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REPERTORY OF APPELLATE BODY REPORTS

Temporal Application of Rights and Obligations


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> SCM Agreement
> SPS Agreement
> TBT Agreement. See also TBT Agreement, Article 2.4 — International standards as a basis for technical regulation (T.4.3)

T.5.1 SCM Agreement     back to top

T.5.1.1 Brazil — Desiccated Coconut, p. 15, DSR 1997:I, p. 167 at 179–180
(WT/DS22/AB/R)
 

Article 28 [of the Vienna Convention on the Law of Treaties] states the general principle that a treaty shall not be applied retroactively “unless a different intention appears from the treaty or is otherwise established”. Absent a contrary intention, a treaty cannot apply to acts or facts which took place, or situations which ceased to exist, before the date of its entry into force. Article 32.3 of the SCM Agreement is an express statement of intention which we will now examine.
 

T.5.1.2 Brazil — Desiccated Coconut, pp. 18–19, DSR 1997:I, p. 167 at 182–183
(WT/DS22/AB/R)
 

The Appellate Body sees Article 32.3 of the SCM Agreement as a clear statement that for countervailing duty investigations or reviews, the dividing line between the application of the GATT 1947 system of agreements and the WTO Agreement is to be determined by the date on which the application was made for the countervailing duty investigation or review. Article 32.3 has limited application only in specific circumstances where a countervailing duty proceeding, either an investigation or a review, was underway at the time of entry into force of the WTO Agreement. This does not mean that the WTO Agreement does not apply as of 1 January 1995 to all other acts, facts and situations which come within the provisions of the SCM Agreement and Article VI of the GATT 1994. However, the Uruguay Round negotiators expressed an explicit intention to draw the line of application of the new WTO Agreement to countervailing duty investigations and reviews at a different point in time from that for other general measures. …
 

T.5.1.3 EC and certain member States — Large Civil Aircraft, paras. 650, 655–656
(WT/DS316/AB/R)
 

… According to the European Communities, consistent with the principle of non-retroactivity embodied in Article 28 of the Vienna Convention, Article 5 of the SCM Agreement applies to subsidies that were granted after 1 January 1995, while subsidies granted prior to 1 January 1995 fall outside the temporal scope of Article 5. …
 

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Article 28 of the Vienna Convention establishes a presumption against the retroactive effect of treaties … .
 

In order to determine the temporal scope of a particular treaty provision, regard must be had to the text of the treaty at issue, the subject matter of the treaty in question, and to the nature of the treaty obligations undertaken. We therefore turn to consider the text of Article 5 of the SCM Agreement, read in its context, in order to determine whether it indicates the intention of WTO Members with respect to its temporal scope.
 

T.5.1.4 EC and certain member States — Large Civil Aircraft, paras. 659, 662, 665–669, 671
(WT/DS316/AB/R)
 

WTO Members undertook the obligation contained in Article 5 of the SCM Agreement as of 1 January 1995. In other words, as of that date, WTO Members have been under an obligation not to “cause, through the use of any subsidy”, adverse effects to the interests of other Members.
 

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… We recognize that a government could “use” subsidies, in the sense that it employs subsidies for a stated purpose. However, … the reference to the “use of any subsidy” in Article 5 refers to more than merely the “granting” or “maintaining” of a subsidy by a government. In particular, we note that Article 6.3 defines serious prejudice to which Article 5 refers, inter alia, in terms of “significant price undercutting”, “lost sales”, “price depression”, and “price suppression”. Sales and the pricing of goods, in a market economy, are activities usually engaged in by the recipient of a subsidy rather than by the grantor. Such actions of a recipient of a subsidy are clearly relevant for purposes of assessing whether a WTO Member, as the grantor, has complied with its obligation “not to cause, through the use of any subsidy, adverse effects to the interests of other Members.”
 

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… By its terms, Article 28 does not refer to individual acts of subsidization, nor does it refer to obligations arising under Part III of the SCM Agreement. We do not read Article 28 to indicate that Article 5 was intended to apply only to subsidies brought into existence subsequent to 1 January 1995.
 

Our interpretation is also consistent with paragraph 7 of Annex IV to the SCM Agreement. Annex IV sets forth the method for calculating the total ad valorem subsidization of a product for purposes of the presumption of serious prejudice in Article 6.1(a) (an expired provision) of the SCM Agreement. … We agree with the Panel that, although Article 6.1 and Annex IV have expired, they formed part of the original framework for determining when a Member could be considered to have caused adverse effects, and thus provide an important indication of the intended scope of Article 5.
 

