World Trade
Organization

EC measures concerning meat and meat products (hormones)

Award of the Arbitrator
Julio Lacarte-Muró

28. The European Communities maintains that, in this case, there are "particular circumstances" justifying a reasonable period of time of 39 months ²⁶ in total. It argues that the reasonable period of time needed to implement the recommendations and rulings of the DSB can be separated into two distinct phases: (a) a minimum of two years to complete the hormone-specific and residue-specific risk assessments for all the hormones concerned, including an evaluation of the risks posed to human health from failure to observe good veterinary practice²⁷; and (b) a period of 15 months to take any legislative action required, in light of the results of the risk assessments. ²⁸

29. I will first address whether "the particular circumstances" in this case allow the European Communities an initial phase of two years to conduct the risk assessments which it maintains are "mandated" ²⁹ by the findings and conclusions of the Appellate Body Report.

30. Article 19.1 of the DSU reads as follows:

31. The recommendations and rulings of the DSB in this case consist of the findings and conclusions of the Appellate Body Report and the Panel Reports, as modified by the Appellate Body Report, which were adopted by the DSB pursuant to Articles 16.4 and 17.14 of the DSU on 13 February 1998. The Appellate Body Report contained the following recommendation:

The Panel Reports contained the following recommendation:

32. There is an issue in this arbitration as to what constitutes "implementation of the recommendations and rulings of the DSB" under Article 21.3 of the DSU. The European Communities maintains that the Appellate Body Report "mandates" that a number of scientific studies constituting a risk assessment be conducted as "a necessary first step" to bringing the EC measures into conformity with the SPS Agreement. ³² The United States and Canada, on the other hand, argue that as the EC measures were found to be inconsistent with the obligations of the European Communities under the SPS Agreement, the only means of bringing them into conformity with the DSB's recommendations and rulings is by withdrawing them.

33. The Appellate Body Report and the Panel Reports, as modified by the Appellate Body Report, found the EC import prohibition to be inconsistent with the obligations of the European Communities under the SPS Agreement, and recommended that the European Communities bring its "measures" found to be inconsistent with the SPS Agreement into conformity with its obligations under that Agreement. Neither the Appellate Body nor the Panel suggested ways, under Article 19.1 of the DSU, in which the European Communities should implement the recommendations and rulings of the DSB.

34. The Appellate Body concluded that the EC import prohibition of meat and meat products derived from cattle to which certain hormones had been administered for growth promotion purposes was inconsistent with the requirements of Articles 5.1 and 3.3 of the SPS Agreement. ³³ The Appellate Body agreed with the Panel that "Article 5.1 may be viewed as a specific application of the basic obligations contained in Article 2.2 of the SPS Agreement", and stressed that "Articles 2.2 and 5.1 should constantly be read together." ³⁴ The Appellate Body stated:

35. The Appellate Body confirmed the legal conclusions of the Panel Reports that the EC import prohibition was inconsistent with Articles 5.1 and 3.3 of the SPS Agreement. As indicated above, the Appellate Body stated that Article 5.1 must be read together with Article 2.2 of the SPS Agreement, and requires that "the results of the risk assessment must sufficiently warrant -- that is to say, reasonably support -- the SPS measure at stake." For an SPS measure to be based on a risk assessment, as required under Article 5.1, there must "be a rational relationship between the measure and the risk assessment" (emphasis added). The Appellate Body examined the scientific studies presented to the Panel by the European Communities in support of its measures, and affirmed "the ultimate conclusion of the Panel that the EC import prohibition is not based on a risk assessment within the meaning of Articles 5.1 and 5.2 of the SPS Agreement and is, therefore, inconsistent with the requirements of Article 5.1" (emphasis added). ³⁶ It is important to note that, despite differences in the interpretation of Articles 3.1 and 5.2 of the SPS Agreement by the Panel and the Appellate Body, the Appellate Body agreed with the Panel's conclusions on every major point relating to whether the EC Directives at issue were "based on an assessment, as appropriate to the circumstances, of the risks to human ... health" in accordance with Article 5.1 of the SPS Agreement.

36. In the Appellate Body Report, as in the Panel Reports, the "measures" found to be inconsistent with the obligations of the European Communities under the SPS Agreement were the Directives ³⁷ maintaining the import prohibition of meat and meat products derived from cattle to which certain hormones had been administered for growth promotion purposes. These Directives were codified and replaced by Directive 96/22, effective 1 July 1997, and it is Directive 96/22, therefore, which must be brought into conformity with the obligations of the European Communities under the SPS Agreement.

