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WOVEN WOOL SHIRTS AND BLOUSES FROM INDIA
Report of the Appellate Body
India appeals from certain issues
of law and legal interpretations in the Panel Report, United
States - Measure Affecting Imports of Woven Wool Shirts and Blouses
from India, WT/DS33/R (the "Panel Report"). That
Panel was established on 17 April 1996 to consider a complaint
by India against the United States relating to a transitional
safeguard restraint imposed on imports of woven wool shirts and
blouses (category 440) from India.
The measure was imposed by the
United States on 14 July 1995 after bilateral consultations with
India in April and June 1995 did not result in a mutually-agreed
solution. The restraint was effective as from 18 April 1995 for
one year and was later extended through 17 April 1997. The United
States took this transitional safeguard action pursuant to Article
6 of the Agreement on Textiles and Clothing (the "ATC").
As required by Article 6.10 of the ATC, the United States
referred the matter to the Textiles Monitoring Body (the "TMB"),
which concluded - and confirmed upon review - that the transitional
safeguard action in this case was imposed in accordance with the
requirements of the ATC. The TMB found that "actual
threat of serious damage had been demonstrated" and that
"this actual threat could be attributed to the sharp and
substantial increase in imports from India".1; At
India's request, the Dispute Settlement Body (the "DSB")
established a panel (the "Panel") to examine the legality
of the United States' transitional safeguard measure.
After the release of the interim
report of the Panel, the United States announced that it would
withdraw the transitional safeguard measure, effective as of 22
November 1996, "due to a steady decline in imports of woven
wool shirts and blouses from India and the adjustment of the industry".
Nevertheless, India requested that the Panel continue its work
and produce a comprehensive report on the dispute. The Panel
Report in United States - Measure Affecting Imports of Woven
Wool Shirts and Blouses from India was circulated to the Members
of the World Trade Organization (the "WTO") on 6 January
1997. The Panel Report contains the following conclusions and
On 24 February 1997, India
notified the DSB2 of its decision to appeal certain issues
of law covered in the Panel Report and certain legal interpretations
developed by the Panel, pursuant to Article 16.4 of the Understanding
on Rules and Procedures Governing the Settlement of Disputes
(the "DSU"), and filed a notice of appeal with
the Appellate Body pursuant to Rule 20 of the Working Procedures
for Appellate Review (the "Working Procedures").
Pursuant to Rule 21 of the Working Procedures, India filed
an appellant's submission on 6 March 1997. At the request of
the United States, pursuant to Rule 16(2) of the Working Procedures,
the Appellate Body extended the time for the United States to
file its appellee's submission to 24 March 1997. On that date,
the United States filed its submission pursuant to Rule 22 of
the Working Procedures.
The oral hearing provided for
in Rule 27 of the Working Procedures was held on 7 April
1997. The participants presented their arguments and answered
questions from the Division of the Appellate Body hearing the
II. Arguments of the Participants
India agrees with the overall
conclusions of the Panel Report, but alleges that the Panel erred
in law when making its findings on the burden of proof, on the
TMB and on the issue of judicial economy.
1. Burden of Proof
India notes that the Panel
made statements on the burden of proof in its findings in paragraph
7.12 of the Panel Report as well as in its comments on the interim
review in paragraph 6.7 of the Panel Report. India argues that
both statements are incorrect, and furthermore, are contradictory.
India asserts that the specific interim review comments at issue
are part of the findings to be reviewed by the Appellate Body.
India asserts that the fact
that India had initiated dispute settlement proceedings did not
impose upon India the obligation to establish that the United
States had violated Article 6 of the ATC, as the Panel
stated in paragraph 7.12, nor the obligation to present a prima
facie case to that effect, as the Panel stated in paragraph
6.7. According to India, the issue of the burden of proof is
an issue of substantive law and must be answered solely on the
basis of the substantive law of the WTO in the light of the customary
rules of interpretation of public international law. India maintains
that the question of whether it is up to a particular Member to
demonstrate an inconsistency with the Marrakesh Agreement Establishing
the World Trade Organization3 (the "WTO Agreement")
does not depend on whether the Member is a complaining or a respondent
party in the proceedings in which the inconsistency is at issue,
but rather on the nature of the provision invoked. In India's
view, the rules on the burden of proof determine which party in
the dispute must make a legal claim and supply the evidence;
the function of the rules is to ensure that a dispute can be settled
even if the legal claims and factual information before the panel
are incomplete. As India reads it, according to the Panel's comments
on the interim review, both parties bear a burden of proof of
Moreover, India argues that
the Panel's finding on the distribution of the burden of proof
is inconsistent with the finding on the same issue by the concurrent
WTO panel in United States - Restrictions on Imports of Cotton
and Man-made Fibre Underwear. 4 India points to that
panel's statement that the principle that the party invoking the
exception carries the burden of proof is well-established in the
GATT 1947 practice.5 Thus, India argues that in making
its finding on burden of proof in this case, the Panel failed
to take into account the customary practice of the CONTRACTING
PARTIES under the GATT 1947. India maintains that the ATC
is an exception to the GATT 1994 because it authorizes the temporary
maintenance of measures inconsistent with Articles XI and
XIII of the GATT 1994. India argues that within that temporary
and exceptional regime deviating from basic GATT principles, Article
6 of the ATC establishes an exception from the general
principles of trade in textiles and clothing that are set out
in Article 2.4 of the ATC by authorizing the introduction
of new and discriminatory quantitative restraints within the framework
of what Article 6.1 of the ATC describes as "a specific
transitional safeguard mechanism" that "should be applied
as sparingly as possible". India concludes that the principles
applied to the exceptions in the GATT 1994, therefore, apply with
even greater force to Article 6 of the ATC. In India's
view, the Panel's finding on burden of proof changes the operation
of the substantive requirements under Article 6 of the ATC,
upsetting the negotiated balance of interests between importing
and exporting Members under the ATC.
