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Turkey - Restrictions on Imports of Textile and Clothing Products

Report of the Panel

(Continued)


    IX. Findings

    A. Preliminary Rulings Recalled

  1. On 14 August 1998 Turkey requested the Panel to make three preliminary rulings in limine litis. On 28 August 1998 we invited India and the third parties to comment in writing on Turkey's request. The Panel held a meeting with the parties only on 19 September 1998 to consider the request and on 25 September 1998, the Panel issued its rulings on the issues raised by Turkey. In its first submission, Turkey also requested the Panel to reject India's complaint on the grounds that the consultations preceding the request for establishment of a panel were defective. In this section, as foreshadowed in our rulings of 25 September 1998, we recall and expand on those rulings rejecting Turkey's first three preliminary objections and then analyze Turkey's claim concerning the inadequacy of the consultations.
  2. 1. Article 6.2 of the DSU

  3. Firstly, in its request for preliminary rulings, Turkey claimed that India's request for the establishment of a panel did not respect the specificity requirements of Article 6.2 of the Understanding on the Rules and Procedures Governing the Settlement of Disputes ("DSU") in that it failed to identify specifically the measures at issue and the products subject to those measures and that its basic rights of defense and due process were impaired. 238
  4. On 25 September 1998 the Panel issued the following ruling on this point:
  5. "In assessing Turkey's claim that India's request for the establishment of a panel was not sufficiently precise, we consider that it is important that a panel request, which defines the terms of reference, meets this criterion so as to inform the defending party and potential third parties both of the measures at issue, including the products they cover, and of the legal basis of the complaint. This is necessary to ensure due process and the ability of the defendant to defend itself.

    We have examined India's request for establishment of the panel (WT/DS34/2). While not identified by place and date of publication, the measures are specified by type (i.e. quantitative restrictions), by effective date of entry into force (1 January 1996) and by product coverage (textiles and clothing, a well defined class of products in the WTO). 239 In our view the panel request meets the minimum requirements of specificity of Article 6.2 of the DSU as interpreted by the Appellate Body in Bananas III and LAN. 240 Even if we agree that India's request could have been more detailed, we conclude that Turkey is sufficiently informed of the measures at issue and the products they cover, and that our terms of reference are sufficiently clear. Consequently, we reject Turkey's claim that the Panel should refuse to accept India's request in limine litis for its failure to respect the basic requirements of Article 6.2 of the DSU."

    2. Necessity of Participation of the European Communities

  6. Secondly, in its request for preliminary rulings, Turkey claimed that the Panel should dismiss India's claims because they are directed only against Turkey while the measures at issue were taken pursuant to a regional trade agreement between Turkey and the European Communities, 241 and according to Turkey, the European Communities should also have been a party to the dispute. 242
  7. On 25 September 1998, the Panel issued the following ruling on this point:
  8. "Turkey states that the measures at issue were introduced in the context of the trade agreement concluded with the EC, which Turkey and the EC notified to the CRTA as a customs union (WT/REG/22/1). The Panel will obviously have to assess whether such import restrictions introduced by Turkey in the context of that trade agreement are compatible with the WTO Agreement and its related instruments.

    We note that the EC has decided not to participate as a third party in this dispute. We note that the DSU does not allow for any other form of participation in favour of a Member, not party to the dispute, other than the third-party rights under Article 10 of the DSU, which, we also note, have been extended in previous cases to meet the specific circumstances of the case. In the absence of any relevant provision in the DSU, in light of international practice, 243 and noting the position of the EC to this point, we consider that we do not have the authority to direct that a WTO Member be made third-party or that it otherwise participate throughout the panel process.

