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XXIII. Article 23 back to top
A. Text of Article 23
Article 23: Strengthening of the Multilateral System
1. When Members seek the redress of a violation of obligations or
other nullification or impairment of benefits under the covered
agreements or an impediment to the attainment of any objective of the
covered agreements, they shall have recourse to, and abide by, the rules
and procedures of this Understanding.
2. In such cases, Members shall:
(a) not make a determination to the effect that a violation has
occurred, that benefits have been nullified or impaired or that the
attainment of any objective of the covered agreements has been impeded,
except through recourse to dispute settlement in accordance with the
rules and procedures of this Understanding, and shall 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 this Understanding;
(b) follow the procedures set forth in
Article 21 to determine the
reasonable period of time for the Member concerned to implement the
recommendations and rulings; and
(c) follow the procedures set forth in
Article 22 to determine the
level of suspension of concessions or other obligations and obtain DSB
authorization in accordance with those procedures before suspending
concessions or other obligations under the covered agreements in
response to the failure of the Member concerned to implement the
recommendations and rulings within that reasonable period of time.
B. Interpretation and Application of Article 23
1. General
778. In US
— Section 301 Trade
Act, the Panel stated that Article
23 has to be construed in light of the object and purpose of the WTO.
The Panel opined that State responsibility was not only triggered when
an actual violation takes place:
“In treaties which concern only the relations between States, State
responsibility is incurred only when an actual violation takes place. By
contrast, in a treaty the benefits of which depend in part on the
activity of individual operators the legislation itself may be construed
as a breach, since the mere existence of legislation could have an
appreciable ‘chilling effect’ on the economic activities of
individuals.”(1135)
779. In US
— Certain EC
Products, the Panel considered the European
Communities argument that the United States unilaterally imposed trade
sanctions and thereby violated Article 23 of the DSU. The Panel, in a
finding not directly reviewed by the Appellate Body, held that both
paragraphs of Article 23 provide a prohibition on “unilateral redress”,
but that this prohibition is more directly provided for under the second
paragraph of Article 23:
“The structure of Article 23 is that the first paragraph states the
general prohibition or general obligation, i.e. when Members seek the
redress of a WTO violation,(1136) they shall do so only through the DSU.
This is a general obligation. Any attempt to seek ‘redress’ can take
place only in the institutional framework of the WTO and pursuant to the
rules and procedures of the DSU.
The prohibition against unilateral redress in the WTO sectors is more
directly provided for in the second paragraph of Article
23. From the
ordinary meaning of the terms used in the chapeau of Article 23.2 (‘in
such cases, Members shall’), it is also clear that the second
paragraph of Article 23 is ‘explicitly linked to, and has to be read
together with and subject to, Article 23.1’.(1137) That is to say, the
specific prohibitions of paragraph 2 of Article 23 have to be understood
in the context of the first paragraph, i.e. when such action is
performed by a WTO Member with a view to redressing a WTO violation.”(1138)
780. The Panel on US
— Certain EC Products also agreed with the
European Communities that Article 23.2 contains specific examples of
conduct inconsistent with the rules of the DSU, but held that the first
analytical step necessarily was to determine — before turning to
Article 23.2 — whether the measure at issue falls under the scope of
Article 23.1:
“We also agree with the US — Section 301 Trade Act Panel Report
that Article 23.2 contains ‘egregious examples of conduct that
contradict the rules of the DSU’(1139) and which constitute more
specific forms of unilateral actions, otherwise generally prohibited by
Article 23.1 of the DSU.
‘[t]hese rules and procedures [Article
23.1] clearly cover much
more than the ones specifically mentioned in Article
23.2. There is a
great deal more State conduct which can violate the general obligation
in Article 23.1 to have recourse to, and abide by, the rules and
procedures of the DSU than the instances especially singled out in
Article 23.2.‘(Footnotes omitted)(1140)
The same Panel identified a few examples of such instances where the
DSU could be violated(1141) contrary to the provisions of
Article 23. Each
time a Member seeking the redress of a WTO violation is not abiding by a
rule of the DSU, it thus violates Article 23.1 of the DSU.
In order to verify whether individual provisions of
Article 23.2 have
been infringed (keeping in mind that the obligation to also observe
other DSU provisions can be brought under the umbrella of Article 23.1),
we must first determine whether the measure at issue comes under the
coverage of Article 23.1. In other words, we need to determine whether
Article 23 is applicable to the dispute before addressing the specific
violations envisaged in the second paragraph of Article 23 of the DSU or
elsewhere in the DSU.”(1142)
2. Article 23.1
(a) “seek[ing] the redress of a WTO violation”
781. In US
— Certain EC
Products, the Panel, in a finding not
reviewed by the Appellate Body, considered whether the United States was
“seeking to redress” what it perceived to be a WTO violation when it
decided to withhold liquidation on imports from the European Communities
of a list of products and impose a contingent liability for 100 per cent
duties on each individual importation of affected products (“3 March
Measure”).
“The term ‘seeking’ or ‘to seek’ is defined in the
Webster
New Encyclopaedic Dictionary as: ‘to resort to, … to make an
attempt, try’…. The term ‘to redress’is defined in the New
Shorter Oxford English Dictionary as ‘repair (an action); atone
for (a misdeed); remedy or remove; to set right or rectify (injury, a
wrong, a grievance etc.); obtaining reparation or compensation’…..
The term ‘redress’ implies, therefore, a reaction by a Member
against another Member, because of a perceived (or WTO determined) WTO
violation, with a view to remedying the situation.
