WORLD TRADE ORGANISATION

RURITANIA: MEASURES CONCERNING SUPPLY OF YYTRIUM

(REPUBLIC OF RURITANIA / REPUBLIC OF POTOMAC) JUDGEMENT

INTERNATIONAL JUDGEMENT DELIBERATION 2012

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HEAD NOTE: GATT, 1994 Article X, Xi, XX (g) It rests on the government and not the private players or entity to decide the q ota !or a partic lar prod ct or anything may it "e# $rivati%ation o! s ch sectors &ill lead to destr ction o! healthy competition and &ill ma'e the &hole sector nreg latory and ncontrolla"le &hich ltimately &ill lead to destr ction# (atio )ecidendi* +,a-or prod cers and dominant players o! nat ral reso rces sho ld !airly allocate the reso rces#. SUMMARY: In the partic lar case, the complaint has "een so ght "y (ep "lic o! $otomac against rep "lic o! ( ritania# In this complaint, the complainant has raised o"-ection against the allocation o! all the prod ction o! /ytri m to one speci!ic company and there"y promoting anti competitive practices# The panel has considered vario s provisions nder Article X, XI and XX# 0ince this practice o! providing &hole prod ction o! /ytri m to one company &ill lead to not only monopoly " t also removal o! all other companies !rom the mar'et &itho t giving them an eq al !ootage# 1 rther the restriction on e2port o! ra& material has to "e carried o t "y govt# 3ven i! a private entity restricts any e2ports on its o&n, it cannot violate the provisions o! GATT, &hen the partic lar state is a mem"er co ntry# It is also determined that this practice may contin e !or an inde!inite period and might "e till the reserve may "e depleted, hence the panel cannot ta'e the arg ment o! reserving or s staina"le se o! reso rces as it is $rima !acie an anti competitive practice# Also there is no signs &hat so ever that the partic lar reso rce might get depleted in the near ! t re# 4eeping all the considerations nder vie&, the panel considers the complaint relevant and the reso rces m st "e s pplied on eq al !ootage#

BACKGROUND: ( ritania is a 5at ral (eso rce rich co ntry# Avion ,etal 6orp (hereina!ter re!erred to as +Avion.) esta"lished its initial research and development department in ( ritania in 1991# 0 "seq ently, it stepped into e2ploration and mining activities in vario s parts o! ( ritania# The ( ritanian la&s did not allo& a !oreign enterprise to acq ire property or land in that co ntry# ,ost o! the reso rce7rich areas &ere still nder the control o! the government# The
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( ritanian government a&arded mining leases to the interested parties "ased on a discretionary system o! lease allocation# Avion ,etal 6orp received mining leases in di!!erent parts o! ( ritania and in the !ar7!l ng province o! 0inch ria# 0inch ria &as home to a n m"er o! rare earth elements and chemicals, " t &as hitherto ne2plored# It &as also later discovered that there &as a" ndant s pply o! rare earth elements and minerals in 0inch ria# Avion man !act red many rare earth minerals s ch as "a 2ite, manganese, magnesi m, al mini m, lanthan m, %inc and many more and Avion prod ction share o! these minerals is 8978: ; in ( ritania and 19 ; glo"ally &hereas Avion is the largest man !act rer o! /ytri m having almost <9 ; share# , l"erry Inc (!or short, +, l"erry.) decided to =&or' &ith> Avion in esta"lishing the long term relationship# ?or' &ith simply in " siness means to have a " siness tie7 p to s pply &ith ra& material or any other thing &hich another company is in need and this may "e done nder the oral or &ritten contract and here , l"erry contacted &ith Avion !or the s pply o! /ytri m# ?or' &ith does not mean that , l"erry and Avion are merged or amalgamated to !orm one company# The agreement "et&een "oth the companies is not &ritten contract# 1ai-i 6o# and ,et 6orp#, registered at $otomac, negotiated &ith Avion !or the s pply o! /ytri m and to'en sale &as made " t no ! rther s pply &as made# These corporations also tried !or s stained s pply !rom any other so rces " t they &ere not s ccess! l as Avion is the largest man !act rer o! /ytri m and controlled glo"al prod ction# These companies attempted to impress pon the ,inisters the need to compel Avion to provide a !air allocation and s pply o! the rare earths# The ,inisters replied that this is a matter o! private commercial dealing and that the government sho ld not inter!ere in the matter o! a&arding contracts "y private companies# The e2ec tives o! the a!oresaid companies replied that the ( ritanian Government is the c stodian o! nat ral reso rces and that the companies have an o"ligation to act !airly in the matter o! allocation o! rare nat ral reso rces#

