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This article was downloaded by: [Northeastern University] On: 24 November 2014, At: 01:12 Publisher: Routledge Informa Ltd Registered in England and Wales Registered Number: 1072954 Registered office: Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UK Australian Journal of International Affairs Publication details, including instructions for authors and subscription information: http://www.tandfonline.com/loi/caji20 Resolving and defusing trade disputes: the potential for creativity in the Australia–European Union relationship Iain Sandford & Maree TanKiang Published online: 25 Jul 2011. To cite this article: Iain Sandford & Maree TanKiang (2011) Resolving and defusing trade disputes: the potential for creativity in the Australia–European Union relationship, Australian Journal of International Affairs, 65:4, 469-487, DOI: 10.1080/10357718.2011.584857 To link to this article: http://dx.doi.org/10.1080/10357718.2011.584857 PLEASE SCROLL DOWN FOR ARTICLE Taylor & Francis makes every effort to ensure the accuracy of all the information (the “Content”) contained in the publications on our platform. However, Taylor & Francis, our agents, and our licensors make no representations or warranties whatsoever as to the accuracy, completeness, or suitability for any purpose of the Content. Any opinions and views expressed in this publication are the opinions and views of the authors, and are not the views of or endorsed by Taylor & Francis. The accuracy of the Content should not be relied upon and should be independently verified with primary sources of information. Taylor and Francis shall not be liable for any losses, actions, claims, proceedings, demands, costs, expenses, damages, and other liabilities whatsoever or howsoever caused arising directly or indirectly in connection with, in relation to or arising out of the use of the Content. This article may be used for research, teaching, and private study purposes. Any substantial or systematic reproduction, redistribution, reselling, loan, sub-licensing, systematic supply, or distribution in any form to anyone is expressly forbidden. Terms & Conditions of access and use can be found at http://www.tandfonline.com/page/terms- and-conditions

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Page 1: Resolving and defusing trade disputes: the potential for creativity in the Australia–European Union relationship

This article was downloaded by: [Northeastern University]On: 24 November 2014, At: 01:12Publisher: RoutledgeInforma Ltd Registered in England and Wales Registered Number: 1072954 Registeredoffice: Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UK

Australian Journal of InternationalAffairsPublication details, including instructions for authors andsubscription information:http://www.tandfonline.com/loi/caji20

Resolving and defusing trade disputes:the potential for creativity in theAustralia–European Union relationshipIain Sandford & Maree TanKiangPublished online: 25 Jul 2011.

To cite this article: Iain Sandford & Maree TanKiang (2011) Resolving and defusing trade disputes:the potential for creativity in the Australia–European Union relationship, Australian Journal ofInternational Affairs, 65:4, 469-487, DOI: 10.1080/10357718.2011.584857

To link to this article: http://dx.doi.org/10.1080/10357718.2011.584857

PLEASE SCROLL DOWN FOR ARTICLE

Taylor & Francis makes every effort to ensure the accuracy of all the information (the“Content”) contained in the publications on our platform. However, Taylor & Francis,our agents, and our licensors make no representations or warranties whatsoever as tothe accuracy, completeness, or suitability for any purpose of the Content. Any opinionsand views expressed in this publication are the opinions and views of the authors,and are not the views of or endorsed by Taylor & Francis. The accuracy of the Contentshould not be relied upon and should be independently verified with primary sourcesof information. Taylor and Francis shall not be liable for any losses, actions, claims,proceedings, demands, costs, expenses, damages, and other liabilities whatsoeveror howsoever caused arising directly or indirectly in connection with, in relation to orarising out of the use of the Content.

This article may be used for research, teaching, and private study purposes. Anysubstantial or systematic reproduction, redistribution, reselling, loan, sub-licensing,systematic supply, or distribution in any form to anyone is expressly forbidden. Terms &Conditions of access and use can be found at http://www.tandfonline.com/page/terms-and-conditions

Page 2: Resolving and defusing trade disputes: the potential for creativity in the Australia–European Union relationship

Resolving and defusing trade disputes: the potential

for creativity in the Australia�European Union

relationship

IAIN SANDFORD AND MAREE TANKIANG*

Disagreements are a natural and inevitable part of any substantial relation-ship. This is particularly true in the area of international trade, wherenational interests and the domestic commercial objectives with which theyare closely aligned often come into conflict with the interests of tradingpartners. Because disagreements are inevitable, trade agreements usuallyprovide a framework for resolution of disputes. However, the typicaldispute settlement framework established in trade agreements seldomcaptures the imagination of the business community. Indeed, publicinternational law frameworks for trade dispute settlement tend not to beused for anything other than disputes of the largest magnitude or wherethere is a deep political issue that is otherwise insoluble. This article arguesthat such an approach to the crafting of dispute clauses in trade agreementsis a missed opportunity. It suggests that, in the context of the relationshipbetween Australia and the European Union, there is potential to develop arange of different approaches to address problems in an effective andaccessible manner.

Keywords: disputes; European Union; trade

Introduction

Disagreements are a natural and inevitable part of any substantial relationship.

This is particularly true in international trade, where national interests and the

domestic commercial objectives with which they are aligned often come into

conflict with the interests of trading partners. Because disagreements are

inevitable, trade agreements usually provide a framework for resolution of

disputes. However, the typical dispute settlement framework established in

*Iain Sandford is Director of the International Trade Group at Minter Ellison Lawyers, Canberra,

and Adjunct Professor of Law at the University of Canberra. He has worked on a range of

international and commercial disputes, including as a panellist in World Trade Organization

dispute proceedings.<[email protected]>

Maree TanKiang is a corporate lawyer, specialising in intellectual property law. Maree recently

joined the Commonwealth Scientific and Industrial Research Organisation (CSIRO) as in-house

legal counsel. <[email protected]>

Australian Journal of International Affairs Vol. 65, No. 4,

pp. 469�487, August 2011

ISSN 1035-7718 print/ISSN 1465-332X online/11/040469-19 # 2011 Australian Institute of International Affairs

DOI: 10.1080/10357718.2011.584857

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trade agreements seldom captures the imagination of the business community.Indeed, such frameworks tend not to be used for anything other than disputes ofthe largest magnitude or where there is an otherwise insoluble political issue.

