Cessation and reparation in the GATT/WTO legal system: A view from the law of state responsibility

Journal of World Trade

Volumn 41, Issue 6, 2007, Pages 1237-1258

  Shadikhodjaev, Sherzod ^a   Park, Nohyoung ^b  

^a Korea Institute for International Economic Policy (KIEP)   (South Korea)

^b Korea University   (South Korea)

Author keywords

[No Author keywords available]

Indexed keywords

COMPENSATION SYSTEM; GATT; LEGAL SYSTEM; WORLD TRADE ORGANIZATION;

EID: 38049024116     PISSN: 10116702     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (154)

1. This term is commonly used in WTO law to mean both "suspension of concessions or other obligation" under the Dispute Settlement Understanding (DSU) and "countermeasures" under the Agreement on Subsidies and Countervailing Measures (SCM Agreement).
2. To the peculiar aspects of the GATT/WTO system one can ascribe its multilateralism, a well-established international organization with the specific decision-making procedures, the scope of subject-matter (international trade) and of membership (States and separate customs territories), a complex of treaty rules ("single undertaking") and judicial decisions, and a unique dispute settlement mechanism.
3. See, e.g., Peter Van den Bossche, The Law and Policy of the World Trade Organization: Text, Cases and Materials (Cambridge: Cambridge University Press, 2005), pp. 60-65;
4. Joost Pauwelyn, Conflict of Norms in Public International Law: How WTO Law Relates to Other Rules of International Law (Cambridge: Cambridge University Press, 2003), pp. 25-88;
5. Donald McRae, The WTO in International Law: Tradition Continued or New Frontier?, 3 J.I.E.L. 1 (2000), 27-41;
6. Ernst-Ulrich Petersmann, Dispute Settlement in International Economic Law - Lessons for the Strengthening International Dispute Settlement in Non-Economic Areas, 2 J.I.E.L. 2 (1999), 189-248, 1999;
7. David Palmeter and Petros C. Mavroidis, The WTO Legal System: Sources of Law, 92 A.J.I.L. 3 (1998), 398-413.
8. See Lorand Bartels, Applicable Law in WTO Dispute Settlement Proceedings, 35 J.W.T. 3 (2001), 510-512.
9. According to ICJ Statute Article 38(1), applicable law before the Court consists of (a) general or particular international conventions; (b) international custom; (c) the general principles of law recognized by civilized nations; and (d) judicial decisions and the teachings of the most highly qualified publicists of the various nations, as subsidiary means for the determination of rules of law.
10. UNCLOS Article 293(1) on applicable law reads: "[a] court or tribunal having jurisdiction under this section shall apply this Convention and other rules of international law not incompatible Arith this Convention".
11. See, e.g., DSU Articles 7.1-7.2.
12. Joust Pauwelyn, The Role of Public International Law in the WTO: How Far Can We Go?, 95 A.J.I.L. 3 (2001), 563.
13. Panel Report, Korea Measures Affecting Government Procurement, WT/ DS163/R (1 May 2000), para. 7.96.
14. As mentioned by the Chairman ofthe ILC's Study Group on the Fragmentation of International Law, no rule is "general" or "special" in the abstract but in relation to some other rule. According to him, such relationality of the rule can be determined either in respect of the latter's subject-matter, or the scope of parties involved. The distinction between lex generalis and lex specialis in this article is based on the premise that WTO law is part of general international law, and that both legal systems deal with the same subject-matter, that is, remedies. For the relational character of the "general/special" distinction in the international law doctrine, see M. Koskenniemi, Study on the Function and Scope of the Lex Specialis Rule and the Question of "Self-Contained Regimes", UN Doc. ILC(LVI)/SG/FIL/CRD.1 (7 May 2004) and Add.1 (4 May 2004). See also the outline of the Study, para. 2.3, available at: (visited 12 September 2006).
