50. The US/EC Bananas III arbitration decision quoted above expounds that the authority of Arbitrators under Article 22.3(b)-(c) implicitly includes the power to review whether a request made under subparagraph (a) should have been made (in part) under subparagraphs (b) or (c). In our view, the fact that the powers of Arbitrators under subparagraphs (b)-(c) are explicitly provided for in Article 22.6, implies a fortiori that the authority of Arbitrators includes the power to review whether the principles and procedures set forth in these subparagraphs have been followed by the Member seeking authorization for suspension.

51. A close examination of the ordinary meaning of the terms of the subparagraphs of Article 22.3 makes clear that the scope of the review of the request for suspension varies slightly with the nature of the obligations contained in the different subparagraphs. The introductory clause of Article 22.3 provides that the complaining party shall apply the following principles and procedures in considering what concession or other obligations to suspend:

(a) Subparagraph (a) imposes the principle that suspension is sought first in the same sector as that in which there was a violation.

(b) Subparagraph (b) requires a consideration of whether it is not practicable or effective to seek suspension in the same sector(s) where a violation has been found by the panel or the Appellate Body.

(c) Subparagraph (c) requires a consideration of whether it is not practicable or effective to seek suspension in the same agreement and that the circumstances are serious enough to seek suspension under another agreement.

(d) Subparagraph (d) requires that certain factors shall be taken into account when applying the principles of subparagraphs (a), (b) and (c).

(e) Subparagraph (e) requires a complaining party that makes a request under subparagraphs (b) or (c) to state the reasons therefore.

52. It follows from the choice of the words "if that party considers" in subparagraphs (b) and (c) that these subparagraphs leave a certain margin of appreciation to the complaining party concerned in arriving at its conclusions in respect of an evaluation of certain factual elements, i.e. of the practicability and effectiveness of suspension within the same sector or under the same agreement and of the seriousness of circumstances. However, it equally follows from the choice of the words "in considering what concessions or other obligations to suspend, the complaining party shall apply the following principles and procedures" in the chapeau of Article 22.3 that such margin of appreciation by the complaining party concerned is subject to review by the Arbitrators. In our view, the margin of review by the Arbitrators implies the authority to broadly judge whether the complaining party in question has considered the necessary facts objectively and whether, on the basis of these facts, it could plausibly arrive at the conclusion that it was not practicable or effective to seek suspension within the same sector under the same agreements, or only under another agreement provided that the circumstances were serious enough.²⁰

53. The choice of the words "that party shall take into account" in subparagraph (d) makes clear that the Arbitrators have the authority to fully review whether the factors listed in subparagraphs (i)-(ii) of Article 22.3(d) have been taken into account by the complaining party in applying all the principles and procedures set forth in subparagraphs (a)-(c). By the same token, the choice of the words "it shall state the reasons therefore" in subparagraph (e) implies that the Arbitrators are to review the reasons stated therefore by a complaining party in making a request under subparagraphs (b) or (c).

54. Consequently, our margin of review of the complaining party's considerations under subparagraphs (b) and (c) will be slightly different from our review of whether account has been taken of the factors listed in subparagraph (d) and whether reasons have been stated pursuant to subparagraph (e). It bears pointing out, however, that our margin of review of the complaining party's considerations under subparagraphs (b) and (c) will inevitably be coloured by our review of the question whether the factors listed in subparagraphs (i)-(ii) of Article 22.3(d) have been taken into account when applying the principles of (b) and (c).

55. A systematic interpretation of the subparagraphs of Article 22.3 also reveals that these provisions read in their context imply a sequence of steps towards WTO-consistent suspension of concessions or other obligations which respects both a margin of appreciation for the complaining party in question as well as a margin of review by Arbitrators, if a request for suspension under Article 22.2 is challenged pursuant to Article 22.6. The final phrases of subparagraphs (b) and (c) provide that a complaining party "may seek to suspend concessions or other obligations", they do not provide that the complaining party "may suspend" concessions or other obligations without any other condition. Furthermore, subparagraph (e) provides that if a party decides to request authorization for such suspension, "it shall state the reasons therefore". Thus the apparent right of the complaining party to consider itself the practicability and effectiveness of suspension under a particular sector and/or agreement is only an initial or temporary right. Subsequently, this initial assessment by the party requesting authorization from the DSB, if challenged by the other party through the initiation of an arbitration proceeding, has to withstand scrutiny by the Arbitrators in respect of the conditions and factors under the different subparagraphs as described above. This sequence of procedural steps under Article 22 is similar to the sequence of procedural steps in dispute settlement proceedings before panels and the Appellate Body.²¹ The multilateral nature of the WTO dispute settlement system implies the possibility of a multilateral assessment of the WTO-consistency of a measure or action by one party, if challenged by another party.

