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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)


G. CONSISTENCY OF THE EC REGULATION WITH ARTICLE 2.4 OF THE TBT AGREEMENT

1. Burden of proof

7.48 The issue of burden of proof has been repeatedly examined in WTO jurisprudence. The Appellate Body stated in US - Wool Shirts and Blouses that:

… the burden of proof rests upon the party, whether complaining or defending, who asserts the affirmative of a particular claim or defence. If that party adduces evidence sufficient to raise a presumption that what is claimed is true, the burden then shifts to the other party, who will fail unless it adduces sufficient evidence to rebut the presumption.67

7.49 Once the Panel determines that the party asserting the affirmative of a particular claim or defence has succeeded in raising a presumption that its claim is true, it is incumbent upon the Panel to assess the merits of all the arguments advanced by the parties and the admissibility, relevance and weight of all the factual evidence submitted with a view to establishing whether the party contesting a particular claim has successfully refuted the presumption raised. In the event that the arguments and the factual evidence adduced by the parties remain in equipoise, the Panel must, as a matter of law, find against the party who bears the burden of proof.

7.50 Under the well-established principle concerning burden of proof, it is for the complaining party to establish the violation it alleges; it is for the party invoking an exception or an affirmative defence to prove that the conditions contained there are met; and it is for the party asserting a fact to prove it.68 Applying this principle in the context of Article 2.4 of the TBT Agreement, it is Peru, as the complaining party, that bears the burden of establishing a prima facie case by demonstrating that a relevant international standard exists and that this standard was not used as a basis for the technical regulation. At this point, should the European Communities make an assertion to rebut Peru's claims, it carries the burden of establishing that assertion. We note that the European Communities asserted that Codex Stan 94 is ineffective or inappropriate to fulfil the legitimate objectives pursued by the EC Regulation. According to the Appellate Body, "the burden of proof rests upon the party, whether complaining or defending, who asserts the affirmative of a particular claim or defence".69 Thus, in line with the principle enunciated by the Appellate Body, the burden of proof rests with the European Communities, as the party "assert[ing] the affirmative of a particular claim or defence", to demonstrate that the international standard is an ineffective or inappropriate means to fulfil the legitimate objectives pursued by the EC Regulation.70

7.51 Moreover, we are concerned that a complaining party, if it were to be required to determine, as part of the prima facie case it has to establish, what the "legitimate" objectives pursued by the respondent are and what factors may render the international standard "inappropriate" in light of the respondent's specific conditions, may not be in a position to do so. A complainant cannot in our view be required to spell out the "legitimate" objectives pursued by a technical regulation. Only the respondent Member can do so. Similarly, we consider that the assessment of whether a relevant international standard is "inappropriate" includes considerations which may be distinct from those underlying an "effectiveness" assessment, and may extend to considerations which are proper to the Member adopting or applying a technical regulation. As indicated below, whereas the "effectiveness" of an international standard bears upon the result of the means employed, the "appropriateness" of that international standard bears upon the nature of the means employed. Consequently, when a Member challenges a technical regulation under Article 2.4, it cannot in our view be required to second-guess what those considerations of "appropriateness" are which underlie the respondent's decision not to use a relevant international standard as a basis. A complainant would then be required to explain why a relevant international standard is not "inappropriate", without knowing on what basis the respondent considers the relevant international standard "inappropriate".71

7.52 For the reasons stated above, it is for Peru, as the complaining party, to establish prima facie that the EC Regulation is a technical regulation within the meaning of the TBT Agreement; that relevant international standards exist; and that such standards were not used as a basis for the technical regulation. The burden rests with the European Communities, as the party "assert[ing] the affirmative of a particular claim or defence", to demonstrate that the international standard is an ineffective or inappropriate means to fulfil the legitimate objectives pursued by the Regulation.

2. Application of the TBT Agreement to measures adopted before 1 January 1995

7.53 The European Communities argues that Article 2.4 of the TBT Agreement is not applicable to measures that were adopted before 1 January 1995. Referring to Article 28 of the Vienna Convention, the European Communities claims that the adoption of its Regulation was an "act … which took place … before the date of entry into force of the treaty" and since there is no expression of contrary intention, Article 2.4 does not apply to the Regulation.

7.54 Article 2.4 of the TBT Agreement states:

Where technical regulations are required and relevant international standards exist or their completion is imminent, Members shall use them, or the relevant parts of them, as a basis for their technical regulations except when such international standards or relevant parts would be an ineffective or inappropriate means for the fulfilment of the legitimate objectives pursued, for instance because of fundamental climatic or geographical factors or fundamental technological problems.

7.55 Peru claims that the expression "[w]here technical regulations are required" indicates that Article 2.4 applies in the situations in which technical regulations are required and not merely at the point in time when the decision to adopt them was taken. Peru argues that the European Communities' argument cannot be reconciled with Article XVI:4 of the WTO Agreement, which provides that "each Member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided for in the annexed agreements" or with Article 28 of the Vienna Convention, pursuant to which a treaty does apply to situations that continue to exist after its entry into force. Peru points out that the European Communities made a similar claim in the context of the SPS Agreement in EC - Hormones which the Appellate Body rejected by stating that "if 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".

