1. ADEQUACY OF THE CONSULTATIONS

7.17 Consultations under Article 4 of the DSU are normally required as the first step in the WTO dispute settlement process. ⁷²³ Article 4.2 of the DSU requires a Member "to accord sympathetic consideration to and afford adequate opportunity for consultation regarding any representations made by another Member ...". Article 4.5 of the DSU specifies that "[i]n the course of the consultations ... before resorting to further action under this Understanding, Members should attempt to obtain satisfactory adjustment of the matter". However, if consultations fail to settle a dispute within 60 days of the request for consultations, Article 4.7 of the DSU authorizes the complaining party to request the DSB to establish a panel. ⁷²⁴

7.18 The EC argues that the consultations that were held in this matter between the Complainants and the EC did not fulfil their minimum function of affording a possibility for arriving at a mutually satisfactory solution and a clear setting out of the different claims of which a dispute consists. The Complainants argue that Article 4.5 of the DSU only requires that an "attempt" be made to resolve the matter. Since consultations were held on 14-15 March 1996, the Complainants argue that they complied with the DSU and were authorized to request the DSB to establish a panel when those consultations failed to produce a mutually agreed solution to the dispute. We note that the EC did not raise this issue in the DSB. ⁷²⁵

7.19 Consultations play a critical role in the WTO dispute settlement process as they did under GATT. Experience under the DSU to date has shown that consultations frequently enable disputes between Members to be resolved without resort to the dispute settlement panel process. ⁷²⁶ Since the DSU provides in Article 3.7 that "[a] solution mutually acceptable to the parties to a dispute and consistent with the covered agreements is clearly to be preferred", disputing parties should consult in good faith and attempt to reach such a solution. Consultations are, however, a matter reserved for the parties. The DSB is not involved; no panel is involved; and the consultations are held in the absence of the Secretariat. In these circumstances, we are not in a position to evaluate the consultation process in order to determine if it functioned in a particular way. While a mutually agreed solution is to be preferred, in some cases it is not possible for parties to agree upon one. In those cases, it is our view that the function of a panel is only to ascertain that consultations, if required, were in fact held or, at least, requested. ⁷²⁷

7.20 As to the EC argument that consultations must lead to an adequate explanation of the Complainants' case, we cannot agree. Consultations are the first step in the dispute settlement process. While one function of the consultations may be to clarify what the case is about, there is nothing in the DSU that provides that a complainant cannot request a panel unless its case is adequately explained in the consultations. The fulfilment of such a requirement would be difficult, if not impossible, for a complainant to demonstrate if a respondent chose to claim a lack of understanding of the case, a result which would undermine the automatic nature of panel establishment under the DSU. The only prerequisite for requesting a panel is that the consultations have "fail[ed] to settle a dispute within 60 days of receipt of the request for consultations ...". ⁷²⁸ Ultimately, the function of providing notice to a respondent of a complainant's claims and arguments is served by the request for establishment of a panel and by the complainant's submissions to that panel.

7.21 We reject the EC's claim that the Complainants' case should be dismissed because the consultations held concerning this dispute did not perform their minimum function of affording a possibility for arriving at a mutually satisfactory solution and a clear setting out of the different claims of which a dispute consists.

2. SPECIFICITY OF THE REQUEST FOR PANEL ESTABLISHMENT

(a) Article 6.2 and the request for establishment of the Panel

7.22 Article 6.2 of the DSU provides in relevant part as follows:

The EC claims that the request for the establishment of the Panel in this case fails to "identify the specific measures at issue" and does not "provide a brief legal basis of the complaint sufficient to present the problem clearly".

7.23 The relevant parts of the Complainants' request for the establishment of this Panel read as follows:

(b) The arguments of the parties

7.24 The EC claims that the Complainants' request for the establishment of this Panel fails to comply with the requirements of Article 6.2 of the DSU. The EC notes that the request refers specifically to only one EC regulation and describes that regulation and related, but unspecified, measures as a "regime". The EC further notes that while the request refers to some specific agreements and provisions, it suggests that there might be other unspecified provisions and agreements that are relevant, and that it fails to explain which part of the EC regime is inconsistent with the requirements of which provision of which agreement. The EC argues that for these reasons the panel request is inadequate to serve as the basis for the terms of reference of the Panel and inadequate to give appropriate notice to the EC and potential third parties of which claims may be put forward by the Complainants. In support of its arguments, the EC cites two panel reports issued under the Tokyo Round Agreement on the Interpretation of Article VI (the "Tokyo Round Anti-Dumping Code"), one of which was adopted by the Committee on Anti-Dumping Practices and one of which was not. ⁷³⁰

7.25 In response, the Complainants argue that their request refers to the basic EC regulation that establishes the EC rules on banana imports and that this reference is sufficient to identify the measures at issue. They argue, in addition, that Article 6.2 does not require a panel request to tie each part of a contested measure to a specific provision of a WTO agreement that it is inconsistent with, but rather that submissions to panels serve that purpose. The Complainants further argue that the Tokyo Round Anti-Dumping Code cases are irrelevant. Moreover, they note that the EC did not raise this issue at either DSB meeting at which the panel request was presented and cannot now claim that it was prejudiced by not knowing the claims of the Complainants. Finally, the Complainants argue that this Panel may not rule on this claim because it is outside the Panel's terms of reference.

