1. The Principle of Judicial Economy

219. As cited by the Panel, we stated in United States - Shirts and Blouses that "a panel need only address those claims which must be addressed in order to resolve the matter at issue".¹⁷¹

220. The matter at issue is set forth in the Panel's terms of reference, which are usually defined by the request for establishment of a panel which must contain a statement of both the specific measure at issue and the legal basis of the complaint.¹⁷² The standard terms of reference, used in this case¹⁷³, instruct the Panel:

221. Article 3.7 of the DSU provides as follows:

This is affirmed in Article 3.4 of the DSU which stipulates:

222. As recommendations and rulings of the DSB are a function of the findings and recommendations of panels and the Appellate Body, Canada submits that a panel must address, at a minimum, those claims covered by the terms of reference that will determine the course of implementation. If making a ruling on one claim will sufficiently determine the course of implementation, it would be redundant for a panel to go further. However, a panel that addresses certain claims, but declines to address others that would better frame the course of implementation will, in Canada's view, not necessarily have resolved the matter at issue.¹⁷⁵

223. The principle of judicial economy has to be applied keeping in mind the aim of the dispute settlement system. This aim is to resolve the matter at issue and "to secure a positive solution to a dispute".¹⁷⁶ To provide only a partial resolution of the matter at issue would be false judicial economy. A panel has to address those claims on which a finding is necessary in order to enable the DSB to make sufficiently precise recommendations and rulings so as to allow for prompt compliance by a Member with those recommendations and rulings "in order to ensure effective resolution of disputes to the benefit of all Members."¹⁷⁷

224. In this case, for the Panel to make findings concerning violation of Article 5.1 with respect to other Canadian salmon, without also making findings under Articles 5.5 and 5.6, would not enable the DSB to make sufficiently precise recommendations and rulings so as to allow for compliance by Australia with its obligations under the SPS Agreement, in order to ensure the effective resolution of this dispute with Canada. An SPS measure which is brought into consistency with Article 5.1 may still be inconsistent with either Article 5.5 or Article 5.6, or with both.

225. Furthermore, there is no reason, in applying the principle of judicial economy, to examine Articles 5.5 and 5.6 for only one category of the products in dispute, i.e., ocean-caught Pacific salmon, and not to undertake the same analysis for the other categories, i.e., other Canadian salmon. The Panel gave no convincing reason why it examined Article 5.5 and 5.6 for only one category of the products in dispute, i.e., ocean-caught Pacific salmon, and did not undertake the same analysis for other categories, i.e., other Canadian salmon. The Panel's only explanation for limiting its examination of Article 5.5 and 5.6 to ocean-caught Pacific salmon was that "the evidence and arguments before us which are relevant to Articles 5.5 and 5.6 are centered on adult, wild, ocean-caught Pacific salmon."¹⁷⁸ (emphasis added) The Panel made no finding that Canada has not made a prima facie case relating to its Articles 5.5 and 5.6 claims concerning other Canadian salmon. We note that, in this respect, the case at hand presents similarities with Japan - Taxes on Alcoholic Beverages ("Japan - Alcoholic Beverages") in which we considered the panel's failure to address all the products referred to in its terms of reference to be an error of law.¹⁷⁹ Likewise, in the present case, the Panel's terms of reference include not only ocean-caught Pacific salmon, but also other Canadian salmon.

226. We, therefore, find it to be an error of law that the Panel did not consider it appropriate or necessary "in order to resolve the matter at issue" to address Article 5.5 and 5.6 with respect to other Canadian salmon.

2. Article 5.5

(a) First Element of Article 5.5

227. We recall that with regard to ocean-caught Pacific salmon, the Panel examined the first element of Article 5.5, i.e., the existence of distinctions in appropriate levels of protection in different situations, on the basis of four comparisons. In each of these comparisons, ocean-caught Pacific salmon was compared to other fish and fish products. The Panel found that ocean-caught Pacific salmon and other fish and fish products have one or several disease agents in common, or - for ocean-caught Pacific salmon - give rise to an alleged concern for a disease agent. According to the Panel, the situation regarding ocean-caught Pacific salmon and the situations of other fish and fish products are therefore different, i.e., comparable, within the meaning of the first element of Article 5.5. We recall that we have upheld this finding.¹⁸⁰

228. Furthermore, the Panel noted that imports of fresh, chilled or frozen ocean-caught Pacific salmon are prohibited while imports of other fish and fish products, under certain conditions, are allowed. This difference in SPS measures indicates a difference in the appropriate levels of protection. The Panel found, on that basis, distinctions in the appropriate levels of protection in the different situations which were covered by the four comparisons.¹⁸¹

229. In its examination of the comparability of situations under the first element of Article 5.5, the Panel considered only ocean-caught Pacific salmon, not other Canadian salmon. The Panel did not examine whether other Canadian salmon and other fish and fish products have one or several disease agents in common, or - for other Canadian salmon - , give rise to an alleged concern for a disease agent.¹⁸² It did not, therefore, come to a conclusion on whether the situation regarding other Canadian salmon and the situations regarding other fish and fish products are comparable within the meaning of the first element of Article 5.5.

