Article 21.3(c)), the Arbitrator stated that he was bound not only by Article 21.3 of the DSU, but also by the factual findings and the legal judgments that form the basis of the Panel and the Appellate Body Reports that have been adopted as recommendations and rulings by the DSB.

“In my limited role as arbitrator, I am bound not only by Article 21.3 of the DSU. I am bound also by the factual findings and the legal judgments that form the basis of the Panel and the Appellate Body Reports that have been adopted as recommendations and rulings by the DSB. So too are the parties to the dispute. To those I turn to assess this proposal by the European Communities as it relates to these two ECJ cases.

 Where the Panel and the Appellate Body have expressed one view on issues relating to the substance of this dispute, I am not free, in fulfilling my limited mandate as arbitrator, to express another. I am certainly not free in this limited role to contradict the reasoning of the Panel and Appellate Body that led to the recommendations and rulings that have been adopted by the DSB. The purpose of an Article 21.3 arbitration is not to question the recommendations and rulings of the DSB; it is to establish the reasonable period of time a Member should have to implement them. The aim of implementation is implementation. Nothing less. And nothing more.”(1604)

(iii) Prompt compliance: the shortest period possible

1029.     The Arbitrator in EC — Hormones (Article 21.3(c)) considered that, when read in the context of the requirement of “prompt compliance” of Article 21.1, 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”. 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.”(1605)

1030.     In Canada — Pharmaceutical Patents (Article 21.3 (c)), 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.”(1606)

1031.     The Arbitrator on Argentina — Hides and Leather (Article 21.3(c)) 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.”(1607)

1032.     In US — Gambling (Article 21.3(c)), the Arbitrator expressed that for various reasons the “shortest period possible for implementation within the legal system” standard should not be applied in isolation from the text of the DSU:

“[l]t is useful to recall that the DSU does not refer to the ‘shortest period possible for implementation within the legal system’ of the implementing Member. Rather, this is a convenient phrase that has been used by previous arbitrators to describe their task. I do not, however, view this standard as one that stands in isolation from the text of the DSU. In my view, the determination of the “shortest period possible for implementation” can, and must, also take due account of the two principles that are expressly mentioned in Article 21 of the DSU, namely reasonableness and the need for prompt compliance. Moreover, as differences in previous awards involving legislative implementation by the United States have shown, and as the text of Article 21.3(c) prescribes, each arbitrator must take account of ‘particular circumstances’ relevant to the case at hand. Strict insistence on the ‘shortest period possible for implementation within the legal system’ of the implementing Member would, in my view, tie an arbitrator’s hands and prevent him or her from properly identifying and weighing the particular circumstances that are determinative of ‘reasonableness’ in each individual case.”(1608), (1609)

1033.     The Arbitrator in EC — Export Subsidies on Sugar (Article 21.3(c)), reiterated the three governing principles applicable to an arbitrator’s determination of the reasonable period of time under Article 21.3 (c) of the DSU:

“These governing principles at issue are:

 

  • the reasonable period of time should be the shortest period of time possible within the legal system of the implementing Member;(1610)
     
  • the implementing Member must utilize all the flexibility and discretion available within the its legal and administrative system in order to implement within the shortest period of time possible; and
     
  • the ‘particular circumstances’ of the case must be taken into account in determining the reasonable period of time.”(1611)

1034.     In Brazil — Retreaded Tyres (Article 21.3(c)), the Arbitrator noted that the “average time period” or a particular proceed is inherently not the shortest period of time:

“I do not consider that the approach of calculating the average duration of a sample of proceedings from a past 5-year period under a different procedure than the one at issue in the present case provides an accurate and pertinent estimate of the time that the Federal Supreme Court will need to complete the pending [Allegation of Violation of Fundamental Precept] proceeding. … previous arbitrators have refused to rely on average time periods in determining the reasonable period of time because an average figure “inherently” represents more than the shortest possible period of time necessary within an implementing Member’s legal system. For these reasons, I consider Brazil’s estimate of the likely duration of the pending [Allegation of Violation of Fundamental Precept] proceeding on the basis of an average of a sample of [Direct Unconstitutionality Action] proceedings not appropriate.”(1612)

(iv) Concept of “reasonableness”

1035.     In US — Hot-Rolled Steel (Article 21.3(c)), the Arbitrator considered that the essence of “reasonableness” as articulated by the Appellate Body in US — Hot-Rolled Steel, in the context of Article 6.8 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.(1613)

 

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.”(1614)

1036.     Along the same lines, the Arbitrator in US — Offset Act (Byrd Amendment) (Aticle 21.3(c)) stated that:

“The final sentence of Article 21.3(c), moreover, makes clear that the “reasonable period of time” cannot be determined in the abstract, but rather has to be established on the basis of the particular circumstances of each case. I therefore agree, in principle, with the Arbitrator in US — Hot-Rolled Steel, who found that the term “reasonable” should be interpreted as including “the notions of flexibility and balance”, in a manner which allows for account to be taken of the particular circumstances of each case.”(1615)

1037.     In Chile — Alcoholic Beverages (Article 21.3(c)), 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.”(1616)

(v) The 15-month guideline

1038.     The Arbitrator in EC — Hormones (Article 21.3(c)) 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”.(1617)

1039.     In Canada — Pharmaceutical Patents (Article 21.3 (c)), the Arbitrator noted that “the 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.”(1618)

1040.     In EC — Bananas III (Article 21.3(c)), 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”:

“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’.(1619)

1041.     In US — Offset Act (Byrd Amendment) (Article 21.3(c)), the Arbitrator explained that:

“The 15-month period set forth in Article 21.3(c) is a “guideline”, expressed as a maximum period, and does not represent an average, or usual, period. Rather, as previous arbitrators have recognized, it is ultimately the relevant “particular circumstances” that influence what is a “reasonable period of time” for implementation.”(1620)

(vi) “particular circumstances”

General

1042.     In Japan — Alcoholic Beverages II (Article 21.3(c)), the Arbitrator recalled that “Article 21(3)(c) of the DSU also stipulates, however, that the “reasonable period of time” maybe shorter or longer than 15 months, depending upon the “particular circumstances”. The term, “particular circumstances”, is not defined in the DSU”(1621)

1043.     In Canada — Pharmaceutical Patents (Article 21.3 (c)), the Arbitrator defined “particular circumstances” as those that can influence what the shortest period possible for implementation may be within the legal system of the implementing Member:

“The “particular circumstances” mentioned in Article 21.3 are, therefore, those that can influence what the shortest period possible for implementation may be within the legal system of the implementing Member. Conceivably, several such “particular circumstances”, depending on the facts, could be relevant to a case such as the one before me.

… There may well be other “particular circumstances” that may be relevant to a particular case. However, in my view, the “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. For example, as others have ruled in previous Article 21.3 arbitrations, any proposed period intended to allow for the “structural adjustment” of an affected domestic industry will not be relevant to an assessment of the legal process. The determination of a “reasonable period of time” must be a legal judgement based on an examination of relevant legal requirements.”(1622)

Failure to commence implementation

1044.     In US — Section 110(5) Copyright Act (Article 21.3(c)), the Arbitrator stated that “[i]f it is perceived by an arbitrator that an implementing Member has not adequately begun implementation after adoption so as to effect “prompt compliance”, it is to be expected that the arbitrator will take this into account in determining the ‘reasonable period of time’”.(1623)

1045.     In Chile — Price Band System (Article 21.3(c)), the Arbitrator stated that “whether or not a Member is able to complete implementation promptly, it must at the very least promptly commence and continue concrete steps towards implementation”.(1624)

1046.     An implementing Member’s failure to commence implementation of the DSB’s recommendations and rulings was a factor taken into account by the Arbitrator in EC — Chicken Cuts (Article 21.3(c)), when determining the reasonable period of time for implementation. The Arbitrator stated:

“Mere discussion is not implementation. There must be something more to evidence that a Member is moving toward implementation. I therefore agree with Brazil and Thailand that this failure to commence implementation of the DSB’s recommendations and rulings is a factor that I should take into account in determining the reasonable period of time for implementation.”(1625)

1047.     The Arbitrator in Colombia — Ports of Entry (Article 21.3(c)) stated that “I should take into account any action or inaction by Colombia in the period of time comprised between the date of adoption of the Panel Report by the DSB and the initiation of these arbitration proceedings when determining the reasonable period of time for implementation”.(1626)

Implementation through legislative action versus administrative decision

1048.     In US — Oil Country Tubular Goods Sunset Reviews (Article 21.3(c)), the Arbitrator stated that the nature of the steps taken for implementation, i.e. legislative or administrative, has a bearing on the “reasonable period of time”:

“[T]he nature of the steps to be taken for implementation has a bearing on the “reasonable period of time” required to fully implement the recommendations and rulings of the DSB. The implementation may require amendments to administrative guidelines or procedures that may not involve such action. Implementation may also involve only the remedying of the deficiencies in a particular determination. Previous arbitration awards under Article 21.3(c) have recognized that when implementation requires legislative action, the “reasonable period of time” required may be longer than in cases where only administrative action is required to amend guidelines or procedures or to remedy the deficiencies in particular determinations.(1627) It is, however, not for the arbitrator under Article 21.3(c) to prescribe a particular method of implementation and to determine the “reasonable period of time” on the basis of that method.”(1628),(1629)

1049.     In US — Gambling (Article 21.3(c)), the Arbitrator reiterated that the reasonable period of time for implementation will vary on whether the implementing action is legislative or administrative:

“It is by now well established that a key determinant of the reasonable period of time for implementation is the nature of the implementing action that is to be taken. Legislative action will, as a general rule, require more time than regulatory rule-making, which in turn will normally need more time than implementation that can be achieved by means of an administrative decision.”(1630),(1631)

1050.     The Arbitrator in EC — Chicken Cuts (Article 21.3(c)), highlighted the important distinction between “legislative” and “administrative” means of implementation:

“Previous arbitrations have highlighted that implementation achieved through administrative processes generally requires less time than implementing legislation.(1632) This distinction is premised on the fact that administrative action generally may be accomplished solely by one institution (often the Executive Branch) of the implementing Member, whereas legislative action generally requires the participation of additional institutions (typically at last the Legislative Branch-likely to have slower, more deliberative processes — possibly in conjunction with the Executive Branch as well).(1633) The implementation steps proposed by the European Communities under Community law are expected to be accomplished exclusively by the Commission, without involvement by the Council or the European Parliament. I therefore do not consider these steps to be “legislative” in the sense in which I believe that term has come to be understood in the context of arbitrations under Article 21.3(c). Accordingly, I must take into account in my determination the administrative nature of the proposed implementation process.”(1634)

1051.     In US — Stainless Steel (Mexico) (Article 21.3(c)) the Arbitrator stated that both legislative and administrative means of implementation proposed by the United States fell within the range of permissible means, that are capable of achieving WTO compliance in accordance to the DSB recommendations and rulings:

“It is widely accepted that implementation through administrative action usually takes a shorter period of time than implementation through legislative action. In the light of the parties’ responses to questioning at the oral hearing, I am not persuaded that the United States is not in a position to eliminate the simple zeroing methodology in periodic reviews by administrative action, or that legislative implementation would necessarily be more effective than administrative implementation. In these circumstances, I turn to the period of time within which administrative action eliminating the methodology of simple zeroing in periodic reviews could be completed.”(1635)

Complexity of implementation

1052.     In Canada — Pharmaceutical Patents (Article 21.3(c)), 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”:

“[l]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.”(1636)

1053.     In US — Gambling (Article 21.3(c)), the Arbitrator attached some significance to the fact that the field of internet gambling is one that is highly regulated in the United States, and stated:

“A myriad of interconnected and overlapping laws apply to these activities, including state and federal laws, and criminal and civil statutes. For this reason, a careful examination of how proposed legislation will impact the existing regulatory regime will be a necessary part of the process of adopting implementing legislation in this dispute.”(1637)

1054.     In US — Stainless Steel (Mexico) (Article 21.3(c)), the Arbitrator considered compliance in that case to be complex and legitimately considered a particular circumstance:

“For the United States, compliance in this case is complex, mainly because terminating simple zeroing in periodic reviews would imply changes in its duty assessment methodology. …

 

In principle, the elimination of simple zeroing in periodic reviews is distinct from the issue of the “allocation of antidumping duties among the importers for assessment purposes”. The former can clearly be carried out by administrative means. In the real world, because it involves imposition of differing levels of financial liability among the importers, depending on the circumstances, the latter may be easier to bring about on a durable basis by a legislative enactment. In the real world too, however, the elimination of simple zeroing in periodic reviews is closely related to the issue of the allocation of final antidumping duties among importers; implementation of the former might well be tied to reaching satisfactory resolution of the complexities of allocation of anti-dumping duties among the importers. Accordingly, the technical complexities of allocation of duties among importers cannot casually be disregarded but, to the contrary, may legitimately be considered a particular circumstance affecting the determination of a reasonable time for abolition of the methodology of simple zeroing in periodic reviews.”(1638)

Measure fundamentally integrated into other policies

1055.     In Chile — Price Band System (Article 21.3(c)), the Arbitrator considered that the unique role of the price band system in Chilean society was a relevant factor to take into account in his determination of the reasonable period of time:

“I am of the view that the PBS is so fundamentally integrated into the policies of Chile, that domestic opposition to repeal or modification of those measures reflects, not simply opposition by interest groups to the loss of protection, but also reflects serious debate, within and outside the legislature of Chile, over the means of devising an implementation measure when confronted with a DSB ruling against the original law. In the light of the longstanding nature of the PBS, its fundamental integration into the central agricultural policies of Chile, its price-determinative regulatory position in Chile’s agricultural policy, and its intricacy, I find its unique role and impact on Chilean society is a relevant factor in my determination of the ‘reasonable period of time’ for implementation.”(1639)

Contentiousness / political sensitivity

1056.     The Arbitrator in Canada — Pharmaceutical Patents (Article 21.3(c)) stated that “I see nothing in Article 21.3 to indicate that the supposed domestic “contentiousness” of a measure taken to comply with a WTO ruling should in any way be a factor to be considered in determining a “reasonable period of time” for implementation.”(1640)

1057.     In US — Section 110(5) Copyright Act (Article 21.3 (c)), the United States referred to the “controversy” surrounding the legislation, and the “divergent views of stakeholders”. The Arbitrator stated that:

“[A]ny argument as to the “controversy”, in the sense of domestic “contentiousness”, regarding the measure at issue is not relevant. … While I agree that this is an important issue, I do not see how it will add any additional time to the legislative process, as the content of the legislation effecting implementation is precisely the issue that Congress will decide through its normal procedures.”(1641)

1058.     The Arbitrator in Canada — Patent Term (Article 21.3(c)), stressed that, in that dispute, contentiousness or political sensitivity was not a “particular circumstance” which should be taken into account in determining the reasonable period of time. The Arbitrator stated:

“The treatment of existing patents which benefit from a longer period of protection than the period prescribed by Article 33 of the TRIPS Agreement may be highly controversial and closely connected politically with the amendment of Article 45 of the Canadian Patent Act. However, as I have already said, this issue is outside the strict boundaries of the implementation of the recommendations and rulings of the DSB. Consequently, the “contentiousness” of this issue is certainly not a “particular circumstance” which I should take into account in determining the “reasonable period of time” in the present case. Therefore, Canada cannot invoke legislative choices and the likely divisiveness of the debate in the Canadian Parliament to justify its request for a “reasonable period of time” of 14 months and two days.”(1642)

1059.     In US — Offset Act (Byrd Amendment) (Article 21.3 (c)), the Arbitrator refused to take into account in his determination of the “reasonable period of time” both the existence of several legislative options and the need of the implementing Member to take into account international treaty obligations as not qualifying as particular circumstances within the meaning of Article 21.3(c):

“Moreover, l am fully aware of the high level of economic and political interest in this particular dispute, as evidenced by the significant number of WTO Members involved in all stages of this dispute, including in these arbitration proceedings. Nevertheless, “complexity” of implementing legislation as a particular circumstance, within the meaning of Article 21.3(c), is a legal criterion, to be examined without regard for political contentiousness or other non-legal factors that may surround a measure at issue. I am precluded, by my mandate under Article 21.3(c), from giving consideration to these non-legal factors.

In the light of the above considerations, I therefore do not accept the United States’ argument that implementation of the recommendations and rulings of the DSB in this dispute gives rise to complexity that would qualify as a particular circumstance within the meaning of Article 21.3(c).”(1643)

1060.     In EC — Tariff Preferences (Article 21.3(c)), the Arbitrator was not persuaded by the statements of the European Communities that the particular nature of the Drug Arrangements within the GSP scheme and the development policy of the European Communities warrants any increase in the reasonable period of time for implementation, and stated:

“Although a modification to the Drug Arrangements may well be described as “politically sensitive”, this factor does not distinguish the Drug Arrangements from any other measure that is likely to be the subject of a WTO dispute. The measure examined in Chile — Price Band System was quite different. That measure had a “unique … impact on Chilean society” (that is, the society of the implementing Member); “domestic opposition” to its repeal or modification reflected “serious debate, within and outside the legislature of Chile, over the means of devising an implementation measure” and “not simply opposition by interest groups to the loss of protection”.”(1644)

1061.     The Arbitrator in EC — Export Subsidies on Sugar (Article 21.3(c)), stated that “[p]revious arbitrators have consistently held that the “contentiousness” or “political” of the measure to be implemented is not a “particular circumstance[]” that is relevant under Article 21.3(c).”(1645),(1646)

Structural adjustments of the implementing Member’s affected industries

1062.     In Indonesia — Autos (Article 21.3(c)), 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.(1647) 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).”(1648)

1063.     The Arbitrator in Canada — Pharmaceutical Patents (Article 21.3(c)) stated that:

“[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. For example, as others have ruled in previous Article 21.3 arbitrations, any proposed period intended to allow for the “structural adjustment” of an affected domestic industry will not be relevant to an assessment of the legal process. The determination of a “reasonable period of time” must be a legal judgement based on an examination of relevant legal requirements.”(1649)

Economic and financial collapse

1064.     In Indonesia — Autos (Article 21.3(c)), the Arbitrator took into account Indonesia’s assertion that its economy was near collapse:

“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.”(1650)

1065.     In Argentina — Hides and Leather (Article 21.3(c)), Argentina had argued that it needed 46 months as the reasonable period of time for implementation. The Arbitrator stated that:

“I agree that under Article 21.2 of the DSU in conjunction with Article 21.3(c), account may appropriately be taken of the circumstance that the WTO Member which must comply with the DSB recommendations and rulings is a developing country confronted by severe economic and financial problems. That those problems in the case of Argentina are real is not disputed, although there may be debate as to whether Argentina’s economy is “near collapse”.”(1651)

Economic harm to the complainant’s economic operators

1066.     In US — Offset Act (Byrd Amendment) (Article 21.3 (c)), the complaining parties urged the Arbitrator to consider the economic harm that might be inflicted on their economic operators by another disbursement of collected anti-dumping and countervailing duties to United States’ producers. The Arbitrator considered that the economic harm suffered by foreign exporters should not have an impact on the determination of the reasonable period of time:

“In my view, economic harm suffered by foreign exporters does not, and cannot, by definition, impact on what is the “shortest period possible within the legal system of the Member to implement the recommendations and rulings of the DSB”.(1652) The particular circumstances, within the meaning of Article 21.3(c), can only be of such nature as will influence the evolution and unfolding of the implementation process itself. Factors external to the legislative process itself are of no relevance for the determination of the reasonable period of time for implementation.

 

I do not wish to imply that economic harm, caused by the WTO-inconsistent measure, to economic agents of the Complaining Parties, or any other WTO Members, is irrelevant in the context of the implementation of the recommendations and rulings of the DSB. Many WTO-inconsistent measures will cause some form of economic harm to exporters of WTO Members.(1653) However, the need, and urgency, to remove WTO-inconsistent measures, and to remove the harm to economic agents caused by such measures, is, in my view, already reflected in the principle of “prompt compliance” under Article 21.1. The same concern, in my view, underlies the well-established principle, under Article 21.3(c), that the reasonable period of time for implementation be the shortest time possible within the legal system of the Member. Thus, it would be supererogatory, and incongruous, to accord renewed consideration to the issue of economic harm when determining the shortest period possible for implementation within the legal system of the implementing Member.” (1654)

Interests of developing countries

1067.     In US — Oil Country Tubular Goods Sunset Reviews (Article 21.3), reference was made to Article 21.2 by Argentina to support the view that its status as a developing country should be taken into account in the determination of the reasonable period of time.(1655) The Arbitrator disagreed with this view and considered that the reasonable period of time for implementation is not affected by the fact that the complaining Member is a developing country and that instead the fundamental requirement is that the implementation process should be completed in the shortest period possible within the legal and administrative system of the implementing Member.(1656)

1068.     On finding that “Article 21.2 contemplates a clear nexus between the interests of the developing country invoking the provision and the measures at issue in the dispute, as well as a demonstration of the adverse effects of such measures on the interests of the developing country Member(s) concerned,”(1657) the Arbitrator in US — Gambling (Article 21.3(c)) declined to consider the precise relationship between paragraphs 2 and 3 of Article 21 because the developing country Member concerned failed to provide specific evidence of affected interests and their relationship with the measures at issue.(1658)

1069.     The Arbitrator in EC — Export Subsidies on Sugar (Article 21.3(c)) agreed with the Arbitrator in US — Gambling (Article 21.3(c)) that Article 21.2 enjoins arbitrators, when determining the reasonable period of time for implementation, to take into account the interests of developing country Members who have “demonstrated their interests as developing country Members for the purposes of Article 21.2.”(1659)

1070.     In EC — Chicken Cuts (Article 21.3(c)), the Arbitrator paid particular attention to the demonstrated affected interests of the developing country Members pursuant to Article 21.2; however, the reasonable period of time for implementation, already being the shortest period of time possible, was not additionally affected by the fact that the complaining member was a developing country.(1660)

1071.     In a situation where both the implementing and the complaining Member are developing countries, the Arbitrator in Colombia — Ports of Entry (Article 21.3(c)) stated “the requirement provided in Article 21.2 is of little relevance, except if one party success in demonstrating that it is more severely affected by problems related to its developing country status than other party.”(1661)

Calendar / schedule of legislative body

1072.     In US — Offset Act (Byrd Amendment) (Article 21.3 (c)), the Arbitrator considered that the fact that at any given point in the Congressional schedule there would be a “greater opportunity” to pass legislation than at another point in time was not a particular circumstance relevant for the determination of the reasonable period of time for implementation in that case. However, the Arbitrator stated that:

“This is not to say that the schedule of the United States Congress (or any other legislative body of any implementing Member) can never be a relevant particular circumstance; for instance, previous arbitrators have given consideration, in their determination of the reasonable period of time for implementation, to circumstances where a draft bill could not be introduced into Congress for a number of months because a new Congress had not yet convened at the time when the arbitration was initiated.”(1662)

1073.     With regard to a legislature’s schedule, the Arbitrator in US — Gambling (Article 21.3(c)), stated that a legislature’s schedule is not totally irrelevant to the determination of the reasonable period of time for implementation and may or may not be relevant depending on the particular case.(1663)

Rules on entry into force of legal instruments

1074.     The Arbitrator on Korea — Alcoholic Beverages determined that it was reasonable to include in the reasonable period of time the “thirty-day grace period for enforcement of certain … instruments” provided in a Korean statute.(1664)

1075.     The Arbitrator on EC — Bananas III appeared to take into account the European Communities’ statement that “any change in legislation which directly affects the customs treatment of products in connection with importation or exportation, enters into force either on 1 January or 1 July of the relevant year”(1665) in determining the reasonable period of time in that dispute.(1666)

Institutional changes

1076.     In EC — Tariff Preferences (Article 21.3(c)), the European Communities argued that the reasonable period of time should be extended because of the enlargement of the European Union, the election of a new European Parliament and the designation of a new Commission. The Arbitrator agreed to consider as circumstances that might prolong the reasonable period of time: the time needed to translate certain instruments into 20 official languages as well as the time needed to respond to potential requests for verification by member States that the necessary qualified majority has been reached when adopting the implementing regulation. The Arbitrator however did not take into account the fact that a new Parliament was to be elected and a new Commission designated.(1667)

Limited powers of the executive branch

1077.     In Japan — Alcoholic Beverages II (Article 21.3(c)), 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.(1668)

Existence of potentially multiple alternative options for implementing DSB recommendations and rulings

1078.     In US — Offset Act (Byrd Amendment) (Article 21.3 (c)), the Arbitrator did not consider that the existence of numerous options to implement was relevant to the determination of the “reasonable period of time”:

“I do not consider the existence of numerous options to implement the recommendations and rulings of the DSB, as invoked by the United States, to be relevant to my determination of the ‘reasonable period of time’ for implementation of the recommendations and rulings of the DSB.(1669) The weighing and balancing of the respective merits of various legislative alternatives is one of the key functions and aspects of any legislative process. The mere fact that implementation of the recommendations and rulings of the DSB necessitates the choice between several, or even a large number of, alternative options is generally not, in my view, in and of itself, a particular circumstance that would inform my determination of the shortest period possible to implement the recommendations and rulings of the DSB in this case.”(1670)

Scientific studies or consultations

1079.     The Arbitrator on EC — Hormones (Article 21.3 (c)) indicated 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.”(1671)

Changes other than those necessary to implement the DSB recommendations

1080.     The Arbitrator on Canada — Autos (Article 21.3 (c)) declined to take into account the fact that “it might be more convenient for Canada to implement the DSB’s recommendations in this case on the same timeline as it has planned for the reform of its customs administration regime”.(1672)

1081.     In EC — Tariff Preferences (Article 21.3(c)), the Arbitrator confirmed that his determination on the reasonable period of time for implementation must have regard only to the shortest period possible within the legal system of the European Communities to bring its measures (the Drug Arrangements) into conformity with its WTO obligations. In the Arbitrator’s view, “the mere fact that the European Communities has decided to incorporate the task of implementation within the larger objective of reforming its overall GSP scheme cannot lead to a determination of a shorter, or longer, period of time.”(1673).

1082.     In Colombia — Ports of Entry (Article 21.3(c)), the Arbitrator stated that:

“In addition, while the implementing Member is free to initiate wider reforms of its municipal law in the process of implementing of the DSB’s recommendations and rulings, such objectives do not justify a longer implementation period. My determination as to the reasonable period of time for implementation of these recommendations and rulings must focus on the shortest period possible within the legal system of the implementing Member to bring the particular measures found to be inconsistent into conformity with its WTO obligations.”(1674)

Time for additional proceedings / decisions

1083.     In EC — Chicken Cuts (Article 21.3(c)), the European Communities states that it would not take any action internally until it receives a World Customs Organization decision. The Arbitraor considered that:

“Thus, conceivably, a finding of the WCO on tariff classification in response to a request for such a finding by the European Communities could have the effect of prolonging this dispute rather than contributing to its resolution through implementation of the recommendations and rulings of the DSB. In fulfilling my obligations as arbitrator under the DSU, I am naturally reluctant to take into account, in my determination of the reasonable period of time, the time needed to obtain from another international organization a decision that may not contribute to — or may possibly even hinder — the implementation of the recommendations and rulings of the DSB.

 

… Therefore … I cannot accept recourse to the WCO as an element of the European Communities’ proposed implementation that I must factor into my calculation of the reasonable period of time simply because the European Communities has proposed it.”(1675)

Distribution of seats among political parties

1084.     In Canada — Patent Term (Article 21.3(c)), the United States emphasized that under Canada’s parliamentary system, the Government of Canada controlled the majority in both Houses of Parliament, the House of Commons and the Senate. According to the United States, with this majority, the government controlled the legislative process, and set the timetable for both Houses of Parliament from start to finish; the Government of Canada could essentially pass any legislation it wishes in whatever time it liked. The Arbitrator stated that:

“It may well be possible that Canada’s political system and the actual distribution of seats among the political parties in Canada’s Parliament facilitate the passage of legislative initiatives taken by the present Canadian government. I am, however, very reluctant to take these factors into account in determining the “reasonable period of time”. These factors vary from country to country, and from constitution to constitution. Even within a given country, they will change over time. In addition, their evaluation will often be difficult and highly speculative. I also note that such factors have never been considered as “particular circumstances” in any of the earlier awards under Article 21.3(c) of the DSU. Thus, the political factors mentioned in the preceding paragraph, and invoked by the United States in support of its request for a “reasonable period of time” of six months, are not relevant to my task.”(1676)

(vii) Burden of proof

1085.     The Arbitrator in EC — Hormones (Article 21.3(c)) considered that:

“[T]he 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.”(1677)

1086.     The Arbitrator on Canada — Pharmaceutical Patents (Article 21.3(c)) 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.’(1678) 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.”(1679)

1087.     In EC — Tariff Preferences (Article 21.3(c)), India argued that the implementing Member — in this case, the European Communities — bears the burden of demonstrating that the period it proposes is reasonable and that “the already great burden becomes even greater” if this period is more than 15 months. The Arbitrator disagreed and held that, in his view, the European Communities must demonstrate that the period it proposes is reasonable; “but I do not find it necessary in this arbitration to determine whether the burden of proof becomes greater if the period proposed is more than 15 months.”(1680)

1088.     The Arbitrator in EC — Chicken Cuts (Article 21.3 (c)), expressed the view that “an implementing Member seeking to go outside its domestic decision-making processes bears the burden of establishing that this external element of its proposed implementation is necessary for, and therefore indispensable to, that Member’s full and effective compliance with its obligations under the covered agreements by implementing the recommendations and rulings of the DSB.”(1681)

1089.     In Colombia — Ports of Entry (Article 21.3(c)), the Arbitrator stated that that:

“I am guided by previous arbitrators’ awards that place the burden on the implementing Member to demonstrate that, if immediate compliance is impracticable, the period of time it proposes constitutes a “reasonable period of time”. However, this does not absolve the other Member from producing evidence in support of its contention that the period of time requested by the implementing Member is not “reasonable”, and a shorter period of time for implementation is warranted.”(1682)

(viii) Other issues

Relevance of time periods granted in previous arbitration awards

1090.     The Arbitrator in EC — Export Subsidies on Sugar (Article 21.3) found that although an arbitrator could derive some useful guidance from previous arbitration awards concerning legislative measures of the implementing Member, the facts and circumstances of implementation in one dispute may, and in most instances will, differ from the facts and circumstances of implementation in another dispute.(1683)

Non-application to prohibited subsidies

1091.     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.”(1684)

Participation by all the original parties

1092.     In Japan — Alcoholic Beverages II (Article 21.3(c)), 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.(1685)

More than one reasonable period of time for implementation

1093.     In US — Gambling (Article 21.3(c)), the Arbitrator did not exclude the possiblity of determining different periods of time for bringing different measures into conformity:

“Neither the Panel nor the Appellate Body referred to the distinction that Antigua now draws, namely between the United States’ regulation of the supply of “non-sports related and horseracing” gambling and betting services, on the one hand, and its regulation of the supply of “other sports-related” gambling and betting services, on the other …[I]t seems to me that the findings of both the Panel and the Appellate Body are based on the premise that each of the three statutes in question prohibits a broad category of gambling activities.(1686)

Because I do not rule on whether the distinction asserted by Antigua exists, I need not, in this proceeding, resolve the issue of whether it is permissible for an arbitrator under Article 21.3(c) of the DSU to determine more than one reasonable period of time for implementation. I am not persuaded that the mere use of the indefinite article “a” in the phrase “a reasonable period of time” suffices, as the United States suggests, to establish definitively that an arbitrator is authorized only to determine a single reasonable period of time for implementation in a dispute. At the same time, conceptually, I have difficulty accepting that it may be possible to determine, as Antigua seems to request me to do, two separate reasonable periods of time in respect of the same measure.(1687) I would not, however, want to exclude a priori, and without having carried out a thorough interpretative analysis of the relevant provisions of the DSU, the possibility that an arbitrator might be able to fix separate reasonable periods of time for separate measures. It is true that, to date, no arbitrator has done so.(1688) Yet it is also true that, to date, no arbitrator has been asked to do so.”(1689)

1094.     In Colombia — Ports of Entry (Article 21.3(c)), the Arbitrator was also asked to determine two separate reasonable periods of time for bringing the indicative prices mechanism and the ports of entry measure into conformity. The Arbitrator then expressed that in US — Glambing (mentioned above), “the arbitrator did not exclude the possibility that an arbitrator might be able to establish separate reasonable periods of time for separate measure.”(1690) However, the Arbitrator decided that it was not appropriate in this case.

The continued application of WTO-inconsistent measures during the reasonable period of time

1095.     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.”(1691)

1096.     The Panel in 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.(1692)

(d) Table showing the length of time taken in Article 21.3(c) proceedings to date

1097.     The following table provides information on the length of time taken in WTO proceedings to date from the date of the adoption of the panel report (and where applicable, the Appellate Body report) to circulation of the Article 21.3(c) award.(1693) It is updated to 30 September 2011.

4. Article 21.4

(a) Table showing the length of time to date from panel establishment through to the determination of the reasonable period of time

Prescribed Time-Period in Article 21.3(c) 90 days from date of adoption of report(s)
Average to Date 144 days
Longest to Date 256 days
Shortest to Date 104 days
* Average to Date Calculated from Date of Appointment of Arbitrator 56 days
* Longest to Date Calculated from Date of Appointment of Arbitrator 91 days
* Shortest to Date Calculated from Date of Appointment of Arbitrator 28 days
WT/DS No. Short Title Days from adoption of report(s) * Days from appointment of arbitrator
WT/DS8, WT/DS10, WT/DS11 Japan — Alcoholic Beverages II 105 28
WT/DS 18 Australia — Salmon 109 43
WT/DS26, WT/DS48 EC — Hormones 105 29
WT/DS27 EC — Bananas III 104 30
WT/DS54, WT/DS55, WT/DS59, WT/DS64 Indonesia — Autos 137 47
WT/DS75, WT/DS84 Korea — Alcoholic Beverages 107 42
WT/DS87, WT/DS110 Chile — Alcoholic Beverages 132 57
WT/DS 114 Canada — Pharmaceutical Patents 133 59
WT/DS 136, WT/DS 162 US — 1916 Act 155 71
WT/DS139, WT/DS142 Canada — Autos 107 42
WT/DS 155 Argentina — Hides and Leather 196 80
WT/DS 160 US — Section 110(5) Copyright Act 172 54
WT/DS 170 Canada — Patent Term 139 49
WT/DS 184 US — Hot-Rolled Steel 180 75
WT/DS207 Chile — Price Band System 145 91
WT/DS217, WT/DS234 US — Offset Act (Byrd Amendment) 137 72
WT/DS246 EC — Tariff Preferences 153 47
WT/DS268 US — Oil Country Tubular Goods Sunset Reviews 172 60
WT/DS285 US — Gambling 121 50
WT/DS265, WT/DS266, WT/DS283 EC — Export Subsidies on Sugar 162 53
WT/DS269, WT/DS286 EC — Chicken Cuts 146 68
WT/DS336 Japan — DRAMs (Korea) 140 61
WT/DS332 Brazil — Retreaded Tyres 256 60
WT/DS344 US — Stainless Steel (Mexico) 164 63
WT/DS366 Colombia — Ports of Entry 135 64

1098.     The following table provides information on the length of time taken in WTO proceedings to date, where applicable, from the date of the establishment of a panel to the date of the determination of the reasonable period of time (Article 21.4 of the DSU).(1694) It is updated to 30 September 2011.

1099.     This table excludes cases where a Member was found to have granted prohibited and/or actionable subsidies. In such cases, no reasonable period of time for compliance is determined under Article 21.3 of the DSU. Rather, the time-period for compliance is determined by the panel in its report in cases of prohibited subsidies (Article 4.7 of the SCM Agreement), or already specified in the SCM Agreement in cases of actionable subsidies (six months, Article 7.9 of the SCM Agreement).

5. Article 21.5

(a) Function and scope of Article 21.5 proceedings: Panel’s mandate

1100.     In Canada — Aircraft (Article 21.5 — Brazil), the Appellate Body disagreed with the Panel’s reasoning that the scope of Article 21.5 dispute settlement proceedings was limited to the issue of whether or not the respondent had implemented the DSB recommendations. In the Appellate Body’s view, under Article 21.5 , a panel is obliged to examine the consistency of the “measures taken to comply” with WTO law:

Prescribed Time-Period in Article 21.4 15-18 months
Average to date 21 months and 14 days
Longest to Date (excluding cases where compliance period determined under the SCM Agreement) 45 months 22 days
Shortest to Date 8 months 7 days
WT/DS No. Case Time from establishment of the panel to the determination of the reasonable period of time
WT/DS2, WT/DS4 US — Gasoline 19 months 22 days
WT/DS8, WT/DS10, WT/DS 11 Japan — Alcoholic Beverages II 16 months 17 days
WT/DS18 Australia — Salmon 22 months 13 days
WT/DS26 EC — Hormones 24 months 9 days
WT/DS27 EC — Bananas III 19 months 29 days
WT/DS31 Canada — Periodicals 14 months 26 days
WT/DS34 Turkey — Textiles 17 months 24 days
WT/DS48 EC — Hormones 19 months 13 days
WT/DS50 India — Patents (US) 17 months 1 day
WT/DS54, WT/DS55, WT/DS59, WT/DS64 Indonesia — Autos 17 months 24 days
WT/DS56 Argentina — Textiles and Apparel 15 months 11 days
WT/DS58 US — Shrimp 22 months 20 days
WT/DS69 EC — Poultry 14 months 19 days
WT/DS75, WT/DS84 Korea — Alcoholic Beverages 19 months 18 days
WT/DS76 Japan — Agricultural Products II 18 months 27 days
WT/DS79 India — Patents (EC) 13 months 8 days
WT/DS87, WT/DS110 Chile — Alcoholic Beverages 30 months 5 days
WT/DS90 India — Quantitative Restrictions 25 months 10 days
WT/DS98 Korea — Dairy 19 months 26 days
WT/DS99 US — DRAMS 16 months 3 days
WT/DS103, WT/DS113 Canada — Dairy 20 months 17 days
WT/DS 114 Canada — Pharmaceutical Patents 18 months 17 days
WT/DS122 Thailand — H-Beams 18 months 6 days
WT/DS126 Australia — Automotive Leather II 12 months 13 days
WT/DS 132 Mexico — Corn Syrup 16 months 24 days
WT/DS 136 US — 1916 Act 24 months 27 days
WT/DS139, WT/DS142 Canada — Autos 20 months 3 days
WT/DS141 EC — Bed Linen 17 months 29 days
WT/DS146, WT/DS175 India — Autos 23 months 20 days
WT/DS 155 Argentina — Hides and Leather 25 months 5 days
WT/DS160 US — Section 110(5) Copyright Act 19 months 19 days
WT/DS161, WT/DS169 Korea — Various Measures on Beef 22 months 23 days
WT/DS162 US — Anti-Dumping Act of 1916 19 months 2 days
WT/DS166 US — Wheat Gluten 20 months 14 days
WT/DS 170 Canada — Patent Term 17 months 6 days
WT/DS 174, WT/DS290 EC — Trademarks and Geographical Indications 20 months 7 days
WT/DS 176 US — Section 211 Appropriations Act 18 months 2 days
WT/DS177, WT/DS178 US — Lamb 18 months 25 days
WT/DS 179 US — Stainless Steel 17 months 7 days
WT/DS184 US — Hot-Rolled Steel 22 months 29 days
WT/DS189 Argentina — Ceramic Tiles 13 months 3 days
WT/DS202 US — Line Pipe 21 months 6 days
WT/DS204 Mexico — Telecoms 25 months 26 days
WT/DS206 US — Steel Plate 14 months 6 days
WT/DS207 Chile — Price Band System 24 months 5 days
WT/DS211 Egypt — Definitive Anti-Dumping Measures on Rebar from Turkey 16 months 24 days
WT/DS212 US — Countervailing Measures on Certain EC Products 19 months
WT/DS217, WT/DS234 US — Offset Act (Byrd Amendment) 21 months 20 days
WT/DS219 EC — Tube or Pipe Fittings 26 months 6 days
WT/DS231 EC — Sardines 16 months 24 days
WT/DS238 Argentina — Preserved Peaches 17 months 9 days
WT/DS245 Japan — Apples 20 months 17 days
WT/DS246 EC — Tariff Preferences 20 months 2 days
WT/DS257 US — Softwood Lumber IV 19 months 5 days
WT/DS264 US — Softwood Lumber V 22 months 27 days
WT/DS265, WT/DS266, WT/DS283 EC — Export Subsidies on Sugar 25 months 28 days
WT/DS268 US — Oil Country Tubular Goods Sunset Review 24 months 18 days
WT/DS269, WT/DS 286 EC — Chicken Cuts 25 months 13 days
WT/DS276 Canada — Wheat Exports and Grain Imports 19 months 14 days
WT/DS277 US — Softwood Lumber VI 16 months 23 days
WT/DS282 US — Anti-Dumping Measures on Oil Country Tubular Goods 29 months 16 days
WT/DS285 US — Gambling 24 months 28 days
WT/DS291, WT/DS292, WT/DS293 EC — Approval and Marketing of Biotech Products 45 months 22 days
WT/DS294 US — Zeroing (EC) 28 months 9 days
WT/DS295 Mexico — Anti-Dumping Measures on Rice 30 months 11 days
WT/DS296 US — Countervailing Duty Investigation on DRAMs 21 months 14 days
WT/DS299 EC — Countervailing Measures on DRAM Chips 20 months 18 days
WT/DS302 Dominican Republic — Import and Sale of Cigarettes 19 months 20 days
WT/DS308 Mexico — Taxes on Soft Drinks 23 months 26 days
WT/DS312 Korea — Certain Paper 16 months 13 days
WT/DS322 US — Zeroing (Japan) 24 months 12 days
WT/DS331 Mexico — Steel Pipes and Tubes 18 months 17 days
WT/DS332 Brazil — Retreaded Tyres 31 months 22 days
WT/DS334 Turkey — Rice 25 months 4 days
WT/DS335 US — Shrimp (Ecuador) 8 months 7 days
WT/DS336 Japan — DRAMS (Korea) 22 months 26 days
WT/DS337 EC — Salmon (Norway) 22 months 24 days
WT/DS339, WT/DS340, WT/DS342 China — Auto Parts 28 months 15 days
WT/DS343 US — Shrimp (Thailand) 24 months 16 days
WT/DS344 US — Stainless Steel (Mexico) 24 months 16 days
WT/DS345 US — Customs Bond Directive 23 months 20 days
WT/DS350 US — Continued Zeroing 24 months 11 days
WT/DS362 China — Intellectual Property Rights 21 months 13 days
WT/DS363 China — Publications and Audiovisual Products 31 months 28 days
WT/DS366 Colombia — Ports of Entry 23 months 21 days
WT/DS367 Australia — Apples 36 months 28 days
WT/DS375, WT/DS376, WT/DS377 EC — IT Products 27 months 8 days
WT/DS379 US — Anti-Dumping and Countervailing Duties (China) 29 months 26 days
WT/DS382 US — Orange Juice (Brazil) 21 months
WT/DS383 US — Anti-Dumping Measures on PET Bags 12 months 16 days
WT/DS402 US — Zeroing (Korea) 13 months 5 days (395 days)

 

“[W]e 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’.

