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WORLD TRADE
ORGANIZATION

WT/DS231/R
29 May 2002

(02-2894)

 
  Original: English

EUROPEAN COMMUNITIES —
TRADE DESCRIPTION OF SARDINES




Report of the Panel

(Continued)



IV. ARGUMENTS OF THE PARTIES

A. ALLOCATION OF THE BURDEN OF PROOF

4.1 Peru contends that in the case of Article 2.4 of the TBT Agreement, the elements of the prima facie case to be presented by the complainant party include the presentation of evidence demonstrating the existence of a technical regulation; a relevant international standard; and the failure of the European Communities to base the Regulation at issue on the international standard, Codex Stan 94. Peru claims that in the case of Article 2.2 of the TBT Agreement, the elements of the prima facie case presented by the complainant party must show evidence of the existence of a technical regulation and of the trade-restrictive consequences of that regulation. Peru argues that it is then for the European Communities, as the Member imposing the technical regulation, to justify in terms of its own legitimate objectives the failure to base its technical regulation on the international standard in the case of Article 2.4 of the TBT Agreement, and the need to impose a trade-restrictive technical regulation in the case of Article 2.2 of the TBT Agreement.

4.2 Peru also submits that in allocating the evidentiary burden on the specific elements of Articles 2.2 and 2.4 of the TBT Agreement, the provisions of Article 2.5, as well as the object and purpose of the TBT Agreement, need to be taken into account. In Peru's view, Article 2.5 of the TBT Agreement reflects the fact that if a Member adversely affected by a technical regulation had to explain and demonstrate that the deviation from an international standard is not necessary to fulfil a legitimate objective, it would have to prove the negative, which is impossible. Peru argues that the terms of Article 2.5 relate to a pre-dispute settlement situation and therefore do not establish a rule for the allocation of the burden of proof. However, Peru considers that Article 2.5 of the TBT Agreement does reflect a principle that also applies during the dispute settlement stage, namely the principle that a party to a dispute cannot be asked to prove the negative. Article 2.5 establishes not only a right for the Members adversely affected by a technical regulation; it establishes also an important right for the Member that has prepared, adopted or applied the regulation. This is the right to indicate which legitimate objective it is pursuing with a regulation challenged under Article 2.4 of the TBT Agreement and why it could not use the relevant international standard as a basis. This right is important because it means that it is that Member which may determine the policy objectives and constraints against which a challenged regulation is evaluated. It is important that this right be respected also in panel proceedings. Prior to the exercise of that right, the complainant may, depending on the circumstances of the case, only be able to guess what the objectives and constraints of the defendant might be. It is only after the defendant has exercised its right that the complainant is in the position to present evidence demonstrating that the objective identified can be achieved by using international standards as a basis. Article 2.5 therefore distributes the "burden of explanation" in the pre-dispute settlement situation in the same manner as the burden of proof should be distributed during dispute settlement proceedings. Peru concludes that it is for the European Communities to present evidence explaining why the monopolization of the name sardines for Sardina pilchardus is necessary to achieve the declared objective of market transparency.

4.3 Peru subsequently argues that in light of the extensive evidence submitted by both parties and Canada, it is no longer necessary for the Panel to decide the question of whether there is an allocation of the burden of proof specific to Articles 2.2 and 2.4 of the TBT Agreement. Noting the Appellate Body's statement in EC - Hormones that "a prima facie case is one which, in the absence of effective refutation by the defending party, requires a panel, as a matter of law, to rule in favour of the complaining party presenting the prima facie case", Peru argues that it established a prima facie case of violation of Articles 2.4, 2.2 and 2.1 of the TBT Agreement. Thus, Peru claims that whether the burden of proof is allocated on the basis of the specific provisions and objectives of the TBT Agreement or on the basis of the generally applicable principles followed by the Appellate Body, the result would be the same.

4.4 The European Communities agrees with Peru that it is for the party asserting a particular claim or a defence to prove such a claim or defence, but rejects Peru's interpretation of Article 2.5 of the TBT Agreement. The European Communities submits that the scope of Article 2.5 is to enhance the transparency that a central government body has to follow when preparing, adopting and applying a technical regulation; therefore, Article 2.5 of the TBT Agreement is not intended, as Peru alleges, to establish a higher threshold of explanation.

4.5 The European Communities argues that the Appellate Body in EC - Hormones dealt with a provision in the Agreement on the Application of Sanitary and Phytosanitary Measures (the "SPS Agreement") that is parallel to Article 2.5 of the TBT Agreement:

Article 5.8 of the SPS Agreement does not purport to address burden of proof problems; it does not deal with a dispute settlement situation. To the contrary, a Member seeking to exercise its right to receive information under Article 5.8 would, most likely, be ina pre-dispute situation, and the information or explanation it receives may well make it possible for that Member to proceed to dispute settlement proceedings and to carry out the burden of proving on a prima face basis that the measure involved is not consistent with the SPS Agreement.

