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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)
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)
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)
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)
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)
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)
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)
… 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)
… 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)
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)
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)
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)
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 analyzed 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)
… 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)
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)
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)
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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