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Mutually agreed solutions under the WTO Dispute Settlement Understanding: An Analytical Framework after the Softwood Lumber Arbitration

Published online by Cambridge University Press:  20 May 2011

ALBERTO ALVAREZ-JIMÉNEZ
ALBERTO ALVAREZ-JIMÉNEZ*
Affiliation:
University of Ottawa
*
*Email: [email protected].
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Abstract

The unprecedented enforcement of the mutually agreed solution (MAS) in the WTO Softwood Lumber disputes – but outside the WTO dispute settlement system – and the recent use of MAS to resolve important trade disputes should trigger a hard look at these dispute settlement instruments provided for by the DSU. This article seeks to provide a detailed framework of analysis of MAS under the DSU that allows the WTO dispute settlement system to adjudicate MAS-related disputes. WTO Members should not go outside the system to enforce MAS. The article illustrates that MAS can create binding obligations and that MAS are WTO law, given the explicit reference to them in the DSU, their intimate relation with the WTO-covered agreements and the requirement for compliance with these agreements. In addition, the article offers an interpretation of the DSU that allows panels and the Appellate Body to regard MAS as applicable law. This interpretation is offered in the view that there is no policy reason to sustain that these controversies – always fully related to WTO rights and obligations and framed under the corners of the covered agreements – have to be resolved by an adjudication system other than that of the WTO.

Type
Review Article
Information
World Trade Review , Volume 10 , Issue 3 , July 2011 , pp. 343 - 373
Copyright
Copyright © Alberto Alvarez-Jiménez 2011

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References

1 Softwood Lumber Agreement between the Government of Canada and the Government of the United States of America – 2006, available at http://www.international.gc.ca/controls-controles/softwood-bois_oeuvre/other-autres/agreement-accord.aspx (last visited 6 January 2011).

2 United States – Preliminary Determinations with Respect to Certain Softwood Lumber from Canada, DS236; United States – Provisional Anti-Dumping Measure on Imports of Certain Softwood Lumber from Canada, DS247; United States – Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada, DS257; United States – Final Dumping Determination on Softwood Lumber from Canada, DS264; United States – Investigation of the International Trade Commission in Softwood Lumber from Canada, DS277; United States – Reviews of Countervailing Duty on Softwood Lumber from Canada, DS311. Information about these disputes is available at http://www.wto.org/english/tratop_e/dispu_e/dispu_subjects_index_e.htm#lumber (last visited 5 January 2011).

3 Article XIV provides in relevant part:

1. Either Party may initiate dispute settlement under this Article regarding any matter arising under the SLA 2006 (Softwood Lumber Agreement) …

6. If the Parties do not resolve the matter within 40 days of delivery of the request for consultations, either Party may refer the matter to arbitration by delivering a written Request under the LCIA Arbitration Rules in effect on the date the SLA 2006 was signed, irrespective of any subsequent amendments, as modified by the SLA 2006 or as the Parties may agree …

The tribunal rendered two decisions: the first was the award on liability, on 2 May 2008, and the second was the Remedy Ruling, on 26 February 2009. Both decisions are available at http://www.international.gc.ca/controls-controles/softwood-bois_oeuvre/other-autres/agreement-accord.aspx?lang=eng#legal (last visited 5 January 2011). The Softwood Lumber MAS had another novel dimension: retrospective remedies for the violation of trade obligations, which led to the second award already mentioned. See Tomer Broude, The Softwood Lumber Arbitration and Retrospective Trade Remedies, 10 March 2009, Kluwer Arbitration blog, available at http://kluwerarbitrationblog.com/blog/2009/03/10/the-softwood-lumber-arbitration-and-retrospective-trade-remedies/ (last visited 5 January 2011). The issue of retrospective remedies in MAS is assessed below in Section 4.Two recent developments are worth mentioning. The first is that a second tribunal issued an award regarding the Softwood Lumber MAS on 21 January 2011 finding Canada in violation of it. See, Government of Canada, Statement by Minister Van Loan on Softwood Lumber Ruling, available at http://www.international.gc.ca/media_commerce/comm/news-communiques/2011/031.aspx?lang=eng (last visited 31 January 2011). The second is that a new dispute about compliance with the Softwood Lumber MAS has recently emerged. In effect, the United States is claiming that lumber producers in British Columbia are violating the MAS. See ‘Softwood lumber battle reignited’, Globe and Mail, 14 November 2010, available at http://www.theglobeandmail.com/report-on-business/softwood-lumber-battle-reignited/article1798538/ (last visited 6 January 2011).

4 See Office of the United States Trade Representative, ‘EU Sign Agreement Designed to Settle Bananas Dispute’, press release June 2010, available at http://www.ustr.gov/about-us/press-office/press-releases/2010/june/us-eu-sign-agreement-designed-settle-bananas-dispute (last visited 6 January 2011). The text of the agreement is available at the above-mentioned link.

