Jean Monnet Center at NYU School of Law


IV. Comments

A. Substantive aspects of the case

1. The `black letter law': essential holdings of panel of Appellate Body

Essentially, these cases settle two basic issues of substantive WTO anti-dumping law, which had never been addressed as such in GATT or WTO dispute settlement.

First, the panel and AB defined the scope of application of the WTO anti-dumping provisions. The panels concluded that `any law that objectively addresses dumping' falls under art. VI GATT and the Anti-Dumping Agreement. The AB held similarly that art. VI GATT is applicable to any `specific action against dumping', which encompasses at a minimum action that may be taken only when the constituent elements of dumping are present. Furthermore, the panel made clear that they considered that is necessary and sufficient for such applicability that the legislation at issue requires the establishment of `dumping' as defined in art. VI GATT as a necessary condition for action to be undertaken. That the legislation at issue imposes other additional conditions is of no relevance to the applicability of the WTO anti-dumping provisions.

Secondly, the panel and AB explicitly confirmed in this case what had been suggested in the literature: the WTO anti-dumping regime is `exhaustive' in the sense that it does not allow WTO members to take anti-dumping measures not provided in the WTO anti-dumping regime, e.g. by introducing or maintaining in their national legislation additional anti-dumping remedies.155 The panels' and the AB's reasoning convincingly removes doubts in this respect raised by the use of the word `may' in art. VI:2 GATT and the language of footnote 24 sub art. 18.1 Anti-Dumping Agreement.

On the basis of these basic findings the conclusion that the 1916 Act violates the WTO anti-dumping regime was easily reached.156 Whatever other conditions are to be fulfilled for a cause of action under the 1916 Act, a finding of `dumping' as required. And it is clear that the 1916 Act provides for sanctions, which are different from the anti-dumping measures the WTO anti-dumping regime provides for.

2. Implications for antitrust law?

The Panel's and AB's conclusion as to applicability of the WTO anti-dumping regime to the 1916 Act was not based on its possible or actual interpretation as a protectionist statute. Both Panel and AB indeed held that, even if the US contentions as to the antitrust nature of the 1916 Act were correct, this would not detract from the applicability of WTO anti-dumping law.
Given the Panel's and AB's definition of the scope of the WTO anti-dumping regime, it is clear that even non-hybrid statutes, providing in pure antitrust fashion for a specific private right of action against predatory dumping would fall under and violate the WTO anti-dumping regime. In this sense the holdings in this case have a potential impact on antitrust law.

This impact is however very limited157 and does not extend to `classic' antitrust law. The Panel gave good reasons why. First, it pointed out that antitrust laws dealing specifically with price discrimination typically address price discrimination within a given jurisdiction. These would definitely not fall under the WTO anti-dumping regime. Secondly and more fundamental, it pointed out that under general antitrust law transnational price discrimination - and a fortiori dumping - never forms the necessary basis for antitrust action. Under general antitrust or competition law a finding of transnational price discrimination may provide, at most, supporting evidence of the underlying forms of market disruption that antitrust law seeks to address, such as abuse of a dominant position or price conspiracy.

Even if the impact on antitrust approaches to dumping situations is limited, is it good for the development of the international trade order? Most economists and a lot of legal scholars agree that anti-dumping action is only economically warranted in case of predatory dumping, i.e. systematically selling on the import market at below cost prices with the view of intimidating and/or eliminating rivals in order to bring about higher prices than would prevail in a competitive market.158 Non-predatory dumping is considered in sum to be beneficial for the import market as a whole. Nevertheless, current anti-dumping law, including the WTO regime, is ill designed to identify and address predatory dumping159. At first sight then, it would seem to be a good thing to allow for the abovementioned specific statutes addressing only predatory dumping. However, the unilateral introducing or maintaining by one or more WTO members of the said type of specific antitrust legislation, seems not very effective in a context of international predatory practices, the proper assessment of which would seem to require an investigation of market conditions both in the import and the export market. Furthermore, it is questionable whether the existence of such laws, in addition to unchanged existing `classic' administrative anti-dumping regimes, would present any answer to the efficiency critique on anti-dumping160. Indeed, it must be noted that most reform proposals stress the need of cooperative or multilateral efforts, ideally leading to the abolishment of anti-dumping laws and their replacement by appropriate multilateral antitrust or competition law tools to address cross-border predatory practices.161

All in all this case thus does not have much spillover effects to antitrust law. And the limited effects there are, seem not to be much regretted.

