One of the key features of the WTO dispute settlement process is the applicable set of procedures to address Members' compliance with panel and Appellate Body (AB) reports. An aspect of this process is that, after a WTO Member has been found to be acting not in conformity with its WTO obligations, ‘a reasonable period of time’ to implement the recommendations and rulings of the Dispute Settlement Body (DSU) must be fixed. The length of this period can be especially important for a successful developing country complainant who may be substantially affected by the other Member's violations of the covered agreements and whose interest may require the quickest possible compliance. When parties to the dispute do not agree among themselves, one of the ways in which the period of time of implementation of the panel and AB reports of the dispute may be set is through arbitration, pursuant to Article 21.3(c) of the Dispute Settlement Understanding (DSU), which provides in pertinent part:
[I]f it is impracticable to comply immediately with the recommendations and rulings, the Member concerned shall have a reasonable period of time in which to do so. The reasonable period of time shall be: …
(c) a period of time determined through binding arbitration within 90 days after the date of adoption of the recommendations and rulings. In such arbitration, a guideline for the arbitrator should be that the reasonable period of time to implement panel or Appellate Body recommendations should not exceed 15 months from the date of adoption of a panel or Appellate Body report. However, that time may be shorter or longer, depending upon the particular circumstances.Footnote 1
In several recent cases developing country complainants have obtained different results regarding the recognition of their developing country status as being one of the particular circumstances that must be taken into account by arbitrators when fixing the reasonable period of time for implementation of the recommendations of the DSB. In United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services,Footnote 2European Communities – Export Subsidies on Sugar,Footnote 3 and European Communities – Customs Classification of Frozen Boneless Chicken Cuts,Footnote 4 Antigua, Brazil, and Thailand invoked Article 21.2 of the DSU, according to which, ‘Particular attention should be paid to matters affecting the interests of developing country Members with respect to measures which have been subject to dispute settlement.’Footnote 5 These developing country complainants argued that, to establish the reasonable period of time of implementation, the arbitrator should take into account Article 21.2 in order to set a shorter implementation period than would usually be the case, because of their need to see prompt compliance with the respective panel and AB reports of the dispute.Footnote 6
The awards differed regarding the applicability of Article 21.2 in Article 21.3(c) proceedings and as to other issues that have a direct bearing on such applicability. US–Gambling and EC–Export Subsidies on Sugar concluded that Article 21.3(c) arbitrators should include developing country complainants' affected interests as part of the circumstances that arbitrators must take into account in setting the reasonable period of time of implementation. EC–Chicken Cuts, on the other hand, held that it was not necessary to take into account such situations for reasons that will be detailed below. As a result, Article 21.2 did not play any role within Article 21.3(c) proceedings in this award.
This paper builds on the reasoning in US–Gambling and EC–Export Subsidies on Sugar and provides a possible interpretation of the DSU that gives arbitrators direction regarding how to apply Article 21.2 in practice, with meaningful consequences for the benefit of developing countries. The interpretation achieves these benefits without impairing arbitrators' discretion to discharge their duties or constraining developed country respondents in their choice of the means to implement adopted panel and Appellate Body reports.
The paper is divided into four substantive parts. The first explains the arbitrators' reasoning in the above-mentioned awards and highlights the different approaches they took regarding the relevance of Article 21.2 in Article 21.3(c) proceedings from the perspective of developing country complainants. The second part briefly outlines the main shortcomings of these awards from the developing country Members' perspective. The third part presents an interpretative approach that could be used by arbitrators to apply Article 21.2 within Article 21.3(c) proceedings triggered by developing country Members. Finally, the fourth part shows how developing country complainants and developed country respondents could make use of the proposed interpretation in such proceedings.
1. The diverse views in recent Article 21.3(c) awards initiated by developing countries
US–Gambling, EC–Export Subsidies on Sugar, and EC–Chicken Cuts adopted different approaches regarding the following issues: (i) the notion of a reasonable period of implementation by the respondent Member of the measures to comply with the adopted panel and Appellate Body reports of the dispute, (ii) the level of deference Article 21.3(c) arbitrators should show to respondents' choices regarding the means of implementation that take longer for compliance than others available, and (iii) most important for the purpose of this article, the relevance of the fact that the complainants are developing country Members as one of the circumstances that Article 21.3(c) arbitrators must take into account when determining the reasonable period of time for the implementation of adopted reports.Footnote 7
The reasonable period of time for implementation in US–Gambling, EC–Export Subsidies on Sugar, and EC–Chicken Cuts
The arbitrator in US–Gambling, and those in EC–Export Subsidies on Sugar and EC–Chicken Cuts differed regarding the scope of the term ‘reasonable period of time for implementation’. In the latter two awards, the term was found to mean the shortest period of time possible for the implementing Member.Footnote 8 The arbitrator in EC–Chicken Cuts considered that it was the time necessary to adopt the measures to comply with the DSB recommendations and rulings according to the given Member's standard practice, taking into account the particular circumstances of the case. The arbitrator in EC–Chicken Cuts said that ‘[w]hile WTO Members will, unquestionably, always want to ensure that they are complying fully with all of their WTO obligations by implementing adverse WTO rulings as quickly as possible in their own legal systems, ordinarily their standard practices in those systems should suffice’.Footnote 9EC–Chicken Cuts went further and declared that standard practice in the implementing Member may comprise both steps mandated by law to adopt the measures necessary to comply with the adopted reports and those that, although are not mandatory, are usual whenever a measure of the given type is enacted, such as consultations with interested parties.Footnote 10 Both elements must be assessed by Article 21.3(c) arbitrators.Footnote 11 Basically, according to this approach, Article 21.3(c) arbitrators should try to determine the time needed to enact the measures to comply with the respective panel or AB report in accordance with the standard practice of the respondent Member, and this time would be the reasonable period of time for implementation.
