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Settlement of Interstate Trade Disputes—The Role of Law and Legal Procedures*

Published online by Cambridge University Press:  07 July 2009

Rudolf Ostrihansky
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Extract

The end of the 1980s and the beginning of the 1990s have witnessed a considerable shift in managing trade relations on an interstate level. The first and most striking event is obviously the GATT Uruguay Round. The prolonged negotiations, culminating in the ‘Brussels breakdown’ in December 1990, have shown a large degree of disagreement among the trading powers as to the extent and content of substantive international trade rights and obligations.

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Netherlands Yearbook of International Law , Volume 22 , December 1991 , pp. 163 - 214
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Copyright © T.M.C. Asser Press 1991

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References

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2. If no satisfactory adjustment is effected between the contracting parties within a reasonable time, or if the difficulty is of the type described in paragraph 1 (c) of this Article, the matter may be referred to the Contracting Parties. The Contracting Parties shall promptly investigate any matter so referred to them and shall make appropriate recommendations to the contracting parties which they consider to be concerned, or give a ruling on the matter, as appropriate. The CONTRACTING Parties may consult with contracting parties, with the Economic and Social Council of the United Nations and with any appropriate inter-governmental organization in cases there they consider such consultation necessary. If the Contracting Parties consider that the circumstances are serious enough to justify such action, they may authorize a contracting party or parties to suspend the application to any other contracting party or parties of such concessions or other obligations under this Agreement as they determine to be appropriate in the circumstances. If the application to any contracting party of any concession or other obligations in fact suspended, that contracting party shall then be free, not later than sixty days after such action is taken, to give written notice to the Executive Secretary to the CONTRACTING PARTIES of its intention to withdraw from this Agreement and such withdrawal shall take effect upon the sixtieth day following the day on which such notice is received by him.’

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32. European Economic Community — Payments and Subsidies Paid to Processors and Producers of Oilseeds and related Animal-Feed Proteins; report of the Panel issued 14 December 1989 (GATT Doc. L/6627), paras. 149-151.

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46. Understanding Regarding Notification, Consultation, Dispute Settlement and Surveillance; BISD, 26 Supplement, p. 210.

47. GATT Doc. L/61, reproduced by Hudec, R.E., The GATT Legal System and World Trade Diplomacy, 2nd edn. (1990) pp. 359–360.Google Scholar

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68. Petersmann, E.-U., ‘The Mid-Term Review Agreements of the Uruguay Round and the 1989 Improvements to the GATT Dispute Settlement Procedures’, 32 GYIL (1989) pp. 280–316, at pp. 285–289.Google Scholar

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70. On the spontaneous consequences of the codification of dispute settlement procedures during the Tokyo Round see Hudec, loc. cit. a 7, pp. 180-183.

71. Tumlir, J., ‘GATT Rules and Community Law — A Comparison of Economic and Legal Functions’, in Hilf, M. et al. , eds., The European Community and GATT (1986) pp. 1–22, at p. 20.Google Scholar

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74. BISD, 35 Supplement, p. 246; 36 Supplement, pp. 168, 307, 346.

75. Text quoted after the Havana Charter for an International Trade Organization, March 24, 1948, Including a Guide to the Study of the Charter; The United States Department of State, Publication 3206, Commercial Policy Series 114, Washington (1948) p. 112.

76. Hilf considers the problem of the exclusiveness of the GATT dispute settlement procedures as a delicate issue, and calls for leaving this question open; Hilf, M., ‘EC and GATT: A European proposal for Strengthening the GATT Dispute Settlement Procedures’, in Rode, R., ed., GATT and Conflict Management. A Transatlantic Strategy for a Stronger Regime (1990) pp. 63–101, at pp. 86–87.Google Scholar

77. BISD, 36 Supplement, p. 61.

78. Procedures under Article XXIII (decision of 5 April 1966), BISD, 14 Supplement, p. 18.

79. The Standards Code, the Government Procurement Code, the Customs Valuation Code and the Subsidies Code.

80. The Import Licensing Code and the three sectoral arrangements.

81. Art. 15 para. 7 of the Code (BISD, 26 Supplement, p. 185).

82. Canal-Forgues, E. and Ostrihansky, R., ‘New Developments in the GATT Dispute Settlement Procedures’, 24 JWTL (1990) no. 2, pp. 67–89, at p. 80.Google Scholar

83. The use of outside arbitration was suggested by Cruz during one of the meetings of the American Society of International Law; ASIL, Proceedings of the 77th Meeting (1983) ‘Can the GATT Resolve International Trade Disputes?’ panel, pp. 287–292, at p. 292.Google Scholar

