The Right to Regulate for Public Morals Upheld (Somewhat): The WTO Panel Report in EC-Seal Products

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Whitecoat Seal PupThere have been few interpretations of Article XX(a) of the General Agreement on Tariffs and Trade (GATT 1994) – the  specific exception that justifies what would ordinarily be a State’s GATT-inconsistent measure, unless such measure is deemed “necessary to protect public morals”.  As with any of the ten enumerated exceptions under Article XX of GATT 1994, a State invoking GATT Article XX(a) must first meet the requirements of the specific exception (e.g. demonstrating that the challenged measure is indeed “necessary to protect public morals”), and thereafter show that the challenged measure also complies with the overall requirements of ‘good faith’ (Brazil – Measures Affecting Imports of Retreaded Tyres, Appellate Body Report of 3 December 2007, at para. 215) as contained in the chapeau to Article XX (e.g. demonstrating that the challenged measure is not being applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade).  The 25 November 2013 Panel Report in European Communities – Measures Prohibiting the Importation and Marketing of Seal Products [hereafter, “EC-Seal Products“] issued the very first decision upholding a State’s right to regulate for public morals as an exception under Article XX(a) of GATT 1994, in relation to ongoing trade arising from seal hunting (pictured above left,) and seal products.

It may be recalled that the 2009 Panel Report in China- Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products [hereafter, “China – Publications and Audiovisual Products“] was the first occasion for a WTO panel to directly interpret the scope and meaning of measures “necessary to protect public morals” under GATT Article XX(a). China had invoked the “public morals” exception in GATT Article XX(a) to justify a set of measures that regulated the entry of foreign publications, audiovisuals and other media forms.  China argued that its regulations were designed to protect public morals in China by reviewing the content of foreign cultural goods and forms of expression that could potentially collide with significant values in Chinese society.  The China – Publications and Audiovisual Products Panel had little trouble accepting the interpretation of “public morals” (China-Publications and Audiovisual Products, para. 7.759) already laid down in the 2004 Panel Report in United States- Measures Affecting the Cross-Border Supply of Gambling and Betting Services [hereafter, “US-Gambling“], which had defined “public morals” in Article XIV of the General Agreement on Trade in Services (GATS), as “standards of right and wrong conduct maintained by or on behalf of a community or nation” (US – Gambling, para. 6.465).  However, the Panel ultimately rejected China’s assertion of GATT Article XX(a) exception (China-Publications and Audiovisual Products, para. 7.911), finding that China had failed to show the “necessity” of its challenged measures for the supposed purpose of protecting public morals.  The Appellate Body upheld these findings in its December 2009 Report.

EC-Seal Products involved challenges brought by Canada and Norway against several regulations comprising the “EU Seal Regime”, involving “products, either processed or unprocessed, deriving or obtained from seals, including meat, oil, blubber, organs, raw fur skins and tanned fur skins, as well as articles made from fur skins and oil.” (EC – Seal Products, para. 2.6.)  Canada and Norway alleged that the European Union had committed various violations of the Technical Barriers to Trade (TBT) Agreement, GATT 1994, as well as the Agreement on Agriculture.  As described by the EC-Seal Products Panel, the EU Seal Regime:

“prohibits all seal products, whether they are made exclusively of seal or contain seal as an input.  The Regime makes an exception with regard to the import and/or placing on the market of seal products in three situations, namely when they result from IC hunts [Inuit Community hunting practices, hereafter, ], MRM hunts [marine resource management hunts], or in the case of Travellers imports [products brought by EU citizens for personal use].” (para. 7.105) (Italics added.)

