F UNCTION OF A RTICLE XX Article XX allows a WTO Member to adopt or - - PowerPoint PPT Presentation

TRAINING PROGRAMME FOR THE GOVERNMENT OF INDONESIA

SESSION 4: The GATT 1994: General and Security Exceptions

Jogjakarta, Indonesia 26-29 March 2019

AGENDA

I. General Exceptions 1. Function of Article XX 2. Structure of Article XX 3. Order of Analysis 4. Burden of Proof 5. Specific Subparagraphs 6. Chapeau of Article XX II. Security exceptions 1. Do WTO panels and the Appellate Body have jurisdiction to examine national security measures? 2. Are national security measures self-judging? 3. Can national security measures be taken at any time? 4. Article XXI in the GATT 1947 5. Article XXI in the WTO

FUNCTION OF ARTICLE XX

• Article XX allows a WTO Member to adopt or enforce a

measure that is inconsistent with its obligations under the GATT 1994 in order to pursue certain public policy goals provided that the measure is applied in a manner consistent with the requirements set out in Article XX.

• Article XX balances the right of WTO Members to invoke

public policy exceptions and the rights of other WTO Members to ensure that the substantive obligations of the GATT 1994 are respected.

STRUCTURE OF ARTICLE XX

Article XX: General Exceptions Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail,

• r

a disguised restriction

• n

international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures: (a) necessary to protect public morals; (b) necessary to protect human, animal or plant life or health; … (d) necessary to secure compliance with laws or regulations which are not inconsistent with the provisions

• f this Agreement

(e) - (j) Chapeau Application

• f the

measure Sub- paragraphs Public policy

• bjectives

ORDER OF ANALYSIS

• Panel finds that a measure is inconsistent with Member A's

GATT 1994 obligations.

• Member A argues the measure is justified under Article XX.
• Panel assesses whether the measure is justified under

Article XX in a two-tiered analysis:

• 1. Does the measure fall within the scope of one or

more of the sub-paragraphs in order to enjoy provisional justification ?

• 1. If yes, does the measure fully meet the requirements
• f the chapeau of Article XX?

BURDEN OF PROOF

• Article XX is an affirmative defence:
• defence because it arises only when a measure has

been found to be inconsistent with a provision of the GATT 1994.

• affirmative because the burden of proof rests with the

Member invoking it.

BURDEN OF PROOF

• 1. Respondent invoking Article XX must

demonstrate that its measure meets the requirements

• f

the relevant sub- paragraphs and the chapeau.

• 2. The burden then shifts to the Complainant to

rebut the Respondent's arguments by, inter alia, demonstrating that there are less restrictive alternatives to achieve the objective pursued.

• 3. Burden then shifts back to Respondent

to, inter alia, claim that the alternative measures are not reasonably available.

SPECIFIC SUBPARAGRAPHS

Article XX GENERAL POLICY OBJECTIVES PRODUCT-SPECIFIC POLICY OBJECTIVES RELATION TO MEASURE REQUIRING JUSTIFICATION

(a) Public morals* Necessary to... (b) Life and health* Necessary to... (c) Importation or exportation of gold and silver* Relating to... (d) Law enforcement* Necessary to... (e) Products of prison labour Relating to... (f) National treasures* Imposed for the protection of... (g) Natural resources* Relating to the conservation of... (h) Commodity agreements* Undertaken in pursuance of... (i) Domestic materials* Involving restrictions on export of... (j) Products in short supply* Essential to... Provisions interpreted by the Appellate Body in bold. Provisions applied mainly or exclusively to export restrictions in italics*

ARTICLES XX(A), (B) AND (D)

• Measures "necessary to" the protection of public morals

(Article XX(a)), public health (Article XX(b)), and the enforcement of laws and regulations (Article XX(d)).

Design

• Is there a relationship between the

measure and the public policy

• bjective pursued?
• Is the measure capable of

protecting the public policy

• bjective?

Necessity:

• Weighing and balancing exercise
• Importance of the value,
• Trade restrictiveness of the

measure, and

• Contribution of the measure

to the public policy objective pursued.

• Consideration of LRAs.

PUBLIC MORALS

• What are public morals? Are they the same for every country?
• Panel in US – Gambling: "standards of right and wrong conduct

maintained by or on behalf of a community or nation" (para. 6.465).

