126. In our view, these figures illustrate the considerable economic differences between a developing WTO Member and the world's largest trader. We believe that these differences confirm our considerations above that it may not be practicable or effective for Ecuador to suspend concessions or other obligations under the GATS or with respect to all product categories under the GATT. However, to some extent, the same rationale could hold true also for suspension of obligations under the TRIPS Agreement by a developing country Member in a situation involving a substantial degree of economic inequality between the parties concerned.

127. In this respect, we note Ecuador's argument that it has limited its request for suspension under the TRIPS Agreement to only three areas of protection of intellectual property rights where adverse effects for Ecuador and difficulties in implementing suspension would seem to arise the least. We recall that Article 22.3(a-b) requires us to review the complaining party's considerations as to why suspension is not practicable or effective in the same sector(s) or in (an)other sector(s) under the same agreement(s) where violations were found. Article 22.3(c) requires in addition a review of whether circumstances are serious enough to justify suspension across agreements. Finally, Article 22.3(d) requires a review of whether the complaining party has taken into account certain factors in applying these principles and procedures just mentioned. None of these provisions requires the complaining party to establish that suspension with respect to another sector or under another agreement is in fact and at present practicable and effective, or will become so at some point in the future. Nor are we, as Arbitrators, in our review pursuant to subparagraphs 6 or 7 of Article 22, required to establish that the suspension of certain TRIPS obligations is effective and practicable for Ecuador in this case.

(e) 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" were taken into account

128. We next analyze whether Ecuador has taken into account the factors of trade in the sector(s) or under the agreement(s) where violations were found and the importance of such trade for the complaining party within the meaning of subparagraph (i) of Article 22.3(d). We recall our interpretation above that these factors relate primarily to the trade nullified or impaired by the WTO-inconsistent measures which have not been brought into compliance, and that trade in the goods or service sectors or under the GATT and GATS agreements in their entirety are of subsidiary importance for our review. Therefore, in this case we consider mainly whether Ecuador has taken into account in particular the importance of trade in bananas and their distribution, but also the importance of such trade in the banana sector relative to trade in the goods and service sectors on the whole.

129. More specifically, Ecuador emphasizes that the banana sector is the lifeblood of its economy. Ecuador is the largest exporter of bananas in the world and the largest exporter to the European market. Banana production is also the largest source of employment and the largest source of foreign earnings. Nearly 11 per cent of Ecuador's population is totally dependent on this sector. Banana exports (in goods only) represent 25.45 per cent of Ecuador's total merchandise exports. Banana production represents nearly 5.2 per cent of the GDP. In Ecuador's view, the banana industry is of greater importance to its economy than the whole agricultural sector in most developed countries. Ecuador concluded that it would be difficult to find an economic sector where it would be possible to hurt Ecuador more than in the banana sector.

130. This information demonstrates that Ecuador has taken into account that its economy is highly dependent upon bananas and is highly sensitive to any changes in international trade flows and conditions of competition abroad. We conclude that Ecuador has taken into account within the meaning of subparagraph (i) of Article 22.3(d) the trade in the sector(s) and agreement(s) where violations of WTO-law have been found and the importance of such trade to Ecuador.

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

131. Finally, we review whether Ecuador has taken into account "broader economic elements" related to nullification or impairment and "broader economic consequences" of the requested suspension within the meaning of subparagraph (ii) of Article 22.3(d) in applying the principles and procedures of Article 22.3, and in particular in considering that "circumstances are serious enough" to justify suspension under another agreement than those where violations were found.

132. In these respects, Ecuador offered the following argumentation. On the one hand, Ecuador argued that it currently faces the worst economic crisis in its history. Ecuador pointed at the fact that its economy shrank by 7 per cent in 1999 and that total imports declined by 52 per cent. Unemployment rose to 17 per cent. We do not question the alarming nature of these economic indicators. However, the European Communities contended that Ecuador has not clearly established a causal link between the EC's failure to comply with the DSB rulings within the reasonable period of time and the economic crisis in Ecuador. In the EC's view, this crisis may be due to multiple reasons, including natural disasters and domestic political problems.