… as we see it, the inclusion of pre-1995 subsidies in the calculation of the amount of subsidies suggests that negotiators contemplated that subsidies granted before the entry into force of the SCM Agreement are, as a conceptual matter, capable of causing adverse effects.
 

… as the Panel found, “[p]aragraph 7 of Annex IV recognises that a subsidy granted prior 1 January 1995 may, in certain circumstances (i.e., where its benefits are allocated to future production), be relevant to the serious prejudice determination in Article 5(c) and thus, may give rise to adverse effects under Article 5”. Paragraph 7 of Annex IV therefore supports the proposition that subsidies granted prior to 1 January 1995 are subject to the obligation contained in Article 5 of the SCM Agreement.
 

… We find it of little relevance to our analysis and do not consider that it sheds light on the temporal scope of Article 5.
 

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Our reading of Article 5 does not lead to a “retroactive” application of that provision. The application of Article 5 to subsidies granted prior to 1995 is justified by virtue of the obligation, under that provision, not to cause, through the use of any subsidy, adverse effects to the interests of other Members. We see no indication in the text of Article 5 to suggest that the obligation set out in that provision is limited to subsidies granted after the date of entry into force of the SCM Agreement.
 

T.5.1.5 EC and certain member States — Large Civil Aircraft, paras. 680–681
(WT/DS316/AB/R)
 

The Panel expressed the view that Part III of the SCM Agreement generally is concerned with a situation that subsists and continues over time, rather than with specific acts performed by Members. According to the Panel:
 

[w]hile “cause” is used as a verb in Article 5, it does not connote specific action on the part of a Member. Rather, it describes a particular relationship between the antecedent conduct of a Member and subsequent events which ultimately are attributed to that Member.
 

We see no reason to disagree with the Panel. Article 5 reflects the notion that it is the causing, through the use of any subsidy, of adverse effects, rather than the granting of the subsidy that is the situation that is addressed by that provision. As we have noted above, Article 5 does not prohibit the granting or the use of a subsidy per se. Rather, Members are permitted to grant or maintain specific subsidies to the extent that they do not cause adverse effects within the meaning of Articles 5 and 6 of the SCM Agreement. The context of Article 5 also supports the notion that Part III generally is concerned with a situation that continues over time, rather than with specific acts. For instance, Article 6.4 contemplates that the displacement or impeding of exports, for purposes of Article 6.3(b), shall be demonstrated based on evidence relating to “an appropriately representative period sufficient to demonstrate clear trends in the development of the market for the product concerned, which, in normal circumstances, shall be at least one year”. In addition, Article 6.3(d) suggests that an increase in the world market share of the subsidizing Member is to be determined on the basis of “a consistent trend over a period when subsidies have been granted”.
 

T.5.1.6 EC and certain member States — Large Civil Aircraft, para. 684
(WT/DS316/AB/R)
 

… Article 5 of the SCM Agreement sets out an obligation not to cause, through the use of any subsidy, adverse effects to the interests of other Members. It is the “causing” of such effects that is relevant for purposes of Article 5, and the conclusion as to retroactivity will hinge on whether that situation continues or has been completed, rather than on when the act of granting a subsidy occurred.
 

T.5.1.7 EC and certain member States — Large Civil Aircraft, para. 685
(WT/DS316/AB/R)
 

Article 14(1) of the ILC Articles stipulates that “[t]he breach of an international obligation by an act of a State not having a continuing character occurs at the moment when the act is performed, even if its effects continue”. In other words, Article 14(1) distinguishes between acts and the effects of such acts. Referring to the ILC’s Commentary on this provision, the European Union observes that “[a] completed act occurs ‘at the moment when the act is performed’, even though its effects or consequences may continue”. We agree with the European Union that it is important to distinguish between an act and its effects. Article 5 of the SCM Agreement is concerned, however, with a “situation” that continues over time, rather than with specific “acts”. Thus, although the act of granting a subsidy may have been completed prior to 1 January 1995, the situation of causing adverse effects may continue.
 