84. GATT Focus No. 76 (November 1990) p. 4.

85. GATT/CP.3/SR.37 p. 5, reproduced in GATT Analytical Index, March 1970, 3rd rev. edn. (1970).

86. Dam, op. cit. n. 5, p. 351; Kolasa, J., Law-Making and Law-Enforcing for International Trade: Some Reflections on the GATT Experience (1976) p. 19Google Scholar; White, G., ‘Legal Consequences of Wrongful Acts in International Law’, 16 NYIL (1985) pp. 137–173, at p. 168CrossRefGoogle Scholar; Canal-Forgues and Ostrihansky, loc. cit. a 82, p. 80.

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89. Kennedy, loc. cit. a 87, pp. 83-85.

90. Alexandroff and Morton, loc. cit. n. 87, pp. 40-41.

91. Hudec, loc. cit. n. 7, p. 174.

92. Coccia, M., ‘Settlement of Disputes in GATT Under the Subsidies Code: Two Panel Reports on EEC Export Subsidies’, 16 Georgia JI & CL (1986) pp. 1–44, at pp. 8–9.Google Scholar

93. 1989 Improvements, s. F (a).

94. Jackson, J.H., Restructuring the GATT System (1990) p. 65.Google Scholar

95. The view that no right to a panel exists is supported by Castel, loc. cit. n. 50, p. 846, and by Canal-Forgues and Ostrihansky, loc. cit. n. 82, p. 72.

96. Davey, loc. cit. a 51, p. 58; Van Bael, I., ‘The GATT Dispute Settlement Procedure’, 22 JWTL (1988) no. 4, pp. 67–77, at p. 68.Google Scholar

97. The procedure for selecting the fifth panelist provides for several stages, if the parties cannot agree on a particular person. In the last instance the fifth panelist is selected by ballot (Annex 1901.1 para. 3).

98. Fox, H., ‘Arbitration’, in Waldock, H., ed., International Disputes. The Legal Aspects (1972) pp. 101–127, at pp. 121–125.Google Scholar

99. See, e.g., the declarations of Australia, Austria, Barbados, Belgium, Botswana (the first five in the alphabetical order) reproduced in ICJ Yearbook (1987-1988) pp. 62-65.

100. Chorzów Factory, Jurisdiction, PCIJ, Series A, No. 9, p. 32.

101. Mc Whinney, op. cit. n. 12, p. 61.

102. ICJ Rep. (1963) p. 29.

103. Ibid. p. 38.

104. Ibid. p. 30, quoting the case of Free Zones of Upper Savoy and the District of Gex. PCJJ, Series A/B, No. 46, p. 162.

105. PCIJ Series A/B, No. 46, p. 162.

106. Jackson, op. cit. n. 27, p. 137; Whitt, R.S., ‘The Politics of Procedure: An Examination of the GATT Dispute Settlement Panel and the Article XXI Defense in the Context of the US Embargo of Nicaragua’, 19 Law and Policy in Int. Business (1987) pp. 603–631, pp. 612, 628Google Scholar; Ingersoll, S.A., ‘Current Efficacy of the GATT Dispute Settlement Process’, 22 Texas ILJ (1987) pp. 87–108, at p. 104.Google Scholar

107. McWhiimey, op. cit. n. 12, pp. 156-158.

108. Before 1989 a practice of standard terms of reference developed (1979 Understanding, Annex, para. 6(ii)). The 1989 decision turned this practice into a rule.

109. 1989 Improvements, s. F (b) para. 1.

110. Jackson, op. cit. n. 94, p. 68; but Davey, loc. cit. n. 51, p. 89, points out that there is no general acceptance of the notion that a panel decision constitutes a binding precedent.

111. United States — Section 337 of the Tariff Act of 1930; BISD, 36 Supplement, p. 345, report issued on 16 January 1989.

112. United States — Imports of Certain Automotive Spring Assemblies; BISD, 30 Supplement, p. 107, report adopted on 26 May 1983.

113. Ibid. p. 127 (para. 66); see also Modak-Truran, M., ‘Section 337 and GATT in the Akzo Controversy: A Pre- and Post-Omnibus Trade and Competitiveness Act Analysis’, 9 Northwestern JIL & Business (1988) pp. 382–414, at pp. 396–398.Google Scholar

114. Canada — Administration of the Foreign Investment Review Act; BISD, 30 Supplement, p. 141, report adopted on 7 February 1984.

