A WTO Dispute from A to Z: US – Shrimp
The Shrimp Turtle Case: Brief Background • Sea turtles were being subject to incidental capture by fishermen. In 1989, USA enacted Section 609 of Public Law 101 -162 (S. 609) which encouraged bilateral and multilateral negotiations for the protection and conservation of sea turtles with governments engaged in commercial fishing operations likely to have a negative impact on sea turtles. (Para2.7) • In 1996, Revised Guidelines to S. 609 were passed which stipulated that all shipments of shrimp and shrimp products into USA were to be accompanied by a declaration attesting that the shrimp had been harvested “either under conditions that do not adversely affect turtles or in waters subject to the jurisdiction of a certified nation. (Para 2.11) • Certification was to be granted annually to harvesting countries other than those where turtles do not occur or that exclusively use means that do not pose a threat to sea turtles (TEDS), “only if those countries provided evidence of the adoption of a regulatory program governing the incidental taking of sea turtles in the course of commercial shrimp trawl harvesting that was comparable to that of USA and if the average rate of that incidental taking of sea turtles was comparable to that of USA. • In October 1996, the above embargo was extended to apply to all shrimp and shrimp products harvested in the wild by citizens or vessels of nations which had not been certified. (Para 2.15)
Parties Complainants India Malaysia Pakistan Thailand Respondent USA Third Parties Australia, Colombia, Costa Rica, Ecuador, El Salvador, the EEC, Guatemala, Hong Kong, Japan, Mexico, Nigeria, the Philippines, Senegal, Singapore, Sri Lanka, Venezuela Timeline Consultations Requested: 8 Oct 1996 Held: 19 Nov 1996 Panel Requested by Malaysia and Thailand on: 9 Jan 1997 Requested by Pakistan on: 30 Jan 1997. Requested by India on: 25 Feb 1997. Established: 25 Feb 1997 for Malaysia, Thailand and Pakistan. Established: 10 April 1997 for India. Decision that Panel be consolidated: 25 Feb 1997. Panel Notification that could not make report in 6 months: 22 Sept 1997. Meeting with Experts and Parties: 21 & 22 Jan 1998. Report Circulated: 6 April 1998. The Shrimp Turtle Case: Basic Elements
Measures in Issue • Section 609 of the USA Public Law 101 – 162 (S. 609) which prohibited the importation of shrimp or shrimp products harvested with commercial fishing technology that could adversely affect sea turtles except if the exporting country was certified. • Certification was carried out on the basis of The 1996 Revised Guidelines for determining comparability of foreign programs for the protection of turtles in shrimp trawl fishing operations with those of the United States. • It is this shrimp import ban under S. 609 and the method and process of certification under the Revised Guidelines that have been in issue in this case.
India, Pakistan, Thailand, Malaysia Article XI:1 Article XIII:1 Article 1:1. Article XXIII:1 (a) USA Article XX GATT Article XX (b) and (g) Summary of Parties’ Claims.
India, Pakistan, Thailand, The US embargo constitutes a prohibition or restriction on the importation of shrimp or shrimp products in violation of Article XI:1. (Para 3.136). Malaysia Argues that the prohibition falls under Article XI as it bans import of shrimp from any country not meeting certain policy conditions. (Para 3.140) USA USA did not dispute that with regard to uncertified countries, S. 609 amounted to a restriction on the importation of shrimp within the meaning of Article XI:1. (Para 3.143) The complainants have the burden of establishing the alleged violation. (Para 3.143) Under Article XX GATT, nothing is to be construed to prevent the adoption or enforcement of the measures at issue. As such, USA did not need not address Article XI. Parties’ Arguments on Whether S.609 Violates Article XI:1 GATT.
Panel Findings on Article XI:1. 1. USA Was in Violation of Article XI:1 • Because USA did not dispute the fact that with respect to countries not certified under S. 609, the Section amounted to a restriction. In legal jurisprudence, if a party admits a particular fact, it may be considered as such. (Para 7.15) • Even if USA did not make an admission, evidence showed the US prohibition of shrimp from non certified Members violated Article XI:1 as it was a prohibition or restriction within the meaning of Article XI:1. (Para 7.16) 2. Burden of Proof. (Para 7.14) • The Burden rests on the party whether complaining or defending, who asserts the affirmative of a particular claim or defence. • Precisely how much and precisely what kind of evidence will be required to establish a presumption that a claim is valid will necessarily vary from case to case.