B. Some methodological and procedural issues addressed in the case

1. "Multiple complaints" issues: separate panel proceedings on both claims and no enhanced third party rights

This case was one of the many in the short history of WTO dispute settlement that arose from so called multiple complaints, i.e. complaints by different Member involving the same subject matter.

Art. 9.1 DSU provides that `whenever feasible' a single panel should be established in such cases. This makes sense. Given the limited resources available for dispute settlement, it is efficient to have single proceedings for the settlement of sufficiently similar claims. Consolidation of such claims also assures coherence in reasoning and consistency in outcome162163. In this case, not only the measure at issue was exactly the same, the claims put forward by Japan and the EC were virtually the same. Hence this could have been a textbook example of a situation where consolidation would be appropriate. However such consolidation did not take place. The main reason seems to be the time gap of four months between the requests for panel establishment and three months between the actual establishment of a panel. This is indeed much longer than in most cases where consolidation took place164, although it may be noted in a recent case, brought by the US and the EC against India a time gap of 5 months between both requests and more than three and a half months between panel establishment did not prevent consolidation165.

Art. 9.3 covers the hypothesis that cases are not dealt with by a single panel. "To the greatest extent possible", the panels will be of the same composition and the timetable for the panel process shall be harmonized. This shows again the concern with efficiency and coherence. In this case the Panels were indeed of the same composition but no harmonisation of timetables or concurrent deliberations took place. In the Japan panel report, it is explained that none of the parties requested harmonisation, that the US objected to concurrent deliberations and that the EC was in disfavor of delay of proceedings of its own complaint166. However, art. 9.3 does not make the harmonisation of time tables subject to request and/or assent by the parties to the dispute. Hence a second opportunity to assure procedural efficiency and coherence in reasoning and outcome was only partially seized.

The status of third party of EC and Japan in each other proceedings could not make up for this loss of full connection between both proceedings167. One way to create a closer connection would have been for the panel to grant the enhanced third party rights the EC and Japan requested168. Since the AB report in the EC - Hormones case, it is clear that panels have the discretion under art. 12.1 DSU to grant such rights, in particular if the Panel considers it necessary for ensuring all parties due process of law. The Panel refused the request and the AB confirmed. As I understand the Panel's reasoning, the refusal seems to be largely due to a reluctance to blur the distinction between (the respective rights) of parties and third parties as laid down in the DSU. However, is such a distinction not ipso facto blurred for simultaneous complainants/third parties status in multiple complaints situations and wouldn't it be justified in such a case, contrary to what the AB held, to seek guidance in art. 9 as `context' for art. 10 in this situation?

I must admit that I have no clear-cut answer to the questions asked above. And it must be said that the fear for incoherence proved to be largely unfounded in this case. Both panel reports are indeed very consistent. Equally, it may be argued that by not pushing the multiple complaints issue and its discretion too much, the panel may have eased procedural tension, thus creating a more settlement inducive atmosphere. But what a waste to have two proceedings....

2. Objections against jurisdiction

As pointed out in the overview of the reports, the Panel in the EC case and the AB rejected an EC claim of untimeliness against the US objection against the jurisdiction to hear the claims of the EC.

The AB agreed with the panel that the US had raised its objection against jurisdiction at an unappropriately late stage (interim review) of the panel proceedings. Like the Panel it also pointed out that jurisdictional objections are not simply "procedural objections" to be raised as early as possible but that "[t]he vesting of jurisdiction is a fundamental prerequisite for lawful panel proceedings".169 In a footnote it added that is "it is a widely accepted rule that an international tribunal is entitled to consider the issue of its own jurisdiction on its own initiative and to satisfy itself that it has jurisdiction"(the author underlines).

Of course, this holding is as such to be approved of. One can imagine the damage that would be done to the legitimacy of the WTO dispute settlement system if only one case were adjudicated on the basis of disputed jurisdiction.

As a practical matter, how should panels then go about addressing the jurisdiction issue, if the parties themselves have not addressed it in limine litis? According to the AB, Panels should address the question apparently propriu motu. Of course, due process concerns would require Panels to open the issue for discussion by the parties. One way to proceed would then be that each panel at the earliest possible stage of the proceedings - i.e. the first session of the first substantive meeting - puts the question of its jurisdiction to the - especially responding - parties.

3. Examination of domestic law

In these cases the panels revisited the question of how to examine the domestic legislations the compatibility of which is to be reviewed. These cases are noteworthy in that they address new aspect to the problem, namely the case where a Panel has to review a very old piece of legislation, carrying with it a diffuse `halo' of different interpretations from different sources.