The EC-Seal Products Panel first approached the concept of “public morals” in regard to the characterization of the EU Seal Regime as a “technical regulation” alleged to have breached nondiscrimination obligations under Articles 2.1 and 2.2 of the TBT Agreement.  The Panel agreed with the US-Gambling definition of “public morals” restated in China – Publications and Audiovisual Products, adding that WTO Members are “afforded a certain degree of discretion in defining the scope of ‘public morals’ with respect to various values prevailing in their societies at a given time.” (EC – Seal Products, para. 7.381)  According to the Panel, two issues are implicated in resolving the question of whether a measure truly aims to address public morals relating to a particular concern for the State issuing the challenged regulations or measures:

“…first, whether the concern in question indeed exists in that society; and second, whether such concern falls within the scope of ‘public morals’ as ‘defined and applied’ by a regulating Member ‘in its territory, according to its own systems and scales of values’.” (EC- Seal Products, para. 7.383. Italics applied.)

The Panel then scrutinized evidence to determine the existence of the EU public’s concerns as to “seal welfare and/or any other concerns or issues that the European Union seeks to address”, as well as the “connection between such concerns…and the ‘public morals’ (i.e. standards of right or wrong) as defined and applied within the European Union.” (EC- Seal Products, para. 7.384).  After examining the text and legislative history of the EU Seal Regime, and other evidence, the Panel held:

“…we conclude that the objective of the EU Seal Regime is to address the moral concerns of the EU public with regard to the welfare of seals.  Specifically:  a) the incidence of inhumane killing of seals; and b) EU citizens’ ‘individual and collective participation as consumers in, and exposure to (‘abetting’) the economic activity which sustains the market for seal products derived from inhumane hunts…the ban under the EU Seal Regime is capable of making a contribution to preventing the EU public from being exposed on the EU market to products that may have been derived from seals killed inhumanely in Canadian or Norwegian products….[however with regard to the exceptions for ] while the measure prohibits certain seal products on the EU market based on their link to the potential incidence of inhumane killing of seals, the measure allows commercial activities within the European Union, which is directly connected to the processing of the same products.  This incoherency, in the measure, in our view, further reduces the contribution of the measure to the reduction of the global demand for seal products derived from inhumane killing…the EU Seal Regime undermines its intended objective of addressing the EU public concerns on seal welfare….We conclude that the EU Seal Regime is not more trade restrictive than necessary within the meaning of Article 2.2 of the TBT Agreement” (EC – Seal Products, paras. 7.410, 7.448, 7.455, and 7.505) (Italics added.)

Following its analysis of alleged violations of the TBT Agreement, the EC-Seal Products Panel then proceeded to find that the EU Seal Regime – specifically the exceptions in favor of seals and seal products derived from “IC hunts” (Inuit Community hunts) and “MRM hunts” (marine resource management hunts) – were indeed inconsistent with non-discrimination obligations under Articles I:1 and III:4 of GATT 1994.  However, the Panel ultimately found that such GATT-inconsistent measures under the EU Seal Regime could be justified under the “public morals” exception in GATT Article XX(a).  In reaching this conclusion, the Panel drew heavily upon its analysis of “public morals” in relation to characterizing the EU Seal Regime as a “technical regulation” within the purview of the TBT Agreement.  According to the Panel:

“Given the close relationship between the GATT 1994 and the TBT Agreement and the need to interpret relevant provisions under both Agreements in a consistent and harmonious manner, we consider that an analysis of a measure’s contribution to an objective under Article 2.2 of the TBT Agreement is also relevant to such analysis under Article XX of GATT 1994.  The Appellate Body in US-Tuna II (Mexico) recalled that in assessing the necessity of a measure under Article 2.2, a panel must assess the contribution to the legitimate objective actually achieved by the measure at issue as in other situations, such as for instance when determining the contribution of a measure to the achievement of a particular objective in the context of Article XX.  Accordingly, we will refer back to our relevant analysis under Article 2.2 of the TBT Agreement to the extent necessary for the analysis of the measure’s contribution under Article XX(a) of the GATT 1994.” (EC – Seal Products, para. 7.634)  (Italics added.)