India, Pakistan, Thailand Prohibition from non certified countries is inconsistent with MFN in Article 1:1 because physically identical shrimp from different Members are treated differently by US upon importation. (Para 3.135) This differentiated treatment is solely based on the method of harvest and the conservation policies of the harvesting government. Harvested wild shrimp is forbidden entry if harvested by a national of a non certified country but not of a certified country. (Para 7.18) Initially affected countries were given a phase in period of 3 years while newly affected nations were not given similar period of time. Malaysiaargues was given only 3 months to comply. (Para 3.142) USA The US measure was applied equally to all harvesting nations. (Para 3.143) Denies entry of shrimp based on method of harvest. (Para 7.20) Difference in phase in periods was because the longer time period was needed for the undeveloped character of TED technology, while the shorter period was later made possible by the improvements in the technology. Parties’ Arguments on Article XIII:1 and 1:1.
Panel findings on Articles XIII:1 and 1:1. • The panel did not find it necessary to review the allegations with respect to Article XIII:1 and Article 1:1 given the panel conclusion with respect to Article XI:1 that S. 609 violates Article XI:1. (Para 7.22) • The panel’s decision not to review the above Articles was based on the jurisprudence in the Wool Shirts case that a panel need only address those claims which must be addressed in order to resolve the matter in issue in the dispute. (Para 7.22)
India, Pakistan, Thailand, Malaysia Article XX (b) and (g) cannot be invoked to justify a measure which applies to animals outside the Member’s jurisdiction. (Para 3.157). Article XX (g) is limited to the conservation of finite resources such as minerals rather than biological or renewable resources for which there was a limited supply, hence the possibility of depletion. (Para 3.237) US measure was not “necessary” because the complainants already had adequate programs in place for the protection of turtles within their jurisdictions. (Para 3.217) USA Measures found inconsistent with Articles XI:1 are justified under Articles XX (b) and (g). (Para 3.147). Article XX (b) and (g) contain no jurisdictional limitations nor limitations on the location of the animals or natural resources to be protected and conserved. (Para 3.159) The measures were necessary to reduce sea turtle mortality which were threatened with extinction. The use of TEDs was also necessary because other measures to protect sea turtles were not sufficient to allow sea turtles to recover from the brink of extinction. (Para 3.222) Parties’ Arguments on Articles XX (b) and (g).
Panel findings on Article XX (b) and (g) GATT. • The Chapeau • The US measure was not within the scope of measures permitted under the chapeau of Article XX. In order for Article XX to apply, it must not only come under one or another of the particular exceptions a – j. It must also satisfy the chapeau. (Para 7.28) • The purpose of the Article XX chapeau is generally to prevent the abuse of the exceptions of Article XX. Hence the Chapeau determines to a large extent the context of the specific exceptions contained in the paragraphs of Article XX. (Para 7.29) • The panel therefore must first examine whether the measure at issue satisfied the conditions contained in the chapeau. If this is the case, then the panel would examine whether the measure is covered by Article XX (b) and (g). • The chapeau prohibits the application of a measure that constitutes “arbitrary or unjustifiable discrimination” between countries where the same measure exists. The US ban applied to all Members seeking to export shrimp to USA. Some of these Members were certified and could export the shrimp but some were not certified and were thus subject to the ban. Discriminatory treatment was thus applied to shrimp from the non certified countries. (Para 7.33)
Panel Findings: The Chapeau. • The chapeau states that a nation may discriminate but not in an arbitrary or unjustifiable manner. The US measure constitutes unjustifiable discrimination between countries where the same conditions prevail. This is because the US measure was taken unilaterally without any serious attempt to reach before hand a negotiated solution, contrary to the object and purpose of the WTO Agreement. (Para 7.49 and 7.61) • Article XX only allows Members to derogate from GATT as long as in doing so, they do not undermine the WTO multilateral trading system, thus also abusing the exceptions contained in Article XX. Such undermining and abuse would occur when a member jeopardizes the operation of the WTO Agreement in such a way that guaranteed market access and non discriminatory treatment within a multilateral framework would no longer be possible. This type of measure if adopted by a Member would raise a serious threat to the system if similar measures are adopted by the same or other Members. (Para 7.44) • Thus by allowing such a measure even though their individual impact may not appear to be such as to threaten the multilateral trading system, one would affect the security and predictability of the multilateral trading system. (Para 7.45)
Panel Findings: The Chapeau and Article XX (b) and (g). • In considering a measure under Article XX, the panel must determine not only whether the measure on its own undermines the WTO multilateral trading system, but also whether such type of measure if it were to be adopted by other Members, would threaten the security and predictability of the multilateral trading system. (Para 7.44) • The panel noted that its findings do not question the legitimacy of environmental policies, including those promoted through multilateral conventions. It considered its findings to be in line with the principles embodied in many international agreements pursuant to which international cooperation was to be sought before having recourse to unilateral measures. (Para 7.60) 2. Article XX (b) and (g). • The panel did not find it necessary to examine whether the US measure is covered by the Article XX (b) and (g), on the basis of the fact that the measure did not satisfy the chapeau. (Para 7.63).