2. The TMB
India asserts that the Panel's
finding in paragraph 7.20 of the Panel Report that the TMB, when
examining a transitional safeguard measure in accordance with
Article 6.10 of the ATC, "is not limited to the initial
information submitted by the importing Member as parties may submit
additional and other information in support of their positions,
which, we understand, may relate to subsequent events"6,
was requested neither by India nor by the United States. India
contends that this finding attributes to the TMB discretionary
powers that neither of the parties to the dispute suggested the
India argues that the ATC
and the DSU accord exporting Members three important procedural
rights: (i) the right to hold consultations on the proposed transitional
safeguard action on the basis of specific and factual information;
(ii) the right to a review of a transitional safeguard action
by the TMB; and (iii) the right to refer the matter to the DSB
for examination by a panel. In India's view, the Panel's finding
denies Members the benefit of the first two of these three rights.
India submits that the Panel
bases its finding on the erroneous notion that the ATC
and the DSU establish a "two-track process" for
the review of transitional safeguard actions, and that therefore
the matter on which the TMB makes a recommendation and the matter
submitted to the DSB can be different. In India's view, the ATC
and the DSU establish a two-stage procedure under which
the same measure is first submitted to the TMB and, if its recommendations
are not acceptable, to the DSB. India stresses that the TMB review
is a substitute for consultations normally held before the request
for the establishment of a panel, and India argues that information
that was not available at the time when the safeguard determination
was made is not information that is "relevant" in the
TMB's review of that determination under Article 6.10 of the ATC.
India further asserts that the
task of the TMB is to deal with disputes arising from measures
actually taken and to carry out those functions that are specifically
assigned to it by the ATC. According to India, the expression
of views on transitional safeguard actions that have not yet been
taken is not part of this task. India maintains that by attributing
to the TMB this additional competence, even when the Members did
not agree to seek views on that matter, the Panel attributed to
the TMB the authority to conciliate without the consent of the
Members concerned, which is not consistent with the DSU.
Finally, India asserts that
a comparison of the provisions of the ATC on the TMB and
the provisions of the Multi-Fibre Arrangement (the "MFA")
on the Textiles Surveillance Body (the "TSB"), reveals
that the TMB, in contrast to the TSB under the MFA, has a well-defined,
limited function of a legal nature.
In response to the argument
by the United States that the Panel's statement on the role of
the TMB is merely obiter dicta on which the Appellate
Body need not rule, India argues that Articles 17.6, 17.12 and
17.13 of the DSU do not distinguish between dicta
and findings. According to India, the right to appellate review
would be seriously impaired if panels could express legal opinions
on any point other than the issues involved in the case before
them and Members of the WTO could not seek an appellate review
of those opinions.
3. Judicial Economy
India points out that the Panel
did not make findings on two of the four issues India submitted
to the Panel for examination: namely, whether the United States'
failure to specify in its request for consultations whether the
proposed transitional safeguard action related to serious damage
or the actual threat of serious damage was consistent with Article
6 of the ATC; and whether the retroactive application
by the United States of its transitional safeguard action was
consistent with Article 2 of the ATC.
India argues that, within the
framework of the ATC, the determination, the request for
consultations on a proposed transitional safeguard action and
the actual application of the transitional safeguard action must
be regarded as distinct measures that can be contested separately.
India states that it contested these measures separately not
for the purpose of making the panel address theoretical issues,
but rather out of a practical concern relating to the implementation
of the Panel's recommendations by the United States. India argues
that by defining the three factually and legally distinct measures
as a single, "contested measure", the Panel denied India
the right to an objective assessment of the request for consultations
and the application of the transitional safeguard action in accordance
with Article 11 of the DSU. 7 India insists that
it is not arguing that panels have to address in all instances
all legal claims made by the parties. India acknowledges that
there are many instances in which a finding on one matter resolves
the dispute on another matter. In the present case, however,
India maintains that the Panel's findings did not resolve the
dispute on the two matters referred to above.
India asserts that the Panel
failed to distinguish the contested "measure" from the
matter to be examined. India explains that any dispute brought
by a WTO Member under Article XXIII:1(a) of the GATT 1994 concerns
an act or omission of another Member, that is a "measure".
India notes that the dispute settlement procedures of the WTO
begin with consultations on a specific measure and end with a
recommendation on that measure. However, India maintains that
the matter the panel must examine in accordance with Articles
6, 7 and 11 of the DSU is not the measure by itself, but
rather the legal claims which the parties to the dispute make
in connection with the measure. India concludes that the function
assigned to a panel under Article 11 of the DSU is, thus,
to examine all legal claims made relating to all measures at issue.
