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REPERTORY OF APPELLATE BODY REPORTS

Suspension of Concessions or Other Obligations


ON THIS PAGE:

US — Certain EC Products, para. 120
US — Cotton Yarn, para. 120
Mexico — Taxes on Soft Drinks, para. 77
US — Continued Suspension / Canada — Continued Suspension, paras. 303, 305-307, 309-310
US — Continued Suspension / Canada — Continued Suspension, para. 315
US — Continued Suspension / Canada — Continued Suspension, para. 348
US — Continued Suspension / Canada — Continued Suspension, para. 352
US — Continued Suspension / Canada — Continued Suspension, para. 387
US — Continued Suspension / Canada — Continued Suspension, paras. 388-389
EC — Bananas III (Article 21.5 — Ecuador II) / EC — Bananas III (Article 21.5 — US), para. 249


S.9.1 US — Certain EC Products, para. 120
(WT/DS165/AB/R)

The obligation of WTO Members not to suspend concessions or other obligations without prior DSB authorization is explicitly set out in Articles 22.6 and 23.2(c), not in Article 3.7 of the DSU … We consider, however, that if a Member has acted in breach of Articles 22.6 and 23.2(c) of the DSU, that Member has also, in view of the nature and content of Article 3.7, last sentence, necessarily acted contrary to the latter provision.

 
S.9.2 US — Cotton Yarn, para. 120
(WT/DS192/AB/R)

Our view is supported further by the rules of general international law on state responsibility, which require that countermeasures in response to breaches by states of their international obligations be commensurate with the injury suffered. In the same vein, we note that Article 22.4 of the DSU stipulates that the suspension of concessions shall be equivalent to the level of nullification or impairment. This provision of the DSU has been interpreted consistently as not justifying punitive damages. These two examples illustrate the consequences of breaches by states of their international obligations, whereas a safeguard action is merely a remedy to WTO-consistent “fair trade” activity. It would be absurd if the breach of an international obligation were sanctioned by proportionate counter measures, while, in the absence of such breach, a WTO Member would be subject to a disproportionate and, hence, “punitive”, attribution of serious damage not wholly caused by its exports. In our view, such an exorbitant derogation from the principle of proportionality in respect of the attribution of serious damage could be justified only if the drafters of the ATC had expressly provided for it, which is not the case.

 
S.9.3 Mexico — Taxes on Soft Drinks, para. 77
(WT/DS308/AB/R)

We observe, furthermore, that Mexico’s interpretation of Article XX(d) disregards the fact that the GATT 1994 and the DSU specify the actions that a WTO Member may take if it considers that another WTO Member has acted inconsistently with its obligations under the GATT 1994 or any of the other covered agreements. … By the same logic, such action under Article XX(d) would evade the specific and detailed rules that apply when a WTO Member seeks to take countermeasures in response to another Member’s failure to comply with rulings and recommendations of the DSB pursuant to Article XXIII:2 of the GATT 1994 and Articles 22 and 23 of the DSU. Mexico’s interpretation would allow WTO Members to adopt WTO-inconsistent measures based upon a unilateral determination that another Member has breached its WTO obligations, in contradiction with Articles 22 and 23 of the DSU and Article XXIII:2 of the GATT 1994.

 
S.9.4 US — Continued Suspension / Canada — Continued Suspension, paras. 303, 305-307, 309-310
(WT/DS320/AB/R, WT/DS321/AB/R)

The suspension of concessions may not be maintained indefinitely. The authorization to suspend concessions is contingent and limited in time. Article 22.8 of the DSU provides that the suspension of concessions shall be “temporary” and shall only be applied until one of the three resolutive conditions set out in that provision obtains, namely, when:

 

… the measure found to be inconsistent with a covered agreement has been removed, or the Member that must implement recommendations or rulings provides a solution to the nullification or impairment of benefits, or a mutually satisfactory solution is reached.

