A pirate of the caribbean? the attractions of suspending trips obligations

Journal of International Economic Law

Volumn 11, Issue 2, 2008, Pages 313-364

  Ruse Khan, Henning Grosse ^a  

^a MAX PLANCK INSTITUTE FOR INTELLECTUAL PROPERTY COMPETITION AND TAX LAW   (Germany)

Author keywords

[No Author keywords available]

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EID: 44949120561     PISSN: 13693034     EISSN: 14643758     Source Type: Journal    
DOI: 10.1093/jiel/jgn015     Document Type: Article

References (313)

1. Refus Yerxa, 'The Power of the WTO Dispute Settlement System', in Refus Yerxa and Bruce Wilson (eds), Key Issues in WTO Dispute Settlement: The First Ten Years (Cambridge: Cambridge University Press, 2006) 1-5 at 3.
2. See WTO, Legal Texts - The Uruguay Round Agreements, Understanding on Rules and Procedures Governing the Settlement of Disputes, online available at http://www.wto.org/english/docs_e/legal_e/28-dsu.pdf (visited 14 March 2008), Article 3:7 DSU.
3. WTO, Legal Texts - The Uruguay Round Agreements, Agreement on Trade Related Aspects of Intellectual Property Rights, online available at http://www.wto.org/english/docs_e/legal_e/27-trips.pdf (visited 14 March 2008). In this article, I will refer to suspending obligations under the TRIPS Agreement also as Intellectual Property (IP) cross-retaliation since the scenario at stake usually involves countering non-compliance with obligations regarding trade in goods or services.
4. See in particular Arvind Subramanian and Jayashree Watal, 'Can TRIPS Serve as an Enforcement Device for Developing Countries in the WTO?', 3 Journal of International Economic Law (2000), at 403-16;
5. the idea was more recently picked up by Maristela Basso and Edson Beas, 'Cross-retaliation through TRIPS in the Cotton Dispute?', 9 (5) Bridges Monthly Review (2005), at 19-20, online available at http://www.ictsd.org/monthly/ bridges/ BRIDGES9-5.pdf (visited 15 March 2008).
6. See Recourse to Article 7.9 SCM and Article 22.2 DSU by Brazil, United States - Subsidies on Upland Cotton (US - Cotton), WT/DS267/26, 7 October 2005.
7. On 17 October 2005, the US objected to the level of suspension proposed by Brazil and claimed that the principles set forth in Article 22:3 DSU have not been followed. It requested arbitration proceedings under Article 22:6 DSU (see WT/DS267/27).
8. On 7 December 2005, the arbitrators suspended the Article 22:6 arbitration proceedings (see WT/DS267/29) until an Article 21.5 DSU Panel (see WT/DS267/30& 32) decided on the consistency of the US implementation measures with recommendations of the DSB in the US - Cotton case. After the Panel's decision of 18 December 2007 found US measures in continuous inconsistency with WTO law (see WT/DS267/RW), the US appealed. Article 22:6 arbitration therefore (if Brazil so requests) can only continue in case the Appellate Body again sides with Brazil.
9. See Recourse by Antigua and Barbuda to Article 22:2 DSU, United States - Measures Affecting the Cross-Border Supply of Gambling and Betting Services (US - Gambling), WT/DS285/22, 22 June 2007.
10. Recourse to Arbitration by the United States under Article 22:6 of the DSU - Decision of the Arbitrator, United States - Measures Affecting the Cross-Border Supply of Gambling and Betting Services (US - Gambling), WT/DS285/ARB, 21 December 2007, para 6.1.
11. See Bridges Weekly Trade News Digest, With Negotiations Frozen, Potential WTO Disputes Looming, Vol.10 No.28 (2 August 2006) - online available at http://www.ictsd.org/weekly/06-08-02/wtoinbrief.htm#1 (visited 15 March 2008);
12. compare also Forbes.com, Trade Disputes will Mark 2008, 29 January 2008 - online available at http://www.forbes.com/opinions/2008/01/28/doha- trade-talks-oped-cx_ccp_0129doha.html (visited 29 January 2008).
13. See the recent dispute launched by Brazil against US Farm Subsidies (United States - Domestic Support and Export Credit Guarantees for Agricultural Products, WT/DS365).
14. See Recourse to Arbitration by the European Communities under Article 22:6 of the DSU - Decision of the Arbitrator, European Communities - Regime for the Importation, Sale and Distribution of Bananas (EC - Bananas III), WT/DS27/ARB/ECU, 24 March 2000.
15. WTO, Legal Texts - The Uruguay Round Agreements, General Agreement on Trade in Services, online available at http://www.wto.org/english/docs_e/ legal_e/26-gats.pdf (visited 14 March 2008).
16. As a result of Antigua's lack of natural resources, the bulk of the economy is dependent upon tourism and the provision of banking and other financial services; see Antigua's explanations in US - Gambling (Article 22:2), above n 7, at 3.
17. Ibid, at 3;
18. and WTO Panel Report, United States - Measures Affecting the Cross-Border Supply of Gambling and Betting Services (US - Gambling), WT/DS285/R, 10 November 2004, para 3.2.
19. US - Gambling (Article 22:2), above n 7, at 3.
20. US - Gambling (Panel Report), above n 14, at 3.5.
21. Ibid, at 3.2.
22. For a discussion on key aspects of the dispute see Markus Krajewski, 'Playing by the Rules of the Game?' 32 (4) Legal Issues of Economic Integration (2005), at 417-47;
23. and Federico Ortino, 'Treaty Interpretation and the WTO Appellate Body Report in US-Gambling: A Critique', 9 Journal of International Economic Law (2006), at 117-48.
24. See WTO Appellate Body Report, United States - Measures Affecting the Cross Border Supply of Gambling and Betting Services (US - Gambling), WT/DS285/AB/R, 7 April 2005.
25. Due to a specific authorization for domestic service suppliers in the so-called Interstate Horseracing Act, the US was unable to show that the prohibitive US measures are applied equally to foreign and domestic suppliers of betting services for horse racing; see paras 362-72.
26. Determined by arbitration under Article 21:3 (c) DSU.
27. Recourse to Article 21:5 of the DSU by Antigua and Barbuda - Panel Report, United States - Measures Affecting the Cross-Border Supply of Gambling and Betting Services (US - Gambling), WT/DS285/RW, 30 March 2007;
28. For an overview on the whole procedural history and the main findings of the Panels and the Appellate Body see the WTO Dispute Settlement Website at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds285_e.htm (visited 15 March 2008).
29. US - Gambling (Article 22:2), above n 7.
30. Initially Antigua had also requested authorization for suspending commitments relating to communication services under GATS but withdrew this request in the course of the proceedings; see US - Gambling (Article 22:6), above n 8, para 4.20.
31. Request by the United States for Arbitration under Article 22:6 of the DSU, United States - Measures Affecting the Cross-Border Supply of Gambling and Betting Services, (US - Gambling), WT/DS285/23, 24 July 2007.
32. This arbitration is again conducted by the original Panel - see United States - Measures Affecting the Cross-Border Supply of Gambling and Betting Services, Recourse of the United States to Article 22:6 of the DSU (WT/DS285/24) 6 August 2007.
33. Regarding the amount of retaliation, Article 22:4 DSU requires the retaliating country to ensure equivalence between the level of concessions or other obligations suspended and the level of nullification or impairment of benefits. The DSU offers no further guidance here and arbitrators have generally taken an 'equality-of-harm' approach by comparing the detrimental effect of the inconsistent measure of the non-complying state with the detrimental effect of the retaliatory measure; See Thomas Sebastian, 'World Trade Organization Remedies and the Assessment of Proportionality: Equivalence and Appropriateness', 48 (2) Harvard International Law Journal 337-82 (2007), at 350-1.
