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Balancing between Trade and Public Health Concerns: The Latest Step in the Plain Packaging Saga

Published on August 8, 2018        Author:  and
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The Australian Tobacco Plain Packaging (TPP) measures raised the classic issue of balancing between competing interests. While aiming at improve public health by putting plain packaging requirements on tobacco products, Australia revived an important debate in international economic law concerning whether international obligations have become too intrusive for the State’s policy space, asphyxiating the sovereign right to protect essential interests or values.

On the one hand, Australia’s measures seem to have been encouraged by public health concerns and the Framework Convention on Tobacco Control (FCTC), which is a component of a juridical strategy that purports to construct a consensus in the international legal community on the need to fight the tobacco epidemic. As the preamble to the Convention clearly states, the parties were ‘determinedto give priority to their right to protect public health’. On the other hand, the judicial contestation of the TPP measures nevertheless showed the diversity of competing interests at stake, which made the topic a perfect example of those multifaceted litigations raised before a plurality of international courts and tribunals.

The need to determine a balance between the right of the State to legislate to protect public health and the rights of tobacco companies had appeared already in the case law of the European Court of Human Rights(ECtHR Hachette Filipacchi presse automobile et Dupuy v. France,). Investment arbitration has also been another setting for this sort of litigation, most notably after Philip Morris introduced two claims contesting that the Australian and Uruguayan legislation restricting the presentation and sale of cigarettes was in violation of its rights stemming from BITs. In both cases, these requests remained unsuccessful. The ICSID tribunal used the systemic integration principle of Article 31(3)(c) VCLT to operate a balancing test between the investment protection obligations under the BIT and the State’s right to regulate, established in customary international law, together with its corollary, the police powers doctrine (Philip Morris Brands Sàrl, Philip Morris Products S.A. and Abal Hermanos S.A. v. Oriental Republic of Uruguay, award, para 290).

Ever since the introduction of the complaints in 2012, the question that remained was whether the WTO adjudicatory bodies would have interpreted trade obligations in keeping with this line of reasoning. In an earlier post on the Panel report, Margherita Melillo reflected on how the Panel used the FCTC for evidentiary purposes. This blog post continues this reflection by looking at how the Panel resolved conflicting interests of public health and trade.

Balancing in international trade law

Concerns about the treatment of tobacco control measures under international trade law date back at least to the 1990 GATT case Thailand – Restrictions on importation and internal taxes on cigarettes. While tobacco control measures have also been the subject of two recent trade disputes (i.e. Dominican Republic — Import and Sale of Cigarettesand US — Clove Cigarettes), neither of these disputes drew as much attention to these concerns as Australia – Plain Packaging. At the heart of this dispute was the sharp conflict between the trade interests of the complainants and the public health concerns of Australia. International trade law normally addresses such conflicts through a system of ‘rule and exception’, set out to strike a balance between trade and non-trade interests. However, the two agreements at issue in Australia – Plain Packaging, namely the TBT Agreementand the TRIPS Agreement, do not contain a general ‘exception clause’ equivalent to GATT Article XX. The balancing of competing interests (trade and public health) in this dispute thus took place in the context of determining the consistency, or otherwise, of the TPP measures with Article 2.2 of the TBT Agreement and Article 20 of the TRIPS Agreement.

More trade restrictive than necessary?

The complainants alleged that the TPP measures were more trade restrictive than necessary to achieve their legitimate objective, contrary to Article 2.2 of the TBT Agreement. This provision allows Members to adopt technical regulations that achieve legitimate objectives, insofar as they are not more trade restrictive than necessary to fulfil those legitimate objectives. Parties to the dispute agreed that the objective of the TPP measures, as the Panel put it, was ‘to improve public health by reducing the use of, and exposure to, tobacco products’ (para 7.232). They also accepted that such objectives are legitimate within the meaning of Article 2.2 (para 7.248). Their disagreement was over the trade restrictiveness of the measures and their contribution to the public health objective they pursue. The complainants contended that the measures were more trade restrictive than necessary and proposed four alternative measures that would have been, in their view, reasonably available and less trade-restrictive while making an equivalent contribution to the realization of the legitimate objectives.