    We can find no provision in the DSU that would prevent India from initiating a panel procedure against measures imposed by Turkey in these circumstances. Moreover, we are not aware of any general rule applicable to cases in which disputed measures arise from a bilateral or multilateral agreement, that would prohibit a Member from initiating a dispute settlement procedure against one party to such agreement. Accordingly, we do not accept Turkey's claim that India's request should be rejected at this stage of the panel process because India's request was not directed against all parties to the trade agreement which, according to Turkey, forms the basis for the introduction of the measures at issue. This is without prejudice to our decision whether the said measures are WTO compatible. We would like also to emphasise that we shall ensure due process throughout these panel proceedings and that in this context we are aware of the means existing under the DSU for panels to obtain technical advice and information from any relevant source."

  9. In terms of Article XXIII of the 1994 General Agreement on Tariffs and Trade ("GATT") and the DSU any Member may initiate a dispute settlement procedure against any other Member if it considers that its rights have been nullified or impaired by is other Member. We note that there is no special provision in the DSU for dispute settlement proceedings involving customs unions or any other type of regional trade agreements. We note also that the Turkey-EC customs union itself is not a Member of the WTO and therefore cannot be the subject of any DSU procedure, as it lacks WTO legal personality. 244
  10. We also recall that in the EC - Bananas III 245 dispute the Panel and the Appellate Body addressed the compatibility of EC measures adopted pursuant to the Lom� Convention with the WTO Agreement, notwithstanding the EC claim that it was required to adopt the measures pursuant to that Convention and notwithstanding the fact that its Lom� partners were not parties to the dispute.
  11. It is relevant to recall the case law of the International Court of Justice (ICJ). The ICJ has not declined to exercise jurisdiction in cases similar to this one. For example in the ICJ Military and Paramilitary Activities in and Against Nicaragua case, the US argued that the application brought by Nicaragua was inadmissible because Nicaragua had not also impleaded third countries whose participation was essential. The ICJ dismissed this argument, saying:
  12. "There is no doubt that in appropriate circumstances the Court will decline, �, to exercise the jurisdiction conferred upon it where the legal interests of a State not party to the proceedings "would not only be affected by a decision, but would form the very subject-matter of the decision". � Where however claims of a legal nature are made by an Applicant against a Respondent in proceedings before the Court, and made the subject of submissions, the Court has in principle merely to decide upon those submissions, with binding force for the parties only, and no other State� Other States which consider that they may be affected are free to institute separate proceedings, or to employ the procedure of intervention. There is no trace, either in the Statute or in the practice of international tribunals, of an "indispensable parties" rule of the kind argued for by the United States, which would only be conceivable in parallel to a power, which the Court does not possess, to direct that a third State be made a party to proceedings." 246

  13. The ICJ Phosphate Lands in Nauru case concerned a proceeding initiated by Nauru against Australia alone in respect of the administration of a fund in favour of Nauru. The case was based on an international treaty whereby Australia, New Zealand and the United Kingdom were co-administrators of the fund. The ICJ exercised jurisdiction despite the absence of the two other administering authorities since the legal interest of those third countries (which could be affected by the result of the dispute) did not form the subject-matter of the dispute which was the legal relationship between Australia and Nauru. The ICJ stated:
  14. "In the present case, a finding� regarding the existence or the content of responsibility attributed to Australia by Nauru might well have implications for the legal situation of the two other States concerned, but no finding in respect of that legal situation will be needed as a basis for the Court's decision on Nauru's claims against Australia. Accordingly, the Court cannot decline to exercise its jurisdiction." 247

    In its separate opinion, Judge Shahabuddeen added:

    "To return to the question under examination, as to whether Australia may be sued alone, I consider that an affirmative answer is required for three reasons. First, the obligations of the three Governments under the Trusteeship Agreement were joint and several. Second, assuming that the obligations were joint, this did not by itself prevent Australia from being sued alone. Third, a possible judgment against Australia will not amount to a judicial determination of responsibility of New Zealand and the United Kingdom." 248