133. We note that subparagraph (ii) of Article 22.3(d) does not require the complaining party to establish a causal connection between nullification or impairment suffered and "broader economic elements" to be taken into account. It is sufficient to show that there is a relation between the "broader economic elements" considered by Ecuador and the nullification and impairment caused by the EC import regime for bananas. We consider Ecuador's argument plausible that the nullification and impairment caused by the WTO-inconsistent aspects of that EC import regime have aggravated these economic problems, especially in view of the importance of trade in bananas and related distribution services for Ecuador's economy.

134. As to "broader economic consequences" of the suspension of concessions or other obligations, Ecuador submitted that such consequences for the European Communities would be virtually non-existent. In Ecuador's view, given the economic disparity between the parties, such consequences would be felt rather by Ecuador.

135. We have addressed and accepted Ecuador's arguments that it has taken account of this factor in considering whether to seek suspension under another agreement. We are thus satisfied that Ecuador has taken into account within the meaning of subparagraph (ii) of Article 22.3(d) "broader economic elements" and "broader economic consequences" in applying the principles and procedures set forth in Article 22.3.

136. In this context, we note that our interpretation and application of the factors listed in subparagraph (d) of Article 22.3 is corroborated by the provisions of Article 21.8⁴⁰ which require the DSB, in considering which action might be appropriate if a case is brought by a developing country Member, to take into account not only the trade coverage of the measures complained of, but also their impact on the economy of the developing country Members concerned.

137. In the light of the foregoing discussion, we conclude that Ecuador has followed the principles and procedures set forth subparagraph (c) in considering that "circumstances are serious enough" to seek suspension under another agreement than those where violations were found and that it has taken into account the factors listed in subparagraph (d) in applying the principles and procedures set forth in Article 22.3.

138. Accordingly, we conclude that Ecuador has followed the principles and procedures set forth in Article 22.3 in requesting authorization from the DSB to suspend certain obligations under the TRIPS Agreement.

V. REMARKS ON THE SUSPENSION OF TRIPS OBLIGATIONS

A. THE SCOPE OF THE SUSPENSION TO BE AUTHORIZED UNDER THE TRIPS AGREEMENT

139. We recall that Article 19 of the DSU provides that "the panel or the Appellate Body may suggest ways in which the Member concerned could implement the recommendations". While Article 19 does not explicitly mention arbitration proceedings under Article 22, in our view, there is nothing in the DSU that would preclude Arbitrators, acting pursuant to Article 22.6, from making suggestions on how to implement their decision. Given that this case is the first one involving subparagraphs (b)-(e) of Article 22.3 and the first one concerning the suspension of TRIPS obligations, we believe that it is particularly appropriate to set out our views on the suspension of TRIPS obligations. We also note that Ecuador has expressed its interest in hearing our views on these issues.

140. We first note that Article 1.3 of the TRIPS Agreement defines in general the reach of the TRIPS Agreement:

"Members shall accord the treatment provided for in this Agreement to the nationals of other Members. In respect of the relevant intellectual property right, the nationals of other Members shall be understood as those natural or legal persons that would meet the criteria for eligibility for protection provided for in the Paris Convention (1967), the Berne Convention (1971), the Rome Convention and the Treaty on Intellectual Property in Respect of Integrated Circuits, were all Members of the WTO members of those conventions. �". (emphasis added, footnotes omitted).

141. Thus, an authorization by the DSB of the request for suspension vis-�-vis the European Communities would permit Ecuador to suspend the treatment provided for in the TRIPS provisions in question with respect to nationals within the meaning of Article 1.3 of those 13 EC member States⁴¹ which the request for suspension by Ecuador refers to.