 

 

Reading the first sentence of Article 22.8 as a whole, the “removal” of “the measure found to be inconsistent” should be properly understood to require nothing less than substantive removal of the inconsistent measure. Substantive removal may be achieved by repealing the inconsistent measure. Where a WTO Member adopts an implementing measure that replaces the inconsistent measure, the implementing measure must bring about substantive compliance, that is, compliance with the DSB’s recommendations and rulings and consistency with the covered agreements. We recognize that the first condition in Article 22.8may be understood more narrowly as referring only to compliance with the DSB’s recommendations and rulings. However, a dispute could not be brought to its finality unless the implementing measure rectifies the inconsistencies found in the DSB’s recommendations and rulings and is not in other ways inconsistent with the covered agreements. Interpreting the first condition as requiring substantive compliance, therefore, will ensure that the first condition in Article 22.8 achieves the result obtained under the other two conditions in the same provision, that is, the final and substantive resolution of a dispute. …

 

In terms of the first condition in Article 22.8, therefore, the application of the suspension of concessions may continue until the removal of the measure found by the DSB to be inconsistent results in substantive compliance. If a disagreement arises as to whether substantive compliance is achieved, the fulfilment of the first condition in Article 22.8 cannot be confirmed unless the disagreement is resolved through multilateral dispute settlement. Thus, the suspension of concessions continues to apply pending the outcome of the dispute settlement proceedings concerning the first resolutive condition in Article 22.8. If, by recourse to a multilateral dispute settlement process, the implementing measure is found to bring about substantive compliance, the suspension of concessions may no longer be applied pursuant to the first condition in Article 22.8 and cessation of the suspension is required.

 

This interpretation is supported by the second sentence of Article 22.8 … The second sentence of Article 22.8 requires surveillance by the DSB until its recommendations to bring a measure into conformity with the covered agreements have been implemented. In other words, DSB surveillance is required until substantive compliance is achieved.

 

 

… We agree that the three conditions in Article 22.8 are alternatives to each other. However, they are alternatives leading to the same result, that is, the termination of the suspension of concessions and final resolution of a dispute. It is difficult to envisage how a dispute could be finally resolved merely because the inconsistent measure is formally removed, regardless of whether substantive compliance has been achieved. …

 

Although Article 22.8 sets forth the resolutive conditions under which the suspension of concessions must cease to apply, it does not identify the procedures to be followed should a dispute arise as to whether one of the conditions has been satisfied. This does not mean that Members can remain passive once concessions have been suspended pursuant to the DSB’s authorization. The requirement that the suspension of concessions must be temporary indicates that the suspension of concessions, as the last resort available under the DSU when compliance is not achieved, is an abnormal state of affairs that is not meant to remain indefinitely. Members must act in a cooperative manner so that the normal state of affairs, that is, compliance with the covered agreements and absence of the suspension of concessions, may be restored as quickly as possible. Thus, both the suspending Member and the implementing Member share the responsibility to ensure that the application of the suspension of concessions is “temporary”. Moreover, the fulfilment of the first resolutive condition in Article 22.8 requires certain actions from both Members. The implementing Member is required to remove the measure found to be inconsistent with a covered agreement. At the same time, the suspending Member is required to ensure that the suspension of concessions is only applied within the limits of Article 22.8. Where, as in this dispute, an implementing measure is taken and Members disagree as to whether this measure achieves substantive compliance, both Members have a duty to engage in WTO dispute settlement in order to establish whether the conditions in Article 22.8 have been met and whether, as a consequence, the suspension of concessions must be terminated. Once substantive compliance has been confirmed through WTO dispute settlement procedures, the authorization to suspend concessions lapses by operation of law (ipso jure), because it has been determined that one of the resolutive conditions pursuant to Article 22.8 is fulfilled. …

 
S.9.5 US — Continued Suspension / Canada — Continued Suspension, para. 315
(WT/DS320/AB/R, WT/DS321/AB/R)

… In sum, a presumption of good faith, which can be claimed by both parties, does not offer a clear answer to the question of when inconsistencies arising from the original measure should be considered to have been removed within the meaning of Article 22.8 of the DSU.

 
S.9.6 US — Continued Suspension / Canada — Continued Suspension, para. 348
(WT/DS320/AB/R, WT/DS321/AB/R)

… Thus, initiation of Article 21.5 proceedings by either Member, as soon as possible, to examine the consistency with the covered agreements of Directive 2003/74/EC would contribute to a prompt resolution of the disagreement as to whether the inconsistent measure has been removed and whether the suspension of concessions must be terminated pursuant to Article 22.8.

