WORLD TRADE
ORGANIZATIONWT/DS114/13
18 August 2000
(00-3328)
CANADA – PATENT PROTECTION OF PHARMACEUTICAL
PRODUCTS
Arbitration
under Article 21.3(c) of the
Understanding on Ru les and Procedures
Governing the Settlement of Disputes
Award of the Arbitrator
James BacchusWT/DS114/13
Page 1
I. Introduction
1. On 7 April 2000,  the Dispute Settlement Body (the "DSB") adopted the Panel Report in
Canada – Patent Protection of Pharmaceutical Products ("Canada – Pharmaceutical Patents ").  1
On 25 April 2000, Canada informed the DSB, pursuant to Article 21.3 of the  Understanding on Rules
and Procedures Governing the Settlement of Disputes   (the "DSU"), that it would implement the
recommendations and rulings of the DSB in this dis pute;  however, Canada said that it would require
a "reasonable period of time" to do so, under the terms of Article 21.3 of the DSU.
2. Consultations between Canada and the European Communities on the duration of the
reasonable period of time for implementation occurred but these did not result in agreement.
3. By joint letter of 20 June 2000, Canada and the European Communities notified the DSB that
they had agreed that the duration of the reasonable period of time for implementation should be
determined through binding arbitration, under the terms of Article 21.3(c) of the DSU, and that I
should act as Arbitrator.  The parties also indicated in that letter that they had agreed to extend thetime period for the arbitration, fixed at 90 days by Article 21.3(c) of the DSU, until 31 August 2000.Notwithstanding this extension of the time period, th e parties stated that the arbitration award would
be deemed to be an award made under Article 21.3(c) of the DSU.  My acceptance of this designationas Arbitrator was conveyed to the parties by letter of 21 June 2000.
4. Written submissions were received from Canada and the European Communities on
6 July 2000, and an oral hearing was held on 20 July 2000.
II. Arguments of the Parties
A. Canada
5. Canada submits that the implementation of the DSB's recommendations and rulings in this
case can be accomplished through regulatory change rather than through legislative amendment,which Canada submits is usually more time consuming.
 2  Given the extent of consultations required
in this contentious field, Canada believes that the regulatory process can be carried out and finalizedin a maximum of 11 months' time from the date of adoption of the Panel Report.
6. In its submission, Canada explains the process by which changes are made to its regulatory
regime.  According to Canada, the Government of Canada Regulatory Policy ("Regulatory Policy")states that the use of the government's regulatory powers should result in "the greatest net benefit to
                                                     
1WT/DS114/R.
2Canada's submission, para. 9.WT/DS114/13
Page 2
Canadian society".  Accordingly, authorities who propose the exercise of regulatory power are
obliged to demonstrate that the benefits of regulating clearly outweigh the costs, and that an effort has
been made to structure the regulatory measures so as to maximize the benefits to Canadians and
minimize the costs.
7. Canada explains that, in the normal course, the department with responsibility for the area in
which the problem has arisen, in this case, the Department of Industry, should include informationabout the problem in its Report on Plans and Priorities, a document which is tabled in the CanadianParliament.  Where a potential regulatory initiative has not been so planned and reported, thedepartment must nevertheless explain the rationale for its planned regulatory proposal regarding theproblem in its Departmental Regulatory Plan.  In  the Department of Industry, that information is
reviewed by the Department's Senior Policy Committee, which evaluates and categorizes the
proposal.
8. The responsible department is then required to draft a proposed regulation. The department
must also prepare a Regulatory Impact Analysis Statement (the "RIAS"), which describes the purposeof the draft regulation, the alternatives considered, a cost-benefit analysis, the results of consultationswith interested parties, the department's response to the concerns raised, and how the regulation will
be enforced.
9. Canada further clarifies that, pursuant to the provisions of the Canadian  Statutory
Instruments Act , the proposed regulation and supporting documentation, including the RIAS, must be
produced in both English and French, Canada's two of ficial languages.  They must then be approved
by the responsible department's legal services and senior management, and sent to the Clerk of the
Privy Council and to the Deputy Minister of Justic e for review.  The Privy Council Office ensures that
the proposal is consistent with the government's overall program and that the responsible departmenthas adequately considered the communications aspects of the proposed regulatory action.  TheRegulations Section of the Department of Justice examines the regulation to ensure that it has a properlegal basis and, in particular, that "it does not trespass unduly on existing rights and freedoms and isnot, in any case, inconsistent with the purposes and provisions of the  Canadian Charter of Rights and
Freedoms   and the  Canadian Bill of Rights ".
 3
10. Canada explains that the Regulatory Policy also requires that the complete documentation in
support of a proposal be sent to the Regulatory Affairs and Orders in Council Secretariat of the Privy
Council Office, which is the agency responsible for administering the Policy.  The Secretariat reviewsthe proposal to ensure that it is consistent with the Policy and, in particular, that: the responsible
                                                     