34. See US - Gambling (Article 22:6), above n 8, paras 3.1-3.9, 3.148. This issue occupies most of the arbitrators' analysis (Part III, pages 10-55) and interestingly includes a dissenting opinion of one arbitrator who agrees with Antigua's proposed counterfactual (para 3.62-3.73). The proper determination of equivalence under Article 22:4 DSU however is not relevant for the legality of cross-retaliation under Article 22:3 DSU. Its further discussion therefore is beyond the scope of this article.
35. US - Gambling (Article 22:6), above n 8, para 6.1.
36. Ibid, at paras 5.6 and 6.1.
37. See Bridges Weekly Trade News Digest, US Snubs WTO Ruling on Internet Gambling, Vol.11 No.16 (9 May 2007) - online available at http://www.ictsd.org/weekly/07-05-09/wtoinbrief.htm#1 (visited 31 January 2008).
38. There are however several precedents for the modifications of existing GATS commitments (under the relevant Article XXI GATS procedure). These follow from the accession of several East and Central European WTO Members to the EC in 2004 which resulted in the EC's notification of its intention to modify or withdraw various service commitments made by these accession Members in order to align their scheduled commitments with those of other EC Members; see Council for Trade in Services (Original & Supplementary). Notification from the European Communities and its Member States Pursuant to Article V of the GATS (S/SECRET/8 of 11 June 2004 and S/SECRET/9 of 12 April 2005).
39. Revealing in this regard is the US statement that it is now bringing its GATS commitments "into conformity with its public policy on gambling" see WTO News, DSB Adopts Compliance Review Reports on US Gambling and Chile Price Band System, 22 May 2007 - online available at http://www.wto.org/ english/news_e/news07_e/dsb_22may07_e.htm (visited 31 January 2008).
40. Associated Press, Antigua Threatens to target US Interests as WTO Adopts Decision on Internet Gambling, 22 May 2007 - online available at http://www.theage.com.au (visited 31 January 2008).
41. It has been suggested that lobbying of US horseracing and related betting businesses on the one hand and strong feelings about the sovereign right to regulate public policy and morality issues on the other are the main underlying causes for leaving the (arguably discriminatory) current US laws and practices unchanged; see Johannes Bernabe, 'Assessing the Implications of the Gambling Dispute', 11 (4) Bridges Monthly Review 8-9 (2007), at 8 - online available at http://www.ictsd.org/monthly/bridges/Bridges%2011-4.pdf (visited 31 January 2008).
42. From a more general perspective, one can point to the tension between international obligations and national autonomy which are exemplified here: While the WTO dispute settlement process and its 'response' measures under Article 22 DSU aim for compliance and consistency with international (WTO) obligations, the Article XXI proceedings allow to modify international (WTO) obligations and so to uphold national sovereignty; see Henning Grosse Ruse - Khan, 'Gambling with Sovereignty: Complying with International Obligations or Upholding National Autonomy' (Paper presented at the Inaugural Conference of the Centre of International Economic Law at Victoria University, Wellington, New Zealand) 15-16 December 2007 (on file with author).
43. Compare also the similar mechanism in Articles XXVII and XXVIII GATT.
44. Council for Trade in Services, Procedures for the Implementation of Article XXI of the General Agreement on Trade in Services (GATS), (S/L/80) 29 October 1999.
45. See Article XXI:1 (b) GATS and S/L/80, above n 36, paras 1 and 2.
46. While the document S/SECRET/10 containing the US notification is not available to the public, the Notifications of Claim of Interest from all those WTO Members which considered their benefits to be affected refer to this document and the enclosed US notification of its intention to withdraw commitments relating to gambling and betting services; see World Trade Organization, Notification of Claim of Interest (India, S/L/288);
47. (European Communities, S/L/289);
48. (Japan, S/L/290);
49. (Costa Rica, S/L/291);
50. (Macao, China, S/L/292);
51. (Antigua and Barbuda, S/L/293);
52. (Canada, S/L/294);
53. (Australia, S/L/295).
54. Referred to as "affected Member", Article XXXI:2 (a) GATS (emphasis added).
55. See Article XXI:2 (a) GATS and S/L/80, above n 36, para 3 (emphasis added).
56. See World Trade Organization, Notification of Claim of Interest, above n 38;
57. further Bridges Weekly Trade News Digest, Antigua Gambling Dispute: Major Economies Demand Compensation from US, Vol.11 No.24 (4 July 2007) - online available at http://www.ictsd.org/ weekly/07-07-04/story3.htm (visited 31 January 2008).
58. See Article XXI:2 (a) GATS and S/L/80, above n 36, para 4. According to Article XXI:2 (a) GATS, "the Members concerned shall endeavour to maintain a general level of mutually advantageous commitments not less favourable to trade than that provided for in Schedules of specific commitments prior to such negotiations".
59. Statement by USTR Spokeswoman Gretchen Hamel on Gambling, 17 December 2007, online available at http://www.ustr.gov/Document_Library/Press_Releases/ 2007/December/Statement_by_USTR_Spokeswoman_Gretchen_Hamel_on_Gambling.html (visited 31 January 2008). The agreement involves compensatory commitments to maintain "liberalized markets for warehousing services, technical testing services, research and development services and postal services relating to outbound international letters". Several news reports however doubted whether the agreement involved any real compensation since it - with regard to postal services - merely made a twenty-year-old practice legally binding without any new commitments in sensitive sectors such as domestic delivery or storage at ports and airports, see Financial Times, EU raises doubt over US trade deal, 24 December 2007 - online available at http://www.msnbc.msn.com/id/ 22381096/ (visited 3 January 2008).
60. See Statement by USTR Spokeswoman Gretchen Hamel on Gambling, above n 43.
61. Compare S/L/80, above n 36, paras 7-8, 12.
62. Further details on the arbitration proceedings (appointment of panellists; applicability of the "Rules of conduct for the understanding on rules and procedures governing the settlement of disputes"; terms of reference; envisioned time period) are regulated in paras 7-14.
63. Reuters, Antigua seeks WTO arbitration in US gambling dispute, 1 February 2008, online available at http://www.reuters.com/articlePrint? articleId=USL3165644020080131 (visited 1 February 2008).
64. One report rightly points out that the new arbitration filing makes it possible for the EC to reconsider its settlement with the US and join the arbitration proceeding; see PR Newswire, Costa Rica Files for Arbitration in WTO Gambling Dispute, 1 February 2008, online available at http://sev.prnewswire.com/gambling-casinos/20080131/DC1299931012008-1.html (visited 1 February 2008).
65. There is no precedence for arbitration regarding the US modification proposal: Even though no agreement was reached in relation to the EC's further modifications proposed in S/SECRET/9, none of the fourteen affected Members has referred the matter to arbitration. See Council for Trade in Services, Notification from the European Communities and its Member States Pursuant to Article V of the GATS (S/SECRET/8/Add.1) 15 August 2006, paras 4-8.
66. In particular, could the findings of the Article 22:6 arbitration regarding equivalence between the level of nullification and the level of suspension under Article 22:4 DSU serve as precedence? Arbitration under Article XXI GATS must consider the level of affectedness (=nullification) suffered due to the withdrawal of gambling commitments in order to determine what level of compensatory adjustments re-establishes the previous balance of commitments (compare S/L/80, above n 35, para 13).
