Etudes et travaux Studies and Working Papers

COUNTERMEASURES IN THE WTO DISPUTE SETTLEMENT SYSTEM

An Analysis of their Characteristics and Procedure in the Light of General International Law

Facundo PEREZ-AZNAR Foreword by Professor Marcelo KOHEN

Awarded with the Mariano Garcia-Rubio Prize

Institut Universitaire de Hautes Etudes Internationales, Genve Graduate Institute of International Studies, Geneva

ACKNOWLEDGEMENTS The present pages have been the culmination of a two-year course of study at the Graduate Institute of International Studies where I pursued my D.E.A. (Diplme dEtudes Aprofondies) in International Law. I must thank the Commission des subsides de formation du Canton de Fribourg, whose scholarship has made it possible for me to complete my studies. In 2004 this work was awarded the Mariano Garca-Rubio Price. I am grateful to the jury for the honour they have given me and for the invaluable incentive that this award means for future research. Thanks also to the Institute for giving me the possibility of publishing this work. My special thanks should go to Professors Marcelo Kohen and Gabrielle Marceau for their comments, their encouragement and availability. Their passion for international law and the intensity of their lessons have been a true source of inspiration. I must also thank Ana Moldero and Heather Fabrikant for the patient correction of the English grammar of this work. All mistakes are, however, my own responsibility. I want to express my deepest gratitude to a number of people and friends with whom I shared those years in Geneva. They have helped me in different ways and have been with me in moments of joy and happiness as well as in those of distress and sadness. I am indebted particularly to Julio Bacio Terracino and Deborah Ruiz Verduzco for their unconditional friendship and assistance. Y a vos Bel, gracias por acompaarme en este camino. Finally, I wish to dedicate this work to my family, who have given me their encouragement and support throughout this undertaking, and who have instilled a love of life, peace and justice into me. I hope that love will be reflected in this work.

Facundo Perez Aznar La Plata, 18th October 2005.

TABLE OF CONTENTS
INTRODUCTION .......................................................................................................... 1 I. THE UNITY OF THE COUNTERMEASURES REGIME IN THE INTERNATIONAL LEGAL SYSTEM.......................................................................... 4 a. The Relationship Between WTO Law and General International Law ................... 4 i. The WTO Law as a Self-contained Regime .................................................... 4 ii. The WTO as a System of lex specialis .......................................................... 10 b. Customary Rules on Countermeasures in General International Law ................... 13 i. Existing Customary Rules on Countermeasures............................................ 13 ii. Codification of Customary Rules on Countermeasures................................. 23 c. The Role of Customary Rules on Countermeasures in the WTO Law .................. 29 i. Application of Customary Rules under the WTO Law ................................. 30 ii. General Principles of Countermeasures in the Context of the WTO Law ..... 35 II. MATERIAL ASPECTS OF COUNTERMEASURES ......................................... 39 a. Preclusion of Wrongfulness of Countermeasures ................................................. 39 b. Cause of Countermeasures: An International Wrongful Act................................. 42 c. Object of Countermeasures: The Responsible State.............................................. 46 d. Temporary Character and Reversibility of Countermeasures................................ 50 e. Purpose of Countermeasures................................................................................. 52 f. Countermeasures and Sanctions............................................................................ 54 g. The Level of Countermeasures ............................................................................. 57 i. The Concept of Proportionality in General International Law ...................... 57 ii. Determination of the Level of Countermeasures in the WTO System .......... 58 iii. Equivalence, Reciprocity and Proportionality............................................... 61 iv. Case Law Concerning the Level of Countermeasures in the WTO System .. 63 v. Situations Where Proportionality Should be Applied in the WTO System ... 66 h. Obligations Affected by Countermeasures............................................................ 71 III. PROCEDURAL ASPECTS OF COUNTERMEASURES IN THE WTO SYSTEM....................................................................................................................... 78 a. Exclusion of Countermeasures Without Authorisation of the DSB ...................... 79 b. Implementation of DSB Decisions........................................................................ 83 i. Principle of Prompt Compliance ................................................................... 83 ii. The Reasonable Period of Time................................................................. 85 iii. Authorisation to Take Countermeasures ....................................................... 88 iv. The Carrousel Suspension............................................................................. 90 c. Multilateral Surveillance of the Implementation Process...................................... 91 i. The Compliance Procedure ........................................................................... 91 ii. Surveillance of Countermeasures in the WTO System ................................ 93 d. Controlling Countermeasures................................................................................ 95 i. Arbitration Under Article 22.6 of the DSU ................................................... 95 ii. The Sequencing Problem .............................................................................. 99 e. Special Treatment for Developing Countries and Countermeasures ................... 103 i. Developing Countries, Surveillance and Implementation ........................... 106 ii. Developing Countries and the Authorisation to Apply Countermeasures ... 111 iii. Countermeasures and Least-Developed Countries ...................................... 113 CONCLUSION........................................................................................................... 114 BIBLIOGRAPHY....................................................................................................... 119

FOREWORD

Since its creation, the World Trade Organisation has attracted the attention of scholars. Vast legal literature has been consequently produced. The majority of this production has been the work of highly specialised scholars and practitioners with little regard, if any, to general international law. Fortunately, this situation has changed over the years. At present, there are few who still contend that WTO law is a selfcontained regime. Even fewer are those who continue to believe that the WTO is the nec plus ultra of the international legal system proposing to generalise it to other fields, if not to the ensemble of the international legal order. Mariano Garcia Rubio, a young Argentinian scholar who was a teaching and research assistant at the Graduate Institute of International Studies, was a pioneer in linking WTO law with international law; in showing that the former is in the last resort subordinated to the latter. This "Studies and Working Papers" collection had the privilege to count amongst its first publications Garcia Rubio's On the Application of Customary Rules of State Responsibility by the WTO Dispute Settlement Organs . The present volume written by another young Argentinian scholar, Mr. Facundo Perez Aznar continues this tradition. Facundo Perez Aznar's Countermeasures in the WTO Dispute Settlement System. An Analysis of their Characteristics and Procedure in the Light of General International Law rightly analyses a key element of the WTO dispute settlement mechanism through the prism of international law. It convincingly proves both the inspiration of the WTO regime in the general rules of counter-measures and the residual applicability of the latter in order to fill the gaps or to integrate the specific WTO rules. In general, reprisals or counter-measures are considered inherent to the international system, given its lack of centralised organs. Indeed, counter-measures are the remnants of a system in which its subjects take justice into their own hands. By definition, in such a situation, only the subject that is strong enough can impose, or simply dare, to apply counter-measures. Perez Aznar's work is not only useful for its

positivistic analysis of the requirements of counter-measures in general international law and in WTO law but also because it allows the reader to think over some of the paradoxes present herein. On the one hand, the DSU provides something that is lacking in general international law: the obligatory previous ascertainment by a quasi-judicial body of the existence of a breach against the author of those measures, as a condition to resort to such measures. This is clear progress, avoiding the simple disguise of what is a pure violation of an international obligation, within the envelope of counter-measures. On the other hand, Perez Aznar demonstrates how odd a supposedly highly developed system of settlement of disputes seems when it legitimises something that appears to be the antithesis of a judicial mechanism of dispute settlement and ultimately recognises self-help as a way of enforcing DSB decisions. In other words, the lack of centralised measures of implementation of DSB decisions becomes apparent. One may or may not agree with Mr. Perez Aznar's analysis and conclusions. One can share or not share his methods and his overall perception of general international law, particularly those rules related to counter-measures. However, undisputably, his work will attract the interest of scholars and practitioners eager to better understand the interplay of rules of WTO and general international law in the field of counter-measures, as well as the interest of those international lawyers not familiar with WTO willing to understand its specific system. It is with great pleasure that I preface this volume. I am sure that Mariano Garcia Rubio would have also praised its qualities, and would have been pleased to know that someone of his nationality has followed his perspective in dealing with a subject he would have certainly dealt with in his thesis. The first edition of the Mariano Garcia Rubio Prize could not have been awarded in a more fitting way.

Marcelo G. Kohen

INTRODUCTION A major achievement of the Marrakech Agreement, whereby the Word Trade Organisation (WTO) was created, has been the adoption of the Understanding on Rules and Procedures Governing Dispute Settlement or Dispute Settlement Understanding (DSU), which establishes a dispute settlement system providing compulsory jurisdiction for dealing with WTO trade-related disputes. Within this system a mechanism of enforcement of the decisions of the Dispute Settlement Body (DSB) is also provided. In this respect, in the event that a Member does not withdraw a measure that has been found by the DSB to be inconsistent with the WTO covered agreements, the DSU provides two temporary remedies. The first remedy is compensation, a temporary remedy applicable until the removal of the inconsistent measure, which requires the agreement of the party to the dispute and must be consistent with the terms of the covered agreements. On principle, compensation is preferred to suspension of concessions because the effect of compensation normally is the lowering of barriers to trade in the territory of the defending party. Nevertheless, this is a very rare occurrence because it shall be granted on the basis of the most favoured nation principle, i.e. the same compensation must be given to all WTO Members. The second remedy, and the object of this work, is the suspension of concessions or other obligations under the WTO covered agreements, namely, countermeasures.1 These measures, considered to be the last resort of the system, consist in the non-fulfilment of obligations under the WTO treaty, prior authorization of the DSB. In contrast with
1 The suspension of concessions or other obligations is a measure that under international law is formally called non-forcible reprisals or, more recently, countermeasures. As it will be seen in this work, the characteristics of the suspension of concessions permit them to be subscribed as countermeasures. Moreover, the Agreement on Subsidies and Countervailing Measures (SCM) use the term countermeasures to describe the suspension of concessions or other obligations in response to an unlawful subsidy. Most of the doctrine calls the suspension of concessions or other obligations countermeasures or retaliation, without distinguishing between them. Some authors use also the term sanction.

compensation, countermeasures normally entail the raising of trade barriers by the successful complainant vis--vis the defendant party, contrary to free trade principles. Under the WTO dispute settlement system, any member may request a DSB authorization to suspend concessions or other obligation in order to obtain the withdrawal of the measure inconsistent with the terms in the WTO covered agreements. The enforcement system within the WTO, in particular the possibility of resorting to countermeasures, is praised by many scholars. They suggest that it brings efficiency to the WTO dispute settlement system and that it is one of the elements that make DSU one of the most advanced international dispute settlement systems and a source from where classical international law should evolve.2 Now, to what extent are these expectations of effectiveness founded? To what extent are these measures a real innovation in international law? The new rules concerning trade countermeasures have produced new debates, revived old ones, and imposed the necessity of analysing the parallelisms and differences between these new rules and those on countermeasures in general international law. In this respect, it is not clear which of the new rules imply the recognition of pre-existing rules and which ones are innovations that respond to peculiarities under the WTO system. It is not clear either, what is the real aim of including countermeasures, a typical remedy of a decentralized system as the system of general international law, in a dispute settlement system. The answer to these questions will help to determine the real innovations of the WTO dispute settlement system in relation to countermeasures and to establish the relationship between WTO law and general international law. This would assists in determining to what extent, and under what circumstances it is possible to apply customary rules on countermeasures in WTO law.

2 Cf. PETERSMAN, E.-U., The GATT/WTO Dispute Settlement System. International Law, International Organizations and Dispute Settlement , United Kingdom, Kluwer Law Internaional, 1997, 344 pp., at p. 65. See also, SLAUGHTER, A.-M., International Law in a World of Liberal States, EJIL , vol. 6, n. 4, 1995, pp.503-538.

This work is divided into three chapters. The first chapter is devoted to the relationship between WTO law and general international law and how this relation influences the application of customary rules on countermeasures in the WTO regime. In the second chapter I will analyse the material aspects of countermeasures under WTO regime in the light of customary rules in order to determine what conditions are applied in the two systems and if there are situations where WTO treaty contract out of those rules. In the third chapter I will focus on the procedural aspects of the authorization and application of countermeasures under the WTO dispute settlement system in order to determine which are the obligations imposed on state Members, and the effects of such authorization.

I.

THE UNITY OF THE COUNTERMEASURES REGIME IN THE INTERNATIONAL LEGAL SYSTEM

a.

The Relationship Between WTO Law and General International Law

When analysing the relation between WTO law and general international law, authors have usually wondered whether the system of WTO is a selfcontained regime or whether the rules concerning the consequences of breaches of the WTO treaty obligations constitute a system of lex specialis . The position taken on this issue has important consequences for the question of how international law interacts with WTO law, particularly with respect to countermeasures. This issue will help to determine whether the rules concerning the consequences of international wrongful acts of general international law are applicable to WTO law and, if they are, to what extent the DSB could apply rules of customary international law on countermeasures in their decisions.

i.

The WTO Law as a Self-Contained Regime

The notion of a self-contained regime has its origins in the Case Concerning United States Diplomatic and Consular Staff in Tehran3 of 1980. In this case the ICJ suggested that diplomatic law was a selfcontained regime because it established the obligations of States under this regime, it contained the possible wrongful acts that could arise within it and it specified the remedies to counter those acts.4 Following this line of reasoning, the Court considered that breaches of diplomatic law would not allow the injured State to adopt remedies that were not
3 Case Concerning United States Diplomat and Consular Staff in Teheran (United States of America v. Iran), Judgement of 24 May 1980, I.C.J. Reports 1980 , p. 3. 4 In the words of the Court: The rules of diplomatic law, in short, constitute a selfcontained rgime which, on the one hand, lays down the receiving States obligations regarding the facilities, privileges and immunities to be accorded to diplomatic missions and, on the other, foresees their possible abuse by members of the mission and specifies the means at the disposal of the receiving State to counter any such abuse s (emphasis added) ( Ibid ., at p. 40, para. 86).

contemplated in that field.5 Thus, these specific fields would prevent the application of rules of general international law, particularly in relation to remedies as in the case of countermeasures. But this concept was later interpreted as a recognition of the existence in international relations of certain specific fields that could be considered to be free from interference of general international law. Under this reasoning, the direct or subsidiary application of rules of general international law, in particular the rules regarding the consequences of international wrongful acts, would be excluded.6 Departing from the idea that this concept to a certain extent implies isolation from general international law, many authors have considered WTO law as a self-contained regime. These scholars normally consider that free market and trade between individuals across borders is the key to welfare and that State sovereignty is an obstacle to this liberalisation.7 They believe that what commercial international law needs is to move away from the state-centred principle that rules in international law8 and that in this area there is no need for international law as traditionally conceived.9 The authors that view WTO as a self-contained regime
5 The ICJ stated that diplomatic law itself provides the necessary means of defence against, and sanction for, illicit activities by members of diplomatic or consular missions ( Ibid ., at p. 39, para. 83). 6 Under this last conception of self-contained regime Alex Marshick defines the term as a fully autonomous legal system [] created by international law, but [with explicit exclusion of] any application of norms that are no part of the regime (MARSCHIK, A., Too Much Order? The Impact of Special Secondary Norms on the Unity and Efficacy of the International Legal System, EJIL , vol.9, n. 1, 1998, pp. 212-239 at p. 233). 7 Cf. McRAE, D.M., The contribution of international trade law to the development of international law, RCADI , v. 260, 1996, pp. 99-238, at p. 117. 8 McRae, for example, considers that removing the impediments that sovereignty places in the way of trading across borders is fundamental for international trade law ( Ibid. , p. 123). 9 Ibid. , p. 174. Other authors have even claimed that the theory of self-contained regime is confirmed by WTO jurisprudence. According to Trebilcock and Howse the self-contained character of the GATT regime was enforced by the panel ruling in the Tuna/Dolphin case in which international environmental treaties were considered irrelevant, because they had not been concluded among the Contracting parties to the General Agreement, in clear opposition of what is required by art. 31.3(c) of the Vienna Convention on the Law of Treaties (TREBILCOCK, M. and HOWSE, R., The Regulation of International Trade , 2 nd edition, London-New York, Routledge, 1999, 612 pp., at p. 74-75). Contrary to that interpretation, it seems that the Appellate Body used the relevant terminology of these agreements to interpret the WTO text (See, Appellate Body Report, United States Import

normally consider that WTO and general international law are two separate systems with different rationales. Consequently, no rule of general international law, including the rules of State responsibility, would be applicable in international trade law, unless expressly provided for in the WTO treaty (e.g. as is the case of the application of customary rules of interpretation of general international law10, or that of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) where express mention is made of special regulations contained in other conventions). The conception of the WTO system as a self-contained regime is perhaps a remnant of the pre-1994 GATT system, which was based on diplomatic negotiation and on the maintenance of the balance of interest. Under the GATT the panel of experts behaved more as an organ of conciliation, which tried to restore the balance of interest, than as a judicial body. It prepared a report making observations concerning the lawfulness of the commercial measures only when its efforts to conciliate were unsuccessful. Nevertheless, over the years the GATT started a process of legalisation that culminated in the creation of the WTO with the judicialisation of the dispute settlement system. In this context it seems difficult to reconcile the idea of restoring an economic equilibrium with the idea of judicial settlement.11 In this respect, the theory of the WTO system as a self-contained regime has been the object of criticism. First, the authors who try to apply the concept of a self-contained regime to the WTO system neglect some important aspects of international economic relations and international trade law. States and individuals are both actors in international economic relations. Even if individuals have a fundamental role in producing goods and services and in trading across borders, international economic relations are still the objects of interstate
Prohibition of Certain Shrimp and Shrimp Products, adopted on 6 November 1998, WT/DS58/AB/R, paras. 167-168). 10 Article 3.2 of the Dispute Settlement Understanding [hereinafter DSU]. 11 See DUPUY, P.-M., Lunit de lordre juridique international, RCADI , t. 297, 2002, PP. 9-489 at p. 451.

relationships. States are the principal actors in negotiating international treaties and in determining the international rules of economic relations. In other words, economic regulations necessarily need to be implemented by formal treaty institutions based on state sovereignty, as is the case of the WTO. Those rules created by States are fundamental for international economic relations because they provide stability and predictability to the international economic system and are an important tool in the implementation of free trade and in the elimination of protectionism. 12 In addition, international trade law cannot be emancipated from international law. The former is a part of international economic law and this, in turn, is part of international law. Like other branches of international law, international trade law possesses a specific object of regulations (international trade relations), specific normative material and special principles13. Moreover the special rules and object of international trade law do not justify the isolation of this branch from the rest of international law, because even if international trade law regulates cross-border exchanges of goods, this regulation is not exclusive, and several other rules of international law are applicable in those situations.14 Furthermore, as will be seen later in this work, the remedies provided in the WTO system seem to recognise to a larger extent the existing remedies in general international law, especially with respect to countermeasures. Second, it is questionable whether the concept of self-contained regime should imply independence from general international law. Authors normally cite as examples of a self-contained regime diplomatic law and the law of the European communities, and even human rights. 15 However, it is difficult to imagine that these fields should fall completely outside international law. They have arisen under international law, by
12 See JACQUET, Jean-Michel and DELEBECQUE Phillippe Droit du commerce international , 3rd ed., Paris, Dalloz, 2002, 500 pp., at p.7. 13 VOITOVICH, S. A., International economic Organizations in the International legal Process , Dordrecht, Martinux Nijhof, 1995, 199 pp., at p. 8. 14 GARCIA RUBIO, Mariano, On the Application of Customary Rules of State Responsibility by the WTO Dispute Settlement Organs , Studies and Working Papers, HEI, Geneva, 2001, 100 pp., at p. 45. 15 Cf. op. cit. , (note 6).

way of custom or by treaties. Even if the application of international law was limited, this limitation cannot be absolute because international law continues to be applicable, at least to some degree.16 Moreover, there are rules of international law that cannot be eluded because of their character, as is the case of jus cogens, or because the States participating in those regimes have agreed to be obliged by other rules, for example in the case of a treaty of environmental law. Third, the considerable number of other subjects that WTO law touches upon incidentally when regulating international trade law, such as human rights, intellectual rights, environment, international labour law, makes it impossible to consider WTO law as isolated from the rest of international law. The need to find a solution each time that WTO rules are in divergence with other international rules in a particular case obliges one to consider at least some degree of relation between those areas of international law. A complete isolation from international law would be unconceivable17 and would imply renouncing to the solutions that international law can provide and a rejection of international law as a system altogether. Fourth, the fact that the WTO Agreements constitute an international treaty, and that they must consequently be interpreted as such, using the international rules on interpretation, seems to indicate that this treaty is placed under international law and that it must therefore be interpreted in this context. In the US Gasoline case the Appellate Body made it clear that the WTO is not a closed system. In this case the Appellate Body stated that the fact that Article 3.2 of the DSU requires that the WTO agreements be interpreted in the light of customary rules of interpretation reflects an acknowledgement that the WTO agreements are not to be read in clinical isolation from public international law.18 Since WTO is
For example, in the case of the interpretation of a treaty or in the case of the reform or modification of the treaty on which the system is based. 17 Joost Pauwelyn has pointed out that no one has spoken of self-contained regimes in the sense of treaty regimes that are completely isolated from all rules of general international law (PAUWELYN, J., The Role of Public International Law in the WTO: How Far can we Go?, AJIL , vol. 95, 2001, pp. 535-578, at p. 540). 18 Appellate Body Report, United States - Standards for Reformulated and Conventional Gasoline , WT/DS2/AB/R, adopted 29 April 1996, DSR 1996:I, p. 16, at para. 17.
16

not a closed system that is watertight to other sources of international law 19 some degree of relation has to be accepted. Over and above, taking into account the definition of self-contained regime made by Bruno Simma 20, in particular in its final part, it seems difficult to consider the WTO system as a self-contained regime. The DSU recognises countermeasures as one of the remedies under WTO law. Thus countermeasures, the ultimate remedy of general international law, are ruled rather than prohibited in the DSU. In other words, recognising a remedy that is typical of general international law (even if some general rules concerning those measures are modified under the WTO) implies that WTO remedies are not fully independent from international law.21 The difficulties found in justifying the WTO system as a self-contained regime have led some authors to assimilate the WTO structure to the structure of nation-states in order to justify some impermeability from general international law. Deborah Cass, for example, has suggested that WTO has a constitutional structure similar to that of modern nationstates, which can be distinguished from the structure of international law.22 Recently, McRae has suggested that the WTO rules codified in the covered agreements resemble a civil law system and that the practice of the dispute settlement organs is similar to that of judges in a common law system. 23 Furthermore, this author considers the procedural developments introduced by the dispute settlement organs, such as burden of proof or

MARCEAU, G., A Call for Coherence in International Law. Praises for the Prohibition Against Clinical Isolation in WTO Dispute Settlement, JWT , vol. 33, n. 5, 1999, pp. 87152, at p. 107. 20 Simma defines a self-contained regime as a subsystem that is intended to exclude more or less totally the application of the general legal consequences of wrongful acts, in particular the application of the countermeasures normally at the disposal of an injured party (emphasis added) (SIMMA, B. Self-contained regimes, NYIL, vol. 16, 1985, pp. 111-136, at p.117). 21 It is worth noting that countermeasures are not allowed in diplomatic law and the law of the European communities, the most cited examples of a self-contained regime. 22 CASS, Deborah Z., The 'Constitutionalization' of International Trade Law: Judicial Norm-Generation as the Engine of Constitutional Development in International Trade, EJIL , vol. 12, n. 1, 2001, pp. 39-75. 23 McRAE, D. M., What is the Future of WTO Dispute Settlement?, JIEL , vol. 7, n. 1, 2004, pp. 3-21, at p. 8.

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judicial economy, to be based on procedural law developed in internal jurisdictions rather than in international law.24 This hypothesis can be the object of the same criticism made to the theory of self-contained regime. In addition, even if it could be argued that some characteristics of the WTO can be assimilated to some characteristics of nation-states, it is obvious that the WTO has more similarities with other international organisations that with States. In this respect, there is no doubt that international organisations are part of and bound by general international law. Moreover, any similarity with national systems could not justify isolation from general international law because States are part of the international system and its relations are regulated by international law.

ii.

The WTO as a System of lex specialis

Since all the international rules emanate, directly or indirectly, from the will of States, and given that States are equal in rights, one of the main characteristics of the system of international law is the lack of hierarchy between its sources.25 This lack of hierarchy allows States to contract out of or deviate from general international law by special rules in order to regulate the relationships between them. 26 These special rules (customary or treaty rules) can exclude or modify some other rules of general international law provided, first, that due respect is paid to existing rules of jus cogens and second, that the position of third-party States is in no way harmed.27

Ibid. , p. 14. This lack of hierarchy between sources does not imply the non-existence of hierarchy between international norms, as in the case of the rules of jus cogens recognised in the Vienna Convention on the Law of the Treaties. (see NGUYEN QUOC, D., DAILLER, A., PELLET, A., Droit International Public, 7th ed., Paris, LGDJ, 2002, 1510 pp., at p. 115). 26 PAUWELYN, J., op. cit . (note 17), p. 536. 27 THIRLWAY, H.W.A., The Law and Procedure of the International Court of Justice. Part One, BYIL , 1989, pp. 1-157, at p. 103, quoted in GARICIA RUBIO, op. cit. (note 14), at p. 36.
24 25

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This principle is called the lex specialis principle, according to the Latin maxim lex specialis derogat lex generali.28 The International Law Commission (ILC)has codified the notion of lex specialis in the Draft Articles on State Responsibility, which in its Article 55 provides:
These articles do not apply where and to the extent that the conditions for the existence of an internationally wrongful act or the content or implementation of the international responsibility of a State are governed by special rules of international law.
29

The rationale of the lex specialis principle is that States can decide to create more specific rules in order to better govern relations in a specific area of international law. The prevalence of these special rules is based on the presumption that a specific set of rules has priority over a general set of rules because the specific set is supposed to be an elaboration of the more general set.30 For this reason, when the parties intended to establish a special regime, this should prevail over general rules.31 The draft article of the ILC clearly provides that the effects of an international wrongful act can be modified by special rules as treaty rules, but such special rules would only apply to the extent that they modify the general rules in other words, up to what is provided by the special rule. This limitation has two main consequences. First, those circumstances not covered by special rules are still governed by general rules of international law. Secondly, the fact that a special rule may apply
Even if this principle was not embodied in the Vienna Convention in the Law of the Treaties, it remains a part of general international law. Nevertheless, for some authors this principle is not a positive rule of international law but only a criterion for interpretation or a tool for the solution of conflicts between rules, as it could be also the concept of lex posteriori (See KONTOU, Nancy, The Termination and Revision of Treaties in the Light of New Customary International Law , Oxford, Clarendon Press, 1994, 169 pp., at p. 142). The International Law Commission (hereinafter ILC) seems to follow this approach. With respect to the principle of lex specialis , it is stated that this is only one of a number of possible approaches towards determining which of several rules potentially applicable is to prevail or whether the rules simply coexist (CRAWFORD, James, The International Law Commissions Articles on State Responsibility. Introduction, Text and Commentaries , Cambridge - New York, Cambridge University Press, 2001, 387 pp., at p. 306). 29 Article 55 of the Draft Articles on State Responsibility [hereinafter DASR], (emphasis added). 30 MUS, J. B. Conflicts between Treaties in International Law, Netherlands International Law Review , vol. XLV, 1998, pp. 208-232 at p. 218. 31 KONTOU, N., op. cit. (note 28) at p.142.
28

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to the extent of its modification also implies that for a true derogation from the general rules to take effect, the parties to the instrument must expressly indicate that by entering the treaty-based regime they exclude the application of certain or of all the general rules of international law on the consequences of international wrongful acts.32 Nevertheless, in the absence in a treaty (in our case of study the WTO treaty) of a special treaty clause, which purports to prevent, or resolve some conflicts, it remains a matter of interpretation whether the parties, by concluding a treaty, intend to maintain, abolish or modify the earlier obligations.33 This interpretation should be made sensibly on a case-by-case basis. In this vein, Bruno Simma considers that the exclusion or modification through a self-contained regime of normal secondary rules which leads to a softening of the legal consequences of wrongful acts should not be easily presumed.34 Mariano Garca Rubio has pointed out that WTO rules concerning the consequences of breaches of the WTO treaty constitute a system of lex specialis vis--vis general international law. Departing from the idea that in the WTO system there is no special rule that provides expressly that they exclude the application of general international law, he argued that customary rules of State responsibility should be applied by the WTO organs for the settlement of disputes when there is no express treaty provision that prohibits this or when the existing remedies under the treaty prove to be inefficient.35 Other authors have shared this reasoning.36 In addition, the ILC has considered the WTO Dispute Settlement Understanding as an example of a system of lex specialis.37 Furthermore,
32 ARANGIO RUIZ, G., Fourth report on State Responsibility, YILC , vol. II, part one, 1992, p. 42 para. 125 (emphasis added). 33 KARL, Wolfram, Conflicts between treaties, in BERNHARDT, Rudolf (ed.) Encyclopedia of Public International Law , , Amsterdam, North-Holland, 1992, vol. IV, pp. 935-941, at p. 937. 34 SIMMA, B., op. cit. (note 20), at p. 135. 35 Op. cit. (note 14), at p. 3. 36 PAUWELYN, J., op. cit. (note 17), at p. 541, and BARTELS, Lorand, Applicable Law in WTO Dispute Settlement Proceedings, JWT, vol. 35, n. 3, 2001, pp. 499-519, at p. 518. 37 CRAWFORD, J., op. cit . (note 28), at p. 307.

