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REPERTORY OF APPELLATE BODY REPORTS

Mandatory and Discretionary Legislation


ON THIS PAGE:

US — 1916 Act, paras. 60-61
US — 1916 Act, paras. 88-91
US — 1916 Act, para. 99
US — 1916 Act, para. 100
US — Section 211 Appropriations Act, para. 259
US — Countervailing Measures on Certain EC Products, para. 159 and footnote 334
US — Corrosion—Resistant Steel Sunset Review, para. 89
US — Corrosion—Resistant Steel Sunset Review, para. 93 and footnote 94
US — Corrosion-Resistant Steel Sunset Review, para. 98
US — Upland Cotton, para. 706
US — Zeroing (EC), para. 214


M.1.1 US — 1916 Act, paras. 60-61     back to top
(WT/DS136/AB/R, WT/DS162/AB/R)

Prior to the entry into force of the WTO Agreement, it was firmly established that Article XXIII:1(a) of the GATT 1947 allowed a Contracting Party to challenge legislation as such, independently from the application of that legislation in specific instances. While the text of Article XXIII does not expressly address the matter, panels consistently considered that, under Article XXIII, they had the jurisdiction to deal with claims against legislation as such. In examining such claims, panels developed the concept that mandatory and discretionary legislation should be distinguished from each other, reasoning that only legislation that mandates a violation of GATT obligations can be found as such to be inconsistent with those obligations. We consider the application of this distinction to the present cases in section IV(B) below.

 

Thus, that a Contracting Party could challenge legislation as such before a panel was well settled under the GATT 1947. We consider that the case law articulating and applying this practice forms part of the GATT acquis which, under Article XVI:1 of the WTO Agreement, provides guidance to the WTO and, therefore, to panels and the Appellate Body. Furthermore, in Article 3.1 of the DSU, Members affirm “their adherence to the principles for the management of disputes heretofore applied under Articles XXII and XXIII of GATT 1947”. We note that, since the entry into force of the WTO Agreement, a number of panels have dealt with dispute settlement claims brought against a Member on the basis of its legislation as such, independently from the application of that legislation in specific instances.

 
M.1.2 US — 1916 Act, paras. 88-91     back to top
(WT/DS136/AB/R, WT/DS162/AB/R)

… the concept of mandatory as distinguished from discretionary legislation was developed by a number of GATT panels as a threshold consideration in determining when legislation as such — rather than a specific application of that legislation — was inconsistent with a Contracting Party’s GATT 1947 obligations. The practice of GATT panels was summed up in United States Tobacco as follows:

 

… panels had consistently ruled that legislation which mandated action inconsistent with the General Agreement could be challenged as such, whereas legislation which merely gave the discretion to the executive authority of a contracting party to act inconsistently with the General Agreement could not be challenged as such; only the actual application of such legislation inconsistent with the General Agreement could be subject to challenge. (emphasis added)

 

Thus, the relevant discretion, for purposes of distinguishing between mandatory and discretionary legislation, is a discretion vested in the executive branch of government.

 

The 1916 Act provides for two types of actions to be brought in a United States federal court: a civil action initiated by private parties, and a criminal action initiated by the United States Department of Justice. Turning first to the civil action, we note that there is no relevant discretion accorded to the executive branch of the United States’ government with respect to such action. These civil actions are brought by private parties. A judge faced with such proceedings must simply apply the 1916 Act. In consequence, so far as the civil actions that may be brought under the 1916 Act are concerned, the 1916 Act is clearly mandatory legislation as that term has been understood for purposes of the distinction between mandatory and discretionary legislation.

 

The Panel, however, examined that part of the 1916 Act that provides for criminal prosecutions, and found that the discretion enjoyed by the United States Department of Justice to initiate or not to initiate criminal proceedings does not mean that the 1916 Act is a discretionary law. In light of the case law developing and applying the distinction between mandatory and discretionary legislation, we believe that the discretion enjoyed by the United States Department of Justice is not discretion of such a nature or of such breadth as to transform the 1916 Act into discretionary legislation, as this term has been understood for purposes of distinguishing between mandatory and discretionary legislation. We, therefore, agree with the Panel’s finding on this point.