Since the objective of the measures at issue was undisputed and such objectives fall within the illustrative list of legitimate objectives under Article 2.2, the main task of the Panel was to determine whether these measures were indeed trade-restrictive but nevertheless contributed to the legitimate objectives. Taking the evidence before it in its totality, the Panel concluded that ‘the TPP measures, in combination with other tobacco-control measures maintained by Australia […], are apt to, and do in fact, contribute to Australia’s objective of reducing the use of, and exposure to, tobacco products’ (para 7.1025). The Panel also found that ‘the TPP measures are trade restrictive, ‘insofar as, by reducing the use of tobacco products, they reduce the volume of imported tobacco products on the Australian market, and thereby have a “limiting effect” on trade’ (para 7.1255).

Having found that the TPP measures are trade-restrictive but make a significant contribution to the protection of public health, the Panel had to weigh and balance the trade and public health interests at stake to determine whether they are more trade-restrictive than necessary to achieve their public health objectives. In doing so, the Panel first considered the risk of non-fulfilment of the objectives and then the reasonable availability of alternative measures that are less trade-restrictive while making an equivalent contribution to the achievement of those objectives. On the ‘risks of non-fulfilment’, it found that ‘the public health consequences of not fulfilling [the] objective are particularly grave’ (para 7.1322). It then examined the proposed alternative measures and found that the complainants failed to demonstrate their proposed alternative measures (individually or collectively) constituted a less trade-restrictive alternative to the TPP measures with an equivalent contribution to Australia’s objective (paras 7.1362-7.1723). Against this background, the panel concluded that the TPP measures are not more trade-restrictive than necessary to achieve their legitimate objective of improving public health (para 7.1732).

Unjustifiable encumbrance?

The complainants also alleged that the TPP measures constitute special regulations that unjustifiably encumber the use of trademarks in the course of trade, contrary to Article 20 of the TRIPS Agreement. The threshold issues here were whether the measures in question constitute ‘special regulation’ and ‘encumbrance’ within the meaning of Article 20. The parties to the dispute agreed that the measures indeed constituted special regulations, but they disagreed over the precise scope of the term ‘encumbrance’. While the complainants argued that it covers all kinds of hindrances and impediments, Australia insisted that it covers only limitations on the use of trademarks. Australia was of the view that a total prohibition on the use of trademarks is outside the scope of Article 20. The Panel agreed with the complainants that it would be ‘counterintuitive’ to consider that a measure that restricts the use of a trademark would be subject to the disciplines of Article 20 while a more far-reaching measure to prohibit such use would not’ (para 7.2238). This consideration has led the Panel to conclude that ‘encumbrances arising from special requirements within the meaning of Article 20 may range from limited encumbrances, […], to more extensive encumbrances, such as a prohibition on the use of a trademark in certain situations’ (para 7.2239). This finding settles the debate over the meaning of the term ‘encumbrance’ in Article 20. While scholars such as Pires de Carvalho have argued that the degree of encumbrance is not to be taken into account for the applicability of the provision, others, most notably McGrady, have argued that a prohibition falls outside the scope of application of Article 20 because the provision deals with whether the trademark could be used and not how it may might be used. The position of Pires de Carvalho seems to have prevailed over the one of McGrady in the eyes of the Panel. On this point, it is also interesting to note that a similar discussion took place concerning what constitutes a technical regulation within the meaning of the TBT Agreement. The Appellate Body in EC – Asbestos reversed the conclusion of the Panel,stating that an absolute prohibition does not qualify as a technical regulation.

Having passed the threshold issues, the Panel then had to determine whether such an encumbrance was unjustified within the meaning of Article 20. No definition or guidance as to what constitutes ‘unjustifiable encumbrance’ exist under the TRIPS Agreement. Nor there is case law on the subject. The Panel had to appreciate the justifiability in concreto, balancing the two conflicting interests.

In the absence of an agreed upon definition or jurisprudence, the Panel interpreted what constitutes ‘unjustifiably’ encumbering the use of trademarks in light of the object and purpose of the TRIPS Agreement. Here the Panel relied mainly on Article 8.1 of the TRIPS Agreement and the Doha Declaration on the TRIPS Agreement and Public Health. Having found that these two provisions authorize WTO Members to take measures for the protection of public health, the Panel concluded that the complainants have not demonstrated that the TPP measures unjustifiably encumber within the meaning of Article 20 (para 7.2605). That is to say that although the measures at issue encumber the use of trademarks within the meaning of Article 20, the encumbrance is justified by virtue of its public health objective. This conclusion resonates with the conclusion of scholars like M. Abbott who have argued  that an interpretation of Article 20 consistent with Article 8 and the Doha Declaration would have acknowledged and given effect to the ‘right to protect public health’ in any implementing action under the TRIPS Agreement and in any dispute settlement proceeding.