(c) Analysis of the Article 6.2 claim

7.26 We examine first the argument by the Complainants that we have no authority to consider the EC claim. As noted above, panels under GATT 1947 and the Tokyo Round agreements considered similar claims. ⁷³¹ We see no reason to deviate from that practice. Because of the application of "reverse" consensus decision-making applicable in the case of panel establishment in the DSB, the DSB is not likely to be an effective body for resolving disputes over whether a request for the establishment of a panel meets the requirements of Article 6.2 of the DSU. Therefore, as a practical matter only the panel established on the basis of the request (and thereafter the Appellate Body) can perform that function. Moreover, the issue we are asked to resolve can be viewed in essence as a decision on the scope of our terms of reference, which is clearly a proper subject for consideration by a panel. ⁷³² We turn therefore to an analysis of the EC claim in light of the interpretative rule of the Vienna Convention and of Article XVI of the WTO Agreement. In this connection, we examine (i) the ordinary meaning of the terms of Article 6.2, (ii) the context of the terms of Article 6.2, (iii) the object and purpose of Article 6.2 and (iv) past practice under Article 6.2 and its predecessor.

(i) Ordinary meaning of treaty terms

7.27 Article 6.2 of the DSU requires that the "specific measures at issue" be "identif[ied]" and that there be "a brief summary of the legal basis of the complaint sufficient to present the problem clearly". The EC challenges the panel request on both grounds. As to the first requirement, the panel request does identify the basic EC regulation at issue by place and date of publication. In our view, this complies with the requirements of Article 6.2. While the request does not identify the subsequent EC legislation, regulations and administrative measures that further refine and implement the basic regulation, we believe that the "banana regime" that the Complainants are contesting is adequately identified.

7.28 As to the second requirement of Article 6.2, a complete elaboration of the complainant's legal argument is not required. Article 6.2 specifies only that the request must include a "summary" of the legal basis of the complaint and that the summary need only be "brief". However, Article 6.2 does require that summary to "present the problem clearly". In undertaking an analysis of whether the panel request in this case complies with the terms of Article 6.2 of the DSU, we find it useful to divide the request into three categories of specificity. First, in most cases, the request alleges that the EC banana regime is inconsistent with the requirements of a specific provision of a specific agreement. Second, in the case of the Agreement on Agriculture, the request simply alleges that the regime is inconsistent with that agreement. Third, the panel request indicates that the list of provisions specified in the request is not exclusive. We examine the compliance of the request with Article 6.2 in each of these three situations.

7.29 Where the panel request alleges that the banana regime is inconsistent with the requirements of a specific article of a specific agreement, we believe that the request is sufficiently specific to comply with the minimum standards established by the terms of Article 6.2 of the DSU. For example, the request claims that the regime is inconsistent with the requirements of six GATT provisions: Articles I, II, III, X, XI and XIII, as well as inconsistent with the requirements of specific provisions of the Agreement on Import Licensing Procedures, the Agreement on Trade-Related Investment Measures and the General Agreement on Trade in Services. Generally, each of these provisions is concerned with a distinct obligation. For example, Article I of GATT bans discrimination on the basis of origin in respect of certain specified matters. A fair reading of the panel request's reference to Article I would be that there is an allegation that the EC banana regime is inconsistent with the requirements of Article I because it contains elements that discriminate in favour of some countries to the detriment of Members. Such an allegation can be described as a "brief summary of the legal basis of the complaint", which arguably presents the "problem" clearly, i.e. there is discrimination on the basis of product origin which is inconsistent with the requirements of Article I. However, a panel request that does no more than identify a measure and specify the provision with which it is alleged to be inconsistent is, in our view, at the outer limits of what is acceptable under Article 6.2. Nonetheless, particularly in light of our analysis below of the object and purpose and of the context of Article 6.2 and of past GATT and WTO practice, we believe that this conclusion is the appropriate interpretation of the terms of Article 6.2. In this regard, we note that there is no explicit requirement in Article 6.2 to explain how the measure at issue is inconsistent with the requirements of a specific WTO provision and the EC concedes in its response to our questions that a simple listing of the provision and agreement alleged to have been violated may suffice for the purposes of Article 6.2. ⁷³³

7.30 The panel request alleges an inconsistency with the requirements of the Agreement on Agriculture, without specifying any provision thereof. It also states that "the EC's measures are inconsistent with the following Agreements and provisions among others", suggesting that there may be inconsistencies with unspecified agreements and inconsistencies with unspecified provisions of the specified agreements. In these two situations, it is not possible at the panel request stage, even in the broadest generic terms, to describe what legal "problem" is asserted. While a reference to a specific provision of a specific agreement may not be essential if the problem or legal claim is otherwise clearly described, in the absence of some description of the problem, a mere reference to an entire agreement or simply to "other" unspecified agreements or provisions is inadequate under the terms of Article 6.2. Accordingly, we find that references to a WTO agreement without mentioning any provisions or to unidentified "other" provisions are too vague to meet the standards of Article 6.2 of the DSU.

7.31 Thus, we preliminarily find that, given the ordinary meaning of the terms of Article 6.2 of the DSU, the panel request made by Complainants was generally sufficient to meet its requirements. We note, however, that since the invocation of the Agreement on Agriculture in the panel request did not indicate a specific provision thereof, we will not consider the claim raised by Ecuador in its first written submission under that Agreement. We will also not consider the claims raised by Ecuador, Guatemala and Honduras, and the United States in their first written submissions under Article 5 of the TRIMs Agreement since the panel request referred only to Article 2 of the TRIMs Agreement. ⁷³⁴ We now consider whether this preliminary finding is supported by the context and the object and purpose of Article 6.2. We also consider past practice under Article 6.2 and its predecessor.