56. We believe that this interpretation is consistent with the purpose of an arbitration proceeding under Article 22, as far as it concerns an examination of a claim that the principles and procedures of Article 22.3 have not been followed. Article 22.7 stipulates that in the event the Arbitrators determine that those principles have not been followed, the complaining party shall apply them consistent with paragraph 3 and also that the DSB can only authorise a request for suspension if it is consistent with this paragraph. These objectives could not be accomplished if the authority of the Arbitrators would not include the right to review the initial consideration by the complaining party within its margin of appreciation of the principles and procedures set forth in subparagraphs (b)-(c), whether the factors in subparagraph (d) have been taken into account in the particular circumstances of a case, and whether the complaining party has stated the reasons in accordance with subparagraph (e) of Article 22.3.

57. In our view, such a scope of review by the Arbitrators does not and need not question the "nature of the concessions or other obligations to be suspended" within the meaning of Article 22.7. But we also note that Article 22.3(a) leaves discretion to the complaining party concerned first to select concessions or other obligations to be suspended up to the level of nullification or impairment allegedly suffered within the same sector(s) where a violation has been found, while the discretion to seek suspension across sectors and/or agreements remains limited by the requirements of Article 22.3(b)-(e) and, if challenged by the other party, is subject to review by the Arbitrators as described above.

58. For all these reasons, we reject Ecuador's interpretation of the scope and degree of review by the Arbitrators, acting pursuant to Article 22.6, of whether a complaining party, in seeking authorization for suspension under subparagraphs (b)-(c), considered the principles and procedures set forth in Article 22.3.

59. But we also reject the EC's argument that Ecuador bears the burden of establishing that it has respected the principles and procedures set forth in Article 22.3. Given our considerations concerning the burden of proof in arbitration proceedings under Article 22 above, we believe that it is for the European Communities to challenge Ecuador's considerations of the principles and procedures set forth in Article 22.3(b)-(d). Once the European Communities has shown prima facie that these principles and procedures have not been followed, and that the factors listed in subparagraph (d) were not taken into account, however, it is for Ecuador to rebut such a presumption.

60. In view of our considerations concerning the burden of proof above, we also believe that certain information as to how Ecuador considered the principles and procedures set forth in Article 22.3(b)-(c), and took into account the factors listed in Article 22.3(d) may indeed be in the sole possession of Ecuador. Also given the requirement in subparagraph (e) that the party requesting authorization for suspension "shall state the reasons therefore", it is our position that Ecuador had to come forward and submit information giving reasons and plausible explanations for its initial consideration of the principles and procedures set forth in Article 22.3 that caused it to request authorization under another sector and agreement than those where violations were found.

61. In the light of this general interpretation of Article 22.3, we address in the following sections first Ecuador's request to suspend commitments in respect of the "wholesale trade services" sector under GATS as one of the same sectors with respect to which the EC was found to have taken WTO-inconsistent measures by the panel, reconvened upon request by Ecuador pursuant to Article 21.5. Second, we address Ecuador's request, pursuant to Article 22.3(c), for suspension of concessions or other obligations across sectors and agreements.

B. ECUADOR'S REQUEST FOR SUSPENSION OF CONCESSIONS OR OTHER OBLIGATIONS IN THE SAME SECTOR WHERE VIOLATIONS WERE FOUND

62. In its request under Article 22.2, Ecuador lists as a sector with respect to which it seeks to suspend commitments under the GATS the subsector of "wholesale trade services" (CPC 622). We recall that the report of the reconvened panel in the proceeding between Ecuador and the European Communities under Article 21.5 of the DSU²² found the revised banana regime to be in violation of Articles I and XIII of GATT as well as Articles II and XVII of GATS with respect to the EC's commitments on wholesale trade services within the sector of distribution services.