In arriving at this conclusion, the Panel also considered the fact that the TPP measures are ‘in line with the emerging multilateral public health policies in the area of tobacco control as reflected in the FCTC and [its] guidelines’ (para 7.2604). The Panel was of the view that the fact FCTC (a non-WTO agreement) endorses the TPP measures reinforces their justifiability. This raises the longstanding question of whether WTO adjudicatory bodies could use non-WTO agreement as an interpretative key. Although the Appellate Body has used such instruments to interpreting WTO agreement in the past, the jurisprudence is far from settled on this matter. This is why Honduras highlighted this issue in its notification of appeal.

A parallel could be made with the Brazil – Tyrescase. Here, the Appellate Body adopted a holistic approach and stressed that, because of their nature, health protection measures had to be analyzed in the larger framework of the State policy action. Looking at the measure as a whole would allow for a clearer overview of the objectives pursued by the State to be identified, in order to facilitate a more accurate balancing. Moreover, the analysis of the effectiveness of the measure had to take a chronologically larger standpoint; the effectiveness of a public policy can in fact take time to emerge (paras 151 and 182). This holistic approach, elaborated in the framework of Article XX GATT, seems to be reiterated in the framework of Articles 20 and 8 TRIPS: the unjustifiability of the encumbrance has be examined in light of all the contextual elements that lead to the adoption of the public health measure, including the reliance on the FCTC and the customary right to regulate. Here we find a strong similarity with the balancing operated in the Philip Morris case, based on an intersystemic and holistic approach.

Conclusion

The WTO Panel’s recent report is the last step in a long saga. This saga has allowed different international courts and tribunals to test the flexibility of international obligations with regard to the State’s regulatory space in health issues. The plain packaging report confirms a general trend in WTO case law, whereby the telosof the measure serves to justify the interference within free-trade obligations. In fact, the Appellate Body had floated an ‘unspoken sympathy for well-intentioned health and safety measures’, an unspoken sympathy that is based on the axiological importance attributed to the policies at stake. This kind of ‘smell test’, as Hudec notoriously defined it, reflects Robert Alexy’s idea of weight formula, intrinsic in the balancing operation operated in different fora. The Panel has extended this technique to two areas of WTO law where its scope of application was doubtful.  

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Trade Retaliation in the Time of Trump

Published on August 3, 2018        Author: 
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A week ago the Editor-in-Chief of this Journal published a piece titled Black Lies, White Lies and Some Uncomfortable Truths in and of the International Trading System. Prof. Weiler’s argument can be summarised in two-steps: the steel tariffs imposed by the US arguing national security reasons were a gross violation of the WTO system — the black lie. The EU response establishing countermeasures did not follow the letter — or the spirit — of WTO Dispute Settlement System (Article 23). This may seem like a minor political issue, but, from a legal point of view, it undermines the system that the EU is declaring to uphold — the white lie.

Prof. Weiler — who I hold in utmost respect and appreciation as an academic and a person — does an excellent job in explaining the limitations of the WTO Dispute Settlements Understanding (DSU) to provide an adequate response to these cases. He cites the Internet Gambling saga and explains how the party violating the agreement has all the incentives to continue the violation until told by the final voice within the DSU (the Appellate Body) to cease in its conduct. In my view, this is an accurate description of a well-known problem within international trade law, since, pretty much, the creation of the WTO in 1994.

On paper, I would have nothing to add to his excellent editorial. In practice, there are a few elements that, I believe, could enrich the readers understanding of what is at stake here and how a system can organically evolve to address some of these shortcomings. Read the rest of this entry…

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Lessons from the WTO Plain Packaging reports: The use of the evidence-based WHO Framework Convention on Tobacco Control as evidence in international litigation

Published on July 16, 2018        Author: 
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Introduction

The WTO Plain Packaging reports have finally been published. The four reports (merged in a single document) contain the findings of the WTO panel in the disputes launched in 2012-2013 by Honduras, Dominican Republic, Cuba, and Indonesia. The disputes were directed against some tobacco control measures adopted by Australia – so-called ‘the plain packaging’ (TPP) laws. In a nutshell, TPP mandates that all tobacco products be sold in unattractive standardised packaging, thereby curtailing the use of colours, design and trademarks by tobacco manufacturers. As it was already leaked one year ago, the panel has ruled in favour of Australia.