(ii) Context

7.32 The terms of Article 6.2 of the DSU must be interpreted in light of their context in the WTO dispute settlement system. First and foremost, that system is designed to settle disputes. ⁷³⁵ Article 3.2 of the DSU specifies that "[t]he dispute settlement system of the WTO is a central element in providing security and predictability to the multilateral trading system. ...". Article 3.3 continues in the same vein (emphasis added):

In our view, the DSU must be interpreted so as to promote the prompt settlement of disputes, without adopting a reading of DSU provisions that would prolong disputes unnecessarily or make the DSU overly difficult for Members, including developing country Members, to use. A clear test of specificity, such as we apply in this case, is required.

7.33 The problems presented by other interpretations of Article 6.2 are readily apparent in this case. While no one would contest that there is a real dispute between the Complainants and the EC over the EC's import regime for bananas, if we were to rule that the panel request did not meet the requirements of Article 6.2 of the DSU and that the Complainants' panel request was accordingly invalid, the resolution of this dispute would be delayed by at least 6 or 7 months. Yet, what purpose would that serve? Once the Complainants filed their first submission, there could be no doubt exactly what their claims were. To the extent that a respondent could legitimately claim surprise in what was contained in a complainant's submission, the efficient solution would be to grant the respondent several more weeks to file its initial submission, not to start the entire consultation/panel request process over. This is particularly true given that a reading of Article 6.2 of the DSU such as the EC proposes could result in some parts of the case being accepted, while others were relegated to a different proceeding, something completely contrary to the DSU's philosophy of resolving all related issues together, as expressed in Article 9 of the DSU. ⁷³⁶ Moreover, such a reading could make it more difficult for Members, and particularly developing-country Members, to use the dispute settlement system, except by incurring the expense of private legal experts at the earliest stage of the proceedings.

7.34 Thus, a consideration of the context of the terms of Article 6.2 supports the preliminary finding reached in paragraph 7.31 above.

(iii) Object and purpose

7.35 We see three purposes for Article 6.2 of the DSU. First, the request for the establishment of a panel under Article 6.2 will usually serve to set the terms of reference of the panel under Article 7 of the DSU. Second, the request informs the responding Member of the scope of the case against it. Third, the request informs potential third parties of the scope of the case, so that they can better decide whether they wish to assert third-party rights.

7.36 In this case, we believe that the request for establishment of a panel adequately serves these three purposes. First, we have already found that Article 6.2 of the DSU requires a complainant to specify the provision of the WTO agreements that it is relying upon by agreement and article. Thus, a panel will always be able to understand which claims it is required to examine under its terms of reference. Given this interpretation of Article 6.2, we understand our terms of reference without difficulty in this case.

7.37 Second, it appears that the panel request adequately informed the EC of the case against it. We reach this conclusion in light of the facts that the EC did not complain about the request's specificity until it filed its first submission, it did not ask for time beyond the normal periods indicated in the DSU to file its submission and it did not claim in its written submissions that its defence was prejudiced in any particular way by a lack of specificity in the panel request. The EC stated at the Panel's hearings, however, that it had been prejudiced in that the lack of minimal clarity handicapped the EC in the preparation of its defence. However, as pointed out by the Complainants, the EC's oral presentation at the first meeting of the Panel, its responses to our questions and its rebuttal submission essentially followed the line of argument made in its initial submissions, suggesting that it had sufficient time to develop its line of defence. In these circumstances, we believe that the object and purpose of Article 6.2 of the DSU was served by the Complainants' panel request, suggesting that such request was adequately specific under Article 6.2.

7.38 Third, it appears that the panel request adequately informed third parties of the case against the EC, as 20 third parties participated in this panel process. ⁷³⁷

7.39 Thus, a consideration of the object and purpose of Article 6.2 supports the preliminary finding reached in paragraph 7.31 above.

7.40 Article XVI:1 of the WTO Agreement provides, as noted above, that the "WTO shall be guided by the decisions, procedures and customary practices" of GATT. In the case of adopted panel reports, the Appellate Body has indicated that

There are two GATT/WTO cases that consider issues related to the one we face here. In 1992 a panel declined to consider claims based on GATT Articles X and XXIII(b)-(c) because they were not within its terms of reference, which it noted were defined by the request for the establishment of the panel. ⁷³⁹ More recently, a WTO panel reached a similar result in respect of a claim that consultations had not been properly held under Article XXIII, rejecting the claim because a fair reading of the documents that were used to establish its terms of reference showed that the issue had not been raised in those documents. ⁷⁴⁰ Although treated as a "terms of reference" issue in both cases, the results were in effect determined on the basis of the panel request. The terms of reference were found not to encompass the claim because the provision or issue had not been referred to in the panel request (and related documents in one case), which in both cases had served to establish the panels' terms of reference. Our reading of the terms of Article 6.2 of the DSU is not inconsistent with these past GATT/WTO panel decisions, nor with a recent Appellate Body decision affirming the above-mentioned WTO panel decision. ⁷⁴¹ In this connection, we note that the power of a panel to interpret its terms of reference is not negated by the requirement in Article 7.2 of the DSU that a panel address the "relevant" provisions of covered agreements cited by the parties.