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the ILC has stated that the difference between lex specialis and a selfcontained regime is a question of degree and that the article on lex specialis included in the Draft Articles was designed to cover both forms under that concept.38 This implies that the concept of self-contained regime would be a strong form of lex specials. These arguments, in addition to those invoked above in relation with the concept of self-contained regime, show that the degree of autonomy of the WTO system from international law can be better explained using the concept of lex specialis , because under WTO there is a degree of application of general international law. The issue that remains to be determined is the extent of customary rules of countermeasures in international law and the degree of applicability of these rules in the system of WTO.

b.

Customary Rules on Countermeasures in General International Law

i.

Existing Customary Rules on Countermeasures

The recognition of countermeasures in international law is an aspect of a decentralised system that to some degree accepts the possibility of States resorting to unilateral acts provided that some conditions are fulfilled. These conditions are established in customary international law, through State practice, international case law, and in treaty law, all of which acknowledge some restrictions to unilateral acts. As regards treaty law, the right to apply forcible reprisals was fundamentally reduced during the first half of the XX century by treaty obligations that limited the use of force in the relations among States. In 1907 the Drago-Porter convention established the prohibition of the use

38

Ibid. , p. 308, para. 5.

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of force for the recovery of contract debts from governments.39 Later, the Covenant of the League of Nations in 1919 limited the possibility of its members to resort to war.40 In 1928 the Kellogg-Brian Pact outlawed war as an instrument of national policy. Finally, resorting to the use of force was definitely prohibited in 1945 by the United Nations Charter. Article 2(4) of the Charter bans all member States from the threat or use of force against the territorial integrity or political independence of a state. As a result, nowadays force is legitimate only when it is exercised in selfdefence and under certain conditions. Nevertheless, a certain margin of self-help remains in international law in the form of non-forcible countermeasures. Linos A. Sicilianos, among other authors, has pointed out that even if this right of self-help has often been thought in relation with the use of force, ce droit naturel, inhrent, inalinable,..npuise pas la problmatique de la justice prive dans les relations internationales puisquelle peut aussi prendre des formes pacifiques .41 In this context, the possibility to resort to non-forcible countermeasures is submitted to certain regulations. The limitations to resorting to non-forcible countermeasures are reflected on different treaty obligations. The Vienna Convention on the Law of Treaties regulates in Article 60 the suspension or termination of treaties in relation with a material breach. This article has been considered a customary rule of international law by the ICJ.42 On the one hand, this regulation comprises only treaty obligations, it is applicable only to
39 Article 1 of the Hague Convention II of 1907. Even if the Convention was not universally ratified, the limitations on acts of selfhelp contained therein are considered to be a part of customary international law. See BENEDEK, Wolfgang, Drago-Porter Convention (1907), Encyclopedia of Public International Law , BERNHARDT, Rudolf (ed.), Amsterdam, North-Holland, 1992, vol. I, p. 1102. 40 Under the League of Nations the members were obliged not to resort to war before submission of the dispute to inquiry or arbitration, or to the Council of the League. It was further prohibited to resort to war within three months after the arbitrators award or the Councils report. See Articles 10, 12, 13 and 15 of the Covenant of the League of Nations. 41 ALLAND, D., Justice prive et ordre juridique international : tude thorique des contre-mesures en droit international public, Paris, Pedone, 1994, 503 pp., at p. 17. 42 Legal Consequences for States of the Continued Presence of South Africa in Namibia (South West Africa) notwithstanding Security Council Resolution 276 (1970), I.C.J. Reports 1971 , p. 16, at p. 47, para. 95; Case concerning the Appeal Relating to the Jurisdiction of the ICAO Council ( India v. Pakistan ), I.C.J. Reports 1972 , p. 46, at p. 67, para. 38; Case concerning the Gab kovo-Nagymaros Project (Hungary/Slovakia), I.C.J. Reports 1997, p. 7, at p. 38, para. 46.

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situations of a material breach, and the suspension or termination of the obligation reaches both the injured and the responsible state in relation with the same treaty. 43 On the other hand, countermeasures are related with the implementation of state responsibility in general, are applicable to all international wrongful acts (without making a distinction between the source of the obligation), and on principle do not affect the substantive legal obligations of States parties that remain valid. But besides these differences there are some similarities between these measures: both measures are in response to an international wrongful act, both are directed against the responsible state, both have a subsidiary character, both are temporal and both are subjected to some limitations.44 These similarities have been observed by authors, who have pointed out the relation between the consequences of breach of a treaty and those of countermeasures. Paul Reuter has stressed that [i]nternational responsibility relates to the breach of obligations and its general principles are the same, whatever the source of the obligation (treaty, custom or unilateral act).45 Sicilianos considers that both rules constitute countermeasures: reprisals would be the genus while denunciation and suspension would be the species.46 For its part, the Study Group on the Law of State Responsibility of the International Law Association has stressed that the law of responsibility, quite properly, is applicable to breaches of treaties.47 These similarities are confirmed by the fact that the ILC used Article 60 of the Vienna Convention as a source of inspiration for the provisions related with countermeasures.48 Therefore,
43 In this sense the ICJ stated in Gab kovo-Nagymaros Project case: the Court is of the view that it is only a material breach of the treaty itself, by a State party to that treaty, which entitles the other party to rely on it as a ground for terminating the treaty. The violation of other treaty rules or of rules of general international law may justify the taking of certain measures, including countermeasures, by the injured State, but it does not constitute a ground for termination under the law of treaties ( Gab kovo-Nagymaros Project , ibid. , at p.65, para. 106). 44 SICILIANOS, L.-A., The Relationship Between Reprisals and Denunciation or Suspension of a Treaty , EJIL , vol. 4, n. 3, 1993, pp. 341-359 , at p. 344. 45 REUTER, Paul, Introduction to the Law of Treaties , London-New York, Pinter Publishers, 1989, 236 pp., at p. 193. 46 Op. cit. (note 44), at p. 342. 47 First Report of the International Law Association (ILA) Study Group on the Law of State Responsibility, para. 129 (available at htpp//:www.ila-hq.org). 48 The ILC admitted that some articles on countermeasures were inspired in Article 60 of the Vienna Convention on the Law of Treaties. See CRAWFORD, J., op. cit . (note 28), at pp. 256 and 290.

15

since suspension or termination of treaties under the Vienna Convention could qualify as a special kind of countermeasure, its principles could be applicable, mutatis mutandis , to the law of countermeasures. In addition to the limitation of countermeasures by way of agreements, treaties instituting regional organisations tend to limit or prohibit countermeasures. Under the North American Free Trade Agreement (NAFTA), countermeasures can only be taken if the panel report is not implemented voluntarily and, in case of a manifestly excessive retaliation by the winning party, the losing party may request arbitration to determine the level of countermeasures.49 Under the MERCOSUR, for its part, countermeasures can be taken when the losing party does not apply the decision of the dispute settlement mechanism. 50 A more restrictive system concerning the limitation of countermeasures has been created by the European Union treaties, where States exclude the possibility to resort to unilateral procedures. Under this system parties renounced the possibility of taking countermeasures in response of a breach and created a special system of enforcement. In particular Article 113 of the EEC Treaty of 1957 was interpreted by the Court of Justice of the European Communities as precluding States from resorting to countermeasures, without the communitys consent.51 State practice, on the other hand, also appears to recognise the existence of rules concerning countermeasures and accept its limitations. For example, national legislation usually recognizes the possibility of
Article 2019 of the North American Agreement of Free Trade of December 1992, ILM, vol XXXIII, 1993, p. 605. See MARCEAU, Gabrielle, The Dispute Settlement Rules of the North American Free Trade Agreement: A Thematic Comparison with the Dispute Settlement Rules of the World Trade Organisation, in PETERSMAN, E.-U. (ed), International Trade Law and the GATT/WTO Dispute Settlement System , The Hague, London, Boston, Kluwer Law International, 1999, pp. 487-541. 50 See Annex of the Protocol of Ouro Preto of 17 December 1994, available at htpp//:www.mercosur.org.uy/espanol/snor/normativa/ourop941.htm 51 CJEC, Affaire No. 41-76, Donckerwolcke, Recuiel (1976), p. 1937. See PESCATORE, P., Droit international et droit communautaire. Essai de rflexion comparative. Centre universitaire europen de Nancy, p. 18. See, for example, Cases 90 and 91/63, Commission v. Luxembourg & Belgium [1964] E.C.R. 625 at p. 631; Case 52/75, Commission v. Italy [1976] E.C.R. 277 at p. 284; Case 232/78, Commission v. France [1979] E.C.R. 2729; Case C-5/94, R. v. M.A.F.F., ex parte Hedley Lomas (Ireland) Limited, [1996] E.C.R. I-2553.
49

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countermeasures not implying the use of force, provided that some conditions are fulfilled.52. State practice also seems to recognize the existence of a right to take countermeasures not implying the use of force, such as economic boycotts or the freezing of state assets. It is true that in some cases, when resorting to countermeasures, States do not respect international rules concerning their application, going beyond the customary law instead and questioning even the existence of one such rule. However, the reaction of the international community against this kind of actions, as for example in the case of the U.S. embargo against Cuba, also shows a practise that goes in the direction of limiting unilateral acts and in condemning countermeasures that are out of proportion. Moreover, these reactions against customary law on countermeasures should be analyzed taking into account that any attempt to invoke the exception of a rule should be read as a confirmation rather than as a limitation of that rule,53 and in the light of the fundamental principle of sovereign equality, which provides that there are no States which practice counts more than the practice of others.54 In relation with international case law, international judgments have also shown the limitations that exist in international law towards countermeasures. One of the first international awards related to

52 See for example, Restatement of the law, Foreign relations law of the United States, USA - Uganda (1978). In October 1978, the United States Congress adopted a legislation prohibiting exports of goods and technology, and all imports from, Uganda. Uganda Embargo Act, 22 USC s. 2151 (1978). In addition, the embargo adopted by the European countries also constituted a suspension of Argentinas rights under agreements on trade in textiles and trade in mutton and lamb, for which security exceptions of GATT did not apply. The treaties are reproduced in O.J.E.C. 1979 L 298, p. 2; O.J.E.C. , 1980 L 275, p. 14. For the French legislation concerning countermeasures see ALLAND, D, op. cit. (note 41), at p. 17. 53 As the ICJ stated in Military activities in and against Nicaragua : If a State acts in a way prima facie incompatible with a recognized rule, but defends its conduct by appealing to exceptions or justifications contained within the rule itself, then whether or not the States conduct is in fact justifiable on that basis, the significance of that attitude is to confirm rather that to weaken the rule. ( Case Concerning the Military and Paramilitary Activities in and Against Nicaragua (Merits) (Nicaragua v. United States), Judgment of 27 June 1986, ICJ Reports 1986 , p. 14, at p. 88, para. 186). 54 KOHEN, M. La pratique et la thorie des sources du droit international, in Socit Franaise pour le droit international, Colloque de Genve, La pratique et le droit international , Paris, Pedone, 2003, pp. 82-111, at p. 88.

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countermeasures was the Naulilaa arbitration.55 This award was rendered after a German expedition in 1915 against the Portuguese authorities in Angola, in response to the killing of Germans citizens on the frontier of this colony. In this award, the Tribunal stated that the parties were obliged to negotiate before resorting to reprisals and that these measures were only lawful after an unsuccessful summation. With respect to proportionality, the award stated that [m]me si lon admettait que le droit des gens nexige pas que la repsaille se mesure approximativement loffence, on devrait certainement considrer, comme excesives et portant illicites, des reprsailles hors de toute proportion avec lacte que les a motives.56 Moreover, the Tribunal highlighted that a lawful countermeasure must be limited by the requirements of humanity and the rules of good faith applicable in relations between States.57 In the Cysne arbitration the tribunal also analyzed the question of countermeasures.58 In 1915 a German submarine destroyed a vessel called Cysne, flying a Portuguese flag (a neutral State at that moment) 59. Germany admitted that the destruction of the ship was unlawful but it stated that it had destroyed it as a justified reprisal in response to a British international breach. The German government, based in the Naulilaa award, argued that the Cysne was a seizable objective60. The tribunal rejected this reasoning and recalled that reprisals, consisting on principle of an act contrary to international law, only could be justified if it had been provoked by another act equally contrary to international law, and considered that reprisals could only be directed against the responsible state, and not third States.61

55 Responsabilit de lAllemagne raison des dommages causes dans les colonies portugaises du Sud de lAfrique (affaire du Naulilaa) (Allemagne/Portugal), UNRIAA, vol. II, 1928, p. 1013, at p. 1027. 56 Ibid. , at p. 1028. 57 Ibid. , at p. 1026. 58 Responsabilit de lAllemagne raison des actes commis postrieurement au 31/071914 et avant que le Portugal ne participt a la guerre (affaire du Cysne)(Allemagne/Portugal , UNRIAA, vol. II, p. 1035 (1930), at p. 1057. 59 Ibid. , at p. 1053. 60 Ibid. , at p. 1055. 61 Ibid. , at p. 1057.

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Perhaps the most emblematic award related with countermeasures is the Air Services arbitration, which, among other things, introduced the term countermeasure to international case law.62 In 1978, an American airline announced its resumption of a west coast London-Paris service with a change of gauge in London, where passengers would be transferred from a larger to a smaller plane. France objected that this change of gauge was contrary to the 1946 Air Services Agreement between France and the United States. Despite further French objection the American company sought to operate the service, but passengers were not allowed to disembark in Paris. In response, the US acting contrary to the 1946 agreement, prohibited flights by French designated carriers to the US west coast from Paris via Montreal so long as the French ban of American flights continued. This measure was taken despite the fact that the parties had agreed to refer the dispute to arbitration. In the award the tribunal recognized the entitlement of a State to affirm its rights through countermeasures,63 and analyzed the condition of proportionality and its relation with the concept of equivalence. 64 It affirmed that the present state of international law does not prohibit the use of countermeasures during negotiations, especially when the measure is accompanied by an offer to submit the dispute to a dispute settlement procedure.65 Nevertheless, the tribunal considered that the power to take countermeasures disappears when a case is before a tribunal and the latter is in a position to act given that it has the necessary means to achieve the objectives justifying counter-measures, because the objectives attended by countermeasures would be replaced by the power to decide on interim measures of protection (even if this power is expressly mentioned or is implied in the statute of the tribunal).66 For its part, the International Court of Justice (ICJ) has also contributed to the development of customary international law in relation to countermeasures. In the Corfu Channel Case, the Court recalled that
62 Case concerning the Air Services Agreement of 27 March 1946 (United States v. France ) , UNRIAA, vol. XVIII, 1979, pp. 416-453. 63 Ibid. , p. 443, para. 81. 64 Ibid. , para. 83. 65 Ibid. , p. 445, para. 91. 66 Ibid. , para. 96.

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States have the duty to refrain from acts of reprisals involving the use of force, in particular those that take the form of intervention that by the nature of things, [are] reserved for the most powerful States, and might easily lead to perverting the administration of international justice itself.67 Later, in the Appeal Relating to the Jurisdiction of the ICAO Council case the Court, in relation to the suspension of a treaty as a response to a wrongful act, considered that dispute settlement provisions must be maintained even though they are contained in a treaty that is the object of a dispute in which its validity or effect is being challenged or, in the words of the Court: Nor in any case could a merely unilateral suspension per se render jurisdictional clauses inoperative, since one of their purposes might be, precisely, to enable the validity of the suspension to be tested.68 Similar reasoning was reached in the Case Concerning United Sates Diplomatic and Consular Staff in Tehran. Here the Court underlined the principle that dispute settlement provisions applicable in a dispute may not be suspended by way of countermeasures; otherwise unilateral action would replace an agreed provision capable of resolving the dispute.69 In addition, the Court analyzed the case of countermeasures taken by the US considering that [t]hey where measures taken in response to what the United States believed to be grave and manifest violations of international law. 70 Thus, even if the Court did not recognize the legality of those measures it underlined the unilateral character, not only of the measure but also of the assertion of the existence of a wrongful act. In Military and Paramilitary Activities in and against Nicaragua71 the ICJ treated the issue of resorting to countermeasures, their condition of proportionality, and in which cases States can be their target. Even if in

67 Corfu Channel case (Merits) (United Kingdom v. Albania), Judgment of 9 April 1949, I.C.J. Reports 1949 , p. 4, at p. 35; Military and Paramilitary Activities in and Against Nicaragua, op. cit. (note 53) at p. 127, para. 249. 68 Case concerning the Appeal Relating to the Jurisdiction of the ICAO Council (India v. Pakistan ), I.C.J. Reports 1972 , p. 46, at p. 53. 69 Diplomatic and Consular Staff case, op. cit. (note 3) at p. 28, para. 53. 70 Ibid ., p. 41, para. 89 (emphasis added). 71 Military and Paramilitary Activities in and Against Nicaragua, op. cit. (note 53).

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this case countermeasures involving the use of force were analyzed 72, these principles are also applicable to non-forcible countermeasures. The Court, after wondering if there was a justification in the intervention of the United States in Nicaragua under the right to take countermeasures,73 stated that the acts of which Nicaragua was accused could only have justified proportionate counter-measures on the part of the State which had been the victim of these acts. []They could not justify counter-measures taken by a third state.74 Conditions of countermeasures were clearly treated by the Court in the Gab kovo-Nagymaros Project case.75 Here the Court recognized countermeasures as a circumstance precluding wrongfulness on the ground that the measure so adopted is in response to an international wrongful act76 and is directed against the wrongful state. 77 With respect to the so-called summation, the ICJ stated that the injured state must have called upon the State committing the wrongful act to discontinue its wrongful conduct or to make reparation for it before any resort to countermeasures.78 In relation to proportionality the Court held that the effects of a countermeasure must be commensurate with the injury suffered, taking account of the rights in question.79 In this case, the Court found that the diversion of the Danube carried out by Czechoslovakia was not a lawful countermeasure because it was not proportionate. For this reason it decided not to analyze other conditions of countermeasures, namely: the purpose to induce compliance and the fact that the measure chosen must be reversible,80 but it recognized their existence by the fact of enunciating them. The judgment is also important because when dealing with the conditions of countermeasures the Court

72 The Court stated that under customary international law states do not have the right to take countermeasures involving the use of force in the event of intervention. Ibid ., p. 118, para. 252. 73 Ibid. , p. 106, para. 201. 74 Ibid ., p. 117, para. 249. 75 Gab kovo-Nagymaros Project, op. cit. (note 42), at p. 55, para. 83. 76 Ibid ., p. 55, para. 82. 77 Ibid ., para. 83. 78 Ibid ., p. 56, para. 84. 79 Ibid ., para. 85. 80 Ibid ., para. 87.

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referred to the Draft Articles on State Responsibility adopted by the International Law Commission on its first reading.81 The last development on the limitation of States to resort to non-forcible countermeasures comes perhaps with the creation of the World Trade Organisation by the Marrakech Agreement. The DSU annexed to the Marrakech Agreement establishes a mechanism for the settlement of WTO-related disputes that limits the possibility of States to resort to countermeasures in the case of WTO related disputes. Countermeasures continue to exist under this system, but the unilateralism that these measures imply is mitigated, at least to some degree, because even if States keep the possibility to take countermeasures they leave in the hands of the DSB the determination of the existence of the breach to a WTO obligation, the time to comply with that obligation, the authorization to apply countermeasures, the determination of the maximum level of such measures, and the surveillance of their application. All of these developments in international law demonstrate the existence of a body of customary and treaty rules concerning countermeasures, which establishes the principles and conditions of exercise that States must follow in applying countermeasures and some situations where countermeasures are forbidden. They also demonstrate the concern of States and tribunals about the dangers of resorting to countermeasures in international law. Even if international judgments recognized a so-called right to take counter-measures, they also express the concern of judges in relation with the risk that the application of such measures entails. In this respect, tribunals have pointed out that countermeasures are reserved to the most powerful States, that they can distort the administration of international justice and that they could eventually entail an escalation of unilateral measures. Those developments also demonstrate that the conditions of countermeasures are sometimes not well delimited in customary

81

Ibid ., para. 83.

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international law. Here international treaties can play an important role in determining in which situations and under which conditions countermeasures can be applied. Moreover, the lack of hierarchy between sources in international law allows States to modify or limit customary international law by way of lex specialis . This appears to be the situation under the NAFTA Agreement or in the WTO treaty with respect to countermeasures.

ii.

Codification of Customary Rules on Countermeasures

All the developments related to countermeasures that have been analysed, i.e. state practice, international judgments and treaties, have been reflected in the different attempts at codification on the rules of state responsibility. These efforts of codification were intended to reach a more precise formulation and a systematisation of rules of general international law and thus avoid the suppleness and malleability of customary rules. The issue of countermeasures, within the different subjects of State responsibility, has been omnipresent in the different attempts at codification. In 1924 the Assembly of the League of Nations adopted a resolution requesting the Council to convene a committee of experts to prepare a provisional list of topics subject to codification.82 In 1925 the so-called Committee of Experts for the Progressive Codification of International Law appointed several sub-committees to deal with the different topics of codification. One of them was in charge of the subject of State responsibility. Within the issues that this sub-committee was appointed to examine was the question of [w]hether, and, if so, in what terms it should be possible to contemplate the conclusion of an international convention providing for the ascertainment of the facts which may involve liability on the part of a State and forbidding in such cases recourse to measures of coercion before the means of pacific settlement have been exhausted.83 The subject of State Responsibility
82 83

See Legal, 1927.V.1, document C.196.M.70.1927.V. Question (ii),League of Nations document C.275.1927.V, p. 5.

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was the principal issue of the unsuccessful Conference for the Codification of International Law of 1930. Among the Circumstances under which States can decline their responsibility that were included in the Bases of discussion drawn up in 1929 by the preparatory committee of the conference, was the Basis of discussion No. 25, which provided: A state is not responsible for damage caused to a foreigner if it proves that it acted in circumstances justifying the exercise of reprisals against the State to which the foreigner belongs. 84 In addition, the Institute of International Law (IIL) in its Paris session of 1934 adopted a resolution entitled Rgime des reprsailles en temps de paix., based on the report of Nicolas Politis. 85 The resolution defined the concept of reprisals, distinguishing it from other concepts such as retorsion, measures taken by international organisations and legitimate self-defence. It is stated that non-armed reprisals are prohibited when the respect of law can be assured by dispute settlement procedures. Moreover, some procedural conditions prior to a resort to reprisals were established, i.e. summation, proportionality, non-prejudice to third parties, and reprisals were due to the imperfection of international law and that the organisation of the international community should imply the disappearance of reprisals.86 This resolution was not only an attempt to codify the existing law, but also an effort to go beyond customary law in order to improve it.87 As a consequence, in the Resolution there are rules of customary international law that existed at that moment together with other regulations that the Institute believed pouvoir recommander ladoption des gouvernements et lattention des organes internationaux.88 After the Second World War, the task of codification was continued by the United Nations. In 1948 the General Assembly established the
See League of Nations Conference for the codification of International Law (1930), New York, Oceana, 1972. For the Bases of Discussion submitted to the 1930 conference see YILC , 1956, vol. II, pp. 223-225. 85 Annuaire de lInstitut de droit international , vol. 38, 1934, p. 708. The text of the resolution is available also in htpp//:www.idi-iil.org. 86 Ibid ., p. 624. 87 Ibid ., p. 626. 88 Ibid ., p. 692.
84

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International Law Commission, with the aim of fulfilling the Charter mandate of encouraging the progressive development of international law and its codification.89 The subject of State Responsibility featured among the fourteen topics selected for discussion. The work began in 1955 with the appointment of F.V. Garca Amador as Special Rapporteur on State Responsibility. But he did not give much importance to the issue of reprisals, which he considered only as armed reprisals.90 This was criticised by Roberto Ago who, with a broader conception of reprisals, considered that when dealing with punishable or penal consequences of an unlawful international fact [] such institutions as reprisals had to be taken into consideration.91 In 1963 Ago was appointed Special Rapporteur on State Responsibility, a position that he held until 1980. He made it clear that the articles should include the issue of countermeasures. At that time, however, reprisals were only seen as a means of sanction. In fact, the second point in the recommendations of the Subcommittee made to the ILC in 1973 referred to [r]eprisals and their possible role as a sanction for an international wrongful act. 92 This line was continued in the following years, where countermeasures, called at that moment the legitimate application of a sanction, were introduced circumspectly among the circumstances precluding wrongfulness of an act of a state. 93 In his eighth report Ago proposed an article that followed this wording but, since some Members of the ILC expressed reservations concerning the term sanction94, the

UN Charter, Art. 13 (a). Res. 174 (II) of 21 November 1947. He rejected the view that reprisals constituted grounds for exoneration from responsibility and considered that reprisals, as the term is generally understood in theory and in practice, imply a State conduct contrary to the rules of contemporary international law ( YILC , 1956, vol. II, p. 208, para. 187). 91 YILC , 1957, vol. I, p. 157, para. 63. He considered that the possibility of punishing a State responsible for an international wrongful act must also be taken into account in cases where no reparation can be obtained. He seemed to equate the penal consequences for the responsible State to the taking of countermeasures or reprisals (Ibid. , p. 170 para. 23). 92 YILC , 1963, Vol. II, p. 228, para. 6. 93 YILC , 1973, Vol. II, p. 178, para. 7. In this respect it was said that this conduct does not constitute an international wrongful act because, in those circumstances, the State is not required to comply with the international obligation which it would normally have to respect ( Ibid. ). 94 YILC , 1979, Vol. I, p. 63, para. 31.
90

89

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term countermeasure was preferred95, leaving the former for those measures applied by virtue of a decision taken by an international organization.96 During the appointment of Willen Riphagen as Special Rapporteur between 1980 and 1986, the work of the ILC related to countermeasures was concentred on its conditions of exercise (e.g. proportionality), its relation with the international dispute settlement mechanisms and interim measures of protection and its limits in relation to peremptory norms and diplomatic protection97. Riphagen suggested distinguishing between measures of reciprocity, affecting the same obligations as the one of the breach, and countermeasures, affecting different obligations, uncorrelated with the original breach. 98 From 1988 to 1995 Gaetano Arangio Ruiz was engaged as Special Rapporteur. He concentrated his work on two main issues: the relation of the Draft Articles with the UN Charter and the limits of countermeasures. He was convinced that it was necessary to find a limitation to the unilateral reactions of States. The ILC adopted the text of the Draft Articles with commentaries on first reading in 1996. Part Two of the project (called Content, forms and degrees of international responsibility) included Chapter III, which was devoted to countermeasures. Article 48 of the 1996 Draft Articles established a link between the application of countermeasures and compliance with dispute settlement obligations. Countermeasures pending negotiations were excluded, with the exception of interim measures of protection which are necessary to preserve the rights of the injured state. In addition, the controversial Part Three (Settlement of Disputes) included regulations dealing with countermeasures and dispute settlement and the procedural conditions for the taking of countermeasures.99 Article 58 established detailed procedural conditions relating to the application of
95 The article adopted in 1979 provided: Article 30: Countermeasures in respect of an internationally wrongful act. The wrongfulness of an act of a State not in conformity with an obligation of that State towards another State is precluded if the act constitutes a measure legitimate under international law against that other State, in consequence of an internationally wrongful act of that other State.(YILC , 1979, Vol. II, p. 115, para. 25). 96 Ibid. , p.121, para. 21. 97 YILC , 1985, vol. II, part One, p. 10-13. 98 Ibid . 99 YILC , 1996, vol. II, part Two, p. 63.

