the issue of the admissibility of disputes before wto
TRANSCRIPT
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THE ISSUE OF THE ADMISSIBILITY OF DISPUTES BEFORE WTO
PANELS IN CONFLICTS RELATED WITH FREE TRADE
AGREEMENTS: DOES THE WTO’S DISPUTE SETTLEMENT
BODY´S JURISDICTION PREVAIL OVER THE FTA’S DISPUTE
SETTLEMENT MECHANISM?
PROYECTO DE GRADO
PONTIFICIA UNIVERSIDAD JAVERIANA
FACULTAD DE CIENCIAS JURÍDICAS
DEPARTAMENTO DE DERECHO ECONÓMICO
BOGOTÁ D.C.
2017
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PONTIFICIA UNIVERSIDAD JAVERIANA
FACULTAD CIENCIAS JURÍDICAS
BOGOTÁ D.C.
2017
PROYECTO DE GRADO
THE ISSUE OF THE ADMISSIBILITY OF DISPUTES BEFORE WTO PANELS IN
CONFLICTS RELATED WITH FREE TRADE AGREEMENTS: DOES THE WTO’S
DISPUTE SETTLEMENT BODY´S JURISDICTION PREVAIL OVER THE FTA’S
DISPUTE SETTLEMENT MECHANISM?
2017
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INDEX
I. Introduction
II. Preliminary issues
a. The dispute settlement system of the WTO
b. Inherent jurisdiction
c. The difference between jurisdiction and admissibility
III. Legal impediments as a motive for declining the exercise of jurisdiction
a. The existence of legal impediments
b. Article 3.7 of the DSU
c. Article 3.10 of the DSU
IV. The CHIMEHA FTA between Chilo, Meco and Haito
a. Presentation of the case
b. Arguments for the complainant
c. Arguments for the respondent
V. Conclusions
VI. Bibliography
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Nota de Advertencia: Artículo 23 de la Resolución N° 13 de Julio
de 1946
“La Universidad no se hace responsable por los conceptos
emitidos por sus alumnos en sus trabajos de tesis. Solo velará por
qué no se publique nada contrario al dogma y a la moral católica y
porque las tesis no contengan ataques personales contra persona
alguna, antes bien se vea en ellas el anhelo de buscar la verdad y
la justicia”.
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Abstract: El auge en la celebración de TLCs, donde las partes acuerdan la creación un foro
de resolución de disputas, que conoce todas las controversias que surjan en el marco del
tratado, incluso en aquellas donde se debe aplicar derecho de la OMC, ha suscitado un gran
debate: ¿los hechos ocurridos entre las partes en el marco de un TLC afectan la capacidad de
los tribunales de la OMC de decidir la controversia, por virtud de una objeción a la
admisibilidad? Este escrito analizará las decisiones proferidas por los tribunales de la OMC,
buscando plantear una respuesta a dicho interrogante.
Palabras clave: Organización Mundial del Comercio, tratado de libre comercio,
admisibilidad, superposición de jurisdicciones
Abstract: The rise of FTAs, where the parties agree to set up a dispute settlement forum,
which will hear of all disputes arising under the treaty, including those where the WTO law
is to be applied, has arose the present debate: Can facts between the parties in the frame of
an FTA affect the capacity of panels and the Appellate Body to decide the merits of the
dispute, by virtue of an objection to the admissibility of the dispute? This paper will analyze
the different rulings from WTO tribunals in order to answer the question.
Keywords: World Trade Organization, free trade agreement, admissibility, overlapping of
jurisdictions
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THE ISSUE OF THE ADMISSIBILITY OF DISPUTES BEFORE WTO PANELS IN
CONFLICTS RELATED WITH FREE TRADE AGREEMENTS: DOES THE
WTO’S DISPUTE SETTLEMENT BODY´S JURISDICTION PREVAIL OVER
THE FTA’S DISPUTE SETTLEMENT MECHANISM?
I. Introduction
The issue that this paper will address was born from the proliferation of free trade agreements
in the late twentieth century. Traditionally, it had been understood that the jurisdiction of the
Dispute Settlement Body (Hereafter “DSB”) of the World Trade Organization (Hereafter
“WTO”) is compulsory and exclusive. However, with the rise of free trade agreements
(Hereafter “FTAs”) with dispute settlement forums, beyond the "spaghetti bowl" problem,
the overlapping of jurisdictions has arisen a conflict amongst the jurisdictions of the DSB
and the dispute settlement mechanisms of the free trade agreements.
Given the lack of a solution to this problem in the covered agreements, international doctrine
began to propose a myriad of possible solutions to the overlapping of jurisdictions. These
proposals led to a new doctrinal debate: the application of non-WTO rules, such as the ones
contained in an FTA, to WTO law disputes.
Different panels and the WTO Appellate Body have been able to set a precedent in resolving
various disputes arising in the framework of a free trade agreement, but there has not been a
clear position that can be applied to all cases, either because of the lack of arguments of the
defendants or because of the ease of solving the cases on the basis of criteria other than
jurisdiction or admissibility. The approach to this issue is not peaceful, since in one way or
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another it is required to balance the sovereignty of states to bear on new treaty obligations,
even over WTO law, versus the supremacy of WTO law, as the multilateral organization par
excellence, over free trade agreements.
However, as the WTO tribunals have ruled in cases were an overlapping of jurisdictions
exists, this paper will analyze the thesis of the “legal impediments”, as a way to preclude the
panel to exercise its jurisdiction.
Moreover, this paper will analyze the case proposed in the ELSA Moot Court competition
2016-20171, as it is the ideal scenario to debate the different arguments that can lead a panel
to decide whether to decline the exercise of its validly established jurisdiction, due to a
admissibility objection.
II. Preliminary issues
a. The dispute settlement system of the WTO
The WTO was created in the Uruguay Round negotiations, which took place from 1986 to
1994, by means of the Marraquesh Agreement. Later, it was established and became
operational on January 1st, 1995. Nowadays, 164 countries from around the globe are
members of the WTO, being one of the most successful international organization in the
world.2 The WTO has six widely defined functions: (i) administer WTO trade agreements;
(ii) be a forum for trade negotiations; (iii) handling trade disputes; (iv) monitoring national
1 The ELSA Moot Court competition is a simulated hearing of the WTO dispute settlement system, organized by the European Law Student’s Association. Teams from all the world prepare and analyze a fictive case and present their arguments both for the Complainant and the Respondent in front of a Panel which consists of WTO and trade law experts. More information available at: https://emc2.elsa.org/ 2 What is the WTO? (n.d) Retrieved from: https://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm
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trade policies; (v) give technical assistance and training for developing countries; and (vi)
cooperate with other international organizations.3
Without a doubt, the administration of the WTO dispute settlement system is one of the most
important functions of the WTO. Indeed, Article 3.2 of the Dispute Settlement Understanding
(Hereafter “DSU) states that: “The dispute settlement system of the WTO is a central element
in providing security and predictability to the multilateral trading system”.4 Furthermore,
Article 3.3 of the DSU recognizes that: “The prompt settlement of situations in which a
Member considers that any benefits accruing to it directly or indirectly under the covered
agreements are being impaired by measures taken by another Member is essential to the
effective functioning of the WTO”.5
Therefore, the two main functions of the WTO dispute settlement system are to seek “the
maintenance of a proper balance between the rights and obligations of Members”6 and
“clarify the existing provisions of those agreements in accordance with customary rules of
interpretation of public international law”,7 but having in consideration that
“Recommendations and rulings of the DSB cannot add to or diminish the rights and
obligations provided in the covered agreements.”.8
3 Ibidem; Marrakesh Agreement Establishing the World Trade Organization, Apr 15, 1994, 1867 U.N.T.S.154, 33 I.L.M1144 (1994), Article 3. 4 Understanding on Rules and Procedures Governing the Settlement of Disputes, Marrakesh Agreement Establishing the World Trade Organization, Annex 2, 1869 U.N.T.S. 401, 33 I.L.M. 1226 (1994), Article 3.2. 5 Ibidem. 6 Ibidem Article 3.3. 7 Ibidem, Article 3.2 8 Ibidem.
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In words of Peter Van den Bossche and Werner Zdouc, the WTO dispute settlement system
is the jewel in the crown of the WTO, and has arguably been the most prolific of all State-to-
State dispute settlement systems since its establishment.9 In fact, on November 10th, 2015,
the 500th dispute was submitted to the WTO by Pakistan, requesting consultations with South
Africa due to its provisional anti-dumping duties on cement from Pakistan.10 More than 500
disputes over 20 years of history of the WTO dispute settlement system demonstrates its
importance in international trade. This fact can be contrasted with the 300 disputes that were
brought in a period of 47 years to the dispute settlement system of the General Agreement
on Tariffs and Trade (Hereafter “GATT”), that is an agreement signed in 1947 that regulates
trade between nations, which had a dispute settlement system that ceased to exist when the
agreement was incorporated in the WTO system.11
The success of the WTO dispute settlement system is due to its very own characteristics and
the changes that were introduced by the contracting parties from the previous GATT dispute
settlement system. One of its main characteristics, is that the jurisdiction of the WTO dispute
settlement system has a compulsory and exclusive nature. According to its compulsory
nature, a responding member has, as a matter of law, no choice but to accept the jurisdiction
of the WTO dispute settlement system. This characteristic is reflected on Article 6.1 of the
DSU, which states: “If the complaining party so requests, a panel shall be established at the
latest at the DSB meeting following that at which the request first appears as an item on the
DSB's agenda, unless at that meeting the DSB decides by consensus not to establish a
9 Peter Van den Bossche & Werner Zdouc, The Law and Policy of the World Trade Organization: Text, Cases and Materials, Cambridge University Press, 3rd edition (2013), page 94 10 World Trade Organization, (2016) Annual report 2016. Retrieved from: https://www.wto.org/english/res_e/booksp_e/anrep_e/anrep16_chap6_e.pdf 11 Ibidem.
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panel.”12 Therefore, the main difference with other international courts is that there is no
need for the parties to a dispute to accept in a separate declaration or agreement the
jurisdiction of the WTO dispute settlement system to adjudicate the dispute, since, the
membership of the WTO constitutes consent to, and acceptance of, the jurisdiction of the
WTO dispute settlement system.13
On the other hand, according to its exclusive jurisdiction, a complaining member is obliged
to bring any dispute arising under the covered agreements to the WTO dispute settlement
system.14 This characteristic is reflected on Article 23.1 of the DSU:
“When Members seek the redress of a violation of obligations or other nullification or
impairment of benefits under the covered agreements or an impediment to the attainment of
any objective of the covered agreements, they shall have recourse to, and abide by, the rules
and procedures of this Understanding”.15
Therefore, accordingly, the panel in US – Section 301 Trade Act (2000) stated that this
provision:
“imposes on all Members to ‘have recourse to’ the multilateral process set out in the DSU
when they seek the redress of a WTO inconsistency. In these circumstances, Members have to
have recourse to the DSU dispute settlement system to the exclusion of any other system, in
particular a system of unilateral enforcement of WTO rights and obligations. This, what one
12 Understanding on Rules and Procedures Governing the Settlement of Disputes, Marrakesh Agreement Establishing the World Trade Organization, Annex 2, 1869 U.N.T.S. 401, 33 I.L.M. 1226 (1994), Article 6.1. 13 Peter Van den Bossche & Werner Zdouc, The Law and Policy of the World Trade Organization: Text, Cases and Materials, Cambridge University Press, 3rd edition (2013), page 160. 14 Ibidem, page 161. 15 Ibidem, Article 23.1.
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could call ‘exclusive dispute resolution clause’, is an important new element of Members’
rights and obligations under the DSU”.16
Later, the Panel in EC – Commercial Vessels clarified the extent of the exclusive nature of
the WTO dispute settlement system’s jurisdiction by stating:
“It follows from this conception of Article 23.1 as a general obligation not to act unilaterally
when seeking redress of a violation of an obligation under the WTO that the requirement to
have recourse to the DSU is not limited to an "exclusive jurisdiction clause", in the sense in
which that expression is used by the European Communities. Interpreted in light of its context
and purpose, Article 23.1 not only ensures the exclusivity of the WTO vis-à-vis other
international fora but also protects the multilateral system from unilateral conduct.”17
These previous ruling of different panels shows that WTO members have the obligation to
abstain from taking unilateral actions against other members that violate one provision of the
covered agreements, but they must also abstain from presenting their claims before other
international dispute settlement forums. Note that the rulings of the WTO tribunals are not
binding as such, but as Article 3.2 of the DSU states that “The dispute settlement system of
the WTO is a central element in providing security and predictability to the multilateral
trading system.”18 subsequent panels must consider those rulings, since they create legitimate
expectations among WTO members.19
16 Panel Report, United States – Sections 301-310 of the Trade Act 1974, WT/DS152/R, adopted 22 December 1999, paragraph 7.43 17 Panel Report, European Communities – Measures Affecting Trade in Commercial Vessels, WT/DS301/R, adopted 22 April 2001, paragraph 7.193 18 Understanding on Rules and Procedures Governing the Settlement of Disputes, Marrakesh Agreement Establishing the World Trade Organization, Annex 2, 1869 U.N.T.S. 401, 33 I.L.M. 1226 (1994), Article 3.2. 19 Appellate Body Report, Japan - Taxes on Alcoholic Beverages, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted 4 October 1996, page 14.
