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World Trade
Organization

WT/DS69/R
12 March 1998
(98-0921)
Original: English

European Communities - Measures Affecting the Importation of Certain Poultry Products

Report of the Panel

(Continued)


20. The EC submitted that Article XXVIII of GATT was not a substantive provision but provided only the procedural requirements by which a Member could legally modify, change or withdraw, totally or partially, one of its concessions. These changes were justified by commercial considerations or by the creation of a customs union. In the latter case, Article XXIV:6 referred explicitly "to the procedures set forth in Article XXVIII", thus underlining again the procedural nature of that provision. Under Article XXVIII, there was no obligation to reach an agreement but there was an obligation to seek an agreement, in particular with Members having a particular trade interest. Detailed rules to be respected in order to ensure the participation of those Members were provided in the Understanding on the interpretation of Article XXVIII of the General Agreement on Tariffs and Trade 1994 which was annexed to the GATT 1994. Further guidelines were detailed in the Decision of the GATT CONTRACTING PARTIES adopted on 10 November 1980. The EC argued that Brazil had not complained, either during the consultations or in its request for the establishment of the Panel or, finally, in its written and oral interventions before this Panel, of any violation by the EC of the procedural requirements set out in that provision. It had signed an agreement with the EC on 31 January 1994, thus acknowledging that the procedures had been fully respected to the satisfaction of the two parties concerned. Any subsequent later complaint with respect to the procedure followed in order to reach that agreement was clearly "estopped" by now. Brazil could not therefore claim today, three years after the conclusion of that procedure, that a violation of Article XXVIII had occurred. Moreover, no evidence had been provided to support such a claim by Brazil. The negotiating history of Article XXVIII indicated that the GATT CONTRACTING PARTIES had expressed their views to the effect that no violation of the non-discrimination principle through an Article XXVIII procedure was possible. The EC believed that this was still the case.

21. Brazil argued that there was no obligation to conclude an agreement under Article XXVIII but Brazil and the EC did reach an agreement. And this agreement reflected the specification of the general rights and obligations. The EC could withdraw concessions, without the fear of counter withdrawals, on condition that it opened up other concessions. Brazil had agreed to forego its right to counter withdraw. These rights and obligations were directly applicable by reason of Article XXVIII. The CONTRACTING PARTIES authorized these specifications of the Article XXVIII rights and no contracting party had objected to the agreements reached within Article XXVIII. Under the terms of Article XXVIII:3(b), contracting parties which were not party to the negotiations were free within six months of the conclusion of negotiations, to withdraw substantially equivalent concessions if they were not satisfied with the bilateral country-specific agreements between the Members principally concerned. No contracting party took such action so therefore it could be concluded that all the contracting parties were satisfied. Brazil submitted, moreover, that in order to determine the nature of the EC's current commitments to Brazil within the WTO, this Panel had to look at the Oilseeds Agreement. The dispute between Brazil and the EC did not relate to whether the EC was complying with its Schedule but whether the EC's Schedule reflected the commitments made by the EC to Brazil following the Oilseeds negotiations. 11 Brazil maintained that a commitment had been made, within the terms of Article XXVIII of GATT, to open a country-specific TRQ of 15,500 tonnes of frozen chicken. The EC maintained, Brazil argued, that a commitment had been made to open such a TRQ but on an MFN basis. Brazil believed that the difference between the parties could only be resolved by the Panel by reference to the Oilseeds Agreement itself and by reference to the implementation of the other TRQs opened as part of that agreement.