…
On its face, this description of the 3 March Measure shows that,
because of the US perceived WTO inconsistency of the 1998 Bananas regime
put in place by the European Communities as a measure taken to implement
the Panel and Appellate Body recommendations (the ‘EC implementing
measure’), the United States imposed an increased contingent liability
on EC listed imports only. This 3 March Measure was, therefore,
discriminatory and aimed at the European Communities exclusively. The
unilateral imposition of a liability for 100 per cent duty as of 3 March
(well above the bound rates of tariffs) constitutes the imposition of a
debt on such imports, and adds further obligations on such imports, even
if the full effect of such liability is suspended until a future
liquidation date. This debt, this liability, this additional obligation
imposed on listed EC imports, is evidence that the United States wanted
to remedy, was ‘seeking to redress’, what it perceived to be a WTO
violation.”(1143)
(b) “recourse to, and abide by”
782. In US
— Section 301 Trade
Act, the Panel held that Article
23.1 of the DSU prescribes “a general duty of a dual nature”:
“Article 23.1 is not concerned only with specific instances of
violation. It prescribes a general duty of a dual nature. First, it
imposes on all Members to ‘have recourse to’the multilateral process
set out in the DSU when they seek the redress of a WTO inconsistency. In
these circumstances, Members have to have recourse to the DSU dispute
settlement system to the exclusion of any other system, in particular a
system of unilateral enforcement of WTO rights and obligations. This,
what one could call ‘exclusive dispute resolution clause’, is an
important new element of Members’ rights and obligations under the
DSU.”(1144)
3. Article 23.2(a)
783. The Panel on US
— Section 301 Trade Act held that a statute
“which … reserves the right for the Member concerned to do something
which it has promised not to do under Article 23.2(a)”is a violation
of Article 23.2(a) read together with Article
23.1:
“The text of Article 23.1 is simple enough: Members are obligated
generally to (a) have recourse to and (b) abide by DSU rules and
procedures. These rules and procedures include most specifically in
Article 23.2(a) a prohibition on making a unilateral determination of
inconsistency prior to exhaustion of DSU proceedings.
…
[T]he very discretion granted under Section 304, which under the US
argument absolves the legislation, is what, in our eyes, creates the
presumptive violation. The statutory language which gives the USTR this
discretion on its face precludes the US from abiding by its obligations
under the WTO. In each and every case when a determination is made
whilst DSU proceedings are not yet exhausted, Members locked in a
dispute with the US will be subject to a mandatory determination by the
USTR under a statute which explicitly puts them in that very danger
which Article 23 was intended to remove.
…
Trade legislation, important or positive as it may be, which
statutorily reserves the right for the Member concerned to do something
which it has promised not to do under Article
23.2(a), goes, in our
view, against the ordinary meaning of Article 23.2(a) read together with
Article 23.1.”(1145)
4. Article 23.2(c)
(a) General
784. After determining that the so-called 3 March Measure, which
imposed an increased bonding requirement upon goods from the European
Communities, constituted a measure taken to redress a WTO violation (see
the excerpt referenced in paragraph 781 above), the Panel in US
— Certain Measures examined whether the 3 March Measure violated Article
23.2(c) of the DSU. The Panel, in a finding not reviewed by the
Appellate Body, held that “any WTO suspension of concessions or other
obligations without prior DSB authorization is explicitly prohibited”:
“Article 23.2(c) prohibits any suspensions of concessions or other
obligations (taken as measures seeking to redress a WTO violation),
prior to a relevant DSB authorization. Article 3.7 provides that
suspension of concessions or other obligations should be used as a last
resort, and subject to a DSB authorization. In Article
22.6, the
suspension of concessions or other obligations is prohibited during the
arbitration process which can only take place before the DSB
authorization.
…
In the context of these provisions, any WTO suspension of concessions
or other obligations without prior DSB authorization is explicitly
prohibited. On 3 March there was no relevant DSB authorization of any
sort.”(1146)
(b) Relationship with other provisions of the DSU
(i) Article 3.7
785. In US
— Certain EC
Products, the Appellate Body clarified that
“[t]he obligation of WTO Members not to suspend concessions or other
obligations without prior DSB authorization is explicitly set out in
Articles 22.6 and 23.2(c), not in Article 3.7 of the DSU”. It “consider[ed],
however, that if a Member has acted in breach of Articles 22.6 and
23.2(c) of the DSU, that Member has also, in view of the nature and
content of Article 3.7, last sentence, necessarily acted contrary to the
latter provision.”(1147)
5. Relationship with other WTO Agreements
(a) SCM Agreement
786. In Canada
— Aircraft Credits and
Guarantees, the Panel
recalled the prospective nature of WTO dispute settlement remedies and
that such an approach was also applicable to the SCM Agreement:
“In any event, even if the WTO dispute settlement mechanism does
only provide for prospective remedies, we note that it does so in
respect of all cases, and not only those involving prohibited
export subsidies. Article 23.1 of the DSU provides that Members shall
resolve all disputes through the multilateral dispute system, to the
exclusion of unilateral self-help. Thus, to the extent that the WTO
dispute settlement system only provides for prospective remedies, that
is clearly the result of a policy choice by the WTO Membership. Given
this policy choice, and given the fact that Article 23.1 of the DSU
applies to all disputes, including those involving (alleged) prohibited
export subsidies, we see no reason why the (allegedly) prospective
nature of WTO dispute settlement remedies should impact on our
interpretation of the second paragraph of item (k).”(1148)
XXIV. Article 24 back to top
A. Text of Article 24
Article 24: Special Procedures Involving Least-Developed Country Members
1. At all stages of the determination of the causes of a dispute and
of dispute settlement procedures involving a least-developed country
Member, particular consideration shall be given to the special situation
of least-developed country Members. In this regard, Members shall
exercise due restraint in raising matters under these procedures
involving a least-developed country Member. If nullification or impairment is found to result from a measure
taken by a least-developed country Member, complaining parties shall
exercise due restraint in asking for compensation or seeking
authorization to suspend the application of concessions or other
obligations pursuant to these procedures.
2. In dispute settlement cases involving a least-developed country
Member, where a satisfactory solution has not been found in the course
of consultations the Director-General or the Chairman of the DSB shall,
upon request by a least-developed country Member, offer their good
offices, conciliation and mediation with a view to assisting the parties
to settle the dispute, before a request for a panel is made. The
Director-General or the Chairman of the DSB, in providing the above
assistance, may consult any source which either deems appropriate.
B. Interpretation and Application of Article 24
No jurisprudence or decision of a competent WTO body.
XXV. Article 25
back to top
A. Text of Article 25
Article 25: Arbitration
1. Expeditious arbitration within the WTO as an alternative means of
dispute settlement can facilitate the solution of certain disputes that
concern issues that are clearly defined by both parties.
2. Except as otherwise provided in this Understanding, resort to
arbitration shall be subject to mutual agreement of the parties which
shall agree on the procedures to be followed. Agreements to resort to
arbitration shall be notified to all Members sufficiently in advance of
the actual commencement of the arbitration process.