4.6 The European Communities contends that the burden of proving that Article 2 of the EC Regulation is not in conformity with paragraphs 4, 2 and 1 of Article 2 of the TBT Agreement and with Article III:4 of GATT 1994 rests entirely with Peru. Accordingly, all the elements of Article 2.4 of the TBT Agreement that must be demonstrated to establish a prima facie case are: that a technical regulation has been prepared; that "a relevant international standard" was in existence or imminent; that the Member did not use the standard or the relevant part of it as a basis for the technical regulation; and that the use of the standard was ineffective or inappropriate for the fulfilment of the legitimate objectives pursued.

4.7 The European Communities further argues that, according to Article 2.2 of the TBT Agreement, Peru has to demonstrate trade-restrictive effects; identify correctly the legitimate objectives pursued; and finally, establish that these restrictive effects are more trade-restrictive than necessary.

4.8 With regard to Article 2.1 of the TBT Agreement and Article III:4 of the GATT 1994, concerning which the European Communities asserts that Peru has indicated no criterion to allocate the burden of the proof, the European Communities claims that, in line with the consolidated WTO jurisprudence on the matter, Peru must present evidence and argument sufficient to establish a presumption that Article 2 of the EC Regulation is inconsistent with its obligations under these Articles. The European Communities argues that Peru must prove that (1) it is a law, regulation or requirement affecting the internal sale, offering for sale, purchase, distribution or use; (2) the imported and domestic products affected by it are "like"; and (3) the treatment accorded to the imported products is less favourable.

B. WHETHER THE EC REGULATION IS A TECHNICAL REGULATION

4.9 Peru notes that paragraph 1 of Annex 1 of the TBT Agreement defines the term "technical regulation" as a document which lays down product characteristics with which compliance is mandatory and submits that the EC Regulation, according to its title, lays down "common marketing standards for preserved sardines". Peru argues that the EC Regulation constitutes a technical regulation within the meaning of Annex 1 of the TBT Agreement because it lays down characteristics preserved sardines must possess if they are to be marketed under the name sardines in the European Communities. In particular, Peru submits that Article 2 of the EC Regulation states which characteristics preserved sardines must possess in order to market them in the European Communities under the name "sardines" and notes that one such characteristic is that the product in question must be prepared from the fish of species Sardina pilchardus. Peru also argues that the language of Article 9 of the EC Regulation which provides that the EC Regulation "shall be binding in its entirety and directly applicable in all Member States" makes compliance with the measure mandatory.

4.10 The European Communities accepts that its Regulation is a technical regulation for the purposes of the TBT Agreement and that it lays down marketing standards for preserved Sardina pilchardus. The European Communities submits that, in 1989, it notified the Regulation at issue under the Tokyo Round Agreement on Technical Barriers to Trade (the "Tokyo Round Standards Code"). Referring to the Appellate Body's statement in EC - Asbestos that "the proper legal character of the measure at issue cannot be determined unless the measure is examined as a whole", the European Communities, therefore does not accept that Article 2 of the EC Regulation, taken in isolation, is a technical regulation as Peru claims. The European Communities argues that Article 2 can only be interpreted in the context of the entire Regulation.

4.11 The European Communities submits that its Regulation provides that the name specified for preserved Sardina pilchardus cannot be used for other products. However, this does not mean that it lays down mandatory labelling requirements for products other than preserved Sardina pilchardus and therefore it is not considered a technical regulation for preserved Sardinops sagax , preserved herrings or any other product except Sardina pilchardus . The system of rules concerning the labelling of foodstuffs in the European Communities is established by Directive 2000/13/EC of the European Parliament and of the Council of 20 March 2000 on the approximation of the laws of the member States relating to the labelling, presentation and advertising of foodstuffs (the "EC Directive 2000/13").7 EC Directive 2000/13 sets out the basic framework and is designed to be complemented by more detailed European Communities rules or, in their absence, more detailed member States rules.

4.12 The European Communities further submits that Article 2 of its Regulation is not a technical regulation because the definition of a technical regulation in the TBT Agreement refers only to labelling, not naming. The names of the products of interest to Peru and the third parties are set out in various measures of the member States of the European Communities which have not been identified by Peru. It is EC Directive 2000/13, in conjunction with the various measures of the member States of the European Communities that constitute the technical regulation for the products identified by Peru and the third parties.

4.13 In response to the European Communities' arguments, Peru claims that it considers the whole of the EC Regulation to be a technical regulation because it lays down the characteristics of the product that may be marketed as preserved sardines. Peru, however, argues that it is only challenging in this dispute the WTO-consistency of the requirement set out in Article 2 of the EC Regulation which reserves the use of the term "sardines" exclusively for Sardina pilchardus . Peru argues that the other elements contained in the EC Regulation are nevertheless relevant in determining whether this requirement is consistent with Articles 2.1, 2.2 and 2.4 of the TBT Agreement.