37. The ultimate holding of the Appellate Body Report, affirming the Panel Reports, is that the EC import prohibition is not based on a risk assessment within the meaning of Articles 5.1 and 5.2 of the SPS Agreement. "The essence of the Appellate Body's endorsement of the Panel's finding of inconsistency with Article 5.1" was not, as maintained by the European Communities, "the absence of a suitably specific risk assessment". ³⁸ That is not what the Appellate Body found. Rather, the Appellate Body, agreeing with the Panel, concluded that the EC import prohibition was not based on a risk assessment in accordance with the provisions of the SPS Agreement. These findings constitute the recommendations and rulings of the DSB, adopted on 13 February 1998 under Articles 16.4 and 17.14 of the DSU, which must be implemented by the European Communities within the reasonable period of time as determined by this arbitration.

38. It is not within my mandate under Article 21.3(c) of the DSU, to suggest ways or means to the European Communities to implement the recommendations and rulings of the Appellate Body Report and Panel Reports. My task is to determine the reasonable period of time within which implementation must be completed. Article 3.7 of the DSU provides, in relevant part, that "the first objective of the dispute settlement mechanism is usually to secure the withdrawal of the measures concerned if these are found to be inconsistent with the provisions of any of the covered agreements" (emphasis added). Although withdrawal of an inconsistent measure is the preferred means of complying with the recommendations and rulings of the DSB in a violation case³⁹, it is not necessarily the only means of implementation consistent with the covered agreements. An implementing Member, therefore, has a measure of discretion in choosing the means of implementation, as long as the means chosen are consistent with the recommendations and rulings of the DSB and with the covered agreements.

39. Withdrawal is the preferred means of implementation under Article 3.7 of the DSU, and prompt compliance with the recommendations and rulings of the DSB is essential under Article 21.1. It would not be in keeping with the requirement of prompt compliance to include in the reasonable period of time, time to conduct studies or to consult experts to demonstrate the consistency of a measure already judged to be inconsistent. That cannot be considered as "particular circumstances" justifying a longer period than the guideline suggested in Article 21.3(c). This is not to say that the commissioning of scientific studies or consultations with experts cannot form part of a domestic implementation process in a particular case. However, such considerations are not pertinent to the determination of the reasonable period of time.

40. I would like to emphasize that the obligation of the European Communities to base its measures on an assessment of the risks to human health, in conformity with the provisions of the SPS Agreement, commenced on 1 January 1995 when the WTO Agreement came into force. ⁴⁰ Article XVI:4 of the WTO Agreement specifically requires every Member to "ensure the conformity of its laws, regulations and administrative procedures with its obligations" under the covered agreements. Contrary to the European Communities' arguments that it did not know that hormone-specific and residue-specific assessments were required by Article 5.1 of the SPS Agreement⁴¹, the European Communities did not need to wait for the Appellate Body Report before commissioning scientific studies to support its import ban. Indeed, the European Communities seemed to recognize this when it convened the Scientific Conference on Growth Promotion in Meat Production from 29 November to 1 December 1995 specifically to assess whether there were risks to human health from hormone-treated beef. However, the studies from that Scientific Conference were found by the Panel, and confirmed by the Appellate Body, to not rationally support the EC import prohibition. ⁴²

41. To grant the European Communities a further two years, from the date of adoption by the DSB of the Appellate Body Report and Panel Reports, to conduct the risk assessment that was required as of 1 January 1995 would not be consistent with the provisions of the DSU requiring prompt compliance with DSB recommendations and rulings, nor with the obligations of the European Communities under the SPS Agreement.

42. For the foregoing reasons, it would not be proper to include in the reasonable period of time granted to the European Communities under Article 21.3(c) of the DSU, an initial phase of two years for the conduct and completion of scientific studies to determine if there is a risk to human health from hormone-treated beef.

43. Having determined that the time required for conducting a risk assessment cannot be considered as "particular circumstances" justifying an extension of the reasonable period of time beyond 15 months, I will turn to the arguments made by the United States and Canada that there are "particular circumstances" which would justify a reasonable period of time of 10 months.

44. The United States and Canada argue that compliance with the recommendations and rulings of the DSB in this case can only be achieved by the repeal of the existing import prohibition, and that within the European legislative system, full implementation is practicable within a period of 10 months, i.e., by 1 January 1999. In their view, the repeal of Directive 96/22 can be effected by means of the consultation procedure under Article 43 of the EC Treaty. The European Communities contests this point and maintains that any modification of Directive 96/22 must be based on Article 100a of the EC Treaty, and must be adopted, therefore, under the co-decision procedure provided for in Article 189b of the EC Treaty. In its written submission, the European Communities asserts that:

During the oral hearing in this arbitration, the European Communities asserted that, if determined necessary in the light of the results of the risk assessment, it would take the necessary legislative steps to amend or repeal the existing Directive 96/22 within a period of 15 months, using the co-decision procedure provided for in Article 189b of the EC Treaty.

