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DISPUTE SETTLEMENT SYSTEM TRAINING MODULE: CHAPTER 4

Legal basis for a dispute

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4.2 Types of complaints and required allegations in GATT 1994

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The GATT 1994 contains “consultation and dispute settlement provisions” in both Articles XXII and XXIII. However, it is Article XXIII:1(a) to (c) which sets out the specific circumstances in which a (WTO) Member is entitled to a remedy. Article XXIII:2 originally specified the form that this remedy could take, but the consequences of a successful recourse to the dispute settlement system nowadays are set out in more detail in the DSU. Article XXIII of GATT 1994 therefore retains its significance chiefly for specifying in paragraph 1 the conditions under which a Member can invoke the dispute settlement system. Article XXIII:1 of GATT 1994 states:

“Nullification or Impairment
 
1. If any contracting party should consider that any benefit accruing to it directly or indirectly under this Agreement is being nullified or impaired or that the attainment of any objective of the Agreement is being impeded as the result of
  
  1. the failure of another contracting party to carry out its obligations under this Agreement, or
      
  2. the application by another contracting party of any measure, whether or not it conflicts with the provisions of this Agreement, or
      
  3. the existence of any other situation,
      
the contracting party may, with a view to the satisfactory adjustment of the matter, make written representations or proposals to the other contracting party or parties which it considers to be concerned. Any contracting party thus approached shall give sympathetic consideration to the representations or proposals made to it.”

 

The different types of complaints under Article XXIII:1 of GATT 1994  back to top

In subparagraphs (a), (b) and (c), Article XXIII:1 provides for three alternative options (i.e. (a) “or” (b) “or” (c)) on which a complainant may rely. However, Article XXIII:1 starts with an introductory clause containing the condition that a Member “consider that any benefit accruing to it directly or indirectly under this Agreement is being nullified or impaired or that the attainment of any objective of the Agreement is being impeded”. This must be the result of one of the scenarios specified in subparagraphs (a), (b) and (c).

The first, and by far, the most common complaint is the so-called “violation complaint” pursuant to Article XXIII:1(a) of GATT 1994. This complaint requires “nullification or impairment of a benefit” as a result of the “the failure of another [Member] to carry out its obligations” under GATT 1994. This “failure to carry out obligations” is just a different way of referring to a legal inconsistency with, or violation of, the GATT 1994. There also needs to be “nullification or impairment” as a result of the alleged legal inconsistency.

The second type of complaint is the so-called “non-violation complaint” pursuant to Article XXIII:1(b) of GATT 1994. A non-violation complaint may be used to challenge any measure applied by another Member, even if it does not conflict with GATT 1994, provided that it results in “nullification or impairment of a benefit”. There have been a few such complaints both under GATT 1947 and in the WTO.

The third type of complaint is the so-called “situation complaint” pursuant to Article XXIII:1(c) of GATT 1994. Literally understood, it could cover any situation whatsoever, as long as it results in “nullification or impairment”. However, although a few such situation complaints have been raised under the old GATT, none of them has ever resulted in a panel report. In the WTO, Article XXIII:1(c) of GATT 1994 has not so far been invoked by any complainant.

Given the admissibility of “non-violation” and “situation complaints”, the scope of the WTO dispute settlement system is broader than that of other international dispute settlement systems which are confined to adjudicating only violations of agreements. Simultaneously, the WTO dispute settlement system is narrower than those other systems, in the sense that a violation must also result in nullification or impairment (or possibly the impeded attainment of an objective). This particularity of the system for settlement of international trade disputes reflects the intention to maintain the negotiated balance of concessions and benefits between the WTO Members. It was GATT practice and it is now WTO law that a violation of a WTO provision triggers a rebuttal presumption of nullification or impairment of trade benefits (Article 3.8 of the DSU).

In summary, the WTO dispute settlement system provides for three kinds of complaints: (a) “violation complaints”, (b) “non-violation complaints” and (c) “situation complaints”. Violation complaints are by far the most frequent. Only a few cases have been brought on the basis of an allegation of non-violation nullification or impairment of trade benefits. No “situation complaint” has ever resulted in a panel or Appellate Body report based on Article XXIII:1(c) of GATT 1994.

 

Violation complaint  back to top

As outlined above, a violation complaint will succeed when the respondent fails to carry out its obligations under GATT 1994 or the other covered agreements, and this results directly or indirectly in nullification or impairment of a benefit accruing to the complainant under these agreements. If it can be established before a Panel and the Appellate Body that these two conditions are satisfied, the complainant will “win” the dispute.

In practice, the first of these two conditions, the violation, plays a much more important role than the second condition, nullification or impairment of a benefit. This is due to the fact that nullification or impairment is “presumed” to exist whenever a violation has been established. This presumption evolved in GATT jurisprudence1 and is today codified in Article 3.8 of the DSU. Article 3.8 is concerned only with violation complaints (“where there is an infringement”). The presumption set out in this article relates to nullification or impairment once it has been established that there is a breach of an obligation. The presumption does not address the question whether there is such a violation, and it should not be confused with this question.2

The effect of the legal presumption is that of a reversal of the burden of proof. The concept of a legal presumption and the language in the last sentence of Article 3.8 of the DSU imply that the presumption set out by Article 3.8 of the DSU can be rebutted. However, there has been no single case of a successful rebuttal in the history of GATT and the WTO to date. GATT panels rejected all attempts to demonstrate that there was no actual trade impact.3 For instance, the fact that an import quota had not been fully utilized was insufficient for proving the absence of nullification or impairment of benefits because quotas give rise to increased transaction costs and uncertainties that could affect investment plans.4 In another case, a panel rejected the claim that the GATT-inconsistent measure caused no or insignificant trade effects arguing that the national treatment requirement in GATT 1947 did not protect expectations on export volumes, but expectations on the competitive relationship between imported and domestic products.5 The Appellate Body has endorsed this reasoning.6 One GATT panel went as far as to observe that the presumption had, in practice, operated as an irrefutable presumption.7

In the practice of the WTO dispute settlement system, panels typically cite Article 3.8 of the DSU (other than disputes brought under the GATS) once they have concluded that the defendant has violated a rule of a covered agreement. Unless the defendant (exceptionally) makes an attempt to rebut the presumption, panels dedicate no more than a brief paragraph at the end of their reports to the issue of nullification or impairment. It should be noted that the types of complaints brought under the GATS are slightly different.

  

Notes:

1. Panel Report, Uruguay — Recourse to Article XXIII, para. 15.  back to text

2. The Appellate Body has confirmed this separation in Appellate Body Report, Wool Shirts and Blouses DSR1997:I, 323 at 334 and 335  back to text

3. Panel Report, Italy — Agricultural Machinery, paras. 21-22  Panel Report, Canada — FIRA, para. 6.7  back to text

4. Panel Report, Japan — Leather II (US), paras. 54-56.  back to text

5. Panel Report, US — Superfund, para. 5.1.9  back to text

6. Appellate Body Report, EC — Bananas III, paras. 252 and 253.  back to text

7. Panel Report , US — Superfund, para. 5.1.7  back to text

  

  

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