T.5.1.8 EC and certain member States — Large Civil Aircraft, para. 686
(WT/DS316/AB/R)
 

In sum, we agree with the Panel that Article 5 addresses a “situation” that consists of causing, through the use of any subsidy, adverse effects to the interests of another Member. It is this “situation”, which is subject to the requirements of Article 5 of the SCM Agreement, that is to be construed consistently with the non-retroactivity principle reflected in Article 28 of the Vienna Convention. The relevant question for purposes of determining the temporal scope of Article 5 is whether the causing of adverse effects has “ceased to exist” or continues as a “situation”. We consequently disagree with the European Union that, by virtue of Article 28 of the Vienna Convention, no obligation arising out of Article 5 of the SCM Agreement is to be imposed on a Member in respect of subsidies granted or brought into existence prior to the entry into force of the SCM Agreement. This may mean that a subsidy granted prior to 1 January 1995 falls within the scope of Article 5 of the SCM Agreement, but this is only because of its possible nexus to the continuing situation of causing, through the use of this subsidy, adverse effects to which Article 5 applies. In reaching this conclusion, we are not saying that the causing of adverse effects, through the use of pre-1995 subsidies, can necessarily be characterized as a “continuing” situation in this case. Rather, we simply find that a challenge to pre-1995 subsidies is not precluded under the terms of the SCM Agreement.
 

T.5.1.9 EC and certain member States — Large Civil Aircraft, paras. 687, 689
(WT/DS316/AB/R)
 

… According to the European Union, … the pre-1995 subsidies should be assessed in the light of the Tokyo Round Subsidies Code, and not the SCM Agreement. …
 

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As we see it, the European Union’s argument is based on the assumption that subsidies that were granted or brought into existence before 1 January 1995 amount to completed “acts” or “situations” and, thus, are outside the temporal scope of application of the SCM Agreement. We have disagreed with that proposition above, and do not consider our approach to lead to a retroactive application of Article 5 of the SCM Agreement. As the ILC has explained, “[t]he non-retroactivity principle cannot be infringed by applying a treaty to matters that occur or exist when the treaty is in force, even if they first began at an earlier date”.
 

T.5.1.10 EC and certain member States — Large Civil Aircraft, para. 690
(WT/DS316/AB/R)
 

… we modify the Panel’s interpretation of Article 5 of the SCM Agreement and consider that the “causing, through the use of any subsidy, of adverse effects” is covered by Article 5 even if it arises out of subsidies granted or brought into existence prior to 1 January 1995, and that a challenge to such subsidies is not precluded under the terms of the SCM Agreement. Accordingly, we uphold the Panel’s conclusion, in paragraph 7.65 of the Panel Report, rejecting the European Communities’ request to exclude all subsidies granted prior to 1 January 1995 from the temporal scope of the dispute.
 

T.5.2 SPS Agreement     back to top

T.5.2.1 EC — Hormones, para. 128
(WT/DS26/AB/R, WT/DS48/AB/R)
 

… We agree with the Panel that the SPS Agreement would apply to situations or measures that did not cease to exist, such as the 1981 and 1988 Directives, unless the SPS Agreement reveals a contrary intention. We also agree with the Panel that the SPS Agreement does not reveal such an intention. The SPS Agreement does not contain any provision limiting the temporal application of the SPS Agreement, or of any provision thereof, to SPS measures adopted after 1 January 1995. …
 

Textiles and Clothing Agreement. See Textiles and Clothing Agreement, Article 6.10 — No backdating of a safeguard (T.7.7)
 

T.5.3 TBT Agreement. See also TBT Agreement, Article 2.4 — International standards as a basis for technical regulation (T.4.3)     back to top

T.5.3.1 EC — Sardines, para. 200
(WT/DS231/AB/R)
 

We recall that Article 28 of the Vienna Convention on the Law of Treaties (the “Vienna Convention”) provides that treaties generally do not apply retroactively. … As we have said in previous disputes, the interpretation principle codified in Article 28 is relevant to the interpretation of the covered agreements.
 

T.5.3.2 EC — Sardines, para. 205
(WT/DS231/AB/R)
 

… We fail to see how the terms “where technical regulations are required”, “exist”, “imminent”, “use”, and “as a basis for” give any indication that Article 2.4 applies only to the two stages of preparation and adoption of technical regulations. To the contrary, as the Panel noted, the use of the present tense suggests a continuing obligation for existing measures, and not one limited to regulations prepared and adopted after the TBT Agreement entered into force. …
 

TRIPS Agreement. See TRIPS Agreement, Article 70 (T.9.11–15)
 


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