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countermeasures as for example the right of the responsible State to submit a dispute over countermeasures to arbitration. However, this part was greatly criticised by States and within the ILC.100 In 1996 James Crawford was appointed as Special Rapporteur on State responsibility. Among the major unresolved issues of the project that required special consideration was the question of countermeasures. 101 During the second reading in 1999 the Commission considered the question of dispute settlement with respect to countermeasures.102 In 2000, this issue was moved into the new Part Three dealing with the implementation of responsibility. This chapter was the most controversial aspect of the provisional text adopted in 2000.103 Some governments criticised the inclusion of countermeasures in the text because of the danger of legitimising them by its regulation.104 Others criticised the formulation of the various articles, especially those dealing with obligations not subject to countermeasures (as extreme economic or political coercion), the procedural conditions to resort to countermeasures (qualifying them as unfounded in law and as unduly cumbersome and restrictive105), and the question of the so-called collective countermeasures.106 The debate on these issues, both in the General Assemblys Sixth Committee and in the ILC itself show their extreme sensitivity and the concern felt by many as to the dangers of abuse.107 In 2001 there was a reconsideration of the articles in the light of some comments made by governments. Thus, the ILC deleted the paragraph that had prohibited countermeasures when negotiations were being pursued in good faith. It was also agreed to delete the distinction between countermeasures and provisional countermeasures but the notion
Cf. YILC , 1996, Vol. I, pp. 175 and 189. ILC Report , 1997, A/52/10, paras. 30 and 161. 102 See A/CN.4/498 & Adds. 1-4, 1999. For a summary of the ILC debate and conclusions see A/54/10. 103 CRAWFORD, J., op. cit . (note 28), at p. 48. 104 Cf. Cuba, A/C.6/55/SR.18. para. 61; India, A/C.6/55/SR.15, para. 29; Mexico A/C.6/55/SR.20, para. 38. 105 Cf. United Kingdom, A/C.6/55/SR.14, paras. 35.36; United States, A/C.6/55/55/SR.18, para. 69. 106 CRAWFORD, J., op. cit . (note 28), at p. 48. 107 For a summary of the Sixth Committee debate on countermeasures see A/CN.4/513, paras. 144-182.
100 101

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of urgent countermeasures was kept. In addition, it was decided to delete the former Part Three,108 and Article 58 of the 1996 Draft Articles. 109 Finally, in 2001 the International Law Commission completed its work on State responsibility. In the definitive version there are seven articles dealing with countermeasures. Under Part One (General Principles) Article 22 includes countermeasures among the Circumstances precluding wrongfulness. Under Part Three (The Implementation of the International Responsibility of a State), Chapter II (Articles 49 to 54) deals with countermeasures. Even if the Draft Articles seek to formulate, by way of codification and progressive development, the basic rules of international law concerning the responsibility of States for their internationally wrongful acts, there is no consensus over which regulations are the product of codification of an existing rule and which imply progressive development of international law promoted by the members of the ILC.110 This situation has arisen particularly in relation to the regulations concerning countermeasures where there have been many debates with regard to the relationship between countermeasures and dispute settlement.111 Besides the problems found in codifying international law and criticism of the work of codification, the advantages of codification seem to
108 See the comments of the Study Group of the International Law Association at htpp://www.ila-hq.org. 109 CRAWFORD, J., op. cit . (note 28), at p. 52. 110 Article 15 of the Statute of the ILC makes the distinction between codification and progressive development of international law. Codification is the more precise formulation and systematization of rules of international law in fields where there already has been extensive State practice, precedent and doctrine. It implies the conversion of customary rules into written rules. These norms are opposable due to the creation of the customary rule that occurred before the codification, notwithstanding that the codification creates a point of departure since it is certain that the rule existed. On the other hand, progressive development implies the preparation of draft conventions on subjects which have not yet been regulated by international law or in regard to which the law has not yet been sufficiently developed in practice of States that is the concretization of new rules based on existing law. They are only opposable since they are included in a treaty binding for the parties or they have become customary international law. See NGUYEN QUOC, D., op. cit. (note 25), at p. 336. 111 See Symposium: Counter-measures and Dispute Settlement: the Current Debate within the ILC, EJIL , vol. 5, n. 1, 1994, pp. 20-119.

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outweigh the disadvantages. The process of codification allows a debate between international actors over the existence and range of international rules. The result of the codification process provides clarity and certainty to customary international rules, facilitating the application of those rules by international tribunals and States, making the study of international law easier. Codification helps to determine which is the existing law in a specific moment and to use this material for further developments of international law. For the sake of this work, the results of codification in relation to countermeasures allow a comparison and an analysis of WTO rules concerning countermeasures in the light of the regulations of the Draft Articles, in order to determine their extent and the relationship between those rules.

c.

The Role of Customary Rules on Countermeasures in the WTO Law

The first issue that arises when analysing the role of customary international law in WTO law is the difference between interpretation and application of law. The natural aim of a rule is its application to a particular situation for which it has been established. However, since the formulation of every norm is an abstraction and conceptualisation of behaviour, the authors of a rule cannot anticipate all the situations in which it will be applicable. It is the work of judges to determine whether a rule can be applicable to a particular situation, by way of interpretation.112 On principle, there is no rule that is applicable automatically, thus every time a rule must be applied it must be previously interpreted. In other words, the interpretation is one part of the process of the application of a rule and it is present every time a rule has to be applied. Nevertheless, the term application can also be used to refer to the use of other rules of general international law in the interpretation a WTO provision. Under

112

See NGUYEN QUOC, D., op. cit. (note 25), at p. 253.

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this latter meaning the term application would equal he concept of interpretation. That distinction made, it is possible to observe that under WTO there are two limitations concerning the applicable law that appear to be insurmountable and accepted by most of the doctrine. On the one hand and according to Article 11 of the DSU, the jurisdiction of WTO panels is limited to claims under WTO covered agreements. Therefore, no claims concerning violation of rules of international law apart from those contained in WTO covered agreements can be brought before a WTO panel.113 Moreover, it is provided that the panels, Appellate Body and DSB cannot add to or diminish the rights and obligations provided in the covered agreements.114 On the other hand, and by virtue of Article 3.2 of the DSU, rules of interpretation of general international law shall be applied to interpret the WTO agreements. Between these two extremes there is a vast area which authors try to delimit.

i.

Application of Customary Rules under the WTO Law

If we analyse the views of different authors in relation to the application of general international law by the DSB, we can divide them into four degrees of acceptance of the application of customary international law. The first degree would be the application of customary rules of interpretation of public international law to interpret the covered agreements. 115 In this point it seems there is no disagreement between the scholars since Article 3.2 of the DSU expressly provides that one of the functions of the dispute settlement system of WTO is to clarify the existing provisions of [the covered] agreements in accordance with customary rules of interpretation of public international law.116 On
113 Cf. MARCEAU, G., op. cit. (note 19), at p. 113; PAUWELYN, J., op. cit. (note 17), at p. 554. 114 Articles 3.2 and 19.2 of the DSU. 115 Cf. CHARNEY, Jonathan I., Is International Law Threatened by multiple international tribunals?, RCADI , 1998, vol. 271, pp. 101-382, at p. 219. 116 Article 3.2 of the DSU.

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principle, those rules would be the rules contained in Article 30 and 31 of the Vienna Convention on the Law of Treaties as well as other customary rules on interpretation that have not been codified, as for example the concept of evolutive interpretation,117 or that of lex specialis118. A second degree would be the application of rules of general international law (apart from the rules of interpretation) to interpret the covered agreements. For some authors the gateway to those rules is Article 31 (3) (c) of the Vienna Convention, which establishes that in interpreting a treaty account must be taken not only of the treaty itself, but also of any relevant rules of international law applicable in the relations between the parties.119 Furthermore, the statement by the Appellate Body that the covered agreements must not be interpreted in clinical isolation of public international law seems to confirm that the WTO agreements are to be interpreted in the light of customary rules of international law, and that the DSB will be required to examine outside sources of law when defining or delimiting a WTO obligation.120 The application of general international law in interpreting the rights and obligations of the covered agreements was confirmed in Korea Measures Affecting Government Procurement where the panel noted about the rules of customary international law:

117 This concept was used by the panel and the Appellate Body in US Shrimp products . Panel Report, United States Import Prohibition of Certain Shrimp and Shrimp Products, adopted on 6 November 1998 , WT/DS58/R, DSR 1998:VII p. 2821, para. 7.8 and Appellate Body Report, op. cit. (note 9), para. 129. 118 Apart from this, it has been a principle applicable to the interpretation of treaties; as the principle of lex posteriori , the principle of lex specialis was not embodied in the Vienna Convention on the Law of Treaties. See, KARL, Wolfram, op. cit. (note 33), p. 937.The principle of lex specialis was applied by WTO panels and the Appellate Body in order to establish the relation between GATT 1994 and the other WTO agreements and to determine the relation between the most specific and detailed agreements within the WTO. Cf. Appellate Body Report, Regime for the importation of Bananas , adopted 25 September 1997, WT/DS27/AB/R, DSR 1997: II, p. 591 para. 204. Panel Report, EC Sardines , adopted 23 October 2002, WT/DS231/R, as modified by the Appellate Body, WT/DS231/AB/R, para 7.15-719. 119 MARCEAU, G., op. cit. (note 19), at p. 137; PAUWELYN, J., op. cit. (note 17), at p. 543, According to Dupuy, this rgle fondamentale dont la seule existence suffirait faire comprendre la dbilit conceptuelle et la non conformit au droit de lide mme de rgime autosuffisant. DUPUY, op. cit. , (note 11), at p. 456. 120 MARCEAU, G., ibid. , at p. 115.

31

We do not see any basis for arguing that the terms of reference [in DSU Article 7.1] are meant to exclude reference to the broader rules of customary international law in interpreting a claim properly before the Panel.
121

Therefore, arbitrators, panels or the Appellate Body, can apply other general rules of international law in interpreting WTO regulations, as for example human rights, environmental law, law of treaties, or any other international rule that should be useful to interpret the provisions of the covered agreements. A third degree of application of general international law would be the application of customary rules in the procedural aspects of the dispute settlement mechanism. This has been understood by some authors as interpretation of the DSB regulations related to the procedural aspects, but since many of the rules that have been applied by the DSB relate to principles and institutions that on principle were alien to the DSU, it seems this is not mere interpretation. In practice, panels and the Appellate Body have frequently referred to and applied other rules of international law concerning dispute settlement when examining WTO claims. They have applied, for example, rules related to standing,122 representation by private counsel,123 la comptence de la comptence, 124 burden of proof 125 and regime of proof during the procedure,126 the acceptability of amicus curiae briefs, 127 authority to draw adverse inferences,128 judicial economy,129 the notion of substantial interest,130 the

Panel Report, Korea Measures Affecting Government Procurement , WT/DS163/R, adopted 19 June 2000, DSR 2000:VIII, pp. 3757-3758, para. 7.101, footnote 755. 122 Panel Report, European CommunitiesRegime for the Importation, Sale and Distribution of Bananas , 25 September 1997, WT/DS27/R, para. 133 and 136. 123 Ibid. , para. 10. 124 Appellate Body Report, United StatesAnti-Dumping Act of 1916, 26 September 2000 , WT/DS136/AB/R, para. 54. 125 Appellate Body Report, United StatesMeasures Affecting Imports of Woven Wool Shirts and Blouses , 23 May 1997, WT/DS33/AB/R, para. 14. 126 Cf. Panel Report, European Communities Measures Concerning Meat and Meat Products (Hormones) , WT/DS26/R, 18 August 1997 , para. 126. 127 Panel Report, United StatesImport Prohibition of Certain Shrimp and Shrimp Products , op. cit. (note 117), and Appellate Body Report, op. cit. (note 9), para. 107. 128 Appellate Body Report, CanadaMeasures Affecting the Export of Civilian Aircraft, 20 August 1999, WT/DS70/AB/R, para. 202.
121

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principle of precaution,131 the rights of defence,132abuse of rights, 133 estoppel and acquiescence,134 and non liquet. 135 A fourth degree would be the application of other customary rules of general international law by the DSB. Some authors share the opinion that the absence of explicit provision in the DSU that excludes a priori any source of international law from being applied to such disputes would imply a continuation or implicit acceptance of general international law as potentially applicable in WTO dispute settlement proceedings.136 Joost Pauwelyn, for instance, argues that unlike the Law of the Sea Convention and the Statute of the ICJ, the DSU does not include an explicit provision on applicable law and consequently, it cannot be interpreted that the DSU excludes all other rules.137 But even with an explicit reference to the applicable law, tribunals apply other rules of international law, as is the case of the ICJ that applies, for example, unilateral acts of States besides not being expressly referred to in Article 38 of the ICJ Statute. 138 Moreover, the idea that the DSB can apply other rules of international law can be reinforced by the recurrent use of the a contrario reasoning used by the DSB in order to fill gaps in the covered agreements. As Lorand Bartels has pointed out, the Appellate Body frequently adopts a method of first ascertaining whether there is any prohibition, expressed or implied, on a particular rule, and then adopting a rule or principle of international law. 139
129 Op. cit. (note 125), at para.19; Appellate Body Report, AustraliaMeasures Affecting the Importation of Salmon , 6 November 1998, WT/DS18/AB/R, para. 223. 130 Op. cit., (note 122), para .132. 131 EC Measures Concerning Meat and Meat Products (Hormones) , op. cit . (note 126) para. 120. 132 Op. cit., (note 122), para. 154. 133 United States Import Prohibition of Certain Shrimp and Shrimp Products, op. cit. (note 117), para. 122. 134 Panel Report, Guatemala Definitive Anti Dumping Measures on Grey Portland Cement from Mexico, 24 October 2000, WT/DS156/R, para. 8.24. 135 The Coconuts case (see note 144) has been viewed as a non liquet . See DAVEY, William, Has the WTO Dispute Settlement System Exceeded Its Authority?, JIEL, vol. 4, n. 1, 2001, p. 79-110 p. 106. 136 In accord PAUWELYN, J., op. cit. (note 17), at p. 541; GARCIA RUBIO, op. cit. (note 14); and BARTELS, L., op. cit. (note 36), at p. 518. 137 PAUWELYN, J., op. cit. (note 17), at p. 561. 138 Ibid. , p. 562. 139 BARTELS, L., op. cit. (note 36), at p. 516.

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The application of customary rules was confirmed in Korea Measures Affecting Government Procurement, where the panel expressed:
We take note that Article 3.2 of the DSU requires that we seek within the context of a particular dispute to clarify the existing provisions of the WTO agreement in accordance with customary rules of interpretation of public international law. However, the relationship of the WTO Agreements to customary international law is broader than this . Customary international law applies generally to the economic relations between the WTO Members. Such international law applies to the extent that the WTO treaty agreements do not contract out from it . To put it another way, to the extent there is no conflict or inconsistency, or an expression in a covered WTO agreement that implies differently, we are of the view that the customary rules of international law apply to the WTO treaties and to the process of treaty formation under the WTO
140

Even if this statement was criticised in the Dispute Settlement Body meeting following its adoption141 and even if some scholars are opposed to it arguing that it was not appealed,142 its relevance is manifest because it integrates the reasoning concerning the application of general international law in the WTO case law, thus creating an important precedent. Furthermore, the reasoning of Government Procurement seems to reflect the DSB practice. In fact, panels, arbitrators, and the Appellate Body have frequently referred to and applied other rules of international law in examining WTO claims. They have applied, for example, general principles of international law, such as the principle of good faith.143 With respect to the law of treaties, the principle of non-retroactivity, 144

140 Panel Report, Korea Measures Affecting Government Procurement , op. cit. (note 121) p. 3756, para. 7.96. 141 Quoted in BARTELS, L., op. cit. (note 36), at p. 516, footnote 78. 142 Cf. GRAN, Patricio, Remedies under WTO Law, JIEL , n. 4, December 2001, p.755772. 143 Panel Report, Korea Measures Affecting Government Procurement , op. cit. (note 121), at para. 7.93. 144 Cf. Appellate Body Report, BrazilMeasures Affecting Desiccated Coconut, 20 March 1997 , WT/DS22/AB/R, at para. 15; Appellate Body Report, CanadaPatent Protection Term, 12 October 2000 , WT/DS170/AB/R, paras. 7174.

34

error in treaty formation 145, Articles 60 and 70 of the 1969 Vienna Convention on termination146 have been applied. Moreover, as Pauwelyn points out, WTO panels and the Appellate Body have also applied WTO rules that are not part of WTO covered agreements (such as the Declaration on the Relationship of the WTO and the IMF147 and acts of WTO organs such as waivers148), as well as non-WTO rules that are part of general international law (such as the Lom Convention149 and unilateral acts of WTO members 150).

ii.

General Principles of Countermeasures in the Context of the WTO Law

Independently of the position taken with respect to the degree of application of customary law in WTO law, the arguments provided by the different authors are useful in determining whether and in which circumstances the DSB can apply customary law on countermeasures. Firstly, the fact that the WTO law is a system of lex specialis under international law, and taking into account that WTO rules on countermeasures seem to be part of the broader international law concerning countermeasures, can be an argument in favour of the application when necessary of rules of general international law on countermeasures to the WTO rules. In this sense, customary rules on countermeasures would be included in Article 31(3) (c) of the Vienna
Panel Report, Korea Measures Affecting Government Procurement , op. cit. (note 121) paras. 7.123-126. 146 Decision by the Arbitrators, Brazil Export Financing Programme for Aircraft Recourse to Arbitration by Brazil under Article 22.6 of the DSU and Article 4.11 of the SCM Agreement (Brazil Aircraft), WT/DS46/ARB, circulated on 28 August 2000, para. 3.10. 147 Appellate Body Report, ArgentinaMeasures Affecting Imports of Footwear, Textiles, Apparel and Other Items, 22 April 1998 , WT/DS56/AB/R, para. 65 (quoting the IMF memorandum) and para. 69. 148 Panel Report, European CommunitiesRegime for the Importation, Sale and Distribution of Bananas , WT/DS27/R, op. cit. (note 121) para. 164. 149 Ibid. , para. 167. 150 Panel Report, United States Sections 301-310 of the Trade Act of 1974, 22 December 1999, Adopted by the Dispute Settlement Body on 27 January 2000 , WT/DS152/R, DSR 2000:II, p. 815, at para. 7.43 and 7.114.
145

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Convention among the relevant rules of international law applicable in the relations between the parties. Secondly, the application in a subsidiary manner of the customary rules on countermeasures would be a way of granting the respect of the limitation of unilateral reactions of States established under Article 23 of the DSU. Moreover, in accordance with the presumption against conflict between rules that exist in general international law both sources of norms on countermeasures shall be interpreted as being complementary one to the other and not as being in opposition. In addition, as will be shown below, most of the WTO rules relating to the material aspects on countermeasures confirm pre-existing rules of general international law. This seems to be the recognition rather than the rejection of the general international law remedy of countermeasures. Thirdly, trade countermeasures are one aspect of the game of unilateral acts of States that, before concretising the GATT/WTO system, was an area regulated exclusively by general international law. The creation of the WTO implied a set of new rules concerning this type of countermeasures but this did not imply its total suppression from general international law. Fourthly, the regulations providing that dispute settlement organs cannot add to or diminish the rights and obligations provided in the covered agreements151 is not to be interpreted as a negation of international law. A restrictive interpretation of these provisions would imply that the DSB should apply WTO articles literally because it could otherwise add to or diminish the rights and obligations contained therein. This literal application would eliminate the margin of interpretation that panels and Appellate Body have under the customary rules of interpretation and would produce situations of non liquet152 when the panel or the appellate
151 152

Articles 3.2 and 19.2 of the DSU The application of non liquet by international tribunals has been criticised by part of the doctrine. Cf. LAUTERPACHT, Hersch, The Function of Law in the International Community , Oxford, Clarenden Press, 1933, 469 pp., at p. 67, and the dissident opinion of Judge Rosalyn Higgins in the Legality of the Threat or Use of Nuclear Weapons, I.C.J. Reports 1996 , p. 583, at p. 592.

36

body do not find a solution without adding to or diminishing the rights and obligations. The Appellate Body seems to have made a more flexible interpretation in considering that the obligation not to add to or diminish the rights and obligations is fulfilled when the legal conclusions are not tainted by any reversible error of law and has underlined that this requirement would imply the correct interpretation and application of provisions of the covered agreements. 153 Without engaging in this debate, it seems that the application of customary rules on countermeasures to interpret or to fulfil gaps of the WTO rules would not add to or diminish the right and obligations of the covered agreements. Moreover, WTO adjudicating bodies practice shows that the arbitrators have been applying customary rules on State responsibility, including on countermeasures, in interpreting DSU provisions. They have applied provisions on attribution, 154 and lex specialis155. In relation to countermeasures, they have used the principle of proportionality of countermeasures as codified by the ILC 156 and they have employed the definition of countermeasures of the ILC.157 In addition, Bartels points out that there are hard cases that cannot be solved by applying exclusively the covered agreements158, where it is necessary to apply the definitions, principles or rules of international law. These cases could arise also in issues related with countermeasures. The complementary function of customary rules on countermeasures in these cases may permit the DSB to reach more equitable solutions and thus fulfil the main function of the WTO dispute settlement system: the requirement of providing security and predictability to the multilateral trading system.

Appellate Body Report, Chile Taxes on Alcoholic Beverages , WT/DS87/AB/R and WTDS110AB/R, 13 December 1999, para. 79. 154 CanadaMeasures Affecting the Importation of Milk , 27 October 1997, WT/DS103/R and WT/DS113/R, para. 7.77 and 427; TurkeyRestrictions on Imports of Textile and Clothing Products, 19 November 1999 , WT/DS34/R, para. 9.33. 155 Op. cit. (note 118). 156 Decision by the Arbitrators, European Communities Regime for the Importation, Sale and Distribution of Bananas Recourse to Arbitration by the European Communities under Article 22.6 of the DSU, WT/DS27/ARB, 9 April 1999 , DSR 1999:II, p. 725, para. 6.16.; Decision by the Arbitrators, Brazil Export Financing Programme for Aircraft, WT/DS46/ARB, op. cit. (note 146), para. 3.44, 45 and 48. 157 EC Bananas, ibid., p. 774, para 6.16 158 BARTELS, L., op. cit. (note 36), at p. 513.
153

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To conclude, even if it is clear that the WTO has special rules on countermeasures, it appears that these rules do not apply exclusively, and that there are some aspects that remain governed by customary international law. Thus, it is suggested in this work that some principles of customary international law on countermeasures, for instance proportionality and reversibility are applicable to countermeasures under WTO law.

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II.

MATERIAL ASPECTS OF COUNTERMEASURES

As a system of lex specialis, the WTO treaty establishes particular rules that regulate the application of countermeasures. Some rules imply the recognition of those rules of general international law, others imply a derogation of those rules, while others remain silent in relation to certain aspects of countermeasures. In this section the material aspects of countermeasures under WTO will be analysed in the light of general international law on countermeasures in order to evaluate its similarities and differences and to determine what the extent of the special character of each rule is and when the lex generalis (general international law) can be applied in a complementary way.

a.

Preclusion of Wrongfulness of Countermeasures

In international law, a countermeasure involves an action taken in derogation from an international obligation that is justified because it is taken in response to an international wrongful act. This peculiarity was already observed in the Cysne arbitration,159 and was pointed out by IIL, which expressed that non-forcible reprisals are measures drogatoires aux rgles ordinaires du droit des gens. 160 Accordingly, the Draft Articles provides that countermeasures consist in the non-performance [] of international obligations of the state [] towards the responsible state.161 This characteristic of countermeasures permits them to be differentiated from other reactions in international law such as acts of retorsion, which are not inconsistent with any international obligation of the State, even though they could be a response to an internationally wrongful conduct.162

Op. cit. (note 58), at p. 1057. Article 1 of the 1934 Resolution, op. cit. (note 85). See also, Gab kovo-Nagymaros Project, op. cit. (note 42), at p. 55, para 82. 161 Article 49.2 of the DASR 162 PARTSCH, Karl Josef, Retorsion, in BERNHARDT, Rudolf (ed.), Encyclopedia of Public International Law , Amsterdam, North-Holland, 1992, vol. IV, pp. 232-233.
159 160

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The inherent wrongful character of countermeasures justifies the different efforts to limit the application of countermeasures and to codify their rules and conditions.163 Under WTO law the necessity to limit this kind of unilateral actions of States was translated into the necessity to obtain authorisation of the DSB before applying countermeasures and it is one of the reasons why countermeasures under WTO law are sensed to be the last resort which this Understanding provides to the Member invoking the dispute settlement procedures.164 The obligations that can be the object of countermeasures could arise from different sources, i.e. the non-application of a customary or treaty obligation. However, in most situations countermeasures imply the nonfulfilment of treaty obligations.165 This is the situation under the WTO where countermeasures imply basically a derogation of the obligations under the covered agreements towards a member that has not withdrawn such measures as found to be inconsistent with these agreements by DSB. This unilateral action normally consists in trade restrictions towards goods coming from the wrongdoer member,166 but it could also comprise the non-fulfilment of other obligations, such as copyrights or patents rights.167 On the other hand, there are some obligations that cannot be the subject of countermeasures due to the character of the rule in question or because States agree not to apply countermeasures in certain obligations. In the first situation, under general international law rules of jus cogens , fundamental human rights, dispute settlement obligations and diplomatic

163 As Alland points out: leur rglamentation est videmment lie leur illicit ( Op. cit. (note 41), at p. 130). 164 Article 3.7 of the DSU 165 An example of the non-performance of a customary obligation would be a case where a state decides not to apply customary obligations contained in a treaty, towards a state that has not ratified that treaty. 166 PAUWELYN, Joost, Enforcement and countermeasures in the WTO: rules are rules: toward a more collective approach, AJIL , vol. 94, n. 2, 2000, pp. 335-347, at p. 343. 167 This situation arose in Bananas III where Ecuador was authorised not to respect obligations concerning patents and rules of origin, see section II, h.

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protection, cannot be the object of countermeasures.168 Apart from these restrictions that also apply to the case of countermeasures under WTO law, when ratifying the WTO treaty, parties are obliged not to apply countermeasures that are not permitted under the covered agreements.169 In relation to the preclusion of wrongfulness, the wrongful character of countermeasures is precluded because they are taken in response to an international wrongful act. The Draft Articles include among the circumstances precluding wrongfulness, the case of countermeasures provided that they are taken in accordance with the principles of general international law.170 This situation has different implications in customary international law and in WTO law. Under general international law, it is the state itself that considers if the measure envisaged is justified as a necessary response to an international wrongful act, in other words, it is up to the State to establish the existence of a circumstance precluding wrongfulness171. This would allow the state target of a countermeasure, under general international law, to question the lawfulness of that measure.172 In this case it could occur that the measure was found to constitute another wrongful act. The situation is different in WTO law, where the non-performance of a WTO treaty obligation is subject to the authorisation of the DSB in order not to constitute another situation of nullification or impairment of obligations for not being justified. Thus, the determination of the existence of a situation precluding the wrongfulness of a countermeasure is in the hands of the DSB. Consequently, the State target of a wrongful act could only invoke the responsibility of the State

168 See SICILIANOS, Linos-Alexandre, Les ractions dcentralises lillicite, Paris, L.D.G.J., 1990, 532 pp., pp. 337 and ss. These obligations are embodied in Article 50 of the DASR. 169 Article 22.5 of the DSU 170 See, Article 22 of the DASR 171 Crawford says in this respect that there is no difference between countermeasures and other circumstances precluding wrongfulness (CRAWFORD, J., op. cit . (note 28), at p. 285). 172 As Crawford points out: A State taking countermeasures acts at its peril, if its view of the question of wrongfulness turns out not to be well founded. A State which resorts to countermeasures based on its unilateral assessment of the situation does so at its own risk and may incur responsibility for its own wrongful conduct in the event of an incorrect assessment( Ibid. ).

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that took countermeasures only when they were taken without authorisation or when they exceed the level authorised by the DSB.

b.

Cause of Countermeasures: An International Wrongful Act

The only cause of countermeasures under international law is the existence of an international wrongful act. That means that they can only be used in response to previous breach of an international obligation. Previous implies that is not possible to take countermeasures before the commission of a wrongful act, or preventive countermeasures. The cause of countermeasures was already confirmed in the Naulilaa arbitration where the tribunal stated that a reprisal serait illgale si un acte pralable contraire au droit des gens nen avait fourni le motif. 173 The condition of a previous breach is implicit in Article 49.1 of the Draft Articles, which provides that they can only be taken against a State which is responsible for an internationally wrongful act.174 Equally, under the WTO system, countermeasures can only be taken in response to an international wrongful act or, in the words of the DSU, an infringement of the obligations assumed under the covered agreements that constitutes a case nullification or impairment of benefits.175 The concept of nullification or impairment is included in Article XXIII, paragraph 1, of the General Agreement of Tariff and Trade (GATT) of 1947, which provides:

Op. cit. (note 53), at p. 1056. Article 19.1 of the DSU. 175 Article 3.8 of the DSU. The concept of nullification or impairment originated in the bilateral trade agreements negotiated in the 1920s and 1930s to address those situations where there was a violation of a trade agreement or a situation that does not constitute an international wrongful act but that the party must modify because it prejudices the balance of concessions of the parties concerned. This concept was included among the provisions of dispute settlement of the Havana Charter for the proposed International Trade Organization. See PETERSMANN, E.U. Violation-Complaints and Non-Violation Complaints in Public International Trade Law, German Yearbook of International Law , vol. 34, 1991, pp. 175-229, at p. 196. See also Article 93 of the Havana Charter for an International Trade Organization and GATT, Analytical Index: Guide to GATT Law and Practice, 1994, 6 th ed., pp. 3-11.
173 174

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If any contracting party should consider that any benefit accruing to it directly or indirectly under this Agreement is being nullified or impaired or that the attainment of any objective of the Agreement is being impeded as the result of (a) the failure of another contracting party to carry out its obligations under this agreement, or (b) the application by another contracting party of any measure, whether or not it conflicts with the provisions of this Agreement, or

(c)

the existence of any other situation.