Remarkable is especially the methodology the panels set out for themselves as a preliminary matter. Two principles seem to be at the core of this methodological approach

(i) a panel may analyze the operation of the domestic legislation and determine whether the description of the functioning of the law, as made by the respondent, is consistent with the legal structure of that Member.

(ii) in making such determination the starting point will be an analysis of the terms of that law. However, even if this text would be found to be clear on its face, the panel must take into consideration the interpretation given by domestic courts and other authorities, in order to avoid developing an understanding of the law different from how it is actually applied.

The combination of both principles results in a balanced approach, showing on the one hand sensitivity to the competences of domestic interpreters (second principle), without being entirely deferential to the interpretations made by those interpreters and especially to the presentations made by the respondent party before the panel (second principle). The application the Panel made of these principles when it continued to determine the weight it would give to different secondary sources, such as case law legislative history, illustrates very well this balance.

Also elucidating in this respect is a comparison to the approach taken in respectively the India Patents case and the Section 301 case.

In formulating the first principle, the panels referred to the following statement of the AB in the India Patents case:

"[i]t is clear that an examination of the relevant aspects of Indian municipal law ... is essential to determining whether India has complied with its obligations under Article 70.8(a) [of the TRIPS Agreement]. To say that the Panel should have done otherwise would be to say that only India can assess whether Indian law is consistent with India's obligations under the WTO Agreement."170

However, India Patents is often criticized for a lack of deference or `institutional sensitivity'171 to domestic interpreters. 172 At issue in this case was inter alia whether a particular administrative practice could be regarded as a sound legal basis for implementing a particular duty under the TRIPS agreement, where this practice was in conflict with the terms of relevant provisions of Indian patent legislation.173 The panel and AB held that it did not. In reaching this conclusion, the panel showed very little consideration for the arguments based on interpretation of Indian constitutional law made as defence by India.174 Thus, the critique goes that the panel and AB in the India Patents case failed to give due account to the concern addressed in the second principle.

By contrast to India Patents and analogous to the 1916 Act cases, the second principle was also explicitly articulated and applied in the US - Section 301-310 of the Trade Act of 1974 case, which was decided just before the panel reports discussed here were issued.175 The Panel in that case stated that only by understanding and respecting the specificities of each Member's legal system, a correct evaluation of conformity could be established176. It further pointed to the necessity to be cognizant of the `multilayered' character of the law at issue, consisting of the statutory language, but also other institutional and administrative elements177 and noted that the elements of such multilayered law are often inseparable and should not be read independently from each other when evaluating the overall conformity of the law with WTO obligations 178. The Panel applied the principle inter alia when it had to decide whether Section 304 of the US Trade Act 1974 violated art. 23.2(a) DSU because it required the USTR to determine whether another member denies US rights and benefits under the DSU, regardless of whether the DSB had adopted a report on the matter or not. The panel found that although the statutory text constituted a prima facie violation, this inconsistency was removed by the aggregate effect of a Statement of Administrative Action (SAA) and US statements made before the panel. 179

That a balanced approach does not necessarily leads to a deferential result and that such an approach not necessarily entails an important impact of extra-statutory sources, is illustrated by the - very conscientious - application by the panel of the methodology it set out when determining the applicability of art. VI GATT to the 1916 Act. Once it had found that the sole criterion for applicability was whether the Act objectively addressed dumping as defined in art. VI, it was clear that the extra-statutory elements would not matter much in coming to a final conclusion as to applicability. The non-statutory elements were indeed not very relevant to the transnational price discrimination or dumping test the panel found in the text of the statute. However, the panel again was very explicit in giving reasons why it considered these elements not very relevant.

In sum, the approach of the Panel to the examination of domestic deserves a positive evaluation. It carved out a very balanced methodology, which it applied in a consistent and transparent way. Together with the Section 301 case, the 1916 Act cases sets an example to be followed, also in cases where the United States is not the defendant.

4. The distinction between mandatory and discretionary legislation

In this case, the AB for the first time addressed the doctrine of mandatory vs. discretionary legislation. Affirming the holding of the panels that the prosecutorial discretion present in the 1916 Act was not sufficient to make it discretionary legislation, the AB confirmed what can be called the `classic doctrine' with respect to the distinction between mandatory and discretionary legislation (hereinafter: M/D-distinction), which had been a long time part of the GATT 1947 panel tradition 180.