 

[I]n 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.”(1695)

1101.     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.”(1696)

1102.     In EC — Bed Linen (Article 21.5 — India), the Appellate Body concisely summarized prior case law on the function and scope of Article 21.5 proceedings:

“We addressed the function and scope of Article 21.5 proceedings for the first time in Canada — Aircraft (Article 21.5-Brazil). There, we found that Article 21.5 panels are not merely called upon to assess whether ‘measures taken to comply’ implement specific ‘recommendations and rulings’ adopted by the DSB in the original dispute.(1697) We explained there that the mandate of Article 21.5 panels is to examine either the ‘existence’ of ‘measures taken to comply’ or, more frequently, the ‘consistency with a covered agreement of implementing measures.(1698) This implies that an Article 21.5 panel is not confined to examining the ‘measures taken to comply’ from the perspective of the claims, arguments, and factual circumstances relating to the measure that was the subject of the original proceedings.(1699) Moreover, the relevant facts bearing upon the ‘measure taken to comply’ may be different from the facts relevant to the measure at issue in the original proceedings. It is to be expected, therefore, that the claims, arguments, and factual circumstances relating to the ‘measure taken to comply’ will not, necessarily, be the same as those relating to the measure in the original dispute.(1700) Indeed, a complainant in Article 21.5 proceedings may well raise new claims, arguments, and factual circumstances different from those raised in the original proceedings, because a ‘measure taken to comply’ may be inconsistent with WTO obligations in ways different from the original measure. In our view, therefore, an Article 21.5 panel could not properly carry out its mandate to assess whether a ‘measure taken to comply’ is fully consistent with WTO obligations if it were precluded from examining claims additional to, and different from, the claims raised in the original proceedings.”(1701),(1702)

1103.     Based on its examination of the words “existence” and “consistency”, the Appellate Body in US — Softwood Lumber IV (Article 21.5) concluded that the scope of Article 21.5 proceedings is not limited to the implementing measure, but also extends to a full consideration of the factual and legal background against which the implementing measure is taken. The Appellate Body stated:

“By virtue of the remainder of its first sentence, it is also clear that the scope of Article 21.5 encompasses any “disagreement as to the existence or consistency with a covered agreement of measures taken to comply”. … In order to make an assessment of the “existence or consistency” of “measures taken to comply”, it seems to us that a panel must be able to assess measures taken to comply in their full context, including how such measures are introduced into, and how they function within, the particular system of the implementing Member. The word “existence” suggests that measures falling within the scope of Article 21.5 encompass not only positive acts, but also omissions. It also suggests that, as part of its assessment of whether a measure taken to comply exists, a panel may need to take account of facts and circumstances that impact or affect such existence. The word “consistency” implies that panels acting pursuant to Article 21.5 must objectively assess whether new measures are, in fact, consistent with relevant obligations under the covered agreements. As the Appellate Body has already stated, such an evaluation involves consideration of “that new measure in its totality” and the “fulfilment of this task requires that a panel consider both the measure itself and the measure’s application.”(1703) The fact that Article 21.5 mandates a panel to assess “existence” and “consistency” tends to weigh against an interpretation of Article 21.5 that would confine the scope of a panel’s jurisdiction to measures that move in the direction of, or have the objective of achieving, compliance. These words also suggest that an examination of the effects of a measure may also be relevant to the determination of whether it constitutes, or forms part of, a “measure[] taken to comply”.(1704)

Having thus considered the first sentence of Article 21.5, we note first that the phrase “measures taken to comply” does place some limits on the scope of proceedings under that provision-an issue that is not disputed. At the same time, in order to fulfil its mandate under Article 21.5, a panel must be able to take full account of the factual and legal background against which relevant measures are taken, so as to determine the existence, or consistency with the covered agreements, of measures taken to comply.”(1705)

1104.     The Appellate Body in US — Softwood Lumber IV (Article 21.5) observed three key differences between the function and scope of Article 21.5 and ‘regular’ panel proceedings:

“Turning to the role played by Article 21.5 within the broader framework of the DSU, we note that there are key differences between proceedings under Article 21.5 of the DSU and “regular” panel proceedings. First, the composition of an Article 21.5 panel is, in principle, already determined wherever possible, it is the original panel. These individuals will be familiar with the contours of the dispute, and the experience gained from the original proceedings should enable them to deal more efficiently with matters arising in an Article 21.5 proceeding “against the background of the original proceedings”.(1706) Secondly, the time-frames are shorter-an Article 21.5 panel has, in principle, 90 days in which to issue its report, as compared to the six to nine months afforded original panels. Thirdly, there are some limits on the claims that can be raised in Article 21.5 proceedings.(1707) Yet, these limits should not allow circumvention by Members by allowing them to comply through one measure, while, at the same time, negating compliance through another.

 

Taken together, these observations underscore the balance that Article 21.5 strikes between competing considerations. On the one hand, it seeks to promote the prompt resolution of disputes, to avoid a complaining Member having to initiate dispute settlement proceedings afresh when an original measure found to be inconsistent has not been brought into conformity with the recommendations and rulings of the DSB, and to make efficient use of the original panel and its relevant experience. On the other hand, the applicable time-limits are shorter than those in original proceedings, and there are limitations on the types of claims that may be raised in Article 21.5 proceedings. This confirms that the scope of Article 21.5 proceedings logically must be narrower than the scope of original dispute settlement proceedings. This balance should be borne in mind in interpreting Article 21.5 and, in particular, in determining the measures that may be evaluated in proceedings pursuant to that provision.”(1708)

1105.     With respect to the panel’s mandate, the Appellate Body in US — Softwood Lumber VI (Article 21.5 — Canada) noted that although a panel cannot fulfil its mandate in abstraction from the original measure, the panel is not bound by the findings of the original proceedings concerning the original measure:

Article 21.5 of the DSU identifies the task of a panel operating pursuant to that provision as resolving disagreements “as to the existence or consistency with a covered agreement of a measure taken to comply with the recommendations and rulings” of the DSB. This task cannot be done in abstraction from the measure that was subject of the original proceedings.(1709) The measure taken to comply in this case is the Section 129 Determination. Although it is distinct from the original determination, the Section 129 Determination incorporates by reference many parts of the analysis in the original determination,(1710) and retains and relies on much of the evidence collected in the original investigation. … In these circumstances, we do not see why the Panel would be bound by the findings of the original panel.

 

This does not mean that a panel operating under Article 21.5 of the DSU should not take account of the reasoning of an investigating authority in an original determination, or of the reasoning of the original panel. Article 21.5 proceedings do not occur in isolation but are part of a “continuum of events”.(1711) This is a consequence of the mandate of an Article 21.5 panel, namely, to examine whether recommendations and rulings from the original dispute have been implemented consistently with the covered agreements. When an investigating authority making a redetermination provides different explanations of, or draws different inferences from, specific pieces of evidence that were also before it in the original investigation, this maybe relevant to the assessment of whether its reasoning is adequate and based on positive evidence. Such deviations from prior reasoning may raise questions about the objectivity of the authority’s assessment of the evidence or the credibility of its explanations. Similarly, doubts could arise about the objective nature of an Article 21.5 panel’s assessment if, on a specific issue, that panel were to deviate from the reasoning in the original panel report in the absence of any change in the underlying evidence in the record and explanations given by the investigating authority in a redetermination.(1712) These concerns are not, however, based on the binding effect of the adopted findings of the original panel.”(1713)

1106.     The Panel in US — Softwood Lumber VI (Article 21.5 — Canada) had described its role in Article 21.5 proceedings as the following:

The role of a Panel in an Article 21.5 proceeding is to evaluate the challenged measure to determine its consistency with the defending Member’s obligations under the relevant WTO Agreements. Thus, the Panel is not limited by its original analysis and decision — rather, it is to consider, with a fresh eye, the new determination before it, and evaluate it in light of the claims and arguments of the parties in the Article 21.5 proceeding. While it is true that “a panel acting pursuant to Article 21.5 of the DSU would be expected to refer to the initial panel report, particularly in cases where the implementing measure is closely related to the original measure, and where the claims made in the proceeding under Article 21.5 closely resemble the claims made in the initial panel proceedings”,(1714) in a case involving a new determination in the same case, it is clear that the facts are likely to be very similar to the original …While we cannot preclude the possibility that a Member might implement a DSB recommendation by specifically answering points raised by a panel (or the Appellate Body) in the relevant decisions, this is by no means required by the DSU. Nor is it the only means by which implementation may be achieved.”(1715)

(b) The “matter” in Article 21.5 proceedings

(i) General

1107.     In EC — Bed Linen (Article 21.5 — India), pursuant to its findings in Guatemala — Cement I,(1716) the Appellate Body emphasized that Article 21.5 proceedings are similar to the original proceedings and thus, the “matter” at issue consists of the same elements: (i) the specific measures at issue (in this case, the measures taken to comply) and (ii) the legal basis of the complaint, i.e. the claims.(1717)

(ii) Measures concerned by Article 21.5 panel proceedings: measures taken to comply

General

1108.     In US — Upland Cotton, the Appellate Body recalled the neutrality of the WTO’s dispute settlement system in the extent of implementing actions taken by the implementing Member:

“The Appellate Body has stated that, where alternative means of achieving compliance are possible, the choice of means “belongs, in principle, to the implementing Member”.(1718) Because it is for the implementing Member to choose among alternative means of implementation, WTO dispute settlement cannot be said to provide incentives or disincentives for a WTO Member to take broader or narrower action as part of its implementation efforts.”

1109.     The Appellate Body continued:

“Because it is for the implementing Member to choose among alternative means of implementation, WTO dispute settlement cannot be said to provide incentives or disincentives for a WTO Member to take broader or narrower action as part of its implementation efforts. In other words, the WTO dispute settlement system is neutral in terms of the breadth of the actions to be adopted by the implementing Member, provided the changes are sufficient to bring that Member into compliance with its WTO obligations.”(1719)

Concept of “measures taken to comply”

1110.     In Canada — Aircraft (Article 21.5 — Brazil), 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:(1720) 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.”(1721)

1111.     The Appellate Body in EC — Bed Linen (Article 21.5 — India) reiterated that the “measures” at issue in an Article 21.5 proceeding can only be those “measures taken to comply”. It further stated that “[i]f a claim challenges a measure which is not a ‘measure taken to comply’, that claim cannot properly be raised in Article 21.5 proceedings.”(1722)

1112.     In EC — Bed Linen (Article 21.5 — India), the Appellate Body rejected India’s attempt to raise the same claim(1723) that it had raised before the original panel as regards a component of the implementation measure which was the same as in the original measure. The Appellate Body dismissed India’s consideration that the implementing decision can only be “a whole new measure”. In fact, in India’s reasoning, it should be entitled to raise the same claim because the “measure taken to comply” in this dispute was “separate and distinct” from the measure subject to the original dispute, although some aspects of the measure remain the same.(1724) India therefore argued that the part of the redetermination that merely incorporated elements of the original determination on “other factors” would constitute an inseparable element of a new measure taken to comply with the DSB rulings in the original dispute. Recalling its jurisprudence in Canada — Aircraft (Article 21.5 — Brazil) and US — FSC (Article 21.5 — EC), the Appellate Body stressed the requirement to raise a new claim challenging a new component of the measure taken to comply which was not part of the original measure.(1725)

1113.     In US — Softwood Lumber IV (Article 21.5 — Canada), the United States requested a preliminary ruling that the results of the First Assessment Review of the countervailing duty order were not “measures taken to comply” and therefore the Panel lacked the jurisdiction to review them.(1726) The Panel rejected this request finding that Article 21.5 proceedings were not limited only to measures that Members explicitly made to implement DSB rulings and recommendations:

Article 21.5 proceedings are not restricted to measures formally, or explicitly, taken by Members to implement DSB rulings and recommendations….

…In our view, and taking into account previous dispute settlement decisions regarding DSU Article 21.5 , the USDOC’s treatment of pass-through in the First Assessment Review is also covered by these proceedings, because it is clearly connected to the panel and Appellate Body reports concerning the Final Determination, and because it is inextricably linked to the treatment of pass-through in the Section 129 Determination….

…we consider that there is sufficient overlap in the timing, or temporal effect, and nature of the Final Determination, Section 129 Determination and First Assessment Review for the latter to fall within the scope of the present DSU Article 21.5 proceedings… 

…if we exclude the pass-through analysis in the First Assessment Review from these proceedings, Canada and the United States will still dispute the same issue, i.e., pass-through of subsidy benefit, in respect of the same import entries,(1727) as they did in the original proceedings concerning the Final Determination. In our view, this would be wholly inconsistent with the object and purpose of the DSU which, as noted above, is to ensure the prompt settlement of disputes”.(1728)

1114.     The Appellate Body in US — Softwood Lumber IV (Article 21.5) examined various dictionary meanings of the word “taken” and found that “measures taken to comply” refers to measures that have been taken in the direction of, or for the purpose of achieving, compliance. The Appellate Body stated:

“In examining the meaning of “measures taken to comply” in Article 21.5, we begin with the word “taken”. There is a wide range of dictionary meanings of the word “taken”, which is the past participle of the verb “take”. The meanings of “take” include, for example, “[b]ring into a specified position or relation”; “[s]elect or use for a particular purpose.”(1729) The preposition “to” is “[u]sed in verbs … in the sense of ‘motion, direction, or addition to’, or as the mark of the infinitive.”(1730) As the United States points out, the word “comply” is defined as “accommodate oneself to (a person, circumstances, customs, etc.)… Act in accordance with or with a request, command, etc.”(1731) The French and, in particular, Spanish versions of this phrase (“mesures prises pour se conformer” and “medidas destinadas a cumplir”, respectively) also imply that relevant measures are associated with the objective of complying. On its face, therefore, the phrase “measures taken to comply” seems to refer to measures taken in the direction of, or for the purpose of achieving, compliance.”(1732)

Scope of the measures taken to comply

1115.     In EC — Bed Linen (Article 21.5 — India), the Panel declined to consider India’s claim on the “other factors” analysis after finding that the original panel had dismissed the claim and India had not appealed.(1733) The Appellate Body concurred, explaining that there is no reason to conclude that a “part of the redetermination that merely incorporates elements of the original determination … would constitute an inseparable element of a measure taken to comply with the DSB rulings in the original dispute”. In its view, the “other factors” analysis was such an element — an unrevised element of the original measure — that “the investigating authorities of the European Communities were able to treat… separately” when conducting the redetermination:

“We agree with India that the investigating authorities of the European Communities were required to revise the original determination of dumping and injury in order to comply with the DSB recommendations and rulings. Towards this end, the European Communities recalculated the dumping margins without applying the practice of ‘zeroing’ that had been found to be inconsistent with WTO obligations in the original dispute. According to the recalculation, two of the individually examined Indian producers were not dumping. The investigating authorities deducted the imports attributable to those two producers from the volume of dumped imports, and, accordingly, the volume of dumped imports in the redetermination was lower than in the original determination. According to EC Regulation 1644/2001, the investigating authorities of the European Communities also ‘re-examined’ whether a causal link between the two revised elements — dumped imports and the injury to the domestic industry — still existed, and the Panel reviewed that re-examination.

 

The amount of dumped imports will, of course, have an impact on the assessment of the effects of the ‘dumped imports’ for the purposes of determining injury. It is clear, therefore, that the revised findings on dumping and injury could have a bearing on whether a causal link exists between dumping and injury. But whilst a revised finding of dumping will, in all likelihood, have an impact on the ‘effect of dumped imports’, we see no reason to conclude as well that this revised finding would have any impact on the ‘effects … of known factors other than the dumped imports’ in this dispute. Accordingly, we are of the view that the investigating authorities of the European Communities were not required to change the determination as it related to the ‘effects of other factors’ in this particular dispute. Moreover, we do not see why that part of the redetermination that merely incorporates elements of the original determination on ‘other factors’ would constitute an inseparable element of a measure taken to comply with the DSB rulings in the original dispute. Indeed, the investigating authorities of the European Communities were able to treat this element separately. Therefore, we do not agree with India that the redetermination can only be considered ‘as a whole new measure’”.(1734)

1116.     In US — Countervailing Measures on Certain EC Products (Article 21.5 — EC) the Panel concluded that the scope of a measure taken to comply includes determinations which formed the basis of the measure taken to comply (in that case, revisions to the original determinations taken in order to comply with the DSB recommendations and rulings), but did not include determinations which were not necessarily part of the measure taken to comply and had no potential effect on the measure taken to comply:

“Since the whole of the affirmative likelihood-of-subsidization re-determinations, as set out in the Section 129 determinations at issue, are measures taken to comply in these proceedings, the Panel considers that the treatment of the evidence relating to the subsidy programmes upon which that affirmative re-determination is based, is also part of the measures taken to comply.

 …

As regards the likelihood-of-injury determination, none of the Section 129 determinations at issue includes a revision of the likelihood of continuation or recurrence of injury. …(1735)

…[I]t therefore appears that whether the failure to revise the likelihood-of-injury analysis is necessarily part of a measure taken to comply depends on the potential effect of the re-determination of the likelihood-of-subsidization on the likelihood-of-injury analysis.

 …Where no new rate of subsidization is calculated and no exporter-specific decision on likelihood-of-subsidization is made, as here, we can see no basis for concluding that re-determination of the likelihood of recurrence or continuation of subsidization affects the likelihood-of-injury analysis.(1736) The Panel therefore considers that reconducting a likelihood-of-injury determination, given the particular circumstances in this dispute, is not a measure that should be adopted by the United States to bring about compliance with the recommendations and rulings of the DSB and thus the failure to reconduct the likelihood-of-injury determination is not an aspect of the measures taken to comply.”(1737)

1117.     The Appellate Body in US — Softwood Lumber IV (Article 21.5) noted that in light of the express link between “measures taken to comply” and “recommendations and rulings” in the first sentence of Article 21.5, determining the scope of “measures taken to comply” must also involve an examination of the DSB recommendations and rulings:

“A further feature of the first sentence of Article 21.5 is the express link between the “measures taken to comply” and the recommendations and rulings of the DSB. Accordingly, determining the scope of “measures taken to comply” in any given case must also involve examination of the recommendations and rulings contained in the original report(s) adopted by the DSB. Because such recommendations and rulings are directed at the measures found to be inconsistent in the original proceedings,(1738) such an examination necessarily involves consideration of those original measures. Lastly, the end of the first sentence of Article 21.5 indicates that where there is disagreement regarding measures taken to comply, there should be recourse to the original panel “wherever possible”, thus expressing a preference for dealing with these “disagreements” before the original panel that made the original recommendations and rulings in the dispute, rather than starting over again in new proceedings before a new panel.”(1739)

1118.     The Appellate Body in US — Softwood Lumber IV (Article 21.5 Canada) further found that that “[s]ome measures with a particularly close relationship to the declared ‘measure taken to comply’, and to the recommendations and rulings of the DSB, may also be susceptible to review by a panel acting under Article 21.5 .”(1740)

1119.     In US — Upland Cotton (Article 21.5 — Brazil), the Appellate Body made findings on the scope of the measures taken to comply in the case of Article 21.5 proceedings. After recalling the relevance of the DSB’s recommendations and rulings for a preliminary assessment of the measures taken to comply, the Appellate Body pointed at additional elements which allow an exhaustive appreciation. Drawing from the Members discretion to take appropriate action for compliance, the Appellate Body shed light on some criteria that should be applied to identify measures taken to comply:

“ While the DSB’s recommendations and rulings are a relevant starting point for identifying the “measures taken to comply” in an Article 21.5 proceeding, they are not dispositive as to the scope of such measures. Where alternative means of implementation are available, a WTO Member enjoys some discretion in deciding what measures to take to comply with the DSB’s recommendations and rulings. A WTO Member may choose to take measures that are broader than strictly required to comply with the DSB’s recommendations and rulings. The identification of the “measure taken to comply” is determined by reference to what a Member has actually done, and not to what a Member might have done, to ensure compliance with the DSB’s recommendations and rulings. Therefore, when the measures actually “taken” by the implementing Member are broader than the DSB’s recommendations and rulings, we do not see why the scope of the DSB’s recommendations and rulings should necessarily limit the scope of the “measures taken to comply” for purposes of the Article 21.5 proceedings.”(1741)

1120.     In EC — Bananas III (Article 21.5 — Ecuador II) and EC — Bananas III (Article 21.5 — US), the Appellate Body disagreed with the Panel’s application of the legal standard used by the Appellate Body in US — Softwood Lumber IV (Article 21.5) (see paragraph 1118 above) since in the Appellate Body’s view, the Panel should have first considered whether the measure at issue is in itself a measure taken to comply and, only if that analysis cannot provide a clear answer, it should apply the analysis of US — Softwood Lumber IV (Article 21.5 — Canada):

“With respect to the legal standard adopted by the Panel, we note that the Panel relied upon the Appellate Body’s finding in US — Softwood Lumber IV (Article 21.5 — Canada) that “[s]ome measures with a particularly close relationship to the declared ‘measure taken to comply’, and to the recommendations and rulings of the DSB, may also be susceptible to review by a panel acting under Article 21.5.”(1742) In its conclusion, the Panel found that the EC Bananas Import Regime was a measure taken to comply “in itself” and also “on the basis of its particularly close relationship to the alleged final measure taken to comply”.(1743)

 

The conclusions of the Panel derived from its application of the reasoning in US — Softwood Lumber IV (Article 21.5 — Canada). The Panel, however, failed to reflect in its reasoning that US — Softwood Lumber IV (Article 21.5-Canada) was not concerned with whether a measure is in itself a measure taken to comply. That dispute concerned the situation where, by reason of the close relationship between the measure at issue and the declared measure taken to comply, the measure at issue fell within the scope of Article 21.5. It will ordinarily be necessary to consider first whether the measure at issue is in itself a measure taken to comply. Only if that analysis cannot provide a clear answer, is the analysis of US — Softwood Lumber IV (Article 21.5 — Canada) of application.”(1744)

Panel’s discretion to decide on scope of the measures taken to comply

1121.     The Panel in Australia — Salmon (Article 21.5 — Canada) ruled that an Article 21.5 panel could not leave to the discretion of the parties the decision on whether a measure is a “measure taken to comply”:

“We note that an Article 21.5 panel cannot leave it to the full discretion of the implementing Member to decide whether a measure is one ‘taken to comply’. If one were to allow that, an implementing Member could simply avoid any scrutiny of certain measures by a compliance panel, even where such measures would be so clearly connected to the panel and Appellate Body reports concerned, both in time and in respect of the subject-matter, that any impartial observer would consider them to be measures ‘taken to comply’”.(1745)

1122.     In EC — Bed Linen (Article 21.5 — India), the Panel, in a finding upheld by the Appellate Body,(1746) also concluded that it is for the panel to decide whether certain measures have been “taken to comply” with a DSB ruling:

“Thus, it is clear that it is the Panel, and not the EC, which decides whether the measures cited by India in the request for establishment are to be considered “measures taken to comply” and therefore fall within the purview of this dispute. That said, however, it is also not India’s right to determine which measures taken by the EC are measures taken to comply. Rather, this is an issue which must be considered and decided by an Article 21.5 panel.”(1747)

Panel’s terms of reference and measures taken to comply

1123.     With respect to the relationship between “measures taken to comply” and a panel’s terms of reference, the Appellate Body in US — FSC (Article 21.5 — EC II) discussed the relationship between Article 6.2 of the DSU and Article 21.5 of the DSU:

“[W]e are of the view that the phrase “these dispute settlement procedures” does encompass Article 6.2 of the DSU, and that Article 6.2 is generally applicable to panel requests under Article 21.5.(1748) At the same time, given that Article 21.5 deals with compliance proceedings, Article 6.2 needs to be interpreted in the light of Article 21.5. In other words, the requirements of Article 6.2, as they apply to an original panel request, need to be adapted to a panel request under Article 21.5.

 

We note that the purpose of Article 21.5 is to resolve a disagreement between the parties “as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings” of the DSB. Thus, an Article 21.5 panel may be called upon to examine either the “existence” of “measures taken to comply” with DSB recommendations and rulings, or, when such measures exist, the “consistency” of those measures with the covered agreements, or a combination of both, in situations where the measures taken to comply, through omissions or otherwise, may achieve only partial compliance.

 

It is important to note that the text of Article 21.5 expressly links the “measures taken to comply” with the recommendations and rulings of the DSB. Therefore, the “specific measures at issue” to be identified in Article 21.5 proceedings are measures that have a bearing on compliance with the recommendations and rulings of the DSB. This, in our view, indicates that the requirements of Article 6.2 of the DSU, as they apply to an Article 21.5 panel request, must be assessed in the light of the recommendations and rulings of the DSB in the original panel proceedings that dealt with the same dispute.”(1749)

1124.     In order to identify the “specific measures at issue” and to provide “a brief summary of the legal basis of the complaint” in a panel request under Article 21.5, as required by Article 6.2 of the DSU, the Apellate Body in US — FSC (Article 21.5 — EC II) further explained that a complaining party must identify, at a minimum, the following elements in its panel request:

“First, the complaining party must cite the recommendations and rulings that the DSB made in the original dispute as well as in any preceding Article 21.5 proceedings, which, according to the complaining party, have not yet been complied with. Secondly, the complaining party must either identify, with sufficient detail, the measures allegedly taken to comply with those recommendations and rulings, as well as any omissions or deficiencies therein 118, or state that no such measures have been taken by the implementing Member. Thirdly, the complaining party must provide a legal basis for its complaint, by specifying how the measures taken, or not taken, fail to remove the WTO-inconsistencies found in the previous proceedings, or whether they have brought about new WTO-inconsistencies.”(1750)

1125.     In US — FSC (Article 21.5 — EC II) the Panel had recalled that for a panel’s terms of reference to include any measure taken to comply, the said measure must be adequately identified in the request for the establishment of the panel:

“On a holistic basis, the text of the EC Panel request cites the ETI Act, in its entirety, as well as both the 2000 and 2002 (Article 21.5) panel and Appellate Body reports, including recommendations and rulings adopted by the DSB. The Panel request also refers to a failure to withdraw prohibited subsidies and a failure to implement DSB recommendations and rulings from the original and first compliance proceedings. Article 6.2 of the DSU requires identification of the specific measure at issue, but not specific aspects of a specific measure.(1751) We find no specific requirement in Article 6.2 concerning the manner or method for identifying a specific measure at issue. If its content is adequately described in the Panel request, then the particular measure may be adequately identified. Together, we believe that the textual references in the EC Panel request embrace the ETI provisions grandfathering the original FSC scheme, as well as Panel and Appellate Body findings of inconsistency of the Article 5 of the ETI Act, as adopted by the DSB. In our view this clearly meets the requirements of Article 6.2 of the DSU.”(1752)

1126.     In US — Countervailing Measures on Certain EC Products (Article 21.5 — EC) the Panel found that the “measure taken to comply” is of such a fundamental nature that, even when parties remain silent on the issue, a Panel has a duty to determine that the measure has actually been “taken”:

“While the Panel considers the affirmative likelihood-of-subsidization re-determinations as set out in the three Section 129 determinations as the measures taken to comply, the Panel must address the possibility that these determinations may not have been implemented and consequently not “taken”(1753) by the United States. The European Communities drew our attention to the possible lack of implementation in its First written submission, where it indicated that “[i]f the USDOC in fact refused to implement its findings in its Section 129 issues and decision memoranda for the three sunset reviews at issue here, there is all the more reason for this Panel to find that the United States has failed to comply with the recommendations and rulings of the Dispute Settlement Body.”(1754) While none of the parties pursued the issue, the apparent lack of implementation concerns this Panel as it might mean that the Section 129 determinations are not and will never be in force and that the United States has not actually “taken” any measures to comply.

 

In an Article 21.5 proceeding, the measure or measures taken to comply go to the heart of panel’s mandate. The Appellate Body has ruled that panels have a duty to examine issues of a “fundamental nature”, issues that go to the root of their jurisdiction, on their own motion if the parties to the dispute remain silent on those issues.(1755) Therefore, even though the parties have not argued this issue, we must determine whether the three Section 129 determinations, despite the absence of direction by the USTR to implement, still constitute measures “taken” to comply.”(1756)

1127.     In EC — Bed Linen, the Appellate Body ruled on the panel’s discretion in the identification of the measures taken to comply in the request for its establishment:

“We agree with the Panel that it is, ultimately, for an Article 21.5 panel — and not for the complainant or the respondent — to determine which of the measures listed in the request for its establishment are “measures taken to comply”. Although the issue raised by India in this appeal relates primarily to the scope of claims that may be raised in Article 21.5 proceedings, this issue is intertwined with the question of which measures may be considered as “measures taken to comply” with the DSB rulings in an original dispute.”(1757)

Measures other than ‘measures taken to comply’

1128.     In US — Softwood Lumber IV (Article 21.5 — Canada) the Panel and Appellate Body concurred that a panel’s mandate under Article 21.5 of the DSU is not necessarily limited to an examination of an implementing Member’s measure declared to be “taken to comply” and may include a review of other measures which have close relationship to the declared “measure taken to comply”, and to the recommendations and rulings of the DSB. The Appellate Body stated:

“[A] panel’s mandate under Article 21.5 of the DSU is not necessarily limited to an examination of an implementing Member’s measure declared to be “taken to comply”. Such a declaration will always be relevant, but there are additional criteria, identified above, that should be applied by a panel to determine whether or not it may also examine other measures. Some measures with a particularly close relationship to the declared “measure taken to comply”, and to the recommendations and rulings of the DSB, may also be susceptible to review by a panel acting under Article 21.5 . Determining whether this is the case requires a panel to scrutinize these relationships, which may, depending on the particular facts, call for an examination of the timing, nature, and effects of the various measures. This also requires an Article 21.5 panel to examine the factual and legal background against which a declared “measure taken to comply” is adopted. Only then is a panel in a position to take a view as to whether there are sufficiently close links for it to characterize such an other measure as one “taken to comply” and, consequently, to assess its consistency with the covered agreements in an Article 21.5 proceeding.”(1758)

Timing of compliance

1129.     The Appellate Body in US — Upland Cotton (Article 21.5 — Brazil) considered the US statement that Article 21.5 proceedings are “on an expedited basis with no reasonable period of time [for the responding Member] to come into compliance”.(1759) The Appellate Body confirmed that the reasonable period of time is allowed only for WTO-consistent measures:

“it is a characteristic of Article 21.5 proceedings that no reasonable period of time for implementation is available if the new measure taken to comply with the DSB’s recommendations and rulings is found to be WTO-inconsistent.”(1760)

Effect of a ruling adopted by the DSB in an original dispute for the parties in Article 21.5 proceedings

1130.     The Appellate Body in EC — Bed Linen (Article 21.5 — India) recalled its conclusion in the US — Shrimp (Article 21.5 — Malaysia) dispute and the provisions of Article 17.14 of the DSU(1761) in order to rule that a Panel’s finding unless appealed becomes crystallized, once adopted by the DSU, a final resolution to be accepted by the parties:

“[l]n our view, an unappealed finding included in a panel report that is adopted by the DSB must be treated as a final resolution to a dispute between the parties in respect of the particular claim and the specific component of a measure that is the subject of that claim. This conclusion is supported by Articles 16.4 and 19.1, paragraphs 1 and 3 of Article 21, and Article 22.1 of the DSU. Where a panel concludes that a measure is inconsistent with a covered agreement, that panel shall recommend, according to Article 19.1, that the Member concerned bring that measure into conformity with that agreement. A panel report, including the recommendations contained therein, shall be adopted by the DSB within the time period specified in Article 16.4 — unless appealed. Members are to comply with recommendations and rulings adopted by the DSB promptly, or within a reasonable period of time, in accordance with paragraphs 1 and 3 of Article 21 of the DSU. A Member that does not comply with the recommendations and rulings adopted by the DSB within these time periods must face the consequences set out in Article 22.1, relating to compensation and suspension of concessions. Thus, a reading of Article 16.4 and 19.1, paragraphs 1 and 3 of Article 21 of the DSU, and Article 22.1, taken together, makes it abundantly clear that a panel finding which is not appealed, and which is included in a panel report adopted by the DSB, must be accepted by the parties as a final resolution to the dispute between them, in the same way and with the same finality as a finding included in an Appellate Body Report adopted by the DSB — with respect to the particular claim and the specific component of the measure that is the subject of the claim.”(1762)

(iii) Claims in Article 21.5 proceedings

General

1131.     The Appellate Body in EC — Bed Linen (Article 21.5 — India) stressed that “[i]f a claim challenges a measure which is not a “measure taken to comply”, that claim cannot properly be raised in Article 21.5 proceedings.”(1763)

1132.     In US — Upland Cotton (Article 21.5 — Brazil), the Appellate Body delineated the scope of the claims that may be raised in Article 21.5 proceedings:

“We agree with the United States that the scope of claims that may be raised in an Article 21.5 proceeding is not unbounded. As the Appellate Body found in EC — Bed Linen (Article 21.5 — India), a complainant who had failed to make out a prima facie case in the original proceedings regarding an element of the measure that remained unchanged since the original proceedings may not re-litigate the same claim with respect to the unchanged element of the measure in the Article 21.5 proceedings.(1764) Similarly, a complainant may not reassert the same claim against an unchanged aspect of the measure that had been found to be WTO-consistent in the original proceedings.(1765) Because a dopted panel and Appellate Body reports must be accepted by the parties to a dispute,(1766) allowing a party in an Article 21.5 proceeding to re-argue a claim that has been decided in adopted reports would indeed provide an unfair “second chance” to that party. “(1767)

“A complaining Member ordinarily would not be allowed to raise claims in an Article 21.5 proceeding that it could have pursued in the original proceedings, but did not.”(1768)

1133.     In EC — Bed Linen (Article 21.5 — India), the Appellate Body established that a complainant’s failure to raise a prima facie case in the original proceedings impacts on the scope of the respondent’s compliance obligation in an Article 21.5 dispute:

“[T]he original panel ruled that India had failed to present a prima facie case in respect of its claim under Article 3.5 relating to “other factors”.(1769) In our view, the effect, for the parties, of findings adopted by the DSB as part of a panel report is the same, regardless of whether a panel found that the complainant failed to establish a prima facie case that the measure is inconsistent with WTO obligations, that the Panel found that the measure is fully consistent with WTO obligations, or that the Panel found that the measure is not consistent with WTO obligations. A complainant that, in an original proceeding, fails to establish a prima facie case should not be given a “second chance” in an Article 21.5 proceeding, and thus be treated more favourably than a complainant that did establish a prima facie case but, ultimately, failed to prevail before the original panel, with the result that the panel did not find the challenged measure to be inconsistent with WTO obligations. Nor should a defending party be subject to a second challenge of the measure found not to be inconsistent with WTO obligations, merely because the complainant failed to establish a prima facie case, as opposed to failing ultimately to persuade the original panel.”

1134.     Therefore, for the Appellate Body, it is not in dispute that “[i]f a claim challenges a measure which is not a “measure taken to comply”, that claim cannot properly be raised in Article 21.5 proceedings.”(1770)

1135.     Previously, the Appellate Body had upheld the Panel’s findings as regards the claims not raised in the original proceedings:

“[A] claim which, as a legal and practical matter, could have been raised and pursued in the original dispute, but was not, cannot be raised on the same facts and legal premises in an Article 21.5 proceeding to determine the existence or consistency of measures taken to comply with the recommendation of the DSB in the original dispute.”(1771)

1136.     In US — Upland Cotton (Article 21.5 — Brazil), having recognized that the scope of claims that may be raised in an Article 21.5 proceeding is not unbounded, the Appellate Body agreed that if the “measure taken to comply” is a new measure, “a complaining Member may raise new claims against that measure in the Article 21.5 proceedings”.(1772)

Claims already raised and decided during the original proceedings

1137.     In US — Shrimp (Article 21.5 — Malaysia), Malaysia raised a claim against an aspect of the implementation measure that was the same as the original measure, and that, at the appeal stage, the Appellate Body had found to be not inconsistent with WTO obligations in the original dispute. The Appellate Body upheld the panel’s dismissal of Malaysia’s claim on the grounds that an adopted Appellate Body Report must be treated as a final resolution to a dispute between the parties to that dispute:

“We wish to recall that panel proceedings under Article 21.5 of the DSU are, as the title of Article 21 states, part of the process of the ‘Surveillance of Implementation of Recommendations and Rulings’ of the DSB. This includes Appellate Body Reports. To be sure, the right of WTO Members to have recourse to the DSU, including under Article 21.5, must be respected. Even so, it must also be kept in mind that Article 17.14 of the DSU provides not only that Reports of the Appellate Body ‘shall be’ adopted by the DSB, by consensus, but also that such Reports’ shall be … unconditionally accepted by the parties to the dispute….’ Thus, Appellate Body Reports that are adopted by the DSB are, as Article 17.14 provides,’… unconditionally accepted by the parties to the dispute’, and, therefore, must be treated by the parties to a particular dispute as a final resolution to that dispute. In this regard, we recall, too, that Article 3.3 of the DSU states that the ‘prompt settlement’ of disputes ‘is essential to the effective functioning of the WTO’.”(1773)

1138.     In EC — Bed Linen (Article 21.5 — India), the Panel declined to consider India’s claim on the “other factors” analysis after finding that the original panel had dismissed the claim and that India had not appealed it.(1774) The Appellate Body explained that, based on other provisions of the DSU, namely Article 16.4, 19.1, 21.1, Article 21.3 and 22.1, an unappealed finding in an adopted panel report must be treated as the “final resolution to a dispute between the parties in respect of the particular claim and the specific component of a measure that is the subject of that claim”. The Appellate Body thus gave equal value to a panel finding in an adopted Report as to a finding included in an adopted Appellate Body Report:

“[A]n unappealed finding included in a panel report that is adopted by the DSB must be treated as a final resolution to a dispute between the parties in respect of the particular claim and the specific component of a measure that is the subject of that claim. This conclusion is supported by Article 16.4 and 19.1, paragraphs 1 and 3 of Article 21 of the DSU, and Article 22.1 of the DSU. Where a panel concludes that a measure is inconsistent with a covered agreement, that panel shall recommend, according to Article 19.1, that the Member concerned bring that measure into conformity with that agreement. A panel report, including the recommendations contained therein, shall be adopted by the DSB within the time period specified in Article 16.4 — unless appealed. Members are to comply with recommendations and rulings adopted by the DSB promptly, or within a reasonable period of time, in accordance with paragraphs 1 and 3 of Article 21 of the DSU. A Member that does not comply with the recommendations and rulings adopted by the DSB within these time periods must face the consequences set out in Article 22.1, relating to compensation and suspension of concessions. Thus, a reading of Article 16.4 and 19.1, paragraphs 1 and 3 of Article 21 of the DSU, and Article 22.1, taken together, makes it abundantly clear that a panel finding which is not appealed, and which is included in a panel report adopted by the DSB, must be accepted by the parties as a final resolution to the dispute between them, in the same way and with the same finality as a finding included in an Appellate Body Report adopted by the DSB — with respect to the particular claim and the specific component of the measure that is the subject of the claim.

The Panel’s ruling that India’s claim under Article 3.5 relating to “other factors” was not properly before it is also consistent with the object and purpose of the DSU. Article 3.3 provides that the prompt settlement of disputes is “essential to the effective functioning of the WTO”. Article 21.5 advances the purpose of achieving a prompt settlement of disputes by providing an expeditious procedure to establish whether a Member has fully complied with the recommendations and rulings of the DSB.(1775) For that purpose, an Article 21.5 panel is to complete its work within 90 days, whereas a panel in an original dispute is to complete its work within 9 months of its establishment, or within 6 months of its composition. It would be incompatible with the function and purpose of the WTO dispute settlement system if a claim could be reasserted in Article 21.5 proceedings after the original panel or the Appellate Body has made a finding that the challenged aspect of the original measure is not inconsistent with WTO obligations, and that report has been adopted by the DSB. At some point, disputes must be viewed as definitely settled by the WTO dispute settlement system.”(1776)

1139.     With respect to the status of unappealed panel findings, the Appellate Body in EC — Bed Linen (Article 21.5 — India) upheld the Panel’s conclusion that the complainant’s failure to appeal the Panel’s finding in the original dispute triggers adoption by the DSB without modification of this finding. In this circumstance, compliance is limited to aspects of the original determination that the respondent has to bring into conformity and the 21.5 proceedings are bound to solely feature new claims. Moreover, while submitting that, neither Article 21.5 of the DSU nor any other provision entitles India to such a “second chance”, the Panel emphasized that:

“[A] claim which, as a legal and practical matter, could have been raised and pursued in the original dispute, but was not, cannot be raised on the same facts and legal premises in an Article 21.5 proceeding to determine the existence or consistency of measures taken to comply with the recommendation of the DSB in the original dispute.”(1777)

1140.     Therefore, having considered that India’s claim under Article 3.5 of the Anti-Dumping Agreement was not properly before it, the Appellate Body ruled that “[i]f a claim challenges a measure which is not a “measure taken to comply”, that claim cannot properly be raised in Article 21.5 proceedings.”(1778)

Claims different from or additional to those raised in the original proceedings:

1141.     In Canada — Aircraft (Article 21.5 — Brazil), the Appellate Body examined whether an Article 21.5 panel could consider a new claim that challenged an aspect of the measure taken to comply that was not part of the original measure and had not been, and could not have been, previously raised before the panel in the original proceedings. The Appellate Body explained that an Article 21.5 panel is not limited solely to examining whether the Member had complied with the DSB recommendations and rulings, but rather must examine the consistency of the new measure with the relevant provisions of, in casu, the SCM Agreement. The Appellate Body considered that the utility of Article 21.5 proceedings would be hampered if the panel could only consider the new measure from the perspective of the claims raised during the original proceedings:

“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.(1779) 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.”(1780)

1142.     In US — FSC (Article 21.5 — EC), the Appellate Body upheld a ruling on a new claim challenging an aspect of the measure taken to comply that was a revision of the original measure.(1781)

1143.     The Panel in EC — Bed Linen (Article 21.5 — India) voiced due process concerns about a situation where a complainant raises in the Article 21.5 proceeding new claims regarding unchanged aspects of the measures concerned that could have been raised during the original proceedings but were not for one reason or another:

“As an extreme example, assume a complaining Member challenges an anti-dumping duty in dispute settlement, and alleges violations only in connection with the investigating authorities’ determination of injury. Assume the Panel concludes that the anti-dumping duty is inconsistent with the AD Agreement because of a violation of Article 3.4 in the determination of injury, and the DSB recommends that the defending Member ‘bring the measure into conformity’. Assume the defending Member reevaluates only the injury aspect of its original decision, makes a new determination of injury, and continues the imposition of the anti-dumping duty on the basis of the new finding of injury and the pre-existing finding of dumping and causal link. If that anti-dumping duty, and all aspects of the determinations underlying that duty, are considered the ‘measure taken to comply’, then the complaining Member could, in a subsequent Article 21.5 proceeding, allege a violation in connection with the dumping determination which had not been challenged in the original dispute. If the Article 21.5 panel found a violation of the AD Agreement in the determination of dumping, it would presumably conclude that the measure taken to comply is inconsistent with the AD Agreement. In this circumstance, the defending Member would have no opportunity to bring its measure into conformity with the AD Agreement with respect to the dumping calculation. Moreover, the defending Member would be subject to potential suspension of concessions as a result of a finding of violation with respect to the dumping aspect of the original determination which, because it was not the subject of any finding of violation in the original report, the Member was entitled to assume was consistent with its obligations under the relevant agreement. Such an outcome would not seem to be consistent with the overall object and purpose of the DSU to achieve satisfactory resolution of disputes, effective functioning of the WTO, to maintain a proper balance between the rights and obligations of Members, and to ensure that benefits accruing to any Member under covered agreements are not to nullified or impaired.”(1782),(1783)

1144.     In EC — Bed Linen (Article 21.5 — India), the Appellate Body further stressed that a complainant in Article 21.5 proceedings could raise new claims, meaning claims that it did not raise in the original proceedings:

“[T]he relevant facts bearing upon the ‘measure taken to comply’ may be different from the facts relevant to the measure at issue in the original proceedings. It is to be expected, therefore, that the claims, arguments, and factual circumstances relating to the ‘measure taken to comply’ will not, necessarily, be the same as those relating to the measure in the original dispute.(1784) Indeed, a complainant in Article 21.5 proceedings may well raise new claims, arguments, and factual circumstances different from those raised in the original proceedings, because a ‘measure taken to comply’ may be inconsistent with WTO obligations in ways different from the original measure. In our view, therefore, an Article 21.5 panel could not properly carry out its mandate to assess whether a ‘measure taken to comply’ is fully consistent with WTO obligations if it were precluded from examining claims additional to, and different from, the claims raised in the original proceedings.”(1785),(1786)

1145.     The Panel in US — Countervailing Measures on Certain EC Products (Article 21.5 — EC) reiterated that “an Article 21.5 panel can consider a new claim on an aspect of the measure taken to comply that constitutes a new or revised element of the original measure, which claim could not have been raised in the original proceedings.”(1787) The Panel also recalled that “an Article 21.5 panel cannot consider the same claim on an aspect of the measure taken to comply that is an unchanged element of the original measure and was already challenged in the original proceedings and dismissed by an adopted report.”(1788) The Panel noted:

“The purpose of Article 21.5 is to provide an expeditious procedure to establish whether a Member has properly implemented the DSB recommendations and rulings. Admitting such a new claim would mean providing the European Communities with a second chance to raise a claim that it failed to raise in the original proceedings. The Appellate Body, however, has found that a party cannot cure the failure to include a claim in the panel request by raising the claim in subsequent submissions or statements.(1789)

 

Moreover, the Panel is concerned that allowing a new claim on the likelihood-of-injury in the current proceedings may jeopardize the principles of fundamental fairness and due process. In our view, it would be unfair to expose the United States to the possibility of a finding of violation on an aspect of the original measure that the United States was entitled to assume was consistent with its obligations under the relevant agreement given the absence of a finding of violation in the original report.(1790)”(1791)

Claims not included in the Article 21.5 panel request

1146.     The Panel in US — Countervailing Measures on Certain EC Products (Article 21.5 — EC) concluded that, notwithstanding that a claim is raised in written submissions, if the said claim is not properly specified in the panel request, the claim will fall outside of the panel’s terms of reference:

“In Korea — Diary, the Appellate Body explained 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 of the DSU. The Appellate Body opined that such a 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(1792). Article 21.3 of the SCM Agreement contains at least two obligations, one referring to the likelihood of subsidization, the other to the likelihood of injury. The claim on the likelihood of subsidization is identified in the Panel request but there is no mention of the likelihood-of-injury aspect.(1793) The Panel considers that this is one of the cases where the mere listing of an article, couple with the reference to only one of the obligations provided for in that article, falls short of meeting the requirements in Article 6.2 of the DSU. Thus, in our view, the European Communities failed to state a claim regarding the likelihood of injury in the Panel request.