The 884 pages of the final reports contain a lot of food for thought, and will keep many of us busy for long. This post focuses on a relatively narrow issues, namely the role of the Framework Convention on Tobacco Control (FCTC) in the case.  Despite being often overlooked in mainstream international scholarship, the FCTC is a remarkable treaty. It is the first (and so far, only) treaty ever negotiated under the auspices of the World Health Organization (WHO). Adopted by the World Health Assembly in May 2003, it has now reached the massive number of 181 ratifications. The FCTC is also a living treaty: it established a set of institutions, including a Conference of the Parties (COP) that meets biannually and has adopted 9 sets of guidelines.The FCTC was conceived in the ‘90s as an ‘international regulatory strategy’ to ‘promote national action on tobacco control’ (in the words of one of its main promoters, Allyn Taylor), in the face of the growing tobacco epidemic. To this end, the treaty (and later its guidelines) have been developed as ‘evidence-based’ instruments, i.e. as texts that require the adoption of tobacco control measures whose effectiveness has been established by evidence (see Taylor and Bettcher 2000). The set of measures is a comprehensive one, encompassing measures for the reduction of supply and measures for the reduction of demand of tobacco products. TPP measures are also part of this comprehensive set; specifically, they are recommended by the Guidelines to Article 11 and in the Guidelines to Article 13 of the FCTC.

In addition to their role in domestic implementation, the FCTC and its guidelines have proved to be useful instruments in the international disputes launched against the tobacco control measures adopted by its parties (see my earlier report as well as the more recent article by Zhou, Liberman and Ricafort). In some cases, the FCTC and its guidelines have been relied upon for their evidential value, while in others they have been considered ‘evidence’ by reason of their ‘evidence-based’ nature. The TPP reports prepared by the WTO panel are the latest cases in this series. The following sections review the approach taken by the panel on the role of the FCTC, and briefly compare it to the previous international disputes.

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China leans in on international adjudication: Why Beijing’s answer to defeat will be more forceful engagement

Published on May 2, 2018        Author: 
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This year China might suffer the third in a string of stinging defeats at international tribunals that would then cover trade, investment, and law of the sea matters. Contrary to persistent expectations in some policy circles, China’s leaders will not opt for withdrawal. They have resolved to make existing mechanisms work for China, and shape global governance by doubling down on engagement. In line with different degrees of Chinese integration into these systems, Beijing will respond by ratcheting up litigation (trade), upgrading bilateral treaties (investment), and pushing for favourable state practice through diplomacy (law of the sea). The international community will have to deal with a newly powerful legal actor who is very much on the offense.

Failure and Frustration

In two ways, trade law could this year deliver the third bombshell setback in China’s recent engagement with international adjudication. Firstly, there is China’s soon to be decided WTO complaint against the EU’s retention of a distinct (although modified) antidumping methodology for (states like) China. A similar case against the United States is in the consultation stage. Beijing had expected that its Accession Protocol would deliver automatic ‘market economy status’ including more favourable antidumping treatment 15 years after it joined the WTO.

Secondly, a major trade law standoff is unfolding between China and the US, involving the mutual adoption of tariffs and filing of WTO complaints, which could come to a head this year. The US filed a complaint on China’s protection of intellectual property (IP) rights alleging TRIPS Agreement violations. At the same time, the US Trade Representative (USTR) proposed tariffs following a Section 301 US Trade Act of 1974 investigation into Chinese IP practices. Beijing already responded with a WTO complaintalleging that such tariffs would violate the GATT, and its own list of proposed tariffs. Less crucially, China initiated another case alleging GATT and Safeguards Agreement violations through US tariffs on steel and aluminium products.

Previously, giant life insurer Ping An became the first Chinese company to lose an investment arbitration, when its $1 billion claim against Belgium over the Fortisbank nationalization was rejected in 2015. A year later, China suffered an almost total defeat against the Philippinesin an Annex VII UNCLOS law of the sea arbitration on South China Sea issues in July 2016.