• Public

morals exceptions were invoked in several disputes: US – Gambling, EC – Seal Products, Colombia – Textiles, and Indonesia – Import Licensing Regimes.

PUBLIC MORALS

PUBLIC HEALTH

• Article XX(b) allows Members to adopt measures: "necessary to

protect human, animal or plant life and health."

• As with public morals, there has been some deference to Members

in determining whether the challenged measure was designed to protect public health.

• Brazil – Retreaded Tyres:

▪ Ban on retreaded tyres. ▪ Risks for human and animal health arising from the accumulation of waste tyres. ▪ Measure was also "necessary" because it was apt to produce a material contribution to the achievement of its objective.

SECURE COMPLIANCE WITH LAWS & REGULATIONS

• Article XX(d) of the GATT 1994 allows Members to adopt measures

"necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement … ".

1. The measure must be designed to secure compliance with national laws

• r regulations, such as customs laws or intellectual property laws.
• In Mexico – Taxes on Soft Drinks, Mexico invoked Article XX(d) to defend its

discriminatory taxes as a measure necessary for Mexico to get the United States to comply with its NAFTA obligations.

• Panel and AB: domestic laws or regulations only.

2. Those laws and regulations must not be inconsistent with provisions of the GATT 1994.

3. The measure must be necessary to secure compliance with those laws or regulations (Appellate Body Report, Thailand – Cigarettes, para. 163).

OTHER SUBPARAGRAPHS

• Article XX(g) of the GATT 1994 allows Members to adopt measures

"relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions

• n domestic production or consumption."
• Article XX(j) of the GATT 1994 allows Members to adopt measure

that are "essential to the acquisition or distribution of products in general or local short supply".

CHAPEAU OF ARTICLE XX

▪ The chapeau addresses, not so much the challenged

measure or its specific contents as such, but the manner in which that measure is applied (Appellate Body Report, US-Gasoline, p. 22).

▪ To meet the requirements of the chapeau, the measure

must not be:

1.

Applied in a manner that arbitrarily discriminates between countries where the same conditions prevail;

2.

Applied in a manner that unjustifiably discriminates between countries where the same conditions prevail;

3.

A disguised restriction on international trade.

EXTRATERRITORIAL APPLICATION OF ARTICLE XX

• Article XX permits WTO Members to restrict imports of

products whose characteristics jeopardise public morals in their own territory, the life and health of their own population, the enforcement of their own laws in their jurisdiction and to protect their own natural resources.

• But does Article XX allow WTO Members to take

measures designed to change policies that affect public morals in another territory, the life and health of people abroad, the enforcement of the laws of other countries and natural resources located in other countries or in common areas?

EXTRATERRITORIAL APPLICATION OF ARTICLE XX

• Public morals: Can a Member justify a ban on imports of fur

from countries that do not ban the use of leghold traps?

• Life and health: Can a Member justify a ban on imports of

lead acid batteries from countries without legislation protecting workers against lead poisoning?

• Law enforcement: Can a Member justifiably limit its trade

relations to countries that effectively secure compliance with their laws against corruption in customs matters?

• Natural resources: Can a Member impose a surcharge on

imports of energy intensive products from countries with levels of air pollution higher than its own?

EXTRATERRITORIAL APPLICATION OF ARTICLE XX

• The text of Article XX does not explicitly provide that Article XX cannot be

used to justify a domestic measure that is designed to affect public policies abroad.

• Nevertheless, in previous GATT cases, respondents argued, and GATT panels

agreed with them, that Article cannot. See US – Tuna Dolphin I (1990) and US – Tuna Dolphin II (1992).

• GATT panel in the US - Tuna Dolphin II dispute (1992), para. 5.24:

"[i]f … Article XX were interpreted to permit contracting parties to take trade measures so as to force other contracting parties to change their policies within their jurisdiction, including their conservation policies, the balance of rights and obligations among contracting parties, in particular the right of access to markets, would be seriously impaired. Under such an interpretation the General Agreement could no longer serve as a multilateral framework for trade among contracting parties."

EXTRATERRITORIAL APPLICATION OF ARTICLE XX

• In the WTO, the question of the extraterritorial application of Article XX was

addressed in the US – Shrimp dispute.