This classic doctrine regarding the distinction was summed up in 1994 by the last GATT 1947 panel in US - Tobacco:

"....panels had consistently ruled that legislation which mandated action inconsistent with the General Agreement could be challenged as such, whereas legislation which merely gave the discretion to the executive authority of a contracting party to act inconsistently with the General Agreement could not be challenged as such; only the actual application of such legislation inconsistent with the General Agreement could be subject to challenge"181

In the light of this `classic' formulation of the doctrine, the application of the M/D distinction to the 1916 Act at issue in this case did not present great difficulties in this case. The only element of executive discretion allowed for by the 1916 Act was the prosecutorial power of the US Department of Justice to initiate (or not) criminal proceedings. Prosecutorial discretion is merely discretion whether a law should be applied; it does not allow the prosecuting authority to actually apply the law. Such discretion is not sufficient to move the law at issue to the `discretionary branch' of the M/D-distinction as it was traditionally applied182.

A closer look at the reasoning of the Panel in this case and the Panel in the Section 301 case, which its report during the panel proceedings in this case, shows that the traditional M/D-distinction (hereinafter: `classic doctrine') is less unproblematic than the AB's confirmation of its continuing validity seems to suggest.

The Panel in this case indeed did not directly reason on the basis of the classic doctrine to arrive at its conclusion that the 1916 Act was mandatory. Unlike the AB, the Panel's conclusion was essentially based on art. 18.4 Anti-dumping Agreement, which requires WTO Members to bring their anti-dumping legislation in conformity with art. 18.4 Anti-Dumping Agreement. Referring to earlier GATT panel reports, especially the unadopted EC - Audio Cassettes report, the panel held that it would be incompatible with this obligation of conformity and with the general principle of effectiveness to find that the prosecutorial discretion provided for by the 1916 Act was discretionary (or non-mandatory) and thus could as such not be found in violation of the WTO anti-dumping provisions.

In the Section 301 case the M/D-distinction the panel held that the discretionary nature of national legislation did not necessarily preclude it from violating as such WTO obligations. The Panel reasoned as follows:

"[We] believe that resolving the dispute as to which type of legislation, in abstract, is capable of violating WTO obligations is not germane to the resolution of the type of claims before us. In our view the appropriate method in cases such as this is to examine with care the nature of the WTO obligation at issue and to evaluate the Measure in question in the light of such examination. The question is then whether, on the correct interpretation of the specific WTO obligation at issue, only mandatory or also discretionary national laws are prohibited. We do not accept that there has to be one and fast rule covering all domestic legislation. After all, is it so implausible that the framers of the WTO Agreement, in their wisdom, would have crafted some obligations which would render illegal even discretionary legislation and crafted other obligations prohibiting only mandatory legislation? Whether or not Section 304 violates Article 23 depends, thus, first and foremost on the precise obligations contained in Article 23. " 183

Although the Panel in this case stressed that its approach did not require a wholesale reversal of the `classic doctrine'184, its `obligation-by-obligation' approach shifts the focus from the nature of the legislation at issue - which seems to be at the core of the classic test - to the WTO obligation at issue. This seems at least hard to reconcile with a `mechanical' application of this classic doctrine as a mere `threshold consideration'.185 And at least potentially it lowers the threshold for a finding of violation186.

Whereas in its earlier EC report, the Panel remarked that the Section 301 case did not affect its reasoning on the M/D-distinction187, the Japan report refers several times to this report as supporting its reasoning on the basis of art. 18.4 Anti-Dumping Agreement188. And indeed, making abstraction of formulas used, the Panel's approach in this case shows a comparable shift of focus from the nature of the disputed legislation to what is required by the WTO obligation(s) at issue.

Such a change of focus, and the `harder look' at the discretion present in national legislation it entails, seems adequately to address the concern that the mere existence of discretionary measures allowing for a may have a negative impact on trade, regardless of their being applied or not. The Section 301 panel eloquently emphasized this189. Other discretionary measures, of course, may not have such an impact. A Section 301 kind of approach to the M/D distinction seems adequate to distinguish between discretionary measures impacting trade negatively and others that do not.