First, concerning the so-called violation complaints, Article XXIII.1(a) includes the violation of international trade obligations under the WTO treaty. 176 Wrongful acts under the WTO cover the non-fulfilment of a vast game of obligations of different nature under the covered agreements, as for example obligations related to subsidies, intellectual property rights, safeguards, anti-dumping,177 and other obligations that would threaten the liberalisation of trade of goods and services between nations. These obligations, as a consequence of being included in an international treaty, are subject to international law. These obligations share in with the Draft Articles that there exists an international wrongful act as soon as an international obligation is not performed, independently of the existence or inexistency of damage, according to the principle of objective responsibility for result. In other words: material damage is not a constitutive element of an internationally wrongful act nor a requirement of State Responsibility.178 This characteristic of State Responsibility is included in the DSU, which provides:
In cases where there is an infringement of the obligations assumed under a covered agreement, the action is considered prima facie to constitute a case of nullification or impairment. This means that there is normally a presumption See PETERSMANN, E.U., ibid . See ROESSLER, Frieder, The Concept of Nullification and Impairment in the Legal System of the World Trade Organization, in PETERSMANN, E.U. (ed), International Trade Law and the GATT/WTO Dispute Settlement System, Studies in Transnational Economic Law , vol. 11, Deventer and Boston, Kluwer Law and Taxation Publishers, 1997, pp. 123-142. 178 PETERSMAN, E.-U., op. cit. (note 2), at p. 136.
176 177

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that a breach of the rules has an adverse impact on other Members parties to that covered agreement, and in such cases, it shall be up to the Member against whom the complaint has been brought to rebut the charge.
179

Therefore, the party that decides to bring a case before the DSB does not need to prove any damage. The DSBs panel will only limit itself to determine if there are any measures contrary to the WTO treaty, but it will not analyse if this measure produced any damage to the injured State. Only in a more advanced phase of the dispute settlement procedure will arbitrators under Article 22.6 analyse the level of damage in order to determine the level of countermeasures, if authorisation to apply countermeasures is requested. Secondly, in relation to the so-called non-violation complaints, Article XXIII.1 (b) of GATT deals with these situations. This is a very controversial notion of international liability for injurious consequences arising out of acts not prohibited by international law, which presupposes that a member can nullify or impair its commitments to another Member without violating an obligation. It is based on the assumption that the benefits Governments expect to obtain from trade agreements can be negated by permissible actions by another Government that could not reasonably have been anticipated at the time of the negotiation of the agreement. 180 Non-violation complaints were kept under WTO besides the criticism of many scholars.181 In addition, some authors have wondered if the concept is still viable with the increasing linkage to agreements that were outside the WTO system (such as environment or labour protection), while others speculate whether the WTO should still keep a concept that was constructed for a system based on diplomatic conciliation.182
Article 3.8 of the DSU PALMETER, David N. and MAVROIDIS, Petros C, Dispute Settlement in the Word Trade Organization: practice and procedure , Cambridge, Cambridge University Press, 2004, 330 pp., at p. 163. 181 For example, judge Pescatore proposed to delete this concept that he considered to be no more than a legal fantasy. See PESCATORE, Pierre., The GATT Dispute Settlement Mechanism. Its Present Situation and its Prospects, JWT , February 1993, pp. 5-20, at p. 19. Quoted in PETERSMANN, op. cit. (note 2), at p. 146. 182 See COTTIER, T. and NADAKAVUKAREN Schefer, K., Non Violations-Complaints in WTO/GATT Dispute Settlement: Past, Present and Future, in E.-U. Petersman (ed),
180 179

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Even if non-violation complaints are not very common under the GATT/WTO dispute settlement system, 183 and that the panel in the Fuji/Kodak case considered that these cases should be approached with caution and should remain an exceptional remedy184, the discussion of whether the non-violation complaints constitute a breach of an international obligation would have important consequences in the issue of countermeasures, because under general international law those measures can be resorted to only in response to an international wrongful act. Some authors have tried to resolve the problem of the obligatory character of non-violation complaints by considering that they constitute a violation of the principles of international law and suggest that the WTO should recognize only those non-violation complaints that are violations of the equity-based principle of good faith under international law.185 Moreover, the fact that under the WTO law the determination of the existence of a non-violation complaint has binding force, reinforces the idea that we are confronted with an international obligation, at least since the adoption of the panel or appellate body report. In addition to these arguments, another element that reinforces the obligatory character of non-violation complaints is the fact that they are a particular kind of obligation. In this respect, Article 26.1 (b) of the DSU provides that the non-violation complaint needs to be accompanied with specific evidence of harm, in order to prove damages, because the presumption that infringement of an obligation of the agreements constitutes prima facie a case of nullification and impairment does not apply in these cases. 186 Based on the fact that damage must be proven, it
International Trade Law and the GATT/WTO Dispute Settlement System , Kluwer Law International, The Hague, London, Boston, 1999, pp.145-183, at p. 147. 183 GATT panels found non-violation nullification and impairment in four out of 14 instances in which it was alleged. Under WTO non-violation complaint was alleged in one case, in the so-called Kodak/Fuji case, but the Panel concluded that the United States had not demonstrated that the Japanese measures nullified of impaired benefits or assorted less favourable treatment to imported photographic products. See Japan Measures Affecting Consumer Photographic Film and Paper, complaint by the United States, WT/DS44/R, DSR 1998:IV, pp. 1177-1827, at p. 1767, para. 10.402. 184 Ibid. , p. 1648, para. 10.37. 185 Op. cit. (note 183), at p.146 186 Ibid. , at p. 154.

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could be argued that non-violation complaints are part of the kind of responsibility based on the fault or want of due diligence187 that characterise the international regimes related to consequences of activities non-incompatible with international law (i.e. responsibility for the transport of radioactive substances, the damages as a consequence of the launch of satellites, or damages on the sea caused by oil pollution).188 In sum, there is no doubt that the object of a violation complaint is an international wrongful act and it seems that non-violation complaints would make special kinds of wrongful acts. Furthermore, situation complaints under GATT XXIII.1(c) are unlikely to happen.189 These elements seem to prove that the countermeasures under WTO law can only be applied in response to an international wrongful act, as is the case in general international law.

c.

Object of Countermeasures: The Responsible State

Under general international law there is a prohibition to resort to countermeasures against a State other than the State responsible for an international wrongful act. The object of countermeasures is the nonfulfilment of an international obligation, in response to the nonfulfilment of another international obligation. This implies that a certain link of causality must exist between the action and the reaction that involves the wrongful act and the countermeasure.190 This causality, the relationship between the cause (the wrongful act) and the effect (in this case the possibility to apply countermeasures) are granted when there is a correspondence between the subjects involved in the two obligations that are infringed. If this correspondence between the two infringements is not fulfilled, there would be two causes (two wrongful acts) and not a cause and an effect (the elements that composes an international obligation), i.e. the fulfilment of a conduct (act or omission) and a

See CRAWFORD, J., op. cit . (note 28), at p.82. See NGUYEN QUOC, D., op. cit. (note 25), at p. 763. Op. cit. (note 180), at p. 261. 190 Op. cit. (note 44), at p. 70.
187 188 189

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consequence in case that conduct is not fulfilled. Thus, third parties cannot be the target of countermeasures. The application of countermeasures against a State other than the doer of the international wrongful act would go against that logic. Otherwise, the third State -the State victim of the argued countermeasure- would have the possibility to take action based on this new infringement: apply countermeasures and require compliance. The inadmissibility of reactions against third States was already expressed in the Cysne award where the tribunal stated: Les reprsailles ne sont admissibles que contre lEtat provocateur.191 The IIL in its 1934 resolution also expressed that States victims of breaches must [l]imiter les effets des reprsailles lEtat contre qui elles sont diriges, en respectant, dans toute la mesure du possible, tant les droits des particuliers que ceux des Etats tiers. 192 This condition is codified in the Draft Articles, which provides that [a]n injured State may only take countermeasures against a State which is responsible for an internationally wrongful act.193 By the same token, under WTO law countermeasures can be undertaken only against the responsible State, but the difference here is that it is a third party (the DSB) and not the victim of the alleged infringement that determines which is the responsible State. Thus, under WTO law, the responsible State means the member that fails to bring the measure found to be inconsistent with a covered agreement into compliance therewith,194 that is to say, the State that fails to implement the recommendation and rulings of the DSB or, in the words of the DSU, the Member concerned.195 That implies that customary rules on countermeasures also share with the WTO system the idea that countermeasures cannot be directed against third States.

Op. cit. (note 58), at p. 1057. Article 6, para. 3, of the 1934 Resolution, op. cit. (note 85). Article 49.1 of the DASR 194 Article 22.7 of the DSU 195 According to the original footnote 9, of Article 19 of the DSU: Member concerned is the party to the dispute to which the panel or Appellate Body recommendations are directed.
191 192 193

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In addition, a distinction must be made between the different ways in which countermeasures can affect third states. In the Cysne award the tribunal distinguished between two cases: the voluntary or direct reaction of a State victim of a wrongful act towards a third state (measures that are forbidden under international law); and those situations where the reaction affects third states but in an indirect or involuntary manner (the secondary effects).196 Under WTO law, since countermeasures usually involve trade restrictions, those measures are likely to affect the interest of third states, particularly in sectors that are vulnerable to variations in international trade and in developing countries. The DSU contains some regulations in order to deal with the effects of countermeasures in third countries. For WTO Member States considering the possibility of applying countermeasures shall take into account the broader economic elements related to the nullification or impairment and the broader economic consequences of the suspension of concessions or other obligations.197 Moreover, the DSU contains rules related to disputes involving least-developed country members198 that are also applicable when the dispute indirectly involves the interests of this category of countries. Nevertheless, the rules included in the WTO treaty do not seem to be fully satisfactory, since they are too vague and do not expressly mention the interest of third parties. These regulations should be interpreted in the light of customary rules concerning the effects of countermeasures that seem to be more specific with respect to the effect on third states. In
The Tribunal stated: Les reprsailles ne sont admissibles que contre lEtat provocateur. Il se peut, il est vrai, que des reprsailles lgitimes, exerces contre un Etat offenseur, atteignent des ressortissants dun Etat innocent. Mais il sagira l dune consquence indirecte, involontaire, que lEtat offens sefforcera, en pratique , toujours dviter ou de limiter autant que possible. Au contraire, les mesures prises par lEtat allemand, en 1915, vis--vis des navires de commerce neutres, se dirigeaient directement et volontairement contre des ressortissants dEtats innocents des violations de la D.L. [Dclaration de Londres] imputes lAngleterre et ses allis. Elles constituaient ds lors, pur autant quelles ntaient pas conformes la D.L., des actes contraires au droit des gens. (op. cit. (note 58), at p. 1057). 197 Article 22.3 (a) of the DSU, (emphasis added). 198 Article 24.1 of the DSU.
196

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addition, under the WTO dispute settlement system, even if it is not always possible to avoid the collateral effects of countermeasures in third States, those member States that resort to countermeasures, and the DSB when authorising and monitoring them, should be particularly concerned in the incidental consequences on the position of third States. In this respect, the work of the different organs of the United Nations on the effects of sanctions on third States prove to be useful. The Committee on Economic, Social and Cultural Rights discussed the effects of economic sanctions (including measures imposed by States) on civilian populations and stressed that whatever the circumstances those kinds of measures should always take full account of the provisions of the International Covenant on Economic, Social and Cultural Rights.199The General Assembly, for its part, has stressed that in the formulation of sanction regimes, due account should be taken of the potential effects of sanctions on third States and considered that the views of third States which could be affected by the imposition of sanctions shall be taken into consideration.200 Furthermore, it could arise that the state taking countermeasures under the WTO system incurs in international responsibility for the effects on third States. In this sense James Crawford has pointed out:
In a situation where a third State is owed an international obligation by the State taking countermeasures and that obligation is breached by the countermeasure, the wrongfulness of the measure is not precluded as against the third State. In that sense the effect of countermeasures in precluding wrongfulness is relative. It concerns the legal relations between the injured State and the responsible State.
201

199 General Comment 8 (1997), E/C.12/1997/8, 5 December 1997, para. 1. See also the Note by the Security Council President on Proposals to Improve the Work of the Sanctions Committee (S/1999/92OF, 29 January 1999). Moreover, it stated that: it is essential to distinguish between the basic objective of applying political and economic pressure upon the governing elite of a country to persuade them to conform to international law, and the collateral infliction of suffering upon the most vulnerable groups within the targeted country. Ibid , para. 4 200 Resolution on the Implementation of the Provisions of the Charter of the UN related to Assistance to Third States Affected by the Application of Sanctions , General Assembly Resolution, A/RES/57/25 of 19 November 2002, p. 3. 201 CRAWFORD, J., op. cit . (note 28), at p. 285

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d.

Temporary Character and Reversibility of Countermeasures

In general international law there is a well established principle, which provides that countermeasures are temporary measures. The Naulilaa arbitration already stated that reprisals should be provisional, because they have as effect suspendre momentanment [] lobservation de telle out telle rgle du droit des gens.202 For its part, the resolution of the IIL established that States resorting to reprisals must cesser les reprsailles aussitt quil aura t obtenu une satisfaction raisonnable.203 The ILC has codified the temporal character of countermeasures in the Draft Articles, which provides that countermeasures are limited to the non-performance for the time being of international obligations of the state.204 In addition, when dealing with the termination of countermeasures, it provides: Countermeasures shall be terminated as soon as the responsible State has complied with its obligations under Part Two in relation to the internationally wrongful act.205 These obligations under the Draft Articles normally mean the cessation of the wrongful act and reparation. Similarly, countermeasures under the WTO system have a temporary character, which means that those measures must cease once the aim of its adoption has been fulfilled or, in other words, when legality is restored. Otherwise, they would create a new situation of wrongfulness that would extend from the cessation of the wrongful act until the termination of the countermeasure, thus creating another situation of nullification or impairment. Following this logic, the DSU provides:

Op. cit. (note 55), at p. 1026. Art. 6, para. 6, of the DASR. 204 Article 49.2 of the DASR (emphasis added). These regulations seem to put an end to a debate in international doctrine on the temporal or permanent character of some countermeasures. Notwithstanding the fact that Sicilianos considers that in particular circumstances states can resort to irreversible countermeasures, as for example in the case of the denunciation of a treaty ( op. cit. (note 44), at p. 272). 205 Article 53 of the DASR.
202 203

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The suspension of concessions or other obligations shall be temporary and shall only be applied until such time as the measure found to be inconsistent with a covered agreement has been removed, or the Member that must implement recommendations or rulings provides a solution to the nullification or impairment of benefits, or a mutually satisfactory solution is reached.
206

Another aspect of the temporary character of countermeasures is the condition of reversibility. According to the ILC project:
Countermeasures shall, as far as possible, be taken in such a way as to permit the resumption of performance of the obligations in question.
207

This means that countermeasures shall not only be terminated when the responsible State complies with its international obligations but also they must be taken in a way that allows the resumption of the obligations when the wrongful act has ceased. Thus, States shall take countermeasures in an international obligation that can be resumed and not in obligations wherein permanent infringement would create a new situation of wrongfulness, for example, in the case of the suspension of a dispute settlement provision contained in a treaty. 208 Reversibility was recognised as one of the conditions for the application of countermeasures by the ICJ in the Gab kovo-Nagymaros Project case. 209 It is suggested in this work that even if the DSU has no regulation related to the reversibility character of countermeasures, the suspension of concessions or other obligations under WTO law should be undertaken in such a way as to permit the resumption of the obligation in question. Also in this case, the condition of reversibility existing under general international law could be fully applicable under WTO law.

Article 22.8 of the DSU. Article 49.3 of the DASR. 208 Appeal Relating to the Jurisdiction of the ICAO Council, op. cit. (note 68) at p. 53, para. 16. 209 Gab kovo-Nagymaros Project, op. cit. (note 42), at p. 55, para. 87.
207

206

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e.

Purpose of Countermeasures

The purpose of countermeasures in international law is to induce compliance. This was recognised by the ICJ in the Gab kovo-Nagymaros Project case where the tribunal considered the purpose of inducing compliance as a condition of countermeasures, which means to induce the wrongdoing State to comply with its obligations under international law.210 This main function of countermeasures is codified in the Draft Articles, which provides that countermeasures be taken in order to induce that State to comply with its obligations under Part Two211 of the Articles. These obligations under general international law are normally the cessation of the wrongful act and reparation. Under the WTO regime, the purpose of countermeasures is also to induce compliance. Even if the DSU does not expressly mention the purpose of countermeasures, the function of these measures has been recalled by arbitrators under Article 22.6 of the DSU in all their awards.212 Nevertheless, here the concept of compliance has, on principle, a more limited meaning than in general international law. In WTO law compliance normally means the withdrawal of the measure found to be inconsistent with a covered agreement. In this sense the DSU provides:
In the absence of a mutually agreed solution, the first objective of the dispute settlement mechanism is usually to secure the withdrawal of the measures concerned if these are found to be inconsistent with the provisions of any of the covered agreements.
213

By the same logic, Article 19.1 of the DSU prescribes:

Ibid. Article 49.1 of the DASR 212 EC-Bananas , WT/DS27/AB/R, op. cit. (note 118) para. 136.; EC-Bananas , WT/DS27/ARB, op. cit. (note 156) para. 2.13, Decision by the Arbitrators, European Communities Measures Concerning Meat and Meat Products (Hormones) Original Complaint by the United States Recourse to Arbitration by the European Communities under Article 22.6 of the DSU , WT/DS26/ARB, 12 July 1999, DSR 1999:III, 1105, para. 39. Decision by the Arbitrators, Brazil Export Financing Programme for Aircraft Recourse to Arbitration by Brazil under Article 22.6 of the DSU and Article 4.11 of the SCM Agreement (Brazil Aircraft), WT/DS46/ARB, circulated on 28 August 2000, para. 3.44. 213 Art. 3.7 and 22.8 of the DSU
210 211

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Where a panel or the Appellate Body concludes that a measure is inconsistent with a covered agreement, it shall recommend that the Member concerned bring the measure into conformity with that agreement.

Compliance is thus the first objective of the DSU dispute settlement mechanism and can be considered as being the equivalent of the obligation of cessation of a wrongful act under general international law. This would imply that under WTO there is no obligation for the losing party to make reparation for damages produced by measures that are not in conformity with the WTO agreements. Since there is no regulation related to reparation, it seems that DSB decisions are limited to requesting cessation of the unlawful measures ex nunc, i.e. without the possibility of establishing reparation for retroactive damages. 214 Some authors argue that the impracticality of retroactive remedies is due to the main objective of the WTO, which is to protect (and to re-establish) the balance of concessions between the parties, and not to make a reparation for the loss of trade opportunities.215 Despite the continuous emphasis made by arbitrators on the purpose of countermeasures -to induce compliance (rather than to re-balance concessions)- some authors still doubt about the purpose of countermeasures and consider that the implicit objective of countermeasures under WTO law is to compensate rather than to induce compliance. 216 This view is criticised by other authors who consider
214 This interpretation seems to be confirmed by the reactions produced as a consequence of the panel report in Australia - Automotive Leather . Panel Report, Australia Subsidies Provided to Producers and Exporters of Automotive Leather, WT/DS126/RW, adopted 11 February 2000. Here the panel acting under article 21.5 of the DSU accepted the possibility of applying retrospective remedies. This decision was widely criticised by the parties in dispute and by other countries during the subsequent DSB meeting, arguing that there is no basis for retrospective remedies either in GATT/WTO practice or in the WTO treaty, and that it has not been followed by panels and parties in subsequent WTO disputes. See GOH, Gavin and ZIEGLER, Andreas R., Retrospective Remedies in the WTO after Automotive Leather , JIEL Vol. 6, Issue 3, September 2003 pp. 545-564. 215 See, LUFF, David, Le droit de lOMC , Bruxelles, Bruylant, 2004, 1277 pp., at p. 926. This author considers that reparation for the loss of trade opportunities will be a task of national jurisdictions. ( Ibid. ) 216 Axel Desmedt considers that, even if compliance is the ultimate goal of the DSU, in calculating the amount of countermeasures the DSU contents itself with compensation of actual trade losses. DESMEDT, Axel, Proportionality in WTO Law, JIEL , vol. 4, 2001,

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restoring the bilateral balance as something conceived under GATT that does not fit in well with WTO law, where trade obligations are viewed as being owed to the entire community. 217 In sum, it seems that the concept of compliance is narrower in WTO law since reparation is more restrained in this subsystem. In general international law this concept implies cessation and reparation, while in WTO law it would only imply the withdrawal of a measure incompatible with the WTO treaty. Nevertheless, this difference is in complete harmony with general international law because of the possibility of States to limit the rules of general international law by virtue of the principle of lex specialis .

f.

Countermeasures and Sanctions

Another question that arises in connection with the purpose of countermeasures is whether countermeasures are sanctions, i.e. if they have a punitive character. This discussion also takes place in general international law. The notion of sanctions in international law is a controversial issue that has produced strong debates in the doctrine going beyond the merely semantic aspect.218 Nevertheless, most scholars seem to agree that, besides being two different concepts, countermeasures and sanctions share some characteristics: both are responses to an international wrongful act, directed against the author of that act, and both imply some degree of coercion and must meet some conditions as proportionality and reversibility. However, authors do not agree as to what the differences are between each category of acts.

pp. 441-480, at p. 450. See also PAUWELYN, op. cit. (note 166), p. 343; PALMETER, David and ALEXANDROV, Stanimir A., Inducing compliance in WTO Dispute Settlement, in KENNEDY, D. and SOUTHWICK J. (eds.), The Political Economy of International Trade Law , Cambridge, Cambridge University press, 2002, pp. 646-666, at p.647. 217 Cf. CHARNOVITZ, Steve, The WTOs Problematic Last Resort Against Noncompliance, Aussenwirtschaft, n. 57 vol. IV, 2002, pp. 409-439, at p. 415. 218 See for example the debate within the ILC, YILC , 1979, Vol. I, p. 63, para. 31; Alland ( Op. cit. (note 41), at p. 213), and WHITE, N.D. and ABASS, A., Countermeasures and sanctions, in EVANS, Malcom D. (ed), International Law , Oxford, 2003, pp. 505-527.

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One part of the doctrine, drawing a parallel between international law and municipal law, assimilates sanctions to criminal responsibility and countermeasures to civil responsibility, and considers that the distinction lies in the punitive character of these measures.219 Following this line of reasoning, Jean Combacau considers that the main objective of a sanction is to give an exemplary measure directed to the responsible State in order to prevent it from behaving wrongfully again, and also directed to third parties to show what the response would be if they reacted in a similar manner.220 Nevertheless, in the definition of sanction most of the literature emphasizes the character of the agent determining the measure. According to this doctrine, the idea of sanctions responds to a centralised system where a third party, with some degree of authority over those responsible for a wrongful act, has the power to control and supervise the behaviour of States. 221 Georges Abi-Saab, for example, defines sanction as a coercive measure taken against a target State or entity in application of a decision by a socially competent organ, i.e. an organ legally empowered to act in the name of the society or community that is governed by the legal system. 222 Thus, the idea of punishment through sanctions should only exist in a collective system of enforcement such as that provided in Chapter VII of
Roberto Ago for example, when referring to the legitimate application of a sanction as a circumstance precluding wrongfulness, used the term sanction to describe a measure which, although not necessarily involving the use of force, is characterised, at least in part, by the fact that its purpose is to inflict punishment. That is not the same purpose as coercion to secure the fulfilment of the obligation, or the restoration of the right infringed, or reparation, or compensation ( YILC , 1973, vol. II, para. 5, p. 175). 220 COMBACAU, Jean, Sanctions, in BERNHARDT, Rudolf (ed.), Encyclopedia of Public International Law , North-Holland Amsterdam, 1992, Vol. IV, p. 314 221 The concept of sanction would also imply some degree of juridical procedure that includes due process and the respect of the right to defence in order to determine the wrongdoer and to calculate the sanction. 222 ABI-SAAB, Georges, The Concept of Sanction in International Law, in GOWLLAND-DEBBAS, Vera (ed.) United Nations Sanctions and International Law, HEI, Geneva - Kluwer Law International, The Hage 2001, 401 pp., at p. 32. In accord, CRAWFORD, James, The relationship between sanctions and countermeasures, in Gowlland-Debbas, Vera (ed.), United Nations Sanctions and International Law , HEI, Geneva-Kluwer Law International: The Hage 2001, 401 pp., at p. 61.
219

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the United Nations Charter. In this case sanctions determined by the Security Council must be followed by States on the basis of Article 25 of the UN Charter, which provides that members agree to accept and carry out the decisions of the Security Council in accordance with the Charter. Accordingly, when the Security Council decides to apply embargoes or any other economic sanction, States are obliged to follow those decisions. The situation is different in relation to the authorisation to apply countermeasures under WTO law. Even if decisions adopted by the DSB are binding to the parties in the dispute, the decision concerning countermeasures is an authorisation that gives the complainant (and only the complainant) the right to apply countermeasures but not the obligation to resort to them. In fact, in many cases members have not taken countermeasures despite the authorisation of the DSB. The optional character of the authorisation to take countermeasures, and the fact that it is addressed only to the State (or States) victim to the wrongful measure, hinders from qualifying countermeasures under WTO law as sanctions. In other words, in a multilateral dispute settlement system such as the WTO dispute settlement system, even if there is a third party that determines the existence of a wrongful conduct and authorises the application of countermeasures, there is no obligation to apply them and the authorisation is valid only to the State to which it is addressed. This assertion is reinforced by the fact that WTO arbitrators have explicitly stated that DSU countermeasures do not have a punitive nature.223 Consequently, neither in international law nor in WTO law can countermeasures be considered as sanctions.

223 Decision by the Arbitrators, European Communities Measures Concerning Meat and Meat Products (Hormones) Original Complaint by the United States Recourse to Arbitration by the European Communities under Article 22.6 of the DSU , WT/DS26/ARB, 12 July 1999, DSR 1999:III, 1105, para. 39.

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g. i.

The Level of Countermeasures The Concept of Proportionality in General International Law

In order to achieve the purpose of compliance, the aim of countermeasures is to persuade the responsible State to withdraw the wrongful act. Apart from being a circumstance precluding wrongfulness, countermeasures imply, in essence, the non-fulfilment of an international obligation. With the aim of being persuasive, these measures sometimes produce unfair situations, principally because strong countries have a greater possibility to resort to them and because without limits, countermeasures could result in an escalation of reactions and counter reactions. Their exceptional character entails that countermeasures are subject to some limitations in order to provide security and predictability in international relations. Thus, under international law the level of countermeasures is limited by some principles which can acquire the form of equivalence, reciprocity or appropriateness, but that are encompassed in the principle of proportionality. The necessity to respect the principle of proportionality in applying countermeasures in international law has already been stated in the Naulilaa arbitration224 and reaffirmed by the IIL in 1934.225 The principle of proportionality was also analysed in the Air Services226arbitration, where the tribunal considered it was insufficient to evaluate the issue of proportionality of countermeasures only in quantitative terms. Yet, it considered that it was also necessary to take into account qualitative aspects of the wrongful act or, in the words of the tribunal, importance of the questions of principle arising from the alleged breach. The tribunal stated:

224 According to the award it should be considered as excessive and therefore unlawful reprisals out of all proportion to the act that motivated them. (Op. cit. (note 53), at p. 1028) 225 The resolution provided that in applying reprisals states must [p]roportionner la contrainte employe la gravit de lacte dnonc comme illicite et limportance du dommage subi ( op. cit. (note 85), Article 6, para. 2). 226 Op. cit. (note 62).

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It is generally agreed that all counter-measures must, in the first instance, have some degree of equivalence with the alleged breach : this is a well-known rule. It has been observed, generally, that judging the proportionality of countermeasures is not an easy task and can at best be accomplished by approximation. In the Tribunals view, it is essential, in a dispute between States, to take into account not only the injuries suffered by the companies concerned but also the importance of the questions of principle arising from the alleged breach .[] If the importance of the issue is viewed within the framework of the general air transport policy adopted by the United States Government and implemented by the conclusion of a large number of international agreements with countries other than France, the measures taken by the United States do not appear to be clearly disproportionate when compared to those taken by France.
227

For its part, the ICJ in the Gab kovo-Nagymaros Project case analysed the condition of proportionality of countermeasures and stated that the effects of a countermeasure must be commensurate with the injury suffered, taking account of the rights in question.228 Thus, under general international law two criteria determine the proportionality of countermeasures: (a) the gravity of the internationally wrongful act, and (b) the rights in question. The Draft Articles on State responsibility codify the principle of proportionality in the following terms:
Countermeasures taken by an injured State shall not be out of proportion to the degree of gravity of the internationally wrongful act and the effects thereof on the injured State.
229

ii.

Determination of the Level of Countermeasures in the WTO System

Under the WTO regime the concepts that expressly determine the level of countermeasures are the principle of equivalence and the principle of appropriateness.230
Ibid ., para. 83. Gab kovo-Nagymaros Project, op. cit. (note 42), at p. 56, para. 85. 229 Article 51 of the DASR 230 It is worth noting that in the WTO dispute settlement system the principle of proportionality is only mentioned in a footnote, despite being a condition of countermeasures recognised in State practice, doctrine and jurisprudence.
227 228

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Thus, when establishing the limits of the countermeasures the DSU requires that:
The level of the suspension of concessions or other obligations authorized by the DSB shall be equivalent to the level of the nullification or impairment.
231

For its part, the Agreement on Subsidies and Countervailing Measures (SCM), in relation to countermeasures in response of prohibited subsidies, requires that:
In the event the recommendation of the DSB [to withdraw the subsidies] is not followed within the time period specified by the panel [] the DSB shall grant authorization to the complaining Member to take appropriate countermeasures
232

In addition, the SCM Agreement, in its original footnotes 9 and 10 provides, with exactly the same wording, that the expression appropriate is not meant to allow countermeasures that are disproportionate in the light of the fact that the subsidies dealt with under these provisions are prohibited. 233 This different wording between the two agreements has led authors to suggest that there were two different standards for the imposition of countermeasures. One more flexible, Article 4.11 of SCM Agreement with its requirements similar to those of general international law and another more limited, Article 22.4, with a more restrictive requirement of equivalence. This seems to be corroborated by the WTO arbitral case law.