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Avion also said that they are a c stodian o! rare nat ral reso rces and that cannot increase their o tp t "eyond a sel! determined level o! :,99,999 metric tons in a year# Avion also mentioned that this limit is determined !or the preservation o! e2ha sti"le nat ral reso rces and that they are req ired to hono r their pre7e2isting commitments &ith other c stomers# They re! sed to give list o! companies@p rchasers &ith &hom they had contracts " t it &as apparent that , l"erry &as the s "stantial p rchaser o! the prod ct# 1ai-i 6o and ,et 6orp e2plored all the possi"ilities o! legal remedies in ( ritania or $otomac# 0ince the alleged anti7competitive practice &as related to an agency sit ated &ithin the - risdiction o! ( ritania, the legal advice &as to e2ha st the local remedies availa"le in ( ritania# 1ai-i 6o# and ,et 6orp !iled a !ormal complaint "e!ore the ( ritanian Antitr st 6ommission in A999# The 6ommission, ho&ever, dismissed the complaint saying that non concl sion o! a contract "et&een t&o private entities !or the s pply o! a prod ct is not a matter that co ld "e decided "y the 6ommission# The signatories to pl rilateral Agreement &ere req ired to implement the international treaty o"ligations at the m nicipal level thro gh national legislation# It is ass med that "oth ( ritania and $otomac had already -oined the pl rilateral agreement and have incorporated identical provisions o! the pl rilateral agreement in their domestic la&s# This Agreement only allo&s respective ,em"er co ntries to !ile a disp te at the ?TB, " t private commercial practices &hich co ld "e classi!ied as restrictive practices co ld also "e "ro ght "e!ore the disp te settlement "ody !or resol tion# SUMMARY OF ISSUES RAISED: The applicant has contended that Avion has violated Article Xi o! GATT "y re! sing to enter into contract &ith " siness other than certain speci!ic " siness and has also said that since mining is controlled "y ( ritanian government sho ld !airly allocate them and Avion has entered into coll sive Trade $ractices &hich is violative o! Article X o! GATT# Avion is dominant player in s pply o! /ytri m and re! sal to enter into contract other than certain speci!ic enterprises is an a" se o! dominance and anti7competitive practise nder Article Xi#

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Applicant has also contended that - sti!ication o! Avion is not relevant "eca se preservation o! nat ral reso rces sho ld "e in p rs ance o! governmental ! nction or in con- nction &ith governmental meas res " t it is not in this sit ation# (espondents have contended that government o! ( ritania have no role in s pply o! ra& material and it is totally nder private commercial dealing# They have also contended that they have limited the s pply o! ra& material in order to preserve the nat ral reso rces &hich are covered nder Article XX (g) and there!ore, it is not a anti7competitive practise#