By the same token, this more nuance approach to the classic doctrine adequately addresses concerns regarding the conformity of the M/D-distinction with the requirement of art. XVI:4 of the WTO Agreement for Members to bring their laws, regulations and administrative practices into conformity with all WTO obligations.190 It seems to have been indeed this kind of concern that brought the Panel in this case to address the M/D-distinction on the basis of art. 18.4 Anti-Dumping Agreement, which imposes the same kind of requirement as art. XVI:4 in the specific context of the WTO anti-dumping provisions.191

After all this perturbation of the `classic doctrine', back to the AB, which has the final word. Does the AB's reaffirmation of the `classic doctrine' imply a rejection of the more innovative approaches in the Panel reports in this case and the Section 301 case? I am tempted to think that the answer is negative.

First, the AB's reaffirmation may be read as limited to the `mandatory legislation' side of the distinction, leaving the issue of discretionary legislation unaddressed192 and open for decision in a later case, if necessary.

Secondly and more importantly, there is the affirmation of the Panel's allocation of the burden of proof with respect to the M/D-distinction. . Indeed, the AB agreed with the qualification by the Panel of the M/D-distinction argument as an affirmative defense, the burden of proof of which rests with the respondent. Thus, showing that the disputed act is mandatory is not part of the complainant's burden of bringing a prima facie case of violation, but for the respondent to adduce sufficient evidence that the legislation provides for such executive discretion that it does not as such violate the WTO obligations invoked by the claimant. This seems to be consistent with the Section 301 approach, emphasizing the need to have a close look at the concrete WTO obligations at issue, before deciding whether the discretionary elements of the disputed legislation suffice to exclude the possibility of as such violation.

The way the M/D distinction was applied by two later panels, suggests that although they seem to adhere to the `classic' view as endorsed by the AB in this case, they only apply the distinction after careful consideration of the exact content of the WTO obligations at issue193.

5. Judicial economy

Judicial economy has to do with the necessity to make findings on a claim in light of earlier findings made with regard to another claim.194 Exercising judicial economy allows Panels to rule on claims only to the extent necessary to resolve the dispute195. Therefore it often functions as an `issue-avoidance technique', allowing panels and AB to avoid having to address difficult or controversial issues when not necessary to settle a dispute196.

Traditionally the application of the judicial economy principle was a rather mechanical process, where the Panel simply stopped after having found a violation of one provision. 197 In the Australian - Salmon case the AB introduced a more functional standard:

`A Panel has to address those claims on which a finding is necessary in order to enable the DSB to make sufficiently precise recommendations and ruling so as to allow for prompt compliance by a Member[..]'198

In this case the Panel essentially addressed the principle three times when deciding whether or not to address claims made.

The first time, it decided not to apply the principle after having found a violation of art. VI:2 GATT (only duties are legitimate anti-dumping measures). Although it found that this finding addressed an essential feature of the 1916 Act, it considered that further findings on other anti-dumping provisions might be useful to assist the DSB. Secondly, the Panel applied judicial economy to decline to further consider the claims made based on art. III:4 GATT and art. XI GATT. Thirdly, in the Japan case, the Panel finally considered that it needed not to exercise judicial economy with regard to the claim based on article XVI:4 WTO Agreement and art. 18.4 Anti-Dumping Agreement, since the violation of art. VI GATT 1994 and several provisions of the Anti-Dumping Agreement it already had found, automatically implied a violation of the former provisions.

The Panel's use of the principle in this case seems a sensible application of the Salmon principle. The Panel had indeed at an earlier stage of the proceeding determined that art. VI and the Anti-dumping Agreement are a single undertaking and that the applicability of art. VI entails the applicability of the Agreement. Next, before declining to rule on the art. III:4 and XI claims, it pointed out that it considered that art. VI was a lex specialis to art III cq XI. Thirdly, when the violation of one provision automatically entails the violation of another it is unnecessary to exercise judicial economy. 199

The application of the principle by the Panel in the aforementioned instances did not entail real `issue avoidance'. However, such `issue avoidance' was clearly a motive for the panel not to address certain arguments Parties had made, such as those regarding the aforementioned relation between art. XVI:4 and the distinction between mandatory and discretionary legislation.

The AB in its turn restricted also restricted itself to a consideration of issues appeal and related arguments raised, it considered absolutely necessarily to reach a decision on the case. Its aforementioned treatment of the distinction between mandatory and discretionary law, shows that this allowed the AB to avoid at least one `hot potato'.

6. Suggestions of means to secure compliance WITH FINDINGS

Only in the Japan case, the panel made the specific suggestion that one means to comply with the findings made would be to repeal the act, thereto invited by Japan. The panel did not do so in the EC case, nor did the AB in its report.