142. Article 1.3 of the TRIPS Agreement further specifies that the criteria for determining which persons are entitled to the treatment provided for under the TRIPS Agreement are those that meet the criteria for eligibility for protection laid down in the main pre-existing intellectual property conventions, including the Paris Convention, the Berne Convention, the Rome Convention, and the Treaty on Intellectual Property in Respect of Integrated Circuits (IPIC Treaty).⁴²

143. We recall that Ecuador's request for the suspension of TRIPS obligations refers to Article 14 of Section 1 of the TRIPS Agreement on "Copyright and related rights" as well as Section 3 on "Geographical indications" and Section 4 on "Industrial designs".

144. In respect of the protection of performers, producers of phonograms (sound recordings) and broadcasting organisations within the meaning of Article 14 of the TRIPS Agreement, criteria for eligibility for protection of persons are defined in the Rome Convention. In this respect, it is important to point out that, in the case of suspension of obligations under Article 14, as requested by Ecuador, there may be different right holders of the different rights related to phonograms and that these right holders do not necessarily all have the nationality, within the meaning of Article 1.3 of the TRIPS Agreement, of one of those 13 member States in question, even if the phonogram concerned has been produced in one of those member States. The performer having rights to a phonogram under Article 14 may be a non-national of these 13 member States, but the producer of the phonogram may be a national of those member States. Such complicated situations will have to be carefully considered by Ecuador in implementing the suspension of TRIPS obligations, if authorized by the DSB, so as not to adversely affect right holders who cannot be regarded as nationals of those 13 EC member States.

145. In respect of the criteria for eligibility for the protection of industrial designs, the Paris Convention is relevant.

146. The legal protection of geographical indications⁴³ is enjoyed by "interested parties" within the meaning of Articles 22.2 and 23.1 of the TRIPS Agreement.⁴⁴ Article 22.1 of the TRIPS Agreement creates a clear link between a region, locality or territory and a protectable geographical indication. This implies that the suspension of protection of geographical indications would concern parties interested in geographical indications which identify a good as originating in the territory of one of the respective 13 EC member States, or a region or locality in that territory.

147. It should be emphasized that in its relation to all other WTO Members and the natural or legal persons that are their nationals, Ecuador continues to be bound by its obligations under the TRIPS Agreement and that all these WTO Members continue to be entitled to exercise their rights under the DSU with respect to Ecuador.

B. THE SUSPENSION OF TRIPS OBLIGATIONS AND THE RELATION WITH THE CONVENTIONS ADMINISTERED BY WORLD INTELLECTUAL PROPERTY ORGANISATION (WIPO)

148. The parties disagree on whether Article 2.2 of the TRIPS Agreement prevents or permits the suspension of TRIPS obligations which have a relation to the Paris Convention, Berne Convention, the Rome Convention or the IPIC Treaty. Article 2.2 provides:

"Nothing in Parts I to IV of this Agreement shall derogate from existing obligations that Members have to each other under the Paris Convention, the Berne Convention, the Rome Convention and the Treaty on Intellectual Property Right in Respect of Integrated Circuits."

149. This provision can be understood to refer to the obligations that the contracting parties of the Paris, Berne and Rome Conventions and the IPIC Treaty, who are also WTO Members, have between themselves under these four treaties. This would mean that, by virtue of the conclusion of the WTO Agreement, e.g. Berne Union members cannot derogate from existing obligations between each other under the Berne Convention. For example, the fact that Article 9.1 of the TRIPS Agreement incorporates into that Agreement Articles 1-21 of the Berne Convention with the exception of Article 6bis does not mean that Berne Union members would henceforth be exonerated from this obligation to guarantee moral rights under the Berne Convention.

150. In any event, Article 2.2 only refers to Parts I to IV of the TRIPS Agreement, while the provisions on "Dispute Prevention and Settlement" are embodied in Part V. This Part of the TRIPS Agreement contains, inter alia, Article 64.1⁴⁵ which provides that the DSU applies to disputes under the TRIPS Agreement unless otherwise specifically provided therein. Examples for something "otherwise specifically provided" are paragraphs 2 and 3 of that same Article 64. These paragraphs specifically provide that so-called "non-violation" and "situation" complaints within the meaning of subparagraphs 1(b) and 1(c) of Article XXIII of GATT cannot be lodged during a transitional period and that the Council for TRIPS should examine the scope and modalities for these types of complaints under the TRIPS Agreement. However, nothing in Article 64 or other Articles of the TRIPS Agreement provides specifically that Article 22 of the DSU does not apply to the TRIPS Agreement.

