WORLD TRADE WT/DS27/AB/R
9September 1997
ORGANIZATION(97-3593)
Appellate Body
EUROPEAN COMMUNITIES -REGIME FOR THE
IMPORTATION, SALE AND DISTRIBUTION OFBANANAS
AB-1997-3
Report oftheAppellate BodyWT/DS27/AB/R
Page i
I. Introduction ..............................................1
A. Procedural Matters .....................................4
B. Oral Hearing .........................................7
II. Arguments oftheParticipants ...................................7
A. European Communities -Appellant ...........................7
1. Preliminary Issues ................................8
(a) Right oftheUnited States toAdvance Claims under theGATT
1994 ....................................8
(b) Specificity oftheRequest forEstablishment ofthePanel ...9
2. Interpretation oftheAgreement onAgriculture ...............9
3. Interpretation ofArticle XIII oftheGATT 1994 ..............10
4. Separate Regimes .................................11
5. Interpretation oftheLomé Convention andScope andCoverage of
theLomé Waiver .................................13
6. Licensing Agreement ...............................14
7. Articles I:1andX:3(a) oftheGATT 1994 andArticle 1.3ofthe
Licensing Agreement ...............................14
8. Interpretation ofArticle III:4 oftheGATT 1994 .............15
9. Interpretation ofArticle I:1oftheGATT 1994 ..............16
10. Measures Affecting Trade inServices ....................17
11. Scope ofArticle IIoftheGATS ........................20
12. Effective Date ofGATS Obligations .....................22
13. Burden ofProof ..................................22
14. Definition ofWholesale Trade Services ...................23
15. Alleged Discrimination Under Articles IIandXVII oftheGATS ...24
(a) Operator Category Rules .......................24
(b) Activity Function Rules .......................25
(c) Hurricane Licences ...........................25
16. Nullification orImpairment ...........................25
B. Ecuador, Guatemala, Honduras, Mexico andtheUnited States -Appellees ..26
1. Trade inGoods ..................................26
(a) Country Allocations ..........................26
(b) Licensing Agreement ..........................28
(c) Article IIIoftheGATT 1994 ....................29
(d) Article I:1oftheGATT 1994 ....................30
(e) Article XoftheGATT 1994 .....................31
(f) Hurricane Licences ...........................31
2. General Agreement onTrade inServices ..................32
(a) Threshold Legal Issues ........................32
(b) Application ofGATS totheECLicensing System .......35
3. Procedural Issues .................................38
(a) Request forEstablishment ofaPanel ................38
(b) Right oftheUnited States toAdvance Claims under theGATT
1994 ....................................39
(c) Nullification orImpairment ......................40
C. Ecuador, Guatemala, Honduras, Mexico and the United States -
Appellants ..........................................41
1. Scope oftheLomé Waiver ...........................41
2. Measures "required" bytheLomé Convention ...............42
3. GATS Claims ofGuatemala, Honduras andMexico ...........43WT/DS27/AB/R
Page ii
4. Scope oftheAppeal ...............................43
D. European Communities -Appellee ............................44
1. Lomé Waiver --Traditional ACP Bananas .................44
2. Lomé Waiver --Preferential Treatment ofNon-Traditional
Bananas .......................................45
3. GATS Claims ofGuatemala, Honduras andMexico ...........46
III. Arguments oftheThird Participants ...............................46
A. Belize, Cameroon, Côte d'Ivoire, Dominica, Dominican Republic, Ghana,
Grenada, Jamaica, Saint Lucia, St.Vincent andtheGrenadines, Senegal and
Suriname ...........................................46
B. Colombia ...........................................51
C. Costa Rica andVenezuela .................................53
D. Nicaragua ..........................................56
E. Japan .............................................57
IV. Issues Raised inthisAppeal ...................................58
A. Preliminary Issues .....................................62
1. Right oftheUnited States toBring Claims under theGATT 1994 ..62
2. Request forEstablishment ofthePanel ...................64
3. GATS Claims byGuatemala, Honduras andMexico ...........65
4. Ecuador 'sRight toInvoke Article XIII oftheGATT 1994 .......67
B. Multilateral Agreements onTrade inGoods ......................68
1. Agreement onAgriculture ............................68
2. Article XIII oftheGATT 1994 ........................71
3. TheScope oftheLomé Waiver ........................73
(a) What is"required" bytheLomé Convention? ..........74
(b) What iscovered bytheLomé Waiver? ...............80
4. The"Separate Regimes" Argument ......................82
5. Licensing Agreement ...............................84
6. Article X:3(a) oftheGATT 1994 .......................86
7. Article I:1oftheGATT 1994 .........................88
8. Article IIIoftheGATT 1994 .........................89
C. General Agreement onTrade inServices .......................93
1. Application oftheGATS ............................93
2. Whether Operators areService Suppliers Engaged inWholesale Trade
Services .......................................95
3. Article IIoftheGATS ..............................97
4. Effective Date oftheGATS Obligations ...................99
5. Burden ofProof ..................................100
6. Whether theECLicensing Procedures areDiscriminatory Under
Articles IIandXVII oftheGATS .......................101
(a) Operator Category Rules .......................102
(b) Activity Function Rules ........................103
(c) Hurricane Licences ..........................104
D. Nullification orImpairment ................................105
V. Findings andConclusions ......................................107WT/DS27/AB/R
Page 1
WORLD TRADE ORGANIZATION
APPELLATE BODY
European Communities -Regime for
theImportation, Sale andDistribution
ofBananas
European Communities, Appellant/Appellee
Ecuador, Guatemala, Honduras, Mexico and
theUnited States, Appellants/Appellees
Belize, Cameroon, Colombia, Costa Rica,
Côte d'Ivoire, Dominica, Dominican
Republic, Ghana, Grenada, Jamaica, Japan,
Nicaragua, Saint Lucia, St.Vincent andthe
Grenadines, Senegal, Suriname and
Venezuela, Third ParticipantsAB-1997-3
Present:
Bacchus, Presiding Member
Beeby, Member
El-Naggar, Member
I. Introduction
1. TheEuropean Communities andEcuador, Guatemala, Honduras, Mexico andtheUnited States
(the"Complaining Parties") appeal from certain issues oflawandlegal interpretations inthePanel
Reports, European Communities -Regime fortheImportation, SaleandDistribution ofBananas1(the
"Panel Reports"). ThePanel wasestablished on8May 1996 toconsider acomplaint bytheComplaining
PartiesagainsttheEuropeanCommunitiesconcerningtheregimefortheimportation,saleanddistribution
ofbananas established byCouncil Regulation (EEC) No.404/93 of13February 1993 onthecommon
organizationofthemarketinbananas("Regulation404/93")2,andsubsequentEClegislation,regulations
andadministrative measures, including those reflecting theprovisions oftheFramework Agreement
1Compl aintbyEcuador ,WT/DS27/R/ECU;Compl aintbyGuat emal aandHondur as,WT/DS27/R/GTM,WT/DS27/R/HND;
Complaint byMexico, WT/DS27/R/MEX; Complaint bytheUnited States, WT/DS27/R/USA, 22May 1997.
2Official Journal, No. L47,25February 1993, p.1.WT/DS27/AB/R
Page 2
onBananas (the"BFA"), which implement, supplement andamend thatregime. Therelevant factual
aspects oftheECcommon market organization forbananas aredescribed fully atparagraphs 3.1to
3.36 ofthePanel Reports.3
2. ThePanel issued fourPanel Reports thatwere circulated totheMembers oftheWorld Trade
Organization (the"WTO") on22May 1997. ThePanel Reports contain thefollowing conclusions:
WithrespecttoEcuador,inparagraph9.1oftheReport,WT/DS27/R/ECU,thePanelconcluded:
...thatforthereasons outlined inthisReport aspects oftheEuropean
Communities 'import regime forbananas areinconsistent with its
obligations under Articles I:1,III:4, X:3andXIII:1 ofGATT, Article
1.2oftheLicensing Agreement andArticles IIandXVII oftheGATS.
Theseconclusionsarealsodescribedbrieflyinthesummaryoffindings.
With respect toGuatemala andHonduras, inparagraph 9.1oftheReports, WT/DS27/R/GTM
andWT/DS27/R/HND, thePanel concluded:
...thatforthereasons outlined inthisReport aspects oftheEuropean
Communities 'import regime forbananas areinconsistent with its
obligations under Articles I:1,III:4, X:3andXIII:1 ofGATT and
Article 1.3oftheLicensing Agreement. These conclusions arealso
described briefly inthesummary offindings.
3The following terms areused throughout thisReport:
• "ACP States" refers totheAfrican, Caribbean andPacific States which areparties totheFourth ACP-EC
Convention ofLomé (the "Lomé Convention"), signed inLomé, 15December 1989, asrevised bythe
Agreement signed inMauritius, 4November 1995;
• "traditional ACP States" refers tothe12ACP States, listed intheAnnex toRegulation 404/93, which
have traditionally exported bananas totheEuropean Communities; these areCôte d'Ivoire, Cameroon,
Suriname, Somalia, Jamaica, Saint Lucia, St.Vincent andtheGrenadines, Dominica, Belize, Cape Verde,
Grenada and Madagascar;
• "traditional ACP bananas" refers tothequantities ofbananas, exported bythetraditional ACP States,
uptothequantities ofbananas setoutintheAnnex toRegulation 404/93;
• "non-traditional ACP bananas" refers tothequantities ofbananas exported bythetraditional ACP States
inexcess ofthequantities ofbananas setoutintheAnnex toRegulation 404/93, andtothequantities
ofbananas exported bybanana-producing ACP States other than traditional ACP States;
• "third-country bananas" refers tothequantities ofbananas exported bynon-ACP States totheEuropean
Communities.WT/DS27/AB/R
Page 3
WithrespecttoMexico,inparagraph9.1oftheReport,WT/DS27/R/MEX ,thePanelconcluded:
...thatforthereasons outlined inthisReport aspects oftheEuropean
Communities 'import regime forbananas areinconsistent with its
obligations under Articles I:1,III:4, X:3andXIII:1 ofGATT, Articles
1.2and1.3oftheLicensing Agreement andArticles IIandXVII of
theGATS. These conclusions arealso described briefly inthe
summary offindings.
With respect totheUnited States, inparagraph 9.1oftheReport, WT/DS27/R/USA, thePanel
concluded:
...thatforthereasons outlined inthisReport aspects oftheEuropean
Communities 'import regime forbananas areinconsistent with its
obligations under Articles I:1,III:4, X:3andXIII:1 ofGATT, Article
1.3oftheLicensing Agreement andArticles IIandXVII oftheGATS.
Theseconclusionsarealsodescribedbrieflyinthesummaryoffindings.
Ineach ofthePanel Reports, thePanel made thefollowing recommendation:
...thattheDisputeSettlementBodyrequesttheEuropeanCommunities
tobring itsimport regime forbananas into conformity with its
obligations under GATT, theLicensing Agreement andtheGATS.
3. On11June 1997, theEuropean Communities notified theDispute Settlement Body4(the"DSB")
ofitsdecisiontoappealcertainissuesoflawcoveredinthePanelReportsandcertainlegalinterpretations
developed bythePanel, pursuant toparagraph 4ofArticle 16oftheUnderstanding onRules and
Procedures Governing theSettlement ofDisputes (the"DSU"), andfiled aNotice ofAppeal with the
Appellate Body pursuant toRule 20oftheWorking Procedures forAppellate Review (the"Working
Procedures ").On23June 1997, theEuropean Communities filed anappellant 'ssubmission pursuant
toRule 21oftheWorking Procedures .On26June 1997, theComplaining Parties filed anappellant 's
submission pursuant toRule 23(1) oftheWorking Procedures .Inaccordance with Rule 16(2) ofthe
WorkingProcedures,andattherequestoftheComplainingParties,theAppellateBodygrantedatwo-day
extension forthefiling ofappellees 'andthird participants 'submissions. On9July 1997, the
Complaining Parties filed anappellee 'ssubmission pursuant toRule 22oftheWorking Procedures ,
andtheEuropean Communities filed anappellee 'ssubmission pursuant toRule 23(3) oftheWorking
4WT/DS27/9, 13June 1997.WT/DS27/AB/R
Page 4
Procedures .Ecuador alsofiled aseparate appellee 'ssubmission onthatdate. Ajoint third participants '
submission wasfiled byBelize, Cameroon, Côte d'Ivoire, Dominica, Dominican Republic, Ghana,
Grenada, Jamaica, Saint Lucia, St.Vincent andtheGrenadines, Senegal andSuriname (the"ACP third
participants") on9July1997 pursuant toRule 24oftheWorking Procedures .That same day,Colombia,
Nicaragua andJapan filed third participants 'submissions andajoint third participants 'submission
wasfiled byCosta Rica andVenezuela.
A. Procedural Matters
4. On10July1997, pursuant toRule 16(2) oftheWorking Procedures ,theGovernment ofJamaica
asked theAppellate Body topostpone thedates oftheoralhearing, setoutintheworking schedule
for21and22July1997, to4and5August 1997. This request wasnotgranted astheAppellate Body
wasnotpersuaded thatthere were exceptional circumstances resulting inmanifest unfairness toany
participant orthird participant thatjustified thepostponement oftheoralhearing inthisappeal.
5. Byletter of9July 1997, theGovernment ofSaint Lucia submitted reasons justifying the
participation oftwospecialist legal advisers, who arenotfull-time government employees ofSaint
Lucia, intheAppellate Body oral hearing. Saint Lucia argued thatthere aretwoseparate issues
concerning rights ofrepresentation inWTO dispute settlement proceedings. Thefirstissue iswhether
astate mayhave itscasepresented before apanel ortheAppellate Body byprivate lawyers. Thesecond
issue deals with thesovereign right ofastate todecide who constitutes itsofficial government
representatives ordelegation. Onthesecond, andmore fundamental issue, Saint Lucia submitted that
asamatter ofcustomary international law, nointernational organization hastheright tointerfere with
agovernment'ssovereignrighttodecidewhomitmayaccreditasofficialsandmembersofitsdelegation.
Furthermore, Saint Lucia noted thatneither theDSU northeWorking Procedures dealwith theissue
ofasovereign state'sentitlement toappoint itsdelegation oraccredit persons asfullandproper
representatives ofitsgovernment. Saint Lucia maintained thattodosowould gobeyond thepowers
ofapanel, theAppellate Body ortheWTO under customary international law. Saint Lucia alsoobserved
thatthere isnoprovision intheDSU orintheWorking Procedures requiring governments tonominate
only government employees astheir counsel inWTO panel orAppellate Body proceedings.
6. TheGovernments ofCanada andJamaica supported therequest bySaint Lucia. Inaletter
of14July1997, Canada stated itsconcurrence with theproposition advanced bySaint Lucia thatthe
composition ofaWTO Member 'sdelegation, intheabsence ofanyrules tothecontrary, isamatter
internal totheMember itself. Canada argued thatitistheMember 'sright toauthorize those individualsWT/DS27/AB/R
Page 5
itconsiders necessary orappropriate torepresent itsinterests. Canada maintained thatitisnot
appropriate forapanel ortheAppellate Body toverify thecredentials ofindividuals thataMember
hasauthorized toparticipate initsdelegation. Byletter of14July1997, Jamaica alsosubmitted that
agovernment hastheright todetermine thecomposition ofitsown delegation within thecontext of
international lawandpractice.
7. On14July1997, theComplaining Parties filed awritten submission opposing therequest of
Saint Lucia forpermission toallow non-governmental employees toparticipate intheAppellate Body 's
oralhearing inthisappeal. TheComplaining Parties pointed outthatthePanel ruled, initsfirst
substantive meeting withtheparties on10September 1996, thattheprivate counsel seeking torepresent
Saint Lucia were notentitled toattend thePanel 'smeetings inthiscase. TheComplaining Parties
noted that"the Panel 'sruling isnotspecifically appealed inthisappeal".
8. With respect toSaint Lucia 'srequest thatitslegal advisers begranted anopportunity to
participate intheAppellate Body 'soralhearing, theComplaining Parties argued thatthere isnobasis
fortheWTO tochange itsestablished practice inthisarea, andthatsuch achange would entail a
fundamental change inthepremises underlying theWTO dispute settlement system. TheComplaining
Parties maintained thattherules ofinternational lawgoverning diplomatic relations, particularly those
codified intheVienna Convention onDiplomatic Relations5,donotsupport theproposition thata
government canname whomever itwants asamember ofitsdelegation torepresent itinaforeign
international body. The Complaining Parties also argued that theVienna Convention onthe
Representation ofStates intheir Relations withInternational Organizations ofaUniversal Character6
hasnever come intoforce andhasnotbeen ratified byanyofthemajor hoststates, including Switzerland
andtheUnited States, andassuch isnotapplicable totheWTO. TheComplaining Parties argued
thatthelawofdiplomatic representation does notgivestates carte blanche astowhom theymayappoint
totheir delegations. Furthermore, with respect tothepractice ofother international organizations and
international tribunals, theComplaining Parties argued thatwhere participation ofoutside counsel is
permitted, itisdone soinaccordance with specific written rules which have been negotiated andagreed
tobyparties tothatorganization ortreaty.
9. TheComplaining Parties submitted thatfrom theearliest years oftheGeneral Agreement on
Tariffs andTrade (the"GATT"), presentations bygovernments indispute settlement proceedings have
5Done atVienna, 16April 1961, 500 UNTS 95.
6Done atVienna, 14March 1975, AJIL 1975, p.730.WT/DS27/AB/R
Page 6
been made exclusively bygovernment lawyers orgovernment trade experts. With respect todeveloping
countries, theComplaining Parties argued that, unlike thepractice before other international tribunals,
under theprovisions ofArticle 27.2 oftheDSU, developing countries areentitled tolegal assistance
from theWTO Secretariat. TheComplaining Parties alsocited certain policy reasons insupport of
their position. WTO dispute settlement, they argued, isdispute settlement among governments, and
itisforthisreason thattheDSU safeguards theprivacy oftheparties during recourse todispute
settlement procedures. Furthermore, theComplaining Parties asserted thatifprivate lawyers were
allowed toparticipate inpanel meetings andAppellate Body oralhearings, anumber ofquestions
concerning lawyers 'ethics, conflicts ofinterest, representation ofmultiple governments and
confidentiality would need toberesolved.
10. On15July 1997, theAppellate Body notified theparticipants andthird participants inthis
appeal ofitsruling thattherequest bySaint Lucia would beallowed. TheAppellate Body saidthe
following:
...wecanfindnothing intheMarrakesh Agreement Establishing the
World Trade Organization (the"WTO Agreement "),theDSU orthe
Working Procedures ,norincustomary international law orthe
prevailing practice ofinternational tribunals, which prevents aWTO
MemberfromdeterminingthecompositionofitsdelegationinAppellate
Body proceedings. Having carefully considered therequest made by
thegovernment ofSaint Lucia, andtheresponses dated 14July1997
received from Canada; Jamaica; Ecuador, Guatemala, Honduras,
Mexico andtheUnited States, werulethatitisforaWTO Member
todecide who should represent itasmembers ofitsdelegation inan
oralhearing oftheAppellate Body.
11. Inproviding additional reasons forourruling inthisReport, itisimportant tonote first to
what thisruling does anddoes notapply. Arequest wasreceived from theGovernment ofSaint Lucia
toallow theparticipation oftwolegal counsel, who arenotgovernment employees ofSaint Lucia,
intheoralhearing oftheAppellate Body inthisappeal. This isnotanappeal ofthePanel 'sruling
concerning theparticipation ofthesame counsel inthepanel meetings with theparties inthiscase.
ThePanel 'sruling wasnotappealed byaparty tothedispute7,andthus thatruling isnotbefore us
inthisappeal. Second, itiswell-known thatinWTO dispute settlement proceedings, many governments
seek andobtain extensive assistance from private counsel, who arenotemployees ofthegovernments
7Pursuant toArticles 16.4 and17.4 oftheDSU, only parties toadispute, andnotthird parties, may appeal apanel report.WT/DS27/AB/R
Page 7
concerned, inadvising onlegal issues; preparing written submissions topanels aswell astothe
Appellate Body; preparing written responses toquestions from panels andfrom other parties aswell
asfrom theAppellate Body; andother preparatory work relating topanel andAppellate Body
proceedings. These practices arenotatissue before us.Thesoleissue before usiswhether Saint
Lucia isentitled toberepresented bycounsel ofitsown choice intheAppellate Body 'soralhearing.
12. Wenotethatthere arenoprovisions intheMarrakesh Agreement Establishing theWorld Trade
Organization (the"WTO Agreement "),intheDSU orintheWorking Procedures thatspecify who can
represent agovernment inmaking itsrepresentations inanoralhearing oftheAppellate Body. With
respect toGATT practice, wecanfindnoprevious panel report which speaks specifically tothisissue
inthecontext ofpanel meetings with theparties. Wealsonote thatrepresentation bycounsel ofa
government 'sown choice may well beamatter ofparticular significance --especially fordeveloping-
country Members --toenable them toparticipate fully indispute settlement proceedings. Moreover,
given theAppellate Body 'smandate toreview only issues oflaworlegal interpretation inpanel reports,
itisparticularly important thatgovernments berepresented byqualified counsel inAppellate Body
proceedings.
B. Oral Hearing
13. Theoralhearing washeldon21,22and23July1997. Inhisopening statement, thePresiding
Member oftheDivision reminded theparticipants andthird participants thatthepurpose oftheoral
hearing wastoclarify anddistil thelegal issues raised inthisappeal. Theparticipants andthird
participants presented oralarguments, were questioned bytheMembers oftheDivision hearing this
appeal, andmade concluding statements. Thethird participants participated fully inallaspects ofthe
oralhearing.
II. Arguments oftheParticipants
A. European Communities -Appellant
14. TheEuropean Communities appeals from certain ofthePanel 'slegal findings andconclusions
aswell asfrom certain legal interpretations developed bythePanel.WT/DS27/AB/R
Page 8
1. Preliminary Issues
(a) Right oftheUnited States toAdvance Claims under theGATT 1994
15. TheEuropean Communities argues thatthePanel infringed Article 3.2oftheDSU byfinding
thattheUnited States hasaright toadvance claims under theGATT 1994. TheEuropean Communities
asserts that, asageneral principle, inanysystem oflaw, including international law, aclaimant must
normally have alegal right orinterest intheclaim itispursuing. TheEuropean Communities refers
tojudgments ofthePermanent Court ofInternational Justice (the"PCIJ") andtheInternational Court
ofJustice (the"ICJ") assupport foritsargument thattheconcept ofactio popularis "isnotknown
tointernational lawasitstands atpresent".8
16. According totheEuropean Communities, treaty lawisa"method ofcontracting outofgeneral
international law". Therefore, theWTO Agreement must contain arejection oftherequirement ofa
legal interest oranacceptance ofthenotion ofactio popularis inorder toconclude thattheWTO dispute
settlement system setsaside therequirement ofalegal interest. Theabsence ofsuch anexpress rule
intheDSU orintheother covered agreements indicates thatgeneral international lawmust beapplied.
TheEuropean Communities maintains thatthereasoning advanced bythePanel thatallparties toa
treaty have aninterest initsobservance isageneral observation which istrueforalltreaties. The
European Communities submits thatthishasnotbeen accepted bytheICJasavalid proposition under
general international lawgranting allparties toamultilateral treaty locus standi inallcases.
17. TheEuropean Communities alsoargues thattheprovisions ofArticle 10.2 oftheDSU, allowing
aWTO Member thathas"asubstantial interest inthematter before apanel" toparticipate asathird
party, suggest afortiori thataparty toadispute must show alegal interest. TheEuropean Communities
asserts thattheUnited States hasnoactual orpotential trade interest justifying itsclaim, since itsbanana
production isminimal, ithasnever exported bananas, andthissituation isunlikely tochange dueto
climatic andeconomic conditions intheUnited States. Intheview oftheEuropean Communities,
thePanel failstoexplain howtheUnited States hasapotential trade interest inbananas, andproduction
alone does notsuffice forapotential trade interest. TheEuropean Communities alsocontends that
8The European Communities refers totheSouth West Africa Cases (Second Phase), ICJReports 1966, p.47; theCase
Concerning theBarcelona Traction, Light, andPower Company, Limited (Second Phase), ICJReports 1970, p.32; and
theMavrommatis Palestine Concessions Case ,PCIJ (1925), Series A,No. 2,p.12.WT/DS27/AB/R
Page 9
theUnited States hasnoright protected byWTO lawtoshield itsowninternal market from theindirect
effects oftheECbanana regime.
(b) Specificity oftheRequest forEstablishment ofthePanel
18. TheEuropeanCommunitiesarguesthatArticle6.2oftheDSUrequiresthata"specificmeasure"
beidentified, which implies thatthemere identification ofthelegislation orregulations atissue isnot
sufficient, especially ifthey arebroad andextensive andifonly specific aspects ofthem arebeing
attacked. TheEuropean Communities asserts that"specific measures atissue" should begiven a
substantive meaning andnotaformalistic interpretation. TheEuropean Communities submits further
thattherequest forestablishment ofapanel must atthevery least make alinkbetween thespecific
measure concerned andthearticle ofthespecific agreement allegedly infringed thereby inorder to
giveboth thedefending party andprospective third parties aclear ideaofwhat thealleged infringements
are.
2. Interpretation oftheAgreement onAgriculture
19. Intheview oftheEuropean Communities, thePanel erred ininterpreting Article 4.1ofthe
Agreement onAgriculture .TheEuropean Communities submits thatthePreamble oftheAgreement
onAgricultureindicatesthatMemberswereawareoftheuniquenessandthespecificityofthenegotiations
concerning agricultural products intheUruguay Round ascompared totariff negotiations inother areas.
Two elements ofthisspecificity areespecially important inthecontext ofthese proceedings. First,
thetransition from ahighly restrictive system, largely based onnon-tariff barriers, tomore open market
access foragricultural products hadtobeprogressive. Second, theprocess ofreform initiated bythe
Agreement onAgriculture wasaimed atachieving binding commitments inthree areas: market access,
domestic support andexport competition. Thefundamental achievement ofthisreform process was
theobligation toremove non-tariff barriers andtoconvert them intotariff equivalents, including tariff
quotas. TheEuropean Communities contends thatthePanel 'sfailure totake intoaccount both the
context andthenegotiating history oftheAgreement onAgriculture ,inparticular asevidenced bythe
Modalities document9,contributed tothePanel 'serroneous interpretation ofArticle 4.1.
9Modalities fortheEstablishment ofSpecific Binding Commitments Under theReform Programme ,MTN.GNG/MA/W/24,
20December 1993.WT/DS27/AB/R
Page 10
20. The European Communities argues thatArticle 4.1isasubstantive provision. Read in
conjunction withArticle 1(g), itdefines themarket access commitments regarding agricultural products
contained intheSchedules as"commitments undertaken pursuant totheAgreement onAgriculture ".
Insupport ofitsargument, theEuropean Communities alsorefers tothePanel 'sinterpretation ofArticle
21.1 oftheAgreement onAgriculture .Intheview oftheEuropean Communities, Article 21.1 confirms
the"agricultural specificity" initsclearest form anddemonstrates thattherules oftheAgreement on
Agriculture ,including theSchedules specifically referred toinArticle 4.1,supersede theprovisions
oftheGATT 1994 andtheother Annex 1Aagreements, where appropriate. TheEuropean Communities
submits thatpursuant toArticle 21.1 oftheAgreement onAgriculture ,Article XIII:2(d) oftheGATT
1994isapplicabletomarketaccesscommitments,subjecttotheprovisionofArticle4.1oftheAgreement
onAgriculture allowing theinclusion inthose commitments of"other market access commitments as
specified" intheSchedule. TheEuropean Communities does notcontest thattheMembers 'Schedules
areformallyannexedtotheGATT1994.However,inapplyingtheruleofpriorityintheimplementation
oftheWTO rules relating toagricultural products, assetoutinArticle 21.1 oftheAgreement on
Agriculture ,theprovisions oftheGATT 1994 shall beapplied with regard totheparts oftheSchedules
concerning theagricultural products "subject totheprovisions" oftheAgreement onAgriculture ,and
inparticular, Article 4.1. Themarket access commitments contained inthepartofeach Member 's
Schedule relating toagricultural products shall therefore bethose resulting from the"bindings and
reductions oftariffs, andother market access commitments asspecified therein ".
21. TheEuropean Communities submits further thatthefactthatanumber ofMembers have used
tariff quotas, with country-specific allocations andan"others" category formaking current access
commitments, isaclear indication thatthepractice ofallocating tariff quotas inthismanner was
considered acceptable under theAgreement onAgriculture .TheEuropean Communities asserts that
thePanel 'sconclusion thatthispractice iscontrary toArticle XIII oftheGATT 1994, andisnot
protected byArticle 21.1 oftheAgreement onAgriculture ,willdestroy alarge partoftheresults of
theUruguay Round negotiations onagriculture relating totariffication.
3. Interpretation ofArticle XIII oftheGATT 1994
22. TheEuropean Communities disagrees withseveral aspects ofthePanel 'sconclusions onArticle
XIII oftheGATT 1994. TheEuropean Communities argues thatwhile Article XIII:2(d) does not
explicitly permit allocations onthebasis ofagreement with some Members nothaving asubstantialWT/DS27/AB/R
Page 11
interest, itdoes notforbid thatpossibility. Theonly unequivocal obligation flowing from Article XIII,
with respect toMembers nothaving asubstantial interest, istoensure thatanyMember isentitled
tohave access toatleast ashare ofthetariff ratequota thatapproaches, asclosely aspossible, the
share itwould expect toreceive intheabsence ofthattariff ratequota. TheEuropean Communities
submits thatanagreement ontheallocation ofthetariff quota shares with asmany supplying countries
aspossible cannot beagainst theobject andpurpose ofArticle XIII. Furthermore, theterms ofArticle
XIII:2(d) donotexclude thecombined useofagreements andunilateral allocations forsubstantial
suppliers. What isimportant, fortheallocation tobeinconformity withArticle XIII, isthatanyMember
notable toreach anagreement with theimporting Member should notbepenalized initsaccess to
thetariff ratequota. TheEuropean Communities refers tothepanel report inNorway -Restrictions
onImports ofCertain Textile Products10("Norway -Imports ofTextile Products "),arguing thatifthe
combined useofallocation methods isallowed forMembers having asubstantial interest, itisalso
allowed forMembers nothaving asubstantial interest. More specifically, with respect toGuatemala,
theEuropean Communities maintains thatGuatemala cannot beconsidered ashaving been harmed in
itstrade interests inbananas inanyway bythedecision oftheEuropean Communities toinclude it
inthe"others" category, which amounts to49percentofthetariff ratequota. Inaddition, theEuropean
Communities asserts thatthetariff quota reallocation rules fortheBFA arenotinconsistent with
Article XIII.
4. Separate Regimes
23. TheEuropean Communities argues thatthere are,infact, twoseparate ECimport regimes
forbananas: onepreferential regime fortraditional ACP bananas andoneerga omnes regime forall
other imported bananas. TheEuropean Communities contends further thatthenon-discrimination
obligations ofArticles I:1,X:3(a) andXIII oftheGATT 1994 andArticle 1.3oftheAgreement on
Import Licensing Procedures (the"Licensing Agreement "),onlyapply within each ofthese tworegimes.
24. TheEuropean Communities takes theview thatinthecontext ofthetariff negotiations inthe
Uruguay Round, theissue ofspecified quantities oftraditional ACP bananas under thepreferential
treatment provided forbytheLomé Convention wasnever raised nordiscussed, letalone negotiated
orincludedintheECGATTScheduleLXXX.Legally,thisimpliesthat,underthepreferentialtreatment
oftheLomé Convention, thespecified quantities ofimports oftraditional ACP bananas arenotpart
10Adopted 18June 1980, BISD 27S/119, paras. 15-16.WT/DS27/AB/R
Page 12
ofthebound commitments oftheerga omnes regime andthat theobligations oftheEuropean
Communities vis-à-vis Members thatareparties totheLomé Convention have their source inthe
Convention itself andnotintheGATT 1994. Furthermore, theallocation bytheEuropean Communities
ofthetariff quota intheECSchedule isnotonly separate from, butalsoirrelevant to,theallocation
ofACP preferential quantities, andalicence fortheimportation ofbananas atthein-quota reduced
ratecould never beused toimport bananas from anytraditional ACP State. Therefore, theEuropean
Communities submits thatthePanel 'sconclusion thatthere isasingle licensing regime issimply refusing
toseewhat happens intherealworld.
25. Insupport ofthis"separate regimes" argument, theEuropean Communities refers tothePanel
onNewsprint .11TheEuropean Communities claims thatthesituations inthatpanel report andinthis
caseareidentical, inparticular, therelationship between anerga omnes tariff ratequota andpreferential
treatment under apreferential agreement. TheEuropean Communities admits thatthere isapartial
(and rather formalistic) difference between thepresent case andthePanel onNewsprint case inthat
thepreferential regime inthelatter case wasjustified under Article XXIV oftheGATT 1947. The
European Communities argues thatthisdoes notaffect therelevance ofthePanel onNewsprint case,
because thepreferential nature oftheLomé Convention hasnotbeen contested andtheEuropean
Communities continues tobelieve thattheLomé Convention isjustified under Article XXIV. The
European Communities isconcerned thatthePanel 'sfindings would oblige theEuropean Communities
toinclude traditional ACP bananas inthecurrent tariff quota fornon-traditional ACP andthird-country
bananas, i.e.toincrease ormodify theconcessions made bytheEuropean Communities inthecontext
oftheUruguay Round. This would affect thebalance ofrights andobligations resulting from the
Uruguay Round negotiations onagriculture.
26. TheEuropean Communities submits thatthePanel ignored the"objective legal situation" that
thecommon organization ofthemarket inbananas hasthree separate elements: aninternal one, a
general external oneandapreferential one. TheEuropean Communities asserts thattheplain language
oftheGATT 1994 indicates thatArticle XIII applies tothenon-discriminatory administration of
quantitative restrictions andtariff quotas. TheEuropean Communities contends thatithasonly one
tariff quota concerning bananas --thetariff quota of2.2million tonnes setoutintheECSchedule --
andthatthepreferential quantities oftraditional ACP bananas arenotincluded inthistariff quota.
11Adopted 20November 1984, BISD 31S/114, para. 55.WT/DS27/AB/R
Page 13
5. Interpretation oftheLomé Convention andScope andCoverage oftheLomé
Waiver
27. TheEuropean Communities submits thatthePanel endorsed adifferent interpretation ofthe
Lomé Convention andoftheLomé Waiver12from theonecommonly accepted bytheparties tothat
Convention.