This article argues that the typical approach to crafting dispute clauses intrade agreements misses an important opportunity. It suggests that, in thecontext of the relationship between Australia and the European Union (EU),there is potential to develop a range of different approaches to address problemsin an effective and accessible manner. The analysis is divided into three parts. Inthe first part, we describe the ‘default’ approach to dispute resolution clauses intrade agreements. We also highlight some impediments created by thisapproach for the effective resolution of international trade disputes. The nextpart reviews examples of international dispute settlement frameworks in tradeagreements that, in different ways, address some or all of these problems. Inthe final section, we apply principles and lessons from these examples topossible frameworks for disputes that may arise in the context of EU�Australiatrade. We briefly consider quarantine issues. Further, as a case study, we refer toa recent Federal Court trademark case as an example where an innovativeapproach to dispute resolution could provide a useful option compared withexisting mechanisms. We suggest there are lessons from the innovativeapproaches adopted in other contexts that could be applied to supplementexisting frameworks for dealing with Australia�EU disputes.

Problems with the default approach to dispute settlement clauses in trade

agreements

Dispute settlement systems reflect the nature of intergovernmental tradeagreements

Trade agreements are instruments of countries’ foreign policies and are, for thatreason, inherently political undertakings. They are about the way governmentsrelate to each other over time. Accordingly, they often have non-economicobjectives*for example, the trade agreement at the heart of the EU is perhapsthe world’s most successful example of using economic integration to drivegeopolitical goals around peace and security.

But trade agreements are also about international commerce. Commercialagreements inevitably deal with private interests and the dealings of privateparties. Although governments negotiate trade deals and private parties are notformally parties, such agreements have important impacts for the opportunitiesenjoyed and challenges faced by commercial actors.

From the point of view of private interests in the domestic economy, tradeagreements can create opportunities or benefits for importers and consumers byreducing the impact of government measures that act as barriers to entry forforeign suppliers of goods or services. At the same time, trade agreements focuson creating opportunities for export-oriented industries by reducing foreign

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trade barriers. Governments’ economic objectives in trade agreements usuallyinclude promoting beneficial economic integration, and, where trade barriers(i.e. governmental measures) represent the most important barriers to marketentry, their removal results in greater economic integration over time.

This dual political/governmental and economic/commercial character meansit is a mistake to analyse trade agreements only by reference to how they dealwith trade and economic issues. The dual character permeates not only thecommitments and rules agreed in such treaties, but also the systems the partnerscreate to manage the relationship embodied in the agreement, such as thedispute settlement framework.

The availability of an outlet for disagreements is important, both from thepolitical/governmental as well as the economic/commercial points of view.From the political side, it allows disputes to be quarantined from other aspectsof the relationship. A dispute settlement system that allows each side to have itssay, that is free from perception of bias, and that has a track record of beingreasonable and fair also has the benefit of rendering an outcome that can moreeasily be seen as a politically ‘legitimate’ resolution of the dispute, even if oneside wins and the other loses.1

The ‘default’ approach to dispute settlement clauses in trade agreements

But intergovernmental political interest in disputes also means that governmentsare generally keen to ensure that the governments themselves*as opposed to anyprivate domestic interests*address disagreements. Accordingly, most intergo-vernmental dispute frameworks establish an obligation to ‘consult’ to resolve thedispute on a bilateral negotiated basis. At the same time, however, thecommercial impact of trade measures means that the private parties usuallywant an outcome that actually has commercial meaning for them. A commer-cially meaningful outcome to a trade dispute may include eventual withdrawal(or upholding) of an impugned trade measure, but it will usually also includetimely resolution, compensation for losses and certainty of outcome.

The practical economic interests of private stakeholders mean that privatesector groups may sometimes wish themselves to challenge measures that theyperceive to be inconsistent with the deal agreed to. Even where they have nodirect right of access, private stakeholders like to be able to see what is going onand be able to have their say in an appropriate form. As has been observedelsewhere, international dispute resolution systems that do not have these kindsof characteristics tend to suffer from a deficit of ‘external’ legitimacy.2

In response to the demand for commercially legitimate resolutions to disputesinvolving trade measures, governments will usually allow their measures to betested in domestic courts, although there are factors that mean this may not be arealistic option. For example, in a common law system like Australia, thesovereign parliament may validly enact domestic laws that are inconsistent withtreaty obligations, or a domestic court may adopt a deferential standard of

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administrative review when looking at trade measures such as dumping orquarantine decisions. Of course, where international trade agreements are fullyimplemented into domestic law, domestic courts can provide the best remedybecause domestic judicial decisions are legally binding and enforceable.An excellent example in the Australian context is the Project Blue Sky litigationin which New Zealand broadcast media makers were able to invalidate anAustralia media content standard that gave more favourable treatment todomestic over New Zealand content providers.3

Recognising the need for an outlet for disputes, most modern tradeagreements will have a dispute settlement framework built in. In the contextof EU�Australia relations, the relevant mechanism is the World TradeOrganization’s (WTO’s) ‘Understanding on Rules and Procedures Governingthe Settlement of Disputes’4 (the Dispute Settlement Understanding or DSU),which provides for consultations, review of measures by a panel, and appeal onpoints of law to a standing Appellate Body. The system in the DSU has beenemulated in other agreements and has become something of a ‘default’ modelfor dispute settlement systems in trade agreements (see, for example, Chapter17 of the Australia�ASEAN [Association of Southeast Asian Nations]�NewZealand Free Trade Agreement*Australia’s most recently concluded suchagreement).

