WORLD TRADE  
ORGANIZATION  WT/DS246/14 
20 September 2004 
 (04-3944) 
 Original:   English 
   
 
     
 
    
 
 
EUROPEAN COMMUNITIES  – CONDITIONS FOR THE GRANTING 
OF TARIFF PREFERENCES TO  DEVELOPING COUNTRIES 
 
 
 
ARB-2004-1/17 
 
   
Arbitration  
under Article 21.3(c) of the  
Understanding on Rules and Procedures  
Governing the Settlement of Disputes  
 
 
 
     
 
 
Award of the Arbitrator 
John Lockhart 
   WT/DS246/14 
 Page i 
 
 
 
I. Introduction................................................................................................................... ..............1  
II. Arguments of the Parties....................................................................................................... ......2  
A. European Communities.................................................................................................. 2 
B. India.......................................................................................................................... .....9 
III. Reasonable Period of Time...................................................................................................... .13 
A. General Principles....................................................................................................... 13 
B. The Measure to be Brought into Conformity ............................................................... 15 
C. Implementation Process............................................................................................... 17 
1. Overall Process ...............................................................................................17  
2. Individual Steps in Implementation................................................................18  
3. Institutional Changes ......................................................................................24  
D. Nature of the Drug Arrangements ............................................................................... 25 
E. Article 21.2 of the DSU................................................................................................ 26 
IV. The Award ...................................................................................................................... ..........27  
 WT/DS246/14 
Page ii  
 
TABLE OF ARBITRATIONS CITED IN THIS AWARD 
 
Short Title Full Title and Citation of Arbitration 
Argentina – Hides and Leather  Award of the Arbitrator, Argentina – Measures Affecting the Export of 
Bovine Hides and Import of Finished Leather – Arbitration under 
Article 21.3(c) of the DSU , WT/DS155/10, 31 August 2001, DSR 2001:XII, 
6013 
Canada – Autos  Award of the Arbitrator, Canada – Certain Measures Affecting the 
Automotive Industry – Arbitration under Article 21.3(c) of the DSU , 
WT/DS139/12, WT/DS142/12, 4 October 2000, DSR 2000:X, 5079 
Canada – Patent Term  Award of the Arbitrator, Canada – Term of Patent Protection – Arbitration 
under Article 21.3(c) of the DSU , WT/DS170/10, 28 February 2001, 
DSR 2001:V, 2031 
Canada – Pharmaceutical Patents  Award of the Arbitrator, Canada – Patent Protection of Pharmaceutical 
Products – Arbitration under Article 21.3(c) of the DSU , WT/DS114/13, 
18 August 2000 
Chile – Alcoholic Beverages  Award of the Arbitrator, Chile – Taxes on Alcoholic Beverages – Arbitration 
under Article 21.3(c) of the DSU , WT/DS87/15, WT/DS110/14, 
23 May 2000, DSR 2000:V, 2583 
Chile – Price Band System  Award of the Arbitrator, Chile – Price Band System and Safeguard Measures 
Relating to Certain Agricultural Products – Arbitration under Article 21.3(c) 
of the DSU , WT/DS207/13, 17 March 2003 
EC – Bananas III  Award of the Arbitrator, European Communities – Regime for the 
Importation, Sale and Distribution of Bananas – Arbitration under Article 21.3(c) of the DSU , WT/DS27/15, 7 January 1998, DSR 1998:I, 3 
EC – Hormones  Award of the Arbitrator, EC Measures Concerning Meat and Meat 
Products (Hormones) – Arbitration under Article 21.3(c) of the DSU , 
WT/DS26/15, WT/DS48/13, 29 May 1998, DSR 1998:V, 1833 
Indonesia – Autos  Award of the Arbitrator, Indonesia – Certain Measures Affecting the 
Automobile Industry – Arbitration under Article 21.3(c) of the DSU , 
WT/DS54/15, WT/DS55/14, WT/DS59/13, WT/DS64/12, 7 December 1998, DSR 1998:IX, 4029 
Korea – Alcoholic Beverages  Award of the Arbitrator, Korea – Taxes on Alcoholic Beverages – 
Arbitration under Article 21.3(c) of the DSU , WT/DS75/16, WT/DS84/14, 
4 June 1999, DSR 1999:II, 937 
US – 1916 Act  Award of the Arbitrator, United States – Anti-Dumping Act of 1916 – 
Arbitration under Article 21.3(c) of the DSU , WT/DS136/11, WT/DS162/14, 
28 February 2001, DSR 2001:V, 2017 
US – Offset Act  
(Byrd Amendment ) Award of the Arbitrator, United States – Continued Dumping and Subsidy 
Offset Act of 2000 – Arbitration under Article 21.3(c) of the DSU , 
WT/DS217/14, WT/DS234/22, 13 June 2003 
US – Section 110(5) Copyright Act  Award of the Arbitrator, United States – Section 110(5) of the US Copyright 
Act – Arbitration under Article 21.3(c) of the DSU , WT/DS160/12, 
15 January 2001, DSR 2001:II, 657 
  WT/DS246/14 
 Page 1 
 
 
WORLD TRADE ORGANIZATION  
AWARD OF THE ARBITRATOR  
 
 European Communities – Conditions for the 
Granting of Tariff Preferences to Developing Countries 
 Parties: 
 
European Communities 
India 
  ARB-2004-1/17 
  Arbitrator:  
 John Lockhart 
 
  
I. Introduction 
1. On 20 April 2004, the Dispute Settlement Body (the "DSB") adopted the Appellate Body 
Report
1 and the Panel Report2, as modified by the Appellate Body Report, in  European  
Communities – Conditions for the Granting of  Tariff Preferences to Developing Countries  ("EC –
 Tariff Preferences ").3  At the DSB meeting of 19 May 20 04, the European Communities confirmed 
its intention to implement the recommendations and ruli ngs of the DSB in this dispute and stated that 
it would require a "reasonable period of time" in which to do so, pursuant to Article 21.3 of the 
Understanding on Rules and Procedures Governing the Settlement of Disputes   (the "DSU").4   
2. On 16 July 2004, India informed the DSB that consultations with the European Communities 
had not resulted in agreement on the reasonable peri od of time for implementation.  India therefore 
requested that such period be determined by binding  arbitration, in accordance with Article 21.3(c) of 
the DSU.5   
3. The European Communities and India were unable to  agree on an arbitrator within 10 days of 
the matter being referred to arbitration.  Therefore,  on 26 July 2004, India requested that the Director-
General appoint an arbitrator pursuant to footnote 12  to Article 21.3(c) of the DSU.  The Director-
                                                      
1Appellate Body Report, WT/DS246/AB/R. 
2Panel Report, WT/DS246/R. 
3WT/DS246/10. 
4WT/DSB/M/169, para. 34. 
5WT/DS246/12. WT/DS246/14 
Page 2  
 
General appointed me as arbitrator on 4 August 2004, after consulting the parties.
6  I informed the 
parties of my acceptance of the appointme nt by letter dated 6 August 2004.   
4. The European Communities and India have agreed that this award will be deemed to be an 
arbitration award under Article 21.3(c) of the DSU,  notwithstanding the expiry of the 90-day period 
stipulated in Article 21.3(c).7  The parties have also agreed, pursu ant to Article 21.4 of the DSU, that 
"exceptional circumstances" in this dispute justify the determination of the reasonable period of time 
more than 18 months after the establishment of the Panel.8 
5. The European Communities and India provided their written submissions to me on 
18 August 2004.  I requested additional informati on from the European Communities by letter dated 
24 August 2004, and the European Communities provided a written response on 1 September 2004.9  
An oral hearing was held on 2 September 2004.   
II. Arguments of the Parties 
A. European Communities 
6. The European Communities requests that I dete rmine the "reasonable period of time" for 
implementation of the recommendations  and rulings of the DSB in this  dispute to be 20 months and 
10 days from the date of adoption by the DSB of the Panel and Appellate Body Reports, which it 
calculates as being "until 1 January 2006".10   
7. The European Communities descri bes the "general standard" for determining the reasonable 
period of time under Article 21.3(c) of the DSU as that set out in the Award of the Arbitrator in  EC – 
Hormones .  That is, the reasonable period of time "shoul d be the shortest period possible within the 
legal system of the Member to implement the recommendations and rulings of the DSB".11  T h e  
European Communities submits that subsequent arbitr ators have confirmed that this standard does not 
                                                      