India concludes that by defining its task solely in terms of
the measure to be brought into conformity with the ATC,
the Panel curtailed India's right to an objective assessment of
all the legal claims it had made in its request for a panel.
India also observes that while a panel must examine all claims
made by the parties to the dispute and cannot go beyond these
claims, it need not examine all arguments of the parties and can
develop its own arguments.
India asserts that the panels
established under the GATT 1947 did not apply the concept of judicial
economy as suggested by the Panel in the Panel Report. India
contends that those previous panels did not systematically end
their legal analysis as soon as they had found the contested measure
to be inconsistent with the GATT 1947, but instead determined
the scope of their examination in the light of the objectives
and legal interests of the parties to the dispute. India argues
that had the Panel in this case been guided by the customary practice
of the CONTRACTING PARTIES to the GATT 1947, it would have determined
the scope of its examination in the light of India's expressed
legal interest in findings on which the Panel failed to rule.
Because the Panel in this case was not guided by this customary
practice, India argues that matters that could be resolved in
one proceeding will have to be resolved instead in multiple proceedings
if future panels apply this Panel's concept of judicial economy.
Therefore, India submits that
the Panel's application of the notion of judicial economy undermines
the objectives of the DSU, which are described in Article
3.2 of the DSU and in India's view, include both dispute
resolution as well as dispute prevention. India maintains that
these objectives can only be achieved if panels resolve both the
dispute over the particular contested measure and the issues of
interpretation arising from all legal claims made in connection
with that measure.
B. United States
With respect to each of the
three issues raised in this appeal, the United States argues that
the Panel acted correctly. The United States asks the Appellate
Body to affirm the Panel Report.
1. Burden of Proof
The United States argues that
the Panel properly addressed the issue of burden of proof in paragraphs
6.7 and 7.12 of the Panel Report. Unlike India, the United States
does not see any contradiction between the Panel's statements
in paragraphs 6.7 and 7.12 of the Panel Report, and considers
paragraph 6.7 to be the final interpretative word on this issue
by the Panel. As the United States sees it, the Panel found,
consistently with the DSU, that both India and the United
States had differing burdens to present factual and legal arguments:
first, as the complaining party, India had the initial burden
of establishing "a prima facie case of violation of
the ATC, namely, that the restrictions imposed by the United States
did not respect the provisions of Article 2.4 and 6 of the ATC";
then, after India had established a prima facie case,
the United States had the burden "to convince the Panel that,
at the time of its determination, it had respected the requirements
of Article 6 of the ATC".
The United States argues that
the Panel did not assign any burden of proof, in the sense of
burden of persuasion, to either India or the United States. The
United States contends that India distorts the findings of the
Panel when it claims that the Panel held that India had the ultimate
burden of persuasion. According to the United States, the Panel
merely required India to meet the burden of going forward with
the evidence. The United States argues that it is clear from
the ordinary meaning of Articles 3.8, 6.2 and paragraph 5 of the
working procedures for panels in Appendix 3 of the DSU
that India had the obligation to initiate and commence the legal
and factual issues, not only at the stage of a request for a panel,
but also at the first substantive meeting of the parties. In
other words, India had to make a prima facie demonstration
that the United States' measure violated provisions of the ATC.
The United States stresses that, in fact, India did so successfully
in the present case.
The United States argues that
India incorrectly asserts that there is a "consistently applied"
and "well-established" GATT practice that the party
invoking an exception carries the burden of proof of justifying
the use of the exception. According to the United States, the
panel reports cited by India in its appellant's submission do
not reflect GATT practice justifying India's arguments that:
(1) everything other than India's "core rules" are exceptions;
(2) all "exceptions" are required to be construed narrowly;
and (3) the complaining party has no burden to demonstrate that
a so-called "exception" was improperly invoked. The
United States maintains that the reports cited are either distinguishable,
irrelevant, or contradicted by other reports, and that only in
a few special situations involving the general exceptions of the
GATT 1994 and other isolated exceptions of the GATT 1994 have
panels consistently assigned the ultimate burden of persuasion
to a particular party.