  15. The practice of the ICJ indicates that if a decision between the parties to the case can be reached without an examination of the position of the third state (i.e. in the WTO context, a Member) the ICJ will exercise its jurisdiction as between the parties. In the present dispute, there are no claims against the European Communities before us that would need to be determined in order for the Panel to assess the compatibility of the Turkish measures with the WTO Agreement. 249
  16. It should be noted that there is no WTO concept of "essential parties". Based on our terms of reference and the fact that we have decided (as further discussed hereafter) not to examine the GATT/WTO compatibility of the Turkey-EC customs union, we consider that the European Communities was not an essential party to this dispute; the European Communities, had it so wished, could have availed itself of the provisions of the DSU, which we note have been interpreted with a degree of flexibility by previous panels, 250 in order to represent its interests. We recall in this context that Panel and Appellate Body reports are binding on the parties only. 251
  17. Under WTO rules, the European Communities and Turkey are Members with equal and independent rights and obligations. For Turkey, it is not at all inconceivable that it adopted the measures in question in order to have its own policy coincide with that of the European Communities. However, in doing so, it should have been aware, in respect of the measures it has chosen, that its circumstances were different from those of the European Communities in relation to the Agreement on Textiles and Clothing ("ATC") and thus could reasonably have been anticipated to give rise to responses which focussed on that distinction.
  18. In the context of our concern for due process and pursuant to Article 13 of the DSU, we put a series of questions to the European Communities and invited it to comment on any matter it considered relevant. The European Communities, while responding to the specific questions, did not avail itself of the latter opportunity. 252
  19. 3. The Need to Exhaust TMB Procedures

  20. Thirdly, in its request for preliminary rulings, Turkey claimed that India was required to exhaust the special dispute settlement procedures under the ATC first before it could refer the matter to the DSB and that consequently, this Panel had not been established properly. 253
  21. On 25 September 1998, the Panel issued the following ruling on this point:
  22. "We note that the special and additional dispute settlement procedures before the Textile Monitoring Body (TMB) apply when measures are imposed pursuant to the ATC and that Article 8.1 of the ATC provides that the TMB is established to examine measures taken under the ATC and their conformity therewith.

    We note that Turkey, in its own notifications to the Committee on Regional Trade Agreements (CRTA) and to the TMB (pursuant to Article 3.3 of the ATC), stated that the import restrictions at issue were justified and had been introduced pursuant to its agreement with the EC and in conformity with Article XXIV of GATT 1994. For instance, in its 7 November 1997 notification to the TMB (G/TMB/N/308), Turkey wrote that it was notifying the TMB of the "details of certain quantitative limits introduced by Turkey in respect of imports of certain textile and clothing products into Turkey from certain WTO Members, and necessary to give effect to the Customs Union in conformity with the provisions of Article XXIV of GATT 1994". We also note that the notification to the TMB, for its information, was made pursuant to Article 3.3 of the ATC, which refers to "any new restrictions (�) taken under any GATT 1994 provision".

    In our view India's claim under Article 2.4 of the ATC is a reflection of its claims under GATT 1994. This is to say that India does not claim a violation of the ATC except in so far as the ATC, in Article 2.4, prohibits the imposition of restrictions inconsistent with GATT 1994. Article 2.4 of the ATC provides that all new import restrictions on textile and clothing products are prohibited, except if justified under the ATC or under GATT 1994.

    As noted above, Turkey itself has indicated that its new restrictions on textile and clothing products are justified under and have been imposed pursuant to Article XXIV of GATT 1994, and as such can be exempted from the general prohibition against new restrictions mentioned in Article 2.4 of the ATC.

    Since the measures at issue are alleged to have been imposed pursuant to GATT 1994 (and India's claim relates to Turkey's alleged justification pursuant to GATT 1994), we reject Turkey's in limine litis request that the TMB should have been seized of the matter under Article 8 of the ATC prior to its referral to the DSB. This ruling is without prejudice to our eventual decision on whether the said measures at issue constitute a WTO compatible justification pursuant to Article 2.4 of the ATC and other WTO rules."

