WTO Dispute Settlement EC Measures Concerning Meat and Meat Products (Hormones)

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WTO Dispute SettlementEC Measures Concerning
Meat and Meat Products (Hormones)
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Table of Contents

• Background
• Pleadings
• Findings and Conclusions
• Procedural Issues
• Substantive Issues
• Subsequent Developments

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Background

• The European Communities (EC) prohibited the
  market and importation of meat and meat products
  that have been treated with any of six hormones
  for growth purposes.
• Of the six hormones, three are naturally
  occurring (17ß, progesterone, testosterone), the
  other three are artificially produced
  (trenbolone, zeranol, MGA).

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Pleadings

• Canada and U.S. argued that the EC measures
  violated
• Agreement on the Application of Sanitary and
  Phytosanitary Measures (SPS Agreement) Articles
  2, 3 and 5.
• Agreement on Technical Barriers to Trade (TBT
  Agreement) Article 2
• GATT Articles I, III and XI

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Findings and Conclusions

• Panel Stage
• The EC measures are inconsistent with SPS
  Agreement Articles 3.1, 5.1 and 5.5.
• TBT Agreement is not applicable pursuant to
  Article 1.5 of TBT Agreement.
• GATT is of no need to be examined since the EC
  measures are found to be inconsistent with SPS
  Agreement.
• Appellate Body Stage
• The EC Measures are inconsistent with Articles
  3.3, 5.1, 5.2.

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Procedural Issues--Burden of Proof

• Panel Stage
• The initial burden of proof rests on the
  complaining party. However, once a prima facie
  case is made, the burden of proof shifts to the
  responding party.
• Article 3.3 provides an exception to the general
  obligation in Article 3.1. Once a complaining
  party proves a prima facie case under 3.1, the
  burden of proof under 3.3 shifts to the
  responding party.

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Procedural Issues--Burden of Proof

• Appellate Body Stage
• Upheld the first statement of the Panel.
• Article 3.3 is not the exception of Article 3.1.
  Article 3.1 simply excludes from its scope of
  application the kinds of situations covered by
  Article 3.3. Therefore, the general rule of
  burden of proof is not affected. The complaining
  party still has to establish a prima facie case
  that the EC measures violate Article 3.3 of the
  SPS Agreement.

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Procedural Issues--Standard of Review

• DSU Article 11 states, A Panel should make an
  objective assessment of the matter before it,
  including an objective assessment of the facts of
  the cases and the applicability of and conformity
  with the relevant covered agreements.
• Therefore, the standard of review is neither de
  novo review, nor total deference, but rather the
  objective assessment of the facts.

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Procedural Issues--The Precautionary Principle

• AB The precautionary principle does not override
  the provisions of SPS Agreement
• The precautionary principle has not been written
  into the SPS Agreement for justifying measures
  that are otherwise inconsistent with the
  Agreement.
• Responsible, representative government commonly
  act out of prudence and precaution where risks to
  human health are concerned.
• The precautionary principle does not relieve a
  Panel from the duty of applying the normal
  principles of treaty interpretation in reading
  the provisions of SPS Agreement.

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Procedural Issues--Temporal Application of SPS

• Panel SPS Agreement applies to SPS measures that
  were enacted before Jan 1, 1995 if those measures
  were maintained after the date.
• AB In Brazil-Coconut, it has addressed this
  issue on the basis of Article 28 of Vienna
  Convention on the Law of Treaties, therefore
  agreed the Panels opinion that the SPS Agreement
  would apply to the measures at issue unless the
  SPS Agreement reveals a contrary intention.

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Procedural Issues--Selection and Use of Experts

• Panel Neither SPS Agreement Article 11.2 nor DSU
  Article 13.2 limits a Panels right to seek
  information from individual experts, as opposed
  to a group of experts as provided in SPS
  Agreement Article 11.2 and DSU Article 13.1 and
  13.2.
• AB upheld the Panels opinion.

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Procedural Issues-- Claims vs. Arguments

• Appellate Body
• Legal claims are different from legal arguments.
  While a Panel is prohibited from addressing legal
  claims that are not within its terms of
  reference, a Panel is permitted to examine any
  legal argument submitted by a party or to develop
  its own legal reasoning with regard to claims
  within its terms of reference.
• As both complainants had claimed violations of
  Article 5.5 of SPS Agreement, the Panel did not
  err in relying its legal finding on reasoning not
  suggested by the parties.

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Substantive Issues--SPS Agreement Articles 3.1
and 3.3

• Article 3.1 requires Members base their sanitary
  or phytosanitary measures on international
  standards, guidelines or recommendations.
• Panel The so-called, based on in this
  provision means conform to.
• AB rejected the Panels opinion
• a. Based on only requires is supported, and
  is looser than conform to.
• b. The term conform to is explicitly stated in
  Article 3.2, which suggests the drafters
  intention.
• c. The principle of in dubio mitus, which means
  if the meaning of a term is ambiguous, that
  meaning is to be preferred which interferes less
  with the territorial and personal supremacy of a
  party.

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Substantive Issues--SPS Agreement Articles 3.1
and 3.3

• The interpretation of Article 3.3
• Panel The EC was required by Article 3.3 to
  comply with the requirements of Article 5.
• AB Although the situation if there is a
  scientific justification does not explicitly
  refer to Article 5, consistency with Article 5 is
  nevertheless required
• The second sentence of Article 3.3 refers to
  consistency with other provisions of the SPS
  Agreement.
• Footnote 2 defines scientific justification in a
  way that takes into account the risk assessment
  required in Article 5.1.

