E. Costa Rica

81. Costa Rica submitted that the complaint by Ecuador concerned matters of direct interest to Costa Rica. Ecuador challenged the obligation of the European Communities to accord a country-specific tariff quota allocation to Costa Rica and the other Members having a substantial interest in supplying bananas to the European Communities. It also challenged the methods used by the European Communities to determine the quota shares and hence the relative size of the quotas allocated to Costa Rica and Ecuador. The current rules of the DSU permitted only Ecuador to defend its interests as party whereas Costa Rica could merely participate in the proceedings as a third party.
82. Costa Rica argued that the Panel must go further than granting "enhanced" third-party status to Costa Rica and the other third parties. The Panel�s task was to interpret multilateral agreements in respect of measures affecting Members other than the parties to this dispute. In the view of Costa Rica, the Panel must therefore, as Article 10.1 of the DSU confirmed, take into account the interests of third parties throughout the Panel process, including in the drafting of the findings. It was not sufficient to permit third parties to be present and to record their views in the descriptive part of the report. Their arguments, to the extent that they differed from those of the parties, must also be explicitly addressed in the Panel's findings.
83. Costa Rica submitted that in its first submission Ecuador did not clearly distinguish between claims relating to measures implementing the rulings of the panel and AB by the European Communities and claims relating to matters which neither the panel nor the AB had addressed. Ecuador's arguments did not take into account the limitation of Article 21.5 procedures to "measures taken to comply with the recommendations and rulings" of the DSB. Instead, on the allocation of the quota among supplying countries, Ecuador went so far as to ask the Panel "not only to reaffirm its prior rulings and interpretations, as affirmed and modified by the AB, but also to provide the European Communities with a more explicit recommendation and guidance as to how to comply �".¹⁶¹
84. For these reasons it was not clear to Costa Rica which findings Ecuador expected the Panel to make on the EC's creation and distribution of country-specific quotas for Members with a substantial supplying interest and which rulings or recommendations of the DSB these measures failed to comply with. Costa Rica assumed that Ecuador claimed that the allocation of country-specific quotas to the four Members with a substantial interest in supplying bananas and the distribution of the shares of the quota among those Members on the basis of their shares in the EC market in the period 1994-1996 were measures "taken to comply with the recommendations and rulings [of the DSB]" within the meaning of Article 21:5 of the DSU, and that both these measures were inconsistent with Article XIII of GATT. Costa Rica submitted that, if these were the claims of Ecuador, they must be rejected.
85. Costa Rica submitted that the allocation of country-specific quotas and the distribution of the quota shares among Members with a substantial supplying interest were matters on which neither the original panel nor the AB had made any ruling or recommendation and which could therefore not be raised as compliance issues in a proceeding under Article 21.5 of the DSU. Ecuador failed to take into account that there was an important distinction between the scope of ordinary panel procedures and that of procedures initiated in accordance with Article 21.5 of the DSU. In an ordinary panel procedure, a complaint could relate to any measure. ¹⁶² Proceedings under Article 21.5 were, however, limited to disputes on measures taken to comply with the recommendations or rulings of the DSB, i.e. exclusively about matters on which a panel or the AB had already made rulings and corresponding recommendations. This followed from the wording of Article 21.5, which accorded Members the right to resort to these procedures only in respect of a "disagreement as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings [of the DSB]". If a new matter could be submitted to a panel under an Article 21.5 procedure, the party complained against would be deprived of many of the procedural rights it would have enjoyed had the matter been submitted to an ordinary panel proceeding, including the right to an implementation period of 15 months. Moreover, an examination of entirely new issues within the constrained timeframe of Article 21.5 procedures amounted to a denial of due process.
86. Costa Rica submitted further that Ecuador was of the view that the European Communities should abandon country-specific quotas altogether. Ecuador, while conceding that country-specific quotas were permitted under Article XIII, essentially argued that a single global quota would be more efficient. Ecuador therefore did not distinguish between what it considered to be desirable de lege ferenda and the recommendations the Panel was entitled to make de lege lata. Furthermore, neither the panel nor the AB had made any rulings or recommendations calling into question the right of the European Communities to allocate country-specific quotas. On the contrary, their rulings and recommendations relating to the manner in which the country-specific quotas were to be administered implied that the European Communities had the right to make country-specific allocations.
87. According to Costa Rica, Ecuador was also of the view that the allocation of shares among the Members with a substantial interest in supplying bananas was inconsistent with Article XIII:2(d), second sentence, of the GATT, because the European Communities had selected 1994-1996 as the previous representative period, which could not be considered to be representative within the meaning of that provision, and because the European Communities should have taken into account special factors justifying the allocation of a larger share to Ecuador. However, neither the panel nor the AB had addressed the question of how the shares of the quota would have to be allocated among Members with a substantial supplying interest once the EC's separate regimes for ACP bananas and other bananas had been merged for the purposes of Article XIII. In the view of Costa Rica, the panel had made it explicit that it considered this matter to be a subsidiary issue that it need not examine. ¹⁶³
88. According to Costa Rica it was therefore clear that Ecuador was asking the Panel to address aspects of the banana import regime that had not yet been examined, to develop an entirely new interpretation of the concepts of "representative period" and "special factors" and to apply this interpretation to an extremely complex factual situation which was not the subject of a finding by the panel in the original proceeding. Ecuador's requests therefore fell outside the framework of Article 21.5 of the DSU and must consequently be rejected by the Panel.

