WORLD TRADE WT/DS22/AB/R
21February 1997
ORGANIZATION(97-0695)
Appellate Body
BRAZIL -MEASURES AFFECTING DESICCATED COCONUT
AB-1996-4
Report oftheAppellate BodyWT/DS22/AB/R
Page1
WORLD TRADE ORGANIZATION
APPELLATE BODY
Brazil -Measures Affecting Desiccated
Coconut
Philippines, Appellant/Appellee
Brazil, Appellant/Appellee
European Communities, Third Participant
United States, Third ParticipantAB-1996-4
Present:
El-Naggar, Presiding Member
Ehlermann, Member
Lacarte-Muró, Member
I. Introduction
ThePhilippines andBrazil appeal from certain issues oflawandlegalinterpretations inthe
Panel Report, Brazil -Measures Affecting Desiccated Coconut1(the"Panel Report"). ThatPanel was
established toconsider acomplaint bythePhilippines against Brazil relating tothecountervailing duties
imposed byBrazil onimports ofdesiccated coconut fromthePhilippines pursuant toInterministerial
Ordinance No.11(the"Ordinance") on18August 1995.
Theapplication forinitiation ofthecountervailing dutyinvestigation wasfiledwiththeBrazilian
authorities on17January 1994. Theinvestigation wasinitiated on21June 1994, provisional
countervailingdutieswereimposedon23March1995,anddefinitivecountervailingdutieswereimposed
on18August 1995. TheMarrakesh Agreement Establishing theWorld Trade Organization2(the"WTO
Agreement ")entered intoforce forbothparties tothisdispute, Brazil andthePhilippines, on1January
1995, thatis,aftertheapplication for,andtheinitiation of,theinvestigation andpriortotheimposition
oftheprovisional anddefinitive countervailing duties.
1WT/DS22/R, 17October 1996.
2Done atMarrakesh, Morocco, 15April 1994.WT/DS22/AB/R
Page2
ThePanel Report wascirculated toMembers oftheWorld Trade Organization (the"WTO")
on17October 1996. Itcontains thefollowing conclusions:
a. Article VIofGATT 1994 doesnotconstitute applicable law
forthepurposes ofthisdispute. Asaresult, thesubstance
ofthePhilippines 'claims under thatArticle, andofitsclaims
under Articles IandIIofGATT 1994which derive fromtheir
claims ofinconsistency withArticle VIofGATT 1994, cannot
beconsidered bythisPanel.
b. TheAgreement onAgriculture doesnotconstitute applicable
lawforthepurposes ofthisdispute. Asaresult, thesubstance
ofthePhilippines 'claims under thatAgreement cannot be
considered bythisPanel.
c. ThePhilippines 'claim regarding Brazil 'sfailure toconsult
isnotwithin theterms ofreference ofthisPanel andtherefore
itssubstance cannot beconsidered.3
ThePanel made thefollowing recommendation:
ThePanel, having concluded thatthesubstance ofthePhilippines '
claims arenotproperly before it,recommends thattheDispute
Settlement Body make sucharuling.4
On16December 1996, thePhilippines notified theDispute Settlement Body5(the"DSB") of
itsintentiontoappealcertainissuesoflawcoveredinthePanelReportandlegalinterpretationsdeveloped
bythePanel, pursuant toparagraph 4ofArticle 16oftheUnderstanding onRules andProcedures
Governing theSettlement ofDisputes (the"DSU")andfiledaNotice ofAppeal withtheAppellate Body,
pursuant toRule20oftheWorking Procedures forAppellate Review (the"Working Procedures ").
On9January 1997, thePhilippines filedanappellant 'ssubmission.6On14January 1997,
Brazil filedanappellant 'ssubmission pursuant toRule23(1) oftheWorking Procedures .On24January
3Panel Report, para. 294.
4Panel Report, para. 295.
5WT/DS22/8, 18December 1996.
6Pursuant toRule 21(1) oftheWorking Procedures .WT/DS22/AB/R
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1997, Brazil filedanappellee 'ssubmission pursuant toRule22oftheWorking Procedures andthe
Philippines filedanappellee 'ssubmission pursuant toRule23(3) oftheWorking Procedures .That
same day,theEuropean Communities andtheUnited States submitted thirdparticipants 'submissions
pursuant toRule24oftheWorking Procedures.
