International Economic Law and Policy Blog

A Few Thoughts on the AB's Tuna 21.5 Report

I am not as critical as Rob of the AB's Tuna 21.5 report, but I do have some concerns. Let me set them out briefly.

First, the Appellate Body said the following about the standard it applies under TBT Article 2.1:

7.153. We have already undertaken some analysis relevant to the first issue when we addressed the United States' appeal of the Panel's articulation of the legal standard to be applied in the second step of an assessment of whether a technical regulation accords less favourable treatment under Article 2.1 of the TBT Agreement. We noted that, in determining whether the detrimental impact on imports stems exclusively from a legitimate regulatory distinction, the "particular circumstances" of the case may inform the appropriate way in which to assess even-handedness in that specific case. While acknowledging the potential utility to the even-handedness assessment of an inquiry into whether the detrimental impact, and the explanations given for it, can be reconciled with, or are rationally related to, the policy pursued by the measure at issue, we explained that this is one possible examination that could be undertaken to determine whether a regulatory distinction is arbitrary or unjustifiable and thus not even-handed under Article 2.1. Yet, taking too narrow an approach to such an inquiry could lead a panel into error. To appreciate properly whether a measure is even-handed, an inquiry into the nexus between the regulatory distinctions found in the measure and the measure's policy objective may have to encompass also, or to be supplemented by, consideration of whether the differences in the treatment accorded to different groups of products by virtue of those distinctions, and the resulting detrimental impact, are disproportionate in the light of the objective pursued.

(See also para. 7.97)  This is nothing new, because it comes from COOL, but the part about the "nexus between the regulatory distinctions found in the measure and the measure's policy objective," and whether the regulatory distinctions "are disproportionate in the light of the objective pursued," worries me.  In the real world, with actual measures drafted by actual people, and influenced by actual special interest groups, I'm not sure how easy it will be to satisfy this test.  As a result, once there is detrimental impact, it becomes very hard to defend measures as "stem[ming] exclusively from a legitimate regulatory distinction."  I'm not saying that the "nexus" inquiry envisioned here is irrelevant; I just wouldn't rely on it as the sole basis in the "legitimate regulatory distinction" analysis.  The inquiry should be a very broad look at the design, structure, architecture, etc. of the measure.  Based on the findings in this case, I worry the broader perspective is getting lost.

Second, if you read through the crucial parts of the AB's reasoning leading to a finding of violation (at paras. 7.254-265), relating to the "determination provisions," the basis for the finding seems really quite small.  It does appear that, perhaps, there are some minor elements of the U.S. statute and regulations that, to a limited extent, may not address harms to dolphins in some fisheries in the same way that harms in other fisheries are addressed.  As a result, perhaps the U.S. measure is not perfectly calibrated to the risks to dolphins in different fisheries.  But that lack of calibration is very subtle.  And I'm just not sure how many measures can satisfy a standard that requires such a high degree of calibration.

And finally, while I'm complaining about things, let me offer a more general comment on the AB's Article 2.1 standard, which, to repeat, looks at "whether the detrimental impact on imports stems exclusively from a legitimate regulatory distinction."  It has always seemed to me that this standard is a bit narrow and inflexible.  I wonder if a reformulation that involves a more holistic assessment of these same elements, and clearer language, would be better.  For example, you could look at whether (and to what degree) a measure has a detrimental impact on imports; and you could look at whether (and to what degree) the measure reflects a legitimate, non-protectionist policy.  Then you would weigh and balance these two elements, to reach a final conclusion on whether less favorable treatment exists.  I feel like this kind of analysis would be the one most likely to get you to the right result, and it would do so in a way that was more easily understood by, and thus had more credibility with, the general readership of these decisions.  And it would only take a subtle shift from the current language and approach to get there, so it wouldn't be a radical departure from the existing jurisprudence.

Does the Appellate Body Need a Senior Judicial Officer?

A result like that in the recent Tuna/Dolphin 21.5 proceeding, on which I blogged here early this week http://worldtradelaw.typepad.com/ielpblog/2015/11/the-tunadolphin-appellate-body-215-ruling-a-decision-that-could-threaten-the-integrity-and-efficiency-of-wto-dispute-settl.html, necessarily focuses attention on the inner workings of the Appellate Body.  How could such an incoherent almost unreadable opinion, where the finding of violation appears to be based, at least in no small part, on a mistaken reading of US municipal law, be allowed to see the light of day?  As those familiar with my scholarship know, I have been a great admirer of the AB's achievements over the years. In my  post earlier this week, I speculated that the Tuna/Dolphin ruling might in part be explained as a kind of amalgam of different views by a divided AB or even a divided division.  The head of the AB Secretariat Werner Zdouc, as I mentioned, has apparently taken an activist position that Members of the AB avoid dissenting or separate opinions.  But this may be coming at a cost of a lack of transparency and indeed basic clarity about the underlying jurisprudential stances of the appellate judges.  Already one could see this in cases like Seals, on balance an excellent outcome, but where scholars like Greg Schaffer rightly complained about the obscurity of the grounds of the AB's reasoning on key points.  The doctrinal glissage between Seals, Cloves and Dominican Republic Cigarettes about whether legitimate non-protectionist grounds for regulatory distinctions is a consideration in the application of National Treatment, a very important issue that relates to policy space and the legitimacy of the WTO, is a troubling example of the AB shifting without any kind of clear expression of change of direction.  One could say that the judges were brought to overrule Dominican Republic Cigarettes through the transitional device of an obscure footnote about that decision in Cloves.      

We know little about the exact role Werner Zdouc is playing in the current decision-making of the AB, though that he would apparently take a strong stance on an issue that goes to the core of judicial collegiality does to me raise questions about what a secretariat is exactly supposed to do.  Zdouc has been with the AB for 10 years, but was in the WTO bureaucracy for years before that.  He is an intelligent thoughtful Austrian lawyer, and I regard him as a professional friend.  He keeps what seem to be investment banker's hours and is among the hardest working people at the WTO for sure-but even so he enjoys and values contacts with academics, and has not infrequently made the time for a coffee or drink in a busy schedule when I was passing through Geneva.   

In most courts and tribunals there tends to be more, often much more rotation in the law clerks than in the judges.  But Zdouc has been a long-term fixture and there have been many rotations in the AB during his tenure.  In a sense, this situation could not but give him some unusual degree of influence over the AB, as an institutional memory and source of continuity.

There is a case to be made that the WTO should have a senior judicial officer (perhaps along the lines of the Advocate-General function in the EU) who is a truly independent, and whose advice on how cases ought to be decided would be in the form of published opinions, not back room counsel.  This is not a new proposition or original with me (I seem to recall Joseph Weiler suggesting it once, though I'm not sure).  Independence would mean that Advocate-General does not come out of the WTO bureaucracy but from a different background more consonant with such a function.  Experience in another international or regional court or tribunal for instance.     One version of this proposal in in this essay by Armand de Mestral and M. Auerbach-Ziogas http://ebooks.cambridge.org/chapter.jsf?bid=CBO9780511494499&cid=CBO9780511494499A025.  I am not wedded to one version of the idea, and I think there would be a way of introducing it that would not necessarily entail changing the DSU, provided that the A-G opinion were not binding in any way and that it were given within the current time frames for proceedings as required by the DSU.

In circumstances where it is clear to all that there is very limited capacity for the WTO to be an effective forum for the negotiation of new trade rules, and where there is so much centrifugal dynamism in regional negotiations, what gives the WTO salience today is the quality and legitimacy of dispute settlement; that a multilateral tribunal, the AB, interprets key norms of liberalized trade, like National Treatment and MFN, on a regular basis helps to keep regional fragmentation from resulting in normative fragmentation.  We must not allow the crown jewels of the multilateral trading system to be stolen, lost or commandeered. 

 

All thoughts and reactions welcome!

 

  

 

The Tuna/Dolphin Appellate Body 21.5 Ruling: A decision that could threaten the integrity and efficiency of WTO dispute settlement

As Susan Esserman and I pointed out in Foreign Affairs some years back, the WTO dispute settlement system is among the most advanced adjudicative mechanisms yet devised for international law. One of its innovative features is a means by which disagreements over compliance are themselves subject to resolution by the judges. The risk is that this process, stipulated in Article 21.5 of the Dispute Settlement Understanding, may be abused to undermine the finality and certainty of rulings, extending or even expanding the dispute instead of resolving it.