The arbitrator in US–Gambling, however, contested the assertion that the terms ‘reasonable’ and ‘shortest’ period of time are interchangeable. In his view, the term explicitly contemplated in Article 21.3(c) was the ‘reasonable period of time to implement’, not the ‘shortest’ one, and it would be inconvenient to assume that arbitrators should always look for the shortest period of time of implementation, because it could tie their hands and prevent them from estimating a period of implementation that, according to the particular circumstances of the case, was reasonable.Footnote 12 Thus, from this reasoning one could conclude that, according to US–Gambling, there could be cases in which the reasonable period of time of implementation was not the shortest one, according to the particular circumstances of the case.
What level of deference should Article 21.3(c) arbitrators show to respondents' choices of means of implementation that take longer for compliance than others available?
In US–Gambling, EC–Export Subsidies on Sugar, and EC–Chicken Cuts, the arbitrators confirmed that it was up to the respondent Member to decide by which means it would implement the recommendations and rulings of the DSB.Footnote 13 However, these awards demonstrated slightly different perspectives as to the deference Article 21.3(c) arbitrators should show to respondent Members' choice of the specific means of implementation, particularly when the means chosen takes longer to comply with the ruling than other means that are available. US–Gambling left the question open,Footnote 14 but EC–Export Subsidies on Sugar and EC–Chicken Cuts put limits on respondent Members' choices in this situation. Indeed, EC–Export Subsidies on Sugar indicated that the implementing Member did not have complete freedom to choose any method of implementation,Footnote 15 and the arbitrator pointed out that:
[T]he chosen method must be such that it could be implemented within a reasonable period of time in accordance with the guidelines contained in Article 21.3(c). Objectives that are extraneous to the recommendations and rulings of the DSB in the dispute concerned may not be included in the method if such inclusion were to prolong the implementation period …Footnote 16
EC–Chicken Cuts took the same general view, although with a slight difference in perspective, given the particularities of the case. This award made a distinction, not contemplated in EC–Export Subsidies on Sugar, regarding the degree of deference arbitrators had to show regarding implementing Members' decisions. If the implementation means fall within the respondent Member's legal system, Article 21.3(c) arbitrators should defer to the Member's choice even if that choice takes longer to implement than other available internal means of implementation.Footnote 17 However, if the respondent Member attempts to deploy implementation means that fall outside its legal system,Footnote 18 Article 21.3(c) arbitrators should show a lower degree of deference,Footnote 19 and according to EC–Chicken Cuts, the implementing Member has the burden of demonstrating that this deployment ‘is necessary for, and therefore indispensable to, that Member's full and effective compliance with its obligations under the covered agreements by implementing the recommendations and rulings of the DSB’.Footnote 20
There is, however, an aspect related to the selection of the means of implementation in which all three awards coincided: respondent Members do not have to deploy extraordinary means to comply with adopted panel and AB reports.Footnote 21 Therefore, Article 21.3(c) arbitrators do not have to estimate the reasonable period of time for implementation based on the availability of such means.
The relations between Articles 21.2 and 21.3(c) of the DSU in US–Gambling, EC–Export Subsidies on Sugar, and EC–Chicken Cuts
Two lines of jurisprudence exist regarding the relations between Articles 21.2 and 21.3(c) of the DSU. The first, set recently by EC–Chicken Cuts, considers that it is not necessary to link these provisions, given that the reasonable period of time of implementation by the respondent Member should be the shortest, no matter the type of Member the complaining party is.Footnote 22 The second was first suggested by the arbitrator in US–Gambling and was further developed by the arbitrator in EC–Export Subsidies on Sugar. It recognizes that the situation that a developing country complainant is facing is one of the particular circumstances that Article 21.3(c) arbitrators might take into account when estimating the reasonable period of time for implementation of the adopted panel or AB reports of a given dispute. It was the arbitrator in US–Gambling who took the first step towards the recognition of links between Articles 21.2 and 21.3(c). He stressed, in the above-mentioned award the following:
Turning briefly to the context in the light of which Article 21.2 must be interpreted, I note that the provision is located within Article 21, which is entitled ‘Surveillance of Implementation of Recommendations and Rulings’. The second paragraph of Article 21, like the first,Footnote 23 sets out a broad principle that guides and informs the more specific paragraphs that follow, including Article 21.3. Given that Article 21 contains a number of additional paragraphs dealing with different aspects of surveillance and implementation, it seems likely that Article 21.2 informs each of the subsequent paragraphs in a different manner. Arguably, for example, Article 21.2 could constitute a legislative expression of a factor that is to constitute a ‘particular circumstance’ to be taken into account under Article 21.3(c). The last two paragraphs of Article 21 are also … of potential use in interpreting the scope and role of Article 21.2. Each of those provisions also deals with developing country Members of the WTO at the stage of surveillance and implementation of DSB recommendations and rulings.Footnote 24 Yet, contrary to Article 21.2, both Article 21.7 and Article 21.8 expressly apply to the developing country Members that brought the case, that is, to developing countries as complaining parties.Footnote 25
This analysis was further developed in EC–Export Subsidies on Sugar, where the arbitrator, relying heavily on US–Gambling, said:
[I] consider that Article 21.2 is to be interpreted as directing an arbitrator to pay ‘[p]articular attention’ to ‘matters affecting the interests’ of both an implementing and complaining developing country Member or Members.Footnote 26 … the text of Article 21.2 does not limit its scope of application to an implementing developing country Member … . Footnote 27
US–Gambling and EC–Export Subsidies on Sugar departed from the traditional Article 21.3(c) arbitral awards according to which the focus of the estimation of the reasonable period of time of implementation was mainly on the respondent Member's implementing process.Footnote 28 Although this may be the rule in most cases, the awards in US–Gambling and EC–Export Subsidies on Sugar provide that the ‘particular circumstances’ of the case might exceptionally include factors other than the respondent Member's circumstances, such as the situation faced by the developing country complainant's interests in the dispute, to determine the reasonable period of time for implementation. There is indeed, from the developing countries' perspective, a systemic difference between these two above-mentioned approaches, because while US–Gambling and EC–Export Subsidies on Sugar allow arbitrators to take into account the developing country complainant's affected interest in Article 21.3(c) proceedings, EC–Chicken Cuts regards it as being unnecessary.