Such setbacks trigger angry reactions in China against allegedly biased international institutions that might never give China a fair shake. Many commentators decried China’s supposed second-class membership in the WTO, when the EU decided against granting market economy status, while recent US trade actions are termed severe violations and ‘typical of unilateralism and trade protectionism’ by the Chinese government. Chinese officials were stunned when the investor in Ping Anlost over the ‘technicality’ of whether to rely on the older or the more recent bilateral investment treaty (BIT) between China and Belgium. Following the South China Sea case, it was mooted that Beijing could ‘denounce’ the UN Convention on the Law of the Sea (UNCLOS) to be safe from other states’ attempts to ‘exploit’ the system ‘for political reasons’.

Doubling Down

Yet China is not going to withdraw, and Western governments, as guardians of the current system, will be surprised by how forcefully it will instead lean in to shape existing legal regimes. Tools will differ, but trade litigation, investment treaty making and law of the sea diplomacy to influence state practice serve the same purpose: align the rules further with China’s interests.

This effort is part of the more assertive foreign policy outlined by China’s president Xi Jinping, who just consolidated his power at the First Session of the 13th National People’s Congress. In a major shift, Xi has declared that China will no longer just participate in the international system, but provide ‘guidance’ towards a ‘new international order’. A recent treatise in the People’s Daily confirmed the ambition to seize the ‘historic opportunity’ to shape a new order while US policies under President Trump leave a leadership vacuum.

An underestimated driver of such strategic decisions is a policy elite of Chinese international lawyers who overwhelmingly favour playing offense. Prominent academics and legal counsels to the Chinese leadership have argued that with WTO dispute resolution, just showing up is half the battle. They have called for China to develop the litigious ‘mind set’ and investment treaty framework to go with its new status as major global investor. Lastly, they want China to go around the South China Sea award and influence the law of the sea by shaping state practice through diplomacy.

Bespoke Strategies

After China was refused ‘market economy status’, its Ministry of Commerce immediately struck back at the EU with a complaint at the WTO. Should it now lose the case, its appeal will already be prepared, as will be fresh complaints tackling the broader issue from different angles. At the same time, Beijing encourages Chinese companies to more proactively ‘prove’ to regulatory agencies abroad that they operate under market conditions, and contest adverse decisions at local courts.

Similarly, the Chinese government very quickly responded to recent (partly only proposed) US tariffs, with two fresh complaints. The current overall dispute with Washington will see a Chinese leadership that is more open to negotiated solutions than on antidumping methodology. Should there be any adverse decisions, though, China would again immediately appeal and file further complaints.

Flanking its litigation strategy, China continues massive diplomatic lobbying. Firstly, this serves to gain recognition as a market economy. More than 80 countries have already complied by explicitly providing such recognition, and FTA negotiations in line with theBelt and Road Initiative are to increase that number. President Xi has called for hastened implementation of China’s free trade strategy to strengthen its position in writing global trade rules, after failed Western efforts with TPP and TTIP left the field open.

Secondly, Beijing is actively portraying itself as defender of the WTO trade regime against a protectionist Trump administration onslaught. While many governments share US concerns about IP rights in China, Beijing uses (potential) US tariff implementation without WTO decisions, especially where broadly targeted such as on steel and aluminium, to position itself as the better trade citizen. China’s aim is not only to offset pressure concerning domestic legal changes, but also to shape future coalitions of states in international trade law reform (or rather in blocking reform where existing frameworks suit China).

On investment law, the investor’s defeat in Ping An spurred the Chinese government to quickly improve its investment treaties and seek influence on global investment rules harmonization. Beijing wants to get new investor-friendly treaties in place that include improved transitional clauses, and grant broad access to international arbitration, as well as, quite unusually, appellate bodies. Chinese lawyers argue that such mechanisms may improve legal predictability, but perhaps more importantly they would give the Chinese side another chance in case of defeat.

Wanting to make use of the full arsenal of available measures, the Chinese leadership also acts on the multilateral level. On the path towards a common worldwide investment law system that looks more like the WTO in the trade area, Beijing seeks to set the agenda and touts the ‘Guiding Principles for Global Investment Policymaking’, adopted at the 2016 G20 Summit in Hangzhou, as a first step. The non-binding principles are infused with Chinese wording and interpretations of principles such as legal predictability, transparency, and effective dispute resolution.