The Panel then adopted much of its analysis under Article 2.2 of the TBT Agreement to conclude that the ban aspect of the EU Seal Regime “makes a material contribution to the objective of the measure” (para. 7.637).  However, while the Panel acknowledged its previous analysis that the IC and MRM exceptions to the ban in the EU Seal Regime severely undermined the objectives of the Regime, ultimately the Panel adjudged that this still did not detract from the overall necessity of the EU Seal Regime for the protection of public morals in the European Union:

“…the degree of the contribution made by the ban is diminished by both the explicit and implicit exceptions under the measure.  Specifically, with respect to the IC and MRM exceptions, we considered that the exceptions, combined with the absence of any mechanism under the measure to inform consumers of the presence of seal products on the EU market, reduced the effectiveness of the ban under the measure by allowing seal products access to the EU market.  Further, the implicit exceptions provided under the measure through certain commercial activities such as transit and inward processing for export were also found to undermine the measure’s fulfillment of the objective.  Overall, with respect to the EU Seal Regime as a whole, however, we found that it contributed to a certain extent to its objective of addressing the EU public moral concerns on seal welfare.

…Based on the assessment above, the EU Seal Regime can be provisionally deemed ‘necessary’ within the meaning of Article XX(a) of the GATT 1994, unless it is demonstrated that the European Union could have adopted a GATT-consistent or less-trade restrictive measure as an alternative to the EU Seal Regime…we conclude[] that the alternative measure proposed by the complainants was not reasonably available to the European Union given inter alia the animal welfare risks and challenges found to exist in seal hunting in general.  Therefore, we consider that the EU Seal Regime is provisionally deemed necessary within the meaning of Article XX(a) of the GATT 1994.” (paras. 7.638 and 7.639) (Italics added.)

There are many points of interest from the EC- Seal Products Panel Report, including its significance as an international decision involving competing claims of compliance with trade rules and the asserted environmental, cultural, and public morals justifications for the modified quantitative restrictions built into the EU Seal Regime.  From an interpretive standpoint, it was also unique for the Panel to wholly transpose its analysis of “public morals” in relation to Article 2.2 of the TBT Agreement for purposes of interpreting “public morals” under Article XX(a) of GATT 1994.  From a methodological standpoint, it was somewhat contradictory to have the Panel’s explicit findings that the EU Seal Regime exceptions severely undermined the “public morals” objectives of the Regime, be subsequently found insufficient to detract from the overall necessity of the EU Seal Regime to protect “public morals” within the EU as they relate to animal welfare.  At best, this seemed to be an instance where the qualified or modified ban on seal products in the EU were deemed to affirm “public morals”, but the exceptions for seal hunting by the Inuit Communities, seal hunting for marine resource management, and exceptions for travelers bringing in such products for personal use were, even if contrary to ‘public morals’, could be counterbalanced by the “public morals” effect of the EU Seal Regime as a whole.  It would have been empirically more rigorous – and certainly made a feasibly stronger case under GATT Article XX(a) – if the Panel had managed to juxtapose the concrete effects of the ban aspect of the EU Seal Regime on the actual levels of importation and/or exportation of seal products, as having distinctly outweighed the impact on such importation and exportation levels arising from the incidence or frequency of exceptions-based trade in seal products.

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    Lorand Bartels says

    January 27, 2014

    Diane, thanks for this excellent comment. For my part, what I find interesting about this report is what it said about the chapeau non-discrimination conditions, both in Art 2.1 TBT and Art XX GATT. It should now be clear that these conditions are not just a matter of the 'good faith' application of the exceptions or a line of 'equilibrium' between rights and obligations, judicial pabalum that has - at best - served only to obscure their true function.

    Rather, they comprise a distinct and secondary subsystem of discrimination obligations entailing an assessment of legitimate purpose, suitability and necessity, based, importantly, not on the purpose of the measure itself (in this case, public morals), but rather on the purpose of the non-application of the measure in certain cases (ie exceptions - in this case indigenous rights). As far as Art XX goes, this is directly contrary to the Appellate Body Report in Brazil - Retreaded Tyres, which this panel quite noticeably sidesteps on this point.

    (As to the relation between the exceptions and the chapeau: in my view one is a rule against overregulation, and the other a rule against underregulation, ie non-application, or exceptions).