DECISION: +1e& nations have "een so poor as to have " t one god# Gods &ere made so easily, and the ra& material cost so little, that generally the god mar'et &as !airly gl tted and heaven crammed &ith these phantoms#. ( ritania is the &orld>s largest prod cer o! /ytri m, &hich is sed !or the man !act re o! high technology gadgets !or &hich there is a gro&ing mar'et &orld7&ide# ( ritania controls almost C9; o! the &orld7&ide prod ction o! /ytri m# Avion ,etal 6orp is the leading glo"al mining corporation &ith presence in vario s parts o! the &orld# Its main activities incl de e2ploration and mining o! minerals and other rare earth metals# Avion ,etal 6orp>s parent corporation is registered in the neigh"o ring - risdiction o! $in' $ong " t has prod ction !acilities in all mineral7rich co ntries in the &orld# 0ome o! the minerals and rare earths prod ced "y Avion incl de "a 2ite, manganese, magnesi m, al mini m, %inc, silica, lanthan m, /ytri m and Ter"i m, to name a !e&# There are several other mining companies in ( ritania &hich e2plore prod cts s ch as manganese, magnesi m, al mini m and silica# Avion>s prod ction share o! the a"ove prod cts may "e "et&een 8978: percent in ( ritania and 19 percent glo"ally# Do&ever, Avion is "y !ar the largest man !act rer &hen it comes to the prod ction o! /ytri m, &here it has almost a <9 percent share# , l"erry Inc (!or short, +, l"erry.) is one o! the &orld>s technological leaders in high tech electronic goods and appliances# , l"erry is incorporated in $otomac# Its ne& prod ct e7 pod, a m lti7! nctional technological prod ct has ca ght the &orld>s imagination# This
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prod ct &hich contri" ted to less than A percent o! , l"erry>s &orld7&ide reven e in A999 has s ddenly emerged as the =gadget !or the ! t re># , l"erry decided that they sho ld =&or' &ith> Avion ,etal 6orp in esta"lishing a long7 term relationship &hich as per the ! rther !acts &as ded ced in terms o! common nderstanding "et&een the parties " t as per the impression !rom the !acts no contract in &riting &as made# The !irst iss e ta'en "y the panel !or consideration is &hether Avion has violated Article Xi o! GATT "y re! sing to enter into contract &ith " siness other than certain speci!ic " siness and since mining is controlled "y ( ritanian government, Avion has entered into coll sive Trade $ractices &hich is violative o! Article X o! GATT# Avion and , l"erry had no &ritten contract "et&een them that they co ld prod ce it "e!ore the $anel# 1ail re o! s ch a doc ment to "e prod ced "e!ore the $anel, $anel ass mes that there has "een no contract o! s ch a nat re and i! as s ch prima !acie there is no contract there!ore, re! sal o! Avion to grant /ytri m to other companies is a "ad practise !ollo&ed "y them as they are the &orld>s largest man !act rer o! /ytri m and other small man !act rers are not capa"le eno gh to s pply constantly s !!icient amo nt o! /ytri m in the mar'et# There!ore, the de!ence o! Avion that they are s pplying /ytri m to the e2isting c stomers and there!ore not capa"le o! s pplying /ytri m to other companies !ails as they co ld not prod ce any contact "e!ore the $anel# There!ore, it is the &rong trade policy &hich has "een !ollo&ed "y the Avion# 5o& &hen &e loo' into the provisions o! Article X o! the GATT agreement, nder &hich &e !ind cla se 1(d) &hich speci!ically states* The !ollo&ing shall "e prohi"ited as incompati"le &ithin the meaning o! this $l rilateral agreement* all agreements "et&een nderta'ings, decisions "y associations o! nderta'ings and concerted practices &hich may a!!ect trade "et&een ,em"ers o! this pl rilateral agreement and &hich have as their o"-ect or e!!ect the prevention, restriction or distortion o! competition &ithin the ,em"er 0tates, and in partic lar those &hich*

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(d) apply dissimilar conditions to eq ivalent transactions &ith other trading parties, there"y placing them at a competitive disadvantageE And ?hen &e !oc s on the other part o! Article X i#e# 6la se A, &hich states thatE X (A)# Any agreements or decisions prohi"ited p rs ant to this Article shall "e a tomatically Foid# (eading Article X(1)(d) and Article X(A) together it can "e analysed and concl ded that, any mem"er co ntry applying dissimilar conditions to transaction "et&een n mero s parties &ill "ecome void "y the e!!ect o! these t&o provisions o! article X# 1 rther &hen &e see a recent case regarding the same anti competitive practice, decided "y the panel, &hat they re!erred to as crisis &as, +In this sense, as noted "y the 3 ropean Gnion, i! there is no possi"ility !or an e2isting shortage ever to cease to e2ist, it &ill not "e possi"le to +relieve or prevent. it thro gh an e2port restriction applied on a temporary "asis# I! a meas re &ere imposed to address a limited reserve o! an e2ha sti"le nat ral reso rce, s ch meas re &o ld "e imposed ntil the point &hen the reso rce is ! lly depleted# This temporal !oc s seems consistent &ith the notion o! +critical., de!ined as +o! the nat re o!, or constit ting, a crisis#. 0o "y no means it has "een sho&n "y Avion H co# that there &as a crisis or an rgent need !or s ch restriction and neither the s pply &as to n mero s companies on a large scale# 1 rther in the same complaint china>s arg ment &as sh t do&n on the simple "asis that &hen a co ntry has some "ene!its and rights o! the GATT agreements it also has to a"ide "y its o"ligations and r les ! rther they cannot adopt anti competitive techniq es against nations# In G0 I Gnder&ear, the Appellate Jody descri"ed the policy nderlying Article X*A as pertaining to transparency and d e process* +Article X*A, General Agreement, may "e seen to em"ody a principle o! ! ndamental importance I that o! promoting ! ll disclos re o! governmental acts a!!ecting ,em"ers and private persons and enterprises, &hether o! domestic or !oreign nationality# The relevant policy principle is &idely 'no&n as the principle o! transparency and has o"vio sly d e process dimensions# The essential implication is that ,em"ers and other persons a!!ected, or li'ely to "e a!!ected, "y governmental
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meas res imposing restraints, req irements and other " rdens, sho ld have a reasona"le opport nity to acq ire a thentic in!ormation a"o t s ch meas res and accordingly to protect and ad- st their activities or alternatively to see' modi!ication o! s ch meas res#.1 The !acts in the present case &hich has "een "e!ore this $anel disclose that, Government o! ( ritania has given a lease to Avion and is al&ays contin o sly monitoring the e2traction and monitoring the man !act re o! (a& ,aterials, there!ore it "ecomes the d ty o! the Government o! ( ritania that the ra& materials are properly and adeq ately distri" ted so as not ma'e any monopoly in the mar'et, there!ore, the de!ence o! the Avion that it is completely $rivate commercial dealing and Government o! ( ritania sho ld not inter!ere in the matter is not - sti!ied#

