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Complaint by the European Communities.
November 2004, the European Communities filed a request for
consultations with Canada asserting that Canada should have removed its
retaliatory measures since the EC has removed the measures found to be
WTO-inconsistent in the EC — Hormones case.
The issues which the EC intends to raise in
the consultations include, but are not limited to:
- the failure by Canada to remove the retaliatory measures despite the
EC’s removal of the WTO-inconsistent measures:
- the unilateral determinations by Canada that the new EC legislation
is a continued WTO violation; and
- the failure of Canada to follow DSU Article 21.5 dispute settlement
procedures to adjudicate the matter.
The EC considers that the continued use by
Canada of retaliatory measures in this case, in the current
circumstances, are violations of Articles I and II of GATT 1994, and
Articles 21.5, 22.8, 23.1 and 23.2 (a) and (c) of the DSU.
On 19 November 2004, Australia, Mexico and the United States
requested to join the consultations. On 14 December 2004, Canada
informed the DSB that it had accepted the request of the United States
to join the consultations.
On 13 January 2005, the European Communities requested the establishment of a panel. At its meeting on 25 January 2005, the DSB deferred the establishment of a panel.
Panel and Appellate Body proceedings
At its meeting on 17 February 2005, the DSB established a panel. Australia, Canada, China, Mexico and Chinese Taipei reserved their third party rights. On 23 February 2005, Norway reserved its third party rights. On 25 February 2005, Brazil reserved its third party rights. On 28 February 2005, India and New Zealand reserved their third party rights. On 27 May 2005, the European Communities requested the Director General to compose the panel. On 6 June 2005, the Director-General composed the panel. The first substantive meeting of the Panel with the parties took place on 12-15 September 2005, which was open for observation by the public.
On 20 January 2006, the Chairman of the Panel informed the DSB that due to the complexity of the dispute, and the administrative and procedural matters involved, the panel would not be able to complete its work in six months. Based on the current assessment of the process, the panel expects to issue its final report to the parties in the course of October 2006.
On 23 January 2007, the Chairman of the Panel informed the DSB that it had expected to issue its final report to the parties in the course of October 2006. However, due to the complexity of the scientific issues involved and due to the difficulties in scheduling the second open hearing of the Panel with the parties and experts consulted by the Panel, it was not possible to meet that time line. The Panel estimated that it would issue its final report to the parties in the course of June 2007. On 22 June 2007, the Chairman of the Panel informed the DSB that the preparation of the Panel Report was taking longer than expected and that it expected to issue its final report to the parties in the course of October 2007.
On 31 March 2008, the Panel report was circulated to Members. The Panel concluded that, with respect to the claims of the European Communities concerning the violation of Article 23.2(a) read together with Articles 21.5 and 23.1 of the DSU, Canada made the following procedural violations:
- by seeking, through the measure at issue — that is the suspension of concessions or other obligations subsequent to the notification of the EC implementing measure (Directive 2003/74/EC) — the redress of a violation of obligations under a covered agreement without having recourse to, and abiding by, the rules and procedures of the DSU, Canada has breached Article 23.1 of the DSU;
- by making a determination within the meaning of Article 23.2(a) of the DSU to the effect that a violation had occurred without having recourse to dispute settlement in accordance with rules and procedures of the DSU, Canada has breached Article 23.2(a) of the DSU.
In addition, having addressed the claims raised by the European Communities concerning Article 23.1 read together with Articles 22.8 and 3.7 of the DSU, the Panel concluded that:
- to the extent that the measure found to be inconsistent with the SPS Agreement in the EC - Hormones dispute (WT/DS48) has not been removed by the European Communities, Canada has not breached Article 22.8 of the DSU;
- to the extent that Article 22.8 has not been breached, the European Communities has not established a violation of Articles 23.1 and 3.7 of the DSU as a result of a breach of Article 22.8.
In the light of these conclusions, the Panel recommended that the DSB request Canada to bring its measure into conformity with its obligations under the DSU. The Panel further suggested that, in order to implement its findings under Article 23 and in order to ensure the prompt settlement of this dispute, Canada should have recourse to the rules and procedures of the DSU without delay.