Suggestions of possible means to secure compliance are allowed for by art. 19.1, second sentence DSU. Such suggestions are not uncommon in WTO anti-dumping cases.200 In case of serious violations, the panels sometimes suggest to repeal the measure201. Such suggestions are less common in other fields and the suggestion to repeal occurs extremely rarely.

As the annotated case was not a typical anti-dumping case, the suggestion to repeal by the Japan panel was therefore somewhat remarkable. Furthermore, such a strong, `activist' statement made by a panel is somewhat out of tune with the careful attempts to ease political tension and increase acceptability for its conclusions earlier in the report.

It seems, by the way, difficult to imagine any other means for the US to secure compliance than by repealing the 1916 Act, given the extent of the violations found by the panels as confirmed by the AB. Although remarkable and maybe strategically somewhat unfortunate, the panel's suggestion was correct.

155 See e.g. J. H. Bourgeois WTO Dispute Settlement in Anti-Dumping Cases, 1 J.INT'L.ECON.L. 259, at 272 (1998).

156 Some authors had already predicted such an outcome, see in particular Diane M. Keppler, The Geneva Steel Co. Decision Raises Concerns in Geneva: Why the 1916 Antidumping Act Violates the WTO Antidumping Agreement, 32 GEO.WASH.J.INT'L.L.&ECON. 293 (1999, 303-310.

157 As mentioned in part IIA, the US is the only WTO member to provide for a private right of action against dumping.

158 This is generally accepted with regard to "unfair" pricing practices in antitrust. See supra part IIA

159 For a short introduction to the critique on both economical (efficieincy) and fairness rationales of anti-dumping, see e.g. M. TREBILCOCK and R. HOWSE, THE REGULATION OF INTERNATIONAL TRADE, 178-189 (1999)

160 Even if such acts were not considered to fall under art. VI, it may well be argued that the coexistence of administrative anti-dumping and a private right of action violates art. III:4 GATT 1994. Compare on the (in)compatibility of the 1916 Act with art. III GATT 1947 : Roger P. Alford, Why a private right against dumping would violate GATT, 66 N.Y.U.L. REV. 696 (1991), 740 et seq (relying especially on the requirement of procedural equality set out in the Section 337 case (see Panel report on United States - Section 337 of the Tariff Act of 1930, Report by the Panel, adopted 7 November 1989, 36 supp. BISD 345 (1990), para. 5.19); see also John H. JOHN H. JACKSON, THE WORLD TRADING SYSTEM : LAW AND POLICY OF INTERNATIONAL ECONOMIC RELATIONS, 274 (1997) and the references there in fn. 95.

161 See for a short overview of these reform proposals: M.TREBILCOCK & R. HOWSE, supra note 160, 188-189.

162 The efficiency concern could be considered to be more acute than the coherence concern. The possibility of appellate review may indeed mitigate this concern, although it should not be forgotten that the appellate review is more restricted than the panel review.

163 Art. 9.2 DSU addresses another concern with consolidation of cases: procedural fairness. It states that when a single Panel is established, this Panel shall organize its examination and present its findings to the DSB in such a way that the rights, which parties would have enjoyed in separate proceedings, are in no way impaired. More specifically, it adds that separate reports will be submitted if a party to the dispute asks to do so. Furthermore, art. 9.2 provides that all written submissions by parties shall be made available to all other parties and that each complainant has the right to be present when any of the other complainants shall present its views to the panel. It may be noted that these provisions have in particular regard to the due process interest of complainants .

164 See for an overview of such cases during the first three years of WTO dispute settlement: Debra P. Steger and Susan M. Hainsworth, World trade organization dispute settlement: the first three years, 1 J.INT'L.ECON.L. 199, 206 (1998).

165 See Panel report on India - Measures affecting trade and investment in the motor vehicle industry, WT/DS146/R and WT/DS175/R, issued on 21 December 2001, para.1.1. and following.

166 See Japan panel report, para. 6.27.

167 Art. 10 DSU and art. 6 Annex 3 to the DSU provide following rights to third parties: to be heard during a session of the first substantive meeting of the panel, to make written submissions and to receive the submissions of the parties to the first meeting of the panel.

168 The EC requested the right to be present during both substantive meetings of the Japan panel proceedings and to make a submission on each occasion. Japan requested to be allowed to be present during the entire second substantive meeting of the EC panel proceedings and to receive all documents exchanged by the parties in the EC panel proceedings.

169 Appellate Body report, para 53.

170 Appellate Body Report on India - Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/AB/R (complaint by US), adopted 16 January 1998, para. 66.