Theoralhearing provided forinRule27oftheWorking Procedures washeldon30January
1997. Theparticipants andthirdparticipants presented theirarguments andanswered questions from
theDivision oftheAppellate Body hearing theappeal.
II. Arguments ofParticipants andThird Participants
A. ThePhilippines
ThePhilippines appeals from certain ofthePanel'slegal findings andconclusions, aswell
asfrom certain legalinterpretations developed bythePanel. ThePhilippines submits thatthePanel
erred inconcluding thatArticle VIoftheGeneral Agreement onTariffs andTrade 1994 (the"GATT
1994") cannot beindependently applied intransitional situations where theAgreement onSubsidies
andCountervailing Measures (the"SCM Agreement ")isnotapplicable pursuant toArticle 32.3of
theSCM Agreement, andthattheinapplicability ofArticle VIoftheGATT 1994 renders Articles I
andIIoftheGATT 1994 inapplicable. InthePhilippines 'view, thePanel erroneously treated the
Philippines ’reliance onArticles IandIIoftheGATT 1994asonethat"derive[s] from" thePhilippines ’
invocation ofArticle VIoftheGATT 1994.
According tothePhilippines, thePanel’sanalysis isflawed byitsfailure toaddress thisdispute
inaccordance withtheproper relationship between Articles I,IIandVIoftheGATT 1994 and
Article 32.3oftheSCMAgreement .ThePanel erredinstarting andfocusing itsanalysis onArticle 32.3
oftheSCM Agreement ,which thePhilippines didnotinvoke. ThePanel should havefirstevaluated
whether thedisputed measure isinconsistent withArticles IandIIoftheGATT 1994, andifitwas
found tobeinconsistent, thenthePanel should haveexamined whether themeasure could bejustified
under Article VIoftheGATT 1994. Moreover, because Brazil 'sdefence ispredicated onanexception
(Article 32.3oftheSCM Agreement )toyetanother exception (Article VIoftheGATT 1994) tothe
general rule(Articles IandIIoftheGATT 1994), thePanel should haveinterpreted Article 32.3of
theSCM Agreement narrowly.WT/DS22/AB/R
Page4
ThePhilippines argues that,when theWTO Agreement entered intoforce forbothBrazil and
thePhilippines on1January 1995, thePhilippines became entitled toinvoke itsrights under Articles I
andIIoftheGATT 1994, anditsrights arising under Article VIoftheGATT 1994, inregard toany
countervailing measure imposed against thePhilippines byanyWTO Member, including Brazil, after
theWTO Agreement 'sentry intoforce. Article 32.3oftheSCM Agreement ,atmost, precludes the
application oftheSCM Agreement toWTO-era measures applied forbefore theentry intoforce of
theWTO Agreement duetothedifferences between theSCM Agreement andtheAgreement on
Interpretation andApplication ofArticles VI,XVIandXXIII oftheGeneral Agreement onTariffs and
Trade (the"Tokyo Round SCM Code"),butsuchatransitional ruledoesnotaffect theapplicability
ofArticles I,IIandVIoftheGATT 1994, whose texts areexactly identical totheircounterpart
provisions intheGeneral Agreement onTariffs andTrade 1947 (the"GATT 1947").
ThePhilippines asserts thatinternational lawprinciples ascodified intheVienna Convention
ontheLawofTreaties (the"Vienna Convention ")7ensure thenon-retroactive application oftreaties.
Article 28oftheVienna Convention insulates anactthattookplace before thenewtreaty 'sentry into
force fromtheobligations ofthattreaty. Asthesubstance andconclusion oftheinvestigation leading
totheimposition byBrazil ofthecountervailing measure atissue inthisdispute occurred afterthe
entry intoforce oftheWTO Agreement ,Articles I,IIandVIoftheGATT 1994 constitute thelaw
applicable tothemeasure indispute, andsuch applicability does notinvolve retroactivity. The
Philippines challenges thePanel'sfinding thattheapplication ofArticle VIoftheGATT 1994 to
thecountervailing dutymeasure indispute leads toa"manifestly absurd orunreasonable" result. In
thePhilippines ’view, application ofArticle VIoftheGATT 1994 toadefinitive countervailing duty
isnolessfairthanapplying WTO norms toother pre-WTO measures, suchasoccurred inUnited
States -Standards forReformulated andConventional Gasoline8("United States -Gasoline ").