7.41 With respect to practice of GATT contracting parties and Members in requesting panels, numerous examples may be found in the period from 1989 ⁷⁴² to date of panel requests containing only an allegation that a measure is inconsistent with the requirements of a specific provision of a specific agreement, without a more detailed description of the problem. ⁷⁴³ Indeed, as noted above, the EC concedes as much in its response to our questions where it examines panel requests in eight WTO cases and finds that in most cases there is no specific explanation given as to how the contested measure is inconsistent with the requirements of the specified provisions of the specified agreements. To date, no GATT or WTO panel has found such requests to be inadequate, except in respect of the antidumping and countervailing duty claims discussed in the following paragraph. Thus, our reading of the terms of Article 6.2 of the DSU is consistent with the practice followed by GATT contracting parties and WTO Members in requesting panels under Article 6.2 and the similar language of its predecessor provision, which was adopted by the GATT CONTRACTING PARTIES in 1989.

7.42 It can be argued, however, that our reading of the terms of Article 6.2 may not be consistent with several panel decisions (adopted and unadopted) under the Tokyo Round Agreement on Implementation of Article VI (the "Tokyo Round Anti-Dumping Code"). ⁷⁴⁴ We find these cases to be of limited relevance in the interpretation of the terms of Article 6.2 of the DSU. In the first place, the Tokyo Round Anti-Dumping Code had different rules for the initiation of panel procedures than were applicable in the case of GATT 1947 panels. More fundamentally, Article 15 of the Tokyo Round Anti-Dumping Code required a so-called conciliation procedure, involving the disputing parties and the Committee charged with supervising the operations of the Code, between the end of the consultation period and the filing of a request to establish a panel. The practice under this conciliation procedure involved the preparation of a detailed statement of issues by the complaining party, which was circulated to the members of the Committee so that they might attempt to solve the dispute through conciliation. Article 15.5 of the Tokyo Round Anti-Dumping Code referred to the conciliation process as involving a "detailed examination by the Committee". In order to make the conciliation process meaningful, it may have been appropriate to insist that all claims brought before a panel have been considered in the conciliation process. Such a conciliation requirement does not exist under the DSU and did not exist under GATT 1947 rules. There has never been a practice of preparing such a statement of claims. Moreover, the nature of antidumping cases is different from this case.

7.43 In any event, we recognize that past practice under the Tokyo Round Anti-Dumping Code may have been inconsistent with the result we reach. We recall that Article 3.3 of the DSU states that the prompt settlement of disputes is essential to the effective functioning of the WTO and we believe that our interpretation of Article 6.2 of the DSU best achieves that objective.

(v) Cure

7.44 Finally, we note that at the second substantive Panel meeting, we expressed the preliminary view that even if there was some uncertainty whether the panel request had met the requirements of Article 6.2, the first written submissions of the Complainants "cured" that uncertainty because their submissions were sufficiently detailed to present all the factual and legal issues clearly. We considered that at the time that the EC filed its first written submission to the Panel, it had complete knowledge of the Complainants' case through their submissions. In light of our analysis of the panel request and Article 6.2 as outlined above, we confirm our preliminary view. ⁷⁴⁵

7.46 In light of the foregoing finding, since the invocation of the Agreement on Agriculture in the panel request did not indicate a specific provision thereof, we will not consider the claim raised by Ecuador in its first written submission under that Agreement. We will also not consider the claims raised by Ecuador, Guatemala and Honduras, and the United States in their first written submissions under Article 5 of the TRIMs Agreement since the panel request referred only to Article 2 of the TRIMs Agreement. ⁷⁴⁶

3. REQUIREMENT OF LEGAL INTEREST

7.47 The EC argues that the US claims concerning trade in goods should be rejected because US banana production is minimal, its banana exports are nil and that for climatic reasons this situation is not likely to change. As a result, the EC suggests that the United States has not suffered any nullification or impairment of WTO benefits in respect of trade in bananas as required by Article 3.3 and 3.7 of the DSU. ⁷⁴⁷ Moreover, the EC argues that the United States would have no effective WTO remedy under Article 22 of the DSU. With no effective remedy and absent any notion of a declaratory judgment or advisory opinion in the WTO dispute settlement system, the EC claims that the United States cannot raise "goods" issues because it has "no legal right or interest" therein. The EC argues that there must be a requirement in the WTO dispute settlement system that a complaining party have such a "legal interest" because the absence of such a requirement would undermine the DSU by leading to litigation "by all against all". The EC also suggests that the interests of Members in any given case can be adequately protected through assertion of a third party interest in the case.

7.48 In response, the Complainants argue that there is no basis in the DSU for the EC's claim and that their claims are covered by the Panel's terms of reference. They argue that Article 3.8 of the DSU presupposes a finding of infringement prior to a consideration of the nullification-or-impairment issue, suggesting that even if no compensation were due, an infringement finding could be made. Moreover, they argue that it is inappropriate to try to define potential trade. They also mention that in a past case the EC advanced a broad notion of nullification or impairment, which if generally accepted would permit the Complainants to claim nullification or impairment in this case.