6WT/DS246/13. 
7The 90-day period following adoption of the Panel and Appellate Body Reports expired on 
19 July 2004. 
8The Panel was established on 27 January 2003. (WT/DS246/5) 
9"Responses of the European Communities to the Advance Questions of the Arbitrator", 
1 September 2004. 
10European Communities' submission, paras. 2 and 43.  In response to questioning at the oral hearing, 
the European Communities indicated that it calculates the reasonable period of time in the following manner:  
the period begins to run on 21 April 2004 (that is, the day after the adoption of the Panel and Appellate Body Reports);  20 months and 10 days later is 31 December 2005;  the period ends at "zero hours" on 
1 January 2006. 
11Ibid., para. 5, quoting Award of the Arbitrator, EC – Hormones , para. 26.    WT/DS246/14 
 Page 3 
 
 
require the use of "an expeditious or extraordinary legislative procedure"12 and that the particular 
circumstances of implementation need to be consid ered, including:  the nature of the implementing 
measure as legislative and/or administrative;  the legislative complexity of the implementing measure;  
the intricacy of the lawmaking process;  and "whe ther the measure concerned is so fundamentally 
integrated into the domestic system that opposition to changes reflects a serious debate".13  T h e  
European Communities maintains that  each of these particular circumstances is relevant to this 
arbitration. 
8. The European Communities contends that th e "legislative task" of implementing the 
recommendations and rulings in this dispute is "v ery complex" because of "the intricacy of the 
Appellate Body findings".14  According to the European Comm unities, implementation will require 
the following two steps, in turn: 
(a) First, modification of the special arrangements to combat drug production and 
trafficking (the "Drug Arrangements") contained in the European Communities' existing Generalized System of Preferences ("GSP") scheme, which is embodied in Council Regulation (EC) No. 2501/2001 of  10 December 2001 ("Regulation 2501").
15  
The European Communities submits that, as th e current GSP scheme is due to expire 
on 31 December 200516, it is "[m]ost logical" for the modification of the Drug 
Arrangements to coincide with the adopti on of a new GSP scheme "in order to avoid 
any gap for granting the additional tariff preferences to affected beneficiary 
developing countries".17  The European Communities highlights the "practical 
absurdity" of modifying the Drug Arrangements and then, shortly after, adopting a new GSP scheme.
18    
                                                      
12European Communities' submission, para. 6. 
13Ibid., para. 7, referring to Award of the Arbitrator,  Chile – Price Band System , para. 48. 
14Ibid., para. 10.  
15Official Journal of the European Communities , L Series, No. 346 (31 December 2001), p. 1. (Exhibit 
EC-1 submitted by the European Communities to the Arbitrator)   
16Council Regulation (EC) No. 2 211/2003 of 15 December 2003, Official Journal of the European 
Union , L Series, No. 332 (19 December 2003), p. 1. (Exh ibit EC-2 submitted by the European Communities to 
the Arbitrator) 
17"Responses of the European Communities to the Advance Questions of the Arbitrator", 
1 September 2004, p. 5. 
18European Communities' statement at the oral hearing. WT/DS246/14 
Page 4  
 
(b) Secondly, selection of the developing country beneficiaries under special or 
additional arrangements to address particular  development needs within the new GSP 
scheme, taking into account the interests of the current beneficiaries of the Drug 
Arrangements in accordance with Article  21.2 of the DSU.  The European 
Communities maintains that it can only comply  with Article 21.2 and ensure "that all 
developing countries which have similar deve lopment needs continue to enjoy special 
tariff preferences" if the step of selecting beneficiaries is included in the calculation 
of the reasonable period of time.
19  The European Communities supports its argument 
by stating that "the Appellate Body explicitly acknowledged that developing 
countries with special needs might enjoy additional tariff preferences".20 
9. According to the European Communities, the fi rst step in implementation will involve the 
adoption by the Council of the European Union (t he "Council") of a regulation to modify the Drug 
Arrangements and, concurrently, establish a new GSP scheme (the "Council Regulation").21  T h i s  
process will involve several steps, which th e European Communities describes as follows: 
(a) Proposal by the Commission of the European Communities (the "Commission")  
 The Commission is a "political body" with "the exclusive right of legislative initiative".22  The 
Commission began discussing the recommendations and rulings in the present dispute shortly after they were adopted, and it subsequently issued guidelines on this matter as part of a 
communication to the Council and other relevant  institutions regarding the new GSP scheme 
to commence in 2006.
23  The next step is for the Commission services24 to prepare a proposal 
for presentation to the Commissioners, taking into account the views expressed by "all relevant stakeholders"
25 on the initial communication to th e Council.  The cabinet of each 
                                                      
19European Communities' submission, para. 14. 
20Ibid., para. 13. 
21Ibid., para. 12, as clarified by the Europe an Communities at the oral hearing. 
22Ibid., para. 17. 
23Communication from the Commission to the Council, the European Parliament and the European 
Economic and Social Committee, Developing countries, inte rnational trade and sustainable development:  the 
function of the Community's generalised system of preferences (GSP) for the ten-year period from 2006 to 2015 , 
COM(2004) 461 final, 7 July 2004, pp. 6, 9, and 10. (Exhibit EC-5 submitted by the European Communities to 
the Arbitrator) 
24In response to questioning at the oral hearing, the European Communities explained that the 
Commission "services" are similar to minist ries or agencies of the Commission. 
25European Communities' statement at the oral hearing.  WT/DS246/14 
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Commissioner26 conducts a "political review"27 of the proposal, and then the Commissioners 
adopt the proposal by majority vote.  The propo sal is then translated into the 20 official 
languages and transmitted to the Council.  The European Communities estimates that the 
Commission could adopt a proposal regarding the Council Regulation in October 2004. 
(b) Opinion of the European Parliament on the Commission's proposal  
The European Parliament is the "co-legislat or" of the European Communities, comprising 
"representatives of the peoples of Member States".28  According to "established practice"29 
and in the light of a Framework Agreement between the European Parliament and the 
Commission30, the Council consults the European Par liament on "all trade matters unless they 
are confidential or of minimal political or economic importance".31  The Council "normally"32 
delays consideration of a proposal by th e Commission regarding such matters until the 
European Parliament has provided an opinion  on the proposal.  Previously, the European 
Parliament has given its opinion on "the most important ... regulations"33 concerning the 
European Communities' GSP scheme. 
The relevant committee of the European Par liament examines the proposal and hears from 
"representatives of the Commission or other re levant economic and political stakeholders".34  
The committee then adopts a report and submits it to the European Parliament, sometimes 
including suggested amendments to the pr oposal.  The "full European Parliament 
Assembly"35, which usually meets monthly, votes on the committee's report.  The report is 
then translated into the 20 official languages and transmitted to the Council as an opinion of 
the European Parliament.  The European Commun ities estimates that the European Parliament 
could provide to the Council its opinion on th e Commission's proposal regarding the Council 
Regulation in January 2005. 
                                                      
26In response to questioning at the oral hearing, the European Communities explained that the cabinet 
of a Commissioner is similar to a "private office" of the Commissioner, comprising four to six individuals working under the Commissioner's authority. 
27European Communities' submission, para. 17. 
28Ibid., para. 18. 
29Ibid., para. 20. 
30Official Journal of the European Communities , C Series, No. 121 (24 April 2001), p. 122. 
(Exhibit EC-7 submitted by the European Communities to the Arbitrator) 
31European Communities' submission, para. 20. 
32Ibid. 
33Ibid., para. 22. 
34Ibid., para. 21. 
35Ibid. WT/DS246/14 
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(c) Opinion of the Economic and Social Committee (the "ECOSOC") on the 
Commission's proposal  
The ECOSOC is an "advisory body"36 comprising "representatives of the various economic 
and social components of organised civil society".37  In the light of a "Cooperation Protocol" 
agreed between the Commission and the ECOSOC38, the Council has always sought an 
opinion from the ECOSOC about proposals concerning the European Communities' GSP 
scheme.  The European Communities estimates  that the ECOSOC could provide to the 
Council its opinion on the Commission's propo sal regarding the Council Regulation in 
January 2005. 
(d) Adoption of the Council Regulation  
The Council comprises representatives of the member States of the European Union at 
ministerial level, with votes weighted according to size.39  Various Council working groups 
and the Committee of the Permanent Representa tives of the Member States ("Coreper") 
prepare the Council's decision to adopt a regulation based on the Commission's proposal, 
taking into account any opinions provided by the European Parliament or the ECOSOC.  The 
Council then votes to adopt the decision.  The Council must adopt the decision unanimously if, on its own, it changes the proposal originally presented by the Commission.
40  This would 
rarely occur, however, because in practice th e Council changes the proposal in consultation 
with the Commission.  Thus, the Council would normally adopt the decision by qualified 
majority.  As from 1 January 2005, a member State of the Council may request verification 
that the decision was taken by at least 62 pe r cent of the total population of the European 
Union.  If not, the decision is not adopted.41  The European Commun ities estimates that the 
                                                      