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However, an agreement is not worth much, if its obligations cannot be enforced when one of
the signatories fail to comply with such obligations. This is why the members of the WTO
established a system during the Uruguay round of negotiation, underscoring the high
importance to the compliance by all members with their obligations under the WTO
agreement.20 In the previous GATT system, there was a need for consensus among the
contracting parties in order to approve the request of the complaining party to establish and
compose a panel. However, even if this consensus was reached, the final report also needed
to be adopted by consensus, which clearly did not happen often, since the respondent voted
against the adoption. Moreover, even if it permitted the adoption, anyhow it was able to
refuse to implement the recommendations without suffering any consequence, since it could
block any authorization of sanctions against it. 21
In words of William Davey:
“Indeed, only about one-half of the panel reports issued in the 1990’s were adopted by the
GATT contracting parties. As a consequence, the GATT dispute settlement system became
perceived as being incapable of handling controversial cases, since it was assumed that one
of the parties would block adoption of the panel report. This meant that disputes that should
have been considered in the system were not brought to it because of a belief that no positive
results could be obtained”22
This was one of the mayor changes that were agreed in the Uruguay Round, since the
contracting parties knew that the problems of delay and blockage were a priority to be
20 Introduction to the WTO dispute settlement system (n.d) Retrieved from: https://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c1s1p1_e.htm 21 Andrew T. Guzman & Joost Pauwelyn, International Trade Law, Wolters Kluwer Law & Business, 2nd edition (2012), page 129 22 Ibidem
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solved.23 The DSU removed the possibility for defendants to block access to justice, since it
provides for “strict time limits and what is referred to as “automaticity” which effectively
removes the power of a party to block the process”.24 In short, the new system contemplates
that the adoption of the report has to take place within 60 days after it is referred to the DSB,
unless there is a consensus not to adopt the report, which is called “negative consensus”.
This means that “as long as one member want the report adopted, it will be adopted”.25
Therefore, if a complaining party wishes to claim its case before a panel, it must request the
DSB to establish a panel. Such a request serves two essential purposes: (i) it defines the scope
of the dispute and delimits the jurisdiction of the panel; and (ii) it serves the due process
objective of notifying the respondent and third parties of the nature of the complainant’s case.
According to Article 6.2 of the DSU, “The request for the establishment of a panel shall be
made in writing. It shall indicate whether consultations were held, identify the specific
measures at issue and provide a brief summary of the legal basis of the complaint sufficient
to present the problem clearly.”26
Moreover, note that Article 1.1 of the DSU states that:
“The rules and procedures of this Understanding shall apply to disputes brought
pursuant to the consultation and dispute settlement provisions of the agreements listed
in Appendix 1 to this Understanding (referred to in this Understanding as the
“covered agreements”). The rules and procedures of this Understanding shall also
23 Ibidem 24 Ibidem 25 Ibidem, page 135 26 Understanding on Rules and Procedures Governing the Settlement of Disputes, Marrakesh Agreement Establishing the World Trade Organization, Annex 2, 1869 U.N.T.S. 401, 33 I.L.M. 1226 (1994), Article 6.2
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apply to consultations and the settlement of disputes between Members concerning
their rights and obligations under the provisions of the Agreement Establishing the
World Trade Organization (referred to in this Understanding as the “WTO
Agreement”) and of this Understanding taken in isolation or in combination with any
other covered agreement.”.27
That is why, the complainant must prove the connection between the measure that is
inconsistent with WTO law, and the specific provision of the covered agreements28 from
which the inconsistency emerges.
Furthermore, those are not the only remarkable features of the WTO dispute settlement
system. In order to avoid denial of justice, the disputes are adjudicated by independent,
impartial judges every time that a willing complainant has expressed his desire to this effect.
More concretely, the WTO establishes a two-stage adjudication process, whereby disputes
will be first submitted to panels, which are ad-hoc bodies, not permanent, which are
established for the purpose of adjudicating a particular dispute, and are dissolved once they
have accomplished this task. Moreover, Article 17.1 of the DSU provides for the
establishment of a standing 7-judges Appellate Body, to hear the appeals of panel reports,
27 Ibidem, Article 1.1 28 The covered agreements are listed in Annex 1 of the DSU, they are: “(i) the Agreement Establishing the World Trade Organization (Marraquesh Agreement); (ii) Multilateral Trade Agreements, which contains: Annex 1A: Multilateral Agreements on Trade in Goods; Annex 1B: General Agreement on Trade in Services; Annex 1C: Agreement on Trade-Related Aspects of Intellectual Property Rights; and Annex 2: Understanding on Rules and Procedures Governing the Settlement of Disputes; and (iii) Plurilateral Trade Agreements, such as Annex 4: Agreement on Trade in Civil Aircraft, Agreement on Government Procurement, International Dairy Agreement and International Bovine Meat Agreement. However, the application of the plurilateral trade agreements is subject to the condition that the state gave it additional consent for being part of the agreement, being an exception to the single undertaking principle.”
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with the limitation of not extending its review beyond the understanding of the legal issues
involved.29
According to the statistics provided by the WTO, in the period 1995-2014, 136 panel reports
from the 201 adopted reports were appealed by the Members. Specifically, 21 reports out of
29 reports adopted of panel established pursuant Article 21.5 of the DSU (Compliance
procedures after a panel of Appellate Body decision), and 115 out of 172 adopted panel
reports panel reports established pursuant other Articles than 21.5 of the DSU were appealed.
In sum, 68% of all panel reports were appealed.30
In sum, the dispute settlement system of the WTO plays an essential role in protecting the
multilateral trading system, by providing an strict procedure which ensures the compliance
of the decision by the defeated party.
b. Inherent jurisdiction
Before analyzing if WTO panels and the Appellate Body have inherent jurisdiction, and if
they can apply inherent powers, it is pertinent to address the meaning of each of these
concepts. According to the International Court of Justice, the inherent jurisdiction can be
understood in this way:
“It should be emphasized that the Court possesses an inherent jurisdiction enabling
it to take such action as may be required (…) to provide for the orderly settlement of
29 Louise Johannesson and Petros C. Mavroidis, The WTO Dispute Settlement System 1995-2016: A Data Set and its Descriptive Statistics, European University Institute, EUI Working Paper RSCAS 2016/72 (2016), page 1. Available at: http://cadmus.eui.eu/bitstream/handle/1814/44568/RSCAS_2016_72.pdf?sequence=1&isAllowed=y 30 Dispute Settlement: Statistics (n.d) Retrieved from: https://www.wto.org/english/tratop_e/dispu_e/stats_e.htm
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all matters in dispute, to ensure the observance of the “inherent limitations on the
exercise of the judicial function” of the Court, and to “maintain its judicial
character”. Such inherent jurisdiction, on the basis of which the Court is fully
empowered to make whatever findings may be necessary for the purposes just
indicated, derives from the mere existence of the Court as a judicial organ established
by the consent of States, and is conferred upon it in order that its basic judicial
functions may be safeguarded”.31
For that reason, one international tribunal may go beyond the strict mandate of the agreement,
in order to solve issues related to its jurisdiction.
However, the real issue relies on consequences that the recognition of the inherent
jurisdiction would make, i.e. entitling the court to use inherent powers to resolve the dispute.
As Orakhelashvili states, “the judicial nature of international tribunals and inherent powers
following therefrom may produce a jurisdiction ‘supplement’ not directly foreseen under a
given jurisdictional clause.”32 Therefore, in words of Andrew D. Mitchel and David Heaton:
“Inherent jurisdiction is the source of such incidental powers as an international court or
tribunal requires in order to maintain and exercise its subject-matter jurisdiction in a judicial
manner. Despite a lack of any mandate to do so in the instrument creating the international
tribunal or conferring upon it jurisdiction, a tribunal may—under its inherent jurisdiction—
apply principles or rules16 of international law to these ends. An example is the International
Criminal Tribunal for the Former Yugoslavia’s (ICTY) recognition that it “possesses inherent
31 I.C.J. Reports, Nuclear Tests (Austl. v. Fr.), Judgmenet, I.C.J. Reports 1974, pages 253, 259–60 32 Alexander Orakhelashvili, Questions of International Judicial Jurisdiction in the LaGrand Case, 15 Leiden J. Int’l L. 105, 115 (2002).
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jurisdiction to prosecute the crime of contempt,” although no provision for this is made in its
statute.”33
However, these inherent powers that are not recognized by instrument creating the
international tribunal or conferring upon its jurisdiction cannot be broadly used. According
to Joost Pawelyn, the inherent jurisdiction and the inherent powers must be solely used by
the tribunal to:
“(i) “to interpret the submissions of the parties” in order to “isolate the real issue in the case
and to identify the object of the claim”; (ii) (…) to determine whether one has substantive
jurisdiction to decide a matter (the principle of la compétence de la compétence; (iii) (…) to
decide whether one should refrain from exercising substantive jurisdiction that has been
validly established; and (iv) (…) to decide all matters linked to the exercise of substantive
jurisdiction and inherent in the judicial function such as claims under rules on burden of
proof, due process, and other general international rules on the judicial settlement of
disputes.”34
Having analyzed the concepts of inherent jurisdiction and inherent powers, one question
arises: Does WTO tribunals have inherent jurisdiction and therefore can apply their inherent
powers in solving the disputes?
33 Andrew D. Mitchell, David Heaton, “The Inherent Jurisdiction of WTO Tribunals: The select application of Public International Law required by the judicial function”, Michigan Journal of International Law, Vol. 31:561 (2009), pages 565-566 34 Joost Pauwelyn, Conflict of Norms in Public International Law International Law: How WTO Law Relates to other Rules of International Law, Cambridge Studies in International and Comparative Law (2003), pages 447-48
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In fact, in the frame of the WTO, the panels and the Appellate Body have been reluctant in
recognizing the existence of the inherent powers. However, they have used them in several
cases. It was until the Mexico – Soft Drinks dispute, the Appellate Body stated that:
“WTO panels have certain powers that are inherent in their adjudicative function. Notably,
panels have the right to determine whether they have jurisdiction in a given case, as well as
to determine the scope of their jurisdiction. In this regard, the Appellate Body has previously
stated that “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
in any case that comes before it.” Further, the Appellate Body has also explained that panels
have “a margin of discretion to deal, always in accordance with due process, with specific
situations that may arise in a particular case and that are not explicitly regulated.”35
Therefore, one WTO tribunal may go beyond the mandate of the covered agreements when
resolving one specific dispute, due to its inherent jurisdiction. Despite the above, according
to Andrew D. Mitchel and David Heaton, after analyzing the cases in which different panels
and the Appellate Body used their inherent powers, the use of these powers is subject to the
following conditions:
“(1) necessity to resolve an issue; (2) lack of autonomous substantive content in the principle;
and (3) consistency with the constitutive instruments of the international tribunal in question
(the Covered Agreements in the context of the WTO). In addition, a principle must be
recognized in customary international law or be a general principle of law. Inherent
35 Appellate Body Report, Mexico - Tax Measures on Soft Drinks and Other Beverages, WT/DS308/AB/R, adopted 6 March 2006, paragraph 45
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jurisdiction does not provide a vehicle for applying any rule an international tribunal wishes
to apply.”36
For the matter of this paper, the application of the principle of “La compétence de la
competence” in the WTO system is essential, since it is the first step on analyzing if a panel
can decline to exercise its jurisdiction. To resolve this question, Andrew D. Mitchel and
David Heaton applied their purposed test, and they found that:
“the power of a WTO Tribunal to decide whether or not it has jurisdiction over a particular
claim is necessary, at least where raised by one of the parties or the WTO Tribunal, as if it
does not have jurisdiction then it can make no judicial determination on the merits at all. The
ability to examine whether a tribunal has jurisdiction also has no autonomous substantive
content: the criteria of jurisdiction themselves are provided by the relevant agreements. For
example, in the case of a compliance panel, Article 21.5 of the DSU normatively establishes
the panel’s jurisdiction: a measure must be one “taken to comply” with a previous DSB ruling
to fall within the scope of compliance proceedings. The inherent power to examine
jurisdiction merely enables application of this norm. Finally, there is nothing in the DSU or
elsewhere that suggests that a WTO Tribunal cannot ascertain whether it has jurisdiction.