230. We do not believe, however, that the comparability of these situations under Article 5.5 depends on an exact knowledge of the nature and number of diseases positively detected or possibly occurring in other Canadian salmon. The situation of other Canadian salmon may be the same as that of ocean-caught Pacific salmon; it may be better or worse. The risks for the Australian aquatic environment resulting from imports of other Canadian salmon may therefore be identical to, lower or higher than, those arising from imports of ocean-caught Pacific salmon. However, these differences, if there are any, do not make the comparisons with other fish and fish products, as undertaken in the four comparisons, any less meaningful. They do not diminish the comparability of risks for the Australian aquatic environment arising from the imports of, on the one hand, other Canadian salmon and, on the other, other fish and fish products.

231. Furthermore, we recall that the Panel noted in the context of its examination of Article 5.5 regarding ocean-caught Pacific salmon that Australia had explicitly determined its appropriate level of protection to be as "a high or 'very conservative' level of sanitary protection aimed at reducing risk to 'very low levels', while 'not ... a zero-risk approach' ".¹⁸³ However, the Australian statements on its appropriate level of protection, which were noted by the Panel, are not limited to ocean-caught Pacific salmon, but apply to all salmon in dispute including other Canadian salmon.¹⁸⁴ We, therefore, consider that for other Canadian salmon, Australia's appropriate level of protection is also a high or very conservative level of protection aimed at reducing risk to very low levels, but not a zero risk level.

232. Australia did not explicitly determine the appropriate levels of protection for other fish and fish products. We recall, however, that the importation of other fish and fish products is, under certain circumstances, allowed. The appropriate levels of protection reflected in the SPS measures applied to other fish and fish products are, therefore, not "very conservative" and thus different from the appropriate level of protection for ocean-caught Pacific salmon.

233. We, therefore, conclude that, with respect to other Canadian salmon, there are distinctions in the appropriate levels of protection in different, i.e., comparable, situations and that the first element of Article 5.5 is fulfilled.

(b) Second Element of Article 5.5

234. We recall that for ocean-caught Pacific salmon, the Panel began its analysis of the second element of Article 5.5, i.e., the existence of arbitrary or unjustifiable distinctions in appropriate levels of protection, by noting that in view of the difference in SPS measures and corresponding appropriate levels of protection for ocean-caught Pacific salmon, on the one hand, and the other fish and fish products, on the other, one might expect some justification with regard to this difference, such as higher risk related to imported salmon products. The Panel noted, however, that the arguments, reports, studies and expert opinions, in this respect, point in the other direction. The Panel stated that these data provide evidence that two categories of non-salmonids, for which more lenient SPS measures apply, i.e., herring used as bait and live ornamental finfish, can be presumed to represent at least as high a risk - if not a higher risk - than that associated with ocean-caught Pacific salmon.¹⁸⁵ The Panel found that the distinctions in the levels of protection for ocean-caught Pacific salmon, on the one hand, and herring used as bait and live ornamental finfish, on the other, are arbitrary or unjustifiable. The Panel, therefore, concluded that the second element of Article 5.5 is fulfilled.¹⁸⁶ We recall that we have upheld this finding.¹⁸⁷

235. We believe that this reasoning applies also to other Canadian salmon. In our view, this reasoning is not affected by the possibility that other Canadian salmon may represent a higher risk for the Australian salmonid population than ocean-caught Pacific salmon. We note that the Panel stated that the evidence submitted to it pointed in the direction of a higher risk of disease introduction associated with imports of herring used as bait and live ornamental finfish than the risk posed by imports of salmon products for human consumption.¹⁸⁸

236. We, therefore, conclude that with respect to other Canadian salmon the second element of Article 5.5 is fulfilled.

(c) Third Element of Article 5.5

237. We recall finally that, with regard to ocean-caught Pacific salmon, the Panel examined the third element of Article 5.5, i.e., the existence of discrimination or a disguised restriction on international trade, in taking into account three "warning signals" and three "additional factors". On the basis of these "warning signals" and "additional factors", considered cumulatively, the Panel found that the distinctions in the levels of protection imposed by Australia for ocean-caught Pacific salmon, on the one hand, and, herring used as bait and live ornamental finfish, on the other, result in a disguised restriction on international trade. We recall that we have upheld this finding.¹⁸⁹