(ii) Modifications of schedules

22. The EC submitted that the purpose of the procedure under Article XXVIII was to ensure that the "security and predictability of GATT tariff bindings, a principle which constituted a central obligation in the system of the General Agreement" 12, was preserved, in accordance with the provisions of Article II. In recognizing that the procedure under Article XXVIII had been successfully completed, the CONTRACTING PARTIES accepted that the EC Schedules of concessions had been modified with their agreement and represented the new tariff commitments of the EC for the products concerned. The EC explained that the EC Schedule 13 provided, as a result of the Uruguay Round negotiations with respect to the three products at issue in this dispute 14 for a duty-free tariff quota up to 15,500 tonnes for the frozen poultry meat 15 while the out-quota base duty rate was 1,600 ECU/tonne, 940 ECU/tonne and 1,575 ECU/tonne, respectively. The duty-free in-quota rate after the Uruguay Round negotiations corresponded exactly to the results of the Article XXVIII Oilseeds negotiations. However, market access for the frozen poultry meat was the subject of further negotiation as a result of the tariffication exercise that consisted in the introduction of out-quota decreasing bound rates. The new decreasing bound rates had replaced the variable levy that constituted the EC commitment under its previous Schedule as modified by the Article XXVIII Oilseeds negotiations. Thus, there was a series of modifications to the EC GATT Schedule of commitments with respect to the frozen poultry meat all of which were effected with the active support and agreement of all the other Members (GATT contracting parties at the time), including Brazil. In summary, first, the EC Schedule was modified as a result of the conclusion of the Article XXVIII Oilseeds Agreement. Secondly, it was then re-negotiated and modified as a result of the Uruguay Round.

23. Brazil replied that during the time in which the Oilseeds Agreement determined the EC's obligations to Brazil, the EC had commitments under Article XXVIII of GATT which were not reflected in its Schedule. If the EC had not changed its Schedule so as to reflect the opening of a 15,500 TRQ (whatever its nature) could a Member not have asked a dispute settlement panel to ensure that the EC's Schedule did reflect the commitments it had made? Thus, a closer examination of the EC's two agreements argument, giving rise to "successive modifications", revealed, according to Brazil that (i) the EC did not twice modify its country schedule; (ii) the EC had commitments under Article XXVIII that were not reflected in its Schedule; and (iii) whatever those commitments were, the EC did not offer security and predictability to WTO Members.

24. The EC, recalling a passage in the recent Banana III panel report 16, submitted that it seemed indisputable that the tariff rates specified in the EC's Uruguay Round Schedule, including the TRQs, were the valid EC tariff bindings in respect of frozen poultry meat. No declaration which would amount to a reservation or any belated after thought could affect the validity and the effects of the voluntary acceptance by Brazil of the results of the Uruguay Round negotiation.

25. As concerns the question of entering a reservation because the country-specific nature of a TRQ was not apparent from the Schedule, Brazil observed that no reservations were permissible to the Marrakesh Agreement which established the WTO. 17 Secondly, as had been established by the Appellate Body 18, the presence of a reservation was not a prerequisite for the challenge by a Member of another Member's schedule.

(iii) The Vienna Convention on the Law of Treaties

(a) Article 59(1) 19 of the Vienna Convention

26. The EC submitted its analysis was confirmed by the application to this case of the customary rules of interpretation of public international law. In applying Article 3.2 of the DSU, a number of recent WTO dispute settlement decisions 20 had indicated that certain provisions of the Vienna Convention on the Law of Treaties (Vienna Convention) had attained the status of rules of customary or general international law. This had been specifically indicated for Article 31 and 32 of the Vienna Convention. The EC was of the view that that was also the case for Articles 59(1) and 30(3). These provisions were the expression of the general international law principle concerning the succession of legal acts having an identical binding force between the same parties. 21 Citing Article 59(1) of the Vienna Convention22, the EC submitted that in the case in dispute, the two parties, EC and Brazil, were not only parties to the bilateral agreement concluding the Article XXVIII Oilseeds negotiations under the GATT but also to the later Marrakesh agreement encompassing the results of the Uruguay Round. Both agreements related, inter alia, to the tariff levels for frozen poultry products at issue in this dispute. Both Brazil and the EC ratified the Marrakesh Agreement which contained the agreed new set of rules with respect, inter alia, to the tariff treatment of the frozen poultry meat. The rule under Article 59(1) solved the issue of the coexistence of the two agreements in this case by considering that the Article XXVIII Oilseeds Agreement was no longer applicable. The EC was therefore of the view that the modified EC Schedule which resulted from the Uruguay Round negotiations had replaced the earlier Article XXVIII Oilseeds Agreement. It was no longer possible for Brazil to allege a violation by the EC of the Article XXVIII Oilseeds Agreement and there was no violation by the EC of the existing commitments under the EC Schedule LXXX. As a subsidiary argument, the EC recalled briefly that in any event, Article 30(3) of the Vienna Convention would not allow any different conclusion: "When all the parties to the earlier treaty are parties also to a later treaty but the earlier treaty is not terminated or suspended in operation under Article 59, the earlier treaty applies to the extent that its provisions are compatible with those of the later treaty".