36European Communities' submission, para. 23. 
37Treaty Establishing the European Community, Art. 257, Official Journal of the European 
Communities , C Series, No. 325 (24 December 2002), p. 136. (Exhibit EC-10 submitted by the European 
Communities to the Arbitrator) 
38European Communities' submission, para. 24, referring to Exhibit EC-11 submitted by the European 
Communities to the Arbitrator. 
39Ibid., para. 26, referring to the Treaty Establishing the European Community, Art. 205, Official 
Journal of the European Communities , C Series, No. 325 (24 December 20 02), p. 118 (Exhib it EC-15 submitted 
by the European Communities to the Arbitrator), "in conjunction with" the Protocol on the Enlargement of the 
European Union, Art. 3, Official Journal of the European Communities , C Series, No. 325 (24 December 2002), 
p. 164. (Exhibit EC-17 submitted by the European Communities to the Arbitrator) 
40Treaty Establishing the European Community, Art. 250(1), Official Journal of the European 
Communities , C Series, No. 325 (24 December 2002), p. 132. (Exhibit EC-16 submitted by the European 
Communities to the Arbitrator) 
41Protocol on the Enlargement of the European Union, Art. 3, Official Journal of the European 
Communities , C Series, No. 325 (24 December 2002), pp. 164 and 165. (Exhibit EC-17 submitted by the 
European Communities to the Arbitrator)  WT/DS246/14 
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Council Regulation could be adopted in May 2005 an d that it would then enter into force after 
it is signed by the President of the Council and published in the  Official Journal of the 
European Union .   
10. According to the European Co mmunities, the second step in implementation will involve the 
adoption by the Commission of a regulation identify ing the beneficiaries of special or additional 
arrangements to address particular development needs under the new GSP scheme (the "Commission 
Regulation").  The Commission Regulation will implement the Council Regulation by providing 
instructions to customs authorities indicating wh ich countries are to benefit from the special or 
additional arrangements under the new GSP scheme.  The Commission Regulation will be adopted in 
accordance with a specific regulatory procedure42, which the European Communities describes as 
follows: 
(a) Proposal by the Commission  
The Commission submits a proposal for the Commission Regulation to a regulatory 
committee comprising member States' representa tives.  The European Communities estimates 
that the Commission could submit such a proposal in September 2005. 
(b) Adoption of the Commission Regulation  
If the regulatory committee votes in favour of th e proposal, the Commission adopts by simple 
majority the Commission Regulation proposed.  The European Communities estimates that 
the committee could complete deliberations on th e proposal in October 2005 and that, if the 
committee approves, the Commission could adopt the Commission Regulation in 
November 2005. 
If the regulatory committee votes against the proposal or does not provide an opinion, the 
Commission submits the proposal to the Council and informs the European Parliament.  The 
Council may adopt a regulation based on the prop osal by qualified majority within three 
months.  If the Council neither adopts the proposal nor indicates its opposition to the proposal 
within this three-month period, the Commissi on adopts the proposed Commission Regulation.  
If the Commission submits the proposal to the Council, the European Communities estimates 
that the selection of beneficiaries will be de layed by approximately six or seven months. 
                                                      
42Council Decision of 28 June 1999, Art. 5, Official Journal of the European Communities , L Series, 
No. 184 (17 July 1999), p. 25. (Exhibit EC-18 subm itted by the European Communities to the Arbitrator) WT/DS246/14 
Page 8  
 
(c) Publication of the Commission Regulation
 
The Commission Regulation is published in the  Official Journal of the European Union .  
According to "established practice", regulations that must be implemented by the customs 
authorities, such as the Commission Regulation, "should normally" be published at least six weeks before they enter into force.
43 
(d) Entry into force of the Commission Regulation  
Regulations to be implemented by the customs authorities, such as the Commission 
Regulation, enter into force on 1 January in any year, or "exceptionally" on 1 July.44  
11. The European Communities points to several a dditional factors that it argues may delay the 
completion of the steps for implementation described above.  First, the decision-making process "has 
become more cumbersome and time consuming since the enlargement of the European Union from 15 
to 25 Member States on 1 May 2004".45  Secondly, the European Communities indicates that the 
current Commission will present a legislative proposal "as soon as possible"46, but that a new 
Commission will take over from 1 November 2004.  The new Commission will have to discuss the 
proposal with the European Parliament and the Counc il.  Thirdly, the European Communities explains 
that a new European Parliament was elected in June 2004. 
12. Finally, the European Communities states that "the Drug Arrangements are an integral and 
essential part of its development policy".47  According to the European  Communities, preferences of 
the kind provided under the Drug Arrangements were first granted to four countries in 1990 and have 
subsequently been extended to other countries.  The European Communities submits that the Drug 
Arrangements reflect its consistent  approach of supporting "alternative trade possibilities ... to break 
the vicious circle of drug [addic tion] and development problems".48  According to the European 
Communities, changes to the Drug Arrangements w ill be politically sensitive and subject to "very 
close scrutiny by the relevant stakeholders"49, particularly because of the implications for several 
developing countries.  The European Communities sugg ests that this could increase the time taken to 
                                                      
43European Communities' submission, para. 36, referring to Council Resolution of 27 June 1974, 
Official Journal of the European Communities , C Series, No. 79 (8 July 1974), p.1. (Exhibit EC-19 submitted 
by the European Communities to the Arbitrator) 
44Ibid.   
45Ibid., para. 29. 
46Ibid., para. 30.  
47Ibid., para. 39.  See also European Communities' submission, para. 41. 
48European Communities' submission, para. 41. 
49Ibid., para. 42.  WT/DS246/14 
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reach a solution because, for example, further discu ssions with the member States of the European 
Union and among various bodies of the European Communities will be required.  The European 
Communities refers to the Award of the Arbitrator in  Chile – Price Band System50 to support its 
contention that I should take this circumstance in to account in determining the reasonable period of 
time for implementation.   
B. India 
13. India requests that I determine the "reasonabl e period of time" for implementation of the 
recommendations and rulings of the DSB in this dis pute to be no more than six months and two weeks 
from the date of adoption by the DSB of the Panel and Appellate Body Reports, so that the period 
would expire no later than 3 November 2004.51 
14. India submits that the implementation period in  this dispute should be the shortest period 
possible within the legal system of the European Communities.52  India argues that the European 
Communities has the burden of proving that immediat e implementation is impracticable and that the 
period of time proposed by the European Communitie s is reasonable in view of the particular 
circumstances of this case;  also, the European Communities must prove  that the period proposed is 
the shortest period possible within the legal system  of the European Communities.  India argues that 
this burden is increased if the period pr oposed is longer than 15 months.   
15. India recognizes that it is not the Arbitrator's  task to determine the means by which the 
European Communities implements the relevant re commendations and rulings.  Nevertheless, India 
submits that "the European Communities is not f aced with the problem of choosing between various 
implementing measures".53  Furthermore, India argues that the "intricacy of the Appellate Body's 
findings" is not relevant to the determin ation of the reasonable period of time.54  India refers to 
Articles 3.7 and 21.1 of the DSU to demonstrate that the European Communities must comply promptly with the recommendations and rulings of the DSB, either by withdrawing the measure found 
to be inconsistent with the covered agreements , or by amending that measure to remove the 
inconsistency.   
                                                     
 
50Award of the Arbitrator, Chile – Price Band System , para. 48. 
51India's submission, para. 66. 
52Ibid., paras. 2 and 43-44, referring to Award of the Arbitrator, EC – Hormones , para. 26 and Award 
of the Arbitrator, US – Offset Act (Byrd Amendment ), para. 44. 
53Ibid., para. 3. 
54India's statement at the oral hearing.  WT/DS246/14 
Page 10  
 