According to the United States,
in disputes involving the vast majority of GATT provisions, it
is well-established practice that the complaining party has the
burden of making a prima facie case. Furthermore, the
United States argues that India's legal taxonomy is overly simplistic
in that it treats all so-called "exceptions" identically
and fails to consider the reasons why such so-called "exceptions"
exist. The United States argues that India also ignores the fact
that, in addition to "obligations", WTO Member also
have "rights", and that many, if not most, of what would
be considered "exceptions" under India's taxonomy are
more properly viewed as "rights". The United States
argues that India's approach results in a "crude" method
of treaty interpretation that is at odds with what the Appellate
Body said in United States - Standards for Reformulated and
Conventional Gasoline, in the sense that India's treatment
of so-called "exceptions" is not case-by-case, but instead
is a simplistic, "one-size-fits-all" mechanical approach
to treaty interpretation.8
Finally, the United States
argues that India's theory, if accepted, would alter significantly
the rights and obligations of WTO Members with respect to a multitude
of provisions of the GATT 1994 and other WTO agreements. 9
Assuming arguendo that
India correctly asserts that there is a "consistently applied"
and "well-established" GATT practice that the party
invoking an exception carries the burden of proof, the United
States argues that Article 6 of the ATC is not such an
exception. The non-exceptional nature of Article 6 is reflected
in Article 2.4 of the ATC, which states two very general
rules, namely, that textile restrictions existing before the ATC
came into force would be grandfathered, and that new restrictions
may be introduced only in accordance with the provisions of the
ATC and other relevant provisions of the GATT 1994. The
United States contends that the term "except" used in
Article 2.4 of the ATC is in this context a synonym for
"only", "provided that", or "unless"
and cannot be read as an indication that Article 6 of the
ATC is an exception. The United States adds as well that
the text, context and object of Article 6 of the ATC
support the conclusion that Article 6 is not a provision that
compels a shifting of the burden of proof. The United States
argues that for importing countries, Article 6 constituted a critical
quid pro quo for the acceptance of the ATC's phase-out
of pre-existing quotas and integration of textiles and clothing
trade into the multilateral trading system. The United States
asserts that as an integral ATC provision, the transitional
safeguard mechanism is on an equal footing with the other provisions
of the ATC, such as the integration schedule of Article
2. Therefore, the United States concludes, the phrase "should
be applied as sparingly as possible" in Article 6.1 of the
ATC does not provide support for the notion that Article
6 is an exceptional provision; rather, that phrase merely reminds
Members not to abuse their right to use temporary, transitional
safeguard measures.10 The United States asserts that the
treatment of Article 6 of the ATC as an exception would
upset the carefully negotiated balance of rights and obligations
of Article 6.11
2. The TMB
The United States argues that
the Panel's discussion of the TMB was mere obiter dicta
which had no effect on the outcome of the case, and that it is
difficult to see how India's procedural rights under the ATC
have been denied in any way by this dicta. The United
States considers that the appropriate manner of "addressing"
this Panel's dicta on an issue raised by neither of the
parties would be for the Appellate Body simply to declare this
aspect of the report to be dicta and not to offer any additional
dicta of its own with respect to the role of the TMB.
Furthermore, the United States
observes that nothing in the text of the ATC supports India's
assertion that the information considered by the TMB in its examination
of the transitional safeguard action must be limited to the information
used by the importing Member in making its determination to take
the transitional safeguard action. According to the United States,
Article 6.10 of the ATC, and in particular the phrase,
"any other relevant information", clearly contemplates
the consideration of information that is not the same as that
used by the importing Member at the time of the determination
to take the action. The United States also argues that nothing
in the ATC supports India's assertion that the TMB, in
contrast to the TSB, has a well-defined, limited function of a
3. Judicial Economy
The United States argues that
the Panel did not err by declining to rule on all claims made
by India. According to the United States, nothing in the DSU
or elsewhere in the WTO Agreement requires a panel to rule
on every claim raised by a party. The United States argues that
the text of Article 11 of the DSU does not impose such
obligation. The United States cites Article 3.7 of the DSU
for the proposition that the primary function of the dispute settlement
system is to resolve disputes by achieving the withdrawal of WTO-inconsistent
measures, not to render interpretations or to generate opinions
on any issue. The United States notes that Article IX of the
WTO Agreement provides a mechanism for obtaining authoritative
interpretations, as recognized in Article 3.9 of the DSU.
12 The United States does not accept India's argument that
WTO dispute settlement has the "twin objective" of "dispute
resolution" and "dispute prevention". According
to the United States, this argument is at odds with Articles 3.7
and 3.9 of the DSU. The United States maintains that "dispute
prevention" is, at most, a subsidiary function under the
DSU, and one which does not translate into a legal requirement
that a panel address every claim raised by a party.
With respect to India's argument
that there are three "measures", rather than one, at
issue in this case, the United States observes that it
is clear from Article 6.12 of the ATC that the "measure"
is in fact the transitional safeguard action, not the procedures
leading up to the imposition of the transitional safeguard action.
In the opinion of the United States, India's interpretation of
"measure" constitutes the sort of arbitrary subdivision
of a measure that the Appellate Body criticized in United States
- Standards for Reformulated and Conventional Gasoline. The
United States also argues that India's belated identification
of three measures, rather than one measure, is nothing more than
a post hoc argument presented for the first time in this
The United States points out
that in addition to being consistent with the text of the DSU,
the Panel's decision to refrain from ruling on certain issues
raised by India was consistent with the well13established
practice of the GATT 1947 panels, which frequently declined to
address claims in situations where the resolution of a claim was
unnecessary for the purpose of resolving a dispute. The United
States asserts that this practice has been continued under the
DSU and the WTO Agreement by both WTO panels and
the Appellate Body.
The United States also suggests
that, as an alternative to finding that the Panel did not err
when it declined to make findings on certain issues, the Appellate
Body, as it did in Brazil - Measures Affecting Desiccated Coconut,
could simply address the issue by deciding that it is unnecessary
to resolve the procedural issue raised by India since it will
have absolutely no effect on the previous conclusion by the Panel
that the transitional safeguard measure imposed by the United
States was inconsistent with the ATC.