67. The key issue is whether, in determining the nullification suffered, Article XXI GATS arbitrators will look at the entire market for online gambling or merely at the segment of horse-racing gambling (where the US easures were found as not meeting the requirements of the chapeau in the exception of Article XIV GATS in US - Gambling). The latter approach was preferred by the majority of the Article 22:6 arbitrators as the most appropriate counterfactual which reflects a reasonable assumption for compliance with the DSB rulings in US - Gambling; "and thus can be considered to accurately reflect the benefits accruing to Antigua that have been nullified or impaired" [see US - Gambling (Article 22:6), above n 8, paras 3.49, 3.53, 3.57, 3.61 and the separate opinion in para 3.62-3.73, which considers it "not unreasonable for Antigua to base its counterfactual on an assumption that the United States would open its market to the cross-border provision of remote gambling services"]. In Antigua's case, if the arbitrators under Article XXI GATS follow the Article 22:6 award, one could therefore expect compensation for Antigua in form of additional service commitments with a value of around US$ 21 million p.a. Under Article XXI GATS however, arbitration must determine compensatory adjustments which equalize the US withdrawal of its GATS commitments in its entirety. Since the US aims to withdraw all specific commitments on "Gambling and Betting Services" across all four modes of supply [and not only those relating to cross border supply of horse-racing gambling services - see World Trade Organization, Notification of Claim of Interest -Australia, (S/L/295) 25 June 2007], the nullification of benefits must be determined accordingly. While determining concrete compensation further depends on the individual Members' level of 'affectedness' under Article XXI (2) a) GATS, the benefits nullified (i.e. affected) must be evaluated against the full scope of commitments withdrawn. Under Article XXI GATS should be no room for arguing that the US may justify domestic measures limiting commitments on gambling services under the public morals exception of Article XIV GATS: Decisive is the level of affectedness "by a proposed modification or withdrawal" of commitments [see Article XXI (2) a) GATS]. This difference between Article 22:6 DSU and Article XXI (3) GATS arbitration will likely lead to significantly higher values in the compensatory adjustments awarded under the latter.
68. Article XXI:4 (b) GATS and S/L/80, above n 36, paras 16-18.
69. See Article XXI:1-3 GATS
70. See Article XXI:1, 2, 5 GATS and S/L/80, above n 36.
71. Used in Article XXI:4 (b) GATS as well as in S/L/80, above n 36, paras 16 and 18.
72. See Article XXI:1 (a) GATS and S/L/80, above n 36, para 20.
73. Compare also Johannes Bernabe, above n 33, at 8.
74. USTR Statement on Internet Gambling, 21 December 2007, online available at http://www.ustr.gov/Document_Library/Press_Releases/2007/December/ Statement_on_Internet_Gambling.html (visited on 31 January 2008).
75. Relating to the potential conflict between Article 21.5 proceedings over compliance and Article 22.6 over the right to retaliate due to non-compliance; see Mitsuo Matsushita, Thomas J. Schoenbaum, Petros Mavroidis, The World Trade Organization (Oxford: Oxford University Press, 2003) 30-2.
76. World Trade Organization, Notification of Claim of Interest from Antigua and Barbuda (S/L/ 293), 25 June 2007.
77. See Article XXI:3-4 GATS and S/L/80, above n 36, paras 7-14, 16-18, 20-22.
78. Article 22:8 DSU should be applied here since a successful modification in turn for compensation under Article XXI GATS offers a form of "solution to the nullification and impairment of benefits".
79. See ArticleS 3:7 and 22:1 of the DSU.
80. Refus Yerxa, above n 1, at 4.
81. Peter Sutherland, John Sewell, David Weiner, 'Challenges Facing the WTO and Policies to Address Global Governance', in Gary P. Sampson (ed.), The Role of the World Trade Organization in Global Governance (United Nations Press: Tokyo, 2001) 105;
82. OXFAM, Rigged Rules and Double Standards (2002), at 251; online available at http://www.maketradefair.com/assets/english/report_english.pdf (visited 24 January 2008);
83. Commission on Intellectual Property Rights (CIPR), Integrating Intellectual Property and Development Policy (London, 2002), at 157 - online available at www.iprcommission.org (visited 31 January 2008).
84. Refus Yerxa, above n 1, at 3.
85. On the historical origin in Article XXIII GATT see Yuka Fukunaga, 'Securing Compliance Through the WTO Dispute Settlement System', 9 Journal of International Economic Law 383-426 (2006), at 416-17;
86. One can also point to Article 60 (2) (b) of the Vienna Convention on the Law of Treaties (done at Vienna on 23 May 1969, United Nations, Treaty Series, Vol. 1155, 331) - which allows a state affected by a material breach of a treaty to invoke it as a ground for suspending the operation of the treaty in whole or in part in the relations between itself and the defaulting state - as evidence for a re-balancing paradigm.
87. In favour of this approach: David Palmeter and Stanimir A. Alexandrov, '"Inducing Compliance" in WTO Dispute Settlement', in Daniel L.M. Kennedy and James D. Southwick (eds), The Political Economy of International Trade Law (Cambridge: Cambridge University Press, 2002) 646-66;
88. Generally critical on re-balancing: Holger Spamann, 'The Myth of 'Rebalancing' retaliation in the WTO Dispute Settlement System', 9 Journal of International Economic Law (2006), at 31-79.
89. Steve Charnovitz, The WTO's Problematic Last resort Against Non-compliance, 14 August 2003, at 8-16 - online available at http://www.worldtradelaw.net/articles/charnovitzlastresort.pdf [revised version of an article published in Aussenwirtschaft, (12/2002)].
90. Refus Yerxa, above n 1, at 3.
91. Compare also Article 51 of the International Law Commission's Articles on Responsibility of States for International Wrongful Acts (ASR) which requires countermeasures to commensurate with the injury suffered. The articles are annexed to UN General Assembly, Resolution on Responsibility of States for Internationally Wrongful Acts (A/RES/56/83), 12 December 2001.
92. If one assumes inducing compliance as the objective of the suspension mechanism (see subsequently), then there is no reason to limit the amount of retaliation to the level of nullification suffered - instead, to bring about compliance might require to go well above that level: At least two arbitration panels have authorized "appropriate countermeasures" under Article 4:10 of the Agreement on Subsidies and Countervailing Measures (WTO, Legal Texts - The Uruguay Round Agreements, Agreement on Subsidies and Countervailing Measures, online available at http://www.wto.org/english/docs_e/ legal_e/24-scm.pdf - SCM Agreement) above the injury suffered [see Recourse to Arbitration by the United States under Article 22:6 of the DSU and Article 4:11 of the SCM Agreement - Decision of the Arbitrator, United States - Tax Treatment for Foreign Sales Corporations (US - FSC), WT/ DS108/ARB, 30 August 2002, para 5.30-5.52;
93. Recourse to Arbitration by Canada under Article 22:6 of the DSU and Article 4:11 of the SCM Agreement - Decision of the Arbitrator, Canada - Export Credits and Loan Guarantees for Regional Aircraft (Canada - Export Credits), WT/DS222/ARB, 17 February 2003, paras 3.48, 3.107-3.121].
94. WTO, Legal Texts - The GATT 1947, General Agreement on Tariffs and Trade, online available at http://www.wto.org/english/docs_e/legal_e/gatt47_e. pdf.
95. WTO, Legal Texts - The Uruguay Round Agreements, Agreement on Safeguards, online available at http://www.wto.org/english/docs_e/legal_e/25- safeg.pdf. Article 8 of the Agreement on Safeguards obliges the Member implementing a safeguard measure to offer a compensation to any affected Member at a "substantially equivalent level of concessions and other obligations to that existing under GATT 1994 between it and the exporting Members which would be affected by such a measure" (Article 8:1). If no agreement is reached on compensation, "then the affected exporting Members shall be free (. . .) to suspend (. . .) the application of substantially equivalent concessions or other obligations under GATT 1994, to the trade of the Member applying the safeguard measure" (Article 8:2). Steve Charnovitz [above n 66, at 9] concludes that this provision is clearly based on the re-balancing idea.
96. For a detailed discussion on the Article XXI GATS proceedings initiated by the US to modify its existing GATS commitments relating to cross-border gambling, see section II above.