Finally, in the third issue area of the law of the sea, after the stunning loss on South China Sea claims, Beijing decided to undermine the award’s authority with a diplomatic push to underline contradictory state practice. Chinese officials aim to prevent the arbitrators’ restrictive interpretations of ‘historic rights’ and ‘island’ status from becoming international customary law. They point out, for example, that the United States and Japan use tiny rocks to make extensive maritime claims, and lobby states worldwide to support China’s interpretation of its islands’ entitlements. Some scholars point out the potential for further UNCLOS implementation agreements(as on deep seabed mining), which could clear up ambiguity in terms favourable to China and override the tribunal’s decisions.

While China may strictly reject compliance with the South China Sea award, it needs UNCLOS to protect its interests and gain influence on maritime governance. Beijing aims to secure a large UNCLOS-sanctioned continental shelf in the East China Sea, based on favourable geography vis-à-vis Japan. It wants Chinese companies to be in a prime position for the coming International Seabed Authority-sanctioned mining bonanza under the high seas worldwide, and it intends to have a seat on the table regarding Arctic governance issues. Indicative of its strategic choice to shape the system from within, China now adopts more UNCLOS-like language for its South China Sea claims and backs away from the ‘Nine-dash Line’.

The Future of China and International Law

So, in a nutshell, what should we expect China to do? Its approach has already evolved considerably. The focus shifted from the international legal order’s ‘hardware’ – joining institutions and equipping them with Chinese judges and staff – to its ‘software’. Now the Chinese leadership wants more influence on the treaties and customary law behind the system. In a parallel process, once it feels confident enough in a particular field, China gradually but inevitably boots up participation at court.

Prominent voices in China, including Prof. Yi Xianhe, member of the Foreign Ministry Consultative Committee on International Law, have argued that China must be a ‘leader country’ on international law, if it is to consolidate economic and political gains. That includes actively engaging with international tribunals. Such statements represent an emerging consensus among Chinese international lawyers that forward-leaning engagement will on balance be a positive for China, and the best protection of its national interests.

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Qatar under Siege: Chances for an Article XXI Case?

Published on January 9, 2018        Author: 
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For more than six months now, the richest country of the world has been under an embargo imposed by its Arab neighbours, apparently motivated by their discontent over Qatar’s increasingly independent course in international affairs. The embargo raises controversial questions under international law, for example in light of the principle of non-intervention and the human rights of the people affected. For now, Qatar has chosen to contest the embargo’s legality at the World Trade Organization (WTO), requesting consultations with the UAE (DS526), Bahrain (DS527), and Saudi Arabia (DS528). The dispute could, for the first time, require a WTO panel to interpret Article XXI GATT, the security provision that has been described as ‘an unreviewable trump card, an exception to all WTO rules that can be exercised at the sole discretion of a Member State’ (Roger Alford 2011; see also the blog by Diane Desierto here).

While the cases against Bahrain and Saudi Arabia have not moved past the consultations phase, Qatar has requested the establishment of a panel in the case against the UAE, and the Dispute Settlement Body (DSB) has approved this request on 22 November. Qatar’s claim concerns a long list of complaints under the General Agreement on Tariffs and Trade (GATT), the General Agreement on Trade in Services (GATS), and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). In response, the UAE has explicitly referred to the security exceptions of the relevant agreements, arguing that the measures were a response to Qatar’s funding of terrorist organizations and therefore justified in the interest of national security.

Article XXI GATT stipulates, amongst other things, that nothing in the GATT ‘shall be construed’ … ‘to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests’, in three different contexts, including those of ‘war or other emergency in international relations’. The language of Article XXI suggests it is a so-called ‘self-judging clause’, justifying measures which are considered necessary by the State that adopts them. The crucial legal question is to what extent the Article allows for review. According to the UAE, the WTO dispute settlement system is neither empowered nor equipped to hear disputes concerning national security. Qatar, however, argues that while Members have the right to adopt bona fide security measures, such measures remain subject to WTO oversight.

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From the Editor’s Mailbag

Published on October 4, 2016        Author: 
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The following are two letters received from Claus Dieter Ehlermann and Robert Howse respectively.

“I am writing to you as Editor of the European Journal of International Law about the recent article by Robert Howse, ‘The World Trade Organization 20 Years On: Global Governance by Judiciary’ in the EJIL, Volume 27, No. 1 (2016). At page 41, Professor Howse devotes a paragraph to the resignation of Debra Steger, the first Director of the Appellate Body Secretariat, in late March 2001.