7.56 The general principle of international law embodied in Article 28 of the Vienna Convention is that "[u]nless 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." In Brazil - Desiccated Coconut, the Appellate Body stated that, in reference to Article 28 of the Vienna Convention, "[a]bsent a contrary intention, a treaty cannot apply to acts or facts which took place, or situations which ceased to exist, before the date of its entry into force".72 We note that the EC Regulation was adopted on 21 June 1989 and the TBT Agreement entered into force on 1 January 1995. In this regard, the EC Regulation is a situation which has not ceased to exist after the date of the entry into force of the TBT Agreement but is a continuing situation. Therefore, absent a contrary intention, the TBT Agreement applies to the EC Regulation.

7.57 The TBT Agreement itself does not reveal any such contrary intentions. The TBT Agreement does not contain a transition period and there are provisions that indicate that the TBT Agreement was intended to apply to technical regulations that were adopted before the entry into force of the TBT Agreement. We note, for instance, that Article 2.2 states that "Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade"; Article 2.3 states that "[t]echnical regulations shall not be maintained if the circumstances or objectives giving rise to their adoption no longer exists…"; and Article 2.6 states that a "Member preparing, adopting or applying a technical regulation which may have a significant effect on trade of other Members shall … explain justification for that technical regulation" (emphasis added).

7.58 Although the temporal issue has not been considered by panels or the Appellate Body in the context of the TBT Agreement, an analogous temporal issue has been considered in the context of the SPS Agreement . The Appellate Body in EC - Hormones examined whether the SPS Agreement applies to certain SPS measures that were enacted before the entry into force of the SPS Agreement on 1 January 1995 and held that, under Article 28 of the Vienna Convention, the SPS Agreement is applicable to such measures:

We agree with the Panel that the SPS Agreement would apply to situations or measures that did not cease to exist, such as the 1981 and 1988 Directives, unless the SPS Agreement reveals a contrary intention. We also agree with the Panel that the SPS Agreement does not reveal such an intention. The SPS Agreement does not contain any provision limiting the temporal application of the SPS Agreement , or of any provision thereof, to SPS measures adopted after 1 January 1995. In the absence of such a provision, it cannot be assumed that central provisions of the SPS Agreement , such as Articles 5.1 and 5.5, do not apply to measures which were enacted before 1995 but which continue to be in force thereafter.73

7.59 The factual aspect of the current dispute is not dissimilar to the one in hand in EC - Hormones in that, like the 1981 and 1988 Directives, the EC Regulation is a "situation or measure that did not cease to exist" and the TBT Agreement does not reveal a contrary intention to limit the temporal application of the TBT Agreement to measures adopted after 1 January 1995.

7.60 Therefore, Article 2.4 of the TBT Agreement applies to measures that were adopted before 1 January 1995 but which have not ceased to exist.

3. Whether Codex Stan 94 is a relevant international standard

(a) Consideration of Codex Stan 94 as a relevant international standard

7.61 Peru argues that Codex Stan 94 is a relevant international standard as it was adopted by the Codex Alimentarius Commission which is an internationally recognized standard setting body that develops standards for food products. Referring to the definition of "standard" set out in Annex 1 of the TBT Agreement, Peru argues that it is an international standard that was adopted by consensus. Peru claims that Codex Stan 94 is also a relevant international standard that applies to sardines and sardine-type products that are prepared from the fish of 21 different species, including Sardina pilchardus and Sardinops sagax.

7.62 Although the European Communities does not contest that the Codex Alimentarius Commission is an internationally recognized standard setting body, the European Communities claims that the requirement to use relevant international standards as a basis set out in Article 2.4 of the TBT Agreement does not apply to existing measures. The European Communities also argues that Codex Stan 94 is not a relevant international standard on the basis that it did not exist and its adoption was not imminent when the EC Regulation was adopted. Furthermore, the European Communities also takes issue with several procedural features surrounding the development of Codex Stan 94. The European Communities argues that the standard was not adopted by consensus and that the prior, non-final draft of Codex Stan 94 indicates that the use of the common name for the species other than Sardina pilchardus without the word "sardines" is an independent option and Peru's interpretation that it is not an independent option would render Codex Stan 94 invalid. The European Communities argues that if Peru's interpretation were accurate, it would render Codex Stan 94 invalid because the change in the language of the standard was made without a referral back to the Committee for its approval. According to the European Communities, under Codex rules, any substantive change in the process of developing an international standard requires the approval of the Committee. The European Communities finally argues that paragraph 6.1.1(ii) of Codex Stan 94 is not the relevant provision for the EC Regulation because the EC Regulation does not regulate products other than preserved Sardina pilchardus.

7.63 International standards are standards that are developed by international bodies. Our starting point of analysis, therefore, is whether Codex Stan 94 comes within the scope of the definition of "standard" provided in Annex 1.2 of the TBT Agreement and followed by whether the Codex Alimentarius Commission is an international body within the meaning set out in Annex 1.2 of the TBT Agreement.

7.64 The term "standard" is defined as:

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. It may also include or deal exclusively with terminology, symbols, packaging, marking or labelling requirements as they apply to a product, process or production method.