Finally, the United States observes
that the practice of panels and the Appellate Body in refraining
from making findings that are unnecessary to the resolution of
disputes has been described as being based on concerns of judicial
economy. The United States argues that to the extent such concerns
were valid under the pre-WTO regime, they are, in view of the
number of matters now referred to the DSB, even more valid today.
In order to preserve the integrity of the WTO system in general,
and the dispute settlement mechanism in particular, the United
States argues that both panels and the Appellate Body should focus
only on those claims that must be addressed to resolve a dispute.
III. Issues Raised in this
This appeal raises the following
(b) Whether the TMB is limited
in its examination of a transitional safeguard action pursuant
to Article 6.10 of the ATC to the evidence used by the
importing Member in making its determination to take such action,
or may also consider developments and information subsequent to
that determination; and
(c) Whether, under Article 11
of the DSU, a complaining party is entitled to a finding
on all of the legal claims it makes to a panel relating to the
measure in dispute.
IV. Burden of Proof
On the issue of burden of proof,
the Panel concluded the following at paragraph 7.12 of the "Findings"
section of the Panel Report:
The Panel illuminated this finding
at paragraph 6.7 in the "Interim Review" section of
the Panel Report:
Although the Panel's finding
at paragraph 7.12 and comments on interim review at paragraph
6.7 of the Panel Report are not a model of clarity, we do not
believe the Panel erred in law. We agree with the Panel that
it was up to India to present evidence and argument sufficient
to establish a presumption that the transitional safeguard determination
made by the United States was inconsistent with its obligations
under Article 6 of the ATC. With this presumption thus
established, it was then up to the United States to bring evidence
and argument to rebut the presumption.
The foundation of dispute settlement
under Article XXIII of the GATT 1994 is the assurance to Members
of the benefits accruing directly or indirectly to them under
the GATT 1994. This was true as well of dispute settlement under
the GATT 1947. If any Member should consider that its benefits
are nullified or impaired as the result of circumstances set out
in Article XXIII, then dispute settlement is available. With
respect to complaints of violation of obligations pursuant to
Article XXIII:1(a) of the GATT 1994, Article 3.8 of the DSU
codifies previous GATT 1947 practice:
Article 3.8 of the DSU
provides that in cases where there is an infringement of the obligations
assumed under a covered agreement -- that is, in cases where a
violation is established -- there is a presumption of nullification
or impairment. Article 3.8 then goes on to explain that "the
Member against whom the complaint has been brought" must
rebut this presumption. However, the issue in this case is not
what happens after a violation is established; the issue in this
case is which party must first show that there is, or is not,
a violation. More specifically, the issue in this case is which
party has the burden of demonstrating that there has, or has not
been, an infringement of the obligations assumed under Article
6 of the ATC.14
In addressing this issue, we
find it difficult, indeed, to see how any system of judicial settlement
could work if it incorporated the proposition that the mere assertion
of a claim might amount to proof. It is, thus, hardly surprising
that various international tribunals, including the International
Court of Justice, have generally and consistently accepted and
applied the rule that the party who asserts a fact, whether the
claimant or the respondent, is responsible for providing proof
thereof.15 Also, it is a generally-accepted canon of evidence
in civil law, common law and, in fact, most jurisdictions, that
the burden of proof rests upon the party, whether complaining
or defending, who asserts the affirmative of a particular claim
or defence. If that party adduces evidence sufficient to raise
a presumption that what is claimed is true, the burden then shifts
to the other party, who will fail unless it adduces sufficient
evidence to rebut the presumption. 16
In the context of the GATT 1994
and the WTO Agreement, precisely how much and precisely
what kind of evidence will be required to establish such a presumption
will necessarily vary from measure to measure, provision to provision,
and case to case.
A number of GATT 1947 panel
reports contain language supporting the proposition that the burden
of establishing a violation under Article XXIII:1(a) of the GATT
1947 was on the complaining party. As early as 1952, in Treatment
by Germany of Imports of Sardines, concerning a complaint
by Norway, the panel clearly put the burden of establishing a
violation of the GATT 1947 obligations at issue on the complaining
party, when it concluded:
In 1978, in EEC - Measures
on Animal Feed Proteins, concerning a complaint by the United
States, the panel made it equally clear that the burden of proof
in that case was on the complaining party. In the final paragraph
of that panel report, the panel stated:
Two recent panel reports under
the GATT 1947 which follow this approach are the 1992 report in
Canada - Import, Distribution and Sale of Certain Alcoholic
Drinks by Provincial Marketing Agencies19 and the 1994
report in United States - Measures Affecting the Importation,
Internal Sale and Use of Tobacco.20 In the first case,
the United States claimed that Canada had not fully eliminated
the listing and delisting practices that a prior GATT panel report
had found to be inconsistent with Article XI of the GATT 1947.