Article 22.4 of the DSU. When it refers to actionable subsidies, SCM Agreement requires countermeasures to be commensurate instead of appropriate or equivalent. 233 The original footnotes 9 and 10 with exactly the same wording provides that This expression is not meant to allow countermeasures that are disproportionate in light of the fact that the subsidies dealt with under these provisions are prohibited. The requirement of countermeasures to be appropriate was already present in Article XXIII.2 of GATT 1947, which stated that when the parties consider that the circumstances are serious enough to justify such action, they may authorise a contracting party or parties to suspend the application to any other contracting party or parties of such concessions or other obligations under this Agreement as they determine to be appropriate in the circumstances.
232

231

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In Bananas III the arbitrators, compared the term appropriate provided under Article XXIII.2 of GATT with the term equivalent provided under Article 22.4 of the DSU and considered that the latter implies a higher degree of correspondence, identity or stricter balance between the level of the proposed suspension and the level of nullification or impairment. Therefore, [] the benchmark or equivalence reflects a stricter standard of review.234 Following a similar line of reasoning, the arbitrators in Brazil Aircraft saw Article 4.11 and 4.12 of the SCM Agreement as special or additional rules and considered that provisions of both agreements must be read so as to give meaning to all of them. Based on this reasoning, the tribunal stated that there is no legal obligation that countermeasures in the form of suspension of concessions or other obligations be equivalent to the level of nullification or impairment.235 In US FSC the arbitrators considered that the different wording of the correspondent articles in the SCM Agreement implied that there was an intention to regulate the two situations differently, and that a sense must be accorded to this difference.236 In sum, it is clear that the distinction made between the two concepts was designed to have practical effects, as has been pointed out by the doctrine and WTO case law. Nevertheless, even if the two concepts have some differences, the dispute settlement system is only one and is governed by DSU, which provides the rulings for dispute settlement and the same possibilities of recourse to the Appellate Body and to arbitration. In addition, under both Agreements arbitrators have considered that the purpose of countermeasures is to induce compliance. Even if there are differences, the concepts of equivalence and appropriateness are closely linked, because both refer to the limitations of countermeasures and both are framed by the broader (but not less restrictive) principle of proportionality. This is proved by the fact that the arbitrators have
234 EC Bananas Recourse to Arbitration by the EC under Article 22.6 of the DSU, op. cit. (note 156), para. 6.5. 235 Decision of the Arbitrators, Brazil Export Financing Programme for Aircraft, WT/DS46/ARB, op. cit. (note 146), at para. 3.57. 236 Decision of the Arbitrators, United States Tax Treatment for Foreign Sales Corporations Recourse to Arbitration by the United States under Article 22.6 of the DSU and Article 4.11 of the SCM Agreement, WT/DS108/ARB, 30 August 2002, para. 5.47-5.50.

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invoked proportionality when the principle of equivalence appropriateness does not suffice to determine the level countermeasures.237

or of

iii.

Equivalence, Reciprocity and Proportionality

Many authors have considered the WTO dispute settlement system, which is based on the concept of equivalence, as a more restrictive regime than that of general international law, which follows the concept of proportionality. 238 Mavroidis, for example, argues that the criteria to determine the limits of countermeasures on the gravity of the internationally wrongful act, as it happens in general international law, seem to adopt a rather relaxed standard of proportionality.239 Axel Desment considers that contrary to customary international law, WTO law will not consider the gravity of the wrongful act. Instead, countermeasures must be tailored according to the injury (i.e. the nullification or impairment) suffered as a result of the violation.240 Thus, in WTO law countermeasures would be calculated according to the injury (the nullification or impairment) suffered as a result of the violation without taking into account any other element. This conception is linked to the concept inherited from GATT, which considers that nullification or impairment implies an alteration on the balance of benefits and consequently, the function of countermeasures would be limited to compensate in order to re-establish that balance. 241 Under this framework, the concept of equivalence would be assimilated into the concept of reciprocity. Enzo Cannizzaro calls normative countermeasures those measures aimed at reproducing, at a different level, the legal balance altered by the breach. In this context,

See infra (notes 268, 271 and 274). Cf. DESMEDT, Axel, op. cit. (note 216) at p. 448. MAVROIDIS, Petros C., Remedies in the WTO Legal System: Between a Rock and a Hard Place, EJIL , 2000, v. 11, n. 4, pp.763-813, at p. 773. 239 MAVROIDIS, ibid. 240 DESMEDT, Axel, op. cit. (note 216) at p. 448. 241 See PAUWELYN, J., op. cit. (note 166), p. 340.
237 238

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proportionality is assessed by the capacity of the response to attain a legal equivalence between breach and response. He considers that in those cases the concept of proportionality tends thus to overlap with that of reciprocity. 242 The standard of reciprocity is not only applied in international trade, but also in diplomatic relations, in the law of armed conflicts and in the law of treaties.243 Nevertheless, the standard of equivalence has not always produced equitable solutions. For example, in the dispute between India and Pakistan concerning the hijacking incident in 1971 before the ICJ,244 India denied Pakistani civil aircraft clearance to fly over Indian territory. Even if this situation was considered to be equivalent, it was not proportional because damages produced by the response exceeded by far those caused by the alleged breach, since at that time India divided Pakistani territory into two parts.245 In the Air Services arbitration the tribunal considered that even if countermeasures must, in the first instance, have some degree of equivalence with the alleged breach, there are situations where it does not suffice to compare the losses produced by the wrongful act with the losses resulting from countermeasures. Thus, equivalence would be the first step in analysing proportionality, but the analysis would not stop there, when equivalence cannot provide an appropriate solution. However, doctrine and WTO arbitrators have usually argued that the principle of proportionality in countermeasures under international law is broader in scope than the principle of equivalence because it also implies taking into account the gravity of the wrongful act. According to this conception, moving away from the principle of equivalence in the determination of countermeasures would imply admitting countermeasures with a punitive character. Nevertheless, it seems that the

242 CANNIZZARO, Enzo, The Role of Proportionality in the Law of International Countermeasures, EJIL , vol. 12, 2001, pp. 889-916, p. 900. 243 SIMMA, Bruno, Reciprocity, in BERNHARDT, Rudolf (ed.), Encyclopedia of Public International Law , North-Holland, Amsterdam, 1992, Vol. IV, p. 315. 244 Appeal Relating to the Jurisdiction of the ICAO Council op. cit. (note 42) , I.C.J. Reports 1972 , p. 46. 245 Op. cit. (note 242), at p. 901.

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situation in international law is different. In my opinion, under international law the concept of proportionality does not only imply that countermeasures shall be applied considering the degree of gravity of the internationally wrongful act, but also that the effects thereof on the injured State must be considered, as it has been codified by the international law commission.246 This would imply that there are situations where the principle of proportionality is more restrictive than the principle of equivalence. Furthermore, under international law countermeasures are meant to be proportionate, which does not imply that they are punitive.

iv.

Case Law Concerning the Level of Countermeasures in the WTO System

Arbitrators have normally followed the idea that equivalence has to be determined in quantitative terms. Accordingly, equivalent countermeasures are calculated on the basis of a comparison of the trade value of the measure inconsistent with WTO regime with the trade value of the countermeasure. In EC Bananas III, which was the first request for suspension of concessions under Article 22.2 of the DSU, the arbitrators stated that equivalence connotes a correspondence, identity or balance between two related levels, i.e. between the level of the concessions to be suspended, on the one hand, and the level of the nullification or impairment, on the other.247 The arbitrators considered that it is impossible to ensure correspondence or identity between two levels if one of the two is not clearly defined. 248 In order to calculate the level of the US trade flows, the arbitrators used as benchmark losses in US exports of goods to the European communities. 249 This line of reasoning was followed in EC-Hormones ,250 where the arbitrators first calculated the estimated total beef exports without the hormone ban in
Article 51 of the DASR Decision by the Arbitrators, E C Bananas Recourse to Arbitration by the EC under Article 22.6, op. cit. (note 156), para. 4.1. 248 Ibid. , para. 4.7. 249 Ibid. , para. 6.12. 250 European Communities (Hormones), op. cit. (note 223).
247 246

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place and from that amount they deduced actual exports. The result was the value in price terms of EC imports that the United States and Canada were allowed to target with a prohibitive tariff rate of 100 per cent. Thus, the value of the product kept out by the hormone ban was aimed at being equivalent to the value of the product kept out by the countermeasures.251 The issue of taking into account other elements when calculating the level of countermeasures arose in the US Anti-dumping Act of 1916, which was the first case where a WTO Member sought to suspend qualitatively equivalent obligations. In all previous cases, parties seeking to suspend concessions or other obligations had provided a quantitative, monetary figure indicating the amount of suspension sought. In this case, however, the EC wanted to apply a mirror legislation to the 1916 Act of the United States without establishing quantifiable or monetary limits on how its suspension would be applied in practice. The arbitrators rejected the EC argument that the suspension of obligations is somehow equivalent because its proposed measure would replicate the 1916 Act and stated that similar or identical measures may not result in the required equivalence between the level of suspension and the level of nullification or impairment252, because even when identical measures are applied in similar ways, the effects on trade can be dramatically different.253 The arbitrators considered that to establish whether a proposed suspension of obligations was equivalent to the level of suspension or impairment, it was necessary to find out how such suspension would be applied and, to do so, it was necessary to determine the trade or economic effects of the breach in quantitative or monetary terms. 254 The arbitrators concluded that the measures proposed by the EC would be equivalent only if the suspension was applied just up

251 Decision by the Arbitrators, European Communities Measures Concerning Meat and Meat Products (Hormones) Original Complaint by the United States Recourse to Arbitration by the European Communities under Article 22.6 of the DSU , WT/DS26/ARB, 12 July 1999, DSR 1999:III. 252 Decision by the Arbitrators, United States Anti-dumping Act of 1916 (original complaint by the European Communities). Recourse to Arbitration by the United States under Article 22.6 of the DSU , 24 February 2004, WT/DS136/ARB, para. 5.32 (emphasis added).. 253 Ibid ., para. 5.30 (emphasis added). 254 Ibid ., para. 7.2.

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to the level of nullification or impairment sustained by the European Communities as a result of the 1916 Act, but not beyond this amount. Otherwise, it was possible that the EC proposed a suspension that exceed the level of nullification or impairment when it is applied and thereby become punitive.255 With respect to the notion of appropriateness under the SCM Agreement, it seems that arbitrators have not always followed the same reasoning. In Brazil Aircraft256 the arbitrators rejected Brazils argument that the countermeasures must be equivalent to the level of nullification or impairment pursuant to Article 22.4 of the DSU. The arbitrators considered that the term appropriate should not be given the same meaning as the term equivalent because the former allows for more leeway that the word equivalent.257 Moreover, the arbitrators noted that the notion of nullification or impairment is not found in Articles 3 and 4 of the SCM Agreement and for this reason, the level of appropriate countermeasures should not be based only on the level of nullification or impairment. 258 With regards to the definition of the term countermeasures the parties had referred to dictionary definitions but the arbitrators found it more appropriate to refer to its meaning in general international law and use the definition of the Draft Articles on State Responsibility of the ILC and concluded that a countermeasure is appropriate inter alia if it effectively induces compliance.259 Nevertheless, in US FSC 260 the arbitrators moved away from this reasoning. First, by using dictionary definitions instead of referring to the meaning of the term countermeasures in general international law the arbitrators found that the ordinary meaning of the term countermeasures included actions directed either at countering the measure at issue (effectively neutralising the export subsidy), or at
Ibid ., para. 7.1. Decision by the Arbitrators, Brazil Export Financing Programme for Aircraft, WT/DS46/ARB, op. cit. (note 146). 257 Ibid ., para. 3.51 258 Ibid ., para. 138 259 Ibid ., para. 3.45 260 United States Tax Treatment for Foreign Sales Corporations recourse to Arbitration by the United States under Article 22.6, op. cit. (note 236).
255 256

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countering its effects on the affected party, or both. 261 Regarding the meaning of appropriate, the arbitrator concluded that the term was bound by a requirement to avoid disproportion between the proposed countermeasure and either the actual violating measure itself, the effects thereof on the affected Member, or both.262 In this vein, the arbitrator considered that the entitlement to countermeasures is to be assessed in light of the legal status of the wrongful act and the manner in which the breach of that obligation has upset the balance of rights and obligations between Members.263 The arbitrators considered that the relative proportion that should exist implies that there must be no manifest imbalance or incongruity between the wrongful act and the countermeasures.264 The arbitrators considered that in light of the gravity of the breach Members under the SCM Agreement are entitled to assess the appropriateness of such countermeasures with a margin of appreciation, due to the severity of the breach.265 This line of reasoning was followed in Canada Aircraft Credits and Guarantees .266

v.

Situations Where Proportionality Should be Applied in the WTO System

The doctrine and WTO case law concur that the principle of equivalence, generally, is more restrictive than the principle of proportionality. Nevertheless, this could not be the case in all situations. Arbitrators have recognised that in some cases the principle of equivalence would not be adequate in determining the level of countermeasures, e.g. in the case of multiple complaints and in the case of double-counting of nullification or impairment. In addition, there are other situations where it seems that the principle of proportionality should be applied in order to avoid unfair solutions.
Ibid ., para. 5.6. Ibid. , para. 5.19. 263 Ibid ., para .5.24. 264 Ibid ., para. 5.18. 265 Ibid ., para. 5.62. 266 Decision by the Arbitrators, Canada Export Credits and Loan Guarantees for Regional Aircraft Recourse to Arbitration by Canada under Articled 22.6 of the DSU and Article 4.11 of the SCM Agreement , WT/DS222/ARB, 17 February 2003.
261 262

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The first hypothesis is the case of multiple complaints. Since the parties do not need to demonstrate any trade loss in order to initiate dispute settlement, any WTO member could initiate the settlement of a dispute under the SCM Agreement against a single export subsidy and it could be authorised to take countermeasures in the amount of the subsidy. This could create a situation where a defendant is faced with multiple countermeasures, the total of which would exceed the amount of the prohibited subsidy.267 The arbitrators in Brazil Aircraft admitted that this hypothesis could arise and considered that in this case the arbitrator could allocate the amount of appropriate countermeasures among the complainants in proportion to their trade in the product concerned.268 In other words, it would be necessary to resort to proportionality in order to find a solution. Nonetheless in US FSC, when analysing the same hypothesis, the arbitrators moved away from this line of reasoning. Here the arbitrators considered the EC to be entitled to take countermeasures for the entire subsidy amount, despite the fact that the illegal subsidy benefited US exports to all WTO Members, not just the complainant. The arbitrator considered that not to grant prohibited subsidies is an erga omnes obligation owed in its entirety to each and every Member. It cannot be considered to be allocable across the Membership.269 Since the EC was the only complainant, the arbitrators authorised the EC to apply countermeasures for the total amount of subsidies. However, in analysing what would happen if there were multiple complainants seeking to take countermeasures in an amount equal to the value of the subsidy, the arbitrators considered that any hypothesis [of] a future complainant [...] would inevitably give rise to a different situation270 and considered that in a particular case, trade effects rather than the amount
Op. cit. (note 180), p. 294, Brazil Export Financing Programme for Aircraft, WT/DS46/ARB, op. cit. (note 146), para. 3.59 (emphasis added). 269 Decision of the Arbitrators, United States Tax Treatment for Foreign Sales Corporations Recourse to Arbitration by the United States under Article 22.6 of the DSU and Article 4.11 of the SCM Agreement, WT/DS108/ARB, 30 August 2002, para. 6.10. 270 Ibid. , para. 6.29.
267 268

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of the subsidy could enter into consideration as a relevant factor in determining the appropriate amount of countermeasures under Article 4.10 of the SCM Agreement.271 Even if in this case the arbitrators seem to take a more pragmatic case-by-case approach, it appears that to find a solution in those hypothetical cases it would be necessary to resort to the principle of proportionality. The second hypothesis is the problem of double-counting to determine the nullification or impairment. This situation would arise if different WTO Members which have suffered nullification or impairment because of the same trade loss in goods or services, made cumulative requests for suspension of concessions for the same amount of nullification or impairment caused by a Member, provoking thus an overlapping of claims. In Bananas III the arbitrators considered this problem because the US claimed that losses of US exports with third countries (e.g. US fertilizer, pesticides and machinery shipped to the banana-producing countries) should also be considered for the calculation of the level of countermeasures.272 The arbitrators refused to include these elements in the calculation arguing that the countries of origin of the bananas had the right to request authorisation to apply countermeasures.273 Nevertheless, they considered that if they were to allow such double-counting of the same nullification of impairment with different WTO Members, the authorizations to suspend concessions granted by the DSB to different WTO members could exceed the overall amount of nullification or impairment caused by the member that has failed to bring a WTOinconsistent measure into compliance with WTO law. The arbitrators considered first, that this situation would be incompatible with the standard of equivalence -because the same amount of nullification or impairment inflicted on one member cannot be simultaneously inflicted on another-, secondly that such cumulative suspension of concessions by different WTO Members for the same amount of nullification or

Ibid. , para. 6.33. EC Bananas Recourse to Arbitration by the EC under Article 22.6 of the DSU, op. cit. (note 156), para. 6.12 273 Ibid. , para. 6.14
271 272

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impairment would run counter to the general international law principle of proportionality of countermeasures.274 Another hypothesis in which the principle of proportionality can be helpful in determining the level of countermeasures is in cases where the dispute is between countries with manifest differences in the size of their economies. On the one hand, a strong countrys economy is normally diversified in many economic sectors and these countries generally have the power to counterbalance any injury in a particular sector, produced by the imposition of countermeasures. On the other hand, small economies usually depend on specific sectors of the economy and do not have the power to counterbalance injuries to those sectors. Moreover, the trade of strong countries is commonly spread out in various external markets, while the trade of small countries is limited to a number of countries. Closing a trade destination for a small country could imply the impossibility of placing an important amount of goods on which the economy depends, provoking negative effects on the population. In the event that a strong country wanted to take countermeasures against a small country it could occur that an equivalent measure would not be proportional because of the effects that it could produce. In such a case, it appears that a countermeasure lower than the level of nullification or impairment would be enough to achieve compliance. However, it could happen that a small country tried to take countermeasures against a strong country. Here again, since the purpose of countermeasures is to achieve compliance, it would be necessary to authorise a level of countermeasures not equivalent but proportional in order to achieve the withdrawal of the measure. In other words, if proportionality is not taken into account when determining the level of countermeasures, at least to some extent, there is a risk of changing the purpose of countermeasures from being measures designed to induce compliance to being a sort of compensation. In this respect, strictly equivalent countermeasures seem to be more a kind of forcible compensation than countermeasures. This situation would

274

Ibid. , para. 6.16 (last emphasis added).

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produce a type of duplication of the rulings concerning compensation under the DSU as well as a sort of derogation of the conditions for compensation, since one of the aspects that differentiate compensation from countermeasures in the DSU is that the former is voluntary. Moreover, WTO case law normally uses the principle according to which WTO regulations have to be interpreted in such a way as to give effect to all regulations. Consequently, the assimilation of countermeasures with a sort of special compensation would eliminate the drafters intention of providing two different remedies. For these reasons, this work suggest that both the DSB, in authorising countermeasures, and the States, in applying them, should consider other aspects that are inherent to the notion of equivalence and appropriateness, which emanate from the global principle of proportionality. Thus, proportionality should be assessed taking into account not only the quantitative element of the injury suffered, but also qualitative factors such as the importance of the interests protected and the effects of the measures in the target state. In this respect the amount of countermeasures authorised in Canada Aircraft Credits and Guarantees (Article 22.6 Canada)275 seems to show an evolution in the level of countermeasures.276 Here the arbitrators found that, because of Canadas statement that it did not intend to withdraw the subsidy, 277 it was appropriate to increase the amount of authorised countermeasures by an additional 20 percent. The arbitrators consequently awarded Brazil the right to take countermeasures in an amount equal to 120 percent of the amount of the subsidy.278 The steps taken by the arbitrators in US Antidumping Act of 1916 also show an evolution in the determination of the level of countermeasures.279

275 Canada Export Credits and Loan Guarantees for Regional Aircraft Arbitration under Article 22.6 of the DSU, WT/DS222/ARB, 17 February 2003, op. cit. (note 266) , para. 3.92. 276 It has to be noted that this arbitration was under the SCM agreement in which countermeasures must be appropriate. 277 Ibid. , para. 3.7. 278 Ibid. 279 See note 252.

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h.

Obligations Affected by Countermeasures

In general international law there is no requirement that States taking countermeasures are limited to suspension of performance of the same or a close related obligation.280 The only limitation is that the nonperformance of an international obligation as a way of countermeasure shall not affect the respect of human rights, the peremptory norms, or the prohibition of threat or use of force, among other obligations. 281 Nevertheless, in virtue of the principle of lex specialis States can agree between them on which obligations will be excluded from being the target of countermeasures. This seems to be the situation under the WTO system where States parties have agreed to apply countermeasures in the same or related obligation, when it is practicable or effective (Article 22.3), and when a covered agreement does not prohibit such suspension (Article 22.5). In relation to the obligation not to apply countermeasures that are prohibited in any covered agreement, Article 22.5 of the DSU provides: The DSB shall not authorize suspension of concessions or other obligations if a covered agreement prohibits such suspension.282 An example would be the case of General Procurement Agreement (GPA), which prohibits cross-retaliation.283 With respect to the application of countermeasures in the same or related obligation, Article 22.3 of the DSU establishes the so-called principles and procedures that the complaining party shall apply in considering what concessions or other obligations to suspend.284 There is one general principle (the suspension of obligation in the same sector), and two
CRAWFORD, J., op. cit . (note 28), at p. 282. See Article 50 of the Draft Articles. It is worth mentioning that these obligations are also applied to countermeasures under the WTO. 282 Article 22.5 of the DSU 283 GPA Art. XXII:7. The article provides that concessions or other obligations under that agreement may not be suspended as a result of obligations under other agreements, and that disputes involving the GPA may not lead to the suspension of concessions or other obligations under other agreements. 284 Article 22.3 of the DSU
280 281

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subsidiary principles (the suspension of concessions or other obligations across sectors or across agreements, the so-called cross-retaliation) that remains the exception and does not become the rule. 285 The general principle provides that countermeasures should not affect sectors other than those in which a violation of a WTO obligation was found to exist. This is the so-called parallel retaliation. Article 22.3 (a) provides that the complaining party should first seek to suspend concessions or other obligations with respect to the same sector(s) as that in which the panel or Appellate Body has found a violation or other nullification or impairment. The DSU defines the concept of sector,286 even if this definition has been criticised as being too broad.287 But this general principle does not imply that countermeasures shall affect all the sectors in which a violation has been found. In EC Bananas III (US) (Article 22.6 - EC) the US requested authorisation to suspend concessions covering only goods obligations under the GATT 1994, although the underlying violation covered both goods and services under GATS.288 The EC objected this request arguing that when findings of nullification or impairment are found in more than one sector, suspension must be commensurate with the harm experienced in each sector.289 The arbitrators disagreed, holding that the United States has the right to request suspension of concessions in either of these two sectors, or in both, up to the overall level of nullification or impairment suffered.290

EC- Bananas, op. cit. (note 156), para. 3.7. Subparagraph (f) says for purposes of this paragraph, sector means: (i) with respect to goods, all goods; (ii) with respect to services, a principal sector as identified in the current Services Classification List which identifies such sectors; (iii) with respect to trade-related intellectual property rights, each of the categories of intellectual property rights covered in Section 1, or Section 2, or Section 3, or Section 4, or Section 5, or Section 6, or Section 7 of part II, or the obligations under part III, or Part IV of the Agreement on TRIPS; 287 Op. cit. (note 215), at p. 946. 288 EC- Bananas, op. cit. (note 156). para. 1.1. 289 Ibid ., para. 3.8. 290 Ibid ., para. 3.10.
285 286

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The first subsidiary principle is the suspension of obligations in other Sectors under the same agreement, or cross-sectoral retaliation. Article 22.3 (b) provides that if the complaining party considers that it is not practicable or effective to suspend concessions or other obligations with respect to the same sector(s), it may seek to suspend concessions or other obligations in other sectors under the same agreement. The Article also provides a definition of agreement, applicable to the paragraph.291 The second subsidiary principle is the suspension of obligations under another covered agreement, or cross-agreement retaliation. Article 22.3 (c) provides that if the complaining party considers that it is not practicable or effective to suspend concessions or other obligations with respect to other sectors under the same agreement, and that the circumstances are serious enough, it may seek to suspend concessions or other obligations under another covered agreement.292 Here another condition is added for the application of countermeasures under another covered agreement, i.e. the seriousness of the circumstances. Thus, the complaining party resorting to cross-retaliation will have to consider not only whether the countermeasures are practicable or effective but also whether the circumstances are serious enough to merit such kind of measures. The arbitrators in Bananas III293 interpreted subparagraphs (b) and (c) of Article 22.3 and considered that these regulations leave a certain margin of appreciation to the complaining party concerned in arriving at its conclusions in respect of an evaluation of certain factual elements, i.e. of the practicability and effectiveness of suspension within the same sector or under the same agreement and of the seriousness of circumstances,

291 Subparagraph (g) says for purposes of this paragraph, agreement means: (i) with respect to goods, the agreements listed in Annex 1 A of the WTO Agreement, taken as a whole as well as the Plurilateral Trade Agreements in so far as the relevant parties to the dispute are parties to these agreements; (ii) with respect to services, the GATS; (iii) with respect to intellectual property rights, the Agreement on TRIPS. 292 Article 22.3 (c) of the DSU. 293 Decision by the Arbitrators, European Communities Regime for the Importation, Sale and Distribution of Bananas Recourse to Arbitration by the European Communities under Article 22.6 of the DSU , WT/DS27/ARB/ECU, 24 March 2000, DSR 2000:V, p. 2235, para. 52.

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even if such margin of appreciation [] is subject to review by the arbitrators.294 In the view of the arbitrators, the margin of review
implies the authority to broadly judge whether the complaining party in question has considered the necessary facts objectively and whether, on the basis of these facts, it could plausibly arrive at the conclusion that it was not practical or effective to seek suspension within the same sector under the same agreements, or only under another agreement provided that the circumstances were serious enough.
295

In addition, the suspension of concessions across sectors or across agreements, is more restrictive in relation to the procedure. If a Member decides to request authorisation for cross-retaliation it must state its reasons in its request. Subparagraph (e) provides that the complaining party, requesting authorisation to suspend concessions or other obligations in other sectors under the same agreement or under another covered agreement, shall state the reasons therefor in its request.296 At the same time the complaining party shall forward the request to the relevant Councils and also, in the case of a request pursuant to suspend obligations in other sectors under the same agreement, to the relevant sectoral bodies.297 The first time in which cross-retaliation took place was in the Bananas III case.298 Although the panel in this case found that the revised banana regime was in violation of GATT and GATS Agreements,299 Ecuador requested the arbitrators authorisation to suspend concessions or other obligations under the GATS as well as under the TRIPS Agreement, basing its request on the argument that the withdrawal of concession in the goods sector was not practicable or effective, and that the circumstances were serious enough to request authorisation to suspend concessions in other sectors and in other agreements.300 In this case, the
Ibid. , para. 52 (emphasis added). Ibid. 296 Article 22.3(e) of the DSU 297 Ibid. 298 EC Bananas Recourse to Arbitration by the EC under Article 22.6 of the DSU , op. cit. (note 293), 299 Ibid. , para. 1 300 Ibid. , para. 2
294 295

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arbitrators took into consideration the fact that Ecuador was a developing country and was faced with the worlds largest trader; consequently, they considered that it may not be practicable or effective for Ecuador to suspend concessions or other obligations under the GATS or with respect to all products categories under the GATT.301 The arbitrators held that a consideration by the complaining party in which sector or under which agreement suspension may be expected to be least harmful to itself would seem sufficient for us to find a consideration by the complaining party of the effectiveness criterion of Article 22.3. 302 Accordingly, arbitrators authorised Ecuador to suspend obligations of intellectual property rights concessions under the TRIPS in copyright and related rights of performers, producers of phonograms, and broadcasting organization, geographical indications, and industrial designs.303 Nevertheless, the Arbitration limited the effects of the suspension of the intellectual property rights in question only for the purposes of supply destined for the domestic market and considered that the authorisation of suspension did not entitle other WTO Members to regulate any of their obligations under the TRIPS Agreement.304 After the award that authorised Ecuador to apply countermeasures in other WTO agreements, some authors saw cross-retaliation, especially under the TRIPS Agreement, as the ideal enforcement tool for developing countries.305 This is based on the fact that the limited size of developing country markets renders countermeasures ineffective in the same sector, and countermeasures in the form of trade restrictions inefficient since they make imported products more expensive, thus making development even more difficult. In this context the most effective possibility would be to cross-retaliate in areas covered by the TRIPS agreement, such as pharmaceutical and chemical patents, which are more practicable for developing countries.