As Chair of the Appellate Body at that time, I would like to offer some facts to avoid misunderstandings.

First, as WTO Director of the Information and Media Relations Division, Keith Rockwell, said at the time, Professor Steger resigned for personal reasons. Second, the Appellate Body Members have always held her in the highest respect, she has always been very loyal and respectful to us, and we remain very close friends to this day. Third, there was absolutely no linkage whatsoever to the EC-Asbestos amicus brief issue. All seven Appellate Body Members and Professor Steger were in complete agreement on this issue and case all the way through.”

C-D.E.

“We should all be grateful to Claus-Dieter Ehlermann, former Member of the WTO Appellate Body, and one of its original Members, for clearing the air concerning the Appellate Body’s relationship with its Secretariat, and particularly the head Debra Steger, during the turbulent formative years that were marked by, inter alia, the controversy over amicus curiae briefs.  I have always had excellent amicable professional relations with both Dr. Ehlermann and his former Appellate Body colleagues, as well as with Ms. Steger; given my high esteem for all involved it is comforting to be assured that the controversy in question did not in any way test or strain a vital working relationship that was very likely crucial to the Appellate Body’s early success as a true trade court.”

R.H.

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Detecting Prohibited Subsidies and Determining Continued Compliance: WTO Panel Rules (Again) for the US in the Airbus Dispute with EU

Published on September 26, 2016        Author: 
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On 22 September 2016, the United States Trade Representative (USTR) scored another victory in its long-running dispute with the European Union (EU) over subsidies provided by certain EU Member States to large civil aircraft manufacturer Airbus. The USTR sought to prove that 36 challenged EU measures remained inconsistent with its duty to comply with the rulings and recommendations issued by the WTO Dispute Settlement Body (DSB) after adopting the original 30 June 2010 Panel Report in this case.  Specifically, the US challenged four types of subsidies allegedly made by the EU and/or certain EU Member States to Airbus for continuing inconsistency with the Subsidies and Countervailing Measures (SCM) Agreement: 1) launch aid or member State financing; 2) equity infusions for the corporate restructuring of Aerospatiale and Deutsche Airbus; 3) infrastructure related measures of German and Spanish authorities; and 4) research and technological development funding provided by the EU and certain member States.

The 22 September 2016 WTO Panel Report European Communities and Certain Member States – Measures Affecting Trade in Large Civil Aircraft [hereafter, “2016 Panel Report”] found, among others, that: 1) French, German, Spanish, and UK launch aid or member State financing for the Airbus A350XWB constituted actionable specific subsidies (2016 Panel Report, para. 7.1.c.ii.); 2) the EU and certain member States have failed to comply with their obligation to withdraw the subsidies for other Airbus aircraft (2016 Panel Report, para. 7.1.c.ix.); 3) the EU continues to be in violation of Articles 5(c) and 6.3(a)(b) and (c) of the SCM Agreement by failing to comply with previous recommendations and rulings of the WTO Dispute Settlement Body in the original 30 June 2010 Panel Report (2016 Panel Report, para 7.2); 4) to the extent that the challenged EU measures remain inconsistent with the SCM Agreement, they have nullified or impaired benefits accruing to the US under that Agreement (2016 Panel Report, para. 7.3); and 5) the EU and certain member States failed to bring 34 of its 36 challenged measures into conformity with their obligations under the SCM Agreement (2016 Panel Report, para. 7.4).

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Back to the Lawless Jungle? The Vulnerability of EU Anti-Dumping Measures against China after December 2016

Published on June 15, 2016        Author: 
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In a previous post, I argued that the European Union would violate its WTO obligations under the WTO Anti-Dumping Agreement (ADA) if EU anti-dumping investigators will continue to apply ‘non-market economy’ (NME) treatment of Chinese exports in AD investigations under the EU Anti-Dumping Regulation (ADR) after December 11, 2016. It is on that day that Art.15(a)(ii) of China’s Accession Protocol (CAP) expires. Until that date, Art.15(a)(ii) provides WTO members with the right to use non-standard price comparison methodologies to determine whether and to what extent Chinese exports have been ‘dumped’ onto a third country market. The provision has served as a legal basis for a highly effective trade defense remedy that allows for the imposition of extraordinarily steep anti-dumping duties against Chinese exports, and Chinese exports of steel products and solar panels in particular. After the expiration of the said provision, the adoption of EU AD measures against China that are based on the use of non-standard price and cost comparison methodologies will be highly vulnerable to legal challenge in WTO Dispute Settlement (DS) proceedings in Geneva. This conclusion, however, does not prejudge the legality of AD measures that the EU has (or will have) adopted against Chinese producers prior to the December deadline. The question about the post-2016 legality of already existing EU AD measures that are “not based on a strict comparison with domestic prices or costs in China” (Art.15(a)(ii) CAP), is particularly relevant in context of the rising amount of new EU AD measures and investigations against Chinese producers of steel and solar panels that the EU has imposed and initiated in the last 18 months. It is this very question that is subject to analysis in this post.

