11:54 AM May 21, 1996

DISQUIET OVER WTO APPELLATE BODY RULING

Geneva 20 May (Chakravarthi Raghavan) -- The ruling of the Appellate Body of the World Trade Organization in the case brought by Venezuela and Brazil against the US over its gasoline rules under the US Clear Air Act appears to have increased the ability of countries to take national trade policy measures under some of the exceptions to Art. XX, which could otherwise be inconsistent with GATT obligations.

In doing so, the Appellate Body appears to have over-ruled a long line of precedents for applying the "necessity" test in respect of "measures" taken by a country, contrary to its GATT obligations, under the General Exceptions Article.

In terms of measures purported to be taken for "conservation of exhaustible natural resources", the scope of actions for the more powerful industrial countries has been probably widened.

The report of the Appellate Body, and as modified by it that of the original panel report, were accepted by the WTO's DSB (as required by the Dispute Settlement Understanding).

Japan however made clear in a statement at the DSB that the fact it had not objected to the report did not mean it agreed to everything that had been said there. More specifically, Japan reserved its rights in respect of the interpretation put by the Appellate Body on Art. XX.

Several other delegations privately said later that there were aspects of the ruling, and the Appellate Body's approach itself, that had caused them some disquiet, but that they did not want to raise them or voice their views at the DSB on the first ruling of the Appellate Body, and with reference to a particular dispute between two parties.

The delegations noted that under the Ministerial Decision at Marrakesh, the DSU and its working is to be reviewed, within four years of WTO entry into force, that is before end 1999, and the continuance of the DSU, modification or termination is to be decided at the first Ministerial meeting thereafter.

As a result, they said, this will be one of the issues that would figure at the Singapore Ministerial Meeting, under the "implementation" agenda issue.

In releasing to the media the reports of the Appellate Body and the original panel report (which on adoption became automatically derestricted under the rules), the WTO press office did not provide copies of delegation statements nor any briefing of the statements made at the DSB.

The WTO's even normal non-transparent functioning, and the relay of information flowing out of the meetings of the WTO bodies, has now become even worse.

This appears to be due, in part to the hiatus and perhaps friction that has developed between the WTO head and some of the delegations heading the WTO bodies, as well as the objections of some major delegations to their statements and views being relayed to the media.

Since some of these very delegations come out of meetings and tell the media hanging outside their versions of what they and others said, their motivations in curbing the media office are being interpreted as part of their efforts to manipulate information to suit their interests.

The WTO does not admit media to its meetings, and the rules provide only for the Chair of a meeting, at its discretion, issuing a press communique if it chooses. In practice for several years the press office of the GATT, and now its successor WTO, holds briefings where much of the routine information, including copies of statements of delegations, are made available to the media.

The situation is now such that the WTO would easily beat to the winning post every international and intergovernmental organization in terms of blocking flows of information. Even the World Bank and the IMF, after the sustained attacks on them from NGOs over their policies and programmes, have attempted to open out to the media and the public.

Perhaps through this process of controlled and managed information flow, the WTO and the majors hope to escape being the central focus of attention (and attack) from NGOs and others concerned over the current models of globalization that is creating so many fall outs.

But in fact they may be achieving the contrary.

In the case involving the US gasoline issue has noted that in Art XX, in the various exceptions for departures from the GATT obligations, some varying languages have been used by drafters: the term "necessary" has been used in respect of protection of public morals, protection of human, animal or plant life or health or securing compliance with laws or regulations not inconsistent with GATT provisions; and the term "relating to" has been used in respect of importations and exportations of gold, about products of prison labour and "conservation of exhaustible natural resources, if such measures are made effective in conjunction with restrictions on domestic production or consumption."

The Appellate Body has thus ruled against the application of the "necessity" test, namely whether the measures purported to be taken for conservation of exhaustible natural resources was "necessary" or other measures could have been resorted to. Rather the ruling appears to suggest, the test to be applied is whether the measures have a nexus or relationship to the objective.

Also, the requirement in XX (g) about such measures (on imports) being made effect in conjunction with restrictions on domestic production or consumption only requires "even-handedness" in imposition of restrictions, and not any requirement for being "identical". It has also ruled out the application of any empirical "effects" test (between the measures taken and the avowed objective).

The Appellate Body has laid out as a general rule of interpretation that the phrase in XX(g), 'relating to the conservation of exhaustible natural resources' may not be read "so expansively as seriously to subvert the purposes and objects of Art. III:4" (equal treatment between domestic and imported products) nor Art. III:4 given "so broad a reach as effectively to emasculate Art. XX(g) and the policies and interests it embodies".

Having given such a broad reach, the Appellate Body has then gone to say that the relationship between the affirmative commitments set out in, e.g. Articles I, II and XI, and the policies and interests embodied in the General Exceptions listed in Art. XX, can be given meaning within the framework of the General Agreement and its object and purpose by a treaty interpreter only on a case-to-case basis, by careful scrutiny of the factual and legal context in a given dispute, without disregarding the words actually used by the WTO Members themselves to express their intent and purpose."

The Appellate Body also appears to have got into a habit, common with superior domestic courts, of giving some obiter dicta on Trade and Environment issues -- an area where there is considerable difference among the WTO members -- by referring to the WTO preamble and the Marrakesh Ministerial Decision on Trade and Environment.

Several delegations privately said that the DSU, while being a mechanism for speedy settlement of disputes between members, has specifically made clear that while the WTO Dispute Settlement System serves to preserve rights and obligations of Members under the agreements covered by the WTO, and to 'clarify' the existing provisions in accordance with customary rules of interpretation of public international law, the recommendations and rulings of the DSB cannot add to or diminish rights and obligations under the agreements.

But with the Appellate Body's rulings automatically accepted, any views on issues not strictly involving legal questions posed to it become thus controversial, delegates said.

The review process of the DSU, to be started at the Singapore Ministerial meeting, would need to look carefully into these aspects, they noted. Also, they said, while the DSU has removed some traffic jams in the old GATT in the appointment of panels and the adoption of their rulings, it has created some new ones in terms of implementation of rulings.

For e.g. while the acceptance of rulings are now automatic, the implementation of a ruling, and removal of measures affecting another party, could easily be put off for a year or two.

Under the rules now, the WTO member required to carry out a ruling has to report within 30 days of its "intentions" on implementation. And if it is impracticable to comply with the ruling immediately, the Member will have a "reasonable period" of time to do so. This "reasonable" period is to be the period proposed by the Member and accepted by the DSB, or a period of time mutually agreed by the parties to the dispute within 45 days of adoption of the ruling, or a period of time determined through binding arbitration, with the arbitrator given a "guideline" that the period should not exceed 15 months from the adoption of a panel ruling.