The WTO Dispute Settlement System1995-2003

Edited by

Federico Ortino

and

Ernst-Ulrich Petersmann

KLUWER LAW INTERNATIONALTHE HAGUE/ LONDON/ NEW YORK

Table of Contents

Foreword vxii

List of Abbreviations xxi

PART IThe Doha Development Round Negotiations on Improvements and

Clarifications of the WTO Dispute Settlement Procedures

Chapter 1E. U. PETERSMANNTHE DOHA DEVELOPMENT ROUND NEGOTIATIONS ONIMPROVEMENTS AND CLARIFICATIONS OF THE DISPUTESETTLEMENT UNDERSTANDING 2001-2003: AN OVERVIEW 3

I. The Importance of International Organizations for Rule of Law andPeaceful Settlement of International Disputes 5

II. Proposals for Improving the Working Procedures of WTO DisputeSettlement Panels 7

III. Proposals for Moving from Ad hoc to Permanent Panelists 8IV. Improvements and Reforms of the WTO Appellate Body 9V. Proposals for Reforms of Article 21 of the DSU 10VI. Proposals for Reforms of Article 22 of the DSU 11VII. Arbitration within the WTO 12VIII. Special and Differential Treatment of Developing Countries under the

WTO Dispute Settlement System 13IX. Additional Negotiating Proposals on Improvements and Clarifications

of the DSU 14X. Policy Conclusions 15

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Chapter 2W. J. DAVEYPROPOSALS FOR IMPROVING THE WORKING PROCEDURES OFWTO DISPUTE SETTLEMENT PANELS 19

I. Codification of Working Procedures 19II. Transparency 20III. Participation 22IV. Gathering Information 23V. Preliminary Rulings 24VI. Timeframes 24VII. Settlements 25VIII. Consultations and Panel Establishment 26IX. Dormant Cases 26X. Miscellaneous 27

Chapter 3T. COTTIERPROPOSALS FOR MOVING FROM AD HOC PANELS TOPERMANENT WTO PANELISTS 31

I. Introduction 31II. Ideas and Proposals Submitted 32III. Assessment 34

A. Practical and Operational Issues 34B. Constitutional Issues 36

IV. Further Suggestions: A College of Permanent Panelists 38

Chapter 4D. P. STEGERIMPROVEMENTS AND REFORMS OF THE WTO APPELLATEBODY 41

I. Introduction 41II. Increase in the Number of Appellate Body Members? 43III. "Judicialization" of the Appellate Body? 45IV. Length of Term 46V. Remand Authority 46VI. Reform of the Panel Process 47VII. Conclusion 48

Chapter 5J. PAUWELYNPROPOSALS FOR REFORMS OF ARTICLE 21 OF THE DSU 51

I. Surveillance of Implementation by the DSB 51II. Article 21.5 Compliance Procedures 53

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A. Some Facts 53B. Article 21.5 Procedures 53C. The Parties in an Article 21.5 Procedure 55D. The Disagreements or Measures That Can Be Examined in an

Article 21.5 Procedure 56III. Article 21.3 Arbitrations on Reasonable Period of Time 59

Chapter 6P. C. MAVROIDISPROPOSALS FOR REFORM OF ARTICLE 22 OF THE DSU:RECONSIDERING THE "SEQUENCING" ISSUE AND SUSPENSIONOF CONCESSIONS 61

I. A Multilateral Finding of Inadequate Implementations is the NecessaryCondition to Exercise the Right to Request Suspension of Concessions 61A. What is Sequencing? 61B. The Primary Law 62C. The Case-Law 62D. In Favour of Sequencing 64E. State Practice Evolves the Other Way 66F. Why Legislation is Needed 66G. Legislation Ante Portas; All (but Australia) in Favour of Sequencing 67H. A "First Do no Harm" Approach 68

II. Suspension of Concessions and the Re-negotiation of Remedies 69A. Moving on to Issues that Might Divide 69B. The "Daring" Proposals 70C. The "Modest" Agenda 71D. Taking Care of Business: Views from the Outside World 71

Chapter 7V. HUGHESARBITRATION WITHIN WTO 75

I. Introduction 75II. History 75

A. The Havana Charter 75B. The GATT 1947 76C. The 1979 Tokyo Understanding 77D. The Uruguay Round Negotiations 77E. The 1989 Improvements 78

III. Arbitration Under the DSU 80A. Arbitration under Article 25 80B. Arbitration under Article 21.3(c) 82

IV. Conclusion 85

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Chapter 8F. ROESSLERSPECIAL AND DIFFERENTIAL TREATMENT OF DEVELOPINGCOUNTRIES UNDER THE WTO DISPUTE SETTLEMENT SYSTEM 87