16. India emphasizes that the measure that th e European Communities must bring into 
conformity, in implementing the recommendations and rulings of the DSB in this dispute, is the 
measure that the Panel and Appellate Body found to  be inconsistent with the European Communities' 
obligations under the covered agreements.  India notes that the European Communities is working on 
a new GSP scheme for the years 2006 to 2015 and that the Commission has referred to the Appellate 
Body Report in  EC – Tariff Preferences  in relation to this new scheme.
55  However, India maintains 
that the present arbitration relates to only one co mponent of the European Communities' GSP scheme, 
namely the Drug Arrangements.  India argues that a "wholesale review"56 of the European 
Communities' GSP scheme is not necessary to implem ent the relevant recommendations and rulings, 
and therefore it is not relevant to the dete rmination of the reasonable period of time for 
implementation that the European Communities may wish to "work on the larger task of revising its 
general GSP Scheme".57  India also contends that the availability of various options for 
implementation is not a "particular circumstance" relevant to the determination of the reasonable 
period of time for implementation.58  
17. According to India, in order to implement the recommendations and rulings of the DSB, the 
European Communities needs to bring the Drug Arrange ments into conformity with Article I:1 of the 
General Agreement on Tariffs and Trade 1994  (the "GATT 1994").  Thus, India states, the reasonable 
period of time does not encompass the time required for the European Communities to demonstrate that the Drug Arrangements are justified under th e Enabling Clause or any other exception.   
18. India refers to conclusions by previous arb itrators that the steps that the implementing 
Member takes towards implementation in the period between adoption of the relevant reports and an 
arbitration under Article 21.3(c) of the DSU are re levant in determining th e reasonable period of time 
for implementation.
59  India argues that the European Communities has had "ample time to  initiate  
and  complete  the preliminary phase of adopting implementing legislation".60   
                                                      
55Communication from the Commission to the Council, the European Parliament and the European 
Economic and Social Committee, Developing countries, inte rnational trade and sustainable development:  the 
function of the Community's generalised system of preferences (GSP) for the ten-year period from 2006 to 2015 , 
7 July 2004, p. 5. (Exhibit India-3 submitted by India to the Arbitrator) 
56India's submission, para. 31. 
57Ibid., para. 32, referring to Award of the Arbitrator, Argentina – Hides and Leather  and Award of the 
Arbitrator, Canada – Autos , para. 55.  See also India's submission, para. 35. 
58Ibid., para. 34, referring to Award of the Arbitrator, US – Offset Act (Byrd Amendment) , para. 59. 
59India's submission, paras. 37 and 38, referring to Award of the Arbitrator,  Chile – Price Band 
System , para. 43 and Award of the Arbitrator, US – Section 110(5) Copyright Act , para. 46.  
60Ibid., para. 36. (original emphasis)  WT/DS246/14 
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19. India states that, in order to implement the recommendations and rulings of the DSB, the 
European Communities will have to withdraw th e Drug Arrangements or amend Regulation 2501 
according to the procedure set out in Article 133 of  the Treaty Establishing the European Community.  
According to India, the bodies involved in this procedure are the Commission and the Council, and "there is no requirement for ot her institutions of the European Communities to be consulted".
61  India 
also maintains that the European  Communities is able to implemen t measures expeditiously because 
of the flexibility in its legislative system and th e absence of "specified timeframes" for completion of 
each step.62 
20. India describes the specific steps required for the European Communities to implement the 
recommendations and rulings of the DSB in this dispute as follows: 
(a) Adoption of proposal by the Commission  
India contends that the Commission is able to adopt a proposal as soon as it is drafted and to 
transmit the proposal to the Council on the day of adoption.  India states that the European Communities indicated before the Panel that cr iteria for the selection of beneficiaries under 
the Drug Arrangements already existed, even thou gh they were not published.  Therefore, the 
Commission does not need time to develop such criteria.  According to India, the Commission 
has indicated in a press statement that it w ill transmit its proposal regarding the European 
Communities' GSP scheme to the rele vant institutions by October 2004.
63  India infers from 
this that the Commission has already drafte d a proposal to implement the recommendations 
and rulings of the DSB.  Moreover, India argues that the European Communities would 
require no more than one further month in whic h to refine and adopt a proposal and present it 
to the Council.  This would make a total of  five months from the date on which the DSB 
adopted the Panel and Appellate Body  Reports in this dispute.   
                                                      
61India's submission, para. 47. 
62Ibid., para. 48. 
63Ibid., para. 29, referring to "Developing countries:  Commission unveils system of trade preferences 
for next ten years – simple, transparent and objective", IP/04/860, 7 July 2004, p. 2. (Exhibit India-4 submitted 
by India  to the Arbitrator) WT/DS246/14 
Page 12  
 
(b) Adoption of Commission's proposal as a Council regulation
 
India states that, in the Council, the Commission's  proposal will be considered by Coreper, the 
committee established under Article 207 of the Treaty Establishing the European Community.  
India reiterates that the Council is "not lega lly obliged" to consult either the European 
Parliament or the ECOSOC and that, if it does choose to seek opinions from those institutions, these opinions are "not binding on the Council".
64  India also argues that the Council is able to 
consult the European Parliament and the EC OSOC at the same time as the Council is 
discussing the Commission's proposal and, theref ore, no additional time is needed for such 
consultation.  Following Coreper's discussion of the Commission's proposal, the relevant "measure"
65 is placed on the agenda of the next monthly Council meeting for adoption by 
qualified majority.  After adoption, according to India, the President of the Council signs the 
measure and the measure is published in the  Official Journal of the European Communities .  
India submits, with reference to the time taken to adopt previous Council regulations 
amending Regulation 2501, that the Council is ab le to consider a proposal by the Commission 
and to enact it within one month and two week s, whether or not the Council consults the 
European Parliament and the ECOSOC. 
21. India contests the European Communities' suggestion that the selection of beneficiaries 
should be considered in determin ing the reasonable period of time in  this dispute.  Rather, India 
maintains that only the "framework regulation"66 of the Council, modifying or withdrawing the Drug 
Arrangements, is required to implement the r ecommendations and rulings of the DSB.  Any 
subsequent selection of countries would simply be  part of the implemen tation of the Council's 
framework regulation.  
22. India rejects the European Communities' contentio n that translation delays and changes in the 
composition of the European Parliament and the Co mmission are relevant to the reasonable period of 
time for implementation.  Moreover, according to In dia, arbitrators under Article 21.3(c) of the DSU 
have repeatedly held that mere contentiousness of  implementation measures is not relevant to the 
determination of the reasonable period of time.  India challenges the European Communities' reliance 
on the Award of the Arbitrator in  Chile – Price Band System .  India argues that  Chile – Price Band 
System  involved the removal of "trade advantages enjo yed by [the] broader domestic constituency" of 
                                                      
64India's submission, para. 57. 
65Ibid., paras. 58 and 59. 
66India's comments at the hearing on the "Responses of the European Communities to the Advance 
Questions of the Arbitrator", 1 September 2004.  WT/DS246/14 
 Page 13 
 
 
the implementing Member, which gave rise to  "domestic opposition" and "serious debate"67;  the 
situation in the present dis pute is quite different.  
23. Finally, India argues that the Drug Arrangements "affect the interests of many developing 
country Members, including India".68  Therefore, according to India, Article 21.2 of the DSU requires 
the European Communities to "accord  the highest priority to bringing the Drug Arrangements ... into 
conformity with its obligations under the GATT 1994".69  India indicates that the developing country 
Members whose interests are to be taken into account  under Article 21.2, when read in context, are 
the parties to the dispute, and not third parties or any other Members.  Moreover, even if Article 21.2 
referred to all developing country Members, India ma intains that the interests of India and all other 
developing country Members that are not beneficiari es of the Drug Arrangements would prevail to the 
extent that they conflict with the interests of the 12 beneficiaries. 
III. Reasonable Period of Time 
A. General Principles 
24. Article 21.3 of the DSU provides that an im plementing Member sha ll have a "reasonable 
period of time" in which to comply with the r ecommendations and rulings of the DSB in a given 
dispute "[i]f it is impracticable to comply immediat ely".  Pursuant to Articles 21.3(a) and 21.3(b), the 
reasonable period of time may be a period proposed  by the implementing Member and approved by 
the DSB or, in the absence of such approval, a period  of time mutually agreed by the parties to the 
dispute within a specified time period.  In th e present dispute, no approval was obtained under 
Article 21.3(a) and no agreement was reached under Article 21.3(b) .  Accordingly, pursuant to 
Article 21.3(c) of the DSU and the agreement of the parties, it is my task as Arbitrator to determine 
the "reasonable period of time" for the European  Communities to implement the recommendations 
and rulings of the DSB in  EC – Tariff Preferences .   
25. In determining the reasonable period of time for implementation, I am guided by several 
provisions of the DSU, including Article 21 in particular.  To begin with, Article 21.1 provides that "[p]rompt compliance with recommendations or rulings of the DSB is essential in order to ensure 
                                                     