63. Therefore, we believe that Ecuador's request to suspend commitments on "wholesale trade services" falls within the scope of Article 22.3(a) as it concerns one of the same sectors as those where the reconvened panel found a violation. We note that subparagraph (a) provides that a complaining party should first seek suspension in such sectors. In this respect, we recall the considerations concerning the interpretation of Article 22.3(a) in the US/EC Bananas III arbitration decision:

"3.9 � However, the obligations of subparagraphs (b) or (c) to substantiate why suspensions of concessions under the same sector or under the same agreement were not practicable or effective would only be relevant if the suspension of concessions proposed by the United States would be outside the scope of the panel or Appellate Body findings, e.g. if the proposed suspension would concern other service sectors than distribution services, or trade-related intellectual property rights.

3.10 We recall that subparagraph (a) of Article 22.3 of the DSU refers to the suspension of "concessions or other obligations with respect to the same sector(s) as that in which the panel or Appellate Body has found a violation or other nullification or impairment." We note that the words "same sector(s)" include both the singular and the plural. The concept of "sector(s)" is defined in subparagraph (f)(i) with respect to goods as all goods, and in subparagraph (f)(ii) with respect to services as a principal sector identified in the "Services Sectoral Classification List". We, therefore, conclude that the United States has the right to request the suspension of concessions in either of these two sectors, or in both, up to the overall level of nullification or impairment suffered, if the inconsistencies with the EC's obligations under the GATT and the GATS found in the original dispute have not been removed fully in the EC's revision of its regime. In this case the "same sector(s)" would be "all goods" and the sector of "distribution services", respectively. Our conclusion, based on the ordinary meaning of Article 22.3(a), is also consistent with the fact that the findings of violations under the GATT and the GATS in the original dispute were closely related and all concerned a single import regime in respect of one product, i.e. bananas."

64. In view of these considerations, and given that Ecuador's request to suspend commitments on "wholesale trade services" falls under subparagraph (a) of Article 22.3, there is obviously no need for us to examine whether the principles and procedures set forth in subparagraph (b-d) of Article 22.3 have been followed.²³ We conclude that Ecuador may obtain authorization by the DSB to suspend commitments on "wholesale trade services" because this subsector is within the same (distribution service) sector as that in which the reconvened panel found violations of Articles II and XVII of GATS.

C. ECUADOR'S REQUEST FOR SUSPENSION OF CONCESSIONS OR OTHER OBLIGATIONS UNDER ANOTHER SECTOR OR AGREEMENT THAN THAT WHERE VIOLATIONS WERE FOUND

65. Ecuador specifies in its request for suspension of other obligations under the TRIPS Agreement, pursuant to subparagraph (c) of Article 22.3, as obligations which it intends to suspend across sectors and agreements:²⁴

(i) Article 14 on "Protection of performers and producers of phonograms (sound recordings) and broadcasting organisations" under Section 1 (Copyrights and related rights) of the TRIPS Agreement;

(ii) Section 3 (Geographical Indications); and

(iii) Section 4 (Industrial Designs).

66. We recall that there were no findings of violations under the TRIPS Agreement in the report of the reconvened panel in the proceeding between Ecuador and the European Communities under Article 21.5 of the DSU.²⁵

67. The European Communities alleges that in making these request for suspension of TRIPS obligations Ecuador has not followed the principles and procedures set forth in subparagraphs (b) and (c). In the EC's view, Ecuador has in particular not demonstrated why it is not practicable or effective for it to suspend concessions under the GATT or commitments under the GATS in service sectors other than distribution services; nor that circumstances are serious enough for requesting suspension under another agreement; nor that it has taken into account the parameters in subparagraphs (i) and (ii) of Article 22.3(d).

68. Ecuador contends that it did not request suspension entirely under the GATT and/or in service sectors under the GATS other than distribution services because it considered that it would not be practicable or effective in the meaning of Article 22.3(b) and (c) of the DSU, that circumstances in Ecuador's bananas trade sector and the economy on the whole are serious enough to justify suspension under another agreement, and that the parameters in Article 22.3(d)(i)-(ii) corroborate this conclusion.