The panel concluded, however, that with the exception of the listing
and delisting practices of the province of Ontario, the United
States had not substantiated its claim that Canada still maintained
listing and delisting practices inconsistent with Article XI of
the GATT 1947. In the second case, the complainants claimed, inter
alia, that the penalty provisions of the Domestic Marketing
Assessment legislation enacted by the United States were separate
taxes or charges within the meaning of Article III:2 of the GATT
1947, and that Section 1106(c) of the 1993 Budget Act of the United
States, mandated action inconsistent with Article VIII:1(a) of
the GATT 1947. With regard to both claims, the panel concluded
that the evidence submitted to it did not support the complainants'
claims of inconsistency with the GATT 1947 obligations involved.
India has argued that it is
"customary GATT practice" that the party invoking a
provision which is identified as an exception must offer proof
that the conditions set out in that provision are met. We acknowledge
that several GATT 1947 and WTO panels have required such proof
of a party invoking a defence, such as those found in Article
XX21 or Article XI:2(c)(i)22, to a claim of violation
of a GATT obligation, such as those found in Articles I:1, II:1,
III or XI:1. Articles XX and XI:(2)(c)(i) are limited exceptions
from obligations under certain other provisions of the GATT 1994,
not positive rules establishing obligations in themselves. They
are in the nature of affirmative defences. It is only reasonable
that the burden of establishing such a defence should rest on
the party asserting it.23
We do not believe that these
particular previous GATT 1947 panel reports are relevant in this
case. This case concerns Article 6 of the ATC. The ATC
is a transitional arrangement that, by its own terms, will terminate
when trade in textiles and clothing is fully integrated into the
multilateral trading system. Article 6 of the ATC is an
integral part of the transitional arrangement manifested in the
ATC and should be interpreted accordingly. As the Appellate
Body observed in United States - Restrictions
on Imports of Cotton and Man-made Fibre Underwear with respect
to Article 6.10 of the ATC, we believe Article 6 is "carefully
negotiated language ... which reflects an equally carefully drawn
balance of rights and obligations of Members ... ."24
That balance must be respected.
The transitional safeguard mechanism
provided in Article 6 of the ATC is a fundamental part
of the rights and obligations of WTO Members concerning non-integrated
textile and clothing products covered by the ATC during
the transitional period. Consequently, a party claiming a violation
of a provision of the WTO Agreement by another Member must
assert and prove its claim. In this case, India claimed a violation
by the United States of Article 6 of the ATC. We agree
with the Panel that it, therefore, was up to India to put forward
evidence and legal argument sufficient to demonstrate that the
transitional safeguard action by the United States was inconsistent
with the obligations assumed by the United States under Articles
2 and 6 of the ATC. India did so in this case. And, with
India having done so, the onus then shifted to the United States
to bring forward evidence and argument to disprove the claim.
This, the United States was not able to do and, therefore, the
Panel found that the transitional safeguard action by the United
States "violated the provisions of Articles 2 and 6 of the
V. The TMB
India appealed the following
statement relating to Article 6.10 of the ATC at paragraph
7.20 of the Panel Report:
In our view, this statement
by the Panel is purely a descriptive and gratuitous comment providing
background concerning the Panel's understanding of how the TMB
functions. We do not consider this comment by the Panel to be
"a legal finding or conclusion" which the Appellate
Body "may uphold, modify or reverse". 26
VI. Judicial Economy
With respect to the issue of
whether Article 11 of the DSU entitles a complaining party
to a finding on each of the legal claims it makes to a panel,
the Panel stated in paragraph 6.6 of the Panel Report:
The function of panels is expressly
defined in Article 11 of the DSU, which reads as follows:
Nothing in this provision or
in previous GATT practice requires a panel to examine all
legal claims made by the complaining party. Previous GATT 1947
and WTO panels have frequently addressed only those issues that
such panels considered necessary for the resolution of the matter
between the parties, and have declined to decide other issues.
Thus, if a panel found that a measure was inconsistent with a
particular provision of the GATT 1947, it generally did not go
on to examine whether the measure was also inconsistent with other
GATT provisions that a complaining party may have argued were
violated.27 In recent WTO practice, panels likewise have
refrained from examining each and every claim made by the complaining
party and have made findings only on those claims that such panels
concluded were necessary to resolve the particular matter.28
Although a few GATT 1947 and
WTO panels did make broader rulings, by considering and deciding
issues that were not absolutely necessary to dispose of the particular
dispute, there is nothing anywhere in the DSU that requires
panels to do so.29
Furthermore, such a requirement
is not consistent with the aim of the WTO dispute settlement system.
Article 3.7 of the DSU explicitly states:
Thus, the basic aim of dispute
settlement in the WTO is to settle disputes. This basic aim is
affirmed elsewhere in the DSU. Article 3.4, for example,
As India emphasizes, Article
3.2 of the DSU states that the Members of the WTO "recognize"
that the dispute settlement system "serves to preserve the
rights and obligations of Members under the covered agreements,
and to clarify the existing provisions of those agreements
in accordance with customary rules of interpretation of public
international law" (emphasis added). Given the explicit
aim of dispute settlement that permeates the DSU, we do
not consider that Article 3.2 of the DSU is meant to encourage
either panels or the Appellate Body to "make law" by
clarifying existing provisions of the WTO Agreement outside
the context of resolving a particular dispute. A panel need only
address those claims which must be addressed in order to resolve
the matter in issue in the dispute.30
We note, furthermore, that Article
IX of the WTO Agreement provides that the Ministerial Conference
and the General Council have the "exclusive authority"
to adopt interpretations of the WTO Agreement and the Multilateral
Trade Agreements.31 This is explicitly recognized in Article
3.9 of the DSU, which provides:
In the light of the above, we
believe that the Panel's finding in paragraph 7.20 of the Panel
Report is consistent with the DSU as well as with practice
under the GATT 1947 and the WTO Agreement.
