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World Trade
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WT/DS70/R
14 april 1999
(99-1398)
Original: English

Canada - Measures Affecting the Export of Civilian Aircraft

Report of the Panel

(Continued)


4. Procedures governing Business Confidential Information

(a) Arguments of the parties

9.54 Early in this proceeding, Canada asked the Panel to adopt special working procedures for the protection of Business Confidential Information (hereinafter "BCI"). To this end, Canada submitted a set of draft procedures to the Panel. Canada stated that its draft procedures struck a balance between (1) the need for "reasonable access" to BCI by the Panel and the other disputing parties, and (2) the need to provide private business interests with adequate protection for their proprietary business information.

9.55 Brazil agreed in principle with Canada's request, but recommended a number of changes to the draft procedures submitted by Canada.

(b) Evaluation by the Panel

9.56 We note that procedures concerning the protection of confidential information are provided for in Article 18.2 of the DSU. We note, however, that Article 12.1 of the DSU effectively permits panels to adopt working procedures in addition to those set forth in the DSU, after consulting the parties to the dispute.524 Given the sensitive nature of the BCI that could be submitted to the Panel in the present case, and given the agreement between the parties on the need for additional protection of such Business Confidential Information, the Panel decided to adopt special Procedures Governing Business Confidential Information that go beyond the protection afforded by Article 18.2 of the DSU. The Panel agreed with Canada that such Procedures should strike a balance between "reasonable access" to BCI, and the need to protect the integrity of such BCI.

9.57 The Panel sent proposed Procedures Governing BCI to the parties on 4 November 1998. Brazil provided comments on the proposed Procedures later the same day. Brazil noted that the proposed Procedures only provided for BCI to be submitted to, and stored at, the premises of the WTO or the premises of the submitting party's embassy or mission. Brazil expressed its concern that the Procedures proposed by the Panel did not allow a party to keep a set of BCI submitted by the other at its Geneva Mission. Brazil considered that this would "unduly restrict the ability of the parties to deal effectively with [BCI] during the course of this very rapid proceeding." Brazil proposed changes that would allow either party to keep a set of BCI submitted by the other party in a secure location, namely a locked safe, at its Geneva mission, and that would grant the other party to visit the other party's Geneva mission to review the secure location and propose changes in the arrangements. Brazil asserted that such changes would "achieve a reasonable balance between the competing interests of providing reasonable access to information and providing adequate safeguards for [the BCI] of private business interests."

9.58 The Panel wrote to Canada to solicit its views on the changes proposed by Brazil. Canada replied that, in its view, the change proposed by Brazil did "not afford private interests the protection provided for in the special procedure devised by the Panel [on 4 November 1998]." Canada also expressed the concern that disagreement between parties over the adequacy of protection afforded BCI at one another's Geneva missions "could in itself cause unwanted delays in providing access to the information and thus undermine the very reason for Brazil's request."

9.59 Having taken into account the comments made by both parties, the final Procedures Governing BCI adopted by the Panel (see Annex I) provided for the submission of BCI at inter alia the Geneva mission of the other party. The Procedures stated that such BCI shall be stored in a safe in a locked room at the premises of the relevant Geneva mission, with restrictions imposed on access to the locked room and safe. The Procedures also provided for either party to visit the other party's Geneva mission and review the proposed location of the safe, and to propose any changes.

9.60 In a subsequent submission, Canada stated that because "the modified procedures do not provide the requisite level of protection for [BCI]. ... Canada would not be in a position to submit [BCI] under the modified procedures." Canada submitted, however, that the Procedures proposed by the Panel on 4 November 1998 "struck a reasonable balance between the interests of the parties to have access to evidence submitted to the Panel and to provide protection for [BCI]."