 

The fact that the European Communities argued this claim in its First written submission cannot cure the absence of a sufficiently specified claim in the Panel request.”(1794)

(c) “recommendations and rulings”

(i) General

1147.     The Panel in US — FSC (Article 21.5 — EC II) reiterated the importance of “recommendations and rulings” and further noted that the obligation to implement DSB recommendations and rulings remains in effect until the measure taken to comply is fully consistent with a Member’s WTO obligations. The Panel stated:

“ ‘Recommendations and rulings’ are at the core of WTO dispute settlement.(1795) As the title of Article 21 of the DSU makes clear, panel proceedings under Article 21.5 form part of the process of the “Surveillance of Implementation of the Recommendations and Rulings”.

 

Article 21.5 compliance proceedings form part of a continuum of events(1796) flowing from the various steps in dispute settlement proceedings, with the operative recommendations and rulings for the purposes of Article 21.5 compliance proceedings being those adopted by the DSB in the original proceedings. These remain operative through compliance panel proceedings under Article 21.5 of the DSU until the “problem” is entirely “fixed”…”(1797)

(ii) Concept of recommendations and rulings

1148.     The Panel in US — FSC (Article 21.5 — EC II) stated that the phrase “recommendations and rulings” referred to those recommendations and rulings by a panel and/or Appellate Body which become effective upon their adoption by the DSB:

“The text of Article 21.5 of the DSU does not itself indicate which are the relevant “recommendations and rulings”. Several provisions of the covered agreements indicate that panels and/or the Appellate Body make “recommendations”.(1798) We believe that, in its context,(1799) the text of Article 21.5 of the DSU, refers to “recommendations and rulings” emanating from the DSB,(1800) as the authority to articulate operative WTO recommendations and rulings.(1801)

 

Recommendations by a panel and/or Appellate Body under Article 19 of the DSU (or Article 4.7 of the SCM Agreement) become effective only upon their adoption by the DSB. Once the DSB adopts a dispute settlement report, the findings and recommendations in that report become collective, operative DSB rulings and recommendations. The very notion of “measures taken to comply with the recommendations and rulings” in the text of Article 21.5 of the DSU is predicated upon DSB adoption of a panel/ Appellate Body report. No compliance obligation would arise unless and until panel and Appellate Body recommendations and rulings are adopted by the DSB to become DSB recommendations and rulings.”(1802),(1803)

(iii) A “new” recommendation

1149.     The Panel in US — FSC (Article 21.5 — EC II) observed that, upon finding that a measure taken to comply was inconsistent with the DSB recommendations and rulings, a panel was not required to make a “new” recommendation that the Member concerned bring itself into conformity with the covered agreements:

“We note that the focus of Article 21.5 of the DSU is helping parties to resolve a dispute. Article 21.5 of the DSU does not contain the terms “make recommendations”. Nor, beyond the reference to monitoring compliance with existing recommendations and rulings, does it contain an explicit reference to the “recommendation” provisions of Article 19 of the DSU, or to Article 4.7 of the SCM Agreement. We see no express requirement in the text of Article 21.5 of the DSU that a compliance panel must formulate recommendations upon finding an inconsistency with a covered agreement, including a recommendation under Article 4.7 upon a finding of inconsistency with Article 3 of the SCM Agreement.”(1804)

(d) “through recourse to these dispute settlement procedures”

(i) General

1150.     The parties to a dispute have often concluded ad hoc procedural agreements to solve the sequencing problem between compliance review procedures under Article 21.5 and the suspension of concessions and other obligation procedures under Article 22. These procedural agreements also tend to include procedural arrangements concerning the various stages of Article 21.5 compliance review procedures.

(ii) Application of Article 6.2 to Article 21.5 proceedings

1151.     The Appellate Body in US — FSC (Article 21.5 — EC II) expressed the view that the phrase “these dispute settlement procedures” encompasses Article 6.2 of the DSU, and that Article 6.2 is generally applicable to panel requests under Article 21.5. The Appellate Body further noted that “given that Article 21.5 deals with compliance proceedings, Article 6.2 needs to be interpreted in the light of Article 21.5. In other words, the requirements of Article 6.2, as they apply to an original panel request, need to be adapted to a panel request under Article 21.5.”(1805)

1152.     In Mexico — Corn Syrup (Article 21.5 US), with respect to its analysis of the effect of the absence of consultations on the Panel’s authority, the Appellate Body stressed the link between the original proceedings and proceedings under Article 21.5 of the DSU. In this connection, the Appellate Body assumed arguendo that the same procedures apply in Article 21.5 proceedings as in original panel proceedings. In this extent, it hypothesized that “if, on this assumption”, it finds that the failure of the United States’ communication to indicate whether consultations were held would not deprive a panel of its authority to deal with and dispose of the matter before it”, then the Appellate Body need not inquire further into the procedures that are actually required in proceedings under Article 21.5 of the DSU.(1806)

(iii) Timing of the establishment of Article 21.5 panels

1153.     Article 21.5 panels are frequently established at the first DSB meeting at which the request for establishment was submitted.(1807) In most of the cases, the establishment at the first DSB meeting was a procedural requirement agreed by the parties in an ad hoc agreement regarding procedures under Articles 21 and 22 of the DSU applicable to the given dispute.

(e) Waiving the right to Article 21.5 proceedings

1154.     In EC — Bananas III (Article 21.5 — Ecuador II) I EC — Bananas III (Article 21.5 — US), the Appellate Body addressed the question of whether the Understandings on Bananas,(1808) which the European Communities had concluded with the United States and with Ecuador, prevented the complainants from initiating compliance proceedings pursuant to Article 21.5 of the DSU with respect to the European Communities’ regime for the importation of bananas introduced by Council Regulation (EC) No. 1964/2005 of 29 November 2005.(1809) Further to a preliminary objection raised by the European Communities and based on Articles 3.3, 3.4 and 3.7 of the DSU, the Panel had found that the Understandings on Bananas could prevent the complainants from initiating compliance proceedings pursuant to Article 21.5 only if these Understandings constituted a “positive solution and effective settlement to the dispute in question”.(1810) The Panel had then found that the Understandings did not constitute a positive solution to the dispute because (i) the Bananas Understanding provides only for a means, i.e. a series of future steps, for resolving and settling the dispute; (ii) the adoption of the Bananas Understanding was subsequent to recommendations, rulings and suggestions by the DSB; and (iii) parties had made conflicting communications to the WTO concerning the Bananas Understanding.(1811) The Appellate Body disagreed with the Panel’s approach since it considered that the Panel should have commenced by analysing the text of the Understandings themselves in order to ascertain whether the parties had agreed to waive their right to compliance proceedings:

“With this in mind, we turn to analyze of the Understandings on Bananas at issue. We consider that the complainants could be precluded from initiating Article 21.5 proceedings by means of these Understandings only if the parties to these Understandings had, either explicitly or by necessary implication, agreed to waive their right to have recourse to Article 21.5. In our view, the relinquishment of rights granted by the DSU cannot be lightly assumed. Rather, the language in the Understandings must reveal clearly that the parties intended to relinquish their rights.(1812)

In the light of these considerations, we conclude that the Panel erred in placing the relevance it did on the conflicting statements of the parties at the meeting of the DSB, because, what the Panel was required to do was to provide an interpretation of the text of the Understandings. Only once it had done so, could it then consider conflicting statements to the DSB for the limited purpose of either seeking confirmation of the Panel’s interpretation, or determining the meaning because the textual interpretation left the meaning ambiguous or led to manifestly absurd results. Having found, based on the interpretation of the text of the Understandings, that these Understandings did not contain a relinquishment of the right to initiate compliance proceedings, we arrive at the same conclusion as the Panel, in paragraph 7.136 of the Ecuador Panel Report and in paragraph 7.165 of the US Panel Report, namely, that the complainants were not precluded from initiating these proceedings due to the Understandings on Bananas.”(1813)

(f) Table showing the length of Article 21.5 proceedings to date

1155.     The following table provides information on the length of time taken in WTO proceedings to date from the date of the referral of the matter to the Article 21.5 panel to the date of the circulation of the report (Article 21.5 of the DSU).(1814) It is updated to 30 September 2011.

Prescribed Time-Period in Article 21.5 90 days
Average to Date 246 days
Longest to Date 449 days
Shortest to Date 90 days
WT/DS No. Case Name Compliance Panel Report(s) under Article 21.5 Days from referral of the matter to Article 21.5 panel to circulation of report
WT/DS18 Australia — Salmon Panel Report, Australia — Salmon (Article 21.5 — Canada), circulated 18 February 2000 205 days
WT/DS27 EC — Bananas III Panel Report, EC — Bananas III (Article 21.5 — EC), circulated 12 April 1999 90 days
    Panel Report, EC — Bananas III (Article 21.5 — Ecuador), circulated 12 April 1999 90 days
    Panel Report, EC — Bananas III ( Article 21.5 — Ecuador II), circulated 7 April 2008 384 days
    Panel Report, EC — Bananas III (Article 21.5 — US), circulated 19 May 2008 312 days
WT/DS46 Brazil — Aircraft Panel Report, Brazil — Aircraft (Article 21.5 — Canada), circulated 9 May 2000 152 days
    Panel Report, Brazil — Aircraft (Article 21.5 — Canada II), circulated 26 July 2001 160 days
WT/DS58 US — Shrimp Panel Report, US — Shrimp (Article 21.5 — Malaysia), circulated 15 June 2001 235 days
WT/DS70 Canada — Aircraft Panel Report, Canada — Aircraft (Article 21.5 — Brazil), circulated 9 May 2000 152 days
WT/DS103, WT/DS113  Canada — Dairy Panel Report, Canada — Dairy (Article 21.5 — New Zealand and US), circulated 11 July 2001 132 days
Panel Report, Canada — Dairy (Article 21.5 — New Zealand and US II), circulated 26 July 2002 220 days
WT/DS108 US — FSC (Article 21.5 — EC) Panel Report, US — FSC (Article 21.5 — EC), circulated 20 August 2001 243 days
    Panel Report, US — FSC (Article 21.5 — EC II), circulated 30 September 2005 225 days
WT/DS126 Australia — Automotive Leather II (Article 21.5 — US) Panel Report, Australia — Automotive Leather II (Article 21.5 — US), circulated 21 January 2000 99 days
WT/DS 132 Mexico — Corn Syrup (Article 21.5 — US) Panel Report, Mexico — Corn Syrup (Article 21.5 — US), circulated 22 June 2001 242 days
WT/DS141 EC — Bed Linen (Article 21.5 — India) Panel Report, EC — Bed Linen (Article 21.5 — India), circulated 29 November 2002 191 days
WT/DS207 Chile — Price Band System (Article 21.5 — Argentina) Panel Report, Chile — Price Band System (Article 21.5 — Argentina), circulated 8 December 2006 322 days
WT/DS212 US — Countervailing Measures on Certain EC Products (Article 21.5 — EC) Panel Report, US — Countervailing Measures on Certain EC Products (Article 21.5 — EC), circulated 17 August 2005 324 days
WT/DS245 Japan — Apples (Article 21.5 — US) Panel Report, Japan — Apples (Article 21.5 — US), circulated 23 June 2005 328 days
WT/DS257 US — Softwood Lumber IV (Article 21.5 — Canada) Panel Report, US — Softwood Lumber IV (Article 21.5 — Canada), circulated 1 August 2005 199 days
WT/DS264 US — Softwood Lumber V (Article 21.5 — Canada) Panel Report, US — Softwood Lumber V (Article 21.5 — Canada), circulated 3 April 2006 306 days
WT/DS267 US — Upland Cotton (Article 21.5 — Brazil) Panel Report, US — Upland Cotton (Article 21.5 — Brazil), circulated 18 December 2007 446 days
WT/DS268 US — Oil Country Tubular Goods Sunset Reviews (Article 21.5 — Argentina) Panel Report, US — Oil Country Tubular Goods Sunset Reviews (Article 21.5 — Argentina), circulated 30 November 2006 258 days
WT/DS277 US — Softwood Lumber VI (Article 21.5 — Canada) Panel Report, US — Softwood Lumber VI (Article 21.5 — Canada), circulated 15 November 2005 263 days
WT/DS285 US — Gambling (Article 21.5 — Antigua and Barbuda) Panel Report, US — Gambling (Article 21.5 — Antigua and Barbuda), circulated 30 March 2007 254 days
WT/DS294 US — Zeroing (EC) (Article 21.5 — EC) Panel Report, US — Zeroing (EC) (Article 21.5 — EC), circulated 17 December 2008 449 days
WT/DS312 Korea — Certain Paper (Article 21.5 — Indonesia) Panel Report, Korea — Certain Paper (Article 21.5 — Indonesia), circulated 28 September 2007 248 days
WT/DS322 US — Zeroing (Japan) (Article 21.5 — Japan) Panel Report, US — Zeroing (Japan) (Article 21.5 — Japan), circulated 24 April 2009 371 days

6. Ad hoc agreements on procedures under Articles 21 and 22 concluded by parties

(a) Table of ad hoc agreements on sequencing procedures under Article 21.5 and Article 22

1156.     The following table provides information on ad hoc agreements on sequencing procedure under Articles 21.5 and 22 of the DSU. It is updated to 30 September 2011.

DS No. Case Agreement on procedures under Articles 21 and 22
DS18 Australia — Salmon WT/DS18/RW, para. 1.3
DS46 Brazil — Aircraft WT/DS46/13
DS58 US — Shrimp WT/DS58/16
DS70 Canada — Aircraft WT/DS70/9
DS103,
DS113
Canada — Dairy WT/DS103/14 and 24
WT/DS113/14 and 24
DS103, DS113 Canada — Dairy (Article 21.5 — New Zealand and US II) WT/DS103/14 and 24
WT/DS113/14 and 24
DS108 US — FSC WT/DS108/12
DS122 Thailand — H-Beams WT/DS122/10
DS126 Australia — Automotive Leather II WT/DS126/8
DS141 EC — Bed Linen WT/DS141/11
DS155 Argentina — Hides and Finished Leather WT/DS155/12
DS184 US — Hot-Rolled Steel WT/DS184/19
DS206 US — Steel Plate WT/DS206/9
DS207 Chile — Price Band System WT/DS207/16
DS245 Japan — Apples WT/DS245/10
DS257 US — Softwood Lumber TV WT/DS257/18
DS264 US — Softwood Lumber V WT/DS264/18
DS265,
DS266,
DS283
EC — Export Subsidies on Sugar WT/DS265/36
WT/DS266/36
WT/DS283/17
DS267 US — Subsidies on Upland Cotton WT/DS267/22
DS268 US — Oil Country Tubular Goods Sunset Reviews WT/DS268/14
DS277 US — Softwood Lumber VI WT/DS277/11
DS282 US — Anti-Dumping Measures on Oil Tubular Goods Country WT/DS282/12
DS285 US — Gambling WT/DS285/16
DS286,
DS269
EC — Chicken Cuts WT/DS286/18
WT/DS269/16
DS291 EC — Approval and Marketing of Biotech Products WT/DS291/38
DS294 US — Zeroing (EC) WT/DS294/21
DS295 Mexico — Anti-Dumping Measures on, Rice WT/DS295/15
DS312 Korea — Certain Paper WT/DS312/7
DS322 US — Zeroing (Japan) WT/DS322/26
DS334 Turkey — Rice WT/DS334/13
DS336 Japan — DRAMs (Korea) WT/DS336/18
DS344 US — Stainless Steel (Mexico) WT/DS344/17
DS350 US — Continued Zeroing WT/DS350/19
DS362 China — Intellectual Property Rights WT/DS362/15
DS363 China — Publications and Audiovisual Products WT/DS363/18
DS366 Colombia — Ports of Entry WT/DS366/14
DS375,
DS376,
DS377
EC — IT Products WT/DS375/17
WT/DS376/17
WT/DS377/15

(b) The sequencing issue

1157.     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 1170 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”.(1815)

(c) Sequencing solutions in ad hoc procedural agreements

(i) Recourse to Article 21.5 before initiating Article 22 proceedings

1158.     In Australia — Automotive Leather II, the United States and Australia agreed on a procedural understanding on 4 October 1999, whereby the complainant, the United States, would not initiate Article 22 proceedings until the circulation of the compliance panel’s report pursuant to Article 21.5 . The relevant part of the procedural agreement provides that “the United States will not request authorization to suspend concessions until after the review panel has circulated its report.”(1816)

1159.     In US — Shrimp, the disputing parties, Malaysia and the United States, agreed on a procedural agreement on 22 December 1999, which included a similar provision to that in Australia — Automotive Leather II (see paragraph 1158 above). However, in this case Malaysia undertook not to initiate Article 22 proceedings until the adoption of the 21.5 panel report. The relevant part of the procedural agreement reads as follows:

“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.(1817)

1160.     Similarly, in Argentina — Hides and Leather, the disputing parties, the European Communities and Argentina, agreed on a procedural agreement on 26 February 2002. According to this agreement, the complainant, the European Communities, would only have recourse to Article 22 proceedings after the completion of the Article 21.5 proceedings. The relevant part of the procedural agreement provides that:

“However, the EC’s resort to the DSU for the purposes of suspension of concessions or other obligations may take place only after completion of proceedings under Article 21.5 of the DSU.”(1818)

(ii) Simultaneous Articles 21.5 and 22 proceedings

1161.     In Canada — Dairy, the disputing parties, New Zealand and Canada, agreed on 23 November 1999 on a procedural agreement whereby the complainant, New Zealand, could request authorization to suspend concessions under Article 22 either simultaneously or after an Article 21.5 proceeding. In the event that the Articles 21.5 and 22 proceedings were simultaneously initiated, and the matter referred to arbitration pursuant to Article 22.6, the parties would request the arbitrator to suspend its work until the adoption of the compliance panel [and Appellate Body] report[s]. The relevant part of the procedural agreement reads as follows:

“After the end of the period available to Canada to implement the DSB recommendations and rulings …, 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”).

New Zealand may request authorization to suspend concessions or other obligations pursuant to Article 22.2 the DSU simultaneously with or after any New Zealand request for the establishment of a panel pursuant to paragraph 1.

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.”(1819)

(iii) Agreement not to appeal the compliance report

1162.     In Australia — Automotive Leather II (see paragraph 1158 above), the disputing parties agreed to refrain from appealing Article 21.5 compliance panel’s findings on whether or not the measures taken by Australia were consistent with the recommendations and rulings of the DSB. The relevant part of the procedural agreement reads as follows:

“Both Australia and the United States will unconditionally accept the review panel report and there will be no appeal of that report.”(1820)

(iv) Withdrawal of Article 22 arbitration request

1163.     In US — FSC, the disputing parties, the European Communities and the United States, concluded a procedural agreement on 29 September 2000. Pursuant to this agreement, in the event that the DSB found that the measures taken to comply by the United States were not inconsistent with the covered agreements, the European Communities undertook to withdraw its request for authorization to suspend concessions under Article 22. The relevant part of the procedural agreement provides that:

“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.”(1821)

(v) Direct recourse to Article 22

1164.     In US — FSC, the disputing parties agreed that in the absence of measures taken to comply by the United States, the European Communities could proceed directly to request authorization to suspend concessions under Article 22.2, without having recourse to Article 21.5 proceedings. The relevant part of the procedural agreement reads as follows:

“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 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.”(1822)

(vi) Agreement not to object to arbitration under Article 22.6

1165.     In Japan — Apples, the disputing parties, Japan and the United States, agreed, in a procedural agreement concluded on 30 June 2004, that in the event the complainant, the United States, requested authorization to suspend concessions, the respondent, Japan, would object to the proposed level of suspension and request arbitration under Article 22.6. In that case, the United States undertook not to object to the referral of the dispute to arbitration under Article 22.6. The relevant part of the procedural agreement provides that:

“Under DSU Article 22.6, Japan 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 United States’ request and the matter will be referred to arbitration pursuant to DSU Article 22.6. The United States will not pose any objection to the referral of the matter to such arbitration.”(1823)

(vii) Non-application of the 30-day deadline in first sentence in Article 22.6

1166.     In EC — Bed Linen, the disputing parties, the European Communities and India, agreed in a procedural agreement concluded on 13 September 2001, that the European Communities would not invoke the 30-day deadline in the first sentence in Article 22.6 in order to block India’s request for arbitration under Article 22.6. The relevant part of the procedural agreement reads as follows:

“If on the basis of the results of proceedings under Article 21.5 of the DSU that might be initiated by India no later than 31 March 2002, India decides to initiate proceedings under Article 22 of the DSU, the EC will not assert that India is precluded from obtaining DSB authorization because India’s request was made outside the 30 day time-period specified in the first sentence of Article 22.6 of the DSU.”(1824)

1167.     In Australia — Automotive Leather II (see paragraph 1158 above), the disputing parties, the United States and Australia, agreed to extend the 30-day time period in the first sentence of Article 22.6 to 60 days. In addition, the 60-day deadline would start from the date of circulation of the compliance panel report. By common consent, the 60-day period for completing the arbitration under Article 22.6 was reduced to 45 days. The relevant part of the procedural agreement provides:

“Pursuant to footnote 6 to Article 4 of the SCM Agreement, Australia and the United States agree that the deadline for DSB action under the first sentence of Article 22.6 of the DSU shall be 60 days after the circulation of the review panel 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 45 days after the matter is referred to arbitration.” (1825)

(d) Consultations

1168.     In US — Steel Plate, the disputing parties, the United States and India, agreed in a procedural agreement concluded on 14 February 2003, that should the complainant consider that the situation described in Article 21.5 exists, it would request consultations with the respondent prior to requesting the establishment of a compliance panel. The relevant part of the procedural agreement reads:

“Should India consider that the situation described in Article 21.5 of the DSU exists, India will request consultations which the parties agree to hold within 12 days from the date of circulation of the request. India and the United States 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.”(1826)

1169.     In US — Hot-Rolled Steel, Japan agreed not to request authorization to suspend concessions pursuant to Article 22.2 the DSU without first providing advance notice to and consulting with the United States. Paragraph 1 of the said agreement reads:

“If Japan at some future date decides to request DSB authorization to suspend concessions or other obligations under Article 22.2 the DSU, it will provide the United States advance notice and will consult with the United States before making such a request.”(1827)

(e) Establishment of the panel

1170.     In Brazil — Aircraft and Canada — Aircraft, and the two proceedings under Article 21.5 brought by Canada and Brazil against each other, the disputing parties agreed, in two identical procedural agreements concluded on 23 November 1999, to include a provision whereby the parties would agree to establish the 21.5 panels at the first DSB meeting. The relevant part of the procedural agreement reads as follows:

“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.

 

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.”(1828)

(f) Appointment of panelists

1171.     In Japan — Apples, the disputing parties agreed that if the original panelists were not available for the compliance panel or the Article 22.6 arbitration (or both) proceedings, they would request the Director General of the WTO to appoint a replacement for the proceeding or proceedings in which this was required. The relevant part of the procedural agreement provides:

“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 parties will 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 either proceeding, the parties will further request that in making this appointment, the Director-General seek a person who will also be available to act in both proceedings.”(1829)

(g) Participation of experts

1172.     In Japan — Apples, the disputing parties agreed that if the participation of experts was deemed necessary, the parties would not object to the participation of the original experts. The relevant part of the procedural agreement provides:

“Should the Article 21.5 compliance panel determine that the participation of experts is necessary, and should the panel consider the participation of the original experts appropriate, the parties will not object to the participation of the original experts.”(1830)

(h) Cooperation to ensure time-limits for the work of the compliance panel and Appellate Body are respected

1173.     In Canada — Dairy, the disputing parties agreed to include a provision in the procedural agreement whereby they would agree to cooperate to ensure that the 90-day deadlines for both the compliance Panel and the Appellate Body work were respected. The relevant part of the procedural agreement reads as follows:

“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.

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.”(1831)

(i) Non-prejudice of the parties other rights

1174.     In US — Steel Plate, the disputing parties included a clause whereby they agreed that the provisions in the procedural agreement did not prejudice their rights or interests. The relevant part of the agreement provides that:

“These agreed procedures do not prejudice the rights of India or the United States to take any action or procedural step to protect their rights or interests, including the activation of any aspect of the provisions of the DSU.”(1832)

1175.     In EC — Export Subsidies on Sugar, Brazil and the European Communities agreed to jointly request the adoption by the DSB of a draft decision safeguarding their respective rights under the DSU. The draft decision reads:

“The DSB takes note of the Understanding reached between Brazil and the European Communities and agrees that, in the event that the DSB adopts recommendations and rulings that measures taken by the European Communities to comply with the prior recommendations and rulings of the DSB do not exist or are inconsistent with a covered agreement, the DSB shall grant Brazil upon its request authorization to suspend concessions or other obligations pursuant to Article 22 of the DSU unless (i) the DSB decides by consensus not to do so, or (ii) the European Communities objects to the level of suspension proposed or claims that the principles and procedures set forth in Article 22.3 have not been followed, in which case the matter shall be referred to arbitration under Article 22.6 of the DSU.”(1833)

(j) Panel’s scope of review of procedural agreements

1176.     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 1170 above). Brazil however stated at a hearing during the Article 22.6 Arbitration proceedings that the recourse by Canada to Article 22.2 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 counter measures 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.(1834) 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.(1835)

 

XXII. Article 22    back to top

A. Text of Article 22

Article 221: 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 settlement procedures, with a view to developing mutually acceptable compensation. If no satisfactory compensation has been agreed within 20 days after the date of expiry of the reasonable period of time, any party having invoked the dispute settlement procedures may request authorization from the DSB to suspend the application to the Member concerned of concessions or other obligations under the covered agreements.

 

3.     In considering what concessions or other obligations to suspend, the complaining party shall apply the following principles and procedures:

 

(a)     the general principle is that the complaining party should first seek to suspend concessions or other obligations with respect to the same sector(s) as that in which the panel or Appellate Body has found a violation or other nullification or impairment;

 

(b)    if that party considers that it is not practicable or effective to suspend concessions or other obligations with respect to the same sector(s), it may seek to suspend concessions or other obligations in other sectors under the same agreement;

 

(c)    if that party considers that it is not practicable or effective to suspend concessions or other obligations with respect to other sectors under the same agreement, and that the circumstances are serious enough, it may seek to suspend concessions or other obligations under another covered agreement;

 

(d)    in applying the above principles, that party shall take into account:

 

(i)     the trade in the sector or under the agreement under which the panel or Appellate Body has found a violation or other nullification or impairment, and the importance of such trade to that party;

 

(ii)     the broader economic elements related to the nullification or impairment and the broader economic consequences of the suspension of concessions or other obligations;

 

(e)    if that party decides to request authorization to suspend concessions or other obligations pursuant to subparagraphs (b) or (c), it shall state the reasons therefor in its request. At the same time as the request is forwarded to the DSB, it also shall be forwarded to the relevant Councils and also, in the case of a request pursuant to subparagraph (b), the relevant sectoral bodies;

 

(f)    for purposes of this paragraph, “sector” means:

 

(i)     with respect to goods, all goods;

 

(ii)     with respect to services, a principal sector as identified in the current “Services Sectoral Classification List” which identifies such sectors;(14)

 

(footnote original) 14 The list in document MTN.GNS/W/120 identifies eleven sectors.

 

(iii)     with respect to trade-related intellectual property rights, each of the categories of intellectual property rights covered in Section 1, or Section 2, or Section 3, or Section 4, or Section 5, or Section 6, or Section 7 of Part II, or the obligations under Part III, or Part IV of the Agreement on TRIPS;

 

(g)     for purposes of this paragraph, “agreement” means:

 

(i)     with respect to goods, the agreements listed in Annex 1A of the WTO Agreement, taken as a whole as well as the Plurilateral Trade Agreements in so far as the relevant parties to the dispute are parties to these agreements;

 

(ii)     with respect to services, the GATS;

 

(iii)     with respect to intellectual property rights, the Agreement on TRIPS.

 

4.     The level of the suspension of concessions or other obligations authorized by the DSB shall be equivalent to the level of the nullification or impairment.

 

5.     The DSB shall not authorize suspension of concessions or other obligations if a covered agreement prohibits such suspension.

 

6.     When the situation described in paragraph 2 occurs, the DSB, upon request, shall grant authorization to suspend concessions or other obligations within 30 days of the expiry of the reasonable period of time unless the DSB decides by consensus to reject the request. However, if the Member concerned objects to the level of suspension proposed, or claims that the principles and procedures set forth in paragraph 3 have not been followed where a complaining party has requested authorization to suspend concessions or other obligations pursuant to paragraph 3(b) or (c), the matter shall be referred to arbitration. Such arbitration shall be carried out by the original panel, if members are available, or by an arbitrator(15) appointed by the Director-General and shall be completed within 60 days after the date of expiry of the reasonable period of time. Concessions or other obligations shall not be suspended during the course of the arbitration.

 

(footnote original) 15 The expression “arbitrator” shall be interpreted as referring either to an individual or a group.

 

7.     The arbitrator(16) acting pursuant to paragraph 6 shall not examine the nature of the concessions or other obligations to be suspended but shall determine whether the level of such suspension is equivalent to the level of nullification or impairment. The arbitrator may also determine if the proposed suspension of concessions or other obligations is allowed under the covered agreement. However, if the matter referred to arbitration includes a claim that the principles and procedures set forth in paragraph 3 have not been followed, the arbitrator shall examine that claim. In the event the arbitrator determines that those principles and procedures have not been followed, the complaining party shall apply them consistent with paragraph 3. The parties shall accept the arbitrator’s decision as final and the parties concerned shall not seek a second arbitration. The DSB shall be informed promptly of the decision of the arbitrator and shall upon request, grant authorization to suspend concessions or other obligations where the request is consistent with the decision of the arbitrator, unless the DSB decides by consensus to reject the request.

 

(footnote original) 16 The expression “arbitrator” shall be interpreted as referring either to an individual or a group or to the members of the original panel when serving in the capacity of arbitrator.

 

8.     The suspension of concessions or other obligations shall be temporary and shall only be applied until such time as the measure found to be inconsistent with a covered agreement has been removed, or the Member that must implement recommendations or rulings provides a solution to the nullification or impairment of benefits, or a mutually satisfactory solution is reached. In accordance with paragraph 6 of Article 21, the DSB shall continue to keep under surveillance the implementation of adopted recommendations or rulings, including those cases where compensation has been provided or concessions or other obligations have been suspended but the recommendations to bring a measure into conformity with the covered agreements have not been implemented.

 

9.     The dispute settlement provisions of the covered agreements may be invoked in respect of measures affecting their observance taken by regional or local governments or authorities within the territory of a Member. When the DSB has ruled that a provision of a covered agreement has not been observed, the responsible Member shall take such reasonable measures as may be available to it to ensure its observance. The provisions of the covered agreements and this Understanding relating to compensation and suspension of concessions or other obligations apply in cases where it has not been possible to secure such observance.(17)

 

(footnote original) 17 Where the provisions of any covered agreement concerning measures taken by regional or local governments or authorities within the territory of a Member contain provisions different from the provisions of this paragraph, the provisions of such covered agreement shall prevail.


B. Interpretation and Application of Article 22

1. General

(a) Nature and purpose of countermeasures

1177.     In EC — Bananas III (US) (Article 22.6 — EC), the Arbitrators confirmed that the authorization to suspend concessions or other obligations is a temporary measure pending full implementation by the Member concerned. They further agreed with the United States “that this temporary nature indicates that it is the purpose of countermeasures to induce compliance”. However, the Arbitrators considered that “this purpose does not mean that the DSB should grant authorization to suspend concessions beyond what is equivalent to the level of nullification or impairment. In our view, there is nothing in Article 22.1 of the DSU, let alone in paragraphs 4 and 7 of Article 22, that could be read as a justification for countermeasures of a punitive nature”.(1836)

1178.     Similarly, the Arbitrators in EC — Bananas III (Ecuador) (Article 22.6 — EC) observed that “the object and purpose of Article 22 … is to induce compliance”.(1837)

1179.     In Canada — Aircraft Credits and Guarantees (Article 22.6 — Canada) the Arbitrator considered that “Article 22.1 of the DSU is particularly clear as to the temporary nature of suspensions of concessions or other obligations, pending compliance.” The Arbitrator further stated that “[u]nder Article 22.1 of the DSU and Article 4.10 of the SCM Agreement, non-compliance is the very event justifying the adoption of countermeasures.” Moreover, the Arbitrator noted that “…the EC — Bananas Arbitrators, referring to [DSU Article 22.1], expressed the view that suspension of concessions or other obligations was intended to induce compliance because it was temporary.”(1838)

1180.     In US — 1916 Act (EC) (Article 22.6 — US), the Arbitrators clarified that they were “not called upon to ‘provide a comprehensive list of the purposes’ of the suspension of concessions or other obligations, or to ‘rank these purposes in some sort of order of priority’”.(1839) Further to quoting the above awards, the Arbitrators agreed that “a fundamental objective of the suspension of obligations is to induce compliance”. It emphasized that “[t]he fact that such suspension is meant to be temporary — as indicated in Article 22.1 — is further evidence of this purpose.”(1840) The Arbitrators further indicated that:

“We also agree with the critically important point that the concept of “equivalence”, as embodied in Article 22.4, means that obligations cannot be suspended in a punitive manner. This means that in suspending certain obligations owed to the United States under the GATT and the Anti-Dumping Agreement, the European Communities cannot exceed the level of nullification or impairment sustained by the European Communities as a result of the 1916 Act. We consider this further below.”(1841)

1181.     In US — Offset Act (Byrd Amendment) (Article 22.6), the Arbitrator questioned the nature of the countermeasures, in particular whether “inducing compliance”, as set out in EC — Bananas III (US) (Article 22.6 — EC), was the only objective pursued by the DSU when allowing a WTO Member to suspend concessions or other obligations. In that regard, the Arbitrator noted that:

“The concept of ‘inducing compliance’ was first raised in the EC — Bananas III (US) (Article 22.6 — EC)(1842) arbitration and has been referred to since in other arbitrations. However, it is not expressly referred to in any part of the DSU and we are not persuaded that the object and purpose of the DSU — or of the WTO Agreement — would support an approach where the purpose of suspension of concessions or other obligations pursuant to Article 22 would be exclusively to induce compliance. Having regard to Articles 3.7 and 22.1 and 22.2 of the DSU as part of the context of Articles 22.4 and 22.7, we cannot exclude that inducing compliance is part of the objectives behind suspension of concessions or other obligations, but at most it can be only one of a number of purposes in authorizing the suspension of concessions or other obligations. By relying on ‘inducing compliance’ as the benchmark for the selection of the most appropriate approach we also run the risk of losing sight of the requirement of Article 22.4 that the level of suspension be equivalent to the level of nullification or impairment.”(1843)

1182.     In US — Offset Act (Byrd Amendment) (Article 22.6), the Arbitrator further remarked that the reason for suspending concessions is not explicit in the DSU, and that the means for “inducing compliance” are likely to vary in each case:

“[T]he DSU does not expressly explain the purpose behind the authorization of the suspension of concessions or other obligations. On the one hand, the general obligation to comply with DSB recommendations and rulings seems to imply that suspension of concessions or other obligations is intended to induce compliance, as has been acknowledged by previous arbitrators.(1844) However, exactly what may induce compliance is likely to vary in each case, in the light of a number of factors including, but not limited to, the level of suspension of obligations authorized.”(1845), (1846)

2. Article 22.2

(a) Specificity in the request for suspension of concessions or other obligations

(i) Application of Article 6.2 specificity requirement

1183.     In EC — Bananas III (Ecuador) (Article 22.6 — EC), the Arbitrators held that the requests for suspension of concessions under Article 22.2, as well as the requests for a referral to arbitration under Article 22.6, serve similar due process objectives as requests under Article 6.2 and thus concluded that the specificity standards are relevant for Article 22 requests:

“The DSU does not explicitly provide that the specificity requirements, which are stipulated in Article 6.2 for panel requests, apply mutatis mutandis to arbitration proceedings under Article 22. However, we believe that requests for suspension under Article 22.2, as well as requests for a referral to arbitration under Article 22.6, serve similar due process objectives as requests under Article 6.2. First, they give notice to the other party and enable it to respond to the request for suspension or the request for arbitration, respectively. Second, a request under Article 22.2 by a complaining party defines the jurisdiction of the DSB in authorizing suspension by the complaining party. Likewise, a request for arbitration under Article 22.6 defines the terms of reference of the Arbitrators. Accordingly, we consider that the specificity standards, which are well-established in WTO jurisprudence under Article 6.2, are relevant for requests for authorization of suspension under Article 22.2, and for requests for referral of such matter to arbitration under Article 22.6, as the case may be. They do, however, not apply to the document submitted during an arbitration proceeding, setting out the methodology used for the calculation of the level of nullification or impairment.”(1847)

(ii) Minimum specificity requirements

1184.     In EC — Hormones (US) (Article 22.6 — EC), the Arbitrators stated that the minimum requirements attached to a request to suspend concessions or other obligations are:

“(1) the request must set out a specific level of suspension, i.e. a level equivalent to the nullification and impairment caused by the WTO inconsistent measure, pursuant to Article 22.4; and (2) the request must specify the agreement and sector(s) under which concessions or other obligations would be suspended, pursuant to Article 22.3.”(1848), (1849)

1185.     In EC — Bananas III (Ecuador) (Article 22.6 — EC), in connection with the first minimum requirement for making a request for the suspension of concessions or other obligations, Ecuador requested suspension under Article 22.2 the DSU in the amount of US$ 450 million. Ecuador’s methodology paper and submissions indicated that the direct and indirect harm and macro-economic repercussions of its entire economy amount to US$ 1 billion. Ecuador argued that, pursuant to Article 21.8 of the DSU, the total economic impact of the European Communities banana regime should be considered by the Arbitrators by applying a multiplier when calculating the level of nullification and impairment suffered by Ecuador. The Arbitrators stated:

“[T]he level of suspension specified in Ecuador’s request under Article 22.2 is the relevant one and defines the amount of requested suspension for purposes of this arbitration proceeding. Additional estimates advanced by Ecuador in its methodology document and submissions were not addressed to the DSB and thus cannot form part of the DSB’s referral of the matter to arbitration. Belated supplementary requests and arguments concerning additional amounts of alleged nullification or impairment are, in our view, not compatible with the minimum specificity requirements for such a request because they were not included in Ecuador’s request for suspension under Article 22.2 the DSB.”(1850)

1186.     With respect to the second minimum requirement for making a request for the suspension of concessions or other obligations, the Arbitrators in EC — Bananas III (Ecuador) (Article 22.6 — EC) noted that Ecuador listed the service subsector of “wholesale trade services (CPC 622)” under the GATS; “Protection of performers, producers of phonograms (sound recordings) and broadcasting organizations” in Section 1 (Copyright and related rights), Section 3 (Geographical indications) and Section 4 (Industrial designs) under the TRIPS Agreement. The Arbitrators determined that these requests by Ecuador under the GATS and TRIPS Agreement fulfilled the minimum requirement to specify the agreements and sectors with respect to which it requests authorization to suspend concessions or other obligations. However, the Arbitrators held with respect to Ecuador’s statement that it “reserve[d] the right” to suspend concessions under the GATT:

“[T]he terms of reference of arbitrators, acting pursuant to Article 22.6, are limited to those sector(s) and/or agreements) with respect to which suspension is specifically being requested from the DSB. We thus consider Ecuador’s statement that it ‘reserves the right’ to suspend concessions under the GATT as not compatible with the minimum requirements for requests under Article 22.2. Therefore, we conclude that our terms of reference in this arbitration proceeding include only Ecuador’s requests for authorization of suspension of concessions or other obligations with respect to those specific sectors under the GATS and the TRIPS Agreement that were unconditionally listed in its request under Article 22.2.”(1851)

(b) “concessions or other obligations under the covered agreements”

(i) Tariff “concessions”

List of products

1187.     In EC — Hormones (US) (Article 22.6 — EC) and in EC — Hormones (Canada) (Article 22.6 — EC), the United States and Canada had not attached a list of products to its request for suspension of concessions (as the United States had done in EC — Bananas III (US) (Article 22.6 — EC)). The European Communities had requested the Arbitrators to first decide on the amount of trade impairment, to then request a specific product list from the United States and Canada and to finally determine whether both were “equivalent”. The Arbitrators in both cases declared themselves “unable to follow the EC request” since “[n]o support for this request can be found in the DSU”(1852) and thus they “d[id] not have jurisdiction to set a definite list of products that can be subject to suspension”.(1853) The Panel considered that the “qualitative aspects of the … suspension touching upon the “nature” of concessions … fall outside the arbitrators’ jurisdiction”:

“The authorization given by the DSB under Article 22.6 of the DSU is an authorization ‘to suspend [the application to the Member concerned of] concessions or other obligations [under the covered agreements]’.(1854) In ourview, the limitations linked to this DSB authorisation are those set out in the proposal made by the requesting Member on the basis of which the authorisation is granted. In the event tariff concessions are to be suspended, only products that appear on the product list attached to the request for suspension can be subject to suspension. This follows from the minimum requirements attached to a request to suspend concessions or other obligations. They are, in our view: (1) the request must set out a specific level of suspension, i.e. a level equivalent to the nullification and impairment caused by the WTO inconsistent measure, pursuant to Article 22.4(1855); and (2) the request must specify the agreement and sector(s) under which concessions or other obligations would be suspended, pursuant to Article 22.3.(1856)

 

Neither can support for the EC request be found in other provisions of Article 22

 

In our view, the determination of other aspects related to the suspension remain the prerogative of the Member requesting the suspension. We note, in particular, that the Member in respect of whom concessions or other obligations would be suspended, can object to ‘the level of suspension proposed’(1857) and that an arbitrator has to ‘determine whether the level of such suspension is equivalent to the level of nullification or impairment’.(1858) Arbitrators are explicitly prohibited from ‘examin[ing] the nature of the concessions or other obligations to be suspended’(1859) (other than under Articles 22.3 and 22.5).