Four resolution problems

The default system has a number of features. These include that it is agovernment-to-government process. Although, as described above, privatecommercial interests will often bear the commercial brunt of governmentalmeasures affecting trade, under the default model only governments areempowered to challenge those measures. A government generally will only dothat where the point of principle raised is of significant importance to it*eitherbecause the trade affected is valuable or strategically important; the problem isegregious and obvious; or the problem has proven insoluble through other means.

The default model is also an elaborate process, involving the appointment ofan ad hoc panel and a lengthy process of adjudication. In addition, the decisionof the panel is not itself binding but usually merely forms the basis ofrecommendations as to how to resolve the dispute. In the WTO, for example,panel reports must be adopted by the Dispute Settlement Body.

A further issue under WTO dispute settlement system and free trade agreement(FTA) frameworks is a perception by commercial parties that the system lacksenforceability. There are some opportunities for self-help enforcement through aprocess of trade retaliation. However, trade retaliation carries the principaldrawback of necessarily reducing the benefits of a trade agreement for thecountry imposing the retaliatory measures. Furthermore, such measures canprejudice domestic interests that had nothing to do with the original dispute, as isillustrated in several European Court of Justice cases, such as the FIAMM

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case, where European companies sought compensation from the EuropeanCommission for harm caused as a result of US retaliatory measures imposed dueto European non-compliance with the WTO bananas cases.5 At the end of theday, there is no automatic method to obtain compensation for harm caused byillegal measures. Effectively, there is no remedy for private interests affected otherthan looking forward to the prospective withdrawal of an offending measure.

These features create in the default model at least four problems, whichmeans that it fails to be an appropriate outlet for the resolution of manydisputes. These resolution problems may be summarised as follows:

. Dispute settlement under the default approach tends to take a long time toresolve disputes (we call this the ‘speed problem’).

. Dispute settlement within government-to-government frameworks undertrade agreements tends to be reserved for matters of high politicalimportance or tremendous economic value (we call this the ‘thresholdproblem’).

. Certain stakeholders*particularly in the private sector*effectively havelittle opportunity to use these systems to address the problems they mayencounter with governmental measures affecting their trade (we call this the‘access problem’).

. Remedies are prospective and do not compensate affected interests for harmcaused by wrongful acts or omissions. There is no injunction to prevent harmbeing continued*even to the point where members are given a ‘reasonableperiod of time’ to rectify measures found to be inconsistent with WTOobligations (we call this the ‘enforcement problem’).

This is not to say that the WTO system and FTA dispute systems which aremodelled on it are not suitable for their purpose. It is just that their purpose islimited to resolving the biggest and toughest international trade disputes in amanner that is legitimate for the government stakeholders in the WTO system.It does not try to resolve the many smaller (but still commercially significant)problems that play out in a trade relationship from year to year.

Alternative approaches to dispute resolution

It would not be correct to suggest that the standard government-to-governmentdispute resolution system and recourse to domestic courts are the only disputeresolution mechanisms offered by modern trade agreements to addressgovernmental measures that appear to violate trade commitments or rules.Although government-to-government resolution is the default setting, there area number of examples of alternative approaches to dispute resolution in tradeagreements. In this section, we review the architecture of, and experience with,a selection of some of the alternative models from the WTO’s DSU, FTAs,private law and investment practice.

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WTO: Article 5 and Article 25 of the DSU

In addition to its well-known system of consultations, establishment of a panel

and appeal to the standing Appellate Body, the WTO DSU also provides for two

alternative dispute resolution models*namely, ‘good offices, conciliation and

mediation’ (good offices) and ad hoc arbitration.Good offices are contemplated by Article 5. The process is voluntary,

confidential and without prejudice to the rights of parties in any further

proceedings under the DSU. The system involves facilitated resolution of

disputes, although little formal detail guides how the process is to work. The

Director General of the WTO made a standing offer as to the availability of his

good offices to resolve disputes in 2001 (WTO 2001). Although this offer has

never been taken up, there has been one case in which a process of mediation

via the office of the Director General addressed an issue relating to preferences

for tuna arising between Thailand, the Philippines and the European

communities. In that matter, the parties agreed they were not in a dispute as

such.6 Nonetheless, the use of good offices appears to have allowed the parties

to reach a satisfactory reconciliation of their differing views.7 The details of that

resolution formally remain confidential, although a case study on this matter

has been published (Xuto 2005).Arbitration is provided for by Article 25 of the DSU.8 Article 25.1 sets forth

that: ‘Expeditious arbitration within the WTO as an alternative means of

dispute settlement can facilitate the solution of certain disputes that concern

issues that are clearly defined by both parties’. The parties are given full control

over the process, with the only formal requirements imposed by the DSU

relating to notification of the Dispute Settlement Body and that the award is

binding. Other members are entitled to join arbitrations, if the parties agree.A key element of the Article 25 framework is that ‘Articles 21 and 22 of [the

DSU] shall apply mutatis mutandis to arbitration awards’. This means the

Dispute Settlement Body is charged with monitoring implementation and that

the DSU’s provisions on compliance review and enforcement apply to the

outcomes of Article 25 arbitrations. Since the arbitration is governed by the

DSU, this process also has the advantage that the WTO Secretariat will also

lend administrative assistance and arbitrators’ costs are borne by the organisa-

tion rather than the parties.Perhaps surprisingly, Article 25 arbitration has not caught on in the WTO.

The single example of its use, however, illustrates some of its potential. United

States*Section 110(5) of the US Copyright Act was a dispute that had been

addressed by a panel. The Section 110 measure had been found to be

inconsistent with US obligations. The evident intention of the United States

ultimately was to comply, although it was not possible to amend the relevant

legislative measures within the period of time determined for implementation.