3. Other Members may become party to an arbitration proceeding only
upon the agreement of the parties which have agreed to have recourse to
arbitration. The parties to the proceeding shall agree to abide by the
arbitration award. Arbitration awards shall be notified to the DSB and
the Council or Committee of any relevant agreement where any Member may
raise any point relating thereto.
4.
Articles 21 and 22 of this Understanding shall apply
mutatis
mutandis to arbitration awards.
B. Interpretation and Application of Article 25
1. General
(a) Scope of the Arbitrators’ mandate under Article 25
787. In US
— Section 110(5) Copyright Act (Article
25.3), the first
time since the inception of the WTO that Members have had recourse to
arbitration pursuant to Article 25 of the DSU, the Arbitrators observed
that such recourse is not subject to multilateral control and that,
accordingly, “it is incumbent on the Arbitrators themselves to ensure
that it is applied in accordance with the rules and principles governing
the WTO system”:
“The Arbitrators note that this is the first time since the
establishment of the WTO that Members have had recourse to arbitration
pursuant to Article 25 of the DSU.(1149) Whereas the DSB establishes
panels or refers matters to other arbitration bodies, Article 25
provides for a different procedure. The parties to this dispute only had
to notify the DSB of their recourse to arbitration. No decision is
required from the DSB for a matter to be referred to arbitration under
Article 25. In the absence of a multilateral control over recourse to
that provision, it is incumbent on the Arbitrators themselves to ensure
that it is applied in accordance with the rules and principles governing
the WTO system(1150)….”(1151)
(b) Jurisdiction of the Arbitrators under
Article 25
788. In US
— Section 110(5) Copyright Act (Article
25.3), the
Arbitrators were called upon to determine the level of nullification or
impairment of benefits to the European Communities as a result of
Section 110(5)B of the US Copyright Act. The Arbitrators considered that
it was for them to determine whether they had jurisdiction to consider
this issue; they concluded that they did have jurisdiction:
“As recalled by the Appellate Body in United States
— Anti-Dumping Act of 1916,(1152) it is a widely accepted rule that an
international tribunal is entitled to consider the issue of its own
jurisdiction on its own initiative. The Arbitrators believe that this
principle applies also to arbitration bodies.(1153)”(1154)
(c) Burden of proof in Article 25 arbitrations
789. In US
— Section 110(5) Copyright Act (Article
25.3), the
Arbitrators followed the rules on burden of proof applicable in Article
22.6 arbitrations as stipulated in the agreed procedures submitted by
the parties. Therefore, it was for the United States, the defendant in
the original panel proceedings, to provide a prima facie case that the
methodology and estimates proposed by the European Communities did not
accurately reflect the European Communities benefits being nullified or
impaired:
“The Arbitrators carefully examined the claims, arguments and
evidence submitted by the parties in light of the rules on burden of
proof applicable in the context of arbitrations under Article 22.6 of
the DSU, as instructed by the parties. The Arbitrators were mindful of
the fact that, in arbitration proceedings under Article
22.6, a party
contests the level of countermeasures which the other intends to take
under paragraphs 2, 3 and
4 of Article 22. It is therefore
understandable that the burden be on the party that contests the level
of countermeasures to make a prima facie demonstration that the
methodology and the calculations submitted by the party intending to
apply countermeasures are inconsistent with the requirements of Article
22 of the DSU. For instance, in the European Communities — Hormones
cases, the initial burden was on the European Communities. The present
case, however, was referred to the Arbitrators by both parties ‘by
mutual agreement’. It is arguable whether or not there is a
complainant and a defendant. This said, we note that the agreed
procedures submitted by the parties(1155) expressly instruct us to follow
the allocation of the burden of proof applied in arbitrations under
Article 22.6. We also note that the parties agreed that the European
Communities would submit a methodology paper ahead of the first written
submissions, as in proceedings under Article
22.6. As a result, the
Arbitrators decided to allocate the burden of proof accordingly, as in
an Article 22.6 case.”(1156)
(d) Matters dealt under Article 25 arbitrations
(i) Nullification or impairment of benefits
General
790. In US
— Section 110(5) Copyright Act (Article
25.3), the
Arbitrators were called on to determine the level of nullification or
impairment of benefits to the European Communities as a result of
Section 110(5)B of the US Copyright Act. As indicated in paragraph 788
above, the Arbitrators concluded that they did have jurisdiction. The
first step in their reasoning was to compare the panel procedure under
the DSU with the Article 25 arbitration. The Arbitrators concluded that
the procedure provided for in Article 25 may be considered an
alternative to a panel procedure:
“The Arbitrators first note that, pursuant to the text of
Article 25.1, arbitration under Article 25 is an ‘alternative means of dispute
settlement’.(1157) The term ‘dispute settlement’ is generally used
in the WTO Agreement to refer to the complete process of dispute(1158)
resolution under the DSU, not to one aspect of it, such as the
determination of the level of benefits nullified or impaired as a result
of a violation. It may be argued that the procedure provided for in
Article 25 is actually an alternative to a panel procedure. This would
seem to be confirmed by the terms of Article
25.4, which provides that
‘Articles 21 and 22 of this Understanding shall apply mutatis mutandis
to arbitration awards.’(1159)
Article 22.2 itself, unlike Article
21.3(c), does not refer to arbitration as an alternative to the
negotiation of mutually acceptable compensation. It could then be argued
that arbitration under Article 25 is not intended for ‘determin[ing]
the level of nullification or impairment of benefits’to the European
Communities as a result of Section 110(5)(B) of the US Copyright Act.”(1160)
791. Despite their acknowledgement that an argument may be made
whereby arbitration pursuant to Article 25 would be considered as not
being intended for determining the level of nullification or impairment
of benefits, the Arbitrators in US — Section 110(5) Copyright Act
(Article 25.3) considered that the elements sustaining such an argument
are outweighed by other elements of interpretation. The Arbitrators
therefore concluded that, “pending further interpretation by the
Members”, they did have jurisdiction under Article 25 to determine the
level of European Communities’ benefits that were nullified or
impaired in this case:
“While being mindful of these elements of interpretation, the
Arbitrators are of the view that they are outweighed by other elements,
based on the fact that none of the provisions concerned expressly
excludes recourse to arbitration under Article 25 in the particular
context in which they apply. Article 25.2 itself provides that resort to
arbitration shall be subject to mutual agreement of the parties which
shall agree on the procedures to be followed ‘except as otherwise
provided in this Understanding’. Article 25 itself does not specify
that recourse to Article 25 arbitration should be excluded when
determining the level of nullification or impairment suffered by a
Member. On the contrary, the terms of Article 25.1 referring to ‘the
solution of certain disputes that concern issues that are clearly
defined by the parties’ may support the view that Article 25 should be
understood as an arbitration mechanism to which Members may have
recourse whenever necessary within the WTO framework. We also note that
Article 22.2 refers to ‘negotiations […] with a view to developing
mutually acceptable compensation.’ There is no language in that
provision which would make it impossible to consider arbitration as a
means of reaching a mutually acceptable compensation.