An egregious example of such abuse has been the way in which Mexico has chosen to attack the US dolphin-friendly voluntary labeling scheme in WTO litigation. Mexico’s bad faith conduct began with its very filing of the dispute, in flagrant violation of a choice of forum clause in the NAFTA, which specified that disputes of this nature, involving environmental or scientific facts, must be brought before the NAFTA forum not the WTO (NAFTA Article 2005.4 (a) and (b))

When the dispute finally got the WTO Appellate Body, Mexico lost on almost all fronts, except one narrow issue. The United States changed its scheme to address that one issue, concerning even-handedness of regulatory burden being calibrated to the risk to dolphins in Mexico's Eastern Tropical Pacific (ETP) fishery and other fisheries. Then Mexico decided to abuse the 21.5 process to open up many issues already decided by the AB, and indeed other issues never litigated, basically manipulating the 21.5 process to re-open and reframe the entire dispute. Incredibly, the panel bought it; and even more incredibly, although with some important pushback, the AB has rewarded or condoned such behavior. Now, a sophisticated WTO litigant that doesn’t like the outcome of the original litigation has an option to constantly re-litigate under the guise of the 21.5 process.

One of the key advantages of the WTO adjudicative system, to produce some kind of finality in controversial trade matters, can easily be eroded. Especially by WTO Members who have lots of experience in trade disputes and lots of trade lawyers. At the limit, and fortunately it was the United States on the other end of this dispute and not a capacity-limited Member, the respondent could be forced into settlement in order to obtain some certainty, regardless of the legal merits of its claim. The Appellate Body in its 21.5 ruling found the United States in continuing violation not because of its changes to the original measure, nor because it had failed to amend the original measure in the ways the AB had originally suggested were necessary, but on the basis of features of the original measure unaltered from before the original dispute and un-impugned in the original AB ruling. Almost by good fortune, the finding of violation is so obscure and imprecise that there will certainly have to be a further round of 21.5 proceedings. These should give the AB an opportunity to reconsider the system-threatening features of the decision just rendered. The decision did close some doors to the kind of abuse exemplified by Mexico’s conduct in this dispute; next time round the AB must shut the others. My sense is that the AB was divided in this case, perhaps quite sharply. It would not be difficult to reverse engineer as it were (pardon the slight misuse of that phrase) the AB 21.5 ruling into different opinions, including on the issue of the need to shut the door to abusive relitigation of the original dispute in 21.5 proceedings. (Apparently, the head of the WTO Appellate Body secretariat, Werner Zdouc has a horror of separate opinions-one that seems to outweigh the horror of incoherent unanimous reports) The outcome of the AB 21.5 ruling, a finding of violation that is rather fuzzy and based on abstract comparisons of specific wording in different clauses, without a real world grasp on the meaning for even-handedness as far as effects go, may reflect a very strenuously bargained overlapping consensus, a constructed and arguably artificial compromise.

The Original AB Ruling

Let’s start with what the AB decided in its original ruling. In its report in US-Tuna the Appellate Body 1) reversed findings of the panel that led it to the conclusion that the original measure violated TBT Articles 2.2 and 2.4); 2) reversed findings of the panel that led it to the conclusion that the original measure did not violate TBT Article 2.1; 3) completed the analysis under TBT Article 2.1 and in so doing found that the United States was in violation of Article 2.1; 4) found that the panel’s approach to judicial economy, in not considering Mexico’s GATT claims, violated Article 11 of the DSU, but did not complete the analysis under GATT, because Mexico stated in response to questioning by the division of the Appellate Body that it did not wish the Appellate Body to complete the analysis under GATT if it found a violation of TBT Article 2.1. In sum, the sole inconsistency with the covered agreements found by the Appellate Body was a violation of 2.1, upon completion of the analysis. The nature of this inconsistency was articulated by the Appellate Body in paragraphs 284ff of its Report. The Appellate Body first noted that “The aspect of the measure that causes the detrimental impact on Mexican tuna products is thus the difference in labelling conditions for tuna products containing tuna caught by setting on dolphins in the ETP, on the one hand, and for tuna products containing tuna caught by other fishing methods outside the ETP, on the other hand. The question before us is thus whether the United States has demonstrated that this difference in labelling conditions is a legitimate regulatory distinction, and hence whether the detrimental impact of the measure stems exclusively from such a distinction rather than reflecting discrimination.”(Paragraph 284) The legitimate regulatory distinction invoked by the United States was that the regulatory costs, and costs imposed on the industry, by the labelling conditions in the case of the ETP were not justified in the case of non-ETP tuna because of the considerably lower risk to dolphin mortality of tuna fishing outside the ETP. The Appellate Body found the United States had not discharged its burden of proof with respect to legitimate regulatory distinction, since it had not shown that only through the same kind of costly measures that the US used to address dolphin mortality in the ETP could it tackle the lesser risk of dolphin mortality outside the ETP. In particular, the AB raised the possibility that the US scheme could be “calibrated” to this lesser risk through certification by the ship’s captain, avoiding the expense of independent observers, etc. This notion was not vetted by the AB merely as a random hypothetical: as the AB pointed out, certification by the captain in the case of fisheries other than the ETP was an option already contemplated by the relevant US statute. It is not surprising that the AB came to the conclusion that the United States had not discharged its burden of proof, since the US authorities had not even attempted to use the means already available to them by statute (namely, captain’s certification) to address the outside the ETP risks, means that did not present the kinds of regulatory costs and burdens associated with independent observers in the case of the high-risk ETP tuna fishery.

In sum, it was evident to the Appellate Body that these high regulatory costs and burdens could not persuasively constitute a legitimate regulatory distinction, if there were clear, available alternative means for the United States to calibrate its labeling conditions based upon the relative risks to dolphin mortality posed by different fisheries. Through its 2013 Final Rule the United States adopted these alternative means.

The 21.5 Compliance Panel

The question for the 21.5 panel should have been two-fold: 1) first and foremost, whether the regulatory changes the US made to bring itself into compliance  had the result of sufficiently narrowing the difference in labeling conditions between ETP and non-ETP fisheries such that this difference could be considered now to derive exclusively from a legitimate regulatory distinction; 2) whether the original measure was altered such as to give rise to some new, different violation of a provision of a covered agreement. The Appellate Body observed in Softwood Lumber VI (Article 21.5-Canada): “the scope of Article 2.15 proceedings logically must be narrower than the scope of original panel proceedings.” (Paragraph 1708) Further in Canada-Aircraft (Article 21.5-Brazil) the Appellate Body held: “Proceedings under 21.5 do not concern just any measure of a Member of the WTO; rather, Article 21.5 proceedings are limited to those ‘measures taken to comply with the recommendations and rulings of the DSB….in principle, there would be two separate measures: the original measure which gave rise to the recommendations and rulings of the DSB and the ‘measures taken to comply which are-or should be-adopted to implement those recommendations and rulings.”(Paragraphs 1720-1721;emphasis in original). In EC-Bed Linen (Article 21.5 India), the Appellate Body held: “If a claim challenges a measure which is not a ‘measure taken to comply’, that claim cannot properly be raised in Article 21.5 proceedings.” (Paragraph 78: emphasis in original).” Further, in US-Shrimp (Article 2.15 Malaysia), the Appellate Body held that a 21.5 panel may not re-visit the WTO consistency of any aspect of a new measure taken for compliance that a) remains unchanged from the original measure and b) was not found to violate a provision of a covered agreement in the original proceedings. (Paragraphs 89-106) In particular, the Appellate Body emphasized the importance of the finality of the original findings and recommendations adopted by the DSB as a binding settlement of the dispute between the parties, in accordance with Article 17.14 of the DSU. (Paragraph 97)

The 21.5 panel, however, in its report made set of comparisons de novo between situations that were not compared by the Appellate Body in its completion of the analysis under TBT Article 2.1, and made findings of violation of 2.1 based upon these comparisons. That would have been acceptable, if this set of comparisons resulted either from changes to the various categories in the original measure and/or to the requirements applicable to each category, which raised new issues of WTO compliance. The paragraphs of its report where the panel engages in this exercise of de novo comparisons are confusing and at times almost incomprehensible. (Paragraphs 7.249-7.263). Part of the reason for this murkiness could that this adventure of de novo comparisons was undertaken by the panel on its own motion not based on any prior pleadings of Mexico, and indeed was raised for the first time by the panel with the parties in its questions to them.