9.61 In light of Canada's comments, it appeared to the Panel that Canada was essentially concerned that the level of protection afforded by the final Procedures was less than that afforded by the Procedures proposed on 4 November 1998. Accordingly, the Panel addressed the following question to Canada:

Canada stated in its oral presentation [at the first substantive meeting] (paras. 20-21) that "the original procedures adopted by the Panel governing confidential business information provided...a sufficient level of protection for that information", but that "the procedures governing confidential business information, as modified at Brazil's request, ... do not provide the requisite level of protection..." (emphasis in original). Could Canada please explain how the level of protection under the procedures ultimately adopted by the Panel for the protection of confidential business information differs, in substance, from what would have been afforded by the procedures to which Canada indicates it could have agreed. For example, under the first set of procedures, what other than good faith would prevent a representative of a party that had signed a non-disclosure form from taking verbatim notes on the confidential business information on the premises of either the WTO or the opposing party, removing those notes from those premises and then disclosing them to non-authorized persons? Would not exactly the same degree of good faith be involved under either set of procedures?

9.62 In response, Canada stated:

Canada continues to believe that the Panel's amended confidentiality procedures do not adequately protect private sector interests and the interests of the Government of Canada in maintaining effective control over the dissemination of business confidential information. In particular they may not be adequate to protect the Government of Canada from potential liability under domestic law, in the event the confidentiality provisions are not strictly observed.

In Canada's view, the essential difference between the confidentiality procedures originally proposed by the panel and those ultimately adopted are that the original procedures entrusted the commercial confidential materials to the care of a neutral third party, i.e. the WTO Secretariat. The modified procedures oblige Canada to entrust the materials to the care of the opposing Party, which Party, or at least nationals of the Party on whose behalf the present case is being pursued, may have an immediate and commercial interest in these materials.

Under the original procedures, any breach of these procedures is likely to take the form of detailed or verbatim notes on a document, as is implied in the Panel's question. Under the modified procedures, breach could take the form of a photocopy of the actual document. The difference between the commercial and legal effects of the two potential forms of breach are substantial.

As to commercial effects, the uncertain authenticity of notes on a document will diminish its utility and correspondingly decrease the potential commercial injury that might be caused by its disclosure to an interested party. For example, in negotiations for the sale of aircraft, a purchaser might pass a copy of the term sheet proposed by one manufacturer/seller to the agents of a competing manufacturer/seller, as a means of inducing the first manufacturer/seller to lower its price or otherwise improve the terms of its offer. A copy of a term sheet is a far more effective inducement for the manufacturer/seller to vary his proposal than the assertion by the purchaser that the competing manufacturer/seller has offered better terms, even if the specific content of the alleged better terms is detailed by the purchaser.

As to legal liability, any claim, based on the production of detailed or verbatim notes, that business confidential information was improperly disclosed would constitute hearsay under Canadian law, and its evidentiary value would be limited. A photocopy of an original document, however, would constitute best evidence. (emphasis supplied)

9.63 The Panel considers that any special procedures (i.e., in addition to Article 18.2 of the DSU) for the protection of BCI in the context of WTO dispute settlement will necessarily depend on the good faith of the parties and their representatives. This is true of the final Procedures adopted by the Panel, and is equally true of the 4 November 1998 Procedures.

9.64 We recall that both the 4 November 1998 Procedures, and the final Procedures, provided that BCI "shall not be copied, ... except as specifically provided in these Procedures."525 In response to a request from Canada, the Panel subsequently, on 21 December 1998, amended the final Procedures to clarify that the term "copied" included verbatim transcription. Despite the prohibition of copies, therefore, both sets of Procedures effectively allowed approved persons to make detailed (but not verbatim) handwritten notes of a party's BCI.

9.65 Canada suggests that it is the potential for approved persons representing one party to make photocopies of BCI submitted by the other party (because the BCI is entrusted to the care of that other party) that renders the final Procedures unacceptable. Canada effectively argues that there was no potential to make photocopies under the 4 November 1998 Procedures, because the BCI was entrusted to the WTO Secretariat, and that this potential exists under the final Procedures because they envisage BCI being provided to the other party to the dispute. Canada submits that "the uncertain authenticity of notes on a document will diminish its utility and correspondingly decrease the potential commercial injury that might be caused by its disclosure to an interested party". Canada asserts that photocopies of documents have greater commercial effects than detailed handwritten notes of the contents of such documents.526 We note that Canada has advanced no additional arguments in support of its assertion that the protection afforded to BCI by the final Procedures is less than that afforded by the 4 November 1998 Procedures.