The !acts p t "e!ore this $anel has no&here mentioned that the government o! ( ritania has p t an e2traction limit on ra& materials as to preserve the 5at ral (eso rces# Do&ever, it &o ld "e a di!!erent sit ation i! the Avion is not the largest man !act rer o! /ytri m, in this sit ation it co ld s pply ra& materials to any company and can decide everything " t since it is the largest man !act rer o! the /ytri m, it has the responsi"ility to s pply ra& material in s ch a &ay that it is not ar"itrary and not anti7competitive trade policy# It sho ld allocate the reso rces in certain ratio and at a price &hich is reasona"le# ,onopoly mar'et sho ld not "e created "eca se today most o! the &orld economies are !ree mar'et economy and monopoly is only in certain cases &here the state has speci!ically mentioned in p "lic order or !or national sec rity p rposes# 0ince 1ai-i and ,et corp# Dad already contracted &ith other companies &hich man !act rer very less amo nt o! /ytri m and have !ailed since they &ere na"le to provide contin o s s pply o! /ytri m and since Avion controls the man !act rer o! /ytri m glo"ally there!ore, Avion sho ld provide them a 1air allocation and s pply o! ra& material#

http*@@&&&#&to#org@english@resKe@"oo'spKe@analyticKinde2Ke@gatt1994K94Ke#htmL!nt:<8

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There!ore, the de!ence ta'en "y the Avion that since d e to limit o! q antity can "e e2traction they are not a"le to s pply /ytri m to any other company other than its e2isting c stomers is !ailed and dismissed "y the $anel#

Article Xi * General 3limination o! M antitative (estrictions states that A" se "y nderta'ing in a +)ominant $osition. &ith the relevant mar'et# It is generally nderstood that Article XI* 1 permits the application o! e2port d ties, ta2es and other charges (hereina!ter, e2port d ties), " t prohi"its all other meas res &hich might restrict the q antity o! e2ports o! a prod ct (hereina!ter, q antitative e2port restrictions)# M antitative e2port restrictions prohi"ited "y Article XI* 1 incl des meas res s ch as q otas, "ans, minim m prices and non7a tomatic licensing req irements# M antitative e2port restrictions made e!!ective thro gh state7trading operations are also covered "y Article XI* 1#A The scope and type o! meas res that may restrict the q antity o! e2ports o! a prod ct and there!ore violate Article XI* 1 is potentially very large# In this case Avion is in a dominant position "eca se it is the &orld>s largest man !act rer o! /ytri m and other man !act rer o! /ytri m are not a"le to contin o sly s pply the ra& material &hen 1ai-i and ,et 6orp# 6ontracted &ith s ch other man !act rer !or the s pply o! /ytri m# There!ore, Avion is in the dominant position in respect o! the mar'et o! /ytri m# M antitative restrictions (M(s) are meas res &hich prohi"it or restrict the q antity o! a prod ct that may "e imported# A typical e2ample o! q antitative restrictions &o ld "e a meas re allo&ing the importation o! 19,999 &idgets only# This q antitative restriction is also re!erred to as a q ota# A tari!! q ota, ho&ever, is not a q ota and is not considered to "e a q antitative restriction# A tari!! q ota is a q antity &hich can "e imported at a certain d ty# 1or e2ample, a ,em"er may allo& the importation o! :,999 &idgets at 19 per cent ad valorem and any &idgets imported a"ove this q antity at A9 per cent ad valorem. Tari!! q otas are not q antitative restrictions since they do not prohi"it or restrict importation# They only s "-ect imports to varying d ties#
2

The Jloom"erg Na& (eportsIAntitr st H Trade vol#A 11th 3dn#

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The only permitted restrictions on trade are d ties, ta2es and other charges, and not prohi"itions, q otas or licensing# This general r le is not &itho t e2ceptions,