The AB 21.5 Report

As already noted, there are parts of the AB report that rightly push back on Mexico’s attempt to relitigate the whole dispute under the guise of 21.5 proceedings. At least some AB Members had serious concern that Mexico’s conduct might be seen as an abuse of 21.5. Thus, in paragraph 5.8 the AB underlined: “5.8. In reviewing the WTO-consistency of a measure "taken to comply", compliance panels should be mindful of the principle of prompt settlement of disputes embodied in Article 3.3 of the DSU. Accordingly, compliance proceedings cannot be used "to 're-open' issues decided in substance in the original proceedings." Further, the AB questioned whether the panel’s method of operating in finding new violations concerning the original measure was consistent with its justification that it had jurisdiction under 21.5 due to interlinkages between the original measure and the steps taken to comply: “The Panel had, in discussing its jurisdiction under Article 21.5 of the DSU, emphasized the interlinkages between elements of the amended tuna measure, it subsequently conducted a segmented analysis that isolated consideration of each element of the measure without accounting for the manner in which the elements are interrelated, and without aggregating or synthesizing its analyses or findings relating to those elements before reaching its ultimate conclusions as to the consistency or inconsistency of the amended tuna measure.”(7.2) At least, here the AB recognized that the panel wasn’t limiting itself to examining aspects of the original measure in their interaction with the steps that the US had taken to comply but rather was using this as a pretext to allow Mexico a second kick at the can, simply re-arguing the original measure. A similar recognition is reflected also in the following observations of the AB: It is also surprising that, in this part of its reasoning, the Panel made little reference to the original Appellate Body report in this dispute and did not acknowledge or discuss the concept of "calibration" advanced by the United States, and used by the Appellate Body as a means of testing the even-handedness of the original tuna measure” (Paragraph 7.101).

While saying all this, however, the AB found a way of permitting a second kick at the can, a relitigation of the original measure: aspects of the original measure could be reviewed, even if they were not challenged or decided in the original proceeding, where these aspects of the original measure constitute "an integral part of the measure taken to comply".(Paragraph 5.8) Of course, unless the original measure is completely replaced with a new measure, it is not surprising that aspects of the original measure will interact with the new measure. The real issue for preserving the proper scope of 21.5 proceedings is: does the interaction lead to the aspects of the original measure being in non-conformity with the WTO law in a manner different or more severe than before that interaction? If not then this is a second kick of the can. But here the AB was dealing with the same question of non-conformity of the original aspects of a measure that could and should have been dealt with in the original proceedings.

The AB Finding of Violation

The AB finding of violation (upon completion of the analysis) entirely centers on the issue of the circumstances in which heightened risk to dolphins can trigger the highest level of monitoring and verification in the case of non purse-seine and non-ETP tuna, including the requirement of an observer on every boat. As noted, the lack of calibration that the AB had found in the original report, the sole basis for a violation, was the between the treatment of ETP purse seine fishery tuna and all non-ETP tuna. The reasoning was that Mexico had established there is some dolphin mortality risk in the latter case and therefore one could not justify on the basis of a legitimate regulatory distinction that there would be no real monitoring of dolphin mortality as a requirement for using the dolphin-safe label in the case of non-ETP tuna generally.

In addressing the situations where non-purse seine and non-ETP tuna could trigger the highest level of monitoring and verification, because of some specific identified heightened risk to dolphins, the AB was in fact examining an aspect of the original measure unaffected by the US modification, which introduced an intermediate level of monitoring and verification (captain’s certification) in the case of non-ETP tuna generally. Thus, even if not disingenuous, the AB justification for 21.5 jurisdiction here on the basis of supposed interaction between the modification of the original measure and aspects that remain unchanged is certainly strained. Basically, the new requirement of captain certification of non-ETP generally would in no way change the operation of the provisions where, in the original measure, because of heightened risk to tuna in a specific fishery the highest level of monitoring and inspection could be required. It is not as if, for example, captain’s certification introduced a lower level of monitoring and inspection for non-ETP generally but sacrificing the possibility of the highest level where a specific fishery was shown to present a special heightened risk to dolphins.
One would think that pre-existing provisions that allow the imposition of the highest level of monitoring and verification (the level applied to the ETP purse seine fishery) in other cases where comparable high risks to dolphins exist in specific fisheries would reinforce the evenhandedness of the modified measure not undermine it (there is even some language in the AB report to this effect, suggesting some considerable cleavage between AB Members in this dispute). So it is truly difficult to fathom the AB’s reasoning. But let’s try. It has something to do with two turns of phrase that are used in the original US legislative scheme to articulate situations where heightened risk to dolphins may trigger the highest level of scrutiny even in the case of non-ETP and/or non-purse seine fisheries.
In the case of purse seine fishing outside the ETP, the determination of “regular and significant association between dolphins and tuna” is what triggers the requirement of independent observer certification. This is B)(i) as set out in the original measure. This provision is based on the recognition that, even though the dolphin-tuna association is already well-established and pervasive in the ETP, such an association could occur elsewhere and thus should trigger comparable intensive monitoring in order to ensure the integrity of the “dolphin-safe” label, given the well-established dangers of using purse seine nets. Now if we turn to the second “determination” provision, which concerns “other fisheries”, this is the one set out in in (D) of the original measure. Here the trigger for independent observer certification is indeed different: “regular and significant mortality or serious injury to dolphins.”

According to the AB, “The determination provision applicable to the non-ETP purse-seine fishery allows for the addition of a requirement for observer certification if there is a determination of "regular and significant association", but not for a determination of "regular and significant mortality or serious injury". In our view, this is difficult to reconcile with the fact that such an observer certification is required in the ETP large purse-seine fishery, and that such a determination, on the basis of "regular and significant mortality or serious injury", can be made pursuant to the other relevant determination provision, which is applicable to "all other fisheries." (Paragraph 7.258)

Now it will immediately observed that the conditions of competition affected by the differences in wording here, if there is any effect, would be between non-ETP purse seine tuna and other non- ETP tuna. In other words, the relative treatment at issue does not affect the treatment of Mexican purse seine ETP tuna.

Why the different language? In the case of non-ETP purse seine tuna, regular and significant association with dolphins, combined with the use of purse seine technology, raises a robust presumption that there will be significant dolphin mortality. In other words, the presence of these two risk factors together leads to a common sense judgment that regular and significant mortality in likely to occur and thus the highest level of monitoring and verification is necessary.

The AB seems to think that there could be situations in the non-ETP purse seine fishery where there could be regular and significant mortality or serious injury to dolphins other than those that result from regular and significant association. Now this is of course entirely hypothetical on the AB theory. On that theory, there would only be a violation in situations where in the case of non-ETP purse seine tuna the highest level of monitoring and verification was not imposed regardless of there being regular and significant mortality to dolphins, i.e. merely because the “association” requirement had not been met. Even if one abstracts from the error of seeing this finding as within 21.5 jurisdiction (it concerns comparisons in the original measure unaffected by the US compliance steps), and also ignores the error of regarding the difference as affecting the conditions of competition with the Mexican purse seine industry while it could only affect the conditions of competition between non-ETP purse seine and other non-ETP tuna, it would be hard to find an “as such” violation here because there is no necessity based on the provisions themselves that certification distinctions would ever result in any modification of the conditions of competition. This would only happen if the regulator, in the case of non-ETP purse seine tuna, exercised its discretion not to impose the highest level of monitoring and verification in a situation where the existence of regular and significant mortality to dolphins could nevertheless be shown—i.e. simply because the “association” requirement was not met. It is unclear empirically that purse seine tuna fishing outside the ETP would ever pose a regular and significant risk to dolphins in instances where there is a lack of tuna-dolphin association. So, in other words, it is speculative whether the difference in the provisions could ever modify conditions of competition (even assuming the misguided view of the AB as to what conditions of competition we are dealing with); this would depend on the exercise of discretion against the highest level of monitoring and verification in a situation that might never arise-where there was serious and regular dolphin mortality in a non-ETP purse seine fishery without tuna-dolphin "association" existing  . In sum, there is no “as such” violation because the mere wording of the provisions would not compel or create a serious risk of discretion being exercised so as to allow laxer monitoring and enforcement in a situation where regular and significant dolphin mortality or injury actually exists.

The above is an attempt to engage with what the AB was saying. But the reasoning is so confused and twisted that one cannot be sure of what they actually had in their heads in thinking of the difference in operation of the “association” and “mortality” conditions. For example, they say at 7.260: “we do not find persuasive the United States' argument that there is no basis for imposing an observer requirement in the absence of evidence that a purse-seine fishery exists where there is regular and significant mortality without tuna-dolphin association also being present.” (emphasis added) Yet, as just noted it is precisely in the case of “other” e.g. non-purse seine non-ETP fisheries, that there is a requirement of “mortality”  but without that of “association”. The AB seems to have thought, contrary to what the law says, that the highest level of monitoring and verification was being imposed in the case of non-purse seine, non-ETP tuna only where both "association" and "mortality" were established.  