The different results obtained by the developing country complainants in US–Gambling, EC–Export Subsidies on Sugar, and EC–Chicken Cuts
Developing country complainants have recently obtained different results regarding having their affected interests accepted as being one of the particular circumstances Article 21.3(c) arbitrators must look at when fixing the reasonable period of time for implementation of the recommendations of the DSB.
Although it was the arbitrator in US–Gambling who first recognized the possibility of considering the developing country status of the complaining party, and the adverse consequences of the inconsistent measures on its interests as one of the relevant particular circumstances to determine the reasonable period of time of implementationFootnote 29 within Article 21.3(c) proceedings, US–Gambling did not take into account Antigua's status or situation as a particular circumstance relevant to the calculation of the time for compliance with the adopted panel and AB reports of this case. The arbitrator found that Antigua had proven neither the negative effects inflicted by the inconsistent measures on its industries nor a clear relationship between the measures and such effects.Footnote 30
In contrast, taking into account this burden-of-proof requirement of US–Gambling, Brazil and Thailand were able to prove in EC–Export Subsidies on Sugar the negative impact of the European Communities' inconsistent measures on their interests and the causal link between both.Footnote 31 The arbitrator in EC–Export Subsidies on Sugar recognized that the burden of proof had been satisfied, and for the first time in Article 21.3(c) jurisprudence, the situation of the developing country complainant was considered as being relevant for the calculation of the reasonable time of implementation by the respondent.Footnote 32
EC–Export Subsidies on Sugar meant a breakthrough for developing country complainants in Article 21.3(c) proceedings;Footnote 33 however, any future positive effect of this award did not last long, because EC–Chicken Cuts returned matters to where they had been before US–Gambling. Indeed, although the arbitrator in EC–Chicken Cuts recognized that Brazil had demonstrated that its interests had been affected by the measures adopted by the European Communities, he denied attributing any consequence derived from Brazil's developing country status and affected interests, because he was calculating the shortest period of time of implementation, regardless of the type of complaining party.Footnote 34
2. Brief comments on the awards in US–Gambling, EC–Export Subsidies on Sugar, and EC–Chicken Cuts from the developing country complainants' viewpoint
From the developing country complainants' perspective, EC–Chicken Cuts raises some concerns as to its definition of the term ‘reasonable period of time for implementation’, despite the fact that the arbitrator defined it as the shortest period of time of implementation. This definition certainly cannot be the source of worry. The concern is the fact that, ultimately, the arbitrator in EC–Chicken Cuts linked the reasonable period of time only to the time that the implementing Member takes to adopt measures to comply with the recommendations and rulings of the DSB according to its standard practice, as was mentioned in Part I.A. The end result of applying this approach might not be the shortest period of time for implementation in disputes where the complaining party in Article 21.3(c) proceedings was a developing country Member. In effect, the developed country Member might well comply more quickly with the adopted reports of the case, for instance, by omitting some non-statutory steps of the standard practice or by reducing the time they usually took. Therefore, the time standard practice takes to implement may not always be the shortest period of implementation.
Also, EC–Chicken Cuts virtually ignores the relation that Article 21.2 could have with Article 21.3(c), and, by doing so, prevents developing country complainants from potentially gaining the benefits of these provisions within Article 21.3(c) proceedings.
However, it is important to underscore the findings of EC–Export Subsidies on Sugar and EC–Chicken Cuts regarding, first, the limits on respondent Members' right to choose the means of implementation, and, second, the lower level of deference that, according to EC–Chicken Cuts, arbitrators may show to respondent Members' choice of means when they comprise actions outside the Member's legal system. These findings may be of significant value for developing countries in Article 21.3(c) proceedings. The existence of these limits and the lower degree of deference could even be more readily justified when the complainant is a developing country Member that is claiming the benefit of Article 21.2 and has shown the adverse impact that the inconsistent measures are having on its interests.Footnote 35
Let me now turn to commenting on the jurisprudence regarding the relations between Article 21.2 and 21.3(c) of the DSU in US–Gambling and EC–Export Subsidies on Sugar. Undoubtedly, these cases represent an important development in protecting developing country Members' demonstrated affected interests, though the jurisprudence contains certain elements that are not yet fully clarified. For example, the arbitrator in EC–Export Subsidies on Sugar included the developing country complainants' interests as part of the particular circumstances of the dispute when he calculated the reasonable period of time of implementation, but the award was completely silent regarding how much of a role these circumstances played in the calculation.Footnote 36 This silence may have been convenient for the arbitrator. It permitted him to avoid debates regarding whether he had attached either too much or too little importance to the developing country complainants' affected interests, but it might not be transparent enough from a developing country's standpoint.Footnote 37
There are other questions, however, that a comprehensive understanding of the role Article 21.2 may play in Article 21.3(c) proceedings should address:
(a) In practical terms, what does it mean for developing country complainants that their interests are considered as a ‘particular circumstance’ taken into account by Article 21.3(c) arbitrators when calculating the reasonable period of time of implementation?
(b) Is it possible that, despite the fact that a given developing country complainant's situation is regarded as a ‘particular circumstance’, an Article 21.3(c) arbitrator might lawfully not assign it any special effect at the time of calculating the reasonable period of time for implementation?
(c) How can an arbitrator effectively take into account a developing country complainant's affected interests in Article 21.3(c) proceedings, and what obligations is he or she under?
