Legal issues arising in WTO dispute settlement proceedings

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10.8 The nature of domestic legislation as an object of a dispute

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The characterization of domestic legislation, which becomes the object of dispute settlement, is an interesting aspect relating to the distinction between questions of law and questions of facts. This distinction is relevant, among other things, for the scope of the appellate review.

Domestic law is frequently at issue in disputes. Article XVI:4 of the WTO Agreement provides that “[e]ach Member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements.” For example, often in a dispute, a complaint will not address whether an internal tax imposed by the respondent on a certain shipment of imports, say imported vodka, was consistent with Article III:2 of GATT 1994. Rather, the complainant will directly challenge the internal tax law as such as being inconsistent with Article III:2 of GATT 1994 where different internal taxes are imposed under the law on two different kinds of “like” products, say shochu and on vodka. In other words, the complaint is directed at the existence of the law rather than a specific application of the law. In such cases, several issues relating to the domestic legislation must be reviewed before the question of its (WTO) conformity can be decided.

Probably the most important of these issues is whether the domestic legislation in question is mandatory or discretionary in providing for an act in contravention of WTO law. As has already been discussed, Members can successfully challenge laws as such (i.e. the existences of the law itself) only if such laws are mandatory. However, it is not always clear whether a particular domestic law is mandatory or discretionary with respect to WTO-inconsistent acts. The question could depend on a host of factors such as the domestic legal framework, how the law in question operates together with other domestic legal provisions, the relationship between the different branches of government and how the authorities and courts interpret domestic law. A panel would then have to make a determination in light of these factors of whether the law is mandatory or discretionary in the WTO sense. Under domestic law, such determination would certainly be a legal question. However, is it also a legal question within the framework of WTO dispute settlement? If so, the panel’s assessment of whether or not the domestic law is mandatory would be subject to appellate review. However, if it is a question of fact, it would not be subject to appellate review. There are other issues relating to the nature, content, and structure of challenged domestic laws or measures that raise the same question: is this a question of law or a question of fact from the perspective of WTO law? The Appellate Body has had an opportunity to express itself on the question of how to qualify, for purposes of WTO law, domestic legal characterizations.

In India — Patents (US), for example, the Appellate Body insisted that it was the panel’s task to determine whether India’s “administrative instructions” were in conformity with its obligations under the TRIPS Agreement. For that purpose, the panel was entitled to and even obliged to seek a detailed understanding of the operation of the domestic provisions in question. From this, the Appellate Body concluded that it was also necessary for the Appellate Body to review the panel’s examination of the same Indian domestic law.1 In US — Section 211 Appropriations Act, the Appellate Body concluded on the basis of its own prior jurisprudence that “municipal law of WTO Members may serve not only as evidence of facts, but also as evidence of compliance or non-compliance with international obligations. … Such an assessment is a legal characterization by a panel. And, therefore, a panel’s assessment of municipal law as to its consistency with WTO obligations is subject to appellate review under Article 17.6 of the DSU.” 2

In contrast, the panel in US — Section 301 Trade Act stated that it was “called upon to establish the meaning of Sections 301-310 as factual elements and to check whether these factual elements constitute conduct by the US contrary to its WTO obligations.” 3 Under this approach, it would seem that the panel’s establishment of these factual elements would not be a question of law subject to appellate review.



1. Appellate Body Report, India — Patents (US), paras. 66 and 68.  back to text

2. Appellate Body Report, US — Section 211 Appropriations Act, para. 105  back to text

3. Panel Report, US — Section 301 Trade Act, para. 7.18 (emphasis added).  back to text



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This interactive training module is based on the “Handbook on the WTO Dispute Settlement System” published in 2004. The second edition of this handbook published in 2017 can be found at here.

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