What Is To Be Done?

What recourse is there against a ruling that is so confused and wrong-headed, and with negative systemic implications, opening the door (seemingly narrowly but actually pretty widely when you see how loosely the AB uses the concept of interlinkage) to misuse of the 21.5 process to relitigate the original dispute? One option, invoking the ghost of Hudec, is “civil disobedience”-simply not implement the decision given its gross illegitimacy, and accept the possibility of retaliation by Mexico. This might make sense in the circumstances, as the entire premise of the WTO dispute settlement authorities’ jurisdiction was Mexico’s internationally wrongful act of violating the forum selection clause in NAFTA. In turn, the US could continue to pursue a NAFTA claim against Mexico for its violation of NAFTA. This would result in US retaliation against Mexico that would fully match WTO countermeasures by Mexico. There is a possibility, Simon Lester raised this in a recent exchange of ours, that Mexico is blocking a panel to hear that claim. If that is the case then perhaps the US would be justified in taking countermeasures against Mexico under general international law for its violation of NAFTA and lack of good faith in implementing NAFTA’s dispute settlement procedures. It will be recalled that in the Soft Drinks dispute Mexico claimed that its own countermeasures against the US for blocking a NAFTA panel could be justified under GATT Article XX (d): that claim failed. But the AB in that case never addressed whether the GATT/DSU is a lex specialis that completely displaces the operation of the ILC Articles of State Responsibility with respect to countermeasures, especially to the extent that they reflect custom. Arguably, there are no provisions of the GATT or the DSU that purport to contract out explicitly of the right to take non-forcible proportional countermeasures against an un-remedied international wrongful act. Thus, again arguably, WTO Members have reserved the right to take countermeasures in the form of trade restrictions that, but for this right under custom, would be internationally wrongful as violations of WTO rules.

But there is a less unconventional course of action, which might permit the AB to reconsider some of its misadventures in this ruling. There could be a rule-making change or indeed merely an interpretative statement, that the regulator shall not in exercising discretion in the application of the determination provisions, make any determination that would result in a situation where the monitoring and verification requirements are uncalibrated to the level of risk of dolphin mortality and injury, as objectively determined. Further it is understood that the requirement of an independent observer where there is tuna-dolphin association in the case of non-ETP purse seine fisheries is intended, in its effect, to ensure that there is an independent observer in situations of heightened risks of dolphin mortality and injury of the kind that are known to exist in the case of the ETP fishery. The discretion of the regulator shall be exercised accordingly.

This approach to implementation will remind some readers of this blog of the solution in the Section 301 dispute. There was concern that the US law on its face would lead to serious risk of the exercise of discretion in a manner that violates WTO rules. The panel accepted a statement by the US in the litigation process that the law would not be interpreted and applied so as to lead to a violation of the WTO norms at issue. This satisfied the panel that there was no “as such” violation. It will almost certainly to Mexico bringing further 21.5 proceedings, and thus to a possible self-correction by the AB of its most ill-considered ruling.

 

The First ISDS Marijuana Case

Earlier this year, I was speculating about a NAFTA Chapter 11 claim against a U.S. tax provision that had an impact on marijuana businesses, and more generally I've been wondering about ISDS challenges to marijuana regulation.  I thought the first such claim -- or rather, the intent to file such a claim -- might be a ways off, but apparently it has arrived sooner than I expected, as explained by Investment Arbitration Reporter:

Several U.S. nationals have served Canada with a formal Notice of Intent (click to download) under Chapter 11 of the North American Free Trade Agreement (NAFTA).

The would-be claimants allege that Canada breached the non-discrimination and minimum standards of protection provisions of the NAFTA when the country’s health regulatory authorities denied a license for a medical marijuana production facility in the province of Ontario.

The company CEN Biotech Inc. and its co-claimants profess to have suffered a whopping $4.8 billion (US) in damages. The calculations underlying this figure are not discussed in the Notice, but would seem to encompass projected future profits for a marijuana production business that never went into production.

I'm not sure how far this particular case will go, but we may see more of these as marijuana becomes more widely legalized and regulated.

Guest Post on Annexation of Ukrainian Territory

This is a guest post from Nataliya Haletska, a PhD student at Ivan Franko Lviv National University, Ukraine

I am working on a paper regarding the possibility of bringing territorial disputes under the auspices of the WTO. Particularly, I came to conclusion that the annexation of the part of Ukrainian territory, Crimea, may be regarded as a breach of Russia’s WTO obligations. Please see for more details below.

In 2014 Russia has occupied a part of the territory of Ukraine, in particular, the peninsula of Crimea and officially joined it to Russian territory. Pursuant to the Geneva Convention (IV) relative to the Protection of Civilian Persons in Time of War it appears that Russia may bear international responsibility for Crimea as the occupied territory. According to the Article XXVI:5(a) of the GATT 1994 “each government accepting this Agreement does so in respect of its metropolitan territory and of the other territories for which it has international responsibility”. Thus, it can be concluded that Russia is likely to be responsible for actions performed on the territory of Crimea under WTO law.

The occupation of Crimea by Russia arguably has caused certain trade barriers for Ukraine. According to publicly available resources Russia has applied its customs tariffs (particularly, Customs Tariff of the Customs Union) on the territory of Crimea. That means that goods transported from the continental territory of Ukraine to another part of the territory of Ukraine (the Crimean peninsula) have to be officially imported in compliance with Russia’s importation rules and with the payment of tariffs in accordance with the Russia’s customs tariff regime. Such action affected international trade regime of Ukraine, as it increased price of Ukrainian goods imported from the Crimean peninsula to other states (including Russia). Thus, Russia’s trade measures caused by the occupation of Crimea may be considered as a challenged measure.

Potentially, in my humble opinion, the challenged measure could be considered in violation of at least Article II and Article XI:1 of the GATT 1994. Article II of the GATT 1994 prohibits establishing new or increasing bound customs tariffs. The application of Russia’s tariff regime and creation of the de-facto customs border in the middle of the territory of Ukraine has made Ukrainian importers (even potential) pay a tariff for the importation of goods. Such actions can be considered as a breach of Article II of the GATT 1994. Consequently, the de-facto customs border between the continental territory of Ukraine and the Ukrainian territory-Crimean peninsula has resulted in the limitation in quantity of goods both exported from Ukraine and imported into Ukraine via Crimean peninsula. Thus, such actions may be considered as a breach of Article XI:1 of the GATT 1994. The main idea is that Russia is obliged to maintain Ukraine’s WTO-regime (i.e. no tariffs for Ukrainian goods) and not Russia’s WTO regime with respect to the territory of Crimea. Additionally, the non-violation complaint is also possible.

I would appreciate your comments.

 

Indian Journal of International Economic Law: Call for Papers

The Indian Journal of International Economic Law (IJIEL) is a law journal published by National Law School of India University, Bangalore (NLSIU) under the patronage of the Indian government sponsored chair on WTO Law. The Journal is oriented towards publishing academic work that considers the legal issues in the field of international economic law from a comparative perspective and/or the perspective of the developing world. The IJIEL accepts academic submissions in the form of articles, notes, comments or book reviews. IJIEL is now inviting submissions for Volume 8(1) and 8(2).

Volume 8(1):

Continuing with the past tradition, Volume 8(1) will be a general edition dealing with a host of legal issues in the field of international economic law, which includes multidisciplinary research concerning the WTO, trade laws at various levels of government, financial institutions, regulatory subjects such as taxation and competition policy, various services sectors such as banking and brokerage, linkages to human rights and cultural problems and international commercial arbitration.

Volume 8(2):

This year, considering the contemporary relevance of the Trans Pacific Partnership, IJIEL is coming up with a special issue on the “Implications of the Trans-Pacific Partnership”. The Trans-Pacific Partnership is expected to reshape business practices and trade law regime across the world. We have already received a very enthusiastic response for this issue and hope the student community would also want to contribute to the scholarship on this contemporary topic.

IJIEL is now accepting submissions for both the issues under the following categories:

1.  Articles (5000 to 12000 words) must deal with a theme of interest or importance comprehensively and are expected to show an extensive coverage of existing literature and a high level of analysis.               
2. Essays for the Law in Focus section (3000 to 5000 words) must concisely analyse contemporary legislations, landmark treaties or other specific issues in international economic law of a contemporary nature.
3. Case Notes, Legislative Comments and Book/Article Reviews (2000 to 7000 words).

The Editorial Board invites submissions for Volume No.8(1) and 8(2) of 2016. The Journal follows a rolling submissions policy and the deadline for the forthcoming volume is 25th March, 2016. Please send in your queries or submissions to [email protected].