$anel &o ld li'e to mar' the points in the china>s case* +Altho gh the ?TB $anel act ally admitted that re!ractory7grade "a 2ite is +essential. to 6hina "eca se o! its important ind strial role, it ho&ever re-ected to validate 6hina>s meas res> con!ormity &ith Article XI*A(a) GATT 1994 "eca se o! (i) the lac' o! temporariness and (ii) the !ail re o! 6hina to demonstrate the physical e2istence o! a shortage* +The $anel does not consider 6hina>s application o! the meas re to "e +temporarily applied. &ithin the meaning o! to - sti!y its imposition nder that provision as a meas re to either prevent or relieve a +critical shortage. O###P a +shortage. re!ers to a de!iciency in the q antity o! goods# The prod ct>s importance in se, tho gh relevant in an assessment o! &hether a prod ct is +essential. to a ,em"er, and perhaps indicative o! ! t re demand !or a prod ct, does not in!orm &hether a shortage c rrently e2ists#.8 This case in &hole s mmarises the implication o! Article XI# The t&o important aspects that lac' o! temporariness and secondly need !or s ch restriction na"le o! sho&ing any physical shortage even are le!t nans&ered in this case that &hen Avion is e2porting everything to , l"erry than &hy there is no scope !or other companies &hen the prod ction "y Avion is at a very large scale and it in any case is e2porting and contin o sly prod cing the rare earth mineral# 1 rther e2tracts !rom the - dgement read as, +The $anel does not consider that 6hina>s restriction on e2ports o! re!ractory7grade "a 2ite, &hich has already "een in place !or at least a decade &ith no indication o! &hen it &ill "e &ithdra&n and every indication that it &ill remain in place ntil the reserves have "een depleted, can "y any de!inition "e considered to "e +temporarily applied. to address a critical shortage &ithin the meaning o! Article XI*A(a)# Bn this "asis, the $anel concl des that 6hina cannot - sti!y its e2port q ota p rs ant to

?T@)0894@1 (G0)E ?T@)089:@1 (3G)E ?T@)089C@1 (,e2ico)# at Q#84<

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Article XI*A(a) OandP cannot agree &ith 6hina that it c rrently !aces a +critical shortage. o! re!ractory grade "a 2ite in the sense o! Article XI*A(a)#.4 5o& tal'ing a"o t the role o! the government, In G0 I 6o ntervailing ) ty Investigation on )(A,0, the Appellate Jody determined that Rentr stmentR occ rs &here a government gives responsi"ility to a private "ody, and RdirectionR re!ers to sit ations &here the government e2ercises its a thority over a private "ody#: ?hile the Appellate Jody ac'no&ledged that a command is one &ay to direct, it also noted that Rgovernments are li'ely to have other means at their disposal to e2ercise a thority over a private "odyR and that ROsPome o! these means may "e more s "tle than a ScommandS or may not involve the same degree o! comp lsion#R < ?hen considering the notions o! delegation or command, the Appellate Jody also remar'ed* RIn most cases, one &o ld e2pect entr stment or direction o! a private "ody to involve some !orm o! threat or ind cement, &hich co ld, in t rn, serve as evidence o! entr stment or direction#QR (elying on the a"ove vie&points o! "oth the panel and the e2cerpt o! the china>s case, the panel is o! the vie& that the reliance o! Avion H co nder Article XI is ns staina"le and cannot "e granted# Article XX (g) applies to meas res Rrelating to the conservation o! e2ha sti"le nat ral reso rces i! s ch meas res are made e!!ective in con- nction &ith restrictions on domestic prod ction or cons mption#R According to ?TB case la&, restrictions Rreasona"ly related toR or Rprimarily aimed atR the conservation o! nat ral reso rces &ill generally satis!y the Rrelating toR req irement# Do&ever, i! there is evidence that an e2port restriction is designed to protect or promote a domestic processing ind stry, then Article XX (g) cannot "e sed as a - sti!ication#C Article XX (g) relates to the conservation o! e2ha sti"le nat ral reso rces i! s ch meas res are made e!!ective in con- nction &ith restrictions on domestic prod ction or cons mption#
4

?T@)0894@1 (G0)E ?T@)089:@1 (3G)E ?T@)089C@1 (,e2ico)# at (!rom Q#84< to Q#8:1) ?T@)0A9<@AJ@(, adopted A9 T ly A99:, )0( A99:*XFI, C181, para# 11<# Id., para# 111# Id., para# 11<

See GATT $anel (eport, Canada Herring and Salmon, N@<A<C, adopted AA ,arch 19CC, JI0) 8:0@9C, para# :#1#

