4.12 According to India, the EC bore the burden of proving that India had failed to establish a mailbox system meeting the requirements of Article 70.8(a) of the TRIPS Agreement and not merely that there were reasonable doubts that it had failed to do so.

• In the previous case, the United States and India had advanced conflicting views on whether a competitor could obtain a judicial order to force the Patent Office to examine and reject a mailbox application. The United States had claimed that this was possible, while India had pointed out that it was not. Faced with these conflicting claims, the Panel had ruled that "the current administrative practice creates a certain degree of legal insecurity in that it requires Indian officials to ignore certain mandatory provisions of the Patents Act".³⁰ The Panel had also ruled that:

• The Panel had found that the Indian Supreme Court decisions which India had provided to it only established that India's "reliance on an administrative practice regarding the handling of pharmaceutical and chemical product applications is not unconstitutional". However, according to the Panel, this evidence adduced by India did not demonstrate that "a court will uphold the validity of administrative actions which apparently contradict mandatory legislation".³² It had concluded for these reasons that, notwithstanding India's commitment to adapt its legislation on pharmaceutical and agricultural chemical products by the end of the transitional period, "there would remain doubt during the transitional period regarding the eligibility of these products for future patent protection".³³

• The Panel thus had not found that the evidence submitted to it demonstrated that mailbox applications would be invalidated under Indian law. However, on the basis of its interpretation of that law, it had found that there was "a certain degree of legal insecurity" and "doubt" because of an "apparent" contradiction with mandatory law. These doubts were in the view of the Panel sufficient to find the Indian mailbox system to be contrary to Article 70.8(a) because that provision required India to "eliminate any reasonable doubts" that the mailbox applications and the patents based on them would not be invalidated. The Panel had thus interpreted into the TRIPS Agreement the requirement that a Member must eliminate any reasonable doubts that it had met the requirements set out in that Agreement.

• By ruling that India - the party subject to Article 70.8(a) - must remove any reasonable doubts regarding its mailbox system, the Panel effectively had relieved the United States - the party claiming a violation of Article 70.8(a) - of the burden of adducing evidence that the violation had occurred. This shift of the burden of proof on to India would imply that the party claiming a violation of Article 70.8(a) must merely prove that there were reasonable doubts suggesting such a violation. It was then for the defending party to dispel those doubts. By proceeding in this manner, the Panel had applied a standard of proof to the evidence to be adduced by the defending party that no State with courts entitled to review administrative actions could meet. India considered for these reasons that the Panel's interpretation of Article 70.8(a) was not only substantively incorrect but also violated established principles governing the burden and standard of proof. India had appealed therefore both from the substantive finding and from its implications for the distribution of the burden of proof and the standard of proof.

• While the Appellate Body had first ruled that Article 70.8(a) did not comprise the obligation to eliminate "reasonable doubts" that mailbox applications would be invalidated, it nonetheless subsequently declared it sufficient for the Panel to have concluded from the evidence that it - the Panel - had "reasonable doubts" that such invalidation could occur.

• The Appellate Body had reversed the substantive finding of the Panel by ruling:

To India's great surprise, however, the Appellate Body had upheld the Panel's ruling on the distribution of the burden of proof. It had found:

It was difficult to reconcile the two statements in the underlined portions of the above extracts from the Appellate Body report. The Appellate Body first ruled that Article 70.8(a) did not comprise the obligation to eliminate "reasonable doubts" that mailbox applications would be invalidated. However, the Appellate Body subsequently declared it sufficient for the Panel to have concluded from the evidence that it - the Panel - had "reasonable doubts" that such invalidation could occur. The findings of the Panel were consistent: it had interpreted Article 70.8(a) to require India to eliminate any reasonable doubts as to the validity of mailbox applications and it had consequently considered a demonstration that there were such doubts to be sufficient. The Appellate Body had ruled that India did not have to eliminate any reasonable doubts but then effectively reversed that ruling by considering a demonstration of doubts to be sufficient.

4.13 India further advanced that Members should be given the benefit of the doubt on their own interpretations of their municipal law and that the Panel and the Appellate Body had failed to apply the principle that the conformity of the internal law of each State with its treaty obligations must be presumed.

Whether interpretations of municipal law were correct was to be determined by domestic courts

• India's arguments before the Panel in the present case amounted to the following. The implementation of the TRIPS Agreement would require administrative, regulatory, and legislative actions - or choices amongst them - based on interpretations by the executive authorities of Members of their regulations, statutes and constitution. Whether such interpretations were correct could only be determined by domestic courts. India's position was that panels and the Apellate Body should give a Member the benefit of the doubt on its interpretation of its own law unless there was evidence - such as a court decision - that the Member's interpretation of its own law was manifestly incorrect. Members had the legitimate expectation that the interpretation of their municipal law would be left to their domestic courts.

