Non-violation complaints - World trade organization issues and recent free trade agreements

Journal of World Trade

Volumn 39, Issue 2, 2005, Pages 205-237

  Hsu, Locknie ^a  

^a NATIONAL UNIVERSITY OF SINGAPORE   (Singapore)

Author keywords

[No Author keywords available]

Indexed keywords

FREE TRADE; TRADE AGREEMENT; WORLD TRADE ORGANIZATION;

EID: 33644624998     PISSN: 10116702     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (81)

1. Frieder Roessler, "The Concept of Nullification and Impairment in the Legal System of the World Trade Organization", in E.-U. Petersmann (ed.), International Trade Law and the GATT/WTO Dispute Settlement System (The Hague: Kluwer Law International, 1997), Vol. 11, ch. 2, p. 126;
2. and Thomas Cottier and Krista N. Schefer, "Good Faith and the Protection of Legitimate Expectations in the WTO", in M. Bronckers and R. Quick (eds), New Directions in International Economic Law, Essays in Honour of John H. Jackson (The Hague: Kluwer Law International, 2000), ch. 4, p. 58.
3. The moratorium against non-violation complaints for TRIPs was extended by Section 11.1 of the Doha Decision on Implementation-Related Issues and Concerns, available at 〈http://www.wto.org/english/thewto_e/ minist_e/min01_e/midecl_implementation_e.htm#trips〉 (accessed October 2004). In India - Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/AB/R, Appellate Body decision adopted on 16 January 1998, the Appellate Body emphasized that under Article 64.2 of the TRIPs Agreement, the existing cause of action was a violation complaint. It went on to state that the concept of "legitimate expectations" - developed in the context of non-violation complaints, discussed later in this article - should not be applied to violation complaints under TRIPs, as to so would meld them with non-violation complaints; para. 42.
4. Roessler, as note 1 above, p. 126.
5. Cottier and Schefer, "Non-violation Complaints in WTO/GATT Dispute Settlement: Past, Present and Future", in Bronckers and Quick, as note 1 above, p. 166.
6. EEC - Oilseeds, Panel Report adopted 25 January 1990, BISD 37S/86, paras 144 and 148 respectively. These two passages were quoted and applied m Japan - Measures Affecting Consumer Photographic Film and Paper, WT/ DS44/R, Panel Report adopted 22 April 1998, para. 10.35. See also India-Patents, as note 2 above, at paras 39-41. It would appear that the protection afforded by Article XXIII:1(b) is not confined to benefits arising out tariff concessions; in a decision under GATT 1947, US - Restrictions on the Importation of Sugar and Sugar-Containing Products Under the 1955 Waiver and Under the Headnote to the Schedule of Tariff Concessions, L/6631-37S/228, Panel Report adopted 7 November 1990, at para. 5.21, the Panel stated that it "recognized that Article XXIII:l(b) does not exclude claims of nullification or impairment based on provisions of the General Agreement other than Article II". See also the WTO Panel decision in Korea - Measures Affecting Government Procurement, WT/DS163/R, Panel Report adopted 19 June 2000.
7. Cottier and Schefer, as note 1 above, p. 58.
8. Ibid., p. 59. Roessler, too, argues that, given the changes in the international trade regulation system since GATT 1947, "the field of potential application of this provision has diminished significantly. Roessler, as note 1 above, p. 134, but also see pp. 133-134 generally, for his reasons.
9. The Article XXIII:1(b) complaint has been said to offer a "considerable amount of headache, in particular in defining its relation to the violation complaint". Cottier and Schefer, as note 1 above, p. 58. For a discussion on history and ambiguity problems of Article XXIII:1(b) and expansion of the concept into GATS, see Sung-Joon Cho, GATT Non-Violation Issues in the WTO Framework: Are They the Achilles' Heel of the Dispute Settlement Process?, 39 Harv. Int'l L.J. (1998), p. 311.
10. For an overview of the debate in relation to TRIPs, see, generally, "Non-violation and Situation Complaints", Summary Note by the Secretariat, WTO, IP/C/W/349, and more specifically, "Non-violation Complaints and the TRIPS Agreement", Note by the Secretariat, IP/C/W/124. See also Frederick M. Abbott, TRIPs in Seattle: The Not-So-Surprising Failure and the Future of the TRIPs Agenda, 18 Berkeley J. Int'l L. (2000), p. 165,
11. part III, For a related but separate discussion on how bilateral investment treaties and FT As are generally affecting IP rights, see C. Correa, Bilateral Investment Agreements: Agents of new global standards for the protection of intellectual property rights?, August 2004, available at 〈http://www.grain.org/briefings_files/correabits-august-2004.pdf〉 (accessed October 2004).
