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REPERTORY OF APPELLATE BODY REPORTS

Order of Analysis — Use of Assumptions


ON THIS PAGE:

US — Gasoline, p. 22, DSR 1996:I, p. 3 at 20
US — Shrimp, para. 119
US — FSC, para. 89 and footnote 99
Canada — Autos, para. 151
US — Steel Safeguards, footnote 494 to para. 481
Canada — Wheat Exports and Grain Imports, para. 109
Canada — Wheat Exports and Grain Imports, para. 122
Canada — Wheat Exports and Grain Imports, paras. 126-129
US — Upland Cotton, paras. 431-433
US — Upland Cotton, para. 628
US — Gambling, para. 292
US — Zeroing (EC) (Article 21.5 — EC), paras. 277-279


O.2.1 US — Gasoline, p. 22, DSR 1996:I, p. 3 at 20      back to top
(WT/DS2/AB/R)

… In order that the justifying protection of Article XX may be extended to it, the measure at issue must not only come under one or another of the particular exceptions — paragraphs (a) to (j) — listed under Article XX; it must also satisfy the requirements imposed by the opening clauses of Article XX. The analysis is, in other words, two-tiered: first, provisional justification by reason of characterization of the measure under XX(g); second, further appraisal of the same measure under the introductory clauses of Article XX.

 
O.2.2 US — Shrimp,
para. 119      back to top
(WT/DS58/AB/R)

The sequence of steps indicated above in the analysis of a claim of justification under Article XX reflects, not inadvertence or random choice, but rather the fundamental structure and logic of Article XX. The Panel appears to suggest, albeit indirectly, that following the indicated sequence of steps, or the inverse thereof, does not make any difference. To the Panel, reversing the sequence set out in United States — Gasoline “seems equally appropriate”. We do not agree.

 
O.2.3 US — FSC,
para. 89 and footnote 99      back to top
(WT/DS108/AB/R)

We start with the United States’ argument that the Panel erred by failing to begin its examination of the European Communities’ claim under Article 3.1(a) of the SCM Agreement with footnote 59 of that Agreement. Instead, the Panel began its examination with the general definition of a “subsidy” that is set forth in Article 1.1 of the SCM Agreement. This definition applies throughout the SCM Agreement, to all the different types of “subsidy” covered by that Agreement. In our view, it was not a legal error for the Panel to begin its examination of whether the FSC measure involves export subsidies by examining the general definition of a “subsidy” that is applicable to export subsidies in Article 3.1(a). In any event, whether the examination begins with the general definition of a “subsidy” in Article 1.1 or with footnote 59, we believe that the outcome of the European Communities’ claim under Article 3.1(a) would be the same. The appropriate meaning of both provisions can be established and can be given effect, irrespective of whether the examination of the claim of the European Communities under Article 3.1(a) begins with Article 1.1 or with footnote 59.99

 
O.2.4 Canada — Autos,
para. 151      back to top
(WT/DS139/AB/R, WT/DS142/AB/R)

In United States — Import Prohibition of Certain Shrimp and Shrimp Products, we said, in the context of Article XX of the GATT 1994, that a panel may not ignore the “fundamental structure and logic” of a provision in deciding the proper sequence of steps in its analysis, save at the peril of reaching flawed results. Similarly, here, the fundamental structure and logic of Article I:1, in relation to the rest of the GATS, require that determination of whether a measure is, in fact, covered by the GATS must be made before the consistency of that measure with any substantive obligation of the GATS can be assessed.