India, Pakistan, Thailand The measure at issue represents a clear infringement of Articles I, XI and XIII GATT and it is well established that in cases where there is a clear infringement of provisions of GATT, the action would prima facie constitute a nullification or impairment within the meaning of Article XXIII GATT. (Para 3.297) USA USA did not address this issue. Parties’ Arguments on Article XXIII:1 (a) GATT
Panel findings on Article XXIII:1 GATT. • The US measure violates Article XI and is not justified under Article XX. There is therefore a presumption of nullification or impairment within the meaning of Article 3.8 DSU and it is for USA to rebut it. (Para 7.64) • The panel found that USA had not succeeded in rebutting the presumption that its breach of GATT has nullified or impaired benefits accruing to the complainants herein. (Para 7.65)
Panel Conclusion. • The import ban on shrimp and shrimp products as applied by USA on the basis of S. 609 was not consistent with Article XI:1 GATT and could not be justified under Article XX GATT. (Para 8.1) • The issue in dispute was not the urgency of protection of sea turtles, or the desirability or necessity of the environmental objectives of the US policy on sea turtle conservation. Members are free to set their own environmental objectives but they are bound to interpret those objectives in such a way that is consistent with their WTO obligations, not depriving the WTO Agreement of its object and purpose. (Para 9.1).
Parties Appellant USA APPELLES India Malaysia Pakistan Thailand Third Parties Australia, Ecuador, the EEC, Hong Kong, China and Nigeria. Timeline Notice of Appeal: 13 July 1998 Report circulated: 12 Oct 1998 Adoption: 6 Nov 1998 The Shrimp Turtle Case: Appellate Body
The Shrimp Turtle Case: Key Issue raised on Appeal • Whether the panel erred in finding that the measure at issue constituted unjustifiable discrimination between countries where the same conditions prevailed and thus was not within the scope of measures permitted under Article XX GATT.
Appellate Body Findings. An Error in the Interpretive Analysis of the Panel. The Appellate Body found that the interpretive analysis adopted by the Panel constituted an error in legal interpretation because: 1. The Panel did not inquire specifically into how the application of S.609 constituted a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevailed. (Para 115) 2. The Panel did not follow all the steps of applying the customary rules of interpretation of public international law, according to Article 3.2 DSU. It did not expressly examine the ordinary meaning of the words of Article XX. (Para 114). 3. The Panel did not look into the object and purpose of the chapeau of Article XX. Rather it looked into the object and purpose of the whole of GATT and the WTO Agreement. Maintaining rather than undermining the multilateral trading system is necessarily a fundamental premise underling the WTO Agreement, but it is not a right or an obligation, nor is it an interpretive rule which can be employed in the appraisal of a given measure under the chapeau of Article XX. (Para 116)
Appellate Body Findings Continued. 4. The general design of a measure, as distinguished from its application, is to be examined in the course of determining whether the measure falls within one of the paragraphs of Article XX chapeau. The Panel did not attempt to inquire into how the measure at stake was being applied in such a manner as to constitute abuse or misuse of a given kind of exception. (Para 116). 5. The above flaws flowed from the fact that the Panel disregarded the sequence of steps essential for making a finding under Article XX. (Para 117). As stated in the US Gasoline case, the analysis is two tiered: First; provisional justification of the measure by reason of characterization under XX (g); second, further appraisal of the same measure under the introductory clauses of Article XX. This reflects the fundamental structure and logic of Article XX. Reversing the above sequence makes a whole world of difference. (Para 118) 6. The Panel formulated a broad standard and a test that finds no basis either in the text of the chapeau or in that of either of the two specific exceptions claimed by USA. The Panel in effect construed a priori test that purports to define a category of measures which ratione materiae fall outside the justifying of the chapeau. (Para 121).