InthePhilippines 'view, thePanel improperly disregarded thePhilippines ’argument thatthe
transitional decisions9recognize therightofWTO Members toinvoke WTO norms eveninsituations
723May 1969, 1155 U.N.T.S. 331; 8International Legal Materials 679.
8WT/DS2/9, adopted 20May 1996.
9By"transitional decisions", werefer totheDecision onTransitional Co-Existence oftheGATT 1947 andtheWTO
Agreement, PC/12-L/7583, 13December 1994; theDecision onTransitional Co-Existence oftheAgreement onInterpretation
andApplication ofArticles VI,XVIandXXIII oftheGeneral Agreement onTariffs andTrade andtheMarrakesh Agreement
Establishing theWorld Trade Organization (the"Decision onTransitional Co-existence oftheTokyo Round SCM Code
andtheWTO Agreement"), SCM/186, 16December 1994; andtheDecision onConsequences ofWithdrawal from or
Termination oftheAgreement onInterpretation andApplication ofArticles VI,XVIandXXIII oftheGeneral Agreement
onTariffs andTrade (the"Decision onConsequences ofWithdrawal fromorTermination oftheTokyo Round SCM Code"),
SCM/187, 16December 1994.WT/DS22/AB/R
Page5
involving elements thatoccurred prior totheentry intoforce oftheWTO Agreement .TheDecision
onTransitional Co-Existence oftheTokyo Round SCM Code andtheWTO Agreement expressly
recognizes theavailability ofWTO dispute resolution notonlyasanoption, butasanimmediate
pre-emptive choice inmatters alsocovered bytheTokyo Round SCM Code.TheDecision on
Consequences ofWithdrawal from orTermination oftheTokyo Round SCM Code ispermissive,
expressly recognizing theright ofasignatory totheTokyo Round SCM Code,thatisalsoaWTO
Member, tochoose under which regime itwillvindicate itsrights. ThePhilippines contends thatit
hastheprocedural righttoresort totheDSUtoenforce itssubstantive WTO rights.
While Article 28oftheVienna Convention recognizes thatitslimitations onnon-retroactivity
maybequalified where "adifferent intention appears fromthetreaty orisotherwise established", the
PhilippinesarguesthatnosuchintentionisindisputablyestablishedbyArticle32.3oftheSCMAgreement
andtheother provisions upon which thePanel relied. Itwaswrong forthePanel Report tovarythe
plain meaning oftheterm, "thisAgreement", inArticle 32.3oftheSCM Agreement soastorefer
alsototheGATT 1994.
InthePhilippines 'view, thecontext ofArticle 32.3oftheSCMAgreement doesnotwarrant
inferring areference toArticle VIoftheGATT 1994. Article 32.1oftheSCMAgreement confirms
thatthereference inArticle 32.3oftheSCM Agreement to"thisAgreement" means onlytheSCM
Agreement .Theomission intheSCMAgreement ofnote2tothepreamble oftheTokyo Round SCM
Code doesnotsupport, andinfactundercuts, thePanel'snon-separability finding. Thepresence of
cross-references from Articles 10and32.1oftheSCM Agreement toArticle VIoftheGATT 1994
doesnotmake Article VIoftheGATT 1994 soinseparable from theSCM Agreement astonegate
therights ofWTO Members toinvoke Article VIoftheGATT 1994 independently. Such arightto
choose existed under thepre-WTO regime despite similar cross-references intheTokyo Round SCM
Code toArticle VIoftheGATT 1947. Furthermore, itwasimproper forthePanel tosupport itsnon-
separability finding withthebroad argument thatArticle 7.1oftheDSUfosters an"integrated" dispute
settlement framework that"allows apanel tointerpret provisions ofcovered agreements inthelight
oftheWTO Agreement asawhole".10
According tothePhilippines, theobject andpurpose ofArticle 32.3oftheSCM Agreement
andtheWTO Agreement alsodonotwarrant interpreting thephrase "thisAgreement" inArticle 32.3
oftheSCM Agreement toinclude Article VIoftheGATT 1994.