    I think the panel did an excellent job on all of this. My one criticism would be that it adheres, albeit uncomfortably, to the mistaken notion that discrimination at this secondary stage must somehow be different from discrimination at the primary stage. This is neither factually nor legally necessary. Even with the same discrimination, the question being asked is different: at the first stage it is whether the discrimination exists. At the second stage, it is whether it is justified.

    But this is not so important. What is important is that finally it looks like we are out of a 15 year old judicially created mire on the meaning of the Chapeau conditions.

    Rob Howse says

    January 27, 2014

    Where did the panel say that the exceptions "severely undermined" the objectives of the main measure?As the long citation suggests, the panel concluded that the CONTRIBUTION to achievement of the main objective was SOMEWHAT reduced by virtue of the exceptions pursuing DIFFERENT legitimate objectives, but that the main measure still made a material contribution to the main objective. Since liberal democracies pursue multiple legitimate public policy objectives all the the time, one normally expects regulatory trade offs where the policy adopted will often not be an optimal one to achieve a single objective because others have to be pursued as well. It isn't for the WTO to tell Members how they make these trade-offs as long as they are not discriminatory. Thus it is useless to ask a WTO panel to measure how much achievement of legitimate objective A is sacrificed by pursuing legitimate objective B; the real issue is whether in light of what is required to pursue B in terms of an exception there is still a contribution to the achievement of A. In Seals that was pretty obvious just from looking at how the market shrank in the wake of the ban (though part of that was probably consciousness raising over time about the cruelty of the hunt)

    As for Brazil-Tyres it was good that the panel was not misled by the language there concerning the chapeau. In Brazil-Tyres the AB was not dealing with a scheme DESIGNED to address multiple legitimate public policy objectives. Rather the issue was the non-APPLICATION of the scheme to certain cointries, explicit natioanlity-based discrimination, based on considerations extrinsic to the scheme being justified, namely Brazil's obligations under a non-WTO treaty, which played no part in the design and operation of the regulatory scheme for tires being justified under Article XX.

    Not only was the objective of fulfilling Brazil's obligations under MERCOSUR not part of the tires scheme, but it is only a legitimate objective justifying MFN type discrimination under Article XXIV of GATT not Art. XX.

    For these reasons the chapeau finding in Brazil-Tyres was irrelevant to the issues that the panel had to consider in Seals.

    Lorand Bartels says

    January 27, 2014

    Hi Rob. The point about Brazil - Tyres is that it was said there that discrimination under the Chapeau could only be justified in terms of the policy objective of the measure itself. I think this directly contradicts Seals, which says that discrimination under the Chapeau can be justified on other grounds (viz, those relevant to the discrimination). Whether on this basis Brazil - Tyres would have been decided differently is a different question. I take your point that FTA-compliance is not an Article XX objective, but that does not matter. As the Seals panel said, following the AB, legitimate objectives can be found elsewhere in the WTO agreements. That was of course said in a slightly different context, but I see no reason why that should not apply to second stage Chapeau discrimination questions.

    Rob Howse says

    January 27, 2014

    Dear Lorand, perhaps I need to explain further. The AB has emphasized that the chapeau is concerned with discrimination in the application of the measure as opposed to its design (see for instance AB Shrimp I). The issue to which you are referring in Seals concerns a measure that is DESIGNED to achieve multiple objectives. There is hence no contradiction. The AB in Brazil-Tyres was clearly considering de jure MFN type discrimination (not also at issue by the way in Seals as the exceptions in the design of the measure were not country-specific) of a scheme that was not DESIGNED to address the environmental issue as well as the objective of fulfilling Brazil's MERCOSUR objectives Thus the AB never in Tyres ever came to the absurd conclusion that a measure is indefensible under Article XX if some of the features of its DESIGN that require justification are explained by policy objectives other than the main objective being invoked. That would have gutted Article XX in the real world of pervasive regulatory trade offs. I also find utterly perplexing your notion that it is not relevant that in Tyres it happened that the other policy objective besides the main objective found its possible justification under a totally DIFFERENT provision of GATT. This further shows, no, that the AB did NOT in Tyres box itself in to the untenable proposition that measures cannot be justified under Art. XX where they may have features that require justification, but which go to a legitimate objective other than the one being invoked to justify the principle features of the measure. Since that other legitimate objective was an Article XXIV not XX objective in Tyres, it is understandable that the AB found that one could not under the chapeau consider discrimination as justified that went to legitimate purposes not covered by ANY provision of XX, but instead covered by an exceptions provision with a fundamental different architecture from XX, namely GATT XXIV.