VII. Findings and Conclusions
For the reasons set out in this
Report, the Appellate Body upholds the legal findings and conclusions
of the Panel.
The Appellate Body recommends
that the Dispute Settlement Body make a ruling consistent with
the legal findings and conclusions in the Panel Report and this
Signed in the original at Geneva this 15th day of April 1997 by:
1 G/TMB/R/3, confirmed in G/TMB/R/6.
2 WT/DS33/3, 24 February 1997.
3 Done at Marrakesh, Morocco, 15 April 1994.
4 Adopted 25 February 1997, WT/DS24/R, para. 7.16.
5 India cites seven GATT 1947 panel reports to demonstrate that there has been a consistently applied and well-established practice that the party invoking an exception bears the burden of proof.
6 Panel Report, para. 7.20.
7 India also asserts that the question of what constitutes the "measure" that may be maintained in accordance with Article 6.12 of the ATC for a period of up to three years and the question of what constitutes "the specific measures at issue" within the meaning of Article 6 of the DSU are obviously completely different issues.
8 Referring to the Appellate Body Report in United States - Standards for Reformulated and Conventional Gasoline, AB-1996-1, adopted 20 May 1996, WT/DS2/9, p. 19, the United States argues that India's approach ignores the "object and purpose" of provisions, it provides for no "scrutiny of the factual and legal context in a given dispute" and it disregards "the words actually used by WTO Members themselves to express their intent and purpose".
9 The United asserted that under India's theory, all of the WTO provisions providing special and differential treatment for developing countries would be labelled as exceptions and that, therefore, the burden of persuasion would be on the developing country seeking to rely on one of these provisions.
10 The United States notes that the Appellate Body in United States - Restrictions on Imports of Cotton and Man-made Fibre Underwear, AB-1996-3, adopted 25 February 1997, WT/DS24/AB/R, p. 15, did not interpret Article 6 of the ATC either narrowly or broadly and indicated that the "as sparingly as possible" language could not be examined in isolation.
11 The United States notes that the Appellate Body in United States - Restrictions on Imports of Cotton and Man-made Fibre Underwear, did not "loosen up the carefully negotiated language of Article 6.10, which reflect an equally carefully drawn balance of rights and obligations of Members ...".
12 The United States refers in this context to the Appellate Body Report in Japan - Taxes on Alcoholic Beverages, AB-1996-2, adopted 1 November 1996, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, pp. 13-15.
13 India argues that not only the United States' determination, but also the United States' request for consultations and the backdating of the United States' restraint each constitute a distinct "measure" that can be contested separately.
14 Article 8.10, last sentence, of the ATC, allows a Member to invoke Article XXIII of the GATT 1994.
15 M. Kazazi, Burden of Proof and Related Issues: A Study on Evidence Before International Tribunals (Kluwer Law International, 1996), p. 117.
16 See M.N. Howard, P. Crane and D.A. Hochberg, Phipson on Evidence, 14th ed. (Sweet & Maxwell, 1990), p. 52: "The burden of proof rests upon the party, whether plaintiff or defendant, who substantially asserts the affirmative of the issue." See also L. Rutherford and S. Bone (eds.), Osborne's Concise Law Dictionary, 8th ed. (Sweet & Maxwell, 1993), p. 266; Earl Jowitt and C. Walsh, Jowitt's Dictionary of English Law, 2nd ed. by J. Burke (Sweet & Maxwell, 1977), Vol. 1, p. 263; L.B. Curzon, A Directory of Law, 2nd ed. (Macdonald and Evans, 1983), p. 47; Art. 9, Nouveau Code de Procédure Civile; J. Carbonnier, Droit Civil, Introduction, 20th ed. (Presses Universitaires de France, 1991), p. 320; J. Chevalier and L. Bach, Droit Civil, 12th ed. (Sirey, 1995), Vol. 1, p. 101; R. Guillien and J. Vincent, Termes juridiques, 10th ed. (Dalloz, 1995), p. 384; O. Samyn, P. Simonetta and C. Sogno, Dictionnaire des Termes Juridiques (Editions de Vecchi, 1986), p. 250; J. González Pérez, Manual de Derecho Procesal Administrativo, 2nd ed. (Editorial Civitas, 1992), p. 311; C.M. Bianca, S. Patti and G. Patti, Lessico di Diritto Civile (Giuffré Editore, 1991), p. 550; F. Galgano, Diritto Privato, 8th ed. (Casa Editrice Dott. Antonio Milani, 1994), p. 873; and A. Trabucchi, Istituzioni di Diritto Civile (Casa Editrice Dott. Antonio Milani, 1991), p. 210.
17 Adopted 31 October 1952, BISD 1S/53, para. 15. See also the report of the Working Party in The Australian Subsidy on Ammonium Sulphate, adopted 3 April 1950, BISD Vol. II/188, para. 11.