 
M.1.3 US — 1916 Act, para. 99     back to top
(WT/DS136/AB/R, WT/DS162/AB/R)

We note that answering the question of the continuing relevance of the distinction between mandatory and discretionary legislation for claims brought under the Anti-Dumping Agreement would have no impact upon the outcome of these appeals, because the 1916 Act is clearly not discretionary legislation, as that term has been understood for purposes of distinguishing between mandatory and discretionary legislation. Therefore, we do not find it necessary to consider, in these cases, whether Article 18.4, or any other provision of the Anti-Dumping Agreement, has supplanted or modified the distinction between mandatory and discretionary legislation. For the same reasons, the Panel did not, in the Japan Panel Report, need to opine on this issue.

 
M.1.4 US — 1916 Act, para. 100     back to top
(WT/DS136/AB/R, WT/DS162/AB/R)

… we note that, before the Panel and before us, the United States invoked the distinction between mandatory and discretionary legislation to argue that the 1916 Act cannot be mandatory legislation because United States’ courts have interpreted or may interpret the 1916 Act in ways that would make it consistent with the WTO obligations of the United States. As we have seen, in the case law developed under the GATT 1947, the distinction between mandatory and discretionary legislation turns on whether there is relevant discretion vested in the executive branch of government. The United States, however, does not rely upon the discretion of the executive branch of the United States’ government, but on the interpretation of the 1916 Act by the United States’ courts. In our view, this argument does not relate to the distinction between mandatory and discretionary legislation.

 
M.1.5 US — Section 211 Appropriations Act, para. 259     back to top
(WT/DS176/AB/R)

… As the Panel rightly noted, in US 1916 Act, we stated that a distinction should be made between legislation that mandates WTO-inconsistent behaviour, and legislation that gives rise to executive authority that can be exercised with discretion. We quoted with approval there the following statement of the panel in US Tobacco:

 

… panels had consistently ruled that legislation which mandated action inconsistent with the General Agreement could be challenged as such, whereas legislation which merely gave the discretion to the executive authority of a contracting party to act inconsistently with the General Agreement could not be challenged as such; only the actual application of such legislation inconsistent with the General Agreement could be subject to challenge.

 

Thus, where discretionary authority is vested in the executive branch of a WTO Member, it cannot be assumed that the WTO Member will fail to implement its obligations under the WTO Agreement in good faith. Relying on these rulings, and interpreting them correctly, the Panel concluded that it could not assume that OFAC would exercise its discretionary executive authority inconsistently with the obligations of the United States under the WTO Agreement. Here, too, we agree.

 
M.1.6 US — Countervailing Measures on Certain EC Products, para. 159 and footnote 334     back to top
(WT/DS212/AB/R)

There remains the question whether Section 1677(5)(F) is inconsistent per se with the WTO obligations of the United States because it mandates334 a particular method of determining the existence of a “benefit” that is contrary to the SCM Agreement. We agree with both the appellant and appellee that “Section 1677(5)(F) does not … prescribe any specific methodology”, and, consequently, does not mandate the USDOC to apply the “same person” method. …

 
M.1.7 US — Corrosion—Resistant Steel Sunset Review, para. 89
(WT/DS244/AB/R)     back to top

We observe, too, that allowing measures to be the subject of dispute settlement proceedings, whether or not they are of a mandatory character, is consistent with the comprehensive nature of the right of Members to resort to dispute settlement to “preserve [their] rights and obligations … under the covered agreements, and to clarify the existing provisions of those agreements”. As long as a Member respects the principles set forth in Articles 3.7 and 3.10 of the DSU, namely, to exercise their “judgement as to whether action under these procedures would be fruitful” and to engage in dispute settlement in good faith, then that Member is entitled to request a panel to examine measures that the Member considers nullify or impair its benefits. We do not think that panels are obliged, as a preliminary jurisdictional matter, to examine whether the challenged measure is mandatory. This issue is relevant, if at all, only as part of the panel’s assessment of whether the measure is, as such, inconsistent with particular obligations. It is to this issue that we now turn.

 
M.1.8 US — Corrosion—Resistant Steel Sunset Review, para. 93 and footnote 94     back to top
(WT/DS244/AB/R)

In adopting this approach, the Panel was applying, as a preliminary consideration, the so-called “mandatory/discretionary distinction”. We explained in US 1916 Act that this analytical tool existed prior to the establishment of the WTO, and that a number of GATT panels had used it as a technique for evaluating claims brought against legislation as such. As the Panel seemed to acknowledge, we have not, as yet, been required to pronounce generally upon the continuing relevance or significance of the mandatory/discretionary distinction.94 Nor do we consider that this appeal calls for us to undertake a comprehensive examination of this distinction. We do, nevertheless, wish to observe that, as with any such analytical tool, the import of the “mandatory/discretionary distinction” may vary from case to case. For this reason, we also wish to caution against the application of this distinction in a mechanistic fashion.