7.65 A standard comes within the definition set out in paragraph 2 of Annex 1 of the TBT Agreement if it provides "for common and repeated use, rules, guidelines or characteristics for products or related processes and production methods"; compliance is not mandatory; and is approved by a "recognized body". We note that the parties are in agreement that Codex Stan 94 is a "standard" and see no reason to disagree with that assessment for the purposes of this dispute. We therefore find that Codex Stan 94 is a standard within the meaning of Annex 1.2 of the TBT Agreement.

7.66 With respect to whether the Codex Alimentarius Commission is an international body for the purposes of this dispute,74 we note that "international body" is defined in Annex 1.4 of the TBT Agreement as a "[b]ody or system whose membership is open to the relevant bodies of at least all Members". According to Rule 1 of the Statutes and Rules of Procedures of the Codex Alimentarius Commission, "[m]embership of the joint FAO/WHO Codex Alimentarius Commission … is open to all Member Nations and Associate Members of the FAO and/or WHO." As membership to the Codex Alimentarius Commission is open to all WTO Members, it is an international body within the meaning of annex 1.4 of the TBT Agreement. Moreover, we note that Peru submitted that the Codex Alimentarius Commission was an internationally recognized standard setting body that develops standards for food products and the European Communities indicated, in a response to the Panel's question on the matter, that it did not "contest the status of the Codex Alimentarius Commission as an international standardization body for the purposes of the TBT Agreement".

7.67 Based on the reasons above, we find that Codex Stan 94 is an international standard for the purposes of this dispute.

7.68 Having determined that Codex Stan 94 is an international standard, the analysis turns to whether Codex Stan 94 is a "relevant" international standard in respect of the EC Regulation. We note that the ordinary meaning of the term "relevant" is "bearing upon or relating to the matter in hand; pertinent".75 Based on the ordinary meaning, Codex Stan 94 must bear upon, relate to or be pertinent to the EC Regulation for it to be a relevant international standard.

7.69 The title of Codex Stan 94 is "Codex Standard for Canned Sardines and Sardine-type Products" and the EC Regulation lays down common marketing standards for preserved sardines. The European Communities indicated in its response that the term "canned sardines" and "preserved sardines" are essentially identical.76 Therefore, it is apparent that both the EC Regulation and Codex Stan 94 deal with the same product, namely preserved sardines. The scope of Codex Stan 94 covers various species of fish, including Sardina pilchardus which the EC Regulation covers, and includes, inter alia, provisions on presentation (Article 2.3), packing medium (Article 3.2), labelling, including a requirement that the packing medium is to form part of the name of the food (Article 6), determination of net weight (Article 7.3), foreign matter (Article 8.1) and odour and flavour (Article 8.2). The EC Regulation contains these corresponding provisions set out in Codex Stan 94, including the section on labelling requirement.

7.70 Therefore, for the reasons set out above and subject to the consideration of European Communities' arguments below, we find that Codex Stan 94 is a relevant international standard.

(b) Consideration of European Communities' temporal argument and its arguments that Codex Stan 94 is not a relevant international standard

7.71 We noted that the ordinary meaning of the term "relevant" is "bearing upon or relating to the matter in hand; pertinent". The dictionary meaning indicates that relevance refers to the subject matter at issue, i.e., preserved sardines, and not to the temporal aspect of the international standard or procedural aspect of the adoption of the international standard. We will nevertheless consider the European Communities' argument that Codex Stan 94 is not a relevant international standard on the ground that it did not exist and its completion was not imminent when the European Communities adopted the Regulation.

(i) The European Communities' argument that the requirement to use relevant international standards as a basis does not apply to existing technical regulations

7.72 The European Communities advances the argument that the language of Article 2.4 of the TBT Agreement requiring that relevant international standards be used as a basis for drawing up technical regulations suggests that the obligation does not apply to existing measures. The European Communities argues that the requirement to use a relevant international standard for technical regulations exists prior to the adoption of the measure, not afterwards because international standards cannot be used as a basis when technical regulations have already been adopted. The European Communities argues that the use of the word "imminent" further confirms its interpretation. For these reasons, the European Communities argues that Article 2.4 of the TBT Agreement applies only to preparation and adoption and not to the application of technical regulations.

7.73 As noted earlier, Article 2.4 of the TBT Agreement states:

Where technical regulations are required and relevant international standards exist or their completion is imminent, Members shall use them, or the relevant parts of them, as a basis for their technical regulations except when such international standards or relevant parts would be an ineffective or inappropriate means for the fulfilment of the legitimate objectives pursued, for instance because of fundamental climatic or geographical factors or fundamental technological problems. (emphasis added)

7.74 Article 2.4 of the TBT Agreement starts with the language "where technical regulations are required". We construe this expression to cover technical regulations that are already in existence as it is entirely possible that a technical regulation that is already in existence can continue to be required. Considered in the context of Article 28 of the Vienna Convention, the existing technical regulation is a situation that has not ceased to exist but continues to exist and Article 2.4 that requires the use of relevant international standards for technical regulations would therefore apply to those existing technical regulations. Moreover, we note that the first part of the sentence of Article 2.4 is in the present tense ("exist") and not in the past tense - "[w]here technical regulations are required and relevant international standards exist or their completion is imminent", Members are obliged to use such international standards as a basis. This supports the view that Members have to use relevant international standards that currently exist or whose completion is imminent with respect to the technical regulations that are already in existence. We do not consider that the word "imminent", the ordinary meaning of which is "likely to happen without delay",77 is intended to limit the scope of the coverage of technical regulations to those that have yet to be adopted. Rather, the use of the word "imminent" means that Members cannot disregard a relevant international standard whose completion is imminent with respect to their existing technical regulations. Therefore, a textual reading of Article 2.4 does not support the view that the requirement to use relevant international standards as a basis for technical regulations applies only to technical regulations that are to be prepared and adopted and is not applicable to existing technical regulations.