Chapter 9E.-U. PETERSMANNADDITIONAL NEGOTIATION PROPOSALS ON IMPROVEMENTSAND CLARIFICATIONS OF THE DSU 91

I. What Is the Appropriate Scope of the Negotiations on Improvementsand Clarifications of the DSU? 91

II. What Is the Appropriate Legal Form for Putting Agreed Improvementsand Clarifications of the DSU into Effect? 92

III. Is There a Need for Shortening, Extending, or Rendering more Flexiblethe Duration of WTO Dispute Settlement Proceedings? 93

IV. Is It Advisable to Strengthen the Rights of Developing Countries andof Third Parties in Consultations (Article 4 of the DSU)? 94

V. Is There a Need for Additional DSU Provisions Promoting the WTOConsistency, Notification and Examination of Mutually AgreedSolutions? 95

VI. Does Article 5 on Good Offices, Conciliation and Mediation Need toBe Strengthened? 95

VII. Is There a Need for Improvements and Clarifications of the Mandateand Procedures of the DSB? 97

VIII. Is There a Need for Improvements and Clarifications of Other DSUProvisions? 98

Chapter 10J. A. LACARTE and C.-D. EHLERMANNPOLICY CONCLUSIONS (2002) 99

Chapter 11C.-D. EHLERMANNREFLECTIONS ON THE PROCESS OF CLARIFICATION ANDIMPROVEMENT OF THE DSU 105

I. Introduction 105II. Relationship Between (Quasi-) Judicial and Political Decision Making 106III. Developing and Least-Developed Countries 108IV. Other Issues 108

A. Appellate Body 109B. Panels 110C. Amicus Curiae Briefs and Transparency 110D. Third Party Rights 111E. Confidential Business Information 111F. Efficiency 111

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G. Time Frames 111H. Remedies 112

V. Conclusion 113

Chapter 12E. KESSIETHE "EARLY HARVEST NEGOTIATIONS" IN 2003 115

I. Introduction 115II. Past Attempts to Reform the DSU 117

A. Attempts Between 1998 and 2001 117B. The Scope of the Doha Mandate 118

III. Review of the Chairman's Text of 28 May 2003 121A. Evolution of the Work of the Special Session of the DSB 121B. Review of the Chaiman's Text 123

IV. Conclusion 139A. System of Permanent Panellists 140B. Remedies 142C. Other Proposals 148

PART IIWTO Jurisprudence and Dispute Settlement Practice

Chapter 13P. C. MAVROIDISDEVELOPMENT OF WTO DISPUTE SETTLEMENT PROCEDURESTHROUGH CASE-LAW 153

I. The DSU is an Incomplete Contract When it Comes to Setting Out theProcedures which WTO Adjudicating Bodies Will Have to Follow 153

II. You, Members, Do Not Have the Exclusive Right to Submit? 155III. Facing the Challenges of Practice 159

A. Parallelism Between Consultations and Panel Proceedings 159B. A Lawful Request For Establishment of a Panel Is ... 160C. Burden of Proof 160D. Treatment of Confidential Evidence 172

IV. Brief Concluding Remarks 176

Chapter 14F. WEISSINHERENT POWERS OF NATIONAL AND INTERNATIONALCOURTS 177

I. Introduction 177II. A Brief Overview of Inherent Powers 178III. The Use of Inherent Powers by the Appellate Body 179

A. The Appellate Body's Working Procedures 179B. Relevant AB Practice 179

IV. Inherent Powers: Lessons from International Adjudicatory Bodies 182A. The Concept of Inherent Powers 182

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B. Revision of Awards 185.C. Interim Measures 186D. Proprio Motu 187

V. Conclusion: Inherent Powers of the AB? 189

Chapter 15W. J. DAVEYWTO DISPUTE SETTLEMENT PRACTICE RELATING TO GATT 1994 191

I. GATT Article I - The Most-Favoured-Nation Obligation 192II. GATT Article III - The National Treatment Obligation 193

A. Discriminatory Taxation 193B. Discriminatory Regulation of Like Products 197

III. GATT Article XI - The Ban on Quantitative Restrictions 200IV. GATT Article XX - The General Exceptions 201

A. Health Measures 201B. Enforcement Measures 203C. Conservation Measures 204D. The Chapeau 206

V. Other GATT Articles 208A. Article II 208B. Article VIII 210C. Article X 210D. Article XIII 212E. Article XVIILB 213F. Article XXIII: l(b) 213G. Article XXIV 214H. Article XXVIII 215

VI. Conclusion 215

Chapter 16F. ORTINOWTO JURISPRUDENCE ON DE JURE AND DE FACTODISCRIMINATION 217

I. Introduction 217II. The National Treatment Principle and the Prohibition of Formal or

De Jure Discrimination 218A. Article 111:2 GATT and Fiscal Measures 219B. Article 111:4 GATT and Non-fiscal Regulation 222