Appellate Body Findings Continued. Whether S. 609 was Justified Under Article XX (g). 1. Exhaustible natural resources. ArticleXX (g) is not limited to the conservation of mineral or non living natural resources. Living resources are just as finite as non living resources. (Para 128). It should be noted that also modern international conventions and declarations make reference to natural resources as embracing both living and non living resources. (Para 130). 2. Relating to conservation of exhaustible natural resources. “Relates to” implies the looking at the relationship between the measure at stake and the legitimate policy of conserving exhaustible natural resources. (Para 135). It involves examination of the general structure of S. 609 and the policy goal it purports to serve, the conservation of sea turtles. • S. 609 (1) is designed to influence countries to adopt national regulatory programs requiring the use of TEDs by their shrimp fishermen. This is directly connected with the policy of conservation of sea turtles S. 609 is not disproportionately wide in its scope and reach in relation to its policy objective of protection and conservation of sea turtles. (Para 140)
Appellate Body Findings Continued. • The means and end relationship between S. 609 and the legitimate policy of conserving an exhaustible endangered species is observably a close and a real one, a relationship that is every bit substantial. (Para 141) 3.Measure is made effective in conjunction with restrictions on domestic production and consumption - whether the restrictions imposed by S. 609 with respect to imported shrimp are also imposed in respect of shrimp caught by USA shrimp trawl vessels. The Appellate Body found that USA had the ability to seize shrimp catch from trawl vessels fishing in US waters and had done so in cases of egregious violations. As such, S. 609 was an even handed measure, which was made effective in conjunction with restrictions on domestic harvesting of shrimp. (Para 144). 4. Conclusion on XX (g) or XX (b)? Since S. 609 falls within the ambit of Article XX (g), there is no need to investigate it under XX (b), considering the US had prayed for XX (b) only if the measure did not fall under XX (g). (Para 146).
Appellate Body Findings: Chapeau. Characterizing S. 609 Under the Chapeau’s standards. There are 3 standards contained in the chapeau. (Para 150) i) Arbitrary discrimination between countries where the same conditions prevail. ii) Unjustifiable discrimination between countries where the same conditions prevail. iii) A disguised restriction on international trade. Arbitrary or Unjustified Discrimination For a measure to be an arbitrary or unjustified discrimination, 3 elements must exist: (Para 150). a) The application of a measure must result in discrimination. b) The discrimination must be arbitrary or unjustifiable in character. c) The discrimination must occur between countries where the same conditions prevail.
Appellate Body Findings: Chapeau Article XX. Unjustifiable Discrimination. • The US did not permit imports of shrimp harvested by commercial shrimp trawl vessels using TEDs comparable in effectiveness to those required in US if those shrimp originated in waters of uncertified countries. This meant that shrimp caught using methods identical to those employed in US were excluded from the US market solely because they had been caught in waters of uncertified countries. (Para 165) • This suggests that the US measure was more concerned with effectively influencing WTO Members to adopt essentially the same comprehensive regulatory regime as that applied by US to its domestic shrimp trawlers, even though many of those Members may be differently situated. • This discrimination results not only when countries in which the same conditions prevail are differently treated, but also when the application of the measure at issue does not allow for any inquiry into the appropriateness of the regulatory program for the conditions prevailing in those exporting countries. (Para 165)
Appellate Body Findings: Chapeau Article XX. • USA also failed to engage the Appellees and other countries in serious across-the-board negotiations with the objective of concluding bilateral or multilateral agreements for the protection and conservation of sea turtles before enforcing the import prohibition against the shrimp exports of those other Members. (Para 166). • The very policy measure of conservation of highly migratory species of sea turtles demands concerted and cooperative efforts on the part of the many countries whose waters are traversed in the course of recurrent sea turtle migrations. The need for such efforts have been recognized by several international instruments and declarations such as the Rio Declaration on Environment and Development, the Convention on Biological Diversity, the Convention on the Conservation of Migratory Species of Wild Animals, and by WTO Members in the Report of the CTE, forming part of the Report of the General Council to Ministers on the occasion of the Singapore Ministerial Conference. (Para 168) • In S. 609, the US expressly recognizes the importance of securing international agreements for the protection and conservation of sea turtles. According to S. 609 (a), the US Secretary of State was directed to initiate negotiations as soon as possible for the development of bilateral or multilateral agreements with other nations for the protection of such species as sea turtles. (Para 167). There are however no records of any substantial efforts to carry out these directions.