3Canada's submission, para. 14.WT/DS114/13
Page 3
department has considered other alternatives; the benefits of regulation clearly outweigh the costs;
adequate consultation with the public has taken place, to allow Canadians to understand the proposed
regulation and to participate in the process; and the responsible department has cooperated with
Canada's provincial governments to ensure that the proposed regulation does not duplicate or overlapany provincial measure.
11. Once these reviews have been completed, the Minister of the responsible department
approves the regulation and supporting documentation and submits them to the Privy Council Officefor consideration by the Cabinet's Special Committee of Council (the "SCC"), which is the Cabinetcommittee that gives Governor in Council approval for the pre-publication of a draft regulation and its
accompanying RIAS.  The Regulatory Policy requires pre-publication of a regulation in order toprovide the Canadian public at large, as opposed to the more limited constituencies initially consulted
by the responsible department, with an opportunity to comment.  Upon approval by the SCC
Ministers, the regulation and its RIAS are published in  the Canada Gazette, Part I, and must be open
for public comment for at least 30 days.
12. Comments received from the public must be weighed on their merits and changes to the
proposed regulation must be considered.  If the proposed regulation is changed, the Department ofJustice Regulations Section must again examine and approve the revised version before it is sent forfinal approval by SCC Ministers.   If the proposed regulation is amended, the RIAS must also be
changed to reflect the amendment.
13. Ministers consider each proposed regulation on its own merits.  If they approve the
regulation, it is registered under a statutory orders and regulations number within seven days of the
Governor General's signature.  The regulation will come into force on a date specified by theGovernor in Council or, where not so specified, on the day of registration.  The approved regulationand its RIAS are then forwarded for publication in the Canada Gazette, Part II, which is published bythe Queen's Printer every second Wednesday. Pursuant to subsection 11(1) of the Statutory
Instruments Act , publication must take place no later than 23 days after registration.  Once published,
the regulation becomes enforceable as law, as the public  is deemed to have notice of the change in the
regulatory regime.
14. Canada believes that the process of draf ting, consultation, approval, promulgation and
registration of the proposed regulation in this case can be accomplished in a maximum of 11 monthsWT/DS114/13
Page 4
time from the date of the adoption of the Panel Report by the DSB.  Canada breaks this period down
as follows:
(a) 2 weeks for identification and assessment, which involves the preparation of an
explanation as to why the measure is needed and a reference by the Department ofIndustry to its Senior Policy Committee for evaluation of the Regulatory Plan andreview of the regulatory proposal;
(b) 3 months for the drafting of the proposed regulation and RIAS; review by relevant
Department of Industry committees;  review and approval by Department of Industrylegal services; development of a communications plan;  forwarding of the proposedregulation for examination by Department of Justice Regulations Section;  informalreview by the Privy Council Office;  fi nal Department of Industry review and
approval for pre-publication and sign ature of the Minister of Industry;
(c) 2 weeks for the formal submission of the regulatory package to the Privy Council
Office for submission to SCC for pre-publica tion and approval.  The material must be
submitted at least one week in advance of a scheduled meeting. Meetings aregenerally held weekly, but less frequently during Parliamentary recesses.  In thisrespect, Canada notes that its Parliament is currently in recess until the end ofSeptember 2000;
(d) 1 month and 1 week for the pre-publication in Canada Gazette, Part I and receipt of
questions and comments from the public;
(e) 1-3 months for the response to public comments;  amendment of the regulation and
RIAS as required; resubmission to Department of Industry legal services andDepartment of Justice Regulations Section;  review and approval for final publicationand signature of the Minister of Industry;  and
(f) 2 weeks for the formal submission of th e regulatory package to the Privy Council
Office for submission to SCC for final publication approval;  final publication inCanada Gazette, Part II.
 4
15. Canada submits that although the above breakdown totals 8-9 months, it may not be possible
to carry out the needed consultations during that time, or to receive the views and advice from all of
the relevant constituencies, since critical aspects of the process will occur during the summer vacation
                                                     
4Canada's submission, para. 19.WT/DS114/13
Page 5
period of July and August.  Accordingly, in order to ensure that these essential steps are properly
carried out, Canada argues that the total period should be increased to approximately 10-11 months.
16. Having explained its regulatory process, Canada turns next to a review of previous
arbitrations under Article 21.3(c) of the DSU.  Canada submits that, in previous arbitrations,arbitrators have consistently begun their assessments by considering the guideline contained inArticle 21.3(c) itself.  A guideline for the arbitrator should be that the reasonable period of time toimplement DSB recommendations should not exceed 15 months from the date of adoption of a panelor Appellate Body report.
17. Canada submits that the reasonable period of time may be shorter or longer, depending on
particular circumstances.  Canada recalls that, as the arbitrator in  Australia - Measures Affecting
Importation of Salmon   ("Australia – Salmon ") put it, "what constitutes a 'reasonable period of time'
depends upon the action which [the implementing Member] takes under its legal system to implement
the recommendations and rulings of the DSB."
 5
18. Canada believes that as it has undertaken to achieve compliance in significantly less time than
is contemplated by the Article 21.3(c) guideline, the onus is clearly on the European Communities, asthe complaining Member, to establish that there are "particular circumstances" to justify an even
shorter period of time.  Canada adds that, in determining whether the European Communities hasdischarged its burden of proof in this case, it will be important to bear in mind that Canada, as theimplementing Member, is not obliged to take unusual steps in order to bring its law into compliancewith its obligations.
19. Canada emphasizes the statement of the arbitrator in  Korea - Taxes on Alcoholic Beverages  
("Korea – Alcoholic Beverages ") that, while the reasonable period of time should be the shortest
possible within the legal system of the implementing Member, "this does not require a Member, in myview, to utilize an  extraordinary   legislative procedure, rather than the  normal   legislative procedure,
in every case."
 6  Canada considers that this approach is in keeping with the discretion that is afforded
to WTO Members by Article 1.1 of the  Agreement on Trade-related  Aspects of Intellectual Property
Rights   (the " TRIPS Agreement ") "to determine the appropriate method of implementing the
provisions of this Agreement within their own legal system and practice".
20. Canada considers that it will achieve compliance with its obligations under the
TRIPS Agreement   by revoking the regulations that are essential to the existence of the stockpiling
                                                     