12. This provision was applied in EC - Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/ R, Panel Report adopted 5 April 2001; see paras 8.276-8278. On the burden of proof, see also para. 5, Annex on Agreed Description of the Customary Practice of the GATT in the Field of Dispute Settlement (Article XXIII:2), in the Understanding on Notification, Consultation, Dispute Settlement and Surveillance of 28 November 1979 (26S/210), from which Article 26 DSU draws the phrase "detailed justification".
13. As note 5 above, at para. 10.36, original footnotes to quotation omitted and emphasis added.
14. Japan - Film, as note 5 above, para. 10.41. See also EC - Asbestos, as note 9 above, para. 8.283. These criteria nave also been applied in evaluating a non-violation claim in respect of proving "adverse effects" under Article 5(b) of the Subsidies and Countervailing Measures Agreement; see Panel Report in US - Continued Dumping and Subsidy Offset Act 2000, WT/DS217/R, WT/DS234/R, adopted 27 January 2003, paras 7.118-7.132. This point was not appealed before the Appellate Body.
15. Ibid., para. 10.43.
16. Ibid., para. 10.56.
17. Ibid., para. 10.57. Although in the context of the case, the Panel was discussing the question of whether expired or repealed measures could be "measures" in Article XXIII:1(b), this quotation should be noted, asunder one FTA, which will be discussed later in this article, there may be a question of whether proposed measures can cause nullification or impairment.
18. At para. 188 of the Appellate Body Report. The EC had argued in that case, that "measures" in Article XXIII:1(b) excluded those which pursued health, rather than commercial, objectives. On the implications of the case for health-related measures under TRIPs, see generally, F.M. Abbott, "Agreement on Trade-Related Intellectual Property Rights", in Federico Ortino and Ernst-Ulrich Petersmann (eds), The WTO Dispute Settlement System 1995-2003 (The Hague: Kluwer Law International, 2003), pp. 451-453.
19. See, for instance, the decision of Japan - Film itself, as well as the GATT decisions cited by the Appellate Body in that case, in footnote 1223. See also text to notes 3 and 5 above.
20. WT/DS163/R, Panel Report adopted 19 June 2000, particularly at para. 7.100. Prior to establishment of the WTO, at least three GATT panels had considered the issue of whether benefits are limited to those based on specific tariff concessions, and indicated that they could go beyond such concessions - for a summary of these, see Note by the Secretariat, IP/C/W/124, paras 31-33.
21. In this regard, the Panel in Japan - Film discussed, in paras 10.72-10.75, three relevant adopted GATT panel reports on non-violation complaints, namely those in Australia - Subsidy on Ammonium Sulphate, GATT/
22. CP.4/39, Panel Report adopted 3 April 1950, Germany - Treatment of Sardines, G/26-1S/53, Panel Report adopted 31 October 1952, and EEC - Payments and Subsidies Paid to Processors and Producers of Oilseeds and Related Animal-Feed, L/6627-37S/86, Panel Report adopted 25 January 1990.
23. Paras 10.79-10.81.
24. EC - Asbestos, as note 9 above, at para. 8.291. The Appellate Body did not have to decide this issue in that case as the point was not raised in the appeal.
25. See para. 10.80.
26. At para. 8.292: "... However, we consider that in view of the time that elapsed between those concessions and the adoption of the [measure complained against] (between 50 and 35 years), Canada could not assume that, over such a long period, there would not be advances in medical knowledge with the risk that one day a product would be banned on health grounds. For this reason, too, we also consider that the presumption applied in Japan-Film cannot be applied to the concessions granted in 1947 and 1962. Any other interpretation would extend the scope of the concept of non-violation nullification well beyond that envisaged by the Panel in Japan-Film. ... In the present case, the burden of proof must be all the heavier inasmuch as the intervening period has been so long. Indeed, it is very difficult to anticipate what a Member will do in 50 years time. It would therefore be easy for a Member to establish that he could not reasonably anticipate the adoption of a measure if the burden of proof were not made heavier."
27. Paras 10.82-10.89.
28. For trade in services, GATS Article XXIII:3 specifically limits the scope of non-violation complaints to the specific commitments made by Members under Part III. For intellectual property, the debate is continuing in the TRIPs Council regarding Article 64.2 and how to deal with the moratorium on applying the non-violation complaint procedure (including the issue of "GATTability"of TRIPs complaints, whether TRIPs complaints should be subject to the full range of dispute settlement procedures under GATT 1994).
29. For a summary of the arguments relating to non-violation complaints being applied beyond trade in goods, see generally "Non-violation and Situation Complaints", Summary Note by the Secretariat, IP/C/W349.