Appellate Body Findings: Chapeau Article XX. • The only attempt to achieve the same was through the negotiation of The Inter American Convention, which stipulated that each party shall take appropriate measures for the protection, conservation and recovery of sea turtle populations and their habitats within such party’s land. (Para 169) • The juxtaposition of the consensual undertakings to put in place regulations providing for the use of TEDs jointly determined to be suitable for a particular party’s maritime areas with the reaffirmation of the parties’ obligations under the WTO Agreement, TBT Agreement and Article XI GATT, enshrined in the Inter American Convention suggest that the Parties to this Convention had marked out the equilibrium line to deal with the issue, and shows that consensual and multilateral procedures were available and feasible for the establishment of programs for the conservation of turtles. (Para 170). • The Inter American Convention thus provides convincing demonstration that an alternative course of action was reasonably open to US for securing the legitimate policy goal of its measure, a course of action other than the unilateral and non consensual procedures of the import prohibition under S. 609. An import prohibition is the heaviest weapon in a Member’s armoury of trade measures. The record does not show that serious efforts were made by USA to negotiate similar agreements with other countries before enforcing S. 609. USA did not even attempt to have recourse to such international mechanisms to achieve cooperative efforts before imposing the ban. (Para 171).
Appellate Body Findings: Chapeau Article XX. • The USA negotiated with some but not with other Members, including the appellees. The effect was plainly discriminatory and unjustifiable, especially when one considers the cumulative effects of the failure of USA to pursue negotiations for establishing consensual means of protection and conservation, notwithstanding the explicit statutory direction in S. 609 itself to initiate negotiations as soon as possible. (Para 172) • Further, under the 1996 guidelines, 14 countries in the wider Caribbean/ • Western Atlantic region had a phase in period of 3 years, while all other countries including the appellees had only 4 months to implement the US requirement of compulsory use of TEDs. These differing periods of implementation were discriminatory. (Para 173) • Differing treatment was also seen in the effort made by USA to transfer the required TED technology to the different countries. Far greater effort was made for the 14 countries than for the other countries. (Para 175). • The above differences in the means of application of S. 609 considered in their cumulative effect constituted unjustifiable discrimination between exporting countries desiring certification in order to gain access to the US shrimp market.
Appellate Body Findings: Chapeau Article XX. Arbitrary Discrimination • S. 609 imposes a single, rigid and unbending requirement that countries applying for certification adopt a comprehensive regulatory program that is essentially the same as the US program, without inquiring into the appropriateness of that program for the conditions prevailing in the exporting countries. There is also little or no flexibility in how officials make the determination for certification pursuant to this law. This rigidity and inflexibility constitutes arbitrary discrimination within the meaning of the chapeau. (Para 177). • Further, there is no transparent and predictable certification process. The process consists principally of administrative exparte inquiry or verification by the US Office of Marine Conservation. There is no opportunity for an applicant country to be heard or to respond to any arguments that may be made against it, in the course of the certification process before a decision for grant or denial is made. Moreover no formal written reasoned decision of acceptance or rejection is rendered. No procedural review or appeal from a denial is provided. (Para 180). • The certification process followed by USA thus appears to be singularly informal and casual. There appears to be no way that exporting Members can be certain of whether the 1996 Guidelines are being applied in a fair and just manner by USA. Exporting members applying for certification whose applications are rejected are denied basic fairness and due process, and are discriminated against, vis a vis the Members who are granted certification. (Para 181).
Appellate Body Findings: Chapeau Article XX. • Article X:3 GATT has a bearing upon this matter. It is only reasonable that rigorous compliance with the fundamental requirements of due process should be required in the application and administration of a measure which purports to be an exception to the treaty obligations of the Member imposing the measure and which effectively results in a suspension of the treaty rights of other Members. (Para 182). • Article X:3 GATT also establishes certain minimum standards for transparency and procedural fairness in the administration of trade regulations which have not been met by USA. (Para 183) • The US measure was thus applied in a manner that amounted to unjustifiable discrimination . The measure was therefore not entitled to the justifying protection of Article XX. Having made this finding, it was not necessary to examine whether the measure constituted a disguised restriction on international trade under the chapeau of Article XX. (Para 184).