45. The United States and Canada argued that the legal basis for any legislative act abolishing or amending Directive 96/22 should be Article 43, not Article 100a, of the EC Treaty, since this Directive was based on Article 43 in the first place. They rely on the decision of the European Court of Justice in United Kingdom v. Council⁴⁴, in which the Court found that Article 43 of the EEC Treaty applied where the legislation proposed was directed both to the objectives of agricultural policy and to other objectives which were pursued on the basis of Article 100 of the EEC Treaty. However, the European Communities states that this is no longer good law, and refers to an action brought on 22 July 1997 by the EC Commission challenging the legality of Council Regulation (EC) No. 820/97 of 21 April 1997, which establishes a system for the identification and registration of bovine animals and the labelling of beef and beef products. The Council adopted that Regulation under the provisions of Article 43 of the EC Treaty as a measure concerning the production and marketing of beef. The Commission has asked the Court to annul the Regulation for the following reasons:

46. The European Communities maintains, furthermore, that regardless of the current state of EC law on this issue, the question will be moot when the Treaty of Amsterdam comes into force, which could be as early as 1 January 1999. Article 152(4)(b) of the Treaty of Amsterdam explicitly provides that "measures in the veterinary and phytosanitary fields which have as their direct objective the protection of public health" must be adopted following the co-decision procedure provided for in Article 189b of the EC Treaty.

47. Strictly as a matter of current EC law, it would appear that a proposal to repeal or modify Directive 96/22 could be initiated under the provisions of Article 43 of the EC Treaty. However, I am mindful that when the Treaty of Amsterdam enters into force, which could be as early as 1 January 1999, veterinary and phytosanitary measures which have as their objective the protection of public health must be adopted by means of the co-decision procedure provided for in Article 189b of the EC Treaty. The European Communities has also stated that upon the entry into force of the Treaty of Amsterdam, any legislative proposal initiated under the consultation procedure provided for in Article 43 would have to be withdrawn and reinitiated under the co-decision procedure provided for in Article 189b of the EC Treaty. ⁴⁶

48. In light of the above considerations, I determine that the reasonable period of time for the European Communities to implement the recommendations and rulings of the DSB in this case is 15 months from the date of adoption of the Appellate Body and Panel Reports by the DSB, that is, 15 months from 13 February 1998.

Signed in the original at Geneva this 26th day of May 1998 by:

_________________________

Julio Lacarte-Muró

²⁶ In its written submission, para. 115, the European Communities stated that it would require a period of approximately four years, consisting of two years to conduct a risk assessment and approximately two years for any legislative process that may be necessary in light of the results of the risk assessment. However, in its concluding statement at the oral hearing, the European Communities reduced the time needed for any legislative process to 15 months. Therefore, the final position of the European Communities was that a reasonable period of time for implementation of the DSB recommendations and rulings would be approximately two years and 15 months, that is, 39 months.

²⁷ Written submission of the European Communities, para. 74.

²⁸ Statements of the European Communities at the oral hearing.

²⁹ Written submission of the European Communities, heading 3), page 23; statements of the European Communities at the oral hearing.

³⁰ Appellate Body Report, para. 255.

³¹ US Panel Report, para. 9.2; Canada Panel Report, para. 9.2.

³² Written submission of the European Communities, para. 72 and p. 23.

³³ Appellate Body Report, paras. 208, 209, 253(l).

³⁴ Appellate Body Report, para. 180.

³⁵ Appellate Body Report, para. 193.

³⁶ Appellate Body Report, para. 208.

³⁷ See footnote 3.

³⁸ Written submission of the European Communities, para. 56.

³⁹ By contrast, in a non-violation case, brought under Article XXIII:1(b) of the GATT 1994, Article 26.1(b) of the DSU states explicitly that "there is no obligation to withdraw".

⁴⁰ The Appellate Body affirmed the Panel's finding that the SPS Agreement does not limit the temporal application of its provisions to SPS measures adopted after 1 January 1995, but also applies to measures which continued in effect after the entry into force of the WTO Agreement. The Appellate Body also noted that "the measure at issue in this appeal is, since 1 July 1997, no longer embodied in the pre-1995 Directives referred to above, but rather in Directive 96/22, which was elaborated and enacted after the entry into force of the WTO Agreement. None of the parties contests that the currently applicable measure is subject to the disciplines of Articles 5.1 and 5.5 of the SPS Agreement." Appellate Body Report, paras. 128-130.

⁴¹ Written submission of the European Communities, para. 52; statements of the European Communities at the oral hearing.

⁴² Appellate Body Report, para. 197; US Panel Report, para. 8.124; Canada Panel Report, para. 8.127.

⁴³ Written submission of the European Communities, para. 106.

⁴⁴ Case 68/86, [1988] E.C.R. 855.

⁴⁵ Case C-269/97, Official Journal No. C 295, 27 September 1997, p. 17.

⁴⁶ Statement of the European Communities at the oral hearing.