4.14 In respect of the European Communities' argument that the Regulation at issue is not a technical regulation for preserved Sardinops sagax or any other product except preserved Sardina pilchardus , Peru argues that it never claimed that the EC Regulation indicates the name under which Sardinops sagax must be marketed and that it is not challenging the European Communities' regulations governing the naming of products made from Sardina pilchardus . Peru argues, on the contrary, that it is challenging the prohibition of the use of the word "sardines" as a trade name for Sardinops sagax .

4.15 Peru explains that the reason for initially referring to the EC Regulation as a labelling requirement8 is based on the fact that paragraph 6 of the Codex Standard for Canned Sardines and Sardine-Type Products is entitled "LABELLING" and sub-paragraph 6.1 is entitled "NAME OF THE FOOD". Peru argues that for the drafters of the Codex standard, the rule on the naming of sardines constituted a labelling requirement and Peru therefore considered it appropriate to describe the EC Regulation as a labelling requirement. Peru further submits that EC Directive 2000/13, to which the European Communities refers to in its arguments, unlike the Codex Stan 94, makes a distinction between rules setting out which characteristics must be indicated on the packages in which foodstuffs are sold (labelling requirements) and rules prescribing the name under which a product must be sold (naming requirement). Peru argues that Article 2 of the EC Regulation neither states which characteristics must be indicated on the packages containing products made from Sardinops sagax nor prescribes the name under which such products must be sold. According to Peru, the prohibition on the use of the term "sardines" in the trade description of products made from Sardinops sagax therefore appears to be neither a labelling requirement nor a naming requirement within the meaning of EC Directive 2000/13.

4.16 Peru claims that the European Communities' argument that Article 2 of its Regulation is not covered by the TBT Agreement because the definition of a technical regulation refers only to labelling but not to naming is incorrect. Peru, however, claims that whether the EC Regulation should be called a "labelling" requirement, a "naming" requirement or simply a "terminology" requirement is a question that the Panel need not address. Peru argues that a technical regulation covers any "document which lays down product characteristics" and the EC Regulation is indisputably part of such a document. Peru concludes that the prohibition of the use of the term "sardines" in the trade name for products that do not conform to the product characteristics set out in the EC Regulation comes within the ambit of the definition of technical regulations.

C. APPLICATION OF THE TBT AGREEMENT TO MEASURES ADOPTED BEFORE 1 JANUARY 1995

4.17 The European Communities argues that Article 2.4 of the TBT Agreement is not applicable to measures that were drawn up before its entry into force. Article 2.4 of the TBT Agreement requires WTO Members to use existing relevant international standards as a basis for drawing up their technical regulations when they decide that these are required. The European Communities therefore submits that the obligation exists prior to the adoption of the measure, not afterwards.

4.18 The European Communities argues that the language of Article 2.4 of the TBT Agreement makes clear that it does not apply to the existence or maintenance of technical regulations. In support of this argument, it submits that Article 2.4 is different from the provision of the SPS Agreement considered by the Appellate Body in EC - Hormones. According to the European Communities, in that case, the Appellate Body based its view on the wording of Articles 2.2, 3.3 and 5.6 of the SPS Agreement, all of which include the word "maintain" and is absent from Article 2.4 of the TBT Agreement.

4.19 The European Communities argues that Article 2.4 of the TBT Agreement, by its clear terms, only applies to the preparation and adoption of technical regulations. It argues that the preparation and adoption of the Regulation, in contrast to its maintenance, are "acts or facts which took place, or situations which ceased to exist, before the date of [the] entry into force" of the TBT Agreement within the meaning of Article 28 of the Vienna Convention on the Law of Treaties (the "Vienna Convention"), entitled "Non-Retroactivity of Treaties".9

4.20 The European Communities further argues that it is only possible to use relevant international standards as a basis for the technical regulation when the technical regulation is being drafted or when it is amended. However, this particular question is not before the Panel because the EC Regulation has not been amended. In its view, the question is whether Members are under an obligation after the WTO Agreement entered into force to revise their existing technical regulations to ensure that they could be considered to have used international standards "as a basis". It is clear from the text of Article 2.4 of the TBT Agreement, especially the words "where technical regulations are required", that such an obligation has not been created by Article 2.4.

4.21 With regard to Article XVI:4 of the Marrakesh Agreement Establishing the WTO (the "WTO Agreement"), the European Communities argues that this provision creates an obligation to ensure that WTO obligations are complied with, but the precise scope of the obligations depends on the language of each specific provision under the covered agreements. In the European Communities' view, Article XVI:4 does not render WTO obligations applicable to acts performed before the entry into force of the WTO Agreement where this does not result from the terms of the provision itself. The European Communities argues that there must be an obligation somewhere in the covered agreements before Article XVI:4 can have effect and the wording of Article 2.4 of the TBT Agreement makes clear that there is no obligation to revise existing technical regulations to bring them into conformity with international standards.

4.22 Peru submits that Article 2.4 of the TBT Agreement does not oblige WTO Members to use international standards as a basis for drawing up their technical regulations when Members decide that these are required but "where technical regulations are required". Accordingly, Peru argues that Article 2.4 applies to situations in which technical regulations are required and not merely at the time when the decision to adopt them is taken. In Peru's view, an international standard can be "used" both in drafting a new technical regulation and in amending an existing regulation. Therefore, Peru contends that the temporal element the European Communities claims to see in the wording of Article 2.4 of the TBT Agreement simply does not exist.