Appellate Body Conclusions. • The Appellate Body stressed that it had not decided that the protection and preservation of the environment was of no significance to the Members of the WTO. (Para 185). • What was decided was that although the measure in dispute serves an environmental objective that is recognized as legitimate under Article XX (g), this measure has been applied by USA in a manner that constitutes arbitrary and unjustifiable discrimination contrary to the chapeau of Article XX. (Para 186). • The Appellate Body therefore concluded that the US measure while qualifying for provisional justification under Article XX (g), failed to meet the requirements of the chapeau and therefore was not justified under Article XX GATT. (Para 187).
Recourse to Article 21.5 – Panel Report. Brief Background • On 6 Nov 1998, the DSB adopted the Appellate Body report and the Panel report as modified by the AB report. • On 21 Jan 1999, US and the other parties to the dispute agreed to a 13 month reasonable period of time for US to comply with the DSB recommendations and rulings. • On 12 Oct 2000, Malaysia requested the DSB pursuant to Article 21.5 DSU to establish a panel to find that by not lifting the import prohibition and not taking the necessary measures to allow the importation of certain shrimp and shrimp products in an unrestrictive manner, the US had failed to comply with the 6 Nov 1998 DSB recommendations and rulings. • On 23 Oct 2000, the DSB decided to refer the matter to the original panel. • Third parties included Australia, Canada, Ecuador, the European Communities, India, Japan, Mexico, Pakistan, Thailand and Hongkong.
Recourse to Article 21.5 – Panel Report. Key Issues Before the Panel • To examine the claims raised by Malaysia with respect to the consistency with GATT of the measures taken by USA to comply with the recommendations and rulings of the DSB in the case US – Import Prohibition of Certain Shrimp and Shrimp Products (hereinafter refereed to as the implementing measure). • Malaysia claims that the US did not comply with the findings of the Appellate Body for the foregoing reasons:
Malaysia The implementing measure as currently applied violates Article XI:1 GATT. (Para 3.28). By continuing to apply a unilateral measure after the end of the reasonable period of time pending the conclusion of an international agreement, US failed to comply with its obligations under GATT. USA revised Guidelines are still not in compliance with the DSB recommendations and rulings. US imposes its own conservation policy and standards on other Members which practice is contrary to the sovereign right of Malaysia to define its own environmental policies and standards. (Para 3.122) USA Section 609 has been found to be provisionally justified under Article XX (g) GATT. (Para 3.38) As far as the other recommendations and rulings are concerned, the US has made serious good faith efforts to negotiate a sea turtle conservation agreement and has modified the guidelines implementing S. 609 in order to comply with those recommendations and rulings. (Para 3.67). Recourse to Article 21.5: Arguments of the Parties.
Recourse to Article 21.5:Panel Findings 1. Article XI:1 • The elements of the original measure found to be incompatible with Article XI:1 are still part of the implementing measure as currently applied by USA. As such, the implementing measure taken by USA to comply with the DSB recommendations violates Article XI:1. (Para 5.23) 2. Article XX (g). • The implementing measure is provisionally justified under XX (g) owing to the fact that it was found to be justified by the Appellate Body and there is no evidence before the panel of a modification of S. 609. (Para 5.41) 3. Arbitrary or Unjustifiable discrimination. • The US had an obligation to make serious good faith efforts to reach an agreement before resorting to the type of unilateral measure currently in place. Those efforts cannot be a one off exercise. They must be a continuous process. (Para 5.67) • By the end of the reasonable period of time, USA had made substantial efforts which were still continuing at the time of the establishment of the panel to conclude an international agreement on the protection and conservation of sea turtles. (Para 5.79)
Recourse to Article 21.5:Panel Findings Continued. • The certification process of S. 609 is no longer rigid. It now takes into consideration the different conditions that exist in the exporting Member countries. The process now provides for the possibility to certify programmes which do not require the use of TEDs. (Para 5.96) As such, USA complies with the DSB ruling with regard to the insufficient inflexibility of the Guidelines. • The difference in phase in periods was corrected by the passage of time and by US’ provision of a shorter phase in period for Malaysia, which at the time of the panel hearing had not yet applied. (Para 5.114). 4. Disguised restriction on International Trade? • By allowing exporting countries to apply programmes not based on the mandatory use of TEDs, and by offering technical assistance to develop the use of TEDs in third countries, the US has demonstrated that S. 609 is not applied so as to constitute a disguised restriction on trade. (Para 5.143)
Recourse to Article 21.5: Panel Conclusions. • The measure adopted by USA in order to comply with the recommendations and rulings of the DSB violates Article XI:1 of GATT. • In light of the recommendations and rulings of the DSB, S. 609 as implemented by the Revised Guidelines and as applied by the US is justified under Article XX GATT as long as the conditions stated in the findings of the panel report in particular, the ongoing serious good faith efforts to reach a multilateral agreement remain satisfied. (Para 6.1) • Should any of the above conditions cease to be met in the future, the recommendations of the DSB may no longer be complied with. In such a case, any complaining party in the original case may be entitled to have further recourse to Article 21.5 DSU. (Para 6.2)
Recourse to Article 21.5: Appellate Body. Key Issues Before the Appellate Body. • Whether the panel correctly fulfilled its mandate under Article 21.5 DSU of examining the consistency with the relevant provisions of GATT of the USA measure that was taken to comply with the DSB recommendations. • Whether the panel erred in finding that the measure at issue is now applied in a manner that no longer constitutes a means of “arbitrary and unjustifiable discrimination between countries where the same conditions prevail” and is therefore within the scope of Article XX.