    In sum, the chapeau discussion in Tyres was irrelevant to any of the issues before the panel in Seals, which concerned a measure designed to achieve multiple policy objectives, not the discriminatory application of measure on the basis of considerations unrelated to its design and purpose.

    Lorand Bartels says

    January 27, 2014

    Dear Rob - I don't accept the AB's distinction between design and application. I find it meaningless. Nor do I think that the measure in Seals had multiple objectives. It had one objective, and an exception based on another objective. That to me puts it in the same class as Brazil - Tyres was wrong. Perhaps we differ on the basic point of the Chapeau. As I said, in my view it is about justifying exceptions to regulation (ie underregulation). Hence I see these cases as structurally the same, and hence I have no difficulty drawing a comparison with an Art XXIV-based justification and an indigenous peoples justification. Now, you make a good point about measures with multiple objectives. That would be dealt with in the first instance under the Art XX subparas (and equivalents elsewhere). How one would decide that a measure has multiple objectives, rather than an objective (or more than one) and an exception is an interesting question. But I do not think that the panel in Seals saw the measure as having multiple objectives. I think it (correctly in my view) saw the measure as I have described it: ie a measure with one objective (morals) and an exception (indigenous peoples).

    Rob Howse says

    January 27, 2014

    Dear Lorand, I do not believe you are correct. The exception provisions are part of the measure in Seals. They are not in a different law, such a special regime concerning aboriginal peoples or marine management for example, but are the product of a single decision of the EU authorities to create a scheme to address the cruelty of the commercial seal hunt, which also. in certain features, takes into account other objectives, including traditional way of life of indigenous communities. I think you are introducing a rather spurious formulation. At the hearings it was common ground between the parties, this became clear, that the ban and the exceptions have been be considered as part of the overall scheme and that the exceptions serve different purposes than the purpose of the ban itself.

    I am not sure of your grounds for objecting to the distinction between the design and application of a scheme as regards the chapeau. The wording of the chapeau refers to the manner in which measures are applied, this is in the text.

    I do agree that the wording in Brazil-Tyres could have been better in an ideal world. My point is only that it does not matter for Seals.

    Lorand Bartels says

    January 27, 2014

    Dear Rob

    I am always happy to be corrected, but I do not think I am wrong in this case. The objective/exception description of the Seals regulation is from paras 7.400-402 of the panel report. I quote the last of these:

    7.402. For us, the interests that were accommodated in the measure through the exceptions must be distinguished from the main objective of the measure as a whole. Further, unlike the issue of seal welfare, we do not find in the evidence submitted that the interests covered by the IC, MRM, and Travellers exceptions are grounded in the concerns of EU citizens. Rather, the evidence suggests that they appear to have been included in the course of the legislative process. For all these reasons, we do not consider that the interests incorporated in the IC, MRM, and Travellers exceptions form independent policy objectives of the EU Seal Regime as a whole.

    As to the precise words used in the Chapeau, yes, it says 'measures [shall] not [be] applied in a manner etc'. To my mind, the best way to make sense of this phrase is to see it in terms of discriminatory non-applications of a measure - ie exceptions. This makes it plainer that what is at issue is under-regulation - again, exceptions. In my article on emissions trading in EJIL (and the ICTSD paper to which you generously contributed a foreword) I went through the cases, and found that indeed underregulation in the context of exceptions was the issue, regardless of the confusing language used to deal with these situations.