This being the case, Article 22.2 of the DSU required the parties to negotiate

with a view to developing mutually acceptable compensation. The initial

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question in such discussions, however, is always: What value? Rather thangoing through the usual process*under which the European communitieswould request the right to retaliate, the United States would object to theamount and the matter would be referred to arbitration under Article 22.6*theparties themselves resolved to use a special Article 25 arbitrator, with terms ofreference effectively the same as for an arbitrator appointed under the provisionof Article 22.6 of the DSU. The arbitrator issued its award to the effect that thelevel of nullification or impairment was a little over t1.2 million per annum,leading the United States to establish a fund in that order to compensateaffected European right holders.

The alternative dispute resolution options of good offices and arbitrationwould appear, in the abstract at least, to have potential to solve the thresholdproblem. This is particularly the case where the non-take-up of the disputeproblem arises because the state involved is otherwise disinclined to engage indispute resolution activity because the cost or commitment required to pursuinga case outweighs the interests concerned. Good offices or the ability to shape astreamlined arbitral procedure designed to limit complexity, the need forspecialised counsel and other elements contributing to cost would seem to be apotential remedy. The fact that these procedures can be kept low key andreasonably confidential means that relatively low-level disputes could be dealtwith in this way.

North American Free Trade Agreement: Chapter 19

The North American Free Trade Agreement (NAFTA)9 and the Canada�UnitedStates Free Trade Agreement (CUSFTA)10 on which it was based, containseveral distinct forms of dispute settlement. Perhaps the most innovative (and byfar the most utilised) is Chapter 19, which provides for a system of binationalpanels to review anti-dumping or countervailing duty (AD/CVD) decisions.

Chapter 19 essentially gives a foreign private party affected by an AD/CVDdecision the opportunity to elect to have an appeal heard not by the domesticcourt of the country adopting measures, but instead by a panel of trade expertsdrawn from both its own country and that of the importing country. It is aninnovative hybrid of public international and domestic law: the existence ofthe process and the displacement of domestic courts’ jurisdiction is mandatedby the treaty, but the process itself applies the substantive and procedural law ofthe importing country.

Review is accordingly conducted as if the binational panel were a domesticcourt. The panel must, in particular, apply the standard of review that would beapplied by a domestic court. Panels may affirm or reject (in whole or in part) anadministrative decision in an AD/CVD case. If a decision is rejected, the matteris remanded to the domestic investigating authority for reconsideration. There isno appeal to the domestic courts from the decision of a binational panel,although there is a limited right for the government of an affected NAFTA party

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to seek review of a binational panel decision through an ExtraordinaryChallenge Committee (ECC). Chapter 19 has been well used. Under CUSFTA,there were 49 cases and 3 ECCs. Under NAFTA, at the date of writing inOctober 2010, there have been well over 120 cases and 3 further ECCs.

Chapter 19 has a limited ambit, relating only to AD/CVD matters. It is acomplex process, closely akin to litigation in the domestic courts. As such, thereremains a threshold issue for invoking the process, such that the affectedexporter must be sufficiently affected by the AD/CVD measures as to beprepared to expend substantial resources on a legal case. Chapter 19 cases alsofail to address the speed problem. However, Chapter 19 avoids the need foraffected industries to escalate the problem to their government in order toinitiate a case, meaning there is no inherent need for political consideration ofthe merits of taking action. Stakeholders have a right of action for themselves,thereby addressing access issues. Furthermore, by acting in the place of adomestic court, rulings are enforceable in the same manner as the decisions of adomestic court. They do not require ‘implementation’ by national authorities inthe manner of other international trade rulings, such as the findings of a WTOpanel. As such, the process is potentially powerful in resolving disputes.11

Australia�United States Free Trade Agreement and Pharmaceutical BenefitsAdvisory Committee review

Under the Australia�United States Free Trade Agreement (AUSFTA),12

Australia was required to establish a review mechanism whereby the sponsorof a drug (usually the drug manufacturer) could request an independent reviewof Pharmaceutical Benefits Advisory Committee (PBAC) decisions not to listtheir drug on the Pharmaceutical Benefit Scheme (PBS), which subsidises theconsumer cost of listed medicines (see Annex 2-C of the AUSFTA andassociated Exchange of Letters). From July 2006, the review process was alsomade available when the PBAC had not recommended the extension of a listingof a PBS-listed drug for an additional indication (Medicare Australia 2006). Thereview system was established under Australian law as required by the treaty.

In line with its commitments, Australia established a panel of experts from anumber of disciplines, including clinical pharmacology, epidemiology and healtheconomics. An independent reviewer is appointed under the mechanism toreview applications from drug companies. The reviewer considers the informa-tion made available to the PBAC by the applicant, as well as details ofrecommendations of the PBAC, and reports of PBAC subcommittees (ibid.). Nonew information is provided to the reviewer and the reviewer submits his or herfindings and comments to the PBAC. The PBAC then re-evaluates its initialdecision, in light of the reviewer’s findings, and may change its initialrecommendation to the relevant Minister. The independent reviewer has nopower to overrule PBAC recommendations (DoHA 2006). The Ministerexamines the PBAC recommendations and uses his or her discretion to determine

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whether to list a particular drug on the PBS per the process set out under Section

85 of the National Health Act 1953 (Cth).Since the independent review process was established in 2006, there have

been two independent reviews of PBAC decisions. In each case, the review was

undertaken and considered by the PBAC within eight months of the PBAC’s

original recommendation not to list.The PBAC review mechanism deals effectively with both the threshold and

access problems by giving affected interests a direct right of access to a dispute

resolution (review) forum. It deals with a politically charged issue in a very low-

key way, meaning that government intervention and politicisation of the issue is

minimised. The cost of applications in proportion to the cost of a listing

application in general is understood to be fairly low. The main drawback of the

PBAC review mechanism from a ‘dispute resolution’ point of view is the absence

of any mechanism to address the ‘enforcement problem’. Reviews may makerecommendations only; these may or may not change the approach the PBAC

takes when re-evaluating an application; and the ultimate decision is at the

discretion of the Minister. The extent of this drawback has not been tested in

practice. In both reviews that have been undertaken, the reviewer did not

recommend that the PBAC reconsider its original decision and the PBAC found

that the review provided no new basis to reconsider its previous recommendation.

