Food Law News - FAO/WHO/WTO/Codex - 2008

WTO News Item, 14 November 2008

WTO DISPUTE SETTLEMENT - DSB adopts rulings in disputes concerning continued sanctions in the beef-hormones cases

At its meeting on 14 November 2008, the Dispute Settlement Body adopted the rulings in the two separate complaints brought by the EC concerning the continued sanctions by the US and Canada in the beef-hormones cases (DS320 & DS321 respectively).

Adoption of the Appellate Body Reports and the Panel Reports

The Dispute Settlement Body (DSB) adopted the Appellate Body (AB) and panel reports after a lengthy exchange of views between members which is summarised below.

The EC said that this was one of the most important rulings that the Appellate Body had handed down so far. Although EC exports continued to face sanctions in Canada and the US, the EC was satisfied with the overall conclusions of the AB. The EC was particularly satisfied with the reversal by the AB of several serious legal errors committed by the panel in its interpretation and application of the Agreement on Sanitary and Phytosanitary Measures (SPS). The EC said that these clarifications enhanced the ability of WTO members to adopt measures to protect the health of their citizens in situations of scientific uncertainty and controversy.

According to the EC, the AB report made it clear that it would be improper for panels to appoint scientists whose independence and impartiality were likely to be compromised. Members could challenge the scientific assessments underlying an international standard and not have to confront the very same scientists who provided that assessment as the panel's advisors in a subsequent dispute over their own assessment, said the EC.

According to the EC, the AB report also made clear that panels did not have to conduct de novo reviews nor decide what constituted the best science, but rather were obliged to determine whether a risk assessment was supported by coherent reasoning and respectable scientific evidence. When interpreting Article 5.7 of the SPS Agreement, panels should not ignore genuine situations of scientific uncertainty, especially where new evidence called into question the results of previous risk assessments. The EC said the AB further clarified the allocation of the burden of proof in SPS cases. It noted that the legal errors committed by the panel were similar to those corrected by the AB in its 1998 Report in the EC-Hormones case and that it would be preferable if panels avoided committing the same errors in future cases.

The EC was, however, disappointed by the AB's reversal of the panels' ruling that the continued US and Canadian sanctions were illegal. The panels' explanation that the US and Canada had determined that the EC's new hormones ban was WTO-incompatible and that in reality they were seeking redress on that basis was convincing, said the EC. The EC was troubled by the AB's finding that Article 22.8 of the DSU permitted sanctions to continue not only until WTO-compliance was actually achieved but also beyond this point, namely until that compliance was established in a WTO dispute. However, from a policy standpoint, the EC was prepared to accept this, as was evidenced by the proposals under discussion in the DSU negotiations, including that of the EC.

According to the EC, the AB's ruling would ensure that retaliating members would not remain passive after the initiation of compliance review proceedings by the implementing member after the adoption of compliance measures. The EC concluded by saying that while this dispute had not been finally resolved, the EC believed that the AB's ruling had brought the parties closer to achieving a solution to this longstanding dispute.

Canada and the US noted the historic importance of this case in the quest to enhance the transparency of the dispute settlement system and make it more accessible to the general public. They expressed their satisfaction with the reversal by the AB of the Panel's findings on DSU Article 23. They particularly welcomed the finding that they were not seeking redress of a violation by continuing their suspension of concessions after the EC had claimed compliance. They applauded the AB's finding that statements made by them in the DSB did not constitute determinations within the meaning of DSU Article 23.2(a).

Canada and the US also expressed disappointment that after investing so much time and resources in this dispute, the AB could not complete its analysis on the consistency of the EC's revised hormones ban with the requirements of the SPS Agreement. They further stated that certain aspects of the AB's Report were deeply troubling from a systemic standpoint. According to Canada and the US, the AB had undertaken unnecessary analyses of DSU provisions and invented rules, procedures and even obligations that were simply not present in the DSU. They said that there was no basis for the statement that Article 21.5 compliance panel proceedings were the only procedure to be followed for resolving post-suspension disputes. They maintained that the AB had chosen to ignore the fact that the current appeal was from a regular panel proceeding considering a claim under DSU Article 22.8.

