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> Relationship to Article XX of the GATT 1994
> Article XIV(a) —
“public morals” and “public order”
> Article XIV(a) —
Burden of proof
> Article XIV(a) —
Necessity test — Reasonably available alternative
> Chapeau of Article XIV
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G.4.1 Relationship to Article XX of the GATT 1994 back to top
G.4.1.1 US — Gambling, para. 291
(WT/DS285/AB/R, WT/DS285/AB/R/Corr.1)
Article XIV of the GATS sets out the general exceptions from
obligations under that Agreement in the same manner as does Article XX
of the GATT 1994. Both of these provisions affirm the right of Members
to pursue objectives identified in the paragraphs of these provisions
even if, in doing so, Members act inconsistently with obligations set
out in other provisions of the respective agreements, provided that all
of the conditions set out therein are satisfied. Similar language is
used in both provisions, notably the term “necessary” and the
requirements set out in their respective chapeaux. Accordingly, like the
Panel, we find previous decisions under Article XX of the GATT 1994
relevant for our analysis under Article XIV of the GATS.
G.4.1.2 US — Gambling, para. 292
(WT/DS285/AB/R, WT/DS285/AB/R/Corr.1)
Article XIV of the GATS, like Article XX of the GATT 1994,
contemplates a “two-tier analysis” of a measure that a Member seeks
to justify under that provision. A panel should first determine whether
the challenged measure falls within the scope of one of the paragraphs
of Article XIV. This requires that the challenged measure address the
particular interest specified in that paragraph and that there be a
sufficient nexus between the measure and the interest protected. The
required nexus — or “degree of connection” — between the measure
and the interest is specified in the language of the paragraphs
themselves, through the use of terms such as “relating to” and “necessary
to”. Where the challenged measure has been found to fall within one of
the paragraphs of Article XIV, a panel should then consider whether that
measure satisfies the requirements of the chapeau of Article XIV.
G.4.2 Article XIV(a)
— “public morals” and “public order” back to top
G.4.2.1 US — Gambling, para. 296
(WT/DS285/AB/R, WT/DS285/AB/R/Corr.1)
In its analysis under Article XIV(a), the Panel found that “the
term ‘public morals’ denotes standards of right and wrong conduct
maintained by or on behalf of a community or nation”. The Panel
further found that the definition of the term “order”, read in
conjunction with footnote 5 of the GATS, “suggests that ‘public
order’ refers to the preservation of the fundamental interests of a
society, as reflected in public policy and law”. The Panel then
referred to Congressional reports and testimony establishing that “the
government of the United States consider[s] [that the Wire Act, the
Travel Act, and the IGBA] were adopted to address concerns such as those
pertaining to money laundering, organized crime, fraud, underage
gambling and pathological gambling”. On this basis, the Panel found
that the three federal statutes are “measures that are designed to ‘protect
public morals’ and/or ‘to maintain public order’ within the
meaning of Article XIV(a)”.
G.4.2.2 US — Gambling, paras. 297-298
(WT/DS285/AB/R, WT/DS285/AB/R/Corr.1)
Antigua contests [the Panel’s finding under Article XIV(a)] on a
rather limited ground, namely that the Panel failed to determine whether
the concerns identified by the United States satisfy the standard set
out in footnote 5 to Article XIV(a) of the GATS, which reads:
[t]he public order exception may be invoked only where a genuine and
sufficiently serious threat is posed to one of the fundamental interests
of society.
We see no basis to conclude that the Panel failed to assess whether
the standard set out in footnote 5 had been satisfied. As Antigua
acknowledges, the Panel expressly referred to footnote 5 in a way that
demonstrated that it understood the requirement therein to be part of
the meaning given to the term “public order”. Although “no
further mention” was made in the Panel Report of footnote 5 or of
its text, this alone does not establish that the Panel failed to assess
whether the interests served by the three federal statutes satisfy the
footnote’s criteria. Having defined “public order” to include the
standard in footnote 5, and then applied that definition to the facts
before it to conclude that the measures “are designed to ‘protect
public morals’ and/or ‘to maintain public order’ ”, the Panel
was not required, in addition, to make a separate, explicit
determination that the standard of footnote 5 had been met.