Uniform Domain-Name Dispute-Resolution Policy

Sometimes, trade agreements will co-opt dispute settlement frameworks to

address cross-border issues that might arise in the context of the partners’ trade

relations. An example is the reference in Article 17.3 (‘Domain Names on the

Internet’) of the AUSFTA’s chapter on ‘Intellectual Property Rights’ to theUniform Domain-Name Dispute-Resolution Policy (UDRP), which provides:

In order to address trademark cyber-piracy, each Party shall require that the

management of its country-code top-level domain (‘ccTLD’) provide an

appropriate procedure for the settlement of disputes, based on the principles

established in the Uniform Domain-Name Dispute-Resolution Policy.

The Internet Corporation for Assigned Names and Numbers (ICANN) is theorganisation responsible for domain names and Internet Protocol addresses.

ICANN is established under the California Nonprofit Public Benefit Corpora-

tion Law for charitable and public purposes, and is therefore a creature of US

municipal statute.Increasing commercial use of the Internet led to a problem of ‘cybersquat-

ting’, whereby recognisable brands were registered by persons unaffiliated with

the business operated by the brand or the intellectual property right holder. In

the mid to late 1990s, it was considered that the problem of cybersquatting

required urgent attention, and governments perceived drawbacks both with

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treaty-based and ad hoc national approaches to resolving the issue. Followingrecommendations from the World Intellectual Property Organization (WIPO),ICANN created the UDRP, which is now automatically adopted by theindividual registrars who register domain names on the Internet.

The policy provides for any person to submit a dispute under the UDRP to anaccredited dispute resolution centre such as the WIPO Arbitration andMediation Center, which, at the end of 2001 (the latest figures cited), accountedfor roughly 60 percent of activity under the UDRP.13 Pursuant to clause 4(a) ofthe policy, claims may be made where it is alleged:

(i) the domain name registered by the domain name registrant is identical orconfusingly similar to a trademark or service mark in which thecomplainant (the person or entity bringing the complaint) has rights; and

(ii) the domain name registrant has no rights or legitimate interests in respectof the domain name in question; and

(iii) the domain name has been registered and is being used in bad faith.

The administrative panel considering the issue may decide in favour of theregistrant (in which case nothing happens), it may decide the registration shouldbe cancelled or it may rule that the registration should be transferred to theapplicant. Where cancellation or transfer is ordered, the registrar will take thisaction unless notified of a court challenge to the decision. As internationaldispute resolution procedures go, the process is extremely simple, cheap andeffective. It does not attempt to displace the jurisdiction of domestic courts, butis overwhelmingly preferred to litigation, as WIPO details on its website.14

The UDRP is frequently used. Recent WIPO figures indicate that itsArbitration and Mediation Center had administered more than 16,000 casessince December 1999 (WIPO 2009b). There were 2329 cases in 2008 alone(WIPO 2009a). It is open to anyone with an issue; does not rely on interventionby states; is low key, cheap and relatively speedy; and the results areimplemented*thereby addressing the speed, threshold, access and enforcementproblems identified in other forms of trade dispute resolution.

Investor�state dispute settlement frameworks under investment agreements(and FTA investment chapters)

Many bilateral investment agreements and FTA investment chapters, as well asthe multilateral Energy Charter Treaty, provide for investors to initiatearbitration proceedings against a government for certain measures affectingthe investor’s investment. The nature of investor�state dispute settlement (ISDS)under treaties differs from international commercial arbitration in that theinvestor itself is not privy to the agreement to arbitrate. Instead, the investorbenefits from a standing offer from the host government made in favour of allinvestors sufficiently connected with the treaty partner.

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Australia’s network of investment agreements numbers roughly 20 bilateralinvestment treaties (BITs), as well as FTAs with Singapore, Thailand and Chile,and the Australia�ASEAN�New Zealand agreement. Australia is also asignatory to the Energy Charter Treaty, although this agreement has neverentered into force for Australia. EU member states have substantial networks ofBITs, particularly with developing country and economy-in-transition partners.

ISDS rules extend the reach of international arbitration to matters falling underpublic international law*namely, the treatment of investments covered byinvestment treaties. Importantly, they provide direct access to the private partieswhose interests have been affected. They also provide for the same framework ofremedies that is available in the context of private international arbitrations*namely, recognition and enforcement of awards by the domestic courts. InAustralia, dispute settlement rules are embodied in the International ArbitrationAct 1974 (Cth), which gives effect to the requirements of both the Convention onthe Recognition and Enforcement of Foreign Arbitral Awards, adopted in 1958by the United Nations Conference on International Commercial Arbitration at itstwenty-fourth meeting (New York Convention), and the Convention on theSettlement of Investment Disputes between States and Nationals of Other States,signed by Australia on 24 March 1975 (the ICSID Convention).

Although, internationally, investment treaty arbitrations are relativelycommon (with an average of about 30 known disputes initiated around theworld in each of the last five years)15 there is no history of such disputesinvolving Australia as a respondent, and there are no publicly known cases inwhich Australian investors have availed themselves of ISDS rights.

A key drawback of ISDS is a perception that it raises issues of a sensitive politicalnature. For that reason, anecdotal evidence is that investors hesitate to invoke theprocess for fear of alienating a host government*ISDS is seen as something of alast resort. ISDS is also regularly criticised by those who consider it could beabused as a tool for ‘chilling’ regulation in pursuit of legitimate governmentobjectives. This has carried through into a reluctance from some governments toendorse ISDS, particularly following the experience in Canada with early disputesunder NAFTA’s investor�state rules (Chapter 11) challenging provincial govern-ment measures that were ostensibly adopted on environmental grounds.