7.49 In examining this issue, we note that neither Article 3.3 nor 3.7 of the DSU nor any other provision of the DSU contain any explicit requirement that a Member must have a "legal interest" as a prerequisite for requesting a panel. The reference in Article XXIII of GATT to nullification or impairment (or the impeding of the attainment of any GATT objective) does not establish a procedural requirement. Moreover, Article 3.8 of the DSU provides that nullification or impairment is normally presumed if there is an infringement of the obligations of a WTO agreement. ⁷⁴⁸

7.50 We fail to see that there is, or should be, a legal interest test under the DSU. This view is corroborated by past GATT practice, which suggests that if a complainant claims that a measure is inconsistent with the requirements of GATT rules, there is not a requirement to show actual trade effects. GATT rules have been consistently interpreted to protect "competitive opportunities" as opposed to actual trade flows. For example, in the 1949 Working Party Report on Brazilian Internal Taxes, a number of the members of the working party took the view that

This view was confirmed in the 1958 Italian Agricultural Machinery case, where the panel noted that Article III of GATT applied to "any laws or regulations which might adversely modify the conditions of competition between the domestic and imported products". ⁷⁵⁰ The Section 337 case notes that Article III is concerned with "effective equality of opportunities for imported products". ⁷⁵¹ These cases confirm that WTO rules are not concerned with actual trade, but rather with competitive opportunities. Generally, it would be difficult to conclude that a Member had no possibility of competing in respect of a product or service. The United States does produce bananas in Puerto Rico and Hawaii. Moreover, even if the United States did not have even a potential export interest, its internal market for bananas could be affected by the EC regime and that regime's effect on world supplies and prices. Indeed, with the increased interdependence of the global economy, which means that actions taken in one country are likely to have significant effects on trade and foreign direct investment flows in others, Members have a greater stake in enforcing WTO rules than in the past since any deviation from the negotiated balance of rights and obligations is more likely than ever to affect them, directly or indirectly. Since the United States is likely to be affected by the EC regime, it would have an interest in a determination of whether the EC regime is inconsistent with the requirements of WTO rules. Thus, in our view a Member's potential interest in trade in goods or services and its interest in a determination of rights and obligations under the WTO Agreement are each sufficient to establish a right to pursue a WTO dispute settlement proceeding. Moreover, we note that this result is consistent with decisions of international tribunals. ⁷⁵²

7.51 As to the EC's suggestions that the absence of a legal interest test (defined to exclude the US "goods" claims in this case) would undermine the DSU because it would lead to litigation "by all against all" and that the interests of Members in any given case can be adequately protected through assertion of a third party rights in the case, we note that all Members have an interest in ensuring that other Members comply with their obligations. That interest is not completely served by the possible assertion of third party rights since there may be no occasion to assert such rights unless another Member initiates a DSU proceeding and since third party rights are more limited than the rights of parties. The likelihood of litigation by all against all seems unlikely, as Members are admonished by Article 3.7 of the DSU to exercise restraint in bringing cases and the cost of bringing cases is such, especially in a case like this one, that this admonition is likely to be followed. In our view, it is also unlikely that significant numbers of cases will be initiated by Members that have no immediate trade interest in their results.

4. NUMBER OF PANEL REPORTS

7.53 The EC requested the Panel, pursuant to Article 9 of the DSU, to prepare four panel reports in this case-one each for the claims of Ecuador, Guatemala and Honduras (who filed a joint first submission), Mexico and the United States. The Complainants suggested that, even if the EC had a right to insist on separate reports under Article 9, it should not do so because of the increased administrative burden that would be placed upon the Panel. Moreover, they requested that the Panel should make the same findings and conclusions with respect to the same claims.

7.54 Article 9 of the DSU provides in relevant part as follows:

7.55 We interpret the terms of Article 9 to require us to grant the EC request. However, in light of the fact that the Complainants presented joint oral submissions to the Panel, joint responses to questions and a joint rebuttal submission, as well as the fact that they have collectively endorsed the arguments made in each other's first submissions, we must also take account of the close interrelationship of the Complainants' arguments.

7.56 In our view, one of the objectives of Article 9 is to ensure that a respondent is not later faced with a demand for compensation or threatened by retaliation under Article 22 of the DSU in respect of uncured inconsistencies with WTO rules that were not complained of by one of the complaining parties participating in a panel proceeding. Our reports must bear this objective in mind.

7.57 For purposes of determining whether a Complainant in this matter has made a claim, we have examined its first written submission, as we consider that document determines the claims made by a complaining party. To allow the assertion of additional claims after that point would be unfair to the respondent, as it would have little or no time to prepare a response to such claims. In this regard, we note that paragraph 12(c) of the Appendix 3 to the DSU on "Working Procedures" foresees the simultaneous submission of the written rebuttals by complaining and respondent parties, a procedure that was followed in this case. To allow claims to be presented in the rebuttal submissions would mean that the respondent would have an opportunity to rebut the claims only in its oral presentation during the second meeting. In our view, the failure to make a claim in the first written submission cannot be remedied by later submissions or by incorporating the claims and arguments of other complainants.

7.59 In light of the foregoing, in the "Findings" we use the term "the Complainants" to refer to all of the Complaining parties who have made a particular claim. In discussing the claim, when we refer to the Complainants' arguments, we mean all arguments made in support of the claim by the various Complaining parties, who have incorporated each other's arguments into their own. Thus, the term "the Complainants" in this report means Guatemala and Honduras and one or more of the other Complaining parties. In cases where only Guatemala has made a claim as outlined above, we refer to that claim as being made by Guatemala.

7.60 As explained above, when one of the Complaining parties has not claimed that a specific provision of a specific agreement has been violated in its initial written submission to the Panel, we do not discuss our findings with respect to that claim in the report for that party. However, for the convenience of readers of the four reports, we have used the same paragraph numbers and footnote numbers for the substantive discussions of the same issues in the four reports. Where an issue has not been raised by Guatemala or Honduras, we indicate in this report which reports and which paragraph numbers in those reports discuss that issue.