30. Apart from those discussed in this section, see also a summary of some other FTAs and their non-violation provisions in "Non-violation Complaints and the TRIPs Agreement", Note by the Secretariat, IP/C/W/124, at paras 91-94.
31. As note 1 above.
32. See, e.g., the Singapore-US FTA; relevant provisions are in the Appendix to this article.
33. See, e.g., the NAFTA and the Korea-Chile FTA; relevant provisions are in the Appendix to this article.
34. See, e.g., the US-Jordan FTA; relevant provisions are in the Appendix to this article.
35. See, e.g., the ASEAN Protocol on Dispute Settlement Mechanism and the EU-Mexico FTA council decision on dispute settlement; sec text accompanying footnotes 61 and 63, below, respectively.
36. Article 26 of the Vienna Convention on the Law of Treaties provides: "Pacta sunt servanda Every treaty in force is binding upon the parties to it and must be performed by them in good faith."
37. Cottier and Schefer, as note 4 above, at p. 167. See the chapter, generally, for an analysis of overlapping aspects of pacta sunt servanda, dausula rebus sic stantibus, frustration of purpose, promissory estoppel and abuse of rights, in relation to the protection of legitimate expectations.
38. See the Appellate Body's views on this matter in European Communities - Customs Classification of Certain Computer Equipment, WT/DS62/AB/R, WT/DS67/AB/R, WT/DS68/AB/R, Appellate Body decision adopted 22 June, 1998, at Part V, confirming its view in India - Patents, as note 2 above, that the concept of legitimate expectations did not apply in violation complaints.
39. Bin Cheng, General Principles of Law as applied International Courts and Tribunal (Grotius Publications, 1987), at p. 114. He elaborates that this "means, essentially, that treaty obligations should be carried out according to the common and real intention of the parties at the time the treaty was concluded, that is to say, the spirit of the treaty and not its mere literal meaning. ... Performance of a treaty obligation in good faith means carrying out the substance of this mutual understanding honestly and loyally" (pp. 114-115).
40. Cottier and Schefer, as note 4, p. 182.
41. Ibid., p. 181. The GATS provides for non-violation complaints in relation to Members' specific commitments under the agreement, and the same remedies apply as for violation complaints, ie, removal of the measure in question is not excluded, unlike under Article 26 DSU.
42. It is not uncommon for FT As to provide for a choice of forum between an FTA tribunal and the WTO dispute settlement mechanism. See, for instance, Article 20.4(3)(a) of the Singapore-US FTA. For a discussion of forum- and rules-shopping in international trade law arising from the parallel development of the WTO dispute settlement system and various bilateral and other dispute settlement mechanisms, see Ernst-Ulrich Petersmann, Proliferation and Fragmentation of Dispute Settlement in International Trade: WTO Dispute Settlement Procedures and Alternative Dispute Settlement Mechanisms, manuscript submitted to Cambridge, St Johns College, for an April 2004 conference on international arbitration.
43. See, e.g., Award on the Merits of Phase 2, Arbitration between Pope & Talbot and the Government of Canada, 10 April 2001, and In the Matter of Crossborder Trucking Services, 6 February 2001, paras 239, 251, 262-270 and 289. In the context of application of international law to investor-State arbitrations, it has been argued that the WTO Agreement contains "relevant" rules of international law which form part of the context for interpretation of BITs; see Gaetan Verhoosel, The Use of Investor-State Arbitration under Bilateral Investment Treaties to Seek Relief for Breaches of WTO Law, 6 J.I.E.L. 2 (2003), pp. 503-506. A similar argument could be made for WTO principles being used in interpretation of FTA provisions.
44. See text accompanying note 10 above.
45. European Community - Tariff Treatment on Imports of Citrus Products from Certain Countries in the Mediterranean Region, Panel Report L/5776, not adopted.
46. This would be a version of what Joost Pauwclyn calls the "AB/AC" type of conflict between treaties: Joost Pauwelyn, Bridging Fragmentation and Unity: International Law as a Universe of Inter-Connected Islands, 25 Michigan J. Int'l L. (2004), p. 903.
47. Full provision is in the Appendix.