Moreover, recourse to Article 25 arbitration in the present situation
is fully consistent with the object and purpose of the DSU. Arbitration
is likely to contribute to the prompt settlement of a dispute between
Members, as commanded by Article 3.3 of the DSU. Indeed, it may
facilitate the resolution of a divergence in the context of a
negotiation of compensations, thus paving the way to implementation
without suspension of concessions or other obligations.
In general, recourse to arbitration under Article 25 strengthens the
dispute resolution system by complementing negotiation under Article 22.2. The possibility for the parties to a dispute to seek arbitration
in relation to the negotiation of compensation operates to increase the
effectiveness of that option under Article
22.2. Incidentally, the
Arbitrators note that compensation, in their opinion, is always to be
preferred to countermeasures of any sort, since it enhances trade
instead of restricting or diverting it. Finally, such an application of
Article 25 does not, at least in the case at hand, affect the rights of
other Members under the DSU.(1161)
Having regard to the object of the arbitration requested by the
parties and the fact that the rights of other Members under the DSU are
not affected by the decision of the European Communities and the United
States to seek arbitration under Article 25, the Arbitrators are of the
view that, pending further interpretation by the Members, they should
declare that they have jurisdiction under Article 25 to determine the
level of EC benefits which are being nullified or impaired in this case.(1162)”(1163)
Nature of the benefits nullified or impaired
792. In US
— Section 110(5) Copyright Act (Article
25.3), the
Arbitrators agreed with the parties that, for the purpose of the
arbitration proceeding, the relevant benefits were those which were
economic in nature:
“In their submissions to the Arbitrators, the parties have focused
on this type of benefit accruing to copyright holders. The Arbitrators
concur with the parties that, for purposes of these arbitration
proceedings, the relevant benefits are those which are economic in
nature.(1164) This is consistent with previous decisions of arbitrators
acting under Article 22.6 of the DSU.(1165) Moreover, like the parties to
this dispute, the Arbitrators will proceed on the assumption that the
licensing royalties realizable by copyright holders constitute an
adequate measure of the economic benefits arising from Articles 11bis(1)(iii) and
11(1)(ii).”(1166)
Benefits denied to a WTO Member
793. The Arbitrators in
US — Section 110(5) Copyright Act (Article
25.3) stated that their task was to assess the level of nullification or
impairment of the benefits denied to the European Communities rather
than determining the benefits denied to European Communities’ right
holders:
“Accordingly, the Arbitrators will, in this case, assess the level
of EC benefits which Section 110(5)(B) is nullifying or impairing in
terms of the royalty income foregone by EC right holders. In making this
observation, the Arbitrators are aware that their task in this case is
to determine the benefits which are denied to the European Communities
rather than determining the benefits which are denied to EC right
holders. However, there can be no question that the benefits which are
denied to the European Communities include the benefits which are denied
to EC right holders.(1167) What is more, the European Communities has not
made out a claim to the effect that Section 110(5)(B) is nullifying or
impairing benefits additional to those which EC right holders could
otherwise derive from Articles 11bis(1)(iii) and
11(1)(ii). As a result,
it is appropriate, for the purposes of these proceedings, to determine
the level of EC benefits which Section 110(5)(B) is nullifying or
impairing in terms of the benefits foregone by EC right holders.”(1168)
Point in time to assess the level of nullification or impairment
794. In US
— Section 110(5) Copyright Act (Article
25.3), the
Arbitrators assumed that the parties wanted an assessment of the level
of benefits nullified or impaired on the date the matter was referred to
arbitration, disregarding the rules established in Article 22.6 of the
DSU:
“The Arbitrators note that they have been appointed under
Article
25 of the DSU. As a result, they do not feel constrained by a number of
obligations imposed on arbitrators in Article 22.6 proceedings. Unlike
Article 22.6, which closely relates to compliance (or absence thereof)
at the end of the reasonable period of time, Article 25 is silent as to
the date on which a matter referred to arbitration should be assessed.
However, the Arbitrators are aware that they are not called upon to
consider the level of EC benefits which may still be nullified or
impaired after the end of the implementation period, but to consider the
level of EC benefits which are being nullified or impaired as a result
of the current application of Section 110(5)(B).(1169) General practice
under the DSU has been to consider the facts of a case as at the date of
establishment of the panel. In the absence of any specification in our
mandate, we believe that it should be assumed that the parties wanted us
to assess the level of benefits nullified or impaired on the date the
matter was referred to us. In other words, we must determine the level
of nullification or impairment of EC benefits over a one-year period
ending as closely as possible to 23 July 2001.(1170)”(1171)
(e) Right to seek and disregard information
795. In US
— Section 110(5) Copyright Act (Article
25.3), the
Arbitrators disregarded the information they had requested from a United
States’ collective management organization because certain conditions
were attached to the use of such information. See paragraph 424
above.