28. TheEuropean Communities argues thatthedecision taken bytheECCouncil initsmeeting
of14to17December 1992 reflects aclear common understanding that"...theLomé commitments
willbemetbyallowing tariff-free imports from each ACP State uptoatraditional level reflecting
itshighest sendings (best ever) inanyoneyear uptoandincluding 1990. Incases where itcanbe
shown thatinvestment hadalready been committed toaprogramme ofexpanding production, ahigher
figure may besetforthatACP State". Thereasons forthisdecision were inProtocol 5onBananas
totheLomé Convention ("Protocol 5")andintheobvious need nottowaste ECpublic money and
trade opportunities thattheEC'sfinancial intervention wastrying toestablish. Thebest-ever shipments
totheEuropean Communities, bydefinition, areastatistical measure ofpasttrade, buttheyinnoway
reflect anelement ofthepresent. TheEuropean Communities argues thatthePanel 'sinterpretation
istantamount toreducing thewords "atpresent" inArticle 1ofProtocol 5toredundancy. Article
1ofProtocol 5took intoaccount adynamic factual situation.
29. TheEuropean Communities disagrees with thePanel 'sconclusion thatthecurrent licensing
system isnot"anadvantage" thattheACP countries enjoyed intheEuropean Communities prior to
theintroduction ofthebanana regime. Before 1993, thelicensing system operated bytheUnited
Kingdom andFrance applied only toimports from third countries, butnottotraditional ACP imports.
Such anadvantage, byvirtue ofProtocol 5,needed tobecarried over intothelicensing arrangements
forthe"new" ECbanana regime. TheEuropean Communities argues further thatArticle 167ofthe
Lomé Convention states thattheobject oftheConvention istopromote trade between theACP States
andtheEuropean Communities, andthattheLomé Convention highlights theimportance ofimproving
conditions formarket access fortheACP States. Article 167clearly goes beyond amere tariff preference
insofar asitalsoprovides forthesecuring of"effective additional advantages". Theeffectiveness of
theadvantages isakeyelement thereof. According totheEuropean Communities, Protocol 5requires
thecontinuation oftheadvantages enjoyed bytraditional ACP States. Tariff preferences alone have
12TheFourth ACP-EEC Convention ofLomé, Decision oftheCONTRACTING PARTIES of9December 1994, L/7604,
19December 1994 (the"Lomé Waiver"); andEC-TheFourth ACP-EC Convention ofLomé, Extension ofWaiver, Decision
oftheWTO General Council of14October 1996, WT/L/186, 18October 1996.WT/DS27/AB/R
Page 14
been shown tobeinsufficient toensure this. Without thecombined tariff preferences andtheimport
licensing system, ACP bananas would notbecompetitive intheECmarket, andtheEuropean
Communities would therefore notbeable tofulfil itsobligations under theLomé Convention.
6. Licensing Agreement
30. Intheview oftheEuropean Communities, thePanel erred inlawininterpreting theLicensing
Agreement ,inparticular, Articles 1.2and1.3,asapplicable totariff quotas. According totheEuropean
Communities, thePanel failed todistinguish appropriately "import quotas", which arequantitative
restrictions, from "tariff quotas", which donotlimit imports butrather regulate access toareduced
tariff rate. TheEuropean Communities asserts thatArticle 1.1oftheLicensing Agreement defines
animport licence as"...anapplication orother documentation ...totherelevant administrative body
asaprior condition forimportation intothecustoms territory oftheimporting Member". TheEuropean
Communities argues thattheECtariff quota licence isnotaprior condition forimportation. Itis
necessary togain access atareduced rate, butnottoimport bananas. TheEuropean Communities
submits thatArticle 1.1oftheLicensing Agreement covers licences which areprior conditions "for
importation", not"for importation atalower duty rate".
7. Articles I:1andX:3(a) oftheGATT 1994 andArticle 1.3oftheLicensing
Agreement
31. With respect tothe"neutrality" obligation inArticle 1.3oftheLicensing Agreement ,the
European Communities submits thattheletter, thecontext andthenegotiating history, andeven the
Panel 'sown interpretation oftherelationship between Article XoftheGATT 1994 andArticle 1.3
oftheLicensing Agreement ,plead against theuseofArticle 1.3oftheLicensing Agreement asalegal
tooltocompare therequirements ofdifferent licensing systems. TheEuropean Communities concludes
thattheuseofArticle 1.3oftheLicensing Agreement inthisway would duplicate Article I:1ofthe
GATT 1994.
32. Inaddition, theEuropean Communities submits thatArticle XoftheGATT 1994 isdesigned
toensure thetransparency andtheimpartiality ofpublic authorities charged with theadministration
oftherelevant national legislation regarding trade. Theraison d'être ofArticle Xistoensure that
administrative actions areasneutral aspossible. According totheEuropean Communities, thePanel
distorted theinterpretation ofthisprovision insuch awaythatArticle Xisnowequivalent toarepetition
ofthemost-favoured-nation ("MFN") provision inArticle I:1oftheGATT 1994. TheEuropeanWT/DS27/AB/R
Page 15
Communities maintains thatthePanel erred infinding thattherequirements ofuniformity, impartiality
andreasonableness inArticle X:3(a) donotrefer totheadministration ofthelaws, regulations, decisions
andrulings, buttothelaws, regulations, decisions andrulings themselves. With respect tothe
interpretation ofArticle 1.3oftheLicensing Agreement ,theEuropean Communities agrees with the
Panel thataperfect parallel canbemade between Article X:3(a) oftheGATT 1994 andArticle 1.3
oftheLicensing Agreement .However, Article 1.3oftheLicensing Agreement islexspecialis forthe
administration ofimport licensing procedures, while Article X:3(a) oftheGATT 1994 islexgeneralis
fortheadministration ofall"laws, regulations, decisions andrulings ...". Asaresult ofthePanel
Reports, theEuropean Communities queries whether itispossible tofindabreach ofArticle X:3(a)
oftheGATT 1994 without alsofinding aninfringement ofArticle 1.3oftheLicensing Agreement .
8. Interpretation ofArticle III:4 oftheGATT 1994
33. TheEuropean Communities asserts thatthePanel erred infinding thatthelicensing regime
isaninternal measure subject toArticle III:4 oftheGATT 1994, andnotaborder measure, andthat
thePanelmisunderstoodthenotionofinternalmeasuresintheGATT1994.TheEuropeanCommunities
refers tothepanel report inItalian Discrimination Against Imported Agricultural Machinery13("Italian
Agricultural Machinery ")andargues thattheword "all" inthatreport, when referring tomeasures
thatmodify conditions ofcompetition between domestic andimported products indomestic markets,
isconcerned with internal measures. TheEuropean Communities asserts thatthepanel report inItalian
Agricultural Machinery stands fortheproposition thatArticle IIIapplies only tomeasures applied to
imported products "once they have cleared through customs".14
34. TheEuropean Communities argues thatalicence isadocument which isaprior condition for
applying thereduced duty-rate bound under theECtariff quota toimported bananas. This allhappens
before thebananas have cleared customs. According totheEuropean Communities, theexistence of
thelicence isjustified byoperations whose very nature isthatofaborder operation concerning the
duty-rate applicable tothatproduct. TheEuropean Communities asserts thatthePanel confuses the
notion ofborder measures andthenotion ofadjustment attheborder ofaninternal measure, thelatter
being thesubject ofAdArticle IIIoftheGATT 1994.
13Adopted 23October 1958, BISD 7S/60.
14Ibid.,para. 11.WT/DS27/AB/R
Page 16
35. Inthecase oftheEClicensing system, itisobvious thatdomestic bananas arenotsubject to
animport licence since they donotcross theborder, donotclear customs, donotpayduty andare
notincluded inanytariff quota. Therefore, thevery application toanimport licence ofthenotion
ofborder adjustment inAdArticle IIIislegally wrong. TheEuropean Communities refers tothepanel
report inUnited States -Section 337oftheTariff Actof193015("United States -Section 337")insupport
ofitsinterpretation. TheEuropean Communities submits further thatmost ofthelicensing procedures
areapplied topersons rather than products. TheEuropean Communities refers tothepanel report
inUnited States -Restrictions onImports ofTuna16("United States -Imports ofTuna (1991) ")insupport
ofitsargument thatArticle IIIcannot beused tocompare treatment between persons butonly between
products.
36. Astotheeffect ofhurricane licences, theEuropean Communities asserts thatasimple side-effect
resulting from theimplementation ofameasure pursuing ageneral internal policy, which hasormight
have aneffect ontheconditions ofcompetition, should notbeconsidered toinfringe Article III:4 of
theGATT 1994 unless clear evidence isprovided thatthisgeneral policy measure wasdesigned to
afford protection todomestic products. TheEuropean Communities asserts thathurricane licences
aredistributed only intheevent ofaproven catastrophe andarelimited tothequantities lostdueto
thedevastation caused byahurricane. Therefore, these licences areclearly ameans ofintervention
tosupport theincome ofthose domestic producers thatareharmed bythehurricane. TheEuropean
Communities points outthatoperators canbenefit from hurricane licences intwoways: they canuse
them toimport bananas from third countries, orthey cansellthelicences. Hurricane licences by
themselves donotaffect theinternal saleoroffering forsaleofdomestic bananas tothedetriment of
imported bananas. Theonly effect theyhave isanoccasional increase intheECtariff quota. Finally,
theEuropean Communities askswhether WTO Members arenotallowed toremedy theconsequences
ofnatural disasters within their ownterritories inorder toprevent their producers from being eliminated.
9. Interpretation ofArticle I:1oftheGATT 1994
37. TheEuropean Communities contends thatthePanel erred inlawininterpreting Article I:1
oftheGATT 1994. With respect totheactivity function rules, theEuropean Communities argues
thatdiscrimination occurs intreating identical situations differently, orintreating different situations
inthesame way. ThePanel 'sfindings would amount tocompelling theEuropean Communities to
15Adopted 7November 1989, BISD 36S/345.
16Unadopted, BISD 39S/155, p.195.WT/DS27/AB/R
Page 17
treat different situations concerning operators, inthesame way, andbydoing so,create additional
burdens forsome thatwould notbeappropriate forthesituation inwhich they areoperating. Inthe
view oftheEuropean Communities, nothing inArticle I:1oftheGATT 1994 forbids aMember to
treat different situations ontheir merits.
38. TheEuropean Communities submits thattariff quota licences have aconsiderable monetary
value andconfer significant advantages totheholders. Thesame factual reality does notexist with
regard totraditional ACP bananas. Itis"simply nonsensical" tofindthataviolation ofArticle I:1
oftheGATT 1994 wascommitted solely onthegrounds thattheactivity function rules arenotused
inthetraditional ACP licensing system. TheEuropean Communities maintains thattheactivity function
rules were established forreasons relating toECdomestic competition policy, andthatcompetition
policy considerations fallentirely outside theambit oftheWTO Agreement asitiscurrently drafted.
39. With respect toexport certificates, theEuropean Communities asserts thatthepossibility of
passing quota rents tobanana producers "does exist" inanysituation where alicensing system exists
together with limited access toaquantitative restriction oratariff quota. Intheview oftheEuropean
Communities,itwouldbewrongtoaffirmthatadistinctioncouldbedrawnbetweenquotarentsresulting
from anexport certificate, andquota rents arising from theexistence ofanimport licence. TheEuropean
Communities argues thatthere isnoadvantage forColombian, Costa Rican andNicaraguan bananas
deriving from therequirement ofexport certificates. Thedistribution ofquota rents, provided that
licences aretradeable, confers noparticular advantage, norhasanyeffect on,theimportation of
Ecuadorian, Guatemalan, Honduran andMexican bananas intotheEuropean Communities ascompared
with theaccess ofBFA bananas totheECmarket.
10. Measures Affecting Trade inServices
40. TheEuropean Communities submits thatthePanel erred inlawbyfinding thatthere isnolegal
basis foranapriori exclusion ofmeasures within theECbanana import licensing regime from the
scope oftheGeneral Agreement onTrade inServices (the"GATS"). TheEuropean Communities
argues thatasaresult ofthePanel 'sinterpretation ofthescope oftheGATS, there isa"total overlap"
between theGATT 1994 andtheother Annex 1Aagreements oftheWTO Agreement ,ontheonehand,
andtheGATS ontheother hand. Any measure canfallunder both theAnnex 1Aagreements and
theGATS simultaneously. TheEuropean Communities maintains thatthere isnoindication thatthe
Panel examines, under theGATS, adifferent aspect orpartoftheEClicence allocation rules from
thatexamined under theGATT 1994 ortheLicensing Agreement .Therefore, exactly thesame measuresWT/DS27/AB/R
Page 18
arescrutinized under theGATT 1994 andunder theGATS. Intheview oftheEuropean Communities,
thisiscontrary toArticles IandXXVIII oftheGATS. Furthermore, thisinterpretation iscontrary
toArticle 3.2oftheDSU.
41. TheEuropean Communities asserts thatthePanel 'sbroad interpretation oftheterm "affecting"
isnotsupported bythetextofArticle XXVIII(c) oftheGATS. Ifthecategory of"measures inrespect
of...thepurchase, payment oruseofaservice" inArticle XXVIII(c) ispart ofthecategory of
"measures affecting trade inservices", then theterm "inrespect of"describes thesame relationship
astheterm"affecting",namelythatbetweenmeasuresandtradeinservices.TheEuropeanCommunities
maintainsthatforanimportantcategoryofthesemeasures,"inrespectof"meansthesameas"affecting".
TheEuropean Communities argues thatthewords "forthesupply ofaservice" inArticle XXVIII(c)(iii)
indicate thatthemeasures must relate toanatural orlegal person initsquality ofaservice supplier,
orinitsactivity ofsupplying aservice. Intheview oftheEuropean Communities, thePanel 's
interpretation neglects thecombined implication ofArticles IandXXVIII(c)(iii) oftheGATS, i.e.
thatthemeasures complained ofmust bear onthesupply ofaservice. Asaconsequence, themeasures
atissue aremeasures inrespect ofimportation ofgoods andmeasures relating tothesupply ofservices
with respect tothese goods.
42. TheEuropean Communities alsoasserts thatthePanel 'sinterpretation isnotsupported bythe
preparatory work fortheGATS. TheEuropean Communities argues thatthere isnoindication that
thebroad interpretation given totheterm "affecting" inaNote bytheSecretariat17,which isreferred
tobythePanel insupport ofitsinterpretation, wasshared bythenegotiators oftheGATS. Inaddition,
introducing intoageneral article onthescope oftheGATS avery specific meaning oftheword
"affecting", derived from previous panel reports interpreting Article IIIoftheGATT 1947, would
betaking things outofcontext. TheEuropean Communities alsoargues thatthePanel 'sview that
thedrafters oftheGATS wanted towiden thescope oftheGATS byusing theterm "supply ofaservice"
instead ofthenarrower term "delivery ofaservice" isinnoway conclusive, because itwould still
need tobeshown thatthemeasures concerned were taken inrespect ofthe"production, distribution,
marketing, saleanddelivery ofaservice" within thedefinition of"supply ofaservice" inArticle
XXVIII(b) oftheGATS. Intheview oftheEuropean Communities, thePanel 'sinterpretation isnot
supported bythecontext oftherelevant GATS provisions. TheEuropean Communities argues that
thepreamble oftheGATS aswell asother important provisions, such asArticles VI:4 andXVI of
17Definitions intheDraft General Agreement onTrade inServices ,Note bytheSecretariat, MTN.GNS/W/139, 15October
1991.WT/DS27/AB/R
Page 19
theGATS, givenoindication thattheGATS isconcerned with theindirect effects ontrade inservices
ofmeasures relating totrade ingoods.
43. Furthermore, theEuropean Communities argues thatthenegotiators oftheGATS wanted to
create aninstrument oflimited coverage thatwould bedistinct ratione materiae from theGATT 1994,
andthatthesimultaneous application oftheGATT 1994 andtheGATS leads toaclear conflict between
therights ofoneMember under oneagreement andtherights ofanother Member under theother
agreement. Intheview oftheEuropean Communities, measures targeted attrade inacertain good,
such astheimposition ofananti-dumping duty, aselective safeguard measure oraprohibitive tariff,
could have repercussions onservice suppliers, inparticular, distribution services, andcould be
condemned under theGATS. This would, inturn, impede theMember 'sright totakemeasures under
theGATT 1994. Asafurther example ofprobable conflicts between theGATT 1994 andtheGATS,
theEuropean Communities mentions discriminatory measures infavour ofgoods taken inacustoms
union pursuant toArticle XXIV oftheGATT 1994. These mayhave negative repercussions onservices
supplied from non-Member countries. Itisquite likely thatthose repercussions would notbecovered
bytherestrictions inscribed intheServices Schedules oftheMembers ofthecustoms union. The
European Communities asserts thatasimilar problem might arise with waivers granted under Article
XXV oftheGATT 1994 thatallow discrimination inrespect oftrade ingoods inrelation towhich
certain services could beprovided. This would runcounter toArticle IIoftheGATS, andtheLomé
Waiver would become useless unless therespective services come within anArticle IIexemption.
44. TheEuropean Communities argues further thatconflicts may occur where Members have,
inaccordance with Article XVI oftheGATS, introduced restrictions intotheir Schedules thatlimit
their commitments under Article XVII. When scheduling initial commitments under Article XVII,
Members were toldthatthere wasnoneed tomake provision intheir Schedules formeasures which
were notdirect limitations onservices trade assuch, butrather were restrictions ontrade ingoods.
TheEuropean Communities argues thatthisinterpretation would have scheduled limitations ontrade
ingoods hadthere been agenerally-shared awareness thatsuch measures were deemed tobecovered
notjustbytheGATT 1994, butalsobytheGATS. TheEuropean Communities contends thatthis
interpretation would amount toupsetting theresults ofthenegotiations onscheduling under theGATS,
ifprecisely those Members thathadbeen themost liberal intheir services scheduling, inparticular
inthesector ofdistribution services, would suffer negative consequences ontheir rights intrade in
goods. The European Communities also maintains thattheabsence ofrules ofconflict andofa
hierarchical relationship between theGATT 1994 andtheGATS indicates thatanoverlap wasnotseenWT/DS27/AB/R
Page 20
bythenegotiators toexist between theGATS andtheGATT 1994, because these agreements were
believed bythenegotiators tocover different domains andtoapply todifferent kinds ofmeasures.
45. Moreover, theEuropean Communities argues thatthePanel 'sview that, intheabsence ofan
overlapbetweentheGATSandtheGATT1994,thevalueofMembers'obligationswouldbeundermined
bythepossibility ofcircumvention, isnotsupported bytheobject andpurpose ofthetwoagreements.
TheEuropean Communities asserts thattheonly example oftheso-called frustration oftheobject and
purpose thatthePanel cansuggest isinthetransport area, which clearly falls under Article III:4 of
theGATT 1994. TheEuropean Communities asserts thatapart from Article V,Article III:4 isprobably
theonlyarticle oftheGATT 1994 thatexplicitly submits certain services measures toGATT disciplines.
Article III:4 applies only toalimited number ofservices andapplies only totheextent thatmeasures
relating tothose services directly affect thecompetitive relationship between imported anddomestic
goods.
46. TheEuropean Communities argues thatasapractical result ofthePanel 'sconclusion thatno
measures areexcluded apriori from thescope oftheGATS, thePanel does notdemonstrate thatthe
impugned measures actually affect thesupply ofservices, within themeaning ofArticle XXVIII(b),
inoneofthefour modes ofservice supply. Under theEC'sview oftheterm "affecting", thePanel
does notexplain how rules dividing upentitlements toparts ofthetariff quota forbananas among
importers constitute measures inrespect oftheproduction, distribution, marketing orsaleanddelivery
ofwholesaletradeservicesbyservicesupplierspresentintheEC'sterritory.TheEuropeanCommunities
asserts thatthePanel 'sfindings onactivity functions, export certificates andhurricane licences are
alsocharacterized bythesame lack ofreasoning.
11. Scope ofArticle IIoftheGATS
47. TheEuropean Communities submits thatthePanel 'sfinding inparagraph 7.304 ofthePanel
Reports"thattheobligationcontainedinArticleII:1oftheGATStoextend‘treatmentnolessfavourable’
should beinterpreted incasu torequire providing nolessfavourable conditions ofcompetition" isin
contradiction with thecustomary rules ofinterpretation ofpublic international law. TheEuropean
Communities asserts thatparagraphs 2and3ofArticle XVII oftheGATS reflect theinterpretation
oftheterms "treatment nolessfavourable" given toArticle III:4 oftheGATT 1994 inthepanel report,WT/DS27/AB/R
Page 21
United States -Section 337.18This interpretation, which iscontentious, cannot beequated with the
ordinary meaning oftheterm "treatment nolessfavourable" inawholly different article oftheGATS.
48. Intheview oftheEuropean Communities, theGATS negotiators found itnecessary inthe
caseofArticle XVII toinclude concepts from previous GATT panel reports toclarify thatthestandard
of"nolessfavourable treatment" wasoneofsubstantive discrimination based onmodification of
competitiveconditions.TheEuropeanCommunitiessubmitsthatsuchclarificationwasexpresslyomitted
from theMFN clause inArticle II:1oftheGATS, despite thefactthatitwasdrafted onthesame
"treatment nolessfavourable" basis asArticle XVII oftheGATS. Therefore, Article II:1oftheGATS
does notencompass theidea ofsubstantive discrimination ortheeven further-reaching notion of
modification ofcompetitive conditions. TheEuropean Communities alsoasserts thattheconcept of
"nolessfavourable treatment" isnotlimited toArticle IIIoftheGATT 1994. There areanumber
ofMFN-typeclausesintheGATT1994whichusethesamewording,forexample,ArticleV,paragraphs
5and6andArticle IX:1. There is,therefore, noreason toconclude thatsince thewording ofArticle
III:4wasused,thisautomaticallycarriesastandardofsubstantivediscrimination,including"modification
ofcompetitive conditions".
49. TheEuropean Communities maintains thatitisonly logical thattheobligations under Article
XVII oftheGATS should bemore onerous than those under Article II,because Members have made
commitments andspecifically opened upcertain sectors, which isnotthecase with Article IIofthe
GATS. According totheEuropean Communities, itisunlikely thatMembers, many ofwhom originally
viewed theGATS MFN clause asaconditional MFN provision during theUruguay Round, could have,
intheend,agreed toanMFN clause thatalsoincludes theprinciple ofequality ofcompetitive conditions
without explicitly saying so.
50. Moreover, theEuropean Communities submits thatlegislators may have agood knowledge
ofthecompetitive conditions prevailing between service suppliers ofthatMember andthose notof
thatMember, butthere isusually alackofknowledge relating tothecompetitive conditions prevailing
among services andservice suppliers ofvarious third countries. Therefore, theEuropean Communities
contendsthatitmaybefeasibleforthelegislatorsofMemberstoensureformallyequaltreatmentbetween
third-country services andservice suppliers, butitisvirtually impossible tobesurethatthey arealso
ensuring equal competitive conditions.
18Adopted 7November 1989, BISD 36S/345.WT/DS27/AB/R
Page 22
51. Finally,theEuropeanCommunitiesarguesthattheformulationofthePanel'sfindinginparagraph
7.304 ofthePanel Report, inparticular, theuseoftheterm incasu might beinterpreted tomean that
thestandard ofequality ofcompetitive conditions inArticle IIoftheGATS applies only when, asin
thiscase, fullcommitments have been made inasector, while theformal MFN standard would apply
forsectors without commitments. This would turnArticle IIintoahalf-conditional MFN clause and
would contradict theresult ofthenegotiations which wastohave noconditions attached totheMFN
clause.
12. Effective Date ofGATS Obligations
52. TheEuropean Communities submits thatthePanel erred initsinterpretation ofwhat constitutes
"asituation" within themeaning ofgeneral international lawascodified inArticle 28oftheVienna
Convention ontheLawofTreaties (the"Vienna Convention ").19TheEuropean Communities maintains
thatthe"situation" isthealleged defacto discrimination against andbetween foreign suppliers which
must beproven toexist atthemoment theobligations ofthetreaty --inthiscase theGATS --apply
totheMembers allegedly having caused thediscrimination, andthatsuch discrimination cannot lawfully
beestablished onthebasis ofthefactual situation existing before theentry intoforce ofthetreaty.
The European Communities argues thatthePanel failed todemonstrate thatthere was defacto
discrimination after theentry intoforce oftheGATS on1January 1995, asthePanel relied entirely
ontheComplaining Parties 'dataontheownership andcontrol ofcompanies relating to1992 andon
theComplaining Parties 'estimates onmarket shares ofcompanies which were based onthesituation
existing before June 1993.
13. Burden ofProof
53. According totheEuropean Communities, thePanel misapplied thestandard ofburden ofproof
affirmed bytheAppellate Body inUnited States -Measure Affecting Imports ofWoven Wool Shirts
andBlouses from India20("United States -Shirts andBlouses from India ").According tothatstandard,
acomplaining party must adduce "evidence sufficient toraise apresumption thatwhat isclaimed is
true" inorder toprove itsclaim.21Intheview oftheEuropean Communities, thisburden ofproof
should besatisfied, atthelatest, atthefirst meeting ofapanel.
19Done atVienna, 23May 1969, 1155 UNTS 331; 8International Legal Materials, p.679.
20WT/DS33/AB/R, adopted 23May 1997.
21Ibid.,p.14.WT/DS27/AB/R
Page 23
54. TheEuropean Communities maintains, first, thatthePanel misapplied thisstandard ofburden
ofproof indeciding which companies area"juridical person ofanother Member" andare"owned",
"controlled" byor"affiliated" withajuridical person ofanother Member within themeaning ofArticles
XXVIII(m) and(n)oftheGATS. Theabsolute minimum foranyclaim under thethird mode ofservice
supply isshowing thatthese conditions arefulfilled. TheEuropean Communities argues thatthePanel,
infact, relied exclusively onthelistofalleged "banana wholesaling companies established inthe
European Communities thatwere owned orcontrolled bytheComplainants 'service suppliers, 1992"
andthatthislistassuch gave noclear indications about ownership orcontrol. Inthisrespect, the
European Communities contends that, inparticular, there aredoubts thatDelMonte wasowned by
Mexican persons atthetime thecomplaint wasbrought andthat, forthisreason, itisimpossible to
argue thattheComplaining Parties hadsatisfied therequirement ofproving their claim inrespect of
companies from Mexico.
55. Second, theEuropean Communities asserts thattheburden ofproof hasnotbeen discharged
with respect tothedistribution ofthemarket forwholesale services forbananas between Category
AandCategory BOperators. TheEuropean Communities contends thatthePanel 'sconclusion isbased
onalleged market shares forimports andproduction, andthatitisnotclear how thedistribution of
market shares intheservices market canbebased completely onshares intheimport andproduction
markets, unless oneassumes thatservice providers supply services only inrespect oftheir ownbananas
andthatthere isnoindependent market forservices inbananas ingeneral. Finally, theEuropean
Communities maintains that, with respect tohurricane licences, thePanel posited anunproved identity
oftheclass ofCategory Boperators andoftheclass of"operators who include orrepresent EC
producers" aswell asthegroup of"operators who include orrepresent ACP producers".
14. Definition ofWholesale Trade Services
56. TheEuropean Communities submits thatthePanel erred inapplying theconcept ofwholesale
trade services intheProvisional Central Product Classification (the"CPC Classification").22The
European Communities argues thatimportation isnotmentioned asoneofthesubordinate services
ofwholesaletradeservices,andthat,althoughthelistofsubordinateservicesisonlyillustrative,reselling
ofmerchandise isthecore activity ofwholesalers, whereas importation involves only buying andnot
selling. Thelicensing regime isanimport licensing system and, therefore, does nottouch theservice
providers oftheComplaining Parties intheir wholesale service activities, butonly intheir import
22Provisional Central Product Classification, United Nations 'Statistical Papers, Series M,No. 77,1991.WT/DS27/AB/R
Page 24
activities, thatis,intheir activities inthegoods sector. TheEuropean Communities maintains that,
withrespect totheallegedly discriminatory effect ofoperator categories, thePanel failed todemonstrate
thatthere areunequal conditions ofcompetition between service suppliers, andnotbetween importers,
who, although theymaybealsoservice suppliers, arenot,inthelatter capacity, affected bythelicensing
system. TheEuropean Communities submits further thatthePanel erred inlawbydetermining that
integrated companies areservice suppliers under theGATS, because normally only their products,
andnottheir services, appear onthemarket, andthus theGATS does notapply.
15. Alleged Discrimination Under Articles IIandXVII oftheGATS
(a) Operator Category Rules
57. TheEuropean Communities argues, inthealternative, thattheEClicensing system forbananas
isnotdiscriminatory under Articles IIandXVII oftheGATS. Therefore, thePanel erred inlawby
condemning theoperator category rules under Articles IIandXVII oftheGATS. TheEuropean
Communities contends that, inthefinal analysis, theoperator category rules arecondemned principally
because ofstatistical evidence onmarket shares. TheEuropean Communities refers tothepanel report
inUnited States -Taxes onAutomobiles23where thepanel looked atthestatistical evidence, andbeyond
thedominant presence ofimported goods inthesector ofthemarket affected bythemeasure, inorder
todetermine whether themeasure hadthe"aim andeffect" ofaffording protection todomestic
production. TheEuropean Communities contends thatthevarious aspects ofthelicensing system pursue
legitimate policies andarenotinherently discriminatory ineffect ordesign. TheEuropean Communities
asserts, therefore, thatthePanel should have looked beyond thefactthat, because ofreasons related
tothehistorical development ofthebanana distribution sector, service suppliers oftheComplaining
Parties areconcentrated inonesegment ofthemarket, andECandACP suppliers inanother segment.
58. TheEuropean Communities contends thatthelegitimate aimoftheoperator category rules,
asrecognized bytheEuropean Court ofJustice (the"ECJ"), istoestablish amachinery fordividing
thetariff quota among thedifferent categories oftraders concerned, toencourage operators dealing
inECandtraditionalACPbananastoobtainsuppliesofthird-countrybananasandtoencourageimporters
ofthird-country bananas todistribute ECandACP bananas. This corresponds with theEC'sobjectives
ofintegrating thevarious national markets andofharmonizing thediffering situations ofbanana traders
inthevarious Member States. The European Communities maintains that toachieve "mutual
23DS31/R, 11October 1994, unadopted.WT/DS27/AB/R
Page 25
interpenetration" ofthemarkets ofthevarious Member States, asystem oftransferability oflicences
wasused.Theoperatorcategoryrulesservedthepurposeofdistributingthequotarentsamongoperators
inthemarket. Thefactthatservice suppliers oftheComplaining Parties mayhave been over-represented
inonecategoryinparticular(CategoryA),andmayhavesignificantbutnotoverwhelmingrepresentation
inanother category (Category B)is,initself, nobasis forarguing thattheoperator category rules afford
protection toEC(orACP) service suppliers. Furthermore, interms ofconditions ofcompetition,
operator category rules donothave theeffect ofaffording protection toservice suppliers ofdomestic-
orACP-origin asthey leave acommercial choice totheoperators.
(b) Activity Function Rules
59. TheEuropean Communities maintains thatECactivity function rules aimtocorrect theposition
ofallripeners vis-à-vis allsuppliers ofbananas andseek tomaintain theripeners 'bargaining power
inrelation totheir commercial partners asitwasbefore thecreation ofthetariff quota. Theeffect
ofactivity function rules ishighly dependent onthecommercial choices ofoperators. Operators who
supplied wholesale services primarily forbananas thatwere brought under thetariff quota canavoid,
orreduce, theextent towhich they aresubject toactivity function rules byextending their services
toinclude ECandACP bananas. TheEuropean Communities further submits thatprimary importers
canresort to"licence pooling" orhaving bananas ripened under contract.
(c) Hurricane Licences
60. TheEuropean Communities asserts thathurricane licences areintended tocompensate those
who suffer directly from damage caused bytropical storms. TheEuropean Communities argues that
thefactthatcompensation benefits those persons who have thenationality ofthecountry where the
disaster took place, does notnecessarily signify thatsuch measures arediscriminatory andmodify the
conditions ofcompetition under Article XVII oftheGATS. There isnoinfringement ofArticle II
oftheGATS, asthere isnoformal, orhidden defacto ,distinction astooperators. There isnoindication
inthehurricane licence rules thatoperators thatarenotACP-owned or-controlled cannot own or
represent ACP producers onthesame basis asACP orEC-owned or-controlled operators.
16. Nullification orImpairment
61. TheEuropean Communities argues thatthePanel erred inparagraph 7.398 ofthePanel Report
initsapplication ofthestandard ofrebuttal under Article 3.8oftheDSU inconcluding thattheEuropeanWT/DS27/AB/R
Page 26
Communities hadnotsucceeded inrebutting thepresumption thatthere wasnullification orimpairment
with respect toalloftheComplaining Parties. TheEC'sargument related only totheUnited States,
andwasthattheUnited States lacked alegal right orinterest with respect totheGATT 1994. This
isoneoftheexceptional cases where thepresumption ofnullification orimpairment inArticle 3.8
oftheDSU could berebutted, because oftheabsence ofanytrade damage totheUnited States, due
toitslackofexports ofbananas. TheEuropean Communities submits thattheUnited States hasnever
exported bananas totheEuropean Communities oranywhere elseintheworld. Demonstrating alack
ofanytrade damage isarecognized way intheGATT ofrebutting thepresumption ofnullification
orimpairment. AsthePanel failed toruleontheissue ofUnited States 'export statistics, itisnot
capable ofdeciding thattheEuropean Communities hasnotsucceeded inrebutting thepresumption
ofnullification andimpairment. TheEuropean Communities contends thatthisisaclear failure by
thePanel toobjectively assess thematter before it,asrequired under Article 11oftheDSU. Moreover,
thePanel erred inlawinitsapplication ofthestandard ofrebuttal under Article 3.8oftheDSU by
assuming thattheEC'srebuttal wasbased onmere quantitative elements when itwasbased onthe
United States 'proven incapacity tograsp competitive opportunities inthebanana export market. Thus,
thePanel rendered meaningless thepossibility ofrebutting thepresumption under Article 3.8ofthe
DSU. TheEuropean Communities alsosubmits thatthePanel infringed Article 9oftheDSU bynot
ruling separately ontheposition oftheUnited States. Therights which theEuropean Communities
would have enjoyed ifseparate panels hadbeen established have been impaired under Article 9ofthe
DSU.