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The G0 (e!orm lated Gasoline Appellate Jody vie&ed =meas res> in Article XX as conservation meas res in their entirety, and not only as provisions or elements o! an overall meas re !o nd to violate the core GATT provisions (G0 (e!orm lated Gasoline AJ report, 0ection III#A)# This introd ced greater de!erence to environmental considerations, "roadening the potential scope o! application o! $aragraph (g) o! Article XX# The Appellate Jody also interpreted the term =e2ha sti"le nat ral reso rces> to incl de living, rene&a"le and non7rene&a"le reso rces# The treatment o! "iological reso rces in pre7?TB - rispr dence incl des the adopted 19CA $anel (eport G0 T na and T na $rod cts !rom 6anada# Dere "oth parties considered t na stoc's, incl ding al"acore t na, to "e an e2ha sti"le nat ral reso rce in need o! conservation management9 # In the adopted 6anada Gnprocessed Derring and 0almon 19CC the $anel (eport also +agreed &ith the parties that salmon and herring stoc's are +e2ha sti"le nat ral reso rces..19# In G0 T na@)olphin I and G0 T na@ )olphin II* the $anels o! "oth cases concl ded that dolphins q ali!ied as nat ral reso rces11# The $anel also determined that, !irst, clean air is a reso rce, second, it is nat ral, and third, potentially co ld "e depleted in 199< G0 (e!orm lated Gasoline
1A

# 1inally, in G0 0hrimp@T rtle I, the Appellate Jody !o nd that

living reso rces are - st as =!inite> as petrole m, iron ore and other non7living reso rces# 18 ?hat the appellate "ody o"served in the 6hinese case, +This is, in !act, the very essence o! the conservation o"-ective set !orth in Article XX(g)* i! a ?TB ,em"er is not ta'ing steps to manage the s pply o! nat ral reso rces domestically, it is not entitled to see' the cover o! Article XX(g) !or the meas res it claims are helping to conserve the reso rce !or ! t re generations O###P In s m, paragraph (g) o! Article XX can - sti!y GATT7inconsistent trade meas res i! s ch meas res along &ith parallel domestic restrictions aimed at the conservation o!
9

G0 T na and T na $rod cts !rom 6anada AJ report, $aragraph 4#9 6anada Gnprocessed Derring and 0almon panel report, $aragraph 4#4 G0 T na@)olphin II panel report, $aragraph :#18 G0 (e!orm lated Gasoline panel report, $aragraph <#8Q G0 0hrimp@T rtle I Appellate Jody (eport, $aragraph 1AC

10

11

12

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nat ral reso rces and are primarily aimed at rendering e!!ective parallel domestic restrictions operating !or the conservation o! nat ral reso rces# A contrario, Article XX(g) cannot "e invo'ed !or GATT7inconsistent meas res &hose goal or e!!ects is to ins late domestic prod cers !rom !oreign competition in the name o! conservation.14 +The domestic policy on ra& materials presented "y 6hina &as t&o!old# 1irst, 6hina seems to have considered that the e2port restriction &o ld inherently red ce domestic prod ction "eca se o! a decrease in demand# 0econd, it arg ed that red cing domestic e2ploitation &itho t restraining e2ports &o ld not "e eq ita"le and &o ld + ndermine 6hina>s s staina"le development.1: This arg mentation ho&ever !ailed to convince the $anel, &hich concl ded that 6hina had not only !ailed to restrict its domestic cons mption o! ra& materials, " t act ally =s "stantially> increased its domestic cons mption o! certain ra& materials (!l orspar and re!ractory7grade "a 2ite) and there!ore !ailed to p t in place even7 handed meas res. 1< The insight dra&n !rom the dra!ting history o! Article XX is a val a"le one# The chapea is animated "y the principle that &hile the e2ceptions o! Article XX may "e invo'ed as a matter o! legal right, they sho ld not "e so applied as to !r strate or de!eat the legal o"ligations o! the holder o! the right nder the s "stantive r les o! the General Agreement# I! those e2ceptions are not to "e a" sed or mis sed, in other &ords, the meas res !alling &ithin the partic lar e2ceptions m st "e applied reasona"ly, &ith d e regard "oth to the legal d ties o! the party claiming the e2ception and the legal rights o! the other parties concerned#.1Q In US Shrimp,1C the Appellate Jody ela"orated on the notion o! preventing a" se or mis se o! the e2ceptions nder Article XX# The Appellate Jody !o nd that +a "alance m st "e str c' "et&een the right o! a ,em"er to invo'e an e2ception nder Article XX and the duty o! that same ,em"er to respect the treaty rights o! the other ,em"ers.#19
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?T@)0894@1 (G0)E ?T@)089:@1 (3G)E ?T@)089C@1 (,e2ico)( Q#89C Q#49C) ?T@)0894@1 (G0)E ?T@)089:@1 (3G)E ?T@)089C@1 (,e2ico)(Q#4AQ)