48. See, for instance, Article 2 of the Safeguards Agreement, Article 3.7 of the Antidumping Agreement, and footnote 13 of the SCM Agreement. In United States - Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea, WT/DS202/AB/R, Appellate Body decision adopted 8 March 2002, for instance, the Appellate Body ruled that a "threat of serious injury" presented a lower threshold for triggering the right to apply a safeguards measure than "serious injury": paras 165-169. Likewise, the words "would cause" would presumably provide a lower threshold than the word "cause", for triggering a category b) complaint. In US - Lamb Safeguards, United States-Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia, WT/DS177/AB/R, WT/DS178/AB/R, Appellate Body decision adopted 16 May 2001, the Appellate Body interpreted the imminence of a threat of serious injury; para. 125. However, these WTO agreements contain provisions which inform or elaborate on interpretation of "threat", and would not be directly helpful in interpreting category b) provisions.
49. For examples of other FTA provisions relating to non-violation complaint provisions, see the Appendix to this article.
50. While the provision resembles that in Article 20.2 of the Central America-Dominican Republic-United States FTA (see Appendix to this article) in that it includes "proposed measures", it differs from the latter in that Article 20.2 provides accompanying language for such proposed measures, in the phrase "would cause". This last phrase does not appear in the Korea-Chile provision above. Both provisions are likely to raise application problems, by their extension of non-violation claims to include measures which have yet to be put in application. In the draft text of the Free Trade Area of the Americas, Article 19 is still under negotiation, and states that the procedures of the dispute settlement chapter apply: "... b) when a Party considers that an actual [or pioposed] measure of another Party is [or would be] inconsistent with the obligations of the FTAA Agreement [or, even if not inconsistent, could cause nullification of impairment of any benefit that a Party could reasonably have expected to accrue to it under this Agreement in the sense of Annex XX (Nullification or Impairment) ...] (italic emphasis added.) The draft text is accessible at 〈http://www.sice.oas.org/FTAADraft/Eng/ ngdse_1.asp〉 accessed October 2004.
51. See also the use of tense in Article 19.14(2) ("is causing nullification and impairment") and 19.15(1)(b) ("a measure causes nullification or impairment...").
52. Signed 22 April 1985 and came into force 1 September 1985; available at 〈http://www.ustr.gov/ Trade_Agreements/Bilateral/Israel/Section_Index. html〉 (accessed November 2004). Some elements of this formulation are also found in Article 34 of the Hungary-Israel FTA signed on and which came into force 1 January 1998.
53. Articles 2 and 3 of the Protocol, as note 61 below.
54. See Petersmann, as 38 above, and Pauwleyn, as note 41 above.
55. United States - Standards for Reformulated and Conventional Gasoline, WT/DS2/9, Appellate Body decision adopted 20 May 1996, at p. 17, and Japan - Alcoholic Beverages, WT/DS8/AB/R, WT/DS10, WT/DS11/AB/R, Appellate Body decision adopted 1 November 1996, at p. 10.
56. As note 2 above, para. 7.18.
57. See Anthony Aust, Modem Treaty Law and Practice (Cambridge: Cambridge University Press), 2000, particularly at pp. 190-191, for a discussion on the application of Articles 31 and 32.
58. WT/DS163/R, Panel Report adopted 19 June 2000.
59. See, for instance, the ASEAN Protocol for Dispute Settlement Mechanism, discussed in the text of note 49 above, and note 61, below.
60. This difference between violation and non-violation remedies has, however, been criticized as lagging behind general international law remedies: see Cottier and Schefer, as note 4, at pp. 180-181.
61. See Petros C. Mavroidis, Remedies in the WTO Legal System: Between a Rock and a Hard Place, 11 E.J.I.L. 4 (2000), p. 792.
62. See, for instance, the provisions of the FTAs between the United States and Singapore, Australia and Morocco respectively, in the Appendix of this article.
63. Article 17.1(d), found in the Appendix of this article, provides that Panel Reports are non-binding. Article 17.2 further provides as follows: "2. (a) After a dispute has been referred to a dispute settlement panel under this Agreement and the panel has presented its report, the Joint Committee shall endeavor to resolve the dispute, taking the report into account, as appropriate. (b) If the Joint Committee does not resolve the dispute within a period of 30 days after the presentation of the panel report, the affected Party shall be entitled to take any appropriate and commensurate measure" (emphasis added).
64. See these provisions in the Appendix of this article.