A complete interpretation of how to apply Article 21.2 in Article 21.3(c) proceedings triggered by developing country complainants would provide answers to these questions. However, for the interpretation to be persuasive and operative for arbitrators, it should satisfy four requirements. First, the interpretation must protect the developing country complainant's interests. Second, it cannot interfere unduly with the respondent Member's right to choose the means of implementation. Third, the interpretation must preserve Article 21.3(c) arbitrators' discretion in calculating the reasonable period of time of implementation, even when developing countries complainant triggers these proceedings, invokes Article 21.2, and has furnished proof of the adverse effects the inconsistent measures have had on its interests.Footnote 38 And, fourth, the interpretation must ensure transparency regarding how and to what extent Article 21.3(c) arbitrators apply Article.21.2 when estimating the reasonable period of time of implementation by a developed country respondent.
3. A proposed interpretation of how arbitrators could apply Article 21.2 within Article 21.3(c) proceedings initiated by developing country complainants
Guided by the above-mentioned four principles, the interpretation advanced in this paper seeks to show, first, what actions arbitrators could take to apply Article 21.2 within Article 21.3(c) proceedings; and, second, what obligations an arbitrator has when a developing country Member invokes Article 21.2 in such proceedings and satisfies the burden of proof consecrated therein.
Actions arbitrators may take to apply Article 21.2 within Article 21.3(c) proceedings
An interpretation by Article 21.3(c) arbitrators of Article 21.2 according to the principles of interpretation provided by Article 31 of the Vienna Convention on the Law of TreatiesFootnote 39 may allow the arbitrators to identify and justify the type of specific substantive and procedural actions they may take to apply Article 21.2 in Article 21.3(c) proceedings started by developing country complainants. In this paper, given the broad texts of Articles 21.2 and 21.3(c), I will make specific use of the approach to interpret Article 31 adopted by the AB in United States–Countervailing Duties on Certain Corrosion-Resistant Carbon Steel Flat Products from Germany. Namely, I will begin the interpretation with the text of the provision, and if such text does not provide enough guidance,Footnote 40 its immediate context will be used to ascertain the content of the provision,Footnote 41 in light of the object and purpose of the treaty.Footnote 42
Although the text of Article 21.2 may be seen as imposing certain obligations on Article 21.3(c) arbitrators – an issue that will be fully discussed below – the raw texts of Articles 21.2 and 21.3(c) are silent with regard to the type of actions that these arbitrators may take to apply Article 21.2.Footnote 43 While Article 21.3(c) orders arbitrators to calculate the reasonable time of implementation taking into account the ‘particular circumstances’, Article 21.2 recommends that they pay attention to ‘matters affecting the interests of developing country members’ in dispute settlement proceedings. Neither Article 21.3(c) nor Article 21.2 provide any guidance regarding the type of actions arbitrators can take in order to apply the latter provision.
That is why arbitrators should look at the immediate context of Articles 21.2 and 21.3(c) for the purpose of identifying the kind of specific actions they can deploy when applying Article 21.2 in Article 21.3(c) proceedings triggered by developing country complainants. The arbitrator in US–Gambling, as has been seen, suggested that one of the provisions that could be used as context to interpret Article 21.2 within Article 21.3(c) proceedings initiated by developing country complainants was Article 21.7,Footnote 44 which provides:
If the matter is one which has been raised by a developing country Member, the DSB shall consider what further action it might take which would be appropriate to the circumstances.
The use of Article 21.7 as context for the application of Article 21.2 by Article 21.3(c) arbitrators can be supported on a number of reasons. First, as the arbitrator in US–Gambling has already noted, all the provisions make up part of the same Article 21, whose heading is Surveillance of Implementation of Recommendations and Rulings; and second, an arbitrator who is requested to take into account the affected interest of the developing country complainant is in a similar position to that of the DSB under Article 21.7, from a general perspective. In effect, (i) both the DSB applying Article 21.7 and the Article 21.3(c) arbitrator seeking to apply Article 21.2 face an issue raised by a developing country complainant Member; (ii) both the DSB and the arbitrator may respond with a result that must conform to the circumstances;Footnote 45 and (iii), both the DSB and the arbitrator are called on to apply two provisions that are of a special nature, because they are aimed at providing differential treatment to developing country Members within dispute settlement proceedings.
Given the similarity in the situations of an Article 21.3(c) arbitrator called on to apply Article 21.2 and of the DSB asked to apply Article 21.7, the relevance of the context provided by Article 21.7 to the interpretation of Articles 21.2 and 21.3(c) is that the Article 21.7 authorizes the DSB to adopt what it labels as ‘further actions’. The Oxford English Dictionary assigns to the word ‘further’ the following meaning: ‘more extended, going beyond what already exists or has been dealt with; additional, more’.Footnote 46 Thus, according to this meaning, Article 21.3(c) arbitrators, by virtue of the context provided by Article 21.7 to Article 21.2, could take actions additional to those they adopt normally, when the complaining party is a developing country Member and has met the burden of proof established in Article 21.2.Footnote 47,Footnote 48
Taking ‘further actions’ could mean for an Article 21.3(c) arbitrator the adoption of a shorter period of time of implementation than would normally be the case, were the complaining party a developed country. If this result may be one of the consequences of interpreting Articles 21.2, Articles 21.3(c) and 21.7 in context, such interpretation receives additional support when viewed in light of the object and purpose of, first, the DSU, and, second, of the WTO Agreement. In effect, because the contextual interpretation of Articles 21.2, 21.3(c), and 21.7 may lead, as will be seen below, to a swifter implementation of the recommendations and rulings of the DSB than would be normally the case,Footnote 49 such interpretation is perfectly in line with the need for prompt compliance, one of the main objectives of the DSU as contemplated by its Article 3.3.Footnote 50
The pertinence of using Article 21.7 as part of the context for the interpretation of Article 21.2 in Article 21.3(c) proceedings could also find additional support in the declared object that the WTO Agreement included in its the preamble, where it is recognized that ‘there is a need for positive efforts designed to ensure that developing countries, and specially the least developed among them, secure a share in the growth in international trade commensurate with the needs of their economic development’.Footnote 51 A shorter period of time of implementation than would normally be the case fixed on the basis of a contextual interpretation of Articles 21.2, 21.3(c), and 21.7 favours the achievement of this objective, because this result sets the basis for a speedier removal of the inconsistent obstacles to trade that were in place. The developing country complainant therefore is able to benefit from the growth in international trade that such removal or modification may yield for its concerned goods or services.