Malaysia The panel improperly limited its analysis to the recommendations and rulings of the DSB and thus failed to fulfill its mandate under Article 21.5 because it did not examine the consistency of the US implementing measure with the relevant GATT provisions. (Para 13 and 14). Avoiding arbitrary or unjustifiable discrimination under the chapeau requires the conclusion of an international agreement which has not been done by USA. (Para 16). USA Malaysia’s argument is based solely on the use of the phrase “recommendations and rulings of the DSB.” The Panel’s use of the said phrasing is entirely appropriate and indicates no limitation in its scope of review. (Para 29). The revised guidelines remedy all inconsistencies identified by the Appellate Body under the chapeau of Article XX. (Para 30) Recourse to Article 21.5: Arguments of the Parties.
Recourse to Article 21.5: Appellate Body Findings. 1. Panel Mandate Under Article 21.5 • What the Panel did was an appropriate fulfilment of its task under the DSU. Panel proceedings under Article 21.5 DSU involve not the original measure but a new and different measure that was not before the original Panel. Therefore when a panel is carrying out a review under Article 21.5, it is not confined to examining the measure taken to comply from the perspective of the claims, arguments and factual circumstances that related to the measure that was the subject of the original proceedings. (Para 86). • The task of the Panel is to consider the new measure in its totality. It should consider the measure itself and the measure’s application, (Para 87) and to decide whether S. 609 had been applied by US in a manner that constituted arbitrary or unjustifiable discrimination. Given the structure of the new measure, the task of the Panel was to determine whether S. 609 had been applied by the USA through the Revised Guidelines, either on their face or in their application, in a manner that constitutes arbitrary or unjustifiable discrimination. This is precisely what the Panel did. (Para 98) • The Panel properly examined S. 609 as part of its examination of the new measure, correctly found that S. 609 had not been changed since the original proceedings, and rightly concluded that the Appellate Body decision with respect to the consistency of S. 609 still stands. (Para 96)
Recourse to Article 21.5 Appellate Body Findings Continued. 2. The Chapeau - Arbitrary and Unjustifiable Discrimination. • The conclusion of an international agreement might not be possible despite serious good faith efforts to achieve the same. It may be possible to conclude an agreement with one group of countries but not another. Requiring that a multilateral agreement be concluded so as to avoid arbitrary and unjustifiable discrimination would mean that a country party to the negotiations with the US, whether a WTO member or not would have in effect a veto over whether USA could fulfill its WTO obligations. Such a requirement would not be reasonable. (Para 123) • As far as possible a multilateral approach is strongly preferred. It is one thing to prefer a multilateral approach in the application of a measure that is provisionally justified under the subparagraphs of Article XX, and another to require the conclusion of a multilateral agreement as a condition of avoiding arbitrary or unjustifiable discrimination. (Para 124).
Recourse to Article 21.5: Appellate Body Conclusions • The AB upheld the finding of the panel that Section 609 as implemented by the Revised Guidelines and as applied so far by USA is justified under Article XX GATT as long as the conditions stated in the panel report, that is, the ongoing serious, good faith efforts to reach a multilateral agreement remain satisfied. (Para 152) • The panel correctly fulfilled its mandate under Article 21.5 of examining the consistency with the relevant GATT provisions of the US measure taken to comply with the recommendations and rulings of the DSB. (Para 153).