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Circulated 7 December 2015
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Complainants Canada; Mexico
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Respondent United States
Mandate of the Arbitrator
On 29 May 2015, the Dispute Settlement Body (DSB) adopted the Article 21.5 Appellate Body reports in these disputes, and the reports of the compliance panel as modified by the Appellate Body. The findings adopted by the DSB were that the United States' amended country of origin labelling (COOL) requirements violated Article 2.1 of the TBT Agreement and Article III:4 of the GATT 1994 because they continued to accord less favourable treatment to imported livestock than to like domestic livestock. Thereafter, Canada and Mexico both filed requests with the DSB for authorization to suspend concessions or other obligations under Article 22.2 of the DSU. Canada and Mexico sought authorization to suspend concessions and related obligations in the goods sector under the GATT 1994 to an annual value of CAD3.068 billion and USD713 million, respectively.Footnote 1 The mandate of the Arbitrator in these proceedings was to ‘determine whether the level of such [proposed] suspension is equivalent to the level of nullification or impairment' to Canada and Mexico.Footnote 2
Main Decisions by the Arbitrator
Jurisdiction of the Arbitrator
‘On 26 June 2015, the Secretariat circulated a note indicating that “the parties agree that [this dispute] has been referred to arbitration under Article 22.6 of the DSU”, and noting the composition of the Arbitrator.’ Notwithstanding this agreement between the parties, the DSB had not itself referred the matter to arbitration. On 23 June 2015, the European Union – who was not a party to these arbitration proceedings – communicated to the DSB its view ‘that it “does not agree that an Article 22.6 DSU request … may be referred to arbitration other than by the DSB”.’Footnote 3 No party (i.e. the United States, Canada, or Mexico) objected to the referral of the dispute to arbitration. Nonetheless, the Arbitrator examined whether the absence of a DSB referral called into doubt whether the Arbitrator was properly ‘vest[ed] with jurisdiction’ to conduct these arbitration proceedings.Footnote 4 The Arbitrator concluded ‘that the procedural absence of formal DSB action in this case does not call into question the vesting of jurisdiction or the capacity of the Arbitrator to proceed. Hence, there was no reason in the present circumstances to suspend or terminate the proceedings on the basis of the manner of referral to arbitration.’Footnote 5
Third-Party Rights
Both Canada and Mexico requested third-party status in the other's arbitration proceedings. The Arbitrator granted these requests citing, in particular, the following factors: (1) ‘similar products and relevant trade barriers being at issue’ in the two proceedings; (2) ‘the potential need to adopt the same or similar methodologies in each proceeding’, (3) ‘the absence of any prejudice to the interests or due process rights of the United States’; and (4) that the Arbitrator could not ‘exclude the possibility that the rights of Canada and Mexico would be adversely affected through their inability to make a statement and submissions, and answer questions, in each other's proceedings’.Footnote 6
Inclusion of Domestic Price Suppression Losses in the Level of Nullification and Impairment
Both Canada and Mexico claimed nullification or impairment suffered as a result of the US COOL measure in respect of two types of losses: (1) export revenue losses, and (2) revenue losses from domestic price suppression.Footnote 7 The United States claimed that including the revenue losses from domestic price suppression in the level of nullification and impairment would be improper, arguing that the relevant trade benefit ‘relates to international trade in livestock, not to domestic markets’.Footnote 8 The Arbitrator concluded ‘that the relevant benefit in this case is the market access that has been nullified or impaired as a result of the COOL measure. Therefore, [the Arbitrator did] not include the domestic price suppression losses claimed by Canada and Mexico in the level of nullification or impairment of benefits.’Footnote 9
Level of Nullification and Impairment
The Arbitrator calculated that the annual level of nullification or impairment of benefits accruing to Canada and Mexico as a result of the COOL measure was CAD1,054.729 million and USD227.758 million, respectively. The Arbitrator found, therefore, that, ‘in accordance with Article 22.4 of the DSU, [Canada and Mexico] may request authorization from the DSB to suspend concessions and related obligations in the goods sector under the GATT 1994 at … level[s] not exceeding’ those named.Footnote 10