In sum, the joint interpretation of Articles 21.2 and 21.7 in Article 21.3(c) proceedings triggered by developing country members has support in the methods of interpretation provided for in Article 31 of the Vienna Convention on the Law of Treaties. Having said that, it is important to turn to the specific aspects of Article 21.3(c) proceedings for which the context provided by Article 21.7 may be valuable.
If, as has been said, by virtue of the joint interpretation of Articles 21.2, and 21.7 in Article 21.3(c) proceedings triggered by developing country complainants, arbitrators can establish a shorter period of time for implementation than would normally be the case were the complaining Member a developed country, a benchmark should be defined that would permit Article 21.3(c) arbitrators to demonstrate and justify the ‘further action’ taken. At this stage, what the arbitrator said in EC–Chicken Cuts becomes relevant: he stated that the benchmark in Article 21.3(c) proceedings in which a developing country is the complainant would be the time it takes to adopt measures equivalent to those necessary to implement the recommendations of the DSB according to the standard practice of the respondent Member. This is the benchmark that takes into account only the implementing Member's circumstances and should be the point of departure for Article 21.3(c) arbitrators applying Article 21.2. A ‘further action’ adopted by Article 21.3(c) arbitrators that would pay attention to the developing country complainant's situation could mean a reduction from the benchmark.
It is important to say that the adoption of this ‘further action’ by an arbitrator applying Article 21.2 in proceedings initiated by a developing country complainant is consistent with what the arbitrator in Indonesia–Autos did. There, he applied Article 21.2 in Article 21.2(c) proceedings in which the developing country member was the implementing party. When he took into account Article 21.2, he said:
Indonesia has indicated that [in a normal situation] it requires six months from the date of adoption of the Panel Report to conduct the domestic rule-making process necessary to implement the recommendations and rulings of the DSB in this case …
[H]owever, this is not a ‘normal situation’. Indonesia … is currently in a dire economic and financial situation. … In these very particular circumstances, I consider it appropriate to give full weight to matters affecting the interests of Indonesia as a developing country pursuant to the provisions of Article 21.2 of the DSU. I, therefore, conclude that an additional period of six months over and above the six-month period required for the completion of Indonesia's domestic rule-making process constitutes a reasonable period of time for implementation of the recommendations and rulings of the DSB in this case.Footnote 52
Simply put, when a developing country implementing Member invokes Article 21.2 in Article 21.3(c) proceedings, arbitrators could, as the arbitrator in Indonesia–Autos implicitly did, set as a benchmark the time of implementation in normal circumstances in the developing country implementing Member and add additional time to account for its particular circumstances, if they consider it appropriate. On the contrary, when developing country complainants invoke the same provision in the same proceedings, arbitrators could use as a benchmark the time of implementation according to the standard practice in the developed country implementing Member and reduce this time to an extent that corresponds to the demonstrated affected interest of the developing country complainant.
Although the interpretation advanced in this paper is, in basic terms, the application of Indonesia–Autos to Article 21.3(c) proceedings triggered by developing country complainants, the interpretation seeks to go further in detailing how it can be applied by arbitrators before they finally determine the period of time of implementation.
To continue, it can be said that if, as was suggested, arbitrators may adopt ‘further actions’ – including those that could be labelled ‘further substantive actions’ because they imply an effective reduction of the time for implementation than would normally be the case were the complainant a developed country Member – such arbitrators may also adopt certain ‘further procedural actions’ required to take the former. One could draw on EC–Chicken Cuts to highlight the type of ‘further procedural actions’ relevant in Article 21.3(c) proceedings triggered by developing country complainants.
EC–Chicken Cuts said, as has been mentioned above in Section 1, that arbitrators could be inquisitive regarding the respondent's choices to implement the recommendations of the DSB through means outside its legal system, which could usually take longer, in order to ascertain if other, shorter means could be used by the implementing Member. A similar inquisitive prerogative could be found to exist in the proceedings dealt with here. Indeed, if a ‘further action’ an arbitrator might take under Article 21.3(c) proceedings were to result in a reduction in the time for implementation, another way to do so would be to take the additional procedural action to inquire of the implementing developed Member during the proceedings whether a shorter means of implementation existed and to require a justification of why this means would not be deployed to comply with the adopted reports. If there were no such justification, the arbitrator could have the discretion to establish the reasonable period of time on the basis of the demonstrated availability of the shorter means of implementation in the respective respondent Member. For instance, if a developed country respondent decided that the means to implement the adopted panel or AB report was by a constitutional amendment, which would take longer than the enactment of domestic legislation, the arbitrator seeking to apply Article 21.2 could show less deference to the implementing Member's choice and be more inquisitive by requesting this Member to demonstrate why other domestic means whose enactment took considerably less time were not available. If the respondent Member failed to provide a convincing argument, the arbitrator could eventually set the reasonable period of implementation based on those domestic means that, according to the evidence of the proceedings, were at the disposal of the Member.Footnote 53
Arbitrators' obligations when applying Article 21.2 within Article 21.3(c) proceedings
Regarding the type of obligations that Article 21.2 imposes on Article 21.3(c) arbitrators, the proposed interpretation advanced here does not tie arbitrators' hands in every proceeding in which a developing country Member is a complainant, but it does not permit them to remain indifferent to this particularity either.