Indeed, the requirements in the DSU that the complaining party specify the relevant Covered
Agreements, “the reasons for the request” (for consultations), and “the measures at issue”
provide criteria through which a panel can ensure that a complaint is properly before it. (…)
Under the three criteria, then, the exercise of la compétence de la compétence is clearly an
incident of inherent jurisdiction that can and does apply within WTO dispute settlement.”37
36 Andrew D. Mitchell, David Heaton, “The Inherent Jurisdiction of WTO Tribunals: The select application of Public International Law required by the judicial function”, Michigan Journal of International Law, Vol. 31:561 (2009), page 574 37 Ibidem, page 582
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In conclusion, WTO tribunals are entitled to use their inherent powers in order to determine
whether they have jurisdiction in a specific dispute.
c. The difference between jurisdiction and admissibility
To address and solve the question posed in the title of this paper, it is important to
differentiate the concepts of jurisdiction and admissibility. This, since the overlapping of
jurisdictions between the dispute settlement of an FTA and the WTO’s DSB, generally
creates a problem of admissibility of the issue, rather than a jurisdictional problem.
At the international level, multiple tribunals have accepted this distinction when addressing
preliminary issues to a dispute. In fact, the International Court of Justice have stated that:
“Objections to admissibility normally take the form of an assertion that, even if the Court
has jurisdiction and the facts stated by the applicant State are assumed to be correct,
nonetheless there are reasons why the Court should not proceed to an examination of the
merits.”38
Also, in the SGS v. Philippines case,39 the International Centre for Settlement of Investment
Disputes arbitral tribunal stated that, even though it had jurisdiction to rule on the claim at
issue, it was going to decline to exercise it, since the tribunal found that the claim was not
admissible due to a forum clause in the contract, which stated that contractual claims were
supposed to be presented before national courts.
38 I.C.J. Reports, Oil Platforms (Iran v US), Judgment, I.C.J. Reports 2003, paragraph 29 39 SGS Société Generale de Surveillance S.A. v. Republic of Philippines, ICSID Case No. ARB/02/6, Decision of the Tribunal on Objections to Jurisdiction, 29 January 2004, paragraphs. 113-124
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According to Pauwelyn and Salles,40 in the frame of the WTO the application of the concept
of admissibility is discussed, since the DSU does not expressly state the differentiation
between issues of jurisdiction and admissibility. They propose that the differentiation has to
be based on the scope of the authority of a panel to decide the existence of the conditions
related to the exercise of a given action or process.
However, the Appellate Body decision on the Mexico – Soft Drinks case, seemed to
introduce this differentiation. As it will be explained in the next section, it is possible to
understand that there was an implicit recognition of legal impediments as a motive for panels
to decline to exercise its validly established jurisdiction, in that specific case, due to a possible
relinquishment of WTO rights in the NAFTA.
For that reason, given that the Appellate Body seemed to introduce this difference, this paper
will analyze the problem of the overlapping of jurisdictions as an admissibility objection,
since the issues of jurisdiction and admissibility are not identical. In fact, Pauwelyn and
Salles,41 explain that there are one similarity and four differences between this two concepts.
In general, the objections to jurisdiction and the ones to admissibility are similar, since they
are both preliminary objections, which are analyzed before the merits of the case, and their
ultimate effect would be the same, i.e. to avoid findings on the merits. However, they differ
one from another in several ways:
40 Joost Pauwelyn and Luis E. Salles, Forum Shopping Before International Tribunals: (Real) Concerns, (Im) Possible Solutions, 42 Cornell International Law Journal 77 (2009), page 93. 41 Joost Pauwelyn and Luis E. Salles, Forum Shopping Before International Tribunals: (Real) Concerns, (Im) Possible Solutions, 42 Cornell International Law Journal 77 (2009), pages 94-97
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First of all, objections to jurisdiction are raised to attack the authority of the court to rule on
the claims, while the objections to admissibility target the conditions for the specific action
or complaint. Therefore, objections to admissibility are raised after finding that the court has
jurisdiction to rule on the merits.
In second place, the governing law of jurisdictional objections refers to the tribunal’s
jurisdictional field (also known as substantive, original or primary jurisdiction), which
basically depends on the fact that the parties granted the explicitly granted the tribunal
jurisdiction on that matter. A contrario sensu, the governing law of admissibility objections
are principles and rules that are binding on the parties to the dispute, which are not necessarily
incorporated in the clause of instrument that granted jurisdiction to the tribunal. In that sense,
one admissibility objection does not touch the jurisdiction of the court, and moreover, if one
tribunal decides not to examine the merits of the case, based on the inadmissibility, the court
would be exercising its jurisdiction.
In third place, the burden of raising one jurisdiction objection is different from raising one of
admissibility, since the lack of jurisdiction is an issue that a tribunal must examine at its own
initiative, while the admissibility issue must be raised by the parties. This difference is
definitely the most important one. A tribunal must sort the jurisdictional issue for itself, even
if neither party raises the question, otherwise it could be resolving the merits without having
the authority to decide the issue. Inadmissibility, in contrast, relates to the legal relationship
between the parties, this is, for example, if the complainant has previously waived its right
to present a case, or if it has to exhaust domestic remedies before filing the case.
23
Fourth, on the one hand, a decision on the inadmissibility of one claim does not acquire the
full force of res judicata when the issue that underlined the inadmissibility may be cured. On
the other hand, a decision on jurisdiction cannot be cured, and therefore, the decision acquire
the force of red judicata.
In that sense, since the issues are so different, it is import to analyze if the responding party
its presenting an objection to the jurisdiction of the court, or to the admissibility to the
dispute, in order to provide a well-founded ruling. For these reason, the next sections will
present different answers to the possibility of a panel to decline to exercise its jurisdiction as
an admissibility issue, rather than a jurisdictional issue itself, due to the overlapping of
jurisdictions.
III. Legal impediments as a motive for declining the exercise of jurisdiction
a. The existence of legal impediments
Before explaining the concept of legal impediments this paper will explain the reasoning
made by the Appellate Body, when recognizing that one WTO tribunal is entitled to decline
to excise its validly established jurisdiction, when certain conditions are present on a dispute.
The Appellate Body in Mexico – Soft Drinks stated that a panel’s decision to decline its
validly established jurisdiction would diminish the right of the complaining member to seek
the redress for a violation of the covered agreements by another member:
“46. In our view, it does not necessarily follow, however, from the existence of these inherent
adjudicative powers that, once jurisdiction has been validly established, WTO panels would
have the authority to decline to rule on the entirety of the claims that are before them in a
24
dispute. To the contrary, we note that, while recognizing WTO panels' inherent powers, the
Appellate Body has previously emphasized that:
“Although panels enjoy some discretion in establishing their own working procedures, this
discretion does not extend to modifying the substantive provisions of the DSU. … Nothing in
the DSU gives a panel the authority either to disregard or to modify ... explicit provisions of
the DSU.94 (emphasis added)””42
After stating this, the Appellate Body analyzed different provision of the DSU that would be
disregarded by a panel if it decides to decline to exercise it validly established jurisdiction:
The first analyzed article was Article 7 of the DSU, which reads as follows:
“Article 7
Terms of Reference of Panels
1. Panels shall have the following terms of reference unless the parties to the dispute agree
otherwise within 20 days from the establishment of the panel:
“To examine, in the light of the relevant provisions in (name of the covered agreement(s)
cited by the parties to the dispute), the matter referred to the DSB by (name of party) in
document ... and to make such findings as will assist the DSB in making the recommendations
or in giving the rulings provided for in that/those agreement(s).”
42 Appellate Body Report, Mexico - Tax Measures on Soft Drinks and Other Beverages, WT/DS308/AB/R, adopted 6 March 2006, paragraph 46
25
2. Panels shall address the relevant provisions in any covered agreement or agreements cited
by the parties to the dispute. (…)”43
The Appellate Body considered that the panel in that specific dispute was established with
standard terms of reference, and therefore the panel was instructed to examine the claims
raised by the United States, and to make findings regarding the consistency of the measures
at issue with WTO law. Moreover, the Appellate Body stated that the words “shall address”
indicates that “panels are required to address the relevant provisions in any covered
agreement or agreements cited by the parties to the dispute.”44 This statement was said, by
reaffirming the previous Appellate Body decisions, for example the one in the Mexico – Corn
Syrup case, in which it stated that: "as a matter of due process, and the proper exercise of
the judicial function, panels are required to address issues that are put before them by the
parties to a dispute."45
Then, the Appellate Body analyzed Article 11 of the DSU, which provides that:
“Article 11
Function of Panels
The function of panels is to assist the DSB in discharging its responsibilities under this
Understanding and the covered agreements. Accordingly, a panel should make an objective
assessment of the matter before it, including an objective assessment of the facts of the case
43 Understanding on Rules and Procedures Governing the Settlement of Disputes, Marrakesh Agreement Establishing the World Trade Organization, Annex 2, 1869 U.N.T.S. 401, 33 I.L.M. 1226 (1994), Article 7 44 Appellate Body Report, Mexico - Tax Measures on Soft Drinks and Other Beverages, WT/DS308/AB/R, adopted 6 March 2006, paragraph 49 45 Appellate Body Report, Mexico - Anti-Dumping Investigation of High-Fructose Corn Syrup (HFCS) from the United States, WT/DS132/AB/RW, 22 October 2001, paragraph 36.
26
and the applicability of and conformity with the relevant covered agreements, and make such
other findings as will assist the DSB in making the recommendations or in giving the rulings
provided for in the covered agreements. Panels should consult regularly with the parties to
the dispute and give them adequate opportunity to develop a mutually satisfactory solution.”46
The Appellate Body considered that the fact that Article 11 states that panels should make an
objective assessment of the matter before it does not necessarily imply that it is discretionary,
but instead states that in previous decisions the Appellate Body held that the word “should”
can be used not only "to imply an exhortation, or to state a preference", but also "to express
a duty [or] obligation".47 Taking into account that statement, it continues arguing that a panel
“would not fulfil its mandate if it were not to make an objective assessment of the matter.”
Therefore, it considered that the wording of article 11 imposes an obligation for the panel to
make an objective assessment of the matter, as well as to make such other findings, and
furthermore, assisting the Dispute Settlement Body in making the recommendations or in
giving the rulings. Finally, it concluded that “It is difficult to see how a panel would fulfil
that obligation if it declined to exercise validly established jurisdiction and abstained from
making any finding on the matter before it.”48
Afterwards, the Appellate Body analyzed Articles 3 and 23 of the DSU, which reads:
“Article 3
General Provisions
46 Understanding on Rules and Procedures Governing the Settlement of Disputes, Marrakesh Agreement Establishing the World Trade Organization, Annex 2, 1869 U.N.T.S. 401, 33 I.L.M. 1226 (1994), Article 11 47 Appellate Body Report, Mexico - Tax Measures on Soft Drinks and Other Beverages, WT/DS308/AB/R, adopted 6 March 2006, paragraph 51 48 Ibidem.
27
(…)
3. The prompt settlement of situations in which a Member considers that any benefits accruing
to it directly or indirectly under the covered agreements are being impaired by measures
taken by another Member is essential to the effective functioning of the WTO and the
maintenance of a proper balance between the rights and obligations of Members.”49
“Article 23
Strengthening of the Multilateral System
1. When Members seek the redress of a violation of obligations or other nullification or
impairment of benefits under the covered agreements or an impediment to the attainment of
any objective of the covered agreements, they shall have recourse to, and abide by, the rules
and procedures of this Understanding.
(…)”50
The Appellate Body considered that both articles entitle any member of the WTO to have
recourse to the DSB whenever it considers that any benefits accruing to it are being impaired
by measures taken by another member, and therefore to have a ruling by a WTO panel.51
After having analyzed all previously developed articles, the Appellate Body considered that
a panel’s decision to decline to exercise its validly established jurisdiction “would seem to
"diminish" the right of a complaining Member to "seek the redress of a violation of
49 Understanding on Rules and Procedures Governing the Settlement of Disputes, Marrakesh Agreement Establishing the World Trade Organization, Annex 2, 1869 U.N.T.S. 401, 33 I.L.M. 1226 (1994), Article 3.3 50 Ibidem, Article 23.1 51 Appellate Body Report, Mexico - Tax Measures on Soft Drinks and Other Beverages, WT/DS308/AB/R, adopted 6 March 2006, paragraph 52
28
obligations" within the meaning of Article 23 of the DSU, and to bring a dispute pursuant to
Article 3.3 of the DSU.”52 In addition, beyond rendering nugatory the right of members
Consider that such a decision “would not be consistent with a panel's obligations under
Articles 3.2 and 19.2 of the DSU.”53 That is why it concluded that “We see no reason,
therefore, to disagree with the Panel's statement that a WTO panel "would seem … not to be
in a position to choose freely whether or not to exercise its jurisdiction.””54
At this point, the ruling of the Appellate Body seemed to indicate that there was nothing that
could preclude a panel from exercising its validly established jurisdiction. However, the
Appellate Body opened the door to future possibilities in which a panel could decline to
exercise validly established jurisdiction without disregarding its obligations nor affecting
member’s rights, by stating that:
“Mindful of the precise scope of Mexico's appeal, we express no view as to whether there may
be other circumstances in which legal impediments could exist that would preclude a panel
from ruling on the merits of the claims that are before it. In the present case, Mexico argues
that the United States' claims under Article III of the GATT 1994 are inextricably linked to a
broader dispute, and that only a NAFTA panel could resolve the dispute as a whole.
