DISPUTE SETTLEMENT SYSTEM TRAINING MODULE: CHAPTER 5
Possible Object of a Complaint — Jurisdiction of Panels and the Appellate Body
WTO complaints are often directed against specific administrative measures taken by authorities of a Member pursuant to domestic laws, for example, anti-dumping duties imposed by an anti-dumping authority following an investigation of certain imports. However, the underlying law itself may also violate a (WTO) legal obligation or otherwise nullify or impair benefits under the covered agreements. Article XVI:4 of the WTO Agreement makes clear that Members must ensure the conformity of their laws, regulations and administrative procedures with their obligations under the WTO Agreement, including its Annexes. Accordingly, Members frequently invoke the dispute settlement system against a law as such, independently of, or without waiting for, the application of that law. For example, claims about taxes which discriminate against imports and contravene Article III:2 of GATT 1994 are typically directed at the tax legislation and not at the tax imposed on a specific shipment of goods at a specific time in the recent past. Successfully challenging the law as such gives the advantage that the respondent’s implementation, ideally the withdrawal or modification of the inconsistent measure (Article 3.7 of the DSU), would equally address the law as such and not be limited to an isolated case of application of such law.
Discretionary and mandatory legislation back to top
There is an important distinction in WTO law between challenging a law as such and challenging the application of that law. Under GATT 1947, panels had already developed the concept that, when legislation as such is the object of a complaint, mandatory and discretionary legislation must be distinguished from each other. The Appellate Body has endorsed this distinction.1 Only legislation that mandates a violation of WTO obligations can be found as such to be inconsistent with those obligations. By contrast, legislation that merely gives discretion to the executive authority of a Member to act inconsistently with the WTO Agreement cannot be challenged as such. In such a case, only the actual application of such legislation in a manner that is inconsistent with the WTO Agreement is subject to challenge. Thus, where discretionary authority is vested in the executive branch of a WTO Member, it cannot be assumed that the WTO Member will fail to implement its obligations under the WTO Agreement in good faith.2 According to this approach, the test is whether or not the legislation in question allows the administrative authorities to abide by that Member’s WTO obligations.
Nonetheless, one panel took issue with this distinction as a principle applying to all WTO obligations. This panel insisted that it depends on the precise WTO provision in question and whether the provision precludes only mandatory laws or also discretionary ones.3 The Appellate Body recently stated that it is “not ... precluding the possibility that a Member could violate its WTO obligations by enacting legislation granting discretion to its authorities to act in violation of its WTO obligation.” 4
Legislation not yet in force back to top
There are times when a piece of domestic legislation has already been adopted, but has not yet entered into force. In other words, the law has been adopted in its final form, but with the stipulation that it will be effective only from a future date. Can such laws be challenged in the WTO dispute settlement system before they enter into force, given that the legislative authorities have completed their work of crafting the law and the entry into effect is only a matter of time and thus automatic? Or is it premature to challenge such a law, given that it has no legal effect until the date of entry into force, which would exclude any violation of WTO law and might also prevent nullification or impairment of any benefit for the time being?Several dispute settlement panels have dealt with this type of question and have found that the challenge was not premature in these specific instances because the entry into force was automatic at a future date and did not depend on further legislative action. Even though the legal effect of such a measure will only occur in the future, the measure already had an impact on the market participants engaging in international trade prior to its coming into force because these market participants typically plan their transactions ahead of time.5
4. Appellate Body Report, US — Countervailing Measures on Certain EC Products, footnote 334 to para. 159. back to text
5. For instance, the panel in US — Superfund insisted that Articles III and XI of GATT 1947 also purport to create the predictability needed to plan future trade. It noted that the coming into force of the tax at issue at the beginning of the second year following that of the dispute was a time frame within which the trade and investment decisions that could be influenced by the tax would be taken. See Panel Report, US — Superfund, para. 5.2.2. back to text