  23. In our view, the determination of this case depends on the Panel's assessment of Turkey's defense that its measures were taken in the context of its customs union with the European Communities, and so for Turkey, were authorized by Article XXIV of GATT. We consider that this is not a matter for the TMB, whose jurisdiction is limited by Article 8.1 of the ATC to the examination of measures taken under the ATC and their conformity therewith. (We address further the relationship between the role of the TMB and that of panels in paragraphs 9.82 to 9.85).
  24. In reconsidering our rulings of 25 September 1998, we find no substantive basis to call them into question.
  25. 4. Inadequacy of the Consultations

  26. Turkey also raised a fourth procedural exception for which it did not request an immediate in limine litis ruling by the Panel. In its first submission, Turkey asserts that India has not sufficiently exhausted the consultations requirements of Article XXII of GATT 1994 and Article 4 of the DSU in order to bring about a mutually acceptable solution to the dispute. 254
  27. For Turkey, the principle of procedural economy as well as the spirit of the WTO dispute settlement mechanism require that panel procedures be considered as ultima ratio means to solve conflicts between Members for which they are unable to find a negotiated solution. For Turkey, India failed to comply with this principle and the spirit of the DSU. While Turkey offered to enter into negotiations on the issues in dispute with India, India refused to enter into such negotiations, in as much as it refused to deal with the issues in dispute in consultations under Article XXII of GATT.
  28. India responded 255 that on 21 March 1996, it requested formal consultations with Turkey under the DSU regarding the matter of the unilateral imposition of quantitative restrictions by Turkey on imports of a broad range of textile and clothing products from India as from I January 1996. This request was accepted by Turkey on 1 April 1996. In a letter confirming this, Turkey stated that it had agreed to enter into consultations "on textiles and clothing restrictions applied by Turkey" at a mutually acceptable time and venue. Further, Turkey considered that "the European Communities as our partner in the customs union should also be represented in the consultations". On 4 April 1996, India proposed that consultations should be held in Geneva on 18-19 April 1996, and stated that India could not accept Turkey�s view that the European Communities should participate in these consultations since, under GATT and WTO practice, consultations under Article XXIII:1 of GATT 1994 were bilateral in nature. India requested that Turkey confirm the venue and time proposed for consultations to be held without the participation of the European Communities. On 16 April 1996, Turkey replied that "the Turkish authorities would be prepared to hold with their Indian counterparts the consultations requested by India ... on the understanding that representatives of the European Communities would also be participating. This meeting could be held on 18 April 1996 from 3:30 p.m. to 6:00 p.m. as suggested by India". India stated that despite this very short notice, it ensured the presence of its delegation at the consultations but the delegation of Turkey did not attend the scheduled meeting nor did it provide an explanation for its absence. India submitted that it sent another communication to Turkey, on 18 April 1996, proposing to enter into bilateral consultations on 19 April 1996. When India endeavoured to confirm the date and venue of the consultations, it was informed that Turkey was not in a position to enter into these consultations without the participation of the European Communities, and that this would be conveyed to India in writing by close-of-business on 19 April 1996. India submits that the communication from Turkey, dated 19 April 1996, was received on 22 April 1996.
  29. India argued that its recourse to the provisions of GATT 1994 and the DSU regarding consultations was frustrated. Its request for bilateral consultations had been made in good faith, in full transparency and with a view to reaching a mutually satisfactory solution. For India, since Turkey did not enter into these consultations within the 30-day period provided for in Article 4.3 of the DSU, Turkey violated Articles 3 and 4 of the DSU, and in particular contravened the provisions of Article 3.10 of the DSU, and therefore the dispute remained unresolved. 256
  30. Firstly, we note that in EC � Bananas III the panel concluded that the private nature of the bilateral consultations means that panels are normally not in a position to evaluate how the consultations process functions, but could only determine whether consultations, if required, did in fact take place. 257 In this case, the parties never consulted, as Turkey declined to do so without the presence of the European Communities.
  31. In Korea � Taxes on Alcoholic Beverages the panel concluded that:
  32. "� the WTO jurisprudence so far has not recognized any concept of "adequacy" of consultations. The only requirement under the DSU is that consultations were in fact held, or were at least requested, and that a period of sixty days has elapsed from the time consultations were requested to the time a request for a panel was made. � We do not wish to imply that we consider consultations unimportant. Quite the contrary, consultations are a critical and integral part of the DSU. But, we have no mandate to investigate the adequacy of the consultation process that took place between the parties and we decline to do so in the present case." 258

