In the recent U.S. - Zeroing (EC), Article 21.5 dispute, there was a systemic issue related to bringing "new" claims in an Article 21.5 proceeding: If a claim could have been brought against the measure at issue in the original proceeding, but was not, can the claim be brought against an unchanged aspect of that measure in the Article 21.5 proceeding?
A few years ago, a panel said no. In the U.S. - Countervailing Measures on EC Products (DS212) case, the panel found that concerns about "fundamental fairness" and "due process" led it to conclude that a claim could not be brought under Article 21.5 in these circumstances (see para. 7.75). In Fn. 294, the Panel explained:
The Panel notes that in EC – Bed Linen (Article 21.5 – India), the panel explained that, in such a situation, a defending Member would not have the opportunity to bring the measure into conformity. Panel Report on EC – Bed Linen (Article 21.5 – India), para. 6.40. Indeed, there is no provision for a "reasonable period" to implement the ruling in an Article 21.5 dispute. Thus, an Article 21.5 panel ruling on such a new claim may immediately give rise to rights for compensation or suspension of concessions under Article 22 DSU. Moreover, the parties do not have the same opportunity to present evidence and arguments in Article 21.5 proceedings.
The circumstances of the present case illustrate the potential procedural unfairness. The European Communities did not agree that the United States could submit consecutive rebuttals and required that the rebuttals be simultaneous. Therefore, the United States could only rebut the arguments in the European Communities' Second written submission during the sole meeting with the parties. Consequently, important facts and issues continued to surface quite late into the Article 21.5 proceedings, proceedings that are already abbreviated. In addition, we note that the record of the original proceedings does not even include evidence regarding the likelihood-of-injury determinations which, as noted above, were made by a different agency than the likelihood-of-subsidization determinations at issue in the original dispute. Thus, were we to consider the injury claim as within our mandate, we would have an extremely limited evidentiary basis on which to rule. Finally, the shorter timeline significantly limits both the panel's opportunity to interact with the parties and the panel's time to deliberate. The panel typically has only one opportunity to meet with the parties, unlike the normal proceedings where two substantive meetings take place.
Thus, the key reasons offered by this panel for not allowing such claims was the absence of a reasonable period of time to implement and the lack of opportunities to present evidence and arguments.
In U.S. - Zeroing (EC), Article 21.5, the panel quoted the DS212 panel and reached the same conclusion (see paras. 8.240-242). On appeal, however, the Appellate Body reversed. In doing so, it stated:
427. While claims in Article 21.5 proceedings cannot be used to re-open issues that were decided on substance in the original proceedings, the unconditional acceptance of the recommendations and rulings of the DSB by the parties to a dispute does not preclude raising new claims against measures taken to comply that incorporate unchanged aspects of original measures that could have been made, but were not made, in the original proceedings. We do not see how allowing such claims in Article 21.5 proceedings would "jeopardize the principles of fundamental fairness and due process"566, or how it would unfairly provide a "second chance"567 to the complaining Member, provided these new claims relate to a measure "taken to comply" and do not re-argue claims that were decided in the original proceedings.
The Appellate Body did not address the concerns noted by the DS212 panel in detail, but rather stated simply that it did not see how "the principles of fundamental fairness and due process" would be undermined.
In my view, there are real concerns here. In this regard, in our DSC (subscribers only) for the AB report, we noted the following problems with allowing such claims:
a complaining Member might choose to hold back certain claims during the original proceedings, reserving them so as to make them during an Article 21.5 proceeding. There are a number of reasons for doing so, including the following. First, it increases the chances that the Article 21.5 complaint will succeed and thus the complainant will obtain the right to impose trade sanctions because compliance has not been achieved. Second, for the claim held in reserve, the responding Member will be faced with trade sanctions immediately, rather than having a reasonable period to bring the measure into compliance, which will have an impact on the possibilities for implementation. And third, Article 21.5 proceedings are shorter and have fewer opportunities for rebuttal by the responding Member, which may make it more difficult to defend the measure.
The second and third reasons draw on the DS212 panel's statements. As to the first reason, the point is that there is an incentive for complainants to hold back a claim so that it can be used later to make sure that the Article 21.5 proceeding results in a violation.
Does anyone have any thoughts on this? When I read the DS212 report initially, I thought it seemed to take a reasonable approach. The Appellate Body has now rejected that approach, but I'm not quite sure why.