15. ILC Draft 2001, Article 55.
16. See ILC, Commentaries to the Draft Articles on "Responsibility of States for Internationally Wrong Acts", Report of the International Law Commission on the Work of its Fifty-Third Session, Official Records of the General Assembly, Fifty-Sixth Session, Supplement No. 10 (A/56/10), chp.IV.E.2, p. 357, para. 3, available at: (visited 15 August 2006).
17. ILC Draft 2001, Article 30.
18. Karl Zemanek, "Responsibility of States: General Principles", in R. Bernhardt (ed.), Encyclopedia of Public International Law, Vol. IV (2000), p. 225.
19. See Rainbow Warrior (New Zealand/France), UN, Reports of International Arbitral Awards (R.I.A.A), Vol. XX, p. 217 (1990), at p. 270, para. 113.
20. See Vienna Convention on the Law of Treaties (1969), Article 60 on "Termination or suspension of the operation of a treaty as a consequence of its breach".
21. See DSU Article 3.7.
22. See DSU Articles 3.7 and 22. 1.
23. See DSU Article 26.1(b) (stating that "there is no obligation to withdraw the measure" for "non-violation" cases under the GATT), and GATS Article XXIII:3 (saying that a mutually satisfactory adjustment may include withdrawal of a non-violation measure). The TRIPs Agreement (Article 64) merely sets the moratorium for "non-violation" cases, and thus does not specify any remedy for these cases.
24. See Panel Report, United States - Standards for Reformulated and Conventional Gasoline, WT/DS2/R (29 January 1996), para. 6.19.
25. See Petros C. Mavroidis, Remedies in the WTO Legal System: Betuven a Rock and a Hard Place, 11 E.J.I.L. 4 (2000), 776.
26. See also Petros C. Mavroidis, Government Procurement Agreement, The Trondheim Case: The Remedies Issue, 48 Aussenwirtshaft (1993), 77-94.
27. See Panel Report, Brazil - Measures Affecting Desiccated Coconut, WT/DS22/R, (17 October 1996), para. 101.
28. These cases were United States - Prohibition of Imports of Tuna and Tuna Products from Canada, adopted on 22 February 1982, BISD 29S/91, 108. and EEC - Restrictions on Imports of Dessert Apples from Chile, BISD 36S/93, 130, cited in Ernst-Ulrich Petersmann, The GATT/WTO Dispute Settlement System: International Law, International Organizations and Dispute Settlement (London, The Hague, and Boston: Kluwer Law International, 1997), p. 81.
29. See, e.g., DSU Articles 3.6-3.7 and 4.3.
30. See DSU Article 19.1.
31. ILC Draft 2001, Article 31.
32. Chi Carmody, Remedies and Conformity under the WTO Agreement, 5 J.I.E.L. 2 (2002), 314.
33. Factory at Chorzów, PCIJ, Series A, No. 17 (1928), 47.
34. It should be noted that there is no uniform and consistent use of the terms "injury", "harm", "damage", "loss", etc. in international law. The ILC, defining "injury", concluded that the terminological variety of this concept "required an inclusive approach to the term 'injury', one which could be broadly construed so as to take into account various forms of reparation". See James Crawford, Jacqueline Peel and Simon Olleson, The ILCs Articles on Responsibility of States for Internationally Wrongful Acts: Completion ofthe Second Reading, 12 EJ.I.L. 5 (2001), 971-972.
35. ILC Draft 2001, Article 31(2).
36. Depending on certain circumstances, several other injury-related factors might be relevant to reparation, viz. remoteness, directness, foreseeability, proximity of the injury etc. See ILC's Commentaries, as note 12 above, pp. 227-228, para. 10.
37. ILC Draft 2001, Article 34.
38. Factory at Chorzów, as note 28 above, at 47.
39. See, e.g., Panel Keport on United States - Import Measures on Certain Products from the European Communities, WT/DS165/R (17 July 2000), para. 6.106. For a discussion of the appropriateness of retroactive remedies in the former GATT system, see, e.g., Minutes of the Meeting of the GATT Committee on Anti-Dumping Practices, ADP/M/40 (15 September 1993), paras 121-141.