B. Ecuador, Guatemala, Honduras, Mexico andtheUnited States -Appellees
1. Trade inGoods
(a) Country Allocations
62. TheComplaining Parties submit thatthePanel correctly found the"two regimes" argument
oftheEuropean Communities tobeirrelevant forWTO purposes. TheComplaining Parties argue
thatnothing inthetextofArticle XIII oftheGATT 1994 suggests thattheobligations concerning
"restrictions" and"shares" oftrade orimports canbeavoided bycreating legal formalities, such as
"separate regimes", foradministrative orother reasons. TheComplaining Parties argue further that
theinsistence bytheEuropean Communities thatithas"only onetariff quota concerning bananas"
isneither legally relevant norfactually correct. Article XIII oftheGATT 1994 clearly does not
distinguish between quota allocations reflected inaSchedule andthose thatarenot. Intheview ofWT/DS27/AB/R
Page 27
theComplainingParties,thepanelreportinNorway -Imports ofTextile Products24confirmsthatcreating
separate regimes forcertain developing countries does notpermit aMember toavoid itsArticle XIII
obligations. TheComplaining Parties alsoargue thatthePanel onNewsprint25does notsupport the
"separate regimes" argument because thejustification ofthepreferential treatment under Article XXIV
oftheGATT 1994 wascrucial inthePanel onNewsprint case, andnosuch justification exists inthis
case. Inresponse totheEC'sconcern about themodification ofitsobligations, theComplaining Parties
argue thatthePanel hasnotmodified theEC'sobligations under itsSchedule buthasinsisted thatthese
obligations beobserved forthebenefit ofallconcerned. Therefore, thePanel correctly concluded
thatalloftheEC'scountry-specific allocations must beconsidered together indetermining consistency
with Article XIII oftheGATT 1994.
63. TheComplaining Parties submit thatthePanel correctly concluded thatECallocations tonon-
substantial suppliers areinconsistent with Article XIII oftheGATT 1994. They argue thatthetext
ofArticle XIII:2(d) oftheGATT 1994, inparticular theword "all", amply supports thePanel 's
conclusion thatthecombined useofagreements andunilateral allocations fortheallocation among
MembershavingasubstantialinterestisinconsistentwithArticleXIII:2(d).Insupportoftheirargument,
theComplaining Parties refer tothepanel report inNorway -Imports ofTextile Products26andtothe
drafting history oftheGATT 1947.27TheComplaining Parties argue thatifArticle XIIIoftheGATT
1994 does notallow thecombined useofagreements andunilateral allocations fortheallocation among
Members having asubstantial interest, italsodoes notallow thecombined usefortheallocation among
Members without asubstantial interest. Concerning theEC'sargument astoallocations toMembers
without asubstantial interest, theComplaining Parties argue thatArticle XIII oftheGATT 1994 is
unambiguous inrequiring thattheadministration ofquantitative restrictions andcountry-specific
allocations must benon-discriminatory and reflective ofrecent trade patterns. The European
Communities persists, against both thetextandtheobject andpurpose ofArticle XIII, indefending
thearbitrary assignments ofshares based onagreements withsuppliers regardless oftheir level oftrade.
Additionally, theComplaining Parties assert thatArticle XIII:2(d) recognizes thatitmay indeed not
always bepracticable toreach agreement with allsuppliers, butitisprecisely forsuch situations that
Article XIII:2(d) provides forthepossibility ofassigning country-specific allocations based onhistorical
24Adopted 18June 1980, BISD 27S/119, paras. 15,16and 18.
25Adopted 20November 1984, BISD 31S/114.
26Adopted 18June 1980, BISD 27S/119, paras. 15-16.
27Report oftheFirst Session oftheLondon Preparatory Committee oftheUnited Nations Conference onTrade and
Employment ,UNDocument EPCT/33, October 1946, p.14,referred tointheComplaining Parties 'appellee 'ssubmission,
para. 36.WT/DS27/AB/R
Page 28
shares. However, theEC'sinsistence thatMembers cannot beconsidered as"having been harmed"
bytheir inclusion inthe"others" category ignores basic economic realities andtheunderlying tenets
ofArticle XIII. Country-specific allocations arerecognized inArticle XIII:2 asanadvantage forwhich
specific rules arerequired tocarry outthegeneral principle inArticle XIII:1 ofnon-discrimination.
TheComplaining Parties assert further thataMember may reallocate unused amounts ofaquota or
tariff quota among other supplying Members, butArticle XIII:2 oftheGATT 1994 does notpermit
thistobedone inadiscriminatory manner.
64. TheComplainingPartiessubmitthatthePanelcorrectlyfoundthatArticle21.1oftheAgreement
onAgriculture isnotadefence totheinconsistencies with Article XIII oftheGATT 1994 found with
respect totheEC'scountry-specific allocations. ThePanel properly dismissed theEC'scontention
thatArticle 4.1oftheAgreement onAgriculture effectively incorporates GATT-inconsistent provisions
oftheSchedules intotheAgreement onAgriculture andthereby legitimizes them. Theordinary meaning
ofArticle 4.1oftheAgreement onAgriculture does notpermit ittoberead asasubstantive provision.
TheComplaining Parties argue that, hadthedrafters wished toincorporate theSchedules byreference
intotheAgreement onAgriculture ,theycould have done soexplicitly. Noprovision oftheAgreement
onAgriculture clashes withArticle XIIIoftheGATT 1994. Accordingly, Article 21.1 oftheAgreement
onAgriculture isnotrelevant, andArticle XIII oftheGATT 1994 applies totheECtariff quota
allocations. ThePanel 'sfindings arefully supported bytheobject andpurpose oftheAgreement on
Agriculture ,which istomake agricultural products subject tostrengthened andmore operationally-
effective GATT rules. Finally, theComplaining Parties assert thatthefactthatthe"current access"
tariff quotas ofmany WTO Members include country-specific allocations does notsupport theEC's
argument. Therelated allegation bytheEuropean Communities thatother countries have disregarded
Article XIII oftheGATT 1994 isfactually unsupported. However, even iftrue, itcannot serve to
contradict theordinary meaning oftherelevant terms oftheAgreement onAgriculture nortoendorse
theECviolations.
(b) Licensing Agreement
65. TheComplaining Parties submit thatthePanel correctly found thattheLicensing Agreement
applies tolicensing procedures fortariff quotas. Intheir view, theEuropean Communities cannot
factually dispute thatimport licences arerequired asaprior condition forimporting in-quota bananas.
Moreover, thisin-quota quantity comprises thesum total ofthird-country andnon-traditional ACP
bananas entering theECmarket. According totheComplaining Parties, thecontext ofArticle 1.1
oftheLicensing Agreement ,aswellasArticles 3.2,3.3andthePreamble oftheLicensing Agreement ,WT/DS27/AB/R
Page 29
andprior GATT practice onthenotion of"restriction", confirm thattheLicensing Agreement also
applies tolicensing procedures fortariff quotas. TheComplaining Parties alsoargue thatamajor
achievement oftheUruguay Round agriculture negotiations wasthelarge-scale conversion ofnon-tariff
barriers totariff quotas. They maintain thatmaking tariff quotas anexception tothedisciplines of
theLicensing Agreement would directly contradict thetrend towards transparency andpredictability.
66. Finally, theComplaining Parties contend thatthePanel properly concluded thattheissuance
ofhurricane licences exclusively toACP andECproducers andproducer organizations, oroperators
including ordirectly representing them, butnottothird-country producers andproducer organizations
oroperators including ordirectly representing them, wasinconsistent withtherequirement of"neutrality
inapplication" contained inArticle 1.3oftheLicensing Agreement .
(c) Article IIIoftheGATT 1994
67. TheComplaining Parties submit thatthePanel correctly found thatthedistribution ofCategory
Blicences conditioned onpurchases ofECbananas isinconsistent with Article III:4 oftheGATT 1994.
According totheComplaining Parties, thetextofArticle III:4 indicates coverage beyond legislation
directly regulating orgoverning thesaleofdomestic andlikeimported products. Insupport ofthis
argument, theComplaining Parties refer tothepanel report inItalian Agricultural Machinery28and
totheInterpretative Note AdArticle IIIoftheGATT 1994. Referring tothepanel report inUnited
States -Section 337,theComplaining Parties argue thatthedispositive issue under Article III:4 is
whether adiscriminatory advantage isaffecting thesaleorpurchase ofthedomestic product.29In
response totheEC'sargument relating tothepanel reports inUnited States -Imports ofTuna (1991)
andUnited States -Section 337,theComplaining Parties assert thatthese panel reports show thatArticle
IIIdoes apply toallmeasures affecting trade ingoods. TheComplaining Parties insist thattheobject
ofArticle IIIistoensure thatMembers accord foreign products nolessfavourable treatment thanlike
domestic products intheapplication ofanymeasure affecting theinternal saleofproducts, regardless
ofwhetheritappliesinternallyorattheborder.TheComplainingPartiesfurtherassertthattheEuropean
Communities cannot claim thatimported products aretreated under theCategory Brules inthesame
way asdomestic products, once they have cleared customs. Insupport ofthisargument, they refer
tothestatement ofthepanel inItalian Agricultural Machinery thatanymeasure that"modif[ies] the
conditions ofcompetition between thedomestic andimported products ontheinternal market", including
28Adopted 23October 1958, BISD 7S/60, para. 11.
29Adopted 7November 1989, BISD 36S/345, para. 5.10.WT/DS27/AB/R
Page 30
onethatencourages domestic purchases ofnational goods, violates Article III:1 oftheGATT 1994.30
Referring totheAppellate Body 'sprevious ruling thatArticle III:1 isageneral principle thatinforms
therestofArticle III31,theComplaining Parties argue thatgiven Category B'sexplicit incentive to
purchase ECbananas, the"design andarchitecture" ofthemeasure toafford protection toECproducers
isclear.
(d) Article I:1oftheGATT 1994
68. TheComplaining Parties submit thatthePanel correctly found theactivity function rules to
beinconsistent with Article I:1oftheGATT 1994. Incontrast totheactivity function rules, thesimpler
proceduresapplicabletoACPbananasconstituteaclearregulatory"advantage"inviolationofArticleI:1
oftheGATT 1994. Insupport oftheir argument, theComplaining Parties refer tothepanel report
inUnited States -Denial ofMost-Favoured-Nation Treatment astoNon-Rubber Footwear from Brazil32
("United States -Non-Rubber Footwear ").NoneoftherationalesinvokedbytheEuropeanCommunities
injustification fortheactivity function rules --such asthatACP imports are"inherently lessprofitable"
andthatdifferent "situations concerning operators" require adifferent allocation ofquota rents --
legitimizes regulations which discriminate explicitly among likeproducts onthebasis oftheir origin.33
TheComplaining Parties addthatArticle I:1oftheGATT 1994 applies toany"rules orformalities",
andthattheEC'sargument thatmeasures intended toimplement competition policies aresomehow
"outside oftheWTO" is"confused andgroundless".
69. According totheComplaining Parties, theEuropean Communities themselves recognized the
commercial value oftheexport certificates intheEuropean Commission Report ontheECBanana
Regime ,inwhich theEuropean Commission indicated thatexport certificates helped theBFA countries
"share intheeconomic benefits ofthetariff quota".34TheComplaining Parties argue thatexport
certificates accord holders inBFA countries preferential bargaining leverage toextract ashare ofthe
quota rentfortheir fruit exported totheEuropean Communities, andhence give BFA countries a
30Adopted 23October 1958, BISD 7S/60, para. 12.
31Appellate Body Report, Japan -Taxes onAlcoholic Beverages ("Japan -Alcoholic Beverages "),WT/DS8/AB/R,
WT/DS10/AB/R, WT/DS11/AB/R, adopted 1November 1996, p.18.
32Adopted 19June 1992, BISD 39S/128, paras. 6.8-6.17.
33Ibid.,para. 6.11.
34Commission oftheEuropean Communities, Report ontheECBanana Regime ,VI/5671/94, July 1994, p.12,contained
intheComplaining Parties 'first submission tothePanel.WT/DS27/AB/R
Page 31
competitive advantage over other Latin American suppliers. This "possibility" (i.e. privilege) was
requested bytheBFA countries.
(e) Article XoftheGATT 1994
70. TheComplaining Parties submit thatthePanel correctly found thatthelicensing procedures
applicable toLatin American bananas differ from, andgosignificantly beyond, those required inrespect
oftraditional ACP bananas inviolation ofArticle X:3(a) oftheGATT 1994. Because everything from
border measures tointernal measures falls within thelanguage ofArticle X:1oftheGATT 1994, and
because theimport licensing procedures oftheEuropean Communities constitute internal lawsregulating
border measures, theComplaining Parties conclude thattheprocedures atissue fallwell within the
scope ofArticle X:1oftheGATT 1994. Thelanguage ofArticle X:3(a) prohibits theapplication of
twosignificantly different, origin-based setsoflicensing procedures. TheComplaining Parties argue
thatthePanel rested itsfindings onareview ofthedifferent ECprocedures, notontheoperator category
andactivityfunctionrulesthemselves.ThePanel'sanalysisspecificallyreviewedthelicensingprocedures
atissue andnottheenabling laws assuch. Furthermore, there isnosupport intheWTO forthe
proposition thatArticle IandArticle XoftheGATT 1994 cannot overlap. ThefactthattheEC
discriminatory import procedures areinconsistent with theuniformity requirement ofArticle X:3(a)
does notmean thatthelicensing rules themselves cannot represent "rules andformalities" thathave
notbeen accorded immediately andunconditionally tolikeproducts ofallorigins inviolation ofArticle
IoftheGATT 1994. ThePanel correctly found thattheECpractices violated both Articles Iand
XoftheGATT 1994. Inresponse totheEC'sargument thatArticle 1.3oftheLicensing Agreement
islexspecialis ,andthatthePanel must therefore make concurrent findings under both Article X:3(a)
oftheGATT 1994 aslexgeneralis andArticle 1.3oftheLicensing Agreement ,theComplaining Parties
submit thatitisonly intheevent ofconflict between theGATT 1994 andaprovision ofanother Annex
1Aagreement (such astheLicensing Agreement ),thattheprovision ofthelatter agreement prevails.
(f) Hurricane Licences
71. Furthermore,theComplainingPartiesassertthatthePanelcorrectlyfoundthathurricanelicences
created anincentive topurchase ECbananas inviolation ofArticle III:4 oftheGATT 1994. Operators
thatpurchase ECbananas canexpect intheevent ofahurricane tobecompensated forboth their lost
volume intheform ofextra "hurricane licences" andwith respect totheir reference quantities for
purposesoffuturelicensingentitlement.Therefore,operatorsarebeingencouraged,bywayofhurricane
licences, topurchase ECbananas instead of"Latin American bananas" inviolation ofArticle III:4WT/DS27/AB/R
Page 32
oftheGATT 1994. According totheComplaining Parties, irrespective oftheimpact hurricane licences
may have hadonthetariff quota, theincentive such licences create topurchase ECbananas isaclear,
discriminatory modification ofconditions ofcompetition inviolation ofArticle III:4 oftheGATT 1994.
Finally, theComplaining Parties assert thatWTO Members areentitled toafford "occasional protection
against theeffects ofnatural disasters", butthey may notdosothrough discriminatory measures that
encourage thepurchase ofECbananas.
72. TheComplainingPartiesassertthatthePanelproperlyconcludedthatthereisnothinginProtocol
5thatsuggests thattheEuropean Communities isrequired toapply other factors toincrease theshares
ofACP countries above their best-ever export levels before 1991. They argue further thattheplain
language ofArticle 1ofProtocol 5makes clear thatitmeans past andpresent ACP "access toits
traditional markets anditsadvantages onthose markets," andnotpending orcontemplated ACP
investments inproduction thatmay ormay notmaterialize atsome future time intheform oftrade
intheECmarket. TheComplaining Parties contend thatoperator category rules were notformerly
enjoyed byACP countries, andarenotrequired toprovide access totraditional markets, andthatthere
areother methods consistent with WTO rules bywhich theEuropean Communities could assist the
ACPcountriesincompetingintheECmarket.DuringthePanelproceedings,theEuropeanCommunities
declined toputforward anyfacts relating tothe"past" "situation" concerning import licence systems.
TheComplaining Parties argue thateven ifthis"factual" issue isreviewable, theEC'sbelated assertion
thatlicences forthird-country banana imports "were apermanent market management system" is
inconsistent with statements made during thePanel proceedings.
2. General Agreement onTrade inServices
(a) Threshold Legal Issues
73. With respect toallissues concerning theGATS raised inthisappeal, theComplaining Parties
argue thatthePanel wascorrect. TheComplaining Parties asktheAppellate Body toaffirm thePanel 's
findings ontheGATS.
74. TheComplainingPartiessubmitthattheordinarymeaningoftheGATS,initscontext,establishes
thatithasabroad scope andthatthePanel correctly concluded thattheGATS applies toallmeasures
affectingthemarketplaceforservices,includingservicesmeasuresthatalsorelatetogoods.Theordinary
meaning oftheterm "affecting" is"having aneffect on"or"having animpact on". TheComplaining
Parties contend thatthenegotiators oftheGATS clarified theinclusive nature oftheterms "trade inWT/DS27/AB/R
Page 33
services" and"supply ofaservice" byadding theillustration found inArticle XXVIII(c) oftheGATS
and, thatthis, together with theordinary meaning oftheterm "affecting", makes plain thatthescope
oftheGATS is"assweeping aspossible". The Complaining Parties argue that theEuropean
Communities isincorrect inclaiming that"affecting" and"inrespect of"areused inparallel inArticle
XXVIII(c) oftheGATS. What follows thephrase "affecting" is"trade inservices" and, bycontrast,
what follows thephrase "inrespect of"isnot"trade inservices". ThePanel was, therefore, correct
inrejecting theEC'sargument.
75. TheComplaining Parties alsomaintain thatthisbroad ordinary meaning isconfirmed bythe
broad interpretation ofArticle IIIoftheGATT byprevious panels. TheComplaining Parties maintain
thatthedrafters oftheGATS were generally familiar with such basic GATT concepts35,andthatthis
includes theNote bytheGATT Secretariat issued totheGATS negotiators.36ASecretariat Note of
thissort, issued generally toalldelegations participating inthenegotiations, isalegitimate partof
thepreparatory work oftheGATS forthepurpose ofconfirming theordinary meaning ofthetext--
inthiscase, itsbroad scope.
76. TheComplaining Parties submit thatthePanel properly found thatthemutual exclusivity of
theGATT 1994 andtheGATS would befundamentally atodds with theobject andpurpose ofboth
agreements. Insupport ofthisargument, theComplaining Parties setoutanumber of"goods measures"
thatdonotdirectly regulate aservice perse,butplace foreign-owned firms atadistinct competitive
disadvantage.37Theacceptance oftheargument oftheEuropean Communities thatmeasures regulating
goods areexcluded from theGATS disciplines would seriously erode service commitments made in
thegoods distribution sector --both wholesaling andretailing. TheComplaining Parties maintain that
theentire sector isdevoted tothedistribution ofgoods andthatmeasures affecting thissector will,
bydefinition, have adirect orindirect connection with goods. Insupport oftheir argument astothe
possibility of"overlaps" between theGATT 1994 andtheGATS, theComplaining Parties refer also
totheAppellate Body Report inCanada -Certain Measures Concerning Periodicals ("Canada -
Periodicals ").38
35The Complaining Parties refer inparticular tothepanel report, Italian Agricultural Machinery ,adopted 23October
1958, BISD 7S/60.
36Definitions intheDraft General Agreement onTrade inServices ,Note bytheSecretariat, MTN.GNS/W/139, 15October
1991, para. 12.
37Complaining Parties 'appellee 'ssubmission, para. 193.
38WT/DS31/AB/R, adopted 30July 1997.WT/DS27/AB/R
Page 34
77. Inresponse tothearguments oftheEuropean Communities concerning anti-dumping duties
andpreferential treatment ofgoods under freetrade agreements, theComplaining Parties submit that
therelevance ofthese arguments isnotclear astheGATS violations inthiscase were notbased on
thefactthattheEuropean Communities provided greater market access toECandACP bananas than
to"Latin American bananas". Inreply totheargument bytheEuropean Communities ontheGATT
exceptions andwaivers, theComplaining Parties submit thatthePanel properly described thisissue
notasafundamental issue ofoverlap between theGATT 1994 andtheGATS, butrather asanissue
ofthe"appropriate drafting ofwaivers". With respect totheEC'sargument concerning scheduling,
theComplaining Parties maintain that, hadthenegotiators understood thatallgoods-related measures
were automatically exempted from theGATS, theywould nothave extended theGATS toinclude entire
sectors --such asdistribution andfreight transportation --devoted entirely tothesaleandmovement
ofsuch goods. Finally, inresponse totheargument bytheEuropean Communities ontheabsence
ofanyprovision intheWTO agreements toresolve conflicts between theGATT 1994 andtheGATS,
theComplaining Parties submit thattheframers oftheGATS didnotadopt aruleofexclusivity, and
thus some sortof"unspoken hierarchy", because they didnotperceive any"overlap" tohave any
significant consequences.
78. TheComplaining Parties submit thatthePanel correctly concluded thatArticle IIoftheGATS
applies toinstances ofdefacto discrimination. TheComplaining Parties argue thatthephrase "treatment
nolessfavourable" inArticle IIoftheGATS isunqualified andtherefore notlimited tomeasures
embodyingdejurediscrimination,butratherbyitstermsappliestoalllessfavourabletreatment,whether
ornotthefactthatitislessfavourable isapparent from thefaceofthemeasure. TheComplaining
Parties agree alsowith thePanel thatArticle IIIoftheGATT 1994 isanimportant context forthe
interpretation ofArticle IIoftheGATS, andthattheprior interpretation ofthephrase "treatment no
lessfavourable" inArticle III:4 byGATT panels confirms thebroad plain meaning ofthesame phrase
asused inArticle IIoftheGATS. Article II:2oftheGATS andtheAnnex onArticle IIExemptions,
which setoutelaborate listing andreview procedures forMFN exemptions, provide additional relevant
context. TheComplaining Parties observe thatitisdifficult toimagine why thenegotiators would
provide such procedures ifMembers were atliberty toadopt discriminatory measures inanyevent,
escaping coverage ofArticle IIunless thediscrimination is"formal" indesign. TheComplaining Parties
alsosupport thePanel 'sreasoning inthattheadditional paragraphs 2and3inArticle XVII oftheGATS
neither addto,norsubtract from, the"treatment nolessfavourable" standard. TheComplaining Parties
agree with thePanel inthatthenarrow "formal" interpretation oftheMFN standard inArticle II:1WT/DS27/AB/R
Page 35
oftheGATS would beincompatible withitsnon-discrimination objective andpurpose. Thenegotiating
history oftheMFN clause intheGATS confirms thatthe"treatment nolessfavourable" standard was
intended torequire effective equality ofopportunities andthattheGATS negotiators were made fully
aware thatithadbeen interpreted inthatway bythepanel report inUnited States -Section 337.39
Insupport ofthisargument, theComplaining Parties refer toaNote bytheGATT Secretariat reviewing
various non-discrimination concepts inthecontext ofoffering possible MFN options fortheGroup
ofNegotiations onServices.40
(b) Application ofGATS totheECLicensing System
79. TheComplaining Parties submit thatthePanel correctly concluded thattheEClicensing rules
affected trade inwholesale trade services. Inresponse totheEC'sargument relating tothecoverage
ofthedefinition ofwholesale trade services, theComplaining Parties argue that, infact, buying directly
affects selling, andthatifawholesaler cannot buybananas, hecannot sellthem. TheComplaining
Parties submit thattheEC'sargument onintegrated companies isirrelevant since theComplaining
Parties demonstrated thattheir main distribution companies distributed bananas they hadpurchased
from independent Latin American growers, inaddition tobananas they grew themselves. Insofar
astrade inwholesale services forbananas wasaffected through import licences, thebanana regime
effectively regulated theaccess ofbanana wholesalers tothemost important itemtheyneeded toprovide
wholesale trade services --namely, bananas.
80. TheComplaining Parties contend thatthePanel properly concluded thatoperator category rules,
activity function rules andhurricane licences modify competitive conditions infavour ofECandACP
wholesale distribution firms incomparison tolikethird-country firms andare,therefore, inconsistent
with both Articles IIandXVII oftheGATS. TheComplaining Parties donotagree with theEC's
"aims andeffects" argument. TheComplaining Parties note thattheEuropean Communities didnot
takethisposition before thePanel, thattheEuropean Communities does notindicate what inthetext
oftheGATS calls forsuch aninquiry, andthattheAppellate Body hasfound previously thattheproper
inquiry inapplying thenational treatment principle ofArticle III:1 oftheGATT 1994 isnotameasure 's
"aim andeffect" butrather anexamination of"...theunderlying criteria used inaparticular ...measure,
39Adopted 7November 1989, BISD 36S/345, para. 5.11.
40Most-Favoured-Nation Treatment andNon-Discrimination Under TheGeneral Agreement onTariffs andTrade ,Note
bytheSecretariat, MTN.GNS/W/103, 12June 1990.WT/DS27/AB/R
Page 36
itsstructure, anditsoverall application toascertain whether itisapplied inawaythataffords protection
todomestic products".41
81. Inresponse totheargument bytheEuropean Communities thattheaimofoperator categories
istoencourage"interpenetration"ofmarkets,theComplainingPartiescontendthatthisstatementignores
theone-way transfer toECandACP firms ofanentitlement toaportion ofthebusiness thathad
historically been inthehands oftheComplaining Parties 'distributors. TheComplaining Parties further
submitthatthemarketintegrationclaimbytheEuropeanCommunitiesislegallyirrelevantunderArticles
IIandXVII oftheGATS andthatArticle VoftheGATS governing market integration does notrelieve
theEuropean Communities from either itsnational treatment oritsMFN obligation vis-à-vis ACP and
third-country service suppliers. TheComplaining Parties refer totheEC'sargument thatoperator
categories were motivated largely bythelegitimate need topromote competition bydistributing quota
rents "inawaywhich wasnotskewed bytheexisting market situation".42According totheComplaining
Parties, thisisjustanother way ofsaying thattheEuropean Communities wished tore-arrange the
"existing market situation" bymoving business andresources from onegroup ofservice suppliers to
another. TheComplaining Parties alsoargue thattheEuropean Communities didnotjustify operator
categories onthebasis ofcompetition policy concerns inanyoftherelevant directives establishing
themeasure. Inresponse totheEC'sargument thatoperator categories donothave aninherently
discriminatory effect, theComplaining Parties argue thatthisisaninappropriate effort bytheEuropean
Communities toplace factual issues before theAppellate Body. Intheir view, operator categories are
"inherently" discriminatory despite theEC'sargument thatallsuppliers areonanequal footing to
compete foraccess tosupplies oftheECandACP bananas. Unlike thewholesalers oftheComplaining
Parties, those oftheEuropean Communities andtheACP States arenotrequired toinitiate newbusiness
relationships innew regions inorder towinback their traditional business.
82. With respect totherealdesign andoperation ofactivity function allocations, theComplaining
Parties submit that, since thePanel 'sassessment wasinlarge partafactual inquiry, theAppellate Body
should notinterfere lightly with it.Inresponse totheECargument ontheprevention ofconcentration
ofeconomic bargaining power inthehands ofthelarge multinational companies, theComplaining
Parties argue thatthisconfirms thePanel 'sanalysis thattheallocation toripeners wasinfactdesigned
41Appellate Body Report, Japan -Alcoholic Beverages ,WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted
1November 1996, p.29.
42EC'sappellant 'ssubmission, para. 311.WT/DS27/AB/R
Page 37
totiltthecompetitiveenvironmentagainsttheComplainingParties'firms.Furthermore,theComplaining
Parties reject theargument bytheEuropean Communities thatthere were various opportunities available
toavoid actual lossofmarket share, assuch options involve substantial costmerely toregain former
business. Asaresult, Complaining Parties 'firms have acompetitive disadvantage over ECfirms which
have notbeen required tomake purchases orinvestments inorder toretain their traditional banana
business.
83. With respect totheallocation ofhurricane licences, theComplaining Parties donotquestion
thelegitimacy ofproviding relief inthecaseofnatural disasters, butrather themechanism theEuropean
Communities haschosen toprovide disaster relief. ThePanel correctly found thatthismechanism,
infact, increases thealready large anddiscriminatory 30percent share ofthetariff quota given
predominantly tofirms from theEuropean Communities andtheACP States. However, themechanism
forhurricane licences places firms oftheComplaining Parties 'origin atacompetitive disadvantage
vis-à-vis ECandACP operators from whom they package thelicences.
84. Inresponse totheEC'sargument with respect toArticle 28oftheVienna Convention ,the
Complaining Parties argue thatthePanel correctly characterized themeasure atissue ascontinuing
measures which were, insome cases, enacted before theentry intoforce oftheGATS, butwhich did
notcease toexist after thatdate. Initscommentary onthefinal draft oftheVienna Convention ,the
International Law Commission recognized thatsuch measures falloutside thescope ofArticle 28of
theVienna Convention .43Concerning market shares, theComplaining Parties argue thatthePanel
necessarily hadtobase itsanalysis ontrade datapertaining toaperiod several years earlier than the
entry intoforce oftheGATS, astheECregime awards import rights based onhistorical trade .
85. With respect totheissue oftheburden ofproof, theComplaining Parties argue that, tothe
extent theAppellate Body canconsider theclaims raised bytheEuropean Communities toconstitute
anissue oflawwithin itsmandate under Article 17.6 oftheDSU, theEuropean Communities does
notshow how thePanel 'srendering ofitsfactual findings constitutes alegal error thattheAppellate
Body should reverse. TheComplaining Parties observe thattheAppellate Body inUnited States -
Shirts andBlouses from India44declined todefine auniform setoffacts needed tocreate thepresumption
ofaviolation, letalone thequantum ofsupport needed toestablish anyparticular factgiven inthe
43The Complaining Parties refer totheYearbook oftheInternational Law Commission ,Vol. II(1966), p.212.
44WT/DS33/AB/R, adopted 23May 1997.WT/DS27/AB/R
Page 38
case. TheComplaining Parties argue aswellthatthePanel based itsevidentiary finding onamethodical,
issue-by-issue examination oftheevidence presented ontherecord, accurately described theinformation
intherecord andexplained how, onthekeyfacts, theEuropean Communities hadnotrebutted the
information submitted bytheComplaining Parties. ThePanel correctly concluded thatDelMonte
wasMexican-owned andthattherelevance tothePanel 'sconclusion ofasuggested alteration ofDel
Monte 'sstatus during thePanel 'sproceeding wasnotclear. TheComplaining Parties further submit
thatthere isnospecific testrequired bytheGATS concerning theownership ofongoing companies.
86. TheComplaining Parties argue that, with respect toownership andcontrol ofservice suppliers
established intheEuropean Communities, theComplaining Parties submitted tothePanel anarray
ofcorroborative information45which thePanel properly determined tobecredible andsufficient. The
Complaining Parties argue thattheEuropean Communities hadnoteven asserted anypoint that
contradicted theComplaining Parties 'facts. TheComplaining Parties maintain thatthePanel correctly
based itsfinding concerning market shares ontheimport andproduction markets, asitisthisactivity
thatgeneratesentitlementstoimportlicencesas"primaryimporters".Withrespecttohurricanelicences,
theComplaining Parties assert thattheEuropean Communities should notbeallowed tore-open this
issue onappeal, asitnever sought todispute theidentification ofCategory Boperators (both ofEC
andACP origin) asrecipients ofhurricane licences bytheComplaining Parties during thePanel
proceeding.
3. Procedural Issues
(a) Request forEstablishment ofaPanel
87. The Complaining Parties submit that thePanel correctly found that therequest forthe
establishment ofapanel satisfied therequirements ofArticle 6.2oftheDSU. Inresponse totheEC's
arguments onspecificity andthenecessity ofshowing anexplicit linkbetween each measure andthe
article allegedly infringed, theComplaining Parties point outthatthere isnoagreed WTO definition
oftheterms"specificmeasuresatissue"andthat,underthepracticeoftheGATT1947CONTRA CTING
PARTIES, most requests fortheestablishment ofapanel contained noexplanation ofhow certain
measures areinconsistent with therequirements ofthespecific agreements. TheComplaining Parties
alsosubmit thatthePanel correctly determined thattherequest wassufficiently precise tofulfil the
45The Complaining Parties refer toExhibit Eoftheir joint rebuttal submission.WT/DS27/AB/R
Page 39
three identified purposes ofapanel request46byenabling thePanel tounderstand without difficulty
which claims itwasrequired toexamine, byadequately informing theEuropean Communities ofthe
caseagainst it,andbyadequately informing third parties ofthecaseagainst theEuropean Communities.
(b) Right oftheUnited States toAdvance Claims under theGATT 1994
88. TheComplaining Parties argue thatthePanel correctly found thattheUnited States hasaright
toadvance "goods claims" inthisdispute. The Complaining Parties submit thattheEuropean
Communities appears tousetheterm "legal interest" asa"short-hand reference" foritsarguments
regarding United States 'export interests inbananas andseems tostipulate anadditional requirement
thatacomplaining party must plead andprove nullification orimpairment asaprecondition forraising
aclaim. TheComplaining Parties contend thatneither Article XXIII oftheGATT 1994 norArticles
3.3or3.7oftheDSU contain anyexplicit requirement thataMember must have a"legal interest"
inorder torequest apanel andthatother provisions intheDSU, such asArticle 3.8,confirm theabsence
ofsuch aprerequisite. Inaddition, the"substantial interest" standard inArticle 10.2 oftheDSU on
third-party participation isirrelevant because therights ofthird-party participation anditspurpose are
fundamentally different from those oftheparties tothedispute.
89. Moreover, theComplaining Parties contend thattheEuropean Communities wasfundamentally
mistaken insuggesting that"general" international law, requiring alegal interest tobring aclaim, is
operative inthiscase. TheComplaining Parties observe thatArticle 3.2oftheDSU encompasses only
customary rules ofinterpretation ofpublic international law. Therefore, consistently withArticle XVI:1
oftheWTO Agreement ,thePanel found that, intheabsence ofanexplicit legal interest requirement
intheWTO Agreement ,GATT practice wasrelevant. AstheComplaining Parties seeit,inGATT
practice, awide variety ofinterests ispermitted tosupport aclaim.47ThePanel noted thattheUnited
States does produce bananas inHawaii andPuerto Rico, andthat, even iftheUnited States didnot
have apotential export interest, itsinternal market forbananas could beaffected bytheECregime
because ofthepotential effect onworld prices. Intheview oftheComplaining Parties, theEC's
arguments ontheissue oftheUnited States 'trade interests contradict theEC'sown pastposition in
46TheComplaining Parties refer totheAppellate Body Report, Brazil -Measures Affecting Desiccated Coconut ("Brazil -
Desiccated Coconut "),WT/DS22/AB/R, adopted 20March 1997, p.22,andargue thatthediscussion inthatReport isequally
relevant torequests forpanels with standard terms ofreference under Article 7.1oftheDSU.