C. SUBSTANTIVE ISSUES

7.61 We now turn to an examination of the substantive issues raised by the Complainants in respect of the EC's regime for the importation, sale and distribution of bananas. We first address claims related to the EC's quantitative allocations for bananas, including the shares assigned to the ACP countries and to signatories of the Framework Agreement on Bananas ("BFA"). Second, we consider tariff issues, including preferences afforded to imports of certain ACP bananas. We then consider the claims made in respect of the EC licensing procedures for bananas. Finally, we examine the claims raised in respect of the General Agreement on Trade in Services.

7.62 Before doing so, we consider whether bananas from the EC, ACP countries, BFA countries and other third countries are "like" products for purposes of the claims made in respect of Articles I, III, X and XIII of GATT. The factors commonly used in GATT practice to determine likeness, such as, for example, customs classification, end-use, and the properties, nature and quality of the product, all support a finding that bananas from these various sources should be treated as like products. ⁷⁵³ Moreover, all parties and third parties to the dispute have proceeded in their legal reasoning on the assumption that all bananas are "like" products in spite of any differences in quality, size or taste that may exist.

1. THE EC MARKET FOR BANANAS: ARTICLE XIII OF GATT

7.64 As of 1995, bananas could be marketed in the EC as follows:

7.65 The Complainants claim that the EC has failed to allocate country-specific tariff quota shares to those Complainants that export bananas to the EC and that the EC's allocation of tariff quota shares to the ACP and BFA countries is inconsistent with the requirements of the tariff quota allocation rules of Article XIII of GATT. The EC responds that it has complied with the terms of Article XIII. In particular, the EC argues that the preferences it provides to traditional ACP bananas are permitted under the Lomé waiver and its treatment of BFA and other bananas is provided pursuant to the EC's Schedule into which the BFA is incorporated.

7.66 We first consider how Article XIII of GATT should be interpreted and whether the EC's banana tariff quota shares conform to its requirements. We then consider whether any inconsistencies with Article XIII are waived by the Lomé waiver or permitted as a result of the negotiation of the BFA and its inclusion in the EC's Schedule.

(a) Article XIII

7.67 Article XIII of GATT generally regulates the administration of quotas and tariff quotas. In relevant parts, it provides as follows:

Article XIII

Non-discriminatory Administration of Quantitative Restrictions

4. With regard to restrictions applied in accordance with paragraph 2 (d) of this Article or under paragraph 2 (c) of Article XI, the selection of a representative period for any product and the appraisal of any special factors* ⁷⁵⁵ affecting the trade in the product shall be made initially by the Member applying the restriction; Provided that such Member shall, upon the request of any other Member having a substantial interest in supplying that product or upon the request of the [Contracting Parties], consult promptly with the other Member or the [Contracting Parties] regarding the need for an adjustment of the proportion determined or of the base period selected, or for the reappraisal of the special factors involved, or for the elimination of conditions, formalities or any other provisions established unilaterally relating to the allocation of an adequate quota or its unrestricted utilization.

5. The provisions of this Article shall apply to any tariff quota instituted or maintained by any Member, and, in so far as applicable, the principles of this Article shall also extend to export restrictions.

7.68 The wording of Article XIII is clear. If quantitative restrictions are used (as an exception to the general ban on their use in Article XI), they are to be used in the least trade-distorting manner possible. In the terms of the general rule ⁷⁵⁶ of the chapeau of Article XIII:2:

In this case, we are concerned with tariff quotas, which are permitted under GATT rules, and not quantitative restrictions per se. However, Article XIII:5 makes it clear, and the parties agree, that Article XIII applies to the administration of tariff quotas. In light of the terms of Article XIII, it can be said that the object and purpose of Article XIII:2 is to minimize the impact of a quota or tariff quota regime on trade flows by attempting to approximate under such measures the trade shares that would have occurred in the absence of the regime. In interpreting the terms of Article XIII, it is important to keep their context in mind. Article XIII is basically a provision relating to the administration of restrictions authorized as exceptions to one of the most basic GATT provisions-the general ban on quotas and other non-tariff restrictions contained in Article XI.

TO CONTINUE WITH EC - REGIME FOR IMPORTATION OF BANANAS - COMPLAINT BY GUATEMALA AND HONDURAS

⁷²³ Under Article 8.10 of the Agreement on Textiles and Clothing, a matter may be taken to the DSB without prior consultations under the DSU.

⁷²⁴ If there is a failure to consult, Article 4.3 of the DSU provides that a panel may be requested after 30 days.

⁷²⁵ Minutes of DSB Meeting of 24 April 1996, WT/DSB/M/15, item 1, pp.1-2; Minutes of DSB Meeting of 8 May 1996, WT/DSB/M/16, item 1, pp.1-5.

⁷²⁶ WT/DBS/8, p.17 (1996 Annual Report of the DSB).

⁷²⁷ DSU, Article 4.3.

⁷²⁸ DSU, Article 4.7.

⁷²⁹ WT/DS27/6.

⁷³⁰ Panel Report on "United States - Anti-Dumping Duties on Imports of Fresh and Chilled Atlantic Salmon from Norway", adopted on 26 April 1994, ADP/87, p.99, paras. 333-335; Panel Report on "EC - Anti-Dumping Duties on Audiotapes in Cassettes Originating in Japan", issued on 28 April 1995, ADP/136, p.53, para. 295.