27. Brazil submitted that the EC had not shown that the conditions of Article 59(1) (a) and (b) had been fulfilled in relation to the Article XXVIII negotiations. Brazil considered, however, that Brazil had shown that there was no incompatibility between Part I of the Uruguay Round schedules, and in particular the EC schedule, with country-specific TRQs. It was clear from the EC schedule that country-specific TRQs were provided for. Secondly, the EC accepted that country-specific provisions were compatible with the WTO Agreements. Thus, incompatibility could not be the ground for the automatic termination of the commitments agreed to under Article XXVIII. Nor had the EC shown that it was the clear intention of the parties that the matter of compensation be governed by the later treaty and not by the terms of the earlier agreement. The EC had itself observed that the earlier agreement had been "incorporated" into the later agreement. The ordinary meaning of the word "incorporation" did not include the idea of "modification". Incorporation meant, according to Brazil, that the terms of the first agreement were incorporated as they stood into the second agreement. Thus, the EC's Article XXVIII commitment was incorporated into the Uruguay Round agreement. Brazil concluded therefore that, if Article 59 was found to be declaratory of customary international law, the EC had not shown that the earlier agreement had been terminated or suspended by operation of Article 59.

28. The EC replied that Article 59(1)(a) of the Vienna Convention was fully relevant to this case. Brazil had disregarded that Article 59(1) provided, under (a) and (b), for two hypotheses which were separate and alternative. Contrary to what Brazil seemed to suggest, the EC was of the opinion that the text of Article 59(1) did not require cumulation of these two hypotheses.

(b) Article 30(3) of the Vienna Convention

29. Citing Article 30(3) of the Vienna Convention 23, the EC submitted that the Article XXVIII Oilseeds Agreement between the EC and Brazil modified the EC Schedule as of 1 January 1994. The Uruguay Round agreement then entered into force on 1 January 1995 and became applicable for agricultural products on 1 July 1995. This treaty covered inter alia the same subject matter (the EC concessions on the frozen poultry meat) among the same contracting parties as the earlier treaty (Brazil and the EC). EC believed that there was no disagreement between Brazil and the EC on the content of the current concessions by the EC with respect to the frozen poultry meat. Neither party contested that a duty-free tariff quota had been established, there was no disagreement on the decreasing duties applicable to the out- quota imports bound as a result of the Uruguay Round negotiations, neither was there disagreement on the size of the TRQ. The revised EC Schedule which incorporated the Article XXVIII Oilseeds Agreement with respect to frozen poultry meat, the EC said, had been replaced, as from 1 January 1995, by the EC Schedule of commitments resulting from the Uruguay Round consistently with Article 59(1) of the Vienna Convention. Reference to the earlier Article XXVIII Oilseeds Agreement was therefore no longer relevant. In any event, in application of Article 30(3) of the Vienna Convention, should the Panel reach any different conclusion (contrary to the EC's submissions) and in particular that the Article XXVIII Oilseeds Agreement was not applicable on a MFN basis and was still relevant, then it could be applicable only to the extent it was compatible with the EC's later Schedule resulting from the Uruguay Round which was a MFN TRQ. Both these lines of argument led to the inevitable conclusion that the EC frozen poultry meat TRQ was applicable on a MFN basis.