97. Article XXI:2 (a) GATS - the similarity to Article 8:1 of the Agreement on Safeguards is evident.
98. Article XXI:4 (b) GATS - this provision resembles Article 8:2 of the Agreement on Safeguards.
99. WTO, Legal Texts - The Uruguay Round Agreements, Agreement Establishing the World Trade Organisation, online available at http://www.wto.org/english/docs_e/legal_e/04-wto.pdf.
100. The "Member concerned" is the party to the dispute to which the panel or Appellate Body recommendations are directed.
101. Peter Van der Bossche, The Law and Policy of the World Trade Organization (Cambridge: Cambridge University Press, 2005) 217;
102. Mitsuo Matsushita, Thomas Schoenbaum, Petros Mavroidis, above n 56, at 25.
103. Such adoption is - by virtue of the negative consensus rule which requires all WTO Members consent not to adopt the report - generally an automaticity, see Article 16:4 and Article 17:14 DSU.
104. Apart from securing a mutually agreed solution, see Article 3:7 DSU.
105. See Recourse to Arbitration by the European Communities under Article 22:6 of the DSU - Decision by the Arbitrators, European Communities - Regime for the Importation, Sale and Distribution of Bananas (EC - Bananas II), WT/DS27/ARB, 9 April 1999, para 6.3 (the arbitrators declared that the temporary nature indicates that "the purpose of countermeasures is to induce compliance. But this purpose does not mean that the DSB should grant authorization to suspend concessions beyond what is equivalent to the level of nullification or impairment"); Recourse to Arbitration by the European Communities under Article 22:6 of the DSU - Decision of the Arbitrator, European Communities - Measures Concerning Meat and Meat Products (EC - Hormones), WT/DS26/ARB, 12July 1999, at para 40 (agreeing with the Bananas arbitrators that the purpose of countermeasures is to induce compliance);
106. EC - Bananas III (Article 22.6 - Ecuador), above n 11, at para 76 (emphasizing that the "interpretation of the 'practicability' and 'effectiveness' criteria is consistent with the object and purpose of Article 22 which is to induce compliance");
107. Recourse to Arbitration by Brazil under Article 22.6 of the DSU and Article 4.11 of the SCM Agreement - Decision by the Arbitrator, Brazil - Export Financing Programme for Aircraft (Brazil - Aircraft), WT/DS46/ARB, 28August2000, para 3.44 (concluding that a countermeasure is "appropriate" under Article 4 SCM "inter alia if it effectively induces compliance");
108. US - FSC (Article 22:6), above n 69, at para 5.52 (stating that "countermeasures are taken against non-compliance, and thus its authorization by the DSB is aimed at inducing or securing compliance with the DSB's recommendation");
109. Canada - Export Credits (Article 22:6), above n 69, at para 3.107 (considering "that countermeasures are there to contribute to the end of a breach" and finding "that in order to induce compliance in this case a higher level of countermeasures" would be necessary and appropriate).
110. See for example Joost Pauwelyn, 'Enforcement and Countermeasures in the WTO: Rules are Rules - Toward a More Collective Approach', 94 (2) American Journal of International Law 335-47 (2000), at 343;
111. Steve Charnovitz, above n 66, at 16;
112. Robert Hudec, The Adequacy of WTO Dispute Settlement Remedies', in Bernhard Hoekman, Aaditya Mattoo, Philip English (eds), Development, Trade and the WTO - A Handbook (Washington DC: The World Bank, 2002), 89;
113. Won-Mog Choi, 'To Comply or Not to Comply? Non-Implementation Problems in the WTO Dispute Settlement System', 41 (5) JWT 1043-71 (2007), at 1043;
114. Ngangjoh H. Yenkong, 'World Trade Organization Dispute Settlement Retaliatory Regime at the Tenth Anniversary of the Organization: Reshaping the "Last Resort" against Non-Compliance', 40 (2) JWT 365-84 (2006), at 365-6;
115. Marco Bronckers and Naboth van den Broek, 'Financial Compensation in the WTO', 8 Journal of International Economic Law 101-26 (2006), at 102;
116. Compare also Jide Nzelibe, 'The Case Against Reforming the WTO's Enforcement Mechanism' [Northwestern University School of Law Public Law and Legal Theory Series No.07-12 (April 2007)], at 14, 19, 29.
117. See Article 49 (1) of the International Law Commission's Articles on Responsibility of States for International Wrongful Acts (ASR).
118. Interestingly, Adam Smith conditioned retaliation on its practical effect to induce compliance instead of perceiving this as the general objective; see Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (1776) (Oxford: Oxford University Press [reprinted], 1998), Book 4 Chapter 2 - cited by Steve Charnovitz, above n 65, at 21.
119. Compare in this regard also Reto Malacrida, 'Towards Sounder and Fairer WTO Retaliation', 42 (1) JWT 3-60 (2008), at 5, who perceives re-balancing as the immediate aim in the context of Article 22:4 DSU and inducing compliance as the ultimate end-goal. Further see Yuka Fukunaga, above n 64, at 417 (who equally points out this dual role which the suspension mechanism of Article 22 DSU has to play);
120. and Marco Bronckers and Naboth van den Broek, above n 81, at 102.
121. Which - as the arbitration in Brazil - Aircraft (Article 22:6), above n 80,
122. and US - FSC (Article 22:6), above n 69, has shown - often will have to go beyond equivalence in order to induce compliance.
123. Reto Malacrida (above n 84, at 5-6) pointing especially to the 'ineffectiveness' test under Article 22:3 (b), (c) DSU which is understood as not having the desired effect of inducing compliance; see EC - Bananas III (Article 22.6 - Ecuador), above n 11, at para 76.
124. For a detailed analysis of this 'selection mechanism' and especially the requirements to move to (IP) cross-retaliation under Article 22:3 (c) DSU, see section IV subsequently.
125. Generally described as aiming to secure "a positive resolution to a dispute" (compare Article 3:7 DSU).
126. Compare Steve Charnovitz, above n 66, at 9-10
127. and Won-Mog Choi, above n 81, at 1049-53;
128. for a well presented statistic on retaliation see Reto Malacrida, above n 84, at 56-60 (Annex B).
129. Finding new trade partners in other markets will take some time and involve investments and transaction costs.
130. US - Gambling (Article 22:2), above n 7, at 2-3.
131. Note however that in US - Gambling the starting point for retaliation in the same sector of the same agreement [Article 22:3 (1) DSU] does not involve raising tariffs but suspending service commitments relating to "Recreational, Cultural and Sporting Services" under Sector 10 of Services Sectoral Classification List contained in document MTN.GNS/W/120. The quote nevertheless points out the key inadequacies of retaliation via raising tariffs for small economies.
132. EC - Bananas III (Article 22:6 - Ecuador), above n 11, at para 95.
133. Ibid, at para 73.
134. Compare Arvind Subramanian and Jayashree Watal, above n 4, at 404.
135. See also Steve Charnovitz, above n 65, at 22-3;
136. Marco Bronckers and Naboth van den Broek, above n 81, at 102.
137. UNCTAD/ICTSD, Resource Book on TRIPS and Development, (UNCTAD/ICTSD: Geneva 2005) Chapter 32, 7.6.1. - online at http://www. iprsonline.org/unctadictsd/ResourceBook Index.htm (visited 10 November 2007);
138. EC - Bananas III (Article 22:6 - Ecuador), above n 11, at para 91.
139. Marco Bronckers and Naboth van den Broek, above n 81, at 103.
140. Arvind Subramanian and Jayashree Watal, above n 4, at 405;
141. Marco Bronckers and Naboth van den Broek, above n 81, at 103.
142. Steve Charnovitz, above n 66, at 28.
143. Robert Z. Lawrence, The United States and the WTO Dispute Settlement System, Council of Foreign Relations Special Report No.25 (March 2007) - online available at www.cfr.org (visited on 22 November 2007), at 15.