 

On these grounds, we cannot require that the US further specify the nature of the proposed suspension. As agreed by all parties involved in this dispute, in case a proposal for suspension were to target, for example, only biscuits with a 100 per cent tariff ad valorem, it would not be for the arbitrators to decide that, for example, cheese and not biscuits should be targeted; that a 150 per cent tariff should be imposed instead of a 100 per cent tariff; or that tariff increases should be levied on a product weight basis, not ad valorem. All of these are qualitative aspects of the proposed suspension touching upon the ‘nature’ of concessions to be withdrawn. They fall outside the arbitrators’ jurisdiction.”(1860)

1188.     In US — Offset Act (Byrd Amendment) (Article 22.6), the requesting parties (all but Mexico, i.e. Brazil, Canada, Chile, European Communities, India, Japan and Korea) requested authorization to suspend tariff concessions and to be allowed to impose additional import duties on a list of products originating in the United States. Since, in the case of the European Communities’ request, the list of products was not “final”, the Arbitrator noted that the European Communities “will notify the DSB every year, prior to the entry into force of a new level of suspension of concessions or other obligations […] the list of products that will be subject to this measure.”(1861), (1862)

“Carousel” type suspension

1189.     In EC — Hormones (US) (Article 22.6 — EC), the European Communities referred to statements made by the United States Trade Representative and submitted that the United States claimed to be free to resort to a “carousel” type of suspension whereby the concessions and other obligations subject to suspension would change every now and then, in particular in terms of product coverage. The European Communities claimed that in so doing the United States would decide not only which concessions or other obligations would be suspended, but also unilaterally would decide whether the level of such suspension of concessions or other obligations was equivalent to the level of nullification and impairment determined by arbitration. Replying to the questions by the Arbitrators, the United States submitted that although nothing in the DSU prevented future changes to the list of products subject to suspension, the United States had no intention of making such changes. The Arbitrators decided to “assume that the US — in good faith and based upon this unilateral promise — will not implement the suspension of concessions in a ‘carousel’ manner” and that “therefore [they] d[id] not need to consider whether such an approach would require an adjustment in the way in which the effect of an authorized suspension is calculated”.(1863) The Arbitrators further considered:

“As explained above,(1864) we do not have jurisdiction to set a definite list of products that can be subject to suspension. It is for the US to draw up that list. In our view, it has to do so within the bounds of the product list put before the DSB. We also agree with the EC that once this list is made or once the US has defined a method of suspension, that list or method necessarily needs to cover trade in an amount not exceeding (i.e. equivalent to or less than) the nullification and impairment we find. This matter of equivalence is not one to be determined exclusively by the US.(1865) The US has an obligation to ensure equivalence pursuant to Article 22.4 of the DSU.(1866) In its reply to our questions, the US submitted that it ‘will scrupulously comply with the requirement that the level of suspension of concessions not exceed the level of nullification or impairment to be found by the Arbitrator’.”(1867),(1868)

(ii) “Obligations”

Cases where the suspension of obligations was requested

1190.     In EC — Bananas III (Ecuador) (Article 22.6 — EC), the Arbitrators indicated that the complainant could obtain authorization from the DSB to suspend unspecified obligations “under the TRIPS Agreement” with respect to certain sectors.(1869)

1191.     In Brazil — Aircraft (Article 22.6 — Brazil), the Arbitrators authorized both the suspension of tariff concessions and the suspension of “obligations” — including obligations under the Agreement on Textiles and Clothing and the Agreement on Import Licensing Procedures.(1870)

1192.     In Canada — Aircraft Credits and Guarantees (Article 22.6 — Canada), the Arbitrator accepted the suspension by Brazil, inter alia, of the application of obligations under the Agreement on Import Licensing Procedures relative to licensing requirements on imports from Canada.(1871)

1193.     In US — 1916 Act (EC) (Article 22.6 — US), the Arbitrators accepted the suspension by the European Communities of “obligations” under the GATT 1994 and the Anti-Dumping Agreement in order to adopt an equivalent regulation to the 1916 Act against imports from the United States.

1194.     In US — Offset Act (Byrd Amendment) (Article 22.6 — Canada), Canada requested, and was granted, the authorization to: (i) impose additional import duties above bound custom duties on products originating in the United States, and (ii) suspend the application of the obligations under Article VI of GATT 1994, Articles 3, 5, 7, 8, 9, 10, 11 and 12 of the Anti-Dumping Agreement and Articles 11, 12, 15, 17, 18, 19, 20, 21 and 22 of the SCM Agreement to determine that the effect of dumping or subsidization of products from the United States is to cause or threaten material injury to an established domestic injury, or is to retard materially the establishment of a domestic industry.(1872)

1195.     In US — Offset Act (Byrd Amendment) (Article 22.6 — Mexico), Mexico requested authorization to suspend the application to the United States “of obligations in the goods sector.”(1873) The Arbitrator granted Mexico the possibility to suspend “concessions or other obligation on products originating in the United States.”(1874)

Whether the “obligations” to be suspended need to be specified

1196.     In US — 1916 Act (EC) (Article 22.6 — US), the European Communities had requested to suspend “obligations” under the GATT 1994 and the Anti-Dumping Agreement in order to adopt an equivalent regulation to the 1916 Act against imports from the United States, instead of tariff concessions. The Arbitrators confirmed that the decision by the European Communities to seek the suspension of “obligations” rather than tariff “concessions” was not subject to their review.(1875) The Arbitrators however examined the question whether the European Communities was nevertheless obligated under Article 22 of the DSU to specify precisely which “obligations” in those two Agreements it sought to suspend. In doing so, the Arbitrator reviewed previous arbitrations and concluded that a party seeking to suspend obligations is not required, under Article 22 of the DSU, to indicate precisely which “obligations” it seeks authorization to suspend:

“In our view, a party seeking to suspend obligations is not required, under Article 22 of the DSU, to indicate precisely which ‘obligations’ it seeks authorization to suspend. Article 22.2 of the DSU states simply that a party may request authorization from the DSB ‘to suspend the application to the Member concerned of concessions or other obligations under the covered agreements.’ There is no requirement that the requesting party identify exactly which obligations it wishes to suspend.

 

Moreover, we note that in previous cases, neither the arbitrators nor the DSB have required requesting parties to enumerate which concessions or other obligations such Members were seeking to suspend. For example, in Canada — Aircraft Credits and Guarantees (Article 22.6 — Canada), the arbitrator accepted, and the DSB authorized, the suspension by Brazil, inter alia, of ‘the application of obligations under the Agreement on Import Licensing Procedures relative to licensing requirements on imports from Canada.’ The Brazilian request did not indicate which ‘obligations’ under the Agreement on Import Licensing it wished to suspend, nor did the arbitrators require such specificity.(1876) In Brazil — Aircraft (Article 22.6 — Brazil), the arbitrators similarly did not object to the suspension by Canada of obligations under ‘the Agreement on Textiles and Clothing and the Agreement on Import Licensing Procedures.’(1877) In EC — Bananas III (Ecuador) (Article 22.6 — EC), the arbitrators indicated that the complainant could obtain authorization from the DSB to suspend unspecified obligations ‘under the TRIPS Agreement’ with respect to certain sectors.(1878)

 

Moreover, even for requests seeking the suspension of tariff concessions ‘and related obligations under the GATT 1994’ the arbitrators did not require specificity as to what these ‘related obligations’ were.(1879)

 

Thus, past practice indicates that arbitrators have accepted requests to suspend unspecified ‘obligations’. The DSB has granted authorization to suspend obligations, while allowing the requesting Member to decide which particular obligations it would select to implement the authorization. We would emphasize, however, that whatever discretion is granted to such a Member is subject to the requirement that the level of suspension of obligations cannot exceed the level of nullification or impairment. We return to this point below.

 

Therefore, we do not consider that the European Communities’ request to ‘suspend the application of the obligations under GATT 1994 and the Anti-Dumping Agreement in order to adopt an equivalent regulation to the 1916 Act against imports from the United States’ can be considered as deficient under Article 22 of the DSU for failing to specify which “obligations” it seeks to suspend.”(1880)

1197.     In US — Offset Act (Byrd Amendment) (Article 22.6 — Canada), the Arbitrator found that Canada’s request for suspension of obligations under a number of articles of the GATT 1994, the Anti-Dumping Agreement, and the SCM Agreement, “to determine that the effect of dumping or subsidization of products from the United states is to cause or threaten material injury to an established domestic industry or is to retard the establishment of a domestic industry”,(1881) “while it could have certainly been more informative, is acceptable in terms of the minimum specificity requirement applicable to Article 22.2 requests.” In that respect, the Arbitrator “consider [ed] that the United States did not demonstrate that either its ability to reach an informed decision to request arbitration, or its ability to defend itself in these proceedings had been prejudiced as a result of the way Canada’s request was formulated.”(1882)

3. Article 22.3

(a) Scope of review by arbitrators under Article 22.3

1198.     In EC — Bananas III (US) (Article 22.6 — EC), the United States argued that the Arbitrators could not examine the principles and procedures set forth in Article 22.3 in that particular arbitration proceeding because the United States had requested authorization to suspend concessions only pursuant to paragraph (a) of Article 22.3. In the view of the United States, the Arbitrators could only do so if the United States had requested authorization to suspend concessions pursuant to paragraphs (b) or (c) of Article 22.3 of the DSU. The Arbitrators disagreed:

“We believe that the basic rationale of these disciplines is to ensure that the suspension of concessions or other obligations across sectors or across agreements (beyond those sectors or agreements under which a panel or the Appellate Body has found violations) remains the exception and does not become the rule. In our view, if Article 22.3 of the DSU is to be given full effect, the authority of Arbitrators to review upon request whether the principles and procedures of subparagraphs (b) or (c) of that Article have been followed must imply the Arbitrators’ competence to examine whether a request made under subparagraph (a) should have been made — in full or in part — under subparagraphs (b) or (c). If the Arbitrators were deprived of such an implied authority, the principles and procedures of Article 22.3 of the DSU could easily be circumvented. If there were no review whatsoever with respect to requests for authorization to suspend concessions made under subparagraph (a), Members might be tempted to always invoke that subparagraph in order to escape multilateral surveillance of cross-sectoral suspension of concessions or other obligations, and the disciplines of the other subparagraphs of Article 22.3 of the DSU might fall into disuse altogether.”(1883)

(b) “the complaining party shall apply the following principles and procedures”

1199.     With respect to the principles and procedures to be applied under Article 22.3, see paragraphs 1202-1203 below.

4. Article 22.3(a)

(a) “general principle … complaining party should first seek to suspend concessions or other obligations with respect to the same sector(s)”

(i) General

1200.     In EC — Bananas III (Ecuador) (Article 22.6 — EC), the Arbitrators examined Ecuador’s request for suspension of concessions or other obligations in the area of the GATS and the TRIPS Agreement. The Arbitrators stated:

“[W]e further recall the general principle set forth in Article 22.3(a) that suspension of concessions or other obligations should be sought first with respect to the same sector(s) as that in which the panel or Appellate Body has found a violation or other nullification or impairment. Given this principle, it remains the preferred option under Article 22.3 for Ecuador to request suspension of concessions under the GATT as one of the same agreements where a violation was found, if it considers that such suspension could be applied in a practicable and effective manner.”(1884)

(ii) Parallelism between violations and requests for suspension of concessions

1201.     In EC — Bananas III (US) (Article 22.6 — EC), the European Communities alleged that in cases where findings of violation or nullification have been made in more than one sector, or under more than one Agreement, requests for the suspension of concessions had to be made commensurate with the number or the degree of violation. The Arbitrators disagreed:

“We recall that subparagraph (a) of Article 22.3 of the DSV refers to the suspension of ‘concessions or other obligations with respect to the same sector(s) as that in which the panel or Appellate Body has found a violation or other nullification or impairment.’ We note that the words ‘same sector(s)’ include both the singular and the plural. The concept of ‘sector(s)’ is defined in subparagraph (f)(i) with respect to goods as all goods, and in subparagraph (f)(ii) with respect to services as a principal sector identified in the ‘Services Sectoral Classification List’. We, therefore, conclude that the United States has the right to request the suspension of concessions in either of these two sectors, or in both, up to the overall level of nullification or impairment suffered, if the inconsistencies with the EC’s obligations under the GATT and the GATS found in the original dispute have not been removed fully in the EC’s revision of its regime. In this case the ‘same sector(s) ‘would be ‘all goods’ and the sector of ‘distribution services’, respectively. Our conclusion, based on the ordinary meaning of Article 22.3(a), is also consistent with the fact that the findings of violations under the GATT and the GATS in the original dispute were closely related and all concerned a single import regime in respect of one product, i.e. bananas.”(1885)

5. Article 22.3(b) and (c)

(a) “if that party considers that it is not practical or effective”

1202.     In EC — Bananas III (Ecuador) (Article 22.6 — EC), the European Communities argued that Ecuador had not demonstrated why it was not practicable or effective for it to suspend concessions under the GATT or commitments under the GATS in service sectors other than distribution services. Ecuador claimed that “it did not request suspension entirely under the GATT and/or in service sectors under the GATS other than distribution services because it considered that it would not be practicable or effective in the meaning of Article 22.3(b) and (c) of the DSU, that circumstances in Ecuador’s bananas trade sector and the economy on the whole are serious enough to justify suspension under another agreement, and that the parameters in Article 22.3(d)(i)-(ii) corroborate this conclusion.”(1886) The Arbitrators held that the term “practicable” connoted “availability” and “suitability”; with respect to the term “effective”, the Arbitrators held that “the thrust of this criterion empowers the party seeking suspension to ensure that the impact of that suspension is strong and has the desired result, namely to induce compliance by the Member which fails to bring WTO-inconsistent measures into compliance with DSB rulings within a reasonable period of time.”

“[A]n examination of the ‘practicability’ of an alternative suspension concerns the question whether such an alternative is available for application in practice as well as suited for being used in a particular case.

 

To give an obvious example, suspension of commitments in service sub-sectors or in respect of modes of service supply which a particular complaining party has not bound in its GATS Schedule is not available for application in practice and thus cannot be considered as practicable. But also other case-specific and country-specific situations may exist where suspension of concessions or other obligations in a particular trade sector or area of WTO law may not be ‘practicable’.

 

In contrast, the term ‘effective’ connotes ‘powerful in effect’, ‘making a strong impression’, ‘having an effect or result’. Therefore, the thrust of this criterion empowers the party seeking suspension to ensure that the impact of that suspension is strong and has the desired result, namely to induce compliance by the Member which fails to bring WTO-inconsistent measures into compliance with DSB rulings within a reasonable period of time.

 

One may ask whether this objective may ever be achieved in a situation where a great imbalance in terms of trade volume and economic power exists between the complaining party seeking suspension and the other party which has failed to bring WTO-inconsistent measures into compliance with WTO law. In such a case, and in situations where the complaining party is highly dependent on imports from the other party, it may happen that the suspension of certain concessions or certain other obligations entails more harmful effects for the party seeking suspension than for the other party. In these circumstances, a consideration by the complaining party in which sector or under which agreement suspension may be expected to be least harmful to itself would seem sufficient for us to find a consideration by the complaining party of the effectiveness criterion to be consistent with the requirement to follow the principles and procedures set forth in Article 22.3.

Our interpretation of the ‘practicability’ and ‘effectiveness’ criteria is consistent with the object and purpose of Article 22 which is to induce compliance. If a complaining party seeking the DSB’s authorization to suspend certain concessions or certain other obligations were required to select the concessions or other obligations to be suspended in sectors or under agreements where such suspension would be either not available in practice or would not be powerful in effect, the objective of inducing compliance could not be accomplished and the enforcement mechanism of the WTO dispute settlement system could not function properly.”(1887)

1203.     In EC — Bananas III (Ecuador) (Article 22.6 — EC), Ecuador argued that it was the prerogative of the Member suffering nullification or impairment to decide whether it is “practicable or effective” to choose the same sector, another sector or another agreement for the purposes of suspending concessions or other obligations. The Arbitrators held that the term “consider” in subparagraphs (b) and (c) granted a certain margin of appreciation, but that a decision by a Member was nevertheless subject to review by the Arbitrators regarding whether the Member had considered “the necessary facts objectively”:

“It follows from the choice of the words ‘if that party considers’ in subparagraphs (b) and (c) that these subparagraphs leave a certain margin of appreciation to the complaining party concerned in arriving at its conclusions in respect of an evaluation of certain factual elements, i.e. of the practicability and effectiveness of suspension within the same sector or under the same agreement and of the seriousness of circumstances. However, it equally follows from the choice of the words ‘in considering what concessions or other obligations to suspend, the complaining party shall apply the following principles and procedures’ in the chapeau of Article 22.3 that such margin of appreciation by the complaining party concerned is subject to review by the Arbitrators. In our view, the margin of review by the Arbitrators implies the authority to broadly judge whether the complaining party in question has considered the necessary facts objectively and whether, on the basis of these facts, it could plausibly arrive at the conclusion that it was not practicable or effective to seek suspension within the same sector under the same agreements, or only under another agreement provided that the circumstances were serious enough.”(1888)

(b) Relationship between Article 22.3(a) and 22.3 (c)

1204.     In EC — Bananas III (Ecuador) (Article 22.6 — EC), the Arbitrators noted that Ecuador argued that, in addition to suspending concessions or other obligations under the GATS and TRIPS Agreement, it “reserves the right to suspend tariff concessions or other tariff obligations granted in the framework of the GATT 1994 in the event that these may be applied in a practicable and effective manner.”(1889) With respect to the criterion of specificity relating to this request, see paragraph 1186 above. The Arbitrators noted an “inconsistency” between making simultaneously a request under Articles 22.3(a) and Article 22.3(c):

“Even if Ecuador’s ‘reservation’ of a request for suspension under the GATT were permissible, there would be a certain degree of inconsistency between making a request under Article 22.3(c) — implying that suspension is not practicable or effective within the same sector under the same agreement or under another agreement-and simultaneously making a request under Article 22.3(a) — which implies that suspension is practicable and effective under the same sector. In this respect, we note that, although Ecuador did not in fact make both requests at the very same point in time, if it were likely that the suspension of concessions under the GATT could be applied in a practicable and effective manner, doubt would be cast on Ecuador’s assertion that at present only suspension of obligations under other sectors and/ or other agreements within the meaning of Article 22.3(b-c) is practicable or effective in the case before us.

 

… we fail to see how it could be possible to suspend concessions or other obligations for a particular amount of nullification or impairment under the same sector as that where a violation was found (which implies that this is practicable and effective) and simultaneously for the same amount in another sector or under a different agreement (which implies that suspension under the same sector(1890) — or under a different sector under the same agreement — is not practicable or effective). But we do not exclude the possibility that, once a certain amount of nullification or impairment has been determined by the Arbitrators, suspension may be practicable and effective under the same sector(s) where a violation has been found only for part of that amount and that for the rest of this amount of suspension is practicable or effective only in (an)other sector(s) under the same agreement or even only under another agreement.”(1891)

6. Article 22.4

(a) “The level of the suspension of concessions or other obligations … shall be equivalent to the level of the nullification or impairment”

1205.     In US — Offset Act (Byrd Amendment) (Article 22.6), the Arbitrator examined the possibility of setting for the “level of suspension”, rather than setting a fixed value, an economic formula that, when completed with the values of annual disbursements made by the respondent under the WTO-inconsistent measure, would give the parties the level of suspension authorized for that year. The Arbitrator concluded that nothing in the Article 22 of the DSU prevented the adoption of a variable level of suspension if the circumstances of the case required it. In particular, the Arbitrator considered:

“While we note that Article 22.4 refers to ‘the level’ (singular) of nullification or impairment and to ‘the level’ (singular) of suspension of concessions or other obligations, we are not persuaded that these terms impose an obligation to identify a single and enduring level of nullification or impairment. The requirement of Article 22.4 is simply that the two levels be equivalent. As long as the two levels are equivalent, we do not see any reason why these levels may not be adjusted from time to time, provided such adjustments are justified and unpredictability is not increased as a result. In fact, we see no limitation in the DSU to the possibility of providing for a variable level of suspension if the level of nullification or impairment also varies.

 

Most previous arbitrators have established one single level of nullification or impairment at the level that existed at the end of the reasonable period of time granted to the responding party to bring its legislation into conformity.(1892) We do not disagree that this approach is, in the large majority of cases, the most appropriate. However, we do not read anything in Article 22 of the DSU that would preclude us from following a different path if the circumstances of this case clearly required it.”(1893)

1206.     In adopting such a decision, the Arbitrator in US — Offset Act (Byrd Amendment) (Article 22.6) gave particular relevance to the circumstances of that case, by considering that, under a variable level of suspension system, the respondent party “would control the levers to make the actual level of suspension of concessions or other obligations go down”. The Arbitrator remarked that while:

“in other arbitrations where the level of nullification or impairment was set once and for all, the responding party could not influence the level of countermeasures applied to its trade, unless the requesting party agreed to modify it, [i]n this case, the level of suspension of concessions will automatically depend on the amount of disbursements made under the [WTO-inconsistent measure] in a given year. If this amount decreases, so will the level of suspension of concessions or other obligations that the Requesting Parties will be entitled to impose. If no disbursements are made, the level of suspension will have to be ‘zero’.”(1894)

1207.     As regards the standard of “equivalence” and its assessment by the Arbitrators, see paragraph 1246 below.

1208.     With respect to the relationship between the “equivalence” standard and the “appropriate countermeasures” standard in arbitrations pursuant to Article 4.10 of the SCM Agreement, see paragraph 1260 below.

7. Article 22.6

(a) Specificity in the request for a referral to arbitration under Article 22.6

1209.     In EC — Hormones (US) (Article 22.6 — EC), the Arbitrators considered that it was better to be as precise as possible in the request for suspension of concessions:

“The more precise a request for suspension is in terms of product coverage, type and degree of suspension, etc. …, the better. Such precision can only be encouraged in pursuit of the DSU objectives of ‘providing security and predictability to the multilateral trading system’ (Article 3.2) and seeking prompt and positive solutions to disputes (Articles 3.3 and 3.7). It would also be welcome in light of the statement in Article 3.10 that ‘all Members will engage in [DSU] procedures in good faith in an effort to resolve the dispute’.”(1895)

1210.     In EC — Bananas III (Ecuador) (Article 22.6 — EC), the Arbitrators held that the requests for a referral to arbitration under Article 22.6, serve similar due process objectives as requests under Article 6.2 and thus concluded that the specificity standards are relevant for Article 22 requests. See paragraph 1183 above.

(b) “by the original panel, if members are available, or by an arbitrator appointed by the Director–General”

1211.     As of 30 September 2011, most arbitrations under Article 22.6 of the DSU have been referred to the original panel. One exception was US — 1916 Act (EC) (Article 22.6 — US). In this case, the Chairman of the original panel was no longer available. However, the other two arbitrators were members of the original Panel.(1896)

(c) Working procedures for article 22.6 arbitrations

1212.     In both Canada — Aircraft Credits and Guarantees and US — Offset Act (Byrd Amendment), the Arbitrator(s) attached their working procedures to their Decisions. The following is a reproduction of the working procedures in US — Offset Act (Byrd Amendment):(1897)

“The Arbitrator will follow the normal working procedures of the DSU where relevant and as adapted to the circumstances of the present proceedings, in accordance with the timetable it has adopted. In this regard,-

 

(a)     the Arbitrator will meet in closed session;

 

(b)     the deliberations of the Arbitrator and the documents submitted to it shall be kept confidential. However, this is without prejudice to the parties’ disclosure of statements of their own positions to the public, in accordance with Article 18.2 of the DSU;

 

(c)     at any substantive meeting with the parties, the Arbitrator will ask the United States to present orally its views first, followed by the party(ies) having requested authorization to suspend concessions or other obligations;

 

(d)     each party shall submit all factual evidence to the Arbitrator no later than in its written submission to the Arbitrator, except with respect to evidence necessary during the hearing or for answers to questions. Derogations to this procedure will be granted upon a showing of good cause, in which case the other party(ies) shall be accorded a period of time for comments, as appropriate;

 

(e)     the parties shall provide an electronic copy (on a computer format compatible with the Secretariat’s programmes) together with the printed version (6 copies) of their submissions, including the methodology paper, on the due date. All these copies must be filed with the Dispute Settlement Registrar, […]. Electronic copies may be sent by e-mail to […]. Parties shall provide 6 copies and an electronic version of their oral statements during any meeting with the Arbitrator or no later than noon on the day following any such meeting.

 

(f)     except as otherwise indicated in the timetable, submissions should be provided at the latest by 5.00 p.m. on the due date so that there is a possibility to send them to the Arbitrator on that date. As is customary, distribution of submissions to the other party(ies) shall be made by the parties themselves;

 

(g)     if necessary, and at any time during the proceedings, the Arbitrator may put questions to any party to clarify any point that is unclear. Whenever appropriate, a right to comment on the responses will be granted to the other party(ies);

 

(h)     any material submitted shall be concise and limited to questions of relevance in this particular procedure.

 

(i)     Parties have the right to determine the composition of their own delegations. Delegations may include, as representatives of the government concerned, private counsel and advisers. Parties shall have responsibility for all members of their delegations and shall ensure that all members of their delegations act in accordance with the rules of the DSU and these Working Procedures, particularly in regard to confidentiality of the proceedings. Parties shall provide a list of the participants of their delegation prior to, or at the beginning of, any meeting with the Arbitrator.

 

(j)     to facilitate the maintenance of the record of the arbitration, and to maximize the clarity of submissions and other documents, in particular the references to exhibits submitted by parties, parties shall sequentially number their exhibits throughout the course of the arbitration.”

(d) Table of arbitration decisions and level of suspension authorized

1213.     The following table provides information on the level of suspension of concessions or other obligations authorized in Article 22.6 arbitrations to date. It is updated to 30 September 2011.

DS No. Case Member(s) requesting the authorization Applicable provisions Level of suspension authorized
DS27 EC — Bananas III US Article 22.6 DSU US$191.4 million (annual)
DS27 EC — Bananas III Ecuador Article 22.6 DSU US$201.6 million (annual)
DS26 EC — Hormones US Article 22.6 DSU US$116.8 million (annual)
DS48 EC — Hormones Canada Article 22.6 DSU CAN$11.3 million (annual)
DS46 Brazil — Aircraft Canada Article 22.6 DSU
Article 4.10 SCM Agreement
CAN$344.2 million (annual)
DS108 US — FSC EC Article 22.6 DSU
Article 4.10 SCM Agreement
US$4,043 billion (annual)
DS136 US — 1916 Act EC Article 22.6 DSU Cumulative monetary value of any amounts payable by EC entities pursuant to final court judgements, and/or settlements of claims, under the 1916 Act
DS217 DS234 US-Offset Act (Byrd Amendment) Brazil, Chile, EC, India, Japan, Korea Article 22.6 DSU Additional duties on yearly value of trade equal to amount of Byrd duties distributed multiplied by 0.72
DS222 Canada — Aircraft Credits and Guarantees Brazil Article 22.6 DSU
Article 4.10 SCM Agreement
US$247.8 million
DS285 US — Gambling Antigua and Barbuda Article 22.6 DSU US$21 million (annual)
DS267 US — Upland Cotton (Article 22.6 — US I) Brazil Article 22.6 DSU
Article 7.10 SCM Agreement
US$147.3 million (annual)
DS267 US — Upland Cotton (Article 22.6 — US II) Brazil Article 22.6 DSU under Article 4.11 SCM Agreement US$147.4 million (annual)

(e) Table showing the length of time in Article 22.6 proceedings to date

1214.     The following table provides information on the length of time taken in Article 22.6 proceedings, calculated from the date of the expiry of the reasonable period of time to the date of circulation of the Article 22.6 decision. It is updated to 30 September 2011.

Prescribed Time-Period in Article 22.6 60 days after the expiry of the reasonable period of time
Average to Date 456 days
Longest to Date 1440 days
Shortest to Date 82 days
*Average Date Calculated from Commencement of Article 22.6 Proceeding 164 days
*Longest to Date Calculated from Commencement of Article 22.6 Proceeding 334 days
*Shortest to Date Calculated from Commencement of Article 22.6 Proceeding 39 days
DS No. Case Date of Article 22.6 decision(s) Days from the expiry of the reasonable period of time / compliance period to circulation of decision *Days from commencement of compliance period to circulation of the Article 22.6 proceeding to decision circulation of decision(1898)
DS27 EC — Bananas III (Ecuador) 24 March 2000 82 days 126 days
DS27 EC — Bananas III (US) 9 April 1999 98 days 70 days

DS26, DS48 EC — Hormones 12 July 1999 60 days 39 days
DS46 Brazil — Aircraft 28 August 2000 284 days 98 days
DS108 US — FSC 30 August 2002 667 days 213 days
DS136 US — 1916 Act 24 February 2004 785 days 158 days
DS217, DS234 US — Offset Act (Byrd Amendment) 31 August 2004 248 days 218 days
DS222 Canada — Aircraft Credits and Guarantees 17 February 2003 273 days 238 days
DS285 US — Gambling 21 December 2007 627 days 150 days
DS267 US — Upland Cotton (Article 22.6 — US I) and US — Upland Cotton (Article 22.6 — US II) 31 August 2009 1440 days 334 days

(f) Table showing separate opinions in Article 22.6 decisions to date

1215.     The following table provides information on individual opinions in Article 22.6 decisions to date. It is updated to 30 September 2011.

WT/DS No. Description Issue Reference
DS108 One arbitrator wishing to stress his position Whether the quantitative element of the breach was to be determined in relation to the full amount of the subsidy or not under the SCM Agreement Decision by the Arbitrator, US — FSC (Article 22.6 — US), footnotes 74 and 82
DS285 Separate opinion Whether it was appropriate to assume a counterfactual scenario under which the United States would provide unrestricted access to its remote gambling and betting market Decision by the Arbitrator, US — Gambling (Article 22.6 — US), paras. 3.62-3.73

8. Article 22.7

(a) The mandate of the Arbitrators

1216.     In EC — Bananas III (US) (Article 22.6 — EC), the Arbitrators examined the extent of the arbitrators’ mandate to review the choice made by a complaining Member pursuant to Article 22.3 (see paragraph 1198 above). In order to do so, they looked at the mandate of arbitrators in paragraphs 6 and 7 of Article 22 and found that there was no contradiction:

Article 22.7 of the DSU empowers the Arbitrators to examine claims concerning the principles and procedures set forth in Article 22.3 in its entirety, whereas Article 22.6 of the DSU seems to limit the competence of Arbitrators to such examination to cases where a request for authorization to suspend concessions is made under subparagraphs (b) or (c) of Article 22.3. However, we believe that there is no contradiction between paragraphs 6 and 7 of Article 22 of the DSU, and that these provisions can be read together in a harmonious way.

 

If a panel or Appellate Body report contains findings of WTO-inconsistencies only with respect to one and the same sector in the meaning of Article 22.3(f) of the DSU, there is little need for a multilateral review of the choice with respect to goods or services or intellectual property rights, as the case may be, which a Member has selected for the suspension of concessions subject to the DSB’s authorization. However, if a Member decides to seek authorization to suspend concessions under another sector, or under another agreement, outside of the scope of the sectors or agreements to which a Panel’s findings relate, paragraphs (b)-(d) of Article 22.3 provide for a certain degree of discipline such as the requirement to state reasons why that Member considered the suspension of concessions within the same sector(s) as that where violations of WTO law were found as not practicable or effective.”(1899)

1217.     The Arbitrators in EC — Bananas III (Ecuador) (Article 22.6 — EC) held with respect to their authority under Article 22.7:

“[T]he jurisdiction of the Arbitrators includes the power to determine (i) whether the level of suspension of concessions or other obligations requested is equivalent to the level of nullification or impairment; and (ii) whether the principles or procedures concerning the suspension of concessions or other obligations across sectors and/or agreements pursuant to Article 22.3 of the DSU have been followed.”(1900)

1218.     In Brazil — Aircraft (Article 22.6 — Brazil), Brazil had claimed that, as a result of the termination of the bilateral agreement the Arbitrators should, pursuant to Article 22.7 of the DSU, 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. The Arbitrators disregarded Brazil’s claim as follows:

“We note that Article 60 of the Vienna Convention provides for the ‘termination’ of a treaty by one party in response to a ‘material breach’ by the other party. Article 70 of the Vienna Convention nevertheless provides that the termination of a treaty does not affect any right, obligation or legal situation of the parties created through the execution of the treaty prior to its termination. We conclude that, even assuming that the Bilateral Agreement has been terminated by Brazil on 14 July 2000, the request by Canada under Article 4.10 of the SCM Agreement, to the extent it was made in accordance with the terms of the Bilateral Agreement, remains unaffected by the termination.(1901) We therefore do not find it necessary to address further this question.”(1902)

1219.     In US — 1916 Act (EC) (Article 22.6 — US), the European Communities had requested to suspend obligations instead of tariff concessions. On that occasion, the Arbitrators considered that “the decision by the European Communities to seek the suspension of ‘obligations’ rather than tariff ‘concessions’ is not subject to review by the Arbitrators”.(1903)

1220.     In US — Offset Act (Byrd Amendment) (Article 22.6 — Canada), the Arbitrator stated that it did not “fall within [his] mandate to recommend the suspension of specific obligations or the adoption of specific measures by the requesting party.”(1904)

1221.     Also in US — Offset Act (Byrd Amendment) (Article 22.6 — Canada), the Arbitrators examined Canada’s request for suspension of obligations under a number of provisions of the GATT 1994, the Anti-Dumping Agreement, and the SCM Agreement. The Arbitrators found that they did not “have authority under our mandate to require Canada to be more specific as to the measures it intends to apply to suspend its obligations” under those provisions.(1905) In that regard, the Arbitrators expressed that:

“[I]t is necessary to differentiate between the WTO obligation to be suspended and the specific measures taken to implement such suspensions. We note that our mandate is to determine whether the level of suspension of WTO obligations is equivalent with the level of nullification or impairment. Article 22.7 of the DSU does not imply a review of the actual measures, which will implement a suspension, to determine if they will exceed the level of nullification or impairment, and in our view, the Arbitrator’s mandate does not extend to addressing or approving the proposed implementation of the suspension of the obligations.”(1906)

1222.     In US — Offset Act (Byrd Amendment) (Article 22.6 — Canada), the Arbitrator left the final decision regarding the legitimacy of the request to the DSB, by noting that:

“[I]f the DSB considers that Canada’s request is not acceptable in this respect, it may reject Canada’s request, pursuant to the last sentence of Article 22.7 of the DSU. Similarly, if the United States were to consider that the actual suspension of obligations by Canada exceeded the level of nullification or impairment determined pursuant to this decision, it may have recourse to the dispute settlement mechanism.”(1907),(1908)

(b) “The arbitrator … shall determine whether the level of such suspension is equivalent to the level of nullification or impairment.”

(i) Assessment of the level of nullification or impairment

Presumption of nullification or impairment not evidence of a level of nullification or impairment

1223.     The Arbitrators in EC — Bananas III (US) (Article 22.6 EC) established that the presumption of nullification or impairment of Article 3.8 of the DSU cannot be taken as evidence proving a particular level of nullification or impairment allegedly suffered by a Member:

“The presumption of nullification or impairment in the case of an infringement of a GATT provision as set forth by Article 3.8 of the DSU cannot in and of itself be taken simultaneously as evidence proving a particular level of nullification or impairment allegedly suffered by a Member requesting authorization to suspend concessions under Article 22 of the DSU at a much later stage of the WTO dispute settlement system. The review of the level of nullification or impairment by Arbitrators from the objective benchmark foreseen by Article 22 of the DSU is a separate process that is independent from the finding of infringements of WTO rules by a panel or the Appellate Body….However, a Member’s legal interest in compliance by other Members does not, in our view, automatically imply that it is entitled to obtain authorization to suspend concessions under Article 22 of the DSU.”(1909)

1224.     In US — 1916 Act (EC) (Article 22.6 — US), the European Communities had not quantified the level of nullification or impairment but rather had requested a qualitative suspension of concessions (see paragraphs 1250-1252 below). The United States had claimed that that the level of nullification or impairment in this case should then be “zero”. The Arbitrators disagreed and indicated that although the level of nullification or impairment had not been specified in quantitative terms by the European Communities, “it clearly is not, and cannot be, ‘zero’”:

“We do not accept the position of the United States that the level of nullification or impairment in this case is ‘zero’. As noted by the European Communities, the original Panel in this dispute found, and the Appellate Body confirmed, that ‘the 1916 Act nullifies and impairs benefits accruing to the European Communities.’ Therefore, while the level of nullification or impairment has not been specified in quantitative terms in the EC request under Article 22.2, it clearly is not, and cannot be, ‘zero’. In our view, this US position cannot be sustained in light of the adopted Panel and Appellate Body findings.

We agree with the arbitrators in EC — Bananas Hi (US) (Article 22.6 — EC) that the presumption of nullification or impairment, as provided in Article 3.8 of the DSU, by no means provides evidence of the level of nullification or impairment sustained by the Member requesting authorization to suspend obligations. However, the fact that the presumption does not automatically translate to a given level does not mean that the level is ‘zero’. The original Panel determined that the 1916 Act ‘nullifies and impairs benefits accruing to the European Communities.’ In light of this conclusion, the level must be something greater than ‘zero’, and it is a contradiction in terms to suggest otherwise.”(1910)

1225.     In US — Offset Act (Byrd Amendment) (Article 22.6), the requesting parties (Brazil, Canada, Chile, European Communities, India, Japan, Korea and Mexico) partially based their request to suspend concessions on the premise that a violation is a form of nullification or impairment. The Arbitrator distinguished the concept of violation from that that of nullification or impairment by noting that, pursuant to Article 3.8 of the DSU, a violation generates a presumption of nullification or impairment, not that a violation is a form of nullification or impairment. The Arbitrator stated:

“If violation was conceptually equated […] to nullification or impairment, there would be no reason to provide for a possibility to rebut the presumption. The theoretical possibility to rebut the presumption established by Article 3.8 can only exist because violation and nullification or impairment are two different concepts.”(1911)

Parameters for calculating the level of nullification or impairment

Trade effect

1226.     In US — Offset Act (Byrd Amendment) (Article 22.6) the Arbitrator noted that “trade effect” as a parameter to determine the level of nullification and impairment pursuant to Article 22 of the DSU “is found neither in Article XXIII of GATT 1994, nor in Article 22 of the DSU. […]” However, the Arbitrator decided to follow an approach based on determining the trade effect of the inconsistent measure since “the ‘trade effect’ approach has been regularly applied in other Article 22.6 arbitrations and seems to be generally accepted by Members as a correct application of Article 22 of the DSU.” The Arbitrator noted in that regard that “[p]revious arbitrators’ decisions based on direct trade impact are not binding precedents”.(1912)

Using reasoned estimates and avoiding speculation

1227.     The Arbitrators in EC — Hormones (US) (Article 22.6 — EC) stated that they were to use reasoned estimates when assessing the level of nullification or impairment. Applying this approach, the Arbitrators rejected United States claims for certain lost exports as “too remote” and “too speculative”.(1913) The Arbitrators considered:

“The question we thus have to answer here is: what would annual prospective US exports of hormone-treated beef and beef products to the EC be if the EC had withdrawn the ban on 13 May 1999? An answer to this question, like any question about future events, can only be a reasoned estimate. It is necessarily based on certain assumptions. In making those estimates and assumptions, we need to guard against claims of lost opportunities where the causal link with the inconsistent hormone ban is less than apparent, i.e. where exports are allegedly foregone not because of the ban but due to other circumstances.”(1914)

1228.     A similar approach was taken by the Arbitrator in Canada — Aircraft Credits and Guarantees (Article 22.6 — Canada). In that case, Canada argued that a certain airline had a “revealed margin of preference” for a Canadian regional aircraft manufacturer. The Arbitrator dismissed this argument in part because “[w]hile such a preference may have existed, Canada has not meaningfully quantified it. …”(1915)

1229.     In US — 1916 Act (EC) (Article 22.6 — US), the Arbitrators referred to the above statements as support to their view that [“i]n determining the level of nullification or impairment sustained by the European Communities as a result of the 1916 Act, we need to rely, as much as possible, on credible, factual, and verifiable information”.(1916) The Arbitrators further considered that “this prudent approach taken by earlier arbitrators is appropriate.”(1917)

1230.     In US — Offset Act (Byrd Amendment) (Article 22.6), the Arbitrator analysed the economic models suggested by the parties, in order to choose the appropriate model to apply in the calculation of the level of nullification or impairment. The Arbitrator “considered the approach of the Requesting Parties to be too aggregated, hence not specific enough to th[e] case. While the model specification proposed by the United States is disaggregated and well specified, [the Arbitrator] concluded that there is insufficient data to run that model with any degree of accuracy.” In light of “the lack of available data to implement the United States’ model”, the Arbitrator decided “to reject the United States’ model in favour of a modified version of the model proposed by the Requesting Parties.”(1918)

Indirect benefits

1231.     The Arbitrators in EC — Bananas III (US) (Article 22.6 — EC) considered the notion of “direct or indirect benefits” accruing under the WTO agreements whose nullification or impairment may give rise to an entitlement to obtain compensation or the authorization to suspend concessions or other obligations. In this case, the United States had argued that its exports to Latin America (e.g. fertilizers) used in the production of bananas that would be exported to the European Communities under a WTO-consistent regime should be counted in setting the level of suspension. The Arbitrators concluded that, “to the extent the US assessment of nullification or impairment includes lost US exports defined as US content incorporated in Latin American bananas (e.g. US fertilizer, pesticides and machinery shipped to Latin America and US capital or management services used in banana cultivation), we do not consider such lost US exports for calculating nullification or impairment in the present arbitration proceeding between the European Communities and the United States”:

“The presumption of nullification or impairment in the case of an infringement of a GATT provision as set forth by Article 3.8 of the DSU cannot in and of itself be taken simultaneously as evidence proving a particular level of nullification or impairment allegedly suffered by a Member requesting authorization to suspend concessions under Article 22 of the DSU at a much later stage of the WTO dispute settlement system. The review of the level of nullification or impairment by Arbitrators from the objective benchmark foreseen by Article 22 of the DSU, is a separate process that is independent from the finding of infringements of WTO rules by a panel or the Appellate Body. As a result, a Member’s potential interests in trade in goods or services and its interest in a determination of rights and obligations under the WTO Agreements are each sufficient to establish a right to pursue a WTO dispute settlement proceeding. However, a Member’s legal interest in compliance by other Members does not, in our view, automatically imply that it is entitled to obtain authorization to suspend concessions under Article 22 of the DSU.