Nevertheless, Mexico does not take issue with the Panel's finding that "neither the subject
matter nor the respective positions of the parties are identical in the dispute under the NAFTA
... and the dispute before us." Mexico also stated that it could not identify a legal basis that
would allow it to raise, in a WTO dispute settlement proceeding, the market access claims it
is pursuing under the NAFTA. It is furthermore undisputed that no NAFTA panel as yet has
52 Ibidem. 53 Ibidem. 54 Ibidem.
29
decided the "broader dispute" to which Mexico has alluded. Finally, we note that Mexico has
expressly stated that the so-called "exclusion clause" of Article 2005.6 of the NAFTA had not
been "exercised". We do not express any view on whether a legal impediment to the exercise
of a panel's jurisdiction would exist in the event that features such as those mentioned above
were present. In any event, we see no legal impediments applicable in this case.”55
This quote shows that all the reasoning of the Appellate Body in this case, was strictly linked
with Mexico’s arguments. Therefore, if other respondent party were to present a different
argumentation, it is possible that the Appellate Body would recognized that the panel was
precluded from exercising its validly established jurisdiction. Natens and Descheemaeker
explain this issue stating that:
“Once jurisdiction has been validly established, there is no margin of discretion for a panel
to decline to exercise this jurisdiction. However, this is not the crux of the issue. As the AB
accurately noted, for these arguments to apply, the jurisdiction of a panel must be validly
established. This requires the absence of procedural impediments, such as Articles 1.1, 4 and
6 DSU. Moreover, and crucially, valid establishment of jurisdiction also requires the absence
of legal impediments. Note that, in paragraph 54 of its report in Mexico – Soft Drinks, the AB
differentiates from paragraph 53 by stating that “legal impediments could exist that would
preclude a panel from ruling on the merits of the claims that are before it.” The AB does not
say that there may be legal impediments that allow a panel to decline jurisdiction, once the
jurisdiction is validly established. It merely states that the existence of legal impediments
precludes the valid establishment of jurisdiction, and consequentially impedes a ruling on the
merits. It seems that the valid establishment of jurisdiction would precede an analysis of
violation of the aforementioned provisions. Consequentially, when a panel declines to
55 Ibidem, paragraph 54.
30
exercise jurisdiction because such jurisdiction is not validly established, it does not act
inconsistently with Articles 23.1, 3.3, 3.2, 7.2 and 11 DSU.”56
In that sense, the key issue to understand when a panel is entitled to decline to exercise its
jurisdiction due to legal impediments, is to determine the concept of legal impediments itself.
Scholars from around the globe have tried to present what could constitute a legal
impediment. Bregt Natens and Sidonie Descheemaeker, gathered the different doctrinal
positions as follows:
“Van Damme mentions “reasons of political propriety, the doctrines of forum non
conveniens, res judicata, lis alibi pendens, and abus de droit, though this list is by no means
exclusive and exhaustive.”57 Henckels highlights forum exclusion clauses, lex posterior and
lex specialis, and elaborately discusses comity.58 Davey and Sapir argue that the Appellate
Body’s remarks point towards several potential legal impediments.59 All of these authors
acknowledge that there are substantial difficulties in reconciling these potential legal
impediments with the Appellate Bodys’s case law. Van Damme concludes, “Ultimately, the
Appellate Body in Mexico – Taxes on Soft Drinks left its report open-ended and internally
contradictory”60.61
56 Bregt Natens and Sidonie Descheemaeker, Say it Loud, Say it Clear — Article 3.10 DSU’s Clear Statement Test as a Legal Impediment to Validly Established Jurisdiction, Forthcoming, Journal of World Trade 49:5., (2014), page 3 57 Isabelle Van Damme, Inherent Powers of and for the WTO Appellate Body, Graduate Institute Geneva – Centre for Trade and Economic Integration Working Paper (2008), pages 29-30, 102. 58 Caroline Henckels, Overcoming Jurisdictional Isolationism at the WTO – FTA Nexus: A Potential Approach for the WTO, (19:3) The European Journal of International Law (2008), pages 571, 581-599. 59 William J Davey and André Sapir, The Soft Drinks Case: The WTO and Regional Agreements, 8:1 World Trade Review (2009), pages 5, 13-17 60 Isabelle Van Damme, Inherent Powers of and for the WTO Appellate Body, Graduate Institute Geneva – Centre for Trade and Economic Integration Working Paper (2008), pages 29, 102 61 Bregt Natens and Sidonie Descheemaeker, Say it Loud, Say it Clear — Article 3.10 DSU’s Clear Statement Test as a Legal Impediment to Validly Established Jurisdiction, Forthcoming, Journal of World Trade 49:5., (2014), page 4
31
However, irrespective of the opinion of such scholars, several panel’s and Appellate Body’s
decisions seem to provide the answer to what can constitute a legal impediment. In the same
Mexico – Soft Drinks decision, the Appellate Body stated in foot note 101 that the right to
have recourse to the DSB to initiate a proceeding, in the term of Articles 3.3 and 23.1 of the
DSU is not absolute. This, taking into account its past report from the EC – Export Subsidies
on Sugar case, where it stated that:
“We see little in the DSU that explicitly limits the rights of WTO Members to bring an action;
WTO Members must exercise their "judgement as to whether action under these procedures
would be fruitful", by virtue of Article 3.7 of the DSU, and they must engage in dispute
settlement procedures in good faith, by virtue of Article 3.10 of the DSU.”62
Therefore, the Appellate Body is stating that Articles 3.7 and 3.10 of the DSU limits the right
of a WTO member to have recourse to the DSB. That line of ideas goes in accordance with
the statement made by the Appellate Body un US – Corrosion-Resistant Steel Sunset Review,
were it held that:
“As long as a Member respects the principles set forth in Articles 3.7 and 3.10 of the DSU,
namely, to exercise their "judgement as to whether action under these procedures would be
fruitful" and to engage in dispute settlement in good faith, then that Member is entitled to
request a panel to examine measures that the Member considers nullify or impair its benefits.
We do not think that panels are obliged, as a preliminary jurisdictional matter, to examine
whether the challenged measure is mandatory. This issue is relevant, if at all, only as part of
62 Appellate Body Report, European Communities - Export Subsidies on Sugar, WT/DS265/AB/R, WT/DS266/AB/R, WT/DS283/AB/R, adopted 28 April 2005, paragraph 312.
32
the panel's assessment of whether the measure is, as such, inconsistent with particular
obligations”63
In that sense, a violation of those articles would seem to be enough to demonstrate that the
panel is precluded to consider if the measure at issue nullify or impairs the benefit of the
complaining member, due to the existence of legal impediments. Furthermore, this thesis was
once again confirmed by the Appeal Body in EC – Bananas III (2nd Recourse to Article 21.5),
when analyzing if the Understanding on Bananas could prevent the complainants from
initiating compliance proceedings pursuant to Article 21.5 of the DSU.64
Taking into account those quotes from Mexico – Soft Drinks, US – Corrosion, EC – Export
Subsidies on Sugar and EC – Bananas III (2nd Recourse to Article 21.5), it is clear that the
Appellate Body seems to indicate that, if there are no procedural impediments, the panel can
only decline to exercise its jurisdiction by a breach of Articles 3.7 or 3.10 of the DSU.
b. Article 3.7 of the DSU
Having concluded that a panel can decline to exercise its validly established jurisdiction when
there is a violation of Articles 3.7 or 3.10 of the DSU, it is relevant to analyze both provisions.
First, this paper will analyze Article 3.7 of the DSU, which states:
“Article 3
General Provisions
63 Appellate Body Report, United States - Sunset Review of Anti-Dumping Duties on Corrosion-Resistant Carbon Steel Flat Products from Japan, WT/DS244/AB/R, Adopted 15 December 2003, paragraph 89. 64 Appellate Body Report, European Communities - Regime for the Importation, Sale and Distribution of Bananas, Second Recourse to Article 21.5 of the DSU by Ecuador, WT/DS27/AB/RW2/ECU, WT/DS27/AB/RW/USA, adopted 26 November 2008, paragraph 227
33
7. Before bringing a case, a Member shall exercise its judgement as to whether action under
these procedures would be fruitful. The aim of the dispute settlement mechanism is to secure
a positive solution to a dispute. A solution mutually acceptable to the parties to a dispute and
consistent with the covered agreements is clearly to be preferred. In the absence of a mutually
agreed solution, the first objective of the dispute settlement mechanism is usually to secure
the withdrawal of the measures concerned if these are found to be inconsistent with the
provisions of any of the covered agreements. The provision of compensation should be
resorted to only if the immediate withdrawal of the measure is impracticable and as a
temporary measure pending the withdrawal of the measure which is inconsistent with a
covered agreement. The last resort which this Understanding provides to the Member
invoking the dispute settlement procedures is the possibility of suspending the application of
concessions or other obligations under the covered agreements on a discriminatory basis vis-
à-vis the other Member, subject to authorization by the DSB of such measures.”65
When interpreting this article, the Appellate Body in EC-Bananas III asserted that:
“135. Accordingly, we believe that a Member has broad discretion in deciding whether to
bring a case against another Member under the DSU. The language of Article XXIII:1 of the
GATT 1994 and of Article 3.7 of the DSU suggests, furthermore, that a Member is expected
to be largely self-regulating in deciding whether any such action would be "fruitful".”66
In fact, the Appellate Body showed in that same case that the discretion is so broad that there
is no need to demonstrate a legal standing in order to present a claim before the DSB, since
65 Understanding on Rules and Procedures Governing the Settlement of Disputes, Marrakesh Agreement Establishing the World Trade Organization, Annex 2, 1869 U.N.T.S. 401, 33 I.L.M. 1226 (1994), Article 3.6 66 Appellate Body Report, European Communities - Regime for the Importation, Sale and Distribution of Bananas, WT/DS27/AB/R, adopted 9 September 1997, paragraph 135
34
there is nothing in the DSU that contains that explicit requirement. In that sense, the Appellate
Body explained that:
“132. We agree with the Panel that "neither Article 3.3 nor 3.7 of the DSU nor any other
provision of the DSU contain any explicit requirement that a Member must have a ‘legal
interest’ as a prerequisite for requesting a panel". We do not accept that the need for a "legal
interest" is implied in the DSU or in any other provision of the WTO Agreement. It is true that
under Article 4.11 of the DSU, a Member wishing to join in multiple consultations must have
"a substantial trade interest", and that under Article 10.2 of the DSU, a third party must have
"a substantial interest" in the matter before a panel. But neither of these provisions in the
DSU, nor anything else in the WTO Agreement, provides a basis for asserting that parties to
the dispute have to meet any similar standard. Yet, we do not believe that this is dispositive
of whether, in this case, the United States has "standing" to bring claims under the GATT
1994.”67
Consequently, it seems very hard to demonstrate a legal impediment under Article 3.7 of the
GATT, since the complaining party has a discretion to present its claims that is so broad, that
it does not need to demonstrate a legal interest. However, the Appellate Body in Mexico –
Corn Syrup interpreted the first sentence of Article 3.7 of the DSU as “reflect a basic
principle that Members should have recourse to WTO dispute settlement in good faith, and
not frivolously set in motion the procedures contemplated in the DSU.”68 This interpretation
gave a narrower interpretation to the complainant´s discretion, since it must act in accordance
with the good faith principle. Note that this statement of the Appellate Body linked this legal
67 Ibidem, paragraph 132. 68 Appellate Body Report, Mexico - Anti-Dumping Investigation of High-Fructose Corn Syrup (HFCS) from the United States, WT/DS132/AB/RW, 22 October 2001, paragraph 73.
35
impediment, with the one contained in Art. 3.10 of the DSU, which will be explained in the
following section of this paper.