47The Complaining Parties refer totheReport bytheWorking Party onBrazilian Internal Taxes ,adopted 30June 1949,
BISD II/181, para. 16.WT/DS27/AB/R
Page 40
United States -Restrictions onImports ofTuna .48TheEuropean Communities claimed inthatcase
thatanytime acountry produces aproduct, even iftheapplication ofanother country 'smeasure is
only hypothetical, thepotential effect onprice initsmarket gives risetoa"legal interest".
90. TheComplaining Parties submit further thatthejurisdictional clause ofArticle XXIII ofthe
GATT 1994 specifically applies toallWTO Members, andthatArticle 3.2oftheDSU specifically
states thattheWTO dispute settlement system "serves topreserve therights andobligations ofMembers
under thecovered agreements".
(c) Nullification orImpairment
91. TheComplaining Parties submit thatthePanel correctly found thatthenumerous violations
bytheEuropean Communities oftheGATT 1994, theLicensing Agreement andtheGATS have nullified
orimpaired benefits theUnited States isentitled toderive from those agreements. ThePanel properly
identified several areas inwhich benefits totheUnited States would benullified orimpaired bynoting
thattheUnited States produces bananas inPuerto Rico andHawaii andbyfinding thattheviolation
bytheEuropean Communities oftheWTO agreements could adversely affect theUnited States 'internal
market. TheComplaining Parties alsoargue thatthePanel justifiably cited thereasoning inUnited
States -Taxes onPetroleum andCertain Imported Substances49("United States -Superfund ")insupport
ofitsfinding thattheEuropean Communities hadfailed torebut thepresumption ofnullification or
impairment.
92. The Complaining Parties submit that thePanel noted aWTO Member 's"interest ina
determination ofrights andobligations under theWTO Agreement". TheComplaining Parties maintain
thatArticle 3.7oftheDSU makes clear thatitisforthecomplaining Member todecide whether to
pursue dispute settlement and,ifnecessary thereafter, whether topursue rights tosuspend concessions.
More precision ofthelevel ofnullification orimpairment becomes necessary only inthecase where
concessions aresuspended under Article 22.4 oftheDSU, because thatprovision requires thatthe
level ofsuspension ofconcessions shall beequivalent tothelevel ofnullification orimpairment.
According totheComplaining Parties, intheabsence ofamutually-agreed solution, thefirstobjective
ofdispute settlement istosecure thewithdrawal oftheinconsistent measure. This objective isnot
48DS29/R, 16June 1994, unadopted.
49Adopted 17June 1987, BISD 34S/136, para. 5.1.9.WT/DS27/AB/R
Page 41
linked tothelevel ofnullification orimpairment, buttowhether themeasure atissue isinconsistent
with WTO obligations.
C. Ecuador, Guatemala, Honduras, Mexico andtheUnited States -Appellants
93. TheComplaining Parties generally agree with thePanel 'sfindings butconsider thatthere are
three conclusions thatstand outinthePanel Reports asbeing unsupported bytherelevant legal texts
andcustomary principles oftreaty interpretation, andarethusmanifestly erroneous findings oflaw.
1. Scope oftheLomé Waiver
94. TheComplaining Parties argue thatthe"ordinary meaning" oftheLomé Waiver, read inits
context andinthelight ofitspurpose, isclear, notambiguous orobscure. TheLomé Waiver clearly
andspecifically waives Article I:1oftheGATT 1994 andnoother provision oftheWTO Agreement .
According totheComplaining Parties, thePanel 'soverall approach ininterpreting theLomé Waiver
wasfundamentally flawed intwoways: first, itignored theordinary meaning ofthetext, andthis
isonly allowed when theordinary meaning would lead toaresult thatis"manifestly absurd or
unreasonable"; andsecond, thePanel focused itsanalysis onspeculation about theobjective ofthe
Lomé Waiver andtheintentions oftheparties seeking theLomé Waiver, rather than onthetext. The
Complaining Parties contend thatunder theVienna Convention ,atreaty 'sobject andpurpose areto
beconsidered indetermining themeaning oftheterms ofthetreaty butnotasanindependent basis
forinterpretation.
95. Furthermore, theComplaining Parties argue thatindeciding thattheLomé Waiver applies
toviolations ofArticle XIII oftheGATT 1994, thePanel disregarded theEC'sexpress denial that
theLomé Waiver covers violations ofArticle XIII oftheGATT 1994 infavour ofwhat itinfers to
have been theEC'sintentions inseeking theWaiver. However, the"object" ofatreaty isthatofall
theparties, notthepresumed intentions thatmight beattributed toonly some ofthose parties. The
Complaining Parties alsoassert thattherules governing theadministration ofquantitative restrictions
inArticle XIII arenotanalogous or"close" totheMFN provision ofArticle IoftheGATT 1994.
Instead, thespecific rules inArticle XIII areinfactanoutgrowth ofArticle XIoftheGATT 1994.
TheComplaining Parties argue thattherefore, thePanel 'sreliance on"ageneral principle requiring
non-discriminatory treatment" shared byArticles IandXIII oftheGATT 1994 is"misguided". The
Lomé Waiver does notstate thatthe"principles" ofArticle I:1arewaived; itstates thatthe"provisions"WT/DS27/AB/R
Page 42
ofthat article arewaived. Awaiver analysis based onloose analogies among various non-
discrimination/MFN-like obligations would extend awaiver from Article Iwell beyond Article XIII
oftheGATT 1994. MFN-like disciplines could alsoinclude Article V:5ontransit ofgoods, Article
IX:1 onmarks oforigin andArticle XVII:1 onstate trading. TheComplaining Parties maintain that
GATT practice shows twothings: thatthenon-discriminatory disciplines inArticle XIIIaredistinct50;
andthatin50years theCONTRACTING PARTIES granted only onewaiver inrespect ofArticle
XIIIoftheGATT 1994.51Consequently, theComplaining Parties conclude thatthenegotiating history
andcircumstances oftheLomé Waiver 'sadoption provide nosupport fordisregarding theplain meaning
ofthetextoftheWaiver.
2. Measures "required" bytheLomé Convention
96. TheComplaining Parties contend thatthetrade inbananas isexclusively regulated byArticle
183oftheLomé Convention andbyProtocol 5.TheComplaining Parties argue thatArticle 168(2)(a)(ii)
oftheLomé Convention only applies toproducts listed inAnnex XL, andthislistdoes notinclude
bananas. TheComplaining Parties maintain furthermore thatAnnex XXXIX confirms thelimited scope
ofArticle 168(2)(a)(ii) oftheLomé Convention. They alsoargued thatthe"more favourable" treatment
provided forbyArticle 168(2)(a)(ii) hasbeen separately andspecifically negotiated between theparties
onaproduct-by-product basis. This didnothappen forbananas. IfAnnex XLdoes notprovide a
specific arrangement foraparticular product, thenthere isnotrade requirement forthatproduct other
thanfortheEuropean Communities toconsult with theACP States onproviding additional preferential
access. TheComplaining Parties assert thatArticle 183andProtocol 5dealwith both traditional and
non-traditional ACP bananas. They argue thatthetextofthese provisions shows inseveral ways that
they contain theentirety oftheEC'sundertakings concerning allbananas from allACP countries.
Intheview oftheComplaining Parties, theECJJudgments inFederal Republic ofGermany v.Council
oftheEuropean Union ("Germany v.Council "),andinAdministrazione delle Finanze delle Stato v.
Chiquita ("Chiquita Italia ")52support theproposition thatProtocol 5islexspecialis ,notonly inrespect
oftrade intraditional ACP bananas, butalsoinrelation toallbananas. Therefore, theordinary meaning
50Insupport oftheir argument theComplaining Parties refer totheWorking Party onImport Restrictions Imposed by
theUnited States Under Section 22oftheUnited States Agricultural Adjustment Act("United States -Section 22"),adopted
5March 1955, BISD 3S/141, p.144; andtotheWaiver ontheCaribbean Basin Economic Recovery Act,Decision of15
February 1985, BISD 31S/20, p.22.
51Waiver Granted inConnection withtheEuropean Coal andSteel Community ,Decision of10November 1952, BISD
1S/17, para. 3.
52Case C-280/93, Germany v.Council ,Judgment oftheCourt of5October 1994, ECR 1994, p.I-4973; andCase C-
469/93, Chiquita Italia ,Judgment oftheCourt of12December 1995, ECR 1995, p.I-4533.WT/DS27/AB/R
Page 43
inthecontext oftherelevant provisions oftheLomé Convention, confirmed bytheapplication ofthe
lexspecialis principles ofinterpretation, shows thattheLomé Convention 'sonly "trade instruments"
onbananas arethose setforth inProtocol 5,andthatProtocol 5contains norequirements with respect
tonon-traditional bananas.
97. TheComplaining Parties alsomaintain that, ifArticle 168(2) oftheLomé Convention isread
torequire preferences forACP bananas inaddition tothose setoutinProtocol 5,itrenders useless
thestrict limitations onpreferential treatment ofProtocol 5fortraditional ACP States. TheComplaining
Parties agree thatduring thefirst18years oftheLomé Convention (1975-1992), thetrade provisions
ofArticle 168(1) and169(1) were notconsidered bytheparties tobeapplicable tobananas. Therefore,
itwasincorrect ofthePanel toconclude thatArticle 168(2) hasbecome applicable since thattime.
Insupportofthesearguments,theComplainingPartiesrefertoECandACPofficialstatementsreflecting
arecognitionthatProtocol5alonegovernsthetreatmentofbananaimportsandthattheLoméConvention
does notrequire preferential treatment fornon-traditional ACP bananas.
3. GATS Claims ofGuatemala, Honduras andMexico
98. TheComplaining Parties submit thattheclaims excluded were fully within thePanel 'sterms
ofreference under Article 7.1oftheDSU, assetoutinthejoint request fortheestablishment ofa
Panel indocument WT/DS27/6. There isnoprovision analogous toArticle 7oftheDSU forfirst
written submissions andtherefore, thePanel hasimpermissibly imposed anadditional obligation on
theComplaining Parties, contrary totheDSU, byrequiring thatallclaims arespelled outina
complaining party 'sfirstwritten submission. TheComplaining Parties notefurther thatsince theclaims
were within thePanel 'sterms ofreference, there wasnoissue ofunfair surprise tothedetriment of
theEuropean Communities inthelight ofthesimultaneous filing ofrebuttal submissions pursuant to
Article 12(c) oftheWorking Procedures inAppendix 3totheDSU.
4. Scope oftheAppeal
99. Inanadditional submission53,Ecuador submits thatthefindings ofthePanel inparagraph 7.93
ofthePanel Reports concerning Ecuador 'sright toinvoke Article XIII:2 orXIII:4 oftheGATT 1994
arenotaddressed intheNotice ofAppeal andthatthere wasnoargumentation onthisissue inthe
EC'sappellant'ssubmission,exceptforinits"conclusions"section.EcuadorcontendsthattheEuropean
53Under Article 22(1) oftheWorking Procedures.WT/DS27/AB/R
Page 44
Communities didnotcomply with therequirements inRule 20(2)(d) oftheWorking Procedures and,
asaresult, didnotconform with its"due process objectives" assetoutbytheAppellate Body inits
Report inBrazil -Measures Affecting Desiccated Coconut .54Therefore, Ecuador asks theAppellate
Body toexclude thisissue from theappeal.
D. European Communities -Appellee
1. Lomé Waiver --Traditional ACP Bananas
100. TheEuropean Communities agrees withthePanel thatArticle IoftheGATT 1994 isa"general
principle requiring non-discriminatory treatment". TheEuropean Communities maintains, however,
thatArticle XIII cannot beassumed tobea"subset" ofArticle I:1oftheGATT 1994, andsubmits
thattheComplaining Parties donotcontest this.55There areseparate GATT 1994 andother WTO
provisions, such asArticle XandXIIIoftheGATT 1994 and1.3oftheLicensing Agreement which,
even though they areMFN ornon-discrimination obligations, have their own raison d'êtreandscope
andcannot beregarded asmere duplications ofeach other. TheEuropean Communities contends that
thecircumstances surrounding thenegotiation oftheLomé Waiver clearly show thatthose involved
inthenegotiations must have been aware andmust have recognized thatthere were, infact, twodifferent
import regimes forbananas. TheEuropean Communities never explicitly requested awaiver forArticle
XIIIoftheGATT 1994 forthesimple reason thatthere wasnoreason, logical orlegal, fordoing so.
TheEuropean Communities wasconvinced thattheprovisions ofArticle XIII refer primarily tothe
allocationofaparticularquantitativerestrictionortariffratequotaandnottoagenericnon-discrimination
principle. Insuch asituation, thequestion ofwhether theLomé Waiver needed tocontain anexemption
notonly from Article I,butalsofrom Article XIIIoftheGATT 1994, never entered intoconsideration.
Therefore, thePanel 'sfinding thatboth regimes constitute oneregime towhich Article XIII should
beapplied across theboard isfundamentally atodds with thecircumstances under which theLomé
Waiver wasnegotiated.
101. Finally, theEuropean Communities observes thatthePanel wascorrect inseeing alinkbetween
Articles I:1andXIII:1 oftheGATT 1994. Otherwise, thespecific language oftheLomé Waiver
referring to"preferential treatment", andnotmerely to"preferential tariff treatment", would bedeprived
54WT/DS22/AB/R, adopted 20March 1997.
55TheEuropean Communities, initsoral presentation totheAppellate Body attheoral hearing, refers totheComplaining
Parties 'appellant 'ssubmission, para. 40.WT/DS27/AB/R
Page 45
ofanymeaning. TheEuropean Communities submits thattheprinciple ofstrict interpretation of
exceptions totheGATT 1994 should beapplied tothetextoftheLomé Waiver, butnottothetext
orthecontent oftheLomé Convention, asthelatter isnotperseanexception totheGATT 1994 or
theother WTO agreements. TheLomé Convention isanautonomous international agreement which
does notstand inahierarchical relationship with theGATT 1994, andinrespect towhich apanel or
theAppellate Body isnotauthorized togive arestrictive interpretation. Intheview oftheEuropean
Communities, insofar asWTO "quasi-judicial organs" need tounderstand theLomé Convention in
order tounderstand theLomé Waiver, such organs should exercise judicial restraint and, inprinciple,
defer totheinterpretations oftheparties totheLomé Convention.
2. Lomé Waiver --Preferential Treatment ofNon-Traditional Bananas
102. TheEuropeanCommunitiessubmitsthatthediscretionexistingunderArticle168(2)oftheLomé
Convention, limiting itstariff obligations toprovide apreferential margin ontheMFN duty applied
tothird-country importation, isunlimited vis-à-vis itsACP partners. TheEuropean Communities argues
thatitmust takeintoaccount theobjectives ofArticle 168andapply thatArticle ingood faith bysecuring
aneffective additional advantage totheACP-originated bananas when compared totheerga omnes
tariff treatment.
103. With respect tothearguments oftheComplaining Parties about what is"required" under the
Lomé Waiver, theEuropean Communities asserts thatbefore 1July1993, Article 168(1) oftheLomé
Convention applied toACP bananas andthatACP bananas could therefore beimported duty-free.
Since 1July 1993, Article 168(2)(a)(ii) hasapplied toACP bananas andACP bananas thusenjoy "a
preference" compared totheMFN-duty rateforthird-country bananas. TheEuropean Communities
argues thatAnnex XLoftheLomé Convention spells outthe"intention" oftheEuropean Communities
with respect to"certain" agricultural products covered byArticle 168(2)(a)(ii). Therefore, Annex XL
merely serves thepurpose ofclarifying thefuture tariff treatment forthelisted products. That list
isbynomeans exhaustive. TheEuropean Communities submits further thatProtocol 5provides for
preferential treatment over andabove thebasic tariff preferential treatment. Intheview oftheEuropean
Communities, Article 168(2)(a)(ii) isnotapplicable totraditional bananas asthese aresubject toProtocol
5which provides formore preferential treatment. However, Article 168(2)(a)(ii) remains applicable
tonon-traditional ACP bananas. Inresponse tothereference bytheComplaining Parties totheECJ's
judgments inGermany v.Council andinChiquita Italia ,theEuropean Communities contends that
those judgments donotsupport theproposition thatProtocol 5islexspecialis ,notonly inrespect of
thetrade intraditional ACP bananas, butalsoinrelation toallbananas.WT/DS27/AB/R
Page 46
104. Finally, theEuropean Communities maintains that,inthelight ofthecircumstances surrounding
thediscussionsleadinguptothegrantingoftheLoméWaiver,thepartnersoftheEuropeanCommunities
inthesediscussionsmusthavebeenperfectlyawarethatthetreatmentofthenon-traditionalACPbananas
wasconsidered tobepartandparcel ofthepreferential treatment granted bytheLomé Convention.
3. GATS Claims ofGuatemala, Honduras andMexico
105. TheEuropean Communities submits thatthePanel acted lawfully when itexcluded theGATS
claims raised bytheUnited States onbehalf ofGuatemala, Honduras andMexico. TheEuropean
Communities asserts thatifclaims aredropped atthestage ofthefirst submission, thecomplaining
party hasvoluntarily narrowed thescope orthenumber ofclaims originally contained intherequest
fortheestablishment ofapanel. Once thedefendant hasrelied onthedropping ofaclaim inthefirst
submission, thecomplaining party isestopped from bringing itupagain. Referring totheAppellate
Body 'sruling inUnited States -Shirts andBlouses from India56thatforreasons ofjudicial economy
apanel need notdecide every claim contained intheterms ofreference ifitcandecide thecasewithout
doing so,theEuropean Communities submits further thatafortiori apanel must have thepower to
omit claims from consideration because theyhave voluntarily been dropped from thefirstsubmission.
Apanel isthemaster ofitsown procedure; itsprocedural rulings canonly bequashed ifthey are
contrary tothefundamental principle ofproper procedure ortotheprovisions oftheWTO Agreement .
Lastly, theEuropean Communities argues thatapanel ruling onclaims notproperly advanced inthe
first written submission would have been contrary toArticle 9.2oftheDSU requiring apanel to
"organize itsexamination ...insuch awaythattherights which theparties tothedispute would have
enjoyed hadseparate panels examined thecomplaints areinnoway impaired".
III. Arguments oftheThird Participants
A. Belize, Cameroon, Côte d'Ivoire, Dominica, Dominican Republic, Ghana, Grenada,
Jamaica, Saint Lucia, St.Vincent andtheGrenadines, Senegal andSuriname
106. Belize, Cameroon, Côte d'Ivoire, Dominica, Dominican Republic, Ghana, Grenada, Jamaica,
Saint Lucia, St.Vincent andtheGrenadines, Senegal andSuriname disagree with certain ofthelegal
56WT/DS33/AB/R, adopted 23May 1997, p.18.WT/DS27/AB/R
Page 47
findings andconclusions ofthePanel andrequest theAppellate Body totakeintoconsideration some
issues ofprincipal concern totheACP third participants. However, theACP third participants also
endorse allthepositions advanced bytheEuropean Communities inthisappeal.
107. TheACP third participants assert thatthePanel erred inlawinfinding thattheComplaining
Parties 'request fortheestablishment ofapanel wassufficient tomeet therequirements ofArticle 6.2
oftheDSU. TheACP third participants maintain thatthepanel request bytheComplaining Parties
contains only "bare allegations ofinconsistencies" anddoes notprovide, asrequired byArticle 6.2
oftheDSU, thesummary ofalegal basis fortheallegations. They submit thatthisbreach severely
prejudiced theACP third participants. They argue further thattheordinary meaning ofArticle 6.2,
thecontext anditsobject andpurpose didnotjustify thePanel 'sdecision. Inparticular, theACP third
participants assert thatitisnotthePanel 'sfunction tocureerrors inthesubmissions oftheComplaining
Parties tothedisadvantage andprejudice ofthird parties orrespondents. With respect tothefunction
ofArticle 6.2oftheDSU, theACP third participants contend thatthePanel misunderstood thepurpose
thatathird party hasin"participating" inthepanel proceedings, which istomake submissions tothe
Panel toprotect vital national interests. Article 6.2plays afundamental roleinenabling third parties
toprepare their submissions tothepanel adequately. Inaddition, theACP third participants argue
thatthePanel erred inlawbynotrecognizing thatalegal interest testisaprinciple ofinternational
law, andthatitisimplicit inArticle XXIII:1 oftheGATT 1994 aswell asinArticles 3.7,4.11 and
10.2 oftheDSU. Itwould beclearly against theintention ofthedrafters oftheWTO Agreement to
permit aMember tobeacomplaining party ifthatMember hasalesser interest than thatrequired
tojoinconsultations orparticipate asathird party. Finally, theACP third participants contend that
alegal interest testisapractical necessity inorder toavoid aproliferation ofcases initiated byMembers
with noimmediate trade interest intheresults ofthedisputes.
108. Intheview oftheACP third participants, thePanel precluded them from properly representing
their interests andthereby tainted theentire proceeding. TheACP third participants assert thatthe
right toobserve atthefirstandsecond substantive meetings ofthePanel with theparties didnotpermit
fullandadequate representation oftheir interests. Previous GATT practice recognizes thatparties
with interests such asthose oftheACP third participants should begiven fullparticipatory rights;
thispractice isalsosupported byArticles 2,3.2, 10.1, 11,12.2, and13.1 oftheDSU. They add
thatthePanel 'sdecision of10September 1996, prohibiting theparticipation ofprivate counsel servingWT/DS27/AB/R
Page 48
onthedelegation ofSaint Lucia inpanel meetings, violated thegeneral principle ofinternational law
thatsovereign states arefreetochoose therepresentation oftheir choice.57
109. TheACP third participants submit thatthePanel erred inlawinitsinterpretation ofthescope
andcoverage oftheLomé Waiver andtheentitlements ofACP States inrespect ofboth traditional
andnon-traditional quantities ofbananas under theLomé Convention. With respect totheinterpretation
oftheEC'sobligations under Article IoftheGATT 1994, theACP third participants taketheview
thatthepurpose oftheLomé Waiver wasnotproperly considered bythePanel. Inparticular, the
Panel didnotacknowledge thefactthatthesolepurpose ofobtaining theWaiver wastodealwith the
findings ofthepanel report inEEC -Import Regime forBananas .58TheACP third participants argue
thatthePanel added theword "clearly" tothetextoftheWaiver which wasnotcontained there and
thatitimproperly interpreted thephrase "asrequired". Inaddition, thePanel erred ininterpreting
recitals totheLomé Waiver asconditions andinitsfinding thatawaiver must beinterpreted narrowly.
TheACP third participants contend thatthedrafters oftheGATT envisaged thattheconditions under
which waivers aregranted might beinterpreted narrowly, butthatonce awaiver isgranted, andin
view ofthefactthatthisisonly done incases ofanexceptional nature involving hardship, there is
nogroundtointerpretnarrowlyactionspermissibleunderinternationalagreementsprotectedbyawaiver.
TheACP third participants submit thatthePanel misinterpreted thepanel report inUnited States -
Restrictions ontheImportation ofSugar andSugar-Containing Products Applied Under the1955 Waiver
andUnder theHeadnote totheSchedule ofTariff Concessions ("United States -Sugar Waiver ").59
110. TheACP third participants alsoargue thatthePanel erred inlimiting thepreference required
tobegranted totraditional ACP States under Protocol 5andArticle 168oftheLomé Convention.
Inthisrespect, theACP third participants submit: first, Protocol 5should notberead inisolation;
andsecond, before 1990, there were noquantitative limitations onACP exports totraditional markets.
Moreover, intheview oftheACP third participants, thePanel erred initsinterpretation oftheEC's
obligations under Article 168oftheLomé Convention andProtocol 5inrelation tonon-traditional
ACP bananas. ThePanel even failed toconsider theapplication ofArticle 168(2)(d) tosuch quantities.
57Insupport oftheir argument, theACP third participants refer totheVienna Convention ontheRepresentation ofStates
intheir Relations withInternational Organizations ofaUniversal Character ,done atVienna, 14March 1975, AJIL 1975,
p.730, aswellastothepracticebefor eotherinternational adjudicatorybodies:Seepp.20and22oftheACPthirdparticipants'
submission and theAnnex thereof.
58DS38/R, unadopted.
59Adopted 7November 1990, BISD 37S/228.WT/DS27/AB/R
Page 49
Inaddition, prior totheintroduction ofRegulation 404/93, non-traditional ACP bananas benefited
from more thanthesimple customs duties exemption. Thebenefits afforded tothose suppliers inrespect
ofquantities prior to1995 must beprotected within thenewbanana regime. TheACP third participants
argue thatArticle 168(2)(a)(ii) oftheLomé Convention includes anobligation ontheEuropean
Communities toadopt measures inrelation totheimportation ofACP agricultural products thatgive
them abenefit over third-country agricultural products andensure more favourable treatment, forwhich
thelevel ofpreference isnotspecified. They assert thatthePanel incorrectly assumed thatArticle
168oftheLomé Convention only obliges theEuropean Communities toprovide tariff-free treatment.
When read inconjunction with Articles 10and167oftheLomé Convention, itisapparent thatthese
provisions impose ontheEuropean Communities aform of"standstill" provision, stipulating thatafter
theintroduction ofthebanana regime, those benefits which hadaccrued previously totraditional ACP
bananas must bemaintained, notnecessarily inform butinsubstance. TheACP third participants
conclude thattheprovisions ofArticle 168oftheLomé Convention confer onACP agricultural products
protection similar tothatspecifically provided fororreiterated inProtocol 5forbananas. The
interpretation bytheEuropean Communities ofitsobligations under theLomé Convention cannot be
considered very generous, butfortheComplaining Parties toargue thatthere arenoobligations in
respect ofnon-traditional ACP bananas istocompletely ignore thetextoftheLomé Convention.
111. TheACP third participants assert thatthescope oftheLomé Waiver must beinterpreted as
extending toEClicensing procedures, because those procedures areanintegral partoftheimportation
regime andaretherefore saved bytheLomé Waiver from inconsistency with Article I:1oftheGATT
1994 as"rules andformalities inconnection with importation". TheACP third participants argue that
theEClicensingregimewasnecessarytogiveeffecttotheEC'sobligationsundertheLoméConvention.
This holds true, inparticular, under acorrect interpretation oftheobligations oftheEuropean
Communities (other than inArticle 168oftheLomé Convention andProtocol 5)under Articles 10,
135and167oftheLomé Convention. TheACP third participants contend thatthePanel incorrectly
determined thatthese commitments areofnolegal effect. Additionally, thePanel erred inlawand
factinfinding thattheEClicensing regime didnotfollow inform theprevious national regimes, since,
intheview oftheACP third participants, thelicensing regime, asregards operator categories and
activity function rules, issubstantially similar totheprevious historic arrangements. Also, thePanel
wasincorrect initsfinding regarding thesubstance oftheprevious national regimes andtheir relations
totheECregime. TheACP third participants argue thatinparticular under theUnited Kingdom system,
ACP producers were given substantial protection and,ineffect, hadaguaranteed outlet fortheir supplies
inboth theUnited Kingdom andtheFrench markets. TheACP third participants conclude thatitisWT/DS27/AB/R
Page 50
clear thatasystem which granted preferences inasuperficial manner, butwhich, under thenewfactual
circumstances ofasingle market, would make thedemise oftheACP banana industry inevitable, would
notmeet theEC'sobligations under Protocol 5.
112. TheACP third participants argue thatthelicensing regime isnecessary because, initsabsence,
marketers ofACP bananas would have tocompete with those ofthird-country bananas. ACP bananas
willbeunable tocompete with third-country bananas because ofthehigher production andshipping
costs ofACP bananas, andbecause oftherisks caused bythe"oligopolistic" structure ofthemarket.
TheACP third participants insist thatwhen theLomé Waiver isconstrued inthelight ofitsobject,
purpose andcontext, itbecomes clear thatitsaves from inconsistency anymeasure thatisreasonably
necessary toimplement theEC'sobligations totheACP States under theLomé Convention. TheACP
third participants argue thatthePanel erred infinding thatthelicensing procedures applied bythe
European Communities totraditional ACP imports, when compared totheprocedures applied toimports
ofthird-country andnon-traditional bananas, canbeconsidered an"advantage". According tothe
ACP third participants, thePanel waswrong tosuggest thatthe"superficial differences" between ACP
import rules andthird-country import rules areofthesame order asthevery substantive disadvantage
atissue intheUnited States -Non-Rubber Footwear case.60Additionally, intheview oftheACP third
participants, thePanel erred both initsproper roleininterpreting theLomé Convention, andinits
interpretation oftheLomé Convention.
113. Finally,theACPthirdparticipantssubmitthatthePanelmisinterpretedthescopeandapplication
oftheGATS. TheACP third participants contend thatthePanel 'sinterpretation oftheterm "affecting"
inArticle I:1oftheGATS ignored thefactthattheGATS covers only the"production" ofaservice,
i.e.trade inservices assuch. TheACP third participants addthattheGATS wasnegotiated after the
GATT 1994 inorder toprovide protection supplementary tothatprovided bytheGATT 1994 and
toaddress trade intheareaofservices notcovered bytheGATT 1994. Concerning theterm, "wholesale
trade services", theACP third participants argue thatthisrelates toreselling andinvolves apurchase
andasubsequent sale. Vertically-integrated companies donot"resell". TheACP third participants
assert thatthescope ofArticle II:1oftheGATS does notextend tothemodification ofconditions of
competition. Intheview oftheACP third participants, themeasures relating tooperator categories,
BFA export certificate requirements andhurricane licences were necessary tocarry outtheEC's
obligations under theLomé Convention.
60Adopted 19June 1992, BISD 39S/128.WT/DS27/AB/R
Page 51
B. Colombia
114. Colombia 'ssubmission concerns three issues oflawandlegal interpretations addressed inthe
appeal oftheEuropean Communities. First, Colombia submits thatthePanel erred inlawinfinding
thattheComplaining Parties 'request fortheestablishment ofapanel identified thespecific measure
atissue andpresented theproblem clearly within themeaning ofArticle 6.2oftheDSU. Thealmost
complete listing ofallthebasic obligations under anagreement assubmitted bytheComplaining Parties
does notprovide anyinformation onthelegal basis ofacomplaint; itmerely informs thereader that
aninconsistency with theagreement isbeing claimed. Furthermore, inColombia 'sview, thefailure
toobserve therequirements ofArticle 6.2oftheDSU cannot be"cured" byclarifying themeasure
atissue andthelegal basis ofthecomplaint inthefirst submission tothepanel. One ofthemost
important functions oftherequirements inArticle 6.2oftheDSU istoenable other Members todecide
whether toparticipate asthird parties intheproceedings. This right cannot beexercised without
sufficient information. Intheevent thatsuch participation isnotsought because thelegal issues raised
bythecomplaining party areinsufficiently clear, aWTO Member whoisapotential third party cannot
subsequently exercise itsright inthelight ofinformation contained inthefirstsubmission, since these
arenotmade available tonon-participants. InColombia 'sview, forMembers thatdecide notto
participate intheproceedings because therequest fortheestablishment ofapanel wasinsufficiently
clear, thesubsequent clarification inthefirst submission cantherefore notbedescribed asa"cure"
oran"efficient solution".
115. Second, Colombia contends thatthePanel erred inlawinfinding thatneither theinclusion
ofthetariff quota shares intheECSchedule, northeAgreement onAgriculture ,permit theEuropean
Communities toactinconsistently with therequirements ofArticle XIIIoftheGATT 1994. Colombia
submits thatthereview ofthetariff quotas scheduled bytheEuropean Communities andtheUnited
States, which entail commitments negotiated with more than fifty other participants intheUruguay
Round, shows thatfew, ifany, ofthese quota allocation commitments presently conform tothe
requirements setoutinArticle XIII oftheGATT 1994. Therefore, inColombia 'sview, itcanbe
safely assumed thatallquota allocation commitments made pursuant totheAgreement onAgriculture
areactually orpotentially inconsistent with Article XIII oftheGATT 1994. Colombia submits that
notonly were quota allocations made irrespective ofArticle XIII, butalso that Members have
incorporated intotheir GATT 1994 Schedules tariff rates onagricultural products inconsistent with
Article II:1(b) oftheGATT 1994. Inthisrespect, Colombia asserts thatthePanel correctly found
that"the tariff rates specified intheECUruguay Round Schedule arevalid ECtariff bindings with
respect tobananas", butthatthePanel erred initsconclusion thattheresults oftheUruguay RoundWT/DS27/AB/R
Page 52
override theresults ofprevious tariff negotiations. Colombia contends thatthePanel 'sinterpretation
does nottakeintoconsideration therequirements oftheprocedures under Article XXVIII oftheGATT
1994 andmakes redundant paragraph 7oftheMarrakesh Protocol totheGeneral Agreement onTariffs
andTrade 1994 (the"Marrakesh Protocol ").Colombia concludes thatintheevent ofconflict between
theGATT1994provisionsandtheAgreementonAgriculture,theapplicableprovisionthatguidesmarket
access concessions undertaken pursuant totheAgreement onAgriculture isArticle 4.1andnottheGATT
1994. Colombia asserts thatthePanel failed torecognize that, inArticles 1(g), 4.1and21ofthe
Agreement onAgriculture ,thedrafters oftheWTO Agreement hadgiven aclear expression oftheir
intention thattheresults ofthetariffication exercise should override theresults ofearlier negotiations.
Bybasing itself ongeneral principles oflaw, thePanel concluded thatthelegal consequences which
thedrafters intended toachieve only inthefield ofagriculture applied toallprevious concessions,
including those forindustrial products.
116. Colombia further contends that, byinterpreting Article 4.1oftheAgreement onAgriculture
as"astatement ofwhere market access commitments canbefound", thePanel deprives notonly this
provision butalsoallthecountry allocation commitments made byorinfavour ofamajority ofWTO
Members ofanylegal relevance. Inthisevent, Article 4.1would have themere function ofa"signpost"
indicating the"way totheschedules". Colombia asserts thattheAgreement onAgriculture regulates
therelationship between itandthescheduled commitments differently from theGATT 1994. While
theGATT 1994 isaframework agreement fortheincorporation oftariff bindings, theAgreement on
Agriculture andthescheduled commitments negotiated under itconstitute together theresult ofa
negotiation onthefirststage ofagricultural reform. Colombia adds thatthemarket access commitments
made under theAgreement onAgriculture constitute, inlarge part, settlements ofdisputes onthe
interpretation andapplication oftheprovisions oftheGATT 1947 thathadarisen prior totheUruguay
Round andduring theUruguay Round negotiations. Theprovisions related totheBFA intheECmarket
access commitments arenotdesigned tocircumvent GATT 1994 provisions, buttosettle pastdisputes
ontheECbanana regime andtoforestall new ones. Finally, Colombia asserts that, bysanctioning
theincrease intariff bindings, butnotthequota allocations negotiated inconjunction with thetariff
bindings, thePanel creates animbalance intheoutcome oftheUruguay Round negotiations on
agriculture.