4.23 Peru contends that the European Communities' argument cannot be reconciled with the principle of non-retroactivity of treaties enshrined in Article 28 of the Vienna Convention. Peru points out that, in the instant case, both the international standard and the EC Regulation continued to exist after the entry into force of the TBT Agreement. Accordingly, Peru claims that the European Communities has been, since 1 January 1995, under the obligation to use Codex Stan 94 as a basis for its Regulation. Moreover, Peru submits that the European Communities' argument has no basis in fact because the naming standard incorporated in Codex Stan 94 did exist when the European Communities adopted the Regulation at issue. Peru notes that the current version of this standard was adopted in 1978, 11 years prior to the adoption of the EC Regulation in 1989.

4.24 Peru further submits that the text of Article 2.4 of the TBT Agreement does not distinguish between regulations adopted after the standard was prepared and regulations adopted before the standard was prepared. Peru argues that the European Communities' proposition cannot be reconciled with Article XVI:4 of the WTO Agreement, according to which "each Member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided for in the annexed Agreements".

4.25 Furthermore, Peru recalls that the Appellate Body rejected a similar claim by the European Communities in EC - Hormones where it stated that "if the negotiators had wanted to exempt the very large group of SPS measures in existence on 1 January 1995 … it appears reasonable to us to expect that they would have said so explicitly". Peru concludes that given the general principle enshrined in Article XVI:4 of the WTO Agreement, existing legislation can be deemed to be exempted from WTO law only if a provision in one of the agreements annexed to the WTO Agreement specifically provides for such an exemption; however there is no such exemption in the TBT Agreement.

D. ARTICLE 2.4 OF THE TBT AGREEMENT

1. Whether Codex Stan 94 is a relevant international standard

4.26 Peru argues that Codex Stan 94 is a relevant international standard. Peru argues that the Codex Alimentarius Commission, established by the FAO and WHO, is an internationally recognized standard setting body that develops standards for food products. The Codex Alimentarius contains more than 200 standards for foods or groups of foods, of which 28 are standards for fish and fishery products; these standards are an internationally agreed reference point for consumers, food producers and processors, national food control agencies and the international food trade.

4.27 Referring to Canada's third party submission, Peru agrees with Canada's statement that:

The Codex Standard is an "international standard". The TBT Agreement defines "standard" but not "international standard". A standard is defined in Annex 1 as a:

Document approved by a recognized body, that provides, for common and repeated use, rules, guidelines or characteristics for products or related processes and production methods, with which compliance is not mandatory.

The Codex Commission is an internationally recognized standard setting body. Codex standards are the internationally agreed global reference point for consumers, food producers and processors, national food control agencies and the international food trade. The Codex Standard in issue is not mandatory.

4.28 Peru argues that Codex Stan 94 is not only an international standard but is also a relevant international standard and that Members are obliged to use relevant international standards as a basis for their technical regulations. Peru notes that the Codex Stan 94, a standard for canned sardines and sardine-type products, was adopted by the Codex Alimentarius Commission in 1978 and revised in 1995. Peru submits that the products to which Codex Stan 94 applies are sardines and sardine-type products that are prepared from fresh or frozen fish of 21 different species, including Sardina pilchardus and Sardinops sagax. Peru further notes that paragraph 6.1.1 of Codex Stan 94 states:

The name of the product shall be:

6.1.1 (i) "Sardines" (to be reserved exclusively for Sardina pilchardus (Walbaum)); or

(ii) "X sardines" of a country, a geographic area, the species, or the common name of the species in accordance with the law and custom of the country in which the product is sold, and in a manner not to mislead the consumer.

4.29 The European Communities does not contest the status of the Codex Alimentarius Commission as an international standardizing body for the purposes of the TBT Agreement. It is also of the opinion that only standards of international bodies with international treaty status that respect the same principles of membership and due process that form the basis for WTO membership should be recognized as international standards.

4.30 The European Communities makes the general observation that Codex Stan 94 contains 20 "sardine-type" species belonging to 11 genera. The underlying rationale for including these 20 species in the list is not apparent as it includes very different species; it is not the fact that they are from a same family, as some of these genera belong to a family other than Clupeidae, e.g., Engaulis anchoita, E. mordax and E. ringens (anchovies) which belong to the family Engraulidae. The European Communities notes that the common name for some of these species are not sardines and that other species that are called "sardines" in other parts of the world are not included in Codex Stan 94. In its view, the objection of Codex members to include Clupea bentinckti at the 24th Session of the Codex Alimentarius Commission illustrates the concern that the list set out in Codex Stan 94 would end up including all Clupeidae, and potentially Engraulidae, species. The consequence would be that the Codex standard would include so many "sardine-type" species that it would be more misleading than informative for the consumer. To illustrate the difficulties involved in determining the coverage of the species under Codex Stan 94, the European Communities refers to the fact that Peru is exporting Sardinops sagax to more than 20 countries under the trade description of "sardines" rather than "Pacific sardines" even though Codex Stan 94 does not permit Sardinops sagax to be called "sardines" without any qualification.