Moreover, at the recent Peru – Agricultural Products issue, the Appellate Body recalled what
was stated in EC – Bananas III, explaining that:
“The "largely self-regulating" nature of a Member's decision to bring a dispute is "borne out
by Article 3.3, which provides that the prompt settlement of situations in which a Member, in
its own judgement, considers that a benefit accruing to it under the covered agreements is
being impaired by a measure taken by another Member is essential to the effective functioning
of the WTO".”69
At this point, one question may arise: If this discretion is broad, and it is also essential to the
effective functioning of the WTO, how it is possible that one legal impediment may arise
from it?
The Appellate Body in the aforementioned Peru – Agricultural Products issue answered this
question, by explaining the situation that occurred in the EC – Bananas III (Article 21.5 –
Ecuador II/ Article 21.5 – US) issue:
“5.19. In our view, although the language of the first sentence of Article 3.7 of the DSU states
that "a Member shall exercise its judgement", the considerable deference accorded to a
Member's exercise of its judgement in bringing a dispute is not entirely unbounded. For
example, in order to ascertain whether a Member has relinquished, by virtue of a mutually
agreed solution in a particular dispute, its right to have recourse to WTO dispute settlement
in respect of that dispute, greater scrutiny by a panel or the Appellate Body may be necessary.
69 Appellate Body Report, Peru - Additional Duty on Imports of Certain Agricultural Products, WT/DS457/AB/R, adopted 31 July 2015, paragraph 5.18
36
This was the issue before the Appellate Body in EC – Bananas III (Article 21.5 – Ecuador II
/ Article 21.5 – US), where it ascertained whether a Member had relinquished its right to
have recourse to the WTO dispute settlement mechanism. In that case, the Appellate Body
had to determine whether that Member was precluded from initiating compliance
proceedings.”70
Therefore, it is possible to conclude that the relinquishment of the right to have recourse to
the WTO dispute settlement, in a particular dispute, constitutes a legal impediment that
inhibits the member to present its claims before a panel, which basically obliges the WTO
tribunal to decline to exercise its validly established jurisdiction.
However, the relinquishment of the right per se does not suffices to constitute a legal
impediment. Note that the panel in Peru – Agricultural Products affirmed that:
“In view of this broad discretion, the Appellate Body maintained that panels "must presume,
whenever a Member submits a request for establishment of a panel, that such Member does
so in good faith, having duly exercised its judgement as to whether recourse to that panel
would be 'fruitful'". The Appellate Body also pointed out that the first sentence of Article 3.7
of the DSU "neither requires nor authorizes a panel to look behind that Member's decision
and to question its exercise of judgement". Therefore, the Appellate Body considered that the
panel in that case was not obliged to consider this issue on its own motion. However, the
Appellate Body's ruling does not indicate whether the presumption that a Member is acting
in good faith and has duly exercised its judgement as to whether recourse to a panel would
be fruitful is a rebuttable presumption.”71
70 Ibidem, paragraph 5.19 71 Panel Report, Peru - Additional Duty on Imports of Certain Agricultural Products, WT/DS457/R, adopted 27 November 2014, paragraph 7.73
37
From this extract, it is possible to conclude that panels must presume that one member has
duly exercised its judgment when presenting a case before the WTO dispute system.
Consequently, the WTO tribunal is not obliged to consider this legal impediment on its own
motion, and therefore, it is the burden of the respondent to demonstrate that the exercise of
the judgment was not duly performed because the complainant has validly relinquished its
right to have recourse to the DSB. Additionally, the issue on whether the presumption is
rebuttable was resolved in the appeal, when the Appellate Body stated that the right was not
entirely unbounded.
It is important to remark that, even if the respondent explicitly invokes the existence of the
legal impediment, due to the complainant’s relinquishment of the right, it would not face an
easy job when convincing the panel to decline to exercise its jurisdiction, since the threshold
to demonstrate a valid relinquishment is extremely high. In fact, the Appellate Body in EC –
Bananas III (2nd recourse to article 21.5 – Ecuador) expressed that:
“217. With this in mind, we turn to analyze of the Understandings on Bananas at issue. We
consider that the complainants could be precluded from initiating Article 21.5 proceedings
by means of these Understandings only if the parties to these Understandings had, either
explicitly or by necessary implication, agreed to waive their right to have recourse to Article
21.5. In our view, the relinquishment of rights granted by the DSU cannot be lightly assumed.
Rather, the language in the Understandings must reveal clearly that the parties intended to
relinquish their rights.”72
72 Appellate Body Report, European Communities - Regime for the Importation, Sale and Distribution of Bananas, Second Recourse to Article 21.5 of the DSU by Ecuador, WT/DS27/AB/RW2/ECU, WT/DS27/AB/RW/USA, adopted 26 November 2008, paragraph 217
38
In this sense, to demonstrate a relinquishment, the respondent must show that the mutually
agreed solution was so clear, that the complainant explicitly relinquished its right to have
recourse to the DSB, or at least, by necessary implications. However, the Appellate Body in
Peru – Agricultural Products went further and described the requirements that must be
fulfilled in order to demonstrate a valid relinquishment of rights that could constitute a legal
impediment, and stated that the relinquishment may be in some instrument, rather than in a
mutually agreed solution, such as a FTA.
“Thus, while we do not exclude the possibility of articulating the relinquishment of the right
to initiate WTO dispute settlement proceedings in a form other than a waiver embodied in a
mutually agreed solution, as in EC – Bananas III (Article 21.5 – Ecuador II / Article 21.5 –
US), any such relinquishment must be made clearly. In any event, in our view, a Member's
compliance with its good faith obligations under Articles 3.7 and 3.10 of the DSU should be
ascertained on the basis of actions taken in relation to, or within the context of, the rules and
procedures of the DSU. Thus, we proceed to examine in this dispute whether the participants
clearly stipulated the relinquishment of their right to have recourse to WTO dispute settlement
by means of a "solution mutually acceptable to the parties" that is consistent with the covered
agreements.”73
Due to the mentioned quote, one can understand that the relinquishment of the right to initiate
WTO dispute settlement proceedings must: (i) be embodied in a waiver, such as a mutually
agreed solution; (ii) the text of the waiver must be clear; and (iii) the waiver must be
consistent with the covered agreements. If the relinquishment complies with those
73 Appellate Body Report, Peru - Additional Duty on Imports of Certain Agricultural Products, WT/DS457/AB/R, adopted 31 July 2015, paragraph 5.25
39
requirements, the respondent may invoke the legal impediment to ask the panel to decline to
exercise its validly established jurisdiction.
In conclusion, the respondent may invoke an admissibility objection of the grounds of a legal
impediment under Article 3.7 of the DSU, when the complainant has relinquished its right to
have recourse to the DSB. However, the threshold to demonstrate this relinquishment is
extremely high, and therefore the respondent must show that the text of the waiver states and
express relinquishment, or at least it must be understood as a necessary implication.
c. Article 3.10 of the DSU
Having addressed the first legal impediment contained in Article 3.7 of the DSU, this paper
will turn its attention to the one contained in Article 3.10 of the DSU, which states:
“Article 3
General Provisions
10. It is understood that requests for conciliation and the use of the dispute settlement
procedures should not be intended or considered as contentious acts and that, if a dispute
arises, all Members will engage in these procedures in good faith in an effort to resolve the
dispute. It is also understood that complaints and counter-complaints in regard to distinct
matters should not be linked.”74
Before analyzing the legal impediment that could arise from a violation of Article 3.10 of the
DSU, its pertinent to study the concept of good faith. However, the issue of addressing this
74 Understanding on Rules and Procedures Governing the Settlement of Disputes, Marrakesh Agreement Establishing the World Trade Organization, Annex 2, 1869 U.N.T.S. 401, 33 I.L.M. 1226 (1994), Article 3.10
40
concept relies on its definition itself. According to Andrew D. Mitchel: “Unfortunately, of
all the principles of international law, the principle of good faith is perhaps the hardest to
define.”75 Regardless, John O’Connor’s definition is useful to illustrate the concept:
“The principle of good faith in international law is a fundamental principle from which the
rule pacta sunt servanda and other legal rules distinctively and directly related to honesty,
fairness and reasonableness are derived, and the application of these rules is determined at
any particular time by the compelling standards of honesty, fairness and reasonableness
prevailing in the international community at that time.”76
Therefore, one state performs in good faith when it acts with honesty, fairness and
reasonableness. Moreover, in the frame of the WTO, the Appellate Body in US – FSC
explained the extent of the good faith principle contained in Article 3.10 of the DSU, by
stating that:
“166. Article 3.10 of the DSU commits Members of the WTO, if a dispute arises, to
engage in dispute settlement procedures "in good faith in an effort to resolve the
dispute". This is another specific manifestation of the principle of good faith which,
we have pointed out, is at once a general principle of law and a principle of general
international law. This pervasive principle requires both complaining and responding
Members to comply with the requirements of the DSU (and related requirements in
other covered agreements) in good faith. By good faith compliance, complaining
Members accord to the responding Members the full measure of protection and
opportunity to defend, contemplated by the letter and spirit of the procedural rules.
75 Andrew D. Mitchell, Goof Faith in WTO Dispute Settlement, Melbourne Journal of International Law 7 Melb. J. Int'l L., (2006), page 344. 76 John O'Connor, Good Faith in International Law, Dartmouth Publishing Co Ltd (1991), page 124.
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The same principle of good faith requires that responding Members seasonably and
promptly bring claimed procedural deficiencies to the attention of the complaining
Member, and to the DSB or the Panel, so that corrections, if needed, can be made to
resolve disputes. The procedural rules of WTO dispute settlement are designed to
promote, not the development of litigation techniques, but simply the fair, prompt and
effective resolution of trade disputes”77
Note that the fact that the Appellate Body described the good faith principle contained in the
DSU as a general principle of law and a principle of general international law is relevant,
because in the event of a legal vacuum, a door may be open to try and fill it by bringing legal
sources that have interpreted the principle in other forums.
Even though article 3.10 deals with engaging in the procedures in good faith, the Appellate
Body in EC – Export Subsidies on Sugar extended the scope of this obligation, by stating
that members “must engage in dispute settlement procedures in good faith, by virtue of
Article 3.10 of the DSU. This latter obligation covers, in our view, the entire spectrum of
dispute settlement, from the point of initiation of a case through implementation.”78
For these reasons, Marion Panizzon stated that Article 3.10 DSU also has other functions,
such as: “(i) a Member’s duty of cooperation with a panel, (ii) fundamental fairness, (iii)
promptness and due process, and (iv) effectiveness.”79
77 Appellate Body Report, United States – Tax Treatment for “Foreign Sales Corporations”, WT/DS180/AB/R, adopted 24 February 2000, paragraph 166 78 Appellate Body Report, European Communities - Export Subsidies on Sugar, WT/DS265/AB/R, WT/DS266/AB/R, WT/DS283/AB/R, adopted 28 April 2005, paragraph 312. 79 Marion Panizzon, “Good Faith, Fairness and Due Process in WTO Dispute Settlement Practice: Overcoming the Positivism of International Trade Law”, in Julian Chaisse and Tiziano Balmelli (eds)
42
Before continuing with the development of the application of the good faith principle in the
WTO, it is important to resolve one question: Is a panel or the Appellate Body entitled to
determine whether one member has acted in accordance or against the good faith principle?
If the answer were to be that a WTO tribunal cannot rule on that matter, it would be highly
improbable that one legal impediment could arise from Article 3.10 of the DSU. This
discussion was given in the frame of the US – Offset Act (Byrd Amendment) issue, were the
Appellate Body stated that:
“296. On appeal, the United States maintains that there is "no basis or justification in the
WTO Agreement for a WTO dispute settlement panel to conclude that a Member has not acted
in good faith, or to enforce a principle of good faith as a substantive obligation agreed to by
WTO Members." We observe that Article 31(1) of the Vienna Convention directs a treaty
interpreter to interpret a treaty in good faith in accordance with the ordinary meaning to be
given to the terms of the treaty in their context and in the light of the treaty's object and
purpose. The principle of good faith may therefore be said to inform a treaty interpreter's
task. Moreover, performance of treaties is also governed by good faith. Hence, Article 26 of
the Vienna Convention, entitled Pacta Sunt Servanda, to which several appellees referred in
their submissions, provides that "[e]very treaty in force is binding upon the parties to it and
must be performed by them in good faith." The United States itself affirmed "that WTO
Members must uphold their obligations under the covered agreements in good faith".
297. We have recognized the relevance of the principle of good faith in a number of cases.
Thus, in US – Shrimp, we stated that: The chapeau of Article XX is, in fact, but one expression
Essays on the Future of the World Trade Organization Volume II, The WTO Judicial System: Contributions and Challenges. Edited (2008 Éditions Interuniversitaires Suisses, pages 26-43.