To begin with, it must be noted that apparently the wording of Article 21.2 contains ‘purposive, not operative language’, to use the expression of the AB in Turkey–Restrictions on Imports of Textile and Clothing Products,Footnote 54 because the word contained therein is ‘should’, which does not denote a mandatory action,Footnote 55 and therefore the provision does not impose any obligation on Article 21.3(c) arbitrators. This conclusion is valid in the sense that Article 21.3(c) arbitrators are not obliged to adopt specific actions, even if developing country complainants have met the burden of proof required in Article 21.2 of the DSU, because the case may be that the standard practice of the implementing developed Member could operate very quickly and respond to the implementation needs of the complainant; therefore, there would be no need to reduce the period of time for implementation on these grounds.
To say the foregoing does not mean that the invocation of Article 21.2 would not create any obligation on arbitrators. These obligations emerge from interpreting Article 21.2 in the context, first, of Article 21.3(c), and, second, of Article 12.11 of the DSU.
(1) Proportionality in the application of Article 21.2 in Article 21.3(c) proceedings
The first obligation imposed on arbitrators is that, if they decide to take what I have called ‘further substantive actions’ to apply Article 21.2, such actions should be related to the circumstances of the developing country complainant's affected interests by virtue of Article 21.3(c). Indeed, this must be so, because the provision uses the expression ‘depending upon the particular circumstances’ in its last sentence, and according to the Oxford English Dictionary, one of the meanings of the verb ‘depend’ is, ‘to be contingent on or conditioned by’.Footnote 56 Therefore the magnitude of the reasonable period of implementation is conditioned by the circumstances both of the developed country respondent and of the developing country complainant. The extent of the ‘further actions’ adopted by arbitrators is, in particular, conditional on the developing country complainant's situation, due to the cause-and-effect relation that exists between the scope of ‘the further actions’ and the final period of time to implement that is shorter than would be normally the case. Thus, for instance, if arbitrators assign a reduction from the benchmark of standard practice to take into account the complainant's situation, the reduction has to correspond to such a situation.Footnote 57 Arbitrators would not be free to make either disproportionate reductions or meaningless ones, given the circumstances of the developing country complainant's affected interest.
(2) Article 21.3(c) arbitrators' duty to justify how they applied Article 21.2 in proceedings triggered by developing country members
The second obligation arbitrators have is that, whenever they are called on to apply Article 21.2 within Article 21.3(c) proceedings, they have to justify in the award the decision either not to take any particular action or to take it. In the first case, arbitrators must specify why they considered it not necessary to adopt further actions to address the adverse situation of the developing country complainant's interest, which, as was mentioned, may be the case if the developed country implementing Member has the means to rapidly implement the recommendations and rulings of the DSB. On the other hand, if arbitrators adopt ‘further actions’, they must provide the reasons why and explain how and to what extent the developing country's affected interests determined the calculation of the reasonable period of implementation.Footnote 58
The duty to justify is the result of an interpretation of Article 21.2 in the context of Article 12.11, the latter being also interpreted in the context of other provisions of the DSU. According to Article 12.11:
When one or more parties is a developing country Member, the panel report shall explicitly indicate the form in which account has been taken of relevant provisions on differential and more-favoured treatment for developing country Members that form part of the covered agreements which have been raised by the developing country Member in the course of dispute settlement procedures.Footnote 59
For the orderly presentation of the reasons behind the arbitrators' duty to justify, this paper proceeds as follows: first, an interpretation of the main obligation of Article 12.11 will be presented. Second, the paper will show why Article 12.11 generally cannot be understood to refer exclusively to panels and panel proceedings. Third, specific reasons will be presented as to why Articles 21.2 and 12.11 read together impose the duty to justify on Article 21.3(c) arbitrators and why the result does not contradict any provision of the DSU.
(a) The obligation consecrated in Article 12.11 of the DSU
The use of the word ‘shall’ in the phrase ‘shall explicitly indicate’ denotes that Article 12.11 is a mandatory provision and that it imposes an obligation. The obligation is defined by the verb ‘indicate’, which according to the Oxford English Dictionary, means ‘to make known, to show’.Footnote 60 Lastly, the obligation arises when two conditions are fulfilled: (i) developing country Members have raised an issue in dispute settlement procedures; and (ii) this issue is related to a provision of the covered agreements that sets a differential or most favoured treatment for these Members.
(b) Article 12.11's duty to justify is restricted neither to panels nor to panel proceedings
(i) Article 12.11 does not allude only to panels
Apparently Article 12.11, by its reference to panel reports, imposes the duty to justify only on panels. To begin with, this is an interpretation of the said provision based exclusively on its text taken in complete isolation from other provisions of the DSU. This is a method of interpretation that must be conducted with extreme care, because it is not the most recommended to ascertain the meaning of international norms. As Ian Sinclair maintains, ‘One cannot simply concentrate on a paragraph, an article, a section, a chapter or a part.’Footnote 61
On the other hand, the interpretation based on this method, according to which reference to panels in the DSU means panels only with the exclusion of other WTO adjudicators, renders absurd and unreasonable results when applied in other circumstances, which further indicates its weakness in relation to the interpretation of the DSU. For instance, Article 11, one of the cornerstones of the WTO dispute settlement system, establishes that ‘a panel should make an objective assessment of the matter before it’.Footnote 62 If interpreters were to give the word ‘panels’ its ordinary meaning only, then Article 21.3(c) arbitrators, Article 22 arbitrators, and even the AB, which is not mentioned in Article 11 either, could make assessments that were not objective when adjudicating disputes in different stages of the dispute settlement system. Certainly, such a narrow interpretation would hardly receive any attention if it were made before these arbitrators or the AB.
However, to show that interpretations in isolation of the DSU may not be conducive to an appropriate assertion of the meaning of its provisions is just the first step regarding the determination of the addressees of Article 12.11. It must be demonstrated that specifically an interpretation of this provision in the context of the DSU evidences that it does not allude to panels and panel proceedings only, but to other WTO adjudicators and proceedings.