10Panel Report, para. 242.WT/DS22/AB/R
Page6
InthePhilippines 'view, thepanel report inUnited States -Countervailing Duties onFresh,
Chilled andFrozen PorkfromCanada11("United States -Pork")offers persuasive guidance onthe
separate applicability ofArticle VIoftheGATT 1994. Thepanel inEuropean Economic Community
-Payments andSubsidies PaidtoProcessors andProducers ofOilseeds andRelated Animal-Feed
Proteins12("EEC-Oilseeds ")ineffect addressed theseparability issue andresolved itinfavour of
applying GATT 1947separately fromtheTokyo Round SCMCode.Inaddition, thePanel Report failed
togivedueweight totheUnited States -Gasoline caseasevidence thatacomplaining WTO Member
isnotrequired toinvoke allagreements thatarepotentially relevant toadispute.
IntheviewofthePhilippines, theunavailability oftheSCMAgreement ’sdefinitions, orthe
possibility ofinterpretations inconsistent therewith, when Article VIoftheGATT 1994isinterpreted
independently, donotnegate theright ofWTO Members toinvoke Article VIoftheGATT 1994
independently intransitional situations where theSCMAgreement isinapplicable. Inaddition, when
independently applied, Article VIoftheGATT 1994 canbeproperly interpreted inlightofpractice
under Article VIoftheGATT 1947 thatantedated, and/or wasnotdependent on,theTokyo Round
SCM Code.
ThePhilippines further argues thatitwasnottheintent oftheoriginal WTO Members toallow
prospective newWTO Members touseapplications forinvestigations filedprior totheiraccession
totheWTO Agreement asabasis forinsulating from theGATT 1994 anycountervailing measures
thatsuchprospective WTO Members mayimpose aftertheiradmission intotheWTO. Inaddition,
thePanel'sruling could leave some WTO Members without anyremedy foratleastfiveyears, until
suchtimeasthe"sunset" review provision inArticle 21.3oftheSCMAgreement becomes effective.
IftheAppellate Body reverses thePanel'sconclusions thatArticles I,IIandVIoftheGATT
1994areinapplicable tothisdispute, thePhilippines requests thattheAppellate Body adopt aprocedure
forthisappeal under Rule16(1) oftheWorking Procedures fortheresolution ofthesubstantive merits
ofthePhilippines'claims.ThePhilippinesincorporatesitsargumentsmadebeforethePanelandsubmits
thatthesubsidy andinjury determinations oftheOrdinance, andthecountervailing measure based
thereon, areinconsistent withArticles IandIIoftheGATT 1994, andnotjustified byArticles VI:3
andVI:6(a) oftheGATT 1994.
11BISD 38S/30, adopted 11July1991.
12BISD 37S/86, adopted 25January 1990.WT/DS22/AB/R
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With respect tothepoint ofappeal raised inBrazil 'sappellant 'ssubmission, thePhilippines
argues thatBrazil didnotaskthePanel torefrain from considering whether ornotArticles IandII
oftheGATT 1994areapplicable tothisdispute. Onthecontrary, Brazil requested thePanel toconsider
theissue oftheapplicability orinapplicability oftheGATT 1994. Inanyevent, Articles IandIIof
theGATT 1994 arecovered bytheterms ofreference because theyare"relevant provisions" within
theagreement "cited" bythePhilippines.
B. Brazil
Brazil generally agrees withthePanel'sfindings andconclusions concerning thelawapplicable
tothisdispute, butnevertheless appeals ononeissue. Brazil claims thattheissueoftheapplicability
ofArticles IandIIoftheGATT 1994wasnotwithin theterms ofreference ofthePanel inthisdispute
andshould nothavebeenaddressed bythePanel.
With respect tothepoints ofappeal raised inthePhilippines 'appellant 'ssubmission, Brazil
considers itappropriate, andinaccordance withprinciples ofinternational law,thatthePanel first
determined whether ithadjurisdiction toconsider thedispute before considering thesubstantive merits
ofthePhilippines ’claims. Thequestion ofwhether theWTO Agreement applies tothesubstance of
thedispute isnotmerely a"defence" asclaimed bythePhilippines, butafundamental jurisdictional
issue. While Brazil doesnotcontest thatthePhilippines hastheprocedural righttoresort totheDSU
toenforce itssubstantive WTO rights, Brazil asserts thatthePanel properly found thatthisdispute
didnotinvolve anysubstantive WTO rights. ThePanel’sconclusion thatitdidnothavejurisdiction
iscorrect, andtheTokyo Round SCM Code constitutes thelawapplicable tothisdispute.