 
S.9.7 US — Continued Suspension / Canada — Continued Suspension, para. 352
(WT/DS320/AB/R, WT/DS321/AB/R)

… In the post-suspension stage of a dispute, however, an original respondent would initiate Article 21.5 panel proceedings for a specific reason: to obtain a multilateral confirmation that its implementing measure has achieved substantive compliance, so as to render the continued application of the suspension of concessions unlawful pursuant to Article 22.8. The situation is thus one of those envisaged under Article 3.3, in that the original respondent considers that its benefits under the covered agreement are being impaired by the suspension of concessions maintained by the original complainant, which is denied by the suspending Member. The task of an Article 21.5 panel, established at the request of the original respondent, is to determine whether the implementing measure brings about substantive compliance. There is nothing “abstract” about such a determination; it results in an adjudication with real consequences, including, in particular, whether the application of the suspension of concessions may continue.

 
S.9.8 US — Continued Suspension / Canada — Continued Suspension, para. 387
(WT/DS320/AB/R, WT/DS321/AB/R)

… The Panel’s finding that, by maintaining the suspension of concessions, the United States and Canada are seeking the redress of a violation without abiding by the rules of the DSU thus appears to presuppose what is yet to be established, that is, that the inconsistent measure against which the suspension of concessions was authorized (Directive 96/22/EC) has actually been “removed” within the meaning of Article 22.8 by Directive 2003/74/EC. This finding of the Panel flows from its erroneous approach of considering Articles 23.1 and 23.2(a) completely separately from the requirements of Article 22.8, which we discussed and rejected earlier.

 
S.9.9 US — Continued Suspension / Canada — Continued Suspension, paras. 388-389
(WT/DS320/AB/R, WT/DS321/AB/R)

… We fail to see the relevance of the distinction between an authorization and an obligation to suspend concessions for purposes of analysing whether the United States and Canada are seeking the redress of a violation concerning Directive 2003/74/EC. The relevant question before the Panel was whether the authorization to suspend concessions had lapsed because one of three conditions in Article 22.8 has been met. In the absence of a finding in WTO dispute settlement that the first condition in Article 22.8 had been met, the authorization to suspend concessions did not cease to be legally valid.

 

In addition, the Panel observed that “[i]n none of the circumstances foreseen by [the first sentence of] Article 22.8 does this provision require a decision of the DSB”. We agree that, under the first sentence of Article 22.8, a decision of the DSB is not required if Members reach a mutually agreed solution. Similarly, a DSB decision is not required if the suspending Member does not dispute that the measure found to be inconsistent with a covered agreement has been removed. However, where a disagreement arises as to whether the measure found to be inconsistent has indeed been removed, this disagreement must be resolved through Article 21.5 proceedings to determine whether the suspension of concessions is still applied consistently with the objective conditions under Article 22.8 or must be terminated. Under such circumstances, DSB decisions are required for the dispute to proceed pursuant to the rules of the DSU, including the decision to establish a panel and the adoption of the panel or Appellate Body reports examining the implementing measure. Moreover, the second sentence of Article 22.8 requires the DSB to keep under surveillance the implementation of adopted recommendations and rulings in cases where concessions have been suspended. Article 22.8 therefore clearly contemplates an ongoing role of the DSB in reviewing the implementation of recommendations and rulings, thus confirming that a dispute concerning implementation should be subject to multilateral resolution and not be decided on the basis of a unilateral declaration of compliance or non-compliance.

 
S.9.10 EC — Bananas III (Article 21.5 — Ecuador II) / EC — Bananas III (Article 21.5 — US), para. 249
(WT/DS27/AB/RW2/ECU, WT/DS27/AB/RW/USA, WT/DS27/AB/RW2/ECU/Corr.1, WT/DS27/AB/RW/USA/Corr.1)

… Article 22.1 of the DSU provides that suspension of concessions is a temporary measure “available” in the event that it has been determined that the original DSB recommendations and rulings have not been fully implemented by the end of the reasonable period of time. The term “available” indicates that, once suspension of concessions is authorized, it is within the Members’ discretion to exercise that authorization subject to the conditions set out in Article 22.8. …

 


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