144. See Marco Bronckers and Naboth van den Broek, above n 81, at 103-4 (which stress the harm done to affected exporters as innocent bystanders and the lack of remedies for the industries affected by the initial WTO violation);
145. see further Steve Charnovitz, above n 66, at 10-14, 23-24 (who discusses various other negative effects on third countries, the WTO as a whole and other international organizations).
146. A general explanation of the theory of comparative advantage, its origins in Adam Smith's and David Ricardo's work, its main argument for specialization and (free) international trade and its current implications can be found in Peter Van der Bossche, above n 77, at 19-24;
147. For an Economist's perspective see Steven Brakman et al., Nations and Firms in the Global Economy (Cambridge: Cambridge University Press, 2006) 63-95.
148. For an analysis of global IP protection based on the trade theory of comparative advantage see subsequently.
149. Compare the objectives set out in Article 7 TRIPS - for a detailed analysis of Article 7 and its role in the interpretation of the TRIPS Agreement in line with Article 3:2 DSU and Article 31 of the Vienna Convention on the Law of Treaties see Henning Grosse Ruse - Khan, 'Proportionality and Balancing within the Objectives of Intellectual Property Protection', in P. Torremanns (ed.), Intellectual Property and Human Rights (Kluwer: 2008, forthcoming).
150. Although there are various bi- and some multilateral agreements which go significantly beyond TRIPS, it is the only international IP agreement which (i) contains provisions on all relevant types of IP rights; (ii) integrates the main provisions of several other international IP Agreements by reference; (iii) includes a list of detailed provisions on the enforcement of IP rights and (iv) binds more than 150 countries around the globe via the WTO's dispute settlement system under which compliance with TRIPS can be challenged.
151. Various news reports in the wake of the arbitrators' award of US$21 million worth of suspension of US IP rights for Antigua indicated that Hollywood and other IP-dependant industries in the US will lobby the US authorities to prevent such retaliation.
152. It would be interesting to see whether Disney, Time-Warner, Microsoft, Pfizer and other IP-dependant companies would win a lobbying battle against the US-farm interest groups if Brazil would be authorized by the DSB to implement its request for suspending IP protection in order to achieve withdrawal of WTO inconsistent cotton subsidies in the US - Cotton dispute.
153. Ecuador, the only country which (before Antigua in US - Gambling) had been awarded the right to suspend IP protection, did never resort to retaliation as it reached a mutually agreeable solution with the EC in June 2001.
154. This may be due to a lacking economic feasibility of the envisioned implementation of the right to suspend IP protection (compare section V. subsequently), but could also indicate the impact a mere threat to suspend IP rights can have. Given the importance of IP rights in the global trading system today, it is unlikely to serve as evidence against the compliance-inducing potential of suspending TRIPS obligations. The dispute was revived in late 2006 when Ecuador (as of December 2007 successfully;
155. see International Herald Tribune, WTO Ruling on EU Banana Tariffs opens door to Sanctions from Ecuador, 10 December 2007, online available http://www.iht.com/articles/ 2007/12/10/business/wto.php, visited 13 December 2007) challenged the WTO consistency of the new 2006 EC Banana Importation regime. This in turn is nevertheless unlikely to lead to a new option for (cross) retaliation for Ecuador since the discriminatory trade preferences to ACP countries at issue are likely to become WTO-consistent under the Economic Partnership Agreements (EPAs) under negotiation between the EC and groups of ACP countries.
156. Arvind Subramanian and Jayashree Watal, above n 4, at 406-7.
157. While TRIPS goes significantly beyond the status quo ante in the international regime of IP protection (by for example introducing binding obligations on copyright protection for software and databases, a full regime of substantive trademark and patent protection (the latter covering all fields of technology) and a comprehensive set of provisions on IP enforcement), its obligations set out merely 'minimum' standards for protection. Article 1 (1) TRIPS makes clear that WTO Members can (and in the last ten years of bilateral Free Trade Agreements frequently have) afford (ed) more extensive protection as long as this does not contravene TRIPS provisions.
158. Wilfried J. Ethier, 'Intellectual Property Rights and Dispute Settlement in the World Trade Organisation', 7 Journal of International Economic Law 449-58 (2004), at 456 sees herein some "meaningful hostages" which developing countries have in trade disputes with developed countries.
159. Ibid, at 455.
160. This observation from the re-balancing perspective supports the claim that the hierarchy under Article 22:3 (a)-(c) DSU relates to the idea of inducing compliance (compare III. A. above): As I will show in section IV subsequently, a WTO Member can move to retaliation in another sector/agreement mainly if same sector/agreement retaliation is unlikely to induce compliance.
161. Steve Charnovitz, above n 66, at 14.
162. The Appendix to the Revised Berne Convention on the Protection of Literary and Artistic Works (of 9 September 1886, completed at Paris 4 May 1896, last revised at Paris 24 July 1971, amended in 1979, WIPO Publication No.287 (E), WIPO 1992) is binding upon all WTO Members by virtue of Article 9 (1) TRIPS. Its mechanism for improving access to knowledge has been a complete failure;
163. see Henning Grosse Ruse - Khan, 'Access to Knowledge under the International Copyright Regime, the WIPO Development Agenda and the European Communities' new External Trade and IP Policy', in Estelle Derclaye (ed.), Research Handbook on the Future of EU Copyright (Edward Elgar Publishing: 2008 forthcoming).
164. Similar to some Pharmaceutical companies threatening market withdrawal because of compulsory licensing in Thailand and Brazil, one could counter that IP dependent industries might decide not to operate in a particular market if that country is likely to use IP suspension as a tool for trade retaliation which then might prevent innovative new products to enter national markets. However, whether this scenario is realistic and, if so, outweighs the benefits of IP cross-retaliation for the domestic economy of the retaliating country remains to be seen. Overall, the decision to withdraw from a national market will be influenced by a variety of factors amongst which the potential for (temporary) IP suspension very likely will play a less important role than broader economic parameters such as market size, competition, consumer demand and buying power.
165. Historical evidence from the IP policies of industrialized countries in the 19th and early 20th century as well as more recent experience of far-eastern countries such as Korea, India and China clearly indicates that in order to facilitate technological development and economic welfare, IP policies must be tailored to the individual circumstances and respond to the domestic strengths and weaknesses in innovation and dissemination of technology; see Commission on Intellectual Property Rights (CIPR), above n 62, at 18-20 and especially the two related background papers by Zorina Khan, Study Paper 1a: Intellectual Property and Economic Development: Lessons from American and European History and Nagesh Kumar, Intellectual Property Rights, Technology and Economic Development: Experiences of Asian Countries, Study Paper 1b - all online available at www.iprcommission.org (visited 24 October 2007).
166. Michael Trebilcock and Robert Howse, The Regulation of International Trade (3rd edn, London: Routledge, 2005) 397, 399, 401.
167. Ibid, at 401.
168. See Article 7 TRIPS.
169. At the same time, there may be an argument for some degree of global harmonization in order to facilitate trade in (IP protected) goods and services and so support the objective of trade liberalization in general. The balance between flexibility and harmonization may vary depending on the field of technology and other subject matter. On the debate of TRIPS flexibilities and policy space see for example Commission on Intellectual Property Rights (CIPR), above n 62, chapter 1 (on IP and Development), 2 (on Patents and Public Health), 5 (on copyright, software and the internet) and especially chapter 8 (on International Architecture);
170. further Carlos Correa, Intellectual Property Rights, the WTO and Developing Countries (London: Zed Books, 2000) 6-8 and generally chapter III and the Annex.
171. Steve Charnovitz, above n 66, at 14.
172. Marco Bronckers and Naboth van den Broek, above n 81, at 103.
173. By showing that suspending for example Article 13 TRIPS (with its rigorous constraints on the way WTO Members can enact exceptions to copyright which benefit the public domain, access to knowledge and other valid societal interests, see Henning Grosse Ruse - Khan, above n 114, at II. 5.) actually can promote cultural, technological or economic development, one may be able to make a case for reviewing such exorbitant TRIPS provisions.
