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2 August 1999
Brazil - Export Financing Programme for Aircraft
AB - 1999-1
Report of the Appellate Body
114. The European Communities submits that Articles 14 and 18.2 of the DSU regulate the question of confidentiality in dispute settlement proceedings. If information is designated as confidential by a party to a dispute, Article 18.2 requires the other parties to take all necessary precautions according to their own administrative traditions and structures. The "bad faith" of other Members cannot be presumed. The proper place to resolve problems posed by the treatment of confidential information is in the current review of the DSU by WTO Members.
(d) United States
115. The United States argues that the need for additional procedures for protecting business confidential information is extremely important, "because it goes to the viability of WTO dispute settlement as a vehicle for preserving the rights and obligations of Members". In the view of the United States, "basic considerations of due process, as well as the need to preserve rights and obligations of Members, require the Appellate Body to apply such procedures". As a consequence, the United States has no objection to the joint request made by Brazil and Canada.
116. The United States makes three general arguments in support of the use of additional procedures for protecting business confidential information in WTO dispute settlement proceedings. First, the United States argues that nothing in the DSU precludes panels or the Appellate Body from adopting additional procedures for protecting business confidential information. On the contrary, Article 12.1 of the DSU explicitly allows panels to deviate from the working procedures set out in Appendix 3 of the DSU. The United States believes that the Appellate Body has authority comparable to that of panels to adopt such procedures as a result of Article 17.9 of the DSU and Article16(1) of the Working Procedures.
117. Second, the United States argues that the application of procedures for protecting business confidential information promotes important objectives because Members' rights and obligations under the covered agreements can only be preserved if due process is accorded to both the complaining party and the responding party. The United States maintains that the demands of due process are not satisfied, however, if the absence of such procedures precludes a Member from properly making its case.
118. Third, the United States maintains, contrary to the position taken by the European Communities, that a Member's national laws do not provide a basis for depriving another Member of its rights under the WTO Agreement. Thus, the United States asserts, the claim by the European Communities that its officials would be unable, under their staff regulations, to accept the undertakings proposed "should not be allowed".
2. Ruling and Reasons
119. In our preliminary ruling of 11 June 1999, we concluded that it is not necessary, under all the circumstances of this case, to adopt additional procedures to protect business confidential information in these appellate proceedings. Our ruling was as follows:
120. We have no further reasons to add to the first two paragraphs of our ruling above. The following is an elaboration of the reasons in the third paragraph of our ruling. Our ruling applies only to the request for additional procedures to protect "business confidential information" in these appellate proceedings, and it, therefore, has no effect on the BCI Procedures adopted by the Panel. Neither the Panel's decision to adopt BCI Procedures, nor the content of those Procedures, has been appealed.
121. With respect to appellate proceedings, in particular, the provisions of the DSU impose an obligation of confidentiality which applies to WTO Members generally as well as to Appellate Body Members and staff. In this respect, Article 17.10 of the DSU states, without qualification, that "[t]he proceedings of the Appellate Body shall be confidential." (emphasis added) The word "proceeding" has been defined as follows:
More broadly, the word "proceedings" has been defined as "the business transacted by a court". In its ordinary meaning, we take "proceedings" to include, in an appellate proceeding, any written submissions, legal memoranda, written responses to questions, and oral statements by the participants and the third participants; the conduct of the oral hearing before the Appellate Body, including any transcripts or tapes of that hearing; and the deliberations, the exchange of views and internal workings of the Appellate Body.
122. Article 18.2 of the DSU also contains rules protecting the confidentiality of written submissions and information submitted to the Appellate Body:
123. In our view, the provisions of Articles 17.10 and 18.2 apply to all Members of the WTO, and oblige them to maintain the confidentiality of any submissions or information submitted, or received, in an Appellate Body proceeding. Moreover, those provisions oblige Members to ensure that such confidentiality is fully respected by any person that a Member selects to act as its representative, counsel or consultant. In this respect, we note, with approval, the following statement made by the panel in Indonesia– Automobiles:
124. Finally, we wish to recall that Members of the Appellate Body and its staff are covered by Article VII:1 of the Rules of Conduct, which provides:
125. For these reasons, we do not consider that it is necessary, under all the circumstances of this case, to adopt additional procedures for the protection of business confidential information in these appellate proceedings. We, therefore, decline the request of Brazil and Canada.