65. See Article 2.2 of the Protocol, dated 20 November 1996, in the Appendix to this article. The important words "whether or not it conflicts with the provisions of this Agreement" in Article XXIII:1(b) have been omitted. It should be noted that the Protocol is currently under review pursuant to the Declaration of ASEAN Concord II or the Bali Concord II, dated 7 October 2003. The ASEAN Protocol on Enhanced Dispute Settlement Mechanism was signed on 29 November 2004 and is accessible at 〈http://www.aseansec.org/16754. htm〉. Under Article 21.2, the new Protocol is to replace the 1996 Protocol with respect to disputes arising after entry into force of the new Protocol. Article 3.2 of the new Protocol (which mirrors Article 2.2 of the 1996 Protocol) states: "Member States which consider that any benefit accruing to them directly or indirectly, under the Agreement or any covered agreement is being nullified or impaired, or that the attainment of any objective of the Agreement or any covered agreement is being impeded as a result of failure of another Member State to carry out its obligations under the Agreement or any covered agreement, or the existence of any other situation may, with a view to achieving satisfactory settlement of the matter, make representations or proposals to the other Member State concerned, which shall give due consideration to the representations or proposals made to it".
66. Article 9 of the Protocol; see Appendix to this article.
67. Decision No. 2/2000 of the EC-Mexico Joint Council of 23 March 2000 (covering trade in goods, government procurement, cooperation for competition, consultation on intellectual property rights, dispute settlement), available at 〈nttp://europa.eu.int/comm/trade/issues/bilateral/countries/mexico/docs/ en2_decision_goods.pdf〉 made pursuant to the Economic Partnership, Political Co-operation and Co-operation Agreement between the EU and Mexico signed 8 December 1997 and in force from 1 October 2000, accessible at 〈http://europa.eu.int/comm.external_relations/mexico.doc/a3_acuerdo_en. pdf〉 (accessed October 2004). The remedies relate only to violations: see Articles 43.1 and 46.8 of the Decision.
68. See Singapore-Australia FTA, Chapter 16, Articles 2.2, 6.1, 10.1 and 10.4(a), accessible at 〈http:// www.mti.gov.sg/public/FTA/frm_FTA_Default. asp?sid-35〉, accessed October 2004.
69. See, e.g., the NAFTA, the Korea-Chile FTA and the Singapore-United States FTA.
70. See, e.g., the US-Jordan FTA. See also the US-Israel FTA, Article 19.2.
71. The FTAs examined in this article generally do not provide any guiding criteria for the application of countermeasures like those found in Article 22.3 DSU, and provide only that suspension should be of benefits of "equivalent effect", seemingly leaving their tribunals a great deal of discretion when ruling on such measures. In some, however, there are guidelines as to the amount of monetary compensation that should be paid: see, for instance, Article 20.7(2) of the Singapore-United States FTA and the Article 22.16(2) of the United States-Morocco FTA. For a discussion of the role of countermeasures in the WTO, see, generally, Renê G.S. Medrado, Renegotiating Remedies in the WTO: A Multilateral Approach, and
72. J. Pauwelyn, Enforcement and Countermeasures in the WTO: Rufes are Rules - Toward a More Collective Approach, 94 AJ.I.L. 2 (April 2000), p. 335;
73. and Mavroidis, as note 57 above, p. 763. For a general critique of whether the WTO remedies system meets its objectives, see J. Pauwleyn, "Remedies in the WTO: First Set the Goal, Then Fix the Instruments to Get There", speech at the British Institute of International and Comparative Law, May 2003.
74. There is some support for this idea in the multilateral context: see Cottier and Schefer, as note 4 above, at p. 181. One writer, has also generally suggested more mediation in WTO, particularly to address several constraints faced by developing countries in dealing with WTO disputes; see Hansel Pham, Developing Countries and the WTO: The Need for More Mediation in the DSU, 9 Harv. Neg. L. Rev. (Spring 2004), p. 331.
75. Where the efficient breach approach is preferred. Such an approach is not without precedent; see the compensation which the EC continues to pay the United States in EC - Measures Concerning Meat and Meat Products (Hormones) dispute: see WT/DS26/ARB.
76. See, for instance, Articles 20.1 and 20.2 of the Singapore-United States FTA.
77. See, e.g., Article 10 of the Agreement between the Republic of Singapore and Japan for a New Age Partnership, signed on 13 January 2002 and in force from 30 November 2002, available at 〈http://www.fta.gov.sg〉 (accessed November 2004), which provides for a first review in 2007, followed by reviews every five years thereafter.
78. Sung-joon Cho, GATT Nan-Violation Issues in the WTO Framework: Are They the Achilles' Heel of the Dispute Settlement Process?, 39 Harv. Int'l L. J. (1998), p. 338.
79. Sung-joon Cho, GATT Nan-Violation Issues in the WTO Framework: Are They the Achilles' Heel of the Dispute Settlement Process?, Ibid., at p. 350.
80. See Article 19, particularly at 19.4; accessible at 〈http://www.mti. gov.sg/public.FTA/ frm_FTA_De&ult.asp?sid=36〉, accessed October 2004.
81. See the arguments by WTO Members, such as those in IP/C/M/29, at para. 223, and Summary Note by the Secretariat, WTO, IP/C/W/349, as note 8 above.