5Award of the Arbitrator under Article 21.3(c) of the DSU, Australia – Salmon , WT/DS18/9,
23 February 1999, para. 33.
6Award of the Arbitrator under Article 21.3(c) of the DSU, Korea – Alcoholic Beverages ,
WT/DS/75/16, WT/DS84/14, 4 June 1999, para. 42.WT/DS114/13
Page 6
exception.  According to Canada, Subsection 55.2(2) of the  Patent Act   will thereby be rendered of no
legal force or effect.  Revocation of the Regulations will completely deprive subsection 55.2(2) of the
Patent Act   of any meaning or effect.  As a result, no one who has availed themselves of the protection
of subsection 55.2(1) -- the "regulatory review" exception -- for the purposes of developing andsubmitting samples of a competing version of a patented product to regulatory authorities for theirreview will, on the coming into force of the revoki ng regulation, be entitled to further manufacture or
further stockpile products prior to the expiration of the term of the relevant patent.  The protectionfrom infringement liability created by the combination of the theory expressed in subsection 55.2(2)and the practical substance given to that theory by the Regulations will be wholly terminated by therevocation.
21. Canada emphasizes, however, that "the revocation of the  Manufacturing and Storage of
Patented Medicines Regulations  will be a very sensitive political matter in Canada", and, thus, that
extensive consultations with stakeholders, interest groups and the general public will be required.
 7  In
Canada's view, a maximum of 11 months' time is, therefore, needed in order to conduct the necessaryconsultations, as well as to comply with the various procedural requirements of the  Statutory
Instruments Act   and the Regulatory Policy.
22. Canada, therefore, requests the arbitrator to rule that 11 months from 7 April 2000, the date of
adoption of the Panel Report by the DSB, is the reasonable period of time for the implementation ofthat ruling in this case.  Thus, Canada proposes a "reasonable period of time" for implementation thatwould end on 7 March 2001.
B. European Communities
23. The European Communities submits that to impl ement fully the recommendations and rulings
of the DSB, Canada must repeal Section 55.2(2) of its  Patent Act , which the Panel in this dispute
found to be inconsistent with the requirements of Article 28(1) of the  TRIPS Agreement .
24. The European Communities is of the view that implementation of the DSB recommendations
in this case requires the repeal of Section 55.2(2) of the  Patent Act , that is, legislative, and not
regulatory action.  The European Communities considers that "it is only necessary to repeal a singlesubparagraph, which is separable from the remainder of the provisions of which it forms part".
 8  The
European Communities argues that "this can be performed in a period of time significantly shorter
                                                     
7Canada's submission, para. 28.
8European Communities' submission, para. 4.WT/DS114/13
Page 7
than the indicative maximum period" of 15 months provided for in Article 21.3(c) of the DSU.  9  The
European Communities argues that, in any event, the "reasonable period of time" in this matter must
not be a period longer than 12 months counted fr om 7 April 2000, the date of the adoption of the
Panel Report in this dispute by the DSB.
25. The European Communities submits that the ordinary meaning of the language in
Article 21.3(c) of the DSU indicates that 15 months is a guideline for the arbitrator and "sets an outerlimit or a maximum in the usual case".
 10  Thus, the European Communities contends that when
implementation can be effected by administrative means, the reasonable period of time should beconsiderably shorter than 15 months.  In addition, the European Communities asserts thatArticle 21.3(c) of the DSU must be interpreted in context, and, in particular in the context ofArticles 3.3 and 21.1 of the DSU, which place particular emphasis on the prompt compliance of
recommendations and rulings of the DSB.
26. The European Communities also highlights the statement of the arbitrator in the
EC Measures Affecting Meat and Meat Products  (Hormones ) ("European Communities –
Hormones ") arbitration, that the reasonable period of time under Article 21.3(c), "should be the
shortest period possible within the legal system of the Member to implement the recommendationsand rulings of the DSB."
 11
27. The European Communities acknowledges that it is not within the mandate of the arbitrator
under Article 21.3(c) of the DSU to decide on the precise ways and means Canada must use toimplement the recommendations and rulings of the DSB.  However, in order to be able to assess if
implementation can occur immediately, and in case this proves to be impracticable to assess the
length of the reasonable period, "it is fundamental for the arbitrator to define the nature of the measurenecessary to implement the recommendations and rulings of the DSB".
 12
28. According to the European Communities, it is important to note that "implementation of the
recommendations and rulings" in Article 21 of the DSU means full implementation, as opposed toprovisional or partial implementation.  The European Communities argues that, in accordance withArticle 3.7 of the DSU, which stipulates that the first objective of the dispute settlement mechanism isusually to secure the withdrawal of the measures concerned if these are found to be inconsistent withthe provisions of any of the covered agreements, Canada has to repeal Section 55.2(2) of its
                                                     