 

Over the last decades of GATT dispute settlement practice, it has become a truism of GATT law that lack of actual trade cannot be determinative for a finding that no violation of a provision occurred because it cannot be excluded that the absence of trade is the result of an illegal measure. As discussed by the original panel reports,(1919) in past dispute settlement practice the non-discrimination provisions have been interpreted to protect “competitive opportunities”(1920) or the “effective equality of opportunities”(1921) for foreign products which may be undermined by “any laws or regulations which might adversely modify the conditions of competition between domestic and imported products”.(1922) All these past panel reports concerned the alleged nullification or impairment of potential trade opportunities under the national treatment clause. Also the US — Superfund case,(1923) from which the wording of Article 3.8 of the DSU establishing the presumption of nullification or impairment in case of an infringement of GATT is drawn, concerned the alleged violation of Article III of GATT. Therefore, the notion underlying the protection of potential trade opportunities is potential trade between the complaining and the respondent party. Likewise, in the case of an alleged violation of the MFN treatment clause, a dispute would involve trade between the complaining party or a third country, on the one hand, and the respondent party, on the other.

 

We are of the view that the benchmark for the calculation of nullification or impairment of US trade flows should be losses in US exports of goods to the European Communities and losses by US service suppliers in services supply in or to the European Communities. However, we are of the opinion that losses of US exports in goods or services between the US and third countries do not constitute nullification or impairment of even indirect benefits accruing to the United States under the GATT or the GATS for which the European Communities could face suspension of concessions. To the extent the US assessment of nullification or impairment includes lost US exports defined as US content incorporated in Latin American bananas (e.g. US fertilizer, pesticides and machinery shipped to Latin America and US capital or management services used in banana cultivation), we do not consider such lost US exports for calculating nullification or impairment in the present arbitration proceeding between the European Communities and the United States.”(1924)

Company-specific effects versus overall effect on the Member

1232.     In EC — Bananas III (US) (Article 22.6 — EC), the initial United States’ request for the authorization to suspend concessions or other obligations involved only losses incurred by one of its companies. The Arbitrators considered that “[i]n order to calculate the level of nullification and impairment for the United States, it is our view that it is necessary to calculate the aggregate net effects on all US suppliers of wholesale services to bananas wholesaled in the European Communities”.(1925)

Court judgements

1233.     In US — 1916 Act (EC) (Article 22.6 — US), the Arbitrators considered that any final judgements under the 1916 Act against European Communities companies “would constitute nullification or impairment of benefits accruing to the European Communities, up to the cumulative dollar or monetary value of the final judgements”:

“In our view, any final judgments entered against EC companies or their subsidiaries under the 1916 Act would constitute nullification or impairment of benefits accruing to the European Communities, up to the cumulative dollar or monetary value of the final judgements. In our view, it would be appropriate to include only “final” judgements, i.e. the amounts payable either after the appeals have been completed, or the appeal periods have expired. Moreover, all such decisions are made public, and therefore the amounts of the judgments are readily verifiable.

 

In a case involving multiple claims — i.e., a judgment award that includes both 1916 Act claims and non-1916 Act claims — the amount included by the European Communities in calculating its level of nullification or impairment would need to be limited to the 1916 Act claims alone.

 

Judgments under the 1916 Act are awarded pursuant to WTO-inconsistent legislation, and clearly nullify or impair benefits accruing to the European Communities under the GATT 1994 and the Anti-Dumping Agreement. The cumulative dollar or monetary value of judgments under the Act therefore could, in principle, be included in any cumulative calculation by the European Communities of the overall level of the nullification or impairment that it has sustained.”(1926)

Settlements

1234.     In US — 1916 Act (EC) (Article 22.6 — US), the Arbitrators considered that any settlement awards entered into by the European Communities companies would “constitute nullification or impairment of benefits accruing to the European Communities, up to the cumulative dollar or monetary value of the settlements”:

“In our view, any settlement awards entered into by EC companies or their subsidiaries under the 1916 Act would equally constitute nullification or impairment of benefits accruing to the European Communities, up to the cumulative dollar or monetary value of the settlements. Once again, such settlements result from WTO-inconsistent legislation, and therefore nullify or impair benefits accruing to the European Communities. In our view, whether the amounts are payable by EC entities pursuant to court orders under the 1916 Act, or settlements under the Act, the legal effect is the same in terms of the nullification or impairment of benefits accruing to the European Communities.

 

In a settlement involving multiple claims — i.e., a settlement of a lawsuit that includes both 1916 Act claims and non-1916 Act claims — the amount included by the European Communities in calculating its level of nullification or impairment would need to be limited to the 1916 Act claims alone.

 

As noted above, in calculating the level of nullification or impairment, it is necessary to rely only on credible, verifiable information, and not on speculation. In the context of settlements under the 1916 Act, this would almost certainly necessitate the disclosure of such settlements, such that the amounts of the settlements — and the portions attributable to the 1916 Act — can be confirmed…”(1927)

Deterrent or “chilling” effect

1235.     In US — 1916 Act (EC) (Article 22.6 — US), the European Communities had argued that the most damaging effect of the 1916 Act was its chilling effect on the commercial behaviour of European companies and its potential use as a means of intimidation of European companies that were either already active on the United States’ market or which had considered entering the market.(1928) The Arbitrators were “of the view that any claim for a deterrent or ‘chilling effect’ by the European Communities in the present case would be too speculative, and too remote.” They warned that they did not need to decide, for the purposes of this arbitration, whether a “chilling effect” could be considered to exist for the purposes of WTO dispute settlement. They only needed to determine whether such a chilling effect could be meaningfully quantified for the purposes of determining the level of nullification or impairment sustained by the European Communities as a result of the 1916 Act.(1929) The Arbitrators concluded that, “[o]n the basis of the information provided to the arbitrators, we agree with the parties that a quantification of the chilling effect is not possible. Accordingly, the chilling effect allegedly caused by the 1916 Act could not be included in any calculation by the European Communities of its overall level of the nullification or impairment.”(1930)

Litigation costs

1236.     In US — 1916 Act (EC) (Article 22.6 — US), the European Communities argued that legal expenses related to the pending US court cases was one of the immediate costs of the 1916 Act.(1931) The Arbitrators disagreed and considered that the litigation costs could not be included in the calculation of the level of the nullification or impairment:

“The Arbitrators recall their position, stated above, that it is appropriate to follow the prudent approach taken by earlier arbitrators in determining the level of nullification or impairment. We are not aware of any basis in the WTO Agreements to support the view advanced by the European Communities that legal fees can be claimed as a loss of a benefit accruing to a WTO Member. Moreover, we are not aware of any prior case in which such a claim has been permitted. It is also not clear which fees, and under what circumstances, could be included in such a claim.

 

In the circumstances of this case, it is uncontested that the European Communities has not ‘meaningfully quantified’ the amount of legal fees paid by EC entities as a result of the 1916 Act. Indeed, the European Communities acknowledges that it has provided only examples of such costs, not an overall, verifiable tabulation. In addition, as indicated above, these examples of legal fees have been contested by the United States.

 

Accordingly, in our view, the litigation costs incurred by EC entities under the 1916 Act could not be included in any calculation by the European Communities of the overall level of the nullification or impairment.”(1932)

Double-counting of nullification or impairment

1237.     In EC — Bananas III (US) (Article 22.6 — EC), the United States had argued that its lost exports, including those of goods and services used in the production of Latin-American bananas for the European market, should be counted in setting the level of suspension. After rejecting the United States’ argument on “indirect benefits” (see paragraph 1231 above), the Arbitrators warned that if overlapping claims by different WTO Members were permissible under the DSU in respect of nullification or impairment suffered because of lost trade in goods, this would result in double counting of nullification and impairment:

“[I]f overlapping claims by different WTO Members as to nullification or impairment suffered because of the same lost trade in goods (and goods and service inputs used in their production or incorporated therein) or the same lost trade in services were permissible under the DSU, the problem of ‘double-counting’ of nullification or impairment would arise. Due to the difference in origin of goods or services used as inputs in the banana production, on the one hand, and the origin of the bananas as end-products, on the other, cumulative requests for compensation or suspension of concessions could be made for the same amount of nullification or impairment caused by a Member.

 

If we were to allow for such ‘double-counting’ of the same nullification or impairment in arbitration proceedings under Article 22.6 of the DSU with different WTO Members, incompatibilities with the standard of ‘equivalence’ as embodied in paragraphs 4 and 7 of Article 22 of the DSU could arise. Given that the same amount of nullification or impairment inflicted on one Member cannot simultaneously be inflicted on another, the authorizations to suspend concessions granted by the DSB to different WTO Members could exceed the overall amount of nullification or impairment caused by the Member that has failed to bring a WTO-inconsistent measure into compliance with WTO law. Moreover, such cumulative compensation or cumulative suspension of concessions by different WTO Members for the same amount of nullification or impairment would run counter to the general international law principle of proportionality of countermeasures.”(1933)'(1934)

Disbursements operating as subsidies

1238.     In US — Offset Act (Byrd Amendment) (Article 22.6) the Arbitrator utilized a formula to determine the effect that a subsidy had on the trade of the Members concerned. The Arbitrator judged that the trade effect of the subsidy could be found by multiplying the value of the subsidy by a “trade effect coefficient” composed of the values of pass-through, import penetration and elasticity of substitution. In this regard, the Arbitrator considered that:

“A basic economic model to derive a coefficient for the trade effects of disbursements operating as subsidies can be described as the product of four variables: the value of the subsidy, a measure of the ad valorem price reduction caused by the CDSOA disbursements (i.e., “pass-through”), a substitution elasticity of imports, and import penetration. The basic relationship of the trade effect can be expressed as follows:

 

Trade effect = (value of disbursements) * [(pass-through) * (import penetration) * (elasticity of substitution)]”(1935)

Changes in the level of nullification or impairment after authorization

1239.     In US — 1916 Act (EC) (Article 22.6 — US), the Arbitrators decided that the European Communities could suspend concessions qualitatively provided always that the level of nullification or impairment was quantified on a monetary basis. To facilitate this, the Arbitrators allowed the European Communities to take into account the cumulative monetary value of any amounts payable by EC entities pursuant to final court judgements for claims under the 1916 Act and the settlement of claims under the 1916 Act. In this context, the Arbitrators referred to the possibility that the quantified amount of nullification or impairment suffered by the European Communities could vary over time as a result of new judgements or settlement agreements under the 1916 Act:

“[T]he quantified amount of nullification or impairment sustained by the European Communities as a result of the 1916 Act may vary overtime, if there are new judgments or settlement agreements under the 1916 Act involving EC entities. This may necessitate access by the parties to all relevant information, including settlement awards. The Arbitrators are confident that each party will abide fully by its obligation under Article 3.10 of the DSU to “engage in dispute settlement procedures in good faith in an effort to resolve the dispute.” In our view, this obligation applies to all stages of the dispute, including during the implementation of the suspension of obligations.

 

We also recall that the United States may have recourse to the appropriate dispute settlement procedures in the event that it considers that the application of the suspension by the European Communities exceeds the level of nullification or impairment that the European Communities has sustained as a result of the 1916 Act…”(1936)

1240.     Concerning the possibility of setting a variable level of suspension of concessions or other obligations in order to reflect possible variations in the level of nullification or impairment, see paragraphs 1205-1206 above.

Exception: arbitrations pursuant to Article 4.10 of the SCM Agreement

1241.     In Brazil — Aircraft (Article 22.6 — Brazil), the Arbitrators considered the provisions of Article 4.11 of the SCM Agreement as special or additional rules and recalled that the concept of nullification or impairment is absent from Articles 3 and 4 of the SCM Agreement. In the Arbitrators’ view, there is no legal obligation in that context that countermeasures in the form of suspension of concessions or other obligations be equivalent to the level of nullification or impairment. The Arbitrators thus concluded that, when dealing with a prohibited export subsidy, an amount of countermeasures that corresponds to the total amount of the subsidy is “appropriate”. See paragraph 1282 below.

1242.     In US — FSC (Article 22.6 — US), the Arbitrators recalled that “Articles 4.10 and 4.11 of the SCM Agreement are ‘special or additional rules’ under Appendix 2 of the DSU, and that in accordance with Article 1.2 of the DSU, it is possible for such rules or procedures to prevail over those of the DSU. There can be no presumption, therefore, that the drafters intended the standard under Article 4.10 to be necessarily coextensive with that under Article 22.4 so that the notion of ‘appropriate countermeasures’ under Article 4.10 would limit such countermeasures to an amount ‘equivalent to the level of nullification or impairment’ suffered by the complaining Member. Rather, Articles 4.10 and 4.11 of the SCM Agreement use distinct language and that difference must be given meaning.”(1937)

(ii) Assessment of the level of suspension of concessions

General

1243.     In EC — Bananas III (US) (Article 22.6 — EC), the Arbitrators considered that “to estimate the level of nullification or impairment, the same basis needs to be used for measuring the level of suspension of concessions. Since the latter is the gross value of US imports from the European Communities, the comparable basis for estimating nullification and impairment in our view is the impact on the value of relevant EC imports from the United States (rather than US firms’ costs and profits, as used in the US submission). More specifically, we compare the value of relevant EC imports from the United States under the present banana import regime (the actual situation) with their value under a WTO-consistent regime (a “counterfactual” situation)”.(1938)

Methodology paper

1244.     In EC — Hormones (US) (Article 22.6 — EC)(1939), EC — Hormones (Canada) (Article 22.6 — EC)(1940) and Brazil — Aircraft (Article 22.6 — Brazil),(1941) the Arbitrators asked the requesting party to provide them with a methodology paper explaining the methodology they applied in calculating the proposed level of suspension.

1245.     In EC — Bananas III (Ecuador) (Article 22.6 — EC), the European Communities requested that the Arbitrators disregard certain information contained in Ecuador’s methodology document on the basis such information was included in Ecuador’s first submission only and not in the methodology document. The Arbitrators held that while a procedural step of submitting a methodology document had been stipulated in another arbitration proceeding for reasons of practicality, such a “methodology document” was not expressly mentioned in the DSU. Furthermore, the Arbitrators rejected “the idea that the specificity requirements of Article 6.2 apply mutatis mutandis to the methodology document”:

“[W]e introduced the procedural step of submitting a methodology document in the US/EC Bananas III arbitration proceeding because we reckoned that certain information about the methodology used by the party for calculating the level of nullification or impairment would logically only be in the possession of that Member and that it would not be possible for the Member requesting arbitration pursuant to Article 22 of the DSU to challenge this information unless it was disclosed. Obviously, if such information were to be disclosed by the Member suffering impairment only in its first submission, the Member requesting arbitration could only rebut that information in its rebuttal submission, while its first submission would become necessarily less meaningful and due process concerns could arise. It was out of these concerns that the United States was requested to submit a document explaining the methodology used for calculating impairment before the filing of the first submission by both parties. Unlike in panel proceedings, where parties do not file their first submissions simultaneously, it has been the practice in past arbitration proceedings under Article 22 that both rounds of submissions take place before a single oral hearing of the parties by the Arbitrators and that in both these rounds parties file their submissions simultaneously.

 

However, we agree with Ecuador that such a methodology document is nowhere mentioned in the DSU. Nor do we believe, as explained in detail above, that the specificity requirements of Article 6.2 relate to that methodology document rather than to requests for suspension pursuant to Article 22.2, and to requests for the referral of such matters to arbitration pursuant to Article 22.6. For these reasons, we reject the idea that the specificity requirements of Article 6.2 apply mutatis mutandis to the methodology document. In our view, questions concerning the amount, usefulness and relevance of information contained in a methodology document are more closely related to the questions of who is required at what point in time to present evidence and in which form, or in other words, the issue of the burden of proof in an arbitration proceeding under Article 22.6. “(1942)

(iii) Standard of equivalence

Quantitative equivalence

1246.     In EC — Bananas III (US) (Article 22.6 — EC), the Arbitrators considered the meaning of “equivalence” and noted “that the ordinary meaning of the word ‘equivalence’ is ‘equal in value, significance or meaning’, ‘having the same effect”, “having the same relative position or function, ‘corresponding to’, ‘something equal in value or worth’, also ‘something tantamount or virtually identical’.(1943)” The Arbitrators considered that “this meaning connotes a correspondence, identity or balance between two related levels, i.e. between the level of the concessions to be suspended, on the one hand, and the level of the nullification or impairment, on the other.”(1944)

1247.     The Arbitrators in EC — Hormones (US) (Article 22.6 — EC) and EC — Hormones (Canada) (Article 22.6 — EC) specifically found that “equivalent” had to be determined in “quantitative” terms:

“What we do have to determine…is whether the overall proposed level of suspension is equivalent to the level of nullification and impairment. This involves a quantitative — not a qualitative — assessment of the proposed suspension. As noted by the arbitrators in the Bananas case, ‘[i]t is impossible to ensure correspondence or identity between two levels if one of the two is not clearly defined’. Therefore, as a prerequisite for ensuring equivalence between the two levels, we have to be able to determine, not only the ‘level of the nullification and impairment’, but also the ‘level of the suspension of concessions or other obligations’. To give effect to the obligation of equivalence in Article 22.4, the Member requesting suspension thus has to identify the level of suspension of concessions it proposes i n a way that allows us to determine equivalence.”(1945)

1248.     Also in the Arbitrators in EC — Hormones (Canada) (Article 22.6 — EC) stated that the “total trade value” could not “exceed the amount of trade impairment we find.”(1946)

1249.     Similarly, the Arbitrators in US — FSC (Article 22.6 — US) noted that drafters of Article 22.4 had explicitly set a “quantitative” benchmark to the level of suspension of concessions or other obligations that can be authorized:

“The drafters [of Article 22.4] have explicitly seta quantitative benchmark to the level of suspension of concessions or other obligations that might be authorized. This is similarly reflected in Article 22.7, which defines the arbitrators’ mandate in such proceedings …

 

As we have already noted in our analysis of the text of Article 4.10 of the SCM Agreement above, there is, by contrast, no such indication of an explicit quantitative benchmark in that provision …”(1947)

Qualitative equivalence

1250.     In US — 1916 Act (EC) (Article 22.6 — US), the Arbitrator acknowledged that this was the first time that a complainant had requested authorization to suspend “qualitatively” equivalent (rather than “quantitatively” equivalent) obligations. The Arbitrators compared the case before them with previous cases and concluded that the fact that the requested suspension had not been stated in quantitative terms “[did] not in and of itself render the EC request inconsistent with Article 22”:

“[T]his the first case in which a WTO Member has sought to suspend “qualitatively equivalent” obligations. In all previous cases, parties seeking to suspend concessions or other obligations have provided a quantitative, monetary figure indicating the amount of suspension sought. Indeed, the European Communities indicated that it was “aware that its request for suspension of ‘qualitatively equivalent’ obligations constitutes a novelty in WTO practice.”

 …

In cases such as EC — Hormones (US) (Article 22.6 — EC), EC-Hormones (Canada) (Article 22.6 — EC) and US — FSC (Article 22.6 — US), where the requested suspension was expressed in quantitative terms, the arbitrators necessarily had to assess whether there was “quantitative equivalence” between the level of the nullification or impairment and the level of the suspension of concessions or other obligations.

 

In the present case, by contrast, the requested suspension has not been stated in quantitative terms. However, this does not in and of itself render the EC request inconsistent with Article 22 …”(1948)

1251.     The Arbitrators on US — 1916 Act (EC) (Article 22.6 — US) further indicated that the question of whether it is possible to determine the WTO-consistency of a “qualitatively equivalent” Article 22.2 request cannot be considered in the abstract but has to be looked at from the point of view of its application:

“Indeed, it is not possible to determine the WTO-consistency of a ‘qualitatively equivalent’ Article 22.2 request in the abstract. Instead, it is necessary to determine how the actual suspension resulting from such ‘qualitative equivalence’ would be applied. More specifically:

 

  • If the suspension of obligations were applied in such a manner that it were equal to or below the level of nullification or impairment sustained by the European Communities, then the suspension would, in principle, be consistent with DSU Article 22.4.(1949)
     
  • If the suspension of obligations were applied in such a manner that it exceeded the level of nullification or impairment sustained by the European Communities, then the suspension would be punitive, and would not be consistent with DSU Article 22.4.

In the present case, in order to determine whether the qualitative suspension could be applied in such a manner that the level of suspension could exceed the level of nullification or impairment, it is necessary to determine the trade or economic effects on the European Communities of the 1916 Act. Once this has been determined, the European Communities could implement its suspension up to, but not beyond, this amount. This necessitates a determination of the trade or economic effects of the 1916 Act on the European Communities in numerical or monetary terms, which is the only way in which the arbitrators can determine “equivalence” in the present context.”(1950)

1252.     In US — 1916 Act (EC) (Article 22.6 — US), the European Communities had requested the right to suspend obligations by enacting a regulation replicating the US 1916 Act which had been found inconsistent with WTO law. The Arbitrators noted that the European Communities request had placed no quantifiable or monetary limits on how the suspension could be applied in practice. The Arbitrators were concerned that the suspension could thus apply to an unlimited amount of US exports to the European Communities. The Arbitrators then rejected the EC argument that the suspension of obligations is somehow “equivalent” because its proposed measure would replicate, or partially replicate, the 1916 Act. The Arbitrators concluded that:

“Leaving aside for the moment the issue of whether we can examine the EC measure, we would reiterate that similar or even identical measures can have dissimilar trade effects. Stated another way, similar or identical measures may not result in the required equivalence between the level of suspension and the level of nullification or impairment.

Given the potentially unlimited application of the EC suspension, as described in its request, it is possible that the EC suspension could exceed the level of nullification or impairment when it is applied, and thereby become punitive. The EC request does not ensure that the suspension will be limited to the level of nullification it has sustained, as expressed in quantifiable economic or trade terms.”(1951)

Assessment of “equivalence”

General

1253.     In EC — Bananas III (US) (Article 22.6 — EC), the Arbitrators considered that they could not fulfil their task of assessing the equivalence between the two levels (i.e. level of nullification or impairment and level of suspension) before they had reached a view on whether the revised EC regime was, in the light of the Panel and the Appellate Body’s findings in the original dispute, fully WTO-consistent:

“[I]t is our opinion that the concept of equivalence between the two levels (i.e. of the proposed suspension and the nullification or impairment) remains a concept devoid of any meaning if either of the two variables in our comparison between the proposed suspension and the nullification or impairment would remain unknown. In essence, we would be left with the option to declare the level of nullification or impairment to be tantamount to the proposed level of suspension, i.e. to equate one variable in the equation with the other. To do that would mean that any proposed level of suspension would necessarily be deemed equivalent to the level of nullification or impairment so equated. Or, we could resort to the option of measuring the level of nullification or impairment on the basis of our findings in the original dispute, as modified by the Appellate Body and adopted by the DSB. To do that would mean to ignore altogether the undisputed fact that the European Communities has taken measures to revise its banana import regime. That is certainly not the mandate that the DSB has entrusted to us.

 

Consequently, we cannot fulfil our task to assess the equivalence between the two levels before we have reached a view on whether the revised EC regime is, in light of our and the Appellate Body’s findings in the original dispute, fully WTO-consistent. It would be the WTO-inconsistency of the revised EC regime that would be the root cause of any nullification or impairment suffered by the United States. Since the level of the proposed suspension of concessions is to be equivalent to the level of nullification or impairment, logic dictates that our examination as Arbitrators focuses on that latter level before we will be in a position to ascertain its equivalence to the level of the suspension of concessions proposed by the United States.(1952)

 

In arriving at this conclusion, we are mindful of the DSB Chairman’s statement at the meeting of 29 January 1999 when the DSB decided to refer this matter to us in our capacity as Arbitrators:

 

‘There remains the problem of how the Panel and the Arbitrators would coordinate their work, but as they will be the same individuals, the reality is that they will find a logical way forward, in consultation with the parties. In this way, the dispute settlement mechanisms of the DSU can be employed to resolve all of the remaining issues in this dispute, while recognizing the right of both parties and respecting the integrity of the DSU.’

 

We are convinced that our chosen ‘way forward’ in tackling the tasks before us is the most “logical way forward”. It is the one that gives full weight and meaning to all of the dispute settlement mechanisms provided for under the DSU that parties to the original Bananas III dispute have chosen to invoke.”(1953)

1254.     In EC — Bananas III (US) (Article 22.6 — EC), the European Communities contested the Arbitrators’ competence to review the WTO-consistency or otherwise of the revised European Communities’ regime (see paragraph 1253 above) on the grounds that such a review would deprive Article 21.5 of its raison d’être. The Arbitrators disagreed:

“[T]he European Communities argues that if we consider the WTO consistency of its banana regime in an arbitration proceeding under Article 22, we will deprive Article 21.5 of its raison d’être. We disagree. For those Members that for whatever reasons do not wish to suspend concessions, Article 21.5 will remain the prime vehicle for challenging implementation measures. However, if we accepted the EC’s argument, we would in fact read the time-limit foreseen in Article 22.6 out of the DSU since an Article 21.5 proceeding, which in the EC view includes consultations and an appeal, would seldom, if ever, be completed before the end of the time-limit specified within Article 22.6 (i.e. thirty days of the expiry of the reasonable period of time).(1954) In this regard it is useful to recall the arbitration award in the Hormones case, in which it is stated ‘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.’(1955) We note that in the US view, if it cannot make a request for authorization to suspend concessions within the Article 22.6 time-period, it loses its right to do so, at least under circumstances where the negative-consensus rule of Article 22.6 applies.”(1956)

1255.     In EC — Bananas III (US) (Article 22.6 — EC), the Arbitrators considered that the benchmark of equivalence reflects a stricter standard of review for Arbitrators acting pursuant to Article 22.7 of the DSU than the degree of scrutiny that the standard of appropriateness, as applied under the GATT 1947 would have suggested. In arriving at this conclusion, the Arbitrators examined the working party on Netherlands Action under Article XXIII:2 to Suspend Obligations to the United States:

“We are mindful of the fact that the working party on Netherlands Action under Article XXIII:2 to Suspend Obligations to the United States’(1957) considered whether the proposed action was “appropriate” and that the Working Party only had “regard” to the equivalence of the impairment suffered:

 

‘2.     The Working Party was instructed by the CONTRACTING PARTIES to investigate the appropriateness of the measure which the Netherlands Government proposed to take, having regard to the equivalence to the impairment suffered by the Netherlands as a result of the United States restrictions.

 

3.     The Working Party felt that the appropriateness of the measure envisaged by the Netherlands Government should be considered from two points of view: in the first place, whether in the circumstances, the measure proposed was appropriate in character, and secondly, whether the extent of the quantitative restriction proposed by the Netherlands Government was reasonable, having regard to the impairment suffered.’ (emphasis added).

 

In our view, in light of the explicit reference in paragraphs 4 and 7 of Article 22 of the DSU to the need to ensure the equivalence between the level of proposed suspension and the level of the nullification or impairment suffered, the standard of appropriateness applied by the 1952 working party has lost its significance as a benchmark for the authorization of the suspension of concessions under the DSU.

 

However, we note that the ordinary meaning of ‘appropriate’, connoting ‘specially suitable, proper, fitting, attached or belonging to’,(1958) suggests a certain degree of relation between the level of the proposed suspension and the level of nullification or impairment, where as we stated above, the ordinary meaning of ‘equivalent’ implies a higher degree of correspondence, identity or stricter balance between the level of the proposed suspension and the level of nullification or impairment. Therefore, we conclude that the benchmark of equivalence reflects a stricter standard of review for Arbitrators acting pursuant to Article 22.7 of the WTO’s DSU than the degree of scrutiny that the standard of appropriateness, as applied under the GATT of 1947 would have suggested.” (1959)

1256.     In EC — Hormones (US) (Article 22.6 — EC) and in EC — Hormones (Canada) (Article 22.6 — EC), the Arbitrators considered that “an arbitrator has to ‘determine whether the level of such suspension is equivalent to the level of nullification or impairment’” but that “[arbitrators are explicitly prohibited from ‘examining] the nature of the concessions or other obligations to be suspended’ (other than under Articles 22.3 and 22.5)”.(1960) The Arbitrators further indicated that the determination of whether the overall proposed level of suspension is equivalent to the level of nullification and impairment involves a quantitative — not a qualitative — assessment of the proposed suspension:

“What we do have to determine, however, is whether the overall proposed level of suspension is equivalent to the level of nullification and impairment. This involves a quantitative — not a qualitative — assessment of the proposed suspension. As noted by the arbitrators in the Bananas case, ‘[i]t is impossible to ensure correspondence or identity between two levels if one of the two is not clearly defined’.(1961) Therefore, as a prerequisite for ensuring equivalence between the two levels, we have to be able to determine, not only the ‘level of the nullification and impairment’, but also the ‘level of the suspension of concessions or other obligations’. To give effect to the obligation of equivalence in Article 22.4, the Member requesting suspension thus has to identify the level of suspension of concessions it proposes in a way that allows us to determine equivalence.”(1962)

Extent of the Arbitrators’ mandate when they reject the proposed level of suspension

1257.     The Arbitrators on EC — Hormones (US) (Article 22.6 — EC) considered that when the Arbitrators determine that the level of suspension of concessions or other obligations sought by the complaining party is not equivalent to the actual level of nullification or impairment suffered, they are obliged to determine what level of suspension would be equivalent:

“There is … a difference between our task here and the task given to a panel. In the event we decide that the US proposal is not WTO consistent, i.e. that the suggested amount is too high, we should not end our examination the way panels do, namely by requesting the DSB to recommend that the measure be brought into conformity with WTO obligations. Following the approach of the arbitrators in the Bananas case — where the proposed amount of US$ 520 million was reduced to US$ 191.4 million-we would be called upon to go further. In pursuit of the basic DSU objectives of prompt and positive settlement of disputes, we would have to estimate the level of suspension we consider to be equivalent to the impairment suffered. This is the essential task and responsibility conferred on the arbitrators in order to settle the dispute. In our view, such approach is implicitly called for in Article 22.7…”(1963)

1258.     Similarly, in EC — Bananas III (Ecuador) (Article 22.6 — EC), the Arbitrators stated:

“[W]e note that, if we were to find the proposed amount…not to be equivalent, we would have to estimate the level of suspension we consider to be equivalent to the nullification or impairment suffered by Ecuador. This approach is consistent with Article 22.7 of the DSU which emphasizes the finality of the arbitrators’ decision. …

 

We recall that this approach was followed in the US/EC arbitration proceeding in EC — Bananas III and the arbitration proceedings in EC — Hormones, where the arbitrators did not consider the proposed amount of suspension as equivalent to the nullification or impairment suffered and recalculated that amount in order to be able to render a final decision.”(1964)

1259.     In Canada — Aircraft Credits and Guarantees (Article 22.6 — Canada), the Arbitrators confirmed that “prior Arbitrators that have rejected proposed levels of countermeasures (or suspensions of concessions) have always proceeded to set levels consistent with the relevant agreements.”(1965)

(c) Exception: standard of appropriateness in subsidy arbitrations

1260.     In Brazil — Aircraft (Article 22.6 — Brazil), the Arbitrators, although indicating that they were following the approach adopted by previous arbitrators, used the standard of appropriateness, that had been rejected in EC — Bananas III (US) (Article 22.6 — EC) (see paragraph 1255 above). This was because Article 4.11 of the SCM Agreement calls for the Arbitrators to determine the “appropriate countermeasures”. The Arbitrators indicated that “[a]s to our task, we follow the approach adopted by previous arbitrators under Article 22.6 of the DSU.(1966) We will have not only to determine whether Canada’s proposal constitutes “appropriate countermeasures”, but also to determine the level of countermeasures we consider to be appropriate in case we find that Canada’s level of countermeasures is not appropriate, if necessary by applying our own methodology.”(1967)

1261.     With respect to the relationship between the “equivalence” and “appropriateness” standards, see paragraphs 1241-1242 above. As regards the particularities of arbitrations pursuant to Article 4.11 of the SCM Agreement, see paragraphs 1279-1293 below and Article 4.11 of the Chapter on the SCM Agreement.

(d) Suspension of concessions awarded under arbitration

1262.     In EC — Bananas III (US) (Article 22.6 — EC), the Arbitrators decided that the suspension by the United States of the application to the European Communities and its member States of tariff concessions and related obligations under GATT 1994 covering trade in a maximum amount of US$191.4 million per year would be consistent with Article 22.4 of the DSU.(1968) Further to the request by the United States,(1969) the DSB, at its meeting on 19 April 1999, authorized the suspension of concessions.(1970)

1263.     In EC — Hormones (US) (Article 22.6 — EC), the Arbitrators decided that the suspension by the United States of the application to the European Communities and its member States of tariff concessions and related obligations under GATT 1994 covering trade in a maximum amount of US$116.8 million per year would be consistent with Article 22.4 of the DSU.(1971) Further to the request by the United States(1972), the DSB, at its meeting on 26 July 1999, authorized the suspension of concessions.(1973)

1264.     In EC — Hormones (Canada) (Article 22.6 — EC), the Arbitrators decided that the suspension by Canada of the application to the European Communities and its member States of tariff concessions and related obligations under GATT 1994 covering trade in a maximum amount of Can$11.3 million per year would be consistent with Article 22.4 of the DSU.(1974) Further to the request by Canada,(1975) the DSB, at its meeting on 26 July 1999, authorized the suspension of concessions.(1976)

1265.     In EC — Bananas III (Ecuador) (Article 22.6 — EC), the Arbitrators decided that the suspension by Ecuador to the European Communities of concessions or other obligations at a level not exceeding US$201.6 million per year would be consistent within the meaning of Article 22.4. The Arbitrators further decided that:

“(b)     Ecuador may request, pursuant to subparagraph (a) of Article 22.3, and obtain authorization by the DSB to suspend concessions or other obligations under the GATT concerning certain categories of goods in respect of which we have been persuaded that suspension of concessions is effective and practicable. Notwithstanding the requirement set forth in Article 22.7 that arbitrators “shall not examine the nature of the concessions or other obligations to be suspended”, we note that in our view these categories of goods do not include investment goods or primary goods used as inputs in Ecuadorian manufacturing and processing industries, whereas these categories of goods do include goods destined for final consumption by end-consumers in Ecuador.(1977) In making its request for suspension of concessions with respect to certain product categories, we note that, consistent with past practice in arbitration proceedings under Article 22,(1978) Ecuador should submit to the DSB a list identifying the products with respect to which it intends to implement such suspension once it is authorized.

 

(c)     Ecuador may request, pursuant to subparagraph (a) of Article 22.3, and obtain authorization by the DSB to suspend commitments under the GATS with respect to “wholesale trade services” (CPC 622) in the principal sector of distribution services.

 

(d)     To the extent that suspension requested under the GATT and the GATS, in accordance with subparagraphs (b) and (c) above, is insufficient to reach the level of nullification and impairment indicated in subparagraph (a) of this paragraph, Ecuador may request, pursuant to subparagraph (c) of Article 22.3, and obtain authorization by the DSB to suspend its obligations under the TRIPS Agreement with respect to the following sectors of that Agreement:

 

Section 1:     Copyright and related rights, Article 14 on ‘Protection of performers, producers of phonograms (sound recordings) and broadcasting organisations’;

 

Section 3:     Geographical indications;

 

Section 4:     Industrial designs.”(1979)

1266.     Further to the request by Ecuador,(1980) the DSB, at its meeting on 28 May 2000, authorized the suspension of concessions.(1981)

1267.     In Brazil — Aircraft (Article 22.6 — Brazil), the Arbitrators decided that the suspension by Canada of the application to Brazil of tariff concessions or other obligations under GATT 1994, the Agreement on Textiles and Clothing and the Agreement on Import Licensing Procedures covering trade in a maximum amount of Can$344.2 million per year would constitute appropriate countermeasures within the meaning of Article 4.10 of the SCM Agreement.(1982) Further to the request by Canada,(1983) the DSB, at its meeting on 12 December 2000, authorized the suspension of concessions.(1984)

1268.     In US — FSC (Article 22.6 — US), the Arbitrators decided that the suspension by the European Communities of concessions under the GATT 1994 in the form of the imposition of a 100 per cent ad valorem charge on imports of certain goods from the United States in a maximum amount of US$4,043 million per year would constitute appropriate countermeasures within the meaning of Article 4.10 of the SCM Agreement.(1985) Further to the request by the European Communities,(1986) the DSB, at its meeting on 7 May 2003, authorized the suspension of concessions.(1987)

1269.     In US — 1916 Act (EC) (Article 22.6 — US), the Arbitrators awarded the European Communities the possibility of suspending concessions “qualitatively” (see paragraphs 1250-1252 above) instead of quantitatively as all the previous cases above, provided that it ensured that “the application of such a suspension is quantified, and does not exceed the quantified level of nullification or impairment it has sustained as a result of the 1916 Act.” As parameters for quantifying the monetary level of its nullification or impairment, the Arbitrators allowed the European Communities to include (i) “the cumulative monetary value of any amounts payable by EC entities pursuant to final court judgments for claims under the 1916 Act”; and (ii) “the cumulative monetary value of any amounts payable by EC entities pursuant to the settlement of claims under the 1916 Act.”(1988)

1270.     In Canada — Aircraft Credits and Guarantees (Article 22.6) the Arbitrator decided that the suspension by Brazil: (a) of the application of the obligation under paragraph 6(a) of Article VI of the GATT 1994 to determine that the effect of subsidization under EDC Canada Account and EDC Corporate Account programmes was to cause or threaten material injury to an established domestic industry, or was to retard materially the establishment of a domestic industry; (b) of the application of obligations under the Agreement on Import Licensing Procedures relative to licensing requirements on imports from Canada; and (c) of tariff concessions and related obligations under the GATT 1994 concerning a list of products to be drawn from the list attached to its request; covering trade in a total amount of US$247,797,000 would constitute appropriate countermeasures within the meaning of Article 4.10 of the SCM Agreement.(1989) Further to the request by Brazil(1990), the DSB, at its meeting on 18 March 2003, authorized the suspension of concessions.(1991)

1271.     In US — Offset Act (Byrd Amendment) (Article 22.6), the Arbitrator awarded the requesting parties (Brazil, Chile, European Communities, India, Japan, Korea and Mexico) the possibility of suspending concessions or other obligations in the form of the imposition of an additional import duty above bound custom duties on a final list of products originating in the United States covering, on a yearly basis, a total value of trade not exceeding, in US dollars, the amount resulting from the following equation:

“Amount of disbursements under CDSOA for the most recent year for which data are available relating to antidumping or countervailing duties paid on imports from [the requesting party] at that time, as published by the United States’ authorities.

 

multiplied by:

 

0.72”(1992)

1272.     Following Canada’s request to suspend concessions and other obligations, the Arbitrator in US — Offset Act (Byrd Amendment) (Article 22.6 — Canada), allowed Canada, in addition to imposing additional import duties, to suspend “the application of the obligations under Article VI of GATT 1994, Articles 3, 5, 7, 8, 9, 10, 11 and 12 of the Anti-Dumping Agreement and Articles 11, 12, 15, 17, 18, 19, 20, 21 and 22 of the SCM Agreement to determine that the effect of dumping or subsidization of products from the United States is to cause or threaten material injury to an established domestic injury, or is to retard materially the establishment of a domestic industry” converting a value of trade not exceeding the amount resulting from the same formula.(1993)

1273.     In US — Offset Act (Byrd Amendment) (Article 22.6), further to the request by all the requesting parties except Chile,(1994) the DSB, at its meeting on 24 and 26 November 2004, authorized the suspension of concessions.(1995) Pursuant to a request by Chile,(1996) authorization to suspend concessions was granted at the DSB meeting on 17 December 2004 (WT/DSB/M/180).

9. Article 22.8

(a) “until such time as the measure found to be inconsistent with a covered agreement has been removed”

(i) Allocation of burden of proof in a post-suspension situation

General

1274.     The issue of allocation of burden of proof under Article 5.7 of the SPS Agreement was decided by the Appellate Body in US/Canada — Continued Suspension. The Appellate Body began by setting the basic guidelines in case of an inquiry on substantive compliance under the DSU and subsequently determined the exact onus borne by each party:

“The allocation of the burden of proof in the context of claims arising under Article 22.8 is a function of the following considerations. First, what is the nature of the cause of action that is framed under Article 22.8. Second, the practical question as to which party may be expected to be in a position to prove a particular issue. Third, consideration must be given to the requirements of procedural fairness.

 

Since the suspension of concessions is a remedy of last resort imposed after an elaborate multilateral dispute settlement process, in our view, it is appropriate that the Member whose measure has brought about the suspension of concessions should make some showing that it has removed the measure found to be inconsistent by the DSB in the original proceedings, so that normality can be lawfully restored. This requires that the original respondent will have an onus to show that its implementing measure has cured the defects identified in the DSB’s recommendations and rulings. The quantum of proof entailed by this is a clear description of its implementing measure, and an adequate explanation regarding how this measure rectifies the inconsistencies found in the original proceedings, so as to place the Article 21.5 Panel in a position to make an objective assessment of the matter and, in the absence of rebuttal, to rule in favour of the original respondent.”(1997)

1275.     Following the reasoning discussed in paragraph 1274 above, the Appellate Body in US/Canada — Continued Suspension held that a Member which, in an effort to rectify inconsistencies found in the original proceedings, replaces a ban under Article 5.1 with a provisional ban under Article 5.7, bears the burden of providing an adequate explanation of how the provisional ban under Article 5.7 rectifies the inconsistencies found in the original proceedings:

“[W]e explained how we see the allocation of the burden of proof in a post suspension situation in which the parties disagree as to whether an implementing measure brings about substantive compliance. The European Communities had to provide a clear description of its implementing measure, and an adequate explanation regarding how this measure rectifies the inconsistencies found in the original proceedings. … The European Communities replaced the original definitive ban with a provisional ban and invoked Article 5.7 as an alternative justification to Article 5.1. Thus, the European Communities had to provide an adequate explanation of how the provisional ban taken under Article 5.7 rectifies the inconsistencies found in EC — Hormones. Such explanation had to include, inter alia, an identification of the insufficiencies in the relevant scientific evidence that precluded the European Communities from performing a sufficiently objective risk assessment.”(1998)

1276.     The Appellate Body, in US/Canada — Continued Suspension, further held that the panel wrongfully allocated the burden of proof by basing its findings on a presumption of good faith compliance by one party resulting in the making of ambiguous and premature statements on the onus born by each party:

“We have …several… concerns with the Panel’s analysis. First, … we do not believe that it was sufficient for the European Communities to have based its case under Article 22.8 on a presumption of good faith. The European Communities may be presumed to have acted in good faith in adopting Directive 2003/74/EC, but this does not respond to the question as to whether Directive 2003/74/EC achieved substantive compliance. Thus, it was incorrect for the Panel to have relied on a presumption of good faith compliance for purposes of determining the allocation of the burden of proof and finding that the European Communities established a prima facie case.