InBrazil ’sview, thePanel properly applied thecustomary rules ofinterpretation ofpublic
international lawassetoutinArticles 31and32oftheVienna Convention toconclude thattheWTO
Agreement didnotapply tothisdispute. Theplain language ofArticle 32.3oftheSCM Agreement
prohibits theapplication ofatleasttheSCM Agreement tothisdispute, andthecontext oftheWTO
Agreement indicates thatArticle 32.3oftheSCM Agreement prevents theapplication ofanyportion
oftheWTO Agreement tothisdispute. There arenumerous indicia thattheWTO Agreement andits
Multilateral Trade Agreements wereintended toapply asawhole. Article II:2oftheWTO Agreement
states thattheagreements andassociated legal instruments included inAnnexes 1,2and3--
encompassing boththeGATT 1994andtheSCMAgreement --are"integral parts" oftheAgreement.WT/DS22/AB/R
Page8
ThereisaunifieddisputesettlementmechanismthatappliestodisputesraisedundertheWTOAgreement,
theGATT 1994 andtheother covered agreements. Thegeneral interpretative notetoAnnex 1Aof
theWTO Agreement indicates thattheGATT 1994 andtheother agreements aretobeconsidered
together. Article 10oftheSCMAgreement indicates thatcountervailing duties mayonlybeimposed
inaccordance withtheprovisions ofArticle VIoftheGATT 1994andtheterms oftheSCMAgreement .
AsthePanel noted, several oftheprovisions oftheSCMAgreement seektointerpret orprovide guidance
onterms usedinArticle VI.AsthePanel further observed, applying Article VIoftheGATT 1994
separately from Article VIoftheGATT 1994 andtheSCM Agreement could leadtodiffering
interpretations ofthebenefits andobligations conferred byArticle VIoftheGATT 1994 asbetween
thesame Members.
InBrazil 'sview, United States -Gasoline doesnotsupport theapplication ofArticle VIof
theGATT 1994 without reference totheSCM Agreement .TheAgreement onTechnical Barriers to
Trade ,invoked inUnited States -Gasoline ,doesnotpurport tointerpret anyarticles ofGATT 1994,
nordoesitcontain anylanguage similar tothatofArticle 10oftheSCMAgreement linking ittospecific
articles oftheGATT 1994.
Brazil asserts thatthePanel'sconsideration oftheDecision onConsequences ofWithdrawal
fromorTermination oftheTokyo Round SCM Code wasconsistent withthereference toa"subsequent
agreement" within themeaning ofArticle 31(3)(a) oftheVienna Convention .Totheextent that
"subsequent practice" within themeaning ofArticle 31(3)(b) oftheVienna Convention hasdeveloped,
itsupports thePanel'sconclusion thatArticle VIoftheGATT 1994 doesnotapply tothisdispute.
Brazil further asserts thatArticle 28oftheVienna Convention ,asa"relevant ruleofinternational law
applicable intherelations between theparties" referred toinArticle 31(3)(c) oftheVienna Convention ,
supports thePanel'sconclusions onthelawapplicable tothisdispute.
Brazil contends thatthepanel reports inUnited States -Pork andEEC-Oilseeds ,invoked
bythePhilippines, provide noguidance forthisdispute. Astheissue ofapplicable lawwasnever
raised inUnited States -Pork,ittherefore gives noindication ofpastpractice onthisissue. Moreover,
because thestructure ofthevarious agreements inthiscasediffers fromthestructure oftheagreements
inEEC-Oilseeds ,thatpanel report provides noguidance ontheinterpretation oftheWTO Agreement .
Should theAppellate Body findthattheWTO Agreement applies, Brazil argues thatitisnot
appropriate fortheAppellate Body toruleonthesubstantive issues inthisdispute. TheAppellateWT/DS22/AB/R
Page9
Body’sauthority islimited byparagraphs 6and13ofArticle 17oftheDSU.Brazil further argues
thatUnited States -Gasoline doesnotsupport theexamination bytheAppellate Body ofthese issues.
If,however, theAppellate Body considers itappropriate toaddress thesubstantive issues, Brazil
incorporates byreference allitssubmissions, bothoralandwritten, tothePanel concerning those issues.
IftheAppellate Body decides thatArticle VIoftheGATT 1994 applies, itmustbeinterpreted onits
ownwithout reference totheTokyo Round SCM Code ortheSCM Agreement .