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?T@)0894@1 (G0)E ?T@)089:@1 (3G)E ?T@)089C@1 (,e2ico) (at Q#4A9, Q#48:7Q#4<:) http*@@&&&#&to#org@english@resKe@"oo'spKe@analyticKinde2Ke@gatt1994K9QKe#htmL!ntC14 G0 0hrimp@T rtle I Appellate Jody (eport http*@@&&&#&to#org@english@resKe@"oo'spKe@analyticKinde2Ke@gatt1994K9QKe#htmL!ntC1:

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In the present case the $anel has !o nd o t that the Government has not made any s ch la& or r le that the man !act rer o! /ytri m sho ld "e made nder any control nor any limit has "een p t over the q antity to "e e2tracted in order to preserve the nat ral reso rces# The practice &hich is !ollo&ed "y the Avion is Anti7competitive and violative o! GATT agreement and it does not !all nder Article XX (g)# Article XX (g) states that it can only "e applied in cases &here restriction in domestic prod ction or cons mption is also made# It means that this e2ception can only "e ta'en &hen s ch restriction &hich is imposed on e2port o! s ch a ra& material is also made applica"le in domestic mar'et " t this e2ception cannot "e ta'en to restrict only e2port and in the domestic mar'et it is sed in the same manner it &as in se earlier# In this present case there is no restriction on the domestic prod ction or cons mption# Avion is only denying the s pply o! ra& materials to other companies other than its previo s c stomers and is contin o sly s pplying the ra& materials to its previo s c stomers in the same q antity it &as s pplying earlier there has "een no c t do&n in the s pply o! ra& materials to them# In US Gasoline,A9 the Appellate Jody descri"ed the term +meas res made e!!ective in con- nction &ith. as a +req irement o! even-handedness in the imposition o! restrictions.* +Fie&ed in this light, the ordinary or nat ral meaning o! =made e!!ective> &hen sed in connection &ith a meas re I a governmental act or reg lation may "e seen to re!er to s ch meas re "eing =operative>, as =in !orce>, or as having =come into e!!ect#> 0imilarly, the phrase =in con- nction &ith> may "e read q ite plainly as =together &ith> or =-ointly &ith#> Ta'en together, the second cla se o! Article XX (g) appears to s to re!er to governmental meas res li'e the "aseline esta"lishment r les "eing prom lgated or "ro ght into e!!ect together &ith restrictions on domestic prod ction or cons mption o! nat ral reso rces# $ t in a slightly di!!erent manner, &e "elieve that the cla se =i! s ch meas res are made e!!ective in con- nction &ith restrictions on domestic prod ct or cons mption> is appropriately read as a req irement that the meas res concerned impose restrictions, not - st in respect o! imported gasoline " t also &ith respect to domestic gasoline# The cla se is a req irement o! evenhandedness in the imposition o! restrictions, in the name o!

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G0 (e!orm lated Gasoline panel report

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conservation, reso rces#.A1

pon the prod ction or cons mption o! e2ha sti"le nat ral

Avion has s o mot ta'en the action that the only certain q antity can "e e2tracted so as to preserve the nat ral reso rces and there is no government reg lations on s ch a thing and Avion has said that the prod ction &hich is done in the company is p to the e2tend it &ill not deplete the nat ral reso rces " t to preserve them and the same prod ction they have already contracted &ith , l"erry to sell them and there!ore they cannot rescind the contract and c t the q antity to "e s pplied its e2isting c stomers There!ore neither it can increase is prod ction "eca se it &ill deplete the e2ha sti"le nat ral reso rces and nether can c t the q antities o! e2isting c stomers# There!ore they are protected nder Art# XX (g) o! GATT# Article XX (g) states restriction in domestic mar'et prod ction or cons mption &hich can only "e done "y the Government or 0tate "eca se it is only the a thority &hich can p t restriction on others and not a private commercial has s ch po&ers to p t restrictions, there!ore only 0tate or Government only can p t restriction on the q antity &hich can "e e2ported# The government has not p t any s ch restrictions on the prod ction o! /ytri m# Avion here has p t sel! determined restriction on the q antity &hich can "e e2tracted in order to preserve the nat ral reso rces there!ore, s ch a limit is not - sti!ied and it has "een s pplying the ra& materials to , l"erry " t &hen 1ai-i and ,et 6orp# Approached !or the s pply o! ra& material it has ta'en the shelter nder Article XX (g) &hich is not permissi"le# Art# XX(g) does not mention that the companies &hich are e2tracting the ra& material can also s o motto ta'e s ch action o! limiting the prod ction in order to preserve the nat ral reso rces and the Avion is also !avo ring only one company to give its &hole prod ction and not to anyone else there!ore the de!ence ta'en "y the Avion has no merits in it# Avion has ta'en the de!ence o! e2ception nder Article XX (g) " t has !ailed to prove that there e2ists any threat that these nat ral reso rces &ill "e depleted soon i! no action o! limiting the q antity o! the ra& material e2tracted "eca se the " rden o! proo! is on that "ody &hich has ta'en s ch de!ence# AA There!ore the Avion has " rden o! proo! " t has
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http*@@&&&#&to#org@english@resKe@"oo'spKe@analyticKinde2Ke@gatt1994K9QKe#htmL!nt99: G0 (e!orm lated Gasoline panel report#