117. Third, Colombia questions whether inthepresent case thetransfer ofaquota rentfrom an
importer toanexporter isan"advantage granted toaproduct" within themeaning ofArticle Iofthe
GATT 1994. Colombia contends thatthePanel correctly recognized thatArticle IoftheGATT 1994
isconcerned with thetreatment offoreign products originating from different foreign sources ratherWT/DS27/AB/R
Page 53
than with thetreatment ofthesuppliers ofthese products, butthatitfails toobserve thisdistinction
ithasestablished. Colombia asserts thatunder thePanel 'slineofreasoning, financial advantages that
might bepassed ontoproducers areequated with competitive advantages accorded totheproduct,
andtheimportant legal distinction between advantages accorded toproducers andthose accorded to
products islost. Within theframework ofatrade agreement such astheGATT 1994, different treatment
ofproducers cannot beequated with different treatment oftheproducts they produce. Therefore, in
Colombia 'sview, thePanel incorrectly concluded thatthequota rents generated from trade inbananas
meansthattheEClicensingproceduresconstitutean"advantagegrantedtoaproduct"withinthemeaning
ofArticle IoftheGATT 1994, asthiscanonly beanadvantage thatchanges theconditions faced
bytheproduct inthemarket oftheimporting Member. Themere transfer ofquota rents from importers
toexporters ofother countries does notalter theconditions thattheproduct soldbytheexporters faces
intherestricted market. Additionally, Colombia contends thatitisnotclear why thePanel referred
tothepanel report inUnited States -Non-Rubber Footwear61;theEuropean Communities didnotargue
thatthere were twotrade effects, onecompensating theother, butonly onepossible trade effect relevant
under Article IoftheGATT 1994 thatfavoured theComplaining Parties. Colombia contends that
thePanel dismissed animportant point inanunreasoned manner andthereby failed todemonstrate
how thecompetitive conditions foraproduct areimproved when quota rents aretransferred from
importers toexporters under aregime which does notencourage anincrease inexports ofthatproduct.
C. Costa Rica andVenezuela
118. Costa Rica andVenezuela submit joint legal arguments with respect totherelationship between
Articles 4.1and21.1 oftheAgreement onAgriculture andArticle XIIIoftheGATT 1994. They argue
thatthetariff bindings andtariff quota allocations resulting from theUruguay Round negotiations on
agriculture areinlarge part inconsistent with Articles IIandXIII oftheGATT 1994. These
inconsistencies arejustified only ifthere isaprovision intheWTO Agreement according towhich tariff
bindings andother market access concessions made pursuant totheAgreement onAgriculture override
theobligations under Articles IIandXIII oftheGATT 1994. InCosta Rica'sandVenezuela 'sview,
Articles 4.1and21.1 oftheAgreement onAgriculture arethelegal expression oftheintent ofthedrafters
togive legal effect toallmarket access concessions incorporated intheSchedules ofConcessions.
Costa Rica andVenezuela contend thatthePanel erred inlawwhen itfound thattheriseinbound
tariffs resulting from thetariffication exercise could bejustified onthebasis ofgeneral principles
61Adopted 19June 1992, BISD 39S/128.WT/DS27/AB/R
Page 54
governing theapplication ofsuccessive treaties. Such aninterpretation would ignore thelegal meaning
ofArticle XXVIII oftheGATT 1994 andofparagraph 7oftheMarrakesh Protocol .Intheview of
Costa Rica andVenezuela, thePanel therefore erred infinding thatGATT-inconsistent quota allocation
commitments made pursuant totheAgreement onAgriculture could notbejustified under theAgreement
onAgriculture .
119. Furthermore,withrespecttothequestionofwhetherArticle4.1oftheAgreementonAgriculture
isasubstantive provision, Costa Rica andVenezuela argue thatthere isnoother example inthewhole
oftheWTO Agreement ofaprovision whose solefunction istoinform thereader ofthelocation of
another provision. Costa Rica andVenezuela contend thattheAgreement onAgriculture regulates
therelationship between itandthescheduled commitments differently from theGATT 1994. While
theGATT 1994 isaframework agreement fortheincorporation oftariff bindings, theAgreement on
Agriculture ,andthescheduled commitments negotiated under it,constitute together theresult ofa
negotiation onthefirststage ofagricultural reform. Additionally, Costa Rica andVenezuela submit
thatthemarket access commitments made under theAgreement onAgriculture constitute, inlarge part,
settlements ofdisputes ontheinterpretation andapplication oftheprovisions oftheGATT 1947 that
hadarisen prior totheUruguay Round andduring theUruguay Round negotiations. Itwould notbe
justified todismiss thequota allocation commitments as"illegitimate deals" between individual
participants intheUruguay Round negotiations designed todiscriminate against other participants.
These allocations were legitimate reactions ofthenegotiators tothelegal uncertainty towhich an
application ofthecriteria setoutinArticle XIII oftheGATT 1994 gives riseinasituation inwhich
ahighly restrictive import regime istransformed intoatariff-based regime.
120. Inaddition, Costa Rica andVenezuela areconcerned that, bysanctioning theriseinthetariff
bindings, butnotthequota allocations negotiated inconjunction with thetariff bindings, thePanel
creates animbalance intheoutcome ofthenegotiations onagriculture. Costa Rica andVenezuela
addthatthey fully support theEC'sview ontheissue whether Article XIII:2(d) oftheGATT 1994
prohibits anallocation ofquotas byanagreement thatincludes countries which donothave asubstantial
supplying interest.
121. Costa Rica andVenezuela question whether inthepresent case thetransfer ofaquota rent
from animporter toanexporter isan"advantage granted toaproduct" within themeaning ofArticle
IoftheGATT 1994. Costa Rica andVenezuela contend thatthePanel correctly recognized thatArticle
IoftheGATT 1994 isconcerned with thetreatment offoreign products originating from differentWT/DS27/AB/R
Page 55
foreign sources rather than with thetreatment ofthesuppliers ofthese products, butthatitfails to
observe thisdistinction ithasitself established. Costa Rica andVenezuela submit that, under thePanel 's
lineofreasoning, financial advantages thatmight bepassed ontoproducers areequated withcompetitive
advantages accorded totheproducts, andtheimportant legal distinction between advantages accorded
toproducers andthose accorded toproducts islost. Within theframework ofatrade agreement such
astheGATT 1994, different treatment ofproducers cannot beequated with different treatment ofthe
products theyproduce. Therefore, Costa Rica andVenezuela taketheposition thatthePanel incorrectly
concluded thatthequota rents generated bytrade inbananas mean thatthey constitute an"advantage
granted toaproduct" within themeaning ofArticle IoftheGATT 1994, asthiscanonlybeanadvantage
thatchanges theconditions inthemarket. Themere transfer ofaquota rentfrom importers toexporters
ofother countries does notalter theconditions thattheproduct soldbytheexporters faces inthequota-
restricted market. Additionally, Costa Rica andVenezuela assert thatitisnotclear why thePanel
referred tothepanel report inUnited States -Non-Rubber Footwear62,since theEuropean Communities
didnotargue thatthere were twotrade effects, onecompensating theother, butonly onepossible trade
effect relevant under Article IoftheGATT 1994 thatfavoured theComplaining Parties. Costa Rica
andVenezuela argue thatthePanel dismissed animportant point inanunreasoned manner andthereby
failed todemonstrate how thecompetitive conditions foraproduct areimproved when quota rents
aretransferred from importers toexporters under aregime which does notencourage anincrease in
exports ofthatproduct.
122. Costa Rica andVenezuela invite theAppellate Body toconsider thebroad implications that
anacceptance ofthePanel 'sinterpretation ofArticle IoftheGATT 1994 would entail. Most WTO
Members thatallocate tariff quotas among supplying countries dosobyallocating ashare tonamed
countries constituting themain suppliers andaresidual share to"other countries". Theproducers of
thenamed countries caneasily obtain thefinancial benefits associated with aquota regime byforming
anexport cartel orasking their government tochannel exports through asingle agency inaccordance
with Articles XVII andXX(d) oftheGATT 1994; the"other countries" would need tocooperate with
oneanother tosecure thatfinancial benefit, which isinherently more difficult. Inspite ofthedifferent
impact onproducers from different countries, thismethod ofallocating trade shares among countries
hasnever been challenged inthehistory oftheGATT. IfArticle IoftheGATT 1994 were interpreted
tooblige Members toafford notonlyequal trade opportunities forproducts butalsoequal opportunities
toobtain therents arising from theadministration ofquotas, aquota allocation mechanism used by
62Adopted 19June 1992, BISD 39S/128.WT/DS27/AB/R
Page 56
practically allWTO Members, including theComplaining Parties, would besubject tochallenge under
theGATT 1994.
D. Nicaragua
123. Nicaragua fully supports theviews expressed byColombia, Costa Rica andVenezuela intheir
submissions totheAppellate Body. Theviews setoutinthese submissions should therefore betreated
bytheAppellate Body asrepresenting theposition ofNicaragua. Nicaragua inparticular shares their
view thattheAgreement onAgriculture ,andconsequently themarket accession commitments made
pursuant tothatAgreement, takeprecedence over theprovisions ofArticle XIII oftheGATT 1994.
124. With respect tothePanel 'sreasoning onArticle XIII:1 that"theimports from allother countries
must besimilarly restricted", Nicaragua contends thatthePanel draws from thisprinciple theincorrect
conclusion thatanydifference inthemethod ofallocation, whether itcanaffect thedistribution oftrade
ornot,isinconsistent with Article XIIIoftheGATT 1994. Nicaragua submits thatthetextofArticle
XIII:1 clearly regulates theimportation ofproducts, notthegranting ofadvantages toexporters or
producers, whereas thesoleobjective ofparagraph 2ofArticle XIII istoprevent distortions inthe
distribution oftrade arising from theadministration ofquotas. Inthiscontext, theterms "similarly
restricted" canonly beinterpreted torefer tomeasures imposed inconnection with importation that
arecapable ofaltering thedistribution oftrade. Therefore, theterms cannot beinterpreted tomean
"restricted withsimilar means", butrather should beinterpreted tomean "with similar restrictive effect".
Nicaragua alsocontends thatthequota allocation inthecaseatissue does notaccord atrade advantage,
since theonly consequence oftheallocation isthatthequota rentisnolonger enjoyed bytheimporter
butbytheexporter oftheexporting country. Theresulting financial advantage cannot beused toincrease
thelevel ofexports because thatlevel isfixed bythequota. Ittherefore does notalter thecompetitive
condition infavour ofthatproduct. Intheview ofNicaragua, themere allocation ofaquota share
toaparticular Member does notdistribute trade shares infavour ofthatMember andcantherefore
notbyitself constitute discriminatory treatment ofproducts inconsistent with Article XIIIoftheGATT
1994. Nicaragua admits thatdifferences inthemeans ofimposing restrictions canleadtodiscrimination
even when they donotchange thedistribution oftrade shares. However, thisisamatter specifically
covered byArticle IoftheGATT 1994 andtheLicensing Agreement .ThePanel 'sinterpretation of
theterms ofArticle XIII oftheGATT 1994 asentailing atotal prohibition ofanydistinction inthe
means ofrestriction, including distinctions thatdonotaffect thedistribution oftrade shares, goes beyond
theterms andobjectives ofArticle XIII andtheGATT 1994 ingeneral.WT/DS27/AB/R
Page 57
125. Inaddition, Nicaragua contends thatthePanel didnotcorrectly determine theissue whether
aMember 'ssupplying interest issubstantial within themeaning ofArticle XIII oftheGATT 1994.
Nicaragua asserts thataMember 'sinterest insupplying aproduct maybesubstantial because itsexports
oftheproduct represent asubstantial proportion oftotal imports ofthequota-allocating Member or
because itsexports oftheproduct represent asubstantial proportion ofitsown total exports. Infact,
thewords "interest insupplying" suggest thatthedetermination should bemade byexamining thepattern
oftrade from theperspective oftheinterest ofthesupplying country, which inturnsuggests thatthe
proportion ofexports oftheproduct initstotal exports istherelevant proportion. With respect to
thePanel 'sargumentation onArticle XXVIII oftheGATT 1994, Nicaragua asserts first thatthere
isnorulethat"substantial supplying interest" canonly bedetermined onthebasis oftheimport share
from which anexception canonly becreated byagreement, and, second thatthefunction oftheterms
asused inArticles XIII andXXVIII isnotidentical. Nicaragua submits that, given thedifferent
objectives ofthetwoprovisions, thedefinition adopted byMembers under Article XIII oftheGATT
1994 canjustifiably differ from thatadopted under Article XXVIII oftheGATT 1994.
E. Japan
126. Initssubmission, Japan presents arguments concerning theissue ofspecificity oftherequest
fortheestablishment ofapanel under Article 6.2oftheDSU. InJapan 'sview, the"Panel 's
interpretations onthisissue arehighly erroneous" and, ifaccepted bytheAppellate Body, willhave
serious implications forthefuture operation ofthedispute settlement mechanism.
127. Japansubmitsthattherequestfortheestablishmentofapaneldoesnotfulfilthetworequirements
ofArticle 6.2oftheDSU: theidentification ofthe"specific measure atissue" andtheprovision of
a"brief summary ofthelegal basis ofthecomplaint". Japan considers thatthemere identification
ofthebasic regulation andasimple listing oftheprovisions which areallegedly violated arenotenough.
Atleast thelinkage "between thespecific measure ...concerned andtheArticle allegedly infringed
thereby" must beprovided tomeet therequirements under Article 6.2oftheDSU. Intheview of
Japan, undue emphasis onthepromptness ofthesettlement, without taking account oftherespondent 's
burden, mayinvite abuse ofthedispute settlement system andcould cause serious damage toitsproper
operation. TheDSU must beinterpreted soastoserve thefairsettlement ofdisputes. Japan argues
thatthePanel 'sargument thattheComplaining Parties "cured" uncertainty with their firstsubmission
should notbeaccepted. Japan asserts: first, thelackofspecificity intherequest fortheestablishment
ofapanel requires extensive additional work ontherespondent 'ssideforthepreparation ofitsdefence,WT/DS27/AB/R
Page 58
which could beavoided iftherequest fortheestablishment ofapanel issufficiently specific; second,
thePanel 'sproposed remedy puts toomuch emphasis ontheinterests oftheComplaining Parties;
andthird, thefirstsubmission does notreplace therequest fortheestablishment ofapanel with respect
tothenotice function which isrequired under Article 6.2oftheDSU. Finally, Japan argues thatthe
Panel 'sreasoning hasnolegal basis inthetextoftheDSU.
128. Japan agrees with theComplaining Parties thatthefirstwritten submission does notdetermine
theclaims made byacomplaining party, andthatsuch afinding hasnobasis inthetextoftheDSU.
However, intheview ofJapan, iftheComplaining Parties failed toinclude intheir firstsubmission
certain claims which areidentified intheir request fortheestablishment ofapanel, those Complaining
Parties should bedeemed tohave withdrawn such claims. Inaddition, Japan does notdisagree with
theComplaining Parties ontheprogressive nature ofapanel proceeding, anditconsiders thattheparties
tothedispute should bepermitted tomake anylegal andfactual arguments responding tothepanel 's
questions orother parties 'arguments throughout theproceeding. However, thecomplaining party 's
legal claims must bewithin theterms ofreference ofthepanel. Finally, Japan considers that, inthis
case, thePanel incorrectly found thatthepanel request adequately informed theEuropean Communities
ofthecaseagainst it.Japan contends thatthePanel 'sanalysis does nottakedueaccount oftheburden
upon therespondent torespond tothecase against it.
IV. Issues Raised inthisAppeal
129. Theappellant, theEuropean Communities, raises thefollowing issues inthisappeal:
(a) Whether theUnited States hadaright tobring claims under theGATT 1994;
(b) Whether therequest fortheestablishment ofthepanel made bytheComplaining Parties
inWT/DS27/6 meets therequirements ofArticle 6.2oftheDSU;
(c) Whether themarket access concessions made bytheEuropean Communities under
theAgreement onAgriculture prevail, asaresult ofArticles 4.1and21.1 ofthe
Agreement onAgriculture ,over theobligations oftheEuropean Communities under
Article XIII oftheGATT 1994;WT/DS27/AB/R
Page 59
(d) Whether theEC'sallocation oftariff quota shares, whether byagreement orby
assignment, tosome, butnottoother, Members nothaving asubstantial interest in
supplying bananas totheEuropean Communities, isconsistent with Article XIII:1 of
theGATT 1994; andwhether thetariff quota reallocation rules oftheBFA are
consistent with therequirements ofArticle XIII:1 oftheGATT 1994;
(e) Whether theEuropean Communities is"required" under therelevant provisions of
theLomé Convention toallocate tariff quota shares totraditional ACP States inexcess
oftheir pre-1991 best-ever export volumes, andtomaintain theECimport licensing
proceduresthatareappliedtoimportsofthird-countryandnon-traditionalACPbananas;
(f) Whether theexistence oftwoseparate ECregimes fortheimportation ofbananas is
legally relevant totheapplication ofthenon-discrimination provisions oftheGATT
1994 andtheother Annex 1Aagreements oftheWTO Agreement ;
(g) Whether theprovisions oftheLicensing Agreement apply tolicensing procedures for
tariff quotas; andwhether Article 1.3oftheLicensing Agreement precludes the
imposition ofdifferent import licensing systems onlikeproducts when imported from
different Members;
(h) Whether Article X:3(a) oftheGATT 1994 precludes theimposition ofdifferent import
licensingsystemsonlikeproductswhenimportedfromdifferentMembers;andwhether
both Article 1.3oftheLicensing Agreement andArticle X:3(a) oftheGATT 1994
apply toimport licensing procedures;
(i) Whether theapplication oftheECactivity function rules toimports ofthird-country
andnon-traditional ACP bananas, intheabsence oftheapplication ofsuch rules to
imports oftraditional ACP bananas, isconsistent with Article I:1oftheGATT 1994;
andwhether theECexport certificate requirement fortheimportation ofBFA bananas
isconsistent with therequirements ofArticle I:1oftheGATT 1994;
(j) Whether theECimport licensing procedures arewithin thescope ofArticle III:4 of
theGATT 1994; and, ifso,whether theECpractice with respect tohurricane licences
isconsistent with therequirements ofArticle III:4 oftheGATT 1994;WT/DS27/AB/R
Page 60
(k) WhethertheGATSappliestotheECimportlicensingprocedures,orwhethertheGATT
1994 andtheGATS aremutually exclusive agreements;
(l) Whether "operators" under therelevant ECregulations areservice suppliers within
themeaning ofArticle I:2(c) oftheGATS thatareengaged inthesupply of"wholesale
trade services"; andwhether vertically-integrated companies, which include such
operators, areservice suppliers;
(m) Whether therequirement ofArticle II:1oftheGATS toextend "treatment noless
favourable" should beinterpreted asincluding defacto, aswell asdejure,
discrimination;
(n) Whether thePanel erred bygiving retroactive effect toArticles IIandXVII ofthe
GATS, contrary totheprinciple stated inArticle 28oftheVienna Convention ;
(o) Whether thePanel misapplied thestandard ofburden ofproof, setoutintheAppellate
Body Report inUnited States -Shirts andBlouses from India63:indeciding which
companiesarea"juridicalpersonofanotherMember"andare"owned"by,"controlled"
byor"affiliated" with persons ofanother Member within themeaning ofparagraphs
(m)and(n)ofArticle XXVIII oftheGATS; indeciding themarket shares ofthe
companies engaged inwholesale trade inbananas within theEuropean Communities;
andinitsconclusions concerning thecategory of"operators who include ordirectly
represent ECorACP producers" thathave suffered damage from hurricanes;
(p) Whether thePanel erred infinding thattheallocation toCategory Boperators of30
percentofthelicences allowing theimportation ofthird-country andnon-traditional
ACP bananas atin-quota tariff rates isinconsistent with therequirements ofArticles
IIandXVII oftheGATS;
(q) Whether thePanel erred infinding thattheallocation toripeners of28percentofthe
Category AandBlicences allowing theimportation ofthird-country andnon-traditional
63WT/DS33/AB/R, adopted 23May 1997.WT/DS27/AB/R
Page 61
ACP bananas atin-quota tariff rates isinconsistent with therequirements ofArticle
XVII oftheGATS;
(r) Whether thePanel erred infinding thattheallocation ofhurricane licences exclusively
tooperators who include ordirectly represent ECorACP producers ofbananas is
inconsistent with therequirements ofArticles IIandXVII oftheGATS;
(s) WhetherthePanelerredinconcludingthattheEuropeanCommunitieshasnotsucceeded
inrebutting thepresumption thatitsbreaches oftheGATT 1994, theGATS andthe
Licensing Agreement have nullified orimpaired benefits oftheComplaining Parties.
130. TheComplaining Parties, asappellants, raise thefollowing issues inthisappeal:
(a) Whether theLomé Waiver granted totheEuropean Communities for"theprovisions
ofparagraph 1ofArticle IoftheGeneral Agreement" applies alsotobreaches ofArticle
XIII oftheGATT 1994 with respect totheEC'scountry-specific allocations for
traditional ACP States;
(b) Whether theEuropean Communities is"required" under therelevant provisions of
theLomé Convention toprovide duty-free access for90,000 tonnes ofnon-traditional
ACP bananas andamargin oftariff preference intheamount of100ECU/tonne for
allother non-traditional ACP bananas;
(c) Whether thePanel erred inexcluding from thescope ofthiscasecertain claims relating
toArticle XVII oftheGATS made byMexico andalltheGATS claims made by
Guatemala andHonduras because those complaining parties didnotaddress such claims
intheir first written submissions tothePanel;
(d) Ecuador raises thequestion whether thePanel 'sfinding atparagraph 7.93 ofthePanel
Reports concerning Ecuador 'sright toinvoke Articles XIII:2 orXIII:4 oftheGATT
1994 isproperly within thescope ofthisappeal.
131. Wewilladdress these issues inturn, andwewilldealsimultaneously with theissues thathave
been raised byboth theEuropean Communities andtheComplaining Parties.WT/DS27/AB/R
Page 62
A. Preliminary Issues
1. Right oftheUnited States toBring Claims under theGATT 1994
132. Weagree with thePanel that"neither Article 3.3nor3.7oftheDSU noranyother provision
oftheDSU contain anyexplicit requirement thataMember must have a‘legal interest ’asaprerequisite
forrequesting apanel".64Wedonotaccept thattheneed fora"legal interest" isimplied intheDSU
orinanyother provision oftheWTO Agreement .Itistruethatunder Article 4.11 oftheDSU, a
Member wishing tojoininmultiple consultations must have "asubstantial trade interest", andthat
under Article 10.2 oftheDSU, athird party must have "asubstantial interest" inthematter before
apanel. Butneither ofthese provisions intheDSU, noranything elseintheWTO Agreement ,provides
abasis forasserting thatparties tothedispute have tomeet anysimilar standard. Yet,wedonotbelieve
thatthisisdispositive ofwhether, inthiscase, theUnited States has"standing"65tobring claims under
theGATT 1994.
133. Theparticipants inthisappeal have referred tocertain judgments oftheInternational Court
ofJustice andthePermanent Court ofInternational Justice relating towhether there isarequirement,
ininternational law, ofalegal interest tobring acase.66Wedonotread anyofthese judgments as
establishing ageneral rulethatinallinternational litigation, acomplaining party must have a"legal
interest" inorder tobring acase. Nordothese judgments deny theneed toconsider thequestion of
standing under thedispute settlement provisions ofanymultilateral treaty, byreferring totheterms
ofthattreaty.
134. This leads ustoexamine Article XXIII oftheGATT 1994, which isthedispute settlement
provision fordisputes brought pursuant totheGATT 1994, most other Annex 1Aagreements andthe
64Panel Reports, para. 7.49.
65Standing, orlocus standi ,isgenerally understood tomean theright tobring anaction inadispute. SeeB.Garner,
ADictionary ofModern Legal Usage (Oxford University Press, 1987), p.347; L.B. Curzon, ADictionary ofLaw,4thed.
(Pitman Publishing, 1993), p.232. Article 1.1oftheDSU states that: "The rules andprocedures ofthisUnderstanding
shallapplytodisputesbroughtpursuanttotheconsultationanddisputesettlementprovisionsoftheagreement slistedinAppendi x
1tothisUnderstanding ...". (emphasis added)
66The EC'sappellant 'ssubmission inparas. 9-10 refers totheICJandPCIJ Judgments in:theSouth West Africa Cases ,
(Second Phase), ICJReports 1966, p.4;theCase Concerning theBarcelona Traction, Light andPower Company, Limited
(Second Phase), ICJReports 1970, p.4;theMavrommatis Palestine Concessions Case ,PCIJ (1925) Series A,No. 2,p.
1;theS.S."Wimbledon" case, PCIJ (1923) Series A,No. 1,p.1; andtheCase Concerning theNorthern Cameroons ,ICJ
Reports 1963, p.4.The Complaining Parties 'appellee 'ssubmission, inpara. 364, also refers totheICJJudgment inthe
South West Africa Cases .WT/DS27/AB/R
Page 63
Agreement onTrade Related Aspects ofIntellectual Property Rights ("TRIPs ").67Thechapeau ofArticle
XXIII:1 oftheGATT 1994 provides:
IfanyMember should consider thatanybenefit accruing toitdirectly
orindirectly under thisAgreement isbeing nullified orimpaired or
thattheattainment ofanyobjective oftheAgreement isbeing impeded
...
Ofspecial importance fordetermining theissue ofstanding, inourview, arethewords "[i]fanyMember
should consider ...".68This provision inArticle XXIII isconsistent with Article 3.7oftheDSU, which
states:
Before bringing acase, aMember shall exercise itsjudgement asto
whether action under these procedures would befruitful.
...
135. Accordingly, webelieve thataMember hasbroad discretion indeciding whether tobring a
case against another Member under theDSU. Thelanguage ofArticle XXIII:1 oftheGATT 1994
andofArticle 3.7oftheDSU suggests, furthermore, thataMember isexpected tobelargely self-
regulating indeciding whether anysuch action would be"fruitful".
136. Wearesatisfied thattheUnited States wasjustified inbringing itsclaims under theGATT
1994 inthiscase. TheUnited States isaproducer ofbananas, andapotential export interest bythe
United States cannot beexcluded. Theinternal market oftheUnited States forbananas could beaffected
bytheECbanana regime, inparticular, bytheeffects ofthatregime onworld supplies andworld prices
ofbananas. Wealsoagree with thePanel 'sstatement that:
...with theincreased interdependence oftheglobal economy, ...
Members have agreater stake inenforcing WTO rules thaninthepast
sinceanydeviationfromthenegotiatedbalanceofrightsandobligations
ismore likely than ever toaffect them, directly orindirectly.69
67Article XXIII oftheGATT 1994 isreferred toasthedispute settlement provision inmost other Annex 1Aagreements
(Agreement onAgriculture ,Agreement ontheApplication ofSanitary andPhytosanitary Measures ,Agreement onTextiles
andClothing ,Agreement onTechnical Barriers toTrade ,Agreement onTrade-Related Investment Measures ,Agreement
onPreshipment Inspection ,Agreement onRules ofOrigin ,Licensing Agreement ,Agreement onSubsidies andCountervailing
Measures ,Agreement onSafeguards )and inTRIPs .
68WenotethatArticlesXXIII: 1andXXIII: 3oftheGAT Susesimilaropeni ngphrases: "IfanyMember shoul dconsi der..."
and "Ifany Member considers ...".
69Panel Reports, para. 7.50.WT/DS27/AB/R
Page 64
137. Wenote, too,thatthere isnochallenge here tothestanding oftheUnited States under the
GATS, andthattheclaims under theGATS andtheGATT 1994 relating totheECimport licensing
regime areinextricably interwoven inthiscase.
138. Taken together, these reasons aresufficient justification fortheUnited States tohave brought
itsclaims against theECbanana import regime under theGATT 1994. This does notmean, though,
thatoneormore ofthefactors wehave noted inthiscase would necessarily bedispositive inanother
case. Wetherefore uphold thePanel 'sconclusion thattheUnited States hadstanding tobring claims
under theGATT 1994.
2. Request forEstablishment ofthePanel
139. Article 6.2oftheDSU requires thatarequest fortheestablishment ofapanel:
...identify thespecific measures atissue andprovide abrief summary
ofthelegal basis ofthecomplaint sufficient topresent theproblem
clearly.
140. Weagree with thePanel thattherequest inthiscase, WT/DS27/6, dated 12April 1996, which
refers to"aregime fortheimportation, saleanddistribution ofbananas established byRegulation 404/93
(O.J. L47of25February 1993, p.1),andsubsequent EClegislation, regulations andadministrative
measures, including those reflecting theprovisions oftheFramework Agreement onbananas, which
implement,supplementandamendthatregime",containssufficientidentificationofthespecificmeasures
atissue tofulfil therequirements ofArticle 6.2oftheDSU.
141. With respect towhether thepanel request provides, asrequired, a"brief summary ofthelegal
basis ofthecomplaint sufficient topresent theproblem clearly"70,weagree with thePanel 'sconclusion
that"therequest issufficiently specific tocomply with theminimum standards established bytheterms
ofArticle 6.2oftheDSU"71(emphasis added). Weaccept thePanel 'sview thatitwassufficient for
theComplaining Parties tolisttheprovisions ofthespecific agreements alleged tohave been violated
without setting outdetailed arguments astowhich specific aspects ofthemeasures atissue relate to
which specific provisions ofthose agreements. Inourview, there isasignificant difference between
theclaims identified intherequest fortheestablishment ofapanel, which establish thepanel 'sterms
70DSU, Article 6.2.
71Panel Reports, para. 7.29.WT/DS27/AB/R
Page 65
ofreference under Article 7oftheDSU, andthearguments supporting those claims, which areset
outandprogressively clarified inthefirstwritten submissions, therebuttal submissions andthefirst
andsecond panel meetings with theparties.
142. Werecognize thatapanel request willusually beapproved automatically attheDSB meeting
following themeeting atwhich therequest first appears ontheDSB'sagenda.72Asapanel request
isnormally notsubjected todetailed scrutiny bytheDSB, itisincumbent upon apanel toexamine
therequest fortheestablishment ofthepanel very carefully toensure itscompliance with both the
letter andthespirit ofArticle 6.2oftheDSU. Itisimportant thatapanel request besufficiently precise
fortworeasons: first, itoften forms thebasis fortheterms ofreference ofthepanel pursuant toArticle
7oftheDSU; and, second, itinforms thedefending party andthethird parties ofthelegal basis of
thecomplaint.
143. Wedonotagree with thePanel that"even ifthere wassome uncertainty whether thepanel
requesthadmettherequirementsofArticle6.2,thefirstwrittensubmissionsoftheComplainants‘cured’
thatuncertainty because their submissions were sufficiently detailed topresent allthefactual andlegal
issues clearly".73Article 6.2oftheDSU requires thattheclaims ,butnotthearguments ,must allbe
specified sufficiently intherequest fortheestablishment ofapanel inorder toallow thedefending
party andanythird parties toknow thelegal basis ofthecomplaint. Ifaclaim isnotspecified inthe
request fortheestablishment ofapanel, then afaulty request cannot besubsequently "cured" bya
complaining party 'sargumentation initsfirstwritten submission tothepanel orinanyother submission
orstatement made later inthepanel proceeding.
144. Wenote, inpassing, thatthiskind ofissue could bedecided early inpanel proceedings, without
causing prejudice orunfairness toanyparty orthird party, ifpanels haddetailed, standard working
procedures thatallowed, inter alia,forpreliminary rulings.
3. GATS Claims byGuatemala, Honduras andMexico
145. Wedonotagree with thePanel 'sdecisions toexclude certain claims under Article XVII of
theGATS made byMexico74andalloftheGATS claims made byGuatemala andHonduras75from
72DSU, Article 6.1.
73Panel Reports, para. 7.44.
74Panel Report, WT/DS27/R/MEX, paras. 7.309-7.311.WT/DS27/AB/R
Page 66
thescope ofthiscase. There isnorequirement intheDSU orinGATT practice forarguments on
allclaims relating tothematter referred totheDSB tobesetoutinacomplaining party 'sfirstwritten
submission tothepanel. Itisthepanel 'sterms ofreference, governed byArticle 7oftheDSU, which
setouttheclaims ofthecomplaining parties relating tothematter referred totheDSB.
146. Inthisdispute, theComplaining Parties filed ajoint request fortheestablishment ofthePanel
inWT/DS27/6, dated 12April 1996, andtheparties tothedispute agreed thatthePanel would have
standard terms ofreference pursuant toArticle 7.1oftheDSU. ThePanel 'sterms ofreference in
thisdispute, therefore, must bedetermined byanexamination ofthejoint request fortheestablishment
ofapanel inWT/DS27/6, which includes claims thattheECmeasures areinconsistent with, inter
alia,Articles II,XVI andXVII oftheGATS. TheComplaining Parties filed their request forthe
establishment forapanel jointly, buttheyfiled their firstwritten submissions tothePanel separately.76
Anyomissions inthearguments contained inthefirstwritten submissions ofMexico orofGuatemala
andHonduras were rectified intheir joint representations with theother Complaining Parties made
atthefirstmeeting oftheparties with thePanel, aswell asintheir joint written rebuttal submission
andintheir joint representations made atthesecond meeting oftheparties with thePanel. Specific
arguments onallrelevant GATS claims were made bythefiveComplaining Parties jointly intheir
oralstatements atthefirstandsecond meetings with thePanel andintheir written rebuttal submission.
147. Forthese reasons, wereverse theconclusions ofthePanel thatcertain claims under Article
XVII oftheGATS made byMexico77andalloftheGATS claims made byGuatemala andHonduras78
arenottobeincluded within thescope ofthiscase. Wedonotagree with thePanel 'sstatement that
a"failure tomake aclaim inthefirstwritten submission cannot beremedied bylater submissions or
byincorporating theclaims andarguments ofother complainants".79Pursuant toArticles 6.2and7.1
oftheDSU, theterms ofreference ofthePanel inthiscase were established intherequest forthe
establishment ofthepanel, WT/DS27/6, inwhich theclaims specified under theGATS were made
byallfiveComplaining Parties jointly.
75Panel Reports, paras. 7.57-7.58.
76Guatemala and Honduras submitted afirst written submission jointly.
77Panel Report, WT/DS27/R/MEX, paras. 7.309-7.311.
78Panel Reports, para. 7.58.