 
67India's statement at the oral hearing. 
68India's submission, para. 65. 
69Ibid. WT/DS246/14 
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effective resolution of disputes to  the benefit of all Members".
70  This is consistent with the 
expectation in Article 21.3, as me ntioned above, that compliance will be immediate, unless this is 
impracticable.  In addition, Article  21.3(c) provides a specific "guideline for the arbitrator", which is 
that the reasonable period of time "should not exceed 15 months from the date of adoption of a panel 
or Appellate Body report", alt hough this period "may be shorte r or longer, depending upon the 
particular circumstances".  
26. Reading Article 21.3(c) together with Article  21.1, and referring for guidance to the Awards 
issued in previous arbitrations under Article 21.3( c), it is clear that the reasonable period of time 
should be "the shortest period possible within th e legal system of the Member to implement the 
relevant recommendations and rulings of the DSB", in  the light of the "particular circumstances" of 
the dispute.71  Both parties to this arbitration concur with this general approach.72   
27. India has argued that the implementing Memb er—in this case, the European Communities—
bears the burden of demonstrating that the period it proposes is reasonable and that "the already great 
burden becomes even greater" if th is period is more than 15 months.73  In my view, the European 
Communities must demonstrate that the period it propo ses is reasonable;  but I do not find it necessary 
in this arbitration to determine whether the burden of proof becomes greater if the period proposed is 
more than 15 months.  I have found the evidence and arguments presented by both the European Communities and India very helpful in determining wh ether, in the particular circumstances of this 
case, the period of time for implementation should be  15 months or a shorter or longer period.   
28. Against this background, I now turn to a di scussion of the measure to be brought into 
conformity.  
                                                     
 
70See also Article 3.3 of the DSU, which provides: 
The prompt settlement of situations in which a Member considers that any 
benefits accruing to it directly or indi rectly under the covered agreements are 
being impaired by measures taken by another Member is essential to the 
effective functioning of the WTO and the maintenance of a proper balance 
between the rights and obligations of Members. 
71Award of the Arbitrator,  Chile – Price Band System , para. 34, citing Award of the Arbitrator,  US – 
1916 Act , para. 32.  See also Award of the Arbitrator,  US – Offset Act (Byrd Amendment) , para. 42. 
72European Communities' submission, paras. 5 and 6;  India's submission, paras. 19 and 20. 
73India's statement at the oral hearing.    WT/DS246/14 
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B. The Measure to be Brought into Conformity 
29. The parties agree74 that the subject of the original dispute in  EC – Tariff Preferences , and the 
specific measure that the Panel and Appellate Body found inconsistent with the GATT 199475, was 
the Drug Arrangements.76  Accordingly, in implementing the recommendations and rulings of the 
DSB in this dispute, the European Communities is required to bring the Drug Arrangements into 
conformity with its WTO obligations.  Neverthele ss, the European Commun ities argues that it would 
be "impracticable" to dissociate the Drug Arra ngements from the European Communities' overall 
GSP scheme by modifying the Drug Arrangements alone, given that the current GSP scheme 
(including the Drug Arrangements) will be replac ed by a new GSP scheme from 1 January 2006.  
Accordingly, the European Communities proposes to bring the Drug Arrangements into conformity as 
part of its reform of the GSP scheme as a whole.77 
30. It is, of course, beyond the scope of my mandate to determine  how  the European 
Communities should implement the recommendations and ru lings of the DSB.  It is for the European 
Communities to choose the method of implementation, provided that the method chosen is consistent 
with the relevant recommendations and rulings an d with the provisions of the covered agreements.78  
Within these limitations, the European Communities is thus entitled to bring the Drug Arrangements 
into conformity through whatever method it deems a ppropriate, be it at the same time and within the 
same instrument as its GSP scheme, or otherwise.   
31. However, as the European Communities itsel f acknowledges, the relevant recommendations 
and rulings of the DSB require the European Commun ities to bring into conformity solely the Drug 
Arrangements, and not any other part of the Eur opean Communities' GSP scheme.  Therefore, my 
determination as to the reasonable period of time fo r implementation in this arbitration must have 
regard only to the shortest period possible within  the legal system of the European Communities to 
bring the Drug Arrangements into conformity with its WTO obligations.  The mere fact that the 
European Communities has decided to incorporate the task of implementation within the larger 
                                                      
74European Communities' submission, para. 10, as clar ified at the oral hearing;  India's submission, 
para. 31, as clarified at the oral hearing.   
75Panel Report,  EC – Tariff Preferences , paras. 3.1 and 8.1(f);  Appellate Body Report,  EC – Tariff 
Preferences , paras. 4 and 190(g). 
76Supra , para. 8(a).  
77European Communities' statement and response to questioning at the oral hearing.  
78See, for example, Award  of the Arbitrator,  Korea – Alcoholic Beverages , para. 45;  Award of the 
Arbitrator, Chile – Price Band System , para. 32;  and Award of the Arbitrator,  US – Offset Act (Byrd 
Amendment ), para. 48.  In addition, "[t]he choice and the timing of the detailed operating steps in enacting a new 
law are properly left to the Member concerned". (Award of the Arbitrator, Chile – Alcoholic Beverages , 
para. 42)  WT/DS246/14 
Page 16  
 
objective of reforming its overall GSP scheme cannot lead  to a determination of a shorter, or longer, 
period of time.  In other words, my task is no t to determine the reasonable period of time for 
reforming the overall GSP scheme.  Rather, my dete rmination must be confined to the reasonable 
period of time for implementing the recommendations and rulings of the DSB with respect to the 
Drug Arrangements.   
32. India has pointed out
79 that the Arbitrator in  Canada – Autos  declined to take into account the 
fact that "it might be more convenient for Canada  to implement the DSB's recommendations in this 
case on the same timeline as it has planned for the reform of its customs administration regime".80  I 
have reached a similar conclusion here with respect  to the European Communities' argument as to the 
practicability of associating the modification of th e Drug Arrangements with the replacement of the 
overall GSP scheme. 
33. Turning to a different but related matter, Indi a contends that the European Communities is 
simply required to bring the Drug Arrangements in to conformity with "Article I:1 of the GATT".81  I 
note that the Appellate Body in  EC – Tariff Preferences  recommended that the DSB request the 
European Communities to bring its inconsistent me asure "into conformity with its obligations under 
the GATT 1994".82  The Panel made a similar recommendation.83  These recommendations are 
consistent with Article 19.1 of the DSU, whic h provides for panels and the Appellate Body to 
recommend that Members bring measures that are f ound "inconsistent with a covered agreement ... 
into conformity with that agreement".  Similarly, Article 22.1 of the DSU refers to implementation of 
a recommendation to bring a measure "into confor mity with the covered agreements".  These 
provisions, and the recommendations and rulings of the DSB in this dispute, are contrary to India's 
argument that the European Communities is simply  required to bring the Drug Arrangements into 
conformity with Article I:1 of the GATT 1994.  A ccordingly, in determining the reasonable period of 
time, I do not take this into account. 
                                                      
79India's submission, para. 32. 
80Award of the Arbitrator,  Canada – Autos , para. 55.   
81India's statement at the oral hearing. 
82Appellate Body Report,  EC – Tariff Preferences , para. 191. 
83"The Panel recommends that the Dispute Settlement Body request the European Communities to 
bring its measure into conformity with its obligations under GATT 1994". (Panel Report,  EC – Tariff 
Preferences , para. 8.2)  WT/DS246/14 
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C. Implementation Process 
34. I now address the specific process through which the European Communities states that it will 
comply with the recommendations and rulings of the DSB in this dispute, beginning with some 
general observations about that process. 
1. Overall Process  
35. The European Communities asks me to determin e that the reasonable period of time for 
implementation lasts until 1 January 2006, which is  the same day that the European Communities 
expects its new GSP scheme to enter into force.   
36. As several previous arbitrators have noted84, flexibility in a Member's legislative system may 
enable the Member to effect a legislative amendmen t in a shorter period of time than might otherwise 
be possible.  In the present case, India submits that  the European Communities' legislative system "is 
characterised by considerable flexibility".85  I agree, in the sense that no mandatory minimum time 
periods are imposed for any particular step in th e implementation process as outlined by the European 
Communities.  The European Co mmunities has used this flexibility to modify Regulation 2501 
(modifying or extending the GSP scheme) promptly in the past.86  I take into account, as a relevant 
matter, the flexibility in the Eur opean Communities' legislative system;  but it does not, of itself, 
determine the question of the reasonable period of time for implementation.   
37. In this arbitration, the European Communitie s referred to the "intricacy" of the Appellate 
Body's findings in  EC – Tariff Preferences , arguing that they lead to complexity in the "legislative 
task for implementation".87  I would not describe the Appellate Body's findings as "intricate";  nor am 
I persuaded that they necessarily impose a complex implementation process or a complex 
                                                      