174. Arvind Subramanian and Jayashree Watal, above n 4, at 403.
175. Defined in Article 22:3 (f ) DSU.
176. See Article 22:3 (g) DSU.
177. These factors are (i) the trade in the sector or agreement where a WTO violation has been found and the importance of that trade to the retaliation Member; and (ii) the broader economic elements relating to nullifying or impairing the trade benefits at issue as well as the broader economic consequences of the requested retaliation.
178. See Thomas Sebastian, above n 25, at 350-1.
179. This expression is used in the DSU as to refer to either an individual or a group (see fn.15, 16 to Article 22 DSU).
180. Article 22:3 (c) DSU - all these requirements have to be understood in the context of Article 22:3 (d);
181. see US - Gambling (Article 22:6), above n 8, at paras 4.29, 44.61-4.64, 4.101-4.104: In a slightly different approach, the arbitrators in EC - Bananas III considered Article 22:3 (d) only of relevance for the determination of seriousness under Article 22:3 (c);
182. compare EC - Bananas III (Article 22:6 - Ecuador), above n 11, paras 121-2.
183. US - Cotton (Article 22:2), above n 5.
184. US - Gambling (Article 22:6), above n 8, at para 2.22.
185. The arbitrators refer to prior Article 22:6 decisions and describe the underlying ratio cite from EC - Hormones (Article 22:6 - Canada), above n 80, para 9: WTO Members, as sovereign entities, can be presumed to act in conformity with their WTO obligations. A party claiming that a Member has acted inconsistently with WTO rules bears the burden of proving that inconsistency.
186. Ibid, at 2.26-2.27 and EC - Bananas III (Article 22:6 - Ecuador), above n 11, at para 59.
187. A related issue is that the retaliating state is not obliged to positively show the effectiveness and/or practicality of the chosen (cross) retaliation (Ibid, para 77-8).
188. EC - Bananas III (Article 22:6 - Ecuador), above n 11, at para 60
189. and US - Gambling (Article 22:6), above n 8, at para 2.27.
190. Both Article 22:3 (b) and (c) start with "if that party considers" (emphasis added).
191. EC - Bananas III (Article 22:6 - Ecuador), above n 11, at para 52
192. and US - Gambling (Article 22:6), above n 8, at para 4.18.
193. Compare US - Gambling (Article 22:6), above n 8, at paras 4.60-4.61, 4.71, 4.75 - the last example is instructive: The arbitrators set out the scope of their legal review by stating: "We must therefore determine whether Antigua has considered the relevant facts objectively and whether, on the basis of these facts, it could plausibly arrive at the conclusion that it was not practicable or effective to seek suspension of concessions or other obligations with respect to other sectors under the GATS" (emphasis added).
194. No further mention is made of the US' initial burden to show that Antigua has not complied with Article 22:3 (c) in this instance - i.e. that it is both practicable and effective to suspend GATS obligations.
195. US - Gambling (Article 22:6), above n 8, at para 4.99;
196. Similar phrases can be found at paras 4.56, 4.60, 4.65. The issue becomes even more evident when contrasted against the language used in EC - Bananas III: "In the light of these considerations, we therefore conclude that the European Communities has not shown that suspension of concessions under the GATT with respect to primary goods and investment goods is both practicable and effective for Ecuador."
197. See EC - Bananas III (Article 22:6 - Ecuador), above n 11, at para 96 (emphasis added); a further example is para 101.
198. Paragraph 4.100 of US - Gambling (Article 22:6), above n 8, addresses this to some extent. But instead of relying on the burden of proof resting with the US (which it did not meet), the arbitrators relied on general considerations of reasonableness and Antigua's status as a developing country.
199. EC - Bananas III (Article 22:6 - Ecuador), above n 11, at para 70.
200. Ibid, at paras 88-96.
201. US - Cotton (Article 22:2), above n 5, at 2.
202. US - Gambling (Article 22:2), above n 7, at 2.
203. EC - Bananas III (Article 22:6 - Ecuador), above n 11, at para 100.
204. US - Gambling (Article 22:6), above n 8, at paras 4.29 and 4.84.
205. As mentioned before, they however differed from the EC - Bananas III arbitral award in that they held the factors in Article 22:3 (d) to constitute relevant context also for the interpretation of practicality and effectiveness;
206. ibid, paras 4.29, 44.61-4.64, 4.101-4.104. On the basis of the shared understanding on these factors (see subsequently) and the overall interpretation of the Article 22:3 (c) requirements, this however does not seem to affect the scope of Article 22:3 (c).
207. Ibid, paras 4.87, 4.93 (particularly relating to welfare losses for Antiguan consumers and businesses).
208. See Ibid, paras 4.56 and 4.60, 4.65 (where the absence of any trade in the sector affected seemed to be decisive) and paras 4.98-4.99 (where various aspects of harm to Antigua's domestic economy seemed crucial - which would speak for an application of the practicality criterion).
209. US - Gambling (Article 22:6), above n 8, at para 4.44.
210. The arbitrators followed this from the wording "concessions and other obligations" in Article 22:3 (b) and (c) (emphasis added).
211. Ibid, para 4.57.
212. Ibid, at para 4.58: IMF Statistics confirmed that no significant volumes of imports of services (relating to the relevant same sector) occur from any country into Antigua. Therefore Antigua had no practicable option of discriminating against US service providers.
213. Suspending MFN or other general obligations however can be argued to undermine the normative value of the relevant WTO principle or rule and might raise a public doubts over the validity of these rules; see Steve Charnovitz, above n 66, at 14;
214. compare also Marco Bronckers and Naboth van den Broek, above n 81, at 103 (in relation to suspending TRIPS obligations).
215. EC - Bananas III (Article 22:6 - Ecuador), above n 11, at para 74,
216. US - Gambling (Article 22:6), above n 8, at para 4.85.
217. EC - Bananas III (Article 22:6 - Ecuador), above n 11, at para 72,
218. US - Gambling (Article 22:6), above n 8, at para 4.84.
219. US - Cotton (Article 22:2), above n 5, at 2;
220. US - Gambling (Article 22:2), above n 7, at 3
221. and US - Gambling (Article 22:6), above n 8, at paras 4.87, 4.93-4.94.
222. US - Gambling (Article 22:6), above n 8, at paras 4.93-4.94 and 4.98-4.99.
223. EC - Bananas III (Article 22:6 - Ecuador), above n 11, at para 73.
224. US - Gambling (Article 22:6), above n 8, at para 4.90-4.91.
225. EC - Bananas III (Article 22:6 - Ecuador), above n 11, at paras 82-6 - compare also Article 22:3 (d) DSU.
226. Ibid, at 128-33.
227. US - Gambling (Article 22:2), above n 7, at 3.
228. US - Gambling (Article 22:6), above n 8, at para 4.110-4.111.
229. Ibid, paras 4.35-4.37, 4.107 and 4.114-4.116.
230. Although it has not been addressed in either of the two awards, an interesting point would be to what extent a strong potential impact of the proposed IP suspension on the non-complying country might count against the factors mentioned above and ultimately even lead to failing the seriousness test.