7.75 There is contextual support for the interpretation that Article 2.4 applies to technical regulations that are already in existence. The context provided by Article 2.5, which explicitly refers to Article 2.4, speaks of "preparing, adopting or applying" a technical regulation and is not limited to, as the European Communities claims, to preparing and adopting. A technical regulation can only be applied if it is already in existence. The first sentence imposes an obligation on a Member "preparing, adopting or applying" a technical regulation that may have a significant effect on trade of other Members to provide the justification for that technical regulation. The second sentence of Article 2.5 states that whenever a technical regulation is "prepared, adopted or applied" for one of the legitimate objectives explicitly set out in Article 2.2 and is in accordance with relevant international standards, it is to be rebuttably presumed not to create an unnecessary obstacle to trade. The use of the term "apply", in our view, confirms that the requirement contained in Article 2.4 is applicable to existing technical regulations.

7.76 Article 2.6 provides another contextual support. It states that Members are to participate in preparing international standards by the international standardizing bodies for products which they have either "adopted, or expect to adopt technical regulations." Those Members that have in place a technical regulation for a certain product are expected to participate in the development of a relevant international standard. Article 2.6 would be redundant and it would be contrary to the principle of effectiveness, which is a corollary of the general rule of interpretation in the Vienna Convention, if a Member is to participate in the development of a relevant international standard and then claim that such standard need not be used as a basis for its technical regulation on the ground that it was already in existence before the standard was adopted. Such reasoning would allow Members to avoid using international standards as a basis for their technical regulations simply by enacting preemptive measures and thereby undermine the object and purpose of developing international standards.

7.77 Based on our examination of the ordinary meaning of the words contained in Article 2.4 of the TBT Agreement and the context provided by Articles 2.5 and 2.6, we are of the view that the requirement contained in Article 2.4 to use relevant international standards as a basis for technical regulations applies to technical regulations that are already in existence. We note, however, that the European Communities argued that while relevant international standards could be used as a basis for a technical regulation when it is amended, this issue was not before the Panel. The European Communities argued that the question at issue is whether Members have an obligation after the WTO Agreement entered into force to revise their existing technical regulations to ensure that they have used relevant international standards as a basis. The European Communities argued that there is no obligation to review and amend existing technical regulations whenever an international standard is adopted or amended and that such obligation would turn standardisation bodies virtually into "world legislators". The European Communities noted that the Appellate Body stated with respect to "an obligation to use standards: We cannot lightly assume that sovereign states intended to impose upon themselves the more onerous, rather than less burdensome, obligation…".

7.78 In our view, Article 2.4 of the TBT Agreement imposes an ongoing obligation on Members to reassess their existing technical regulations in light of the adoption of new international standards or the revision of existing international standards. We do not, however, share the concern expressed by the European Communities that the obligation to amend a technical regulation when a new international standard is adopted would turn standardization bodies into "world legislators" because the nature of the obligation agreed to by Members is circumscribed by four elements. First, the obligation applies only "where technical regulations are required". If a Member does not enact a technical regulation or determines that the technical regulation is no longer required, it need not consider the international standard. Second, the obligation exists only to the extent that the international standard is relevant for the existing technical regulation. Third, if it is determined that a technical regulation is required and the international standard is relevant, Members are to use that international standard "as a basis", which means that Members are to use a relevant international standard as "the principal constituent … or fundamental principle"78 and does not mean that Members must conform to or comply with that relevant international standard.79 The requirement to use the relevant international standard as a basis does not impose a rigid requirement to bring the technical regulation into conformity with the relevant international standard. This provides Members with a certain amount of latitude in complying with the obligation set out in Article 2.4 of the TBT Agreement. In our view, the reference to the term "use as a basis" in Article 2.4 of the TBT Agreement recognizes that there may be various ways in which Members can use the relevant international standard in the formulation of their technical regulations. Finally, Members are not obliged to use the relevant international standard if such international standard is ineffective or inappropriate to fulfil the legitimate objectives pursued by the technical regulation.80 Thus, a judicious application of the obligations contained in Article 2.4 provides assurances against the over-reaching implied by the European Communities.

7.79 If Members did not have an ongoing obligation to examine their technical regulation in light of relevant international standards that are adopted or revised, the effect would be to create grandfather rights for those existing technical regulations that are at odds with those international standards as only the technical regulations enacted after the adoption or revision of the international standard would be subject to the international standard.81 If we were to find that Members do not have an ongoing obligation to reassess their technical regulations, it would be possible to preempt obligations under Article 2.4 of the TBT Agreement by adopting technical regulations before relevant international standards are adopted. As we have examined above, the ordinary meaning and context, especially in the context of Article 2.6 of the TBT Agreement, do not support the view that Members do not have an ongoing obligation to reassess their technical regulations in light of new international standards that are adopted.

