The Appellate Body has issued its (delightfully brief) report in Mexico — Tax Measures on Soft Drinks and Other Beverages” (DS308). The report will merit further study, but it appears on first glance that the Appellate Body has definitively rejected the possibility that panels or the AB would apply non-WTO international law.
Mexico argued, based on language in the Chorzow Factory Case (the AB expressed no opinion on the application of this principle), that the U.S. might be precluded from relying on its WTO rights due to its alleged non-compliance with NAFTA. The AB stated that the determination of the application of this principle would "entail a determination whether the United States has acted consistently or inconsistently with its NAFTA obligations." (footnote omitted) In para. 56, the AB stated:
"We see no basis in the DSU for panels and the Appellate Body to adjudicate non-WTO disputes. Article 3.2 of the DSU states that the WTO dispute settlement system "serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements". (emphasis added) Accepting Mexico 's interpretation would imply that the WTO dispute settlement system could be used to determine rights and obligations outside the covered agreements."
Any argument that this holding is limited to actual settlement of non-WTO disputes (most would agree that a panel cannot actually decide a non-WTO cause of action), as opposed to a determination in order to evaluate the relationship of the non-WTO rule to WTO law, is foreclosed by the context in which this language appears, as well as rather explicit language in paragraph 78:
". . . Mexico's interpretation would imply that, in order to resolve the case, WTO panels and the Appellate Body would have to assume that there is a violation of the relevant international agreement (such as the NAFTA) by the complaining party, or they would have to assess whether the relevant international agreement has been violated. WTO panels and the Appellate Body would thus become adjudicators of non-WTO disputes.[1] As we noted earlier[2], this is not the function of panels and the Appellate Body as intended by the DSU.[3]"
Thus, a panel would not be permitted to evaluate other international law in order to determine whether that other international law constitutes a defense to claims of non-compliance with WTO law.
-------------------------------------------------------------------------------- [1]Article 3.2 of the DSU states that the WTO's dispute settlement system "serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements". (emphasis added) [2]See supra, para. 56. [3]We note that, in its analysis, the Panel also referred to the negotiating history of the GATT 1947, and particularly to the rejection of a proposal presented by India during the negotiations on the International Trade Organization (the "ITO") Charter according to which Members would be permitted to justify, on a temporary basis, retaliatory measures under Article XX. (See Panel Report, para. 8.176 (referring to ITO Doc. E/PC/T/180 (19 August 1947), p. 97; and "Havana Charter for an International Trade Organization", United Nations Conference on Trade and Employment, Final Act and Related Documents (Lake Success, New York, April 1948), pp. 33-34)