Article 12.11 refers to ‘panel reports’ and to ‘dispute settlement procedures’. In order to demonstrate that Article 12.11 has a broad meaning, it is necessary to show in turn that: (i) the reference to panel reports in other provisions of the DSU has not prevented interpreters from applying such provisions to other stages of dispute settlement; and (ii) the term ‘dispute settlement procedures’ has a broad meaning in the DSU, and therefore it does not refer in Article 12.11 to panel proceedings exclusively.
Regarding the first requirement, it is important to highlight that the allusion to panels in different provisions of the DSU has not impeded interpreters from extending the provisions to other WTO adjudicators when there has been a need to do so. To cite but one example, the provision regarding panels' terms of reference has rightly been extended to also cover Article 22.2 arbitration.Footnote 63 So, some case-law has already shown that mention of panel or panel reports is not an obstacle to extending the provision to other phases of WTO dispute settlement.
As to the second requirement – namely, that the use of the term ‘dispute settlement procedures’ in Article 12.11 has a broad meaning and does not only allude to panel proceedings – it can be said that an interpretation of Article 12.11 in the context of the DSU and on the basis of an AB report supports this assertion.Footnote 64
In effect, the wide nature of the term ‘dispute settlement procedures’ is first revealed by the way the term is utilized in Article 3.10 of the DSU, which provides that ‘it is understood that … 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 good faith in an effort to resolve the dispute …’Footnote 65 The term in Article 3.10 cannot be limited only to panel proceedings, and it is understood to mean that resort to the WTO dispute settlement system will not be regarded by Members as an unfriendly act in any of the different stages of the system. Second, the broad meaning of the term ‘dispute settlement procedures’ is also supported by a deduction of what the AB has said regarding its perfectly synonymous ‘dispute settlement proceedings’ when used in Article 21.5 of the DSU. The AB has implicitly stated in Mexico – Antidumping Investigation of High Fructose Corn Syrup (HFCS) from the United States – Recourse to Article 21.5 of the DSU by the United States that the mention in Article 21.5 to dispute settlement proceedings does not allude to compliance proceedings only.Footnote 66
In consequence, the DSU uses the term ‘dispute settlement procedures’ or ‘dispute settlement proceedings’ in a broad sense, and therefore, the reference to them in Article 12.11 does not allude only to panel proceedings.Footnote 67 Now the point is to demonstrate why the duty established in Article 12.11 can specifically be extended to Article 21.3(c) arbitrators when a developing country complainant has invoked Article 21.2 and fulfilled its burden of proof.
(c) Specific interpretation of the DSU leading to the extension of the duty to justify of Article 12.11 over Article 21.3(c) arbitrators
The duty to justify provided for in Article 12.11 can be specifically extended over 21.3(c) arbitrators by a reading of Article 12.11 in the context of Article 21.2. First of all, it is important to mention that Article 21.2 and Article 12.11 have a close connection, in the sense that Article 21.2 is one of the provisions of a covered agreement, the DSU,Footnote 68 that sets forth a differential and most-favoured treatment for developing country Members. Therefore, when a developing country raises Article 21.2 in panel proceedings, the panel report must make known how it took into account this provision in such proceedings. The issue is whether the same Article 21.2 invoked by the same type of members, but before Article 21.3(c) arbitrators, carries with it Article 12.11 and imposes on these arbitrators the duty to make known how they applied Article 21.2 in their proceedings. The answer to this question is that the extension of the duty to justify consecrated in Article 12.11 over such arbitrators is possible unless there is an interpretation of the DSU preventing them from doing so. There is not.
The duty to provide reasons on the basis of Article 12.11 regarding how the Article 21.3(c) arbitrators applied Article 21.2 is perfectly appropriate in the course of such proceedings, when a developing country complainant has raised the provision and met its burden of proof. The norm, Article 21.2, can be invoked in Article 21.3(c) proceedings triggered by developing country complainants since US–Gambling and EC–Exports Subsidies on Sugar, and the duty to justify of Article 12.11 flows from the pertinence of such invocation.
This conclusion is also supported once Articles 12.11, 21.2, and 21.3(c) are seen in light of the objective of the DSU of clarifying the existing provisions of the covered agreements set forth in Article 3.2. In this regard, when interpreting Article 12.7 of the DSU, according to which ‘the report of a panel shall set out the findings of fact, the applicability of relevant provisions and the basic rationale behind any findings and recommendations that it makes. …’,Footnote 69 the AB has stated that the requirement to provide reasons established in this provision ‘contributes to other WTO Members' understanding of the nature and scope of the rights and obligations in the covered agreements'.Footnote 70
In the particular situation, the arbitrators' duty to justify how they took Article 21.2 into account – or why they did not take it into account – when it was invoked by a developing country complainant becomes key to the Members' understanding of how to make effective use of this provision in a very important stage of dispute settlement.Footnote 71
Concluding, the arbitrators' duty to show how they applied Article 21.2 is possible on the basis of a joint interpretation of Articles 21.2, 21.3(c), and 12.11 in the context of the DSU. The existence of this duty is not prevented by any provision of such Agreement; it is consistent with the relevance of Article 21.2 in these proceedings and furthers key objectives of the DSU.Footnote 72
In summary, arbitrators in Article 21.3(c) proceedings in which the complaining parties are developing countries should have the following prerogatives:
(a) To include the situation of the developing country complainant as part of the particular circumstances of the case relevant to determining the reasonable period of time for implementation.
(b) To take ‘further procedural actions’ in order to determine the type of ‘further substantive actions’ appropriate to the circumstances faced by developing country complainants. One such ‘further procedural action’ could be to inquire during the Article 21.3(c) proceedings whether shorter means of implementation existed other than the ones proposed by the respondent Member.
(c) The ‘further substantive actions’ that arbitrators might take could include the following:
(i) Following EC–Chicken Cuts, they could choose, as a benchmark, the period of time it takes the respondent Member country to enact the measures to comply with the adopted reports of the case according to its standard practice and proceed to reduce this time by an amount appropriate to the circumstances faced by the developing country complainant. As has been mentioned, this is consistent with what the arbitrator in Indonesia–Autos did in relation to the application of Article 21.2 in Article 21.3(c) proceedings in which the developing country is the implementing Member.