G.4.3 Article XIV(a)
— Burden of proof back to top
G.4.3.1 US — Gambling, paras. 309-310
(WT/DS285/AB/R, WT/DS285/AB/R/Corr.1)
It is well established that a responding party invoking an
affirmative defence bears the burden of demonstrating that its measure,
found to be WTO-inconsistent, satisfies the requirements of the invoked
defence. In the context of Article XIV(a), this means that the
responding party must show that its measure is “necessary” to
achieve objectives relating to public morals or public order. In our
view, however, it is not the responding party’s burden to show, in the
first instance, that there are no reasonably available
alternatives to achieve its objectives. In particular, a responding
party need not identify the universe of less trade-restrictive
alternative measures and then show that none of those measures achieves
the desired objective. The-WTO agreements do not contemplate such an
impracticable and, indeed, often impossible burden.
Rather, it is for a responding party to make a prima facie case
that its measure is “necessary” by putting forward evidence and
arguments that enable a panel to assess the challenged measure in the
light of the relevant factors to be “weighed and balanced” in a
given case. The responding party may, in so doing, point out why
alternative measures would not achieve the same objectives as the
challenged measure, but it is under no obligation to do so in order to
establish, in the first instance, that its measure is “necessary”.
If the panel concludes that the respondent has made a prima facie case
that the challenged measure is “necessary” — that is, “significantly
closer to the pole of ‘indispensable’ than to the opposite pole of
simply ‘making a contribution to’ ” — then a panel should find
that challenged measure “necessary” within the terms of Article
XIV(a) of the GATS.
G.4.3.2 US — Gambling, para. 311
(WT/DS285/AB/R, WT/DS285/AB/R/Corr.1)
If, however, the complaining party raises a WTO-consistent
alternative measure that, in its view, the responding party should have
taken, the responding party will be required to demonstrate why its
challenged measure nevertheless remains “necessary” in the light of
that alternative or, in other words, why the proposed alternative is
not, in fact, “reasonably available”. If a responding party
demonstrates that the alternative is not “reasonably available”, in
the light of the interests or values being pursued and the party’s
desired level of protection, it follows that the challenged measure must
be “necessary” within the terms of Article XIV(a) of the GATS.
G.4.3.3 US — Gambling, para. 323
(WT/DS285/AB/R, WT/DS285/AB/R/Corr.1)
… a responding party must make a prima facie case that its
challenged measure is “necessary”. A Panel determines whether this
case is made through the identification, and weighing and balancing, of
relevant factors, such as those in Korea — Various Measures on Beef,
with respect to the measure challenged. …
G.4.4 Article XIV(a)
— Necessity test — Reasonably available
alternative back to top
G.4.4.1 US — Gambling, para. 304
(WT/DS285/AB/R, WT/DS285/AB/R/Corr.1)
… the standard of “necessity” provided for in the general
exceptions provision is an objective standard. To be sure, a
Member’s characterization of a measure’s objectives and of the
effectiveness of its regulatory approach — as evidenced, for example,
by texts of statutes, legislative history, and pronouncements of
government agencies or officials — will be relevant in determining
whether the measure is, objectively, “necessary”. A panel is not
bound by these characterizations, however, and may also find guidance in
the structure and operation of the measure and in contrary evidence
proffered by the complaining party. In any event, a panel must, on the
basis of the evidence in the record, independently and objectively
assess the “necessity” of the measure before it.
G.4.4.2 US — Gambling, paras. 306-308
(WT/DS285/AB/R, WT/DS285/AB/R/Corr.1)
The process [of weighing and balancing a series of factors in order
to determine “necessity”] begins with an assessment of the “relative
importance” of the interests or values furthered by the challenged
measure. Having ascertained the importance of the particular interests
at stake, a panel should then turn to the other factors that are to be
“weighed and balanced”. The Appellate Body has pointed to two
factors that, in most cases, will be relevant to a panel’s
determination of the “necessity” of a measure, although not
necessarily exhaustive of factors that might be considered. One factor
is the contribution of the measure to the realization of the ends
pursued by it; the other factor is the restrictive impact of the measure
on international commerce.
A comparison between the challenged measure and possible alternatives
should then be undertaken, and the results of such comparison should be
considered in the light of the importance of the interests at issue. It
is on the basis of this “weighing and balancing” and comparison of
measures, taking into account the interests or values at stake, that a
panel determines whether a measure is “necessary” or, alternatively,
whether another, WTO-consistent measure is “reasonably available”.