30. Referring to Article 30(3) of the Vienna Convention and to paragraph 1(b) of GATT 199424, Brazil submitted that the EC agreed that a tariff concession had been given, and had entered into force, prior to the entry into force of the WTO agreements and that this concession was based on the Article XXVIII of GATT negotiations with Brazil. By the terms of the WTO Agreement itself, that prior concession was incorporated into the EC's GATT 1994 Article II Schedule. The specific concession had to be incorporated and not modified. If the EC had failed to incorporate the TRQ agreed with Brazil and opened on the basis of an Article XXVIII Agreement, it could not use that failure to claim that the TRQ included in the Schedule was a modification of the original concession. This Panel should uphold Brazil's claim in respect of the EC's failure to incorporate the agreed concession. Secondly, Brazil reiterated, the provision of a country-specific concession to Brazil was not incompatible, as required by the terms of Article 30(3) of the Vienna Convention cited above by the EC, with the terms of the Uruguay Round Agreement. Brazil argued that the EC's and other Members' schedules provided a significant number of examples of country-specific TRQs. In any event, the EC itself accepted that Article XXIV of GATT and Article IX of WTO gave rise to such commitments so that they therefore were not incompatible with the terms of the second treaty. Brazil concluded, therefore, that the EC had not demonstrated incompatibility of the provisions of the earlier treaty with the terms of the later treaty within the terms of Article 30(3) of the Vienna Convention.

(c) Article 31 of the Vienna Convention

31. Referring to the general rule of interpretation laid down in Article 31 of the Vienna Convention25, the EC submitted that, together with the context, the interpreter should also take into account "any subsequent agreement between the parties regarding the ... application of its provisions" and "any relevant rules of international law applicable in the relations between the parties" (Article 31(3)(c)). Thus, the EC considered that the term "global" should be given its ordinary meaning in its context and in the light of its object and purpose. Irrespective of the philological meaning of the term "global", Brazil could not disregard the fact that the Article XXVIII Oilseeds negotiations were undertaken in the framework of the GATT. The object and purpose of the negotiations was to re-establish the balance of rights and obligations, following the Oilseeds panel report, within the scope of the GATT and in particular its Articles I and II. The EC found it difficult to conceive of a violation of Articles I and II of GATT that would be more obvious and indefensible than a discrimination on the duty applied upon importation of (like) products based on the origin of those products. 26 The EC noted that during the discussions of the provisions which became the present Article XXVIII, in the Tariff Agreement Committee at Geneva in 1947, the Chairman in summing up the discussions concerning the possibility of withdrawing concessions, stated: "... Therefore, the intent is clear: that in no way should this Article interfere with the operation of the Most-Favoured-Nation clause". 27 The EC also noted that this statement was made in the context of retaliatory trade measures against a unilateral modification or reduction by a Member of its own concessions. The same considerations must apply a fortiori to the agreed modification of a Member's Schedule as a result of authorized Article XXVIII:4 negotiations.

32. Brazil observed that the principle of good faith was a fundamental element in interpreting, understanding and implementing agreements. Interpreting agreements in good faith meant that all parties had to interpret the clear intention of the parties to the agreement and not read the agreement in a way that would lead to an unreasonable or absurd interpretation. In the opinion of Brazil, the ordinary meaning of the Brazil/EC Oilseeds Agreement was clear. Within the context of Article XXVIII of GATT, Brazil had agreed that it would not object to the EC withdrawing certain concessions on the condition that, in return, the EC would open a new compensatory concession specifically for Brazil. The agreement was made within the framework of Article XXVIII which ensured that all Members which had an interest would not be prejudiced. In the opinion of Brazil, no other Member was so prejudiced. Brazil claimed that the EC had agreed in writing, and within the multilateral GATT framework, a country-specific compensation package with Brazil. It was Brazil's opinion that the EC had not respected this package. Moreover, Brazil said, Article 26 of the Vienna Convention set out one of the fundamental principles of law, of whatever nature, namely "pacta sunt servanda", providing that "Every treaty in force is binding upon the parties to it and must be performed by them in good faith". In the opinion of Brazil, the EC had not implemented in good faith the agreement with Brazil.

33. The EC replied that Articles I and XIII of GATT were also clear provisions of a treaty that was binding upon Brazil: did Brazil suggest that the principle "pacta servanda sunt" authorized Brazil to breach those other clear international obligations? It was the EC's view that this theory was deprived of any legal and logical foundation in international law and in the WTO system. The EC had fully complied with its international obligations under both the general provisions of the GATT and the specific commitments of the Article XXVIII Oilseeds Agreement: the EC opened as from 1 January 1994 an MFN frozen poultry meat TRQ and Brazil obtained immediate access to a share of that tariff quota which corresponded to its share of the overall EC imports.