79Ibid.,para. 7.57.WT/DS27/AB/R
Page 67
4. Ecuador 'sRight toInvoke Article XIII oftheGATT 1994
148. Ecuador argues, initssubmission of9July 1997, thattheEuropean Communities didnot
properly setoutanyallegation oferror concerning paragraph 7.93 ofthePanel Reports intheNotice
ofAppeal, nordidtheEuropean Communities include initsappellant 'ssubmission anystatement of
thegrounds forsuch anappeal, anyspecific allegations oferrors intheissues oflawcovered inthe
Panel Reports, oranylegal arguments insupport ofanappeal ofthatfinding. Intheappellant 's
submission oftheEuropean Communities, there wasmerely asummary reference toparagraph 7.93
ofthePanel Reports inPartIV,paragraph 352, oftheConclusions. Ecuador argues thatthisomission,
onthepartoftheEuropean Communities, does notmeet therequirements ofRule 20(2)(d) orRule
21(2) oftheWorking Procedures .
149. ThePanel 'sfinding onthisissue reads asfollows:
...wefind thatthefailure ofEcuador 'sProtocol ofAccession to
address banana-related issues does notmean thatEcuador must accept
thevalidity oftheBFA ascontained intheEC'sSchedule orthatit
isprecluded from invoking Article XIII:2 orXIII:4.80
150. Paragraphs (c)and(d)oftheNotice ofAppeal read asfollows:
(c) ThePanel erred inlawinitsinterpretation oftheAgreement
onAgriculture and, inparticular, ofArticles 4.1and21.1 of
thatAgreement andtheir relation totheGATT, inparticular
itsArticle XIII.
(d) Inthealternative: thePanel erred initsinterpretation of
Article XIII ofGATT, inparticular paragraph 2(d) (both in
relation totheallocation ofcountry shares intheTariff Rate
Quota (TRQ)) forbananas andtothetariff quota reallocation
rules oftheBanana Framework Agreement (BFA).
151. Rule 20(2)(d) oftheWorking Procedures provides thatanotice ofappeal shall include:
...abrief statement ofthenature oftheappeal, including the
allegations oferrors ...(emphasis added)
80Panel Reports, para. 7.93.WT/DS27/AB/R
Page 68
Rule 21(2)(b)(i) oftheWorking Procedures requires thatanappellant 'ssubmission shall setout:
...aprecise statement ofthegrounds fortheappeal, including the
specific allegations oferrors intheissues oflawcovered inthepanel
report ...andthelegal arguments insupport thereof ...(emphasis
added)
152. Inourview, theclaims oferror bytheEuropean Communities setoutinparagraphs (c)and
(d)oftheNotice ofAppeal donotcover thePanel 'sfinding inparagraph 7.93 ofthePanel Reports.
Thefinding inthatparagraph explicitly deals with Ecuador 'sright toinvoke Article XIII:2 orXIII:4
oftheGATT 1994, given thatEcuador acceded totheWTO after theWTO Agreement entered into
force andafter thetariff quota fortheBFA countries hadbeen negotiated andinscribed intheEC
Schedule totheGATT 1994. There isnospecific mention ofthisPanel finding ineither theNotice
ofAppeal orinthemain arguments oftheappellant 'ssubmission bytheEuropean Communities.
Therefore, Ecuador hadnonotice thattheEuropean Communities wasappealing thisfinding. For
these reasons, weconclude thatthePanel 'sfinding inparagraph 7.93 ofthePanel Reports should be
excluded from thescope ofthisappeal.
B. Multilateral Agreements onTrade inGoods
1. Agreement onAgriculture
153. TheEuropean Communities raises thequestion whether themarket access concessions for
agricultural products made bytheEuropean Communities pursuant totheAgreement onAgriculture
prevail over Article XIII oftheGATT 1994. TheEuropean Communities maintains thatthisresult
necessarilyfollowsfromthemeaningandintentofArticles4.1and21.1oftheAgreementonAgriculture.
Accordingly, theEuropean Communities contends thatitispermitted withrespect tosuch market access
concessions toactinconsistently with therequirements ofArticle XIIIoftheGATT 1994. ThePanel
concluded thattheAgreement onAgriculture does notpermit theEuropean Communities toact
inconsistently with therequirements ofArticle XIII oftheGATT 1994.
154. Themarket access concessions foragricultural products thatwere made intheUruguay Round
ofmultilateral trade negotiations aresetoutinMembers 'Schedules annexed totheMarrakesh Protocol,
andareanintegral partoftheGATT 1994. Bytheterms oftheMarrakesh Protocol ,theSchedulesWT/DS27/AB/R
Page 69
are"Schedules totheGATT 1994", andArticle II:7oftheGATT 1994 provides that"Schedules annexed
tothisAgreement arehereby made anintegral partofPart IofthisAgreement". With respect to
concessions contained intheSchedules annexed totheGATT 1947, thepanel inUnited States -
Restrictions onImportation ofSugar ("United States -Sugar Headnote ")found that:
...Article IIpermits contracting parties toincorporate into their
Schedules actsyielding rights under theGeneral Agreement butnot
actsdiminishing obligations under thatAgreement.81
This principle isequally valid forthemarket access concessions andcommitments foragricultural
products contained intheSchedules annexed totheGATT 1994. Theordinary meaning oftheterm
"concessions" suggests thataMember may yield rights andgrant benefits, butitcannot diminish its
obligations.82This interpretation isconfirmed byparagraph 3oftheMarrakesh Protocol ,which
provides:
Theimplementation oftheconcessions andcommitments contained
intheschedules annexed tothisProtocol shall, upon request, besubject
tomultilateral examination bytheMembers. This would bewithout
prejudice totherights andobligations ofMembers under Agreements
inAnnex 1AoftheWTO Agreement .(emphasis added)
155. Thequestion remains whether theprovisions oftheAgreement onAgriculture allow market
access concessions onagricultural products todeviate from Article XIII oftheGATT 1994. The
preamble oftheAgreement onAgriculture states thatitestablishes "abasis forinitiating aprocess of
reform oftrade inagriculture" andthatthisreform process "should beinitiated through thenegotiation
ofcommitments onsupport andprotection andthrough theestablishment ofstrengthened andmore
operationally effective GATT rules anddisciplines". Therelationship between theprovisions ofthe
GATT 1994 andoftheAgreement onAgriculture issetoutinArticle 21.1 oftheAgreement on
Agriculture :
The provisions ofGATT 1994 and ofother Multilateral Trade
Agreements inAnnex 1AtotheWTO Agreement shall apply subject
totheprovisions ofthisAgreement.
81Adopted 22June 1989, BISD 36S/331, para. 5.2.
82Ibid.WT/DS27/AB/R
Page 70
Therefore,theprovisionsoftheGATT1994,includingArticleXIII,applytomarketaccesscommitments
concerning agricultural products, except totheextent thattheAgreement onAgriculture contains specific
provisions dealing specifically with thesame matter.
156. Article 4.1oftheAgreement onAgriculture provides asfollows:
Market access concessions contained inSchedules relate tobindings
andreductions oftariffs, andtoother market access commitments as
specified therein.
Inourview, Article 4.1does more than merely indicate where market access concessions and
commitments foragricultural products aretobefound. Article 4.1acknowledges thatsignificant, new
market access concessions, intheform ofnewbindings andreductions oftariffs aswellasother market
access commitments (i.e. those made asaresult ofthetariffication process), were made asaresult
oftheUruguay Round negotiations onagriculture andincluded inMembers 'GATT 1994 Schedules.
These concessions arefundamental totheagricultural reform process thatisafundamental objective
oftheAgreement onAgriculture .
157. That said, wedonotseeanything inArticle 4.1tosuggest thatmarket access concessions and
commitments made asaresult oftheUruguay Round negotiations onagriculture canbeinconsistent
with theprovisions ofArticle XIII oftheGATT 1994. There isnothing inArticles 4.1or4.2, or
inanyother article oftheAgreement onAgriculture ,thatdeals specifically with theallocation oftariff
quotas onagricultural products. Ifthenegotiators hadintended topermit Members toactinconsistently
with Article XIIIoftheGATT 1994, theywould have saidsoexplicitly. TheAgreement onAgriculture
contains several specific provisions dealing with therelationship between articles oftheAgreement
onAgriculture andtheGATT 1994. Forexample, Article 5oftheAgreement onAgriculture allows
Members toimpose special safeguards measures thatwould otherwise beinconsistent with Article XIX
oftheGATT 1994 andwith theAgreement onSafeguards .Inaddition, Article 13oftheAgreement
onAgriculture provides that, during theimplementation period forthatagreement, Members maynot
bring dispute settlement actions under either Article XVIoftheGATT 1994 orPartIIIoftheAgreement
onSubsidies andCountervailing Measures fordomestic support measures orexport subsidy measures
thatconform fully with theprovisions oftheAgreement onAgriculture .With these examples inmind,
webelieve itissignificant thatArticle 13oftheAgreement onAgriculture does not,byitsterms, preventWT/DS27/AB/R
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dispute settlement actions relating totheconsistency ofmarket access concessions foragricultural
products with Article XIII oftheGATT 1994. Aswehave noted, thenegotiators oftheAgreement
onAgriculture didnothesitate tospecify such limitations elsewhere inthatagreement; hadtheyintended
todosowith respect toArticle XIIIoftheGATT 1994, theycould, andpresumably would, have done
so.Wenotefurther thattheAgreement onAgriculture makes noreference totheModalities document83
ortoany"common understanding" among thenegotiators oftheAgreement onAgriculture thatthe
market access commitments foragricultural products would notbesubject toArticle XIIIoftheGATT
1994.
158. Forthese reasons, weagree with thePanel 'sconclusion thattheAgreement onAgriculture
does notpermit theEuropean Communities toactinconsistently with therequirements ofArticle XIII
oftheGATT 1994.
2. Article XIII oftheGATT 1994
159. TheEuropean Communities raises twolegal issues relating totheinterpretation ofArticle XIII
oftheGATT 1994. Thefirstiswhether theallocation bytheEuropean Communities oftariff quota
shares, byagreement andbyassignment, tosome Members nothaving asubstantial interest insupplying
bananas totheEuropean Communities (including Nicaragua, Venezuela, andcertain ACP countries
inrespect oftraditional andnon-traditional exports), butnottoother such Members (including
Guatemala), isconsistent with Article XIII:1. Thesecond iswhether thetariff quota reallocation rules
oftheBFA areconsistent with therequirements ofArticle XIII:1 oftheGATT 1994.
160. Article XIIIoftheGATT 1994 requires thenon-discriminatory administration ofquantitative
restrictions. Asprovided inparagraph 5,Article XIIIalsoapplies totariff quotas. Article XIII:1 sets
outabasic principle ofnon-discrimination intheadministration ofboth quantitative restrictions and
tariff quotas. Article XIII:1 stipulates thattheimportation orexportation ofaproduct ofaMember
canonly beprohibited orrestricted if:
...theimportation ofthelikeproduct ofallthird countries orthe
exportation ofthelike product toallthird countries issimilarly
prohibited orrestricted.
83ModalitiesfortheEstablishmentofSpecificBindingCommitmentsUndertheReformProgramme,MTN.GNG/MA/W/24,
20December 1993.WT/DS27/AB/R
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161. Inadministering quantitative import restrictions ortariff quotas, Members must alsoobserve
therules inArticle XIII:2. Thechapeau ofArticle XIII:2 provides thatMembers shall:
...aimatadistribution oftrade insuch product approaching asclosely
aspossible theshares which thevarious Members might beexpected
toobtain intheabsence ofsuch restrictions ...
Article XIII:2(d) provides specific rules fortheallocation oftariff quotas among supplying countries,
butthese rules pertain only totheallocation oftariff quota shares toMembers "having asubstantial
interest insupplying theproduct concerned". Article XIII:2(d) does notprovide anyspecific rules
fortheallocation oftariff quota shares toMembers nothaving asubstantial interest. Nevertheless,
allocation toMembers nothaving asubstantial interest must besubject tothebasic principle of
non-discrimination. When thisprinciple ofnon-discrimination isapplied totheallocation oftariff quota
shares toMembers nothaving asubstantial interest, itisclear thataMember cannot, whether by
agreement orbyassignment, allocate tariff quota shares tosome Members nothaving asubstantial
interest while notallocating shares toother Members who likewise donothave asubstantial interest.
Todosoisclearly inconsistent with therequirement inArticle XIII:1 thataMember cannot restrict
theimportation ofanyproduct from another Member unless theimportation ofthelikeproduct from
allthird countries is"similarly" restricted.
162. Therefore, onthefirstissue raised bytheEuropean Communities, weconclude thatthePanel
found correctly thattheallocation oftariff quota shares, whether byagreement orbyassignment, to
some, butnottoother, Members nothaving asubstantial interest insupplying bananas totheEuropean
Communities isinconsistent with therequirements ofArticle XIII:1 oftheGATT 1994.
163. Thesecond issue relates totheconsistency ofthetariff quota reallocation rules oftheBFA
with Article XIII:1 oftheGATT 1994. Pursuant tothese reallocation rules, aportion ofatariff quota
share notused bytheBFA country towhich thatshare isallocated may, atthejoint request ofthe
BFA countries, bereallocated totheother BFA countries. These reallocation rules allow theexclusion
ofbanana-supplying countries, other than BFA countries, from sharing intheunused portions ofa
tariff quota share. Thus, imports from BFA countries andimports from other Members arenot
"similarly" restricted. Weconclude, therefore, thatthePanel found correctly thatthetariff quota
reallocation rules oftheBFA areinconsistent with therequirements ofArticle XIII:1 oftheGATT
1994. Moreover, thereallocation ofunused portions ofatariff quota share exclusively toother BFAWT/DS27/AB/R
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countries, andnottoother non-BFA banana-supplying Members, does notresult inanallocation of
tariff quota shares which approaches "asclosely aspossible theshares which thevarious Members
might beexpected toobtain intheabsence oftherestrictions". Therefore, thetariff quota reallocation
rules oftheBFA arealsoinconsistent with thechapeau ofArticle XIII:2 oftheGATT 1994.
3. TheScope oftheLomé Waiver
164. On9December 1994, attherequest oftheEuropean Communities andofthe49ACP States
thatwere also GATT contracting parties, theCONTRACTING PARTIES granted theEuropean
Communities awaiver from certain ofitsobligations under theGATT 1947 with respect totheLomé
Convention.84Theoperative paragraph ofthisDecision oftheCONTRACTING PARTIES reads as
follows:
Subject totheterms andconditions setouthereunder, theprovisions
ofparagraph 1ofArticle IoftheGeneral Agreement shall bewaived,
until 29February 2000, totheextent necessary topermit theEuropean
Communities toprovide preferential treatment forproducts originating
inACP States asrequired bytherelevant provisions oftheFourth
Lomé Convention, without being required toextend thesame
preferential treatment tolikeproducts ofanyother contracting party.
This istheLomé Waiver. TheWTO General Council, acting pursuant toparagraphs 3and4of
Article IXoftheWTO Agreement andtheprovisions oftheUnderstanding inRespect ofWaivers of
Obligations under theGeneral Agreement onTariffs andTrade 1994 ,decided on14October 1996
toextend thiswaiver until 29February 2000.85
165. Theappeals bytheEuropean Communities andtheComplaining Parties raise twodistinct legal
issues relating tothescope oftheLomé Waiver. Thefirstissue iswhether theEuropean Communities
is"required" under therelevant provisions oftheLomé Convention todowhat ithasdone inthe
measures atissue inthisappeal, thatis,toprovide duty-free access foralltraditional ACP bananas;
toprovide duty-free access for90,000 tonnes ofnon-traditional ACP bananas; toprovide amargin
oftariff preference intheamount of100ECU/tonne forallother non-traditional ACP bananas; to
84TheFourth ACP-EEC Convention ofLomé, Decision oftheCONTRACTING PARTIES of9December 1994, L/7604,
19December 1994.
85EC-The Fourth ACP-EC Convention ofLomé, Extension ofWaiver, Decision oftheWTO General Council of14
October 1996, WT/L/186, 18October 1996.WT/DS27/AB/R
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allocate tariff quota shares tothetraditional ACP States thatsupplied bananas totheEuropean
Communities before 1991 intheamount oftheir pre-1991 best-ever export volumes; toallocate tariff
quota shares tosome traditional ACP States inexcess oftheir pre-1991 best-ever export volumes to
theEuropean Communities; toallocate tariff quota shares toACP States exporting non-traditional
ACP bananas; andtomaintain theimport licensing procedures thatareapplied bythismeasure to
imports ofthird-country andnon-traditional ACP bananas.
166. Thesecond issue iswhether theLomé Waiver, which specifically covers violations ofArticle
I:1oftheGATT 1994, alsocovers violations ofArticle XIIIwith respect totheEC'scountry-specific
tariff quota allocations fortraditional ACP States. Wewilladdress these twoissues inturn.
(a) What is"required" bytheLomé Convention?
167. TheEuropean Communities asserts thatthePanel should nothave conducted anobjective
examination oftherequirements oftheLomé Convention, butinstead should have deferred tothe
"common" ECandACP views ontheappropriate interpretation oftheLomé Convention. Thisassertion
iswithout merit. ThePanel wascorrect instating:
WenotethatsincetheGATTCONTRA CTINGPARTIESincorporated
areference totheLomé Convention intotheLomé waiver, themeaning
oftheLomé Convention became aGATT/WTO issue, atleast tothat
extent. Thus, wehave noalternative buttoexamine theprovisions
oftheLomé Convention ourselves insofarasitisnecessary to
interpret theLomé waiver.86
We, too,have noalternative.
168. From theoperative paragraph oftheLomé Waiver, itisclear thatwhat iswaived iscompliance
with only "theprovisions ofparagraph 1ofArticle IoftheGeneral Agreement", anditisclear also
thatcompliance with those provisions isonly waived "totheextent necessary" topermit theEuropean
Communities toprovide the"preferential treatment" thatis"required" bytherelevant provisions of
theLomé Convention. Itisequally clear thattheuseoftheterm "required" isnotaccidental.
Originally, theEuropean Communities andtheACP States thatwere contracting parties totheGATT
1947 requested awaiver thatwould have allowed theEuropean Communities togrant preferential
86Panel Reports, para. 7.98.WT/DS27/AB/R
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treatment as"foreseen" under therelevant provisions oftheLomé Convention.87However, theterm
"foreseen" wasnotaccepted bytheCONTRACTING PARTIES, andwasreplaced inthetextofthe
waiver bythemore stringent term "required".88Wedonotagree with theEuropean Communities
thatthisisadistinction without adifference.89
169. Todetermine what is"required" bytheLomé Convention, wemust look first atthetextof
thatConvention andidentify theprovisions ofitthatarerelevant totrade inbananas. Article 183
ofChapter 2,entitled "Special undertakings onrumandbananas", which ispartofthegeneral title
on"Trade Cooperation", andProtocol 5onBananas areclearly provisions thatspecifically concern
trade inbananas. Article 183reads asfollows:
Inorder topermit theimprovement oftheconditions under which
bananas originating intheACP States areproduced andmarketed, the
Contracting Parties hereby agree totheobjectives setoutinProtocol 5.
Article 183does notinitself clarify what is"required" with respect totrade inACP bananas. Article
183does, however, refer toProtocol 5,which isanintegral partoftheLomé Convention.90Article
1ofProtocol 5stipulates:
Inrespect ofitsbanana exports totheCommunity markets, noACP
State shall beplaced asregards access toitstraditional markets and
itsadvantages onthose markets, inalessfavourable situation than in
thepastoratpresent.
Therequirements inProtocol 5clearly apply to"traditional markets" fortraditional ACP bananas,
andtonothing more.
87ACP Countries -European Communities, Fourth Lomé Convention, Request foraWaiver, L/7539, 10October 1994.
88CONTRACTING PARTIES, Fiftieth Session, Summary Record oftheFirst Meeting, 8December 1994, SR. 50/1,
8February 1995, p.13.
89Preferential treatment thatisauthorized orcalled forintheLomé Convention, orreflected initsobjectives, may well
bepreferential treatment "foreseen" under theLomé Convention, butitisnotnecessarily preferential treatment "required"
ormade mandatory bytheLomé Convention. Provisions oftheLomé Convention, such asArticle 15(a); Article 24,second
indent; Article 135; andArticle 167authorize orcallforpreferential treatment ofACP products. These provisions elaborate
oneofthecentral objectives oftheLomé Convention --topromote theexpansion oftrade andtheeconomic development
oftheACP States. These provisions may "foresee", butdonot"require", any preferential treatment.
90Pursuant toArticle 368oftheLomé Convention, protocols annexed totheConvention form anintegral part thereof.WT/DS27/AB/R
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170. Inaddition, theLomé Convention contains Article 168(2)(a)(ii), which isalsorelevant totrade
inACPbananas.Article168(2)(a)(ii),whichisfoundinthechapteronthe"Generaltradearrangements"
oftheLomé Convention, reads inrelevant partasfollows:
...theCommunity shall takethenecessary measures toensure more favourable
treatment than that granted tothird countries benefiting from the
most-favoured-nation clause forthesame products. (emphasis added)
These "products" include bananas. Article 168(2)(a)(ii) applies toallACP agricultural products that
come under acommon organization ofthemarket andthataresubject toimport restrictions. Nothing
inArticle 168(2)(a)(ii) indicates thatbananas aretobeexcluded from thescope ofthisprovision, either
because theimport arrangement forbananas isdealt withelsewhere, orbecause bananas arenotincluded
inthenon-exhaustive listofpreferential arrangements under Article 168(2)(a)(ii) thatiscontained in
Annex XLoftheLomé Convention. Therefore, under Article 168(2)(a)(ii), theEuropean Communities
isrequired to"take thenecessary measures toensure more favourable treatment than thatgranted to
third countries benefiting from themost-favoured-nation clause" forallACP bananas. Thisrequirement
inArticle 168(2)(a)(ii) innoway conflicts with Article 1ofProtocol 5,which requires additional
preferential treatment fortraditional ACP bananas over andabove thepreferential treatment forall
ACP bananas thatisrequired byArticle 168(2)(a)(ii).91
171. These aretherequirements thattheLomé Convention imposes ontheEuropean Communities
fortrade inACP bananas. Theadmittedly difficult legislative taskfacing theEuropean Communities
wastotranslate these requirements intoappropriate regulations while alsotransforming thepreviously
varied, national banana markets ofitsMember States intoasingle Community-wide market forbananas.
Itisnotourtask todothisfortheEuropean Communities. Ourtask istodetermine whether the
particular regulatory means thattheEuropean Communities haschosen toemploy, andthatareatissue
inthisappeal, areinfactmeans thatare"required" bytheLomé Convention. Inourview, tobe
"required", each oftherelevant provisions ofthemeasures atissue inthisappeal must bereasonably
necessary togiveeffect totherelevant obligations imposed ontheEuropean Communities bytheLomé
Convention. Weshall examine them inturn.
91This interpretation oftherelationship between Article 168 andProtocol 5isconfirmed bytheECJ inparagraph 101
ofitsJudgment of5October 1994, Germany v.Council ,Case C-280/93, ECR 1994, p.I-4973. The Court stated that"...
theimport ofbananas from ACP States falls under Article 168(2)(a)(ii) oftheLomé Convention ...", andthatArticle 1of
Protocol 5also applies totraditional ACP bananas.WT/DS27/AB/R
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172. TheEuropean Communities grants duty-free access toalltraditional ACP bananas. Itwill
berecalled thatProtocol 5specifies that"noACP State shall beplaced, asregards access toitstraditional
markets anditsadvantages onthose markets, inalessfavourable situation thaninthepastorpresent"
(emphasis added). With respect totraditional ACP bananas, thismandate ofProtocol 5isreinforced
bytheadditional obligations imposed ontheEuropean Communities byArticle 168(2)(a)(ii), which,
aswehave said, applies toallACP bananas. Before thecreation ofasingle Community-wide market
forbananas through theenactment ofRegulation 404/93, duty-free "access" fortheir banana exports
wasindisputably oneofthe"advantages" enjoyed bytheACP States. Therefore, inourview, the
duty-free access afforded bytheEuropean Communities toalltraditional ACP bananas is"required".
173. Inaddition,theEuropeanCommunitiesgrantsduty-freeaccessto90,000tonnesofnon-traditional
ACP bananas andamargin oftariff preference intheamount of100ECU/tonne toallother non-
traditionalACPbananas.Theout-of-quotatariffratefornon-traditionalACPbananasis693ECU/tonne;
theout-of-quota tariff rateforthird-country bananas is793ECU/tonne.92Protocol 5does notapply
here; Protocol 5does notapply tonon-traditional ACP bananas. However, theobligation imposed
ontheEuropean Communities byArticle 168(2)(a)(ii) to"take thenecessary measures toensure more
favourable treatment" forallACP bananas "than thatgranted tothird countries benefiting from the
most-favoured-nation clause forthesame product" does apply. Thetariff rates applied toimports of
bananas from third countries benefitting from MFN treatment areanin-quota tariff rateof75ECU/tonne
and, asalready noted above, anout-of-quota tariff rateof793ECU/tonne. Both theduty-free access
afforded tothe90,000 tonnes ofnon-traditional ACP bananas, imported in-quota, andthemargin of
tariff preference intheamount of100ECU/tonne afforded toallother non-traditional ACP bananas
bytheEuropeanCommunitiesareclearly"morefavourabletreatment"thanthataffordedbytheEuropean
CommunitiestobananasfromthirdcountriesbenefittingfromMFNtreatment.Therefore,theremaining
issue under Article 168(2)(a)(ii) iswhether theparticular measures chosen bytheEuropean Communities
tofulfil theobligations inthatArticle toprovide "more favourable treatment" tonon-traditional ACP
bananas arealsoinfact"necessary" measures, asspecified inthatArticle. Inourview, they are.
Article 168(2)(a)(ii) does notsaythatonly onekind ofmeasure is"necessary". Likewise, thatArticle
does notsaywhat kind ofmeasure is"necessary". Conceivably, theEuropean Communities might
have chosen some other "more favourable treatment" intheform ofatariff preference fornon-traditional
ACP bananas. Butitseems tousthatthisparticular measure can,intheoverall context ofthetransition
from individual national markets toasingle Community-wide market forbananas, bedeemed tobe
"necessary". Therefore, inourview, both theduty-free access granted bytheEuropean Communities
92Out-of-quota tariff rates forshipments in1996-97. SeePanel Reports, para. 3.7.WT/DS27/AB/R
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tothe90,000 tonnes ofnon-traditional ACP bananas andthemargin oftariff preference intheamount
of100ECU/tonne granted toallother non-traditional ACP bananas are"required" bytheLomé
Convention.
174. TheEuropean Communities alsoallocates tariff quota shares tothetraditional ACP States that
supplied bananas totheEuropean Communities before 1991 intheamount oftheir pre-1991 best-ever
export volumes. With respect tothese allocations, itwillberecalled thatArticle 1ofProtocol 5obliges
theEuropean Communities toensure that"[i]n respect ofitsbanana exports totheCommunity markets,
noACP State shall beplaced asregards access toitstraditional markets anditsadvantages onthose
markets, inalessfavourable situation than inthepastoratpresent". Wenote here thattheEuropean
Court ofJustice hasruled initsJudgment of5October 1994 inGermany v.Council thatpursuant to
Article 1ofProtocol 5:
...theCommunity isobliged topermit theaccess, freeofcustoms duty,
only ofthequantities ofbananas actually imported ‘atzero duty’in
thebestyear before 1991 from each ACP State which isatraditional
supplier.93(emphasis added)
Thus, thepivotal dateis1991. Tobesure, theEuropean Communities might have used another basis
fordetermining thetariff quota shares allotted tothetraditional ACP States thatsupplied bananas to
theEuropean Communities before 1991. Forexample, theEuropean Communities might have chosen
touseafixed reference period of10,orperhaps 20,years. TheEuropean Communities might also
have chosen anaverage export volume rather thanthebest-ever export volumes thatwasinfactchosen.
However, some standard wasclearly needed. Thestandard chosen bytheEuropean Communities does
have alegitimate basis inthehistory ofthebanana trade oftheEuropean Communities with the
traditional ACP States. Therefore, wearepersuaded thattheallocation oftariff quota shares for
traditional ACP bananas chosen bytheEuropean Communities is"required".
175. TheEuropean Communities alsoallocates tariff quota shares tosome traditional ACP States
inexcess oftheir pre-1991 best-ever export volumes soastoreflect potential increases intrade inthe
future asaresult ofinvestments made inbanana production inthose ACP States.94Inourview, tariff
93Case C-280/93, ECR 1994, p.I-4973, para. 101.
94Neither theLomé Convention 'sprovisions ontrade development (Articles 135-138), noritsprovisions ondevelopment
finance cooperation (Articles 220-327), canbeinterpreted asrequiring that elements other than thebest-ever levels (e.g.
investment decisions) aretobetaken into account inthedetermination oftheextent ofthepreferential treatment.WT/DS27/AB/R
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quota shares inexcess ofthepre-1991 best-ever export volumes, which aredesigned toreflect potential
increases intrade inthefuture ,arenotreasonably necessary toguarantee thatthese traditional ACP
States arenotplaced, asregards market access andmarket advantages, inalessfavourable situation
thanatanytimebefore 1991 .These traditional ACP States could nothave enjoyed anypre-1991 market
access oradvantages with respect tofuture quantities ofbananas. This would bedifferent only if,
before 1991, these ACP States hadaguarantee inanyoftheir traditional markets thatthey would be
abletoexport quantities ofbananas thatmight inthefuture result from investments theymade. There
was, however, nosuch guarantee. Finally, itisclear thatanyfuture increases intrade asaresult of
investments arehighly speculative. Forthese reasons, weconclude thattheallocation oftariff quota
shares inexcess ofpre-1991 best-ever export volumes toreflect investments isnot"required" bythe
Lomé Convention.
176. TheEuropean Communities alsoallocates country-specific tariff quota shares toACP States
exporting non-traditional ACP bananas. Itwillberecalled thatthemore expansive requirement of
Article 1ofProtocol 5does notapply tonon-traditional ACP bananas. Only themore limited
requirement ofArticle 168(2)(a)(ii), totake"necessary measures toensure more favourable treatment"
tocertain ACP agricultural products, including bananas, applies tonon-traditional ACP bananas.
However, inourview, thisobligation toafford "more favourable treatment" tonon-traditional ACP
bananas could bemetwithout allocating tariff quota shares. Therefore, theallocation oftariff quota
shares toACP States exporting non-traditional ACP bananas isnot"required".
177. Thefinal relevant provisions ofthemeasures atissue thatmust beaddressed aretheimport
licensing procedures thatareapplied tothird-country andnon-traditional ACP bananas. Wehave
concluded thatcertain tariff preferences forACP bananas are"required" bytheLomé Convention.
Wehave alsoconcluded thatthetariff quota allocations totraditional ACP States intheamount of
their pre-1991 best-ever export volumes is"required". Itmaybethat, inorder todoallthatis"required"
bytheLomé Convention, theEuropean Communities should dosomething more. Conceivably, this
could besome form ofimport licensing arrangement. However, theissue before usisnotwhether
some hypothetical licensing arrangement thatmight beenacted bytheEuropean Communities is
"required" bytheLomé Convention. Theissue before usiswhether thespecific provisions ofthese
import licensing procedures thathave infactbeen enacted bytheEuropean Communities, andareat
issue inthisappeal, are"required". Theimport licensing procedures atissue here create advantages
forfavoured ECoperators thatmarket traditional ACP bananas, byproviding those operators withWT/DS27/AB/R
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quota rents that, even theEuropean Communities acknowledges, amount to"cross-subsidization".95
Weseenothing inanyoftherelevant provisions oftheLomé Convention thatcaninanyway be
construed to"require" such "cross-subsidization". Therefore, inourview, these import licensing
procedures arenot"required".
178. Thus, oftherelevant provisions ofthemeasures atissue inthisappeal, weconclude thatthe
European Communities is"required" under therelevant provisions oftheLomé Convention to:provide
duty-free access foralltraditional ACP bananas; provide duty-free access for90,000 tonnes ofnon-
traditional ACP bananas; provide amargin oftariff preference intheamount of100ECU/tonne for
allother non-traditional ACP bananas; andallocate tariff quota shares tothetraditional ACP States
thatsuppliedbananastotheEuropeanCommunitiesbefore1991intheamountoftheirpre-1991best-ever
export volumes. Weconclude alsothattheEuropean Communities isnot"required" under therelevant
provisions oftheLomé Convention to:allocate tariff quota shares tosome traditional ACP States in
excess oftheir pre-1991 best-ever export volumes; allocate tariff quota shares toACP States exporting
non-traditionalACPbananas;ormaintaintheimportlicensingproceduresthatareappliedtothirdcountry
andnon-traditional ACP bananas. Wetherefore uphold thefindings ofthePanel inparagraphs 7.103,
7.204 and7.136 ofthePanel Reports.
(b) What iscovered bytheLomé Waiver?
179. Having determined what is"required" bytheLomé Convention, wemust nextdetermine what
iscovered bytheLomé Waiver.
180. Specifically, wemust determine whether theLomé Waiver applies notonly tobreaches of
Article I:1oftheGATT 1994, butalsotobreaches ofArticle XIII oftheGATT 1994, with respect
totheEC'scountry-specific tariff quota allocations fortraditional ACP States.
181. Theoperative paragraph oftheLomé Waiver reads inrelevant part:
Subject totheterms andconditions setouthereunder, theprovisions
ofparagraph 1ofArticle IoftheGeneral Agreement shall bewaived,
until 29February 2000, totheextent necessary topermit theEuropean
Communities toprovide preferential treatment forproducts originating
95Commission oftheEuropean Communities, Report ontheOperation oftheBanana Regime ,11October 1995, SEC
(95) 1565 final, p.18.Seealso Commission oftheEuropean Communities, Impact ofCross-subsidization within theBanana
Regime ,Note forInformation, Ecuador 'sfirst submission tothePanel, Exhibit 11.WT/DS27/AB/R
Page 81
inACP States asrequired bytherelevant provisions oftheFourth
Lomé Convention, ...96(emphasis added)
182. ThePanel, nevertheless, concluded thattheLomé Waiver should beinterpreted soastowaive
notonly compliance with theobligations ofArticle I:1,butalsocompliance with theobligations of
Article XIII oftheGATT 1994. ThePanel based itsconclusion ontheneed togive "real effect"97
totheLomé Waiver andonthe"close relationship"98between Articles IandXIII:1.
183. Wedisagree with thePanel 'sconclusion. Thewording oftheLomé Waiver isclear and
unambiguous. Byitsprecise terms, itwaives only "the provisions ofparagraph 1ofArticle Iofthe
General Agreement ...totheextent necessary" todowhat is"required" bytherelevant provisions
oftheLomé Convention. TheLomé Waiver does notrefer to,ormention inanyway, anyother
provision oftheGATT 1994 orofanyother covered agreement. Neither thecircumstances surrounding
thenegotiation oftheLomé Waiver, northeneed tointerpret itsoastopermit ittoachieve its
objectives, allow ustodisregard theclear andplain wording oftheLomé Waiver byextending itsscope
toinclude awaiver from theobligations under Article XIII. Moreover, although Articles IandXIII
oftheGATT 1994 areboth non-discrimination provisions, their relationship isnotsuch thatawaiver
from theobligations under Article Iimplies awaiver from theobligations under Article XIII.