(f) Treatment of confidential information
796. In US
— Section 110(5) Copyright Act (Article
25.3), the
Arbitrators decided that, in the absence of specific requests from the
parties as to how confidentiality of business confidential information
should be preserved, they would, in general, rely on the relevant
practice of the Appellate Body:
“In the absence of specific requests from the parties as to how
confidentiality of business confidential information should be
preserved, the Arbitrators will rely generally on the practice of the
Appellate Body on this matter.(1172) To the extent that confidential
information may appear as such in the award in order to support the
findings of the Arbitrators, the Arbitrators decided that two versions
of the award would be prepared. One, for the parties, would contain all
the information used in support of the determinations of the
Arbitrators. The other, which would be circulated to all Members, would
be edited so as not to include the information for which, after
consultation with the parties, the Arbitrators would conclude that
confidentiality for business reasons was sufficiently warranted. The
information which the Arbitrators would consider to be business
confidential would be replaced by ‘x’.(1173)”(1174)
2. Article 25.1
(a) “expeditious arbitration … as an alternative means of dispute
settlement”
797. In US
— Certain EC
Products, the Panel noted that Article 25
of the DSU provides for arbitration as a means of adjudicating WTO
related disputes. The Panel stated that:
“[A]lthough the panel (and Appellate Body) process is the most
commonly used WTO dispute settlement procedure, Article 25 of the DSU,
for example, explicitly provides for arbitration as a means of
adjudicating WTO related disputes. Article 25.4 provides for the
applicability of Articles 21 and 22 of the DSU to the results of such
arbitration. There is no reason why the WTO assessment of the
compatibility of an implementing measure could not be determined by an
Article 25 arbitration, as one of the WTO dispute settlement procedures.”(1175)
798. In US
— Section 110(5) Copyright Act (Article
25.3), the
Arbitrators noted that an Article 25 arbitration is an alternative means
of dispute settlement and considered that an Article 25 arbitration
procedure arguably “is actually an alternative to a panel procedure”.(1176)
See paragraph 787 above.
(b) Differences compared with panel proceedings
799. Also in US
— Section 110(5) Copyright Act (Article
25.3), the
Arbitrators observed that whereas the DSB establishes panels or refers
matters to other arbitration bodies, under Article 25 proceedings, the
parties only had to notify the DSB of their recourse to arbitration. See
paragraph 787 above.
3. Article 25.2
(a) Arbitration under Article 25 should only be excluded when
expressly provided
800. In US
— Section 110(5) Copyright
Act, the Arbitrators, when
deciding whether they were competent to assess the level of
nullification or impairment (see paragraphs 790–794
above), noted that
“none of the provisions concerned expressly excludes recourse to
arbitration under Article 25 in the particular context in which they
apply. Article 25.2 itself provides that resort to arbitration shall be
subject to mutual agreement of the parties which shall agree on the
procedures to be followed ‘except as otherwise provided in this
Understanding’.”(1177)
4. Article 25.4
(a) General
801. In US
— Section 110(5) Copyright Act (Article
25.3), the
Arbitrators noted that the nature of an Article 25 arbitration as an
alternative to the panel procedure (see paragraph 798
above), “would
seem to be confirmed by the terms of Article
25.4, which provides that
‘Articles 21 and 22 of this Understanding shall apply mutatis mutandis
to arbitration awards’(1178).”(1179)
(b) “Articles 21 and 22 …. shall apply mutatis mutandis”
802. In US
— Section 110(5) Copyright Act (Article
25.3), the
Arbitrators indicated that “they [did] not feel constrained by a
number of obligations imposed on arbitrators in Article 22.6 proceedings”.
See paragraph 794 above.
5. Relationship with other Articles
(a) Article 3.3
803. In US
— Section 110(5) Copyright
Act, the Arbitrators
considered that the recourse to Article 25 arbitration in that case was
fully consistent with the object and purpose of the DSU since the
arbitration at issue was likely to contribute to the prompt settlement
of a dispute between the European Communities and the United States, as
commanded by Article 3.3 of the DSU:
“Moreover, recourse to Article 25 arbitration in the present
situation is fully consistent with the object and purpose of the DSU.
Arbitration is likely to contribute to the prompt settlement of a
dispute between Members, as commanded by Article 3.3 of the DSU. Indeed,
it may facilitate the resolution of a divergence in the context of a
negotiation of compensations, thus paving the way to implementation
without suspension of concessions or other obligations.”(1180)
(b) Article 21
804. With respect to the relationship with
Article 21, see paragraphs
790, 797, and 801 above.
(c) Article 22.2
805. With respect to the relationship with
Article 22.2, see
paragraphs 790, 791, 797, and 801
above.
(d) Article 22.6
806. With respect to the relationship between
Article 25 arbitrations
and Article 22.6, see paragraphs
789, 792, 794 and 802
above.
XXVI. Article 26
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A. Text of Article 26
Article 26:
1. Non-Violation Complaints of the Type Described in
Paragraph 1(b)
of Article XXIII of GATT 1994
Where the provisions of
paragraph 1(b) of Article XXIII of GATT 1994
are applicable to a covered agreement, a panel or the Appellate Body may
only make rulings and recommendations where a party to the dispute
considers that any benefit accruing to it directly or indirectly under
the relevant covered agreement is being nullified or impaired or the
attainment of any objective of that Agreement is being impeded as a
result of the application by a Member of any measure, whether or not it
conflicts with the provisions of that Agreement. Where and to the extent
that such party considers and a panel or the Appellate Body determines
that a case concerns a measure that does not conflict with the
provisions of a covered agreement to which the provisions of paragraph
1(b) of Article XXIII of GATT 1994 are applicable, the procedures in
this Understanding shall apply, subject to the following:
(a)
the complaining party shall present a detailed justification in
support of any complaint relating to a measure which does not conflict
with the relevant covered agreement;
(b) where a measure has been found to nullify or impair benefits
under, or impede the attainment of objectives, of the relevant covered
agreement without violation thereof, there is no obligation to withdraw
the measure. However, in such cases, the panel or the Appellate Body
shall recommend that the Member concerned make a mutually satisfactory
adjustment;
(c) notwithstanding the provisions of
Article 21, the arbitration
provided for in paragraph 3 of Article
21, upon request of either party,
may include a determination of the level of benefits which have been
nullified or impaired, and may also suggest ways and means of reaching a
mutually satisfactory adjustment; such suggestions shall not be binding
upon the parties to the dispute;
(d) notwithstanding the provisions of
paragraph 1 of Article 22,
compensation may be part of a mutually satisfactory adjustment as final
settlement of the dispute.