  33. We concur with this statement. We note also that our terms of reference (our mandate) are determined, not with reference to the request for consultations, or the content of the consultations, but only with reference to the request for the establishment of a panel. 259 Consultations are a crucial and integral part of the DSU and are intended to facilitate a mutually satisfactory settlement of the dispute, consistent with Article 3.7 of the DSU. However, the only function we have as a panel in relation to Turkey's procedural concerns is to ascertain whether consultations were properly requested, in terms of the DSU, that the complainant was ready to consult with the defendant and that the 60 day period has lapsed before the establishment of a panel was requested by the complainant. We consider that India complied with these procedural requirements and therefore we find it necessary to reject Turkey's claim.

To continue with Main Claims of the Parties


238 Turkey's arguments are further detailed in paras. 3.6 to 3.8, 3.13 to 3.15, 3.19 and 3.21, India's arguments are in paras. 3.9 to 3.12, 3.16 to 3.18, 3.20, 3.22 and 3.23 and the third parties' arguments are in paras. 3.24 and 3.25 above.

239 [Footnote original]We note also that during the period of consultations Turkey and the EC jointly sent notifications and other communications to the CRTA (WT/REG22/5, WT/REG22/7) and, pursuant to Article 3.3 of the ATC, to the TMB (G/TMB/N/308), in which Turkey lists the new textile import restrictions it adopted following the conclusion of the agreement between the EC and Turkey. In addition, during the meetings of the CRTA (WT/REG22/M1 and M2), and the TMB (meetings of 11-12 December 1997), which preceded the request for the establishment of a panel, the parties discussed the issues relating to this dispute. This confirms to us that Turkey is sufficiently informed of the measures challenged by India in this dispute and the products covered by the measures at issue. Moreover, we note that no comments were made on this issue at any of the meetings of the DSB where the present dispute was discussed (WT/DSB/M13, 15, 42 and 43) and that no Member questioned the scope of the terms of reference in this regard.

240 Appellate Body Report on European Communities � Regime for the Importation, Sale and Distribution of Bananas, adopted on 25 September 1997, WT/DS27/AB/R ("EC-Bananas III") and European Communities � Customs Classification of Certain Equipment adopted on 22 June 1998, WT/DS62, 67, 68/AB/R, ("EC - Computer Equipment" or "EC � LAN").

241 The official title of that agreement is the Customs Union between Turkey and the Community (see WT/REG22/1). The European Communities is a WTO Member. In this Panel report we shall refer to the Turkey-EC customs union without any assessment of the WTO nature of this Article XXIV type of arrangement.

242 Turkey's arguments are further detailed in paras. 3.26, 3.28, 3.30, 3.33 and 3.34, India's arguments are in paras. 3.27, 3.29, 3.31, 3.32, and 3.35 to 3.37 and the third parties' arguments are in paras. 3.38 to 3.40 above.

243 [Footnote original]The Panel examined relevant principles of international law, including the practice of the International Court of Justice in the Military and Paramilitary Activities in and Against Nicaragua case ([1984], ICJ Reports, pp.430-431) and the Phosphate Lands in Nauru case([1992], ICJ Reports, p.259-262) cases (preliminary objections).