9.66 We are not convinced by Canada's arguments in this regard. In particular, although detailed handwritten notes of BCI documents may be less authentic than photocopies of documents containing BCI, we consider that handwritten notes of BCI would nevertheless have some commercial value to certain unscrupulous individuals. The Procedures seek to protect the substance of the BCI, not the form of the BCI. This is because it is the substance of the BCI that has the potential to cause significant commercial prejudice in any form, be it handwritten note or photocopy. Accordingly, we attach no importance to Canada's argument that the final Procedures provide unscrupulous approved persons with the opportunity to make photocopies of BCI documents, whereas the 4 December 1998 Procedures would only have provided unscrupulous approved persons an opportunity to make handwritten notes of BCI. Under both sets of Procedures, the substance of the BCI could have been disclosed by unscrupulous approved persons bent on this course.

9.67 Furthermore, assuming arguendo that a photocopy of BCI does have greater commercial effect than detailed handwritten notes of BCI, we are not convinced that the possibility of approved persons making photocopies of documents containing BCI was totally precluded under the 4 November 1998 Procedures. In order to exclude any potential for approved persons to make photocopies under the 4 November 1998 Procedures, the Secretariat would have had to continually monitor all approved persons' access to the BCI. However, the Secretariat is not responsible for the enforcement of the Procedures, and would not therefore have engaged in such monitoring. Thus, even under the 4 November Procedures, there was a potential for unscrupulous and determined approved persons, having been granted access to the relevant BCI by the Secretariat, to temporarily remove BCI documents for photocopying.

9.68 In our opinion, the important distinction between the 4 November 1998 Procedures, and the final Procedures, is that the latter would facilitate the work of the parties in preparing themselves for these "fast-track" proceedings, without impairing the protection afforded to the substance of the BCI. The timetable of the proceedings is such that party representatives would be likely to spend large periods of time in Geneva. As noted above, Canada itself has recognised the need for a party to have "reasonable access" to BCI submitted by the other party. In the context of a fast-track case in particular, we do not consider that there is "reasonable access" to the BCI if a party is required to adjust its work in respect of that BCI to the official working hours of the WTO Secretariat, excluding evenings and weekends. Under the final Procedures, authorised representatives of the parties would have had the convenience of access to the BCI of the other party at any time of day or night, rather than during the working hours of the WTO Secretariat. In our view, the final Procedures therefore strike a reasonable balance between (1) the need for "reasonable access" to BCI by the Panel and the other disputing parties, and (2) the need to provide private business interests with adequate protection for their proprietary business information.

9.69 For these reasons, we reject Canada's arguments concerning the inadequacies of the final Procedures Governing Business Confidential Information.

5. Deadline for the submission of new evidence or allegations

9.70 In its submission dated 16 November 1998, Canada requested a preliminary ruling that the complaining party may not adduce new evidence or allegations after the end of the first substantive meeting of the Panel with the parties. Canada submitted that, given the accelerated procedure under Article 4 of the SCM Agreement, the late submission of allegations or evidence would be prejudicial, as Canada would be effectively denied an adequate opportunity to respond.

9.71 Brazil asked the Panel to reject Canada's request. Brazil argued that the request is without support in WTO law. In addition, Brazil argued that in Argentine Footwear the Appellate Body affirmed the Panel's authority to permit the submission of new facts at any point in the proceedings, provided that the other party is given an adequate opportunity to respond.

(a) Submission of new evidence

9.72 We recall that the Appellate Body found in Argentine Footwear that neither Article 11 of the DSU, nor the Working Procedures in Appendix 3 of the DSU, establish precise deadlines for the presentation of evidence by parties to a dispute. There is nothing in the DSU, or in the Appendix 3 Working Procedures, to suggest that a different approach should be taken in "fast-track" cases under Article 4 of the SCM Agreement.

9.73 In our opinion, an absolute rule excluding the submission of evidence by a complaining party after the first substantive meeting would be inappropriate, since there may be circumstances in which a complaining party is required to adduce new evidence in order to address rebuttal arguments made by the respondent. Furthermore, there may be instances, as in the present case,527 where a party is required to submit new evidence at the request of the panel. For these reasons, we rejected Canada's request for a preliminary ruling that the Panel should not accept new evidence submitted by Brazil after the first substantive meeting.