9European Communities' submission, para. 4.
10Ibid., para. 14.
11Award of the Arbitrator under Article 21.3(c) of the DSU, European Communities – Hormones ,
WT/DS26/15, WT/DS48/13, 29 May 1998, para. 26.
12European Communities' submission, para. 17.WT/DS114/13
Page 8
Patent Act , which can only be achieved through another legislative act ( actus contrarius ).  The
abrogation of the regulations, as proposed by Canada, cannot achieve this goal.
29. The European Communities observes that, while law-making procedures differ in the various
WTO Members, it is nevertheless instructive to see that the reasonable periods of time forimplementation measures of a legislative nature, that have been granted in the past, cover periodsranging from 11 months and 2 weeks  to 15 months and 1 week .  The European Communities notesfurther that this includes cases where the reasonable period had been decided by arbitration underArticle 21.3(c) of the DSU as well as cases where the parties agreed by consensus underArticle 21.3(b) of the DSU.
30. The European Communities submits that, in  Canada – Certain Measures Concerning
Periodicals   ("Canada – Periodicals "), Canada agreed to take a number of implementation measures
legislatively within 15 months from the adoption of  the Appellate Body Report by the DSB.  The
implementation measures in that dispute covered a wide variety of subject-matter, including the
elimination of the entire Part V.1 of Canada's  Excise Tax Act .  Although the European Communities
concedes that the agreement between the parties in that dispute is not authoritative for the case athand, it argues that that agreement "can serve as an indicative yardstick".
 13  By comparing the degree
of complexity of the measures to be adopted for implementation in the  Canada – Periodicals   case
with the measure to be adopted in this case, it becomes apparent that the "reasonable period of time"in the present case must be "significantly shorter than in [that] case."
 14.
31. According to the European Communities, in  Canada – Periodicals , Canada undertook to take
a variety of measures, including the repeal of a customs tariff, the elimination of Part V.1 of the
Excise Tax Act , the restructuring of the administration of the postal subsidy program and the
harmonization of the commercial postal rates. In this case, the European Communities argues, all thatis needed is the repeal of a single subparagraph of Section 55 of the  Patent Act   without the need for
any other action.  Furthermore, the fact that tax legislation tends to be subject to special  proceduralterms, to which  general economic legislation such as  patent laws are not subject, further militates, in
the view of the European Communities, for a reduction of the "reasonable period of time".
32. The European Communities, therefore, requests the arbitrator to rule that 12 months from
7 April 2000, the date of the adoption of the Panel Report by the DSB, is the "reasonable period of
time" for the ruling in this dispute.  Thus, the European Communities proposes a "reasonable period
of time" for implementation that would end on 7 April 2001.
                                                     
13European Communities submission, para. 23.
14Ibid.WT/DS114/13
Page 9
III. Determination
33. Canada has agreed to implement the recommendations and rulings of the Dispute Settlement
Body ("DSB") in  Canada – Pharmaceutical Patents . 15  Canada has also, however, availed itself of
Article 21.3 of the Dispute Settlement Understand ing ("DSU"), which states in relevant part:
If it is impracticable to comply immediately with the
recommendations and rulings, the Member concerned shall have a
reasonable period of time  in which to do so. (emphasis added)
34. As the duration of the "reasonable period of time" in this case has not been agreed by either
the DSB, under Article 21.3(a), or the parties to the dispute, under Article 21.3(b),  the parties have
requested that I determine this period of time through binding arbitration under Article 21.3(c).  Thisprovision of the DSU refers to the possibility of "b inding arbitration within 90 days after the date of
adoption of the recommendations and rulings".
35. In this Article 21.3 proceeding, Canada has requested a period of 11 months from the date of
adoption of the Panel Report to implement the recommendations and rulings of the DSB, by means ofregulations made under Canada's Patent Act .
 16  The European Communities contests both this form of
implementation and also the period of time requested for implementation by Canada.  To fulfill myresponsibilities as arbitrator, I will look first at the issue of the means of implementation, then at the
meaning of a "reasonable period of time" for implementation, and, finally, at Canada's proposed
timetable for implementation, before making my determination.
A. Means of  implementation
36. The Panel found that "Section 55.2(2) of Canada's  Patent Act   is not consistent with the
requirements of Article 28.1 of the TRIPS Agreement ."
 17  Accordingly, the Panel "recommend[ed]
that the Dispute Settlement Body request that Ca nada bring Section 55.2(2) into conformity with
Canada's obligations under the TRIPS Agreement."  The DSB adopted the Panel Report on7 April 2000.
 18
37. Canada proposes to implement the recommendations and rulings of the DSB, not by means of
legislation, but by means of administrative action in the form of a regulation. The European
Communities responds that, in order to implem ent the recommendations and rulings of the DSB
properly, Canada "has to repeal Section 55.2(2) of its Patent Act, which can only be achieved through
                                                     