40. ILC Draft 2001, Article 35.
41. ILC Draft 2001, Articles 35(a) and 35(b).
42. The three adopted cases were New Zealand-Imports of Electrical Transformers from Finland (B1SD 32S/55, adopted on 18 July 1985);
43. US - Countervailing Duties on Fresh, Chilled and Frozen Pork from Canada (DS7/R, adopted on 11 July 1991);
44. and US - Measures Affecting Imports of Softwood Lumber from Canada (BISD 40S/358, adopted on 27 October 1993).
45. The remaining non-adopted cases were Canada - Imposition of Countervailing Duties on Imports of Manufacturing Beef from the EEC (SCM 85, dated 13 October 1987);
46. United States - Anti-Dumping Duties an Grey Portland Cement and Clinker from Mexico (ADP/82, dated 7 September 1992);
47. and United States - Anti-Dumping Duties on Imports of Stainless Steel Plate from Sweden (ADP/117, dated 24 February 1994).
48. See WTO, Guide to GATT Law and Practice. Analytical Index, Vol. 2 (Geneva: WTO, 1995), p. 678;
49. Patricio Grané, Remedies under WTO Law, 4 J.I.E.L 4 (2001), 764-765;
50. Panel Report, Guatemala - Anti-Dumping Investigation Regarding Portland Cement from Mexico, WT/DS60/R, (19 June 1998), para. 4.410.
51. Mitsuo Matsushita, Thomas J. Schoenbaum and Petros C. Mavroidis, The World Trade Organization: Law, Practice, and Policy (Oxford: Oxford University Press, 2003), p. 78.
52. Panel Report, United States-Measures Affecting Imports of Softwood Lumber from Canada, adopted on 26 October 1993, BISD 40S/358 (SCM/ 162), para. 415.
53. Ibid., para. 414.
54. Ibid., para. 413.
55. Panel Report, United States - Anti-Dumping Duties on Gray Portland Cement and Cement Clinker from Mexico, ADP/82 (dated 7 September 1992), para. 5.40.
56. Id.
57. Ibid., para. 5.43.
58. ILC Draft 2001, Article 35(a) and (b).
59. See Panel Report on European Communities - Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil, WT/DS219/R (7 March 2003), paras 8.9-8.11.
60. Panel Report, Guatemala - Cement I, as note 37 above, para. 3.1(d).
61. Ibid., paras 8.1-8.6.
62. David Palmeter and Petros C. Mavroidis, Dispute Settlement in the World Trade Organization: Practice and Procedure (The Hague, London, and Boston: Kluwer Law International, 1999), p. 165.
63. Grané, as note 37 above, at 767.
64. See Appellate Body Report, Guatemala - Anti-Dumping Investigation Regarding Portland Cement from Mexico, WT/DS60/AB/R (2 November 1998), paras 88-89.
65. Panel Report, Guatemala - Definitive Anti-dumping Measures on Grey Portland Cement from Mexico, 'WT/DS156/R (24 October 2000), para. 9.6.
66. Ibid., para. 9.7.
67. See Panel Report, United States - Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/R (28 February 2001), paras 8.9-8.14.
68. See the DSB's Minutes of Meeting, held on 11 February 2000, WT/DSB/M/75 (7 March 2000). The delegates of the United States, Australia, Canada, Brazil, Japan, the EC and Malaysia, raised several critical points with regard to serious systernic implications of this case. Only Hong Kong's representative welcomed the Panel ruling.
69. WT/DS126/7 (20 September 1999).
70. WT/DS126/8 (4 October 1999).
71. Panel Report on Australia - Subsidies Provided to Producers and Exporters of Automotive Leather - Recourse to Article 21.5 of the DSU by the United States, WT/DS126/RW (21 January 2000), paras 6.9-6.10.
72. Ibid., para. 6.14.
73. Ibid., para. 6.22.
74. Ibid., para. 6.39.
75. Ibid., para. 6.35.
76. Ibid., para. 6.36.
77. Ibid., para. 6.31.
78. Ibid., paras 6.43-6.49.
79. See note 57 above.
80. See also Gavin Goh and Andreas R. Ziegler, Retrospective Remedies in the WTO after Automotive Leather, 6 J.I.E.L. 3 (2003), 549-551.
81. See David Palmeter and Petros C. Mavroidis, Dispute Settlement in the World Trade Organization: Practice and Procedure (2nd edn, Cambridge: Cambridge University Press, 2004), pp. 19-20.