231. EC - Bananas III (Article 22:6 - Ecuador), above n 11, at para 173-74.
232. US - Gambling (Article 22:6), above n 8, at para 2.27.
233. Compare EC - Bananas III (Article 22:6 - Ecuador), above n 11, at para 173.
234. Lionel Bently and Brad Sherman, Intellectual Property (2 edn, Oxford: Oxford University Press, 2004) 5, at 929;
235. Alfredo Illardi and Michael Blakeney, International Encyclopaedia of Intellectual Property Rights (Oxford: Oxford University Press, 2004) 3;
236. Paul Katzenberger and Annette Kur, 'TRIPS and Intellectual Property', in Karl-Friedrich Beier/Gerhard Schricker (eds), From GATT to TRIPS - IIC Studies (New York: Weinheim, 1996) vol. 18 at 5;
237. Christopher Arup, The New World Trade Organisation Agreements (Cambridge: Cambridge University Press, 2000) 30;
238. Annette Kur, 'A New Framework for Intellectual Property Rights - Horizontal Issues', 35 (1) IIC 1-21 (2004), at 7.
239. Article 5 (2) of the Revised Berne Convention on the Protection of Literary and Artistic Works confirms this for the area of copyright by determining that "the extent of protection, as well as the means of redress afforded to the author to protect his rights, shall be governed exclusively by the laws of the country where protection is claimed" (emphasis added).
240. For the private international law question of applicable law, this rule is frequently cited to justify the application of the law of the country where an act conflicts with IP rights granted by the domestic law and on this basis protection is sought (lex loci protections).
241. For the area of patent law, one can refer to Article 4bis (1) of the Paris Convention for the Protection of Industrial Property: "Patents applied for in the various countries of the Union by nationals of countries of the Union shall be independent of patents obtained for the same invention in other countries, whether members of the Union or not." This principle of independence of patents builds on and presupposes the principle of territoriality;
242. compare also Carlos Correa, Trade Related Aspects of Intellectual Property Rights (Oxford: Oxford University Press, 2007) 81.
243. On exceptions on the basis of an extraterritorial application of national IP laws see subsequently.
244. Without referring to the principle of territoriality (but rather Article 51 TRIPS), the arbitrators in EC-Bananas III (Ecuador) came to the same conclusion; see EC - Bananas III (Article 22:6 - Ecuador), above n 11, at paras 153-6 and the further discussion subsequently. The arbitrators in US - Gambling generally confirmed this;
245. see US - Gambling (Article 22:6), above n 8, at para 5.11.
246. See for example section271 (g) of the US Process Patent Amendment Act under which goods produced abroad and subsequently imported into the US are considered infringing if they have been produced by using a process patented in the US - regardless the fact that the use occurred outside US territory. For case law on this provision see Todd P. Blakely, 'Extraterritorial Infringement of a United States Utility Patent', in Marcus Grosch, Eike Ullman (eds), Gewerbliche Schutzrechte und ihre Durchsetzung, Festschrift für Tilman Schilling (Carl Heymanns: Cologne, 2007) 13-30.
247. In the context of copyright see Josef Drexl, 'Lex Americana Ante Portas - Zur Extraterritorialen Anwendung nationalen Urheberrechts', in Bernward Zollner and Uwe Fitzner (eds), Festschrift für Wilhelm Nordemann (Nomos: Baden-Baden, 1999) 429-45.
248. Compare Timothy R. Holbrook, 'Extraterritoriality in US Patent Law', 49 (6) William and Mary Law Review Issue 6 (Forthcoming May 2008), at I. online available http://ssrn.com/abstract=944157 (visited 31 January 2008).
249. Compare Josef Drexl, above n 171, at 434-7.
250. On the impact of extraterritorial application of US copyright law on the internet see Josef Drexl, above n 171, at 436-7. For a more detailed discussion on Antigua's option to extend the impact of IP suspension via the internet see subsequently.
251. According to Article l (1) TRIPS, one needs to show that additional protection beyond TRIPS contravenes TRIPS provisions. For options to challenge certain TRIPS-plus elements in the area of copyright law under Article 1 (1) and Article 9 (2) TRIPS and on the basis of an interpretation which gives due regard to the objectives of TRIPS see Henning Grosse Ruse - Khan, above n 114.
252. Some news reports and comments on US - Gambling certainly point in this direction; see for example New York Times, In Trade Ruling, Antigua Wins Right to Piracy, 22 December 2007, online available at http://www.nytimes.com/2007/12/22/business/worldbusiness/22gambling.html?_r= 2& oref=slogin& oref=slogin (visited 31 January 2008);
253. International Economic Law and Policy Blog, Phyllis Schlafly on the Gambling Ruling and the WTO, online available at http://worldtradelaw. typepad.com/ielpblog/2008/01/phyllis-schlafl.html (visited 31 January 2007). As government policy, this motivation comes quite close to an autonomous determination of what amounts to an IP infringement and how an adequate response should look like - acts which in the WTO context are reserved to the DSB.
254. Compare Josef Drexl, above n 171, at 432-3, 434-5.
255. The principle of universality is based on the concept of a uniform, global copyright vesting on the laws of the country of origin of the protected work and applicable in all countries where that copyrighted work is utilized; see Haimo Schack, Urheber- und Urhebervertragsrecht (Mohr Siebeck: Tübingen, 1997), at 900-918;
256. G Schricker, Urheberrecht (2nd edn, Beck: München, 2000), Vor ss 120ff. para 122.
257. EC - Bananas III (Article 22:6 - Ecuador), above n 11, at para 153.
258. Ibid, paras 153-6 and the further discussion in section B subsequently.
259. US - Gambling (Article 22:6), above n 8, at para 5.11.
260. See Ministerial Conference, Doha Declaration on the TRIPS Agreement and Public Health (WT/MIN(01)/DEC/2), 20 November 2001, para 6 and the following negotiations leading to the 'paragraph six solution';
261. see General Council, Decision of 30 August 2003 (WT/L/540 and Corr.1), 1 September 2003
262. and General Council, Decision of 6 December 2005 (WT/L/ 641), 8 December 2005.
263. See also Arvind Subramanian and Jayashree Watal, above n 4, at 409.
264. Compare II. C. above.
265. See also para 5 (d) of the Doha Declaration on TRIPS and Public Health, above n 182, which explicitly confirms this freedom. Compare also Carlos Correa (above n 168, at 86-7) who argues for an application of the exhaustion principle well beyond sales authorized by the right holder to any situation where the product has been lawfully placed on the market. This issue is further discussed subsequently in relation to the potential role international exhaustion can have to extent the impact of IP suspension.
266. For example because the right holder did not apply for a patent or a trademark or because the country is still benefiting from the extended transition periods for LDCs with regard to pharmaceutical product patents.
267. As the retaliating country might not necessarily pursue such altruistic motives without obtaining own benefits, financial compensation might come from international donors, NGOs or international funds which could equally build on the suspension regime as an base for cheap production of drugs needed in LDCs.
268. Under this doctrine, a first sale or other form of authorized distribution of a product in one country legalizes the resale in another country - even if the product is generally under IP protection in the latter country. Article 6 TRIPS, as confirmed by para 5 (d) of the Doha Declaration on TRIPS and Public Health (above n 182) ensures that domestic policies on (international) exhaustion cannot be challenged under the WTO dispute settlement system.
269. Compare Naboth Van den Broek, 'Power Paradoxes in the Implementation and Enforcement of WTO Dispute Settlement Reports: Interdisciplinary Approaches and New Proposals', 37 (1) JWT (2003), 127-63 at V. A. 1.
270. The retaliating country however should keep in mind that the economic value of these exports certainly has to be taken into account when measuring equivalence under Article 22:4 DSU.
271. Paragraph 5 (d) of the Doha Declaration on TRIPS and Public Health (above n 182). Article 6 TRIPS states: "For the purposes of dispute settlement under this Agreement, subject to the provisions of Articles 3 and 4 nothing in this Agreement shall be used to address the issue of the exhaustion of intellectual property rights."