If arbitrators find during the proceedings that shorter means of implementation exist, and the developed country respondent fails to explain why they cannot be deployed in the case, despite the proved adverse impact on the developing country's interests, arbitrators could estimate the reasonable period of time for implementation according to the shorter means. To do so, arbitrators could draw on the findings in EC–Export Subsidies on Sugar and EC–Chicken Cuts, where it was recognized that implementing Members do not have an unfettered right to choose the means of implementation or a choice that would result in undue delay in compliance.
(a) Arbitrators would retain their discretion to take ‘further actions’ or not for the benefit of developing country complainants in Article 21.3(c) proceedings.
(b) Article 21.2 consistent with Article 12.11 of the DSU would impose on Article 21.3(c) arbitrators the following duties:
(ii) If they adopted ‘further actions’, they would have to indicate in the awards why these actions were appropriate to the circumstances of the developing country complainant.
(iii) If they did not adopt ‘further actions’, they would have to justify their decision in the awards.Footnote 73
Finally, it is important to make clear that the application of Article 21.2 in Article 212.3(c) proceedings is not restricted to disputes in which the complainants are exclusively developing country Members. In effect, nothing in the wording of Article 21.2 would suggest that the mere fact that a developed country Member is also a complainant in the dispute prevents arbitrators from applying such provision for the benefit of the developing country complainants of the dispute.Footnote 74
4. How disputant parties might make the proposed interpretation operative
Developing country complainants
As was mentioned, US–Gambling and EC–Export Subsidies on Sugar established that Article 21.2 places a burden of proof on developing country complainants. It is necessary that they satisfy this burden to allow arbitrators to apply Article 21.2 within Article 21.3(c) proceedings. However, it could be also suggested that developing country complainants should go further in Article 21.3(c) proceedings than merely invoking Article 21.2. Instead, the developing country complainants should take the initiative and include, as part of the pleadings of the case, what ‘further actions’ within the scope of Article 21.3(c) should be taken that are, in their view, appropriate to their circumstances.
On the basis of the interpretation advanced here, developing country complainants could use as a reference the time for implementation according to the standard practice in the respondent Member and ask for some specific reduction that they regard as appropriate. In some cases, they may be able to demonstrate the existence of shorter means of implementation than those proposed by the developed country respondent in order to ask arbitrators to establish the time to implement on the basis of such shorter means, if the developed country failed to provide convincing reasons as to their unavailability in the case at hand.
Developed country respondents
It is well established that the burden of proof of demonstrating the reasonableness of the period of time of implementation rests on the respondent party.Footnote 75 In the case of Article 213(c) proceedings brought by a developing country the developed country respondent should adduce evidence of the reasonableness of its suggested period of time, taking into account the interest of the developing country complainants, as discussed above.
If arbitrators might rely on US–Gambling and EC–Export Subsidies on Sugar in order to apply Article 21.2 within Article 21.3(c) procedures, when the developing country complainants meet the above-mentioned burden of proof and ask arbitrators to take specific ‘further actions’ appropriate to the circumstances, developed country respondents should incorporate such situations within their proposal of a reasonable period of time of implementation.Footnote 76 In order to do so, they have some options. First, as has already been mentioned, a possible benchmark to be used by a developed country respondent in Article 21.3(c) proceedings could be based on its standard practice in enacting the measures to comply with the adopted reports of the case, practice that the implementing party would have to prove. But in addition, and given that the developing country complaining party might have furnished proof of how the inconsistent measure was affecting its interests, the implementing party should also demonstrate the ways it could take into account this particular circumstance in its proposal of a period of time for implementation, which in concrete terms could mean a reduction in the time that standard practice usually takes to adopt domestic measures similar to the ones required to comply with the adopted panel or AB report. Recalling that in EC–Chicken Cuts standard practice was defined as comprising legal and non-legal steps, the implementing developed Member would have the flexibility to either reduce the standard time of legal and non-legal steps, or to reduce the non-legal steps to those strictly necessary, preserving the legal ones – or a combination of both – in a way that would allow the implementing Member to make a proposal for period of time for implementation that is shorter than the one the standard practice takes, thereby incorporating into its calculation the particular circumstances affecting the developing country complainant.
The second option is related to the choice of longer means of implementation. Respondent Members that have shorter means at their disposal should adduce evidence supporting their decision not to use them, in the face of proof of the developing country's adverse situation provoked by the inconsistent measures. Respondent Members would retain their discretion to choose the means of implementation but would have the burden of justifying why these shorter means were not chosen.
Finally, if a developed country respondent possessed the swiftest means of implementation that properly responded to the circumstances of the developing country complainant, it could provide arbitrators with evidence that its standard practice allowed for sufficiently prompt implementation of the recommendations of the DSB and that no ‘further action’ was required.
5. Conclusion
There are two approaches in recent arbitrators' awards regarding the role Article 21.2 plays in Article 21.3(c) proceedings. US–Gambling and EC–Export Subsidies on Sugar set one route, establishing that Article 21.2's calling for paying attention to matters affecting the interests of developing country members does play a role when arbitrators set the reasonable period of time to implement the recommendations of the DSB. Not so long ago, EC–Chicken Cuts set another, declaring that it does not. The interpretation proposed in this article attempts to go a step further along the line set by US–Gambling and EC–Export Subsidies on Sugar and allows arbitrators to make operative Article 21.2 within Article 21.3(c) proceedings.
The interpretation proposed in this paper protects developing country complainants' interests, ensures arbitrators' discretion to perform their duties, and does not unduly interfere with developed country respondents' right to choose the means of implementation. In this sense, the interpretation is a balanced solution with the view to inducing prompt compliance with the recommendations of the DSB when the complaining party is a developing country Member.