1. General Interpretation of the Principles and Procedures Set Forth in Article 22.3

69. In addressing these issues, we recall our interpretations above of the jurisdiction and the scope of review of the Arbitrators, acting pursuant to paragraphs 6 and 7 of Article 22. In this case, our examination of the EC's claim that Ecuador has not followed the principles and procedures set forth in subparagraphs (a-e) of Article 22.3 requires us to analyze the following issues:²⁶

(a) First, whether suspension of concessions under the GATT as one of the same sectors as those where violations were found by the reconvened panel is "not practicable or effective";

(b) Second, whether suspension of commitments under the GATS in another subsector than wholesale trade services within the sector of distribution services is "not practicable or effective";

(c) Third, whether suspension of commitments under the GATS in another service sector than distribution services is "not practicable or effective";

(d) Fourth, whether "circumstances are serious enough" to seek suspension under another agreement than those where violations were found;

(e) Fifth, whether the trade in the sector(s) under the agreement(s) under which violations were found and the "importance of such trade to the party" suffering nullification or impairment were taken into account; and

(f) Sixth, whether "broader economic elements" related to nullification or impairment and the "broader economic consequences" of the requested suspension were taken into account.

70. Several of these issues require the party seeking suspension to consider whether an alternative suspension with respect to the same sectors or agreements under which a violation was found is "not practicable or effective". In this regard, we note that the ordinary meaning of "practicable" is "available or useful in practice; able to be used" or "inclined or suited to action as opposed to speculation etc.".²⁷ In other words, an examination of the "practicability" of an alternative suspension concerns the question whether such an alternative is available for application in practice as well as suited for being used in a particular case.

71. To give an obvious example, suspension of commitments in service sub-sectors or in respect of modes of service supply which a particular complaining party has not bound in its GATS Schedule is not available for application in practice and thus cannot be considered as practicable. But also other case-specific and country-specific situations may exist where suspension of concessions or other obligations in a particular trade sector or area of WTO law may not be "practicable".

72. In contrast, the term "effective" connotes "powerful in effect", "making a strong impression", "having an effect or result".²⁸ Therefore, the thrust of this criterion empowers the party seeking suspension to ensure that the impact of that suspension is strong and has the desired result, namely to induce compliance by the Member which fails to bring WTO-inconsistent measures into compliance with DSB rulings within a reasonable period of time.

73. One may ask whether this objective may ever be achieved in a situation where a great imbalance in terms of trade volume and economic power exists between the complaining party seeking suspension and the other party which has failed to bring WTO-inconsistent measures into compliance with WTO law. In such a case, and in situations where the complaining party is highly dependent on imports from the other party, it may happen that the suspension of certain concessions or certain other obligations entails more harmful effects for the party seeking suspension than for the other party.²⁹ In these circumstances, a consideration by the complaining party in which sector or under which agreement suspension may be expected to be least harmful to itself would seem sufficient for us to find a consideration by the complaining party of the effectiveness criterion to be consistent with the requirement to follow the principles and procedures set forth in Article 22.3.

74. A consideration by the complaining party of the practicability and the effectiveness of an alternative suspension within the same sector or under the same agreement does not need to lead to the conclusion that such an alternative suspension is both not practicable and not effective in order to meet the requirements of Article 22.3. This is so because in no instance do subparagraphs of Article 22.3 require that an alternative suspension within the same sector or under the same agreement be neither practicable nor effective. Thus a consideration by the complaining party that an alternative suspension which does not concern other sectors or other agreements is either not practicable or not effective is sufficient for that party to move on to seek suspension under another sector or agreement.

75. In this context, we recall our considerations above concerning the allocation of the burden of proof in arbitration proceedings under Article 22 that in the light of the requirement in Article 22.3(e), the complaining party requesting suspension has to come forward and submit information giving reasons and explanations for its initial consideration of the principles and procedures set forth in Article 22.3 which led it to request authorization under another sector or another agreement than those where a violation was found. However, by the same token, it would then be for the other party to bear the ultimate burden of showing that suspension within the same sector or under the same agreement is both practicable and effective for the party requesting suspension. This implies for the case before us that once Ecuador has laid out its considerations under Article 22.3, it is ultimately for the European Communities to establish that suspension of concessions on goods under the GATT or suspension of commitments in service sectors other than distribution services under the GATS are both practicable as well as effective for Ecuador given the case-specific and country-specific circumstances.

76. Our interpretation of the "practicability" and "effectiveness" criteria is consistent with the object and purpose of Article 22 which is to induce compliance. If a complaining party seeking the DSB's authorization to suspend certain concessions or certain other obligations were required to select the concessions or other obligations to be suspended in sectors or under agreements where such suspension would be either not available in practice or would not be powerful in effect, the objective of inducing compliance could not be accomplished and the enforcement mechanism of the WTO dispute settlement system could not function properly.