4.31 The European Communities claims that Codex Stan 94 cannot be considered a relevant international standard. The obligation contained in Article 2.4 is to use relevant international standards, where they exist or their completion is imminent, as a basis for the technical regulation. However, the European Communities claims that Codex Stan 94 is not a relevant international standard within the meaning of Article 2.4 of the TBT Agreement because it did not exist and its adoption was not "imminent" when the EC Regulation was adopted.

4.32 The European Communities further argues that there is no obligation to have used a draft international standard as a basis for a technical regulation if its adoption was not "imminent"; therefore, it cannot have been intended that an already existing technical regulation could become inconsistent with Article 2.4 of the TBT Agreement when the adoption of the draft international standard becomes "imminent" or when it is actually adopted and becomes "existing". The European Communities submits that Peru would have had to invoke non-conformity with the predecessor standard in order to make its case and it has not done so. In any case, the European Communities points out that it did comply with the requirements of the Tokyo Round Standards Code when it adopted its Regulation and notified it to the GATT. In its view, it is obvious that a 1994 standard cannot be a "relevant standard" for a Regulation adopted in 1989.

4.33 According to the European Communities, another reason for not considering Codex Stan 94 as a relevant international standard is that it was not adopted in accordance with the principle of consensus set out by the TBT Committee in the Decision of the Committee on Principles for the Development of the International Standards, Guides and Recommendations with Relation to Articles 2, 5 and Annex 3 of the Agreement (the "Decision"). In support of its claim, the European Communities submits the following: (a) According to Rule VI:2 of the Rules of Procedure of the Codex Alimentarius Commission, decisions can be taken by a majority of the votes cast; even if it is not recorded whether Codex Stan 94 was elaborated and adopted by means of a formal vote, it is clear that it was adopted in circumstances in which dissenting members could have been outvoted and, therefore, may have decided not to express their disagreement, i.e., by not insisting on a vote. This is especially so, since the General Principles of the Codex Alimentarius make clear that Codex standards are recommendations that need to be accepted by governments and that their acceptance can be unconditional, conditional or with deviations. (b) Codex Stan 94 has been accepted by only 18 countries, of which only four accepted it fully. None of the member States of the European Communities, or Peru, has accepted the standard. (c) The available records of the discussions relating to Codex Stan 94 demonstrate that Members held diverging views on the appropriate names for preserved sardines and sardine-type products.

4.34 With regard to the elaboration procedure of Codex Stan 94, the European Communities submits that an editorial change, and not a substantive change, was made at step 8 of the procedure. If a substantive amendment had been made at this stage, it would have been necessary to refer the text back to the relevant committee for comments before its adoption. However, if a substantive change had nevertheless been made at step 8 of the Codex elaboration procedure, the European Communities claims that Codex Stan 94 would, in this case, be rendered invalid and could not, therefore, be considered a relevant international standard within the meaning of Article 2.4 of the TBT Agreement.

4.35 Finally, European Communities contends that paragraph 6.1.1(ii) of Codex Stan 94 is not "relevant" for the EC Regulation since the EC Regulation does not regulate products other than preserved Sardina pilchardus , and the relevant part of Codex Stan 94 for the name of this product is paragraph 6.1.1(i).

4.36 Peru notes Canada's argument that Codex Stan 94 meets the principles and procedures set out by the TBT Committee in the Decision. Peru agrees with Canada's argument that Codex Stan 94 was developed in a manner consistent with the principles of the Decision, including the resort to the multilateral consensus based approach in establishing the relevant international standard.

4.37 However, Peru claims that the issue of whether or not Codex Stan 94 was in effect adopted by consensus is not an issue that the Panel needs to decide and that the Decision is not a covered agreement for the purposes of the DSU. Peru argues that the Decision is not an authoritative interpretation of the TBT Agreement. In Peru's view, the Decision merely articulates principles and procedures which, in the view of the TBT Committee, should be followed in developing international standards. Peru asserts that it does not define the term "international standard" in Article 2.4 of the TBT Agreement.

4.38 In addition, Peru submits that it is clear from the relevant report of the Codex Alimentarius Commission that Codex Stan 94 was adopted without a vote and that it can reasonably be assumed that when the TBT Committee used the term "consensus" it referred to a decision-making process similar to the one stipulated in the WTO Agreement where Article IX:1 states that "where a decision cannot be arrived at by consensus, the matter at issue shall be decided by voting". Therefore, the issue is whether the procedures and practices of the decision-making by consensus followed by the Codex Alimentarius Commission resemble those followed by the WTO.