Ibid. , para. 126. Ibid. , para. 73. 303 Ibid. , para. 173. 304 Ibid. , para.156. 305 Cf. SUBRAMANIAN, Arvind and WATAL, Jayashree Can Trips serve as an Enforcement Device for Developing Countries in the WTO?, JIEL , 2000, 403-416.
301 302

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Nevertheless, it appears that there are some difficulties in implementing cross-retaliation. First, intellectual property rights are individual rights. The violation of these rights would amount to expropriation and would consequently cause problems under other international laws.306 Secondly, there are differences between conventional retaliation in goods and retaliation in intellectual property rights. The former only requires a law or another internal regulation to increase the trade restriction on imported goods. The latter needs not only an internal regulation implementing the DSB authorisation to cross retaliate, but also the necessary economic resources to afford the production of those goods, whose patents or copyrights the States were authorised to infringe. But, taking into account the fact that the market of developing countries is generally small and that as arbitration has considered in Bananas III goods produced under such a license could only be sold locally, it seems that neither the government authorised to cross-retaliate nor investors would invest in such an undertaking. The clearest evidence of the relative viability of cross retaliation is the fact that Ecuador has never implemented its authorisation to cross retaliation. Moreover, it seems that this authorisation had little effect on the decision of the EC to modify its regime for the importation of bananas. Even if the award of the arbitrators in Bananas is an important precedent, it seems that cross-retaliation is difficult to implement in practice, at least for small developing countries. The situation would be different, perhaps, if the developing country authorised to retaliate under TRIPS or any other covered agreement had a big important internal market -as could be the case of China, India or Brazil-, but until now this is only a hypothetical case. In sum, it seems that the limitations in the obligations subject to countermeasures contained in WTO law are an innovation with respect to general international law. Thus, by virtue of the principle of lex specialis countermeasures under WTO system would be subject to the rules of general international law contained in Draft Articles307 in addition to
306 307

Ibid., p. 408. Article 50 of the DASR.

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those contained in Article 22.3 of the DSU. Even if, from the wording of this Article, it is not clear whether those rules are binding or not (they use should and may), it seems that they are mandatory. In the first place, this is due to the fact that arbitrators are competent to control the fulfilment of such conditions and, secondly, as was pointed out in Bananas III, the margin of appreciation is subject to review by the arbitrators.308

308

See supra , (note 294).

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III.

PROCEDURAL ASPECTS OF COUNTERMEASURES IN THE WTO SYSTEM

Under the decentralised system of international law every State determines the existence of a wrongful act unilaterally, and considers whether it is injured by such an act. With respect to countermeasures, every State is free to decide when to resort to those measures and has the capacity to determine its level, provided that the conditions on countermeasures under general international law are respected. Nevertheless, this does not exclude the existence of some procedural rules of a customary character in general international law on the application of countermeasures in addition to the customary rules on dispute settlement. Thus, the so-called summation, the obligation not to affect the settlement of the dispute by countermeasures and the impossibility of taking countermeasures when there is a tribunal which has authority to make binding decisions on the parties are obligations that have a customary character and have been recognised by doctrine, State practice and case law. However, even if its existence is accepted, there is disagreement about what the extent of these rules is.309 The possibility of resorting to unilateral measures in international law can be limited by tacit or explicit consent. The case of tacit consent arises, for example, when States acquiesce to submit a dispute to an international jurisdiction with the authority to settle the dispute by a binding decision on the parties. The limitation of countermeasures by explicit consent arises for example in the case of WTO law, where the parties by ratifying the Marrakech Agreement renounce to apply countermeasures other than those authorised by the WTO competent organs. In addition, by ratifying the WTO treaty the member parties empower the DSB with the authority of determining the existence of a
309 The procedural rules of countermeasures under general international law have been codified in the DASR. The most relevant articles of the DASR concerning countermeasures and dispute settlement are articles 50.2 and 52.3. Crawford has pointed out that these provisions [seek] to establish reasonable procedural conditions for the taking of countermeasures in a context where compulsory third party settlement of disputes may not be available (CRAWFORD, J., op. cit . (note 28), at p. 297).

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wrongful act, of establishing the time of compliance for the wrongdoer and, in case of non-compliance, of authorising the application of countermeasures, establishing its maximum level and supervising its implementation. However, this latter assertion does not mean that WTO law has replaced all the existing procedural rules on countermeasures under general international law. As it occurs in relation to the conditions of countermeasures analysed in the second part of this work, some procedural rules of a customary character are replaced by special rules, but some others are confirmed by the WTO rules. In the latter case, rules under general international law could be helpful and could have a subsidiary character in interpreting DSU procedural regulations or when it is not possible to find a solution through these rules.

a.

Exclusion of Countermeasures Without Authorisation of the DSB

As mentioned above, by ratifying the WTO treaty, member States renounce to apply countermeasures without the authorisation of the DSB in those disputes concerning WTO treaty obligations. In this sense Article 23 of the DSU, intituled Strengthening of the Multilateral System provides:
1. When Members seek the redress of a violation of obligations or other nullification or impairment of benefits under the covered agreements or an impediment to the attainment of any objective of the covered agreements, they shall have recourse to, and abide by, the rules and the procedures of this Understanding. 2. In such cases, Members shall: (a) not make a determination to the effect that a violation has occurred, that benefits have been nullified or impaired or that the attainment of any objective of the covered agreements has been impeded, except through recourse to dispute settlement in accordance with the rules and procedures of this Understanding, and shall make any such determination consistent with the findings contained in the panel or Appellate Body report adopted by the DSB or an arbitration award rendered under this Understanding;

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[] (c) follow the procedures set forth in Article 22 to determine the level of suspension of concessions or other obligations and obtain DSB authorization in accordance with those procedures before suspending concessions or other obligations under the covered agreements in response to the failure of the Member concerned to implement the recommendations and rulings within that reasonable period of time.
310

In US Section 301 Trade Act311 the panel interpreted the extent of this article and held that the overall design of Article 23 is to prevent WTO Members from unilaterally resolving their disputes in respect of WTO rights and obligations.312 With respect to the first paragraph of this article, the panel stated:
Article 23.1 is not concerned only with specific instances of violation. It prescribes a general duty of a dual nature . First, it imposes on all Members to have recourse to the multilateral process set out in the DSU when they seek the redress of a WTO inconsistency. In these circumstances, Members have to have recourse to the DSU dispute settlement system to the exclusion of any other system , in particular a system of unilateral enforcement of WTO rights and obligations. This, what one could call exclusive dispute resolution clause, is an important new element of Members rights and obligations under the DSU. Second, Article 23.1 also prescribes that Members, when they have recourse to the dispute settlement system in the DSU, have to abide by the rules and procedures set out in the DSU. This second obligation under Article 23.1 is of a confirmatory nature: when having recourse to the DSU Members must abide by all DSU rules and procedures .
313

With respect to Article 23.2 (a), the panel considered that it is for up to the WTO competent organs through the procedures set forth in the DSU to determine the existence of a violation to a WTO agreement.314 Consequently, the panel stated that Section 304 of the US Trade Act of 1974, by permitting the making of a unilateral determination of inconsistency, even prior to exhaustion of DSU proceedings, violated the WTO agreements because it reserves the right for the Member
310 311

Article 23 of the DSU (emphasis added). United States Sections 301-310 of the Trade Act of 1974, op. cit. (note 150). 312 Ibid. , para. 7.35 313 Ibid. , para. 7.43(emphasis added). 314 Ibid.

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concerned to do something which it has promised not to do under Article 23.2 (a),315 i.e. the unilateral determination of the existence of a violation of a WTO treaty. In relation to countermeasures, Article 23.2 (c) establishes that the DSB has exclusive jurisdiction to provide remedies in case of violation to WTO obligations. In US Certain EC Products,316 the panel interpreted this paragraph and considered that in case of violation of a WTO obligation the application of countermeasures without authorisation of the DSB was prohibited. The panel considered that the specific prohibitions of paragraph 2 have to be understood in the context of the general obligation of the first paragraph and considered that Article 23.2 contains specific examples of conduct inconsistent with the rules of the DSU that constitute specific forms of unilateral actions already prohibited by Article 23.1.317 In addition, it was pointed out that in case of grievance on a WTO matter, the WTO dispute settlement mechanism is the only means available for WTO Members to obtain relief, and only the remedial actions envisaged in the WTO system can be used by WTO Members.318 According to the panel, any attempt to seek redress can take place only in the institutional framework of the WTO and pursuant to the rules and procedures of the DSU. Consequently, any WTO suspension of concessions or other obligations without prior DSB authorisation is explicitly prohibited.319 This decision has been interpreted as outlawing unilateralism under the DSU.320 The panel also analysed the argument of the US, to which its unilateral action was excused because the EC had not implemented the DSB decision on the regime for the importation of bananas and it had thus frustrated and delayed all the US efforts to comply with the DSU mechanism for the suspension of concessions. The panel stated:
Ibid. , paras 7.61 and 7.63. See also paras. 7.35 7.46 (ibid. ). Panel Report, United States Import Measures on Certain Products from the European Communities , WT/DS165/R, adopted 10 January 2001, as modified by the Appellate Body Report, WT/DS165/ABR, DSR 2001: I. 317 Ibid. , paras. 6.18-6.19 318 Ibid. , para. 6.23 (emphasis added). 319 Ibid. , para. 6.38. 320 Op. cit ., (note 215), at p. 968.
315 316

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Even if it were true that the European Communities delayed DSB meetings and the arbitration process (and arguably violated the DSU and rules of the DSB meetings), it is clear that a Member cannot find in another Members violation a justification to set aside the prescriptions of the DSU . The US argument (which implies that it considers itself justified to do what it did because what the European Communities would have done was WTO illegal) is exactly what is prohibited by the Article 23 of the DSU: unilateral determination that a WTO violation has occurred and the unilateral imposition of suspensions of concessions or other obligations. In short, the regime of counter-measures, reprisals or retaliatory measures has been strictly regulated under the WTO Agreement. It is now only in the institutional framework of the WTO/DSB that the United States could obtain the authorization to exercise remedial action.
321

In addition, the panel considered that one of the reasons why Article 23 must be interpreted with a view of prohibiting any form of unilateral action is because such unilateral actions threaten the stability and predictability of the multilateral trade system, 322 one of the main functions of the dispute settlement system, embodied in Article 3.2 of the DSU. For these reasons the panel concluded that the United States, by unilaterally imposing trade sanctions outside the WTO system, violated Article 23 of the DSU. Furthermore, the obligation to request and obtain authorisation from the DSB in order to take countermeasures 323 implies the prohibition to take countermeasures during the procedure. In US Certain EC Products the panel considered that there are more violations of the DSU that can be captured by the general prohibition of Article 23.1 than those listed in paragraph 2 of Article 23. 324 One such violation is the case of Article 22.6 which provides that [c]onsessions or other obligations shall not be suspended during the course of the arbitration, a process which can only take place before the DSB authorisation. Consequently, the panel considered that any WTO suspension of concessions or other obligations without prior DSB authorisation is explicitly prohibited325
Op. cit ., (note 316), at para. 6.133 (emphasis added). Ibid. , para. 6.14. 323 This obligation is contained in Articles 3.7, 22.2, 22.6 and 23.2(c) of the DSU. 324 Op. cit ., (note 316), at para. 6.35. 325 Ibid. , para. 6.38
321 322

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Nevertheless, the fact that the DSB possesses a monopoly in determining the application of countermeasures does not mean that this power is absolute in the sense that the DSB cannot authorise countermeasures ex officio . Under the DSU, the authorisatios to take any countermeasure must be made upon request, as provided in Article 22.6, and the DSB is not allowed to authorize countermeasures without this request.

b. i.

Implementation of DSB Decisions Principle of Prompt Compliance

Article 21.1 of the Dispute Settlement Understanding provides:

Prompt compliance with recommendations or rulings of the DSB is essential in order to ensure effective resolution of disputes to the benefit of all Members.
326

Once the dispute settlement procedure has been activated and a panel has expressed its views in its final report, the DSB must consider the adoption of the panel report, but not before 20 days from the date of its circulation to the Members.327 The report will be adopted by the DSB within 60 days after the circulation of the panel report to the Members, unless a party notifies the DSB of its intention to appeal, or the DSB decides by consensus not to adopt the report.328 If a party notifies the DSB of its intention to appeal, the report of the Appellate Body shall be adopted by the DSB within 30 days of its circulation and unconditionally accepted by the parties to the dispute, unless the DSB decides by consensus not to adopt it.329

326 327 328

Article Article Article 329 Article

21.1 of the DSU 16.1 of the DSU. 16.4 of the DSU. 17.14 of the DSU.

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When the panel or Appellate Body report is adopted by the DSB, its recommendations and rulings become those of the DSB itself,330 and acquire binding force. In this sense, Article 17.14 of the DSU provides that an Appellate Body report adopted by the DSB shall be [] unconditionally accepted by the parties to the dispute. Nevertheless, the situation is not clear. In relation to adopted panel reports. Ruiz Fabri considers that, even if there is no mention in the DSU of the obligatory character of the panel reports adopted by the DSB, this obligation would be contained in Article 3.7 (when it provides that the first objective of the dispute settlement mechanism is to secure the withdrawal of the measures found to be inconsistent with the covered agreements) and Article 21.1, quoted above.331 Mavroidis, for his part, suggests that the binding character of DSB decisions is part of the pacta sunt servanda obligation imposed on all WTO members and contained particularly in Article 23.2 of the DSU, which States that WTO members agreed to assign compulsory third party adjudication to resolve their trade related disputes in favour of the WTO adjudication bodies.332 If a panel or the Appellate body concludes that a measure is inconsistent with a covered agreement, it recommends that the Member concerned bring its measure into conformity with the WTO agreement that has been breached.333 On principle the Member shall immediately comply with the recommendations and rulings of the DSB, as it appears in Article 21.1 of the DSU. For this reason within 30 days after the date of adoption of the panel or Appellate Body report, the Member concerned shall inform the DSB of its intentions in respect of implementation of the recommendations and rulings to the DSB. 334 If a meeting of the DSB is not scheduled within 30 days after the adoption of a report, a special meeting will be held for the purpose of hearing the intention of compliance by the Member concerned.335
Op. cit. (note 180), at p. 235 RUIZ-FABRI, Hlne Le rglement des diffrends au sein de lOMC : naissance dune juridiction, consolidation dun droit, in Souverainet tatique et marchs internationaux la fin du XX sicle, Mlanges offerts Philippe Kahn , 2000, pp. 303-334, at p. 310. 332 MAVROIDIS, op. cit. (note 238), at p. 782. 333 Article 19.1 of the DSU. 334 Article 21.3 of the DSU. 335 Footnote 11 of the DSU.
330 331

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ii.

The Reasonable Period of Time

Even if prompt compliance is preferred, there are situations where the Member is not able to immediately comply with the decisions of the DSB. In order to cover these situations Article 21.3 of the DSU provides:
If it is impracticable to comply immediately with the recommendations and rulings, the Member concerned shall have a reasonable period of time in which to do so.
336

The reasonable period of time is an additional period accorded to the Member concerned to comply with the recommendations and rulings of the DSB when it was impracticable to do so immediately. Arbitrator Lacarte has defined this time period as the shortest period possible within the legal system for the Member to implement the recommendations and rulings of the DSB.337 However, Arbitrator Feliciano has pointed out that this definition is not to be the sole criterion to be taken into account when determining the reasonable period of time. 338 The determination of the reasonable period of time is very important for the issue of countermeasures, because its exhaustion without the implementation of recommendations and rulings of the panel or Appellate Body gives the Member the right to resort to countermeasures prior to authorisation by the DSB. 339
Article 21.3 of the DSU. Cf. Award of the Arbitrator, EC Measures Concerning Meat and Meat Products (Hormones) Arbitration under Article 21.3 (c) of the DSU , WT/DS26/15, WT/DS48/13, 29 May 1998, DSR1998:V, p. 1833, paras. 25-26. 338 Award of the Arbitrator, Chile Taxes on Alcoholic Beverages Arbitration under Article 21.3 (c) of the DSU , WT/DS87/15, WT/DS110/14, 23 Mayt 2000, DSR1998:V, p. 2583, para. 39. 339 Article 22.1 and 2 of the DSU. Moreover, the reasonable period of time produce other procedural effects: a) if not satisfactory compensation is agreed within 20 days after its date of expiry the Member has the right to request authorization to suspend concessions or other obligations (Article 22.2); b) the authorization to suspend concessions or other obligations by de DSB must be done between the 30 days of the expiry of the reasonable period of time (Article 22.6); c) the arbitration under Articles 22.6, and 7, shall be completed within 60 days after the date of expiry of the reasonable period of time (Article 22.6); d) the parties have the duty to enter into negotiations before the expiry of the reasonable period of time (Article 22.2); and e) the date of establishment of the reasonable
337 336

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As regards the determination of the reasonable period of time, the DSU provides three alternatives. First, it can be a period proposed by the Member concerned (the losing member in a dispute) and approved by de DSB.340 Secondly, in the absence of this approval, it shall be the period mutually agreed upon by the parties to the dispute within 45 days after the date of adoption of the recommendations and rulings by the DSB. 341 On a number of occasions, the parties have agreed on the reasonable period of time pursuant to this paragraph.342 Thirdly, in the absence of this agreement, the reasonable period of time shall be determined by binding arbitration within 90 days after the date of adoption of the recommendations and rulings by the DSB.343 With respect to the determination of the time period by arbitration, the jurisdiction of the arbitrator under Article 21.3 (c) is limited to the determination of the reasonable period of time. In the several arbitrations under Article 21.3 (c) that took place344 the arbitrators delimited their jurisdiction by recalling that it is not within its mandate to suggest ways or means to implement the adopted reports345 or to determinate the consistency of the proposed implementation measures with the recommendations and rulings of the DSB.346 On principle there is no limitation on the duration of the reasonable period of time. The DSU does not provide a limited date of this time period when it is determined by approval of the DSB [Article 21.3 (a)] or
period is used to calculate the six months after of which the issue of implementation of the recommendations or rulings shall be placed on the agenda of the DSB meeting (Article 21. 6). 340 Article 21.3 (a) of the DSU. 341 Article 21.3 (b) of the DSU. 342 See Op. cit. (note 180), at p. 238. 343 Article 21.3 (c) of the DSU. 344 Until 15 august 2004 there had been 17 Arbitrations under article 21.3 of the DSU, see: http://www.wto.org/english/tratop_e/distabase_e.htm. 345 Cf. Hormones Arbitration under Article 21.3 (c) of the DSU, op. cit. (note 337), para. 38. 346 Cf. Award of the Arbitrator, Canada Patent Protection of Pharmaceutical Products Arbitration under Article 21.3 (c) of the DSU, WT/DS114/13, 18 August 2000, para. 41. See Chile Taxes on Alcoholic Beverages Arbitration under Article 21.3 (c) of the DSU , op. cit. (note 338), para. 40.

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by agreement [Article 21.3 (b)]. The DSU only provides, in case of Arbitration under Article 21.3 (c), that this period should not exceed 15 months from the date of adoption of a panel or Appellate Body report,347 but this benchmark is only a guideline for the arbitrator and this period may be shorter or longer, depending upon the particular circumstances.
348

Nevertheless, in the first arbitrations under Article 21.3 (c) the benchmark of 15 month was used as a maximum for the reasonable period of time. For example, in EC Bananas III, the arbitrator considered that the complainant party shall prove particular circumstances in order to justify a shorter period than the one stipulated by the guideline of the DSU.349 But later in EC Hormones the arbitrator pointed out that the period of 15 months is a guideline for the arbitrator, and considered that the party seeking to prove that there are particular circumstances justifying a shorter or longer time has the burden of proof under Article 21.3 (c).350 Thus, the arbitrations considered that the 15 months should be the reasonable default period of time unless a party could establish that a longer or shorter period is appropriate.351 However, in Canada Pharmaceutical Patents, the arbitrator changed his line of reasoning and considered that the default position was not 15 months, but immediately.352 Here the arbitrator considered that if the implementing Member cannot prove that it is impracticable to comply promptly arbitrators shall request the respondent to comply immediately.353 Apart from this disagreement, case law in relation to arbitration under Article 21.3 (c) shows that the reasonable period of time usually determined by arbitrators resulted in periods from six to fifteen

See op. cit. (note 180), p. 241. Article 21 (3) (c) of the DSU. 349 Award of the Arbitrator, European Communities Regime for the Importation, Sale and Distribution of Bananas Arbitration under Article 21.3 (c) of the DSU, WT/DS27/15, 7 January 1998, DSR 1998, p. 3, para. 19. 350 Hormones Arbitration under Article 21.3 (c) of the DSU, op. cit. (note 337), para. 48. 351 Op. cit. (note 180), at p. 241 352 Canada Patent Protection of Pharmaceutical Products Arbitration under Article 21.3 (c) of the DSU , op. cit. (note 346), para. 45. 353 Ibid. , para. 47.
347 348

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months.354Yet, the fact that Arbitration under Article 21.3, as it happens with the rest of arbitrations under the DSU, is not subject to appeal, and consequently falls outside control of the DSB, makes it difficult to unify criteria in order to determine the reasonable period of time. This situation could produce a lack of predictability to the responding Member, which after the expiration of the reasonable period of time without implementing the decisions of the DSB could be subject to countermeasures.

iii.

Authorisation to Take Countermeasures

As it was observed, under the WTO system, the application of countermeasures must be preceded by a request of authorisation of the DSB, requested by any party having invoked the dispute settlement procedures. If this situation arises the DSB shall grant authorisation to apply countermeasures unless the DSB decides by consensus to reject the request, or the respondent objects to the level of suspension and the request is referred to arbitration under Article 22.6. The request for authorisation of countermeasures must follow some requirements. In EC Hormones (Article 22.6 EC), the arbitrators considered the minimum requirements of a request for authorisation to suspend concessions or other obligations under Article 22.2 of the DSU. They established first, that the request must set out a specific level of suspension, i.e. a level equivalent to the nullification and impairment caused by the WTO-inconsistent measure, pursuant to Article 22.4; and secondly, the request must specify the agreement and sector(s) under which concessions or other obligations would be suspended, pursuant to Article 22.3. 355 Thus, these requirements are considered to be the necessary minimum because they are the only ones expressly provided in the DSU. These minimum requirements imply that a Member requesting authorisation to apply countermeasures does not need, on
354 See, MONNIER, Pierre, The time to comply with an Adverse WTO Ruling, JWT , vol. 35, n. 5, 2001, pp. 825-845. 355 European Communities (Hormones), op. cit. (note 223), para. 16.

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principle, to submit other elements in order to obtain authorisation. Nevertheless, the submissions of other aspects facilitate the task of the DSB of authorising countermeasures and could produce an extension on the level of authorised countermeasures. These minimum requirements demand from the Member seeking authorisation to apply countermeasures to include a list of potential target products that may be subject to suspension with their request. Besides, the DSU does not expressly provide that such a list is required. However, because of EC Bananas III States started to include a list of potential target products with their request as a requirement of the DSU.356 The reason for including a list of potential target products is that this list is a way of putting pressure on the economic groups that would be harmed by countermeasures in order to pressure the responsible State to comply. In this sense Pauvelyn and Movroidis point out:
the itemization of potential target products serves to notify elements of the private sector in the territory of the Member concerned that they may be required to pay for the non-complying measures that benefits some other element of the economy. Notification, presumably, could lead to internal pressure on the Member concerned to bring the measure into conformity.
357

However, this practice brought the US to argue, in US Anti-dumping Act of 1916,358 that the EC had not identified in its request the particular concessions or other obligations it intended to suspend and to allege that with this behaviour the EC would be asking the DSB to issue a blank cheque.359 The arbitrators rejected this argument and considered that a party seeking to suspend obligations is not required, under Article 22 of the DSU, to indicate precisely which obligations it seeks authorization to suspend.360 They noted that in previous cases, neither the arbitrators nor the DSB had required requesting parties to enumerate which concessions or other obligations Members were seeking to suspend361 and
Op. cit. (note 180), p. 267. Ibid. , p. 268. 358 US Anti-dumping Act of 1916 WT/DS136/ARB, op. cit. (note 252). 359 Ibid ., para. 3.8. 360 Ibid ., para. 3.10. 361 Ibid ., para. 3.11.
356 357

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that past practice indicated the DSB has granted authorization to suspend obligations, while allowing the requesting Member to decide which particular obligations it would select to implement the authorization.362

iv.

The Carrousel Suspension

The practice of submitting a list of potential target products higher in value than the amount of suspension claimed has raised the question of whether a Member may change products subject to retaliation from time to time based on a single authorisation from the DSB.363 After some failures of forcing the EU to comply with the decision of the DSB in the cases Bananas III and Hormones , the US adopted a law in 2000, which allowed the US to rotate the products object to trade restrictions every six months.364 The purpose of the so-called carousel suspension is to cause disruption and uncertainty through periodic changes in the products subject to suspension as a way of putting pressure on the responsible State to comply with the DSB decision. The issue of carousel suspension raised in EC Hormones , when the EC objected to the intention of US to resort to a carousel type of suspension, claiming that, in doing so, the US would decide not only which concessions would be suspended, but it would also decide unilaterally the equivalence of the level of suspension.365 Nevertheless, the arbitrators did not consider the issue because the US stated that it did not have the intention to resort to this kind of suspension.366 Even so, some months later the US included a carrousel provision in a Trade and

Ibid ., para. 3.13. Op. cit. (note 180), at p. 268. 364 MONNIER, Pierre Le systme de compensations et de rtorsions de lOrganisation Mondiale du Commerce : Les Membres de lOMC jouent-ils aux checs comme des billes ou lancent-ils leurs billes comme des nuls ? in International Law Forum , n. 5, pp. 47-61, 2003, at p. 58. 365 European Communities (Hormones), op. cit. (note 223), para. 22. 366 Ibid.
362 363

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Development Act that liberalized trade with Africa and the Caribbean.367 However, this law has never been applied. This appears to be another situation where the principle of equivalence seems to be exceeded by practical circumstances. Even if a type of carrousel suspension could be considered as having been equivalent in quantitative terms, it seems that it could be against some other legal principle as equity or proportionality. The damages that a suspension of this kind could produce in different sectors of the economy would create situations where the principles of security and predictability embodied in the DSU would not be respected and thus would give a punitive character to the countermeasures taken.

c. i.

Multilateral Surveillance of the Implementation Process The Compliance Procedure

Article 21.5 of the DSU states:

Where there is disagreement as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings such dispute shall be decided through recourse to these dispute settlement procedures, including wherever possible resort to the original panel. The panel shall circulate its report within 90 days after the date of referral of the matter to it.
368

This procedure, the so-called compliance procedure, gives the panel authority to review the steps taken by the Members to implement the recommendations and rulings of the DSB and is the concretisation of one of the main functions of the DSB: the surveillance of the implementation of recommendations and rulings, established in Article 21.6 of the DSU. The compliance procedure has two main functions. On the one hand, it
Op. cit. (note 180), at p. 269. Article 21.5 of the DSU. The Article goes on to say: When the panel considers that it cannot provide its report within this time frame, it shall inform the DSB in writing of the reasons for the delay together with an estimate of the period within which it will submit its report.
367 368

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can end a dispute by concluding that a member has taken compliance measures and that the measures are fully consistent with the covered agreements. 369 On the other hand, it can allow the complainant to seek authorisation to take countermeasures when the DSB adopts an adverse Article 21.5 report. The jurisdiction under Article 21.5 shall relate to the existence or consistency of measures taken to comply. The Appellate Body held in Canada Aircraft (Article 21.5 Brazil) that proceedings under Article 21.5 concern only measures taken to comply with the recommendations and rulings of the DSB but not just any measure of a Member of the WTO.370 The Appellate Body added that they must be measures which have been, or which should be adopted by a Member to bring about compliance with the recommendations and rulings of the DSB.371 Thus, it must be a new measure adopted to implement the DSB decision and not the same measure as that which was the subject of the original dispute. 372 On the contrary, this proceeding cannot be used when the government does not implement any measure in order to comply with the recommendations and rulings of the DSB. In relation to the determination of the existence of a measure taken to comply, panels have stated that the decision cannot be left to the discretion of the implementing member.373 It must be the panel who decides whether a particular measure is to be considered a measure taken to comply. 374 The issue of compliance of the Member concerned with the DSB decisions remains on the DSB agenda until the issue is resolved
369

KEARNS, Jason E. and CHARNOVITZ, Steve, Adjudicating Compliance in the WTO: A Review of DSU Article 21.5, JIEL , Volume 5, June 2002 pp. 331-352, at p. 337. Appellate Body Report, Canada Measures Affecting the Export of civilian Aircraft Recourse by Brazil to Article 21.5 of the DSU , WT/DS70/AB/RW, adopted 4 August 2000, para. 36. 371 Ibid. 372 Ibid., para. 41. 373 Appellate Body Report, Australia Measures Affecting Importation of Salmon Recourse to Article 21.5 of the DSU by Canada , WT/DS18/AB/RW, adopted 2 March 2000, DSR 2000:IV, p. 2035, para 7.10 (22). 374 Panel report, European Communities Anti-Dumping Duties on Imports of cotton-type Bed Linen from India Recourse to Article 21.5 of the DSU by India , WT/DS141/RW, adopted 24 April 2003, as modified by the Appellate Body report, WT/DS141/AB/RW, para. 6.15.
370

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definitely. Any Member at any time can submit or request information on the progress of the dispute. In addition, if a panel has found noncompliance it is possible to repeatedly request other compliance panels, until it is determined that the recommendations and rulings of the DSB have been complied with.

ii.