171 This concept was introduced by Robert Howse, Adjudicative Legitimacy and Treaty Interpretation in International Trade Law: The Early Years of WTO Jurisprudence, in THE EU, THE WTO AND THE NAFTA: TOWARDS A COMMON LAW OF INTERNATIONAL TRADE 62-68 (J.H.H.Weiler ed., 2000). He defines `institutional sensitivity' as an awareness of panels and Appellate body of their institutional strengths and weaknesses in relation to other actors which may have a particular expertise or a particular stake in the laws and policies it has to review. Howse regards this as one of three important elements contributing to the legitimacy of WTO dispute settlement (the other elements are fair procedures and coherence and integrity in interpretation). He prefers the concept of `institutional sensitivity' to that of formulae encouraging panels and Appellate Body to show a certain `deference' or `restraint', which in his view are not nuanced enough (id, 62).

172 See the critique of Robert Howse (id., 68) : "[..] complete deference to another authority would not have been appropriate, since outsiders (in this case foreign patent holders) had an interest not necessarily recognizable or recognized by the domestic institutional authority. Nevertheless [...] the AB has arguably gone to the opposite extreme, in holding that WTO dispute settlement organs can interpret domestic law without even taking into account domestic institutional competence in the interpretation of this law." See also eg. William J. Davey, Has the WTO dispute settlement system exceeded its authority? A consideration of deference shown by the system to member government decisions and its use of issue-avoidance techniques, 4 J.INT'L.ECON.L. 79, at 93 (2001): "[...] the panels and the Appellate Body did effectively reject the Indian government view of its powers and the likely reaction of Indian courts to its actions. One can argue that given the uncertainty over what Indian courts might do greater deference to the government's view would have been appropriate".

173 Art. 70.8 (a) TRIPS, the provision at issue, requires Members, who make use of the possibility under TRIPS not immediately to provide patent protection pharmaceutical and/or agricultural products, to make available during the transitional period a `mailbox' system for patent filing regarding such products, to preserve novelty of inventions and priority of applications as of the relevant filing and priority dates.

174 On appeal, India argued that the Panel had erred in its approach, because (1) it did not assess the Indian law as a fact to be established by the United States, but rather as a law to be interpreted by the Panel; (2) it should have given India the benefit of the doubt as to the status of its mailbox system under Indian domestic law and (3) the Panel should have sought guidance from India on matters relating to the interpretation of Indian law (Appellate Body Report on India - Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/AB/R (complaint by US), adopted 16 January 1998, para 64). In rejecting these claims, the AB in particular gave no consideration to the third element of India's claim, which was however different than the first element (see Id. para. 66).

175 See Panel report on United States - Section 301-310 of the Trade Act of 1974, adopted on 27 January 2000, WT/DS152/R.

176 Id, para. 7.24.

177 Id., para. 7.26.

178 Id., para. 7.27.

179 For a critique on the degree of deference given by the panel in the Section 301-case, see eg. Seung Wha Chang, Taming Unilateralism under the Multilateral Trading System: Unfinished Job in the WTO Panel Ruling on U.S. Sections 301-310 of the Trade Act of 1974, 31 LAW & POL'Y INT'L BUS. 1151 (2000), at 1187: "From a WTO policy perspective, it seems undesirable for the WTO panel to follow U.S. constitutional law principles in favor of a construction upholding compliance with international obligations in cases of ambiguity. [...]. An application of the U.S. constitutional law principles in the domestic courts could promote U.S. compliance with the WTO obligations. In contrast, however, a WTO panel's use of a similar method in assessing the WTO consistency of a Member's legislation may serve against the Member's compliance with WTO obligations."

180 For an overview of instances of application of the doctrine under the old GATT jurisprudence, see: Analytical Index: Guide to GATT Law and Practice, Vol. 2, 645-648 and 733-734 (1995); see on this doctrine also: DAVID PALMETER & PETROS MAVROIDIS, DISPUTE SETTLEMENT IN THE WORLD TRADE ORGANIZATION: PRACTICE AND PROCEDURE, 24-26 (1999) and Davey, supra note 173, at 101-103.

181 United States - Measures Affecting the Importation, Internal Sale and Use of Tobacco, adopted on 4 October 1994, BISD 41S/131, para 118, quoted in the Appellate Body report in the annotated case, at para. 88.

182 Davey (supra note 173, at 103) notes that panels in the past have refused to consider that the long-time and consistent non-enforcement of mandatory legislation renders it immune from challenge.