15DSB Meeting of 25 April 2000, WT/DSB/M/79, para. 13.
16Oral Statement of Canada, para. 18.
17Panel Report,  Canada – Pharmaceutical Patents , WT/DS114/R, adopted 7 April 2000, para. 8.1(2).
18DSB Meeting of 7 April 2000, WT/DSB/M/78, para. 69.WT/DS114/13
Page 10
another legislative act (actus contrarius)."  19  For this reason, the European Communities states that "it
is fundamental for the arbitrator to define the nature of the measure necessary to implement the
recommendations and rulings of the DSB."  20  Canada, in turn, maintains that I have no such authority
or mandate.
38. In considering the argument by the European Communities on the means of implementation, I
note first that the Panel Report in  Canada – Pharmaceutical Patents   does not specify, or even
mention, how Canada should implement the recommendations and rulings.  The Panel simplyrecommends that the DSB request Canada to "bring  Section 55.2(2) into conformity" with Canada's
obligations under the  TRIPS Agreement .  The DSB has done so.
39. Thus, it has been left for Canada to decide what form the implementing action should take. As
the arbitrator in  European Communities – Hormones   stated:
An implementing Member … has a measure of discretion in choosing
the means of implementation, as long as the means chosen are
consistent with the recommendations and rulings of the DSB and with
the covered agreements.
 21
40. Moreover, I am of the view that whether the means of implementation chosen by a Member is
consistent with that Member's obligations under the WTO covered agreements is not a question thatfalls within the jurisdiction of an arbitrator under Article 21.3(c).  As the text of the provision makesclear, the sole task of an arbitrator under Article 21.3(c) is to determine a "reasonable period of time"in which a Member must complete implementation.  Thus, I agree with the arbitrator in  Korea –
Alcoholic Beverages   that:
My mandate in this arbitration relates  exclusively   to determining the
reasonable period of time for implementation under Article 21.3(c) ofthe DSU.  It is not within my mandate to suggest ways and means to
implement the recommendations and rulings of the DSB.  Choosing
the means of implementation is, and should be, the prerogative of the
implementing Member, as long as the means chosen are consistent
with the recommendations and rulings of the DSB and the provisionsof the covered agreements.  I consider it, therefore, inappropriate to
determine whether, and to what extent, amendments to various
regulatory instruments are required before the new tax legislation
comes into effect.
 22 (emphasis added)
                                                     
19European Communities' submission, para. 19.
20Ibid., para. 17.
21Supra , footnote 11, para. 38.
22Supra , footnote 6, para. 45.WT/DS114/13
Page 11
41. As an arbitrator under Article 21.3(c), certainly my responsibility includes examining closely
the relevance and duration of each of the necessary steps  leading to implementation to determine
when a "reasonable period of time" for implementation will end.  My responsibility does not,
however, include in any respect a determination of the  consistency   of the proposed implementing
measure with the recommendations and rulings of the DSB.  The proper concern of an arbitrator under
Article 21.3(c) is with  when ,  not  what .
42. What  a Member must do to comply with the recommendations and rulings of the DSB in any
particular case is addressed elsewhere in the DSU.  Article 21.5 sets out special procedures fordetermining "the existence or  consistency   with a covered agreement of measures taken to comply
with the recommendations and rulings" resulting from a dispute.
 23  If there is any question about
whether  what   a Member chooses as a means of implementation is sufficient to comply with the
recommendations and rulings of the DSB, as opposed to  w hen  that Member proposes to do it, then
Article 21.5 applies, not Article 21.3.  The reasons are many and obvious.  For example, if theconsistency of implementing measures could also be examined during arbitrations underArticle 21.3(c), then Article 21.5 would lose much of its effect.  Parties would have little to lose inrequesting also from an arbitrator under Article 21.3(c) an immediate ruling on the consistency of aproposed measure.  Also, the more elaborate Article 21.5 procedures, involving a panel of three orfive members and a report adopted by the DSB, seem more suitable than the more constrained legaldomain of Article 21.3(c) for assessing the consistency of substantive obligations under WTO coveredagreements.
43. For these reasons, I cannot agree with the European Communities' request to examine the
"nature" of the implementation proposed by Canada, in the sense of determining whether thatproposed implementation is consistent with the reco mmendations and rulings of the DSB.  That would
exceed my mandate under the DSU.  It is clear to me that any examination of the consistency of aproposed measure with the recommendations and rulings of the DSB must be made, not in anArticle 21.3 proceeding, but in an Article 21.5 proceeding.  Accordingly, I conclude that the"reasonable period of time" for implementation that must be determined in this Article 21.3proceeding is the "reasonable period of time" for implementing what has been  proposed by Canada ,
and nothing else.  Thus, I offer no opinion whatsoever on whether Canada's proposed regulatory
change is sufficient, or whether legislative change  may be required instead for consistency with the
recommendations and rulings of the DSB.
                                                     
