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REPERTORY OF APPELLATE BODY REPORTS

Mutually Agreed Solutions


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EC — Bananas III (Article 21.5 — Ecuador II) / EC — Bananas III (Article 21.5 — US), paras. 211-212, 215


M.6.1 EC — Bananas III (Article 21.5 — Ecuador II) / EC — Bananas III (Article 21.5 — US), paras. 211-212, 215     back to top
(WT/DS27/AB/RW2/ECU, WT/DS27/AB/RW/USA, WT/DS27/AB/RW2/ECU/Corr.1, WT/DS27/AB/RW/USA/Corr.1)

In respect of the criterion of a “positive solution and effective settlement”, the Panel relied on Article 3.7 of the DSU. Article 3.7 states the “aim” of the dispute settlement system. It articulates a preference for solutions that are mutually acceptable to the parties to a dispute and consistent with the covered agreements. However, nothing in Article 3.7 establishes a condition under which a party would be prevented from initiating compliance proceedings or, indeed, dictates that the only kind of settlement envisaged in that provision is one that bars recourse to compliance proceedings under Article 21.5. Article 3.7 is not prescriptive as to the content of a mutually agreed solution, save that it must be consistent with the covered agreements. The only express limitation referred to in Article 3.7 is that “a Member shall exercise its judgement as to whether action under these procedures would be fruitful”. The Appellate Body has interpreted this phrase to indicate that a Member is “expected to be largely self-regulating in deciding whether any such action would be ‘fruitful’ ”. This is also borne out by Article 3.3, which provides that the prompt settlement of situations in which a Member, in its own judgement, considers that a benefit accruing to it under the covered agreements is being impaired by a measure taken by another Member is essential to the effective functioning of the WTO.

 

The term “solution” employed in Article 3.7 refers to the “act of solving a problem”. There are usually different ways of solving any given problem. Pursuant to Article 19.1 of the DSU, when 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. Accordingly, it is, in principle, within the Member’s discretion to choose the means of implementation and to decide in which way it will seek to achieve compliance. The DSU thus recognizes that a solution leading to compliance can be implemented in various ways. Similarly, a mutually agreed solution pursuant to Article 3.7 may encompass an agreement to forgo the right to initiate compliance proceedings. Or it may provide for the suspension of the right of recourse to Article 21.5 until the steps agreed upon in a mutually agreed solution have been implemented. Yet, this need not always be so. We therefore do not consider that the mere agreement to a “solution” necessarily implies that parties waive their right to have recourse to the dispute settlement system in the event of a disagreement as to the existence or consistency with the covered agreements of a measure taken to comply. Instead, we consider that there must be a clear indication in the agreement between the parties of a relinquishment of the right to have recourse to Article 21.5. …

 

 

… We see nothing in Article 3.7 or elsewhere in the DSU that prevents parties to a dispute from reaching a settlement that would preclude recourse to Article 21.5 proceedings after the adoption of recommendations and rulings by the DSB. In fact, Article 22.8 of the DSU stipulates that suspension of concessions shall only be applied until such time as a mutually satisfactory solution is reached. Thus, the DSU itself clearly envisages the possibility of entering into mutually agreed solutions after recommendations and rulings are made by the DSB. We do not consider that the factor that the Understandings were concluded only after the DSB made recommendations and rulings assists to determine whether the Understandings precluded the parties from initiating Article 21.5 proceedings.

 


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