2. Complaints of the Type Described in
Paragraph 1(c) of Article XXIII of GATT 1994
Where the provisions of paragraph 1(c) of Article XXIII of GATT 1994
are applicable to a covered agreement, a panel may only make rulings and
recommendations where a party considers that any benefit accruing to it
directly or indirectly under the relevant covered agreement is being
nullified or impaired or the attainment of any objective of that
Agreement is being impeded as a result of the existence of any situation
other than those to which the provisions of paragraphs 1(a) and
1(b) of
Article XXIII of GATT 1994 are applicable. Where and to the extent that
such party considers and a panel determines that the matter is covered
by this paragraph, the procedures of this Understanding shall apply only
up to and including the point in the proceedings where the panel report
has been circulated to the Members. The dispute settlement rules and
procedures contained in the Decision of 12 April 1989 (BISD 36S/61–67)
shall apply to consideration for adoption, and surveillance and
implementation of recommendations and rulings. The following shall also
apply:
(a) the complaining party shall present a detailed justification in
support of any argument made with respect to issues covered under this
paragraph;
(b) in cases involving matters covered by this paragraph, if a panel
finds that cases also involve dispute settlement matters other than
those covered by this paragraph, the panel shall circulate a report to
the DSB addressing any such matters and a separate report on matters
falling under this paragraph.
B. Interpretation and Application of Article 26
1. Article 26.1
(a) “detailed justification in support of any complaint”
807. In Japan
— Film, the Panel examined the issue of which party
bears the burden of proof in a claim involving non-violation under
Article 26.1 of the DSU. The Panel stated:
“In a case of non-violation nullification or impairment pursuant to
Article XXIII:1(b), Article 26.1(a) of the DSU and GATT jurisprudence
confirm that this is an exceptional remedy for which the complaining
party bears the burden of providing a detailed justification to back up
its allegations.
…
Consistent with the explicit terms of the DSU and established
WTO/GATT jurisprudence, and recalling the Appellate Body ruling that ‘precisely
how much and precisely what kind of evidence will be required to
establish … a presumption [that what is claimed is true] will
necessarily vary from … provision to provision’, we thus consider
that the United States, with respect to its claim of non-violation
nullification or impairment under Article
XXIII:1(b), bears the burden
of providing a detailed justification for its claim in order to
establish a presumption that what is claimed is true. It will be for
Japan to rebut any such presumption.”(1181)
808. In
EC
— Asbestos, the Panel confirmed that “[w]here the
application of Article XXIII:1(b) is concerned,
Article 26.1(a) of the
Understanding and panel practice in the context of the WTO Agreement and
the GATT 1947 confirm that this is an exceptional course of action
requiring the complaining party to carry the burden of presenting a
detailed justification in support of its complaint”.(1182) The Panel
further stated that “because of the importance conferred on them a
priori by the GATT 1994, as compared with the rules governing
international trade, situations that fall under Article XX justify a
stricter burden of proof being applied in this context to the party
invoking Article XXIII:1(b), particularly with regard to the existence
of legitimate expectations and whether or not the initial Decree could
be reasonably anticipated”.(1183)
2. Jurisprudence under Article XXIII:1(b)
809. With respect to panel and Appellate Body reports on claims
brought under Article
XXIII:1(b), see Section XXIV.B.2 of the Chapter on
the GATT 1994.
C. Relationship with other WTO agreements
1. Article XXIII:1(a) of the GATT 1994
810. With respect to the relationship between
Article XXIII:1(a) and
Article XXIII:1(b) of the GATT 1994, see Section XXIV.B.1(a) of the
Chapter on the GATT 1994.
2. Article XXIII:1(b) of the GATT 1994
811. With respect to the issue of non-violation, see
Section
XXIV.B.2(a) of the Chapter on the GATT 1994.
XXVII. Article 27
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A. Text of Article 27
Article 27: Responsibilities of the Secretariat
1. The Secretariat shall have the responsibility of assisting panels,
especially on the legal, historical and procedural aspects of the
matters dealt with, and of providing secretarial and technical support.
2. While the Secretariat assists Members in respect of dispute
settlement at their request, there may also be a need to provide
additional legal advice and assistance in respect of dispute settlement
to developing country Members. To this end, the Secretariat shall make
available a qualified legal expert from the WTO technical cooperation
services to any developing country Member which so requests. This expert
shall assist the developing country Member in a manner ensuring the
continued impartiality of the Secretariat.
3. The Secretariat shall conduct special training courses for
interested Members concerning these dispute settlement procedures and
practices so as to enable Members’ experts to be better informed in
this regard.
B. Interpretation and Application of
Article 27
No jurisprudence or decision of a competent WTO
body.
XXVIII. Appendix 1: Agreements Covered by
the DSU back to top
A. Text of Appendix 1
Appendix 1: Agreements Covered by the Understanding
(A) Agreement Establishing the World Trade Organization
(B) Multilateral Trade Agreements
Annex 1A:
Multilateral Agreements on Trade in Goods
Annex 1B: General
Agreement on Trade in Services
Annex 1C: Agreement
on Trade-Related Aspects of Intellectual Property Rights
Annex 2:
Understanding on Rules and Procedures Governing the Settlement of
Disputes
(C) Plurilateral Trade Agreements
Annex 4: Agreement on Trade in Civil Aircraft
Agreement
on Government Procurement
International Dairy Agreement
International Bovine Meat Agreement
The applicability of this Understanding to the Plurilateral Trade
Agreements shall be subject to the adoption of a decision by the parties
to each agreement setting out the terms for the application of the
Understanding to the individual agreement, including any special or
additional rules or procedures for inclusion in Appendix
2, as notified
to the DSB.
B. Interpretation and Application of Appendix 1
812. As regards the concept of “covered agreements”, see
paragraphs 1–5 above.
XXIX. Appendix 2: Special or Additional
Dispute Settlement Rules and Procedures back to top
A. Text of Appendix 2
Appendix 2: Special or Additional Rules and Procedures Contained in the Covered Agreements
|
Agreement |
Rules and Procedures |
|
Agreement on the Application of Sanitary and
Phytosanitary Measures |
11.2 |
|
Agreement on Textiles and Clothing |
2.14, 2.21, 4.4, 5.2, 5.4, 5.6, 6.9, 6.10,
6.11, 8.1 through 8.12 |
|
Agreement on Technical Barriers to Trade |
14.2 through 14.4, Annex 2 |
|
Agreement on Implementation of Article VI of
GATT 1994 |
17.4 through 17.7 |
|
Agreement on Implementation of Article VII of
GATT 1994 |
19.3 through 19.5, Annex II.2(f), 3, 9, 21 |
|
Agreement on Subsidies and Countervailing
Measures |
4.2 through 4.12, 6.6, 7.2 through 7.10, 8.5,
footnote 35, 24.4, 27.7, Annex V |
|
General Agreement on Trade in Services
Annex on Financial Services
Annex on Air Transport Services |
XXII:3, XXIII:3
4
4 |
|
Decision on Certain Dispute Settlement
Procedures for the GATS |
1 through 5 |
The list of rules and procedures in this Appendix includes provisions
where only a part of the provision may be relevant in this context.