23Emphasis added.WT/DS114/13
Page 12
B. The meaning of a  "reasonable period of time "
44. My task, then, is a limited one:  to determine the "reasonable period of time" it should take
Canada to make the regulatory change that Canada proposes to make.  To accomplish this task, I
begin with the text of Article 21.3, which states that:
… a guideline for the arbitrator should be that the reasonable period
of time to implement panel or Appellate Body recommendations
should not exceed 15 months   from the date of adoption of a panel or
Appellate Body report.  However, that time may be shorter or longer,
depending upon the  particular circumstances . (emphasis added)
45. I note that the 15-month period is a "guideline", and not an average, or usual, period.  It is
expressed also as a  maximum   period, subject only to any "particular circumstances" mentioned in the
second sentence.  Further, and significantly, a "reasonable period of time" is not available
unconditionally.  Article 21.3 makes it clear that a reasonable period of time is available for
implementation only "[i]f it is impracticable to comply  immediately   with the recommendations and
rulings" of the DSB.  24  Implicit in the wording of Article 21.3 seems to me to be the assumption that,
ordinarily, Members will comply with recommendati ons and rulings of the DSB "immediately".  The
"reasonable period of time" to which Article 21.3 refers is, thus, a period of time in what is implicitlynot the ordinary circumstance, but a circumstance in which "it is impracticable to complyimmediately  … ".
 25
46. Other provisions of the DSU suggest that im plementation of recommendations and rulings of
the DSB must be achieved, if not "immediately", then promptly.  Article 21.1, for example, states that
"prompt  compliance with recommendations and rulings of the DSB is  essential   in order to ensure
effective resolution of disputes to the benefit of all Members".  26  Similarly, Article 3.3 states:
The  prompt   settlement of situations in which a Member considers
that any benefits accruing to it directly or indirectly under the covered
agreements are being impaired by measures taken by another Member
is essential  to the effective functioning of the WTO and the
maintenance of a proper balance between the rights and obligations of
Members.  (emphasis added)
The Concise Oxford Dictionary  defines the word, "prompt", as meaning "acting with alacrity; ready",
and "made, done, etc. readily or at once".  27
                                                     
24Emphasis added.
25Emphasis added.
26Emphasis added.
27The Concise Oxford Dictionary , Della Thompson (ed.) 9th ed. (Clarendon Press, 1995), p. 1096.WT/DS114/13
Page 13
47. Based on the wording of Articles 21.3, and on the context provided in Articles 3.3, 21.1
and 21.4 of the DSU, I agree with the arbitrator in  European Communities – Hormones   that " the
reasonable period of time, as determined under Article 21.3(c), should be the shortest periodpossible within the legal system of the Member to implement the recommendations and rulings ofthe DSB."
 28  Moreover, as immediate compliance is clearly the preferred option under Article 21.3, it
is, in my view, for the implementing Member to bear the burden of proof in showing – "[i]f it is
impracticable to comply immediately" – that the duration of any proposed period of implementation,
including its supposed component steps, constitutes a "reasonable period of time".  And the longer the
proposed period of implementation, the greater this burden will be.
48. The "particular circumstances" mentioned in Article 21.3 are, therefore, those that can
influence what the shortest period possible for implementation may be within the legal system of theimplementing Member.  Conceivably, several such "particular circumstances", depending on the facts,could be relevant to a case such as the one before me.
49. For example, if implementation is by  administrative   means, such as through a regulation,
then the "reasonable period of time" will norma lly be shorter than for implementation through
legislative   means.  It seems reasonable to assume, unless proven otherwise due to unusual
circumstances in a given case, that regulations can be changed more quickly than statutes.  To be sure,the administrative process can sometimes be long;  but the legislative process can oftentimes belonger.
50. Likewise, the  complexity   of the proposed implementation can be a relevant factor.  If
implementation is accomplished through extensive new regulations affecting many sectors of activity,then adequate time will be required to draft the changes, consult affected parties, and make any
consequent modifications as needed.  On the other hand, if the proposed implementation is the simple
repeal of a single provision of perhaps a sentence or two, then, obviously, less time will be needed for
drafting, consulting, and finalizing the procedure.  To be sure, complexity is not merely a matter ofthe number of pages in a proposed regulation;  yet it seems reasonable to assume that, in most cases,the shorter a proposed regulation, the less its likely complexity.
51. In addition, the  legally binding , as opposed to the discretionary, nature of the component
steps leading to implementation should be taken into account.  If the law of a Member dictates amandatory period of time for a mandatory part of the process needed to make a regulatory change,then that portion of a proposed period will, unless proven otherwise due to unusual circumstances in a
given case, be reasonable.  On the other hand, if there is no such mandate, then a Member asserting
                                                     
28Supra , footnote 11, para. 26.WT/DS114/13
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the need for a certain period of time must bear a much more imposing burden of proof.  Something
required by law must be done;  something not required by law need not necessarily be done,
depending on the facts and the circumstances in a particular case.
52. These are but examples.  There may well be other "particular circumstances" that may be
relevant to a particular case.  However, in my view, the "particular circumstances" mentioned inArticle 21.3 do  not include factors unrelated to an assessment of the shortest period possible for
implementation within the legal system of a Member.  Any such unrelated factors are irrelevant todetermining the "reasonable period of time" for implementation.  For example, as others have ruled inprevious Article 21.3 arbitrations, any proposed period intended to allow for the "structuraladjustment" of an affected domestic industry will not be relevant to an assessment of the legalprocess.
 29  The determination of a "reasonable period of time" must be a legal judgement based on an
examination of relevant legal requirements.  30
C. Canada's proposed  "reasonable period of time "
53. In its submission, Canada offers a detailed timetable for implementation of the
recommendations and rulings of the DSB.  Canada estimates that the regulatory process it has chosenas the means of implementation will take 11 months from the date of adoption of the Panel Report,which was 7 April 2000.  Thus, Canada proposes to complete  administrative  implementation by
7 March 2001.  In contrast, in its submission, the European Communities stresses that Canada shouldimplement  legislatively , and argues that Canada should complete  legislative   implementation in a
period not exceeding 12 months from the date of adoption of the Panel Report, that is, by
7 April 2001.  The European Communities did not address, in its submission, the issue of a
"reasonable period of time" for administrative implementation by Canada.  However, in the oralhearing, the European Communities said that, if I we re to decide that it is not within my mandate to
identify the appropriate means of implementation, and if, as a result, my inquiry were to focus on
                                                     