84Award of the Arbitrator,  US – 1916 Act , para. 39;  Award of the Arbitrator,  Canada – Patent Term , 
paras. 63 and 64. 
85India's submission, para. 48. 
86See, for example, Council Regulation (EC)  No. 2211/2003 of 15 December 2003, Official Journal of 
the European Union , L Series, No. 332 (19 December 2003), p. 1.  (Exhibit EC-2 submit ted by the European 
Communities to the Arb itrator)  This regulation extended the GSP scheme to 31 December 2005 and amended, 
among other things, the special incentive arrangements for the protection of labour rights.  India relies on this 
regulation in arguing that the Council is able to adopt a proposal by the Commission within one month and two 
weeks. (India's submission, paras. 60 and 61)  Ac cording to the European Communities, the Commission 
adopted the proposal leading to this regulation on 29 October 2003;  the European Parliament completed its 
opinion on the Commission's proposal on 4 December 2003;  the ECOSOC completed its opinion on the 
Commission's proposal on 10 December 2003;  the Coun cil adopted the regulation based on the Commission's 
proposal on 15 December 2003. ("Re sponses of the European  Communities to the Adva nce Questions of the 
Arbitrator", 1 September 2004, para. 7) 
87European Communities' submission, para. 10. WT/DS246/14 
Page 18  
 
implementing measure.  Therefore, I do not consid er it necessary to take into account what the 
European Communities describes as the "intricacy" of the findings of the Appellate Body in this case. 
2. Individual Steps in Implementation
 
(a) Adoption of a Regulation by the Council 
38. The parties agree that the Council needs to adopt a regulation in order to modify the Drug 
Arrangements, and that this regulation would be based on a proposal to be adopted by the 
Commission.88  However, subject to certain reservations , the European Communities estimates that 
the necessary Council regulation could be adopted in May 200589, whereas India maintains that it 
could be adopted by 3 November 2004.90   
39. An initial reason for this discrepancy in the par ties' submissions relates to the date on which 
the Commission is expected to adopt a proposal.  The European Communiti es estimates that the 
Commission could do so in October 200491, which corresponds with the est imate contained in a "press 
statement" by the Commission that India pr ovides as an exhibit in this arbitration.92  However, based 
on this press statement, India states that it would be "reasonable to assume that the Commission has 
already drafted a proposal to amend or repeal" Re gulation 2501, and thus little additional time is 
required to adopt it.  In any case, according to India, the Commission would need no more than 5 months from the adoption of the Panel and Appe llate Body Reports on 20 April 2004 to present a 
proposal to the Council
93 (that is, according to my calculation, until 20 September 2004). 
40. In assessing this early stage of the implementation process, I take note, first, of the steps that 
the European Communities has already taken sin ce the adoption of the Panel and Appellate Body 
Reports in  EC – Tariff Preferences .  The European Communities confirmed, in response to 
questioning at the oral hearing, that the Comm ission began discussions regarding implementation in 
early May 2004 and that the Commission decided in the course of those discussions to "embed" the 
                                                      
88European Communities' submission, paras. 12 and 17 ;  India's submission, paras. 49 and 60.  The 
parties differ as to whether a regulation by the Council is the only instrument required for implementation, as 
described further below in paras. 44 and 45. 
89"Responses of the European Communities to the Advance Questions of the Arbitrator", 
1 September 2004, p. 3.  
90India's submission, paras. 54, 60, and 66. 
91"Responses of the European Communities to the Advance Questions of the Arbitrator", 
1 September 2004, p. 3. 
92India's submission, para. 29;  "Developing countries:  Commission unveils system of trade 
preferences for next ten years – simple, transparent and objective", IP/04/860, 7 July 2004, p. 2. (Exhibit India-4 
submitted by India  to the Arbitrator) 
93Ibid., paras. 53 and 54.  WT/DS246/14 
 Page 19 
 
 
implementation process into the process of establis hing a new GSP scheme from 1 January 2006.  In 
addition, the European Communities and India ha ve both presented to me a communication from the 
Commission to the Council (and other institutions ), outlining the new GSP scheme, including 
modifications to the Drug Arrangements.94  This communication, which the European Communities 
describes as containing "guidelines" for discussion by relevant inst itutions in advance of the adoption 
by the Commission of a formal legislative proposal95, is dated 7 July 2004.  I am prepared to accept, 
in all the circumstances, that the Commission coul d reasonably be expected to adopt a proposal to 
modify the Drug Arrangements in October 2004.   
41. Another reason for the discrepancy in the par ties' submissions is their assessment of the 
necessity for participation of the European Parlia ment and the ECOSOC in the process leading to 
adoption of the Council regulation.  First, India submits that the Council is not legally bound by 
Article 133 of the Treaty Establishing the European Community96 to seek an opinion from the 
European Parliament and the ECOSOC, and I ndia therefore excludes this step from the 
implementation process.97  In contrast, the European Communities contends that, although this is not 
an express requirement in Article 133, it is an "e stablished practice" and effectively a requirement 
within the European Communities' system and shou ld therefore be included in the implementation 
process.98  Secondly, India submits that, even if the Council were to seek an opinion from the 
European Parliament and the ECOSOC, these in stitutions and the Council could examine the 
Commission's proposal at the same time, rather than sequentially.99  The European Communities 
responds that, even if the three institutions examin e the proposal at the same time, the Council will 
nevertheless require additional time subsequent to th is examination to discuss the proposal further, 
because it needs to make a decision on the proposal in the light of opinions provided by the European 
Parliament and the ECOSOC.100  Accordingly, the European Communities estimates that the 
European Parliament and the ECOSOC could prov ide their opinions in January 2005 and the Council 
                                                      
94Communication from the Commission to the Council, the European Parliament and the European 
Economic and Social Committee, Developing countries, inte rnational trade and sustainable development:  the 
function of the Community's generalised system of preferences (GSP) for the ten-year period from 2006 to 2015 , 
COM(2004) 461 final, 7 July 2004. (Exhibit EC-5 subm itted by the European Communities to the Arbitrator;  
see also Exhibit India-3 submitted by India to the Arbitrator) 
95European Communities' response to questioning at the oral hearing. 
96Official Journal of the European Communities , C Series, No. 325 (24 December 2002), pp. 90 
and 91. 
97India's submission, paras. 47 and 57. 
98European Communities' submission, paras. 18-20 a nd 24, as clarified at the oral hearing.  The 
European Communities also refers to certain agreemen ts between the Commission and the European Parliament, 
and the Commission and the ECOSOC. (Exhibits EC-7 and EC-11 submitted by the European Communities to 
the Arbitrator) 
99India's submission, para. 57. 
100European Communities' response to questioning at the oral hearing. WT/DS246/14 
Page 20  
 
could adopt a regulation based on the Commission' s proposal, taking into account those opinions, in 
May 2005.
101 
42. It is not unusual for domestic or other legal syst ems to follow procedural conventions that are 
not explicitly mandated by legal instruments.  More over, I find relevant that the Council has sought an 
opinion from the European Parliament and the EC OSOC before adopting the great majority of 
regulations related to the European Communities' GSP scheme over the years.102  The European 
Communities has also suggested that the consequenc es of failing to seek such opinions in the present 
implementation process would be a matter to be determ ined by the Court of Justice of the European 
Communities.  It appears, therefore, that adop tion of the regulation in question without seeking 
opinions from the European Parliament and the ECOSOC would be an "extraordinary" procedure.  I agree with previous arbitrators that implementing Members are not required to adopt "extraordinary 
legislative procedures" in every case.
103  In my view, seeking the opinions of the European Parliament 
and the ECOSOC should be included in de termining the reasonable period of time for 
implementation.   
43. On the question of the time required for ta king this step, I also accept the European 
Communities' assertion that the Council needs time  to consider the opinions of the European 
Parliament and the ECOSOC before it makes its  own decision on the Commission's proposal.  If no 
such time were provided for this, it would defeat  the purpose of seeking the opinions.  However, I 
agree with India that the Council could begin its ex amination of the Commission's proposal before it 
receives the opinions of the European Parliament  and the ECOSOC.  The European Communities 
does not appear to dispute this, and it indicates th at these institutions have sometimes conducted their 
examinations "in parallel" in the past.104  With this in mind, the European Communities has not 
demonstrated why the Council would need to  examine the proposal from October 2004 until 
January 2005 and then, after recei ving the opinions of the European Parliament and the ECOSOC, to 
continue its examination until May 2005.  In my view, based on the evidence before me, the Council 
could reasonably be expected to make a decision on the Commission's proposal by adopting a regulation, taking into account the opinions of th e European Parliament and the ECOSOC, before 
May 2005.
105   
                                                      