On 29 May 2008, the European Communities notified its decision to request the Appellate Body to review certain issues of law covered in the Panel report and certain legal interpretations developed by the Panel.
On 10 June 2008, Canada notified its decision to appeal to the Appellate Body certain other issues of law covered in the Panel report and certain legal interpretations developed by the Panel. The Appellate Body examined this appeal with that of WT/DS320. On 22 July 2008, the Chairman of the Appellate Body informed the DSB that in the light of the numerous and complex issues raised in these appeals, and the increased burden on translation services, the Appellate Body would not be able to circulate its report within 60 days. The Appellate Body estimate that the report in these appeals will be circulated no later than 16 October 2008.
On 16 October 2008, the Appellate Body report was circulated to Members.
As regards the DSU, the Appellate Body:
— found that the Panel did not err in stating that proceedings under Article 21.5 of the DSU are open to not only the original complainant, because they may be initiated by original complainants and original respondents;
— upheld the Panel's finding that “it has jurisdiction to consider the compatibility of the [European Communities'] implementing measure with the SPS Agreement as part of its review of the claim raised by the European Communities with respect to Article 22.8 of the DSU”;
— because it has not been established that the measure found to be inconsistent with the SPS Agreement in the EC — Hormones dispute has been removed, upheld the Panel's finding that “the European Communities has not established a violation of Articles 23.1 and 3.7 of the DSU as a result of a breach of Article 22.8”;
— reversed the Panel's finding that, “by maintaining its suspension of concessions even after the notification of [Directive 2003/74/EC]”, Canada is “seeking redress of a violation with respect to [this Directive], within the meaning of Article 23.1 of the DSU”; and
— reversed the Panel's findings that Canada “made a ‘determination’ within the meaning of Article 23.2(a) in relation to Directive 2003/74/EC” on the basis of statements made at DSB meetings and the fact that the suspension of concessions continued subsequent to the notification of Directive 2003/74/EC, and that Canada “failed to make any such determination consistent with the findings contained in the panel or Appellate Body report adopted by the DSB or an arbitration award rendered under the DSU”, in breach of Article 23.2(a).
As regards the Panel's consultations with the scientific experts, the Appellate Body found that the Panel infringed the European Communities' due process rights, because the institutional affiliation of two of the experts compromised their appointment and thereby the adjudicative independence and impartiality of the Panel. Accordingly, the Panel failed to comply with its duties under Article 11 of the DSU.
The Appellate Body also reversed the Panel's finding that the European Communities' import ban relating to oestradiol-17ß is not based on a risk assessment as required by Article 5.1 of the SPS Agreement; however, the Appellate Body is unable to complete the analysis and therefore makes no findings as to the consistency or inconsistency of the import ban relating to oestradiol-17ß with Article 5.1 of the SPS Agreement.
The Appellate Body further reversed the Panel's finding that the provisional import ban relating to testosterone, progesterone, trenbolone acetate, zeranol, and MGA does not meet the requirements of Article 5.7 of the SPS Agreement; however, the Appellate Body was unable to complete the analysis and therefore made no findings as to the consistency or inconsistency of the European Communities' provisional import ban with Article 5.7 of the SPS Agreement.
The Appellate Body further found that because it had been unable to complete the analysis as to whether Directive 2003/74/EC has brought the European Communities into substantive compliance within the meaning of Article 22.8 of the DSU, the recommendations and rulings adopted by the DSB in EC — Hormones remain operative. In the light of the obligations arising under Article 22.8 of the DSU, the Appellate Body recommended that the Dispute Settlement Body request Canada and the European Communities to initiate Article 21.5 proceedings without delay in order to resolve their disagreement as to whether the European Communities has removed the measure found to be inconsistent in EC — Hormones and whether the application of the suspension of concessions by Canada remains legally valid.
At its meeting on 14 November 2008, the DSB adopted the Appellate Body report and the Panel report, as modified by the Appellate Body report.