• The WTO panel followed the same approach as previous GATT panels.
• The Appellate Body disagreed. For the Appellate Body, it was not unusual that

measures that were sought to be justified under Article XX "condition[ed] access to a Member's domestic market on whether exporting Members comply with, or adopt, a policy or policies unilaterally prescribed by the importing Member". These measures could therefore not be "a priori incapable of justification under Article XX".

• Appellate Body did not resolve the general question of the extraterritorial

application of Article XX. It considered that, in that specific case, "there [was] a sufficient nexus between the migratory and endangered marine populations involved and the United States for purposes of Article XX(g)".

EXTRATERRITORIAL APPLICATION OF ARTICLE XX

• The GATT and the WTO approaches to the extraterritorial application of

Article XX differ.

• According to GATT case law, Article XX implicitly provides that it cannot be

used to justify a domestic measure designed to affect public policies abroad.

• According to the WTO Appellate Body, however, it cannot be foreclosed

that Article XX can be used to justify a domestic measure that has some type of extraterritorial application. Nevertheless, in order to justify this type of measure, a respondent must demonstrate that there is "sufficient nexus" between the domestic measure of the importing Member and the products at issue that are the subject of public policy at issue.

ARTICLE XX IN A NUTSHELL

RESPONDENT COMPLAINANT Try to justify under the relevant subparagraph of Article XX

• Question importance of the value/interest
• Question contribution the challenged measure

makes to the objective

• Argue challenged measure has a restrictive

impact on international trade

• Identify less restrictive alternatives (LRAs)

Argue that LRAs are not reasonably available or do not achieve the same contribution as challenged measures Holistic weighing and balancing = provisionally justified under relevant subparagraph of Article XX Analysis under the chapeau

AGENDA

I. General Exceptions 1. Function of Article XX 2. Structure of Article XX 3. Order of Analysis 4. Burden of Proof 5. Specific Subparagraphs 6. Chapeau of Article XX II. Security exceptions 1. Do WTO panels and the Appellate Body have jurisdiction to examine national security measures? 2. Are national security measures self-judging? 3. Can national security measures be taken at any time? 4. Article XXI in practice: GATT 1947 and the WTO

ARTICLE XXI

Article XXI Security Exceptions Nothing in this Agreement shall be construed (a) to require any contracting party to furnish any information the disclosure of which it considers contrary to its essential security interests; or (b) to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests (i) relating to fissionable materials or the materials from which they are derived; (ii) relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment; (iii) taken in time of war or other emergency in international relations; or (c) to prevent any contracting party from taking any action in pursuance of its

• bligations under the United Nations Charter for the maintenance of international

peace and security.

DO WTO PANELS AND THE APPELLATE BODY HAVE

JURISDICTION TO EXAMINE NATIONAL SECURITY MEASURES?

• Several GATT Contracting Parties, most notably the US, suggested

that interpretation of Article XXI was entirely outside the scope of a panel's jurisdiction.

• The 1982 GATT Decision concerning Article XXI recognizes that

"[w]hen action is taken under Article XXI, all contracting parties affected by such action retain their full rights under the General Agreement". These rights include dispute settlement provisions under Article XXIII of the GATT 1994.

• In Mexico – Soft Drinks, the Appellate Body clarified that "panels

are required to address the relevant provisions in any covered agreement or agreements cited by the parties to the dispute" (para. 49). See also Articles 7.2, 11, 17.6 and 17.12 of the DSU.

ARE NATIONAL SECURITY MEASURES

SELF-JUDGING?

• Statements during GATT 1947 Negotiations, Commission A of

the Preparatory Committee of the UN Conference on Trade and Employment, (E/PC/T/A/PV/33), 24 July 1947:

• US Delegate:
• "No one would question the need/right of a Member

to take action relating to its security interests and to determine for itself what its security interests are";

• But… "we cannot permit everything under the sun";
• The word "considers" should not mean that "under the

guise of security, countries will put on measures which really have a commercial purpose".

• Chairman of Commission A: "the spirit in which Members of

the Organization would interpret these provisions was the only guarantee against abuse" of measures taken under the "IT considers" language.

ARE NATIONAL SECURITY MEASURES

SELF-JUDGING?