4.39 For the above reasons, Peru considers that there can be no doubt that Codex standards are adopted in accordance with the principle of consensus as it is understood in the WTO. Furthermore, Peru recalls that in the TBT Committee, the European Communities stated that only the standards of international bodies with international treaty status that respect the same principles of membership and due process that form the basis for WTO membership should be recognized as international standards in the WTO context. According to Peru, the European Communities also stated in the TBT Committee that the Codex Alimentarius Commission could therefore be considered as developing international standards within the meaning of the TBT Agreement.10 Hence, Peru maintains that the European Communities' argument presented in this dispute cannot be reconciled with the position taken in the TBT Committee. Peru also submits that it is perfectly normal that international standards are adopted after a reconciliation of divergent views, otherwise there would probably be no Codex standard that could be considered to have been adopted by consensus.

4.40 In response to a question posed by the Panel in relation to the meaning of the explanatory note contained in Annex 1 of the TBT Agreement which reads "[t]his Agreement covers also documents that are not based on consensus", Peru argues that "relevant international standards" within the meaning of Article 2.4 of the TBT Agreement include standards that were not adopted by consensus.

4.41 Finally, Peru disputes the European Communities' argument that Codex Stan 94 is not a relevant international standard because the Codex Alimentarius Commission would have violated its procedural rules according to which substantive changes to proposed standards can only be made under certain circumstances. Peru is of the view that it is for the members of the Codex Alimentarius Commission to examine whether the procedural requirements for the adoption of standards have been observed and, if necessary, to request corrective action in accordance with the rules and procedures of the Commission. Peru claims that the Panel is not competent to make findings on such issues.

2. Whether Codex Stan 94 was used "as a basis" for the EC Regulation

4.42 Peru argues that Article 2.4 of the TBT Agreement requires Members to use international standards as a basis for their technical regulations except when they are an ineffective or inappropriate means for the fulfilment of their objectives. Peru notes that the ordinary meaning of the word "basis" is "foundation", "main constituent" or "a determining principle". Peru argues that "shall use as a basis" therefore means "shall use as a foundation, main constituent or determining principle".

4.43 Peru claims that a measure would be consistent with paragraph 6.1.1(i) if it requires the term "sardines", when used without any qualification, be reserved for Sardina pilchardus . However, Peru contends that all other species referred to in Codex Stan 94 may be marketed, pursuant to sub-paragraph (ii), as "X sardines" where "X" is either a country, a geographic area, the species or the common name of the species. According to Peru, its sardines should therefore be marketable as "Peruvian sardines", "Pacific sardines", or just "sardines" combined with the name of the species or the common name in the European Communities' member State in which the sardines are sold, such as "Südamerikanische Sardinen" in Germany. Peru contends that in each of the four alternatives set out in this labelling standard, the term "sardines" is part of the trade description and a total prohibition on the use of the term "sardines" in the labelling of canned sardines is not foreseen.

4.44 Peru argues that it is therefore inconsistent with sub-paragraph (ii) of paragraph 6.1.1 of Codex Stan 94 if sardines of the species Sardinops sagax may not be marketed under the name "sardines" qualified by the name of a country, name of a geographic area of origin, name of the species or the common name. Peru argues that the EC Regulation could only be deemed consistent with Article 2.4 of the TBT Agreement if it had used Codex Stan 94 as a main ingredient, foundation or determining principle in formulating its labelling regulation. Peru claims that no element of the standard contained in paragraph 6.1.1(ii) of Codex Stan 94 is reflected in the EC Regulation. Peru concludes that the EC Regulation is not based on the Codex Stan 94, the relevant international standard, and is therefore inconsistent with Article 2.4 of the TBT Agreement.

4.45 The European Communities argues that, under paragraph 6.1.1(ii) of Codex Stan 94, each country has the option of choosing between "X sardines" and the common name of the species. It argues that "the common name of the species in accordance with the law and customs of the country in which the product is sold" is intended to be a self-standing option independent of the formula "X sardines" and that this interpretation is evidenced by the fact that the phrase "the common name of the species in accordance with the law and customs of the country in which the product is sold" is found between commas; there is no comma between "species" and "in accordance with"; and there is a comma before "and in a manner not to mislead the consumer". The European Communities is of the view that the French11 and Spanish12 versions of Codex Stan 94 make it clear that there is no choice to be made but that there is an express indication that, irrespective of the formula used, it should be in accordance with the law and custom of the importing country and in a way that does not mislead the consumer.

4.46 It is the European Communities' view that under paragraph 6.1.1(ii) of Codex Stan 94, importing Members can choose between "X sardines" or the common name of the species. The fact that the name for products other than Sardina pilchardus could not be harmonized and had to defer to each country is reflected in the language "in accordance with the law and customs of the country in which the product is sold". The European Communities notes that there is an additional element contained in Codex Stan 94 that is not applicable to Sardina pilchardus but applicable to other species, namely that the trade description of the latter group of species must not mislead the consumer in the country in which the product is sold.