⁷³¹ Panel Report on "United States - Denial of Most-Favoured Nation Treatment as to Non-Rubber Footwear from Brazil", adopted on 19 June 1992, BISD 39S/128, pp.147-148, paras. 6.1-6.2. Panels under Tokyo Round agreements include: Panel Report on "European Communities - Imposition of Anti-Dumping Duties on Imports of Cotton Yarn from Brazil", adopted on 4 July 1995, ADP/137, pp.105-109, paras. 438-466; Panel Report on "United States - Countervailing Duties on Imports of Fresh and Chilled Atlantic Salmon from Norway", adopted on 27 April 1994, SCM/153, pp.68-69, paras. 208-214; Panel Report on "United States - Anti-Dumping Duties on Imports of Fresh and Chilled Atlantic Salmon from Norway", adopted on 26 April 1994, ADP/87, p.99, paras. 333-335; Panel Report on "United States - Anti-Dumping Duties on Imports of Gray Portland Cement and Cement Clinker from Mexico", issued on 7 September 1992, ADP/82, pp.49-50, para. 5.12.

⁷³² The Appellate Body has considered terms of reference issues. Appellate Body Report on "Brazil - Measures Affecting Desiccated Coconut", issued on 21 February 1997, WT/DS22/AB/R, AB-1996-4, p.22.

⁷³³ In its response, the EC seems to accept that the following panel requests under the DSU meet the requirements of Article 6.2 even though they only list the WTO provisions that the challenged measures are alleged to be inconsistent with, without explaining why: Canada - Certain Measures Concerning Periodicals, Request for the Establishment of a Panel, 24 May 1996, WT/DS31/2; EC - Measures Concerning Meat and Meat Products (Hormones), Request for the Establishment of a Panel, WT/DS26/6; EC - Trade Description of Scallops, Request for the Establishment of a Panel by Chile, WT/DS14/5; EC - Trade Description of Scallops, Request for the Establishment of a Panel by Peru, WT/DS12/7; EC - Trade Description of Scallops, Request for the Establishment of a Panel by Canada, WT/DS7/7. We would note that at least one of the EC's three panel requests under the DSU has mentioned only the agreement and provisions alleged to have been violated, i.e., United States - Tariff Increases on Products from the EC, Request for the Establishment of a Panel by the EC, WT/DS39/2.

⁷³⁴ Given that the request for consultations did list Article 5 of the TRIMs Agreement, the omission of that article in the panel request could be understood as a decision by the Complainants not to pursue this claim in the light of a more thorough legal assessment and/or the consultations.

⁷³⁵ Appellate Body Report on "United States - Measure Affecting Imports of Woven Wool Shirts and Blouses from India", issued on 25 April 1997, WT/DS33/AB/R, AB-1997-1, p.9.

⁷³⁶ Article 9 of the DSU provides that "1. Where more than one Member requests the establishment of a panel related to the same matter, a single panel may be established to examine these complaints taking into account the rights of all Members concerned. A single panel should be established to examine such complaints whenever feasible. ... 3. If more than one panel is established to examine the complaints related to the same matter, to the greatest extent possible the same persons shall serve as panelists on each of the separate panels and the timetable for the panel process in such disputes shall be harmonized".

⁷³⁷ Belize, Cameroon, Canada, Colombia, Costa Rica, Côte d'Ivoire, Dominica, Dominican Republic, Ghana, Grenada, India, Jamaica, Japan, Nicaragua, Philippines, Saint Vincent and the Grenadines, Saint Lucia, Senegal, Suriname and Venezuela. Thailand indicated a third-party interest in the proceedings, but later withdrew.

⁷³⁸ Appellate Body Report on "Japan - Taxes on Alcoholic Beverages", adopted on 1 November 1996, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, AB-1996-2, p.14.

⁷³⁹ Panel Report on "United States - Denial of Most-favoured-nation Treatment as to Non-rubber Footwear from Brazil", adopted on 19 June 1992, BISD 39S/128, 147-148, paras. 6.1-6.2.

⁷⁴⁰ Panel Report on "Brazil - Measures Affecting Desiccated Coconut", issued on 17 October 1996, WT/DS22/R, pp.77-78, paras. 286-290.

⁷⁴¹ Appellate Body Report on "Brazil - Measures Affecting Desiccated Coconut", issued on 21 February 1997, WT/DS22/AB/R, AB-1996-4, p.22.

⁷⁴² In 1989, the GATT CONTRACTING PARTIES adopted Improvements to the GATT Dispute Settlement Rules and Procedures (BISD 36S/61), including the following language, which is quite similar to that contained in Article 6.2 of the DSU:

There were no specific rules on the form of requests for the establishment of panels prior to 1989.

⁷⁴³ See examples cited in note 342 supra. See also EC - Measures Affecting Livestock and Meat (Hormones), Request for the Establishment of a Panel, WT/DS48/5; Brazil - Measures Affecting Desiccated Coconut, Request for the Establishment of a Panel, WT/DS22/2; European Communities - Duties on Imports of Grains, Request for the Establishment of a Panel, WT/DS13/2; Japan - Taxes on Alcoholic Beverages, Request for the Establishment of a Panel by the United States, WT/DS11/2; European Communities - Duties on Imports of Cereals, Request for the Establishment of a Panel, WT/DS9/2; United States - Standards for Reformulated and Conventional Gasoline, Request for the Establishment of a Panel, WT/DS4/2; United States - Measures Affecting the Importation and Internal Sale and Use of Tobacco, Recourse to Article XXIII:2 by Argentina, DS44/8; EEC - Restrictions on Imports of Apples, Communication from Chile, DS39/2 & DS41/2.