18 Adopted 14 March 1978, BISD 25S/49, para. 4.21. See also European Communities - Refunds on Exports of Sugar, Complaint by Brazil, adopted 10 November 1980, BISD 27S/69, para. (e) of the Conclusions; Canada, Administration of the Foreign Investment Review Act, adopted 7 February 1984, BISD 30S/140, para. 5.13; and Japan - Tariff on Import of Spruce, Pine, Fir (SPF) Dimension Lumber, adopted 19 July 1989, BISD 36S/167, para. 10.
19 Adopted 18 February 1992, BISD 39S/27, paras. 5.2-5.3.
20 Adopted 4 October 1994, DS44/R, paras. 82 and 124.
21 Canada - Administration of Foreign Investment Review Act, adopted 7 February 1984, BISD 30S/140, para. 5.20; United States - Section 337 of the Tariff Act of 1930, adopted 7 November 1989, BISD 36S/345, para. 5.27; United States - Measures Affecting Alcoholic and Malt Beverages, adopted 19 June 1992, BISD 39S/206, paras. 5.43 and 5.52; and Panel Report, United States - Standards for Reformulated and Conventional Gasoline, as modified by the Appellate Body Report, AB-1996-1, adopted 20 May 1996, WT/DS2/9, para. 6.20.
22 Japan - Restrictions on Imports of Certain Agricultural Products, adopted 22 March 1988, BISD 35S/163, para. 126.96.36.199; EEC - Restrictions on Imports of Dessert Apples, Complaint by Chile, adopted 22 June 1989, BISD 36S/93, para. 12:3; and Canada - Import Restrictions on Ice Cream and Yoghurt, adopted 5 December 1989, BISD 36S/68, para. 59.
23 Furthermore, there are a few cases that are similar in that the defending party invoked, as a defence, certain provisions and the panel explicitly required the defending party to demonstrate the applicability of the provision it was asserting. See, for example, United States - Customs User Fee, adopted 2 February 1988, BISD 35S/245, para. 98, concerning Article II:2 of the GATT 1947; Canada - Import, Distribution and Sale of Certain Alcoholic Drinks by Provincial Marketing Agencies, adopted 22 March 1988, BISD 35S/37, para 4.34, concerning Article XXIV:12 of the GATT 1947; and United States - Measures Affecting Alcoholic and Malt Beverages, adopted 19 June 1992, BISD 39S/206, para. 5.44, concerning the Protocol of Provisional Application.
24 AB-1996-3, adopted 25 February 1997, WT/DS24/AB/R, p. 15.
25 Panel Report, para. 8.1.
26 Within the meaning of Article 17.13 of the DSU.
27 See, for example, EEC - Quantitative Restrictions Against Imports of Certain Products from Hong Kong, adopted 12 July 1983, BISD 30S/129, para. 33; Canada - Administration of the Foreign Investment Review Act, adopted 7 February 1984, BISD 30S/140, para. 5.16; United States - Imports of Sugar from Nicaragua, adopted 13 March 1984, BISD 31S/67, paras. 4.5-4.6; United States - Manufacturing Clause, adopted 15/16 May 1984, BISD 31S/74, para. 40; Japan - Measures on Imports of Leather, adopted 15/16 May 1984, BISD 31S/94, para. 57; Japan - Trade in Semi-Conductors, adopted 4 May 1988, BISD 35S/116, para. 122; Japan - Restrictions on Imports of Certain Agricultural Products, adopted 22 March 1988, BISD 35S/163, para. 5.4.2; EEC - Regulations on Imports of Parts and Components, adopted 16 May 1990, BISD 37S/132, paras. 5.10, 5.22, and 5.27; Canada - Import, Distribution and Sale of Certain Alcoholic Drinks by Provincial Marketing Agencies, adopted 22 March 1988, BISD 35S/37, para. 5.6; and United States - Denial of Most-Favoured-Nation Treatment as to Non-Rubber Footwear from Brazil, adopted 19 June 1992, BISD 39S/128, para. 6.18.
28 See, for example, Panel Report, Brazil - Measures Affecting Desiccated Coconut, adopted 20 March 1997, WT/DS22/R, para. 293; and Panel Report, United States - Standards for Reformulated and Conventional Gasoline, as modified by the Appellate Body Report, AB-1996-1, adopted 20 May 1996, WT/DS2/9, para. 6.43.
29 See, for example, EEC - Restrictions on Imports of Dessert Apples, Complaint by Chile, adopted 22 June 1989, BISD 36S/93, para.12.20, where the panel explicitly stated that given its finding that the EEC measures were in violation of Article XI:1 of the GATT 1947 and were not justified by Article XI:2(c)(i) or (ii) of the GATT 1947, no further examination of the administration of the measures would normally be required. In that case, the panel nonetheless considered it "appropriate" to examine the administration of the EEC measures in respect of Article XIII of the GATT 1947 in view of the questions of great practical interest raised by both parties.
30 The "matter in issue" is the "matter referred to the DSB" pursuant to Article 7 of the DSU.
31 Japan - Taxes on Alcoholic Beverages, AB-1996-2, adopted 1 November 1996, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, p. 13.