C. European Communities
TheEuropean Communities supports thelegal findings andconclusions ofthePanel. The
European Communities asserts thatthePanel correctly concluded thatArticle VIoftheGATT 1994
isinapplicable tothemeasure indispute andthattheinapplicability ofArticle VIoftheGATT 1994
alsorenders Articles IandIIoftheGATT 1994 inapplicable.
IntheEuropean Communities ’view, thePanel’sfindings areinconformity withtheprinciples
ofcustomary international lawregarding thetemporal application oftreaty obligations, contained in
Article 28oftheVienna Convention ,which apply “[u]nless adifferent intention appears fromthetreaty
orisotherwise established ”.ThePanel correctly considered thetextoftherelevant provisions inthe
lightoftheircontext, andoftheobject andpurpose oftheWTO Agreement ,toreach itslegalconclusion
thatArticle VIoftheGATT 1994 cannot beapplied independently. Itwas,therefore, nolonger
necessary forthePanel toresort tothesubsidiary rulecontained inArticle 28oftheVienna Convention .
Inanycase, theapplication ofthissubsidiary rulewould alsoleadtotheconclusion thatArticle VI
oftheGATT 1994 doesnotapply inthepresent dispute.
According totheEuropean Communities, theUnited States -PorkandEEC-Oilseeds panel
reports invoked bythePhilippines arenotrelevant tothisdispute, astherelationship oftheGATT
1947 totheTokyo Round SCM Code isdifferent from therelationship oftheSCM Agreement tothe
GATT 1994. Thetransitional decisions donotsupport theindependent application ofArticle VIof
theGATT 1994. Moreover, theindependent application ofArticle III:4oftheGATT 1994inUnited
States -Gasoline doesnotsupport theindependent application ofArticle VIoftheGATT 1994, as
therelationship between Article IIIoftheGATT 1994 andtheAgreement onTechnical Barriers to
Trade isdifferent fromtherelationship between Article VIoftheGATT 1994andtheSCMAgreement .WT/DS22/AB/R
Page10
D. United States
TheUnited States disagrees withcertain ofthelegal findings andconclusions ofthePanel,
andrequests thattheAppellate Body takeintoconsideration itsarguments before thePanel asdescribed
inparagraphs 211-224 ofthePanel Report. TheUnited States asserts thatArticle VIoftheGATT
1994 isapplicable toBrazil 'scountervailing dutymeasure andthat,asof1January 1995, Brazil was
bound tolevycountervailing duties consistently withtheprovisions oftheGATT 1994. IftheAppellate
Body considers thesubstantive merits ofthisdispute, itmustdosounder Article VIoftheGATT 1994
alone, without reference totheTokyo Round SCM Code. TheUnited States submits thatthepanel
report inEEC-Oilseeds isinstructive inthisregard.
III. Issues Raised inthisAppeal
ThePhilippines appeals from twolegal findings andconclusions ofthePanel. First, the
Philippines submits thatthePanel erred inconcluding thatArticle VIoftheGATT 1994 cannot be
applied independently intransitional situations where theSCM Agreement isnotapplicable pursuant
toArticle 32.3oftheSCMAgreement .Second, thePhilippines claims thatthePanel erred infinding
thattheinapplicability ofArticle VIoftheGATT 1994 alsorenders Articles IandIIoftheGATT
1994inapplicable. Brazil appeals fromthePanel'slegalfindings andconclusions concerning Articles I
andIIoftheGATT 1994. Brazil argues thattheissue oftheconsistency ofBrazil 'scountervailing
dutymeasure withitsobligations under Articles IandIIoftheGATT 1994 wasnotwithin theterms
ofreference ofthePanel.
Onthebasisofthewritten submissions andoralstatements made bytheparticipants andthird
participants, thisappeal raises thefollowing issues:
1. Whether Article VIoftheGATT 1994applies, independently oftheSCMAgreement ,
toacountervailingdutymeasureimposedasaresultofaninvestigationinitiatedpursuant
toanapplication made before theentry intoforce oftheWTO Agreement ;
2. Whether afinding withrespect totheapplicability ofArticle VIoftheGATT 1994
determines theapplicability ofArticles IandIIoftheGATT 1994; andWT/DS22/AB/R
Page11
3. Whether thePhilippines 'claims under Articles IandIIoftheGATT 1994werewithin
theterms ofreference ofthePanel.