5 European Communities – Measures Affecting the Approval and Marketing of Biotech Products, DS291. For details of the settlement, see European Union, EU and Canada Settle WTO Case on Genetically Modified Organisms, IP/09/1142, 15 July 2009, available at http://europa.eu/rapid/pressReleasesAction.do?reference=IP/09/1142&type= (last visited 6 January 2010).

6 Mexico – Measures Affecting Telecommunications Services, DS204. The text of the MAS is available at http://tcc.export.gov/Trade_Agreements/All_Trade_Agreements/exp_005753.asp (last visited 5 January 2011).

7 See A.L.C. De Mestral and M. Auerbach-Ziogas, ‘A Proposal to Introduce an Advocate General's Position into WTO Dispute Settlement System’, in Steve Charnovitz, Debra P. Steger, and Peter Van den Bossche (eds.), Law in the Service of Human Dignity: Essays in Honour of Florentino Feliciano (Cambridge University Press, 2005), 13, 13.

8 See Colombia – Customs Measures on Importation of Certain Goods from Panama, DS348. The consultations were requested on 20 July 2006. See Summary of the dispute to date available at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds348_e.htm (last visited 5 January 2011).The facts, which are relevant for the purpose of other topics of this paper, were the following: Colombia introduced some measures imposing indicative prices on imports and ports-of-entry restrictions aimed at preventing money laundering, smuggling, and the violation of Colombian customs regulations regarding certain products originating in or coming from Panama. These measures prompted consultations with Panama that concluded in a MAS that the parties labelled ‘Protocol of Procedure for Cooperation and Exchange of Customs Information between Customs Authorities of the Republic of Panama and the Republic of Colombia’ [‘Customs MAS’]. Panama notified the Dispute Settlement Body of the agreement on 1 December 2006. See ‘Summary of the dispute to date’, available at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds348_e.htm (last visited 5 January 2011).

9 During the GATT era, MAS were also sometimes explicitly recommended by panels as a mechanism to settle disputes after panels had rendered their reports and found a violation of the GATT. See, for instance, GATT Panel Report, EEC Restrictions on Imports of Apples from Chile, adopted 10 November 1980, BISD 27S/98; GATT Basic Instruments and Selected Documents, Twenty-seventh Supplement, March 1981, at 117.

10 See European Communities – Regime for the Importation, Sale and Distribution of Bananas, Second Recourse to Article 21.5 of the DSU by Ecuador, WT/DS27/AB/RW2/ECU, WT/DS27/AB/RW/USA, 26 November 2008, para. 215 (hereinafter EC–Bananas III, Second Compliance AB Report), available at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds27_e.htm (last visited 8 March 2010). The official citation of this report is EC–Bananas III (Article 21.5 – Ecuador II)/EC–Bananas III (Article 21.5 – US). I will depart from this citation, since it is lengthy and the report is often referred to in this article.

11 Article 22.8 of the DSU reads as follows: ‘The suspension of concessions or other obligations shall be temporary and shall only be applied until such time as the measure found to be inconsistent with a covered agreement has been removed, or the Member that must implement recommendations or rulings provides a solution to the nullification or impairment of benefits, or a mutually satisfactory solution is reached. In accordance with paragraph 6 of Article 21, the DSB shall continue to keep under surveillance the implementation of adopted recommendations or rulings, including those cases where compensation has been provided or concessions or other obligations have been suspended but the recommendations to bring a measure into conformity with the covered agreements have not been implemented’, World Trade Organization, The Legal Texts: The Results of the Uruguay Round of Multilateral Trade Negotiations (Cambridge University Press, 1999), 372 [italics added] [hereinafter WTO, Legal Texts].

12 It is worth noting that MAS, as a concept, were not a creation of the DSU. There was an important GATT practice, duly codified, under an almost identical label: mutually satisfactory solution. As part of this practice and codification, Article 16 of the 1979 GATT Understanding Regarding Notification, Consultation, Dispute Settlement and Surveillance encouraged panels to actively promote MAS between parties, within panel proceedings, to settle disputes. See GATT Understanding Regarding Notification, Consultation, Dispute Settlement and Surveillance, General Agreement on Tariffs and Trade, Basic Instruments and Selected Documents, Twenty-sixth Supplement, 1978–1979, at 213 [hereinafter 1979 GATT Understanding]. Several GATT disputes ended with MAS at this stage. See, for instance, GATT Panel Report, Japanese – Measures on Imports of Leather, 1979 GATT Understanding, at 321, and Japan – Measures on Imports of Thrown Silk Yarn. See GATT Panel Report, Japan Measures on Imports of Thrown Silk Yarn, Basic Instruments and Selected Documents, Twenty-fifth Supplement, 1977–1978, at 109.