101"Responses of the European Communities to the Advance Questions of the Arbitrator", 
1 September 2004, p. 3. 
102European Communities' submission, paras. 22 and 25, as clarified at the oral hearing. 
103See, for example, Awar d of the Arbitrator, US – Section 110(5) Copyright Act , para. 32 and Award 
of the Arbitrator,  US – Offset Act (Byrd Amendment) , para. 74. 
104European Communities' response to questioning at the oral hearing. 
105See  supra , para. 36.  WT/DS246/14 
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(b) Adoption of a Regulation by the Commission 
44. According to the European Co mmunities, the regulation adopte d by the Council will establish 
a new GSP scheme, including criteria to govern the sel ection of beneficiaries of special or additional 
arrangements to address particular development needs within that sch eme.  The European 
Communities submits that, after the Council establish es these criteria, a further important step must 
occur, namely, the Commission w ill need to select the bene ficiaries under those additional 
arrangements and then adopt anot her regulation identifying these beneficiaries.  The European 
Communities describes this regulation of the Commis sion as an administrative act that will implement 
the regulation of the Council, by providing specific instructions to customs authorities.106  T h e  
European Communities estimates that, assuming the Council adopts the overarching regulation in 
May 2005, the Commission will be able to a dopt an implementing regulation in November 2005.107   
45. India submits that the European Communities can and should implement the 
recommendations and rulings in this dispute purel y through the adoption of a regulation by the 
Council, without the need for an additional regulation by the Commission identifying the relevant beneficiaries.  India states that the selection of  beneficiaries is not necessary to implement the 
recommendations and rulings.
108 
46. As I understand the European Communities' argument109, as elaborated at the oral hearing, 
after the Council adopts a regulation in May 2005,  the Commission will need  time to assess which 
developing countries meet the new criteria establis hed by the Council.  The European Communities 
has not explained which countries it will examine or how it will identify those countries.  However, it 
seems clear from the European Communities' submi ssions that the current 12 beneficiaries of the 
Drug Arrangements will be among the countries examin ed.  Indeed, it appears that the European 
Communities is keen to ensure that any current beneficiary of the Drug Arrangements that remains 
eligible for benefits under special or additional arrangements within the new GSP scheme suffers no 
interruption of tariff preferences ―that is, such a country would con tinue to receive benefits under the 
Drug Arrangements until 31 December 2005, and then  it would receive benefits under the new GSP 
scheme from 1 January 2006.   
                                                      
106European Communities' submission, para. 13, as clarified at the oral hearing. 
107"Responses of the European Communities to the Advance Questions of the Arbitrator", 
1 September 2004, p. 3. 
108India's comments at the hearing on the "Responses of the European Communities to the Advance 
Questions of the Arbitrator", 1 September 2004. 
109Supra , para. 10. WT/DS246/14 
Page 22  
 
47. Although the European Communities indicated at the oral hearing that it does not have the 
objective of ensuring that all 12 current beneficiar ies of the Drug Arrangements continue to benefit 
from special or additional arrangements under the ne w GSP scheme, India argues that the European 
Communities has a certain "preoccupation"
110 with those 12 beneficiaries.  I note that the European 
Communities contends, in connection with Article 21.2 of the DSU111, that "[a]s all current 
beneficiary countries of the Drug Arrangements are developing countries the EC implementing 
measure must pay particular a ttention to their situation".112  The European Communities also states 
that the modification of the Drug Arrangements s hould coincide with the adoption of the new GSP 
scheme "in order to avoid any  gap  for granting the additional tariff preferences to affected 
beneficiary developing countries".113  The European Communities submits that India's proposal of 
modifying the Drug Arrangements before the new G SP scheme comes into force could mean, "[i]n the 
worst of all scenarios, ... that additional preferences would be  interrupted  for beneficiary developing 
countries for a certain time".114  Finally, the European Communities suggested at the oral hearing that, 
in determining how to implement the recommendations  and rulings in this dispute, the European 
Communities "should ensure there is no  interruption  for legitimately granted additional 
preferences".115 
48. As I have said, it is for the European Comm unities to decide how it should implement the 
recommendations and rulings of the DSB, subject to certain restrictions.116  However, as I have also 
stated, my task is not to determine the reas onable period of time for reforming the overall GSP 
scheme;  rather, it is to determine the re asonable period of time for implementing the 
recommendations and rulings of the DSB with respect to the Drug Arrangements.117 
49. I am not satisfied that the period of time fo r implementation should be  determined having 
regard to the desirability of ensuring that certain Me mbers, to the exclusion of others, can continue to 
benefit from tariff preferences that have been found to  be inconsistent with the covered agreements.  
As the European Communities itself points out, ma ny more developing countries exist than the 
                                                      
110India's response to questioning at the oral hearing. 
111The implications of this provision are discussed further  infra , paras. 57-59.  
112European Communities' submission, para. 14. 
113"Responses of the European Communities to the Advance Questions of the Arbitrator", 
1 September 2004, p. 5. (emphasis added) 
114European Communities' statement at the oral hearing. (emphasis added) 
115European Communities' response to questioning at the oral hearing. (emphasis added) 
116Supra , para. 30. 
117Supra , para. 31.  WT/DS246/14 
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current 12 beneficiaries of the Drug Arrangements.118  If I were to include within the period required 
for implementation the process of assessing all of those countries against the new criteria to be 
established by the Council, this could potentially add many months, indeed several more years, to the 
reasonable period of time.  The process of assessing countries could even extend indefinitely, if the 
European Communities implemented a mechanism wh ereby developing countries could apply on an 
 ad hoc  basis to become a beneficiary under the special or additional arrangements.119  
50. According to the European Communities, the final step in the implementation process 
involves the publication of the regulation adopted by  the Commission and its entry into force.  The 
European Communities submits that, pursuant to  "established practice under the [European 
Communities'] internal legislative procedure" as reflected in a Council Resolution of 1974, the 
regulation should enter into force on 1 January or "exceptionally" on 1 July, and publication should 
normally take place at least six weeks before entry into force.120  Although the European Communities 
makes this submission in the context of the prop osed regulation to be adopted by the Commission 
identifying certain beneficiaries under a new GSP scheme121, I understand that the requirements of 
advance publication and entry into force on 1 January  or 1 July apply more generally, to "measures 
which must be implemented by the customs authorities", including "tariff changes".122  In other 
words, these requirements would apply to an y tariff changes necessary to bring the Drug 
Arrangements into conformity with the GATT 1994, wh ether these changes are made effective solely 
through a regulation adopted by the Council, or through a regulation adopted by the Council followed 
by a regulation adopted by the Commission. 
51. I note that the Arbitrator in  Korea – Alcoholic Beverages  determined that it was reasonable 
to include in the reasonable period of time the "t hirty-day grace period for enforcement of certain ... 
instruments" provided in a Korean statute.123  The Arbitrator in  EC – Bananas III   also appears to 
have taken into account the European Communities' st atement that "any change in legislation which 
directly affects the customs treatment of products  in connection with importation or exportation, 
                                                      