151. We further note that subparagraphs (f)(iii) and (g)(iii) of Article 22.3 of the DSU⁴⁶ explicitly define that Sections of the TRIPS Agreement are "sectors", and that the TRIPS Agreement is an "agreement", in respect of which the suspension of TRIPS obligations may be sought, pursuant to subparagraphs (b-c) of Article 22.3, by a complaining party and authorized by the DSB. Provided that Ecuador's request for the suspension of certain TRIPS obligations is consistent with all the requirements of Article 22 of the DSU, including paragraphs 3 and 4 thereof, neither Article 2.2 read in context with Article 64 of the TRIPS Agreement, nor any other provision of the WTO agreements indicate that an authorization by the DSB of that request would in theory be prohibited under WTO law.

152. It is not within our jurisdiction as Arbitrators, acting pursuant to Article 22.6 of the DSU, to pass judgment on whether Ecuador, by suspending, once authorized by the DSB, certain TRIPS obligations, would act inconsistently with its international obligations arising from treaties other than the agreements covered by the WTO (e.g. the Paris, Berne and Rome Conventions which Ecuador has ratified).⁴⁷ It is, if at all, entirely for Ecuador and the other parties to such treaties to consider whether a specific form chosen by Ecuador for implementing such suspension of certain TRIPS obligations gives rise to difficulties in legal or practical terms under such treaties.

C. THE EFFECT ON THIRD-COUNTRY WTO MEMBERS OF THE SUSPENSION OF CERTAIN TRIPS OBLIGATIONS BY ECUADOR WITH RESPECT TO THE EUROPEAN COMMUNITIES

153. It is evident that an authorization by the DSB for Ecuador to suspend certain TRIPS obligations would concern Ecuador only. Such authorization does not exonerate any other WTO Member from abiding by its WTO obligations, including those under the TRIPS Agreement.

154. The obligations of other WTO Members include those in respect of action against imports of goods which involve other infringements of intellectual property rights. In this context, Article 51⁴⁸ in Section 4⁴⁹ on "Special Requirements Related to Border Measures", contained in Part III of the TRIPS Agreement, provides that "Members shall � adopt procedures to enable a right holder who has valid grounds for suspecting that the importation of counterfeit trade or pirated copyright goods may take place", to request customs authorities to suspend release into free circulation of such goods. According to footnote 14 to Article 51, "pirated copyright goods"⁵⁰ include copies made without the consent of the right holder or person duly authorized by the right holder in the country of production, where the making of that copy would have constituted an infringement of a copyright or a related right under the law of the country of importation.

155. We note that, as a result of an authorization by the DSB of Ecuador's request to suspend Article 14 of the TRIPS Agreement, phonograms would be produced in Ecuador consistent with WTO law. However, such phonograms would still be copies made without the consent of the right holder or a person duly authorized by the right holder in the country of production. Pursuant to footnote 13 to Article 51,⁵¹ WTO Members are under no obligation to apply procedures concerning "special requirements related to border measures" to imports of goods put on the market in another country by or with the consent of the right holder. However, with respect to phonograms produced in Ecuador without the consent of the right holder, but consistent with an authorization by the DSB under Article 22.7 of the DSU, the obligations of Article 51 of the TRIPS Agreement to apply such procedures would remain in force for all WTO Members.

156. Distortions in third-country markets could be avoided if Ecuador would suspend the intellectual property rights in question only for the purposes of supply destined for the domestic market. An authorization of a suspension requested by Ecuador does of course not entitle other WTO Members to derogate from any of their obligations under the TRIPS Agreement. Consequently, such DSB authorization to Ecuador cannot be construed by other WTO Members to reduce their obligations under Part III of the TRIPS Agreement in regard to imports entering their customs territories.