Thus, although ISDS addresses the ‘access’ and ‘enforcement’ problems, thesensitive issues it raises cause particular issues around the ‘threshold’ problem.As with other elaborate international dispute settlement regimes, ISDS also failsto yield speedy results.

Identifying options for EU�Australia trade relations going forward

Principles and lessons from past experience

The degree to which the various approaches to dispute settlement set out aboveaddress the four resolution problems is summarised in Table 1.

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Although the default system of dispute settlement has the advantage of being

a known model for new agreements, which lends it a degree of legitimacy (from

the point of view of contracting states), it gives rise to important problems.

These take the form of a lengthy process, high cost and political thresholds for

disputes, access barriers for non-state actors, and problems of enforceability

where a non-compliant state chooses not to implement a decision.The various other international dispute resolution models reviewed above

highlight some alternative approaches that, to a greater or lesser degree, address

these problems. An initial principle which emerges is that it is appropriate to

address specific problems with specific solutions. Different mechanisms appro-

priately address different problems in different contexts, and clearly one approach

will not work for all situations. By addressing specific situations, some systems of

dispute resolution are able to address the ‘speed problem’ and the ‘threshold

problem’ by dealing with matters at a lower level of escalation. The UDRP, for

example, operates effectively because its subject matter is very specific; enforce-

ment is essentially in the hands of the organisations who themselves adopt the

policy; and the process is deliberately kept tight, with arbitral panels empowered

only to make quite limited decisions. This high level of specificity allows the

process to be low key. The PBAC review process is similarly very specific, and,

although the results are not self-executing and enforceable, it is effective in

providing an outlet for issues that otherwise could escalate politically and irritate

the overall bilateral relationship between the United States and Australia.Other frameworks show that special, sectoral approaches to dispute

resolution can be a useful tool to allow negotiators to address particular issues

in a negotiation where the parties have positions that are essentially irreconcil-

able. Chapter 19 of the CUSFTA/NAFTA is an example where a special dispute

framework allowed Canada to return to the negotiating table during fraught

negotiations with the United States, even though Canada’s demand for

exemption from US AD/CVD laws went further than US negotiators could

go.16 The PBAC review system under the AUSFTA gave US pharmaceutical

Table 1.

Effective in dealing with

Mechanismspeed

problemthresholdproblem

accessproblem

enforcementproblem

Default mechanism no no no noDSU Article 5 (good offices) potentially no potentially noDSU Article 25 (WTO arbitration) potentially potentially potentially noNAFTA Chapter 19 no no yes yesPBAC review no yes yes noUDRP yes yes yes yesInvestor�state arbitration no no yes yes

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interests a sweetener for a deal that did not contain a fundamental restructuringof Australia’s system of consumer subsidies for medicines.

This also suggests that it is generally desirable to allow the parties chieflyinterested in a problem to deal with it, while at the same time making access tothe remedy reasonably cost-effective. This can address the ‘access problem’.Thus, in processes where private parties are given access, this can help to dealwith a dispute well before it becomes a feature of the overall bilateralrelationship. Such processes also have the best chance of resolving disputes ina commercially meaningful way by minimising the negative impact of thecontinuation of an unlawful or otherwise inappropriate situation.

Finally, it seems that dispute provisions which give access to domesticenforcement mechanisms are particularly effective, because they remove theuncertainty that goes with a process where a government has to step back andimplement an adverse decision against it. This is a primary appeal of ISDS,which gives an investor the prospect of recovering some value when aninvestment fails as a result of sovereign interference. It is also a key reason whyChapters 19 of the CUSFTA and NAFTA, respectively, have been used far morethan any other dispute resolution framework under those agreements. Theapproaches effectively deal with the ‘enforcement problem’.

Some EU�Australia trade irritants

The value of total trade in goods and services between Australia and the EUincreased 15.1 percent to AU$91.3 billion in 2008, with Australia’s exports tothe EU valued at AU$32.6 billion and Australia’s imports from the EU valued atAU$58.7 billion (DFAT 2009). The trade relationship is substantial andimportant to both sides. In the context of such a large and diverse traderelationship, the incidence of disagreement is remarkably low. That said, thereare perennial trade irritants. These frequently arise from regulatory divergencesbetween Australia and the EU, particularly relating to the marketability ofimported products in respective domestic markets.

One illustration is the issue of geographical indications, which identify that thegoods originated in a country, region or locality where a given quality, reputationor other characteristic is essentially attributable to their geographical origin.17

Australia has been a somewhat reluctant protector of European geographicalindications and other traditional expressions associated with food and beverageproduction, and initiated a WTO challenge to certain European measures in thisarea (WTO 2003a). Another illustration is Australian quarantine measures,which were the subject of a European complaint to the WTO (WTO 2003b).

Scope for creativity in dealing with EU�Australia trade irritants

In this section, we apply some of the lessons from past experience with the designof trade dispute settlement mechanisms to aspects of the two perennial trade

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irritants we identify immediately above: quarantine issues and geographical

indications. These two examples are a small selection from a much wider possible

range of issues for consideration. At their heart, both of these involve the

marketability of products. They arise either because of the regulatory framework

to deal with imports, or the impact of case-by-case regulatory decisions.In an area such as quarantine, there will commonly be traders who are

frustrated by regulatory processes and outcomes that prevent them accessing the

respective Australian or European markets. Indeed, the EU is not alone in

taking issue with Australia’s unashamedly conservative approach to quarantine

and biosecurity matters. The European complaint in relation to Australian

quarantine practices was one of a growing number of WTO cases against

Australia in this area.In a situation where there is a growing number of WTO cases, it is likely that

there is an even greater number of trader-level quarantine problems that are too

minor to bring up at a government-to-government level or in the domestic

courts, or that otherwise have not yet grown into fully fledged disputes. In order

to address problems, and to avoid them growing to a level where they damage

an otherwise positive relationship, it may be useful to think about additional

mechanisms for administrative review. Having regard to the factors reviewed

above in relation to existing alternative dispute settlement systems, such

mechanisms could usefully embody several factors:

. In areas such as quarantine (or related areas, such as product safetyapproval), given the technical subject matter, specific resolution frameworksinvolving technical expertise would be appropriate to deal with theparticular subject matter.