13 WTO, Legal Texts, supra note 11, at 356. The preferential character of MAS has its roots in the 1979 GATT Understanding. The Annex to the 1979 GATT Understanding, which compiled the practice of GATT dispute settlement, explicitly stated, with the use of a slightly different language, that ‘[A] solution mutually acceptable to the parties to a dispute is clearly to be preferred …’13 ‘Annex: Agreed Description of the Customary Practice of the GATT in the Field of Dispute Settlement (Article XXIII:2)’, 1979 GATT Understanding, at 216.

14 WTO, Legal Texts, supra note 11, at 356.

15 Ibid.

16 Ibid.

17 See Ibid. at 355–356.

18 A MAS of this nature is not binding, since texts of this nature do not contain ‘operative language delineating the extent of the obligation(s)’, to draw on the expression used by a GATT panel. (Panel Report, European Economic Community – Imposition of Anti-Dumping Duties on Imports of Cotton Yarn from Brazil, adopted 30 October 1995, BISD 42S/17, para. 582).

19 See WTO Panel Report, European Communities – Regime for the Importation, Sale and Distribution of Bananas, Second Recourse to Article 21.5 of the DSU by Ecuador, WT/DS27/RW2/ECU, 7 October 2008, paras. 7.62–7.63 [hereinafter EC–Bananas III (Article 21.5 – Ecuador II)], available at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds27_e.htm (last visited 6 January 2011). The Panel determined that, despite the fact that MAS are not covered agreements, they are agreements between States and consequently must be interpreted according to Articles 31 and 32 of the VCLT.

20 See India – Measures Affecting the Automotive Sector, WT/DS146/R, WT/DS175/R and Corr.1, adopted 5 April 2002, DSR 2002:V, 1827, para. 7.115 [hereinafter India–Autos Panel Report], available at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds146_e.htm (last visited 6 January 2011). Although this report was appealed, India subsequently withdrew its appeal.

21 See EC – Bananas III, Notification of Mutually Agreed Solution, WT/DS27/58, 2 July 2001, para. G; and EC – Bananas III, Understanding on Bananas between Ecuador and the EC, WT/DS27/60, 9 July 2001, para. G.

22 EC–Bananas III, Second Compliance AB Report, supra note 10, para. 216 [italics added]. However, it is important to mention that the Appellate Body denied MAS character to the Understanding on the basis of its text. See ibid. para. 219.

23 See ibid. para. 217.

24 See for instance Japan – Measures Affecting the Importation of Apples, Notification of Mutually Agreed Solution, WT/DS245/21.G/L/520/Add.1/G/SPS/GEN/299/Add.1.G/AG/GEN/50/Add.1, 2 September 2005, available at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds245_e.htm (last visited 6 January 2011). See also Articles III, V and XIV.2 of the Softwood Lumber Agreement.

25 See India–Autos Panel Report, supra note 20, paras. 7.120–7.123.

26 See WTO Panel Report, Colombia – Indicative Prices and Restrictions on Ports of Entry, WT/DS366/R, 27 April 2009, para. 2.3 [hereinafter Colombia–Ports of Entry Panel Report], available at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds366_e.htm (last visited 5 January 2011). See in this regard, Alvarez-Jiménez, Alberto, ‘Drug Trafficking, Money Laundering and International Trade Restrictions after the WTO Panel Report in Colombia–Ports of Entry: How to Align WTO Law with International Law’, 45 Journal of World Trade 117 (2011)Google Scholar.

27 For the text of this provision, see supra text accompanying note 14. Past GATT practice and codification contemplated notification of MAS. Although this notification was not provided for by the 1979 GATT Understanding, Article 17 established that any contracting party with an interest in the matter had the right to inquire about the solution and to receive adequate information concerning the solution. See 1979 GATT Understanding, supra note 12, at 213. However, the notification of MAS, under this label, was established by the GATT Decision of 12 April 1989, Improvements to the GATT Dispute Settlement Rules and Procedures, in which the following was set forth:

B. Notification

Mutually agreed solutions to matters formally raised under GATT Articles XXII and XXIII, as well as arbitration awards within the GATT, must be notified to the Council where any contracting party may raise any point relating thereto.

GATT, Basic Instruments and Selected Documents, Thirty-sixth Supplement, 1988–1989, July 1990, at 62.

28 See EC–Bananas III, Notification of Mutually Agreed Solution, supra note 21. It is worthy of mention that this Understanding is different from the MAS reached in 2009 within the same dispute, and mentioned above. See supra note 4 and accompanying text.