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of the principle of good faith. This principle, at once a general principle of law and a general
principle of international law, controls the exercise of rights by states.
In US – Hot-Rolled Steel, we found that: … the principle of good faith … informs the
provisions of the Anti-Dumping Agreement, as well as the other covered agreements.
Clearly, therefore, there is a basis for a dispute settlement panel to determine, in an
appropriate case, whether a Member has not acted in good faith.”80
In that sense, the panels and the Appellate Body are entitled to determine whether one
member has acted in accordance or against the good faith principle. Consequently, if a
respondent presents an admissibility objection on the ground of a legal impediment under
Article 3.10 of the DSU, the WTO tribunal would have to analyze the complainant´s actions.
Having determined that a WTO tribunal is entitled to rule on the consistency of the action of
one member with the good faith principle, one distinction must be made. It is important to
remark that, despite the fact that the good faith principle is only one, its application differ
when it is contained in a substantive or in a procedural provision, and therefore, the criteria
to determine whether one member has acted in accordance with the principle must vary. This
distinction -which is recognized by the Appellate Body nowadays- had a late development in
the frame of the WTO, which did not help clarifying the application of the good faith
principle as a way to propose a legal impediment.
Regarding the substantive good faith, the Appellate Body in US – Offset Act (Byrd
Amendment), interpreted this notion of the good faith regarding the obligations contained in
80 Appellate Body Report, United States - Continued Dumping and Subsidy Offset Act of 2000, WT/DS217/AB/R, WT/DS234/AB/R, adopted 16 January 2003, paragraph 296 and 297
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Article 11.4 of the Agreement on Subsidies and Countervailing Measures and Article 5.4 of
the Anti-Dumping Agreement. Furthermore, the Appellate Body reversed the Panel’s
finding, in which it stated that the United States may be regarded as not having acted in good
faith by the sole fact of acting contrary to one substantive provision of the covered
agreements, since the 2nd instance tribunal believed that:
“298. Nothing, however, in the covered agreements supports the conclusion that simply
because a WTO Member is found to have violated a substantive treaty provision, it has
therefore not acted in good faith. In our view, it would be necessary to prove more than mere
violation to support such a conclusion.”81
Therefore, the party wanting to demonstrate that one member acted contrary to the
substantive good faith, shall prove that (i) it violated the substantive treaty provision; and (ii)
something more than a mere violation.
A couple of months later, the panel in Argentina – Poultry applied the test that was
established on the aforementioned case. In this issue, Argentina tried to demonstrate that
“Brazil failed to act in good faith by first challenging Argentina's antidumping measure
before a MERCOSUR Ad Hoc Tribunal and then, having lost that case, initiating WTO
dispute settlement proceedings against the same measure.”82 Therefore, the Panel was
dealing with a typical issue of admissibility, in which the question was whether Brazil failed
to act in procedural good faith. However, the Panel applied the substantive good faith
81 Ibidem, paragraph 298 82 Panel Report, Argentina - Poultry Anti-Dumping Duties, WT/DS241/R, adopted 22 April 2003, paragraph 7.36
45
violation test, because at that time, the procedural good faith concept and test wasn’t
developed. In is decision, the Panel concluded that:
“7.36 On the basis of the abovementioned Appellate Body finding, we consider that two
conditions must be satisfied before a Member may be found to have failed to act in good faith.
First, the Member must have violated a substantive provision of the WTO agreements. Second,
there must be something "more than mere violation". With regard to the first condition,
Argentina has not alleged that Brazil violated any substantive provision of the WTO
agreements in bringing the present case. Thus, even without examining the second condition,
there is no basis for us to find that Brazil violated the principle of good faith in bringing the
present proceedings before the WTO.”83
Five years later, in 2008, the Panel in EC – Bananas III (2nd recourse to Art. 21.5 – Ecuador),
once again applied the substantive good faith principle test. In this case, the issue was whether
the Understandings on Bananas, agreed upon by the European Communities, the United
States and Ecuador, prevented the complainants from initiating compliance proceedings
under to Article 21.5 of the DSU. On appeal, the issue was raised by the European
Communities, who believed that:
“223. (…) the Panel erred in its interpretation and application of the principle of good faith
referred to in Article 3.10 of the DSU. According to the European Communities, the Panel
took the erroneous view that an objection based on the principle of good faith could be
successful only if the European Communities had made out a prima facie case for the alleged
violation of Article 3.10, and also for "something more than mere violation". The European
Communities alleges that the Panel erred in finding that the principle of good faith could only
83 Ibidem
46
be invoked as an "add-on" to the violation of another WTO rule and could not by itself be the
source of rights and obligations of WTO Members.”84
On its ruling, the Appellate Body introduced the difference between the two types of good
faith by stating that:
“227. This finding, however, is not pertinent in the context of the present appeals, because
the legal question before the Panel in the present cases is different from the legal question
before the Appellate Body in US – Offset Act (Byrd Amendment). While, in that case, the
Appellate Body considered the principle of good faith as it relates to a substantive provision
of the WTO agreements, the Panel in the present cases was faced with the allegation of a lack
of good faith as a procedural impediment for a WTO Member to initiate Article 21.5
proceedings.”85
Consequently, the Appellate Body finally recognized that not every claim regarding a
violation of a good faith are the same, since the WTO tribunal must analyze if this principle
is contained on a substantive or in a procedural requirement. Having addressed the previous
difference, a new question arises: How can a member claim a violation of procedural good
faith? In that same case, the Appellate Body showed in which event the legal impediment
would be constituted. Note that it did not established a test per se, but only a situation in
which one member would be acting against the good faith principle. It considered that
“irrespective of the type of proceeding, if a WTO Member has not clearly stated that it would
84 Appellate Body Report, European Communities - Regime for the Importation, Sale and Distribution of Bananas, Second Recourse to Article 21.5 of the DSU by Ecuador, WT/DS27/AB/RW2/ECU, WT/DS27/AB/RW/USA, adopted 26 November 2008, paragraph 223. 85 Ibidem, paragraph 227.
47
not take legal action with respect to a certain measure, it cannot be regarded as failing to
act in good faith if it challenges that measure.”86
Therefore, the legal impediment contained in Article 3.10 of the DSU, regarding the failure
to engage in WTO proceedings in good faith, is constituted when one member clearly states
that it would not take legal action with respect to a certain measure, and afterwards it presents
its claims before a WTO tribunal.
However, once again, the threshold to raise an admissibility objection under Article 3.10 of
the DSU is really high. According to the Appellate Body in Mexico – Corn Syrup, there is
no basis on which one panel can determine whether one member has or not acted in good
faith, therefore, the violation must be explicitly raised:
“47. (…) The requirements of good faith, due process and orderly procedure dictate that
objections, especially those of such potential significance, should be explicitly raised. Only
in this way will the panel, the other party to the dispute, and the third parties, understand that
a specific objection has been raised, and have an adequate opportunity to address and
respond to it.”87
Additionally, the party wanting to demonstrate the violation will have to rebuttal the
presumption of good faith, making at least a prima face case. This was stated by the Appellate
Body in EC – Sardines and by the Panel in Korea – Certain Paper (Article 21.5), as follows:
“6.97 (…) First, we have to assume that WTO Members engage in dispute settlement in good
faith, as required under Article 3.10 of the DSU. (…) Second, we do not consider it
86 Ibidem 87 Appellate Body Report, Mexico - Anti-Dumping Investigation of High-Fructose Corn Syrup (HFCS) from the United States, WT/DS132/AB/RW, 22 October 2001, paragraph 47.
48
appropriate to ask the defendant to produce evidence to rebut a prima facie case that the
complaining party has not made. (…)”88
“278 (…) We must assume that Members of the WTO will abide by their treaty obligations in
good faith, as required by the principle of pacta sunt servanda articulated in Article 26 of the
Vienna Convention. And, always in dispute settlement, every Member of the WTO must
assume the good faith of every other Member. (…)”89
Therefore, since acting in good faith is presumed, the respondent has the burden of proof of
demonstrating that the complainant acted contrary to this principle. On this point, it is
important to review one specific issue regarding the application of the legal impediment
contained in Article 3.10 of the DSU, which has been widely debated by scholars and WTO
members. The principle of estoppel has been considered to apply in the frame of the good
faith as a legal impediment, but this assertion has been questioned by some members of the
WTO before WTO tribunals.
According to the panel in Guatemala – Cement II:
“Estoppel is premised on the view that where one party has been induced to act in reliance
on the assurances of another party, in such a way that it would be prejudiced were the other
party later to change its position, such a change in position is "estopped", that is
precluded.”90
88 Panel Report, Korea – Anti-Dumping Duties on Imports of Certain Paper from Indonesia Recourse to Article 21.5 of the DSU by Indonesia, WT/DS312/R, adopted 28 September 2007, paragraph 6.97 89 Appellate Body Report, European Communities — Trade Description of Sardines, WT/DS231/AB/RW, 26 September 2002, paragraph 278 90 Panel Report, Guatemala – Definitive Anti-Dumping Measure on Grey Portland Cement from Mexico, WT/DS156/R, adopted 17 November 2000, paragraph 8.23.
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Therefore, to demonstrate that a change in a state’s position is estopped, the respondent
member alleging the violation must demonstrate that: (i) that the complainant state did an
initial act; (ii) that this act induced the respondent to act in one specific way; (iii) that the
complainant change its position from the initial act; and (iv) that the change of the action of
the complainant ended prejudicing the respondent member. However, as noted above, the
application of this principle in the frame of the WTO has not been pacific. In order to
understand the different state´s positions on the application of this principle, the Appellate
Body ruling in EC – Export Subsidies on Sugar is really helpful. In that case, the WTO
tribunal summarized the positions by stating that:
“311. The European Communities argues that estoppel is a general principle of international
law, which follows from the broader principle of good faith. As such, estoppel is "one of the
principles which Members are bound to observe when engaging in dispute settlement
procedures, in accordance with Article 3.10 of the DSU." Regarding the content of estoppel,
the European Communities argues that "[e]stoppel may arise not only from express
statements, but also from various forms of conduct, including silence, where, upon a
reasonable construction, such conduct implies the recognition of a certain factual or juridical
situation." Australia, in contrast, submits that the principle of estoppel is not applicable in
WTO dispute settlement. With respect to the content of estoppel, Australia submits that
estoppel cannot "apply as to a statement of a legal situation". Brazil agrees with the Panel
that the European Communities' claims regarding estoppel were "without merit". Similarly,
Thailand maintains that the Panel was correct in concluding that the principle of "estoppel
is not mentioned in the WTO Agreement, or the DSU, and that it has never been applied by
any panel or the Appellate Body." The United States emphasizes that "[n]owhere in the DSU
or the other covered agreements is there a reference to 'estoppel'." Moreover, according to
50
the United States, "'[e]stoppel' is not a defense that Members have agreed on, and it therefore
should not be considered by the Appellate Body."”91
Therefore, this is a very controversial issue, that must be solved by a WTO tribunal. Without
a doubt, this EC – Export Subsidies on Sugar issue is the landmark case regarding the
application on the estoppel principle. In this case, the Appellate Body was really cautious
when analyzing the appellant’s arguments about the panel’s findings on estoppel. As it
ultimately did not believe that the complainant was estopped, the Appellate Body did not
clarify whether the principles applies in the WTO, but it limited itself to make arguendo
statements, considering what would happened if the principle were to apply in the WTO.