 

Secondly, we have difficulty following the reasoning behind the Panel’s conclusion that the presumptions of good faith enjoyed by each party ‘eventually ‘neutralized’ each other’ and that ‘[ultimately, each party had to prove its specific allegations in response to the evidence submitted by the other party.’ The statement is ambiguous about which party made which allegation and how the burden of proof was allocated. In the section in which the Panel describes the scope of its review and circumscribes its terms of reference, the Panel states that, in submissions subsequent to the first written submission, ‘the European Communities has argued the compatibility of its implementing measure with the provisions referred to in the quotation above (i.e. Article[s] 5.1 and 5.7 of the SPS Agreement)’,(1999) However, a few paragraphs later, the Panel refers to the allegation of incompatibility with Article 5.1 of the SPS Agreement as an allegation made by the United States and Canada.(2000) Thus, it is difficult to understand which party had the burden of proving which allegation.”(2001) (footnote omitted)

Standard of review

1277.     The Appellate Body in US/Canada — Continued Suspension, set the extent and limit of a panel’s standard of review in a post-suspension situation, where parties did not initiate 21.5 proceedings but where the panel performs “functions similar to those of an Article 21.5 Panel”:(2002)

“Like any other Panel, an Article 21.5 Panel established in the post-suspension stage, at the request of the original respondent, would be bound to make an objective assessment of the matter. The ultimate issue before such a Panel is whether the measure found to be inconsistent with a covered agreement has been removed. We have interpreted ‘removed’ to mean substantive compliance. The question is which party bears the burden of proof in respect of the issues of substantive compliance….

 

… this case involves a disagreement as to the consistency of a measure taken to comply and, therefore, should have properly been brought under Article 21.5 of the DSU. We also explained how the burden of proof should have been allocated had the dispute been brought under Article 21.5. Although these proceedings were not brought under Article 21.5, the Panel said that it ‘perform[ed] functions similar to those of an Article 21.5 Panel’.(2003) The European Communities had to provide a clear description of its implementing measure, and an adequate explanation regarding how this measure rectifies the inconsistencies found in the original proceedings, so as to have placed the Panel in a position to make an objective assessment of the matter and, in the absence of rebuttal, to rule in favour of the original respondent.”(2004)

1278.     The Appellate Body US/Canada — Continued Suspension, in assessing the validity of provisional implementing measures needed to address the insufficiency of the scientific evidence under Article 5.7 of the SPS Agreement, also discussed the issue of a panel’s standard of review. The Appellate Body agreed that the panel is bound to limit its review to the insufficiencies expressly identified by the Member who adopted the measure,(2005) stating that it did “not consider that the Panel erred by limiting its review to the insufficiencies identified by the European Communities”.(2006)

10. Relationship with other WTO Agreements

(a) Arbitrations pursuant to Article 4.10 and 4.11 of the SCM Agreement

(i) Special or additional rules

1279.     In Brazil — Aircraft (Article 22.6 — Brazil), the Arbitrators indicated that they read the provisions of Article 4.11 of the SCM Agreement as special or additional rules:

“We read the provisions of Article 4.11 of the SCM Agreement as special or additional rules. In accordance with the reasoning of the Appellate Body in Guatemala — Cement,(2007) we must read the provisions of the DSL) and the special or additional rules in the SCM Agreement so as to give meaning to all of them, except if there is a conflict or a difference…”(2008)

1280.     In US — FSC (Article 22.6 — US), the Arbitrators recalled Article 30 of the SCM Agreement and concluded that Article 22.6 of the DSU applies to arbitrations pursuant to Article 4.11 of the SCM Agreement although this latter provision would prevail in case of conflict:

“We also recall the terms of Article 30 of the SCM Agreement, which clarifies that the provisions of the DSU are applicable to proceedings concerning measures covered by the SCM Agreement. Article 22.6 of the DSU therefore remains relevant to arbitral proceedings under Article 4.11 of the SCM Agreement, as illustrated by the textual reference made to Article 22.6 of the DSU in that provision. However, the special or additional rules and procedures of the SCM Agreement, including Articles 4.10 and 4.11, would prevail to the extent of any difference between them.”(2009)’(2010)

(ii) Exception to the requirement of equivalence to the level of nullification or impairment

1281.     The Arbitrators in Brazil — Aircraft (Article 22.6 — Brazil) rejected Brazil’s argument that the countermeasures must be equivalent to the level of nullification or impairment pursuant to Article 22.4 of the DSU, noting that the concept of nullification or impairment is not found in Articles 3 and 4 of the SCM Agreement. The Arbitrator explained:

“A first approach would be to consider that the concept of nullification or impairment does not apply to Article 4 of the SCM Agreement. We note in this respect that, in relation to actionable subsidies, Article 5 refers to nullification or impairment as only one of the three categories of adverse effects. This could mean that another test than nullification or impairment could also apply in the context of Article 4 of the SCM Agreement.

 

That said, we note that the Original Panel concluded that, since a violation had been found, a prima facie case of nullification or impairment had been made within the meaning of Article 3.8 of the DSU, which Brazil had not rebutted. In that context, we are more inclined to consider that no reference was expressly made to nullification or impairment in Article 4 of the SCM Agreement for the following reasons:

 

(a)     a violation of Article 3 of the SCM Agreement entails an irrebuttable presumption of nullification or impairment. It is therefore not necessary to refer to it;

 

(b)     the purpose of Article 4 is to achieve the withdrawal of the prohibited subsidy. In this respect, we consider that the requirement to withdraw a prohibited subsidy is of a different nature than removal of the specific nullification or impairment caused to a Member by the measure.(2011) The former aims at removing a measure which is presumed under the WTO Agreement to cause negative trade effects, irrespective of who suffers those trade effects and to what extent. The latter aims at eliminating the effects of a measure on the trade of a given Member;

 

(c)     the fact that nullification or impairment is established with respect to a measure does not necessarily mean that, in the presence of an obligation to withdraw that measure, the level of appropriate countermeasures should be based only on the level of nullification or impairment suffered by the Member requesting the authorisation to take countermeasures.”(2012)

1282.     In Brazil — Aircraft (Article 22.6 — Brazil), the Arbitrators further indicated that they read the provisions of Article 4.11 of the SCM Agreement as special or additional rules and recalled that the concept of nullification or impairment is absent from Articles 3 and 4 of the SCM Agreement. The Arbitrators considered that, accordingly, in that context there was no legal obligation that countermeasures in the form of suspension of concessions or other obligations be equivalent to the level of nullification or impairment. The Arbitrators thus concluded that, when dealing with a prohibited export subsidy, an amount of countermeasures that corresponds to the total amount of the subsidy is “appropriate”:

“We read the provisions of Article 4.11 of the SCM Agreement as special or additional rules. In accordance with the reasoning of the Appellate Body in Guatemala — Cement,(2013) we must read the provisions of the DSU and the special or additional rules in the SCM Agreement so as to give meaning to all of them, except if there is a conflict or a difference. While we agree that in practice there may be situations where countermeasures equivalent to the level of nullification of impairment will be appropriate, we recall that the concept of nullification or impairment is absent from Articles 3 and 4 of the SCM Agreement. In that framework, there is no legal obligation that countermeasures in the form of suspension of concessions or other obligations be equivalent to the level of nullification or impairment.

 

On the contrary, requiring that countermeasures in the form of suspension of concessions or other obligations be equivalent to the level of nullification or impairment would be contrary to the principle of effectiveness by significantly limiting the efficacy of countermeasures in the case of prohibited subsidies. Indeed, as shown in the present case,(2014) other countermeasures than suspension of concessions or obligations may not always be feasible because of their potential effects on other Members. This would be the case of a counter-subsidy granted in a sector where other Members than the parties compete with the products of the parties. In such a case, the Member taking the countermeasure may not be in a position to induce compliance.

 

We are mindful that our interpretation may, at a first glance, seem to cause some risk of disproportionality in case of multiple complainants. However, in such a case, the arbitrator could allocate the amount of appropriate countermeasures among the complainants in proportion to their trade in the product concerned. The “inducing” effect would most probably be very similar.

 

For the reasons set out above, we conclude that, when dealing with a prohibited export subsidy, an amount of countermeasures which corresponds to the total amount of the subsidy is ‘appropriate’.”(2015)'(2016)

1283.     In US — FSC (Article 22.6 — US), the Arbitrator considered that, since Articles 4.10 and 4.11 of the SCM Agreement may prevail over the provisions of the DSU, there can be no presumption that the drafters intended the standard under Article 4.10 of the SCM Agreement to be “necessarily coextensive” with that under Article 22.4 of the DSU:

“It should be recalled here that Articles 4.10 and 4.11 of the SCM Agreement are ‘special or additional rules’ under Appendix 2 of the DSU, and that in accordance with Article 1.2 of the DSU, it is possible for such rules or procedures to prevail over those of the DSU. There can be no presumption, therefore, that the drafters intended the standard under Article 4.10 to be necessarily coextensive with that under Article 22.4 so that the notion of ‘appropriate countermeasures’ under Article 4.10 would limit such countermeasures to an amount ‘equivalent to the level of nullification or impairment’ suffered by the complaining Member. Rather, Articles 4.10 and 4.11 of the SCM Agreement use distinct language and that difference must be given meaning.

 

Indeed, reading the text of Article 4.10 in its context, one might reasonably observe that if the drafters had intended the provision to be construed in this way, they could certainly have made it clear. Indeed, relevant provisions both elsewhere in the SCM Agreement and in the DSU use distinct terms to convey precisely such a standard as described by the United States, in so many words. Yet the drafters chose terms for this provision in the SCM Agreement different from those found in Article 22.4 of the DSU. It would not be consistent with effective treaty interpretation to simply read away such differences in terminology.

 

We therefore find no basis in the language itself or in the context of Article 4.10 of the SCM Agreement to conclude that it can or should be read as amounting to a ‘trade effect-oriented’ provision where explicitly alternative language is to be read away in order to conform it to a different wording to be found in Article 22.4 of the DSU.

 

We would simply add that, while we consider that the precise difference in language must be given proper meaning, this goes no further than that. Our interpretation of Article 4.10 of the SCM Agreement as embodying a different rule from Article 22.4 of the DSU does not make the DSU otherwise inapplicable or redundant.”(2017)

1284.     As regards the subsidy-specific aspects of the determination of “appropriate countermeasures”, see Articles 4.10 and 4.11 of the Chapter on the SCM Agreement.

1285.     With respect to the standard of “appropriateness” as opposed to the standard of “equivalence”, see paragraphs 1255-1260 above.

(iii) Concept of “appropriate countermeasures”

“countermeasure”

1286.     In Brazil — Aircraft (Article 22.6 — Brazil), the Arbitrators looked at the word “countermeasure” as context for finding a meaning to the word “appropriate”. The Arbitrators considered it less appropriate to rely on the dictionary meaning of the word and preferred to refer to its general meaning in international law and to the work of the International Law Commission on state responsibility:

“While the parties have referred to dictionary definitions for the term “countermeasures”, we find it more appropriate to refer to its meaning in general international law(2018) and to the work of the International Law Commission (ILC) on state responsibility, which addresses the notion of countermeasures.(2019) We note that the ILC work is based on relevant state practice as well as on judicial decisions and doctrinal writings, which constitute recognized sources of international law.(2020) When considering the definition of ‘countermeasures’ in Article 47 of the Draft Articles,(2021) we note that countermeasures are meant to “induce [the State which has committed an internationally wrongful act] to comply with its obligations under articles 41 to 46”. We note in this respect that the Article 22.6 arbitrators in the EC — Bananas (1999) arbitration made a similar statement.(2022) We conclude that a countermeasure is ‘appropriate’ inter alia if it effectively induces compliance.”(2023)

1287.     In US — FSC (Article 22.6 — US), the Arbitrator looked into the ordinary meaning of the word “countermeasure”:

“Dictionary definitions of ‘countermeasure’ suggest that a countermeasure is essentially defined by reference to the wrongful action to which it is intended to respond. The New Oxford Dictionary defines ‘countermeasure’ as ‘an action taken to counteract a danger, threat, etc’.(2024) The meaning of ‘counteract’ is to ‘hinder or defeat by contrary action; neutralize the action or effect of’.(2025) Likewise, the term ‘counter’ used as a prefix is defined inter alia as: ‘opposing, retaliatory’.(2026) The ordinary meaning of the term thus suggests that a countermeasure bears a relationship with the action to be counteracted, or with its effects (cf. ‘hinder or defeat by contrary action; neutralize the action or effect of’).(2027)

 

In the context of Article 4 of the SCM Agreement, the term ‘countermeasures’ is used to define temporary measures which a prevailing Member may be authorized to take in response to a persisting violation of Article 3 of the SCM Agreement, pending full compliance with the DSB’s recommendations. This use of the term is in line with its ordinary dictionary meaning as described above: these measures are authorized to counteract, in this context, a wrongful action in the form of an export subsidy that is prohibited per se, or the effects thereof.

 

It would be consistent with a reading of the plain meaning of the concept of countermeasure to say that it can be directed either at countering the measure at issue (in this case, at effectively neutralizing the export subsidy) or at counteracting its effects on the affected party, or both.

 

We need, however, to broaden our textual analysis in order to see whether we can find more precision in how countermeasures are to be construed in this context. We thus turn to an examination of the expression ‘appropriate’ countermeasures with a view to clarifying what level of countermeasures may be legitimately authorized.”(2028)

“appropriate countermeasure”

1288.     In Brazil — Aircraft (Article 22.6 — Brazil), Canada had proposed adopting countermeasures based on the amount of subsidy per aircraft granted by Brazil instead of basing them on the level of nullification or impairment. The Arbitrators examined the meaning of the term appropriate and concluded that “a counter-measure is ‘appropriate’ inter alia if it effectively induces compliance”:

“In accordance with Article 3.2 of the DSU), we proceed with an analysis of the meaning of the term “appropriate” based on Article 31 of the Vienna Convention.

 

Examining only the ordinary meaning of the term “appropriate” does not allow us to reply to the question before us, since dictionary definitions are insufficiently specific. Indeed, the relevant dictionary definitions of the word “appropriate” are “specially suitable; proper”.(2029) However, they point in the direction of meeting a particular objective.

 

The first context of the term “appropriate” is the word “countermeasures”, of which it is an adjective. While the parties have referred to dictionary definitions for the term “countermeasures”, we find it more appropriate to refer to its meaning in general international law(2030) and to the work of the International Law Commission (ILC) on state responsibility, which addresses the notion of countermeasures.(2031) We note that the ILC work is based on relevant state practice as well as on judicial decisions and doctrinal writings, which constitute recognized sources of international law.(2032) When considering the definition of ‘countermeasures’ in Article 47 of the Draft Articles,(2033) we note that countermeasures are meant to “induce [the State which has committed an internationally wrongful act] to comply with its obligations under articles 41 to 46”. We note in this respect that the Article 22.6 arbitrators in the EC — Bananas (1999) arbitration made a similar statement.(2034) We conclude that a countermeasure is ‘appropriate’ inter alia if it effectively induces compliance.”(2035)

1289.     The Arbitrators in US — FSC (Article 22.6 — US) considered the dictionary meaning of the word “appropriate” and concluded that, as far as the amount or level of countermeasures is concerned, the expression “appropriate” does not in and of itself predefine the precise and exhaustive conditions for the application of countermeasures.(2036) The Arbitrators stated that Articles 4.10 and 4.11 are not designed to lay down a precise formula or otherwise quantified benchmark or amount of countermeasures which might be legitimately authorized in each and every instance.(2037) The Arbitrators indicated:

“Based on the plain meaning of the word, this means that countermeasures should be adapted to the particular case at hand. The term is consistent with an intent not to prejudge what the circumstances might be in the specific context of dispute settlement in a given case. To that extent, there is an element of flexibility, in the sense that there is thereby an eschewal of any rigid a priori quantitative formula. But it is also clear that there is, nevertheless, an objective relationship which must be absolutely respected: the countermeasures must be suitable or fitting by way of response to the case at hand.” (2038)

Footnote 9 of the SCM Agreement

1290.     In US — FSC (Article 22.6 — US), the Arbitrators considered that the term “appropriate” countermeasures in Article 4.10 is informed by footnote 9, which provides guidance as to what the expression “appropriate” should be understood to mean. In the Arbitrators’ view, “these two elements are part of a single assessment and that the meaning of the expression ‘appropriate countermeasures’ should result from a combined examination of these terms of the text in light of its footnote”.(2039) The Arbitrators thus concluded that “[t]his footnote effectively clarifies further how the term ‘appropriate’ is to be interpreted. We understand it to mean that countermeasures that would be ‘disproportionate in light of the fact that the subsidies dealt with under these provisions are prohibited’ could not be considered “appropriate” within the meaning of Article 4.10 of the SCM Agreement”.(2040) Further to analysing the dictionary meaning of the word “disproportionate” in footnote 9, the Arbitrators considered that footnote 9 “confirms that, while the notion of “appropriate countermeasures” is intended to ensure sufficient flexibility of response to a particular case, it is a flexibility that is distinctly bounded” and that “[t] hose bounds are set by the relationship of appropriateness”. In his view, “[t]hat appropriateness, in turn, entails an avoidance of disproportion between the proposed countermeasures and, as our analysis to this point has brought us, either the actual violating measure itself, the effects thereof on the affected Member, or both”.(2041)

1291.     In US — FSC (Article 22.6 — US), the Arbitrators further looked at the text of the final part of footnote 9 and considered that this text directed them “to consider the ‘appropriateness’ of countermeasures under Article 4.10 from this perspective of countering a wrongful act and taking into account its essential nature as an upsetting of the rights and obligations as between Members”.(2042) The Arbitrators further noted that that:

“[T]he negative formulation of the requirement under footnote 9 is consistent with a greater degree of latitude than a positive requirement may have entailed: footnote 9 clarifies that Article 4.10 is not intended to allow countermeasures that would be “disproportionate”. It does not require strict proportionality.”(2043)’(2044)

(iv) Arbitrators’ mandate pursuant to Article 4.11

1292.     In Brazil — Aircraft (Article 22.6 — Brazil), a case that dealt with Canada’s request for authorization to take “appropriate countermeasures” under Article 4.10 of the SCM Agreement, the Arbitrators described their task under Article 4.11 of the SCM Agreement. See paragraph 1260 above.

1293.     In US — FSC (Article 22.6 — US), the Arbitrator considered that their mandate required them to review whether the prevailing Member, in proposing certain measures to take in application of Article 4 of the SCM Agreement, had respected the parameters of what is permissible under that provision:

“[Articles 4.10 and 4.11 of the SCM Agreement] complement each other: the arbitrator’s mandate in relation to countermeasures concerning prohibited subsidies under Article 4 of the SCM Agreement is defined, quite logically, with reference to the notion embodied in the underlying provision in Article 4.10. The expression “appropriate countermeasures” defines what measures can be authorized in case of non-compliance, and our mandate requires us to review whether, in proposing certain measures to take in application of that provision, the prevailing Member has respected the parameters of what is permissible under that provision.

 

In doing this, we must aim at determining whether, in this particular case, the countermeasures proposed by the European Communities are ‘appropriate’.”(2045)

 

Footnotes:

1545. (footnote original) The non-conforming measure might also assume other forms: e.g., an executive or administrative practice actually carried out but not specifically mandated or authorized by statute or administrative regulation; or a “quasi-judicial” determination by an administrative body. Since the Argentine measures involved in this arbitration are not of these kinds, it is not necessary to examine the requirements of compliance where those other kinds of measures are concerned. back to text
1546. Award of the Arbitrator, Argentina — Hides and Leather (Article 21.3(c)), paras. 40-41. See also the Award of the Arbitrator, US — Offset Act (Byrd Amendment) (Article 213(c)), para. 49. back to text
1547. (footnote original) Award of the Arbitrator under Article 21.3(c) of the DSU, Indonesia — Automobile Industry, WT/DS54/15, supra, footnote 10 para. 23; and Award of the Arbitrator under Article 21.3(c) of the DSU, Canada — Pharmaceutical Patents, supra, footnote 9 para. 52. back to text
1548. Award of the Arbitrator, Argentina — Hides and Leather (Article 21.3(c)), para. 41. back to text
1549. Award of the Arbitrator, Japan — DRAMs (Korea) (Article 21.3(c)), para. 37. back to text
1550. Award of the Arbitrator, Colombia — Ports of Entry (Article 21.3(c)), para. 77. back to text
1551. Award of the Arbitrator, Chile — Alcoholic Beverages (Article 21.3 (c)), para. 38. As regards the concept of “flexibility” when considering the reasonable period of time, see also Awards of the Arbitrator, Canada — Patent Term, para. 64; US — 1916 Act, para. 39; US — Section 110(5) Copyright Act, para. 39. back to text
1552. Award of the Arbitrator, US — 1916 Act (Article 21.3(c)), para. 39. See also Awards of the Arbitrator on US — Section 110(5) Copyright Act (Article 21.3(c)), para. 49. back to text
1553. Award of the Arbitrator, Colombia — Ports of Entry (Article 21.3 (c)), para. 65. See also: Award of the Arbitrator, US — Stainless Steel (Mexico) (Article 21.3(c)), para. 42; Award of the Arbitrator, Brazil Retreaded Tyres (Article 21.3(c)), para. 48; Award of the Arbitrator, Japan — DRAMs(Korea) (Article 21.3(c)), para. 25 (referring to Award of the Arbitrator, EC — Chicken Cuts (Article 21.3(c)), para. 49, in turn referring to Award of the Arbitrator, Chile — Price Band System (Article 21.3(c)), para. 39; Award of the Arbitrator, EC — Tariff Preferences (Article 21.3(c)), para. 36; and Award of the Arbitrator, US — Offset Act (Byrd Amendment) (Article 21.3(c)), para. 64). back to text
1554. Award of the Arbitrator, US — Section 110(5) Copyright Act (Article 21.3(c)), para. 46. back to text
1555. Award of the Arbitrator, Chile — Price Band System (Article 21.3(c)), para. 43. back to text
1556. (footnote original) See also Articles 21.3, 21.5, 21.6, and 22.2 of the DSU. back to text
1557. (footnote original) Appellate Body Report, EC — Bananas III (Article 21.5 — Ecuador II) / EC — Bananas III (Article 21.5 — US), paras. 261-273; Panel Report, EC — Commercial Vessels, para. 8.4; Panel Report, Columbia — Ports of Entry, paras. 7.45-7.54. back to text
1558. Panel Report, Thailand — Cigarettes (Philippines), paras. 6.16-6.17. back to text
1559. Award of the Arbitrator, Indonesia — Autos (Article 21.3(c)), para. 24. See also Award of the Arbitrator, Argentina — Hides and Leather (Article 21.3(c)), para. 51. back to text
1560. Award of the Arbitrator, Chile — Alcoholic Beverages (Article 21.3(c)), para. 45. back to text
1561. (footnote original) Award of the Arbitrator, Chile — Alcoholic Beverages, para. 45 (emphasis added). back to text
1562. (footnote original) Award of the Arbitrator, Argentina — Hides and Leather, para. 51. back to text
1563. (footnote original) Award of the Arbitrator, Indonesia — Autos, para. 24. back to text
1564. (footnote original) Article 21.2 of the DSU. back to text
1565. Award of the Arbitrator, Chile — Price Band System (Article 21.3(c)), paras. 55-56. back to text
1566. Award of the Arbitrator, US — Offset Act (Byrd Amendment) (Article 21.3(c)), para. 81. back to text
1567. See, for example, Award of the Arbitrator, Indonesia — Autos (Article 21.3(c)), para. 24; Award of the Arbitrator, Chile — Alcoholic Beverages (Article 21.3(c)), para. 45; and Award of the Arbitrator, Argentina — Hides and Leather (Article 21.3(c)), para. 51. back to text
1568. Award of the Arbitrator, Chile — Price Band System (Article 21.3 (c)), paras. 55 and 56. See also Award of the Arbitrator, US — Offset Act (Byrd Amendment) (Article 21.3(c)), para. 81. back to text
1569. Award of the Arbitrator in EC — Tariff Preferences (Article 21.3(c)), para. 59. back to text
1570. (footnote original) I note that the Arbitrator in EC — Tariff Preferences identified, but did not decide, the issue of whether Article 21.2 might apply to developing country Members whose interests are affected by measures at issue in the dispute but which are not parties to the arbitration. (Award of the Arbitrator, para. 59) No such issue arises in this arbitration. back to text
1571. (footnote original) The Appellate Body has held, for example, that the “matter” referred to in Article 7 of the DSU “consists of two elements: the specific measures at issue and the legal basis of the complaint (or the claims)” (Appellate Body Report, Guatemala — Cement I, para. 72; emphasis original). back to text
1572. (footnote original) Article 21.1 stipulates that “[p]rompt compliance with recommendations or rulings of the DSB is essential in order to ensure effective resolution of disputes to the benefit of all Members.” back to text
1573. (footnote original) Paragraphs 7 and 8 of Article 21 provide as follows:
     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. back to text
1574. Award of the Arbitrator, US — Gambling (Article 21.3(c)), paras. 59-61. back to text
1575. (footnote original) Previous arbitrators have considered that the interests of an implementing developing country Member of the WTO fall within the scope of Article 21.2. (Award of the Arbitrator, Indonesia — Autos, para. 24; Award of the Arbitrator, Chile — Alcoholic Beverages, para. 45; and Award of the Arbitrator, Argentina — Hides and Leather, para. 51.) the Arbitrator in EC — Tariff Preferences stated explicitly that he was not required to resolve the question whether Article 21.2 also applied to interests of developing Member countries not parties to the arbitration. (Award of the Arbitrator, EC — Tariff Preferences, para. 59). the Arbitrator in US — Gambling stated explicitly that he was not required to resolve the question whether Article 21.2 applied to a complaining developing country Member. (Award of the Arbitrator, US — Gambling, para. 62.) back to text
1576. (footnote original) As noted in paragraph 104, infra, it is not necessary for me to decide whether Article 21.2 is applicable to developing countries that are not parties to the arbitration proceedings. back to text
1577. (footnote original) Brazil’s written submission, para. 137; European Communities statement at the oral hearing and response to questioning at the oral hearing; Thailand’s written submission, para. 74. back to text
1578. (footnote original) Award of the Arbitrator, US — Gambling, para. 59. back to text
1579. (footnote original) For instance, Article 3.12 also explicitly refers to a situation in which “a complaint based on any of the covered agreements is brought by a developing country Member against a developed country Member”. Article 12.10 refers to “consultations involving a measure taken by a developing country Member” and a “complaint against a developing country Member”. back to text
1580. Award of the Arbitrator, EC — Export Subsidies on Sugar (Article 21.3(c)), para. 99. back to text
1581. Award of the Arbitrator, Canada — Pharmaceutical Patents (Article 21.3(c)), para. 45. back to text
1582. Award of the Arbitrator, US — Offset Act (Byrd Amendment) (Article 21.3(c)), para. 40. back to text
1583. The United States referred to US — 1916 Act and US — Section 110(5) Copyright Act where the arbitrators set the reasonable period at 10 months and 12 months, respectively. The United States on 12 July 2001 asked the DSB to modify the reasonable period of time determined by the arbitrators in both cases, that were due to expire, respectively, on 26 July 2001 and 27 July 2001, so that the modified periods would instead end on 31 December 2001, or on the date on which the then current 2001 session of the United States Congress adjourned, whichever was earlier. At its meeting of 24 July 2001, the DSB noted and agreed to the United States’ request. In both instances, the complaining parties — the European Communities and Japan in US — 1916 Act; and the European Communities in US — Section 110(5) of the US Copyright Act — having previously reached some understanding with the United States on the matter, did not oppose the requests of the United States. Award of the Arbitrator, US — Hot-Rolled Steel (Article 21.3(c)), para. 39. back to text
1584. Award of the Arbitrator, US — Hot-Rolled Steel (Article 21.3(c)), para. 39. back to text
1585. Award of the Arbitrator, US — Zeroing (Japan) (Article 21.3(c)), para. 4. back to text
1586. Cases in which the parties reached agreement on the reasonable period of time prior to the circulation of the Article 21.3(c) award are excluded. back to text
1587. (footnote original) By contrast, in a non-violation case, brought under Article XXIII: 1(b) of the GATT 1994, Article 26.1(b) of the DSU states explicitly that “there is no obligation to withdraw”. back to text
1588. Award of the Arbitrator, EC — Hormones (Article 21.3(c)), para. 38. See also the Awards of the Arbitrator, Australia — Salmon (Article 21.3(c)), para. 35; Korea — Alcoholic Beverages (Article 21.3(c)), para. 45, where the Arbitrator indicated that “choosing the means of implementation is, and should be, the prerogative of the implementing Member”; Canada — Pharmaceutical Patents (Article 21.3(c)), paras. 40; Chile — Alcoholic Beverages (Article 21.3(c)), para. 42, where the Arbitrator confirmed that “[t]he choice and the timing of the detailed operating steps in enacting a new law are properly left to the Member concerned”; Chile — Price Band System (Article 21.3(c)), para. 32; US — Offset Act (Byrd Amendment) (Article 21.3(c)), para. 48; EC — Tariff Preferences (Article 21.3(c)), para. 30; US — Gambling (Article 21.3(c)), para. 33. back to text
1589. Award of the Arbitrator, US — Hot-Rolled Steel (Article 21.3(c)), para. 30. back to text
1590. (footnote original) Award of the Arbitrator, US — Hot-Rolled Steel, para. 30. back to text
1591. Award of the Arbitrator, Chile — Price Band System (Article 21.3(c)), para. 37. back to text
1592. (footnote original) See Award of the Arbitrator, Canada — Pharmaceutical Patents, paras. 41 — 43; Award of the Arbitrator, Chile — Price Band System, para. 32; Award of the Arbitrator, EC — Tariff Preferences, para. 30; Award of the Arbitrator, US — Oil Country Tubular Goods Sunset Reviews, para. 26; Award of the Arbitrator, US — Gambling, para. 33; and Award of the Arbitrator, EC — Export Subsidies on Sugar, para. 69. back to text
1593. (footnote original) Award of the Arbitrator, Chile — Price Band System, para. 34; Award of the Arbitrator, Canada — Pharmaceutical Patents, para. 47; Award of the Arbitrator, EC — Tariff Preferences, para. 26; Award of the Arbitrator, US — Oil Country Tubular Goods Sunset Reviews, para. 25; and Award of the Arbitrator, EC — Export Subsidies on Sugar, para. 61. back to text
1594. (footnote original) Award of the Arbitrator, Chile — Price Band System, para. 39; Award of the Arbitrator, EC — Tariff Preferences, para. 36; Award of the Arbitrator, US — Offset Act (Byrd Amendment), para. 64. back to text
1595. (footnote original) Award of the Arbitrator, Korea — Alcoholic Beverages, para. 42; Award of the Arbitrator, Chile — Price Band System, para. 51; Award of the Arbitrator, US — Offset Act (Byrd Amendment), para. 74. back to text
1596. Award of the Arbitrator, EC — Chicken Cuts (Article 21.3(c)), para. 49. back to text
1597. (footnote original) See, for example, Award of the Arbitrator, EC — Hormones, para. 38; Award of the Arbitrator, Australia — Salmon, para. 35; Award of the Arbitrator, Korea — Alcoholic Beverages, para. 45; Award of the Arbitrator, Chile — Price Band System, para. 32; Award of the Arbitrator, US — Offset Act (Byrd Amendment), para. 48; Award of Arbitrator, EC — Tariff Preferences, para. 30; and Award of the Arbitrator, US — Oil Country Tubular Goods Sunset Reviews, para. 26. back to text
1598. Award of the Arbitrator, US — Gambling (Article 21.3(c)), para. 33. back to text
1599. Award of the Arbitrator, Colombia — Ports of Entry (Article 21.3 (cf), para. 64. back to text
1600. Award of the Arbitrator, EC — Export Subsidies on Sugar (Article 21.3(c)), para. 69. See also, the Award of the Arbitrator, EC — Chicken Cuts (Article 21.3(c)), para. 55. back to text
1601. (footnote original) Previous arbitrators agree. See Award of the Arbitrator, EC — Hormones, paras. 39 — 42; on EC — Tariff Preferences, para. 31; and on EC — Export Subsidies on Sugar, para. 69. back to text
1602. (footnote original) In this respect, I note my disagreement with the European Communities’ contention that a “particular circumstance” I should take into account here is the fact that “scope [of the relevant WTO provisions in this dispute is] determined by the actions and decisions of… the WCO.” (European Communities’ submission, para. 35) As the Panel and the Appellate Body made clear in their Reports, the Harmonized System — which is negotiated under the auspices of the WCO — does not “determine” the scope of heading 02.10 of the European Communities’ schedule of concessions, but rather, serves as context for the interpretation of the schedule. Both the Panel and the Appellate Body made it abundantly clear in their Reports that they were interpreting the European Communities’ Schedule of Concessions, and not the Harmonized System. (Appellate Body Report, para. 199; Panel Reports, para 7.189). back to text
1603. Award of the Arbitrator, EC — Chicken Cuts (Article 21.3(c)), para. 56. back to text
1604. Ibid, paras. 59 and 62 back to text
1605. Award of the Arbitrator, EC — Hormones (Article 21.3(c)), paras. 25-26. See also the Awards of the Arbitrator, Chile — Alcoholic Beverages (Article 21.3(c)), para. 38; Canada — Pharmaceutical Patents (Article 21.3(c)), para. 47; US — 1916 Act (Article 21.3(c)), para. 32; Chile — Price Band System (Article 21.3(c)), para. 34; US — Offset Act (Byrd Amendment) (Article 21.3(c)), para. 42; EC — Tariff Preferences (Article 21.3(c)), para. 26; US — Oil Country Tubular Goods Sunset Reviews (Article 21.3(c)), para. 25; EC — Export Subsidies on Sugar (Article 21.3(c)), para. 68; and EC — Chicken Cuts (Article 21.3(c)), para. 49; Award of the Arbitrator, Brazil — Retreaded Tyres (Article 21.3(c)) para. 46 back to text
1606. Award of the Arbitrator, Canada — Pharmaceutical Patents (Article 21.3(c)), para. 52. back to text
1607. Award of the Arbitrator, Argentina — Hides and Leather (Article 21.3(c)), para. 49. back to text
1608. (footnote original) With respect to the overriding principle of “reasonableness” I find it useful, like the Arbitrator in US — Hot-Rolled Steel (para. 25), to refer to the Appellate Body’s elaboration of the meaning of the word “reasonable”, albeit in another context. In its Report in US — Hot-Rolled Steel, the Appellate Body stated that the word “reasonable”, albeit in another context. In its Report in US — Hot-Rolled Steel, the Appellate Body stated that the word “reasonable”:
     … 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 in the concept of “reasonableness”, and in a manner that allows for account to be taken of the particular circumstances of each case.
     (Appellate Body Report, paras. 84-85). back to text
1609. Award of the Arbitrator, US — Gambling (Article 21.3(c)), para. 44. back to text
1610. (footnote original) Award of the Arbitrator, Chile — Price Band System (Article 21.3(c)), para. 34 (quoting Award of the Arbitrator, US — 1916 Act, para. 32). See also Award of the Arbitrator, EC — Hormones, para. 26; Award of the Arbitrator, Canada — Pharmaceutical Patents, para. 47; Award of the Arbitrator, EC — Tariff Preferences, para. 26; and Award of the Arbitrator, US — Oil Country Tubular Goods Sunset Reviews, para. 25. back to text
1611. Award of the Arbitrator, EC — Export Subsidies on Sugar (Article 21.3(c)), para. 61. See also Award of the Arbitrator, Brazil — Retreaded Tyres (Article 21.3(c)) paras. 48 and 71; Award of the Arbitrator, US — Stainless Steel (Mexico) (Article 21.3(c)), para. 41 back to text
1612. Award of the Arbitrator, Brazil — Retreaded Tyres (Article 21.3(c)), para. 71. back to text
1613. (original footnote) Appellate Body Report [on US — Hot-Rolled Steel], paras. 84-85. back to text
1614. Award of the Arbitrator, US — Hot-Rolled Steel (Article 21.3(c)), paras. 25-26. See also the Award of the Arbitrator, US — Offset Act (Byrd Amendment) (Article 21.3(c)), para. 44; and US — Gambling (Article 21.3(c)), para. 44. back to text
1615. Award of the Arbitrator, US — Offset Act (Byrd Amendment) (Aticle 21.3(c)), para. 42. back to text
1616. Award of the Arbitrator, Chile — Alcoholic Beverages (Article 21.3 (c)), para. 39. back to text
1617. Award of the Arbitrator, EC — Hormones (Article 21.3(c)), para. 25. back to text
1618. Award of the Arbitrator, Canada — Pharmaceutical Patents (Article 21.3(c)), para. 45. See also Award of the Arbitrator, Chile — Alcoholic Beverages (Article 21.3(c)), para. 39. In US — Hot-Rolled Steel (Article 21.3(c)), the Arbitrator further indicated that he ”… d[id] not see any basis for reading the 15-month guideline as establishing a fixed maximum or ‘outer limit’ for ‘a reasonable period of time’. Neither, of course, does the 15-month guideline constitute a floor or ‘inner limit’ of’ a reasonable period of time’”. Award of the Arbitrator, US — Hot-Rolled Steel (Article 21.3(c)), para. 25. See also the Awards of the Arbitrator, Chile — Price Band System (Article 21.3(c)), para. 33; and US — Offset Act (Byrd Amendment) (Article 21.3(c)), para. 41. back to text
1619. Award of the Arbitrator, EC — Bananas III (Article 21.3(c)), para. 18. See also the Awards of the Arbitrator, Australia — Salmon (Article 21.3(c)), para. 30; and Canada — Auto Pact (Article 21.3(c)), para. 39. back to text
1620. Award of the Arbitrator, US — Offset Act (Byrd Amendment) (Article 21.3(c)), para. 41. back to text
1621. Award of the Arbitrator, Japan — Alcoholic Beverages II (Article 21.3(c)), para. 11. back to text
1622. Award of the Arbitrator, Canada — Pharmaceutical Patents (Article 21.3(c)), paras. 48 and 52. back to text
1623. Award of the Arbitrator, US — Section 110(5) Copyright Act (Article 21.3(c)), para. 46. back to text
1624. Award of the Arbitrator, Chile — Price Band System (Article 21.3 (c)), para. 43. back to text
1625. Award of the Arbitrator, EC — Chicken Cuts (Article 21.3(c)), para. 66. back to text
1626. Award of the Arbitrator, Colombia — Ports of Entry (Article 21.3 (c)), para. 79, back to text
1627. (footnote original) See Award of the Arbitrator, Canada — Pharmaceutical Patents, para. 49; Award of the Arbitrator, Chile — Price Band System, para. 38; and Award of the Arbitrator, US — Offset Act (Byrd Amendment), para. 57. back to text
1628. (footnote original) See, for example, Award of the Arbitrator, Korea — Alcoholic Beverages, para. 45; Award of the Arbitrator, US — 1916 Act, para. 36; Award of the Arbitrator, Chile — Price Band System, para. 32; Award of the Arbitrator, US — Offset Act (Byrd Amendment), para. 48; and Award of the Arbitrator, EC — Tariff Preferences, para. 30. back to text
1629. Award of the Arbitrator, US — Oil Country Tubular Goods Sunset Reviews (Article 21.3(c)), para. 26. back to text
1630. (footnote original) See, for example, Award of the Arbitrator, Australia — Salmon, para. 38; Award of the Arbitrator, US — Section 110(5) Copyright Act, para. 34; Award of the Arbitrator, Canada — Pharmaceutical Patents, para. 49; Award of the Arbitrator, Canada — Patent Term, para. 41; Award of the Arbitrator, Chile — Price Band System, para. 38; Award of the Arbitrator, US — Offset Act (Byrd Amendment), para. 57; and Award of the Arbitrator, US — Oil Country Tubular Goods Sunset Reviews, para. 26. back to text
1631. Award of the Arbitrator, US — Gambling (Article 21.3(c)), para. 35. back to text
1632. (footnote original) See, for example, Award of the Arbitrator, Canada — Pharmaceutical Patents, para. 49; Award of the Arbitrator, US — Section 110(5) Copyright Act, para. 34; Award of the Arbitrator, Australia — Salmon, para. 38; Award of the Arbitrator, Canada — Patent Term, para. 41; Award of the Arbitrator, Chile — Price Band System, para. 38. back to text
1633. (footnote original) See, for example, Award of the Arbitrator, Chile — Price Band System, para. 38.
     I agree with the observation of previous arbitrators that implementation through legislation is likely to require a longer time for implementation than administrative rulemaking or other exclusively Executive action, (emphasis added) (footnote omitted). back to text
1634. Award of the Arbitrator, EC — Chicken Cuts (Article 21.3(c)), para. 67, See also Award of the Arbitrator, Brazil — Retreaded Tyres (Article 21.3(c)) para 78, where it was noted that an arbitrator under Article 21.3 (c) may reasonably expect that implementation would ordinarily be achieved by means entirely within the implementing Member’s law making procedures. The Arbitrator found that the recommendations and rulings of the DSB were addressed specifically to Brazil and not to its MERCOSUR partners. Therefore the measure at issue, Portaria SECEX 14/2004, was found to be a domestic regulatory act adopted by a subdivision of the Brazilian Federal Ministry of Development, Industry and Foreign Trade and there was no need for consultation and negotiations with MERCOSUR partners in the process of adopting any new law. back to text
1635. Award of the Arbitrator, US — Stainless Steel (Mexico) (Article 21.3(c)), para. 53. See also Award of the Arbitrator, Japan — DRAMs (Korea) (Article 21.3(c)), paras. 48 and 52, where Japan contented that it needed to modify its laws to make them WTO consistent and this involved carrying out investigations. The Arbitrator was of the opinion that the only relevant action that needed to be taken was administrative, thereby determining that the reasonable time for implementation was eight months and two weeks, which period was shorter than that requested by Japan. The Arbitrator recognized that decision-making by the Cabinet was mandatory under Japanese law in order for a countervailing duty order to take effect and enter into force. He also noted that there are no specified time-limits in Japan’s legislation for the steps in this process, however, the same could be expedited in relevant circumstances, like in this case. back to text
1636. Award of the Arbitrator, Canada — Pharmaceutical Patents (Article 21.3(c)), paras. 49-51. See also the Award of the Arbitrator, US — Offset Act (Byrd Amendment) (Article 21.3(c)), para. 57; US — Gambling (Article 21.3(c)), paras. 45 — 48; and EC — Export Subsidies on Sugar (Article 21.3(c)), para. 88. back to text
1637. Award of the Arbitrator, US — Gambling (Article 21.3(c)), para. 46. back to text
1638. Award of the Arbitrator, US — Stainless Steel (Mexico) (Article 21.3(c)), paras. 46-47. back to text
1639. Award of the Arbitrator, Chile — Price Band System (Article 21.3 (c)), para. 48. On most occasions, however, arbitrators have typically refused to treat mere contentiousness or political sensitivity as a factor warranting a longer period of time for implementation. See, for example, the Awards of the Arbitrator on Canada — Pharmaceutical Patents, para. 60; Canada — Patent Term, para. 58; US — Offset Act (Byrd Amendment), para. 61; EC — Tariff Preferences (Article 21.3(c)), para. 56. back to text
1640. Award of the Arbitrator, Canada — Pharmaceutical Patents (Article 21.3(c)), para. 60. back to text
1641. Award of the Arbitrator, US — Section 110(5) Copyright Act (Article 21.3(c)), para. 42. back to text
1642. Award of the Arbitrator, Canada — Patent Terms (Article 21.3(c)), para. 58. back to text
1643. Award of the Arbitrator, US — Offset Act (Byrd Amendment) (Article 21.3(c)), paras. 60, 61 and 62. back to text
1644. Award of the Arbitrator, EC — Tariff Preferences (Article 21.3(c)), para. 56. back to text
1645. (footnote original) See Award of the Arbitrator, Canada — Patent Term, para. 58; and Award of the Arbitrator, US — Offset Act (Byrd Amendment), para. 61. back to text
1646. Award of the Arbitrator, EC — Export Subisidies on Sugar (Article 21.3(c)), para. 90. back to text
1647. (footnote original) I note that the Award of the Arbitrator in Japan — Taxes on Alcoholic Beverages WT/DS8/15, WT/DS10/15, WT/DS11/13, 14 February 1997 rejected the argument that adverse effects on producers (and consumers) of the products involved constitute “particular circumstances” that should be taken into account in determining the reasonable period of time under Article 21.3 (c) of the DSU. back to text
1648. Award of the Arbitrator, Indonesia — Autos (Article 21.3(c)), para. 23. See also Award of the Arbitrator, Canada — Pharmaceutical Patents (Article 21.3(c)), para. 52; Award of the Arbitrator, Argentina — Hides and Leather (Article 21.3(c)), para. 41; and Award of the Arbitrator, EC — Export Subsidies on Sugar (Article 21.3(c)), para. 92. back to text
1649. Award of the Arbitrator, Canada — Pharmaceutical Patents (Article 21.3(c)), para. 52. back to text
1650. Award of the Arbitrator, Indonesia — Autos (Article 21.3(c)), para. 24. back to text
1651. Award of the Arbitrator, Argentina — Hides and Leather (Article 21.3(c)), para. 51. back to text
1652. (footnote original) See also Award of the Arbitrator, Canada — Patent Term, para. 48. back to text
1653. (footnote original) See also Award of the Arbitrator, Canada — Patent Term, para. 48. back to text
1654. Award of the Arbitrator, US — Offset Act (Byrd Amendment) (Article 21.3(c)), paras. 79-80. back to text
1655. Award of the Arbitrator, US — Oil Country Tubular Goods Sunset Reviews (Article 21.3(c)), para. 47-48. back to text
1656. Award of the Arbitrator, US — Oil Country Tubular Goods Sunset Reviews (Article 21.3(c)), para. 52. back to text
1657. Award of the Arbitrator, US — Gambling (Article 21.3(c)), para. 60. back to text
1658. Award of the Arbitrator, US — Gambling (Article 21.3(c)), paras. 62 — 63. back to text
1659. Award of the Arbitrator, EC — Export Subisidies on Sugar (Article 21.3(c)), paras. 99-101. back to text
1660. Award of the Arbitrator, EC — Chicken Cuts (Article 21.3(c)), paras. 81-82. back to text
1661. Award of the Arbitrator, Colombia — Ports of Entry (Article 21.3 (c)), para. 106 back to text
1662. Award of the Arbitrator, US — Offset Act (Byrd Amendment) (Article 21.3(c)), para. 69. back to text
1663. Award of the Arbitrator, US — Gambling (Article 21.3(c)), para. 52. back to text
1664. Award of the Arbitrator, Korea — Alcoholic Beverages (Article 21.3 (c)), para. 47. back to text
1665. Award of the Arbitrator, EC — Bananas III (Article 21.3(c)), para. 9. back to text
1666. Award of the Arbitrator, EC — Bananas III (Article 21.3(c)), para. 19. The Arbitrator concluded, in paragraph 20, that the reasonable period of time should be “from 25 September 1997 to 1 January 1999”. In EC — Tariff Preferences (Article 21.3(c)), the Arbitrator, in reference to EC — Bananas III (Article 21.3(c)), regarded the administrative practice of the European Communities pertaining to advance publication of tariff changes and the date on which such changes take effect, as a relevant factor in determining the reasonable period of time for implementation. Award of the Arbitrator, EC — Tariff Preferences (Article 21.3(c)), para. 51. back to text
1667. Award of the Arbitrator, EC — Tariff Preferences (Article 21.3(c)), paras. 52-54. back to text
1668. Award of the Arbitrator, Japan — Alcoholic Beverages II (Article 21.3(c)), para. 27. See also the Award of the Arbitrator, EC — Bananas III (Article 21.3(c)), paras. 6-10. back to text
1669. (footnote original) I recall that the Arbitrator in US — Section 110 (5) Copyright Act stated that, although it is an “important issue” whether a Member decides to “simply repeal” a measure or whether “some other approach will be utilized”, he failed to see how this issue would
     … add any additional time to the legislative process, as the content of the legislation effecting implementation is precisely the issue that Congress will decide through its normal procedures, (original emphasis)
     (Award of the Arbitrator, US — Section 110(5) Copyright Act, para. 42) back to text
1670. Award of the Arbitrator, US — Offset Act (Byrd Amendment) (Article 21.3(c)), para. 59. back to text
1671. Award of the Arbitrator, EC — Hormones (Article 21.3(c)), paras. 38-39. See also the Award of the Arbitrator, Australia — Salmon, para. 36. back to text
1672. Award of the Arbitrator, Canada — Autos (Article 21.3(c)), para. 55. back to text
1673. Award of the Arbitrator, EC — Tariff Preferences (Article 21.3(c)), para. 31. back to text
1674. Award of the Arbitrator, Colombia — Ports of Entry (Article 21.3 (c)), para. 64. back to text
1675. Award of the Arbitrator, EC — Chicken Cuts (Article 21.3(c)), paras. 55-56. back to text
1676. Award of the Arbitrator, Canada — Patent Term (Article 21.3(c)), para. 60. back to text
1677. Award of the Arbitrator, EC — Hormones (Article 21.3(c)), para. 27. back to text
1678. (footnote original) Supra, footnote 11, para. 26. (Award of the Arbitrator, EC — Hormones (Article 21.3(c)), para. 26). back to text
1679. Award of the Arbitrator, Canada — Pharmaceutical Patents (Article 21.3(c)), para. 47. See also the Awards of the Arbitrator, US — 1916 Act (Article 21.3(c)), para. 32; US — Offset Act (Byrd Amendment) (Article 21.3(c)), para. 44; and Award of the Arbitrator, US — Gambling (Article 21.3(c)), para. 31. back to text
1680. Award of the Arbitrator, EC — Tariff Preferences (Article 21.3(c)), para. 27. back to text
1681. Award of the Arbitrator, EC — Chicken Cuts (Article 21.3(c)), para. 52. back to text
1682. Award of the Arbitrator, Colombia — Ports of Entry (Article 21.3 (c)), para. 67. back to text
1683. Award of the Arbitrator, EC — Export Subisidies on Sugar (Article 21.3(c)), para. 97. back to text
1684. Appellate Body Report, Brazil — Aircraft, para. 192. back to text
1685. Award of the Arbitrator, Japan — Alcoholic Beverages II (Article 21.3(c)), para. 3. back to text
1686. (footnote original) The Panel’s explanation of the three federal laws is set out in paragraphs 6.360 to 6.380 of the Panel Report, and the Appellate Body’s treatment of the three statutes is found in paragraphs 257-265 of the Appellate Body Report. With respect to the Wire Act, the Panel observed that it prohibits “the use of a wire communication facility for, inter alia, the transmission in interstate or foreign commerce of bets or wagers”. (Panel Report, para. 6.362. See also Appellate Body Report, para. 259) As for the Travel Act, the Panel stated that it prohibits:
     … gambling activity that entails the supply of gambling and betting services by ‘mail or any facility’ to the extent that such supply is undertaken by a “business enterprise involving gambling” that is prohibited under state law and provided that the other requirements in subparagraph (a) of the Travel Act have been met.
     (Panel Report, para. 6.370. See also Appellate Body Report, para. 261)
     Lastly, the Panel explained that the IGBA prohibits:
     … gambling activity that entails the conduct, finance, management, supervision, direction or ownership of all or part of such a business to the extent that such supply is undertaken by a “gambling business” that is prohibited under state law and provided that the other requirements in sub-paragraph (b)(1) of the Illegal Gambling Business Act have been met.
     (Panel Report, para. 6.377. See also Appellate Body Report, para. 263). back to text
1687. (footnote original) Essentially, Antigua is asking me to determine two separate reasonable periods of time for the United States to implement the DSB’s recommendations and rulings regarding the Wire Act, two separate reasonable periods of time for the United States to implement the DSB’s recommendations and rulings regarding the Travel Act, and two separate reasonable periods of time for the United States to implement the DSB’s recommendations and rulings regarding the IGBA. back to text
1688. (footnote original) In Award of the Arbitrator, US — Hot-Rolled Steel, the Arbitrator determined a single reasonable period of time of 15 months (para. 40); and in Award of the Arbitrator, US — 1916 Act, para. 32. See also Award of the Arbitrator, EC — Hormones, para. 26; Award of the Arbitrator, Canada — Pharmaceutical Patents, para. 47; Award of the Arbitrator, EC — Tariff Preferences, para. 26; and on US — Oil Country Tubular Goods Sunset Reviews, para. 25. back to text
1689. Award of the Arbitrator, US — Gambling (Article 21.3(c)), para. 41. back to text
1690. Award of the Arbitrator, Colombia — Ports of Entry (Article 21.3 (c)), para. 108. back to text
1691. Panel Report, US — Section 129(c)(1) URAA, paras. 3.90 and 3.93. back to text
1692. Panel Report, US — Section 129(c)(1) URAA, para. 3.91. back to text
1693. Cases in which the parties reached agreement on the reasonable period of time prior to the circulation of the Article 21.3(c) award are excluded. back to text
1694. This table excludes cases where no reasonable period of time for implementation was determined. Such cases include those where the panel and/or the Appellate Body found that the measures issue are not inconsistent with the covered agreements. This table also omits several cases where information necessary to calculate the time-period under Article 21.4 is not available as of 30 September 2011. back to text
1695. Appellate Body Report, Canada — Aircraft (Article 21.5 — paras. 40-42. See also Appellate Body Reports, Mexico — Corn Syrup (Article 21.5 — US), paras. 78 and 80, and EC — Bed Linen (Article 21.5 — India), para. 79. back to text
1696. Appellate Body Report, US — Shrimp (Article 21.5 — Malaysia), paras. 86-87. back to text
1697. (footnote original) Appellate Body Report, Canada — Aircraft (Article 21.5 — Brazil), para. 40. back to text
1698. (footnote original) Ibid., paras. 40-41. The panels in EC — Bananas III (Article 21.5 — Ecuador) (paras. 6.8-6.9) and Australia — Salmon (Article 21.5 — Canada) (para. 7.10.9) reached essentially the same conclusion. back to text
1699. (footnote original) Appellate Body Report, Canada — Aircraft (Article 21.5 — Brazil), para. 41. back to text
1700. (footnote original) Ibid. back to text
1701. (footnote original) As we put it In Canada — Aircraft (Article 21.5 — Brazil):
     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.
     (Appellate Body Report, Canada — Aircraft (Article 21.5 — Brazil), para. 41) We defined the function of Article 21.5 proceedings in the same vein in our Report In US — Shrimp (Article 21.5 — Malaysia) (para. 87). back to text
1702. Appellate Body Report, EC — Bed Linen (Article 21.5), para. 79. back to text
1703. (footnote original) Appellate Body Report, US — Shrimp, (Article 21.5 — Malaysia), para. 87. back to text
1704. (footnote original) Both participants agree that the effects of measures taken by an implementing Member can be relevant to determining whether or not that measure may be examined in proceedings under Article 21.5 of the DSU. (Participants’ responses to questioning at the oral hearing) back to text
1705. Appellate Body Report, US — Softwood Lumber TV (Article 21.5), paras. 67 — 69. back to text
1706. (footnote original) Appellate Body Report, Mexico — Corn Syrup (Article 21.5 — US), para. 121. back to text
1707. (footnote original) The Appellate Body has confirmed the existence of such limits in several cases. For example, In US — Shrimp (Article 21.5 — Malaysia), the Appellate Body found that the panel had committed no error in refusing to “re-examine, for WTO-consistency, even those aspects of a new measure that were part of a previous measure that was the subject of a dispute, and were found by the Appellate Body to be WTO-consistent… and that remain unchanged as part of the new measure.” (Appellate Body Report, US — Shrimp (Article 21.5 — Malaysia), para. 89 (emphasis original)) The Appellate Body has also found that a complaining party may not ask an Article 21.5 panel to reexamine certain matters (“the particular claim and the specific component of a measure that is the subject of that claim”) when the original panel made findings in respect of these matters and those findings were not appealed. (Appellate Body Report, EC — Bed Linen (Article 21.5 — India), para. 92-93) See also Appellate Body Report, Mexico — Corn Syrup (Article 21.5 — US), paras. 121-122) However, when the measure taken to comply is a new measure, different from the measure at issue in the original proceedings, “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 original measure”. (Appellate Body Report, Canada — Aircraft (Article 21.5 — Brazil), para. 41) See also the discussion in Appellate Body Report, EC — Bed Linen (Article 21.5 — India), paras. 88-89. back to text
1708. Appellate Body Report, US — Softwood Lumber IV (Article 21.5), para. 66-72. back to text
1709. (footnote original) Appellate Body Report, US — Softwood Lumber IV (Article 21.5 — Canada), para. 68; Appellate Body Report, US — FSC (Article 21.5 — EC II), para. 61. The Appellate Body has already recognized certain circumstances in which the scope of proceedings under Article 21.5 may be limited by the scope of the original proceedings. For example, a party cannot make the same claim of inconsistency against the same measure (or component of a measure) in an Article 21.5 proceeding if the original panel and Appellate Body found the measure to be consistent with the obligation at issue (Appellate Body Report, US — Shrimp (Article 21.5 — Malaysia), paras. 89-99), or if the original panel found that the complaining party had not made out its claim with respect to the measure (or component of a measure). (Appellate Body Report, EC — Bed Linen (Article 21.5 — India), paras. 92-93 and 99) Similarly, a party may not, in proceedings under Article 21.5 of the DSU, seek to have the Appellate Body “revisit the original Panel Report” when that report was not appealed. (Appellate Body Report, Mexico — Corn Syrup (Article 21.5 — US), para. 78) back to text
1710. (footnote original) At pages 6-7 of the Section 129 Determination, the USITC stated:
     We adopt from the original Commission report our prior views and findings in their entirety regarding domestic like product, domestic industry and related parties, use of publicly available information, conditions of competition, cross-cumulation, Maritime Provinces, effects of subsidies or dumping, and consideration of the nature of the subsidy and its likely trade effects, (footnote omitted) back to text
1711. (footnote original) Appellate Body Report, Mexico — Corn Syrup (Article 21.5 — US), para. 121. back to text
1712. (footnote original) We would have concerns, for example, if an Article 21.5 panel were to see no problem in a particular inference drawn by an investigating authority in a redetermination in circumstances where the original panel found that such inference lacked proper support and the inference drawn in the redetermination was based on the same evidence and explained in the same way as in the original determination. back to text
1713. Appellate Body Report, US — Softwood Lumber VI (Article 21.5 — Canada), paras. 102-103. back to text
1714. (footnote original) Appellate Body Report, Mexico — Anti-Dumping Investigation of High Fructose Com Syrup (HFCS) from the United States, Recourse to Article 21.5 of the DSU by the United States (“Mexico — Com Syrup (Article 21.5 — US)”), WT/DS132/AB/RW, adopted 21 November 2001, DSR 2001:XIII, 6675, at para. 109. back to text
1715. Panel Report, US — Softwood Lumber VI (Article 21.5 — Canada), paras. 7.12. back to text
1716. (footnote original) Appellate Body Report, Guatemala — Cement I, paras. 72 and 76, interpreting Article 7 of the DSU. back to text
1717. Appellate Body Report, EC — Bed Linen (Article 21.5), para. 78. back to text
1718. (footnote original) Appellate Body Report, US — Oil Country Tubular Goods Sunset Reviews (Article 21.5 — Argentina), para. 184. back to text
1719. Appellate Body Report, US — Upland Cotton, para. 206. back to text
1720. (footnote original) We recognize that, where it is alleged that there exist no “measures taken to comply”, a panel may find that there is no new measure. back to text
1721. Appellate Body Report, Canada — Aircraft (Article 21.5 — Brazil), para. 36. See also Appellate Body Report, Mexico — Corn Syrup (Article 21.5 — US), paras. 78-79. back to text
1722. Appellate Body Report, EC — Bed Linen (Article 21.5 — India), para. 78. back to text
1723. That same claim was dismissed by the original panel, and India did not appeal that finding. back to text
1724. Appellate Body Report, EC — Bed Linen (Article 21.5 — India), para. 81. back to text
1725. Appellate Body Report, EC — Bed Linen (Article 21.5 — India), paras. 87-89. back to text
1726. Panel Report, US — Softwood Lumber IV (Article 21.5 — Canada), para. 4.2. back to text
1727. (footnote original) We refer to those import entries for which the Final Determination set the cash deposit rate, and the First Assessment Review finalized the duty assessment. See, para. 4.41, supra. back to text
1728. Panel Report, US — Softwood Lumber IV (Article 21.5 — Canada), paras. 4.38-4.48. back to text
1729. (footnote original) Shorter Oxford English Dictionary, 5th edn, W. R. Trumble, A. Stevenson (eds) (Oxford University Press, 2002), Vol.2, p. 3170. back to text
1730. (footnote original) Ibid., Vol. 2, p. 3284. back to text
1731. (footnote original) United States’ appellant’s submission, para. 30 (quoting The New Shorter Oxford English Dictionary, supra, footnote 37, p. 461 (original italics) (Exhibit US-15 submitted by the United States to the Panel)). back to text
1732. Appellate Body Report, US — Softwood Lumber TV (Article 21.5 — Canada), para. 66. back to text
1733. Panel Report, EC — Bed Linen (Article 21.5 — India), para. 6.53. back to text
1734. Appellate Body Report, EC — Bed Linen (Article 21.5 — India), paras. 85-86. back to text
1735. (footnote original) See France Section 129 determination, footnote 208 above, p. 12: UK Section 129 determination, footnote 208 above, p. 9; Spain Section 129 determination, footnote 208 above, p. 9. back to text
1736. (footnote original) We note that in the Anti-Dumping Agreement, the “the magnitude of the margin of dumping” is listed as an injury factor in Article 3.4. There is, however, no corresponding provision on the amount or rate or margin of subsidization in Article 15.4 of the SCM Agreement. Thus, while the amount of subsidization could be considered in both an original injury determination and in a likelihood-of-injury determination, this Panel understands that the failure to do so does not violate any specific provision of the SCM Agreement. Even assuming that the rate of subsidization is relevant to the likelihood-of-injury analysis, the USDOC conducted its affirmative re-determination on an order-wide basis and without recalculating the rate of subsidization is unchanged and has no effect on the volume aspects of the likelihood-of-injury determination.
     As to the potential implication of a reduced amount of subsidized imports, this Panel considers that it is only relevant if it is clear that a change in the subsidy benefit to BS pic and Aceralia necessarily affected the volume of likely subsidized imports and only where it is necessary as a legal matter to make company-specific determinations of the likelihood of subsidization. By analogy to Article 11.3 of the Anti-Dumping Agreement, however, there is no such obligation in Article 21.3 of the SCM Agreement. In the absence of company-specific determinations of the likelihood of subsidization, the USDOCs order-wide-based conclusion that subsidization is likely to continue or recur seems to apply to the entire volume of likely imports, as no imports were explicitly excluded. back to text
1737. Panel Report, US — Countervailing Measures on Certain EC Products (Article 21.5 — EC), paras. 7.20-7.31 back to text
1738. (footnote original) Article 19.1 of the DSU mandates the recommendations that panels and the Appellate Body are to make in the event of a finding that a measure is inconsistent with a covered agreement: they “shall recommend that the Member concerned bring the measure into conformity with that agreement.” (footnotes omitted) Thus, the text of Article 19.1 confirms the link between the measure taken to comply and the inconsistent measure that was the subject of the original proceedings. back to text
1739. Appellate Body Report, US — Softwood Lumber IV (Article 21.5 — Canada), para. 68. back to text
1740. Appellate Body Report, US — Softwood Lumber IV (Article 21.5 — Canada), para. 77. back to text
1741. Appellate Body Report, US — Upland Cotton (Article 21.5 — Brazil), para. 202. back to text
1742. (footnote original) US Panel Report, para. 7.310 (quoting Appellate Body Report, US — Softwood Lumber IV (Article 21.5 — Canada), para. 77). back to text
1743. (footnote original) US Panel Report, paras. 7.531. back to text
1744. Appellate Body Reports, EC — Bananas III (Article 21.5 — Ecuador II) I EC — Bananas III (Article 21.5 — US), paras. 243-244. back to text
1745. Panel Report, Australia — Salmon (Article 21.5 — Canada), para. 7.10, subparagraph 22. See also Panel Report, Australia — Automotive Leather II (Article 21.5 — US), paras. 6.4-6.5. back to text
1746. “We agree with the Panel that it is, ultimately, for an Article 21.5 panel — and not for the complainant or the respondent — to determine which of the measures listed in the request for its establishment are “measures taken to comply”.” Appellate Body Report, EC — Bed Linen (Article 21.5), para. 78. back to text
1747. Panel Report, EC — Bed Linen (Article 21.5), para. 6.15. back to text
1748. (footnote original) In response to questioning at the oral hearing, both participants explicitly agreed with the general applicability of Article 6.2 in Article 21.5 proceedings, although they had some differences on the specific details of the requirements of Article 6.2 in Article 21.5 proceedings. back to text
1749. Appellate Body Report, US — FSC (Article 21.5 — EC II), paras. 59-61. back to text
1750. Appellate Body Report, US — FSC (Article 21.5-EC II), para. 62. back to text
1751. (footnote original) Panel Report, EC — Trade Marks and Geographical Indications (US), p. 14, para. 11 of the Prelimary Ruling. back to text
1752. Panel Report, US — FSC (Article 21.5 — EC II), para. 7.82. back to text
1753. (footnote original) We recall that the Apellate Body In Canada — Aircraft (Article 21.5 — Brazil) considered that measures taken to comply are measures which have been or should be adopted. See paragraph 7.6 above. back to text
1754. (footnote original) EC First written submission, para. 8, footnote 10. back to text
1755. (footnote original) Appellate Body Report on Mexico — Corn Syrup (Article 21.5), para. 36; see also Appellate Body Report on US — Carbon Steel, para 123. back to text
1756. Panel Report, US — Countervailing Measures on Certain EC Products (Article 21.5 — EC), paras. 7.34 — 7.35. back to text
1757. Appellate Body Report, EC — Bed Linen, para. 78. back to text
1758. Appellate Body Report, US — Softwood Lumber IV (Article 21.5 — Canada), para. 77. back to text
1759. Appellate Body Report, US — Upland Cotton (Article 21.5 — Brazil), para. 207. back to text
1760. Appellate Body Report, US — Upland Cotton (Article 21.5 — Brazil), para. 207. back to text
1761. Article 17.14 of the DSU deals with the effect of adopted Appellate Body Reports (as opposed to panel reports) and reads, in relevant part:
     “An Appellate Body Report shall be adopted by the DSB and unconditionally accepted by the parties to the dispute unless the DSB decides by consensus not to adopt the Appellate Body Report within 30 days following its circulation to the Members.” back to text
1762. Appellate Body Report, EC — Bed Linen (Article 21.5 — India), para. 93. back to text
1763. Appellate Body Report, EC — Bed Linen (Article 21.5 — India), para. 78. back to text
1764. (footnote original) See Appellate Body Report, EC — Bed Linen (Article 21.5 — India), para. 93. back to text
1765. (footnote original) See Appellate Body Report, US — Shrimp (Article 21.5 — Malaysia), para. 96. back to text
1766. (footnote original) Ibid., para. 97; and Appellate Body Report, EC — Bed Linen (Article 21.5 — India), para. 93. back to text
1767. Appellate Body Report, US — Upland Cotton (Article 21.5 — Brazil), para. 210. back to text
1768. Ibid., para. 211. back to text
1769. (footnote original) The Panel stated that:
     Neither the Panel nor the Appellate Body in the original dispute had the opportunity to consider arguments with respect to India’s claim in the original proceeding concerning the consistency of the EC’s anti-dumping duty with Article 3.5 of the AD Agreement concerning consideration of “other factors” of injury, because India did not present arguments in support of its claim. The Panel did, however, rule on India’s claim, finding that India had failed to present a prima facie case on this claim, and that aspect of the Panel’s report was adopted without modification.
     (Panel Report, para. 6.52) (original boldface) back to text
1770. Appellate Body Report, EC — Bed Linen (Article 21.5 — India), para. 78. back to text
1771. (footnote original) Panel Report on EC — Bed Linen, para. 6.43. The Panel disagreed with India that the original panel’s finding on India’s claim under Article 3.5 concerning “other factors” was an exercise of judicial economy. In the Panel’s view, it was a finding that India had failed to present a prima facie case of violation. (Ibid., para. 6.44) back to text
1772. Appellate Body Report, US — Upland Cotton (Article 21.5 — Brazil), para. 211. back to text
1773. Appellate Body Report, US — Shrimp (Article 21.5 — Malaysia), para. 97. back to text
1774. The Panel ruled that:
     “When considering the status of adopted Panel Reports, the Appellate Body has indicated that they are binding on the parties “with respect to that particular dispute”. In our view, the Panel’s ruling in the original dispute disposed of India’s claim in this regard. Thus, we consider that India is precluded from reasserting in this proceeding and presenting arguments in support of a claim challenging the EC’s consideration of “other factors” of injury.” (footnotes omitted)
     Panel Report, EC — Bed Linen (Article 21.5 — India), para. 6.52. back to text
1775. (footnote original) Ibid., para. 6.45. back to text
1776. Appellate Body Report, EC — Bed Linen (Article 21.5 — India), paras. 93 and 98. back to text
1777. (footnote original) Panel Report on EC — Bed Linen, para. 6.43. The Panel disagreed with India that the original panel’s finding on India’s claim under Article 3.5 concerning “other factors” was an exercise of judicial economy. In the Panel’s view, it was a finding that India had failed to present a prima facie case of violation. (Ibid., para. 6.44) back to text
1778. Appellate Body Report, EC — Bed Linen (Article 21.5 — India), para. 78. back to text
1779. (footnote original) Supra, para. 37. back to text
1780. Appellate Body Report, Canada — Aircraft (Article 21.5 — Brazil), paras. 40-41. back to text
1781. (footnote original) Appellate Body Report on US — FSC (Article 21.5 — EC), para. 222. back to text
1782. (footnote original) See Articles 3.23.3 of the DSU. back to text
1783. Panel Report, EC — Bed Linen (Article 21.5 — India), para. 6.40. back to text
1784. (footnote original) Ibid. back to text
1785. (footnote original) As we put it In Canada — Aircraft (Article 21.5 — Brazil):
     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.
     (Appellate Body Report, Canada — Aircraft (Article 21.5 — Brazil), para. 41) We defined the function of Article 21.5 proceedings in the same vein in our Report In  US — Shrimp (Article 21.5 — Malaysia) (para. 87). back to text
1786. Appellate Body Report, EC — Bed Linen (Article 21.5 — India), para. 79. back to text
1787. Panel Report, US — Countervailing Measures on Certain EC Products (Article 21.5 — EC), para. 7.64. back to text
1788. Panel Report, US — Countervailing Measures on Certain EC Products (Article 21.5 — EC), para. 7.64. back to text
1789. (footnote original) In EC — Bananas III, the Appellate Body explained 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. 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.”
     Appellate Body Report on EC — Bananas III, para. 143; see also Appellate Body Report on Brazil — Desiccated Coconut, p. 22, DSR 1997:1, p. 167, at p. 186 (stating that a claim falls outside a panel’s terms of reference unless it is identified in the document specifying the panel’s terms of reference); Appellate Body Report on India — Patents (US), para. 88 (emphasizing the difference between the claims, which must be included in the request for establishment as they establish the panel’s terms of reference, and the arguments, which are set out and clarified in the written submissions and oral statements throughout the panel proceedings). back to text
1790. (footnote original) The Panel notes that In EC — Bed Linen (Article 21.5 — India), the panel explained that, in such a situation, a defending Member would not have the opportunity to bring the measure into conformity. Panel Report on EC — Bed Linen (Article 21.5 — India), para. 6.40. Indeed, there is no provision for a “reasonable period” to implement the ruling in an Article 21.5 dispute. Thus, an Article 21.5 panel ruling on such a new claim may immediately give rise to rights for compensation or suspension of concessions under Article 22 DSU. Moreover, the parties do not have the same opportunity to present evidence and arguments in Article 21.5 proceedings
     The circumstances of the present case illustrate the potential procedural unfairness. The European Communities did not agree that the United States could submit consecutive rebuttals and required that the rebuttals be simultaneous. Therefore, the United States could only rebut the arguments in the European Communities’ Second written submission during the sole meeting with the parties. Consequently, important facts and issues continued to surface quite late into the Article 21.5 proceedings, proceedings that are already abbreviated. In addition, we note that the record of the original proceedings does not even include evidence regarding the likelihood-of-injury determinations which, as noted above, were made by a different agency than the likelihood-of-subsidization determinations at issue in the original dispute. Thus, were we to consider the injury claim as within our mandate, we would have an extremely limited evidentiary basis on which to rule. Finally, the shorter timeline significantly limits both the panel’s opportunity to interact with the parties and the panel’s time to deliberate. The panel typically has only one opportunity to meet with the parties, unlike the normal proceedings where two substantive meetings take place back to text
1791. Panel Report, US — Countervailing Measures on Certain EC Products (Article 21.5 — EC), paras. 7.74-7.75. back to text
1792. (footnote original) Appellate Body Report on Korea — Dairy, para. 124. back to text
1793. (footnote original) The Appellate Body in India — Patents (US) stated that:
     “ [t]he jurisdiction of a panel is established by that panel’s terms of reference, which are governed by Article 7 of the DSU. A panel may consider only those claims that it has the authority to consider under its terms of reference. A panel cannot assume jurisdiction that it does not have.”
     Appellate Body Report on India — Patents (US), para. 92; see also Appellate Body Report on US — Shrimp (Article 21.5 — Malaysia), paras. 87-88. back to text