Article XX(a), (b) and (d) GATT 1994 Article XXI GATT 1994

Nothing in the GATT 1994 prevents the adoption or enforcement of measures:

• "necessary to protect public

morals";

• "necessary to protect human,

animal or plant life or health"

• "necessary to secure

compliance with laws or regulations…". "Nothing shall be construed "to prevent any [WTO Member] from taking any action which it considers necessary for the protection of its essential security interests …"

ARE NATIONAL SECURITY MEASURES

SELF-JUDGING?

• In conclusion, Article XXI gives Members significant deference in

determining actions that they consider necessary for the protection

• f their national security interests.
• Some commentators have suggested that:

"[I]t is imperative that a certain degree of 'judicial review' be maintained; otherwise the provision would be prone to abuse without redress. At a minimum, panels and the Appellate Body should conduct an examination as to whether the explanation provided by the Member concerned is reasonable or whether the measure constitutes an apparent abuse". (Van den Bossche and Zdouc, p. 596).

CAN NATIONAL SECURITY MEASURES

BE TAKEN AT ANY TIME?

• Article XXI contains an exhaustive list of situations in which such

actions may be taken, such as the "time of war or other emergency in international relations".

• The term "war" can arguably be interpreted in light of the broader

framework of public international law. In its Tadić decision, the International Criminal Tribunal for the former Yugoslavia defined "an armed conflict" as a situation where "there is a resort to armed force between States …" (para. 70).

• However, what is the meaning of "emergency in international

relations"? Can this concept encompass an economic emergency, such as an increase in imports causing injury to a domestic industry?

CAN NATIONAL SECURITY MEASURES

BE TAKEN AT ANY TIME?

• On the one hand, the meaning of "emergency" is broad: "A

serious, unexpected, and often dangerous situation requiring immediate action".

• On the other hand, if Members were allowed to invoke Article

XXI in situations of an economic emergency, other provisions dealing with the same subject matter, such as Articles XII, XVIII and XIX of the GATT 1994, would become meaningless, which is contrary to the principle of effective treaty interpretation.

• The concept of "emergency" must also be interpreted in its

immediate context in Article XXI, which deals with situations of "war", "traffic in arms", "maintenance of international peace and security", etc.

• If Members were allowed to define for themselves the meaning
• f "emergency", Article XXI would be prone to abuse.

ARTICLE XXI IN THE GATT 1947

• United States embargo on strategic goods

(Czechoslovakia) (1949)

• Ghana – Ban on imports of Portuguese goods

(1962)

• US embargo on trade with Cuba (1962)
• Sweden – Import quota system for footwear

(1975)

• EC, Australia and Canada – Trade Measures

against Argentina (1982)

• US – Embargo on trade with Nicaragua (1982)
• EC – Yugoslavia crisis (1991)

ARTICLE XXI IN THE WTO

• United States — The Cuban Liberty and Democratic

Solidarity Act (DS38)

• Nicaragua — Measures Affecting Imports from Honduras

and Colombia (DS201/DS188)

• Russia — Measures Concerning Traffic in Transit (DS512)
• Ukraine — Measures relating to Trade in Goods and

Services (DS525)

• Qatar's challenges to trade embargoes by Saudi Arabia

(DS567, DS528), Bahrain (DS527), and the United Arab Emirates (DS526) relating to the 2017–2018 Qatar diplomatic crisis.

US SECTION 232 INVESTIGATIONS

Another example of the invocation of national security measures in the WTO are US Section 232 investigations of the effects of imports of certain goods on the US national security:

• From early 60s, the USDOC has conducted more than 25 such investigations

against the imports of various products.

• Prior to the Trump Administration, the final measures were imposed in a

handful of cases, mainly against the imports of crude oil, during political crises.

US SECTION 232 INVESTIGATIONS

• 9 WTO Members (Canada, China, the EU, India, Mexico, Norway,

Russia, Switzerland, and Turkey) challenged these additional duties in the WTO: United States — Certain Measures on Steel and Aluminium Products (DS544, DS547, DS548, DS550, DS551, DS552, DS554, DS556, DS564).

• The complainants characterize the US's measures as WTO-

inconsistent safeguards. In addition, certain complainants imposed on US goods retaliatory measures under Article 8.2 of the SGA.

• For some of these complaints, the panel was established on 21

November 2018, and for others on 4 December 2018.

• The US, on its part, challenged the retaliatory measures imposed

by each of the complainants in separate WTO proceedings.