WORLD TRADE
ORGANIZATIONTN/RL/W/142
28 July 2003
(03-4016)
Negotiating Group on Rules Original:  English
REPLIES BY THE EUROPEAN COMMUNITIES TO QUESTIONS ON TN/RL/W/67 -
"REFLECTION PAPER OF THE EUROPEAN COMMUNITIES ON A SWIFT
CONTROL MECHANISM FOR INITIATIONS"
The following communication, dated 25 July 2003, has been received from the Permanent
Delegation of the European Commission.
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The EC has noted with satisfaction that the "Reflection Paper of the European Communities
on a Swift Control Mechanism for Initiations" (TN/RL/W/67) has been received with considerable
interest by Members in the Rules Group and has prom pted a very useful discussion on several points
raised in the paper.  The EC wishes to reply to some of the more specific questions asked or
comments made by Australia (TN/RL/W/75, "Comments from Australia on the European
Communities Paper: Reflection Paper of the European Communities on a Swift Control Mechanism
for Initiations" ) and the United States (TN/RL/W/103, "Fourth Set of Questions from the United
States on Papers Submitted to the Rules Negotiating Group" ). In answering the questions, the EC
would like to stimulate other Members to share their views on the proposal so as to prepare to the
fullest extent possible the ground for a more detailed discussion of the proposal during the further
negotiations.
I. TN/RL/W/75:  COMMENTS FROM AUSTRALIA ON THE EUROPEAN
COMMUNITIES PAPER:  REFLECTION PAPER OF THE EUROPEAN
COMMUNITIES ON A SWIFT CONTROL MECHANISM FOR INITIATIONS
1. Having an open, transparent system of co nsultations sometimes remedies perceptions
that initiation of an investigation is groundless .  Therefore, Australia considers that any swift
control mechanism should not undermine open consultations.  Otherwise, such a mechanism
may encourage immediate recourse to dispute settlement proceedings which may ultimately be
without foundation.
The EC agrees that open consultations can contribute to avoiding recourse to dispute
settlement and are therefore an important cornerstone of the dispute settlement system.  In the
framework of fast track initiation panels, a balance has to be struck between avoiding an overload of
the system on the one hand and ensuring early resolution of a case on the other.  In the context ofDSU negotiations, the EC has proposed shortening the deadline for "normal cases" to 30 days
(TN/DS/W/1). Since initiations involve procedural and substantive issues of a more limited scope
than normal cases, it seems possible to shorten this 30-day deadline without rendering consultations
meaningless.TN/RL/W/142
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2. Given there is not a corresponding provision as ADA Article 17.4 reflected in the SCM,
does the absence of the inclusion of initiation of anti-dumping investigations in ADA Article 17.4
represent lacuna in the ADA? (…)  Does the EC consider there to be imbalance between the
ADA and the SCM in relation to dispute settlement actions?
The relevant provisions on dispute settlement in the ADA (Article 17 ADA) are more specific
than those in the ASCM (Article 30 ASCM). As far as the object of any dispute settlement action is
concerned, Article 17.4 ADA does specifically mention definitive measures and price undertakings, as
well as (under certain conditions) provisional measures.  The Appellate Body in DS60 Guatemala -
Anti-Dumping Investigation Regard ing Portland Cement from Mexico expressly confirmed that
initiations are not subject to dispute settlement. In turn, Article 30 ASCM contains no enumeration of
the objects of any dispute settlement action in the area of CVD. It might be possible to argue,therefore, that initiations can be attacked under the ASCM.  In this respect, there could arguably be an
imbalance between the ADA on the one hand and the ASCM on the other.
3. If there is no prima facie evidence or one of the elements to initiate are absent, then the
only recommendation could be for the investigation to be terminated.  What doesimplementation and “reasonable period of time” mean in the context where, for example, one of
the elements has not been established by the invest igating authorities?  Surely in such cases, the
investigation should be terminat ed without recourse to dispute se ttlement proceedings.  Further,
in a situation where a fast track panel has dete rmined that one element or the grounds for
initiation are deficient, and the recommendation  is to terminate, could the domestic industry
simply submit a new application?