82. DSU Article 21.5 (emphasis added).
83. The Appellate Body once established that "[p]anels are inhibited from addressing legal claims falling outside their terms of reference". See Appellate Body Report, EC - Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R (January 1997), para. 156.
84. Panel Report, Canada - Measures Affecting the Export of Civilian Aircraft - Recourse by Brazil to Article 21.5 of the DSU, WT/DS70/RW (9 May 2000), para. 5.48.
85. See Panel Report, Australia - Automotive Leather II, as note 58 above, paras 6.35-6.38.
86. For instance, with respect to the argument that retroactive repayment either should not be required in both non-recurring and recurring subsidy cases or in neither case, the US representative in the WTO made the following statement: "In the view of the United States, with regard to the Panel's treatment of the non-recurring subsidies there was a legitimate basis for not requiring the repayment of recurring subsidies that had been granted in the past. Among other things, termination of the recurring subsidies programme had an enforcement effect that was sufficient to accomplish the objective of the SCM Agreement with respect to prohibited subsidies" (DSB's Minutes of Meeting, as note 55 above, p. 9.).
87. See ILC's Commentaries, as note 12 above, p. 244, para. 2;
88. Ian Brownhe, System of the Law of Nations: State Responsibility, Part I (Oxford: Clarendon Press, 1983), p. 219.
89. See Gabčíkovo-Nagymaros Project (Hungary/Slovakia), ICJ Peports 1997, p. 7, at p. 81, para. 152.
90. ILC Draft 2001, Article 36(1).
91. Ibid., Article 36(2).
92. See WTO, A Handbook on the WTO Dispute Settlement System (Cambridge: Cambridge University Press, 2004), p. 80.
93. DSU Article 26.1(d).
94. Impediment of the achievement of GATT objectives has not been raised as a solid basis for any successful litigation in the GATT and WTO. In the GATS text this cause of action is omitted altogether.
95. John H. Jackson, World Trade and the Law of GATT (A Legal Analysis of the General Agreement of Tariffs and Trade) (Indianapolis, IN: Bobbs-Merrill, 1969), p. 181.
96. Appellate Body Report, India - Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/AB/R (19 December 1997), para. 36.
97. Ibid., para. 39.
98. See Note by the Secretariat on Compensation in the Context of GATT Dispute Settlement Rules and Procedures, MTN.GNG/NG13[W/32 (14 July 1989), p. 6, para. III. 11.
99. See Petersmann, as note 23, at 81.
100. Understanding on Notification, Consultation, Dispute Settlement and Surveillance of 28 November 1979 (26S/210), Annex, para. 4.
101. Note by the Secretariat, as note 84 above, p. 5, para. III.7.
102. See COM.TD/5 (1965) cited in ibid., p. 5.
103. The Panel in US - Restrictions on the Importation of Sugar and Sugar-Containing Products Applied Under the 1955 Waiver and under the Headnote to the Schedule of Tariff Concessions considering the content of para. 4 of the Annex to the 1979 Understanding noted that "a contracting party might, in conformity with that provision, choose to grant compensation to forestall a request for an authorization of retaliatory measures under Article XXIII:2, but the Understanding does not oblige it to do so." See L/6631, adopted on 7 November 1990, BISD 37S/228, 262, para. 5.22.
104. Panel Report, EEC - Restyictions on Imports of Dessert Apples - Complaint by Chile, adopted 22 June 1989, BISD 36S/93 (L/6491), paras 10.1-10.3.
105. Ibid., paras 12.34-12.36.
106. See DSU Article 3.7.
107. See DSU Article 22(1).
108. A Handbook on the WTO Dispute Settlement System, as note 78 above, p. 80.
109. See Mutually Acceptable Solution on Modalities for Implementation, Japan - Taxes on Alcoholic Beverages, WT/DS8/17/Add.1, WT[DS10/17/ Add.1, and WT/DS11/15/Add.1 (12 January 1998).