115. European Communities — Refunds on Exports of Sugar — Complaint by Brazil; BISD, 27 Supplement, p. 69, report adopted on 10 November 1980.

116. Ibid. p. 88.

117. European Communities —Refunds on Exports of Sugar; BISD, 26 Supplement, p. 290, at pp. 311-315, report adopted on 6 November 1979; see also Estabrook, J.S., ‘European Community Resistance to the Enforcement of GATT Panel Decisions on Sugar Export Subsidies’, 15 Cornell ILJ (1982) pp. 397–427, at 418–419.Google Scholar

118. ‘To examine and report upon the issues relating to EEC sugar export practices, referred to the Contracting Parties by Australia in Document L/4701.’ BISD, 26 Supplement, p. 291.

119. BISD, 27 Supplement, p. 69.

120. European Economic Community — Payments and Subsidies Paid to Processors and Producers of Oilseeds and Related Animal-Feed Proteins; report of the Panel issued on 14 December 1989 (GATT Doc. L/6627), para. 110.

121. Ibid. para. 111.

122. Ibid. para. 154.

123. See, e.g., terms of reference of panels on wheat flour and pasta, quoted by Coccia, loc. cit. n. 92, pp. 8-9, or the VAT panel, BISD, 31 Supplement, p. 247.

124. GATT Focus No. 80 (April 1991) p. 8.

125. 1989 Improvements, s. 1 para. 2.

126. 1989 Improvements, ss. B and E para. 2.

127. Petersmann, loc. cit. n. 72, pp. 338-339; Hilf, loc. cit. n. 76, p. 77.

128. Chayes, A. et al. , International Legal Process, vol. I (1968) pp. 249–306Google Scholar; Walker, H., ‘Dispute Settlement: the Chicken War’, 58 AJIL (1964) pp. 671–685, at pp. 679–681.CrossRefGoogle Scholar

129. BISD. 12 Supplement, p. 65.

130. The report (issued on 21 November 1963) is reproduced in 3 ILM (1963) pp. 116–117.Google Scholar

131. On the latter rules see Zamora, S., ‘Is There Customary International Economic Law?’, 32 GYIL (1989) pp. 9–42.Google Scholar

132. Simma, loc. cit. n. 42, p. 117.

133. Hudec, op. cit. n. 47, pp. 37-47.

134. ICJ Rep. (1982) p. 18.

135. Canal-Forgues and Ostrihansky, toe. cit. n. 82, pp. 83-85.

136. The most important is Art. 407 para. 1, which states: ‘Subject to the further rights and obligations of this Agreement, the Parties affirm their respective rights and obligations under the General Agreement on Tariffs and Trade (GATT) with respect to prohibitions or restrictions on bilateral trade in goods.’

137. Art. 1904 para. 2.

138. Annex, para. 4.

139. Canal-Forgues and Ostrihansky, loc. cit. n. 82, p. 68.

140. BISD, 11 Supplement, p. 99, report adopted on 16 November 1962.

141. E.g., United States Manufacturing Clause; BISD, 31 Supplement, p. 91, report adopted on 15/16 May 1984; Japan — Customs Duties, Taxes and Labelling Practices on Imported Wines and Alcoholic Beverages; BISD, 34 Supplement, p. 127, report adopted on 10 November 1987.

142. See, e.g., Delupis, L., ‘The Legal Value of Recommendations of International Organisations’, in Butler, W.E., ed., International Law and the International System (1987) pp. 47–65, at pp. 52, 54–55, and 56–57.Google Scholar

143. J. Kolasa, GATT. Z zagadnień tworzenia i stosowania prawa handlu miedzynarodowego (GATT. Some Problems Concerning Law-Making and Law-Enforcement for International Trade) (1979) pp. 142-143 states that the recommendations of the Contracting Parties are not legally binding; the same opinion is presented by Courage-van Iier, loc. cit. n. 26, p. 94.

144. Petersmann, E.-U., ‘The GATT Dispute Settlement System and the Uruguay Negotiations on its Reform’, in Šarčević, M. and Van Houtte, H., eds., Legal Issues in International Trade (1990) pp. 53–99, at pp. 65–66Google Scholar; see also Petersmann, loc. cit. n. 53, p. 64.

145. BISD, vol. n, p. 188, at p. 195 (para. 16), report adopted on 3 April 1950.

146. Oilseeds, supra, n 32, para. 148.

147. BISD, 14 Supplement, pp. 139-140; Dam, op. cit. n. 5 pp. 368-373; Hudec, op. cit. a 47, p. 242; see also the text accompanying a 45 supra.