 
O.2.5 US — Steel Safeguards,
footnote 494 to para. 481      back to top
(WT/DS248/AB/R, WT/DS249/AB/R, WT/DS251/AB/R, WT/DS252/AB/R, WT/DS253/AB/R, WT/DS254/AB/R, WT/DS258/AB/R, WT/DS259/AB/R)

In paragraph 10.278 of the Panel Reports, the Panel stated that it “assumed for the purposes of its consideration of the issue of causation”, that the relevant domestic producers had been correctly defined and that serious injury or threat thereof existed. We note that the Panel found no “increased imports” for five product categories — CCFRS, hot-rolled bar, stainless steel rod, tin mill, and stainless steel wire. However, the Panel must also have assumed, tacitly, that, for the purposes of its causation analysis, imports had increased for those five products. We do not see anything improper per se in panels making such assumptions, especially when doing so enables panels to make findings they otherwise would not have made, thereby facilitating appellate review. We are mindful that the volume and complexity of this case may have prompted the Panel to exercise judicial economy on several issues and to rely on the corresponding inter-dependent assumptions. We note, however, that the cumulation of several inter-related assumptions could have affected our ability to complete the Panel’s legal analysis had we pursued a ruling on causation.

 
O.2.6 Canada — Wheat Exports and Grain Imports,
para. 109
(WT/DS276/AB/R)      back to top

Thus, in each case it is the nature of the relationship between two provisions that will determine whether there exists a mandatory sequence of analysis which, if not followed, would amount to an error of law. In some cases, this relationship is such that a failure to structure the analysis in the proper logical sequence will have repercussions for the substance of the analysis itself. …

 
O.2.7 Canada — Wheat Exports and Grain Imports,
para. 122
(WT/DS276/AB/R)      back to top

… the approach taken by the Panel in this case must be distinguished from the approach taken by the panels in US — Shrimp and Canada — Autos. Those panels proceeded directly to an analysis under one provision, without having engaged in any analysis under, or made any assumptions relating to, a provision setting forth a logically prior analytical step.

 
O.2.8 Canada — Wheat Exports and Grain Imports,
paras. 126-129
(WT/DS276/AB/R)      back to top

… we wish to express some concern about the manner in which the Panel conducted its analysis of the consistency of the CWB Export Regime with Article XVII:1(a) and (b). As a general principle, panels are free to structure the order of their analysis as they see fit. In so doing, panels may find it useful to take account of the manner in which a claim is presented to them by a complaining Member. Furthermore, panels may choose to use assumptions in order to facilitate resolution of a particular issue or to enable themselves to make additional and alternative factual findings and thereby assist in the resolution of a dispute should it proceed to the appellate level.

 

At the same time, panels must ensure that they proceed on the basis of a properly structured analysis to interpret the substantive provisions at issue. As the Appellate Body found in US — Shrimp and Canada — Autos, panels that ignore or jump over a prior logical step of the analysis run the risk of compromising or invalidating later findings. This risk is compounded in the case of two legally interrelated provisions, where one of those provisions must, as a matter of logic and analytical coherence, be analysed before the other, as is the case with subparagraphs (a) and (b) of Article XVII:1 of the GATT 1994.

 

Furthermore, an over-reliance on the use of assumptions as an aid to analysis can detract from the clarity of a panel’s analysis or have other adverse effects at the appellate stage.…

 

The intertwining of analysis and assumption may, in some cases, create a degree of uncertainty as to the precise findings that a panel did make. This could pose difficulties for parties in deciding whether and what to appeal. We thus recommend that when using assumptions as a tool to facilitate analysis — which we recognize can be useful — panels ensure that they are clear and explicit as to exactly what is assumed and what they have concluded based on these assumptions.

 
O.2.9 US — Upland Cotton,
paras. 431-433      back to top
(WT/DS267/AB/R)

As noted above, Article 6.3(c) is silent as to the sequence of steps to be followed in assessing whether the effect of a subsidy is significant price suppression. We note that Article 6.8 indicates that the existence of serious prejudice pursuant to Articles 5(c) and 6.3(c) is to be determined on the basis of information submitted to or obtained by the panel, including information submitted in accordance with Annex V of the SCM Agreement. Annex V provides some limited guidance about the type of information on which a panel might base its assessment under Article 6.3(c). But we find little other guidance on this issue. The text of Article 6.3(c) does not, however, preclude the approach taken by the Panel to examine first whether significant price suppression exists and then, if it is found to exist, to proceed further to examine whether the significant price suppression is the effect of the subsidy. The Panel evidently considered that, in the absence of significant price suppression, it would not need to proceed to analyse the effect of the subsidy. We see no legal error in this approach.