238. Australia's import prohibition applies to both ocean-caught Pacific salmon and other Canadian salmon. In the context of our examination of the third element of Article 5.5, we do not see any plausible reason why conclusions reached for ocean-caught Pacific salmon would not also be valid for other Canadian salmon. If the arbitrary or unjustifiable distinctions in the levels of protection for ocean-caught Pacific salmon, on the one hand, and herring used as bait and live ornamental finfish, on the other, was correctly found to result in a disguised restriction on international trade, the arbitrary or unjustifiable distinctions in the levels of protection for other Canadian salmon, on the one hand, and herring used as bait and live ornamental finfish, on the other, must necessarily also result in a disguised restriction on international trade.

239. In fact, we believe that with respect to one "warning signal", there is even more reason to conclude that the arbitrary or unjustifiable distinctions in the levels of protection for other Canadian salmon, on the one hand, and herring used as bait and live ornamental finfish, on the other, result in a disguised restriction on international trade. In the context of its examination regarding ocean-caught Pacific salmon, the Panel considered that the "insufficiency" of the 1996 Final Report, as a risk assessment reasonably supporting the SPS measure within the meaning of Article 5.1, constitutes a "warning signal" in the examination under Article 5.5, third element. For other Canadian salmon, there is not even the beginning of a risk assessment.

240. We thus conclude that, with respect to other Canadian salmon, the third element of Article 5.5 is also fulfilled and that Australia, by maintaining its import prohibition on all Canadian salmon, has acted inconsistently with Article 5.5 and, by implication, with Article 2.3 of the SPS Agreement.

3. Article 5.6

241. With regard to ocean-caught Pacific salmon, the Panel concluded that the SPS measure at issue - which it considered to be the heat-treatment requirement - is "more trade restrictive than required" to achieve Australia's appropriate level of protection, and therefore that Australia has acted inconsistently with Article 5.6 of the SPS Agreement. Australia appealed this finding of the Panel. We recall that, because of the Panel's error of examining whether the heat-treatment requirement rather than the proper SPS measure at issue, i.e., the import prohibition, is "not more trade-restrictive than required", we reversed the Panel's finding that Australia has acted inconsistently with Article 5.6. We note that, in reversing the Panel's finding on Article 5.6, we did not conclude whether or not Australia's import prohibition on ocean-caught Pacific salmon is consistent with Article 5.6. We recall that we are unable to come to a definitive conclusion on this issue due to the insufficiency of relevant factual findings by the Panel and of facts that are undisputed between the parties.

242. For the same reasons we are unable to come to a conclusion on the question of whether or not the import prohibition on other Canadian salmon is consistent with Article 5.6 of the SPS Agreement.

To continue with Article 2.3 of the SPS Agreement

¹⁷¹Adopted 23 May 1997, WT/DS33/AB/R, p. 19.

¹⁷²DSU, Article 6.2. The "legal basis of the complaint" involves the claims of the complainant. Appellate Body Report, European Communities - Regime for the Importation, Sale and Distribution of Bananas, WT/DS27/AB/R, adopted 25 September 1997, para. 141.

¹⁷³Panel Report, para. 1.4.

¹⁷⁴WT/DS18/3/Rev.1, 11 June 1997.

¹⁷⁵Canada's appellant's submission, paras. 34 - 36.

¹⁷⁶DSU, Article 3.7.

¹⁷⁷DSU, Article 21.1.

¹⁷⁸Panel Report, para. 8.60.

¹⁷⁹Adopted 1 November 1996, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, p. 26. We note that in the Panel Report in Japan - Alcoholic Beverages there was no finding at all on certain products whereas in the present case there is a finding on Article 5.1 with regard to all products covered by the terms of reference.

¹⁸⁰Supra., para. 153.

¹⁸¹Panel Report, para. 8.129. See also footnote 106 of this Report.

¹⁸²We note that Table 3 in para. 4.41 of the Panel Report lists all diseases of concern to Australia and shows wide agreement among the parties about their occurrence in Canadian salmon. However, Table 3 does not distinguish between ocean-caught Pacific salmon and other Canadian salmon.

¹⁸³Panel Report, para. 8.107.

¹⁸⁴See in addition to the references made in support of para. 8.107, i.e., footnotes 326, 327 and 328, the earlier footnote 274 of the Panel Report.

¹⁸⁵Panel Report, para. 8.134.

¹⁸⁶Panel Report, para. 8.141.

¹⁸⁷Supra., para. 158.

¹⁸⁸Panel Report, para. 8.137.

¹⁸⁹We upheld this finding although we reversed the Panel's intermediate finding on the first "additional factor". See paras. 177 and 178 of this Report.