148. Petersmann, loc. cit. n. 144, pp. 86-87.

149. During the EEC — Restrictions on Imports of Dessert Apples—Complaint by Chile dispute (BISD, 36 Supplement, p. 93, report adopted on 22 June 1989) the complainant asked for compensatory measures for the damage (para. 10). The panel, however, stated: ‘[I]t would be possible for the EEC and Chile to negotiate compensation consistent with the provisions of the General Agreement; however the Panel did not consider that it would be appropriate for it to make a recommendation on this matter’ (para. 12.36).

150. McGovern, E., International Trade Regulation. GATT, the United States and the European Community, 2nd edn. (1986) p. 43Google Scholar; Dam, op. cit. n. 5, p. 371.

151. See the text accompanying nn. 47-51 supra.

152. ‘“Sanctions” were imposed, but it quickly became clear that their purpose had been exhausted the moment after they had been authorized. Sanctions proved to be merely the final form in which the normative standard could be declared. When GATT law ran out of declarations, it ran out of things to do.’

Hudec, op. cit. n. 47, p. 202 (commenting on the US Dairy Quotas case).

153. PCIJ Series A, No. 17, p. 47; See also Riebel, E., ‘Damages’, in Bemhardt, R. ed., Encyclopedia of Public International Law, vol. 10 (1987) pp. 68–73Google Scholar and R. Wolfrum, ‘Reparation for Internationally Wrongful Act’, in Bernhardt, ibid. pp. 352-353.

154. White, loc. cit. n. 86, p. 165.

155. Horlick et al., loc. cit. n. 87, p. 67.

156. Jackson, J.H., ‘The Birth of the GATT-MTN System: A Constitutional Appraisal’, 12 Law and Policy in Int. Business (1980) pp. 21–58, at p. 44.Google Scholar

157. Standards Code, Art. 14.23; Customs Valuation Code, Art. 20 para. 11; Anti-Dumping Code, n. 14 (to Art. 15).

158. GATT Focus No. 80 (April 1991) pp. 1 and 8.

159. BISD, 35 Supplement, p. 98, report adopted on 22 March 1988.

160. McDorman, T.L., ‘International Trade Law Meets International Fisheries Law: The Canada-U.S. Salmon and Herring Dispute’, 7 J Int. Arbitration (1990) no. 4, pp. 107–121, at p. 118.Google Scholar

161. Meng, W., ‘The Hormone Conflict Between the EEC and the United States within the Context of GATT’, 11 Michigan JIL (1990) pp. 819–839.Google Scholar

162. Ibid. p. 825.

163. GATT Focus No. 59 (January 1989) p. 3.

164. GATT Focus No. 66 (November 1989) p. 3.

165. Van Houtte, H., ‘Health and Safety Regulations in International Trade’, in Šarčević, and Van, Houtte, eds., op. cit. a 144, pp. 128–144, at p. 134.Google Scholar

166. Art. 14 paras. 9 and 14.

167. Jackson, op. cit. n. 94, p. 95.

168. E.g., Elsen, T.J.H., Litispendence between the International Court of Justice and the Security Council (1986)Google Scholar; Klein, E., ‘Paralelles Tätigwerden von Sicherheitsrat und Internationalem Gerichtsbof bei friedensbedrohenden Streitigkeiten’, in Bemhardt, R. et al. , Völkerrecht als Rechtsordnung, Internationale Gerichsbarkeit, Menschenrechte (Festschrift für Hermann Mosler) (1983) pp. 467–491Google Scholar; Mc Whinney, op. cit. n. 12, pp. 143-147.

169. Polish Upper Silesia (Jurisdiction), PCIJ Series A, No. 6, p. 20.

170. Hudec, op. cit. n. 47, pp. 100-101.

171. GATT Focus No. 78 (January-February 1991) p. 4.

172. EEC Restrictions on Imports of Apples from Chile; BISD, 27 Supplement, p. 98, report adopted on 10 November 1980, and EEC — Restrictions on Imports of Dessert Apples — Complaint by Chile; BISD, 36 Supplement, p. 93, report adopted on 22 June 1989.

173. EEC — Programme of Minimum Import Prices, Licences and Surety Deposits for Certain Processed Fruits and Vegetables; BISD, 25 Supplement, p. 68, report adopted on 18 October 1978.

174. ICJ Rep. (1960) p. 214.

175. Hudec, op. cit. a 47; Mc Whinney, op. cit. n.12.

176. ICJ Rep. (1971) p. 3.