In the Argentina - Financial Services Appellate Body report, circulated last Thursday, the Appellate Body has continued its push to keep certain non-discrimination obligations focused on the impact (or effect) of the measure, with any examination of the purpose (or objective or aim or intent) of the measure carried out separately, as part of the exceptions. In this case, the obligations in question were GATS Article II (MFN) and Article XVII (National Treatment). The Panel had seemed to allow a consideration of purpose to some extent (using the term "regulatory aspects" of the measure). The Appellate Body explicitly rejected that. A key part of its reasoning was that purpose is best left for the exceptions provisions (see paras. 6.97-127, in particular paras. 6.113-117).
In recent years, the Appellate Body has been fairly consistent in this approach, under both the GATT and the GATS. On the other hand, with TBT Agreement Article 2.1, the Appellate Body has famously allowed the purpose of a measure to be considered (through the "stems exclusively from a legitimate regulatory distinction" element), in large part because the TBT Agreement has no exception provision that can be used in this regard.
So it's all set, right? The issue is settled. Purpose is never going to be considered in a GATT or GATS NT or MFN provision.
Well, I'm not so sure. There is a potential case out there that could undermine what the Appellate Body has been doing recently, and cause it to rethink all this.
Recall that GATT Article III has several provisions. The recent cases have been under Article III:4. But there is also Article III:2, second sentence, which, when you consider other provisions incorporated by reference, includes the "should not be applied to imported or domestic products so as to afford protection to domestic production" element. Based on that phrase, the Appellate Body has been clear that you can take into account the measure's purpose when considering this non-discrimination obligation. As it said in Chile - Alcohol, "a measure's purposes, objectively manifested in the design, architecture and structure of the measure, are intensely pertinent to the task of evaluating whether or not that measure is applied so as to afford protection to domestic production." (Para. 71)
In the Article III:2, second sentence cases that have arisen so far, Article XX was not invoked. But in a future case, it could be, which might force the Appellate Body to think about the Article III - Article XX relationship in that context. If purpose can be considered under Article III in a case involving Article III:2, second sentence, what would that mean for the consideration of an Article XX defense?
If such a case were to arise, the Appellate Body would have several options:
- First, it could say that Article III:2, second sentence is special, and not like the other Article III provisions, because of its unique language. It thus demands its own approach, and you can take purpose into account for that provision, but not for the other Article III provisions. But there are some problems with that reasoning. For one thing, the text isn't as different as suggested, and I don't think it's too difficult to justify the consideration of purpose based on the text of other Article III provisions, such as Article III:4. In addition, if you acknowledge that it's fine to look at purpose for Article III:2, second sentence, you undermine the argument that it can't be done in other Article III provisions because of the Article III-XX relationship. As a result, the logic applied to those other provisions, to keep purpose out, collapses.
- A second option for the Appellate Body would be to overturn its clear precedent under Article III:2, second sentence, and say that you can no longer take into account purpose there. That would be bold, because long-standing precedent is rarely overturned so clearly, and the text strongly suggests that purpose should be considered.
- Finally, a third option would be to rethink all of the recent jurisprudence suggesting you cannot look at purpose in the context of certain GATT and GATS non-discrimination obligations. That's a fairly recent development in the case law, without much basis in the text, so changing direction would not be as big a deal.
Sometimes I'm accused of being too subtle, so I'll state my view very clearly: Let's look at purpose as part of all of the non-discrimination obligations!
(And in case you are worried about GATT Article XX and GATS Article XIV being made redundant, keep in mind they will still get plenty of use as exceptions to other obligations).