The requirement, under Article XIV(a), that a measure be “necessary”
— that is, that there be no “reasonably available”, WTO-consistent
alternative — reflects the shared understanding of Members that
substantive GATS obligations should not be deviated from lightly. An
alternative measure may be found not to be “reasonably available”,
however, where it is merely theoretical in nature, for instance, where
the responding Member is not capable of taking it, or where the measure
imposes an undue burden on that Member, such as prohibitive costs or
substantial technical difficulties. Moreover, a “reasonably available”
alternative measure must be a measure that would preserve for the
responding Member its right to achieve its desired level of protection
with respect to the objective pursued under paragraph (a) of Article
XIV.
G.4.4.3 US — Gambling, para. 315
(WT/DS285/AB/R, WT/DS285/AB/R/Corr.1)
In its “necessity” analysis under Article XIV(a), the Panel
appeared to understand that, in order for a measure to be accepted as
“necessary” under Article XIV(a), the responding Member must have
first “explored and exhausted” all reasonably available WTO-compatible
alternatives before adopting its WTO-inconsistent measure. This
understanding led the Panel to conclude that, in this case, the United
States had “an obligation to consult with Antigua before and while
imposing its prohibition on the cross-border supply of gambling and
betting services”. Because the Panel found that the United States had
not engaged in such consultations with Antigua, the Panel also found
that the United States had not established that its measures are “necessary”
and, therefore, provisionally justified under Article XIV(a).
G.4.4.4 US — Gambling, paras. 317-320
(WT/DS285/AB/R, WT/DS285/AB/R/Corr.1)
In our view, the Panel’s “necessity” analysis was flawed
because it did not focus on an alternative measure that was reasonably
available to the United States to achieve the stated objectives
regarding the protection of public morals or the maintenance of public
order. Engaging in consultations with Antigua, with a view to arriving
at a negotiated settlement that achieves the same objectives as the
challenged United States’ measures, was not an appropriate alternative
for the Panel to consider because consultations are by definition a
process, the results of which are uncertain and therefore not capable of
comparison with the measures at issue in this case.
We note, in addition, that the Panel based its requirement of
consultations, in part, on “the existence of [a] specific market
access commitment [in the United States’ GATS Schedule] with respect
to cross-border trade of gambling and betting services”. We do not see
how the existence of a specific commitment in a Member’s Schedule
affects the “necessity” of a measure in terms of the protection of
public morals or the maintenance of public order. For this reason as
well, the Panel erred in relying on consultations as an alternative
measure reasonably available to the United States.
… Antigua claims that the Panel “erred in limiting” its search
for alternatives to the universe of existing United States
regulatory measures. …
We observe, first, that the Panel did not state that it was limiting
its search for alternatives in the manner alleged by Antigua. Secondly,
although the Panel began its analysis of alternative measures by
considering whether the United States already employs measures less
restrictive than a prohibition to achieve the same objectives as the
three federal statutes, its inquiry did not end there. The Panel
obviously did consider alternatives not currently in place in the
United States, as evidenced by its (ultimately erroneous) emphasis on
the United States’ alleged failure to pursue consultations with
Antigua. Finally, we do not see why the Panel should have been expected
to continue its analysis into additional alternative measures, which
Antigua itself failed to identify. As we said above, it is not for the
responding party to identify the universe of alternative measures
against which its own measure should be compared. It is only if such an
alternative is raised that this comparison is required. We therefore
dismiss this aspect of Antigua’s appeal.
G.4.4.5 US — Gambling, para. 332
(WT/DS285/AB/R, WT/DS285/AB/R/Corr.1)
Antigua additionally contends that the Panel acted inconsistently
with Article 11 of the DSU because it undertook no assessment of factual
evidence relating specifically to Antiguan gambling and betting
services when evaluating whether the Wire Act, the Travel Act, and the
IGBA are “necessary”. To determine whether the statutes at issue are
“necessary” under Article XIV(a), the Panel was called upon to
assess the relationship between, on the one hand, the United States’
restrictions on the remote supply of gambling, and, on the other hand,
the “public moral”/“public order” interests identified by the
United States as the reasons for the restrictions contained in the Wire
Act, the Travel Act, and the IGBA. The United States did not explicitly
identify either the source of supply or the foreign nature of
the supply of gambling and betting services as a relevant concern. In
other words, the evidence put before the Panel by the United States
suggests that the nexus is with the remote supply of gambling services,
regardless of its source or the national origin of the suppliers.