Any special or additional rules or procedures in the Plurilateral
Trade Agreements as determined by the competent bodies of each agreement
and as notified to the DSB.
B. Interpretation and Application of Appendix 2
813. With respect to the interpretation and application of
Article
1.2 of the DSU, setting forth the rules applying to the “special or
additional rules and procedures”, see paragraphs 6–10
above.
Footnotes:
1135. Panel Report on
US — Section 301 Trade Act, para. 7.81. back to text
1136. (footnote original) Article 23.1 of the
DSU refers more
accurately to “seek the redress of a violation of obligations or other
nullification or impairment of benefits under the covered agreements or
an impediment to the attainment of any objective of the covered
agreements”, i.e. the three causes of actions under WTO. In this Panel
Report, the expression “WTO violation(s)” refers to all three causes
of actions mentioned in Article 23.1 of the DSU. back to text
1137. (footnote original) Panel Report on
US — Section 301 Trade Act, para. 7.44. back to text
1138. Panel Report on US — Certain EC
Products, paras 6.19–6.20.
This was upheld by the Appellate Body at para. 111. back to text
1139. (footnote original) Panel Report on
US — Section 301 Trade Act, para. 7.45. back to text
1140. (footnote original) Panel Report on
US — Section 301 Trade Act, para. 7.45. back to text
1141. (footnote original) See Panel Report on
US — Section 301 Trade Act, fns. 655 and 656. back to text
1142. Panel Report on US — Certain EC
Products, paras. 6.17–6.20. back to text
1143. Panel Report on US — Certain EC
Products, paras. 6.22 and
6.26. back to text
1144. Panel Report on
US — Section 301 Trade Act, para. 7.43. back to text
1145. Panel Report on
US — Section 301 Trade Act, paras. 7.59, 7.61
and 7.63. back to text
1146. Panel Report on US — Certain EC
Products, paras. 6.37–6.38. back to text
1147. Appellate Body Report on US — Certain EC
Products, para. 120. back to text
1148. Panel Report on Canada — Aircraft Credits and
Guarantees,
para. 7.170. back to text
1149. (footnote original) The Arbitrators recall that arbitration
was seldom used under GATT 1947. back to text
1150. (footnote original) In particular, the Arbitrators believe
that this arbitration should not be applied so as to circumvent the
provisions of Article 22.6 of the DSU (see
Article 23.2(c) of the DSU). back to text
1151. Award of the Arbitrators on US
— Section 110(5) Copyright Act
(Article 25.3), para. 2.1. back to text
1152. (footnote original) See the Appellate Body Report on
United
States — Anti-Dumping Act of 1916, WT/DS136/AB/R and WT/DS162/AB/R,
adopted 26 September 2000, para. 54, footnote 30. back to text
1153. (footnote original) This is evidenced by
Article 21 of the
Optional Rules of the Permanent Court of Arbitration for arbitrations
involving international organizations and States. See Permanent Court of
Arbitration: Optional Rules for Arbitration involving International
Organizations and States, effective 1 July 1996, International Bureau of
the Permanent Court of Arbitration, The Hague, The Netherlands. back to text
1154. Award of the Arbitrators on US
— Section 110(5) Copyright Act
(Article 25.3), para. 2.1. back to text
1155. (footnote original) See WT/DS160/15.
back to text
1156. Award of the Arbitrators on US
— Section 110(5) Copyright Act
(Article 25.3), para. 4.4. back to text
1157. (footnote original) Emphasis added.
back to text
1158. (footnote original) In a note by the GATT Secretariat on
Concept, Forms and Effects of Arbitration (MTN.GNG/NG13/W/20, 22
February 1988), the term “dispute” is defined as a specific
disagreement concerning a matter of fact, law or policy in which a claim
or assertion by one party is met with refusal, counter-claim or denial
by another. back to text
1159. (footnote original) The text of
Article 25 of the DSU is
essentially identical to that of paragraphs 1, 2 and 3 of Section E of
the 1989 Decision on improvements to the GATT dispute settlement
procedures (BISD 36S/63). It is worth noting that, in that Decision,
Section E follows other sections on means of resolution of disputes,
such as consultations (Section C) and good offices, conciliation and
mediation (Section D). Moreover, GATT 1947 did not provide for the
sophisticated means of enforcement found in the DSU. The note MTN.GNG/NG13/W/20
of 22 February 1988, referred to above, also presents
arbitration “as an alternative to the normal dispute settlement
process” (para. 12) or “as an alternative to panel proceedings”
(para. 17). back to text
1160. Award of the Arbitrators on US
— Section 110(5) Copyright Act
(Article 25.3), para. 2.3. back to text
1161. (footnote original) As a matter of fact, it may affect them
positively, given the erga omnes character of compensation. back to text
1162. (footnote original) The Arbitrators’ recognition of their
jurisdiction in this case is not a unilateral extension of WTO
jurisdiction, since it is dependent on the agreement of the parties to a
dispute to have recourse to Article 25 of the DSU. This decision is
without prejudice to the DSU compatibility of the decision of the
parties to accept this award as the level of nullification or impairment
for the purpose of any further proceedings under Article 22 of the DSU
in relation to this case. It is also without prejudice to any
interpretation of the provisions of Articles 22 and
25 of the DSU by the
Ministerial Conference or the General Council. back to text
1163. Award of the Arbitrators on US
— Section 110(5) Copyright Act
(Article 25.3), paras. 2.4–2.7. back to text
1164. (footnote original) This view is based on the object of the
present proceedings, which is to quantify the economic harm suffered by
the European Communities as a consequence of the continued application
of Section 110(5)(B). It does not necessarily follow that Members having
recourse to Article 64 of the TRIPS Agreement need to establish
nullification or impairment of economic benefits accruing to them under
the TRIPS Agreement. The Arbitrators find support for their view in the