⁷⁴⁴ Panel Report on "United States - Anti-Dumping Duties on Imports of Fresh and Chilled Atlantic Salmon from Norway", adopted 26 April 1994, ADP/87, paras. 333-335; Panel Report on "European Communities - Imposition of Anti-Dumping Duties on Imports of Cotton Yarn from Brazil", ADP/137, adopted on 4 July 1995, paras. 438-466; Panel Report on "United States - Anti-Dumping Duties on Imports of Gray Portland Cement and Cement Clinker from Mexico", issued on 7 September 1992 (not adopted), ADP/82, para. 5.12; Panel Report on "EC - Anti-Dumping Duties on Audiotapes in Cassettes Originating in Japan", issued on 28 April 1995 (not adopted), ADP/136, para. 295. In addition, there was one case involving this issue under the Tokyo Round Agreement on Interpretation and Application of Articles VI, XVI and XXIII. Panel Report on "United States - Countervailing Duties on Imports of Fresh and Chilled Atlantic Salmon from Norway", adopted 27 April 1994, SCM/153, paras. 208-214 (following the approach of the Salmon antidumping case cited above). A claim of noncompliance with Article 6.2 was made in the Panel Report on "Measures Affecting Desiccated Coconut", dated 17 October 1996, WT/DS22/R, para. 290, but the panel did not reach the Article 6.2 issue, except as noted above, by finding that the failure to allege that a measure was inconsistent with the requirements of a specific provision of GATT meant that a claim based on that provision was not within the panel's terms of reference, a result which we follow.

⁷⁴⁵ We exclude from this confirmation any suggestion that the panel request was sufficient to allow claims based on the Agreement on Agriculture and Article 5 of the TRIMs Agreement since as to those provisions, the panel request did not comply at all with the requirements of Article 6.2 and, accordingly, there was no uncertainty that could be cured.

⁷⁴⁶ The panel request listed Article XI of GATT, but no claims under Article XI were pursued by the Complainants.

⁷⁴⁷ Article 3.3 of the DSU provides that the prompt settlement of disputes is essential "in situations where a Member considers that benefits accruing to it directly or indirectly under the covered agreements are being impaired". Article 3.7 of the DSU requires Members to exercise judgment as to whether invocation of the DSU would be "fruitful".

⁷⁴⁸ See Panel Report on "United States - Taxes on Petroleum and Certain Imported Substances", adopted on 17 June 1987, BISD 34S/136, 158, para. 5.1.9.

⁷⁴⁹ GATT/CP.3/42, adopted 30 June 1949, II/181, 185, para. 16.

⁷⁵⁰ Panel Report on "Italian Discrimination Against Imported Agricultural Machinery", adopted 23 October 1958, 7S/60, 64, para.12.

⁷⁵¹ Panel Report on "United States - Section 337 of the Tariff Act of 1930", adopted on 7 November 1989, BISD 36S/345, 386-387, para. 5.11.

⁷⁵² The International Court of Justice has not defined the concept of legal interest in specific terms. However, a number of its cases would support finding a legal interest in this case. For example, in the Wimbledon case, the Permanent Court of International Justice found that a state could raise a claim with respect to the Kiel Canal even though its fleet did not want to use it, suggesting that a potential interest was sufficient for a legal interest. PCIJ (1923), Ser. A, no. 1, 20. In Northern Cameroons (Preliminary Objections), the ICJ stated:

Here, our decision will have such an effect to the extent that the EC is obligated to revise the challenged measures. See also Part II of the Draft Articles on State Responsibility, art. 40.2(e)-(f), provisionally adopted by the Drafting Committee of the International Law Commission. A/CN.4/L.524, 21 June 1996.

⁷⁵³ For a general discussion of relevant factors for determining the likeness of products, see Panel Report on "Japan - Taxes on Alcoholic Beverages", adopted on 1 November 1996, WT/DS8/R, WT/DS10/R & WT/DS11/R, pp.111-114, paras. 6.20-6.23, as modified by, Appellate Body Report on "Japan - Taxes on Alcoholic Beverages", adopted on 1 November 1996, WT/DS8/AB/R, WT/DS10/AB/R & WT/DS11/AB/R, pp.19-21.

⁷⁵⁴ Note Ad Article XIII, Paragraph 2(d), reads: "No mention was made of 'commercial considerations' as a rule for the allocation of quotas because it was considered that its application by governmental authorities might not always be practicable. Moreover, in cases where it is practicable, a Member could apply these considerations in the process of seeking agreement, consistently with the general rule laid down in the opening sentence of paragraph 2".

⁷⁵⁵ Note Ad Article XIII, Paragraph 4, provides: "See note relating to 'special factors' in connection with the last subparagraph of paragraph 2 of Article XI". That note reads as follows: "The term 'special factors' includes changes in relative productive efficiency between domestic and foreign producers, or as between different foreign producers, but not changes artificially brought about by means not permitted under the Agreement".

⁷⁵⁶ At the 1955 Review Session, a working party considering amendments to Article XIII stated: "The Working Party ... agreed to recognize that the general rule contained in the introduction to paragraph 2 governed the various sub-paragraphs of that paragraph including those of sub-paragraph (d)". Working Party Report on "Quantitative Restrictions", adopted on 2, 4 and 5 March 1955, BISD 3S/170, 176, para. 24.