(iv) Incorporation

34. Brazil argued that the Community did not administer the TRQ as a country-specific TRQ in the period from January 1994 to July 1995. Moreover, the frozen chicken TRQ had been agreed within the terms of bilateral Article XXVIII negotiations and the multilateral checks and balances that were provided for in that Article. It was distinct from agreements reached within the context of multilateral negotiations. The bilateral Oilseeds Agreement made no mention of the Uruguay Round. Nor did it leave the Community the unilateral right to amend the agreement and change the nature of the concession in line with other bilateral Oilseeds agreements. 28 Brazil did not agree that the Article XXVIII country-specific commitments were changed by reason of their incorporation into the Uruguay Round. The fact that the incorporation was unilaterally made under the heading "minimum access" did not act so as to modify the commitment. Nor did the inclusion of the TRQ within the schedule act so as to diminish the commitment. If the commitments were country-specific before the Uruguay Round, they remained country-specific after the Uruguay Round.

35. The EC submitted that Brazil had not contested the legal analysis made by the EC. The legal issue here was not whether the Article XXVIII Oilseeds Agreement had been "incorporated" in the Uruguay Round but, more fundamentally, what the current obligations of the EC under the GATT were with respect to frozen poultry meat. The Vienna Convention gave a clear and convincing answer to this problem: the Uruguay Round EC Schedule was the only relevant obligation of the EC in this respect. This obligation had been undertaken in full respect of Articles I and XIII of GATT. Brazil had not advanced any argument to the contrary. The EC insisted that, in accordance with Article 3.2 of the DSU, Article 59(1) or, in the alternative, Article 30(3) in connection with Article 31 of the Vienna Convention, should be used by the Panel to solve this dispute.

36. Brazil replied that the rights and obligations of Members of the WTO should be determined on the basis of the clear and precise terms of the WTO Agreements and, where necessary, the dispute settlement mechanism, in clarifying the provisions of those rights and obligations, should do so in accordance with customary rules of interpretation of public international law. 29 In interpreting the scope of Article 3.2 of the DSU, the Appellate Body 30 had found that parts of the Vienna Convention, in particular Articles 31 and 32, had attained the status of customary international law.

(v) MFN and Article XXVIII

37. Brazil noted that the structure of Article XXVIII was such that it both distinguished between Members and allowed them a certain flexibility in reaching bilateral agreements, subject to the review of all Members. The object of the negotiations was to ensure that the general level of trade was maintained but there was no requirement in Article XXVIII that the trade to be maintained by means of compensation in other products had to be on an MFN basis. Brazil argued that Article XXVIII could be an exception to the MFN rule contained in Article I if the parties negotiating the agreement so chose and the other Members did not object. It was Brazil's view that the EC and Brazil had chosen to make the TRQs country-specific and chosen that the MFN principle should not apply. Nor was there anything, in Brazil's opinion, in the nature or text of Article I of GATT which made it automatically applicable to compensation agreements. Citing Article I of GATT, Brazil submitted that a measure given in compensation was based on the granting of restitution, not on the giving of an advantage, favour or privilege. Nor was compensation an immunity. For these reasons, Article I did not apply to compensation TRQs agreed within the framework of Article XXVIII:4. In conclusion, Brazil argued, Article XXVIII was a lex specialis in that it provided for bilateral solutions within a multilateral framework. Article XXVIII:4 negotiations were initially conducted with those specific Members who were primarily concerned. It was only when a bilateral agreement was reached that a limited number of Members who had a substantial interest gained rights. The rights of these parties were limited in time. Finally, all contracting parties under Article XXVIII had the right to intervene to ensure the reasonableness of the parties, in the absence of agreement.