272. See para 5 (d) of the Doha Declaration - which serves as relevant context in the interpretation of Article 6 TRIPS by virtue of Article 31 (3) a) of the Vienna Convention on the Law of Treaties (see Henning Grosse Ruse - Khan, above n 103, at III. B. 5. This is shared by most commentators: see Carlos Correa, above n 168, at 78-82;
273. Daniel Gervais, The TRIPS Agreement - Drafting History and Analysis (2nd edn, London: Sweet and Maxwell, 2003), para 2.69;
274. UNCTAD/ICTSD, above n 95, Part One, Chapter 5, at 3.
275. On these theories compare Carlos Correa, above n 168, 82-87 and UNCTAD/ICTSD, above n 95, Part One, Chapter 5, at 3.
276. The relevant 'Brussels draft' and the one of 23 July 1990 (W/76) are reproduced in Daniel Gervais, above n 192, at 2.67-2.68.
277. For an extension of the various drafts see UNCTAD/ ICTSD, above n 95, Part One, Chapter 5, at 2.
278. Article 51 TRIPS, note 13 (emphasis added).
279. See Carlos Correa, above n 168, at 84-5, 440-1.
280. Ibid, at 84-5.
281. See also UNCTAD/ICTSD (above n 95, Part One, Chapter 5, at 3), where the same conclusion is reached.
282. The objectives under Article 7 TRIPS primarily address different sets of interests, which are to be balanced between the concept of facilitating innovation while equally supporting dissemination of the resulting (technological) knowledge. In order to do this effectively and tailored to the needs of the domestic circumstances, it must allow policy space in implementing TRIPS (compare Henning Grosse Ruse - Khan, above n 103).
283. Article 7 TRIPS - in line with para 5 (d) of the Doha Declaration - therefore calls for flexibility, also in relation to the exhaustion issue under Article 6.
284. Footnote 13 to Article 51 of the TRIPS Agreement: "It is understood that there shall be no obligation to apply such procedures to imports of goods put on the market in another country by or with the consent of the right holder, or to goods in transit."
285. EC - Bananas III (Article 22:6 - Ecuador), above n 11, at para 155 (emphasis added).
286. Without specifically referring to the issue of Article 51 TRIPS, the arbitrators in US - Gambling generally endorsed the comments on Suspending TRIPS obligations; see US - Gambling (Article 22:6), above n 8, at para 5.11.
287. A basis for debating this could follow from the terms counterfeit trademark- and pirated copyright goods which are the subject of the obligations under Article 51 TRIPS. By holding this provision applicable to goods produced in the course of legitimate retaliation which itself is primarily aiming to uphold WTO law, the arbitrators could be criticized as conveying contradicting messages on the legitimacy of the retaliatory system in the WTO versus the normative statements in TRIPS.
288. See Carlos Correa, above n 168, at 439.
289. Such a dispute over the scope of the term exhaustion in Article 6 TRIPS would arguably not fall under the prohibition to bring disputes over national, regional or international exhaustion concepts under the DSU; see UNCTAD/ICTSD, above n 95, Part One, Chapter 5, at 3.
290. Antigua and Barbuda Upping Ante in Gambling Dispute, Congress Daily, Wednesday 20 June 2007.
291. Article 51 TRIPS would arguably not apply in this scenario since it only deals with goods in the sense of physical objects which actually can be inspected at the border.
292. One must stress however that on the basis of the relevant domestic IP law, the downloads taking place in all other WTO Members except Antigua would most likely be considered illegal and infringing copies unless the respective national copyright law would provide for a broad private use exception - which in turn would likely to be in conflict with the three-step-test under Article 13 TRIPS.
293. See US - Gambling (Article 22:6), above n 8, at para 5.2.
294. The arbitrators in EC - Bananas III made quite clear that Ecuador's proposed licensing mechanism to measure and control the utilization of otherwise IP protected subject matter is a necessary element to ensure equivalence under Article 22:4 DSU;
295. see EC - Bananas III (Article 22:6 - Ecuador), above n 11, at paras 160-64.
296. Given Antigua's unwillingness to discuss its preferred approach to suspending TRIPS obligations and the US fears that such action might go beyond equivalence, the arbitrators in US - Gambling explicitly referred to this option and the existing WTO case law on this matter;
297. see US - Gambling (Article 22:6), above n 8, at para 5.12.
298. On the extraterritorial application of IP laws of the non-complying country and its impact on the ability to suspend IP protection see section A above.
299. World Intellectual Property Organisation Copyright Treaty (WCT), adopted in Geneva, 20 December 1996, WO033EN, 36 I.L.M. (1997), 65 - see Articles 11 and 12 WCT.
300. See Part II, Title IV, Chapter 2, Section 2, Article 5 (1) a) of the Economic Partnership Agreement between the CARIFORUM States and the European Community and its Member States - online available at the website of the Caribbean Policy Development Centre at http://www.cpdcngo.org/article.php3? id_article=77 (visited 31 January 2007).
301. Paris Convention on the Protection of Industrial Property, adopted in Paris, 20 March 1883, last revised at Stockholm on 14 July 1967 and amended on 28 September 1979, WIPO Publication No.210, 1. Compare Arvind Subramanian and Jayashree Watal, above n 4, 410-11;
302. EC - Bananas III (Article 22:6 - Ecuador), above n 11, at paras 148-52. The arbitrators argue convincingly that the obligation under Article 2 (2) TRIPS concerning the continued application of Berne- and Paris Convention provisions does not prohibit IP suspension even if it might conflict with other international agreements: In short, Article 2 (2) TRIPS does not extend to dispute settlement in relation to TRIPS. The arbitrators however also stress that they have no jurisdiction to judge on the consistency of a WTO-authorized suspension of IP protection with independent obligations to protect IP outside WTO rules.
303. Such an argument has recently been made by a WIPO official - but has been countered by Frederic Abbot by referring to, inter alia, the principle of estoppel which would bar the US from invoking distinct obligations against Antigua after having submitted to WTO dispute settlement;
304. see Bridges Weekly Trade Digest, Antigua Considers Cross-Retaliation Against US - WIPO Official Creates Stir, Vol. 12 No.2 (23 January 2008), online available at http://www.ictsd.org/weekly/08-01-23/story2. htm (visited 15 March 2008).
305. Unfortunately, this article cannot deal with the extensive details surrounding this issue of overlapping international obligations. It shall however be mentioned here that neither Article 2 (2) TRIPS, nor Article 30 or 60 of the Vienna Convention on the Law of Treaties stand in the way of suspending overlapping international obligations. For a detailed analysis on the application of these provisions see Henning Grosse Ruse - Khan, 'Suspension of Obligations under TRIPS as an Effective Means to Induce Compliance?' [Paper presented at the 7th BIICL/IIEL WTO Conference in London, May 2007 (on file with author)];
306. further see Arvind Subramanian and Jayashree Watal (above n 4, at 410-11), who however argue for an application of Article 30 the Vienna Convention on the Law of Treaties.
307. Unless higher economic losses imposed on the right holder are still within the range of equality of harms, suspending TRIPS plus can lead to a conflict with the proportionality test under Article 51 of the Articles on Responsibility of States for International Wrongful Acts (ASR).
308. Under Article 50 (2) a), Article 52 (3) b) and Article 55 ASR this may be the case especially if the initial WTO inconsistent measure giving rise to retaliation is equally a violation of the FTA.
309. Compare Article 9 DSU on multiple complainants.
310. The legality of such a 'joint IP suspension' strategy however depends on, among other factors, the fulfilment of the Article 22:3 (c) and 22:4 DSU conditions by each individual complainant. Also the existence and scope of other bi- or multi-lateral obligations to protect IP must be taken into account individually.
311. See Bridges Weekly Trade News Digest, above n 9.
312. Compare EC - Bananas III (Article 22:6 - Ecuador), above n 11, at paras 159-64.
313. Such mechanisms may include issuing compulsory licenses; limiting the eligibility for protection; suspending further grants of IP rights; early termination of protection or suspending IP enforcement. Here is not enough room to display the author's analysis of all these options in detail. For an initial assessment see also Arvind Subramanian and Jayashree Watal, above n 4, at 411-15.