• As a matter of policy also, this was a wise approach for panels to follow. Panels had special expertise in the area of WTO/GATT law which they did not have in the area of a Member�s domestic law. Accordingly, they should give Members the benefit of the doubt on their determinations under their domestic law. This was not the same as deferring to a Member�s interpretations of WTO provisions or deferring to a Member's determination on whether a particular factual situation met the WTO standard for imposing anti-dumping duties or for imposing quantitative restrictions under Article 6 of the Agreement on Textiles and Clothing. Thus, the view of the Panel in United States - Restrictions on Imports of Cotton and Man-Made Fibre Underwear³⁷ - that a "policy of total deference to the findings of national authorities could not ensure an objective assessment as foreseen by Article 11" of the Dispute Settlement Understanding - was clearly distinguishable from the present case. India was not advocating a policy of deference: India recommended merely that not only should the burden of showing that a measure taken by a Member to comply with its WTO obligations was invalid under its domestic law be placed firmly on the Member challenging the validity of such a measure, but Members should also be given the benefit of the doubt on their own interpretations of their municipal law, as previous GATT panels had ruled.

• Otherwise, if panels resorted too quickly to adjudicating upon the validity of a Member's actions under its domestic law, an anomalous situation could result where a particular action of a Member stood invalidated on a panel's interpretation of the Member's domestic law but was upheld by the Member's domestic courts. Also, panels should not permit the WTO to be turned into a forum for adjudicating upon the validity of Members' measures under their domestic law.

• The Appellate Body had found in the previous case that the evidence adduced by the United States had established the "presumption" that India�s "mailbox system" was inconsistent with its Patents Act and that India had not submitted evidence rebutting that presumption. This use of a "presumption" was contrary to established principles of international law.³⁸

• The practice of GATT 1947 panels had been consistent with the principle for the settlement of disputes by international tribunals according to which the conformity of the internal law of each state with its treaty obligations must be presumed and a party whose internal law was claimed to be inconsistent with its treaty obligations must therefore be given the benefit of the doubt regarding the interpretation of its internal law.³⁹

• In the previous case, these principles had not been observed. Before the previous Panel, the United States had pointed to certain provisions of the Patents Act that were capable of different interpretations. The Panel and the Appellate Body had considered that the United States had, by adducing this evidence, created a "presumption" that India's mailbox system was inconsistent with its Patents Act. After an "examination" of the Patents Act, the Appellate Body had concluded that India's "explanations" had not persuaded it that mailbox applications would survive legal challenge under the Patents Act.

• It was an established principle of law, confirmed repeatedly by the Appellate Body, that a party claiming a violation of a provision of the WTO Agreement by another Member must assert and prove its claim and that the defendant enjoyed the benefit of the doubt when the interpretation of its domestic law was at issue. The task of the EC was consequently to prove that India's mailbox system was inconsistent with Indian law and that a mailbox application could therefore be successfully challenged in an Indian court. It was not sufficient for it to submit evidence merely casting doubt on that consistency in the minds of the Panelists. The Appellate Body had failed to apply that principle of law in the previous case. India suggested that the Panel be guided by the principles enunciated by the Appellate Body and not by the failure to apply them in a single instance.

4.14 According to India, the Panel and the Appellate Body, in examining the complaint by the United States in the earlier case, had improperly based their conclusions on their interpretation of Indian law.

• In the previous case, the Panel had ruled, on the basis of its own interpretation of the provisions of the Patents Act, that the mailbox system was inconsistent with mandatory requirements of the Patents Act⁴⁰ or "apparently" inconsistent.⁴¹ It did not examine whether India, in applying its Patents Act, had established a mailbox system, but whether the Patents Act permitted it to do so. And the Panel did not determine whether a competitor had, in fact, obtained a judicial order to reject a mailbox application but concluded on the basis of its own assessment of Indian law that an Indian court hypothetically might do so, assuming that a competitor mounted a legal challenge to India�s mailbox in a competent Indian court. However, the Panel failed to note that basic principles of standing and ripeness⁴² applicable in Indian law stood in the way of such a court order.⁴³

• The Appellate Body had not acted in accordance with the principle it had itself enunciated. Rather than examining how India had applied its law on the basis of the interpretation of that law by the Indian authorities, the Appellate Body had based its conclusions on its own interpretation of municipal law. It had ruled as follows:

• The rulings of the Appellate Body were contradictory. It first confirmed that an international tribunal could not interpret domestic law but could only examine the application of that law. This should have led the Appellate Body to examine such questions as: has India established a mailbox system; have mailbox applications been challenged in Indian courts; has any Indian court declared a mailbox application invalid? The fact that India had received 1924 mailbox applications between 1 January 1995 and 15 October 1997, not one of which had been rejected or invalidated, should have been central to the Appellate Body's considerations. Instead, the Appellate Body had interpreted Indian law and examined the questions: is the mailbox system consistent with India's Patents Act; can mailbox applications be challenged under Indian law in Indian courts; can mailbox applications be declared invalid under Indian law? The central finding of the Appellate Body on which it based its conclusion was: "we are not persuaded that India's "administrative instructions" would survive a legal challenge under the Patents Act". It was thus on the basis of its own interpretation of the Patents Act, rather than an assessment of the application of that Act, that the Appellate Body had ruled against India.