1. Issues related to the GATT

89. Costa Rica submitted that the European Communities was not only permitted to allocate country-specific quotas to Costa Rica and the other Members with a substantial interest in supplying bananas under Article XIII of GATT but obliged to do so under Article II of GATT. The European Communities was entitled to allocate the quota shares on the basis of a previous representative period irrespective of any difficulties in determining a period that was representative. ¹⁶⁴
90. Costa Rica argued that the allocation of country-specific quotas was a right of the European Communities under Article XIII:2 of GATT. Article XIII:2 did not state that this right may only be exercised when there were no difficulties in establishing a period that was representative. The assumption underlying this provision was that a Member, by selecting a base period and appraising any special factors that may have affected or may be affecting the trade in the product, could arrive at a distribution of quota shares that satisfied the principle of non-discrimination. The drafters of Article XIII took into account the fact that no allocation method guaranteed a distribution of trade identical to that which would prevail in the absence of the restriction. They declared the non-discrimination requirement therefore to be satisfied when the measures taken "aim" at a distribution of trade "approaching as closely as possible" the distribution which "might be expected" in the absence of the quota. In the view of Costa Rica, it was therefore incorrect when Ecuador stated that "country allocations are allowed at least in some circumstances" ¹⁶⁵ implying that there were circumstances in which a country-specific allocation was a priori excluded.
91. Costa Rica claimed further that the European Communities was obliged to allocate country-specific quotas to Costa Rica and the other Members with a substantial supplying interest in accordance with the tariff quota concession for bananas incorporated in its Schedule. This agreement was consequently part of the EC's obligations under Article II of GATT. For the purposes of an examination of the issues raised by Ecuador, two sets of obligations of the European Communities under the BFA could be distinguished:

(a) to allocate shares of the tariff quota established by the European Communities to countries with a substantial supplying interest, such as Costa Rica; and

(b) to allocate shares of this quota to countries not having a substantial supplying interest and to distribute, and under certain circumstances, redistribute, the quota shares in certain proportions.

92. Costa Rica argued that the first set of BFA obligations listed above had not been found to be inconsistent with the EC's obligations under the GATT. The panel had found that "it was not unreasonable for the European Communities to conclude that at the time the BFA was negotiated Colombia and Costa Rica were the only contracting parties that had a substantial interest in supplying the EC banana market in terms of Article XIII:2(d)". ¹⁶⁶ The European Communities therefore continued to observe those clauses of the BFA that were consistent with the GATT by allocating a share of its tariff rate quota to all Members with a substantial supplying interest. Only the second set of BFA obligations listed above was found by the panel to be inconsistent with Article XIII which had given the European Communities a valid ground for suspending the operation of those provisions. ¹⁶⁷ However, the European Communities was under a legal obligation to continue to observe those clauses of the BFA that were not found to be invalid by the panel. This was confirmed by Article 44 of the Vienna Convention on the Law of Treaties, entitled "Separability of treaty provisions", which codified the rules of customary international law governing the partial invalidity of a treaty. Paragraph 3 thereof provided:

"If the ground [for suspending the operation of the treaty] relates solely to particular clauses, it may be invoked only with respect to those clauses where:

(a) the said clauses are separable from the remainder of the treaty with regard to their application;

(b) it appears from the treaty or is otherwise established that acceptance of those clauses was not an essential basis of the consent of the other party or parties to be bound by the treaty as a whole; and

(c) continued performance of the remainder of the treaty would not be unjust."