IV. Issues Raised In This Appeal
126. The following issues are raised in this appeal:
127. Brazil argues on appeal that certain regulatory instruments relating to PROEX were not properly before the Panel because those instruments came into effect in 1997 and 1998 – after consultations were held between Canada and Brazil. Canada maintains that these instruments were properly before the Panel because Canada's request for consultations, dated 18 June 1996, and its request for the establishment of a panel, dated 10 July 1998, referred to the same "matter", that is, to "PROEX and prohibited subsidies granted thereunder." Furthermore, according to Canada, "the programme has remained unchanged in its essence."
128. On this preliminary objection by Brazil, the Panel made the following ruling:
129. In its request for consultations of 18 June 1996, Canada described the specific measures at issue as "certain export subsidies granted under the Brazilian Programa de Financiamento às Exportações (PROEX) to foreign purchasers of Brazil's Embraer aircraft". In its request for the establishment of a panel, Canada identified the specific measures at issue as follows:
130. We note that Brazil and Canada consulted about "certain export subsidies granted under the Brazilian Programa de Financiamento às Exportações (PROEX) to foreign purchasers of Brazil's Embraer aircraft", and that the request for the establishment of a panel also relates to "the payment of export subsidies through interest rate equalization and export financing programmes under PROEX." We have been advised by Brazil that the regulatory instruments that came into effect in 1997 and 1998, after the consultations had taken place, and that relate to the administration of PROEX, did not change the essence of that regime.
131. In our view, Articles 4 and 6 of the DSU, as well as paragraphs 1 to 4 of Article4 of the SCM Agreement, set forth a process by which a complaining party must request consultations, and consultations must be held, before a matter may be referred to the DSB for the establishment of a panel. Under Article 4.3 of the SCM Agreement, moreover, the purpose of consultations is "to clarify the facts of the situation and to arrive at a mutually agreed solution."
132. We do not believe, however, that Articles 4 and 6 of the DSU, or paragraphs 1 to 4 of Article 4 of the SCM Agreement, require a precise and exact identity between the specific measures that were the subject of consultations and the specific measures identified in the request for the establishment of a panel. As stated by the Panel, "[o]ne purpose of consultations, as set forth in Article 4.3 of the SCM Agreement, is to 'clarify the facts of the situation', and it can be expected that information obtained during the course of consultations may enable the complainant to focus the scope of the matter with respect to which it seeks establishment of a panel." We are confident that the specific measures at issue in this case are the Brazilian export subsidies for regional aircraft under PROEX. Consultations were held by the parties on these subsidies, and it is these same subsidies that were referred to the DSB for the establishment of a panel. We emphasize that the regulatory instruments that came into effect in 1997 and 1998 did not change the essence of the export subsidies for regional aircraft under PROEX.
133. For these reasons, we conclude that the export subsidies for regional aircraft under PROEX, including the regulatory instruments that came into effect after consultations were held between Canada and Brazil, were properly before the Panel.VI. Burden of Proof Under Article 27.4 of the SCM Agreement
134. Canada appeals the Panel's finding that, in a case involving a claim of violation of Article 3.1 (a) against a developing country Member, the complaining party has the burden of demonstrating that the developing country Member in question has not complied with at least one of the elements of Article 27.4.
135. The Panel found as follows:
136. Canada asserts that Article 27.4 is in the nature of a conditional exception or an affirmative defense for a developing country Member, and that, therefore, the burden of proof rests with the respondent developing country Member – in this case, Brazil. Brazil, on the other hand, maintains that Article 27 is a transitional provision that contains a set of special and differential rights and obligations for developing country Members, and that, therefore, the complaining party – here, Canada – has the burden of proving that the developing country Member is not in compliance with Article 27.4.