(b) Submission of new allegations

9.74 We also consider that we are not bound to exclude the submission of new allegations after the first substantive meeting. We can see nothing in the DSU, or in the Appendix 3 Working Procedures, that would require the submission of new allegations to be treated any differently than the submission of new evidence. Indeed, one could envisage situations in which the respondent might present information to a panel during the first substantive meeting that could reasonably be used as a basis for a new allegation by the complaining party. Provided the new allegation falls within the panel's terms of reference, and provided the respondent party's due process rights of defence are respected, we can see no reason why any such new allegation should necessarily be rejected by the panel as a matter of course, simply because it is submitted after the first substantive meeting with the parties. We consider that this approach is consistent with the Appellate Body's ruling in European Communities - Bananas that "[t]here is no requirement in the DSU or in GATT practice for arguments on all claims relating to the matter referred to the DSB to be set out in a complaining party's first written submission to the panel. It is the panel's terms of reference, governed by Article 7 of the DSU, which set out the claims of the complaining parties relating to the matter referred to the DSB."528

6. Deadline for the submission of affirmative defences

9.75 By letter dated 26 November 1998, and during its oral statement at the first substantive meeting on 26 November 1998, Brazil expressed its view, on the basis of certain statements in Canada's first written submission to the Panel, that "Canada might intend to assert that the provisions of paragraph (k) of Annex I to the [SCM] Agreement excuse its otherwise prohibited subsidies." Brazil asserted that reliance on paragraph (k) would amount to a positive defence for which Canada bears the burden of proof. According to Brazil, a good faith interpretation of the DSU requires a party making an affirmative defence to set out the grounds for that affirmative defence in its first written submission to the panel. Accordingly, Brazil asked the Panel "not to accept any evidence or claims of defense in the nature of affirmative defences with regard to the Canada Account, the EDC or any other measure at issue which is not submitted to the Panel and to Brazil prior to the scheduled close" of the first substantive meeting. Brazil asserted that "this is particularly important in this fast-track proceeding, where the time constraints on the Panel could limit, or even preclude, the panel's giving Brazil a reasonable time to respond to new information after" the second written submission, or particularly after the second substantive meeting.

9.76 Canada did not comment on Brazil's request.

9.77 As noted above, there is nothing in the DSU, or in the Appendix 3 Working Procedures, to prevent a party submitting new evidence or allegations after the first substantive meeting. We can see no basis in the DSU to treat the submission of affirmative defences after the first substantive meeting any differently. Thus, although it is desirable that affirmative defences, as with any claim, should be submitted as early as possible, there is no requirement that affirmative defences should be submitted before the end of the first substantive meeting with the parties. Provided that due process is respected, we see nothing to prohibit the submission of affirmative defences after the first substantive meeting with the parties.

9.78 In the present case, we considered that Brazil's due process rights would not be respected if Canada were able to submit an affirmative defence after 12 December 1998, i.e., after the second substantive meeting with the Panel. We therefore required Canada to invoke any affirmative defence it intended to raise in this case by 12 December 1998. In the event, Canada did not adduce any affirmative defences.

To continue with Panel's right to seek information in respect of defences Canada has not made


524 Argentina - Measures Affecting Imports of Footwear, Textiles, Apparel and Other Items, WT/DS56/AB/R, adopted 22 April 1998, para 79.

525 Section VIII.4 of the 4 November 1998 Procedures, and Section VIII.5 of the final Procedures.

526 Canada also points to the superiority of photocopies over handwritten notes for the purposes of Canadian rules of evidence. As Canadian rules of evidence are not relevant in this proceeding, we shall not address this argument.

527 At the time of the second substantive meeting, we asked the parties a series of questions that could have led to the submission of new evidence or arguments. In order to ensure due process, we allowed each party 18 days (i.e., equivalent to the time between the deadline for the respondent's first submission and the deadline for rebuttal submissions) in which to comment on any new evidence or arguments adduced by the other party in response to our questions.

528 European Communities - Regime for the Importation, Sale and Distribution of Bananas, WT/DS27/AB/R, adopted 25 September 1997� para. 145