Canada and the US claimed that the ruling that either an original respondent or complainant had to initiate compliance panel proceedings without delay once a claim of compliance had been made imposed an onerous burden on members with limited resources. They said that the finding that they could each commence their own compliance proceedings which would then be harmonized and result in a review of all the issues, and the intricate rules on burden of proof that would be applicable, were without any basis. They maintained that the AB lacked authority to make these findings and was simply engaged in rule-making, and suggested that it would have been prudent for the AB to review these findings with the parties before enshrining them in its Report.

Canada and the US also expressed concern about the finding of conflict of interest under DSU Article 11 with regard to two of the scientific experts consulted by the Panel. They said that the fact that these scientists had participated as scientific experts in meetings of the Joint FAO/WHO Expert Committee on Food additives, where the hormones at issue in this case were discussed, was hardly a reason for their disqualification. They maintained that the AB's finding would seriously limit the number of internationally recognised scientists who might be available for consultation by WTO panels in cases of this kind and thus could have adverse systemic consequences. They also criticised the AB's conclusions related to the Panel's standard of review and interpretation of the SPS Agreement Articles 5.1 and 5.7. According to Canada and the US, these conclusions appeared to have loosened the disciplines of the SPS agreement that were aimed at ensuring that measures adopted by members were scientifically justified and not disguised restrictions on trade.

Canada and the US concluded by saying that under DSU Article 19, the AB could only issue a recommendation when it had concluded that a measure within the terms of reference of the proceeding was inconsistent with a covered agreement. Given that it did not make such a finding of inconsistency, the AB had no right to make such a recommendation under DSU Article 19. Furthermore, the AB had exceeded its authority by making a recommendation addressed to the complaining members and the responding member. The use of the term “recommend” by the AB had to be interpreted as an ill-considered word choice, as any other reading would be contrary to the DSU. They noted that whereas some parts of the AB Report were solid and well-reasoned, other parts raised significant concerns, not only in the context of this dispute, but in terms of whether the dispute settlement system would function as agreed by members.

Several members, including Argentina, Australia, Brazil, Chile, Costa Rica, Ecuador, Japan, Korea, Mexico and Norway, commented on the systemic issues alluded to by Canada and the US, particularly the recommendation issued by the AB pursuant to DSU Article 19.

The EC said that it was implicit in the US statement that it would not abide by the recommendation of the AB. The EC maintained that it was not open to a member to unilaterally decide whether a recommendation given by the AB was valid or not, or whether it had been made with or without jurisdiction or whether it was binding for the purposes of implementation or not. According to the EC, questions of legal basis and jurisdiction were obviously among those issues considered by the AB before rendering a ruling, and therefore it could be assumed that the AB would only make a recommendation when it was satisfied that it had jurisdiction. Unlike panel reports, AB reports could not be appealed. Unless there was a negative consensus, the Report had to be accepted fully and unconditionally by members.

The EC referred to the US communication (WT/DS320/16) circulated in advance of the meeting and said that the EC did not share the view that the AB did not have the right to interpret the DSU. According to the EC, the AB was empowered and even required to interpret the covered agreements as evidenced by DSU Articles 3.2 and 17.6. The EC recalled the discussion at the DSB on 1 August 2008 concerning the designation of communications from Members expressing their views on AB reports and said that the EC could not agree to the circulation of the US communication as a WT/DS document. Such communications should be circulated in the WT/DSB/COM or WT/DSB series as they related to the work of the DSB.

The EC said that unless the US communication were withdrawn, the EC would insist that its own statement be placed on the same record as the US communication. The EC further stated that in the future a consensus decision would be required before the circulation of such documents in the WT/DS series. The US challenged the assertion of the EC that a consensus decision would be required for the circulation of communications from Members expressing their views on AB reports.

India said that in allowing public observation of the hearings, the AB had exceeded its authority under the DSU. The EC disagreed with India that the AB had exceeded its authority under the DSU, and recalled that the legality of open hearings under the DSU was the subject of an intensive exchange between the parties and the third parties before both the panels and the AB in this dispute. The decisions of the Panels and the AB were correct and supported by the text of the DSU. The EC concluded by saying that transparency in WTO dispute settlement system was highly desirable for its credibility.

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