4.47 The European Communities argues that the use of the word "sardines" for products other than preserved Sardina pilchardus would not be in accordance with the law and customs of the member States of the European Communities and would mislead the European consumers. The term "sardines" has historically been known as referring to Sardina pilchardus . In light of the confusion created by sales of other species, such as sprats as "brisling sardines", the European Communities has constantly attempted to clarify the situation. There is now a uniform consumer expectation throughout the European Communities that the term "sardines" refers only to preserved Sardina pilchardus . The names for preserved Sardinops sagax that are in accordance with the law and custom of the United Kingdom and Germany are Pacific pilchard and Sardinops or pilchard, respectively. Based on these reasons, the European Communities argues that Article 2 of its Regulation follows the guidance provided by Codex Stan 94.

4.48 In support of its interpretation that Codex Stan 94 allows Members to choose between "X sardines" and the common name of the species in accordance with the law and custom the country in which the product is sold, the European Communities refers to the negotiating history of Codex Stan 94, where the text of paragraph 6.1.1 submitted to the Codex Alimentarius Commission by the technical Committee was divided into three paragraphs, with "the common name of the species" being a third and separate option, and also with the phrase "in accordance with the law and custom of the country in which the product is sold, and in a manner not to mislead the consumer" separate from the three paragraphs.13 The European Communities also argues that the minutes of the meeting of the Codex Alimentarius Commission at which Codex Stan 94 was definitively adopted show that the text of paragraph 6.1.1, prepared and discussed in steps 1 to 7 of the elaboration procedure, was amended editorially at the meeting. It recalls that this change is described in the minutes as "editorial"; thus, for the reasons explained in paragraph 4.34 above, the European Communities claims that it was not intended to change the substance of the provision but to reconcile the fact that the word "sardines" by itself was reserved exclusively for Sardina pilchardus with the last paragraph requiring that any name must be in accordance with the law and custom of the country in which the product is sold. For this reason, the European Communities concludes that the text as proposed to the Codex Alimentarius Commission is a good guide to the intended meaning of the standard.

4.49 The European Communities contends that the Vienna Convention is not applicable to the interpretation of Codex standards. The relatively low importance attached to preparatory documents under the Vienna Convention is due to the fact that treaties are legal texts which are considered and adopted by formal ratification procedures and preparatory documents are not. The European Communities is of the opinion that this rationale does not apply to Codex standards and suggests that if the Panel has any doubt on the interpretation of paragraph 6.1.1(ii) of the Codex Stan 94, the Panel should ask the Codex Alimentarius Commission to provide its view of the meaning of this text.

4.50 The European Communities argues that even if Peru's interpretation were valid in that the term "sardines" must be used with a qualification for species other than Sardina pilchardus , Article 2.4 of the TBT Agreement would still not require that such name be used. The European Communities contends that Article 2.4 requires a relevant international standard to be used as a basis for the technical regulation and claims that Article 2.4 requires WTO Members to use an existing relevant international standard as a basis for drawing up their technical regulations when they decide that these are required and not as the basis for the technical regulation. Article 2.4 does not require Members to follow these standards or comply with them. Furthermore, the European Communities argues that Article 2.4 expressly states that a Member may only use the relevant parts of the international standard - that is the parts that are related to the objective pursued by the required technical regulation.

4.51 The European Communities recalls that the Appellate Body has already ruled, in the context of the SPS Agreement, that "based on" cannot be interpreted as meaning "conform to" and therefore reversed a panel ruling that was based on such an interpretation and that found that a European Communities' measure was not "based on" a Codex standard because it did not conform to it. The Appellate Body reasoned in particular that "specific and compelling language" would be needed to demonstrate that sovereign countries had intended to vest Codex standards, which were "recommendatory in form and language", with obligatory force. According to the European Communities, there is no such intention expressed in Article 2.4 of the TBT Agreement. In fact, the text of this provision indicates an even weaker requirement to take a standard into account than was the case with the SPS Agreement.

4.52 Therefore, the European Communities claims that it has "complied with" the text of the Codex Stan 94, because Article 2 of the EC Regulation follows the guidance it provided. Article 2.4 of the TBT Agreement allows WTO Members flexibility and requiring preserved sardine-type products to use the names under which they are known in the European Communities' member States falls within this margin of flexibility.

4.53 Peru disagrees with the European Communities' interpretation of paragraph 6.1.1(ii) of the Codex Stan 94. Peru is of the view that this provision clearly states that the name of the sardines other than Sardina pilchardus shall be "X sardines". Peru argues that both sub-paragraphs of paragraph 6.1.1 indicate the name to be given to sardines in inverted commas. Peru contends that it would therefore not be valid to conclude from the comma before the words "or the common name of the species" that "X" does not apply to this alternative.

4.54 Peru argues that the official languages of the FAO and WHO are English, French and Spanish and that the French text makes it absolutely clear that the Codex Stan 94 was not meant to permit countries to choose between "X Sardines" and the common name of the species. Translated word for word, Peru states that the French text would read in English: "'X sardines', 'X' designating a country, a geographic area, the species or the common name of the species". Peru claims that the French text thus leaves no doubt that the common name is not an option separate from the "X Sardines" option but is one of the four designators defined by "X". According to Peru, the Spanish text is also clear on this point; translated word for word, the Spanish text would read in English: "Sardines X" from a country or a geographic area, with an indication of the species or the common name of the species. Peru asserts that the Spanish text thus clarifies that the drafters of the Codex Stan 94 meant to create the option of adding the common name to the word "sardines", not the option of replacing the word "sardines" with a common name.