118European Communities' response to questioning at the oral hearing. 
119Such a mechanism appears to exist in connection with tariff preferen ces provided under  the "special 
incentive arrangements for the protection of labour righ ts" and the "special incentive arrangements for the 
protection of the environment" within the current GSP scheme.  See Appellate Body Report,  EC – Tariff 
Preferences , para. 182. 
120European Communities' submission, para. 36, referring to Council Resolution of 27 June 1974, 
Official Journal of the European Communities , C Series, No. 79 (8 July 1974), p.1. (Exhibit EC-19 submitted 
by the European Communities to the Arbitrator) 
121European Communities' response to questioning at the oral hearing. 
122European Communities' submission, paras. 36 and 37. 
123Award of the Arbitrator,  Korea – Alcoholic Beverages , para. 47. WT/DS246/14 
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enters into force either on 1 January or 1 July of the relevant year"
124 in determining the reasonable 
period of time in that dispute.125  In the present case, I regard the administrative practice of the 
European Communities, as it pertains to advance publication of tariff changes and the date on which 
such changes take effect, as a relevant factor in determining the reasonable period of time for 
implementation. 
3. Institutional Changes  
52. The European Communities argues that the reasonable period of time for implementation in 
this dispute should be extended because of changes occurring in certain institutions of the European 
Communities that play a role in the implementati on process.  Specifically, the European Communities 
states that the European Union itself grew from 15 to 25 member States on 1 May 2004, a new 
European Parliament was elected in June 200 4, and a new Commission will take charge from 
1 November 2004.126   
53. To start with the European enlargement, the European Communities argues that considerable 
time will be needed to translate into the 20 offi cial languages certain instruments connected with 
implementation.127  I agree that this circumstance is likely to increase the period of time reasonably 
required to complete certain steps in the implementation process.  Therefore, I have taken this into account in my determination.  I also agree with th e European Communities that, if a member State of 
the European Union requested verification that th e Council adopted the implementing regulation by a 
qualified majority representing at least 62% of the population of the European Union, this could add 
to the time required for implementation.
128   
54. I turn to the election of a new European Par liament in June 2004 and the commencement of a 
new Commission on 1 November 2004.  According to the European Communities' estimates, the 
Commission will complete its proposal on a Counc il regulation modifying the Drug Arrangements, 
and that proposal will be transmitted to the European Parliament, in October 2004.129  The fact that a 
new Commission takes charge on 1 November 2004 woul d not appear to increase the time required to 
                                                      
124Award of the Arbitrator,  EC – Bananas III , para. 9. 
125Ibid., para. 19.  The Arbitrator concluded, in paragraph 20, that the reasonable period of time should 
be "from 25 September 1997 to 1 January 1999". 
126European Communities' submission, paras. 29 and 30. 
127Ibid., paras. 17 and 29. 
128Ibid., para. 27, referring to the Protocol on the Enlargement of the European Union, Art. 3, Official 
Journal of the European Communities , C Series, No. 325 (24 December 2002) , pp. 164 and 165. (Exhibit EC-17 
submitted by the European Communities to the Arbitrator) 
129"Responses of the European Communities to the Advance Questions of the Arbitrator", 
1 September 2004, p. 3, as clar ified at the oral hearing.    WT/DS246/14 
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complete that proposal.  Similarly, if the Commission's proposal is transmitted to the European 
Parliament in October 2004, this should allow suffi cient time for the European  Parliament to become 
"operational"130 before it examines the proposal.   
D. Nature of the Drug Arrangements 
55. The European Communities suggests that th e "political sensitivities" of the Drug 
Arrangements and the GSP scheme will increase the time required to implement the recommendations 
and rulings in this dispute.131  The European Communities acknowledges132 that previous arbitrators 
have typically refused to treat mere contentious ness or political sensitivity as a factor warranting a 
longer period of time for implementation.133  However, the European Co mmunities maintains that the 
Drug Arrangements are analogous to the measure that needed to be brought into conformity in  Chile 
– Price Band System  because the Drug Arrangements are "an integral and essential part of its 
development policy".134   
56. I am not persuaded by the statements of the Eu ropean Communities that the particular nature 
of the Drug Arrangements within the GSP scheme and the development policy of the European 
Communities warrants any increase in the reasonable pe riod of time for implementation.  Although a 
modification to the Drug Arrangements may well be d escribed as "politically sensitive", this factor 
does not distinguish the Drug Arrangements from any othe r measure that is likely to be the subject of 
a WTO dispute.  The measure examined in  Chile – Price Band System   was quite different.  That 
measure had a "unique ... impact on Chilean society" (that is, the society of the  implementing  
Member);  "domestic opposition" to its repeal or m odification reflected "serious debate, within and 
outside the legislature of Chile, over the means of devising an implementation measure" and "not 
simply opposition by interest groups to the loss of protection".135 
                                                      
130European Communities' response to questioning at the oral hearing. 
131European Communities' submission, paras. 31 and 42. 
132European Communities' response to questioning at the oral hearing.   
133See, for example, Award of the Arbitrator,  Canada – Pharmaceutical Patents , para. 60;  Award of 
the Arbitrator,  Canada – Patent Term , para. 58;  and Award of the Arbitrator,  US – Offset Act (Byrd 
Amendment) , para. 61. 
134European Communities' submission, paras. 38 an d 39, referring to Award of the Arbitrator,  Chile – 
Price Band System , para. 48.  See also European Communities' submission, para. 41. 
135Award of the Arbitrator,  Chile – Price Band System , para. 48. WT/DS246/14 
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E. Article 21.2 of the DSU 
57. In their submissions, both parties rely on Article 21.2 of the DSU, which provides:  
Particular attention should be paid to matters affecting the interests of 
developing country Members with respect to measures which have 
been subject to dispute settlement. 
58. India appears to suggest that, in order to comp ly with this provision in connection with the 
interests of India (among other countries), the Eu ropean Communities should take less time to 
implement the recommendations and rulings of the DSB in this dispute.
136  Conversely, the European 
Communities suggests that, in order to comply with this provision in connection with the interests of 
the current beneficiaries of the Drug Arrangements,  the European Communities will need more time 
for implementation.137  India rejects the European Communities' approach, arguing that, in relation to 
an Article 21.3(c) arbitration, the obligation in  Article 21.2 relates only to developing country 
Members that are party to the arbitration.138  The European Communities, however, responds that 
Article 21.2 refers to "developing country Members" and not only to the parties to any particular 
dispute.139 
59. Previous arbitrators have not found it necessary to determine the precise boundaries of 
Article 21.2 of the DSU.  Some arbitrators have  taken this provision into account in assessing the 
difficulties faced by an implementing  Member that is a developing country140, or where both parties 
were developing countries.141  No arbitrator has determined wh ether the reference to "developing 
country Members" in Article 21.2 should be interprete d to include, in the context of an Article 21.3(c) 
arbitration, Members that are not party to the arbitrat ion.  It is unnecessary for me to decide this issue 
                                                      
136India's submission, para. 65. 
137European Communities' submission, para. 14. 
138India's statement at the oral hearing. 
139European Communities' response to questioning at the oral hearing. 
140See, for example, Award of the Arbitrator, Indonesia – Autos , para. 24;  Award of the Arbitrator,  
Chile – Alcoholic Beverages , para. 45;  and Award of the Arbitrator, Argentina – Hides and Leather , para. 51. 
141Award of the Arbitrator, Chile – Price Band System , paras. 55 and 56.  See also Award of the 
Arbitrator, US – Offset Act (Byrd Amendment) , para. 81.  WT/DS246/14 
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in the present dispute.  Although India has identified itself as a developing country142, and the 
European Communities has identif ied the current beneficiaries of the Drug Arrangements as 
developing countries143, neither party has provided a satisfactory explanation or evidence of the 
precise manner in which these countries are particular ly affected, as developing country Members, by 
the European Communities' implementation of the r ecommendations and rulings in this dispute, nor 
how this should affect the reasonabl e period of time for implementation. 
IV. The Award 
60. For the reasons set out above, I determine that the "reasonable period of time" for the 
European Communities to implement the recommendations and rulings of the DSB in this dispute is 
14 months and 11 days from 20 April 2004, being th e date of adoption of the Panel and Appellate 
Body Reports by the DSB.  The "reasonable period of  time" will therefore expire on 1 July 2005, such 
that implementation must be comp leted on or before that date.144   
 
Signed in the original at Geneva this 10th day of September 2004 by: 
 
  
 
 
________________________ 
John Lockhart 
Arbitrator 
 
 
                                                     
 
142India's submission, para. 65. 
143European Communities' submission, para. 14. 
144I have calculated the reasonable period of time in the following manner.  14 calendar months from 
20 April 2004 is 20 June 2005, plus 11 additional days brings us to 1 July 2005.  Thus, the last day of the 
reasonable period of time is 1 July 2005.