Quick Take on WTO AB Tuna Ruling

I'm sure Rob (and maybe others) will weigh in soon on today's WTO Appellate Body ruling in the Article 21.5 proceeding of U.S. - Tuna, but let me just quickly mention one point that occurs to me.  (The facts of the measure here are complex, and I can't explain them clearly in this short post, unfortunately, so this may be a little hard to follow.  See the AB report for all the details.)

From what I can tell, the crucial part of the AB's finding of violation that arises from the amended measure relates to an aspect of the measure referred to as the "determination provisions."  These provisions govern how tuna is certified dolphin-safe when caught outside of the areas used by Mexican tuna fishers (Mexico was the complainant).  The problem here was, the certification requirements were a little easier to satisfy for the tuna caught elsewhere as compared to the tuna caught in the fisheries used by the Mexican fishers.  Specifically, for some of the relevant non-Mexican tuna fisheries, an extra dolphin-safe certification requirement (from an outside observer) exists when "there is a regular and significant association between dolphins and tuna, similar to the association between dolphins and tuna in the [Eastern Tropical Pacific]"; however, such a certification is not triggered by "regular and significant mortality or serious injury" to dolphins.  It was the lack of certification in this latter situation that worried the Appellate Body, because it meant the rules were too lax for non-Mexican tuna.

See in particular paras. 6.10-11 and para. 7.258, although you have to read a lot more to fully understand all this, and I'm not sure I do yet.

So if I'm right about this (and please correct me if I'm not), the U.S. could tweak these "determination provisions" in what seems like a pretty minor way, to expand the circumstances where the extra certification is used, and thereby come into compliance with its WTO obligations.  I'm not sure if this would require a legislative or a regulatory change.  I'm also not sure how difficult it would be politically. Did they try to go further when they amended the measure in reaction to the original rulings, and got pushback from the industry?

Practically speaking, what would this mean?  After the adverse Article 21.5 ruling, Mexico now has the right to suspend concessions.  Presumably it will go ahead with this (and an Article 22.6 arbitration will follow).  But if the U.S. does amend the measure, would the U.S. then request an Article 21.5 panel, so as to get itself declared in compliance, and avoid the sanctions?

ADDED: Based on a quick read of the statute (Section 1385(d)(1)(B)), it looks like a legislative change is required here, which may make this tweak kind of difficult to do.

"Like Circumstances" in the TPP Trade in Services Chapter

From the TPP cross-border trade in services chapter:

Article 10.3: National Treatment²

1. Each Party shall accord to services and service suppliers of another Party treatment no less favourable than that it accords, in like circumstances, to its own services and service suppliers.

2 For greater certainty, whether treatment is accorded in “like circumstances” under Article 10.3 (National Treatment) or Article 10.4 (Most-Favoured-Nation Treatment) depends on the totality of the circumstances, including whether the relevant treatment distinguishes between services or service suppliers on the basis of legitimate public welfare objectives.

I'm all for taking into account legitimate public welfare objectives, but when you have the phrase "treatment no less favourable" in a provision, isn't that the best place to look at these objectives?  I know the result ends up the same, but to keep the various national treatment (and MFN) obligations consistent across trade instruments (e.g., the WTO TBT Agreement), and for a more logical interpretation of the text, maybe it would be better to always have the likeness element as a narrow competitiveness analysis, and let "treatment no less favourable" deal with detrimental impact / legitimacy of the objective.

No ISDS as between Australia and New Zealand

Via what is referred to as an "associated document" on the Australia DFAT web site, and a "side instrument" on the NZ MFAT web site, Australia and New Zealand have agreed to exclude ISDS as between each other in the TPP:  

3. No investor of New Zealand shall have recourse to dispute settlement against Australia under Chapter 9, Section B (Investor-State Dispute Settlement) of the TPP Agreement.

4. No investor of Australia shall have recourse to dispute settlement against New Zealand under Chapter 9, Section B (Investor-State Dispute Settlement) of the TPP Agreement.

I see the logic here, but I wonder why that logic only applies to Australia and New Zealand, and doesn't extend to others as well.

Assessing the TPP at the ITC

From the U.S. International Trade Commission:

The U.S. International Trade Commission (USITC) has instituted an investigation to assess the likely impact of the Trans-Pacific Partnership Agreement that the President has announced he intends to enter into with Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.

The investigation, Trans-Pacific Partnership Agreement: Likely Impact on the U.S. Economy and on Specific Industry Sectors, was requested by the U.S. Trade Representative in a letter  received on November 5, 2015.

The Bipartisan Congressional Trade Priorities and Accountability Act of 2015 requires the USITC to prepare a report that assesses the likely impact of the Agreement on the U.S. economy as a whole and on specific industry sectors and the interests of U.S. consumers.  The USITC’s report, which will be public, is due to the President and the Congress no more than 105 days after the President signs the Agreement, which he can do 90 days after he notifies Congress of his intent to do so.  The President notified Congress on November 5, 2015, of his intent to enter into the Agreement.

The USITC will hold a public hearing in connection with the investigation beginning at 9:30 a.m. on January 13, 2016.  Requests to appear at the hearing should be filed no later than 5:15 p.m. on December 22, 2015, with the Secretary, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436.  For further information, call 202-205-2000.

The USITC also welcomes written submissions for the record.  Written submissions should be addressed to the Secretary of the Commission at the above address and should be submitted at the earliest practical date but no later than 5:15 p.m. on February 15, 2016.  All written submissions, except for confidential business information, will be available for public inspection.

More details here, including this: May 18, 2016 is the "Anticipated date for transmitting Commission report to the President and Congress."

The ITC's assessment of FTAs doesn't usually get a whole lot of media attention. This one might be different.

Interpreting GATT Article XXI

Russia wants further interpretation of GATT Article XXI to be on the post-Nairobi agenda:

Interpretation and Implementation of Security Exceptions provided in the Multilateral Trade Agreements

1.5. With reference to the "Decision Concerning Article XXI of the General Agreement" adopted by the CONTRACTING PARTIES on November 30, 1982 and with the view to ensure clarity and predictability of implementation of Security Exceptions Provisions of the WTO Agreements1 Members shall develop a General Council decision on joint understanding on the interpretation of the scope of the rights and obligations of the WTO Members under these Provisions. With this in mind the Members shall engage in negotiations and the General Council shall take the decision on interpretation of the said Provisions pursuant to Article IX:2 of the Marrakesh Agreement by 1 June 2016. To this end, the negotiations shall focus on identification of circumstances when application of the measures pursuant to Security Exceptions is justified, as well as provision of specific transparency requirements and possible retaliatory measures.

1 Such as GATT Article XXI, GATS Article XIV bis, TRIPS Article 73, TRIMS Article 3, Import Licensing Agreement Article 1.10, TFA Article 24.7.

Needless to say, getting agreement here will be quite a challenge.

WTO Jurisprudence in TPP Dispute Settlement

This is from Article 28.11 of the TPP Dispute Settlement Chapter:

3. The panel shall consider this Agreement in accordance with applicable rules of interpretation under international law as reflected in Articles 31 and 32 of the Vienna Convention on the Law of Treaties (1969). In addition, with respect to any obligation of any WTO agreement that has been incorporated into this Agreement, the panel shall also consider relevant interpretations in reports of panels and the WTO Appellate Body adopted by the WTO Dispute Settlement Body. The findings, determinations and recommendations of the panel shall not add to or diminish the rights and obligations of the Parties under this Agreement.

Based on this provision, the role of adopted WTO panel and AB reports in TPP dispute settlement is somewhat clear, although there is plenty of room for disagreement.  But how about the role of adopted and unadopted GATT panel reports, Article 22.6 and Article 21.3 arbitration awards, the one WTO panel report which was never adopted, and WTO panel/AB reports that have been issued or circulated but not yet considered for adoption?

GATT Article XX Exceptions to the TPP TBT Chapter

As far as I know, no responding party ever invoked GATT Article XX as a defense to a claim of violation of the TBT Agreement (although it would have been fun if they had), but given the various statements the Appellate Body has made recently on the interpretation of both the GATT and the TBT Agreement, it is hard to imagine such a defense would be available today.

By contrast, take a look at what the TPP TBT chapter does with this issue.  First off, it says that some of the WTO's TBT obligations are incorporated into the TPP (with an important caveat in paragraph 2):

Article 8.4: Incorporation of Certain Provisions of the TBT Agreement

1. The following provisions of the TBT Agreement are hereby incorporated into and made part of this Agreement, mutatis mutandis: (a) Articles 2.1, 2.2, 2.4, 2.5, 2.9, 2.10, 2.11, 2.12; (b) Articles 5.1, 5.2, 5.3, 5.4, 5.6, 5.7, 5.8, 5.9; and (c) Paragraphs D, E and F of Annex 3.

