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REPERTORY OF APPELLATE BODY REPORTS

Nullification or Impairment


ON THIS PAGE:

EC — Bananas III, paras. 252-253
EC — Export Subsidies on Sugar, para. 296
EC — Export Subsidies on Sugar, para. 299
EC — Bananas III (Article 21.5 — Ecuador II) / EC — Bananas III (Article 21.5 — US), para. 360
EC — Bananas III (Article 21.5 — Ecuador II) / EC — Bananas III (Article 21.5 — US), paras. 464, 469, 475


N.3.1 EC — Bananas III, paras. 252-253     back to top
(WT/DS27/AB/R)

So, too, is the panel report in United States Superfund, to which the Panel referred. In that case, the panel examined whether measures with “only an insignificant effect on the volume of exports do nullify or impair benefits under Article III:2…”. The panel concluded (and in so doing, confirmed the views of previous panels) that:

 

Article III:2, first sentence, cannot be interpreted to protect expectations on export volumes; it protects expectations on the competitive relationship between imported and domestic products. A change in the competitive relationship contrary to that provision must consequently be regarded ipso facto as a nullification or impairment of benefits accruing under the General Agreement. A demonstration that a measure inconsistent with Article III:2, first sentence, has no or insignificant effects would therefore in the view of the Panel not be a sufficient demonstration that the benefits accruing under that provision had not been nullified or impaired even if such a rebuttal were in principle permitted. [BISD 34S/136, para. 5.1.9]

 

The panel in United States Superfund subsequently decided “not to examine the submissions of the parties on the trade effects of the tax differential” on the basis of the legal grounds it had enunciated. The reasoning in United States Superfund applies equally in this case.

 
N.3.2 EC — Export Subsidies on Sugar,
para. 296     back to top
(WT/DS265/AB/R, WT/DS266/AB/R, WT/DS283/AB/R)

… pursuant to Article 3.8, where a Member has acted inconsistently with a covered agreement, the inconsistency is presumed to nullify or impair benefits accruing to other Members. In such a case, the burden falls on the defending Member to rebut this presumption by demonstrating that the inconsistency did not result in nullification or impairment. We observe that Article 3.8 equates the concept of “nullification or impairment” with “adverse impact on other Members”, although the DSU does not define “adverse impact”.

 
N.3.3 EC — Export Subsidies on Sugar,
para. 299     back to top
(WT/DS265/AB/R, WT/DS266/AB/R, WT/DS283/AB/R)

The text of Article 3.8 of the DSU suggests that a Member may rebut the presumption of nullification or impairment by demonstrating that its breach of WTO rules has no adverse impact on other Members. Trade losses represent an obvious example of adverse impact under Article 3.8. Unless a Member demonstrates that there are no adverse trade effects arising as a consequence of WTO-inconsistent export subsidies, we do not believe that a complaining Member’s expectations would have a bearing on a finding pursuant to Article 3.8 of the DSU. Therefore, the European Communities has failed to rebut the presumption of nullification or impairment pursuant to Article 3.8 of the DSU.

 
N.3.4 EC — Bananas III (Article 21.5 — Ecuador II) / EC — Bananas III (Article 21.5 — US),
para. 360     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)

We believe that nullification or impairment resulting from inconsistencies with Articles I:1 and XIII may coincide or overlap, and that any such overlap is relevant only to the calculation of the total level of nullification or impairment suffered for the purposes of negotiating compensation or assessing the amount of nullification and impairment in an arbitration under Article 22 of the DSU. However, we do not need to pronounce on such questions in these Article 21.5 proceedings. Whether or not nullification or impairment caused by the violation of one provision overlaps or coincides with that caused by the violation of another provision does not alter the fact that both infringements trigger the presumption of nullification or impairment under Article 3.8. In any event, a demonstration that nullification or impairment caused by the infringements of distinct WTO obligations may overlap is not sufficient to rebut the presumption in Article 3.8 of the DSU that any of these infringements constitutes a prima facie case of nullification or impairment.

 
N.3.5 EC — Bananas III (Article 21.5 — Ecuador II) / EC — Bananas III (Article 21.5 — US),
paras. 464, 469, 475     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)

We consider that the notion of “standing”, as interpreted by the Appellate Body in the original proceedings, is broader than the notion of “nullification or impairment”. In other words, if there is nullification or impairment, there will also be standing to bring a complaint. However, standing may also exist in cases that result in no finding of nullification or impairment. In the original EC — Bananas III proceedings, the Appellate Body found that “a Member has broad discretion in deciding whether to bring a case against another Member under the DSU”, and that “a Member is expected to be largely self-regulating in deciding whether any such action would be ‘fruitful’ ”. The Appellate Body further concluded that, considering that the United States was a producer and potential exporter of bananas, it was justified in bringing its claims under the GATT 1994. The Appellate Body then used this same argument to find that the United States had suffered nullification or impairment of benefits.

 

 

In these proceedings, as in the original proceedings, the contested measure may not have actual trade effects because, at present, there are no exports of bananas from the United States to the European Communities. However, in order to determine whether the United States has suffered nullification or impairment, “competitive opportunities” and, in particular, any potential export interest of the United States must be taken into account. We do not consider that the European Communities’ argument — that, as a net importer of bananas, the United States could not credibly have a “potential” interest in exporting bananas to the European Communities — is sufficient to rebut the presumption of nullification or impairment under Article 3.8. As noted by the panel and the Appellate Body in the original proceedings, while present production in the United States is minimal, it could at any time start exporting the few bananas it produces to the European Communities. That this may be unlikely does not disprove that the United States is a potential exporter of bananas to the European Communities. …

 

 

… We agree with the arbitrators that the question whether nullification or impairment exists within the meaning of Article 3.8 of the DSU, and the question of what level of suspension of concessions is equivalent to the level of nullification or impairment under Article 22.6, are distinct. Therefore, the question how the arbitrators calculated the level of nullification or impairment under Article 22.6 arises in a different procedural context in WTO dispute settlement. In any event, the arbitrators stated that there was “continuation of nullification or impairment of US benefits under the revised EC regime”, including as a consequence of an inconsistency with Article XIII of the GATT 1994.

 


The texts reproduced here do not have the legal standing of the original documents which are entrusted and kept at the WTO Secretariat in Geneva.