In its reflection paper, the EC has singled out implementation as one of the important aspects
to be addressed in discussions about fast track initiation panels.  Indeed, it would make no sense to
have a fast track procedure without clear rules on implementation.  This would seriously underminethe practical impact of the findings of a fast track panel.  The EC thinks that as a starting point, panels
should be asked to issue specific recommendations going beyond a mere request "to bring the
initiation into conformity with the Agreement".  This could be achieved by making the current
language in Article 19.1 DSU second sentence mandatory in the case of initiation panels.
Investigating authorities could thus be required to carry out a more detailed analysis of the adequacy
and accuracy of evidence concerning dumping/subsidisation, injury or causal link.  As outlined in the
reflection paper, a recommendation to terminate the investigation may also be an option.  This may bethe case where, for example, the standing requirements were not met or where the evidence before the
investigating authority was manifestly unsuitable.  Obviously, implementing a recommendation to
terminate would require considerably less time than carrying out a new analysis of the evidence.  The
EC would in principle not see an y problem with the lodging of a new, correct complaint by the
domestic industry following a fast track panel.
4. What are the implications of footnote 7 (rel ating to the suspensive effect)?  How would
this relate to, for example, ‘stopping the clock’?
The question of whether investigations should be suspended after the lodging of a fast track
panel procedure is one of the most difficult issues to be addressed in the context of the proposed swift
control mechanism for initiations.  Such a suspensive effect would indeed provide the maximum of
"protection" against unjustified initiations.  The investigation would simply be halted for the duration
of the panel proceedings and would have to be resumed once the panel had issued its
recommendations. Appealing as a suspension may seem, it raises a number of serious questions:First, there are systemic questions: Why should a fast track panel on initiations have a suspensive
effect, while a normal panel examining e.g. the imposition of definitive measures does not have such
an effect?  Wouldn't this constitute a fundamental change in the WTO dispute settlement system
which would have to be reflected - if desired by Members - at a broader level beyond fast trackTN/RL/W/142
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initiation panels?  Second, there are practical aspects that have to be taken into account:  Wouldn't the
suspensive effect of fast track panels invite abuse of the mechanism simply in order to stop - if only
for a while - on-going investigations?  Wouldn't this risk overloading and ultimately undermining the
whole mechanism?  The EC is of the view that these systemic and practical concerns are too serious a
burden for a newly created mechanism.  For the aforementioned reasons, the EC considers that asuspensive effect would not be an appropriate element of fast track panel proceedings at this stage.
This does not of course preclude addressing the question of suspension after a thorough analysis of
the experience with the functioning of the mechanism as a whole in the future.
5. Would an arbitration clause based on Article 25 of the DSU result in an expedited
outcome?  Article 25 of the DSU is based on the "mutual agreement" of the parties.  While it is
not subject to the prescriptive time frames of other dispute settlement provisions, it does notprovide any certainty should the parties fail to reach an agreement.
In footnote 8 of TN/RL/W/67 the EC stated: "A rticle 25 DSU could be a useful basis for
discussions on how to model arbitration so as to become a workable alternative to initiation
panels…".  Thus, while Article 25 DSU could be the point of departure for any provision onarbitration on initiations, the EC’s idea was to adapt arbitration to the need for a workable procedure
for initiation panels.  Thus it would not be necessary to maintain the requirement of prior "mutual
agreement" on recourse to arbitration.  There are indeed other examples in the DSU (e.g. Article 21.3,
22.6) where recourse to arbitration does not imply mutual consent.
6. The European Communities notes that the arbitration could be conducted on the basis
of a “checklist” of basic elements required for th e initiation of an investigation.  Does the
European Communities consider that this would be sufficient, particularly as initiation raises
issues of qualitative evidence notwithstanding that it is prima facie evidence?  For example, in a
countervailing duty investigation, would a website address for a government programme besufficient prima facie evidence for initiation of an investigation?