29 See EC–Bananas III (Article 21.5 – Ecuador II), supra note 19, para. 2.7.

30 See ibid. para. 2.8.

31 See ibid. para. 7.107.

32 Ibid. para. 7.100.

33 See EC–Bananas III, Second Compliance AB Report, supra note 10, para. 219.

34 See ibid. para. 222.

35 Notifications of MAS do not seem to play a meaningful role in the practice of the DSB. One of the few articles regarding such practice prepared by a WTO Secretariat lawyer does not even mention such notifications. See Bozena Mueller-Holyst, ‘The Role of the Dispute Settlement Body in the Dispute Settlement Process’, in Rufus Yerxa and Bruce Wilson (eds.), Key Issues in WTO Dispute Settlement (Cambridge University Press, 2005), 25.Another relevant point is the legal consequences that can be attached to the removal by the DSB of the dispute from its agenda. The DSU says nothing in this regard, and such removal did not play a role in the second compliance proceedings in EC–Bananas III. There, the DSB removed the dispute on 1 February 2002 (see EC–Bananas III (Article 21.5 – Ecuador II), supra note 19, para. 7.133). However, such removal did not prevent subsequent litigation in the above-mentioned proceedings. The panel, however, decided not to address the issue, since the respondent, the European Communities, did not attach any legal significance to the said removal (see ibid., para. 7.134). The removal of a dispute from the DSB says nothing regarding whether the dispute ended with the MAS or not, nor could it be taken as a presumption that the solution is a MAS. As the Appellate Body stated, the text of the MAS is the basis to ground any conclusion as to whether a settlement constitutes or not a MAS.

36 See supra text accompanying note 13.

37 WTO, Legal Texts, supra note 11, at 355.

38 EC–Bananas III, Second Compliance AB Report, supra note 10, para. 211.

39 EC–Bananas III (Article 21.5–Ecuador II), supra note 19, para. 7.102. MAS can be inconsistent with the covered agreements. For instance, an exporting Member may reach an orderly marketing agreement (OMA) with an importing Member in order to prevent the imposition of safeguards. The OMA may put an end to the trade dispute regarding the safeguard, but if the exporting Member fails to comply with it, the OMA could not be enforced, provided the importing Member would attempt to do it, since OMAs are contrary to Article 11.1(b) of the Agreement on Safeguards. For a detailed analysis of OMAs, see John H. Jackson, The Jurisprudence of GATT and the WTO: Insights on Treaty Law and Economic Relations (Cambridge University Press, 2000), 69–86.

40 See also article 44 of the VCLT. See Vienna Convention on the Law of Treaties, United Nations, Treaty Series, vol. 1155, p. 331, available at http://untreaty.un.org/ilc/texts/instruments/english/conventions/1_1_1969.pdf (last visited 1 March 2010).

41 I will assess the applicability of MAS a source of law in WTO disputes below in Section 2.3.

42 For a definition of the term, ‘covered agreements’, See Appellate Body Report, Brazil – Measures Affecting Desiccated Coconut, WT/DS22/AB/R, 21 February 1997, at 13, available at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds22_e.htm (last visited 6 January 2011).

43 In my view, it is hard to regard waivers as non-WTO law. They are a type of decision made by the WTO's highest political body, the Ministerial Conference, following a precise procedure set forth by a covered agreement, Article IX of the WTO Agreement, and their intent is to waive a violation of WTO obligations by one or more Members. For a detailed assessment of waivers, leaving little doubt about their WTO law status, See Isabel Feichtner, ‘Law-Making in the WTO: The Law and Politics of the WTO Waiver Power’, paper presented at the 2009 Research Colloquium, Current Research on International Economic Law, American Society of International Law, University of Callifornia, Los Angeles (UCLA), 13 February 2009.

44 See EC–Bananas III, Second Compliance AB Report, supra note 10, para. 212.

45 An interpretation of the DSU supporting the jurisdiction of the dispute settlement system to adjudicate MAS-related disputes is presented below in Section 2 and the possibility of making MAS applicable law is shown in Section 2.3.

46 To be sure, the respondent in a MAS-related dispute still enjoys certain discretion to find the ways in which it will bring its measure into consistency with the MAS, but this discretion may sometimes, not always, be narrower than when the recommendations and rulings of the DSB are aimed at ensuring the consistency of the measure with the covered agreements.

47 See India–Autos Panel Report, supra note 20, para. 7.114 and EC–Bananas III (Article 21.5–Ecuador II), supra note 19, paras. 7.85–7.96.

48 India–Autos Panel Report, supra note 20, para. 7.114.

49 Ibid., para. 7.115, n. 364. The panel, though, pointed out that MAS could nonetheless assist panels in discharging their duties, which means that panels could make use of MAS to assess claims of violation of the covered agreements or defences invoked by respondent Members (see ibid.).