 
M.1.9 US — Corrosion-Resistant Steel Sunset Review, para. 98
(WT/DS244/AB/R)     back to top

The Panel adopted a similar narrow approach in finding that the Sunset Policy Bulletin is not an “administrative procedure” within the meaning of Article 18.4 of the Anti-Dumping Agreement. Having adopted the view that an administrative procedure is “a pre-established rule for the conduct of an anti-dumping investigation”, the Panel assumed that a “rule” means a “mandatory rule” and used its previous finding that the Sunset Policy Bulletin is not a mandatory legal instrument to come to the conclusion that it therefore cannot be an administrative procedure. Again, the Panel did not consider the normative nature of the provisions of the Sunset Policy Bulletin, nor compare the type of norms that USDOC is required to publish in formal regulations with the type of norms it may set out in policy statements. These inquiries would have assisted the Panel in determining whether the Sunset Policy Bulletin is, in fact, an “administrative procedure” within the meaning of Article 18.4 of the Anti-Dumping Agreement.

 
M.1.10 US — Upland Cotton, para. 706     back to top
(WT/DS267/AB/R)

The Panel explained that, in its view, “threat” of circumvention under Article 10.1 requires that there be “an unconditional legal entitlement”. We see no basis for this requirement in Article 10.1. The Panel also stated that “[i]n order to pose a ‘threat’ within the meaning of Article 10.1 of the Agreement on Agriculture, [it did] not believe that it is sufficient that an export credit guarantee programme might possibly, or theoretically, be used in a manner which threatens to lead to circumvention of export subsidy commitments”. In both of these statements, the Panel seems to conflate the phrase “threaten to lead to … circumvention” with certainty that the circumvention will happen. We find it difficult, moreover, to reconcile the Panel’s interpretation with the ordinary meaning of the term “threaten”, which, as we indicated earlier, connotes that something is “likely” to happen. We also find it difficult to reconcile these statements of the Panel with its own view that it did “not believe that the ‘mandatory/discretionary’ distinction is the sole legally determinative one for our examination of whether or not ‘threat’ of circumvention of export subsidy commitments within the meaning of Article 10.1 of the Agreement on Agriculture has been proven to the required standard”.

 
M.1.11 US — Zeroing (EC), para. 214     back to top
(WT/DS294/AB/R, WT/DS294/AB/R/Corr.1)

We … do not agree with the United States that the Panel erred simply because it did not apply the mandatory/discretionary distinction in analysing and finding a violation of Article 2.4.2 of the Anti-Dumping Agreement. As the Appellate Body has said [in US Corrosion-Resistant Steel Sunset Review, paragraph 93], “the import of the ‘mandatory/discretionary distinction’ may vary from case to case”. …

 

334. We are not, by implication, precluding the possibility that a Member could violate its WTO obligations by enacting legislation granting discretion to its authorities to act in violation of its WTO obligation. We make no finding in this respect.     back to text

94. In our Report in US 1916 Act, we examined the challenged legislation and found that the alleged “discretionary” elements of that legislation were not of a type that, even under the mandatory/discretionary distinction, would have led to the measure being classified as “discretionary” and therefore consistent with the Anti-Dumping Agreement. In other words, we assumed that the distinction could be applied because it did not, in any event, affect the outcome of our analysis. We specifically indicated that it was not necessary, in that appeal, for us to answer “the question of the continuing relevance of the distinction between mandatory and discretionary legislation for claims brought under the Anti-Dumping Agreement” (Appellate Body Report, US 1916 Act, para. 99). We also expressly declined to answer this question in footnote 334 to paragraph 159 of our Report in US Countervailing Measures on Certain EC Products. Furthermore, the appeal in US Section 211 Appropriations Act presented a unique set of circumstances. In that case, in defending the measure challenged by the European Communities, the United States unsuccessfully argued that discretionary regulations, issued under a separate law, cured the discriminatory aspects of the measure at issue.     back to text


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