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Comments Off on Back to the Lawless Jungle? The Vulnerability of EU Anti-Dumping Measures against China after December 2016

The USA and Re-Appointment at the WTO: A ‘Legitimacy Crisis’?

Published on May 27, 2016        Author: 
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In recent weeks, it has been reported (for example, here, here, here and here) that the WTO faces a ‘legitimacy crisis’ in the wake of US opposition to the re-appointment to a second, four-year term of Mr Seung Wha Chang (South Korea) to the Appellate Body. In a joint statement of 12 May, US Permanent Representative to the WTO, Ambassador Michael Punke, and USTR General Counsel Tim Reif declared:

The United States is strongly opposed to appellate body members deviating from their appropriate role by restricting the rights or expanding trade agreement obligations […] The United States will not support any individual with a record of restricting trade agreement rights or expanding trade agreement obligations.

In their view, the Appellate Body member exceeded his powers during his mandate, and breached Art. 3(2) of the Dispute Settlement Understanding, which states that ‘[the] Appellate Body cannot add to or diminish the rights and obligations provided in the [agreements of the WTO].’ In other words, Mr Chang is accused of undue judicial activism.

In response, South Korea has reportedly declared its opposition to the re-appointment of any Appellate Body members. As a result, their number would fall from seven to five by June, since another member, Ms Yuejiao Zhang (China), finishes her second term on 31 May, and the Selection Committee has been unable to propose a candidate that would enjoy the membership’s consensus. All six sitting members of the Appellate Body have publicly supported Professor Chang (see here) praising his ‘independence and integrity’ and voicing their disquiet about the implications of the US position. The USA has chastised this move as another instance of undue judicial interference.

This standoff raises questions of general interest on procedures for the appointment of ‘judges’ Read the rest of this entry…

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China’s View of International Litigation: Is the WTO Special?

Published on November 13, 2015        Author: 
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Yesterday, Geraldo Vidigal put up a really interesting post looking at recent patterns of use of the World Trade Organization’s dispute settlement system. One thing that was particularly striking to me was the extent to which China has participated in the WTO dispute settlement system given its previous position on resolution of disputes by international tribunals. Geraldo’s chart of the latest 100 disputes at the WTO shows that only the United States, the EU and Japan have initiated more cases at the WTO in recent years than China (with Japan initiating just one more case than China in this period). Given that the WTO system is the most widely used inter-state dispute settlement system, it might not even be an exaggeration to say that: in terms of numbers of cases brought before international tribunals by states, China is one of the most enthusiastic state users of international tribunals! Of course, that enthusiasm is only before one particular system.

In October 2010 I posted here on EJIL:Talk a piece titled “Is China Changing its View of International Tribunals?“in which I noted that China’s view on international tribunals more broadly seemed to be changing. At the time, I noted China’s participation in the Kosovo Advisory Opinion at the ICJ, which was the first time that the People’s Republic appeared in oral hearings before the ICJ. I also pointed out China’s participation, around the same time, in the written and oral phases of International Tribunal for the Law of the Sea’s (ITLOS) first advisory proceedings –  the Responsibilities and obligations of States sponsoring persons and entities with respect to activities in the Area (Request for Advisory Opinion submitted to the Seabed Disputes Chamber). In 2014, China submitted a substantial written statement in the Request for an advisory opinion submitted by the Sub-Regional Fisheries Commission (SRFC) though it did not take part in the oral hearings.

Of course, we have non-participation by China with respect to the United Nations Convention on the Law of the Sea Annex VII arbitration initiated by the Philippines (in respect of which the tribunal issued an award on jurisdiction a couple of weeks ago). Read the rest of this entry…

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