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Substantive Issues--SPS Agreement Articles 5.1
and 5.2

• Risk Assessment in Annex A, paragraph 4
• Panel two-step process
• Identify the adverse effects on human health.
• If any such adverse effects exist, evaluate the
  potential or probability of such effects.
• AB Upheld the Panels opinion, except to clarify
  the word potential is better interpreted as
  possibility rather than probability to imply
  a lower degree of potentiality.

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Substantive Issues--SPS Agreement Articles 5.1
and 5.2

• The interpretation of based on in Article 5.1
• Panel Stage
• this term has both procedural and substantive
  aspect. With regard to procedural aspect, this
  term involves a minimum procedural requirement
  that a risk assessment be taken into account.
• EC did not meet the minimum procedural
  requirements, therefore the measures are
  inconsistent with Article 5.1.

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Substantive Issues--SPS Agreement Articles 5.1
and 5.2

• Appellate Body Stage
• The term is a substantive requirement that there
  be a rational relationship between the measure
  and the risk assessment.
• Although the burden of proof is on the
  complaining party, the conclusion of the Panel
  still is correct since there was an almost
  complete absence of evidence on MGA, which means
  that there was no risk assessment for MGA.

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Substantive Issues--SPS Agreement Articles 5.1
and 5.2

• Legal Findings to this stage
• Panel EC measures are inconsistent with Article
  3.1 because the measures are not based on
  existing international standards. Besides, this
  inconsistency cannot be justified under Article
  3.3 since these measures are inconsistent with
  Article 5.1.
• AB EC Measures fail to comply with Article 5.1
  and 5.2, therefore are also inconsistent with
  Article 3.3.

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Substantive Issues--SPS Agreement Article 5.5

• Article 5.5 requires Members to avoid arbitrary
  or unjustifiable distinctions if such
  distinctions result in discrimination or a
  restriction on international trade.
• Three elements for violation of Article 5.5
• Members impose measures with different levels of
  protection against risks to human life or health
  in several different situations.
• The treatment of different situations must
  exhibit arbitrary or unjustifiable differences.
• The arbitrary or unjustifiable differences result
  in discrimination or a disguised restriction of
  international trade.

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Substantive Issues--SPS Agreement Article 5.5

• Panel Stage EC measures violate Article 5.5.
• There exists different levels of protection
• a. Natural hormones used for growth purposes vs.
  natural hormones occurring endogenously.
• b. Synthetic hormones used for growth purposes
  vs. natural hormones occurring endogenously.
• c. Hormones used for growth purposes vs.
  anti-microbial growth promoters.
• The EC has not provided a justification for
  these distinctions.
• In this case, the significance of the difference
  in levels of protection combined with
  arbitrariness may be sufficient to reach the
  conclusion that the effect is the discrimination
  on international trade.

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Substantive Issues--SPS Agreement Article 5.5

• AB Stage reverse the Panels conclusion.
• Upheld the Panels finding of different levels of
  protections in three situations.
• In situations a, b, there is fundamental
  distinction between added hormones and
  naturally-occurring hormones because of the
  impossibility to limit the residues from
  naturally-occurring hormones, therefore the
  difference was not arbitrary. However, situation
  c is arbitrary distinction.
• Disagree with the Panels opinion that the level
  of difference in treatment itself can be
  sufficient to demonstrate the third element,
  therefore reversed the Panels opinion that the
  measures resulted in discrimination on
  international trade.

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Subsequent Developments--Factual Background

• EC informed the DSB of its intentions in respect
  of implementation after the adoption of the AB
  report on March 13, 1998.
• EC asked for a 39-month period to implement and
  Canada, U.S. and EC failed to reach an mutual
  agreement about the reasonable period of time for
  EC to comply with the recommendation.
• No action has been taken by EC to implement the
  DSBs recommendation as of May 13, 1999. EC
  objected the proposed suspension of tariff
  concessions of Canada and U.S.

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Subsequent Developments--Arbitration under DSU
Art.21.3(c)

• The Arbitrator awarded EC a 15-month period
• DSU Article 21.3(c) provides the 15-month as a
  guideline to be an outer limit in the usual case.
• The reasonable period of time should be the
  shortest period possible within the legal system
  of the Member to implement rulings of the DSB.
• The burden of proof is on EC because EC is the
  party seeking to prove that there are particular
  circumstances justifying a longer time.
• ABs findings had not suggested any method of
  implementation and DSU Article 3.7 and 21.1
  requires Members to engage in prompt compliance
  with DSB rulings. Therefore, ECs consideration
  to conduct risk assessment process is irrelevant
  to the determination of reasonable period of
  time.

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Subsequent Developments--Arbitration under DSU
Art.22.6

• Estimated nullification caused by EC measures
• Canada CDN11.3 million/year
• U.S. US116.8 million/year
• WTO Members can be presumed to act in conformity
  with WTO obligations. EC is challenging the
  conformity of these proposals with DSU Article
  22.4, therefore bears the burden of proof.
• While EC bears the burden of proof, Canada and
  U.S. is required to submit evidence because such
  evidence may be in their sole possession.
• The arbitrator would estimate the level of
  suspension they consider equivalent if they find
  the proposal WTO-inconsistent under DSU Art.
  22.7.
• Once the nullification is established, Canada and
  U.S. are free to pick products from the proposed
  list in that amount.