7.80 There are other provisions that contextually support the view that the obligation under Article 2.4 is not a static obligation and that there is an ongoing obligation to reassess technical regulations in light of international standards that are adopted or revised. Article 2.3 of the TBT Agreement states:

Technical regulations shall not be maintained if the circumstances or objectives giving rise to their adoption no longer exist or if the changed circumstances or objectives can be addressed in a less trade-restrictive manner.

7.81 The language of Article 2.3 suggests that Members are to eliminate technical regulations that no longer serve their purpose or amend them if the changed circumstances or objectives can be addressed in a less trade-restrictive manner. This requirement also applies to technical regulations that were enacted before the TBT Agreement came into force. Thus, Members would be under an obligation to periodically evaluate their technical regulations and either discontinue them if they no longer serve their objectives or change them if there is a less trade-restrictive manner in which to achieve the underlying objectives of the regulations. Such reading of Article 2.3 is supported by Article 2.8 of the TBT Agreement which states that, wherever appropriate, Members are to "specify technical regulations based on product requirements in terms of performance rather than design or descriptive characteristics". Performance, the ordinary meaning of which is "operation or functioning, usually with regard to effectiveness",82 of products can change and technical regulations governing these products are to reflect these changes. The above interpretation is also consistent with the object and purpose of not creating unnecessary obstacles to international trade and one way to achieve that objective is to discontinue technical regulations that no longer serve their purpose or find a less trade-restrictive manner in which the objective can be fulfilled.

7.82 In support of its argument that Article 2.4 does not create an ongoing obligation to reassess technical regulations when international standards are adopted or amended, the European Communities referred to the Appellate Body's statement that "[w]e cannot lightly assume that sovereign states intended to impose upon themselves the more onerous, rather than the less burdensome, obligation…". The full sentence reads: "We cannot lightly assume that sovereign states intended to impose upon themselves the more onerous, rather than the less burdensome, obligation by mandating conformity or compliance with such standards, guidelines and recommendations". Thus, it is clear that the Appellate Body was distinguishing an obligation to conform to or comply with international standard from the language "based on". We have unequivocally stated that the term "use as a basis" does not mean conform to or comply with relevant international standards. It is our view, however, that, based on the reasons set out above, Members intended to impose an ongoing obligation to reassess their technical regulations in light of international standards that are adopted or revised and to use those relevant international standards as a basis for the technical regulations.

7.83 Based on the reasons set out above, we reject the European Communities' argument that Article 2.4 does not apply to existing technical regulations.

(ii) The European Communities' argument that the "predecessor standard" to Codex Stan 94 should have been invoked because Codex Stan 94 is not the relevant international standard as it did not exist and its adoption was not imminent when the EC Regulation was adopted

7.84 The European Communities argues that even if Article 2.4 were to have a retroactive effect, Codex Stan 94 is not a relevant international standard because "it did not exist and its adoption was not 'imminent' when the Regulation was adopted". The European Communities claims that Peru should have invoked the "predecessor standard" in arguing that the EC Regulation is inconsistent with the relevant international standard. The European Communities points out that "it did comply with the requirements of the Tokyo Round Standards Code when it adopted the Regulation and notified it to the GATT".83

7.85 We examined above the European Communities' temporal argument that Article 2.4 of the TBT Agreement does not apply to measures that were enacted prior to 1 January 1995 and found that, under Article 28 of the Vienna Convention, the EC Regulation is a situation that has not ceased to exist but continues to exist and Article 2.4 of the TBT Agreement therefore is applicable to the EC Regulation. Our conclusion becomes more apparent when the EC Regulation is considered from the perspective of the application rather than the adoption of the Regulation.84

7.86 Having determined that Article 2.4 is applicable to the EC Regulation, we note that Article 2.4 does not impose any temporal constraint in respect of relevant international standards that are to be used as a basis for technical regulations. Moreover, as we noted in paragraphs 7.78 to 7.82, Members have an ongoing obligation to reassess their technical regulations in light of relevant international standards that are adopted or revised. We do not agree with the European Communities' argument that Peru should have invoked the "predecessor standard", presumably the 1978 version of Codex Stan 94, for the reasons set out in paragraphs 7.56 to 7.60.85

7.87 Based on the reasons set out above, we reject the European Communities' argument that Codex Stan 94 is not a relevant international standard because it did not exist and its adoption was not imminent when the EC Regulation was adopted and that Peru should have invoked the predecessor standard.

(iii) The European Communities' argument that Codex Stan 94 is not a relevant international standard because it was not adopted by consensus

7.88 The European Communities argues that because there was no consensus in adopting Codex Stan 94, it is inconsistent with the principle of relevance contained in the Decision of the Committee on Principles for the Development of International Standards, Guides and Recommendations with Relation to Articles 2, 5 and Annex 3 of the Agreement (the "Decision") and therefore is not a relevant international standard.