77. In our view, it is important to point out that Article 22.3 sets out the criteria of practicability and effectiveness in the negative. On the one hand, establishing that something does not exist is often deemed more difficult than proving that it does exist. On the other hand, subparagraph (b) implies that Ecuador's considerations need to show that suspension is not practicable or effective with respect to the same sector(s) as those where a violation was found. That provision does not imply establishing that suspension is practicable and effective in other sectors under the same agreement. Likewise, subparagraph (c) implies showing that suspension is not practicable or effective with respect to other sectors under the same agreement(s) as those where a violation was found, it does not imply establishing that suspension is practicable and effective under another agreement.

78. This has important consequences for the examination of the case before us. They imply that our review of the effectiveness and practicability criteria focuses, in the light of the legal and factual arguments submitted by both parties, on Ecuador's considerations why it is not practicable or effective for it (i) to suspend concessions under the GATT or (ii) commitments under the GATS with respect to the distribution service sector for purposes of subparagraph (b), or (iii) to suspend commitments under the GATS with respect to service sectors other than distribution services for purposes of subparagraph (c). We emphasize that Article 22.3(b) and (c) does not require Ecuador, nor us, to establish that suspension of concessions or other obligations is practicable and/or effective under another agreement (i.e. the TRIPS Agreement) than those under which violations have been found (i.e. the GATT and the GATS). The burden is on the European Communities to establish that suspension within the same sector(s) and/or the same agreement(s) is effective and practicable. However, according to subparagraph (c) of Article 22.3, it is our task to review Ecuador's consideration that the "circumstances are serious enough" to warrant suspension across agreements.

79. From a contextual perspective, it should be stressed that the criteria of practicability and effectiveness are not set forth in subparagraphs (b) and (c) in isolation from the other subparagraphs of Article 22.3. These criteria have to be read in combination especially with the factors set out in subparagraphs (i) and (ii) of Article 22.3(d) which, as the introductory clause of subparagraph (d) stipulates, the complaining party seeking authorization for suspension shall take into account in applying the above principles, i.e. those provided for in subparagraphs (a)-(c).

80. We also note that the threshold for considering a request for suspension in another sector under the same agreement (e.g. service sectors other than distribution services) pursuant to subparagraph (b) is lower than the threshold for considering a request for suspension under another agreement pursuant to subparagraph (c) of Article 22.3. Suspension across sectors under the same agreement is permitted if suspension within the same sector is "not practicable or effective". However, an additional condition applies when the complaining party considers a request for suspension across agreements. Such suspension under another agreement is not justified unless "circumstances are serious enough".

20 Article 11 of the DSU provides in relevant part: "[A] panel should make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements, and make such other findings as will assist the DSB in making the recommendations or in giving the rulings provided for in the covered agreements."

21 This situation is similar to the right of a Member under Article 3.3 of the DSU to decide whether or not to initiate a dispute settlement proceeding by requesting consultations and the establishment of a panel. This is a decision entirely within the discretion of a Member while the decision whether a measure complained of is in fact WTO-inconsistent is left to the panel, the Appellate Body and the DSB.

22 WT/DS27/RW/ECU (dated 12 April 1999, adopted on 6 May 1999).

23 We note that the principles and procedures set forth in subparagraphs (a) and (b)-(c) and thus the standard of our review are different in these subparagraphs. Under subparagraph (a) no consideration or review of whether or not suspension of commitments with respect to "wholesale trade services" as one of the same sectors where violations were found is practicable or effective for Ecuador. Consequently, our conclusions in this section do not detract from our conclusions below that suspension under the GATS of commitments in other subsectors of the distribution service sector as well as suspension of commitments under principal service sectors other than distribution services is not practicable or effective for Ecuador in view of the country-specific and case-specific circumstances.

24 See above subparagraphs (f)(i)-(iii) and (g)(i)-(iii) of Article 22:3 of the DSU.

25 WT/DS27/RW/ECU (dated 12 April 1999, adopted on 6 May 1999).

26 We have already dealt with Ecuador's request to suspend commitments on "wholesale trade services" which falls under subparagraph (a) of Article 22.3 as a request for suspension with respect to the same sector(s) as that in which a violation was found.

27 The New Shorter Oxford English Dictionary ("Oxford English Dictionary"), Oxford (1993), p. 2317.

28 Oxford English Dictionary, p. 786.

29 Of course, suspension of concessions or other obligations is always likely to be harmful to a certain, limited extent also for the complaining party requesting authorization by the DSB.