III. The National Treatament Principle and the Prohibition of Material orDe Facto Discrimination 231A. Article 111:2 GATT and Fiscal Measures 232B. Article 111:4 GATT and Non-fiscal Regulation 249

'IV. Brief Conclusion 262

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Chapter 17L. BARTELSWTO DISPUTE SETTLEMENT PRACTICE ON ARTICLE XXIV OFTHE GATT 263

I. Introduction 263II. Scope of Article XXIV 264III. Article XXIV and Other WTO Rules 265IV. The Article XXIV'Defence' 266

A. Scope of the Article XXIV 'Defence' 267B. Justiciability of Regional Trade Agreements 267C. Timing of the Measure 268D. Necessity of the Measure 269

V. Burden of Proof . 271VI. Conclusions 272

Chapter 18G. MARCEAU and J. P. TRACHTMANGATT, TBT AND SPS: A MAP OF WTO LAW OF DOMESTICREGULATION OF GOODS 275

I. Introduction 275II. How the SPS and TBT Agreements Came to Exist 277III. Comparing the Disciplines of the SPS Agreement, the TBT Agreement

and the GATT 280A. Non-Discrimination: National Treatment and Most-Favoured-

Nation 280B. Necessity and Proportionality Tests 288C. Appropriate Level/Scientific Basis 297D. Harmonization; Conformity with International Standards 300E. (Mutual) Recognition and Equivalence 307F. Internal Consistency 308G. Permission for Precautionary Action 312H. Balancing 314I. Product/Process Issues and the Territorial-Extraterritorial Divide 319J. Conclusion 325

IV. Invoking the Disciplines of SPS, TBT and the GATT 326A. Conditions of Application: Applicable Law 326B. Cumulative Application and the Interpretative Principle of

Effectiveness 328C. General Application of the Agreements 333D. Application to Specific Types of Overlap 339

V. Conclusion 340

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Chapter 19E. OPUKU AWUKUWTO DISPUTE SETTLEMENT PRACTICE AND TRADE-RELATEDENVIRONMENTAL MEASURES 341

I. GATT Dispute Settlement Practice On Trade-Related EnvironmentalMeasures 343

II. WTO Dispute Settlement Practice On Trade-Related EnvironmentalMeasures 345

III. Brief Conclusions 351

Chapter 20P. A. CLARKE, J. BOURGEOIS and G. N. HORLICKWTO DISPUTE SETTLEMENT PRACTICE RELATING TOSUBSIDIES AND COUNTERVAILING MEASURES 353

I. Introduction 353II. The Agreement on Subsidies and Countervailing Measures 353

A. Part I - General Provisions 354B. Part III - Actionable Subsidies 365C. Part V - Countervailing Measures 369D. Part VI - Institutions 373E. Part VII - Notification and Surveillance 373F. Part VIII - Developing Country Members 374G. Part X - Dispute Settlement 374H. Part XI - Final Provisions 375

III. Conclusion 377

Chapter 21W. ZDOUCWTO DISPUTE SETTLEMENT PRACTICE RELATING TO THEGENERAL AGREEMENT ON TRADE IN SERVICES 381

I. Introduction 381II. The Most-Favoured-Nation Treatment Clauses of GATT and GATS 382III. The National Treatment Clauses of GATS and GATT 383IV. Measures Affecting Trade in Services 386

A. The Notion of Measures within the Scope and Coverage of GATS 387B. The Notion of Measures Affecting Trade in Services 389

V. The "Likeness" Problem 394A. The "Likeness" of Service Transactions 395B. The "Likeness" of Service Suppliers 397C. The "Likeness" of Services and Service Suppliers across Modes of

Supply 401VI. No Less Favourable Treatment 403

A. De Facto Discrimination under the GATS National TreatmentClause 406

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B. Limits of De Facto Discrimination under the GATS NationalTreatment Clause 410

C. De Facto Discrimination under the GATS MFN Treatment Clause 413VII. Conclusions on the MFN and National Treatment Principles Applied

to Services 416

Chapter 22F. M. ABBOTTWTO DISPUTE SETTLEMENT PRACTICE RELATING TO THEAGREEMENT ON TRADE-RELATED INTELLECTUAL PROPERTYRIGHTS 421

I. Introduction 421II. Decided Cases 422

A. India - Patent Protection for Pharmaceutical and AgriculturalChemical Products (India ~ Mailbox) 422

B. Canada - Patent Protection of Pharmaceutical Products (Canada —Generic Pharmaceuticals) 424

C. United States - Section 211 Omnibus Appropriations Act of 1998(US - Havana Club) 432

D. United States - Section 110(5) of the US Copyright Act (US -Copyright Exemption) 439

E. Canada - Term of Patent Protection (Canada - Patent Term) 439F. US Claims Regarding Brazil's Compulsory Licensing Legislation 440