. From a trade dispute resolution perspective, it would be desirable to makethe resolution process available before definitive decisions are taken. InAustralia’s quarantine system, for example, critical junctures at whichtraders get frustrated include the point at which decisions are made aboutthe timing for import risk assessment and the priority given to oneassessment relative to others, as well as the point when scientific assessmentshave been completed. An opportunity for review at these stages may notchange the ultimate outcome, but affected stakeholders may better engagewith the process*and the process would benefit from the incentive forrigour that transparency and review create.

. Dealing with issues early suggests that it would be good to maintain a low-key process that is accessible to the economic stakeholders themselves andwhich is governed by municipal law rather than international law.

. In the context of thinking about review options where there are apparentlydifferent regulatory cultures, it may also be useful to think aboutbinational approaches to administrative review, particularly in situationswhere this can increase the legitimacy of the process for internationalstakeholders.

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The issues arising in relation to geographical indications provide an opportunityto examine how a creative approach to dispute resolution may be used toimprove existing domestic dispute resolution mechanisms.

The overlap between a country’s trademark system and the recognition ofgeographical indications is a particularly rich area for potential disputesbetween wine and alcohol producers in Australia and the EU. Australia’sengagement with geographical indications sought both to accommodate theEU’s regulatory culture (for example, through negotiation of wine agreementsthat have gradually phased out Australian use of traditional Europeanexpressions in the wine and beverage market) and resist what have beenperceived as excessive elements (for example, through its WTO challenge).

A recent illustration of the potential for conflicts to arise is the AustralianFederal Court case Bavaria NV v. Bayerischer Brauerbund EV (2009) FCA 428,which was the first time the Federal Court considered the ground for oppositionof trademark registration under Section 61 of the Trade Marks Act 1995 (Cth)that the accepted trademark contains or consists of a sign which is a falsegeographical indication.

In this case, Bavaria NV, a company incorporated in the Netherlands, appliedto register a composite trademark which included the words ‘Bavaria HollandBeer’. Bayerischer Brauerbund EV (BBEV), representing the interests of 240breweries located in Bavaria, opposed the registration on a number of grounds,including under Section 61. The Delegate of the Registrar for Trade Marksupheld an opposition to the trademark on another ground of opposition (Section43 of the Act). Bavaria NV appealed this decision in the Federal Court.

In the case before the Federal Court, BBEV argued that the trademark shouldbe opposed under Section 61, as ‘Bavaria’ and ‘Bavarian’ are signs recognised inGermany as indicating that beer originated in Bavaria and has a quality,reputation or characteristics attributable to beer originating from Bavaria, andthat ‘Bavaria’ is a geographical indication within the meaning of Section 6 of theTrade Marks Act. Justice Bennett held that geographical indications for thepurpose of the Act must be formally recognised in the country of origin andaccepted that ‘Genuine Bavarian Beer’ and ‘Bayerisches Bier’ were recognised inGermany itself, but these phrases were not the same as ‘Bavaria’ or ‘BavarianHolland Beer’ used in the composite trademark. In determining which signs wereformally recognised as geographical indications in Germany, Justice Bennett wasassisted by explanations of the system by three experts in German law. JusticeBennett held that the ground for opposition under Section 61 was not made out asthe trademark does not contain a sign that is a geographical indication for thepurposes of the Act, and noted that Section 61 does not refer to a sign that issubstantially the same as, or deceptively similar to, a geographical indication.

In many ways, this case highlights that the existing dispute resolution systemwithin Australia’s domestic law on geographical indications already addressessome of the resolution problems identified in this article. The existing system wasable to deal effectively with a dispute between two European companies

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exporting beer to Australia. However, the expense in bringing a Federal Courtcase to oppose or obtain trademark registration is an impediment to accessing thesystem.

The issue at the centre of the case*whether a sign is recognised as ageographical indication for the purposes of the domestic implementation of acountry’s international obligations in its trademark system*is the type oftightly defined problem that would benefit from a creative approach to disputesettlement. Taking into account lessons from the dispute resolution mechanismsdiscussed in this article, access and threshold issues within the current disputeresolution system could be assisted in the following ways:

. A system of expert review, similar to the PBAC review system, could beestablished to allow interested parties to seek a non-binding review ofdecisions made by the Delegate of the Registrar for Trade Marks by amember of a panel of experts on whether an approved trademark contains orconsists of a sign that is a false geographical indication. The recommenda-tions following the expert review would then be referred to the Delegate,who, in light of the review, may change his or her original decision. Thiswould give affected parties direct access to a relatively low-key reviewmechanism before resorting to the Federal Court.

. A system of expert determination similar to that under the UDRP could beestablished under which technical issues on geographical indications could bereferred to a panel of experts, who would each answer specific, tightlydefined questions, such as:

1) Should the sign be recognised as a geographical indication for thepurposes of Section 6 of the Trade Marks Act?

2) Should the existing or proposed trademark be opposed for containingor consisting of a sign that is a false geographical indication inaccordance with Section 61 of the Act?

Requests could be made online and the system could provide access to subject-matter experts from different jurisdictions at a relatively low cost. This non-binding expert determination process could be used to assist parties at any stageof the trademark registration or dispute process, including in assessing thelikelihood of success of trademark applications or oppositions, or as evidence inappeals or court cases. This system also has the potential to be extended todetermining similar technical questions on issues regarding the recognition ofgeographical indications in the trademark systems of Australia’s other tradingpartners.