50 See Pauwelyn, Joost, ‘The Role of Public International Law in the WTO: How Far Can We Go?’, 95 American Journal of International Law 535, 554 (2001)CrossRefGoogle Scholar.

51 WTO, Legal Texts, supra note 11, at 355 [italics added].

52 See Appendix I to the DSU. See ibid., at 376.

53 The Oxford English Dictionary defines ‘indirectly’ as ‘Not in express terms; by suggestion or implication.’ See online at http://dictionary.oed.com.proxy.bib.uottawa.ca/cgi/entry/50115396?query_type=word&queryword=indirect&first=1&max_to_show=10&single=1&sort_type=alpha (last visited March 15 2010).

54 This is certainly not to suggest that the jurisdiction of the system would exist only regarding MAS reached after the adoption of panel and Appellate Body reports of the case, since rights and obligations provided for in MAS reached during the consultation phase are indirectly accrued under the DSU, as was indicated.

55 To be sure, lack of mechanisms to enforce international obligations does not mean that the violations do not exist or that the State may not engage its international responsibility for its actions, as the International Court of Justice has repeatedly pointed out. (See International Court of Justice, Case Concerning Armed Activities on the Territory of the Congo (New Application: 2002) (Democratic Republic of the Congo v. Rwanda), Jurisdiction of the Court and Admissibility of the Application, 3 February 2006, para. 127, available at http://www.icj-cij.org/docket/index.php?p1=3&p2=3&k=19&case=126&code=crw&p3=4 (last visited 5 January 2011).

56 WTO, Legal Texts, supra note 11, at 356.

57 GATS Article XXII:3, at sets forth:

A Member may not invoke Article XVII, either under this Article or Article XXIII, with respect to a measure of another Member that falls within the scope of an international agreement between them relating to he avoidance of double taxation. In case of disagreement between Members as to whether a measure falls within the scope of such an agreement, it shall be open to either Member to bring this matter before the Council for Trade in Services. The Council shall refer the matter to arbitration. The decision of the arbitrator shall be final and binding on the Members.

WTO, Legal Texts, supra note 11, at 303.

58 The fact that such proof can easily be furnished through the request for consultations or through the adopted reports of the case does not mean that it is not required.

59 It is important to say that panels facing MAS-related disputes would have to assess their jurisdiction to adjudicate them, even in the unlikely scenario in which parties did not raise this issue. See Appellate Body Report, United States – Continued Dumping and Subsidy Offset Act of 2000, WT/DS217/AB/R, WT/DS234/AB/R, 16 January 2003, para. 208, available at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds217_e.htm (last visited 5 January 2011). This was what the arbitrators did in United States–Section 110(5) of the US Copyright Act, the first case in which Article 25 of the DSU, providing for arbitration as an alternative dispute settlement mechanism, was used. See Award of the Arbitrators, United States – Section 110(5) of the US Copyright Act, Recourse to Arbitration under Article 25 of the DSU, WT/DS160/ARB25/1, 9 November 2001, paras. 2.1–2.7, available at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds160_e.htm (last visited 5 January 2011). For a complete and comparative assessment of this topic, see Laurence Boisson de Chazournes, ‘The Principle of Compétence de la Compétence in International Adjudication and Its Role in an Era of Multiplication of Courts and Tribunals’, in Mahnoush H. Arsanjani, Jacob Katz Cogan, Robert D. Sloane, and Siegfried Wiessner (eds.), Looking to the Future: Essays on International Law in Honor of W. Michael Reisman (Martinus Nijhoff Publishers, 2011), 1027.

60 I am aware that jurisdiction over a claim because it is duly included within a panel's terms of reference does not in itself allow a panel to apply the law on which the claim is based, as is the case, for example, with claims of violation of non-WTO law. See Joel Trachtman, ‘Jurisdiction in WTO Dispute Settlement’, in Rufus Yerxa and Bruce Wilson (eds.), Key Issues in WTO Dispute Settlement (Cambridge University Press, 2005), 134–140. However, this is not the case with MAS-related claims that are part of a panel's terms of reference, as will be shown below in Section 2.3.1.

61 Having arrived at this conclusion, we should pause for a moment and return to the flexible approach regarding notification of MAS under Article 3.6, which has the advantage of making the dispute settlement system capable of promptly settling MAS-related disputes. (See above Section 1.3 and in particular text accompanying note 34).The issue is how to square this approach with the text of the said provision, which, by using the word ‘shall’, imposes a positive obligation on Members to notify MAS to the DSB. To be sure, this provision cannot be interpreted in a way that renders it futile, as the Appellate Body has repeatedly stated. See Appellate Body Report, United States – Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R, adopted 20 May 1996, at 23, available at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds2_e.htm (last visited 4 January 2011).It could be claimed that a request for consultations on the basis of alleged violations of a MAS could serve as notification under Article 3.6, since all requests for consultations must be notified to the DSB by virtue of Article 3.4 of the DSU. This interpretation would not go against the provision of Article 3.6, since nowhere in its text is it provided that the notification must be made immediately after a MAS has been reached. In addition, the notification of Article 3.6 serves the purpose of informing the WTO membership that a dispute has ended, which is what the notification of request of consultations under the MAS does. In effect, such notification informs the DSB that the original dispute ended with the MAS and that a new one under it has started.