137. In United States – Measures Affecting Imports of Woven Wool Shirts and Blouses from India, we stated that "the burden of proof rests upon the party … who asserts the affirmative of a particular claim or defense." (emphasis added) There, we also noted that "Articles XX and XI: (2)(c)(i) are limited exceptions from obligations under certain other provisions of the GATT 1994, not positive rules establishing obligations in themselves. They are in the nature of affirmative defenses." We have also stated previously that the simple characterization of a provision of an agreement as an "exception" to a specific obligation does not, in itself, determine which party has the burden of proof. In EC Measures Concerning Meat and Meat Products (Hormones), we stated:
138. Article 3.1(a) of the SCM Agreement, states, in relevant part:
Article 27.2 (b) of the SCM Agreement provides as follows:
Article 27.4 of the SCM Agreement reads, in relevant part:
139. The ordinary meaning of the text of Article 27.2 (b) is clear. For a period of eight years after the date of entry into force of the WTO Agreement, the prohibition on export subsidies in paragraph 1 (a) of Article 3 of the SCM Agreement does not apply to developing country Members described in Article 27.2 (b) – as long as they comply with the provisions of Article 27.4. With respect to the application of the prohibition of export subsidies in Article 3.1 (a) of the SCM Agreement, paragraphs 2 and 4 of Article 27 contain a carefully negotiated balance of rights and obligations for developing country Members. During the transitional period from 1 January 1995 to 1 January 2003, certain developing country Members are entitled to the non-application of Article 3.1 (a), provided that they comply with the specific obligations set forth in Article 27.4. Put another way, when a developing country Member complies with the conditions in Article 27.4, a claim of violation of Article 3.1 (a) cannot be entertained during the transitional period, because the export subsidy prohibition in Article 3 simply does not apply to that developing country Member.
140. The title of Article 27 is "Special and Differential Treatment of Developing Country Members". Paragraph 1 of that Article provides that "Members recognize that subsidies may play an important role in economic development programmes of developing country Members." Both from its title and from its terms, it is clear that Article 27 is intended to provide special and differential treatment for developing country Members, under certain specified conditions. In our view, too, paragraph 4 of Article 27 provides certain obligations that developing country Members must fulfill if they are to benefit from this special and differential treatment during the transitional period. On reading paragraphs 2 (b) and 4 of Article 27 together, it is clear that the conditions set forth in paragraph 4 are positive obligations for developing country Members, not affirmative defenses. If a developing country Member complies with the obligations in Article 27.4, the prohibition on export subsidies in Article 3.1 (a) simply does not apply. However, if that developing country Member does not comply with those obligations, Article 3.1 (a) does apply.
141. For these reasons, we agree with the Panel that the burden is on the complaining party (incasu Canada) to demonstrate that the developing country Member (incasu Brazil) is not in compliance with at least one of the elements set forth in Article 27.4. If such non-compliance is demonstrated, then, and only then, does the prohibition of Article 3.1(a) apply to that developing country Member.
Continue on to: VII. Has Brazil Increased the Level of its Export Subsidies? 142
Black's Law Dictionary, (West Publishing Co., 1990), p. 1204.
The New Shorter Oxford English Dictionary, (Clarendon Press, 1993), Vol. II, at 2364.
Supra, footnote 33.
The Rules of Conduct have been directly incorporated into the Working Procedures (see Rule 8 of those Working Procedures).
Brazil's appellant's submission, paras. 4-18.
WT/DS46/1, G/SCM/D3/1, 21 June 1996.
WT/DS46/5, 13 July 1998.
Canada's appellee's submission, para. 30.
Panel Report, para. 7.11.
WT/DS46/1, G/SCM/D3/1, 21 June 1996.
WT/DS46/5, 13 July 1998.
WT/DS46/1, G/SCM/D3/1, 21 June 1996.
WT/DS46/5, 13 July 1998.
Answer by Brazil to questions at the oral hearing, 17 June 1999. These specific measures are listed in paragraph 11, supra.
Panel Report, para. 7.9.
Ibid., para. 7.57.
Canada's appellant's submission, paras. 15-21.
Brazil's appellee's submission, paras. 2-12.
Adopted 23 May 1997, WT/DS33/AB/R, p. 14.
Ibid., p. 16.
Adopted 13 February 1998, WT/DS26/AB/R, WT/DS48/AB/R, para. 104.