• The Appellate Body had justified this seeming contradiction as follows:

These formulations disguised the Appellate Body's approach to the municipal law of India and misrepresented the issue that had been before the Appellate Body. India had not claimed or implied that only India "can assess whether Indian law is consistent with India's obligations under the WTO Agreement". India did assert, however, that only its courts could determine whether the application of the Patents Act by the Government of India was consistent with Indian law and that the role of WTO panels and the Appellate Body was to judge whether India's application of its law was consistent with its WTO obligations. This did not mean that Members wishing to challenge the implementation of WTO obligations under domestic law were defenseless. It merely meant that it was not sufficient for them to base their claims merely on one possible interpretation of the domestic law, as the EC was doing in this case. If the parties to a dispute advanced different interpretations of domestic law and the interpretation of that law had not been settled by the domestic courts, the party whose law was at issue should be given the benefit of the doubt. It was in the interest of all Members of the WTO that this principle be applied. Each Member's economic interests were adequately protected if panels, whenever the interpretation of the domestic law had not yet been settled by municipal courts, examined how the defendant's domestic authorities actually applied the defendant's domestic law to products, services and service suppliers or holders of intellectual property rights from the complainant. No Member would wish to be told by a panel or the Appellate Body, as India had been told in the previous case, that it was violating its own domestic law.

4.15 India also argued that the interpretation by the Panel and Appellate Body of Indian law in the earlier case had been incorrect.

• The Patents Act required the Controller to refer patent applications to an examiner; it did not, however, specify the time-frame within which the Controller must do so. The Indian authorities were of the view that, given their broad powers under the Indian Constitution in the field of intellectual property and in the implementation of international treaties, they could use the resulting discretion to postpone the referral of applications for pharmaceutical and agricultural chemical products until 2005 because such products would in any case be patentable only then.

• The Indian authorities were further of the view that the principle of ripeness consistently applied by Indian courts prevented any legal challenge to mailbox applications because these conferred only a potential, future right.⁴⁸ The Appellate Body, in an incomplete assessment of that legal situation, concluded that it was not convinced that the Indian authorities were acting in accordance with Indian law. The Appellate Body conducted what it called "an examination of the relevant aspects of Indian municipal law" and declared that it was not persuaded by the "explanations" given by India. In fact, the "examination" of Indian law had been an interpretation of that law and the "explanations" rejected had been the interpretations of that law by the Indian authorities.

Continuation: Article 70.8(a) of the TRIPS Agreement

³⁰ Document WT/DS50/R, paragraph 7.35 

³¹ Document WT/DS50/R, paragraph 7.37 

³² Document WT/DS50/R, paragraph 7.37 

³³ Document WT/DS50/R, paragraph 7.38

³⁴ Id. 

³⁵ Document WT/DS50/AB/R, paragraph 58 

³⁶ Document WT/DS50/AB/R, paragraph 74

³⁷ Document WT/DS24/R, paragraph 7.10 

³⁸ See Mojtaba Kazazi, Burden of Proof and Related Issues: A Study on Evidence Before International Tribunals, Kluwer Law International, 1996, page 242. According to Kazazi this principle is reflected in Article 27 of the Vienna Convention on the Law of Treaties, according to which a party to a treaty may not "invoke the provisions of its internal law as justification for its failure to perform the treaty". For a summary of the current state of WTO case law on the issue of the burden of proof and on presumptions, see the panel report on Argentina - Measures Affecting Imports of Footwear, Textiles, Apparel and Other Items, WT/DS56/R, paragraphs 6.34-6.40.

³⁹ See, for example, report of the panel on United States - Measures Affecting Alcoholic and Malt Beverages, adopted on 19 June 1992, BISD 39S/206, 284-287, 296-297; and the report of the panel on United States - Measures Affecting the Importation, Internal Sale and Use of Tobacco, adopted on 12 August 1994, DS44/R, paragraph 75; see also document L/5863 concerning an unadopted GATT panel report, dated 17 September 1985, paragraphs 58 and 59 ("gold coins").

⁴⁰ Document WT/DS50/R, paragraph 7.35 

⁴¹ Document WT/DS50/R, paragraph 7.37 

⁴² See further under paragraph 4.17 below.

⁴³ Document WT/DS50/R, paragraph 7.37 

⁴⁴ Document WT/DS50/R, paragraph 7.35 

⁴⁵ Document WT/DS50/R, paragraph 7.37 

⁴⁶ Document WT/DS50/AB/R, paragraphs 69-70 

⁴⁷ Document WT/DS50/AB/R, paragraph 66 

⁴⁸ See further under paragraph 4.17 below.