62 Ehlermann, Clauss-Dieter, ‘Reflections on the Appellate Body of the WTO’, 6 The Journal of International Economic Law 695, 701 (2003)CrossRefGoogle Scholar.

63 See WTO Appellate Body, Mexico – Tax Measures on Soft Drinks and Other Beverages, WT/DS308/AB/R, 6 March 2006, para. 70, available at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds308_e.htm (last visited 5 January 2011). For an assessment of this report, See Alvarez-Jiménez, Alberto, ‘The Appellate Body Report on Mexico–Tax Measures on Soft Drinks and Other Beverages and the Limits of the WTO Dispute Settlement System’, 33 Legal Issues of Economic Integration 319 (2006Google Scholar).

64 See supra text accompanying note 62.

65 However, it is important to mention that bilateral agreements are no longer required to appeal compliance panel reports. They can be appealed directly by parties before the Appellate Body. See, for instance, Appellate Body Report, Mexico – Anti-Dumping Investigation of High Fructose Corn Syrup (HFCS) from the United States, Recourse to Article 21.5 of the DSU by the United States, WT/DS132/AB/RW, 22 October 2001, para. 7, available at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds132_e.htm (last visited 4 January 2011).

66 This is certainly different from the role that MAS may play in assisting panels and the Appellate Body to assess claims of violation of the covered agreements or defences invoked by respondent Members, a role that the panel in India–Autos recognized. See India–Autos Panel Report, supra note 20, para. 7.115, n.364.

67 More on this below in Section 2.3.1.

68 Award of the Arbitrator, Canada/European Communities Article XXVIII Rights, Basic Instruments and Selected Documents, Thirty-seventh Supplement, 1989–1990, at 83–84. It is important to mention that both Canada and the European Communities jointly gave the arbitrator jurisdiction to adjudicate the said controversy. See ibid., at 80.

69 This is not the only way in which the requirement of compliance with the covered agreements of MAS is made effective. Section 3.1.2 below provides another that does not operate as a defense within panel proceedings.

70 See supra text accompanying note 49.

71 WTO Appellate Body, Canada – Certain Measures Affecting the Automobile Industry, WT/DS139/AB/R, WT/DS142/AB/R, 31 May 2000, para. 138, available at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds142_e.htm (last visited 5 January 2011).

72 Wood v. Lucy, Lady Duff-Gordon, Court of Appeals of New York 1917, 222 N.Y. 88, 118 N.E. 214, as quoted by Lon L. Fuller and Melvin Aron Eisenberg, Basic Contract Law, 4th edn (1981) 96.

73 A closing remark is needed to address the potential argument that making MAS applicable may create the conditions for the disfiguration of the system in the sense that it would open the doors for the recognition of WTO decisions that are not part of the covered agreements, such as Ministerial Declarations or determinations of WTO political bodies, as applicable law. These determinations already play a role in the interpretation of the covered agreements, but the risk of transforming them into applicable law is non-existent. Decisions of this nature, important as they are, are nonetheless not legally binding: they are soft-law and do not create rights and obligations and, therefore, cannot serve as a basis for a claim of violation.

74 See Appellate Body Report, United States – Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R, 12 October 1998, para. 108, available at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds58_e.htm (last visited 3 January 2011), and Appellate Body Report, United States – Imposition of Countervailing Duties on Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom, WTO/DS138/AB/R, 10 May 2000, para. 39, available at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds138_e.htm (last visited 4 January 2011).

75 See Appellate Body Report, Turkey – Restrictions on Imports of Textile and Clothing Products, WT/DS34/AB/R, 22 October 1999, paras. 58–59, available at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds34_e.htm (last visited 5 January 2011).

76 See Appellate Body Report, India – Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products, WT/DS90/AB/R, 23 August 1999, para. 97, available at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds90_ehtm (last visited 5 January 2011).

77 See Ehlermann, Clauss-Dieter, ‘Tensions between the Dispute Settlement Process and the Diplomatic and Treaty-Making Activities of the WTO’, 1 World Trade Review 301, 302 (2002)CrossRefGoogle Scholar.

78 This is not to suggest that this decision is cost-free for the WTO dispute settlement system itself – the system expands its jurisdiction and so its administrative burden.