7.89 For the purposes of determining whether standards must be based on consensus, the controlling provision is paragraph 2 of Annex 1 of the TBT Agreement and its explanatory note. The explanatory note for paragraph 2 provides:

Standards prepared by the international standardization community are based on consensus. This Agreement covers also documents that are not based on consensus.

7.90 The first sentence reiterates the norm of the international standardization community that standards are prepared on the basis of consensus. The following sentence, however, acknowledges that consensus may not always be achieved and that international standards that were not adopted by consensus are within the scope of the TBT Agreement.86 This provision therefore confirms that even if not adopted by consensus, an international standard can constitute a relevant international standard.

7.91 The Decision to which the European Communities refers is a policy statement of preference and not the controlling provision in interpreting the expression "relevant international standard" as set out in Article 2.4 of the TBT Agreement. The controlling provision must be understood as paragraph 2 of Annex 1 of the TBT Agreement. As we have seen above, the explanatory note of Annex 1.2 states that standards covered by the TBT Agreement include those that were adopted by consensus and those that were not adopted by consensus.

7.92 Therefore, we reject the European Communities' argument that Codex Stan 94 is not a relevant international standard must be rejected.

(iv) The European Communities' argument that Codex Stan 94 is not a relevant international standard on the basis that Peru's interpretation would mean that the Codex Stan 94 is invalid because there was no referral to the Committee even though there was a substantive change

7.93 The European Communities argues that the negotiating history of paragraph 6.1.1 of Codex Stan 94 indicates that the provision provides an option between "X sardines" on the one hand and the common name of the species on the other. The European Communities' claim is based on the fact that the change is described as "editorial" in the minutes of the meeting. The European Communities points out that the text of paragraph 6.1.1 was prepared and discussed in steps 1 to 7 and the text reads:

6.1.1 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.

The final version of the text reads:

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.

7.94 The European Communities' argument is that these changes are "editorial" as indicated in the minutes of the meeting and points out that substantive changes cannot be made at step 8 of the adoption process because an amendment at the stage requires the text to be referred back to the relevant committee for comments before its final adoption. Therefore, according to the European Communities, the reformulation of the text at step 8 cannot have produced any substantive change and its interpretation that a Member can choose between "X sardines" and common names is correct and that any change to this interpretation would render Codex Stan 94 invalid and therefore cannot be deemed relevant.

7.95 While the European Communities' explanation on the negotiating history and the process involving the adoption of an international standard is much appreciated, we are not persuaded that the negotiating history supports the European Communities' interpretation that Codex Stan 94 allows Members to choose between "X sardines" on the one hand and the common name of the species in accordance with the law and custom of the country in which the product is sold on the other hand. The text of Codex Stan 94 is clear on its face that it provides Members with four alternatives using the term "sardines" combined with the name of a country, the name of a geographic area, the name of species or the common name.87 Moreover, the deletion of the third alternative and the adoption of the current text indicate that the latter reflects the true intentions of the drafters. That the change is referred to as "editorial" in the minutes of the meeting suggests that both the earlier version and the final text expressed the same view but the final text did so more succinctly. Thus, paragraph 6.1.1 of Codex Stan 94 provides four alternatives and the use of the common name is not, as argued by the European Communities, "a self standing option independent from the formula 'X sardine'".

7.96 For these reasons, we reject the European Communities' argument that Codex Stan 94 is not a relevant international standard.

(v) The European Communities' argument that Codex Stan 94 is not a relevant international standard because the EC Regulation does not regulate products other than preserved Sardina pilchardus

7.97 The European Communities argues that paragraph 6.1.1(ii) of Codex Stan 94, on which Peru relies to argue that the EC Regulation is inconsistent with Article 2.4, is not the relevant provision because the EC Regulation does not apply to products other than preserved Sardina pilchardus. The European Communities argues that the relevant part of the international standard is paragraph 6.1.1(i) of Codex Stan 94 which deals with Sardina pilchardus.

7.98 We referred to the Appellate Body finding in EC - Asbestos that a document may prescribe a product characteristic in either a positive or a negative form. We determined that Article 2 of the EC Regulation requires positively that only products using Sardina pilchardus can be "marketed as preserved sardines and under the trade description referred to in Article 7" and that the negative implication flowing therefrom is that those products using species other than Sardina pilchardus cannot be "marketed as preserved sardines and under the trade description referred to in Article 7". We considered that by laying down a product characteristic that only Sardina pilchardus can constitute preserved sardines, the EC Regulation regulates species other than Sardina pilchardus by laying down product characteristics in a negative form.

7.99 As a standard that lays down product characteristics for Sardinops sagax and other species except Sardina pilchardus, we consider that paragraph 6.1.1(ii) of Codex Stan 94 is the relevant provision of the international standard in respect of species other than Sardina pilchardus and therefore reject the European Communities' argument that paragraph 6.1.1(ii) of Codex Stan 94 is not the relevant provision. Therefore, we confirm our finding in paragraph 7.70 that Codex Stan 94 is a relevant international standard.

4. Whether Codex Stan 94 was used as a basis for the technical regulation

7.100 Peru acknowledges 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. Peru argues that Sardinops sagax exported by Peru to the European Communities shall be marketed as "Peruvian sardines", "Pacific sardines", 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. 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.