According to the EC's proposal, arbitration is  most suitable in "clearly defined and
straightforward" cases.  The EC has given examples  of such cases in its submission, i.e. absence of
evidence, manifestly unsuitable evidence in the complaint, missing notification or missing invitation
for consultations of the exporting country concerned.  As far as the latter two examples are concerned,
the checklist approach would obviously be feasible.  The same is true for the first two examples.Here, the EC has cases in mind where e.g. information on basic injury parameters is simply absent
from the complaint or is so obviously meaningless that it can be discarded without any further
detailed analysis. It is of course true that there are borderline cases where a pure "checklist" approach
would not be sufficient in order to assess whether a certain piece of evidence is suitable or not.  The
example given by Australia (website address for go vernment programme) may in fact not be "missing
or manifestly unsuitable evidence" for this purpose.  Of course, this does not mean that it in any event
constitutes “sufficient evidence” for initiation under Article 11.2 ASCM.
7. The merits of having a non-binding advisory opinion under this option are not clear.  It
is also not clear how this would improve predicta bility in proceedings.  While such an opinion
could give a ‘warning’ to the investigating auth ority that the initiation was deficient, the
consistency of the initiation would still be subject to the binding findings of a dispute settlement
panel if it were subsequently challenged.  How would this option provide legal certainty?
In the EC's reflection paper, the option of a "standing advisory body" has been construed
outside the traditional dispute settlement system.  In this respect, it is not intended "to provide legal
certainty" stricto sensu .  As Australia has rightly pointed out, the standing advisory body would rather
issue an "early warning" and report to the Committee which would subsequently discuss the report.
Any subsequent panel would not be obliged to follow the report issued by the standing advisory body,TN/RL/W/142
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but the report would certainly have the authority of an expert opinion and be taken into due
consideration as such by the panel.
II. TN/RL/W/103:  FOURTH SET OF QUESTIONS FROM THE UNITED STATES ON
PAPERS SUBMITTED TO THE RULES NEGOTIATING GROUP
1. With respect to the model for “fast trac k initiation panels”, the EC has provided
suggested elements of such panels, but no suggested  deadlines.  Does the EC envision that a fast
track panel could complete its work before a company goes to the expense of preparing its
questionnaire response?
It is true that questionnaire responses generally have to be delivered within a relatively short
period of time in order to allow investigations to co mply with the tight general time schedule.  In the
case of the EC, questionnaire responses normally have to be handed in 40 days after publication of the
notice of initiation.  Members should strive for provisions which would allow fast track panels to
complete their work before companies have prepared their responses.  However, questionnaire
responses are not the only cost-intensive burden on companies in investigations.  Verification visits,
participation in hearings and comments on disclosure are examples of procedural steps which alsocontribute to the costs of proceedings and which relate to a stage of the investigations when a fast
track panel can generally already have given its view on a case.
2. As an alternative to a fast track panel, the EC has proposed the possibility of recourse to
binding arbitration, using Article 25 of the DSU as a model. Article 25.2 of the DSU providesthat arbitration must be subject to the mutual  agreement of the parties involved.  After the
investigating authority of the importing Member has determined that the information contained
in an application is sufficient to warrant the initiation of an investigation, what incentive would
the Member have to enter into binding arbitration?
The EC has explained its ideas on the adaptation of Article 25 DSU in its reply to question 5
by Australia.
3. In order for a swift control mechanism for initiations to function properly, interested
parties and foreign governments must have access to relevant information on a timely basis.
However, nothing in Article 6 of the AD Agre ement, or Article 12 of the SCM Agreement,
guarantees that parties will have access to rele vant information at the initiation stage.  What
steps does the EC envision to ensure that interested parties ca n review information presented to
the authority in connection with the initiation in  time to make use of a swift control mechanism?
What protections would the EC suggest to en sure that a Member which allows early and full
review of information in connection with initiation is not disadvantaged under the proposed
mechanism?
The EC is aware that a swift control mechanis m for initiations may have implications for
substantive and (above all) procedural provisions of the ADA such as those mentioned in the question
supra .  The EC stands ready to discuss these implic ations with a view to adapting the relevant
provisions if necessary.
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