This is from the U.S. statement at the DSB meeting on Monday (footnotes omitted):
10. EUROPEAN UNION – COUNTERVAILING MEASURES ON CERTAIN POLETHYLENE TEREPHTHALATE FROM PAKISTAN
A. REPORT OF THE APPELLATE BODY (WT/DS486/AB/R AND WT/DS486/AB/R/ADD.1) AND REPORT OF THE PANEL (WT/DS486/R, WT/DS486/R/ADD.1 AND WT/DS486/R/CORR.1)
As a third party in this dispute, the United States provided views primarily focused on the interpretation of the DSU with respect to the matter that Pakistan put before the panel. In the course of the panel proceedings, the measure at issue terminated and Pakistan confirmed that it did not seek a recommendation from the panel. In other words, Pakistan confirmed that no dispute remained between the parties that the challenged measure had been brought into conformity with WTO rules. Nevertheless, Pakistan continued to request findings from the panel and later from the Appellate Body.
The European Union appealed the panel’s issuance of findings in this dispute, and the United States supported the EU’s appeal. As we explained, the DSU does not grant WTO adjudicators the authority to issue advisory opinions regarding the interpretation of the covered agreements in the abstract. A complaining party may not structure its case in a manner that in effect would create such an authority. Rather, the WTO dispute settlement system aims to secure a positive solution to a dispute between the parties.
Pakistan confirmed before the panel and on appeal that it did not seek a recommendation from the DSB when it stated “that panels cannot make recommendations on expired measures under Article 19.1 of the DSU.”
Pakistan’s statement that it did not seek a recommendation confirms that there was no dispute between the parties. Rather, as the panel found, Pakistan sought findings because “the parties dispute, on a fundamental level, how investigating authorities should determine the extent to which duty drawback schemes like the [one at issue] may constitute countervailable subsidies within the meaning of the SCM Agreement.”
That is, Pakistan sought an advisory opinion regarding the application of the SCM Agreement in the future – with respect to different duties on different products, and potentially based on different programs.
The appellate report confirms that the finding is advisory in nature. The appellate report appears to agree with the panel that it was relevant to “resolve” the issue under the SCM Agreement because “similar” cases could arise and “similar” reasoning could be applied in those cases.
A disagreement between the parties “on how investigating authorities should” administer the countervailing duty law – in other circumstances not presented in this dispute – does not fall within the terms of reference for the panel – which also delimits appellate review – as set out by the DSB for this dispute.
As the text of the DSU indicates, the terms of reference of a panel under DSU Article 7.1 provide for a panel to make an “objective assessment of the matter”, words we all know well, but to make the “findings as will assist the DSB in making the recommendation” under the DSU to bring a WTO-inconsistent measure into conformity with WTO rules. DSU Article 11, on the function of panels, repeats these words and this structure. But those latter words – to make “findings as will assist the DSB in making the recommendation” under the DSU – were essentially disregarded in the reports before the DSB today.
Where a complaining party requests an adjudicator to make findings not consistent with the terms of reference established by the DSB, the panel must decline to do so. As Pakistan requested findings with respect to the interpretation and application of the SCM Agreement, but no recommendation on the challenged EU measure, the panel should have found Pakistan’s request to be outside its terms of reference and refrained from making the requested, purely advisory, findings on that basis.
We therefore agreed with the EU’s appeal that Pakistan’s alleged “dispute” was a purely advisory exercise. The United States further agrees with the EU that the DSU does not grant WTO adjudicators the authority to issue advisory opinions regarding the interpretation of provisions of the covered agreements in the abstract, and outside the context of resolving a dispute.
The United States has been warning Members for some time about the concern that WTO adjudicators have been giving “findings” that are advisory, or unnecessary to resolve the dispute.
We recall one egregious instance, in the appeal in Argentina – Measures Relating to Trade in Goods and Services, in which more than two-thirds of the Appellate Body’s analysis – 46 pages – was in the nature of obiter dicta. This is not only inconsistent with the DSU and terms of reference established by the DSB, but contributes to delays in dispute settlement and increased complexity for all Members.
This dispute could and should have been resolved upon Pakistan’s statement that it sought no recommendation on the EU’s withdrawn measure. In that circumstance, there were no “findings as w[ould] assist the DSB in making the recommendations” in the DSU. The reports in this dispute were not necessary to resolve a dispute, but rather – as the EU rightly pointed out – an exercise in making unnecessary interpretations.
This is an interesting systemic issue. I haven't counted up how often the situation of terminated measures arises (although we track it in our index), and it would be interesting to assemble the data on this. How many WTO disputes involve measures that have already been terminated? In how many of those cases was the complainant not seeking a recommendation because termination meant that compliance had already been achieved? Some data on all this could help inform the debate. My sense was always that complainants asked for findings in these circumstances due to fear that the measure at issue could be reimposed, but I can't recall all the cases.
It would also be helpful to get a better sense of what the U.S. would like to see change here. Is it a question of how panels and the Appellate Body should behave? Or should there be limits on Members requesting findings where measures have been terminated? Here, the U.S. expressed concern that Pakistan requested findings but not a recommendation. Would things have been different for the U.S. if Pakistan had asked for a recommendation here, and the panel had declined to give one because the measure had expired?
More generally, if the existing DSU rules have led to outcomes the U.S. is unhappy with, what changes to the rules would help resolve things?
(Thanks to Rob McDougall for pointing me to this.)