29See Award of the Arbitrator under Article 21.3(c), Indonesia – Certain Measures Affecting the
Automobile Industry , WT/DS54/15, WT/DS55/14, WT/DS59/13,  WT/DS64/12, 7 December 1998, para. 23;
Award of the Arbitrator under Article 21.3(c), Japan – Taxes on Alcoholic Beverages , WT/DS8/15,
WT/DS10/15, WT/DS11/13, 14 February 1997, paras. 19 and 27.
30In paras. 3 and 10 of its submission, the European Communities stated that, during earlier
consultations, Canada had offered to implement the recommendations and rulings of the DSB in nine months.Canada argued in the oral hearing in  this arbitration that this offer had been made without prejudice during
confidential consultations, and that, by submitting this evidence to me, the European Communities was inbreach of Article 4.6 of the DSU, which reads:  "Consu ltations shall be confidential, and without prejudice to
the rights of any Member in any further proceedings."  It  is not clear to me that my mandate allows me to rule
on whether submission by the European Communities of evidence of an earlier offer by Canada on defining "areasonable period of time" in this case is inconsistent with Article 4.6 of the DSU.  However, it is not necessaryto do so, as I am able to arrive at a clear determinatio n in this case without considering this evidence, whatever
its legitimacy or merits.  And I have not considered it in making my determination.  Therefore, I make no rulingon Canada's argument relating to Article 4.6.WT/DS114/13
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administrative implementation, then a "reasonable period of time", in the view of the European
Communities, would be "45 to 60 days from pre-publication", which I take to mean 45 to 60 days
following the conclusion of the 30-day period required by Canadian law for pre-publication of the
proposed regulatory change in the Canada Gazette.  31
54. In considering the time period for implementation proposed by Canada, I recall my earlier
observation that a "reasonable period of time" under Article 21.3 should be the shortest periodpossible within the legal system of the Member to implement the recommendations and rulings of theDSB.  I note in this respect that most of the specific implementation steps proposed by Canada areeither legally required under the  Statutory Instruments Act
 32 or mandated under the Government of
Canada Regulatory Policy ("Regulatory Policy").33 The steps set out in the  Statutory Instruments Act  
are required by law.  In contrast, the steps mandated under the Regulatory Policy are not formally
binding in the sense of a law or regulation.  Even so, the steps set out in the Regulatory Policy have
been described to me by Canada in the oral hearing as administrative practices which, in practicalterms, government officials must ordinarily follow, and this statement by Canada has not beenspecifically contested by the European Communities.  I accept, therefore, for purposes of thisarbitration, that these steps, though not legally binding, can nevertheless constitute part of the"reasonable period of time" for implementation.  Accordingly, I have taken both the steps legallyrequired under the  Statutory Instruments Act   and the steps and the durations specified under the
Regulatory Policy into account in evaluating and calculating as mandatory a "reasonable period oftime".
55. However, certain of the time periods specified by Canada for certain steps toward
implementation are not fixed by either law or regulation.  Rather, they have been estimated by Canadafor purposes of this proceeding.  As these estimates are not fixed by either law or regulation, but areonly estimates, Canada bears a greater burden of proof in demonstrating their accuracy andlegitimacy.  And here Canada, in my view, has fallen short.
56. In my judgement, some of the administrative steps Canada has identified to me, and has
already taken toward implementation, could have been accomplished sooner, simultaneously, or both.That said, and given what has already transpired toward implementation, I point now to one of the
additional steps identified by Canada that has not yet been completed.  In paragraph 19(2)(e) of
Canada's written submission, Canada states with respect to the step following the required
pre-publication in the Canada Gazette:
                                                     
31Statement by the European Communities in answer to  a question by the Arbitrator at the oral hearing.
32Statutory Instruments Act , R.S., 1985, c. S-22 (Exhibit 3 of Canada's submission).
33Government of Canada Regulatory Policy, November 1999 (Exhibit 2 of Canada's submission).WT/DS114/13
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Response to public comments;  amendment of regulation and RIAS as
required;  resubmission to Department of Industry legal services andDepartment of Justice Regulations Section; review and approval for
final publication and signature of the Minister of Industry.  Time:  1-3
months  (depending on the complexity and contentiousness of the
proposal).
57. Canada acknowledges that this period of "1-3 months" is not required by law but is part of the
Regulatory Policy, and Canada also acknowledges that the duration of "1-3 months" is an estimatethat is not specifically mandated by the Regulatory Policy.  Yet Canada maintains that this period of
"1-3 months" is necessary nonetheless to allow for the amending of the proposed regulation and
RIAS, if needed, as well as for further approvals of the amended text.  In explanation, Canada states
in part that "comments received from the public must be weighed on their merits and changes to theproposed regulation must be considered."
 34  The amount of time it should reasonably take to complete
this step that Canada says will take "1-3 months" seems, to me, as Canada has stated, to "depend" inpart on the "complexity" of the proposed regulatory change.  The more complex the proposedregulatory change, the more "reasonable" a period of "1-3 months" will seem to accomplish this stepin the change.
58. With this in mind, I turn to the substantive part of Canada's proposed regulatory change,
which reads in its entirety:
The Manufacturing and Storage of Patented Medicines Regulations
are repealed.
 35
I see nothing in this proposed regulatory change that can be described as complex.  What is more, in
this case, comments from the public could not be expected to result in much alteration of the onesubstantive sentence of Canada's proposed regulatory change, which merely repeals the existingregulation.  After all, how many other ways could this one sentence be written?  Likewise, in thiscase, any consideration of any changes that might conceivably be needed in the solitary substantivesentence of the proposed regulatory change could not be expected to take very long.  After the several
years of this dispute, once these final public comments have been received, how much more can be
left to be said?  If this proposed regulatory change were more complex, I might reach a differentconclusion.  Yet it is not complex at all.  And, given the sheer simplicity of the wording, function andpurpose of this proposed regulation, I consider it implausible that this particular implementation stepin this case should take as much time as claimed by Canada.
                                                     