However, the WTO tribunal linked the principle with Article 3.10 of the DSU:
“307. We consider in subsection C below the issue whether the principle of estoppel applies
in the context of WTO dispute settlement. Here, we observe that, to the extent that this concept
applies at all, it is reasonable for a panel to examine estoppel in the context of determining
whether a Member has engaged "in these procedures in good faith", as required under Article
3.10 of the DSU. Hence, not only do we believe that the Panel's examination did not fail to
address the European Communities' contention on Article 3.10 and good faith, but the Panel
made no error in addressing this issue together with the issue of estoppel.”92
However, the Appellate Body stated that “it is far from clear that the estoppel principle
applies in the context of WTO dispute settlement.”93 After making this “political statement”,
in order to avoid the debate that aroused among the parties to the dispute, it expressed the
91 Appellate Body Report, European Communities - Export Subsidies on Sugar, WT/DS265/AB/R, WT/DS266/AB/R, WT/DS283/AB/R, adopted 28 April 2005, paragraph 311 92 Ibidem, 307 93 Ibidem, 310
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eventual boundaries that a respondent party must observe in subsequent cases, when bringing
admissibility objections on the grounds of estoppel:
“312. (…) We see little in the DSU that explicitly limits the rights of WTO Members to bring
an action; WTO Members must exercise their "judgement as to whether action under these
procedures would be fruitful", by virtue of Article 3.7 of the DSU, and they must engage in
dispute settlement procedures in good faith, by virtue of Article 3.10 of the DSU. This latter
obligation covers, in our view, the entire spectrum of dispute settlement, from the point of
initiation of a case through implementation. Thus, even assuming arguendo that the principle
of estoppel could apply in the WTO, its application would fall within these narrow parameters
set out in the DSU.”94
In that sense, to present an objection on the grounds of estoppel, the respondent must comply
with the aforementioned requirements to demonstrate legal impediments under articles 3.7
and 3.10 of the DSU. Despite the above, subsequent case law continued to give discussion
on the matter. For example, almost five years after the EC – Export Subsidies on Sugar issue,
the Panel in EC and certain member States – Large Civil Aircraft stated that that “the good
faith obligation contained in Article 3.10 of the DSU, can reasonably be analysed “in the
light of the general international law principle of estoppel.”95
Moreover, Argentina in Argentina – Poultry96 and the European Union in EC and certain
member States – Large Civil Aircraft97, tried to introduce a different test in other to apply the
94 Ibidem, 312 95 Panel Report, European Communities and certain member States – Measures Affecting Trade in Large Civil Aircraft, WT/DS316/R, adopted 30 June 2010, paragraph 7.101 96 Panel Report, Argentina - Poultry Anti-Dumping Duties, WT/DS241/R, adopted 22 April 2003, paragraph 7.37 97 Panel Report, European Communities and certain member States – Measures Affecting Trade in Large Civil Aircraft, WT/DS316/R, adopted 30 June 2010, paragraph 7.102.
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estoppel principle in the WTO. According to those countries, the necessary conditions to
demonstrate the application of estoppel in the context of Article 3.10 of the DSU are that:
“(i) there is a clear and unambiguous statement of fact; (ii) that statement was made
voluntarily, unconditionally and is authorized by one Member; (iii) and that statement is
relied on in good faith by the other Member.”98
After analyzing the case law on the matter, scholars have not taken a uniform decision on the
applicability of estoppel in the WTO. Taking into account the limitation stated by the
Appellate Body in EC – Export Subsidies on Sugar, scholars such as Bregt Natens and
Sidonie Descheemaeker, consider that:
“We see little use in doing so, as establishing a violation of either of the aforementioned
provisions in se suffices. The invocation of estoppel would be a detour, in which convincing
a panel of the applicability of the principle of estoppel before it would be a first hurdle, and
the determination of the conditions to establish estoppel a second.”99
However, other authors such as Andrew D. Mitchel and David Heaton state that this principle
could be applied by WTO tribunals as a manifestation of their inherent powers due to its
inherent jurisdiction, since it does comply with the aforementioned test proposed by these
authors:
“Applying our criteria above, it may be necessary for a WTO Tribunal to address estoppel to
safeguard the judicial process—to ensure that parties are not permitted to “blow hot and
cold,” which makes a mockery of judicial process and the administration of international
98 Ibidem 99 Bregt Natens and Sidonie Descheemaeker, Say it Loud, Say it Clear — Article 3.10 DSU’s Clear Statement Test as a Legal Impediment to Validly Established Jurisdiction, Forthcoming, Journal of World Trade 49:5., (2014), page 17
53
justice. Estoppel has no autonomous substantive content. As Bartels observes (of equitable
doctrines in international law generally, including abuse of rights), it is a principle “under
which the ability of a party to rely on an express treaty right is conditioned on its own
conduct.” It operates to control the assertion of rights and obligations that otherwise exist by
parties. At least in general terms, estoppel appears to be consistent with the Covered
Agreements. Its effect is to hold a party to a representation where another party has relied on
that representation. Ensuring consistency in state relations, especially given that states act in
a considered and often strategic manner, will, if anything, “provid[e] security and
predictability to the multilateral trading system.””100
I consider that, Mitchel and Heatons’ theory should be taken into account by the WTO
tribunals. Without a doubt, the fact of recognizing the application of the estoppel principle
would be really controversial, but I believe it is perfectly applicable in the frame of the WTO.
As a specific manifestation of the good faith principle, estoppel has the ability to impede that
one member present a specific claim before a WTO panel, since that is the precise end of the
admissibility objections.
In conclusion, a responding party is entitled to present an admissibility objection on the
ground of a violation of Article 3.10 of the DSU. This objection has to be analyzed by the
WTO tribunal, which would have to determine whether the complaining party acted in
accordance with the good faith principle. However, if the responding party believes that the
test for demonstrating a violation of the procedural good faith is not perfectly applicable to
100 Andrew D. Mitchell, David Heaton, “The Inherent Jurisdiction of WTO Tribunals: The select application of Public International Law required by the judicial function”, Michigan Journal of International Law, Vol. 31:561 (2009), pages 580-581
54
its case, it could allege that the complainant´s change of position is estopped, and that
therefore it contravened the good faith principle.
IV. The CHIMEHA FTA between Chilo, Meco and Haito
a. Presentation of the case
Having reviewed the different Appellate Body and panel’s decision on the admissibility
issue, the concepts of legal impediments are going to be developed on a fictional case, which
was written by Gabrielle Marceau -Ph.D, who works as a counselor in the Legal Affairs
Division of the WTO, advising panelists in WTO disputes, and worked at the Director-
General Office and at the Secretariat on WTO related matters.101 The case, named “The
CHIMEHA FTA between Chilo, Meco and Haito”, was written in the frame of the European
Law Students’ Association (ELSA) Moot Court Competition 2016-2017. The relevant case
facts are the following:
“1. Chilo, Meco and Haito are Members of the World Trade Organization (WTO), and they
all produce both agricultural and industrial products. Chilo and Meco are developing
countries, and Haito is a least developed country (LDC).
(…)
7. In 2015, Chilo, Meco and Haito concluded a trilateral trade agreement called the
"CHIMEHA Free Trade Agreement" (CHIMEHA FTA) which entered into force on 1 January
2016, and has been incorporated by each country into its domestic law. Chilo, Meco and
101 United Nations Audiovisual Library of International Law, (n.d) Retrieved from: http://legal.un.org/avl/pdf/ls/Marceau_bio.pdf
55
Haito have reported to the press that the CHIMEHA FTA covers "substantially all the trade"
between them, and all WTO Members seem to agree with them.
(…)
“11. Chapter III contains general provisions and includes the following text in Article 303:
"Articles III, XI, XII, XVIII, XX and XXI of the GATT 1994 are applicable mutatis mutandis
as part of this FTA."”
(…)
16. The FTA contains a dispute settlement mechanism (DSM) for settling disputes between
FTA parties. This FTA DSM is fairly similar to that of the WTO (the DSU), but it contains
some different provisions. Notably, (i) there is a possibility for retroactive financial
compensation when parties agree, (ii) there is a requirement that the FTA panel assesses the
trade effects and the nullification of benefits caused by the measure found inconsistent with
the FTA, and (iii) there is no appeal procedure provided under the FTA DSM.
17. In addition, Chapter VIII regulates the settlement of disputes under the WTO and the
FTA. It states in Article 808:
"Relationship to Dispute Settlement under the WTO:
1. Subject to this Article, disputes regarding any matter arising under both this FTA and the
WTO Agreement, may be settled in either forum at the discretion of the complaining Party
only.
2. Before a Party initiates a dispute settlement proceeding in the WTO against another Party
on grounds that are substantially equivalent to those available to that Party under this FTA,
that Party shall notify the responding Party and any other FTA Party of its intention. If
56
another FTA Party wishes to have recourse to dispute settlement procedures under this FTA
regarding the matter, it shall inform promptly the (initial) notifying Party and those other
Parties shall consult with a view to reaching consensus on the forum to be used. If the Parties
cannot agree, the dispute normally shall be settled under this FTA.
3. In any dispute concerning:
(a) measures taken in the context of balance-of-payment problems; or
(b) a measure adopted or maintained by a Party to protect its human, animal or plant life or
health, or to protect its environment, and
where the responding Party requests in writing that the matter be considered under this FTA,
the complaining Party must, in respect of that matter, thereafter have recourse to dispute
settlement procedures solely under this FTA."
(…)
19. Due to a serious BOP problem, Haito introduced a system of import quota restrictions
on 1 March 2016. According to this system, imports of all products are limited to the amount
exported to Haito in the preceding year (i.e. by March 2015). In its notification to the WTO
BOP Committee, Haito invoked Article XVIII:B of the GATT 1994 to justify its measure. All
exports from all WTO Members, including those from Meco and Chilo, are subject to Haito’s
BOP quota restriction scheme.
(…)
21. Chilo and Meco considered that their exports to Haito should be exempted from such a
BOP import restriction since they are entitled to preferential treatment pursuant to the FTA.
Chilo argued that if Haito failed to remove its BOP import restrictions – at least with respect
to imports from Chilo – it will have to initiate WTO dispute settlement proceedings. Haito
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asserted that only the FTA dispute settlement mechanism can be used for initiating a dispute
concerning a BOP measure implemented within the FTA.
(…)
22. Chilo responds by stating that an FTA cannot modify the fundamental right of WTO
Members to access the WTO dispute settlement system. Chilo also states that the MFN
application of Haito’s BOP scheme across all WTO Members, including the parties to the
CHIMEHA FTA, is WTO inconsistent. Unless the BOP-scheme is removed, Chilo will initiate
a dispute before the WTO Dispute Settlement Body (DSB).
(…)
23. Chilo decided to initiate WTO dispute settlement consultations against Haito. After the
confidential consultation meeting, the FTA parties rushed to the press and reported the
following points which were, by no means, exhaustive of the arguments that could be raised
with respect to Chilo's complaints and Haito' defences.
(…)
26. (…) Haito expressed its surprise that Chilo was challenging the WTO-consistency of the
FTA they had just concluded and accused Chilo of acting in bad faith in using the WTO
dispute settlement mechanism to mount such a challenge. (…)”102
b. Arguments for the Complainant:
The complaining party, which in this case is Chilo, needs that the Panel decides to exercise
its jurisdiction. Normally, as explained above, since the respondent party must explicitly raise
102 The CHIMEHA FTA between Chilo, Meco and Haito. (n.d) Retrieved from: https://elsa.org/wp-content/uploads/ELSA_files/MCC/15thEMC2case_amended.pdf
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the admissibility issue, the complaining party does not need to present an initial argument on
why the Panel shall address the dispute. However, if there is a big issue on the existence of
legal impediments, it is advisable that the complainant states why the factual aspects of the
case do not lead to the formation of legal impediments.
Chilo must start by stating that it has the right to have recourse to the DSB. This, by citing to
the Panel Articles 3.3 and 23.1 of the DSU, which entitle all WTO Members to initiate
procedures before the DSB to redress a violation under the covered agreements, or when a
measure diminishes their rights. Moreover, it has to emphasize on the fact that the jurisdiction
of the WTO is compulsory and exclusive, as the aforementioned case law establishes. This
argument may be the strongest one it has, if it is facing one Panel which is pro WTO. The
fact that panels and the Appellate Body stated in several opportunities that (i) the complaining
party must have recourse to the WTO DSB in the exclusion of any other system; and (ii) that
a respondent has no choice as a matter of law, but to accept the WTO tribunal jurisdiction;
may suffice to one panel to decide to exercise its jurisdiction, irrespective of the situation on
the FTA.
However, if Chilo wants to ensure that the Panel will address its complaints, it would be a
good idea to recognize that its right is not entirely unbounded, since the Appellate Body in
several cases, such as in the aforementioned EC – Export Subsidies on Sugar issue, stated
that there could be legal impediments that preclude the Panel from exercising its jurisdiction.
Regarding the first legal impediment contained in Article 3.10 of the DSU, which requires
all Members to engage in the DSB in procedural good faith, Chilo should start by stating that
the mandate of previous case law is that the Panel has to presume the good faith of the
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members when engaging in these types of procedures. Moreover, it should express why it
did not clearly state that it would not take legal action with respect to a certain measure, by
means of the FTA, which, as explained, has been the threshold imposed by the Appellate
Body to demonstrate the failure to act in good faith.
The first reason to explain why Chilo did not clearly state that it would not take legal action
with respect to a certain measure, is there is no thing such as a clear statement in the text of
the CHIMEHA FTA. A different situation will arise if the somewhere in the FTA the parties
state that they understand that the provisions of the FTA are in accordance with WTO law,
and therefore they would not present any claim regarding the inconsistency of any provision
of the FTA with the covered agreements, before a WTO panel. Moreover, Chilo can argue
that beyond the text of the FTA on its face, it has never made such statement, but conversely,
it has demonstrated its will to have recourse to the WTO dispute settlement system, by
exercising the choice of forum provision contained in Article 808 of the CHIMEHA FTA.