244 We recall that in its Report on India � Patent Protection for Pharmaceutical and Agricultural Chemical Products adopted on 16 January 1998, WT/DS50/AB/R ("India � Patent"), the Appellate Body stated: "Although panels enjoy some discretion in establishing their own working procedures, this discretion does not extend to modifying the substantive provisions of the DSU. (�) Nothing in the DSU gives a panel the authority either to disregard or to modify other explicit provision of the DSU", para. 92.

245 Appellate Body Report on EC - Bananas III, , paras. 164 -188.

246 Military and Paramilitary Activities in and Against Nicaragua [1984] at 431.

247 Certain Phosphate Lands in Nauru ("Nauru"), [1992] ICJ Reports, 240 (June 26); p. 261-262.

248 Nauru case; Separate Opinion of Judge Shahabuddeen, at 271, italics added. A separate opinion is not a dissenting opinion but reflects the additional discussion of one of the Judge of the ICJ.

249 We are aware that the ICJ has declined to exercise its jurisdiction when it concluded that the real "subject-matter of the dispute" is the legal position of a third country which is not before it. In the Monetary Gold Removed from Rome in 1943 case, Italy brought a case against the United Kingdom claiming it had priority over both the British and Albanian claims to the gold in question. However, Albania took no part in the dispute. The ICJ declined to exercise its jurisdiction because it would have been necessary to decide upon the international responsibility of Albania - the very subject-matter of the dispute - without her consent. (See [1954] ICJ Reports, p. 32). In the Case of East Timor, Portugal complained against Australia concerning a treaty between Australia and Indonesia for the delimitation of the continental shelf between Australia and Indonesian-occupied East Timor. Indonesia had not been impleaded by Portugal and had not applied for permission to intervene as a third party. The ICJ declined to exercise its jurisdiction because it would have had to rule, as a prerequisite, on the lawfulness of the possession of East Timor by Indonesia, which was not present in the case. (See [1995] ICJ Reports, pp. 90-106)

250 See for instance the Panel Reports on European Communities � Regime for the Importation, Sale and Distribution of Bananas, adopted on 25 September 1997, WT/DS27/Rs ("EC - Bananas III"), paras. 7.4-7.9 and on European Communities � Measures Concerning Meat and Meat Products (EC - Hormones), adopted on 13 February 1998, WT/DS26, 48/R, paras. 8.12-8.15.

251 Appellate Body Report on Japan � Taxes on Alcoholic Beverages, WT/DS8, 10, 11/AB/R, adopted on 1 November 1996 ("Japan � Alcoholic Beverages"), p. 13.

252 For further information on the details of this procedure and the Panel's invitation to the European Communities, see paras. 4.1 to 4.3 above.

253 Turkey's arguments are further detailed in paras. 3.41 to 3.44 , India's arguments are in paras. 3.45 to 3.49 and the third parties' arguments are in para. 3.50 above.

254 Turkey's arguments are further detailed in paras. 6.1, 6.2, 6.5 and 6.6 above.

255 India's arguments are further detailed in paras. 6.3, 6.4, 6.7 to 6.10 above.

256 India added that the DSB was informed of this situation on 24 April 1996; WT/DSB/M/15, para. 3.

257 Panel Report on EC - Bananas III, paras. 7.18-7.19 (not appealed).

258 Panel Report on Korea � Taxes on Alcoholic Beverages, upheld by the Appellate Body, adopted on 17 February 1999, WT/DS75, 84/R ("Korea � Alcoholic Beverages"), paras. 10.19, (not appealed).

259 See for instance the Appellate Body Report on EC - Bananas III, paras. 139-144; the Appellate Body Report on Brazil - Measures Affecting Desiccated Coconut, adopted on 20 March 1997, WT/DS22/AB/R ("Brazil � Desiccated Coconut"), page 22; and the Appellate Body Report on India � Patent, paras. 86-96.