34Canada's submission, para. 17.
35Text of proposed regulation as notified by Canada in letter of 31 July 2000.WT/DS114/13
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59. This is not to say that the dispute between Canada and the European Communities that has
given rise to the need for this change is in any way a simple one.  Far from it.  This dispute is
complicated indeed.  And the parties, the Panel, and the DSB have all given the many facets of this
dispute the sustained attention that has been warranted by the considerable stakes involved.  Nor isthis to say that only complex laws or regulations have significant results.  Again, far from it.  Some ofthe most significant of legal changes can be stated in  the simplest of terms, and with the most telling
of effects.  And, in contrast, some of the most By zantine by-products of administrative and legislative
endeavour sometimes have little real effect once they are enacted.  Instead, this is only to say that, inmy view, it should not take Canada as much as three months to finalize this proposed regulatorychange once the required 30-day period for pre-publication in the Canada Gazette has ended.
60. As I have noted previously, Canada itself conc edes that this proposed "1-3 month" period
could vary "depending on the complexity and contentiousness of the proposal."
 36  "Complexity", as I
have said, is not an issue here.  Substantively, at this  late point in the resolution of this dispute, we are
dealing only with one sentence in one proposed regulation.  Nothing more.  Nor, I am persuaded,should "contentiousness" ever be an issue.  I see nothing in Article 21.3 to indicate that the supposed
domestic "contentiousness" of a measure taken to comply with a WTO ruling should in any way be afactor to be considered in determining a "reasonable period of time" for implementation.  All WTOdisputes are "contentious" domestically at least to some extent;  if they were not, there would be noneed for recourse by WTO Members to dispute settlement.
61. In looking for additional justification for the time period proposed by Canada, I note that
Canada also requests that "the summer vacation period of July and August" should be taken into
account in calculating the "reasonable period of time" for implementation, and should, as aconsequence, add approximately two months to the period for implementation.
 37  I see no reference to
"summer vacations" in the DSU.  Nor, for that matter, has Canada shown me anything in Canadianlaw or regulatory policy about such "summer vacations".  This argument by Canada is irrelevant.Beyond this, it seems to me that Canada has offered little in the way of additional, persuasivejustification for the notion that much more than a few more weeks following the end of the requiredpre-publication period should be needed to complete  implementation.  Moreover, I am not aware of,
nor has Canada suggested the existence of, any additional step that may be required by Canadian law
or in some way mandated as part of the Regulatory Policy before implementation can be completed.
62. Further to an undertaking given by Canada at the oral hearing in this arbitration, I have
received notice from Canada that the proposed regulatory change at issue here was to be published by
                                                     
36Canada's submission, para. 19(e).
37Ibid., para. 19.WT/DS114/13
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Canada in the edition of the Canada Gazette dated 5 August 2000.  I have since confirmed that the
proposed regulatory change was indeed published on that date  38, and in the form proposed by Canada
in this arbitration.  Thus, the required 30-day period for pre-publication will end 4 September 2000.
In my view, a "reasonable period of time" for im plementation by Canada will end soon thereafter.
63. When they wish to do so, and when they have the lawful discretion to do so, administrative
agencies can act, in the language of the DSU, "promptly".  There is evidence on record in this
proceeding that administrative agencies in Canada have acted quickly in cases where intellectualproperty rights have been known to be at risk.
 39  As I see it, the commitment made by Canada to the
DSB to comply fully with the recommendations and rulings of the DSB in this case, and thereby tofulfill Canada's international obligations as a Member of the WTO, should give rise to, if not equal,then comparable, urgency in Canada.  Whatever their disagreements on a "reasonable period of time"
for implementation in this dispute, doubtless Canada and the European Communities will agree on
this:  the desire of a WTO Member to comply with its treaty obligations under the  WTO Agreement  
should occasion, domestically, some modicum of dispatch.
IV. Award
64. I determine that the reasonable period of time for Canada to implement the recommendations
and rulings of the DSB in this case is  six months   from the date of adoption of the Panel Report by the
DSB on 7 April 2000.   The reasonable period of time will thus end on  7 October 2000 .
                                                     
38Government of Canada Website, Canada Gazette, Saturday, August 5, 2000;  Vol. 134, No. 32
(www.canada.gc.ca/gazette/hompar1-2_e.html).
39See Oral Statement of the European Communities, para. 16, citing the Patented Medicines (Notice of
Compliance ) Regulations , SOR/93-133.WT/DS114/13
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Signed in the original at Geneva this 11th day of August 2000 by:
________________________
James Bacchus
Arbitrator