D. THE SUSPENSION OF TRIPS OBLIGATIONS AND INTERFERENCE WITH PRIVATE RIGHTS

157. We are conscious that the requested suspension of certain TRIPS obligations ultimately interferes with private rights owned by natural or legal persons. These persons are highly unlikely to have any connection with the ongoing failure of the European Communities to fully comply with the DSB rulings in the proceeding under Article 21.5 of the DSU in Bananas III between Ecuador and the European Communities. The same logic holds true for the suspension of concessions or other obligations under the GATT (or other agreements in Annex 1A) and the GATS as well. However, the interference with private property rights of individuals or companies may be perceived as more far-reaching under the TRIPS Agreement, given the potentially unlimited possibility to copy phonograms or use other intellectual property rights. In contrast, producers of goods and service suppliers which are affected by the suspension of concessions or other obligations under the GATT or the GATS may stop exporting to the Member imposing such suspension.

158. We are aware that the implementation of the suspension of certain TRIPS obligations may give rise to legal difficulties or conflicts within the domestic legal system of the Member so authorized (and perhaps even of the Member(s) affected by such suspension). The resolution of such difficulties is of course a matter entirely within the prerogatives of the Member requesting authorization. Obviously, the degree of such difficulties is likely to depend on the means chosen by Ecuador for implementing the suspension of certain TRIPS obligations in relation to the 13 EC member States.

E. CONCLUDING OBSERVATIONS ON THE SUSPENSION OF TRIPS OBLIGATIONS

159. As far as the examination of the equivalence between the level of nullification or impairment suffered and the level of the proposed suspension of concessions or other obligations is concerned, the mandate of the Arbitrators under paragraphs 6 and 7 of Article 22 of the DSU is in our view limited to estimating Ecuador's losses in actual and potential trade and trade opportunities in the relevant goods and service sectors (i.e. trade in Ecuadorian bananas and distribution services by suppliers of Ecuadorian origin). However, in the light of the provisions of Article 19.1 of the DSU referred to above, we wish to make some remarks on Ecuador's intentions on how to implement the suspension of certain TRIPS obligations, if authorized by the DSB.

160. We note with approval that, in implementing the suspension of certain TRIPS obligations at a level not exceeding the level authorized by the DSB, Ecuador intends to account not only for the actual impact of the suspension of intellectual property rights currently used subject to the authorization by the right holder and subject to the payment of remuneration.⁵² The mechanisms described in detail below reflect Ecuador's intention to consider also the potential impact of such suspension in terms of the additional use of the intellectual property rights in question. Such use may be expected to increase as a result of the fact that the DSB's authorization would allow using such intellectual property rights without payment of remuneration to EC right holders and without their authorization, provided that prices for the products incorporating the intellectual property rights concerned decrease.

40 Article 21.8 of the DSU: "If the case is one brought by a developing country Member, in considering what appropriate action might be taken, the DSB shall take into account not only the trade coverage of measures complained of, but also their impact on the economy of developing country Members concerned.".

41 Ecuador's request for suspension under Article 22.2 excludes Denmark and the Netherlands.

42 These eligibility criteria apply whether or not a WTO Member is a party to these pre-existing Conventions.

43 Geographical indications are defined in Article 22.1 of the TRIPS Agreement as indications which identify a good as originating in the territory of a Member, or a region or locality in that territory, where a given quality, reputation or other characteristics of the good is essentially attributable to the geographical origin.

44 Article 22.2 of the TRIPS Agreement: "2. In respect of geographical indications, Members shall provide the legal means for interested parties to prevent:

(a) the use of any means in the designation or presentation of a good that indicates or suggests that the good in question originates in a geographical area other than the true place of origin in a manner which misleads the public as to the geographical origin of the good;
(b) any use which constitutes an act of unfair competition within the meaning of Article 10bis of the Paris Convention (1967).