7.101 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. The European Communities 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". The European Communities argues that 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 custom of the country in which the product is sold". 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 custom of the European Communities' member States and would mislead the consumers in the European Communities. 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.

7.102 Paragraph 6.1.1 of Codex Stan 94 reads:

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.

7.103 Textual reading of paragraph 6.1.1(ii) suggests that for species other than Sardina pilchardus, the label would read "X Sardines" with the "X" denoting a country, a geographic area, the species or the common name of the species in accordance with the law and custom of the country where the product is sold. We consider that paragraph 6.1.1(ii) of Codex Stan 94 contains four alternatives and each alternative envisages the use of the term "sardines" combined with the name of a country, name of a geographic area, name of 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.

7.104 The European Communities construes paragraph 6.1.1(ii) of Codex Stan 94 as providing a choice between "X sardines" with the "X" representing a country, geographical area or the species on the one hand and the common name of species in accordance with the law and custom of the country in which the product is sold on the other hand. The European Communities' interpretation is based on the fact that the phrase "the common name of the species in accordance with the law and custom of the country in which the product is sold" is situated 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".

7.105 We are not persuaded that the European Communities' reasons support its interpretation. As a matter of English grammar, it is not uncommon to insert a comma before the words "or" when listing more than two items. That is, the expression "A, B, C, or D" means one of the four items. It does not mean that A, B or C constitute one option while D is another option. For the European Communities' interpretation to be persuasive, Codex Stan 94 would at least have to contain an additional "or" so as to read:

"X Sardines" of a country, a geographical area or 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.

7.106 With respect to the European Communities' second argument that there is no comma between "species" and "in accordance with", the comma is missing because the words "in accordance with the law and custom of the country in which the product is sold" refer to the "common name of the species" and not to the name of a country, a geographical area or the species which need not be subject to the law and custom of the country.88

7.107 With respect to the European Communities' third argument, the existence of a comma before "and in a manner not to mislead the consumer" indicates that the requirement of not misleading the consumer attaches to all four alternatives.

7.108 The interpretation that paragraph 6.1.1(ii) of Codex Stan 94 contains four alternatives which provide for the use of the term "sardines" in each alternative is confirmed by the French text of Codex Stan 94. We note that the official languages of the Codex Alimentarius Commission are English, French and Spanish which means that all three versions are authentic. The French version reads:

"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. (emphasis added)

7.109 The French version confirms the interpretation that a Member is to choose among the four available alternatives and that it does not offer the option of choosing between "X Sardines" of a country, a geographical area or the species on the one hand and the common name in accordance with the law and custom of the country on the other hand. The Spanish version also confirms the view that the name of the species or common name must be added to the word "sardines" and not replace the word "sardines".

7.110 We note the European Communities' argument 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 because use as a basis does not mean conform to. We are cognizant of the Appellate Body's finding in EC - Hormones that the term "based on" does not mean "conform to". Yet, this observation does not resolve the issue at hand. Article 2.4 states that Members "shall use" international standards "as a basis" for their technical regulation. The use of the word "shall" denotes a requirement that is obligatory in nature and that goes beyond mere encouragement. The ordinary meaning of the word "use" is "to employ for or apply to a given purpose".89 The word "basis" means "the principal constituent of anything, the fundamental principle or theory, as of a system of knowledge".90 Thus, if the European Communities "used" the existing relevant international standard, that is, if it employed or applied Codex Stan 94 as the principal constituent or fundamental principle for the purpose of enacting its technical regulation governing preserved sardines, the EC Regulation would not be inconsistent with Article 2.4 of the TBT Agreement.

7.111 In this regard, the European Communities argued that its Regulation uses Codex Stan 94 as a basis and is therefore consistent with Article 2.4 of the TBT Agreement. Specifically, the European Communities argued that Codex Stan 94 provides that the trade description for species other than Sardina pilchardus is to be determined by the country in which the product is sold in accordance with its law and custom. Based on this interpretation of Codex Stan 94, the European Communities argued that because the UK and German laws prescribe that the trade description for Sardinops sagax is to be Pacific pilchard and Sardinops or pilchard, respectively, there is no need to allow Sardinops sagax to be labelled as sardines on the basis that the use of the term "sardines" would not be in accordance with the law and custom of European Communities' member States. As we have found above, paragraph 6.1.1(ii) of Codex Stan 94 contains four alternatives for labelling species other than Sardina pilchardus and all four alternatives require the use of the term "sardines" with a qualification. The European Communities' interpretation that Members need not use the term "sardines" if their laws provide otherwise would render international standards meaningless because Members would be able to justify their non-use of the relevant international standard on the basis that their domestic technical regulations are contrary to the international standard.

7.112 We recall our finding that the EC Regulation constitutes a technical regulation within the meaning of Annex 1.1 of the TBT Agreement as it lays down product characteristics of preserved sardines. We also found that the EC Regulation contains a labelling requirement that permits only products prepared from Sardina pilchardus to be labelled as "sardines" and that species such as Sardinops sagax cannot be called "sardines" even when it is combined with the name of a country, name of a geographic area, name of the species or the common name in accordance with the law and custom of the country in which the product is sold. The European Communities confirmed that species other than Sardina pilchardus cannot use the word "sardines" and that preserved Sardinops sagax is referred to as pilchards in the European Communities. In light of our findings above, we find that the relevant international standard, i.e., Codex Stan 94, was not used as a basis for the EC Regulation.