184. ThePanel 'sinterpretation oftheLomé Waiver asincluding awaiver from theGATT 1994
obligations relating totheallocation oftariff quotas isdifficult toreconcile with thelimited GATT
practice intheinterpretation ofwaivers, thestrict disciplines towhich waivers aresubjected under
theWTO Agreement ,thehistory ofthenegotiations ofthisparticular waiver andthelimited GATT
practice relating togranting waivers from theobligations ofArticle XIII.
185. There islittle previous GATT practice ontheinterpretation ofwaivers. Inthepanel report
inUnited States -Sugar Waiver ,thepanel stated:
ThePanel tookintoaccount initsexamination thatwaivers aregranted
according toArticle XXV:5 only in"exceptional circumstances", that
theywaive obligations under thebasic rules oftheGeneral Agreement
96TheFourth ACP-EEC Convention ofLomé, Decision oftheCONTRACTING PARTIES of9December 1994, L/7604,
19December 1994.
97Panel Reports, para. 7.106.
98Ibid.,para. 7.107.WT/DS27/AB/R
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andthattheir terms andconditions consequently have tobeinterpreted
narrowly.99
Although theWTO Agreement does notprovide anyspecific rules ontheinterpretation ofwaivers,
Article IXoftheWTO Agreement andtheUnderstanding inRespect ofWaivers ofObligations under
theGeneralAgreementonTariffsandTrade1994,whichproviderequirementsforgrantingandrenewing
waivers, stress theexceptional nature ofwaivers andsubject waivers tostrict disciplines. Thus, waivers
should beinterpreted with great care.
186. With regard tothehistory ofthenegotiations oftheLomé Waiver, wehave already noted that
theCONTRACTING PARTIES limited thescope ofthewaiver byreplacing "preferential treatment
foreseen bytheLomé Convention" with "preferential treatment required bytheLomé Convention"
(emphasis added). This change clearly suggests thattheCONTRACTING PARTIES wanted torestrict
thescope oftheLomé Waiver.
187. Finally, wenote thatbetween 1948 and1994, theCONTRACTING PARTIES granted only
onewaiver ofArticle XIII oftheGATT 1947.100Inview ofthetruly exceptional nature ofwaivers
from thenon-discrimination obligations under Article XIII, itisallthemore difficult toaccept the
proposition thatawaiver thatdoes notexplicitly refer toArticle XIII would nevertheless waive the
obligations ofthatArticle. IftheCONTRACTING PARTIES hadintended towaive theobligations
oftheEuropean Communities under Article XIIIintheLomé Waiver, theywould have saidsoexplicitly.
188. Thus, weconclude that thePanel erred infinding that "the Lomé waiver waives [the]
inconsistency withArticle XIII:1 totheextent necessary topermit theECtoallocate shares ofitsbanana
tariff quota tospecific traditional ACP banana supplying countries inanamount notexceeding their
pre-1991 best-ever exports totheEC".101
4. The"Separate Regimes" Argument
189. Ithasbeen argued bytheEuropean Communities thatthere aretwoseparate ECimport regimes
forbananas, thepreferential regime fortraditional ACP bananas andtheerga omnes regime forall
99Adopted 7November 1990, BISD 37S/228, para. 5.9.
100Waiver Granted inConnection withtheEuropean Coal andSteel Community ,Decision of10November 1952, BISD
1S/17, para. 3.
101Panel Reports, para. 7.110.WT/DS27/AB/R
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other imports ofbananas. Submissions made bytheEuropean Communities raise thequestion whether
thisisofanyrelevance fortheapplication ofthenon-discrimination provisions oftheGATT 1994
andtheother Annex 1Aagreements .TheEuropean Communities argues, inparticular, thatthenon-
discrimination obligations ofArticles I:1,X:3(a) andXIII oftheGATT 1994 andArticle 1.3ofthe
Licensing Agreement ,apply only within each ofthese separate regimes. ThePanel found thatthe
European Communities hasonly oneimport regime forpurposes ofapplying thenon-discrimination
provisions oftheGATT 1994 andArticle 1.3oftheLicensing Agreement .
190. Theissue hereisnotwhether theEuropean Communities iscorrect instating thattwoseparate
import regimes exist forbananas, butwhether theexistence oftwo, ormore, separate ECimport regimes
isofanyrelevance fortheapplication ofthenon-discrimination provisions oftheGATT 1994 and
theother Annex 1Aagreements. Theessence ofthenon-discrimination obligations isthatlikeproducts
should betreated equally, irrespective oftheir origin. Asnoparticipant disputes thatallbananas are
likeproducts, thenon-discrimination provisions apply toallimports ofbananas, irrespective ofwhether
andhow aMember categorizes orsubdivides these imports foradministrative orother reasons. If,
bychoosing adifferent legal basis forimposing import restrictions, orbyapplying different tariff rates,
aMembercouldavoidtheapplicationofthenon-discriminationprovisionstotheimportsoflikeproducts
from different Members, theobject andpurpose ofthenon-discrimination provisions would bedefeated.
Itwould bevery easy foraMember tocircumvent thenon-discrimination provisions oftheGATT
1994 andtheother Annex 1Aagreements, ifthese provisions apply only within regulatory regimes
established bythatMember.
191. Non-discriminationobligationsapplytoallimportsoflikeproducts,exceptwhentheseobligations
arespecifically waived orareotherwise notapplicable asaresult oftheoperation ofspecific provisions
oftheGATT 1994, such asArticle XXIV.102Inthepresent case, thenon-discrimination obligations
oftheGATT 1994, specifically Articles I:1andXIII103,apply fully toallimported bananas irrespective
oftheir origin, except totheextent thatthese obligations arewaived bytheLomé Waiver. We,
therefore, uphold thefindings ofthePanel104thatthenon-discrimination provisions oftheGATT 1994,
specifically, Articles I:1andXIII, apply totherelevant ECregulations, irrespective ifthere isone
ormore "separate regimes" fortheimportation ofbananas.
102Panel onNewsprint ,adopted 20November 1984, BISD 31S/114.
103Wedonotagree with thePanel 'sfindings that Article X:3(a) oftheGATT 1994 and Article 1.3oftheLicensing
Agreementprecludetheimposi tionofdifferentimpor tlicensi ngsystemsonlikeproduct swhen impor tedfromdifferentMember s.
SeeourFindings andConclusions ,paras. (l)and (m).
104Panel Reports, paras. 7.82 and 7.167.WT/DS27/AB/R
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5. Licensing Agreement
192. Theappeal bytheEuropean Communities raises twolegal issues relating totheinterpretation
andapplication oftheLicensing Agreement .Thefirstiswhether theLicensing Agreement applies to
import licensing procedures fortariff quotas. Thesecond iswhether therequirement of"neutrality
inapplication" inArticle 1.3oftheLicensing Agreement precludes theimposition ofdifferent import
licensing systems onlikeproducts when imported from different Members.
193. With respect tothefirst issue, "import licensing" isdefined inArticle 1.1oftheLicensing
Agreement asfollows:
Forthepurpose ofthisAgreement, import licensing isdefined asadministrative
procedures used fortheoperation ofimport licensing régimes requiring the
submission ofanapplication orother documentation (other thanthatrequired
forcustoms purposes) totherelevant administrative body asaprior condition
forimportation intothecustoms territory oftheimporting Member. (emphasis
added)
Although theprecise terms ofArticle 1.1donotsayexplicitly thatlicensing procedures fortariff quotas
arewithin thescope oftheLicensing Agreement ,acareful reading ofthatprovision leads inescapably
tothatconclusion. TheECimport licensing procedures require "the submission ofanapplication"
forimport licences as"aprior condition forimportation" ofaproduct atthelower, in-quota tariff
rate.105Thefactthattheimportation ofthatproduct ispossible atahigh out-of-quota tariff ratewithout
alicence does notalter thefactthatalicence isrequired forimportation atthelower in-quota tariff
rate.106
194. Wenote thatArticle 3.2oftheLicensing Agreement provides that:
Non-automatic licensing shall nothave trade-restrictive or-distortive
effects onimports additional tothose caused bytheimposition ofthe
restriction .(emphasis added)
105SeeCommission Regulation (EEC) No. 1442/93 of10June 1993 laying down detailed rules fortheapplication of
thearrangements forimporting bananas intotheCommunity, which explicitly requires operators tosubmit licence applications.
Official Journal No. L142, 12June 1993, p.6.
106Inthiscase, theout-of-quota tariff rateonbananas isprohibitively high and, therefore, importation ofbananas without
alicence isinfact only atheoretical possibility. SeeB.Borrell, EUBananarama III,The World Bank, Policy Research
Working Paper 1386, December 1994, p.16.WT/DS27/AB/R
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Wenote alsothatArticle 3.3oftheLicensing Agreement reads:
Inthecase oflicensing requirements forpurposes other than the
implementation ofquantitative restrictions, Members shall publish
sufficient information forother Members andtraders toknow thebasis
forgranting and/or allocating licences. (emphasis added)
Weseenoreason toexclude import licensing procedures fortheadministration oftariff quotas from
thescope oftheLicensing Agreement onthebasis oftheuseoftheterm "restriction" inArticle 3.2.
Weagree with thePanel that, inthelight ofthelanguage ofArticle 3.3oftheLicensing Agreement
andtheintroductory words ofArticle XIoftheGATT 1994107,theterm "restriction" asused inArticle
3.2should notbeinterpreted toencompass only quantitative restrictions, butshould beread alsoto
include tariff quotas.108
195. Forthese reasons, weagree with thePanel thatimport licensing procedures fortariff quotas
arewithin thescope oftheLicensing Agreement .
196. With respect tothesecond issue, thePanel found thatArticle 1.3oftheLicensing Agreement
"preclude[s] theimposition ofonesystem ofimport licensing procedures inrespect ofaproduct
originatingincertainMembersandadifferentsystemofimportlicensingproceduresonthesameproduct
originating inother Members".109
197. Article 1.3oftheLicensing Agreement reads asfollows:
Therulesforimportlicensingproceduresshallbeneutralinapplication
andadministered inafairandequitable manner. (emphasis added)
Byitsvery terms, Article 1.3oftheLicensing Agreement clearly applies totheapplication and
administration ofimport licensing procedures, andrequires thatthisapplication andadministration
be"neutral ...fairandequitable". Article 1.3oftheLicensing Agreement does notrequire theimport
licensing rules ,assuch, tobeneutral, fairandequitable. Furthermore, thecontext ofArticle 1.3--
including thepreamble, Article 1.1and,inparticular, Article 1.2oftheLicensing Agreement --supports
107The introductory words ofArticle XIoftheGATT 1994 read asfollows: "No prohibitions orrestrictions other than
duties, taxes orother charges, whether made effective through quotas, import orexport licences orother measures ...".
108Panel Reports, para. 7.154.
109Panel Reports, WT/DS27/R/GTM, WT/DS27/R/HND, WT/DS27/R/MEX and WT/DS27/R/USA, para. 7.261.WT/DS27/AB/R
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theconclusion thatArticle 1.3does notapply toimport licensing rules .Article 1.2provides, inrelevant
part, asfollows:
Members shall ensure that theadministrative procedures used to
implement import licensing régimes areinconformity withtherelevant
provisions ofGATT 1994 ...asinterpreted bythisAgreement, ...
Asamatter offact, none oftheprovisions oftheLicensing Agreement concerns import licensing rules ,
perse.Asismade clear bythetitleoftheLicensing Agreement ,itconcerns import licensing procedures .
Thepreamble oftheLicensing Agreement indicates clearly thatthisagreement relates toimport licensing
proceduresandtheiradministration,nottoimportlicensingrules.Article1.1oftheLicensingAgreement
defines itsscope astheadministrative procedures used fortheoperation ofimport licensing regimes.
198. Weconclude, therefore, thatthePanel erred infinding thatArticle 1.3oftheLicensing
Agreementprecludestheimpositionofdifferentimportlicensingsystemsonlikeproductswhenimported
from different Members.
6. Article X:3(a) oftheGATT 1994
199. TheEuropean Communities raises twolegal issues relating totheapplication andinterpretation
ofArticle X:3(a) oftheGATT 1994. The first issue iswhether therequirements ofuniformity,
impartiality andreasonableness setoutinArticle X:3(a) preclude theimposition ofdifferent import
licensing systems onlikeproducts imported from different Members. Thesecond issue iswhether
both Article X:3(a) oftheGATT 1994 andArticle 1.3oftheLicensing Agreement apply totheEC
import licensing procedures.
200. Onthefirstissue, thePanel found thattheapplication ofoperator category rules andactivity
function rules "inrespect oftheimportation ofthird-country andnon-traditional ACP bananas atin-quota
tariff rates, intheabsence oftheapplication ofsuch rules totraditional ACP imports, isinconsistent
with therequirements ofArticle X:3(a) ofGATT".110Incoming tothisconclusion, thePanel relied
ona1968 Note bytheGATT Director-General, which asserted thatArticle X:3(a) precludes the
application ofonesetofregulations andprocedures tosome contracting parties andadifferent setto
110Panel Reports, para. 7.212, with regard tooperator category rules; and WT/DS27/R/ECU, WT/DS27/R/GTM,
WT/DS27/R/HND and WT/DS27/R/MEX, para. 7.231, with regard toactivity function rules.WT/DS27/AB/R
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others.111However, theEuropean Communities correctly pointed outduring thePanel proceedings
thatthe1968 Note cannot beconsidered asanauthoritative interpretation ofGATT rules because it
wasnever endorsed byaformal decision oftheCONTRACTING PARTIES.
Article X:3(a) oftheGATT 1994 provides:
Each Member shall administer inauniform, impartial andreasonable
manner allitslaws, regulations, decisions andrulings ofthekind
described inparagraph 1ofthisArticle.
ThetextofArticle X:3(a) clearly indicates thattherequirements of"uniformity, impartiality and
reasonableness" donotapply tothelaws, regulations, decisions andrulings themselves ,butrather to
theadministration ofthose laws, regulations, decisions andrulings. Thecontext ofArticle X:3(a)
within Article X,which isentitled "Publication andAdministration ofTrade Regulations", andareading
oftheother paragraphs ofArticle X,make itclear thatArticle Xapplies totheadministration oflaws,
regulations, decisions andrulings. Totheextent thatthelaws, regulations, decisions andrulings
themselves arediscriminatory, theycanbeexamined fortheir consistency with therelevant provisions
oftheGATT 1994.
201. Weconclude, therefore, thatthePanel erred infinding thatArticle X:3(a) oftheGATT 1994
precludes theimposition ofonesystem ofimport licensing procedures onaproduct originating incertain
Members andadifferent system onthesame product originating inother Members.
202. With respect tothesecond issue, thePanel found thattherelevant provisions oftheGATT
1994 andtheLicensing Agreement apply totheECimport licensing procedures forbananas112,and
then proceeded toexamine theconsistency oftheimport licensing procedures with Article X:3(a) of
theGATT 1994. Having found thattheoperator category rules andtheactivity function rules were
inconsistent with Article X:3(a) oftheGATT 1994, thePanel, referring totheruling oftheAppellate
Body inUnited States -Shirts andBlouses from India113,concluded thatitwasnotnecessary toaddress
whether theECimport licensing procedures were alsoinconsistent with theLicensing Agreement .114
111SeeAgreement onImplementation ofArticle VI,Note bytheGATT Director-General of29November 1968, L/3149.
112Panel Reports, para. 7.163.
113WT/DS33/AB/R, adopted 23May 1997, p.19. The Appellate Body stated that"[a] panel need only address those
claims which must beaddressed inorder toresolve thematter inissue inthedispute".
114Panel Reports, paras. 7.213 and 7.232.WT/DS27/AB/R
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203. Article X:3(a) oftheGATT 1994 applies toall"laws, regulations, decisions andrulings of
thekind described inparagraph 1"ofArticle X,which includes those, inter alia,"pertaining to...
requirements, restrictions orprohibitions onimports ...". TheECimport licensing procedures are
clearly regulations pertaining torequirements onimports and,therefore, arewithin thescope ofArticle
X:3(a) oftheGATT 1994. Aswehave concluded, theLicensing Agreement alsoapplies totheEC
import licensing procedures. Weagree, therefore, with thePanel thatboth theLicensing Agreement
andtherelevant provisions oftheGATT 1994, inparticular, Article X:3(a), apply totheECimport
licensing procedures. Incomparing thelanguage ofArticle 1.3oftheLicensing Agreement andof
Article X:3(a) oftheGATT 1994, wenote thatthere aredistinctions between these twoarticles. The
former provides that"the rules forimport licensing procedures shall beneutral inapplication and
administered inafairandequitable manner". Thelatter provides thateach Member shall "administer
inauniform, impartial andreasonable manner allitslaws, regulations, decisions orrulings ofthekind
described inparagraph 1of[Article X]".
Weattach nosignificance tothedifference inthephrases "neutral inapplication andadministered in
afairandequitable manner" inArticle 1.3oftheLicensing Agreement and"administer inauniform,
impartial andreasonable manner" inArticle X:3(a) oftheGATT 1994. Inourview, thetwophrases
are,forallpractical purposes, interchangeable. Weagree, therefore, with thePanel 'sinterpretation
thattheprovisions ofArticle X:3(a) oftheGATT 1994 andArticle 1.3oftheLicensing Agreement
have identical coverage.115
204. Although Article X:3(a) oftheGATT 1994 andArticle 1.3oftheLicensing Agreement both
apply, thePanel, inourview, should have applied theLicensing Agreement first, since thisagreement
deals specifically, andindetail, with theadministration ofimport licensing procedures. IfthePanel
haddone so,thenthere would have been noneed forittoaddress thealleged inconsistency with Article
X:3(a) oftheGATT 1994.
7. Article I:1oftheGATT 1994
205. Theappeal bytheEuropean Communities raises twolegal issues relating totheinterpretation
ofArticle I:1oftheGATT 1994. Thefirstissue iswhether theactivity function rules oftheECimport
licensing procedures areconsistent with Article I:1oftheGATT 1994, intheabsence oftheapplication
ofsuch rules toimports oftraditional ACP bananas. Thesecond issue iswhether theECrequirement
115Panel Reports, WT/DS27/R/GTM, WT/DS27/R/HND, WT/DS27/R/MEX, WT/DS27/R/USA, para. 7.261.WT/DS27/AB/R
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tomatch import licences with export certificates forbananas exported from BFA countries isconsistent
with therequirements ofArticle I:1oftheGATT 1994.
206. Onthefirstissue, thePanel found thattheprocedural andadministrative requirements ofthe
activity function rules forimporting third-country andnon-traditional ACP bananas differ from, and
gosignificantly beyond, those required forimporting traditional ACP bananas. This isafactual finding.
Also, abroad definition hasbeen given totheterm "advantage" inArticle I:1oftheGATT 1994 by
thepanel inUnited States -Non-Rubber Footwear .116Itmay well bethatthere areconsiderations of
ECcompetition policy atthebasis oftheactivity function rules. This, however, does notlegitimize
theactivity function rules totheextent thatthese rules discriminate among likeproducts originating
from different Members. Forthese reasons, weagree with thePanel thattheactivity function rules
arean"advantage"grantedtobananasimportedfromtraditionalACPStates,andnottobananasimported
from other Members, within themeaning ofArticle I:1. Therefore, weuphold thePanel 'sfinding
thattheactivity function rules areinconsistent with Article I:1oftheGATT 1994.
207. Onthesecond issue, thePanel found thattheECexport certificate requirement isinconsistent
with therequirements ofArticle I:1oftheGATT 1994. TheECexport certificate requirement accords
BFA banana suppliers, which areinitial holders ofexport certificates, preferential bargaining leverage
toextract ashare ofthequota rents fortheir fruit exported totheEuropean Communities, andgives
them acompetitive advantage over other Latin American suppliers.117The ECexport certificate
requirement thus provides anadvantage tosome Members (i.e. theBFA countries) thatisnotgiven
toother Members. Therefore, weagree with thePanel thattheexport certificate requirement is
inconsistent with Article I:1oftheGATT 1994.
8. Article IIIoftheGATT 1994
208. Theappeal oftheEuropean Communities raises twolegal issues with respect totheapplication
andinterpretation ofArticle IIIoftheGATT 1994. Thefirstissue iswhether theECprocedures and
requirements forthedistribution oflicences forimporting bananas among eligible "operators" within
theEuropean Communities aremeasures within thescope ofArticle III:4 oftheGATT 1994. The
second issue iswhether theissuance ofhurricane licences exclusively toECproducers andproducer
116Adopted 19June 1992, BISD 39S/128, para. 6.9.
117The European Communities recognized thecommercial value oftheexport certificates intheCommission 'sReport
ontheECBanana Regime ,VI/5671/94, July 1994, p.12,inwhich itindicated thatexport certificates helped theBFA countries
"share intheeconomic benefits ofthetariff quota".WT/DS27/AB/R
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organizations, ortooperators including ordirectly representing them, isinconsistent with Article III:4
oftheGATT 1994.
209. Onthefirstissue, thePanel found that, although licences areacondition fortheimportation
ofbananas intotheEuropean Communities atin-quota tariff rates:
...theadministration oflicence distribution procedures and the
eligibility criteria fortheallocation oflicences tooperators form part
oftheEC'sinternal legislation and are"laws, regulations and
requirements affecting theinternal sale, ..."ofimported bananas in
themeaning ofArticle III:4.118
210. Article III:4 oftheGATT 1994 provides inrelevant part:
Theproducts oftheterritory ofanyMember imported intotheterritory
ofanyother Member shall beaccorded treatment nolessfavourable
than thataccorded tolikeproducts ofnational origin inrespect ofall
laws,regulationsandrequirementsaffectingtheirinternalsale,offering
forsale, purchase, transportation, distribution oruse...
211. Atissue inthisappeal isnotwhether anyimport licensing requirement, assuch, iswithin the
scope ofArticle III:4, butwhether theECprocedures andrequirements forthedistribution ofimport
licences forimported bananas among eligible operators within theEuropean Communities arewithin
thescope ofthisprovision. TheEClicensing procedures andrequirements include theoperator category
rules, under which 30percentoftheimport licences forthird-country andnon-traditional ACP bananas
areallocated tooperators thatmarket ECortraditional ACP bananas, andtheactivity function rules,
under which Category AandBlicences aredistributed among operators onthebasis oftheir economic
activities asimporters, customs clearers orripeners. These rules gofarbeyond themere import licence
requirements needed toadminister thetariff quota forthird-country andnon-traditional ACP bananas
orLomé Convention requirements fortheimportation ofbananas. These rules areintended, among
other things, tocross-subsidize distributors ofEC(and ACP) bananas andtoensure thatECbanana
ripeners obtain ashare ofthequota rents.119Assuch, these rules affect "the internal sale, offering
118Panel Reports, para. 7.178.
119EC'sappellant 'ssubmission, para. 325andtheEC'soral statement, para. 70. Seealso Commission oftheEuropean
Communities, Report ontheOperation oftheBanana Regime ,11October 1995, SEC (95) 1565 final, p.18;andCommission
oftheEuropean Communities, Impact ofCross-subsidization within theBanana Regime ,Note forInformation, Ecuador 's
first submission tothePanel, Exhibit 11.WT/DS27/AB/R
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forsale, purchase, ..."within themeaning ofArticle III:4, andtherefore fallwithin thescope ofthis
provision. Therefore, weagree with theconclusion ofthePanel onthispoint.
212. Onthesecond issue, thePanel found thattheECpractice with respect tohurricane licences
may create anincentive foroperators topurchase bananas ofECorigin formarketing intheEuropean
Communities, andthatthispractice isanadvantage accorded tobananas ofEC-origin thatisnotaccorded
tobananasofthird-countryorigin.ThePanelconcluded,therefore,thattheissuanceofhurricanelicences
exclusively toECproducers andproducer organizations, oroperators including ordirectly representing
them, isinconsistent with therequirements ofArticle III:4 oftheGATT 1994.
213. Hurricane licences allow foradditional imports ofthird-country (and non-traditional ACP)
bananas atthelower in-quota tariff rate. Although their issuance results inincreased exports from
those countries, wenote thathurricane licences areissued exclusively toECproducers andproducer
organizations, ortooperators including ordirectly representing them. Wealsonote that, asaresult
oftheECpractice relating tohurricane licences, these producers, producer organizations oroperators
canexpect, intheevent ofahurricane, tobecompensated fortheir losses intheform of"quota rents"
generated byhurricane licences. Thus, thepractice ofissuing hurricane licences constitutes anincentive
foroperators tomarket ECbananas totheexclusion ofthird-country andnon-traditional ACP bananas.
This practice therefore affects thecompetitive conditions inthemarket infavour ofECbananas. We
donotdispute theright ofWTO Members tomitigate orremedy theconsequences ofnatural disasters.
However, Members should dosoinamanner consistent with their obligations under theGATT 1994
andtheother covered agreements.
214. Forthese reasons, weagree with thePanel thattheECpractice ofissuing hurricane licences
isinconsistent with Article III:4 oftheGATT 1994.
215. Wenote that, incoming tothisconclusion, thePanel found:
However, before deciding whether thepractice ofissuing hurricane
licences isinconsistent with Article III:4, weneed toconsider that
Article III:1 isageneral principle thatinforms therestofArticle III,
astheAppellateBodyhasrecentlystated.SinceArticleIII:1constitutes
partofthecontext ofArticle III:4, itmust betaken intoaccount in
ourinterpretation ofthelatter. Article III:1 articulates ageneral
principle thatinternal measures should notbeapplied soastoafford
protection todomestic production. According totheAppellate Body,
theprotective application ofameasure canmost often bediscerned
from thedesign, thearchitecture, andtherevealing structure oftheWT/DS27/AB/R
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measure. Weconsider thatthedesign, architecture andstructure of
theECpractice ofissuing hurricane licences allindicate thatthe
measure isapplied soastoafford protection toEC(and ACP)
producers.120
216. ThePanel hasmisinterpreted what wesaidintheAppellate Body Report inJapan -Alcoholic
Beverages .121Wewere dealing inthatcasewith allegations ofinconsistencies with Article III:2, first
andsecond sentences, oftheGATT 1994. Itistruethatatpage 18ofthatReport, westated that"Article
III:1 articulates ageneral principle" which "informs therestofArticle III". However, wealsosaid
inthatReport thatArticle III:1 "informs thefirst sentence andthesecond sentence ofArticle III:2
indifferent ways".122With respect toArticle III:2, first sentence, wenoted thatitdoes notrefer
specifically toArticle III:1. Westated:
This omission must have some meaning. Webelieve themeaning is
simply that thepresence ofaprotective application need notbe
established separately from thespecific requirements thatareincluded
inthefirstsentence inorder toshow thatataxmeasure isinconsistent
with thegeneral principle setoutinthefirst sentence.123
With respect toArticle III:2, second sentence, wefound:
Unlike thatofArticle III:2, firstsentence, thelanguage ofArticle III:2,
second sentence, specifically invokes Article III:1. Thesignificance
ofthisdistinction liesinthefact that whereas Article III:1 acts
implicitly inaddressing thetwoissues thatmust beconsidered in
applying thefirstsentence, itactsexplicitly asanentirely separate issue
thatmust beaddressed along with twoother issues thatareraised in
applying thesecond sentence.124
The same reasoning must beapplied totheinterpretation ofArticle III:4. Article III:4 does not
specifically refer toArticle III:1. Therefore, adetermination ofwhether there hasbeen aviolation
ofArticle III:4 does notrequire aseparate consideration ofwhether ameasure "afford[s] protection
todomestic production".
120Seeparagraph 7.249 ofthePanel Reports (footnotes deleted). Seealso asimilar finding inparagraph 7.181 relating
totheoperator category rules.
121WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted 1November 1996.
122Ibid.,p.18.
123Ibid.
124Ibid.,p.24.WT/DS27/AB/R
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C. General Agreement onTrade inServices
1. Application oftheGATS
217. There aretwoissues toconsider inthiscontext. Thefirst iswhether theGATS applies to
theECimport licensing procedures. Thesecond iswhether theGATS overlaps with theGATT 1994,
orwhether thetwoagreements aremutually exclusive. With respect tothefirstissue, thePanel found
that:
...nomeasures areexcluded apriori from thescope oftheGATS as
defined byitsprovisions. Thescope oftheGATS encompasses any
measure ofaMember totheextent itaffects thesupply ofaservice
regardless ofwhether such measure directly governs thesupply ofa
service orwhether itregulates other matters butnevertheless affects
trade inservices.125
Forthese reasons, thePanel concluded:
Wetherefore findthatthere isnolegal basis foranapriori exclusion
ofmeasures within theECbanana import licensing regime from the
scope oftheGATS.126
218. TheEuropean Communities argues thattheGATS does notapply totheECimport licensing
procedures because theyarenotmeasures "affecting trade inservices" within themeaning ofArticle I:1
oftheGATS. Intheview oftheEuropean Communities, Regulation 404/93 andtheother related
regulations deal with theimportation, sale anddistribution ofbananas. Assuch, theEuropean
Communities asserts, these measures aresubject totheGATT 1994, andnottotheGATS.
219. Incontrast,theComplainingPartiesarguethatthescopeoftheGATS,byitsterms,issufficiently
broad toencompass Regulation 404/93 andtheother related regulations asmeasures affecting the
competitive relations between domestic andforeign services andservice suppliers. This conclusion,
they argue, isnotaffected bythefactthatthesame measures arealsosubject toscrutiny under the
GATT 1994, asthetwoagreements arenotmutually exclusive.
125Panel Reports, WT/DS27/R/ECU, WT/DS27/R/MEX and WT/DS27/R/USA, para. 7.285.
126Ibid.,para. 7.286.WT/DS27/AB/R
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220. Inaddressing thisissue, wenote thatArticle I:1oftheGATS provides that"[t]his Agreement
applies tomeasures byMembers affecting trade inservices". Inourview, theuseoftheterm "affecting"
reflects theintent ofthedrafters togive abroad reach totheGATS. Theordinary meaning ofthe
word "affecting" implies ameasure thathas"aneffect on",which indicates abroad scope ofapplication.
This interpretation isfurther reinforced bytheconclusions ofprevious panels thattheterm "affecting"
inthecontext ofArticle IIIoftheGATT iswider inscope than such terms as"regulating" or
"governing".127Wealsonote thatArticle I:3(b) oftheGATS provides that"‘services ’includes any
service inanysector except services supplied intheexercise ofgovernmental authority" (emphasis
added), andthatArticle XXVIII(b) oftheGATS provides thatthe"‘supply ofaservice ’includes the
production, distribution, marketing, saleanddelivery ofaservice". There isnothing atallinthese
provisions tosuggest alimited scope ofapplication fortheGATS. Wealsoagree thatArticle XXVIII(c)
oftheGATS does notnarrow "the meaning oftheterm ‘affecting ’to‘inrespect of’".128Forthese
reasons, weuphold thePanel 'sfinding thatthere isnolegal basis foranapriori exclusion ofmeasures
within theECbanana import licensing regime from thescope oftheGATS.
221. Thesecond issue iswhether theGATS andtheGATT 1994 aremutually exclusive agreements.
TheGATS wasnotintended todealwith thesame subject matter astheGATT 1994. TheGATS was
intended todealwith asubject matter notcovered bytheGATT 1994, thatis,with trade inservices.
Thus, theGATS applies tothesupply ofservices. Itprovides, inter alia,forboth MFN treatment
andnational treatment forservices andservice suppliers. Given therespective scope ofapplication
ofthetwoagreements, theymayormaynotoverlap, depending onthenature ofthemeasures atissue.
Certain measures could befound tofallexclusively within thescope oftheGATT 1994, when they
affect trade ingoods asgoods. Certain measures could befound tofallexclusively within thescope
oftheGATS, when they affect thesupply ofservices asservices. There isyetathird category of
measures thatcould befound tofallwithin thescope ofboth theGATT 1994 andtheGATS. These
aremeasures thatinvolve aservice relating toaparticular good oraservice supplied inconjunction
with aparticular good. Inallsuch cases inthisthird category, themeasure inquestion could be
scrutinized under both theGATT 1994 andtheGATS. However, while thesame measure could be
scrutinized under both agreements, thespecific aspects ofthatmeasure examined under each agreement
could bedifferent. Under theGATT 1994, thefocus isonhowthemeasure affects thegoods involved.
Under theGATS, thefocus isonhow themeasure affects thesupply oftheservice ortheservice
127Panel Reports, WT/DS27/R/ECU, WT/DS27/R/MEX andWT/DS27/R/USA, para. 7.281. See, forexample, the
panel report inItalian Agricultural Machinery ,adopted 23October 1958, BISD 7S/60, para. 12.
128Panel Reports, WT/DS27/R/ECU, WT/DS27/R/MEX and WT/DS27/R/USA, para. 7.280.WT/DS27/AB/R
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suppliers involved. Whether acertain measure affecting thesupply ofaservice related toaparticular
good isscrutinized under theGATT 1994 ortheGATS, orboth, isamatter thatcanonly bedetermined
onacase-by-case basis. This wasalso ourconclusion intheAppellate Body Report inCanada -
Periodicals.129
222. Forthese reasons, weagree with thePanel thattheECbanana import licensing procedures
aresubject toboth theGATT 1994 andtheGATS, andthattheGATT 1994 andtheGATS mayoverlap
inapplication toaparticular measure.
2. Whether Operators areService Suppliers Engaged inWholesale Trade Services
223. TheEuropeanCommunitiesraisestwoissuesconcerningthedefinitionofwholesaletradeservices
andtheapplication ofthatdefinition. Both these issues relate tothePanel 'sfinding that:
...operators inthemeaning ofArticle 19ofRegulation 404/93 and
operators performing theactivities defined inArticle 5ofRegulation
1442/93 areservice suppliers inthemeaning ofArticle I:2(c) ofGATS
provided thatthey areowned orcontrolled bynatural persons or
juridical persons ofother Members andsupply wholesale services.
When operators provide wholesale services with respect tobananas
whichtheyhaveimportedoracquiredformarketing,clearedincustoms
orripened, they areactual wholesale service suppliers. Where
operators form partofvertically integrated companies, they have the
capability andopportunity toenter thewholesale service market. They
could atanytime decide tore-sell bananas which they have imported
oracquired from ECproducers, orcleared incustoms, orripened
instead offurther transferring orprocessing bananas within an
integrated company. Since Article XVII ofGATS isconcerned with
conditions ofcompetition, itisappropriate forustoconsider these
vertically integrated companies asservice suppliers forthepurposes
ofanalysing theclaims made inthiscase.130
224. First, theEuropean Communities questions whether theoperators within themeaning ofthe
relevant ECregulations are,infact,service suppliers inthesense oftheGATS, inthatwhat theyactually
doisbuyandimport bananas. TheEuropean Communities argues that"when buying orimporting,
awholesale trade services supplier isabuyer orimporter andnotcovered bytheGATS atall,because
129Appellate Body Report, WT/DS31/AB/R, adopted 30July 1997, p.19.