79 See Articles 4.4 and 6.2 of the DSU. See WTO, Legal Texts, supra note 11, at 357 and 359.

80 See Appellate Body Report, India – Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/AB/R, 16 January 1998, para. 92, available at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds50_htm (last visited 4 January 2011).

81 According to Colombia, Panama failed to respond to requests for assistance, and, when it did, its answers had multiple inconsistencies. See Colombia–Ports of Entry Panel Report, supra note 26, para. 4.85.

82 The measures were declared WTO-inconsistent. See ibid., paras. 8.1–8.10. Apparently, it would have been irrelevant that Colombia violated Article 23, since the panel declared the violation of the trade-restrictive measures adopted in response to the alleged transgressions of the Customs MAS by Panama. However, it is not irrelevant. Let's assume that Panama had in fact violated the Customs MAS and that the jurisdiction of the system had been admitted at the time of the dispute. If this were the case, compliance with Article 23 would have allowed Colombia to win the MAS-related dispute against Panama instead of being the losing party in the case related to the trade restriction in response to the violation of the MAS. In addition, in general, compliance with Article 23 by the MAS compliant party would prevent the non-compliant party to the MAS from going unpunished for its violation of the MAS.

83 WTO Legal Texts, supra note 11, at 372–373. It is important to mention that the Appellate Body has stated that the actions proscribed in Article 23.2 are not the only ones that Members cannot unilaterally adopt and that there may be others. The list is then indicative, not exhaustive. See WTO Appellate Body Report, United States–Continued Suspension of Obligations in the EC–Hormones Dispute, WT/DS320/AB/R, 16 October 2008, paras. 371–372, available at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds320_e.htm (last visited 4 January 2011).

84 WTO Panel Report, United States – Sections 301–310 of the Trade Act of 1974, WT/DS152/R, 22 December 1999, para. 7.43, available at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds152_e.htm (last visited 4 January 2011).

85 The purpose of this section is to introduce some relevant procedural issues that the jurisdiction of the dispute settlement system to adjudicate MAS-related controversies brings about. The topics assessed should by no means be regarded as the only ones.

86 See India–Autos Panel Report, supra note 20, para. 3.7.

87 See ibid. para. 7.115.

88 See supra text accompanying note 48.

89 The European Communities argued in EC–Bananas III that Ecuador could not start second compliance proceedings regarding a measure that had been implemented pursuant to the Bananas Understanding, which the European Communities considered to be a MAS. See EC–Bananas III (Article 21.5 – Ecuador II), supra note 19, para. 3.2.

90 EC–Bananas III, Second Compliance AB Report, supra note 10, para. 212. Such approach is consistent with public international law. See International Court of Justice, Case Concerning Armed Activities on the Territory of the Congo (Democratic Republic of the Congo v. Uganda), judgment of 19 December 2005, para. 293, available at http://www.icj-cij.org/docket/index.php?p1=3&p2=3&k=51&case=116&code=co&p3=4 (last visited 4 January 2011).

91 EC–Bananas III, Second Compliance AB Report, supra note 10, para. 211 [footnotes omitted].

92 I do not think it necessary to deal with the issue of whether non-WTO bilateral agreements can prevent the exercise of rights of action under the DSU, a point at issue in the ongoing dispute in United States – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products (DS381). There, the United States is claiming that it has the right to choose the dispute settlement system of the North America Free Trade Agreement (NAFTA) to resolve this dispute, on the basis of NAFTA Article 2005, a choice that the United States had made. However, Mexico insisted before the DSB on its rights under the DSU, and the panel has been established. The point is not closely related to the main subject matter of this paper, because NAFTA is, obviously, not a MAS under the DSU. (For a more detailed view of the dispute, See Office of the United States Trade Representative, ‘United States Initiates NAFTA Dispute with Mexico over Mexico's Failure to Move Its Tuna–Dolphin Dispute from the WTO to the NAFTA’, press release November 2009, available at http://www.ustr.gov/about-us/press-office/press-releases/2009/november/united-states-initiates-nafta-dispute-mexico-over (last visited January 3 2011).However, it could be possible to say that, given the broad discretion that the Appellate Body has granted Members to initiate dispute settlement proceedings and the importance of access to the dispute settlement system for the preservation of Members' WTO rights and obligations, a provision of a MAS reached during consultations totally precluding any future type of WTO dispute settlement litigation would likely be regarded as contrary to the DSU.