2. No Party shall have recourse to dispute settlement under Chapter 28 (Dispute Settlement) for a dispute that exclusively alleges violation of the provisions of the TBT Agreement incorporated into paragraph 1 of this Article.

Then look at what happens in the TPP's Exceptions and General Provisions chapter:

Article 29.1: General Exceptions

1. For the purposes of Chapter 2 (National Treatment and Market Access for Goods), Chapter 3 (Rules of Origin and Origin Procedures), Chapter 4 (Textiles and Apparel), Chapter 5 (Customs Administration and Trade Facilitation), Chapter 7 (Sanitary and Phytosanitary Measures), Chapter 8 (Technical Barriers to Trade) and Chapter 17 (State-Owned Enterprises and Designated Monopolies), Article XX of GATT 1994 and its interpretative notes are incorporated into and made part of this Agreement, mutatis mutandis.

So for a complaint brought under the TPP's TBT chapter based on WTO TBT obligations, it seems as though the GATT Article XX exceptions could be used as a defense.

It's kind of hard to know what to make of this.  In practical terms, it may just mean that no one would make claims based on the WTO TBT Agreement in a TPP complaint.  In terms of policy, and what the drafters intended, can we infer any sort of shift in thinking about the GATT Article III/XX/TBT Agreement relationship?

Guest Post on Argentina - Financial Services

This is a guest post by trade lawyer Adarsh Ramanujan:

“Treatment no less favourable” –Article II:1, GATS and Article 2.1, TBT

Pursuant to Simon’s earlier post about the appeal filed by Panama in Argentina – Financial Services, I noticed that one of the grounds of appeal relates to the interpretation and application of the term "treatment no less favourable" in the Articles II:1 and XVII of the GATS. There are several interesting aspects to the Panel Report, though this one caught my attention first.

In terms of the actual test to be applied under Article II:1, GATS, the Panel had otherwise determined that the test from Article XVII, GATS could be borrowed – modification of conditions of competition (para. 7.220). On the specific question of how relevant regulatory aspects would be in making this assessment, the following quote captures the Panel’s conclusion:

7.212 As we have just stated, the "treatment no less favourable" obligation in Article II:1 of the GATS concerns both like services and service suppliers…Their intangible nature, and the relationship established between the consumer and the supplier of the service and, in turn, between the service and its supplier, give services some very special features which differentiate them from goods and which, in our opinion, have a decisive influence on their production, marketing and use. In our view, this immediate context afforded by the actual text of Article II:1 of the GATS, in the light of the special features of services and the importance given to suppliers of services, appears to indicate that the regulatory framework in which service suppliers operate may in certain circumstances be relevant in the context of the GATS since it has a direct impact on the service through the natural or legal person supplying the service. In this respect, it appears to us that the determination of the specific aspects of the regulatory framework to be considered when examining "treatment no less favourable" can only be made on a case‑by‑case basis. (Emphasis added in bold)

Does this mean that regulatory justifications would play the same role as it does in the context of Article 2.1, TBT – where one of the elements to be analysed is if the detrimental impact on imports stems exclusively from a legitimate regulatory distinction rather than reflecting discrimination against the group of imported products? Not exactly. The Panel observed that there are some similarities and differences between GATS and the TBT Agreement (paras. 7.228-7.231):

 

Similarities	Differences
Both agreements recognize Members’ right to regulate in their preamble	TBT only deals with products and not producers; the GATS, however, deals with both services and service suppliers.
	TBT contains no rules of exception, unlike Article XIV, GATS

 

The Panel finally decides that in view of these differences, it would not be appropriate to transpose the TBT interpretation to the GATS. So, in other words, one need not assess whether the alleged differential treatment of certain imported services stem exclusively from legitimate regulatory distinctions, but they need to be considered somewhere in the analysis – to paraphrase the Panel, when the “the relevant regulatory aspects concerning service suppliers [sic] have an impact on the conditions of competition” (para. 7.232).

A comparison with the factual application of this principle to one of the 8 measures under challenge gives a better understanding of how this is to be applied. Argentina had engaged in differential treatment between “cooperating countries” and “non-cooperating countries” and regulatory context for this classification was Argentina’s access to tax information on foreign suppliers. Based on evidence, the Panel more or less rejected Argentina’s arguments in all cases simply because of one fact – the classification between “cooperating countries” and “non-cooperating countries was actually not based on whether there was access to tax information; even countries from whom Argentina had no actual tax information were grouped under “cooperating” simply because they were currently negotiating a treaty to that extent (Panama itself was one such example) and at the same time, not all countries who were presently undertaking such negotiation were considered “cooperating”. One can refer to paras. 7.283-292 in this respect on the Panel’s analysis of measure 1 and one can trace similar factual analyses for the remaining measures as well.

When I think over the application of the law to the facts of the case – I fundamentally don’t see how this differs from the Panel assessing whether the differential treatment stems exclusively from regulatory distinctions. On the contrary, it appears that in these facts, because the differential treatment was not applied consistently and exclusively based on the actual access to tax information (legitimate regulatory distinction), Argentina’s justification were rejected.

In summary, specifically on the aspect of the relevance of regulatory aspects in assessing “treatment no less favourable”, I believe the Panel’s analysis Article II:1, GATS resembles that of Article 2.1, TBT Agreement.

Another interesting point though is making its observations on the relevance of regulatory aspects in assessing “treatment no less favourable”, I believe the Panel’s analysis Article II:1, GATS, the Panel makes no distinction between de jure and de facto classification. On the other hand, I believe there is a school of thought that regulatory aspects are irrelevant under Article 2.1, TBT Agreement for cases of de jure classification

I am looking forward to some clarification in the AB’s Report. Any thoughts anyone?

The TPP Process for Composing Dispute Settlement Panels

If we want trade agreements to be enforceable, there needs to be a dispute settlement process that functions. The WTO process works well because you have a Secretariat and a Director-General to oversee it.  By contrast, as I understand things, NAFTA Chapter 20 has broken down in the panelist selection stage.  Will the TPP avoid the NAFTA problems?

The drafters have certainly tried in the TPP dispute settlement chapter. I haven't looked at every DS chapter in every FTA, but this is certainly the most complex panel composition process I've come across.  They have worked hard to ensure that a responding party cannot block the appointment of panelists.

But have they succeeded?  To start the process in a particular dispute, both the complainant and respondent are supposed to appoint one panelist.  Here's the part describing what happens if the responding party refuses to appoint a panelist, from Article 28.9.2:

(c) If the responding Party fails to appoint a panellist within the period set out in subparagraph (a), the panellist not yet appointed shall be chosen by the complaining Party or Parties:

(i) from the responding Party’s list established under Article 28.10.11 (Qualification of Panellists and Roster Members); or

(ii) where the responding Party has not established a list under Article 28.10.11 (Qualification of Panellists and Roster Members), from the roster of panel chairs established pursuant to Article 28.10.3 (Qualification of Panellists and Roster Members); or

(iii) where no roster of panel chairs has been established pursuant to Article 28.10.3 (Qualification of Panellists and Roster Members), by random selection from a list of three candidates nominated by the complaining Party or Parties.

I found the last contingency to be a little unclear.  If we have to go to "random selection" from a list of three people nominated by the complainant, who oversees this random selection?  Can the complainant itself oversee the process?

Of course, if all TPP parties submit a list of candidates ((c)(i)), or the roster of panel chairs is established ((c)(ii)), we never get to this point.

After you have the first two panelists, the parties are supposed to appoint a chair. But if they can't, and the two panelists can't do so either (I'm simplifying here), there is this option in Article 28.9.2(d)(ivbis):

... where the two panellists fail to appoint the chair of the panel in accordance with paragraph 9.2(d)(iii) within 55 days of the delivery of the request for the establishment of the panel, either disputing Party may elect to have the chair of the panel be appointed by an independent third party from the roster established pursuant to Article 28.10.3  ...

Who is this "independent third party"?  Maybe the WTO Director General?  An Appellate Body Member? Could anyone play this role?

It's really hard to say at this point how many TPP complaints will be brought (there are certainly lots of WTO-plus obligations that could be the basis of a complaint), and how difficult the panel composition process will be.  We may or may not ever get this deep into the panel composition provisions.