 

One might contend that, having decided to separate its analysis of significant price suppression from its analysis of the effects of the challenged subsidies, the Panel’s price suppression analysis should have addressed prices without reference to the subsidies and their effects.

 

However, the ordinary meaning of the transitive verb “suppress” implies the existence of a subject (the challenged subsidies) and an object (in this case, prices in the world market for upland cotton). This suggests that it would be difficult to make a judgement on significant price suppression without taking into account the effect of the subsidies. The Panel’s definition of price suppression, explained above, reflects this problem; it includes the notion that prices “do not increase when they otherwise would have” or “they do actually increase, but the increase is less than it otherwise would have been”. The word “otherwise” in this context refers to the hypothetical situation in which the challenged subsidies are absent. Therefore, the fact that the Panel may have addressed some of the same or similar factors in its reasoning as to significant price suppression and its reasoning as to “effects” is not necessarily wrong.

 
O.2.10 US — Upland Cotton,
para. 628      back to top
(WT/DS267/AB/R)

Before proceeding further, we refer to the order followed by the Panel in its analysis of Brazil’s claims against the United States’ export credit guarantee programmes. We do not find that the Panel’s order of analysis was wrong or that it constituted legal error. Nor has the United States made such a claim on appeal. Nevertheless, we are struck by the fact that the Panel addressed Article 10.2 only at the end of its analysis, especially given that this provision constituted the core of the United States’ defence that the disciplines of the Agreement on Agriculture currently do not apply to export credit guarantees at all.

 
O.2.11 US — Gambling,
para. 292      back to top
(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.

 
O.2.12 US — Zeroing (EC) (Article 21.5 — EC),
paras. 277-279
(WT/DS294/AB/RW, WT/DS294/AB/RW/Corr.1)      back to top

… we consider that, in fulfilling its duties under Article 11 of the DSU, a panel may depart from the sequential order suggested by the complaining party, in particular, when this is required by the correct interpretation or application of the legal provisions at issue.

 

In the US — Continued Suspension / Canada — Continued Suspension disputes, the European Communities similarly argued that the panel erroneously disregarded the conditional order of its legal claims when it examined the European Communities’ alternative claim that the measure at issue was consistent with the Agreement on the Application of Sanitary and Phytosanitary Measures (the “SPS Agreement”), having found earlier, in response to one of the European Communities’ main claims, that the United States and Canada had acted inconsistently with Articles 23.1 and 23.2(a) of the DSU. The Appellate Body rejected this argument, and reasoned that the fact that the European Communities described its claims that the measures at issue achieved substantive compliance with the relevant provisions of the SPS Agreement as “alternative claims” did not preclude the panel from evaluating those claims, because this was required by the correct interpretation of Article 22.8 of the DSU.

 

Accordingly, we find that the Panel did not exceed its mandate, and act inconsistently with Article 11 of the DSU, in addressing the European Communities’ alternative “close nexus” claim without first addressing the European Communities’ “omissions” claim.

 

99. We note that the relationship between Article 1.1 and footnote 59 of the SCM Agreement is, therefore, different in this way from the relationship between the chapeau of Article XX of the GATT 1994 and the particular exceptions listed in sub-paragraphs (a) to (j) of that Article. In our Report in United States — Import Prohibitions of Certain Shrimp and Shrimp Products (“United States — Shrimp”), we observed that the application of the general standards of the chapeau of Article XX of the GATT 1994 is rendered very difficult, if not impossible, if the treaty interpreter does not, first, identify and examine the specific exception at issue (WT/DS58/AB/R, adopted 6 November 1998, para. 120).     back to text


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