93 It can be possible to say that restrictions to rights of action under the DSU may not only come from MAS, but also exceptionally from non-MAS inter-parties agreements. This is the case of agreements aimed at avoiding the sequencing problem under Articles 22 and 23 of the DSU, which may temporarily limit the right of action under the latter provision, without those agreements' possessing MAS status. The agreements do not end the controversy, which in fact continues first under Article 21.5 and then, if necessary, under Article 22. For a detailed explanation of the sequencing problem, see D. Palmeter and P. C. Mavroidis, Dispute Settlement in the World Trade Organization: Practice and Procedure, 2nd edn (Cambridge University Press, 2004), 278–284. See also Appellate Body Report, United States – Import Measures on Certain Products from the European Communities, WT/DS165/AB/R, 11 December 2000, paras. 91–92, available at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds165_e.htm (last visited 4 January 2011).

94 So far, and given that the legal status of MAS has not been addressed by panels or the Appellate Body, requesting parties in consultation or complainants in panel/appeal proceedings have not sought the enforcement of the MAS and instead have sought the declaration of inconsistency with the covered agreements of the measures at issue. See India–Autos Panel Report, supra note 20, para. 1.4, and EC–Bananas III (Article 21.5 – Ecuador II), supra note 19, paras. 1.3 and 3.1.

95 The reasons for this choice were presented above in Section 2.

96 See supra text accompanying note 91.

97 WTO, Legal Texts, supra note 11, at 374.

98 The Tribunal found that Canada had breached the Softwood Lumber MAS (see London Court of International Arbitration, Award on Liability, The United States of America v. Canada, Case No. 7941, 3 March 2008, at I.3). Then, the Tribunal had to determine the remedies for the breach. The United States stated that the remedies were retrospective, and Canada argued that the Softwood Lumber MAS provided only for prospective remedies and that compensation was not due. (See London Court of International Arbitration. Award on Remedies, The United States of America v. Canada, Case No. 7941, 23 February 2009, at 61, 77).The Tribunal determined that the Softwood Lumber MAS and, in particular, Article 31 of the ILC's Articles on State Responsibility, providing for compensation for the breach of international obligations, were the applicable law. The Tribunal stated that, for the principle contained in Article 31 to apply, it was not necessary for it to be included in the Softwood Lumber MAS, unless there was evidence of a different conclusion (see ibid. para. 274). The Tribunal examined the WTO remedies system and concluded that it contemplated only prospective remedies (see ibid. para. 279); however, the Tribunal did not find sufficient similarity between the WTO retrospective remedies provision, Article 22 of the DSU, and the Softwood Lumber MAS (see ibid. para. 287). On the basis of an interpretation of the text of the latter, in light of its context and object and purpose, the Tribunal concluded that retrospective remedies were allowed under the Softwood Lumber MAS (see ibid. para. 306).

99 I do not purport to develop a full answer to this question, since clauses may widely differ in the scope of the remedies.

100 For GATT panel reports dealing with retrospective remedies, See Robert E. Hudec, Broadening the Scope of Remedies in WTO Dispute Settlement, at 9, available at http//www.worldtradelaw.net/articles/hudecremedies.pdf, at 18.Retrospective remedies have been so far recognized in the WTO in only one case: Australia–Subsidies Provided to Producers and Exporters of Automotive Leather, Recourse to Article 21.5 of the DSU by the United States, WT/DS126/RW, 21 January 2000, paras. 6.22, 6.32, and 6.38, available at http://www.wto.irg/english/tratop_e-dispu_e/cases_e/ds126_e.htm (last visited 2 January 2011).

101 As to the possibility of retrospective remedies in general within the WTO dispute settlement system, See Mitsuo Matsushita, Thomas J. Schoenbaum, and Petros C. Mavroidis, The World Trade Organization: Law, Practice, and Policy (Cambridge University Press, 2003), 82–84. This is not to say, however, that all types of retrospective remedies would be available. For instance, retrospective remedies in the form of punitive damages could not be easily found to be legal even under MAS.

102 It is important to recall that the teleological method must be handled with care in the interpretation of WTO law and that the focus must be on the text of the provision in question. See Appellate Body Report, United States – Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R, 12 October 1998, para. 114, available at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds58_e.htm (last visited 5 January 2011). However, the issue of retrospective remedies in MAS is one of those situations in which the use of the said method is safe, since the text is inconclusive as to the above-mentioned subject matter.

103 The lawfulness of retrospective remedies in MAS would be an exceptional situation and therefore would not impair the principle that prospective remedies are the most common remedies within the WTO dispute settlement system.

104 Certainly, arbitration under Article 25 of the DSU, and therefore within the WTO dispute settlement system, could still be used to ensure enforcement with retrospective remedy clauses in MAS. For a general assessment of this provision, See Laurence Boisson de Chazournes, ‘Arbitration at the WTO: A Terra Incognita to be Further Explored’, in Steve Charnovitz, Debra P. Steger, and Peter Van den Bossche (eds.), Law in the Service of Human Dignity: Essays in Honour of Florentino Feliciano (Cambridge University Press, 2005), 181.