38. The EC submitted that Brazil's claims concerning the MFN nature of the EC frozen poultry meat TRQ could not be considered in the context of a violation of Article XXVIII since that provision only contained procedural obligations. This was a rather belated complaint concerning the content of a Schedule that was negotiated during the Uruguay Round and not about the procedures followed in order to revise the EC Schedule that was applicable before the current Uruguay Round Schedule was negotiated. Brazil had ratified the Uruguay Round agreements and was an original Member of the WTO within the terms of Article XI of the WTO Agreement. It could not request now the re-opening of the tariff negotiations with the EC through a dispute settlement procedure. Brazil could not request either, in the opinion of the EC, that the Panel re-do the Article XXVIII negotiations which were concluded in 1993. This would be clearly outside the terms of reference of this Panel. Moreover, it would amount, in practice, to requesting the Panel to substitute itself for the GATT CONTRACTING PARTIES by replacing their judgement on whether offers and counter-offers were "adequate" and in considering the "value" of the different elements of the Oilseeds package which went far beyond the frozen poultry meat. The EC considered that this action by the Panel would clearly breach Article 3.2 of the DSU and would not assist the DSB in discharging its responsibilities in accordance with Article 11 of the DSU. The EC submitted that Brazil confused the legal nature of a particular tariff treatment granted through the procedures foreseen in Article XXVIII - which was based on the MFN clause - with the economic effects of that particular tariff treatment.

39. Brazil submitted that the parties agreed that there were exceptions to the MFN principle within the terms of the GATT Articles. It could also be seen from the practice of the Members that exceptions to the MFN principle were common and that these exceptions were included in the schedules under the parts dealing with MFN commitments. Members' schedules were public documents and formed an integral part of the GATT (and were thus within the standard terms of reference). The schedules did not show, however, from where the country-specific commitments flowed. In practice, they flowed, in the opinion of Brazil, from Articles XXIV and XXVIII of GATT and from other bilateral agreements. It was, therefore, perfectly reasonable for Brazil to consider, on the basis of the provisions of GATT and of Members practice, that the EC had committed itself to opening a country-specific TRQ in Brazil's favour. Brazil claimed that the EC's principal arguments did not address the issue of country-specific commitments but were based on fundamental GATT/WTO principles and the succession of international agreements within the terms of the Vienna Convention. The first question to be addressed, according to Brazil, was the extent to which MFN was an overriding principle in the GATT and the extent to which exceptions were allowable. Brazil considered that it had shown that the procedure to be followed in Article XXIV was the same as in Article XXVIII. Brazil had also shown that the object of both Articles was the same, namely the need to compensate contracting parties for changes to the schedules. Under Article XXIV the change to the schedule came about by reason of the formation of a customs union while the changes under Article XXVIII were made for other reasons. In both situations, the changes were unilateral by the Member making the change, which in turn gave rights to other Members either to agree to the changes and accept compensation or to counter-withdraw equivalent concessions.

(vi) Principle of non-discrimination

40. Brazil claimed that the EC had unilaterally decided that instead of a TRQ as compensation of 15,500 tonnes, it should be 7,100 tonnes. The arbitrariness of this decision and its consequences were inconsistent with the principle of non-discrimination. This general principle of law underlay the GATT/WTO Agreements. It was also a fundamental principle of international law and thus should be applied by the Panel under Article 3.2 of the DSU. The MFN principle was not to be confused with the concept of discrimination. According to Brazil, these two concepts were distinct in their meaning. Within the global balance of the GATT, including Articles I and XXVIII, Brazil and the EC had sought to achieve a non-discriminatory balance. The balance was between the withdrawal of an advantage and the offering of compensation in another product. If the EC failed to respect the agreement which fixed that balance, it was discriminating against Brazil so as to deny Brazil its rights within the multilateral system. In the opinion of Brazil, Regulation 1431/94 31 discriminated to the extent that it allocated the frozen chicken TRQ among other Members that were not entitled to compensation under Article XXVIII and consequently had not concluded bilateral agreements with the EC or were not even contracting parties to the GATT or Members of the WTO.