93. Costa Rica claimed that all of the above conditions for the separability of treaty provisions were met in the present case. The clauses of the BFA providing for allocation of quota shares to countries with a substantial supplying interest could be applied separately from the clauses that called for a discriminatory administration of the quotas. Moreover, discrimination against the two non-BFA countries with a substantial supplying interest (Ecuador and Panama) was not an essential basis for the BFA countries and the EC's consent to the allocation of quota shares for the two BFA countries with a substantial supplying interest (Costa Rica and Colombia). No circumstances had arisen which would render the continued performance of the GATT-consistent provisions of the BFA unjust. On the contrary, the concession of the European Communities incorporating the BFA was "paid for" by the BFA countries through counter-concessions. It was therefore appropriate that the European Communities continued to perform those obligations under the BFA that it could implement consistently with the GATT, including the obligation to accord a country-specific quota to BFA countries with a substantial supplying interest.
94. The principles of international law governing the separability of treaty provisions, Costa Rica submitted, were particularly relevant in the case of the provisions contained in GATT Schedules of Concessions. The concessions incorporated in the Schedules generally resulted from a process of give and take during multilateral trade negotiations. The trade opportunities a Member must provide in accordance with its Schedule were therefore normally "paid for" by counter-concessions of other Members. If a concession was subsequently declared to be partly inconsistent with the GATT, the beneficiaries of that concession lost advantages without being able to withdraw the counter-concessions they had made to obtain that advantage, and the negotiated balance of concessions was consequently upset. To minimize such imbalances, the part of the concession that could be carried out consistently with the WTO agreements should be presumed to be separable from the part found to be inconsistent with such an agreement.
95. In the view of Costa Rica the European Communities had therefore the obligation under Article II of GATT to accord a country-specific quota to Colombia and Costa Rica and under Article XIII of GATT the obligation to extend this benefit to Ecuador and Panama. The European Communities could therefore not abandon its system of country-specific quotas for Members with a substantial supplying interest without violating its obligations under the GATT. Costa Rica submitted that Ecuador's request for the Panel to call upon the European Communities to eliminate country-specific quotas must therefore be rejected.
96. Costa Rica contended that the allocation of the quota shares among the Members with a substantial interest in supplying bananas on the basis of the 1994-1996 period met the requirements of Article XIII of GATT and that Ecuador bore the burden of proving that the EC's selection of a base period and appraisal of special factors was inconsistent with Article XIII.
97. According to the generally accepted rules on the distribution of the burden of proof, Costa Rica argued, Ecuador, as the party claiming that the EC's regime remained inconsistent with Article XIII, must provide evidence supporting the above claim. ¹⁶⁸ If any uncertainty were to remain after the evaluation of the evidence before the Panel, the European Communities would have to be given the benefit of the doubt. This followed from the fact that Article XIII:4 specified that "the selection of a representative period for any product and the appraisal of any special factors affecting the trade in the products shall be made initially by the Member applying the restrictions" and that it then was for those Members which considered that there was a "need for an adjustment of the proportions determined or of the base period selected, or for the reappraisal of the special factors involved" to request consultations with the Member applying the restrictions. Costa Rica submitted that Ecuador had not met its burden of proof.
98. Costa Rica argued further that Ecuador objected to the selection of the 1994-1996 period because trade was distorted by measures which had been found to be inconsistent by the panel. However, there was nothing in the panel report suggesting that the European Communities should have chosen a more recent base period. Under the banana regime originally examined by the panel the European Communities had based the distribution of trade shares in 1995 on market shares in the 1989-1991 period. The Panel concluded that it was reasonable for the European Communities to base its determination that Colombia and Costa Rica were substantial suppliers in 1995 on their market shares during a three-year period ending four years before 1995. The European Communities was now basing the distribution of trade shares in 1999 on market shares during a period ending three years before 1999. Under the new banana import regime the base period selected was thus more recent than the period which the Panel considered to be relevant for the purpose of determining the substantial supplier status. Against this background it was difficult to see on which basis one could conclude that the choice of the base period was inconsistent with the recommendations and rulings the DSB made on the basis of the original panel's report.
99. Costa Rica recalled that Ecuador's share in the world market during the relevant base period would not justify a re-appraisal of the special factors affecting banana trade since, according to the data provided by Ecuador, the average share of Ecuador in the world market during the 1994-1996 period was 26.36 per cent which was almost identical to the quota share of 26.17 per cent allocated by the European Communities. In any case, trade statistics, as such, were not a special factor within the meaning of Article XIII:2. Statistics served to establish the shares of trade during a previous representative period; factors other than trade statistics could be used to determine whether the quota shares should differ from the trade shares during that period.
100. Furthermore, Costa Rica contended that Ecuador claimed that the increase in Costa Rica's country-specific quota share established under Annex I of Regulation 2362 was attributable to the shortfall reallocation carried out under the BFA. ¹⁶⁹ Ecuador also claimed that the increase in Costa Rica's quota share, as a result of the recent changes introduced to the allocations of the country-specific quota, based on the 1994-1996 period, "precisely coincide with the shares taken from Venezuela and Nicaragua". ¹⁷⁰ Costa Rica submitted that at no time during the years 1994, 1995 and 1996 did it benefit from the reallocation of country shares originally allocated to other BFA countries. The percentage allocated to Costa Rica faithfully reflected its share in the EC market during the representative period.
101. Costa Rica submitted that the allocation of country-specific quotas to Costa Rica and the other Members with a substantial interest in supplying bananas and the distribution of the quota shares among those Members on the basis of their shares in the EC market during 1994-1996 were measures on which neither the panel nor the AB had made recommendations or rulings for adoption by the DSB. Costa Rica therefore considered that these measures were not "measures to comply with the recommendations and rulings" of the DSB and that they could not be examined in the framework of a proceeding under Article 21.5 of the DSU.
102. Costa Rica further considered that, if the Panel were to examine these measures, it would have to find that:

(a) the European Communities not only had the right to allocate country-specific quotas to Costa Rica and the other Members with a substantial interest in supplying bananas under Article XIII of GATT, but was obliged to do so under Article II of GATT; and

(b) Ecuador failed to demonstrate that the distribution of the quota shares on the basis of the shares of imports during the 1994-1996 period did not meet the requirements of Article XIII.

103. In either case Ecuador's request that the Panel recommend the elimination of country-specific quotas or a redistribution of the quota shares would therefore have to be rejected.

F. Ecuador's Response to Third Parties

104. In response to the argument presented by the Caribbean States concerning the company Leon Van Parys (LVP) (see paragraph 5.54 encima), Ecuador submitted that LVP was a substantial importer and wholesaler of Ecuadorian bananas on the EC market, and it was the largest EC company in the Noboa Group.
105. Ecuador submitted further that the Caribbean States had misunderstood Ecuador's statement that its services providers had invested some US$200 million under the prior system to buy-back market access (see paragraph 5.58 above). ¹⁷¹ The investment was the price of buying the ability to get bananas entered into the European Communities � in effect, the quota rent granted to EC and ACP services suppliers under the prior system � without obtaining the licences themselves.
106. Ecuador submitted that the Odeadom data cited by the Caribbean States showed only changes in licence allocations by member State and did not show changes in licence allocations by services provider. While some former Category B licence holders (in France and Spain or elsewhere) may not have always ensured that they had title at customs clearance, such that other operators could now claim reference quantities for those, that was not shown by data on shifts in licence allocations by member State. Indeed, a shift from one member Sate to another could as easily result from internal shifts in the operations of an operator group, or from licence transfers from one former Category B holder to another EC or ACP services provider in another member State, as from any shift to wholesalers of third-country bananas
107. In response to allegations that Ecuador's evidence was insufficient to substantiate continuing discrimination against Ecuadorian services suppliers, Ecuador submitted that the Noboa Group's licence allocations covered less than half of the volumes it physically imported into the European Communities (i.e. imports that were customs cleared either by a Noboa company or by an unrelated company).

To continue with Findings

¹⁶¹ Paragraph 98 of Ecuador's first submission.

¹⁶² Article 7 of the DSU.

¹⁶³ Paragraphs 7.94 and 7.88 of the panel report.

¹⁶⁴ Paragraph 95 of Ecuador's first submission.

¹⁶⁵ Paragraph 105 of Ecuador's first submission.

¹⁶⁶ Paragraph 7.85 of the panel report.

¹⁶⁷ Paragraph 7.90 of the panel report.

¹⁶⁸ See AB report on United States - Measures Affecting Imports of Woven Wool Shirts and Blouses from India (WT/DS33/AB/R) Section II. A. 1.

¹⁶⁹ Paragraph 15 of Ecuador's first submission.

¹⁷⁰ Paragraph 80, subparagraph 4, and paragraph 94 of Ecuador's first submission.

¹⁷¹ Paragraphs 81, 82 and 96 of the submission of the Caribbean States.