According to that provision, the complaining party may choose whether to present its claims,
in the CHIMEHA FTA’s DSM, or in the WTO’s DSB. Finally, it can also assert that if the
Panel were to believe that the clear statement may come from paragraphs 2 and 3 of Article
808 of the CHIMEHA FTA, it is subject to a condition. Note that those paragraphs entitle the
responding party to trigger the forum election of the complainant, by notifying that it wants
the dispute to be addressed by the DSM of the FTA, and if they cannot agree, the dispute
shall be settled solely under the FTA. In that sense, Chilo can demonstrate that the clear
statement is not done, since the notification requirement was not duly performed by Haito,
as the clarification questions solved by the case author state:
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“102. Did Haito notify Chilo and Meco and provided a request regarding its recourse
to the Dispute Settlement mechanism under the CHIMEHA FTA as required by paragraph 2
and 3, Chapter VIII of CHIMEHA FTA?
We don't know, but apparently not.”
“129. Did Haito request in writing that the dispute matter be considered under the FTA
and that hence the dispute shall be settled solely under FTA procedures pursuant to Art. 808:3
of the CHIMEHA FTA?
No, please limit yourself to the facts of the case.”103
On the other hand, regarding the second legal impediment contained in Article 3.7 of the
DSU, which requires Members to exercise their judgement as to whether action under the
procedures would be fruitful, Chilo’s argumentation would be a lot easier. First, it can state
that previous case law has recognized that members enjoy of enough discretion to decide, in
their own motion, whether to present its claims before the DSB. Also, that the Appellate
Body and the DSU itself state that this discretion is essential to the effective functioning of
the WTO. However, the key element to demonstrate the inexistence of that legal impediment
is to contend that the only possible way that the respondent may argue that the action would
not result on a fruitfulness result, is demonstrating that the complaining party relinquished
its right to have recourse to the DSB. Taking into account that the Appellate Body stated that
the relinquishment of rights cannot be lightly assumed, Chilo can state that if there was no
103 Clarification Questions and Requests (n.d). Retrieved from: https://emc2.elsa.org/participation/, pages 15 and 18
61
clear statement on the legal text of the CHIMEHA FTA, neither on its subsequent actions,
much less there will be a relinquishment of the right to have recourse to a WTO tribunal.
So, it’s final statement will be really simple. Chilo has the right to have recourse to the DSB,
and since there are no legal impediments that preclude the panel from exercising its
jurisdiction, it shall address que present claims.
c. Arguments for the Respondent
Haito, as the responding party, will have the difficult task to convince the Panel that it must
decline to exercise its validly established jurisdiction, by presenting admissibility objections
on the grounds of the existence of legal impediments.
Knowing the high threshold that the responding would be facing, it is a smart move to divide
the two type of claims that Chilo is presenting, in order to raise different admissibility
objections against both types, waiting that at least one of them will flourish.
Regarding the first type of claims, which is the inconsistency of Haito’s balance of payment
import quota restrictions with WTO law, the respondent shall explicitly invoke a violation of
both legal impediments, i.e. Articles 3.7 and 3.10 of the DSU. The key element to
demonstrate the existence of legal impediments, is to rebuttal the fact that the clear statement
or relinquishment was subject to a condition that did not take place. Even though it seems to
be an impossible job, because of the case author’s clarification questions, there is an
interpretation that might convince the Panel. It is true that Article 808 state that if the
responding party wants the dispute to be solely addressed under the CHIMEHA FTA a
request in writing is strictly needed. But, this is not the only requirement provided for in the
Article. In fact, paragraph 2 states that the complaining party shall notify the responding party
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and any other FTA party of its intention to initiate a dispute settlement proceeding in the
WTO, and is in that precise moment that the respondent must raise its objection to the
complainant´s choice of forum. So, it is reasonable to argue that, if the complaining party did
not notify its intention to the respondent, the respondent had no chance to present its own
notification. In the present issue, there is no case fact that explicitly recognizes Chilo’s
notification. I believe that it is possible to contend that it did not happen, by reading the
following answer to one clarification question:
“130. Was there, in the end, any disagreement between the parties concerning the
choice of dispute settlement forum in the context of a formalized procedure laid out by Art.
808:2 of the CHIMEHA FTA?
Chilo did not give any choice to Haito. Haito, during the consultations mentioned how
surprised it was that Chilo had used the WTO dispute settlement mechanism to challenge
basic provisions of the CHIMEHA FTA.” 104
If the case author state that Chilo did not give any choice to Haito, and that the respondent
was surprised about the complainant´s claims, it seems plausible to conclude that Chilo did
not present its notification, and therefore that Haito was unable to respond with the objection.
So, if the complainant’s argument on why there is no clear statement nor relinquishment in
the text of the FTA is voided, now the respondent must argue why does the legal text or
Chilo’s subsequent attitude provide the clear statement. Going back to Article 808 of the
CHIMEHA FTA, it states that, after all the consultation between the parties on the forum to
be used, if they cannot agree, the dispute normally shall be settled under the FTA. In that
104 Ibidem, page 18
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sense, Haito can plead that Chilo’s judgment on whether the its action under the procedures
would be fruitful was not duly performed, and therefore it acted against the good faith
principle, because it relinquished its right to have recourse to the DSB, since it was clear that
there was no consensus among the parties on the applicable forum, and the measure clearly
stated that in that event, the dispute would be settled in the FTA’S DSM. Moreover, this
relinquishment complies with the requirements established by the Appellate Body in Peru –
Agricultural Products, since (i) it is contained in the agreement; (ii) the text of the agreement
is clear on the no-consensus event; and (iii) there is nothing in the covered agreements that
prohibits one member to have recourse to a DSM, in order to solve its differences with its
FTA parties.
Note that the respondent’s argument is mixing both legal impediments. It states that the text
of the agreement contains both a clear statement and a relinquishment of rights, causing that
the judgment was not duly performed, and that the complainant acted in bad faith. One could
believe that this argumentation confuses both legal impediments, but in fact, this way to
present the argument responds to a strategic reason. If Haito only has this argument to present
its admissibility objection, it is better to present it as the foundation of both legal
impediments. As it was previously explained, both legal impediments require that the
objection is explicitly raised. So, this argumentation will suffice to comply with the first
requirement, and then the Panel shall address the issue on whether it constitutes a
relinquishment of rights, or a clear statement. At that point, the respondent would have twice
the chances to convince the Panel, as it would have had if it only raised one objection.
On the other hand, regarding Chilo’s claims on the inconsistency of specific FTA’s
provisions with the covered agreements, Haito would need to propose a different argument,
64
since Article 808 of the CHIMEHA FTA does not cover this type of claims. In order to
present its admissibility objection, Haito would need to use the legal impediment contained
in Article 3.10 of the DSU, regarding the engagement in good faith.
As explained above, the application of the principle of estoppel in the frame of WTO has
been a very debated issue. However, as the estoppel principle is a specific manifestation of
the good faith, I believe that a panel is entitled to apply this principle and determine whether
one state’s change of position is estopped, by means of its inherent jurisdiction, irrespective
of the fact that the covered agreements do not expressly recognize its application.
As stated before, the panel in the Guatemala – Cement II issue stated that “a change in a
state’s position is estopped when such behavior would prejudice another state, which has
been induced to act according to the assurances of the former state.”105 It is also important
to recall that the Appellate Body stated that if estoppel were to apply in the WTO dispute
settlement system, it would do so in the narrow parameters of Articles 3.7 and 3.10 of the
DSU. In that sense, I consider that a party wanting to present an admissibility issue on the
grounds of estoppel, must demonstrate that the complainant made a subsequent clear
statement, which is contrary to an initial clear statement, and that caused a prejudice to
another state.
In this case, the initial statement arises from the fact that Chilo agreed, signed and ratified
the CHIMEHA FTA. This fact shows that the complainant created the expectation on its FTA
parties, that it was going to comply with its recently agreed obligations. Then, Chilo made a
subsequent statement, by claiming the inconsistency of several provisions of the CHIMEHA
105 Panel Report, Guatemala – Definitive Anti-Dumping Measure on Grey Portland Cement from Mexico, WT/DS156/R, adopted 17 November 2000, paragraph 8.23.
65
FTA. So, considering the aforementioned pacta sunt servanda principle, Haito believed that
Chilo was going to performed the treaty in good faith, without claiming against a treaty that
it just concluded, and therefore it organized its economy by taking into account the
competitive opportunities that it was going to have in foreign markets, and also the
advantages it was giving out in its very own market. At this point, the respondent would only
be missing the prejudice requirement. To demonstrate the prejudice, two answers to the
clarification questions are relevant:
“98. Please confirm that the obligations under Chapter V of the CHIMEHA FTA took
effect at the same time when the FTA entered into force.
All obligations under the CHIMEHA FTA took effect at the same time when the FTA entered
into force.”
“135. Before March 1st 2016 had Chilo and Meco effectively reduced the tariffs to
imports from Haito pursuant to the FTA?
Yes with the entry into force of the CHIMEHA on 1 January 2016”106
Notice that, if all obligations of the CHIMEHA FTA were applicable when Chilo submitted
its claims, specially the Special and Differential Treatment provision, in which Haito
benefitted from a zero-import tariff duty on all its exports to its FTA partners, Haito would
definitely suffer a potential prejudice. Imagine that those measures are found to be
inconsistent with the covered agreements, and therefore they must be taken into conformity
with the WTO law. At that point, Haito’s export rates will be highly compromised, since their
106 Clarification Questions and Requests (n.d). Retrieved from: https://emc2.elsa.org/participation/, pages 14 and 19
66
trade would go from an excellent situation with a zero-tariff regime, to a most favored nation
tariff scheme, in which they will have to compete with products coming from developed and
developing countries, which obviously will have better competitive opportunities than a least
developed country.
In short, Haito would argue that there are of legal impediments in the present dispute, due to
the fact that the complainant relinquished its right to have recourse to the DSB and that
Chilo’s change of position is estopped, and therefore the Panel shall not exercise its validly
established jurisdiction.
V. Conclusions
It is undeniable the importance of the WTO dispute settlement forum, as an essential element
for the proper functioning of multilateralism. Its own characteristics, such as the compulsory
and exclusive jurisdiction, coupled with the facility to enforce decisions by the negative
consensus, make the dispute settlement forum the jewel of the crown of the WTO.
Moreover, the fact that the inherent jurisdiction of international tribunals has been recognized
by the International Court of Justice, enables them to take the required actions to provide for
the settlement of all the maters in the dispute, applying their inherent powers to resolve
preliminary issues. Even though panels and the appellate body were reluctant to acknowledge
the application of these concepts in the WTO framework, since the famous Mexico - Soft
Drinks case, they had begun to delve into this issue.
Furthermore, in order to understand the application of the inherent powers in disputes, the
concepts of admissibility and jurisdiction were differentiated, since it is of fundamental
importance to distinguish between the two possible objections that could be brought before
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a WTO tribunal. While objections to the jurisdiction seek to attack the competence of the
court to hear as regards the particular case or as to defects in the preliminary proceedings,
the objections to admissibility seek to demonstrate that there are external conditions to the
dispute that preclude the possibility of the complainant to present his case before the WTO
tribunal.
To determine what could be taken as a legal impediment that serves as an admissibility
objection to preclude the panel from exercising its jurisdiction, different panel’s and
Appellate Body’s decisions were reviewed. According to the Appellate Body, legal
impediments could arise from a violation of Articles 3.7 and 3.10 of the GATT, which state
that WTO members must exercise their judgement as to whether action under the procedures
would be fruitful; and that they must engage in dispute settlement procedures in good faith,
respectively. However, the threshold to demonstrate the existence of the legal impediment
will be extremely high, since the WTO tribunal has to presume the member’s good faith, as
well as that it has duly exercised its judgment. While to rebut the presumption of the exercise
of the judgment, the respondent must demonstrate that the claimant has relinquished its right
to have recourse to the DSB, to refute the engagement in good faith, the respondent has to
demonstrate that the complainant clearly stated that it would not take legal action with respect
to the object of its claim.
In that sense, the answer to the question raised by the title of this paper –DOES THE WTO’S
DISPUTE SETTLEMENT BODY´S JURISDICTION PREVAIL OVER THE FTA’S
DISPUTE SETTLEMENT MECHANISM? – will depend. As a general rule, the WTO’s
DSB address the issue, irrespective of prior relations between the members in the frame of
an FTA. However, if the respondent explicitly invokes a violation of the aforementioned
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articles, and successfully complies with the burden it bears to rebut the presumption, the
panel or even the Appellate Body will decline to exercise its validly established jurisdiction,
acknowledging the situations occurred in the frame on the FTA.
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