130Panel Reports, WT/DS27/R/ECU, WT/DS27/R/MEX and WT/DS27/R/USA, para. 7.320 (footnotes deleted).WT/DS27/AB/R
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heisnotproviding anyreselling services".131TheEuropean Communities alsochallenges thePanel 's
conclusion that"integrated companies", which may provide some oftheir services in-house inthe
production ordistribution chain, areservice suppliers within themeaning oftheGATS.
225. Onthefirstofthese twoissues, weagree with thePanel thattheoperators asdefined under
therelevantregulationsoftheEuropeanCommunitiesare,indeed,suppliersof"wholesaletradeservices"
within thedefinition setoutintheHeadnote toSection 6oftheCPC.132Wenote further thatthe
European Communities hasmade afullcommitment forwholesale trade services (CPC 622), with
noconditions orqualifications, initsSchedule ofSpecific Commitments under theGATS.133Although
these operators, asdefined intherelevant ECregulations, areengaged insome activities thatarenot
strictly within thedefinition of"distributive trade services" intheHeadnote toSection 6oftheCPC,
there isnoquestion thatthey arealsoengaged inother activities involving thewholesale distribution
ofbananas thatarewithin thatdefinition.
226. TheHeadnote toSection 6oftheCPC defines "distributive trade services" inrelevant part
asfollows:
...theprincipal services rendered bywholesalers andretailers may
becharacterized asreselling merchandise ,accompanied byavariety
ofrelated, subordinated services ...(emphasis added)
WenotethattheCPC Headnote characterizes the"principal services" rendered bywholesalers
as"reselling merchandise". This means that"reselling merchandise" isnotnecessarily theonlyservice
provided bywholesalers. TheCPC Headnote alsorefers to"avariety ofrelated, subordinated services"
thatmayaccompany the"principal service" of"reselling merchandise". Itisdifficult toconceive how
awholesaler could engage inthe"principal service" of"reselling" aproduct ifitcould notalsopurchase
or,insome cases, import theproduct. Obviously, awholesaler must obtain thegoods bysome means
inorder toresell them.134Inthiscase, forexample, itwould bedifficult toresell bananas inthe
European Communities ifonecould notbuythem orimport them inthefirst place.
131EC'sappellant 'ssubmission, para. 293.
132Provisional Central Product Classification, United Nations Statistical Papers, Series M,No. 77,1991, p.189.
133European Communities andtheir Member States 'Schedule ofSpecific Commitments, GATS/SC/31, 15April 1994,
p.52.
134Afterall,astheEuropean Communi tieshaspointedout,"goods cannot walk"orberesoldbythemsel ves(EC'sappel lant's
submission, para. 236).WT/DS27/AB/R
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227. Thesecond issue relates to"integrated companies". Inourview, even ifacompany isvertically-
integrated, andeven ifitperforms other functions related totheproduction, importation, distribution
andprocessing ofaproduct, totheextent thatitisalsoengaged inproviding "wholesale trade services"
andistherefore affected inthatcapacity byaparticular measure ofaMember initssupply ofthose
"wholesale trade services", thatcompany isaservice supplier within thescope oftheGATS.
228. Forthese reasons, weuphold thePanel 'sfindings onboth these issues.135
3. Article IIoftheGATS
229. TheEuropean Communities appeals thePanel 'sfinding:
...thattheobligation contained inArticle II:1ofGATS toextend
"treatment nolessfavourable" should beinterpreted incasu torequire
providing nolessfavourable conditions ofcompetition.136
The critical issue here iswhether Article II:1oftheGATS applies only todejure,orformal,
discrimination orwhether itapplies alsotodefacto discrimination.
230. ThePanel 'sapproach tothisquestion wastointerpret thewords "treatment nolessfavourable"
inArticle II:1oftheGATS byreference toparagraphs 2and3ofArticle XVII oftheGATS. The
Panel said:
...wenote thatthestandard of"nolessfavourable treatment" in
paragraph 1ofArticle XVII ismeant toprovide fornolessfavourable
conditionsofcompetitionregardlessofwhetherthatisachievedthrough
theapplication offormally identical orformally different measures.
Paragraphs 2and3ofArticle XVII serve thepurpose ofcodifying
thisinterpretation, andinourview, donotimpose new obligations
onMembers additional tothose contained inparagraph 1.Inessence,
the"treatment noless favourable" standard ofArticle XVII:1 is
clarified andreinforced inthelanguage ofparagraphs 2and3.The
absence ofsimilar language inArticle IIisnot, inourview, a
justification forgiving adifferent ordinary meaning interms ofArticle
31(1) oftheVienna Convention tothewords "treatment noless
favourable", which areidentical inboth Articles II:1andXVII:1.137
135Panel Reports, WT/DS27/R/ECU, WT/DS27/R/MEX and WT/DS27/R/USA, para. 7.320.
136Ibid.,para. 7.304.
137Ibid.,para. 7.301.WT/DS27/AB/R
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231. Wefind thePanel 'sreasoning onthisissue tobelessthan fully satisfactory. The Panel
interpreted Article IIoftheGATS inthelight ofpanel reports interpreting thenational treatment
obligation ofArticle IIIoftheGATT. ThePanel alsoreferred toArticle XVII oftheGATS, which
isalsoanational treatment obligation. ButArticle IIoftheGATS relates toMFN treatment, notto
national treatment. Therefore, provisions elsewhere intheGATS relating tonational treatment
obligations,andpreviousGATTpracticerelatingtotheinterpretationofthenationaltreatmentobligation
ofArticle IIIoftheGATT 1994 arenotnecessarily relevant totheinterpretation ofArticle IIofthe
GATS. ThePanel would have been onsafer ground haditcompared theMFN obligation inArticle
IIoftheGATS with theMFN andMFN-type obligations intheGATT 1994.138
232. Articles IandIIoftheGATT 1994 have been applied, inpastpractice, tomeasures involving
defacto discrimination.139Werefer, inparticular, tothepanel report inEuropean Economic Community
-Imports ofBeef from Canada140,which examined theconsistency ofEEC regulations implementing
alevy-free tariff quota forhigh quality grain-fed beef with Article IoftheGATT 1947. Those
regulations made suspension oftheimport levyforsuch beefconditional onproduction ofacertificate
ofauthenticity. Theonly certifying agency authorized toproduce acertificate ofauthenticity wasa
United States agency. Thepanel, therefore, found thattheEEC regulations were inconsistent with
theMFN principle inArticle IoftheGATT 1947 asthey hadtheeffect ofdenying access totheEEC
market toexports ofproducts ofanyorigin other than thatoftheUnited States.
233. TheGATS negotiators chose tousedifferent language inArticle IIandArticle XVII ofthe
GATS inexpressing theobligation toprovide "treatment nolessfavourable". Thequestion naturally
arises: iftheGATS negotiators intended that"treatment nolessfavourable" should have exactly the
same meaning inArticles IIandXVII oftheGATS, why didthey notrepeat paragraphs 2and3of
Article XVII inArticle II?Butthatisnotthequestion here. Thequestion here isthemeaning of
"treatment nolessfavourable" with respect totheMFN obligation inArticle IIoftheGATS. There
ismore than onewayofwriting adefacto non-discrimination provision. Article XVII oftheGATS
ismerely oneofmany provisions intheWTO Agreement thatrequire theobligation ofproviding
"treatment nolessfavourable". Thepossibility thatthetwoArticles may nothave exactly thesame
138Inaddition toArticle I(the fundamental MFN provision oftheGATT), Articles III:7, IV(b), V:2 andV:5, IX:1 and
XIII:1 arealso MFN-type obligations intheGATT 1994.
139SeeEuropean Economic Community -Imports ofBeef from Canada, adopted 10March 1981, BISD 28S/92; Spain -
Tariff Treatment ofUnroasted Coffee ,adopted 11June 1981, BISD 28S/102; andJapan -Tariff onImports ofSpruce-Pine-Fir
(SPF) Dimension Lumber ,adopted 19July 1989, BISD 36S/167.
140Adopted 10March 1981, BISD 28S/92, paras. 4.2-4.3.WT/DS27/AB/R
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meaning does notimply thattheintention ofthedrafters oftheGATS wasthatadejure,orformal,
standard should apply inArticle IIoftheGATS. Ifthatwere theintention, why does Article IInot
sayasmuch? Theobligation imposed byArticle IIisunqualified. Theordinary meaning ofthis
provision does notexclude defacto discrimination. Moreover, ifArticle IIwasnotapplicable tode
facto discrimination, itwould notbedifficult --and, indeed, itwould beagood dealeasier inthecase
oftrade inservices, than inthecase oftrade ingoods --todevise discriminatory measures aimed at
circumventing thebasic purpose ofthatArticle.
234. Forthese reasons, weconclude that"treatment nolessfavourable" inArticle II:1oftheGATS
should beinterpreted toinclude defacto ,aswell asdejure,discrimination. Weshould make itclear
thatwedonotlimit ourconclusion tothiscase. Wehave some difficulty inunderstanding why the
Panel stated thatitsinterpretation ofArticle IIoftheGATS applied "incasu".141
4. Effective Date oftheGATS Obligations
235. TheEuropeanCommunitiesalsoraisesthequestionwhetherthePanelerredingivingretroactive
effect toArticles IIandXVII oftheGATS, contrary totheprinciple stated inArticle 28oftheVienna
Convention .Article 28states thegeneral principle ofinternational lawthat"[u]nless adifferent intention
appears from thetreaty orisotherwise established, itsprovisions donotbind aparty inrelation to
...anysituation which ceased toexist before thedateofentry intoforce ofthetreaty ...". ThePanel
stated initsfinding onthisissue that:
...thescope ofourlegal examination includes only actions which the
ECtook orcontinued totake, ormeasures thatremained inforce or
continued tobeapplied bytheEC,andthusdidnotcease toexist after
theentry intoforce oftheGATS. Likewise, anyfinding ofconsistency
orinconsistencywiththerequirementsofArticlesIIandXVIIofGATS
would bemade with respect totheperiod after theentry intoforce
oftheGATS.142
ThePanel stated, further, inafootnote tothisfinding, that"theECmeasures atissue maybeconsidered
ascontinuing measures, which insome cases were enacted before theentry intoforce oftheGATS
butwhich didnotcease toexist after thatdate(theopposite ofthesituation envisaged inArticle 28)".143
141Panel Reports, WT/DS27/R/ECU, WT/DS27/R/MEX and WT/DS27/R/USA, para. 7.304.
142Ibid.,para. 7.308 (footnotes deleted).
143Ibid.,footnote 486.WT/DS27/AB/R
Page 100
236. TheEuropean Communities argues thatthecontinuing situation atissue hereisnotthecontinued
existence ofRegulation 404/93 andother related regulations, butis,instead, thealleged discrimination
against andamong foreign service suppliers. TheEuropean Communities maintains thatdefacto
discrimination isafactataparticular point intime, anddoes notnecessarily continue foraslong as
alawremains inforce. TheEuropean Communities argues thatthePanel based itsfinding with respect
todefacto discrimination ondata related to1992, thatis,before theentry intoforce oftheGATS
on1January 1995. Intheview oftheEuropean Communities, there isnobasis fortheassumption
thatthisfactual datarelating to1992, even ifcorrect, continued toexist after theentry intoforce of
theGATS. Intheabsence ofevidence tothecontrary, theEuropean Communities argues, itshould
beconcluded thatthedefacto discrimination in1992 wasasituation which ceased toexist before the
entry intoforce oftheGATS. Consequently, theEuropean Communities contends thatthenon-
retroactivity principle inArticle 28oftheVienna Convention applies inthiscase, andthatthisinvalidates
thePanel 'sconclusion ofinconsistency oftheECimport licensing regime with Articles IIandXVII
oftheGATS.
237. Itis,however, evident from theterms ofitsfinding thatthePanel concluded, asamatter of
fact, thatthedefacto discrimination didcontinue toexist after theentry intoforce oftheGATS.144
This factual finding isbeyond review bytheAppellate Body. Thus, wedonotreverse ormodify the
Panel 'sconclusion inparagraph 7.308 ofthePanel Reports.
5. Burden ofProof
238. TheEuropean Communities argues thatthePanel hasnotfollowed theruling bytheAppellate
Body inUnited States -Shirts andBlouses from India145,asitrelates totheburden ofproof, indeciding
thefollowing issues:
• which companies area"juridical person ofanother Member" within themeaning of
Article XXVIII(m) oftheGATS andare"owned", "controlled" byor"affiliated" with
such ajuridical person ofanother Member within themeaning ofArticle XXVIII(n)
oftheGATS andareproviding wholesale trade services through commercial presence
within theEuropean Communities;
144Panel Reports, WT/DS27/R/ECU, WT/DS27/R/MEX and WT/DS27/R/USA, para. 7.308.
145Appellate Body Report, WT/DS33/AB/R, adopted 23May 1997.WT/DS27/AB/R
Page 101
• themarket shares oftherespective companies engaged inwholesale trade inbananas
within theEuropean Communities; and
• thecategory of"operators" thatinclude ordirectly represent EC(orACP) producers
who have suffered damage from hurricanes.
239. Inourview, theconclusions bythePanel onwhether DelMonte isaMexican company146,
theownership andcontrol ofcompanies established intheEuropean Communities thatprovide wholesale
trade services inbananas147,themarket shares ofsuppliers ofComplaining Parties 'origin ascompared
with suppliers ofEC(orACP) origin148,andthenationality ofthemajority ofoperators that"include
ordirectly represent" EC(orACP) producers149,areallfactual conclusions. Therefore, wedecline
toruleonthese arguments made bytheEuropean Communities.
6. Whether theECLicensing Procedures areDiscriminatory Under Articles II
andXVII oftheGATS
240. TheEuropeanCommunitiesarguesthattheEClicensingsystemforbananasisnotdiscriminatory
underArticlesIIandXVIIoftheGATS,becausethevariousaspectsofthesystem,includingtheoperator
category rules, theactivity function rules andthespecial hurricane licence rules, "pursue entirely
legitimate policies" and"are notinherently discriminatory indesign oreffect".150
241. Weseenospecific authority either inArticle IIorinArticle XVII oftheGATS forthe
proposition thatthe"aims andeffects" ofameasure areinanywayrelevant indetermining whether
thatmeasure isinconsistent with those provisions. IntheGATT context, the"aims andeffects" theory
haditsorigins intheprinciple ofArticle III:1 thatinternal taxes orcharges orother regulations "should
notbeapplied toimported ordomestic products soastoafford protection todomestic production".
There isnocomparable provision intheGATS. Furthermore, inourReport inJapan -Alcoholic
146Panel Reports, WT/DS27/R/ECU, WT/DS27/R/MEX, WT/DS27/R/USA, para. 7.330.
147Ibid.,para. 7.331.
148Ibid.,paras. 7.333-7.334.
149Panel Reports, WT/DS27/R/ECU and WT/DS27/R/USA, para. 7.392.
150EC'sappellant 'ssubmission, para. 301.WT/DS27/AB/R
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Beverages151,theAppellate Body rejected the"aims andeffects" theory with respect toArticle III:2
oftheGATT 1994. TheEuropean Communities cites anunadopted panel report dealing with Article
IIIoftheGATT 1947, United States -Taxes onAutomobiles152,asauthority foritsproposition, despite
ourrecent ruling.
(a) Operator Category Rules
242. TheEuropean Communities argues thattheaimoftheoperator category system, inview of
theobjective ofintegrating thevarious national markets, andofthediffering situations ofbanana traders
inthevarious Member States, wasnotdiscriminatory butrather wastoestablish machinery fordividing
thetariff quota among thedifferent categories oftraders concerned. Intheview oftheEuropean
Communities, theoperator category system alsoserves thepurpose ofdistributing quota rents among
thevarious operators inthemarket. TheEuropean Communities emphasizes, furthermore, thatthe
principle oftransferability oflicences isused inorder todevelop market structures without disrupting
existing commercial links. Theeffect oftheoperator category rules, theEuropean Communities argues,
istoleave acommercial choice inthehands oftheoperators.
243. Wedonotagree with theEuropean Communities thattheaims andeffects oftheoperator
category system arerelevant indetermining whether ornotthatsystem modifies theconditions of
competition between service suppliers ofECorigin andservice suppliers ofthird-country origin. Based
ontheevidence before it153,thePanel concluded "that most ofthesuppliers ofComplainants 'origin
areclassified inCategory Aforthevastmajority oftheir pastmarketing ofbananas, andthatmost
ofthesuppliers ofEC(orACP) origin areclassified inCategory Bforthevastmajority oftheir past
marketing ofbananas".154Weseenoreason togobehind these factual conclusions ofthePanel.
244. Weconcur, therefore, with thePanel 'sconclusion that"theallocation toCategory Boperators
of30percentofthelicences allowing fortheimportation ofthird-country andnon-traditional ACP
151Appellate Body Report, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted 1November 1996.
152DS31/R, 11October 1994, unadopted.
153Wenote thattheEuropean Communities contests thePanel 'sfindings inparas. 7.331, 7.333 and7.334 ofthePanel
Reports, WT/DS27/R/ECU, WT/DS27/R/MEX, WT/DS27/R/USA, concerning therelative market shares ofsuppliers of
EC(orACP) origin ascompared with suppliers ofComplaining Parties 'origin. Wealso note thatthePanel indicated that
itrelied onevidence supplied bytheComplaining Parties, andthattheEuropean Communities failed topresent information
that would cast doubt ontheevidence presented bytheComplaining Parties (see Panel Reports, WT/DS27/R/ECU,
WT/DS27/R/MEX, WT/DS27/R/USA, paras. 7.331 and 7.333).
154Panel Reports, WT/DS27/R/ECU, WT/DS27/R/MEX, WT/DS27/R/USA, para. 7.334 (footnotes deleted).WT/DS27/AB/R
Page 103
bananas atin-quota tariff rates creates lessfavourable conditions ofcompetition forlikeservice suppliers
ofComplainants 'origin andistherefore inconsistent withtherequirement ofArticle XVII ofGATS".155
Wealsoconcur with thePanel 'sconclusion thattheallocation toCategory Boperators of30percent
ofthelicences forimporting third-country andnon-traditional ACP bananas atin-quota tariff rates
isinconsistent with therequirements ofArticle IIoftheGATS.156
(b) Activity Function Rules
245. TheEuropean Communities maintains thattheaimoftheactivity function rules istoprotect
thebanana ripeners against theconcentration ofeconomic bargaining power inthehands oftheprimary
importers asaresult ofthetariff quota. TheEuropean Communities contends thatthepolicy objective
istocorrect theposition ofallripeners vis-à-vis allsuppliers ofbananas, without distinction asto
nationality. Furthermore, theEuropean Communities asserts, theeffect oftheactivity function rules
depends onthecommercial choices made byoperators. Operators thatpreviously supplied wholesale
trade services tobananas brought under thetariff quota canavoid orreduce theextent towhich they
aresubject totheactivity function rules byextending their services totheECmarket segment. These
operators mayalsoresort tolicence pooling within independent ripeners, ortheymayretain ownership
ofthebananas they import andhave them ripened under contract. Thus, intheview oftheEuropean
Communities, there aremany options open toprimary importers, andtheactivity function rules do
nothave theeffect ofproviding lessfavourable conditions ofcompetition.
246. Asindicated earlier, wedonotaccept theargument bytheEuropean Communities thatthe
aims oreffects oftheactivity function rules arerelevant indetermining whether they provide less
favourable conditions ofcompetition toservices andservice suppliers offoreign origin. Inthisrespect,
wenote thePanel 'sfactual conclusions that:
...even theECstatistics suggest that74to80percentofripeners are
ECcontrolled. Thus, weconclude thatthevastmajority oftheripening
capacityintheECisownedorcontrolledbynaturalorjuridicalpersons
oftheECandthatmost ofthebananas produced inorimported to
theECareripened inECowned orcontrolled ripening facilities.157
155Panel Reports, WT/DS27/R/ECU, WT/DS27/R/MEX, WT/DS27/R/USA, para. 7.341.
156Ibid.,para. 7.353.
157Panel Reports, WT/DS27/R/ECU and WT/DS27/R/USA, para. 7.362 (footnotes deleted).WT/DS27/AB/R
Page 104
Wealsonote thePanel 'sfactual finding that"most oftheservice suppliers ofComplainants '
origin willusually beable toclaim reference quantities only forprimary importation, andpossibly
forcustomsclearance,butnotfortheperformanceofripeningactivities".158Giventhesefactualfindings,
weseenoreason toreverse thePanel 'slegal conclusion thattheallocation toripeners ofacertain
proportionoftheCategoryAandBlicencesallowingtheimportationofthird-countryandnon-traditional
ACP bananas atin-quota tariff rates creates lessfavourable conditions ofcompetition forlikeservice
suppliers ofComplainants 'origin, andistherefore inconsistent with therequirements ofArticle XVII
ofGATS.159
(c) Hurricane Licences
247. TheEuropean Communities asserts thatthepurpose ofthehurricane licences istocompensate
those thatsuffer damage caused bytropical storms. With respect toArticle XVII oftheGATS, the
European Communities maintains thatthehurricane licence provisions donotmodify competitive
conditions between ECoperators andoperators ofComplaining Parties 'origin. With respect toArticle
IIoftheGATS, theEuropean Communities argues thatthere isnodefacto discrimination since there
isnoindication inthehurricane licence rules thatoperators thatarenotACP-owned or-controlled
cannotownorrepresentACPproducersonthesamebasisasACPorEC-ownedor-controlledoperators.
248. Once again, wedonotaccept theargument bytheEuropean Communities thattheaims and
effects ofameasure arerelevant indetermining itsconsistency with Articles IIorXVII oftheGATS.
Wenote thatunder theEChurricane licence rules, only operators who include ordirectly represent
ECorACP producers orproducer organizations affected byatropical storm areeligible forallocation
ofhurricane licences.160ThePanel made aconclusion offactthat"thevastmajority ofoperators who
‘include ordirectly represent ’ECorACP producers areservice suppliers ofEC(orACP) origin".161
Given thisfactual finding, wedonotreverse thePanel 'sconclusions inparagraphs 7.393 and7.397
ofthePanel Reports.
158Panel Reports, WT/DS27/R/ECU and WT/DS27/R/USA, para. 7.362 (footnotes deleted).
159Ibid.,para. 7.368.
160Ibid.,para. 7.392.
161Ibid.WT/DS27/AB/R
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D. Nullification orImpairment
249. ThePanel concluded that:
...theinfringement ofobligations bytheECunder anumber ofWTO
agreements, areaprima facie case ofnullification orimpairment of
benefits inthemeaning ofArticle 3.8oftheDSU, which provides that
"there isnormally apresumption thatabreach oftherules hasan
adverse impact onother Members parties tothatcovered agreement".
Totheextent thatthispresumption canberebutted, inourview the
EChasnotsucceeded inrebutting thepresumption thatitsbreaches
ofGATT, GATS andLicensing Agreement rules have nullified or
impaired benefits oftheComplainants.162
TheEuropean Communities hasappealed thisconclusion.
250. Weobserve, first ofall,thattheEuropean Communities attempts torebut thepresumption
ofnullification orimpairment with respect tothePanel 'sfindings ofviolations oftheGATT 1994 on
thebasis thattheUnited States hasnever exported asingle banana totheEuropean Community, and
therefore, could notpossibly suffer anytrade damage. The attempted rebuttal bytheEuropean
Communities applies onlytoonecomplainant, theUnited States, andtoonly oneagreement, theGATT
1994. Inourview, thePanel erred inextending thescope ofthepresumption inArticle 3.8ofthe
DSU toclaims made under theGATS aswellastoclaims made bytheComplaining Parties other than
theUnited States.
251. Wenote thatArticle 12.7 oftheDSU provides inpartthat:
...thereport ofapanel shall setoutthefindings offact, the
applicability ofrelevant provisions andthebasic rationale behind any
findings andrecommendations thatitmakes. (emphasis added)
Inparagraph 7.398 oftheReports, thePanel hasprovided nomore bywayofa"basic rationale" than
areference inafootnote toaprevious panel report.163That said, wenote thatthetwoissues of
nullification orimpairment andofthestanding oftheUnited States areclosely related. Indeed, the
162Panel Reports, para. 7.398.
163Ibid.,footnote 523.WT/DS27/AB/R
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European Communities argues these twoissues inthealternative. InthepartofthePanel Reports
dealing with standing164,twopoints aremade thatthePanel may well have hadinmind inreaching
itsconclusions onnullification orimpairment. OneisthattheUnited States isaproducer ofbananas
andthatapotential export interest bytheUnited States cannot beexcluded; theother isthattheinternal
market oftheUnited States forbananas could beaffected bytheECbananas regime andbyitseffects
onworld supplies andworld prices ofbananas. These arematters thatwehave already decided are
relevant tothequestion ofthestanding oftheUnited States under theGATT 1994. They areequally
relevant tothequestion whether theEuropean Communities hasrebutted thepresumption ofnullification
orimpairment.
252. So,too,isthepanel report inUnited States -Superfund ,towhich thePanel referred.165In
thatcase, thepanel examined whether measures with "only aninsignificant effect onthevolume of
exports donullify orimpair benefits under Article III:2 ...". Thepanel concluded (and insodoing,
confirmed theviews ofprevious panels) that:
ArticleIII:2,firstsentence,cannotbeinterpretedtoprotectexpectations
onexport volumes; itprotects expectations onthecompetitive
relationship between imported anddomestic products. Achange in
thecompetitiverelationshipcontrarytothatprovisionmustconsequently
beregarded ipso facto asanullification orimpairment ofbenefits
accruing under theGeneral Agreement. Ademonstration that a
measure inconsistent with Article III:2, first sentence, hasnoor
insignificant effects would therefore intheview ofthePanel notbe
asufficientdemonstrationthatthebenefitsaccruingunderthatprovision
hadnotbeen nullified orimpaired even ifsuch arebuttal were in
principle permitted.166
253. Thepanel inUnited States -Superfund subsequently decided "not toexamine thesubmissions
oftheparties onthetrade effects ofthetaxdifferential"167onthebasis ofthelegal grounds ithad
enunciated. Thereasoning inUnited States -Superfund applies equally inthiscase.
254. Forthese reasons, wecanfindnolegal basis onwhich toreverse theconclusions ofthePanel
inparagraph 7.398 ofthePanel Reports.
164Panel Reports, paras. 7.47-7.52.
165Ibid.,footnote 523.
166Adopted on17June 1987, BISD 34S/136, para. 5.1.9.
167Ibid.,para. 5.1.10.WT/DS27/AB/R
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V. Findings andConclusions
255. Forthereasons setoutinthisReport, theAppellate Body:
(a) upholds thePanel 'sconclusion thattheUnited States hadstanding tobring claims under
theGATT 1994 inthiscase;
(b) upholds thePanel 'sconclusion thattherequest fortheestablishment ofthepanel in
thiscasewasconsistent with Article 6.2oftheDSU., with themodification thatafaulty
request cannot be"cured" bythefirst written submission ofacomplaining party;
(c) reverses thePanel 'sconclusions thatcertain oftheclaims under Article XVII ofthe
GATS made byMexico andalltheclaims made under theGATS byGuatemala and
Honduras arenottobeincluded within thescope ofthiscase;
(d) upholds thePanel 'sconclusion thattheAgreement onAgriculture does notpermit the
European Communities toactinconsistently with therequirements ofArticle XIII of
theGATT 1994;
(e) upholds thePanel 'sfinding thattheallocation oftariff quota shares, whether by
agreementorbyassignment,tosome,butnottoother,Membersnothavingasubstantial
interest insupplying bananas totheEuropean Communities isinconsistent withArticle
XIII:1 oftheGATT 1994;
(f) upholds thePanel 'sfinding thatthetariff quota reallocation rules oftheBFA are
inconsistent with Article XIII:1 oftheGATT 1994, andmodifies thePanel 'sfinding
byconcluding thattheBFA tariff quota reallocation rules arealsoinconsistent with
thechapeau ofArticle XIII:2 oftheGATT 1994;
(g) concludes thattheEuropean Communities is"required" under therelevant provisions
oftheLomé Convention to:provide duty-free access fortraditional ACP bananas,
provide duty-free access for90,000 tonnes ofnon-traditional ACP bananas, provide
amargin oftariff preference intheamount of100ECU/tonne forallother non-
traditional ACP bananas, andallocate tariff quota shares tothetraditional ACP States
intheamount oftheir pre-1991 best-ever export volumes;WT/DS27/AB/R
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(h) concludesthattheEuropeanCommunitiesisnot"required"undertherelevantprovisions
oftheLomé Convention to:allocate tariff quota shares totraditional ACP States in
excess oftheir pre-1991 best-ever export volumes, allocate tariff quota shares toACP
States exporting non-traditional ACP bananas, ormaintain theECimport licensing
procedures thatareapplied tothird-country andnon-traditional ACP bananas;
(i) andtherefore, based ontheconclusions in(g)and(h),upholds thefindings ofthePanel
thattheEuropean Communities is"required" under therelevant provisions oftheLomé
Convention toprovide preferential tariff treatment fornon-traditional ACP bananas,
isnot"required" toallocate tariff quota shares totraditional ACP States inexcess of
theirpre-1991best-everexportvolumes,andisnot"required"tomaintaintheECimport
licensing procedures thatareapplied tothird-country andnon-traditional ACP bananas;
(j) reverses thefinding ofthePanel thattheLomé Waiver waives anyinconsistency with
Article XIII:1 oftheGATT 1994 totheextent necessary topermit theEuropean
Communities toallocate tariff quota shares totraditional ACP States;
(k) upholds thePanel 'sfindings thatthenon-discrimination provisions oftheGATT 1994,
specifically, Articles I:1andXIII, apply totherelevant ECregulations, irrespective
ofwhether there areoneormore "separate regimes" fortheimportation ofbananas;
(l) upholds thePanel 'sfinding thatlicensing procedures fortariff quotas arewithin the
scope oftheLicensing Agreement ,andreverses thePanel 'sfinding thatArticle 1.3
oftheLicensingAgreementprecludestheimpositionofdifferentimportlicensingsystems
onlikeproducts when imported from different Members;
(m) reverses thePanel 'sfinding thatArticle X:3(a) oftheGATT 1994 precludes the
imposition ofdifferent import licensing systems onlikeproducts when imported from
different Members; andupholds thePanel 'sfinding thatboth Article 1.3ofthe
Licensing Agreement andArticle X:3(a) oftheGATT 1994 apply totheECimport
licensing procedures, with themodification thatthePanel should have applied the
provisions oftheLicensing Agreement first, asitisthemore specific anddetailed
agreement;WT/DS27/AB/R
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(n) upholds thePanel 'sconclusions thattheECactivity function rules andtheBFA export
certificate requirement areinconsistent with Article I:1oftheGATT 1994;
(o) upholds thePanel 'sfindings thatArticle III:4 oftheGATT 1994 applies totheEC
import licensing procedures, andthattheECpractice with respect tohurricane licences
isinconsistent with Article III:4 oftheGATT 1994;
(p) upholds thePanel 'sconclusions thatthere isnolegal basis foranapriori exclusion
ofmeasures within theECimport licensing regime from thescope oftheGATS and
thattheGATT 1994 andtheGATS may overlap inapplication toameasure;
(q) upholds thePanel 'sfindings that"operators" asdefined intherelevant ECregulations
areservice suppliers within themeaning ofArticle I:2(c) oftheGATS thatareengaged
inproviding "wholesale trade services" andthat, where such operators form partof
vertically-integrated companies, such companies areservice suppliers forthepurposes
ofthiscase;
(r) upholds thePanel 'sconclusion thatArticle II:1oftheGATS should beinterpreted
toinclude defacto ,aswell asdejure,discrimination;
(s) upholds thePanel 'sconclusion thatthescope ofitslegal examination oftheapplication
ofArticles IIandXVII oftheGATS includes only actions that theEuropean
Communitiestook,orcontinuedtotake,ormeasuresthatremainedinforceorcontinued
tobeapplied bytheEuropean Communities, andthusdidnotcease toexist after the
entry intoforce oftheGATS;
(t) upholds thePanel 'sfindings relating to:which companies areowned orcontrolled
by,orareaffiliated with, persons ofComplaining Parties 'origin, andareproviding
wholesale trade services inbananas through commercial presence within theEuropean
Communities; therespective market shares ofservice suppliers ofComplaining Parties '
origin ascompared with service suppliers ofEC(orACP) origin; andthenationality
ofthemajority ofoperators that"include ordirectly represent" EC(orACP) producers
thathave suffered damage from hurricanes;WT/DS27/AB/R
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(u) upholds thePanel 'sconclusions thattheallocation toCategory Boperators of30per
centofthelicences allowing theimportation ofthird-country andnon-traditional ACP
bananas atin-quota tariff rates isinconsistent with Articles IIandXVII oftheGATS;
(v) upholds thePanel 'sconclusions thattheallocation toripeners ofacertain portion of
theCategory AandBlicences allowing theimportation ofthird-country andnon-
traditional ACP bananas atin-quota tariff rates isinconsistent with Article XVII of
theGATS;
(w) upholds thePanel 'sconclusions thattheECpractice with respect tohurricane licences
isinconsistent with Articles IIandXVII oftheGATS; and
(x) upholds thePanel 'sfinding thattheEuropean Communities hasnotsucceeded in
rebutting thepresumption thatitsbreaches oftheGATT 1994 have nullified orimpaired
thebenefits oftheUnited States, withthemodification thatthisfinding should belimited
totheUnited States andtotheEC'sobligations under theGATT 1994.
256. The foregoing legal findings andconclusions uphold, modify orreverse thefindings and
conclusions ofthePanel inParts VIIandIXofthePanel Reports, butleave intact thefindings and
conclusions ofthePanel thatwere notthesubject ofthisappeal.
257. The Appellate Body recommends thattheDispute Settlement Body request theEuropean
Communities tobring themeasures found inthisReport andinthePanel Reports, asmodified bythis
Report, tobeinconsistent with theGATT 1994 andtheGATS intoconformity with theobligations
oftheEuropean Communities under those agreements.WT/DS27/AB/R
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Signed intheoriginal atGeneva this22nd dayofAugust 1997 by:
_______________________________
James Bacchus
Presiding Member
_______________________________ _______________________________
Christopher Beeby Said El-Naggar
Member Member