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!ailed to proo! there!ore there is no merit in the de!ence o! Avion# ,oreover, the nat ral reso rces &hich are "eing e2tracted "y the Avion are ne& and they have recently started e2tracting the reso rces and their appears no chance that they &ill "e soon depleted, it>s good that they have tried to preserve the nat ral reso rces " t they sho ld not se anti7 competitive policies and sho ld not monopoly the mar'et &hich may lead to e2ploitation o! ltimate cons mers#

CONCLUSION: The disp te &hich o!!icial transcripts are availa"le here !lo&s !rom meas res restricting the complainant !rom importing ra& material !rom the sole prod cer Avion H co# 0ince 1ai-i and ,et corp# Dad already contracted &ith other companies &hich man !act rer very less amo nt o! /ytri m and have !ailed since they &ere na"le to provide contin o s s pply o! /ytri m and since Avion controls the man !act rer o! /ytri m glo"ally there!ore, Avion sho ld provide them a 1air allocation and s pply o! ra& material# In !acts it is stated that Avion has considered itsel! as a c stodian o! 5at ral (eso rces and there!ore, they cannot increase the o tp t limit in order to provide ra& material to any other company, other than its e2isting c stomers# Today, in this age o! glo"alisation and technological advancement &hen almost all e2ha sti"le nat ral reso rces are depleting readily and rapidly, it is good that nat ral reso rces are conserved and sed s staina"ly so as to preserve them !or ! t re generations also " t this limit &hich is !i2ed "y the Avion is a sel! determined limit and is not "ased on any scienti!ic calc lations or on the recommendations o! Government or any other international organisation# Avion has ar"itrarily !i2ed the limit o! e2traction o! ra& material# 1acts states that the Government o! ( ritania does not allo& any !oreigner to acq ire land, they only give the lease to e2tract the nat ral reso rces and the Government o! ( ritania has "een consistently and contin o sly monitoring the e2traction o! nat ral reso rces, there!ore i! there &o ld have "een any need to p t a restriction on q antity o! nat ral reso rces to "e e2tracted then the Government o! ( ritania co ld have p t s ch a limit on the e2traction# There!ore nless any limit is not !i2ed "y any proper a thority, the sel! determined limit o!

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Avion cannot "e considered to "e the a thoritative limit "eyond &hich Avion cannot e2plore the nat ral reso rces# The e2port restraints challenged in this disp te incl de e2port q otas and e2port d ties, as &ell as related minim m e2port price, e2port licensing, and e2port q ota administration req irements# These types o! e2port restraints can s'e& the playing !ield against the complainant and other companies in the prod ction and e2port o! n mero s technological e 7prod cts# The e2port restraints can arti!icially increase &orld prices !or these ra& material inp ts &hile arti!icially lo&ering prices !or , l"ery prod cers# This ena"les , l"erry>s domestic do&nstream prod cers to prod ce lo&er7priced prod cts !rom the ra& materials and there"y creates signi!icant advantages !or , l"ery>s prod cers &hen competing against complainant and other prod cers "oth in domestic mar'et and other co ntries> mar'ets# The e2port restraints can also create s "stantial press re on !oreign do&nstream prod cers to move their operations and, as a res lt, their technologies to , l"erry# Dence!orth, the de!ence ta'en "y the Avion that since d e to limit o! q antity &hich can "e e2tracted they are not a"le to s pply /ytri m to any other company other than its e2isting c stomers is !ailed and dismissed "y the $anel# The panel is o! the vie& that there sho ld "e a s pervision o! the Government in allocation o! ra& material and a !air part o! /ytri m sho ld "e made availa"le to the (ep "lic o! $otomac# 6omplaint allo&ed#

Team +).

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