    This under-regulation (ie non-application; exceptions) approach to the Chapeau makes much more sense to me that the idea that somehow there is a measure in theory and then a measure that is applied. By the time one is at Article XX, the measure is always being applied, so it is not a very useful distinction (and to its credit, the panel essentially said the same here, though sadly without ditching the usual terminology altogether).

    I accept that this is not an orthodox way of reading the Chapeau. I just think it makes more sense in theory - and it also reflects what has actually happened in the cases. Hopefully I can persuade you as well.

    Lorand

    Rob Howse says

    January 27, 2014

    Lorand, I see now where you got this notion. While not ideally drafted, this passage from the panel report merely says that the objectives reflected in the exceptions are not the same as the objective that led in the first place to or motivated the decision to pursue a general ban on seal products. In other words, the EU did not SET OUT to pursue the objectives reflected in the indigenous and marine management exceptions but those objectives,
    as the panel also states in this passage, came into the legislative process that produced the measure, and are reflected in the final measure which balances the anti-cruelty objective with these other ones. Why this may have been important to the panel is in determining whether the other objectives could all be balanced as part of the concern with protection of public morals or whether they are extrinsic to the kinds of concerns of EU citizens that go to public morality, of which the main objective, motivated the main measure, clearly was. This doesn't really matter in the end, because there is no reason why it undermines aspects of a measure taken for public morals that some features of that measure might be based on legitimate objectives that nevertheless are not themselves public morals (though I think in the case of the indigenous exception it does), and that in light of these other non-public morals objectives the measure might make a somewhat lesser contribution to the public morals objective. But the bottom line is the same: the legitimacy of WTO Members making trade offs between the extent of achievement of one objective versus another in a legislative scheme.

    Lorand Bartels says

    January 28, 2014

    Dear Rob

    Yes, I agree with you. I think that what the panel did here not only clarifies the analysis of such measures but also gives regulators more room in terms of regulatory autonomy.

    Laura Nielsen says

    February 13, 2014

    Dear Diane, thank you for a good case abstract, and to Rob and Lorand for an inspiring discussion.

    Animal welfare and trade is my passion - and after writing my PhD on the topic (many) years ago, I am of course excited about now having actual case law!

    Coming from Denmark, I have naturally followed the Greenland and IC exception closely in this case - and it is not a secret to anyone (also published with Maria-Alejandra Calle in AJWH) that I believe the Commission got it right the first time around aiming for a PPM - which got changed by the Parliament on grounds that the PPM would not work.

    The IC exception was supposed to help Greenland - but the entire seal discussion have worked against Greenland altogether. While seal fur from Greenland used to be considered quite politically correct (because it is caught in Greenland and used in a traditional manner as opposed to mink which are trapped all their life and only used for their fur), it is now less acceptable and the seal fur trade evidences the dramatic loss of sales.

    The IC exception essentially says that if you are an Inuit it is ok to torture animals by using "modern" type hunting methods. It does not require traditional Inuit hunting methods. There are no requirements as to the hunting method.

    I agree with Rob that is not for the WTO panels to interfere with WTO Members' policy choices and if the EU wants BOTH to protect seals and preserve the Inuit right to trade in seals, it should perhaps be allowed to do so. Had the IC exception been applied so that it also benefitted Inuits outside Greenland, it seems the Panel would have approved it.

    My take on it is that the EU failed in designing this measure. I still believe the EU should have used the PPM - this would also have benefitted Greenland better: The Inuits could then say that the seals were treated humanely and make money on marketing themselves as the custodians of seal welfare or something along those lines. It would also have pushed e.g. Canada and the EU into talks about what is an acceptable seal hunt method? And how do we verify it? Had the EU done that, it would also avoid charging the WTO panels with impossible, and perhaps inappropriate, questions for 3 trade experts: is it ok that the EU wants to benefit Inuits - well who on Earth is going to say NO to that question?!

    Rob Howse says

    February 17, 2014

    Laura one of the great lies that Canada has been putting about is that Canadian Inuit cannot benefit from the exception. In fact it is entirely open to them to take advantage of it and they haven't even tried. In this sense the claim of a violation is not even ripe. Rob