SIEL 2016 Conference Call for Papers Deadline Extended

From the SIEL:

The Society of International Economic Law has extended until November 20 the deadline to submit paper and panel proposals for its 2016 conference, which will be held from 7-9 July in Johannesburg at the University of the Witwatersrand.  The extended call for papers is here.

PEPA/SIEL Call for Papers

From PEPA/SIEL:

5th Conference of the Postgraduate and Early Professionals/Academics Network of the Society of International Economic Law (PEPA/SIEL) 2016

Luxembourg, 14-15 April 2016 

Organised by PEPA/SIEL in collaboration with the Research Unit in Law of the University of Luxembourg

 

SIEL’s Postgraduate and Early Professionals/Academics Network (PEPA/SIEL) is, among other things, interested in fostering collaboration and mentoring opportunities for emerging academics and professionals in International Economic Law (IEL). PEPA/SIEL fulfils these goals through various activities such as organising conferences at which emerging IEL academics and professionals can present and discuss their research in a supportive and welcoming environment.

We are pleased to announce that the fifth conference will take place on 14-15 April 2016 in Luxembourg.

Call for Papers

This conference offers graduate students (students enrolled in Master or PhD programmes) and early professionals/academics (generally within five years of graduating) studying or working in the field of IEL an opportunity to present and discuss their research. It also provides a critical platform where participants can test their ideas about broader issues relating to IEL. One or more senior practitioners and academics will comment on each paper after its presentation, followed by a general discussion.

We invite submissions on any IEL topic including, but not limited to:

-        Law and practice in international economic governance and international organizations;

-        International trade, investment, competition, monetary and financial law;

-        The interaction of IEL branches with other branches of law governing intellectual property, human rights, environment, sustainable development, food safety;

-        Bilateral and regional economic integration and the multilateral trading system;

-        Comparative economic law, focusing on how IEL interacts with laws, institutions and actors at the domestic level;

-        International economics, philosophy, sociology, politics.

More details here.

Passing of John Jackson

This is from Peter Van den Bossche:

The passing of John Jackson leaves us with a feeling of tremendous loss. So many of us owe John so much! He was our teacher, mentor, inspirator, colleague and friend and never ceased to encourage, support and advise us throughout our career. We would not be doing what we are doing now if it was not for him. The field of international trade law would not be what it has become without his academic leadership and vision. His legacy is huge and it is for us to continue doing it justice.

 

Peter Van den Bossche

Chairman, Appellate Body, World Trade Organization

Passing of John Jackson

The sad news today that Professor John Jackson has passed brings back memories of all of his scholarly and professional contributions to international trade law, to the GATT, to the WTO, and to trade scholars and practitioners.  I very much cherished his friendship and have missed him in the past two years.  There will be more to say in the days ahead.

The Keystone XL Rejection

On Friday, President Obama announced the rejection of Canadian company TransCanada's application to build the Keystone XL pipeline.  He offered a brief explanation here.

I'm puzzled by his explanation.  The first reason he gave is that the pipeline would not have created as many jobs as an infrastructure plan:

The pipeline would not make a meaningful long-term contribution to our economy.  So if Congress is serious about wanting to create jobs, this was not the way to do it.  If they want to do it, what we should be doing is passing a bipartisan infrastructure plan that, in the short term, could create more than 30 times as many jobs per year as the pipeline would, and in the long run would benefit our economy and our workers for decades to come.  

Our businesses created 268,000 new jobs last month.  They’ve created 13.5 million new jobs over the past 68 straight months -- the longest streak on record.  The unemployment rate fell to 5 percent.  This Congress should pass a serious infrastructure plan, and keep those jobs coming.  That would make a difference. The pipeline would not have made a serious impact on those numbers and on the American people’s prospects for the future. 

The logic here is hard to follow.  Why reject some jobs on the basis that other jobs might be created under a separate measure?

Underlying the rejection, obviously, are environmental concerns.  But the connection between this decision and the environment is a bit tenuous.  If the measure at issue were a ban on the sale, production, or import of oil derived from oilsands, there might be an environmental argument.  But when the same oil gets transported through the U.S. via train, and when the U.S. will be producing its own oilsands oil, the environmental motive for rejecting this pipeline looks a little weak.

Here's what the Washington Post had to say about the decision to reject: "The politicization of this regulatory decision, and the consequent warping of the issue to the point that it was described in existential terms, was a national embarrassment, reflecting poorly on the United States’ capability to treat parties equitably under law and regulation."

So what's next for TransCanada?  Is there some domestic legal challenge they can bring?  Will they file a NAFTA Chapter 11 claim?  (Interesting how the Washington Post used the term "equitably"!)  Will they cross their fingers for a Republican win in the Presidential election, and then reapply?  I don't know, but if they really spent $2.5 billion so far on this project, it seems likely they will fight to get some of it back.

NAFTA vs. TPP ISDS

Following up on my post from last week, just to clarify, I didn't meant to suggest there is a conflict between NAFTA ISDS and TPP ISDS. I wasn't thinking about conflicts at all.  

(Although I also don't mean to suggest there is no conflict.  If someone can explain how there is a conflict, I'd be happy to consider the possibility.)

Instead, I was just thinking about the policy of establishing two separate avenues to ISDS for particular investors, with different standards under each.  As Todd Tucker pointed out on twitter, TPP might have been a good opportunity to harmonize ISDS standards a bit.  What appears to have happened, though, is that the number of standards has doubled (a "double standard"?) in certain circumstances, with two standards applying simultaneously.  Presumably, the drafters could have folded NAFTA ISDS (and other FTA ISDS provisions) into TPP ISDS, simplifying things considerably.  Now there are extra memos that have to be written comparing various aspects of the two processes, to decide which one to use.  I see some benefits in that for a few of my friends, but still, I wonder if this is the right approach.

Trade Damages vs. Investment Damages in TPP ISDS

This is from Ted Posner, who left it as a comment, but I'm putting it in a separate post:

My comment concerns the relationship between "investment damages" and "trade damages." Take a look at article 9.28.2 of the newly released TPP text. It states "for greater certainty" that a prevailing investor/claimant "may recover only for loss or damage that it has incurred in its capacity as an investor of a Party." This appears to be addressed to the criticisms that some had of the NAFTA award in Cargill v. Mexico. Some perceived the tribunal to have awarded Cargill compensation for diminished trade as well as compensation for harm to its investment. The TPP text appears to be intended to tell future tribunals not to do that. Query, however, whether that really is what the Cargill tribunal did. Query also how a tribunal is to go about distinguishing between loss or damage to a claimant "in its capacity as an investor" and in any other capacity. Consider another case from NAFTA's early days -- the SD Myer case, in w hich an Ohio-based company sued Canada over alleged losses from Canada's decision to prohibit exportation of PCBs. This upset SD Myer's business model, which had entailed removal of PCBs from Canada and remediation of them back home in Ohio. SD Myer prevailed. Was the harm to it harm in its capacity as a US investor in Canada or in its capacity as a trader? 

Antidumping in the TPP

This is from trade lawyer Luiz Eduardo  Salles:

The TPP text has been made public. The text is yet subject to legal scrubbing by the signatories, but this version should be nearly identical to the finally authenticated text.

There is great excitement with the TPP given the potentially novel disciplines on trade it offers.  For the antidumping geeks, however, the TPP is no revolution. Chapter 6 of the TPP deals with “Trade Remedies”. Section B covers “Antidumping and Countervailing Duties”. Section B’s only Article is 6.8, which states that:

1. Each Party retains its rights and obligations under Article VI of GATT 1994, the AD Agreement and the SCM Agreement.”;”

2. Nothing in this Agreement shall confer any rights or impose any obligations on the Parties with regard to proceedings or measures taken pursuant to Article VI of GATT 1994, the AD Agreement or the SCM Agreement.;“

3. No Party shall have recourse to dispute settlement under Chapter 28 (Dispute Settlement) for any matter arising under this Section or Annex 6-A (Practices Relating to Antidumping and Countervailing Duty Proceedings).

The Chapter on Trade Remedies also includes an Annex 6-A, dealing with “Practices Relating to Antidumping and Countervailing Duty Proceedings”. Annex 6-A is drafted as a recognition of certain best practices which are procedural in nature, such as advance notice of initiations of investigations and of intent to promote verifications, issuance of verification and essential facts-available reports, maintenance of public files, issuance of deficiency letters and the granting of  opportunities for parties to provide explanations and additional information.

Therefore, it seems clear from the text of Chapter 6 that the TPP does not add legally enforceable disciplines to the arsenal of dumping regulations. There is only an attempt to entice certain so-called “best practices”, the result of which will need a longer term window to be figured-out. More important, for the antidumping geeks, is that the dispute settlement carve-out in Article 6.8.3 seems to imply that the WTO will remain the international forum of choice for battling over antidumping and countervailing duties. 