4.55 Contrary to the assertion of the European Communities, Peru argues that the drafting history of the Codex Stan 94 confirms that its final version was not meant to give countries the choice between "X Sardines" and the common name of the species. Concerning the separate third option of the text as submitted to the Codex Alimentarius Commission, Peru argues that this option was explicitly deleted at the session during which the current standard was adopted. This therefore confirms the drafters' intention.

4.56 With reference to the European Communities' argument that the change in draft was editorial in nature, Peru submits that since the drafters of the final version of Codex Stan 94 described the change from the earlier version as "editorial", rather than substantive, they were obviously of the view that the earlier version had already expressed what they intended to state in the final version, albeit imperfectly. Peru submits that the reference to the editorial nature of the change therefore clearly implies that, in the view of the drafters, both versions were meant to express the same idea but that the final version expressed it more clearly. The European Communities' suggestion that the Panel rely on the earlier version as a better expression of the meaning of the final version therefore lacks a logical basis.

4.57 Peru recalls that according to Article 32 of the Vienna Convention, the meaning of a treaty may be determined by having recourse to the preparatory work if, and only if, an interpretation based on the text leaves the meaning ambiguous or obscure or leads to a result which is manifestly absurd or unreasonable. Peru argues that while Article 32 of the Vienna Convention is not directly applicable to Codex standards because they are not treaties, the basic legal principle reflected in this provision is nevertheless relevant to the interpretation of those standards as well. Peru argues that Governments must be able to rely on the Codex standards as drafted. Only if their meaning is ambiguous or obscure or leads to a result which is manifestly absurd or unreasonable, can they be expected to have recourse to supplementary means of interpretation. According to Peru, Codex standards could simply not fulfil their function if governments always had to examine their drafting history in order to determine their meaning. Peru therefore argues that the reference to "international standards" in Article 2.4 of the TBT Agreement can therefore only be understood to be a reference to those standards as drafted, except in the situations referred to in Article 32 of the Vienna Convention.

4.58 Peru contends that the terms "in accordance with the law and custom" qualify the immediately preceding terms "of a country, a geographic area, the species, or the common name of the species". This means that selection of the country, area, species or common name may be made in accordance with the domestic law and custom. However, there is nothing in the wording of paragraph 6.1.1(ii) to suggest that the whole of the standard set out in this provision applies only if, and as long as, there is no contrary law and custom. The provision gives four options as to the designator (the "X") with which the term "sardines" may be combined (country, area, species, common name) and leaves it to each country to choose among those options in accordance with its laws and customs. Peru argues that there is no logic in the European Communities' claim that, because it may apply Codex Stan 94 in accordance with its law and custom, it may not apply it at all. In Peru's view, an internationally agreed technical standard would be meaningless if domestic laws and customs could be invoked to justify a deviation. Peru argues that it would be absurd, and hence contrary to the established principles of interpretation, to impute that intention to the drafters of paragraph 6.1.1(ii).



7 OJ L 109 of 6.5.2000, pp. 29-42.

8 Peru initially argues that the EC Regulation constitutes a technical regulation in the form of a labelling requirement. Subsequently, in response to a question posed by the Panel, Peru states that "at issue in this dispute is not a labelling requirement per se but a technical regulation laying down the characteristics of the products that may be marketed as preserved sardines".

9 Article 28 reads as follows:

Unless a different intention appears from the treaty or is otherwise established, its provisions do not bind a party in relation to any act or fact which took place or any situation which ceased to exist before the date of the entry into force of the treaty with respect to that party.

10 Committee on Technical Barriers to Trade, Minutes of the Meeting Held on 21 July 2000, G/TBT/M/20, para. 90.

11 The French text reads: 6.1.1 (ii) "Sardines X", "X" désignant un pays, une zone géographique, l'espèce ou le nom commun de l'espèce en conformité des lois et usages du pays où le produit est vendu, de manière à ne pas induire le consommateur en erreur.

12 The Spanish text reads: 6.1.1(ii) "Sardina X" de un país o una zona geográfica, con indicación de la especie o el nombre común de la misma, en conformidad con la legislación y la costumbre del país en que se venda el producto, expresado de manera que no induzca a engaño al consumidor.

13 The text of paragraph 6.1.1 submitted to the Commission by the technical Committee reads:

The name of the product shall be:
(i) "Sardines" (to be reserved exclusively for Sardina pilchardus (Walbaum)); or
(ii) "X sardines", where "X" is the name of a country, a geographic area, or the species; or
(iii) the common name of the species;
in accordance with the law and custom of the country in which the product is sold, and in a manner not to mislead the consumer.


To continue with 3. Whether Codex Stan 94 is ineffective or inappropriate to fulfil the legitimate objectives pursued by the EC Regulation

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