183 Panel report on United States - Section 301-310 of the Trade Act of 1974, supra note 176, para. 7.53.

184 Id, at para. 7.54.

185 Compare Appellate Body report, para. 88.

186 Compare Davey, supra note 173, 103.

187 EC panel report, para. 6.83, fn. 352.

188 See Japan panel report, para. 6.106, fn. 88 and para. 6.191, fn. 153.

189 Panel report on United States - Section 301-310 of the Trade Act of 1974, supra note 176, esp. para. 7.91 (Emphasizing that the `risk' or `threat' of inconsistent action can have a "chilling effect" on economic operators that is just as damaging as such action itself).

190 See the critique of Mavroidis and Palmeter on this questionable compatibility of the discretionary law category with art. XVI:4 WTO Agreement in PALMETER & MAVROIDIS, supra note 181, 26. The Panels in this case did not address the issue, since they considered their reasoning on the basis of art. 18.4 sufficient. But of course, since art. 18.4 Anti-Dumping Agreement and art. XVI:4 WTO Agreement essentially impose the same kind of requirement on WTO Members, their conclusions based on art. 18.4 can be easily analogized.

191 Because, as pointed out, not all legislation providing for discretion that could be used in a WTO inconsistent manner has as such a "chilling effect" on trade, it seems to me not necessary to go so far as to say that the M/D distinction is irrelevant since the entry into force of art. XVI:4 WTO Agreement, as the Japan panel (para. 189) stated with regard to the art. 18.4 Anti-Dumping Agreement.

192 The Appellate Body indeed did not reject the finding in the Japan panel report that in the light of art. 18.4 Anti-Dumping Agreement the M/D - distinction was no longer relevant in determining whether panels can or cannot review the conformity of the 1916 Act with the WTO anti-dumping provisions. It merely declined to rule on the issue, because the 1916 Act was clearly not discretionary legislation. It also did not pronounce on the panel's holding in the Section 301 case, but merely `noted' it in a footnote. See AB report, para. 98-99.

193 See Panel report on Canada - Export credits and loan guarantees for regional aircraft, WT/DS222/R, 28 January 2002, para 7.56 and following and Panel report on United States - Measures Treating Export Restraints as Subsidies WT/DS194/R, adopted 23 August 2001, para. 8.4 and following. In the latter case the panel stated : "We are not aware of any GATT/WTO precedent that would require a panel to consider whether legislation is mandatory or discretionary before examining the substance of the provisions at issue. To the contrary, we note that a number of panels, in disputes concerning the consistency of legislation, have not considered the mandatory/discretionary question in the abstract and as a necessarily threshold issue. Rather, the panels in those cases first resolved any controversy as to the requirements of the GATT/WTO obligations at issue, and only then considered in light of those findings whether the defending party had demonstrated adequately that it had sufficient discretion to conform with those rules. That is, the mandatory/discretionary distinction was applied in a given substantive context." (Id., para. 8.11, emphasis in original, footnote omitted).

194 See e.g. EC Panel report, para. 6.71.

195 Compare William J. Davey, supra note 173, 108.

196 Id.

197 Id, at 109 (positive about this practice, considering that when inconsistency can be found without addressing a difficult issue, it should not hesitate to do so) See eg. critical about a too mechanical application of judicial economy: S. Cho, Note: Gasoline: United States - Standards for Reformulated and Conventional Gasoline, 7-8 (1998) (rtf-document downloaded from the website of the European Journal of International Law: <>)

198 Appellate Body Report on Australia - Measures Affecting Importation of Salmon, adopted on 6 November 1998, WT/DS18/AB/R, para. 223.

199 Prof. Davey expressed some doubts as to how the guidance given by the Appellate Body in the Salmon case should be interpreted. He even wondered whether it did not simply reject the very notion of judicial economy. (Davey, supra note 173, 109). At least in the annotated case, this fear has been proved to be unfounded.

200 See e.g. Jacques H.J. Bourgeois, supra note 156, at 274.

201 See e.g. the panel in the Guatemala - definitive anti-dumping measures on grey Portland cement from Mexico case: "In light of the nature and extent of the violations in this case, we do not perceive how Guatemala could properly implement our recommendation without revoking the anti-dumping measure at issue in this dispute. Accordingly, we suggest that Guatemala revoke its anti-dumping measure on imports of grey portland cement from Mexico." (Panel report on Guatemala - definitive anti-dumping measures on grey Portland cement from Mexico, WT/DS156/R, issued on 24 October 2000, para. 9.6. ).




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