Surveillance of Countermeasures in the WTO System

One of the most celebrated achievements of the WTO treaty 375 is the surveillance procedure established in Article 21.6 of the DSU376, which puts the monitoring of the implementation of all recommendations or rulings adopted under the responsibility of the DSB. In this respect it is provided that [t]he DSB shall keep under surveillance the implementation of adopted recommendations or rulings. Under the DSU the DSB has the duty to follow up the implementation of recommendations and rulings until the dispute is resolved. In this sense, Article 21.6 provides that [u]nless the DSB decides otherwise, the issue of implementation of the recommendations or rulings shall be placed on the agenda of the DSB meeting after six months following the date of establishment of the reasonable period of time [] and shall remain on the DSB's agenda until the issue is resolved .377 In turn, the Member concerned, i.e. the party to the dispute to which recommendations are directed, has the obligation to keep the DSB informed of the evolution of the situation until the complete resolution of
Cf. PAUWELYN, J., op. cit. (note 166), p. 339. Article 21.6 of the DSU provides: The DSB shall keep under surveillance the implementation of adopted recommendations or rulings. The issue of implementation of the recommendations or rulings may be raised at the DSB by any Member at any time following their adoption. Unless the DSB decides otherwise, the issue of implementation of the recommendations or rulings shall be placed on the agenda of the DSB meeting after six months following the date of establishment of the reasonable period of time pursuant to paragraph 3 and shall remain on the DSB's agenda until the issue is resolved. At least 10 days prior to each such DSB meeting, the Member concerned shall provide the DSB with a status report in writing of its progress in the implementation of the recommendations or rulings. 377 Article 22.6 of the DSU.
375 376

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the dispute. By the same token it is provided that [a]t least 10 days prior to each such DSB meeting, the Member concerned shall provide the DSB with a status report in writing of its progress in the implementation of the recommendations or rulings. 378 In addition, the capacity to request the DSB to follow up decisions is very large. Article 21.6 provides that [t]he issue of implementation for the recommendations or rulings may be raised at the DSB by any Member at any time following their adoption. This means that even a Member that has not been a party to the procedure could exercise this faculty. Nevertheless, it appears difficult to implement this alternative because it seems that here a positive consensus of the DSB is required. Since there is no express mention of the negative consensus in this statement of Article 21.6,379 it seems that the positive consensus provided in Article 2.4 of the DSU and Article IX.1 of the Marrakech Agreement applies. In relation to the duration of the surveillance by the DSB, Article 21.6 covers all the period comprised since the adoption of the recommendation or ruling until the complete resolution of the dispute. Within this period issues related to the implementation of decisions can be raised at any time. This means that the surveillance procedure is also applicable when the procedure is in the phase of enforcement, i.e. when compensation is provided or after the authorisation to apply countermeasures. In this respect Article 22.8 of the DSU in fine provides:
In accordance with paragraph 6 of Article 21, the DSB shall continue to keep under surveillance the implementation of adopted recommendations or rulings, including those cases where compensation has been provided or concessions or other obligations have been suspended but the recommendations to bring a measure into conformity with the covered agreements have not been implemented.
380

Thus, if a Member does not implement a recommendation or ruling within the reasonable period of time or even if a compliance procedure
Article 22.6 of the DSU. The negative consensus is expressly provided in Articles 6.1, 16.4, 17.14, 21.6, 22.6 and 22.7 of the DSU. 380 Article 22.8 of the DSU.
379 378

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under Article 21.5 has taken place after the period has expired surveillance by the DSB continues even if the DSB has authorised the application of countermeasures. The possibility of monitoring the application of countermeasures is one of the main innovations of the WTO dispute settlement procedure and an important step in limiting countermeasures in international law, at least in trade related disputes. Unfortunately, the mechanism of surveillance is in an embryonic phase and countries do not resort to this kind of control by the DSB in relation to countermeasures. One case where it seems there was an attempt to apply this control mechanism to countermeasures was in the Hormones case. At the DSB meeting on 7 November 2003, the EC informed the adoption of a new directive concerning the regime of hormones, which would be in conformity with the DSBs recommendations in the Hormones dispute and manifested its expectation that the United States and Canada should terminate their suspension of concessions to the EC in relation to this dispute.381 Unfortunately there was no reaction to this request within the DSB.

d. i.

Controlling Countermeasures Arbitration Under Article 22.6 of the DSU

On principle, if a party that has invoked the dispute settlement procedures later requests in case of non-compliance authorisation from the DSB to apply countermeasures, the DSB shall grant such authorisation.382 Nevertheless, if the Member concerned, i.e. the Member target of the countermeasures, considers that principles and procedures for the application of countermeasures have not been followed, or objects to the level of the proposed countermeasures, it can resort to arbitration under Article 22.6 of the DSU. The principal effect of resorting to arbitration is the suspension of the authorisation to take countermeasures until the arbitrators have
381 382

Dispute Settlement Body, Annual Report 2003 , WT/DSB/35, 5 December 2003. Article 22.6 of the DSU.

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pronounced their decision. According to Article 22.6 of the DSU in fine : Concessions or other obligations shall not be suspended during the course of the arbitration.383 This delay in the authorisation to take countermeasures will exist until the arbitrators have pronounced on the level or principles of countermeasures and the complaining party makes a new request to the DSB to suspend concession or other obligations. By the same token Article 22.7 in fine provides:
The DSB shall be informed promptly of the decision of the arbitrator and shall upon request, grant authorization to suspend concessions or other obligations where the request is consistent with the decision of the arbitrator, unless the DSB decides by consensus to reject the request.

The jurisdiction of arbitrators, under Articles 22.6 and 22.7, is limited to three situations. The first situation arises when the Member concerned objects to the level of suspension proposed.384 The level of suspension is established in Article 22.4, which provides that [t]he level of the suspension of concessions or other obligations authorised by the DSB shall be equivalent to the level of the nullification or impairment.385 In this case the arbitrators shall determine whether the level of such suspension is equivalent to the level of nullification or impairment386 The second situation arises when the Member concerned considers that the request for authorisation to suspend concessions or other obligations has not followed the principles and procedures for suspension set for in Article 22.3. In this case, there is an apparent contradiction between Article 22.6 and 22.7 because the former 387 includes only paragraph 3 (b) and (c) while the latter 388 includes the three principles of Article 22.3, i.e.

Ibid . Article 22.6 of the DSU. In the relation with the level of countermeasures, see Chapter II.b. 386 Article 22.7 of the DSU. 387 Article 22.6 of the DSU in the concerning part provides: if the Member concerned [] claims that the principles and procedures set forth in paragraph 3 have not been followed where a complaining party has requested authorization to suspend concessions or other obligations pursuant to paragraph 3(b) or (c), the matter shall be referred to arbitration. 388 Article 22.7 of the DSU provides if the matter referred to arbitration includes a claim that the principles and procedures set forth in paragraph 3 have not been followed, the arbitrator shall examine that claim. In the event the arbitrator determines that those
383 384 385

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(a) suspension in the same sector, (b) if suspension in the same sector is not effective or practicable, suspension in other sectors in the same agreement, and (c) if suspension in other sectors is not effective or practicable, suspension in any other covered agreement. This situation was clarified by the arbitrators in EC Bananas III (Ecuador) (Article 22.6 EC), where it was held that the authority granted by Article 22.6 to review claims where the principles and procedures in subparagraphs (b) and (c) have not been followed must imply the arbitrators competence to examine where a request made under subparagraph (a) should have been made in full or in part under subparagraphs (b) or (c).389 Finally, the arbitrators also have jurisdiction to determine if the proposed suspension of concessions or other obligations is allowed under the covered agreement.390 In this respect, the plurilateral Agreement on Government Procurement (AGP) does not allow cross-retaliation.391 However, the jurisdiction of arbitrators is not absolute. Article 22.7 provides that: The arbitrator [] shall not examine the nature of the concessions or other obligations to be suspended392. That means that the qualitative aspects of the proposed suspension, such as the kind of goods that are the object of countermeasures or other issues related with the way in which the suspension of concessions is implemented, fall outside the jurisdiction of arbitrators. In EC Hormones393 the arbitrators

principles and procedures have not been followed, the complaining party shall apply them consistent with paragraph 3. 389 EC Regime for the Importation, Sale and Distribution of Bananas Recourse to Arbitration by the European Communities under Article 22.6 of the DSU , , op. cit. (note 156), para 3.7. They also added If Article 22.3 of the DSU is to be given full effect, the authority of Arbitrators to review upon request whether the principles and procedures of subparagraphs (b) or (c) of that Article have been followed must imply the Arbitrators competence to examine whether a request made under subparagraph (a) should have been made in full or in part- under subparagraphs (b) or (c).[..]If there were no review whatsoever with respect to requests for authorization to suspend concessions made under subparagraph (a), members might be tempted to always invoke that subparagraph in order to escape multilateral surveillance... (ibid.) 390 Article 22.7 of the DSU 391 See supra (note 283). 392 Article 22.7 of the DSU. 393 European Communities (Hormones), op. cit. (note 223).

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recalled that they were explicitly prohibited from examining the nature of the concessions or other obligations to be suspended, other than under Articles 22.3 and 22.5394 and they said:
On these grounds, we cannot require that the US further specify the nature of the proposed suspension. As agreed by all parties involved in this dispute, in case a proposal for suspension were to target, for example, only biscuits with a 100 per cent tariff ad valorem , it would not be for the arbitrators to decide that, for example, cheese and not biscuits should be targeted; or that a 150 per cent tariff should be imposed instead of a 100 per cent tariff; or that tariff increases should be levied on a product weight bases, not ad valorem . All of these are qualitative aspects of the proposed suspension touching upon the nature of concessions to be withdrawn. They fall outside the arbitrators jurisdiction.
395

In US Anti-dumping Act of 1916396 the arbitrators rejected the USs claims of examining the proposed mirror regulation of the EC because [t]his would involve the arbitrators in an examination of the nature of the obligations to be suspended.397 The arbitrators recalled that they have jurisdiction to determine as to whether the suspension of obligations proposed by the European communities is equivalent to the level of nullification or impairment398 but considered that this does not imply jurisdiction to approve the implementation of a specific measure by the complaining party. The arbitrators stated:
we do not have the jurisdiction to determine equivalence between the measure proposed to implement the suspension and the measure that resulted in the nullification or impairment. DSU Article 22.6 and 22.7 authorize the suspension of concessions or other obligations. The arbitrators do not have the jurisdiction to approve the adoption of measures by the complaining party.
399

One characteristic of arbitrations under the DSU that differentiates it from panel reports is that the decisions of arbitrators are not subject to appeal. In this respect Article 22.7 provides:

Ibid., para. 18 in fine . Ibid ., para. 19 (emphasis from the original). 396 US Anti-dumping Act of 1916 , op. cit. (note 252). 397 Ibid., para. 5.40 398 Ibid., para. 5.44 399 Ibid., para. 5.42 (emphasis from the original).
394 395

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The parties shall accept the arbitrators decisions as final and the parties concerned shall not seek a second arbitration.
400

ii.

The Sequencing Problem

In practice, there have been problems in articulating the procedure of compliance under Article 21.5 with the request for authorisation to suspend concessions or other obligations under Article 22.2 and the arbitration under Article 22.6 of the DSU. Article 21.5 provides:
Where there is disagreement as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings such dispute shall be decided through recourse to these dispute settlement procedures,[]The panel shall circulate its report within 90 days after the date of referral of the matter to it.
401

This article makes no reference to the suspension of concessions under Article 22, or to the reasonable period of time. Consequently, it is not clear if the process must take place before the request for suspension of concession, or if it must take place during or after the reasonable period of time. 402 In turn, Article 22.6 of the DSU provides:
When the situation described in paragraph 2 occurs [i.e. when the Member concerned fails to bring the inconsistent measure into conformity with the covered agreements, within the reasonable period of time], the DSB, upon request, shall grant authorization to suspend concessions or other obligations within 30 days of the expiry of the reasonable period of time
403

Article 22.7 of the DSU. Article 21.5 of the DSU. 402 VALLES, Chrerise and McGIVERN, Brendan, The Right to Retaliate under the WTO Agreement The Sequencing problem, in JWT , vol. 34, n. 2, pp. 63-84, at p.65. 403 Article 22.6 of the DSU.
401

400

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This article makes no reference to Article 21.5, neither to how or to by whom the determination of non-compliance is to be made, even if it could be argued that a determination of inconsistency has to be made by a compliance panel established under Article 21.5.404 Moreover, it provides that the arbitration must be completed within 60 days from the expiration of the reasonable period of time, not within 60 days of the arbitration request.405 The sequencing problem occurs when, in the same dispute, parties resort to a compliance procedure under Article 22.6 and to arbitration under Article 21.5. In conformity with Article 22.6, arbitrators must issue their award within 60 days from the expiration of the reasonable period of time. Assuming that a compliance panel shall issue its report up to 90 days after the reasonable period of time, it would be impossible for arbitrators to issue their award within 60 days from the same date, if the complaining Member is supposed to wait for the report under Article 21.5.406 The question that arises is whether it is possible to authorize the suspension of concessions or other obligations before the determination by a panel that the measure has not been brought into conformity with the covered agreements. The sequencing problem arose for the first time in the Bananas III case. Notwithstanding the fact that the reasonable period of time for the EC expired on 1 January 1999,407 two requests for the establishment of Article 21.5 compliance panels were made before the time period expired: on 14 December 1998 EC requested a panel to examine its own measure408 and on 18 December Ecuador requested a compliance panel.409
Op. cit. (note 402), at p..69, op. cit. (note 180), at p. 279. Op. cit. (note 402), at p. 70. 406 Op. cit. (note 180), at p. 280. 407 European communities Regime for the Importation, Sale and Distribution of Bananas Arbitration under Article 21.3(c) of the DSU , op. cit. (note 349), para. 20. 408 Panel Report, European Communities Regime for the Importation, Sale and Distribution of Bananas Recourse to Article 21.5 of the DSU by the European Communities , WT/DS27RW/EEC and Corr. 1, 12 April 1999, DSR 1999:II, 783. 409 Panel report by the Reconvened panel on European Communities Regime for the Importation, Sale and Distribution of Bananas Recourse to Article 21.5 of the DSU by Ecuador , WT/DS27/RW/ECU, dated 12 April 1999, adopted on 6 May 1999, WT/DS27/RW/ECU, DSR 1999:II, 803.
404 405

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These two panels were established by the DSB on 12 January 1999.410 Two days later, on 14 January 1999, the US requested the DSB authorisation to suspend concessions or other obligations but the EC objected to the request so the case was referred to arbitration under Article 22.6 on 25 January.411 On 9 April 1999 the arbitrators under Article 22.6 issued their final decision, where they considered that they could not assess the equivalence between the level of suspension proposed and the level of the nullification or impairment without first ascertaining that the new EC regime for bananas was consistent with the WTO agreements.412.Thus, the arbitrators proceeded to analyse in their award the EC revised regime for bananas, arriving at the conclusion that it was inconsistent with the covered agreements,413 and then they proceeded to establish the level of the authorised suspension. 414 Three days later, on 12 April 1999, Members received the reports of the two panels established under Article 21.5, where panellists considered that the steps taken by the EC to come into compliance were not sufficient and were consequently not consistent with the covered agreements.415 But those conclusions had been already reached in the arbitral award. Thus, in a certain way the arbitrators repeated what they had already said three days before (it is worth mentioning that the two panel reports and arbitral award were done by the same three persons). Nevertheless, the solution found in Bananas III was heavily criticised by the Appellate Body in US Certain EC Products.416 Here the panel had justified the practice followed in Bananas because, it considered, it is legally impossible to assess the level of suspension based on the level of

Ibid. , para. 1.3; op. cit. (note 408), para 1.4. Op. cit. (note 301), para. 1.1. 412 Ibid. , para. 4.8. 413 Ibid. , para. 5.2-5.98. 414 Ibid. , para. 7.1-7.8. 415 European Communities Regime for the Importation, Sale and Distribution of Bananas Recourse to Article 21.5 of the DSU by Ecuador , op. cit. (note 409), para 7.1. 416 Appellate Body Report, United States Import Measures on Certain Products from the European Communities , WT/DS165/AB/R, adopted 10 January 2001, DSR 2001: I, at p. 373.
410 411

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nullification before assessing whether the implementing measure nullifies or impairs WTO rights.417 Even if the Appellate Body seems to have shared this concern, they considered that Article 21.5 panel had erred in stating that Article 22.6 arbitrators can determine the WTO consistency of a measure taken by a Member to comply with DSB recommendations and rulings.418 As Palmeter and Mavroidis explain, the experience of Bananas III led parties in subsequent disputes to reach ad hoc agreements to secure a compliance panel under Article 21.5 before the DSB authorised any suspension of concessions. 419 The first agreement was adopted by Australia and Canada in the Australia Salmon case, where it was provided that arbitration under Article 22.6 would be suspended until completion of Article 21.5 compliance panel proceedings.420 The sequencing problem also arose in disputes related to the Agreement on Subsidies and Countervailing Measures (SCM), but here the situation seems to be less problematic because footnote 6 to Article 4 of the SCM provides that: Any time periods mentioned in this Article may be extended by mutual agreement.421 The first dispute under the SCM where the sequencing problem occurred was Automotive Leather. Here Australia and the United States subscribed an agreement on the sequencing between Article 21.5 and 22.6, using as a model the agreement reached in Australia Salmon and invoking footnote 6 as basis of its agreement. 422 In Brazil-Aircraft,423 US-FSC424 sequencing agreements were also reached.

Panel Report, United States Import Measures on Certain Products from the European Communities , WT/DS165/R, WT/DS165/ABR, op. cit. (note 316), para. 6.122. 418 Op. cit . (note 416), para. 128 (b). 419 Op. cit. (note 180), at p. 284. 420 Panel Report, Australia Measures Affecting Importation of Salmon Recourse to Article 21.5 of the DSU by Canada , WT/DS18/RW, adopted 20 March 2000, DSR 2000:IV, p. 2035, para. 1.3. 421 Original footnote 6 to Article 4 of the SCM. 422 Australia Subsidies Provided to Producers and Exporters of Automotive Leather Recourse to Article 21.5 of the DSU by the United States , WT/DS126/8, 4 October 1999. 423 Brazil Export Financing Programme for Aircraft , WT/DS46/13, 26 November 1999. 424 United States Tax Treatment for Foreign Sales corporations Understanding between the European Communities and the United States Regarding Procedures under
417

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The conflict between Article 21.5 and Article 22.6 has caused heated debates in the doctrine and many countries have proposed reforms in order to sequence between them. 425 A reform to the DSU could be the most desirable, but at the same time the most difficult to reach. The agreements between the parties on a dispute seem to be the easiest way of resolving the sequencing problem. As Palmeter and Mavroidis point out, the long tradition, dating from GATT, of party control over proceedings suggests that WTO Members that are parties to a dispute may extend DSU timetables by mutual agreement.426 Nevertheless, agreements produce only solutions for a particular case and they depend on the consent of the parties, which is not always easy to achieve. In this context, evolution of case law in determining the link between the two articles seems to be the most rational solution. The decision of the Appellate Body in US Certain EC Products427 quoted above seems to go in that direction.

e.

Special Treatment for Developing Countries and Countermeasures

The Marrakech Agreements contain several provisions concerning special and preferential treatment for developing and least-developed country Members. These special rules can also be found in the DSU.428 Nevertheless, the WTO treaty does not provide a definition of these categories of States. In relation to developing countries, Members declare themselves either developed or developing countries. However, other Members can challenge the decision of a Member to make use of
Articles 21 and 22 of the DSU and Article 4 of the SCM Agreement, WT/DS108/12, 5 October 2000. 425 See, MAVROIDIS, Petros C., Proposals for Reform of Article 22 of the DSU: Reconsidering the Sequencing Issue and Suspension of Concessions, in E-U PETERSMANN (ed.) Preparing for the Doha Development Round , European University Institute, Florence, 2002, 148 pp, at p. 27. See also, op. cit. (note 180), at p. 287. 426 Op. cit. (note 180), at p. 286. 427 Op. cit . (note 416), para. 128 (b). 428 Articles 3.12, 4.10, 8.10, 12.10, 12.11, 21.2, 21.7, 21.8, 24.1, 24.2 and 27.2 of the DSU establish special treatment for developing countries.

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provisions available to developing countries. In relation to least developing country members, the list of least-developed countries of the United Nations is used in order to give effect to the special treatment granted by the DSU.429 It is worth noting that these special rules concerning developing countries do not exist in other mechanisms of dispute settlement. Nevertheless, this special treatment seems justified for two main reasons. First, when ratifying the WTO treaty, Members accept the compulsory jurisdiction of the WTO dispute settlement bodies for all disputes related to WTO obligations. Secondly, when ratifying the Marrakech Agreement, it is not possible for States to make reservations to that treaty.430 Within this context, a special and differential treatment would be a way to counterbalance the impossibility of Member countries to protect particular situations by way of reservations or through a case-by-case acceptance of jurisdictionwhere sensitive sectors of the economy are at stake. Otherwise, this situation could have negative effects on the economy of developing countries, which normally depend on a few economic sectors, and whose defencelessness would mean rendering helpless a large part of the population depending on those sectors. In relation to countermeasures, a limitation concerning their application toward developing countries is justified by the nature of measures of that kind. The harmful effects that countermeasures are expected to produce in order to achieve compliance are multiplied when they are directed against developing countries. However, countermeasures could be disadvantageous to developing countries, not only when they are the targets of countermeasures, but also when they try to apply them in order to protect their interests. The economy of developing countries usually depends on the importation of manufactured products and other goods produced by strong economies. Imposing trade restrictions on those products would imply more damage
429 KOROMA, P.T.B., Dispute resolution under the World Trade Organisation, JWT , vol. 28, n. 2, 1994, pp. 23-47, at p. 33. 430 Article XVI.5 of the Marrakech Agreement.

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for the developing country than for the strong country, for which the percentage of trade for its economy would be insignificant. This imbalance shows that a system of implementation by way of economic countermeasures seems to favour economically strong members. 431 This situation of imbalance was highlighted in the Bananas III dispute where the arbitrators noted that:
The suspension of concessions may not only affect the party retaliated against, it may also entail, at least to some extent, adverse effects for the complaining party seeking suspension, especially where a great imbalance in terms of trade volumes and economic power exists between the two parties such as in this case where the differences between Ecuador and the European communities in regard to the size of their economies and the level of socioeconomic development are substantial.
432

Notwithstanding the special status of developing countries in the WTO, the special rules concerning developing countries have been the object of criticism. Authors have objected that those special rules are only declaratives, that in some cases they are not binding, that their wording is too general, and that they do not add any concrete advantages apart from the rights that are already recognised in the general rules of the DSU. 433 These criticisms are also applicable to the special rules concerning countermeasures and developing countries, the effects of which seem to be restrained.

431 HOEKMAN, B.M. and MAVROIDIS, P.C., WTO Dispute Settlement, Transparency and Surveillance, available at htpp://www1.worldbank.org. 432 EC Bananas Recourse to Arbitration by the EC under Article 22.6 of the DSU , op. cit. (note 293), para. 86. 433 Cf. FOOTER, M.E., Developing country practice in the matter of WTO dispute settlement, JWT , 2001, vol. 35, n. 1, pp. 55-98, at p. 70; HORN, Henrik and MAVROIDIS Petros C. Remedies in the WTO Dispute Settlement System and Developing Country Interests, p. 27, available at http://www1.worldbank.org.

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i.

Developing Countries, Surveillance and Implementation

Within Article 21 of the DSU called Surveillance of Implementation of Recommendations and Rulings, there are three paragraphs related to developing countries. Those paragraphs provide:
2. Particular attention should be paid to matters affecting the interests of developing country Members with respect to measures which have been subject to dispute settlement. [] 7. If the matter is one which has been raised by a developing country Member , the DSB shall consider what further action it might take which would be appropriate to the circumstances. 8. If the case is one brought by a developing country Member , in considering what appropriate action might be taken, the DSB shall take into account not only the trade coverage of measures complained of, but also their impact on the economy of developing country Members concerned.
434

A first problem that arises is the binding force of these paragraphs. Article 21.7 and 21.8 seem to contain binding obligations because they use the verb shall. The situation seems to be less restrained in Article 21.2 where should is used. In EC Bed Linen (Article 21.5) India argued that Article 21.2 had to be understood as being mandatory.435 Nevertheless, the panel rejected Indias position and considered that this article imposes no specific or general obligation on Member to undertake any particular action.436 A second problem that occurs is determining to whom these three paragraphs are addressed. It is important to recall that Article 21 contains 3 different procedures: (1) the arbitration to determine the reasonable period of time (Article 21.3), (2) the compliance procedure (Article 21.5) and (3) the surveillance procedure (Article 21.6). A first interpretation is to consider that these three paragraphs are applicable to the three procedures, but it seems that this solution cannot be adopted in the three
Articles 21.2, 21.7 and 21.8 of the DSU (emphasis added). Panel Report, European Communities Anti-dumping Duties on Imports of CottonType Bed Linen from India, 29 November 2002, WT/DS141/RW, para. 6.266. 436 Ibid., para. 6.268.
435 434

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cases because of the wording of the articles. In relation to the first paragraph, Article 21.2 does not provide to whom it is addressed, thus it can be argued that it is applied to all situations under Article 21, i.e. arbitrations, panel and Appellate Body reports and the decision of the DSB. The situation seems to be different in relation to Articles 21.7 and 21.8, because they are explicitly addressed to the DSB. The fact that those paragraphs come after Article 21.6 shows that they are addressed to cover primarily the situations where the DSB put into practice its responsibility of surveillance of the implementation of adopted recommendations or rulings. Nevertheless, these articles should also be applied every time that the DSB analyses the adoption of a panel or Appellate Body report or considers the particular situation of a developing country. The question of special and preferential treatment for developing countries was addressed on a number of occasions by arbitrations dealing with the reasonable period of time under Article 22.3 (c) of the DSU. In Bananas III (Article 21.3) four of the complainants (Ecuador, Guatemala, Honduras and Mexico) were developing countries. They argued that special attention should be paid to their interest on the ground of Articles 21.2, 21.7 and 21.8 of the DSU.437 However, the invocation of special and differential treatment appears to have had no impact on the decision of the arbitrator who was not persuaded that there were any particular circumstances that justified a shorter period than the 15 months prescribed in Article 21.3 (c).438 In Indonesia Autos (Article 21.3),439 Indonesia requested an additional nine month period in order to implement the panel ruling, arguing that its
Award of the Arbitrator, European Communities Regime for the Importation, Sale and Distribution of Bananas Arbitration under Article 21.3 (c) of the DSU, WT/DS27/13, Request of 17 November 1997, by Ecuador, Guatemala, Honduras, Mexico and the US, G/L/20920 November 1997. See also FOOTER, op. cit. (note 433), at p. 70. 438 Ibid., paras. 19 and 20. 439 Award of the Arbitrator, Indonesia Certain Measures Affecting the Automobile Industry Arbitration under Article 21.3(c) of the DSU , WT/DS54/15, WT/DS54/14, WT/DS54/13, WT/DS54/12, 7 December 1998, DSR 1998:IX, 4029, para. 22.
437

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car industry was in need of structural adjustments. 440 Although Arbitrator Christopher Beeby refused to take this argument into account,441 he bore in mind the fact that Indonesia was a developing country facing an economic crisis, and pointed out:
Indonesia is not only a developing country, it is a developing country that is currently in a dire economic and financial situation. Indonesia itself states that its economy is near collapse. In these very particular circumstances, I consider it appropriate to give full weight to matters affecting the interests of Indonesia as a developing country pursuant to the provisions of Article 21.2 of the DSU.
442

Because of the economic situation of the country and the fact that it was a developing country, the arbitrator accorded Indonesia an additional period of six months to implement the panel ruling.443 In Chile Alcoholic Beverages Arbitrator Florentino Feliciano considered that Article 21.2 does not mean that different criteria shall be applied to developing and developed countries in determining the reasonable period of time. 444 According to the arbitrator, article 21.2 enjoins, inter alia , an arbitrator functioning under Article 21.3 (c) to be generally mindful of the great difficulties that a developing country Member may, in a particular case, face as it proceeds to implement the recommendations and rulings of the DSB. 445 In other words, the arbitrator considered that it only must be taken into account the fact that there is an exceptional situation in a developing country, i.e. when the developing country is facing a particular difficulty as an economic crisis. In Argentina Hides and Leather, Argentina requested the arbitrator to give consideration to its interest as a developing country, pursuant to article 21.2, and to take into consideration the great difficulties the country was facing because of its economic crisis, in order to grant a
Ibid., para. 7. Ibid ., para. 23. Ibid ., para. 24. 443 Ibid ., para. 25. 444 Chile Taxes on Alcoholic Beverages Arbitration under Article 21.3 (c) of the DSU , op. cit. (note 338), para. 45. 445 Ibid.
440 441 442

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period of time that would enable it to implement progressively the recommendations and rulings of the DSB. Consequently, it asked for a period of time of three financial years.446 Arbitrator Feliciano considered that Argentina has not been very specific about how its interest as a developing country Member actually bears upon the duration of the reasonable period of time needed to put into legal effect an appropriate amendatory.447 In addition, it seems that the arbitrator, following his previous considerations made in Chile Alcoholic Beverages, considered that two situations must come together to apply Article 21.2, i.e. the dispute has to deal with a developing country, and there must exist a difficulty to comply with the decisions of the DSB in a particular case. Nevertheless, the arbitrator restrained even more the applicability of this paragraph, as he considered that the difficulty to comply must be under very particular circumstances as the case where an economy was near collapse. The arbitrator considered that even if Argentina was a developing country and was facing severe economic and financial problems, there may be debate as to whether Argentinas economy is near collapse448 and consequently, he accorded this country a period of twelve months and twelve days to comply with the decisions of the DSB.449 Chile Price Band System, was the first arbitration involving two developing countries as complainant and respondent.450. Chile argued that account should be taken of its specific interest as a developing county Member when determining a reasonable period of time.451 Argentina questioned this argument because the dispute faced two developing countries and stated that the text of Article 21.2 made no distinction between complainants and respondents when providing that particular

Award of the Arbitrator, Argentina Measures Affecting the Export of Bovine Hides and the Import of Finished Leather Arbitration under Article 21.3(c) of the DSU , 31 August 2001, WT/DS155/10, para. 23. 447 Ibid., para. 51. 448 Ibid. 449 Ibid., para. 52. 450 Award of the Arbitrator, Chile Price Band System and Safeguard Measures Relating to Certain Agricultural Products Arbitration under Article 21.3 (c) of the DSU , WT/DS207/13, 17 March 2003, para. 55. 451 Ibid., para. 16.
446

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attention should be paid to matters affecting the interest of developing countries.452 Arbitrator John Lockhart analysed the particular situation of both countries and pointed out: The absence of presently-existing, concrete difficulties in Chiles position as a developing country stands in contrast to previous arbitrations, wherein Members have identified, not simply their positions as developing countries, but also severe or dire economic and financial situations existing at the time of the proposed period of implementation. In contrast, the acuteness of Argentinas burden as a developing country [] is amplified by Argentinas daunting financial woes at present.453 Despite this statement, the arbitrator considered it unsuitable in this particular case to make a consideration based on the special status of both countries and stated: In the unusual circumstances of this case, therefore, I am not swayed towards either a longer or shorter period of time by the [p]articular attention I paid to the interests of developing countries." 454 In relation to the procedures under Article 21.5 of the DSU, compliance panels have seldom taken into consideration the special treatment for developing countries. In Bananas III Ecuador, one of the complainants, requested a complainant panel under Article 21.5 of the DSU. However, even though Ecuador was a developing country Member and the European Communities could have sought to defend the interests of the bananas-producing developing country Members to the ACP-Lom Agreement, there was no invocation of special and differential treatment provisions by the parties in the dispute and neither panel took the special status of these countries into account.455 A similar situation occurred in Brazil Export financing programme for Aircraft where no consideration was placed on special and differential treatment provisions in Article 21 of the DSU.456 Nevertheless, the situation changed in EC Bed Linen, where India invoked Article 21.2 before a compliance panel, arguing that this provision imposed an obligation on the Members to consider the

Ibid., para. 30. Ibid., para. 55. 454 Ibid . 455 FOOTER, op. cit. (note 433), at p. 73. 456 Ibid .
452 453

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special situation of developing countries.457 Apart from rejecting the alleged binding force of that article, the panel considered that this provision clearly reflects the concern of Members with ensuring that appropriate attention is given to the interests of developing Members, and thus states an important general policy.458

ii.