following statement by the arbitrators in European Communities
— Regime for the Importation, Sale and Distribution of Bananas — Recourse to Arbitration by the European Communities under Article 22.6
of the DSU: “[A] Member’s potential interests in trade in goods or
services and its interest in a determination of rights and obligations
under the WTO Agreements are each sufficient to establish a right to
pursue a WTO dispute settlement proceeding. However, a Member’s legal
interest in compliance by other Members does not, in our view,
automatically imply that it is entitled to obtain authorization to
suspend concessions under Article 22 of the DSU.” See the Decision by
the Arbitrators on European Communities — Regime for the Importation,
Sale and Distribution of Bananas — Recourse to Arbitration by the
European Communities under Article 22.6 of the DSU (hereafter “EC
— Bananas III (22.6) (US)”), WT/DS27/ARB, 9 April 1999, para. 6.10. back to text
1165. (footnote original) See, e.g., the Decisions by the
Arbitrators on EC — Bananas III (22.6) (US), supra, para. 6.12
(benefits nullified or impaired: losses in US exports of goods and
losses by US service suppliers in services supply); European Communities
— Regime for the Importation, Sale and Distribution of Bananas — Recourse to Arbitration by the European Communities under Article 22.6
of the DSU, WT/DS27/ARB/ECU, 24 March 2000, footnote 52 (benefits
nullified or impaired: losses by Ecuador of actual trade and of
potential trade opportunities in bananas and the loss of actual and
potential distribution service supply); European Communities — Measures Concerning Meat and Meat Products (Hormones)
— Original
Complaint by the United States — Recourse to Arbitration by the
European Communities under Article 22.6 of the DSU (hereafter “EC
— Hormones (22.6) (US)”), WT/DS26/ARB, 12 July 1999, para. 41 (benefits
nullified or impaired: foregone US exports of hormone-treated beef and
beef products); European Communities — Measures Concerning Meat and
Meat Products (Hormones) — Original Complaint by Canada
— Recourse
to Arbitration by the European Communities under Article 22.6 of the DSU
(hereafter “EC — Hormones (22.6) (Canada)”), WT/DS48/ARB, 12 July
1999, para. 40 (benefits nullified or impaired: foregone Canadian
exports of hormone-treated beef and beef products). back to text
1166. Award of the Arbitrators on US
— Section 110(5) Copyright Act
(Article 25.3), para. 3.18. back to text
1167. (footnote original) Indeed, as already pointed out, the rights
set forth in Articles 11bis(1)(iii) and 11(1)(ii) must, in conformity
with the provisions of Article 1.3 of the TRIPS
Agreement, be granted to
EC right holders. back to text
1168. Award of the Arbitrators on US
— Section 110(5) Copyright Act
(Article 25.3), para. 3.19. back to text
1169. (footnote original) This seems to imply that the level of
nullification or impairment that the Arbitrators will assess in this
case may be different from that which may exist after the end of the
reasonable period of time. This implies further that the amount which
will be determined by the Arbitrators may not dispense the parties from
an Article 22.6 arbitration. back to text
1170. (footnote original) The reason for the choice of a yearly
basis is essentially because compensations or suspensions of concessions
or other obligations have been so far calculated on a twelve-month
basis. back to text
1171. Award of the Arbitrators on US
— Section 110(5) Copyright Act
(Article 25.3), para. 4.19. back to text
1172. (footnote original) See, in particular, the Appellate Body
Report on Canada — Measures Affecting the Export of Civilian
Aircraft,
WT/DS70/AB/R, adopted 20 August 1999, paras. 141–147. back to text
1173. (footnote original) This approach was used in one
Article 22.6
arbitration and does not seem to have met with objections in the DSB.
See the Decision by the Arbitrators on Brazil — Export Financing
Programme for Aircraft — Recourse to Arbitration by Brazil under
Article 22.6 of the DSU and Article 4.11 of the SCM Agreement (hereafter
“Brazil — Aircraft (22.6)”), WT/DS46/ARB, 28 August 2000, para.
2.14. back to text
1174. Award of the Arbitrators on US
— Section 110(5) Copyright Act
(Article 25.3), para. 1.24. back to text
1175. Panel Report on US — Certain EC
Products, para. 6.119. The
elaboration made by the Panel in this case regarding the mandate of
arbitrators appointed under Article 22.6 of the DSU based upon its
interpretation of Articles 21.5 and
25 of the DSU was later dismissed by
the Appellate Body on the grounds that the Panel’s statements relate
to a measure which was outside its terms of reference. Appellate Body
Report on US — Certain EC Products, paras. 89–90. back to text
1176. Award of the Arbitrators on US
— Section 110(5) Copyright Act
(Article 25.3), para. 2.3. back to text
1177. Award of the Arbitrators on US
— Section 110(5) Copyright Act
(Article 25.3), para. 2.4. back to text
1178. (footnote original) The text of
Article 25 of the DSU is
essentially identical to that of paragraphs 1, 2 and 3 of Section E of
the 1989 Decision on improvements to the GATT dispute settlement
procedures (BISD 36S/63). It is worth noting that, in that Decision,
Section E follows other sections on means of resolution of disputes,
such as consultations (Section C) and good offices, conciliation and
mediation (Section D). Moreover, GATT 1947 did not provide for the
sophisticated means of enforcement found in the DSU. The note MTN.GNG/NG13/W/20 of 22 February 1988, referred to above, also presents
arbitration “as an alternative to the normal dispute settlement
process” (para. 12) or “as an alternative to panel proceedings”
(para. 17). back to text
1179. Award of the Arbitrators on US
— Section 110(5) Copyright Act
(Article 25.3), para. 2.3. back to text
1180. Award of the Arbitrators on US
— Section 110(5) Copyright Act
(Article 25.3), para. 2.5. back to text
1181. Panel Report on Japan — Film, paras. 10.30 and 10.32.
back to text
1182. Panel Report on EC — Asbestos, para. 8.275.
back to text
1183. Panel Report on EC — Asbestos, para. 8.282.
back to text
|