41. The EC replied that the purpose and object of the negotiations under Article XXVIII could not have been, as Brazil claimed, to achieve a result that would constitute a fundamental violation of the basic principle of non-discrimination among Members, which was one of the founding elements of the entire GATT (and now WTO) system. As to Brazil's assertion that a difference existed between the principle of non-discrimination and the MFN principle, the EC could theoretically accept that the general principle of non-discrimination could encompass situations going beyond the mere application of the MFN principle. The EC could nevertheless not accept the consequence implied in Brazil's approach that the implementation of the MFN principle could correspond to a violation of the principle of non-discrimination. This was absurd and should be clearly rejected by the Panel. (See also paragraphs 62 and 60.)

(vii) The EC's Uruguay Round Schedule - minimum access

42. Brazil submitted that if the TRQ in the EC's Schedule was a minimum access TRQ, then the Community had failed to include the Brazilian Article XXVIII TRQ in its Schedule. The Community subsequently amended its schedule in line with the commitments it had undertaken within the context of the Uruguay Round but these changes were the result of a different series of commitments and were distinct in law. The Community Schedule appeared therefore to be inconsistent with its obligations under Article XXVIII. It was understood between the parties that the EC would submit to the GATT the changes to its Schedule at the same time as it would submit its Uruguay Round changes. When the EC submitted a Schedule with a frozen chicken TRQ of 15,500 tonnes, Brazil presumed that this TRQ referred to the TRQ agreed to be specifically for Brazil.

43. At the same time as the Article XXVIII procedures were being completed, the EC replied, the Uruguay Round was also coming to an end. In a letter signed by Ambassador Tran Van Thinh on 14 December 1993, the EC requested Mr. P. Sutherland, Director-General of the GATT, to distribute a revised version of the EC draft lists of commitments together with supporting tables, in order to establish final commitments. In that letter, an "Information Note Concerning the EC Offer on Agriculture" was included. That Information Note indicated the content of the tables attached thereto. For Table 3 - Minimum Access - the following was specifically indicated:

- "the agreement on oilseeds negotiated under Article XXVIII has been incorporated

- tariff quotas, including in-quota tariff rates, agreed in bilateral negotiations have been incorporated."

Finally, the table "Agricultural Negotiations: List of Commitments - Market access: EC - Lists Relating to Minimum Access" provided for a zero per cent TRQ for tariff items 0207 41 10, 0207 41 41 and 0207 41 71 up to 15,500 tonnes. The letter was distributed to all GATT CONTRACTING PARTIES. In the meantime, the revised Schedule was applied by the EC as from 1 January 1994. Within the three-month period set out in the Decision of the CONTRACTING PARTIES of 26 March 1980, no GATT CONTRACTING PARTY objected to the revised Schedule. On the contrary, they had all agreed by 30 March 1994 to a new EC Schedule of commitments, as a result of the Uruguay Round, which included the Article XXVIII Oilseeds Agreement results with respect to the frozen poultry meat.

44. Thus, the EC claimed, the formal notification to the GATT of a separate revised Schedule LXXX of the EC had been carried out: all GATT contracting parties were thus aware of the results of the Article XXVIII Oilseeds negotiations and of the intentions of the EC. The results of the Article XXVIII Oilseeds negotiations were therefore an integral part of the Uruguay Round formal negotiations. This procedure was considered correct and accepted by all the interested Members. It was therefore not correct to affirm, that the complainant was not aware of the interpretation to be given to the Article XXVIII Oilseeds Agreement with respect to the poultry meat TRQ, or of the content of the Oilseeds agreements entered into with the other primarily concerned and substantially interested GATT contracting parties and that no notification had been provided to the GATT. The EC claimed that Brazil was fully informed on all these matters.

45. Brazil considered that it had no reason to understand from the text of the Community's Schedule and from the fact that the changes to the Schedule would be included in the Uruguay Round changes and that the Article XXVIII negotiations were taking place against the background of the Uruguay Round negotiations, that the country-specific chicken TRQ was a minimum access TRQ. It was settled GATT and WTO law, Brazil argued, that a schedule could not take precedence over underlying GATT/WTO obligations. The Sugar panel and the Banana III report 32 (as confirmed by the Appellate Body) provided that inclusion or exclusion of a measure in a schedule could not justify inconsistencies in that schedule with requirements of generally applicable GATT/WTO rules. The fact that the EC excluded from (or failed to include in) its Schedule a TRQ agreed for Brazil, meant that the EC was in clear breach of the basic compensatory rule in Article XXVIII:4. The EC did not compensate Brazil as it was obliged to do, and had agreed to do. Brazil submitted that the key to determining the EC's current commitments to Brazil was not restricted to an examination of the EC's Schedule. A Member could and did have commitments beyond the strict terms of its schedule.