110. See GATT Articles XXVII and XXVIII, and GATS Article XXI. See also, Decision of 26 March 1980 (L/4962) on Procedures for Modifications and Rectification of Schedules of Tariff Concessions, BISD 27S/25.
111. See GATT Article XXIV:6.
112. See Safeguards Agreement Article 8.
113. Although the requirement for an MFN-based compensatory adjustment is explicitly prescribed by GATS Article XXI:2(b), there is no such provision in the GATT. But in European Communities - Measures Affecting the Importation of Certain Poultry Products, the Appellate Body concluded that "... we see nothing in Article XXVIII to suggest that compensation negotiated within its framework may be exempt from compliance with the non-discrimination principle inscribed in Articles I and XIII of the GATT 1994" (emphasis added). See Appellate Body Report in this case, WT/DS69/AB/R (13 July 1998), para. 100.
114. GATT Doc., COM.TD/F/W/4 (11 October 1965), para. 7.
115. See, e.g., TN/DS/W/15 (25 September 2002) and TN/DS/W/17 (9 October 2002).
116. See, e.g., Marco Bronckers and Naboth van den Broek, Financial Compensation in the WTO: Improving the Remedies of WTO Dispute Settlement, 8 J.I.E.L. 1 (2005), 101-126;
117. Marco C.E.J Bronckers, More Power to the WTO?, 4 J.I.E.L. 1 (2001), 62-63;
118. Beatrice Chaytor, Reforming Dispute Settlement for Sustainable Development, SUSTRA International Workshop Berlin (9-10 December 2002), pp. 3-4, available at: (visited 12 September 2006).
119. The 1979 Understanding on Notification, Consultation, Dispute Settlement and Surveillance, paras 4, 16-19, and DSU Article 3.7.
120. Panel Report, US - Prohibition of Imports of Tuna, as note 23 above, para. 3.3.
121. For a general critique on this case, see, e.g., Bernard O'Connor and Margareta Djordjevic, Practical Aspects of Monetary Compensation: The US - Copyright Case, 8 J.I.E.L 1 (2005), 127-142;
122. Gene M. Grossmann and Petros C. Mavroidis, United States - Section 110(5) of the US Copyright Act, Recourse to Arbitration under Article 25 of the DSU: Would've or Should've? Impaired Benefits due to Copyright Infringement, 2 W.T.R. 2 (2003), 233-249;
123. Bernard O'Connor, Remedies in the World Trade Organization Dispute Settlement System - The Bananas and Hormones Cases, 38 J.W.T. 2 (2004), 257-260.
124. For the summary of this case, see WTO: (visited 21 October 2006).
125. Notification of a Mutually Satisfactory Temporary Arrangement, WT/DS160/ 23 (26 June 2003).
126. Under DSU Article 22.2, the losing party, if so requested, must before the expiry of the reasonable period of time enter into negotiations with the complainant to develop a mutually acceptable compensation. If the negotiations do not succeed, the complainant may ask the DSB for authorization of retaliation.
127. DSB Minutes of Meeting, held on 24 June 2003, WT/DSB/M/151 (12 August 2003), para. 6.
128. See DSU Article 3.7.
129. Interesungly, the GATT panel in Norway - Procurement of Toll Collection Equipment for the City of Trondheim also found that nothing precluded the United States (complainant) from negotiating with Norway (respondent) a mutually satisfactory solution on compensation of complainant's lost opportunities provided that this was consistent with GATT rules. See the Panel Report on this case, adopted 13 May 1992, BISD 40S/319 (GPR/DS.2/R, 28 April 1992), paras 4.20-4.26.
130. Some scholars share the same view arguing that "there is nothing that excludes retroactive compensation, because the DSU allows for any mutually agreeable compensation" (emphasis added). See Grossmann and Mavroidis, as note 105 above, p. 247.
131. O'Connor and Djordjevic, as note 105 above, p. 132.
132. Bronckers and van den Broek, as note 102 above, p. 119.
133. See, e.g., DSB Minutes of Meeting, held on 17 April 2002, WT/DSB/M/123 (6 May 2002), para. 5;
134. DSB Minutes of Meeting, held on 24 June 2003, WT/DSB/M/151 (12 August 2003), para. 5.