NAFTA ISDS and TPP ISDS

One issue I've been wondering about for a while is how TPP ISDS will interact with NAFTA ISDS (and ISDS in other FTAs between the TPP parties).  For example, if a Canadian investor in the U.S. wants to bring an investment claim, what would its options be after (if?) TPP comes into effect?  Does it have a choice of either TPP or NAFTA?  Does TPP supersede NAFTA in this regard?

I was hoping for a clear answer in the TPP text as to how these two sets of ISDS provisions might relate.  What I see so far is this:

Article 1.2: Relation to Other Agreements

1. Recognizing the Parties’ intention for this Agreement to coexist with their existing international agreements, each Party affirms,

(a) in relation to existing international agreements to which all Parties are party, including the WTO Agreement, its existing rights and obligations with respect to each other; and

(b) in relation to existing international agreements to which that Party and at least one other Party are party, its existing rights and obligations with respect to such other Party or Parties, as the case may be.

2. If a Party believes that a provision of this Agreement is inconsistent with a provision of another agreement to which it and at least one other Party are party, upon request, the relevant Parties to the other agreement shall consult with a view to reaching a mutually satisfactory solution. This paragraph is without prejudice to a Party’s rights and obligations under Chapter 28 (Dispute Settlement).

Article 1.2.1(b) seems to suggest that existing ISDS provisions will now "coexist" with TPP ISDS.  Does anyone read that differently?

To give a concrete example, perhaps this means that if Canada passes plain packaging legislation, and a U.S. company wanted to challenge it, it could either invoke TPP ISDS (which has a tobacco carveout) or NAFTA ISDS (which does not).

This state of affairs seems odd to me, but perhaps I've missed a provision somewhere, or maybe general international law could play a role, although I imagine that might hurt rather than help with the clarify of the situation.

The TPP Drafter’s Note on Interpretation of “In Like Circumstances”

The TPP "Drafter’s Note on Interpretation of 'In Like Circumstances'" is here.

In paragraph 2, it says:  "Articles II.4 [NT] and II.5 [MFN] do not prohibit all measures that result in differential treatment. Rather, they seek to ensure that foreign investors or their investments are not treated less favourably on the basis of their nationality."

To me, these sentences are kind of a big deal, if they establish that NT and MFN are only about nationality-based discrimination, rather than "best treatment" or some other concept.

Of course, then you get into questions of what "nationality-based discrimination" means, and where you look at that issue.  Note that the drafter's statement was made in the context of interpreting "in like circumstances," when perhaps it belongs under an interpretation of "treatment no less favorable."  Along these lines, in paragraph 3, the note says:

Accordingly, the Parties agreed to include a new footnote in the text: “For greater certainty, whether treatment is accorded in ‘like circumstances’ depends on the totality of the circumstances, including whether the relevant treatment distinguishes between investors or investments on the basis of legitimate public welfare objectives.”

This sentence talks about distinguishing "between investors or investments," and doesn't mention nationality.  That could, I think, lead to the kind of analysis where you look at only two investors/investments, without considering the entire group of investors/investments, comparing the treatment of foreign ones to the treatment of domestic ones.  If we want to be certain that NT and MFN are about nationality-based discrimination, the clarification on this issue may need to be made in the context of "treatment no less favorable."

The TPP Minimum Wage Provision

Here's another obscure TPP issue I've been following: Will there be a requirement that TPP countries adopt a minimum wage?

Article 19.3 of the labor chapter says the following:

2. Each Party shall adopt and maintain statutes and regulations, and practices thereunder, governing acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health.⁵

5 For greater certainty, this obligation relates to the establishment by a Party in its statutes, regulations and practices thereunder, of acceptable conditions of work as determined by that Party.

So what exactly does this obligation mean?  It sounds like everyone has to have a statute or regulation that does something with the minimum wage.  But what is that something?  Could a government pass a statute that says "There shall be no minimum wage"?  Could it set the minimum wage at zero?  At 1 cent per hour?

The TPP Tobacco Carveout

The TPP text is now available here, among other places.  My understanding is that this is not the "legally scrubbed" text, but it should be virtually identical to the final version.  

Analyzing the TPP should keep us all busy for the next year or so.  I'll start with one of my favorite subjects, the tobacco carveout, which is in Chapter 29 (Exceptions and General Provisions):

Article 29.5: Tobacco Control Measures¹²

A Party may elect to deny the benefits of Section B of Chapter 9 (Investment) with respect to claims challenging a tobacco control measure¹³ of the Party. Such a claim shall not be submitted to arbitration under Section B of Chapter 9 (Investment) if a Party has made such an election. If a Party has not elected to deny benefits with respect to such claims by the time of the submission of such a claim to arbitration under Section B of Chapter 9 (Investment), a Party may elect to deny benefits during the proceedings. For greater certainty, if a Party elects to deny benefits with respect to such claims, any such claim shall be dismissed.

12 For greater certainty, this Article does not prejudice: (i) the operation of Article 9.14 (Denial of Benefits); or (ii) a Party’s rights under Chapter 28 (Dispute Settlement) in relation to a tobacco control measure.

13 A tobacco control measure means a measure of a Party related to the production or consumption of manufactured tobacco products (including products made or derived from tobacco), their distribution, labeling, packaging, advertising, marketing, promotion, sale, purchase, or use, as well as enforcement measures, such as inspection, recordkeeping, and reporting requirements. For greater certainty, a measure with respect to tobacco leaf that is not in the possession of a manufacturer of tobacco products or that is not part of a manufactured tobacco product is not a tobacco control measure.

(The investment chapter is here. Section B is ISDS.)

Here's my first question:  Is this provision self-judging?  In other words, who decides whether a measure is a "tobacco control measure"?

The language about a party "electing" to deny benefits suggests maybe it is self-judging.  The whole provision depends on what governments "elect" to do.  

On the other hand,  you need some oversight of these things, or a government might claim that any ordinary regulation is a tobacco control measure because of some distant relationship it has to tobacco control.  A party can "elect" to use the exception, but only, of course, if the measure  is a tobacco control measure.  So perhaps the investment tribunal would need to decide this question?

Here's another question:  Are e-cigarettes, which use nicotine that has been extracted from tobacco, covered here?  Are e-cigarettes a product "made or derived from tobacco"? 

Next up, let's say a government wants to eliminate production of tobacco, and to do so, it expropriates a foreign tobacco company's factory.  Would that fall under this exception? 

Another point worth noting is that this exception is only from ISDS.  Presumably the normal state-state dispute settlement rules would apply to these measures.

It would be a lot of fun if some day there is a case that explores some of these issues.  So far there have only been two ISDS challenges of this kind of measure, so it seems unlikely any such cases are coming, but you never know. 

The TPP Revealed

Now that the TPP text is out, as Simon said, it's time to start talking about it!

The Global Economic Law Network (GELN) is hosting the TPP Revealed workshop at Melbourne Law School in one week, on Friday 13 November 2015. At this one day workshop, experts will present their analysis of the TPP on key issues of interest to the legal profession and their clients. View the program here. 

Tickets are $395 and places are strictly limited. Please click here to register. For enquiries please contact Ms Vesna Stefanovski by email: [email protected]. This conference is part of a series of events on the TPP that will be run by GELN at Melbourne Law School. If you would like to join the GELN email list and be informed of future GELN events please email [email protected].

The European Union's Competence in Trade Negotiations

Here is the European Commission's request for an ECJ opinion on the issue of who has competence to sign and conclude the EU-Singapore FTA (with implications for CETA and future trade agreements):

Request for an opinion submitted by the European Commission pursuant to Article 218(11) TFEU 

(Opinion 2/15)

(2015/C 363/22)

....

Question submitted to the Court

Does the Union have the requisite competence to sign and conclude alone the Free Trade Agreement with Singapore? More specifically:

— Which provisions of the agreement fall within the Union’s exclusive competence?

— Which provisions of the agreement fall within the Union’s shared competence? and

— Is there any provision of the agreement that falls within the exclusive competence of the Member States?

Excellent questions. We are all looking forward to the answers.

The TPP Text: Coming Soon?

Inside US Trade reports that the TPP countries are "aiming to make public" the final TPP text "before the end of this week":

One source close to the negotiations said he now expected the text to be released on Friday (Nov. 6) ...

The text that will be publicly released is not expected to be the final legally scrubbed text, although TPP governments will likely want to ensure it is as close to the final text as possible so that opponents cannot point to changes made at the last minute.