To continue with European Communities - Measures Affecting the Importation of Certain Poultry Products, (c) Article 31 of the Vienna Convention, section (viii) Protection of legitimate expectations


11 These commitments were contained in the Oilseeds Agreement.

12 Panel Report on Newsprint, adopted 20 November 1984, BISD 31S/114, 131-133, paragraph 52.

13 LXXX, Part I - Most Favoured Nation Tariff, Section I - Agricultural Products, Section I B - Tariff Quotas.

14 Which had been indicated under the tariff number 0207 41 10, 0207 41 41 and 0207 41 71 and were presently indicated under the tariff lines 0207 14 10, 0207 14 50 and 0207 14 70.

15 Schedule CXL after the Article XXIV:6 negotiations following the most recent EC enlargement will not entail any modification of the concessions of the EC in this respect.

16 "it was for all prospective members of the WTO to decide whether they would accept the new agreements [resulting from the Uruguay Round], including the new bindings proposed by other participants. Under Article XVI:5 of the WTO Agreement, reservations are not permitted, except to the extent provided for in a WTO agreement; there is no such provision in GATT 1994. In this regard, we recognize the importance of not undermining the stability and predictability of tariff bindings" (paragraph 7.139 of WT/DS27R/GTM).

17 Article 19 of the Vienna Convention specifically recognized that a reservation was only allowable if it was not prohibited by the Treaty.

18 Appellate Body Report on European Communities - Regime for the Importation, Sale and Distribution of Bananas, adopted on 25 September 1997, WT/DS27/AB/R.

19 Article 59(1) (entitled "Termination or suspension of the operation of a treaty implied by conclusion of a later treaty") provided that:

"1. A treaty shall be considered as terminated if all the parties to it conclude a later treaty relating to the same subject matter and (a) it appears from the later treaty or is otherwise established that the parties intended that the matter should be governed by that treaty; (...) (b) the provisions of the later treaty are so far incompatible with those of the earlier one that the two treaties are not capable of being applied at the same time.2. The earlier treaty shall be considered as only suspended in operation if it appears from the later treaty or is otherwise established that such was the intention of the parties."

20 Appellate Body Report on United States - Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R; Appellate Body Report on Japan - Taxes on Alcoholic Beverages, WT/DS8/AB/R; Panel Report on European Communities - Regime for the Importation, Sale and Distribution of Bananas, adopted on 25 September 1997, WT/DS27/R, para.7.272.

21 The same principle was reflected also in Article 39, 40(2) and 54(b) of the Vienna Convention.

22 For text of Article 59(1), see footnote above.

23 See paragraph 26.

24 "(b) the provisions of the legal instruments set forth below that have entered into force under the GATT 1947 before the date of entry into force of the WTO Agreement:

(i) protocols and certifications relating to tariff concessions; ..."

25 "A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose."

26 The recent Appellate Body Report in the Banana III dispute stated in paragraph 190 "the essence of the non-discrimination obligations is that like products should be treated equally, irrespective of their origin".

27 Analytical Index of the GATT, Article XXVIII - Modification of the Schedules, Volume 2, 1995 ed., page 947.

28 Argentina, Poland and Sweden.

29 See Article 3.2 of the DSU.

30 Appellate Body Report on United States - Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R and Appellate Body Report on Japan - Taxes on Alcoholic Beverages, WT/DS8/AB/R.

31 Commission Regulation 1431/94 of 22 June 1994. O.J. L 156/9 of 23.6.1994.

32 Panel Report on United States - Restrictions on Imports of Sugar, adopted on 22 June 1989, BISD 36S/331, paragraph 58. Panel Report on Banana III, op. cit., (WT/DS27/R/USA), page 360. Appellate Body Report on Banana III, op. cit.