135. On the assumption that the compensation provided in this case is partly a "mutually agreed solution" under DSU Articles 3.6 and 3.7, the outcome of such solution affects the disputing parties only.
136. See Arwel Davies, Reviewing Dispute Settlement at the World Trade Organization: A Time to Reconsider the Role/s of Compensation?, 5 W.T.R. 1 (2006), 45-46 and footnote 47.
137. ILC Draft 2001, Article 37.2.
138. Ibid., Article 37.3.
139. See Rainbow Warrior (New Zealand/France), as note 15 above, pp. 272-273, para. 122.
140. See Eibe H. Riedel, "Satisfaction", in R. Bernhardt (ed.), Encyclopedia of Public International Law, Vol. IV (2000),pp. 320-321.
141. See Robert E. Hudec, The GATT Legal System and World Trade Diplomacy (2nd edn, Salem, NH: Butterworth Legal, 1990), pp. 181-200.
142. See Brownlie, as note 74 above, pp. 200-208.
143. Corfu Channel, Merits, ICJ Reports 1949, p. 4, at p. 35, cited in ILC's Commentaries, as note 12 above, pp. 266-267, para. 6.
144. DSU Article 3.7.
145. DSU Article 19.1.
146. See the statements made by the representatives of Canada, Brazil and Japan at the DSB meeting of 11 February 2000, WT/DSB/M/75 (7 March 2000);
147. Goh and Ziegler, as note 67 above, p. 564.
148. Panel Report, Canada - Export Credits and Loan Guarantees for Regional Aircraft, WT/DS222/R (28 January 2002) ara. 7.170.
149. Ernst-Ulrich Petersmann, e.g., explains the relevance of restitution to those cases with (1) "The specific legal context of anti-dumping and countervailing duty law"; and (2) "The specific rights granted to traders subject to 'unfair trade investigations"'. Petersmann, as note 23 above, p. 80. With respect to the first explanation, the remedial nature of anti-dumping and countervailing duties can provide such "specific legal context" as compared to e.g. general customs duties. The "specific rights" mentioned in the second explanation refer to, e.g., the right of foreign exporters to reimbursement of anti-dumping/countervailing duties imposed in compliance with the relevant WTO rules. This right is set forth in Articles 9.3, and 10.3-10.5 of the Anti-Dumping Agreement, and Articles 20.3-20.5 of the SCM Agreement.
150. In support, see, e.g., Report of the Study Group of the International Law Commission, Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion of International Law, UN Doc. A/CN4/L.702 (18 July 2006), pp. 9-10 (stating that "the general law will remain valid and applicable and will, in accordance with the principle of harmonization..., continue to give direction for the interpretation and application of the relevant special law and will become fully applicable in situations not provided for by the latter.");
151. Anja Lindroos and Michael Mehling, Dispelling the Chimera of 'Self-Contained Regimes' International Law and the WTO, 16 E.J.I.L 5 (2005), 861 (stating that "it would normally follow that the multilateral trading system continues to be governed by the precepts of public international law, at least to the extent that these have not been contracted out, deviated from, or otherwise replaced");
152. Mavroidis, as note 21 above, at 765 (arguing that "to the extent... that the WTO regime does not provide for specific remedies, the ILC codification is relevant");
153. Petersmann, as note 23 above, pp. 76-77 (stating that "the different types of substantive consequences ('remedies') recognized under general international law in respect of internationally wrongful acts - cessation of illegal acts, restitution in kind, reparation by equivalent, satisfaction and guarantees of non-repetition - are applicable in the context of GATT law to the extent that GATT law does not provide otherwise").
154. This could be interpretations developed by the Ministerial Conference/ the General Council under Article IX:2 of the WTO Agreement or by the Appellate Body.