3. A Member shall, ex officio if its legislation so permits or at the request of an interested party, refuse or invalidate the registration of a trademark which contains or consists of a geographical indication with respect to goods not originating in the territory indicated, if use of the indication in the trademark for such goods in that Member is of such a nature as to mislead the public as to the true place of origin.
4. The protection under paragraphs 1, 2 and 3 shall be applicable against a geographical indication which, although literally true as to the territory, region or locality in which the goods originate, falsely represents to the public that the goods originate in another territory."
Article 23.1 of the TRIPS Agreement: Additional Protection for Geographical Indications for Wines and Spirits: "Each Member shall provide the legal means for interested parties to prevent use of a geographical indication identifying wines for wines not originating in the place indicated by the geographical indication in question or identifying spirits for spirits not originating in the place indicated by the geographical indication in question, even where the true origin of the goods is indicated or the geographical indication is used in translation or accompanied by expressions such as 'kind', 'type', 'style', 'imitation' or the like." Footnote 4 to Article 23.1: "Notwithstanding the first sentence of Article 42, Members may, with respect to these obligations, instead provide for enforcement by administrative action."
As regards the notion of "interested parties", guidance could be sought from Article 10.2 of the Paris Convention.

45 Article 64.1 of the TRIPS Agreement: "The provisions of Article XXII and XXIII of GATT 1994 as elaborated and applied by the Dispute Settlement Understanding shall apply to consultations and the settlement of disputes under this Agreement except as otherwise specifically provided therein."

46 Article 22.3(f) of the DSU: "for purposes of this paragraph, 'sector' means: �
(iii) with respect to trade-related intellectual property rights, each of the categories of intellectual property rights covered in Section 1, or Section 2, or Section 3, or Section 4, or Section 5, or Section 6, or Section 7 of Part II, or the obligations under Part III, or Part IV of the Agreement on TRIPS;"
Article 22.3(g) of the DSU: "for purposes of this paragraph, 'agreement' means: �
(iii) with respect to intellectual property rights, the Agreement on TRIPS."

47 We also refer in this respect to our considerations in Section D on the suspension of TRIPS obligations and the interference with private rights.

48 Article 51 of the TRIPS Agreement: "Members shall, in conformity with the provisions set out below, adopt procedures to enable a right holder who has valid grounds for suspecting that the importation of counterfeit trade or pirated copyright goods may take place, to lodge an application in writing with competent authorities, administrative or judicial, for the suspension by the customs authorities of the release into free circulation of such goods. Members may enable such an application to be made in respect of goods which involve other infringements of intellectual property rights, provided that the requirements of this Section are met. Members may also provide for corresponding procedures concerning the suspension by the customs authorities of the release of infringing goods destined for exportation from their territories." (footnotes omitted).

49 Members are obliged to provide border measures in respect of goods embodying related rights, but may apply them also in respect of goods which involve infringements of geographical indications or industrial designs.

50 Footnote 14 to Article 51 of the TRIPS Agreement: "For the purposes of this Agreement: �
(b) "pirated copyright goods" shall mean any goods which are copies made without the consent of the right holder or person duly authorized by the right holder in the country of production and which are made directly or indirectly from an article where the making of that copy would have constituted an infringement of a copyright or a related right under the law of the country of importation."

51 Footnote 13 to Article 51 of the TRIPS Agreement: "It is understood that there shall be no obligation to apply such procedures to imports of goods put on the market in another country by or with the consent of the right holder, or to goods in transit."

52 We also wish to emphasise that in calculating the level of nullification and impairment suffered by Ecuador, we considered the entire value of losses of actual trade and of potential trade opportunities in bananas and the loss of actual and potential distribution service supply. We have not based our calculations on the losses in profits incurred by banana producers or companies supplying distribution services. It would facilitate implementing an equivalent level of suspension of TRIPS obligations if actual and potential effects of such suspension of the protection of the intellectual property rights at issue would be taken into account.