III. Process Matters 441A. WIPO Reports 441B. Burden of Proof 442

IV. The Doha Declaration and Its Jurisprudential Implications 444V. Non-Violation Nullification or Impairment in TRIPS 449VI. General Observations and Conclusion 453

Chapter 23M. MATSUSHITAAPPELLATE BODY JURISPRUDENCE ON THE GATS AND TRIPSAGREEMENTS 455

I. Introduction 455II. Appeal Cases under the GATS 455

A. Canada - Periodicals 456B. EC-Bananas 457C. Canada - Automotive Industry 459D. Analysis 460E. A Recent Telecom Dispute Between the United States and Mexico 463

III. Appeal Cases under the TRIPS 465A. Canada - Patent 465B. India - Patent 466C. United States - Section 211 Omnibus Appropriation Act of 1998 467D. Analysis 470

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Chapter 24A. H. QURESHIPARTICIPATION OF DEVELOPING COUNTRIES IN THE WTODISPUTE SETTLEMENT SYSTEM 475

I. Introduction 475II. Brief Statistical Account 476III. The Criteria for Measuring Participation by Developing Countries 480IV. The "Developing Condition" of a Member in the Dispute Settlement

Practice 482V. Problems and Reform 493

A. Reforms 495

Chapter 25C.-D. EHLERMANNSIX YEARS ON THE BENCH OF THE "WORLD TRADE COURT" 499

I. The Exceptional Character of the WTO Dispute Settlement System 500II. The Composition of the Appellate Body 501III. The Working Procedures 503

A. Procedure for Adoption 503B. Divisions of Three Appellate Body Members and the Duration of

the Appeal Procedure 504C Exchange of Views 505D. Selection of Members Constituting a Division 506E. Overall Evaluation 507

IV. Method of Interpretation 508V. The Early Clarification of Procedural Issues 511

A. Burden of Proof 511B. Standard of Review 512C. Distinction Between Issues of Law and Issues of Facts 513D. Special Problem of the Determination of the Meaning of Municipal

Law 515E. Fact Finding by Panels and the Corresponding Duties of WTO

r- Members 515(yiy The Panel Structure 519VII. Issues of Substantive Law 520

A. General Considerations 520B. Difficulties Arising from Structural Differences between WTO and

EC Law 520C. Cumulating of Substantive Obligations in WTO Law 521D. More Stringent WTO Law than EC Law Obligations 522

VIII. The Tensions between the Strong (Quasi-) Judicial and the WeakPolitical Structures 523

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A. General Considerations 523B. Unsatisfactory Functioning of Political Filters 524C. Blockage of the Process of Interpretations and Amendments 525D. Urgency of Improving Political Decision-Making 526E. Dangers of Attributing Direct Effect of WTO Law 527F. Responsibility of the Appellate Body: Principled or Case-specific

Reasoning? 528IX. Conclusions 529

Chapter 26N. PARKSTATISTICAL ANALYSIS OF THE WTO DISPUTE SETTLEMENTSYSTEM (1995-2000) 531

Executive Summary 531Abbreviations 533

I. Overview of the State of WTO Dispute Settlement 534A. State of Annual Complaints 534B. State of Complaints by Country 536C. Joint Complaints 536D. State of Responses by Country 536E. Trends in the Complaints and Responses 537

II. Ways of Dispute Settlement 538V..y A. Settlement of Disputes by the Adoption of PR/ABR 538

B. Settlement of Disputes by other Ways Including Bilateral Settlement 539III. State of Use of the WTO Dispute Settlement System 540

A. Consultation Process 540B. Panel Process 540C. Appellate Process 541

IV. Participation as a Third Party 542A. Participating in Consultations 542B. Participating in Panel Procedures 543C. Participating in Appeal Procedures 543

V. Overview of the WTO Agreements Invoked in Disputes 544A. The WTO Agreements Invoked in Disputes 544B. Provisions of the GATT 1994 Invoked in Disputes 544C. State of Disputes By the GATS 545D. State of Disputes By the TRIPs 546

VI. Time Taken in the Process of Dispute Settlement 546A. From the Request for Consultation to the Adoption of PR/ABR 546B. From the Establishment of a Panel to the Circulation of the PR 547C. From the Establishment of a Panel to the Adoption of PR/ABR 547D. From the Establishment of a Panel to the Decision on the

Reasonable Period of Time for Implementation 547

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E. Total Amount of Time Taken for the Settlement of Disputes 549VII. State of Implementation of the Rulings of the DSB 550

A. Disputes Concerning the Implementation of the Rulings of the DSB 550B. Disputes Concerning the Level of Retaliation 552C. Authorization for Retaliatory Measures 553

Annex I: Chronological Lists of WTO Dispute Settlement Invocations andReports 555

Annex II: Report by the Chairman of the Special Sessions of the DSB to theTNC of 6 June 2003 579

Index 599