67 Appellate Body Report, United States - Measures Affecting Imports of Woven Wool Shirts and Blouses from India ("US - Wool Shirts and Blouses"), WT/DS33/AB/R, adopted 23 May 1997, DSR 1997:I, p. 335.

68 Panel Report, Turkey - Restrictions on Imports of Textile and Clothing Products ("Turkey - Textiles"), WT/DS34/R, as modified by the Appellate Body Report, WT/DS34/AB/R, adopted 19 November 1999, DSR 1999:VI, para. 9.57.

69 Appellate Body Report, US - Wool Shirts and Blouses, p. 335.

70 We are cognizant of the Appellate Body's finding in EC - Hormones that, in reference to Articles 3.1 and 3.3 of the SPS Agreement , the latter provision, which allows Members to establish their own level of sanitary protection, does not constitute an exception to the general obligation of Article 3.1, and that the burden of the complaining party to establish a prima facie case of inconsistency "is not avoided by simply describing that provision as an 'exception'". However, we consider that the Appellate Body's finding in EC - Hormones does not have a direct bearing on the matter before us.

71 We are aware that Members, pursuant to Article 2.5 of the TBT Agreement, upon the request of another Member, "shall explain the justification for that technical regulation in terms of the provisions of paragraphs 2 to 4 [of Article 2]". It cannot be excluded, however, that a Member, while acting in good faith, does not provide all the information required in sufficient detail for the respondent to determine with accuracy what the "legitimate" objectives pursued are and, if applicable, what considerations of "inappropriateness" underlie the Member's decision not to use the international standard as a basis. Lack of such information could frustrate a complainant's efforts to meet its burden of proof regarding the ineffectiveness or inappropriateness of an international standard.

72 Appellate Body Report, Brazil - Measures Affecting Desiccated Coconut ("Brazil - Desiccated Coconut"), WT/DS22/AB/R, adopted 20 March 1997, DSR 1997:I, pp. 179-180.

73 Appellate Body Report, EC - Hormones , para. 128. In Canada - Term of Patent Protection ("Canada - Patent Term"), WT/DS170/R, adopted 12 October 2000, as upheld by the Appellate Body Report, WT/DS170/AB/R, the panel held that the TRIPS Agreement was applicable to patents that were granted before the date of entry into force of the TRIPS Agreement (1 January 1996 for developed Members) because the subject matter of the patent that was granted protection is ongoing and continues past 1 January 1996 and to the extent that the protection of the subject matter continues beyond that date, it is a situation that has not ceased to exist and the TRIPS Agreement is therefore applicable.

74 We note that the Codex Alimentarius Commission is explicitly referred to in Article 3.4 of the SPS Agreement .

75 Webster's New World Dictionary, (William Collins & World Publishing Co., Inc., 1976), p. 1199.

76 EC's Response to Panel Question 6.

77 Webster's New World Dictionary, supra, p. 702.

78 Webster's New World Dictionary, supra, p. 117.

79 This reading of Article 2.4 of the TBT Agreement is consistent with the Appellate Body's finding in EC - Hormones that "based on" does not mean "conform to".

80 A detailed discussion on the meaning of ineffective and inappropriate is set out in paragraph 7.116.

81 We note in this regard that the Appellate Body stated that because the "WTO Agreement was accepted definitively by Members … there are no longer 'existing legislation' exceptions (so called 'grandfather rights')". EC - Hormones , para. 128.

82 Webster's New World Dictionary, supra, p. 1056.

83 EC's First Submission, para. 115.

84 The European Communities argued that "[t]he adoption of the Regulation was an 'act' … which took place … before the date of the entry into force of the treaty and, since there is no expression of contrary intention Article 2.4 does not apply to it". EC's First Submission, para. 113.

85 With respect to the European Communities' argument that it complied with the Tokyo Round Standards Code when it adopted the Regulation, we note that the Tokyo Round Standards Code was terminated pursuant to a decision taken by the Tokyo Round Committee on Technical Barriers to Trade.

86 The record does not demonstrate that Codex Stan 94 was not adopted by consensus. In any event, we consider that this issue would have no bearing on our determination in light of the explanatory note of paragraph 2 of Annex 1 of the TBT Agreement which states that the TBT Agreement covers "documents that are not based on consensus".

87 Our examination of paragraph 6.1.1 of Codex Stan 94 is set out in paragraphs 7.103 to 7.109.

88 We note that the Report of the Tenth Session of the Codex Committee on Fish and Fishery Products states: "The attention of the Committee was drawn to the clause that the name of the food should be 'in accordance with the law and custom of the country in which the product is sold'. One delegation held the view that such a requirement was not conducive to harmonization of food legislation. Other delegations stated that for sardines and sardine type products this provision was indispensable. It was agreed to request governments to supply information on the names commonly used in labelling of these types of products in their countries". (emphasis added)

89 Webster's New World Dictionary, supra, p. 1564.

90 Ibid., p. 117.


To continue with 5. Whether Codex Stan 94 would be an ineffective or inappropriate means for the fulfilment of the legitimate objectives pursued

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