Moreover, the statutes at issue make no distinction on their face as to
gambling services from different origins; the Panel found simply that
the statutes prohibit the remote supply of gambling and betting
services. As a result, there was no need for the Panel to have analysed
evidence relating to the supply of gambling services specifically from
Antigua, and we see no error in the Panel’s decision not to make
an assessment of the Antiguan industry.
G.4.5 Chapeau of Article XIV back to top
G.4.5.1 US — Gambling, para. 339
(WT/DS285/AB/R, WT/DS285/AB/R/Corr.1)
… The focus of the chapeau, by its express terms, is on the application
of a measure already found by the Panel to be inconsistent with one
of the obligations under the GATS but falling within one of the
paragraphs of Article XIV. By requiring that the measure be applied in
a manner that does not … constitute “arbitrary” or “unjustifiable”
discrimination, or a “disguised restriction on trade in services”,
the chapeau serves to ensure that Members’ rights to avail themselves
of exceptions are exercised reasonably, so as not to frustrate the
rights accorded other Members by the substantive rules of the GATS.
G.4.5.2 US — Gambling, paras. 342-344
(WT/DS285/AB/R, WT/DS285/AB/R/Corr.1)
In deciding to assess whether the measures satisfied the requirements
of the chapeau, the Panel explained that, even though such an
examination was “not necessary”, it wanted “to assist the parties
in resolving the underlying dispute in this case”. Antigua alleges
that the Panel acted inconsistently with the Appellate Body’s decision
in Korea — Various Measures on Beef in determining whether the
Wire Act, the Travel Act, and the IGBA meet the requirements of the
chapeau after having found that they were not provisionally justified.
… [the statement by the Appellate Body at paragraph 156 of Korea
— Various Measures on Beef] does not impose a requirement on
panels to stop evaluating a responding party’s defence once they have
determined that a challenged measure is not provisionally justified
under one of the paragraphs of the general exception provision.
Provided that it complies with its duty to assess a matter
objectively, a panel enjoys the freedom to decide which legal issues it
must address in order to resolve a dispute. Moreover, in some instances,
a panel’s decision to continue its legal analysis and to make factual
findings beyond those that are strictly necessary to resolve the dispute
may assist the Appellate Body should it later be called upon to complete
the analysis, as, for example, in this case.
G.4.5.3 US — Gambling, paras. 349-351
(WT/DS285/AB/R, WT/DS285/AB/R/Corr.1)
The United States contends that … the Panel, in fact, assessed only
whether the United States treats domestic service suppliers differently
from foreign service suppliers. Such an assessment is inadequate, the
United States argues, because the chapeau also requires a determination
of whether differential treatment, or discrimination, is “arbitrary”
or “unjustifiable”.
The United States based its defence under the chapeau of Article XIV
on the assertion that the measures at issue prohibit the remote supply
of gambling and betting services by any supplier, whether
domestic or foreign. In other words, the United States sought to justify
the Wire Act, the Travel Act, and the IGBA on the basis that there is no
discrimination in the manner in which the three federal statutes are
applied to the remote supply of gambling and betting services. The
United States could have, but did not, put forward an additional
argument that even if such discrimination exists, it does not
rise to the level of “arbitrary” or “unjustifiable”
discrimination.
In the light of the arguments before it, we do not read the Panel to
have ignored the requirement of “arbitrary” or “unjustifiable”
discrimination by articulating the standard under the chapeau of Article
XIV as one of “consistency”. Rather, the Panel determined that
Antigua had rebutted the United States’ claim of no discrimination at
all by showing that domestic service suppliers are permitted to
provide remote gambling services in situations where foreign service
suppliers are not so permitted. We see no error in the Panel’s
approach.
G.4.5.4 US — Gambling, para. 354
(WT/DS285/AB/R, WT/DS285/AB/R/Corr.1)
We observe, first, that none of the three federal statutes
distinguishes, on its face, between domestic and foreign service
suppliers. We agree with the Panel that, in the context of facially
neutral measures, there may nevertheless be situations where the
selective prosecution of persons rises to the level of discrimination.
In our view, however, the evidence before the Panel could not justify
finding that, notwithstanding the neutral language of the statute, the
facts are “inconclusive” to establish “non-discrimination” in
the United States’ enforcement of the Wire Act. The Panel’s
conclusion rests, not only on an inadequate evidentiary foundation, but
also on an incorrect understanding of the type of conduct that can, as a
matter of law, be characterized as discrimination in the enforcement of
measures.
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