1794. Panel Report, US — Countervailing Measures on Certain EC Products (Article 21.5 — EC), paras. 7.50-7.51. See also paras. 7.57-7.65 for a summary of relevant case law on the issue of ‘claims different from or additional to those raised in the original proceedings’. back to text
1795. (footnote original) Article 19.1 of the DSU provides: “Where a panel or the Appellate Body concludes that a measure is inconsistent with a covered agreement, it shall recommend that the Member concerned bring the measure into conformity with that agreement”. Article 19.2 DSU emphasizes that: “In accordance with paragraph 2 of Article 3, in their findings and recommendations, the panel and Appellate Body cannot add to or diminish the rights and obligations provided in the covered agreements”. The special or additional rule in Article 4.7 of the SCM Agreement requires that, upon finding a prohibited subsidy, the “panel shall recommend” that the subsidizing Member withdraw the subsidy without delay. back to text
1796. (footnote original) Appellate Body Report, Mexico — Corn Syrup (Article 21.5 — US), para. 121 back to text
1797. Panel Report, US — FSC (Article 21.5 — EC II), para. 7.36. back to text
1798. (footnote original) For example: the title of Article 19 and Articles 19.1, 19.2 of the DSU, addressing “Panel and Appellate Body Recommendations”; and the stipulation in Article 4.7 of the SCM Agreement that the “panel shall recommend” (emphasis added). As mentioned, the latter is a special and additional rule in Appendix 2 of the DSU. See supra, note 53. All such panel and Appellate Body “recommendations” are conditional upon a finding of inconsistency with an obligation in the covered agreements. We do not consider that any of these provisions conflict with the general proposition that it is the DSB that is the authority to articulate operative WTO recommendations and rulings. We need thus not entertain the notion that the special or additional dispute settlement provision in Article 4.7 of the SCM Agreement could prevail over the general dispute settlement arrangements to the extent of obviating the need for DSB endorsement of any panel finding (or, where it exists, recommendation), or, conversely, entirely undermining the ability of the DSB to adopt operative recommendations and rulings in prohibited subsidy disputes. We recall the following statement in Appellate Body Report, EC — Export Subsidies on Sugar, para. 334: “Upon adoption, this additional [panel Article 4.7 SCM] recommendation — that the subsidizing Member “withdraw the subsidy without delay” — will become a recommendation or ruling of the DSB.” back to text
1799. (footnote original) We find contextual support in the covered agreements for our view that recommendations and rulings emanate from the DSB after their adoption. For example: the reference in Article 3.4 of the DSU to: “Recommendations and rulings made by the DSB…”: the reference in Article 17.1 of the DSU stipulating the standard terms of reference of panels to examine “the matter referred to the DSB by “the complaining party’s panel request and “to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements”; the reference in Article 11 of the DSU that panels should, inter alia “make such other findings as will assist the DSB in making the recommendations or in giving the rulings provided for in the covered agreements” (emphasis added); the DSU Article 21.1 statement: “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” (emphasis added); and the DSU Article 21.3 reference to “intentions in respect of implementation of the recommendations and rulings of the DSB” (emphasis added). back to text
1800. (footnote original) See, for example, Article 21.5 of the DSU. back to text
1801. (footnote original) We find further support for our view that the operative recommendations and rulings flow from the DSB in prior (adopted) dispute settlement reports. For example, the Appellate Body has clarified that: “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” (emphasis added) (Appellate Body Report, Canada — Aircraft (Article 21.5 — Brazil), para. 36); and “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.” (emphasis added) (Appellate Body Report, US — Shrimp (Article 21.5 — Malaysia), paras. 86-88). back to text
1802. (footnote original) This view is consistent with the letter and spirit of the original GATT dispute settlement provision, Article XXIII:2 of the GATT 1947/1994. We are well aware that the WTO Agreement is different from the GATT system which preceded it, but that it contains many elements of continuity. The previous system was made up of several agreements, understandings and legal instruments, the most significant of which were the GATT 1947 and the nine Tokyo Round Agreements, including the Tokyo Round SCM Code. Each of these major agreements was treaty with different membership, an independent governing body and a separate dispute settlement mechanism. See, for example, Appellate Body Report, Brazil — Desiccated Coconut, p. 11. The GATT 1947 was administered by the CONTRACTING PARTIES (acting collectively). The Tokyo Round SCM Code was administered by the Tokyo Round SCM Committee, comprised of the signatories to that Code. The GATT-era dispute settlement arrangements made it clear that the collectivity of the relevant Committee, rather than the panel, was responsible for formulating operative recommendations. In the current institutional framework of the WTO, the corresponding “collective” entity would be the DSB. back to text
1803. Panel Report, US — FSC (Article 21.5 — EC II), para. 7.34-7.35. back to text
1804. Panel Report, US — FSC (Article 21.5 — EC II), para. 7.40. back to text
1805. Appellate Body Report, US — FSC (Article 21.5-EC II), para. 59. As regards, terms of reference in Article 21.5 proceedings, see para. 1121 above. back to text
1806. Appellate Body Report, Mexico — Corn Syrup (Article 21.5 US), para. 67. back to text
1807. Compliance panels established during first DSB meeting include, for example:  EC — Bananas III (Article 21.5 — European Communities and Ecuador) (WT/DSB/M/53);  Canada — Aircraft (Article 21.5 — Brazil) (WT/DSB/M/72);  US — DRAMS (Article 21.5 — Korea)  WT/DSB/M/79); Mexico — Corn Syrup (Article 21.5 — United States) (WT/DSB/M/91);  US — Countervailing Measures on Certain EC Products (Article 21.5 — European Communities) (WT/DSB/M/176); Compliance Panels with Establishment at First Meeting Pursuant to an Understanding Between the Parties Regarding Procedures under Articles 21 and 22 of the DSU: Australia — Salmon (Article 21.5 — Canada) (WT/ DSB/M/66);  Brazil — Aircraft (Article 21.5 — Canada) (WT/DSB/ M/72); US — Shrimp (Article 21.5 — Malaysia) (WT/DSB/M/91) and (WT/DS58/16); Canada — Dairy (Article 21.5 — United States and New Zealand) (WT/DSB/M/100, WT/DS103/14 and WT/ DS113/14); Canada — Dairy (Article 21.5 II — United States and New Zealand) (WT/DSB/M/116, WT/DS103/24 and WT/DS113/24); US — FSC (Article 21.5 — European Communities) ( WT/DSB/M/95 and WT/DS108/12);  Australia — Automotive Leather II (Article 21.5 — US) ( WT/DSB/M/69); EC — Bed Linen (Article 21.5 — India) (WT/DSB/M/124 and WT/DS141/11);  Japan — Apples (Article 21.5 — United States) (WT/DSB/M/174 and WT/DS245/10); Compliance Panel established during second DSB meeting: Brazil — Aircraft (Article 21. 5II — Canada) (WT/DSB/M/98 and WT/DSB/M/99). back to text
1808. Understanding on Bananas between the European Communities and the United States signed on 11 April 2001 (WT/DS27/59, G/C/W/270; WT/DS27/58, Enclosure 1), and Understanding on Bananas between the European Communities and Ecuador signed on 30 April 2001 (WT/DS27/60 G/C/W/274; WT/DS27/58, Enclosure 2). back to text
1809. Council Regulation (EC) No. 1964/2005 of 29 November 2005 on the tariff rates for bananas, Official Journal of the European Union, L Series, No. 316 (2 December 2005). back to text
1810. Panel Reports, EC — Bananas III (Article 21.5 — Ecuador II), para. 7.75, and EC — Bananas III (Article 21.5 — US), para. 7.105. back to text
1811. Panel Reports, EC — Bananas III (Article 21.5 — Ecuador II), para. 7.76, and EC — Bananas III (Article 21.5 — US), para. 7.107. back to text
1812. (footnote original) In this respect, we note the International Court of Justice, Preliminary Objections, Case concerning the Temple of Preah Vihear (Cambodia v. Thailand), Judgment of 26 May 1961, ICJ Reports (1961) 32, addressing the interpretation of declarations of acceptance of the compulsory jurisdiction of the Court. In order to determine whether Thailand had recognized as compulsory the jurisdiction of the Court, the Court considered that the “sole relevant question” was whether Thailand’s declaration clearly revealed such intention. back to text
1813. Appellate Body Reports, EC — Bananas III (Article 21.5 — Ecuador II) I EC — Bananas III (Article 21.5 — US), paras. 217 and 222. back to text
1814. This table excludes Article 21.5 proceedings where a mutually agreed solution was reached prior to the circulation of the report. back to text
1815. Decision by the Arbitrators, Brazil — Aircraft (Article 22.6 — Brazil), footnote 7. back to text
1816. WT/DS126/8. For similar provisions see also  Brazil — Aircraft, WT/DS46/13; Canada — Aircraft, WT/DS70/9; EC — Bed Linen WT/DS141/11. back to text
1817.  WT/DS58/16, para. 1. For a similar provision see also Thailand — H-Beans, WT/DS122/10; EC — Export Subsidies on Sugar, WT/DS266/36; EC — Export Subsidies on Sugar, WT/ DS283/17; US — Oil Country Tubular Goods Sunset Reviews, WT/DS268/14; US — Oil Country Tubular Goods Sunset Reviews, WT/DS277/11; US — Gambling, WT/DS285/16; EC — Chicken Cuts, WT/DS286/18; EC — Chicken Cuts, WT/DS269/16; Korea — Certain Paper, WT/DS312/7. back to text
1818.  WT/DS155/12, para. 2. For similar provisions, see also US — Steel Plate, WT/DS206/9; Chile — Price Band System WT/DS207/16. back to text
1819. WT/DS113/14. For similar provisions, see also Japan — Apples, WT/DS245/10; US — FSC, WT/DS108/12; US — Softwood Lumber IV, WT/DS257/18; US — Softwood Lumber V, WT/DS264/18; US — Anti-Dumping Measures on Oil Country Tubular Goods, WT/DS282/12. back to text
1820. WT/DSl26/8, para. 4. back to text
1821. WT/DS108/12, para. 12. For similar provisions, see also, Canada — Dairy, WT/DS113/14; Japan — Apples, WT/DS245/10; US — Oil Country Tubular Goods Sunset Reviews WT/DS277/11. back to text
1822. WT/DS108/12, para. 9. For similar provisions, see also US — Upland Cotton, WT/DS267/22. back to text
1823. Japan — Apples, WT/DS245/10, para. 5. For similar provisions see also US — FSC, WT/DS108/12; Canada — Dairy, WT/DS113/14; L7S — Hot-Rolled Steel, WT/DS184/19; EC — Export Subsidies on Sugar, WT/DS283/17. back to text
1824. WT/DS141/11, para. 5. For similar provisions see also US — Shrimp, WT/DS58/16; Thailand — H-Beans, WT/DS122/10; Argentina — Hides and Leather, WT/DS155/12; US — Steel Plate, WT/DS206/9; Chile — Price Band System, WT/DS207/16; Japan — Apples, WT/DS245/10; EC — Export Subsidies on Sugar, WT/DS266/36; EC — Export Subsidies on Sugar, WT/DS283/17; US — Oil Country Tubular Goods Sunset Reviews, WT/DS268/14; US — Anti-Dumping Measures on Oil Country Tubular Goods WT/DS282/12; EC — Chicken Cuts WT/DS286/18; EC — Chicken Cuts, WT/DS269/16; Korea — Certain Paper, WT/DS312/7. back to text
1825.  WT/DS126/8, para. 6. For similar provisions, see also Brazil — Aircraft WT/DS46/13 and Canada — Aircraft, WT/DS70/9. back to text
1826. WT/DS206/9, para. 1. For similar provisions, see also  US — FSC, WT/DS108/12; Canada — Dairy WT/DS103/14; Thailand — H — Beans, WT/DS122/10; US — Steel Plate, WT/DS206/9 and Chile — Price Band System, WT/DS207/16; US — Oil Country Tubular Goods Sunset Reviews, WT/DS268/14; US — Anti-Dumping Measures on Oil Country Tubular Goods, WT/DS282/12; US — Gambling, WT/DS285/16; EC — Chicken Cuts, WT/DS286/18; EC — Chicken Cuts, WT/DS269/16; Korea — Certain Paper, WT/DS312/7. back to text
1827. WT/DS184/19, para. 1. back to text
1828. WT/DS46/13, paras. 1-2. For similar provisions, see also US — FSC, WT/DS108/12; Canada — Dairy, WT/DS103/14; US — Steel Plate, WT/DS206/9; Chile — Price Band System, WT/DS207/16 and Japan — Apples, WT/DS245/10; US — Oil Country Tubular Goods Sunset Reviews, WT/DS268/14; US — Anti-Dumping Measures on Oil Country Tubular Goods, WT/DS282/12; US — Gambling, WT/DS285/16; EC — Chicken Cuts, WT/DS286/18; EC — Chicken Cuts, WT/DS269/16; Korea — Certain Paper, WT/DS312/7. back to text
1829. WT/DS245/10, para. 10. For similar provisions, see also, US — FSC, WT/DS108/12; Canada — Dairy, WT/DS113/14 and Chile — Price Band System, WT/DS207/16; US — Softwood Lumber IV (Article 21.5 — Canada), WT/DS257/18; US — Softwood Lumber V (Article 21.5 — Canada), WT/DS264/18; EC — Export Subsidies on Sugar, WT/DS266/36; EC — Export Subsidies on Sugar, WT/ DS283/17; US — Upland Cotton, WT/DS267/22; US — Oil Country Tubular Goods Sunset Reviews, WT/DS268/14; US — Oil Country Tubular Goods Sunset Reviews, WT/DS277/11; US — Anti — Dumping Measures on Oil Country Tubular Goods, WT/DS282/12; US — Softwood Lumber IV (Article 21.5 — Canada), WT/DS257/18; US — Softwood Lumber V (Article 21.5 — Canada), WT/DS264/18; EC — Export Subsidies on Sugar, WT/DS266/36; EC — Export Subsidies on Sugar, WT/ DS283/17; US — Upland Cotton, WT/DS267/22; US — Oil Country Tubular Goods Sunset Reviews, WT/DS268/14; US — Gambling, WT/DS285/16; EC — Chicken Cuts, WT/DS286/18; EC — Chicken Cuts, WT/DS269/16; Korea — Certain Paper, WT/DS312/7. back to text
1830. WT/DS245/10, para. 11. back to text
1831. WT/DS113/14, paras. 3 and 5. For similar provisions see also Australia — Automotive Leather II, WT/DS126/8; Brazil — Aircraft, WT/DS46/13; Canada — Aircraft, WT/DS70/9; US — FSC, 108/12; US — Steel Plate, WT/DS206/9; Chile — Price Band System, WT/DS207/16; US — Softwood Lumber IV (Article 21.5 — Canada), WT/DS257/18; US — Softwood Lumber V (Article 21.5 — Canada), WT/DS264/18; EC — Export Subsidies on Sugar, WT/DS266/36; EC — Export Subsidies on Sugar, WT/ DS283/17; US — Upland Cotton, WT/DS267/22; US — Oil Country Tubular Goods Sunset Reviews, WT/DS268/14; US — Oil Country Tubular Goods Sunset Reviews, WT/DS277/11; US — Anti-Dumping Measures on Oil Country Tubular Goods, WT/DS282/12; US — Gambling, WT/DS285/16; EC — Chicken Cuts, WT/DS286/18; EC — Chicken Cuts, WT/DS269/16; Korea — Certain Paper, WT/DS312/7. back to text
1832. WT/DS206/9, para. 10. For a similar provision, see Japan — Apples, WT/DS245/10; US — Oil Country Tubular Goods Sunset Reviews, WT/DS277/11; US — Anti-Dumping Measures on Oil Country Tubular Goods, WT/DS282/12; US — Gambling, WT/DS285/16. back to text
1833. WT/DS266/36, para. 15 and Draft Decision of the DSB. For similar provisions see also EC — Export Subsidies on Sugar, WT/DS283/17. back to text
1834. Decision by the Arbitrators in Brazil — Aircraft (Article 22.6 — Brazil), para. 3.6. back to text
1835. Decision by the Arbitrators in Brazil — Aircraft (Article 22.6 — Brazil), paras. 3.7-3.8. back to text
1836. Decision by the Arbitrators, EC — Bananas III (US) (Article 22.6-EC), para. 6.3. See also  Decision by the Arbitrators, EC — Hormones (Article 22.6 — Canada), para. 39. back to text
1837.  Decision by the Arbitrators, EC — Bananas III (Ecuador) (Article 22.6 — EC), para. 76. back to text
1838. Decision by the Arbitrators, Canada — Aircraft Credits and Guarantees (Article 22.6 — Canada), para. 3.105. back to text
1839.  Decision by the Arbitrators, US — 1916 Act (EC) (Article 22.6 — US), para. 5.4. back to text
1840. Decision by the Arbitrators, US — 1916 Act (EC) (Article 22.6 — US), para. 5.7. back to text
1841. Decision by the Arbitrators, US — 1916 Act (EC) (Article 22.6 — US), para. 5.8. back to text
1842. (footnote original) EC — Bananas III (US) (Article 22.6 — US), para. 6.3. back to text
1843. Decision by the Arbitrators, US — Offset Act (Byrd Amendment) (Article 22.6 — Brazil), para. 3.74. back to text
1844. (footnote original EC — Bananas III (US) (Article 22.6 — EC), para. 6.3. back to text
1845. (footnote original) While the value of the suspension or concessions or other obligations easily comes to mind as a relevant factor in inducing compliance, it must also be acknowledged that the actual role of the value of such suspension in securing compliance or not may vary from one case to the next. In some cases, even a very high amount of countermeasures may not achieve compliance, whereas in some others a limited amount may. back to text
1846. Decision by the Arbitrators, US — Offset Act (Byrd Amendment) (Article 22.6 — Brazil), para. 6.2. back to text
1847.  Decision by the Arbitrators, EC — Bananas III (Ecuador) (Article 22.6 — EC), para. 20. back to text
1848. (footnote original) The more precise a request for suspension is in terms of product coverage, type and degree of suspension, etc…, the better. Such precision can only be encouraged in pursuit of the DSU objectives of “providing security and predictability to the multilateral trading system” (Article 3.2) and seeking prompt and positive solutions to disputes (Articles 3.3 and 3.7). It would also be welcome in light of the statement in Article 3.10 that “all Members will engage in [DSU] procedures in good faith in an effort to resolve the dispute”. back to text
1849. Decision by the Arbitrators, EC — Hormones (US) (Article 22.6 — EC), para. 16. back to text
1850.  Decision by the Arbitrators, EC — Bananas III (Ecuador) (Article 22.6 — EC), para. 24. back to text
1851.  Decision by the Arbitrators, EC — Bananas III (Ecuador) (Article 22.6 — EC), para. 29. back to text
1852. Decisions by the Arbitrators, EC — Hormones (US) (Article 22.6 — EC)and EC — Hormones (Canada) (Article 22.6 — EC) para. 14. back to text
1853. Decision by the Arbitrators, EC — Hormones (US) (Article 22.6 — EC), para. 23. back to text
1854. (footnote original) Article 22.6 of the DSU. Bracketed text added is from Article 22.2 the DSU. back to text
1855. (footnote original) In respect of the first requirement see further paragraph 21. back to text
1856. (footnote original) The more precise a request for suspension is in terms of product coverage, type and degree of suspension, etc…, the better. Such precision can only be encouraged in pursuit of the DSU objectives of “providing security and predictability to the multilateral trading system” (Article 3.2) and seeking prompt and positive solutions to disputes (Articles 3.3 and 3.7). It would also be welcome in light of the statement in Article 3.10 that “all Members will engage in [DSU] procedures in good faith in an effort to resolve the dispute”. back to text
1857. (footnote original) Article 22.6, emphasis added. back to text
1858. (footnote original) Article 22.7, emphasis added. back to text
1859. (footnote original) Ibid. back to text
1860. Decisions by the Arbitrators, EC — Hormones (US) (Article 22.6 — EC) and EC — Hormones (Canada) (Article 22.6 — EC), paras. 16-19. back to text
1861. Decision by the Arbitrators, US — Offset Act (Byrd Amendment) (Article 22.6 — EC), para. 5.3. back to text
1862. The authorization to suspend concessions of Brazil, India, Japan and Korea expressely indicated that the additional import duties were to be applied on a “final list of products”. The authorization to the European Communities did not mention the term “final”, and hence the remark made by the Arbitrator. The European Communities had committed, however, (as had the four Member mentioned above) not to change the list of products (see para. 1.6 of the decisions concerning these Members). A similar situation concerned Chile’s request, who would notify each year the products where the suspension of concessions was to be applied; the decision concerning Chile, did not indicate whether or not the Member had committed not to change the products. Finally, in Canada’s request there is no reference to “final” list, nor is there a remark regarding the possibility of altering the products on a yearly basis. back to text
1863. Decision by the Arbitrators, EC — Hormones (US) (Article 22.6 — EC), para. 22. back to text
1864. (footnote original) See paragraphs 18-19. back to text
1865. (footnote original) See paragraphs 20-21. back to text
1866. (footnote original) See Section IV below. back to text
1867. (footnote original) US answers to arbitrators’ Questions 1, 2, 4, 9, 10 and 11, Introduction, p. 1. back to text
1868. Decision by the Arbitrators, EC — Hormones (US) (Article 22.6 — EC), para. 23. back to text
1869.  Decision by the Arbitrators,  EC — Bananas III (Ecuador) (Article 22.6 — EC), para. 173. back to text
1870. Decision by the Arbitrators in Brazil — Aircraft (Article 22.6 — Brazil), para. 4.1. back to text
1871.  Decision by the Arbitrators, Canada — Aircraft Credits and Guarantees (Article 22.6 — Canada), para. 4.1. back to text
1872. Decision by the Arbitrators, US — Offset Act (Byrd Amendment) (Article 22.6 — Canada), para. 5.2. back to text
1873. Decision by the Arbitrators, US — Offset Act (Byrd Amendment) (Article 22.6 — Mexico), para. 1.4. back to text
1874. Decision by the Arbitrators, US — Offset Act (Byrd Amendment) (Article 22.6 — Mexico), para. 5.2. back to text
1875. Decision by the Arbitrators, US — 1916 Act (EC) (Article 22.6 — US), para. 3.7. back to text
1876. (footnote original) Canada — Aircraft Credits and Guarantees (Article 22.6 — Canada), paragraph 4.1. back to text
1877. (footnote original) Brazil — Aircraft (Article 22.6 — Brazil), paragraph 4.1. Although both Canada — Aircraft Credits and Guarantees and Brazil — Aircraft primarily involved requests for “appropriate countermeasures” under the SCM Agreement, in both disputes the requests for countermeasures also cited DSU Article 22.2. back to text
1878. {footnote original)  EC — Bananas III (Ecuador) (Article 22.6 — EC), paragraph 173. back to text
1879. (footnote original) EC — Bananas III (US) (Article 22.6 — EC), paragraph 8.1; EC — Hormones (US) (Article 22.6 — EC), paragraph 84; EEC — Hormones (Canada) (Article 22.6 — EC), paragraph 73. back to text
1880. Decision by the Arbitrators, US — 1916 Act (EC) (Article 22.6 — US)), paras. 3. 10-3.14. back to text
1881. Decision by the Arbitrators, US — Offset Act (Byrd Amendment) (Article 22.6 — Canada), para. 1.7. back to text
1882. Decision by the Arbitrators, US — Offset Act (Byrd Amendment) (Article 22.6 — Canada), para. 5.2. See also para. 1250 below. back to text
1883. Decision by the Arbitrators, EC — Bananas III (US) (Article 22.6-EC), para. 3.7. back to text
1884.  Decision by the Arbitrators, EC — Bananas III (Ecuador) (Article 22.6 — EC), para. 33. back to text
1885. Decision by the Arbitrators, EC — Bananas III (US) (Article 22.6-EC), para. 3.10. back to text
1886.  Decision by the Arbitrators, EC — Bananas III (Ecuador) (Article 22.6 — EC), para. 68. back to text
1887. Decision by the Arbitrators, EC — Bananas III (Ecuador) (Article 22.6 — EC), paras. 70-73 and 76. back to text
1888.  Decision by the Arbitrators,  EC — Bananas III (Ecuador) (Article 22.6 — EC), para. 52. back to text
1889. Decision by the Arbitrators, EC — Bananas III (Ecuador) (Article 22.6 — EC), para. 27. back to text
1890. (footnote original) We note that within a sector, suspension may be possible with respect to certain types of products, while it is not practicable or effective with respect to other categories of products. back to text
1891.  Decision by the Arbitrators, EC — Bananas III (Ecuador) (Article 22.6 — EC), paras. 30-31. back to text
1892. (footnote original) See, e.g., EC — Hormones (Canada) (Article 22.6 — EC), para. 37; Brazil — Aircraft (Article 22.6 — Brazil), paras. 3.63-3.65; US — ESC (Article 22.6 — US), paras. 2.12-2.15; Canada — Aircraft Credits and Guarantees (Article 22.6 — Canada), paras. 3.67-3.73. back to text
1893. Decision by the Arbitrators, US — Offset Act (Byrd Amendment) (Article 22.6 — Brazil), Decision by the Arbitrators, US — Offset Act (Byrd Amendment) (Article 22.6 — Canada), US — Offset Act (Byrd Amendment) (Article 22.6 — Chile) US — Offset Act (Byrd Amendment) (Article 22.6 — EC), US — Offset Act (Byrd Amendment) (Article 22.6 — India) US — Offset Act (Byrd Amendment) (Article 22.6 — Japan) US — Offset Act (Byrd Amendment) (Article 22.6 — Korea) US — Offset Act (Byrd Amendment) (Article 22.6 — Mexico), paras. 4.20-4.21. back to text
1894. Decision by the Arbitrators, US — Offset Act (Byrd Amendment) (Article 22.6 — Brazil), Decision by the Arbitrators, US — Offset Act (Byrd Amendment) (Article 22.6 — Canada), US — Offset Act (Byrd Amendment) (Article 22.6 — Chile), US — Offset Act (Byrd Amendment) (Article 22.6 — EC),  US — Offset Act (Byrd Amendment) (Article 22.6 — India), US — Offset Act (Byrd Amendment) (Article 22.6 — Japan), US — Offset Act (Byrd Amendment) (Article 22.6 — Korea), US — Offset Act (Byrd Amendment) (Article 22.6 — Mexico), para. 4.24. back to text
1895. EC — Hormones (US) (Article 22.6 — EC), footnote 16. We note that the arbitrators in  EC — Bananas III (Ecuador) (Article 22.6 — EC) also quoted this statement.  EC — Bananas III (Ecuador) (Article 22.6 — EC), footnote 12. back to text
1896. WT/DS136/17. back to text
1897. The text of these working procedures is similar to that of the earlier working procedures in Canada — Aircraft Credits and Guarantees, although further developed. back to text
1898. The date of appointment of the Arbitrator is used as the date of commencement of the Article 22.6 proceeding. Where the Article 22.6 arbitration was suspended by agreement of the parties (e.g. to allow for an Article 21.5 proceeding) and then resumed, the date upon which the Article 22.6 Arbitrator resumed its work is used. back to text
1899. Decision by the Arbitrators, EC — Bananas III (US) (Article 22.6-EC), paras. 3.5-3.6. back to text
1900. Decision by the Arbitrators, EC — Bananas III (Ecuador) (Article 22.6 — EC), para. 11. back to text
1901. (footnote original) Furthermore, we note that the interpretation of the first sentence of Article 22.6 of the DSU suggested by Brazil has not been followed by the DSB so far. For instance, the request by Ecuador to suspend concessions or other obligations under Article 22.6 of the DSU in the case on European Communities — Regime for the Importation, Sale and Distribution of Bananas (hereinafter “EC — Bananas”), adopted on 25 September 1997, WT/DS27/AB/R, was made on 8 November 1999, several months after the adoption of the panel report under Article 21.5 (at the DSB meeting of 6 May 1999). back to text
1902. Decision by the Arbitrators in Brazil — Aircraft (Article 22.6 — Brazil), para. 3.10. back to text
1903. Decision by the Arbitrators, US — 1916 Act (EC) (Article 22.6 — US), para. 3.7. back to text
1904.  Decision by the Arbitrators, US — Offset Act (Byrd Amendment) (Article 22.6 — Brazil), para. 4.11. back to text
1905. Decision by the Arbitrators, US — Offset Act (Byrd Amendment) (Article 22.6 — Canada), para. 2.32. back to text
1906. Decision by the Arbitrators, US — Offset Act (Byrd Amendment) (Article 22.6 — Canada), para. 2.29. back to text
1907. (footnote original) See EC — Hormones (Canada) (Article 22.6 — EC), para. 71, US — 1916 Act (EC) (Article 22.6 — US), para. 7.9. back to text
1908. Decision by the Arbitrators, US — Offset Act (Byrd Amendment) (Article 22.6 — Canada), para. 2.32. back to text
1909. Decision by the Arbitrators, EC — Bananas III (US) (Article 22.6-EC), para. 6.10. back to text
1910. Decision by the Arbitrators, US — 1916 Act (EC) (Article 22.6 — US), paras. 5.48-5.50. back to text
1911. Decision by the Arbitrators, US — Offset Act (Byrd Amendment) (Article 22.6 — Brazil), para. 3.23, US — Offset Act (Byrd Amendment) (Article 22.6 — EC),  US — Offset Act (Byrd Amendment) (Article 22.6 — India), para. 3.23, US — Offset Act (Byrd Amendment) (Article 22.6 — Japan), para. 3.23, US — Offset Act (Byrd Amendment) (Article 22.6 — Korea), para. 3.23, US — Offset Act (Byrd Amendment) (Article 22.6 — Mexico), paras. 3.70-3.71, US — Offset Act (Byrd Amendment) (Article 22.6 — Canada), paras. 3.68-3.69, US — Offset Act (Byrd Amendment) (Article 22.6 — Chile), paras. 3.65-3.66, back to text
1912. Decision by the Arbitrators, US — Offset Act (Byrd Amendment) (Article 22.6 — Brazil), paras. 3.70-3.71. back to text
1913. EC — Hormones (US) (Article 22.6 — EC), para. 77. back to text
1914. Decision by the Arbitrators, EC — Hormones (US) (Article 22.6 — EC), para. 41. In support of this position, the EC — Hormones (US) (Article 22.6 — EC) arbitrators quoted from EC — Bananas III (US) (Article 22.6 — EC):
     “We are of the view that the benchmark for the calculation of nullification or impairment of US trade flows should be losses in US exports of goods to the European Communities and losses by US service suppliers in services supply in or to the European Communities. However, we are of the opinion that losses of US exports in goods or services between the US and third countries do not constitute nullification or impairment of even indirect benefits accruing to the US under the GATT or the GATS for which the European Communities could face suspension of concessions.”
          Decision by the Arbitrators, EC — Bananas III (US) (Article 22.6-EC), para. 6.12. back to text
1915. Decision by the Arbitrators, Canada — Aircraft Credits and Guarantees (Article 22.6 — Canada), para. 3.22. back to text
1916. Decision by the Arbitrators, US — 1916 Act (EC) (Article 22.6 — US), para. 5.54. back to text
1917. Decision by the Arbitrators, US — 1916 Act (EC) (Article 22.6 — US), para. 5.57. back to text
1918. Decision by the Arbitrators, US — Offset Act (Byrd Amendment) (Article 22.6 — Brazil)), US — Offset Act (Byrd Amendment) (Article 22.6 — EC) US — Offset Act (Byrd Amendment) (Article 22.6 — India), US — Offset Act (Byrd Amendment) (Article 22.6 — Japan), US — Offset Act (Byrd Amendment) (Article 22.6 — Korea), US — Offset Act (Byrd Amendment) (Article 22.6 — Mexico), paras. 3.22-3.23, US — Offset Act (Byrd Amendment) (Article 22.6 — Canada), paras. 3.20-3.21, US — Offset Act (Byrd Amendment) (Article 22.6 — Chile), paras. 3.19-3.20, back to text
1919. (footnote original) Panel reports on Bananas III, paragraph 7.50. back to text
1920. (footnote original) Report of the working party on Brazilian Internal Taxes, adopted on 30 June 1949, BISD 11/181, 185, paragraph 16. back to text
1921. (footnote original) Panel report on United States — Section 337 of the Tariff Act of 1930, adopted on 7 November 1989, BISD 36S/345, 386-387, paragraph 5.11. back to text
1922. (footnote original) Panel report on Italian Discrimination Against Imported Agricultural Machinery, adopted on 23 October 1958, BISD 7S/60, 64, paragraph 12. back to text
1923. (footnote original) Panel report on United States — Taxes on Petroleum and Certain Imported Substances, adopted on 17 June 1987, BISD 34S/136, 158, paragraph 5.1.9. back to text
1924. Decision by the Arbitrators, EC — Bananas III (US) (Article 22.6-EC), paras. 6.8 and 6.10-6.12. back to text
1925. Decision by the Arbitrators, EC — Bananas III (US) (Article 22.6-EC), para. 6.27. back to text
1926. Decision by the Arbitrators, US — 1916 Act (EC) (Article 22.6 — US), paras. 5.58-5.60. back to text
1927. Decision by the Arbitrators, US — 1916 Act (EC) (Article 22.6 — US), paras. 5.61-5.63. back to text
1928. Decision by the Arbitrators, US — 1916 Act (EC) (Article 22.6 — US), para. 5.64. back to text
1929. Decision by the Arbitrators, US — 1916 Act (EC) (Article 22.6 — US), para. 5.69. back to text
1930. Decision by the Arbitrators, US — 1916 Act (EC) (Article 22.6 — US), para. 5.72. back to text
1931. Decision by the Arbitrators, US — 1916 Act (EC) (Article 22.6 — US), para. 5.73. back to text
1932. Decision by the Arbitrators, US — 1916 Act (EC) (Article 22.6 — US), paras. 5.76-5.78. back to text
1933. (footnote original) Draft Articles on State Responsibility with Commentaries Thereto Adopted by the International Law Commission on First Reading, January 1997, Article 49 on Proportionality: “Countermeasures taken by an injured State shall not be out of proportion to the degree of gravity of the international wrongful act and the effects thereof on the injured State.” See also: I. Brownlie, International Law and the Use of Force by States, Oxford (1983), page 219; H. Kelsen, Principles of International Law, New York (1966), page 21. back to text
1934. Decision by the Arbitrators, EC — Bananas III (US) (Article 22.6-EC), paras. 6.15-6.16. back to text
1935. Decision by the Arbitrators, US — Offset Act (Byrd Amendment) (Article 22.6 — Brazil), US — Offset Act (Byrd Amendment) (Article 22.6 — EC) US — Offset Act (Byrd Amendment) (Article 22.6 — India), US — Offset Act (Byrd Amendment) (Article 22.6 — Japan), US — Offset Act (Byrd Amendment) (Article 22.6 — Korea), US — Offset Act (Byrd Amendment) (Article 22.6 — Mexico), para. 3.117, US — Offset Act (Byrd Amendment) (Article 22.6 — Canada), para. 3.115, US — Offset Act (Byrd Amendment) (Article 22.6 — Chile), para. 3.113, back to text
1936. Decision by the Arbitrators, US — 1916 Act (EC) (Article 22.6 — US), paras. 9.1-9.2. back to text
1937. Decision by the Arbitrators, US — FSC (Article 22.6 — US), para. 5.47. back to text
1938. Decision by the Arbitrators, EC — Bananas III (US) (Article 22.6-EC), para. 7.1. back to text
1939. Decision by the Arbitrators, EC — Hormones (US) (Article 22.6 — EC), para. 5. back to text
1940. Decision by the Arbitrators, EC — Hormones (Canada) (Article 22.6 — EC), para. 5. back to text
1941. Decision by the Arbitrators in Brazil — Aircraft (Article 22.6 — Brazil), para. 2.9. back to text
1942. Decision by the Arbitrators, EC — Bananas III (Ecuador) (Article 22.6 — EC), paras. 35-36. back to text
1943. (footnote original) The New Shorter Oxford English Dictionary on Historic Principles (1993), page 843. back to text
1944. Decision by the Arbitrators, EC — Bananas III (US) (Article 22.6-EC), para. 4.2. back to text
1945. Decision by the Arbitrators, EC — Hormones (US) (Article 22.6 — EC) and EC — Hormones (Canada) (Article 22.6 — EC), para. 20. back to text
1946. Decision by the Arbitrators, EC — Hormones (US) (Article 22.6 — EC) and EC — Hormones (Canada) (Article 22.6 — EC), para. 21. back to text
1947. Decision by the Arbitrators, US — FSC (Article 22.6 — US), paras. 5.46-5.47. back to text
1948. Decision by the Arbitrators, US — 1916 Act (EC) (Article 22.6 — US), paras. 5.17 and 5.20-5.21. back to text
1949. (footnote original) We recall that we asked the United States if “reciprocal or ‘mirror’ retaliation — suspension of the same obligations which have been breached by the Member which is the object of the retaliation — is in principle permissible under the DSU provided that the level of suspension is equivalent to the level of nullification or impairment.” The United States indicated in its reply that it “agrees that the suspension of the same obligations is, in principle, permissible under the DSU provided that the level of suspension is equivalent to the level of nullification or impairment.” Answers of the United States to the Arbitrator’s Questions to the Parties, 20 November 2003, paragraph 38. Emphasis original. back to text
1950. Decision by the Arbitrators, US — 1916 Act (EC) (Article 22.6 — US), paras. 5.21 and 5.23. back to text
1951. Decision by the Arbitrators, US — 1916 Act (EC) (Article 22.6 — US), paras. 5.32 and 5.34. back to text
1952. (footnote original) In this connection, we note that Article 23.2(a) of the DSU provides that Members shall make any determination to the effect that a violation has occurred or that benefits have been nullified or impaired “consistent with the findings contained in the panel or Appellate Body report adopted by the DSB or an arbitration award rendered under this Understanding” (emphasis added). This by implication suggests that issues of violation and nullification or impairment can be determined by arbitration. back to text
1953. Decision by the Arbitrators, EC — Bananas III (US) (Article 22.6-EC), paras. 4.7-4.9. back to text
1954. (footnote original) As we noted in our Initial Decision, Arbitrators pursuant to Article 22 of the DSU are neither in a position to influence the point in time when parties to the original dispute initiate such a procedure, nor when original parties initiate a procedure under Article 21.5 of the DSU, nor when the DSB is in a position to deal with such requests, nor when the DSB establishes a reconvened panel, nor when the DSB refers a matter to arbitration. We recall, on the one hand, that Article 21.5 of the DSU requires reconvened panels to complete their work in principle within 90 days as of the referral of the matter to them, but without specifying when such a proceeding should be initiated. The express wording of Article 21.5 of the DSU does not exclude the possibility of initiating such a proceeding before or after the expiry of the reasonable period of time for implementation of panel and/or Appellate Body reports adopted by the DSB. On the other hand, we recall that, pursuant to Article 22.6 of the DSU, Arbitrators shall complete their work within 60 days as of the expiry of the reasonable period of time. If a proceeding under Article 21.5 of the DSU is initiated close to the end of the reasonable period, or after it has expired, the 90 day period of Article 21.5 and the 60 day period of Article 22.6 become irreconcilable. In any event, our terms of reference as Arbitrators are limited to those foreseen in paragraphs 6 and 7 of Article 22 of the DSU. We note that the relationship of Articles 21.5 and 22 is now under discussion in the ongoing review of the DSU. back to text
1955. (footnote original) Arbitration Award under Article 21.3(c) in EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/15 & WT/DS48/13, paragraph 26 (29 May 1998) (emphasis added). back to text
1956. Decision by the Arbitrators, EC — Bananas III (US) (Article 22.6-EC), para. 4.11. back to text
1957. (footnote original) Report of the working party on Netherlands Action under Article XXIII:2 to Suspend Obligations to the United States, adopted on 8 November 1952, BISD IS/62. back to text
1958. (footnote original) The New Shorter Oxford English Dictionary on Historic Principles (1993), page 103. back to text
1959. Decision by the Arbitrators, EC — Bananas III (US) (Article 22.6-EC), paras. 6.4-6.5. In EC — Hormones (US) (Article 22.6 — EC) and EC — Hormones (Canada) (Article 22.6 — EC), the Arbitrators followed this approach and considered that they “would have to estimate the level of suspension we consider to be equivalent to the impairment suffered” (emphasis added), para. 12. back to text
1960. Decisions by the Arbitrators, EC — Hormones (US) (Article 22.6 — EC) and EC — Hormones (Canada) (Article 22.6 — EC), para. 18. back to text
1961. (footnote original) WT/DS/ARB, para. 4.2. back to text
1962. Decisions by the Arbitrators, EC — Hormones (US) (Article 22.6 — EC) and EC — Hormones (Canada) (Article 22.6 — EC), para. 20. back to text
1963. Decision by the Arbitrators, EC — Hormones (US) (Article 22.6 — EC), para. 12 (footnotes omitted). See also Decision by the Arbitrators, L7S — 1916 Act (EC) (Article 22.6 — US), para. 4.6. back to text
1964. Decision by the Arbitrators, EC — Bananas III (Ecuador) (Article 22.6 — EC), paras. 12-13. See also Decision by the Arbitrators, US — 1916 Act (EC) (Article 22.6 — US), para. 4.7. back to text
1965. Decision by the Arbitrator, Canada — Aircraft Credits and Guarantees (Article 22.6 — Canada), para. 3.51, (footnote omitted). See also Decision by the Arbitrators, US — 1916 Act (EC) (Article 22.6 — US), paras. 4.8 and 4.9. back to text
1966. (footnote original) See Article 22.6 arbitrations in EC — Hormones, Op. Cit., para. 12. back to text
1967. Decision by the Arbitrators in Brazil — Aircraft (Article 22.6 — Brazil), para. 3.18. back to text
1968. Decision by the Arbitrators, EC — Bananas III (US) (Article 22.6-EC), para. 7.8. back to text
1969. WT/DS27/49. back to text
1970. WT/DSB/M/59. back to text
1971. Decision by the Arbitrators, EC — Hormones (US) (Article 22.6 — EC), para. 84. back to text
1972. WT/DS26/21. back to text
1973. WT/DSB/M/65. back to text
1974. Decision by the Arbitrators, EC — Hormones (US) (Article 22.6 — EC), para. 84. back to text
1975. WT/DS48/19. back to text
1976. WT/DSB/M/65. back to text
1977. (footnote original) We would expect that a request by Ecuador under subparagraph (a) of Article 22.3 for suspension of concessions under the GATT with respect to the product categories just mentioned would be at least of the amount identified in paragraph 99 above. back to text
1978. (footnote original) Decision by the Arbitrators in European Communities — Measures Concerning Meat and Meat Products (Hormones) — Original Complaint by the United States — Recourse to Arbitration by the European Communities under Article 22.6 of the DSU (WT/DS26/ARB, dated 12 July 1999), paras. 18-23. Decision by the Arbitrators in European Communities — Measures Concerning Meat and Meat Products (Hormones) — Original Complaint by Canada — Recourse to Arbitration by the European Communities under Article 22.6 of the DSU (WT/DS48/ARB, dated 12 July 1999), paras. 18-21. back to text
1979. Decision by the Arbitrators, EC — Bananas III (Ecuador) (Article 22.6 — EC), para. 173. back to text
1980. WT/DS27/54. back to text
1981. WT/DSB/M/80. back to text
1982. Decision by the Arbitrators in Brazil — Aircraft (Article 22.6 — Brazil), para. 4.1. back to text
1983. WT/DS46/25. back to text
1984. WT/DSB/M/94. back to text
1985. Decision by the Arbitrators, US — FSC (Article 22.6 — US), para. 8.1. back to text
1986. WT/DS108/26. back to text
1987. WT/DSB/M/149. back to text
1988. Decision by the Arbitrators, US — 1916 Act (EC) (Article 22.6 — US), paras. 8.1-8.2. back to text
1989. Decision by the Arbitrator, Canada — Aircraft Credits and Guarantees (Article 22.6 — Canada), para. 4.1. back to text
1990. WT/DS222/10. back to text
1991. WT/DSB/M/145. back to text
1992. Decision by the Arbitrators, US — Offset Act (Byrd Amendment) (Article 22.6 — India), para. 5.2. Similar decisions were taken in regard to the requests of Brazil, Canada, Chile, EC, Japan, Korea and Mexico, with some textual variations in some cases. See decision by the Abitrator in  US — Offset Act (Byrd Amendment) (Article 22.6 — Brazil), US — Offset Act (Byrd Amendment) (Article 22.6 — Canada), US — Offset Act (Byrd Amendment) (Article 22.6 — Chile), US — Offset Act (Byrd Amendment) (Article 22.6 — EC), US — Offset Act (Byrd Amendment) (Article 22.6 — Japan), US — Offset Act (Byrd Amendment) (Article 22.6 — Korea), US — Offset Act (Byrd Amendment) (Article 22.6 — Mexico), para. 5.2. back to text
1993. Decision by the Arbitrators, US — Offset Act (Byrd Amendment) (Article 22.6 — Canada)), para. 5.2. back to text
1994. WT/DS217/38; WT/DS217/39; WT/DS217/40; WT/DS217/41; WT/DS217/42; WT/DS234/31 and WT/DS234/32. back to text
1995. WT/DSB/M/178. back to text
1996. WT/DS217/43. back to text
1997. Appellate Body Reports, US/Canada — Continued Suspension, paras. 361 and 362. back to text
1998. Appellate Body Reports, US/Canada — Continued Suspension, para. 716. back to text
1999. (footnote original) Panel Report, US — Continued Suspension, para. 7.400; Panel Report, Canada — Continued Suspension, para. 7.397. back to text
2000. (footnote original) Panel Report, US — Continued Suspension, para. 7.405; Panel Report, Canada — Continued Suspension, para. 7.398. back to text
2001. Appellate Body Reports, US/Canada — Continued Suspension, paras. 581-583. back to text
2002. Panel Reports, US — Continued Suspension, para. 7.376; and Canada — Continued Suspension, para. 7.373. back to text
2003. (footnote original) Panel Report, US — Continued Suspension, para. 7.376; Panel Report, Canada — Continued Suspension, para. 7.373. back to text
2004. Appellate Body Reports, US/Canada — Continued Suspension, paras. 359 and 580. back to text
2005. In its reports, the panel stated:
         - “Whereas, in the application of the burden of proof in relation to Article 5.7 of the SPS Agreement, it should be for the party challenging the applicability of Article 5.7 to make a prima facie case that the relevant scientific evidence regarding the five hormones is sufficient, it is also for the European Communities, in application of the principle that it is for each party to prove its allegations, to support its own allegations with appropriate evidence. This also has to be considered in the light of the fact that, even though in this case the European Communities is the complainant, it also argues as part of its allegations under Article 22.8 of the DSU that its implementing measure complies with Article 5.7 of the SPS Agreement. Moreover, we recall the consequence of the presumption of consistency with the SPS Agreement and GATT 1994 of measures which conform to international standards, guidelines and recommendations on the risk assessments on which such measures are based. Since, in that context, the European Communities argues that the relevant scientific evidence is insufficient, we consider that it is for the European Communities to identify the issues for which such evidence is insufficient.
         - Therefore, we do not consider that, as Panel, we have any obligation to go beyond the insufficiencies identified by the European Communities. … we deem it appropriate to limit our review exclusively to the “insufficiencies” expressly identified by the European Communities in its submissions to the Panel.”
     Panel Reports, US — Continued Suspension, paras. 7.652-7.653; and Canada — Continued Suspension, paras. 7.629-7.630. back to text
2006. Appellate Body Reports, US/Canada — Continued Suspension, para. 716. back to text
2007. (footnote original) Op. Cit., para. 65. back to text
2008. Decision by the Arbitrators in Brazil — Aircraft (Article 22.6 — Brazil), para. 3.57. back to text
2009. (footnote original) On the notion of “difference”, see Report of the Appellate Body on Guatemala — Anti-Dumping Investigation Regarding Portland Cement from Mexico (“Guatemala — Cement I”), WT/DS60/AB/R, adopted 25 November 1998, DSR 1998:IX, paras. 65 and 66. back to text
2010. Decision by the Arbitrators, US — FSC (Article 22.6 — US), para. 2.6. back to text
2011. (footnote original) We note that Article 3.7 of the DSU refers to the “withdrawal of the measures concerned” as a first objective. However, we also note that, contrary to Article 3.7 of the DSU, Article 4.7 of the SCM Agreement does not provide for any alternative than the withdrawal of the measure once it has been found to be a prohibited subsidy. back to text
2012. Decision by the Arbitrators, Brazil — Aircraft (Article 22.6 — Brazil), paras. 3.47-3.48. back to text
2013. (footnote original) Op. Cit., para. 65. back to text
2014. (footnote original) Canada mentioned that it could have applied a counter-subsidy but refrained from doing so for a number of reasons. back to text
2015. (footnote original) The Arbitrators also reviewed the arguments and evidence submitted by the parties concerning the approach based on the level of nullification or impairment suffered by Canada. They note that this approach implied — as any counterfactual — many more assumptions than the approach based on the amount of the subsidy. The Arbitrators were of the view that, if the calculation of appropriate countermeasures based on the amount of the subsidy were compatible with Article 4.10 of the SCM Agreement, it would be preferable to follow this approach since it could lead to a more objective result. back to text
2016. Decision by the Arbitrators, Brazil — Aircraft (Article 22.6 — Brazil), paras. 3.57-3.60. back to text
2017. Decision by the Arbitrators, US — FSC (Article 22.6 — US), paras. 5.47-5.50. back to text
2018. (footnote original) See, e.g., the Naulilaa arbitral award (1928), UN Reports of International Arbitral Awards, Vol. II, p. 1028 and Case Concerning the Air Services Agreement of 27 March 1946 (France v. United States of America) (1978) International Law Reports, Vol. 54 (1979), p. 338. See also, inter alia, the Draft Articles on State Responsibility With Commentaries Thereto Adopted by the International Law Commission on First Reading (January 1997), hereinafter the “Draft Articles” and the draft Articles provisionally adopted by the Drafting Committee on second reading, A/CN.4/L 600, 11 August 2000. Even though the latter modify a number of provisions of the Draft Articles, they do not affect the terms to which we refer in this report. back to text
2019. (footnote original) We also note that, on the basis of the definition of “countermeasures” in the Draft Articles, the notion of “appropriate countermeasures” would be more general than the term “equivalent to the level of nullification or impairment”. It would basically include it. Limiting its meaning to that given to the term “equivalent to the level of nullification or impairment” would be contrary to the principle of effectiveness in interpretation of treaties. back to text
2020. (footnote original) See Article 38 of the Statute of the ICJ. back to text
2021. (footnote original) We note that Canada objects to us using the Draft Articles in this interpretation process. Canada argues that the Draft Articles are not “relevant rules of international law applicable to the relations between the parties” within the meaning of Article 31.3(c) of the Vienna Convention. As already mentioned, we use the Draft Articles as an indication of the agreed meaning of certain terms in general international law. back to text
2022. (footnote original) Op. Cit., para. 6.3. In that case, the arbitrators had to determine the level of nullification or impairment. Since the Article 22.6 arbitrators in the EC — Bananas case considered that measures equivalent to the level of nullification or impairment can induce compliance, it could be argued that in the present case too, countermeasures equivalent to the level of nullification or impairment should be sufficient to induce compliance. However, the arbitrators in EC — Bananas were instructed by Article 22.7 to determine whether the proposed measures were equivalent to the level of nullification or impairment. back to text
2023. Decision by the Arbitrators, Brazil — Aircraft (Article 22.6 — Brazil), para. 3.44. back to text
2024. (footnote original) The New Shorter Oxford English Dictionary (1993). back to text
2025. (footnote original) Ibid. back to text
2026. (footnote original) Webster’s New Encyclopaedic Dictionary (1994). back to text
2027. (footnote original) The New Shorter Oxford English Dictionary (1993). back to text
2028. Decision by the Arbitrators, US — FSC (Article 22.6 — US), paras. 5.4-5.7. back to text
2029. (footnote original) The New Shorter Oxford English Dictionary (1993), p. 103; Webster’s New Encyclopedic Dictionary (1994), p. 48. back to text
2030. (footnote original) See, e.g., the Naulilaa arbitral award (1928), UN Reports of International Arbitral Awards, Vol. II, p. 1028 and Case Concerning the Air Services Agreement of 27 March 1946 (France v. United States of America) (1978) International Law Reports, Vol. 54 (1979), p. 338. See also, inter alia, the Draft Articles on State Responsibility With Commentaries Thereto Adopted by the International Law Commission on First Reading (January 1997), hereinafter the “Draft Articles” and the draft Articles provisionally adopted by the Drafting Committee on second reading, A/CN.4/L 600, 11 August 2000. Even though the latter modify a number of provisions of the Draft Articles, they do not affect the terms to which we refer in this report. back to text
2031. (footnote original) We also note that, on the basis of the definition of “countermeasures” in the Draft Articles, the notion of “appropriate countermeasures” would be more general than the term “equivalent to the level of nullification or impairment”. It would basically include it. Limiting its meaning to that given to the term “equivalent to the level of nullification or impairment” would be contrary to the principle of effectiveness in interpretation of treaties. back to text
2032. (footnote original) See Article 38 of the Statute of the ICJ. back to text
2033. (footnote original) We note that Canada objects to us using the Draft Articles in this interpretation process. Canada argues that the Draft Articles are not “relevant rules of international law applicable to the relations between the parties” within the meaning of Article 31.3(c) of the Vienna Convention. As already mentioned, we use the Draft Articles as an indication of the agreed meaning of certain terms in general international law. back to text
2034. (footnote original) Op. Cit., para. 6.3. In that case, the arbitrators had to determine the level of nullification or impairment. Since the Article 22.6 arbitrators in the EC — Bananas case considered that measures equivalent to the level of nullification or impairment can induce compliance, it could be argued that in the present case too, countermeasures equivalent to the level of nullification or impairment should be sufficient to induce compliance. However, the arbitrators in EC — Bananas were instructed by Article 22.7 to determine whether the proposed measures were equivalent to the level of nullification or impairment. back to text
2035. Decision by the Arbitrators, Brazil — Aircraft (Article 22.6 — Brazil), paras. 3.42-3.44. back to text
2036. Decision by the Arbitrators, US — FSC (Article 22.6 — US), para. 5.10. back to text
2037. Decision by the Arbitrators, US — FSC (Article 22.6 — US), para. 5.11. back to text
2038. Decision by the Arbitrators, US — FSC (Article 22.6 — US), para. 5.12. back to text
2039. Decision by the Arbitrators, US — FSC (Article 22.6 — US), para. 5.8. back to text
2040. Decision by the Arbitrators, US — FSC (Article 22.6 — US), para. 5.16. back to text
2041. Decision by the Arbitrators, US — FSC (Article 22.6 — US), para. 5.19. back to text
2042. Decision by the Arbitrators, US — FSC (Article 22.6 — US), para. 5.23. back to text
2043. (footnote original) We note in this regard the view of the commentator, Sir James Crawford, on the relevant Article of the ILC text on State Responsibility, reflected in a resolution adopted on 12 December 2001 by the UN General Assembly (A/RES/56/ 83), which expresses — but only in positive terms — a requirement of proportionality for countermeasures:
     “the positive formulation of the proportionality requirement is adopted in Article 51. A negative formulation might allow too much latitude.” (J. Crawford, The ILC’s Articles on State Responsibility, Introduction, Text and Commentaries 2002, CUP, para. 5 on Article 51).
     Article 51 of the ILC Articles on State responsibility (entitled “Proportionality”) reads as follows:
     “countermeasures must be commensurate with the injury suffered, taking into account the gravity of the internationally wrongful act and the rights in question”. (emphasis added)
     We also note in this respect that, while that provision expressly refers — contrary to footnote 9 of the SCM Agreement — to the injury suffered, it also requires the gravity of the wrongful act and the right in question to be taken into account. This has been understood to entail a qualitative element to the assessment, even where commensurateness with the injury suffered is at stake. We note the view of Sir James Crawford on this point in his Commentaries to the ILC Articles :
     “Considering the need to ensure that the adoption of countermeasures does not lead to inequitable results, proportionality must be assessed taking into account not only the purely ‘quantitative’ element of the injury suffered, but also ‘qualitative’ factors such as the importance of the interest protected by the rule infringed and the seriousness of the breach. Article 51 relates proportionality primarily to the injury suffered but ‘taking into account’ two further criteria: the gravity of the internationally wrongful act, and the rights in question. The reference to ‘the rights in question’ has a broad meaning, and includes not only the effect of a wrongful act on the injured State but also on the rights of the responsible State. Furthermore, the position of other States which may be affected may also be taken into consideration.” (op. cit., para. 6 of the commentaries on Article 51). back to text
2044. Decision by the Arbitrators, US — FSC (Article 22.6 — US), para. 5.27. back to text
2045. Decision by the Arbitrators, US — FSC (Article 22.6 — US), paras. 4.3–4.4. back to text

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