Conclusion

This article suggests that dispute resolution provisions in trade agreementsdeserve creative attention. Different forms of dispute resolution are better suited

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to different types of dispute. Provided each process is considered legitimate bythe relevant interests and does not undermine confidence in the overallrelationship under the agreement, making available a range of options has thepotential to allow problems to be managed in the most effective way.

There are significant limitations with the way the default approach to tradedispute settlement deals with issues. In addition to concerns at a governmentallevel, this default approach arguably does not meet the needs of contemporaryAustralian or European business in their dealings in each other’s markets.Although existing dispute settlement frameworks are good for their limitedpurposes, commercial interests have difficulty with the uncertainty and delay inthe system. Commercial stakeholders need more timely resolution; they want toavoid harm or seek compensation for losses incurred; and they wantpredictability of outcome.

The problems of the default approach to trade dispute settlement in EU�Australia trade could be dealt with by supplementing the existing framework indifferent ways. In this article, we have considered a couple of examples,although the real lesson from past experience is that dispute resolutionstructures can be a very useful part of any overall approach to the issues thatarise in trade negotiation. Effective dispute settlement provisions should seek toensure that issues can be addressed at the lowest possible level of politicalescalation. To achieve that, it will often be the case that governments will wantto create opportunities for affected interests themselves to pursue their owninterests in a dispute resolution forum. In addition, trade dispute settlement willwork best where it taps into the municipal law enforcement mechanisms of thecountry whose measures are challenged.

Notes

1. Joseph H.H. Weiler (2001) discusses the ‘internal’ (intergovernmental) and ‘external’ (non-

governmental) legitimacy of World Trade Organization dispute settlement in his important

analysis.

2. See, for example, Weiler (2001)) For elaboration of one of the authors’ views, see Sandford

(2007)

3. See Project Blue Sky Inc. v. Australian Broadcasting Authority (1998) HCA 28.

4. Understanding on Rules and Procedures Governing the Settlement of Disputes, Annex 2 to

the Marrakesh Agreement Establishing the World Trade Organization, see Bhttp://www.

wto.org/english/docs_e/legal_e/28-dsu_e.htm�.

5. See, most recently, ‘Judgment of the Court (Grand Chamber) of 9 September 2008*Fabbrica

italiana accumulatori motocarri Montecchio SpA (FIAMM), Fabbrica italiana accumulatori

motocarri Montecchio Technologies Inc (FIAMM Technologies), Giorgio Fedon & Figli

SpA, Fedon America, Inc. v. Council of the European Union, Commission of the European

Communities, Kingdom of Spain’, Official Journal of the European Union, 51, 8 November:

C 285/04.

6. WT/GC/66, 16 October 2002.

7. WT/GC/66/Add/1, 23 December 2002.

8. The WTO’s other experience with ad hoc arbitration was an arbitration established to

examine the (European Communities’) proposal for a tariff-only regime for imports of

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bananas. This arbitration was created pursuant to the terms of the Doha Waiver of 14

November 2001, not Article 25, and the Dispute Settlement Body played no part. The

mandate of the arbitrator in this case was to ‘determine . . . whether the envisaged rebinding

of the EC tariff for bananas would result in at least maintaining total market access for MFN

[most favoured nation] banana suppliers, taking account of [all EC market access

commitments relating to bananas]’ ACP�EC Partnership Agreement: Decision of 14

November 2001, WTO Doc. WT/MIN(01)/15 (14 November 2001), see Bhttp://www.

wto.org/english/thewto_e/minist_e/min01_e/mindecl_acp_ec_agre_e.htm�. The awards of

the arbitrator in this case are included in WTO documents WT/L/616 and WT/L/625. The

DSU, of course, provides for formal arbitration in two other prescribed circumstances*viz.

Article 21.3(c) and Article 22.6.

9. North American Free Trade Agreement, see Bhttp://www.nafta-sec-alena.org/en/view.

aspx?conID�590�.

10. Canada�United States Free Trade Agreement, see Bhttp://www.international.gc.ca/trade-

agreements-accords-commerciaux/assets/pdfs/cusfta-e.pdf�.

11. Some pertinent experience with Chapter 19 is discussed in Sandford (2005).

12. Australia�United States Free Trade Agreement, see Bhttp://www.dfat.gov.au/fta/ausfta/final-

text/index.html�.

13. Uniform Domain Name Dispute Resolution Policy, see Bhttp://www.icann.org/en/udrp/

udrp-policy-24oct99.htm�.

14. See ‘Selection of UDRP-related court cases’, Bwww.wipo.int/amc/en/domains/challenged.�

15. According to the United Nations Conference on Trade and Development, there have been

well over 300 known investment arbitrations since 1987, affecting 77 countries as a

respondent (UNCTAD 2009).

16. A.L.C. de Mestral (2005: 10) recounts the history of the CUSFTA negotiations over AD/

CVD: ‘Faced with the refusal of the American negotiators to accept the principle of exclusion

or alternatively of replacement of AD/CV laws with competition law, the Canadian

delegation withdrew from the negotiations and only returned when it was agreed that a

solution would be found. Negotiations on the future chapter 19 were rushed through in a

final month, thus permitting the entry into force of CUSFTA on January 1, 1988’.

17. See Section 6 of the Trade Marks Act 1995 (Cth) and Article 22(1) of the Agreement on

Trade-Related Aspects of Intellectual Property Rights (TRIPS).

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Medicare Australia, 2006. ‘Information for applicants seeking independent review’, Pharmaceu-

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Mestral, A.L.C. de, 2005. ‘NAFTA dispute settlement: creative experiment or confusion?’, Draft

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Xuto, Nilaratna, 2005. ‘Thailand: conciliating a dispute on tuna exports to the EC’, in Peter.Gallagher, P. Low, Stoler and L. Andrew (eds), Managing the challenges of WTOparticipation: 45 case studies (Cambridge: Cambridge University Press), p. 555.

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