Developing Countries and the Authorisation to Apply Countermeasures

The central article related to the suspension of concessions or other obligations, Article 22 of the DSU, makes no explicit mention of the situation of developing countries upon a request to apply countermeasures. The only ruling applicable to the special situation of developing countries under this Article is subparagraph (d), which provides that in applying the three principles for the application of countermeasures (suspension in the same sector, in different sector, or in different agreement) the complaining Member shall take into account:
(i) the trade in the sector or under the agreement under which the panel or Appellate Body has found a violation or other nullification or impairment, and the importance of such trade to that party; the broader economic elements related to the nullification or impairment and the broader economic consequences of the suspension of concessions or other obligations;
459

(ii)

In Bananas III (Ecuador 22.6) this subparagraph was analysed. The arbitrators considered that the factors listed in subparagraph (d) provide at least part of the context for further defining the concepts of circumstances and the degree of seriousness460, two necessary conditions to apply cross-agreement retaliation. With respect to
Anti-dumping Duties on Imports of Cotton-Type Bed Linen from India, op. cit . (note 435), para. 6.266. 458 Ibid., para. 6.268. 459 Article 22.3 (d) of the DSU (emphasis added). 460 Decision by the Arbitrators, European Communities Regime for the Importation, Sale and Distribution of Bananas Recourse to Arbitration by the European Communities under Article 22.6 of the DSU , WT/DS27/ARB/ECU, 24 March 2000, DSR 2000:V, p. 2243.
457

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subparagraph (d)(i), the arbitrators considered that in order to apply the criteria contained therein, it had particular significance the fact that the party seeking suspension is a developing country Member to which trade in that sector (the trade in bananas in that case) is much more important than for the member to which the suspension would apply. 461 By making this statement the arbitrators incorporated the situation of developing countries in Article 22 as one of the circumstances to be taken into account when analysing its applicability. Thus, the special treatment of developing countries was integrated with the authorisation to apply countermeasures. In relation to subparagraph (ii), the arbitrators considered that the criterion of broader economic elements related to the nullification or impairment indicates that this factor primarily concerns broader economic elements relating to the Member suffering [the] nullification or impairment462 and not the member for which the countermeasure was sought. Conversely, the arbitrators considered that the criterion of broader economic consequences of the suspension of concessions or other obligations is not necessarily an indication that broader economic consequences relate exclusively to the party which was found not to be in compliance with WTO law, but to both parties in the dispute.463 This paragraph is perhaps the gateway to other international rules that must be taken into account when applying countermeasures. One may wonder whether within the general economic elements and the broader consequences the Member has to take into account when applying countermeasures conditions contained in subparagraph (ii) it would be possible to include other issues, such as the effects of countermeasures on the population, e.g. when they affect a sensitive sector of the economy or even the respect for basic human rights.

Ibid. , para. 84 (emphasis added). Ibid. , para. 85. 463 Ibid. , para. 86.
461 462

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iii.

Countermeasures and Least-Developed Countries

In relation to least-developed countries, the DSU contains a special article related to this category of States entitled Special Procedures Involving Least-Developed Country Members. With respect to countermeasures, the article provides:
At all stages of the determination of the causes of a dispute and of dispute settlement procedures involving a least-developed country Member, particular consideration shall be given to the special situation of least-developed country Members . In this regard, Members shall exercise due restraint in raising matters under these procedures involving a least-developed country Member. If nullification or impairment is found to result from a measure taken by a leastdeveloped country Member, complaining parties shall exercise due restraint in asking for compensation or seeking authorization to suspend the application of concessions or other obligations pursuant to these procedures.
464

Apart from the commitment of WTO Members to give particular consideration to the special situation of least-developed country members at all stages of the dispute settlement procedure, it is not forbidden to apply countermeasures against these States. The only duty in such a case would be to exercise due restraint in seeking authorisation to apply countermeasures. Until now no least-developed country member has been involved in WTO disputes either as complainant or as respondent,465 and consequently none has come to the phase of retaliation. In the event that such a case should arise, these rules would be applicable along with the rules related to developing countries. Nevertheless, it seems that in practice these rules would have little effect.

Article 24.1 of the DSU (emphasis added). According to the information of the WTO website updated on 15 August 2004, only Bangladesh has requested to consultations pursuant to Article 4 of the DSU. See http://www.wto.org/english/tratop_e/distabase_e.htm.
465

464

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CONCLUSION Trade countermeasures are one aspect of the range of acts of self-help that, before the concretisation of the GATT/WTO system, were an area regulated almost exclusively by general international law. With the creation of the WTO, new rules concerning trade countermeasures were established, but this did not imply their total suppression from general international law. On the contrary, the similarities between WTO law and general international law regimes on countermeasures, and the fact that the WTO treaty recognises countermeasures as a remedy, show the unity of the regime of countermeasures in international law. Firstly, as regards the similarities, most of the material aspects of countermeasures in WTO law acknowledge pre-existing rules of general international law. This is the case with the cause, the object, the temporary character and the preclusion of wrongfulness of countermeasures. Some other conditions have some peculiarities under WTO law, as is the case with the purpose of countermeasures and their level, but the similarities seem to outweigh the differences. These differences seem to be the adaptation of the principle of proportionality and compliance to particular situations, in application of the principle of lex specialis . In this respect, the role of treaty regulations in condensing and systematising customary rules is remarkable. Nevertheless, nothing prevents a return to the customary rules when the special regulation cannot provide a solution, as it appears to have been suggested by the dispute settlement organs themselves.466 The area where a real difference exists and where a real innovation with respect to general international law can be found is that of the procedural aspects of countermeasures. The rules established in the DSU prohibit member States to take countermeasures in WTO-trade disputes outside the system. The obligation to request authorisation to apply countermeasures, the determination of their maximum level, and their control by a third party seem to be real limitations to this kind of

466

See supra (notes 268, 271 and 274).

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measures. With these regulations the unilateralism of countermeasures is mitigated, at least to some extent. Nevertheless, this does not mean that WTO law replaces all the existing procedural rules on countermeasures under general international law. Here again, some customary rules are replaced by special rules and some others are confirmed by the WTO rules. Secondly, the acknowledgement by the WTO treaty of a typical remedy of general international law also proves the unity of countermeasures and the strong relationship between WTO law and general international law. The similarities of countermeasures between the two systems seem to lie in the recognition rather than the rejection by WTO law of an ultimate remedy of general international law. It is argued that a self-contained regime implies a system that determines its own obligations, the wrongful acts within it, and its own remedies. Considering that WTO law has a degree of independence from international law similar to that of the European communities or diplomatic law is not possible because the latter systems have their own remedies, and they reject the possibility of applying countermeasures. By contrast, the WTO treaty recognises and regulates countermeasures. In this context it seems that the lower degree of autonomy of WTO law from general international law can be better explained by using the concept of lex specialis. The main effect of the close relationship between countermeasures in general international law and those in the WTO treaty would be the application of customary rules on countermeasures in a subsidiary manner on interpreting WTO rules and on providing solutions when WTO rules are silent or cannot provide a response to a particular problem. Thus, the general rules on proportionality or the concept of compliance, for example, are aspects that seem to have been well developed in general international law and to which the DSB can resort. As regards reversibility, a condition of countermeasures that is not provided in the DSU, it seems that there is nothing in the WTO agreements that prevent this condition from being applied to countermeasures under the WTO regime.

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In relation to the procedural aspects, the subsidiary application of customary rules and international practice in this area could also be envisaged, in order to give full effect to WTO regulations. Hence, the practice of other international organisations in relation to the effects of non-forcible measures or sanctions on developing countries could be useful. The same could be said of the effects of countermeasures in third countries or in civilian populations, where the principles and rules of general international law could be applied. In this respect, Article 22.3(d)(ii) of the DSU seems to be central and it is perhaps the gateway to other international rules that must be taken into account when applying countermeasures, such as the effects of countermeasures on the population, when they affect a sensitive sector of the economy or even the respect for human rights. The reason for this application is not trivial. The flexible, comprehensive nature of general international law would permit the DSB to resort to customary rules on countermeasures in order to interpret WTO rules, fill any possible gaps and reach equitable solutions, thus providing security and predictability in economic relations. The subsidiary application of these rules would not imply for DSB organs to add to or diminish the rights and obligations provided in the covered agreements, if this mandate is interpreted not as referring to a particular article in an agreement but, rather, as a recognition of all the rights, obligations and principles provided in the overall set of agreements. In such an interpretation it would be included, for example, sustainable development, protection of the environment, and the interests of developing countries, principles included in the Marrakech Agreement establishing the WTO. The above-mentioned observations do not imply the nonacknowledgement of the value of the DSU in systematising the rules on countermeasures and in limiting, to some degree, its unilateralism. This poses another question: the inclusion of countermeasures in an international dispute settlement system. Why legitimate something that appears to be the antithesis of a jurisdictional (or quasi-jurisdictional) 116

mechanism of dispute settlement, something that entails the nonfulfilment of an international obligation? Why should such a complex procedure ultimately recognise self-help as a way of enforcing DSB decisions? It could be argued that the purpose of the inclusion is to bring efficiency to the dispute settlement system. Nevertheless, the argument of efficiency is not fully convincing, since experience in the WTO dispute settlement system shows that the effect of countermeasures in the decisions of the defaulting parties to comply with the DSB decisions is relative. 467 Sometimes States do not implement WTO decisions even if an authorisation to apply countermeasures has been granted against them or even when the countermeasures are effectively applied. It could also be argued that the inclusion of these measures is no more than a reflection of the decentralised system of international law. Nevertheless, international practice shows that countermeasures are reserved to the most powerful States. Thus, by accepting countermeasures as a remedy, the dispute settlement system would be granting the enforcement of its decisions to a handful of countries. In addition, this explanation would imply the risk of transforming the inequality among States which exists in practice in a new rule of law, by granting enforcement only to "strong" countries. These two explanations appear to be unsatisfactory. Consequently, this work suggests that the best justification for the inclusion of countermeasures in the dispute settlement system is the intention to limit and control the application of self-help in trade disputes. This appears to be the intention of the Drafters when they considered these measures as the last resort. If it is considered that this is the real function of ruling countermeasures then it will be possible to say that WTO rules on countermeasures are a real step forward in international law. In addition, this explanation would be useful in order to achieve other aims: taking
467 Cf. CHARNOVITZ, S., op. cit. (note 217), p. 429. See also BRONCKERS, Marco and VAN DEN BROEK, Naboth, Trade retaliation is a poor way to get even, in Financial Times , edition of 24 June 2004, p. 15.

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due restraint in authorising and monitoring countermeasures and improving the system of enforcement by other means or by other types of measures that allow the enforcement of DSB decisions for all members. In this respect, a real and centralised system of sanctions can be envisaged, where the DSB has a central role in imposing and controlling these measures, a system where the implementation of the decisions does not depend on the retaliatory abilities of the winning party but in the conviction of its Members that it is necessary to have WTO rules respected in order to reach an effective system for all WTO Members. Possibly, in view of the maturity of the WTO dispute settlement system, it is time to resurrect the idea of collective remedies: the possibility for all Members to retaliate against a non-implementing party. Whatever the solution adopted, the conditions for the application of countermeasures already contained in the WTO treaty could be used as a limit for a new remedy. Even if it seems difficult to foresee any amendment to the DSU in relation to remedies, given the sensitivity of the issue, it appears that an enforcement system effective for all WTO Members and more appropriate for the WTO dispute settlement mechanism is necessary.

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BIBLIOGRAPHY

1 PRIMARY SOURCES 1.1 Treaties and other documents United Nations Charter (including the Statute of the International Court of Justice), 26 June 1945 Vienna Convention on the Law of Treaties, 23 May 1969 , UNTS, vol. 1115, p. 3331. The Results of the Uruguay Round of Multilateral Trade Negotiations , Cambridge, Cambridge University Press, 1995, pp. 492. League of Nations, document C.275.1927.V. Annuaire de lInstitut de droit international, vol. 38, 1934. League of Nations Conference for the codification of International Law (1930), New York, Oceana, 1972. Yearbook of the International Law Commission , 1956, Vol. II. Yearbook of the International Law Commission , 1957, vol. I. Yearbook of the International Law Commission , 1963, Vol. II. Yearbook of the International Law Commission , 1973, Vol. II. Yearbook of the International Law Commission , 1979, Vol. I and II Yearbook of the International Law Commission , 1985, vol. II, Part One. Yearbook of the International Law Commission , 1996, vol. II, Part Two. 119

ILC Report, 1997, A/52/10 Other documents of the ILC: A/CN.4/498 & Adds. 1-4, 1999; A/54/10; A/C.6/55/SR.18; A/C.6/55/SR.15; A/C.6/55/SR.20; A/C.6/55/SR.14; A/C/55/55/SR.18; A/CN.4/513 General Comment 8 (1997), E/C.12/1997/8, 5 December 1997. Note by the Security Council President on Proposals to Improve the Work of the Sanctions Committee, S/1999/92OF, 29 January 1999. Resolution on the Implementation of the Provisions of the Charter of the UN related to Assistance to Third States Affected by the Application of Sanctions, General Assembly Resolution, A/RES/57/25 of 19 November 2002.

1.2 International case law

1.2.1 International Court of Justice Corfu Channel case (Merits) (United Kingdom v. Albania), Judgment of 9 April 1949, I.C.J. Reports 1949 , p. 4. Legal Consequences for States of the Continued Presence of South Africa in Namibia (South West Africa) notwithstanding Security Council Resolution 276 (1970), I.C.J. Reports 1971, p. 16. Case concerning the Appeal Relating to the Jurisdiction of the ICAO Council (India v. Pakistan ), I.C.J. Reports 1972, p. 46. Case Concerning United States Diplomat and Consular Staff in Teheran (United States of America v. Iran), Judgement of 24 May 1980, I.C.J. Reports 1980 , p. 3. 120

Case Concerning the Military and Paramilitary Activities in and Against Nicaragua (Merits) (Nicaragua v. United States), Judgment of 27 June 1986, ICJ Reports 1986 , p. 14 Case concerning the Gab kovo-Nagymaros Project (Hungary/Slovakia), I.C.J. Reports 1997, p. 7.

1.2.2

International Arbitral Awards

Responsabilit de lAllemagne raison des dommages causes dans les colonies portugaises du Sud de lAfrique (affaire du Naulilaa) (Allemagne/Portugal), UNRIAA, vol. II, 1928, p. 1013. Responsabilit de lAllemagne raison des actes commis postrieurement au 31/071914 et avant que le Portugal ne participt a la guerre (affaire du Cysne)(Allemagne/Portugal, UNRIAA, vol. II, 1930, p. 1035. Case concerning the Air Services Agreement of 27 March 1946 (United States v. France), UNRIAA, vol. XVIII, 1979, pp. 416-453.

1.2.3

WTO Panel Reports

Panel Report, European CommunitiesRegime for the Importation, Sale and Distribution of Bananas , 25 September 1997, WT/DS27/R. Panel Report, United States Import Prohibition of Certain Shrimp and Shrimp Products, adopted on 6 November 1998 , WT/DS58/R, DSR 1998:VII p. 2821. Panel Report, European Communities Regime for the Importation, Sale and Distribution of Bananas Recourse to Article 21.5 of the DSU by the

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European Communities , WT/DS27RW/EEC and Corr. 1, 12 April 1999, DSR 1999:II, p. 783. Panel Report by the Reconvened panel on European Communities Regime for the Importation, Sale and Distribution of Bananas Recourse to Article 21.5 of the DSU by Ecuador, WT/DS27/RW/ECU, dated 12 April 1999, adopted on 6 May 1999, WT/DS27/RW/ECU, DSR 1999:II, p. 803. Panel Report, United States Sections 301-310 of the Trade Act of 1974, 22 December 1999, Adopted by the Dispute Settlement Body on 27 January 2000, WT/DS152/R, DSR 2000:II, p. 815. Panel Report, Australia Subsidies Provided to Producers and Exporters of Automotive Leather, WT/DS126/RW, adopted 11 February 2000. Panel Report, Australia Measures Affecting Importation of Salmon Recourse to Article 21.5 of the DSU by Canada, WT/DS18/RW, adopted 20 March 2000, DSR 2000:IV, p. 2035.

Panel Report, United States Import Measures on Certain Products from the European Communities, WT/DS165/R, adopted 10 January 2001, as modified by the Appellate Body Report, WT/DS165/ABR, DSR 2001: I.

Panel Report, European Communities Anti-dumping Duties on Imports of Cotton-Type Bed Linen from India, 29 November 2002, WT/DS141/RW.

Panel Report, European Communities Anti-Dumping Duties on Imports of cotton-type Bed Linen from India Recourse to Article 21.5 of the DSU by India, WT/DS141/RW, adopted 24 April 2003, as modified by the Appellate Body report, WT/DS141/AB/RW.

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1.2.4

WTO Appellate Body Reports

Appellate Body Report, United States - Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R, adopted 29 April 1996, DSR 1996:I, p. 16. Appellate Body Report, Regime for the Importation of Bananas , adopted 25 September 1997, WT/DS27/AB/R, DSR 1997: II, p. 591. Appellate Body Report, United States Import Prohibition of Certain Shrimp and Shrimp Products, adopted on 6 November 1998, WT/DS58/AB/R. Appellate Body Report, CanadaMeasures Affecting the Export of Civilian Aircraft, 20 August 1999, WT/DS70/AB/R. Appellate Body Report, Chile Taxes on Alcoholic Beverages, WT/DS87/AB/R and WTDS110AB/R, 13 December 1999. Appellate Body Report, Australia Measures Affecting Importation of Salmon Recourse to Article 21.5 of the DSU by Canada, WT/DS18/AB/RW, adopted 2 March 2000, DSR 2000:IV, p. 2035. Appellate Body Report, Canada Measures Affecting the Export of Civilian Aircraft Recourse by Brazil to Article 21.5 of the DSU, WT/DS70/AB/RW, adopted 4 August 2000, Appellate Body Report, United StatesAnti-Dumping Act of 1916, 26 September 2000, WT/DS136/AB/R. Appellate Body Report, United States Import Measures on Certain Products from the European Communities, WT/DS165/AB/R, adopted 10 January 2001.

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1.2.5 1.2.5.1

WTO Arbitral Decisions Arbitrations under Article 22.6 of the DSU

Decision by the Arbitrators, European Communities Regime for the Importation, Sale and Distribution of Bananas Recourse to Arbitration by the European Communities under Article 22.6 of the DSU, WT/DS27/ARB, 9 April 1999 , DSR 1999:II, p. 725. Decision by the Arbitrators, European Communities Measures Concerning Meat and Meat Products (Hormones) Original Complaint by the United States Recourse to Arbitration by the European Communities under Article 22.6 of the DSU , WT/DS26/ARB, 12 July 1999, DSR 1999:III, p. 1105. Decision by the Arbitrators, European Communities Regime for the Importation, Sale and Distribution of Bananas Recourse to Arbitration by the European Communities under Article 22.6 of the DSU , WT/DS27/ARB/ECU, 24 March 2000, DSR 2000:V, p. 2243. Decision by the Arbitrators, Brazil Export Financing Programme for Aircraft Recourse to Arbitration by Brazil under Article 22.6 of the DSU and Article 4.11 of the SCM Agreement (Brazil Aircraft), WT/DS46/ARB, circulated on 28 August 2000. Decision of the Arbitrators, United States Tax Treatment for Foreign Sales Corporations Recourse to Arbitration by the United States under Article 22.6 of the DSU and Article 4.11 of the SCM Agreement, WT/DS108/ARB, 30 August 2002. Decision by the Arbitrators, Canada Export Credits and Loan Guarantees for Regional Aircraft Recourse to Arbitration by Canada under Articled 22.6 of the DSU and Article 4.11 of the SCM Agreement, WT/DS222/ARB, 17 February 2003.

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Decision by the Arbitrators, United States Anti-dumping Act of 1916 (original complaint by the European Communities). Recourse to Arbitration by the United States under Article 22.6 of the DSU , 24 February 2004, WT/DS136/ARB.

1.2.5.2

Arbitrations under Article 21.3 (c) of the DSU

Award of the Arbitrator, European Communities Regime for the Importation, Sale and Distribution of Bananas Arbitration under Article 21.3 (c) of the DSU, WT/DS27/13, Request of 17 November 1997, by Ecuador, Guatemala, Honduras, Mexico and the US, G/L/20920 November 1997. Award of the Arbitrator, European Communities Regime for the Importation, Sale and Distribution of Bananas Arbitration under Article 21.3 (c) of the DSU, WT/DS27/15, 7 January 1998, DSR 1998, p. 3. Award of the Arbitrator, EC Measures Concerning Meat and Meat Products (Hormones) Arbitration under Article 21.3 (c) of the DSU, WT/DS26/15, WT/DS48/13, 29 May 1998, DSR1998:V, p. 1833, paras. 25-26. Award of the Arbitrator, Indonesia Certain Measures Affecting the Automobile Industry Arbitration under Article 21.3(c) of the DSU , WT/DS54/15, WT/DS54/14, WT/DS54/13, WT/DS54/12, 7 December 1998, DSR 1998:IX, 4029 Award of the Arbitrator, Chile Taxes on Alcoholic Beverages Arbitration under Article 21.3 (c) of the DSU, WT/DS114/13, 18 August 2000, Award of the Arbitrator, Argentina Measures Affecting the Export of Bovine Hides and the Import of Finished Leather Arbitration under Article 21.3(c) of the DSU, 31 August 2001, WT/DS155/10 125

Award of the Arbitrator, Chile Price Band System and Safeguard Measures Relating to Certain Agricultural Products Arbitration under Article 21.3 (c) of the DSU, WT/DS207/13, 17 March 2003

2 2.1

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CRAWFORD, James, The International Law Commissions Articles on State Responsibility. Introduction, Text and Commentaries , Cambridge New York, Cambridge University Press, 2001, 387 pp. ELAGAB, Omer Yousif, The Legality of Non-Forcible CounterMeasures in International Law, Oxford, Clarendon Press, 1988, 255 pp. GALLAGHER, Peter, Guide to dispute settlement, Kluwer Law International and WTO Editions, 2002, 148 pp. GARCIA RUBIO, Mariano, On the Application of Customary Rules of State Responsibility by the WTO Dispute Settlement Organs, Studies and Working Papers, HEI, Geneva, 2001, 100 pp. 126

HUDEC, Rober E., Enforcing International Trade Law: The Evolution of the Modern GATT Legal System , Butterworth Legal Publishers, 1993 pp. JACKSON, John, The World Trading System: Law and Policy at International Economic Relations, 2 nd ed. Cambridge, MA, MIT Press, 1997. JACQUET, Jean-Michel and DELEBECQUE Phillippe, Droit du commerce international, 3rd ed., Paris, Dalloz, 2002, 500 pp. KONTOU, Nancy, The Termination and Revision of Treaties in the Light of New Customary International Law, Oxford, Clarendon Press, 1994, 169 pp. LUFF, David, Le droit de lOMC, Bruxelles Bruylant, 2004, 1277 pp. PALMETER, David N. and MAVROIDIS, Petros C, Dispute Settlement in the Word Trade Organization: practice and procedure, Cambridge University Press, Cambridge 2004, 330 pp. PAUWELYN, Joost, Conflict of Norms in Public International Law: How WTO Law Relates to other Rules of International Law, Cambridge University Press, 2003, 522 pp. PETERSMAN, Ernst-Ulrich, The GATT/WTO Dispute Settlement System. International Law, International Organizations and Dispute Settlement, United Kingdom, Kluwer Law International, 1997, 344 pp. NGUYEN QUOC, Dinh, DAILLER, Alland, PELLET, Alain, Droit International Public, 7th ed., Paris, LGDJ, 2002, 1510 pp. REUTER, Paul, Introduction to the Law of Treaties , London-New York, Pinter Publishers, 1989, 236 pp.

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BRONCKERS, Marco and VAN DEN BROEK, Naboth, Trade retaliation is a poor way to get even, in Financial Times, edition of 24 June 2004, p. 15. CAFLISCH, Lucius, Cent ans de rglement pacifique des diffrends intertatiques, RCADI, vol. 288, 2001, pp. 245-468. CANAL-FORGUES, Eric Sur linterprtation dans le droit de lOMC, RGDIP, vol. 11, n. 1, 2001, pp. 5-24. CANNIZZARO, Enzo, The Role of Proportionality in the Law of International Countermeasures, EJIL, vol. 12, 2001, pp. 889-916. CARMODY, Chi, Remedies and Conformity under Agreement, JIEL, Volume 5, June 2002, pp. 307-329. the WTO

CASS, Deborah Z., The 'Constitutionalization' of International Trade Law: Judicial Norm-Generation as the Engine of Constitutional Development in International Trade, EJIL , vol. 12, n. 1, 2001, pp. 3975. CHARNEY, Jonathan I., Is International Law Threatened by Multiple International Tribunals?, RCADI, vol. 271, 1998, pp. 101-382. CHARNOVITZ, Steve Rethinking WTO Trade Sanctions, AJIL, vol. 95, n. 4, 2001, pp. 792-832. CHARNOVITZ, Steve, The WTOs Problematic Last Resort Against Noncompliance, Aussenwirtschaft, n. 57 vol. IV, 2002, pp. 409-439. CONBACAU, Jean, Sanctions in BERNHARDT, Rudolf (ed.), Encyclopedia of Public International Law, North-Holland Amsterdam, 1992, Vol. IV, p. 315. COTTIER, T. and NADAKAVUKAREN Schefer, K., Non ViolationsComplaints in WTO/GATT Dispute Settlement: Past, Present and 129

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ABBREVIATIONS

AFDI: AJIL: DSR: EJIL: FYIL: GYIL: IBLJ: JIEL: JWT: NILR: NYIL: RCADI: RGDIP : UNRIA: YILC:

Annuaire franais de droit international American Journal of International Law WTO Dispute Settlement Reports European Journal of International Law Finnish Yearbook of International Law German Yearbook of International Law International Business Law Journal Journal of International Economic Law Journal of World Trade Netherlands International Law Review Netherlands Yearbook of International Law Recueil des Cours de lAcadmie de droit international Revue gnrale de droit international public United Nations Reports of International Awards Yearbook of the International Law Comission

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