IV. Applicability ofArticle VIoftheGATT 1994
A. Background
Thisappeal deals withacountervailing dutyinvestigation which wasinitiated pursuant toan
application filedwiththeBrazilian authorities on17January 1994. Theinvestigation wasinitiated
on21June1994, provisional countervailing duties wereimposed on23March 1995, anddefinitive
countervailing duties wereimposed onimports ofdesiccated coconut fromthePhilippines on18August
1995. TheWTOAgreement entered intoforceforbothparties tothisdispute, Brazil andthePhilippines,
on1January 1995.
With respect tothemeasure atissue inthisappeal, weseeadecision toimpose adefinitive
countervailing dutyastheculminating actofadomestic legalprocess which starts withthefiling of
anapplication bythedomestic industry, includes theinitiation andconduct ofaninvestigation byan
investigating authority, andnormally leads toapreliminary determination andafinaldetermination.
Apositivefinaldeterminationthatsubsidizedimportsarecausinginjurytoadomesticindustryauthorizes
thedomestic authorities toimpose adefinitive countervailing dutyonsubsidized imports.
B. WTO Agreement: AnIntegrated System
TheWTO Agreement isfundamentally different from theGATT system which preceded it.
Theprevious system wasmade upofseveral agreements, understandings andlegalinstruments, the
mostsignificant ofwhich weretheGATT 1947andthenineTokyo Round Agreements, including the
Tokyo Round SCM Code.Each ofthese major agreements wasatreaty withdifferent membership,
anindependent governing bodyandaseparate dispute settlement mechanism.13TheGATT 1947was
13Agreement onTechnical Barriers toTrade ,BISD 26S/8; Agreement onImplementation ofArticle VIIoftheGATT -
Protocol totheAgreement onImplementation ofArticle VIIoftheGATT ,BISD 26S/116, 151; Agreement onImplementation
ofArticle VIoftheGATT (the"Tokyo Round Anti-dumping Code"),BISD 26S/171; Agreement onInterpretation and
Application ofArticles VI,XVIandXXIII oftheGeneral Agreement onTariffs andTrade (the"Tokyo Round SCM Code"),
BISD 26S/56; Agreement onImport Licensing Procedures ,BISD 26S/154; Agreement onGovernment Procurement ,BISD
26S/33; Agreement onTrade inCivil Aircraft ,BISD 26S/162; Arrangement Regarding Bovine Meat,BISD 26S/84; and
International Dairy Arrangement ,BISD 26S/91. TheAgreement onImport Licensing Procedures andtheAgreement on
Trade inCivilAircraft made reference toArticles XXII andXXIII oftheGATT 1947 fordispute settlement. TheArrangement
Regarding Bovine Meat andtheInternational Dairy Arrangement didnotexplicitly provide fordispute settlement.WT/DS22/AB/R
Page12
administeredbytheCONTRACTINGPARTIES,whereastheTokyoRoundSCMCodewasadministered
bytheTokyo Round Committee onSubsidies andCountervailing Duty Measures comprised ofthe
signatories tothatCode.14With respect todisputes brought under Article XXIII oftheGATT 1947,
theCONTRACTING PARTIES were responsible fordispute settlement, including establishment of
panels, adoption ofpanel reports, surveillance ofimplementation ofrulings andrecommendations,
andauthorization ofsuspension ofconcessions orother obligations. TheTokyo Round Committee
onSubsidies andCountervailing Measures wasresponsible foradministering andmonitoring dispute
settlement under Articles 12,13,17and18oftheTokyo Round SCM Code.
Asaresult oftheseparate legalidentity oftheGATT 1947 andtheTokyo Round SCMCode,
acomplaining party either hadtobring adispute under Article VIoftheGATT 1947, inwhich case
itwould invoke thedispute settlement provisions ofArticle XXIII oftheGATT 1947, oralternatively,
under theprovisions oftheTokyo Round SCMCode,inwhich caseitwould commence consultations
under thatCode.Most disputes involving countervailing dutymeasures between 1979and1994were
brought under theTokyo Round SCM Code.15IntheUnited States -Porkcase, notwithstanding that
bothCanada andtheUnited States were signatories totheTokyo Round SCM Code,Canada chose
tobring thematter under thedispute settlement provisions ofArticle XXIII oftheGATT 1947, relying
solely onitsclaims under Article VIoftheGATT 1947.
Unlike theprevious GATT system, theWTO Agreement isasingle treaty instrument which
wasaccepted bytheWTO Members asa"single undertaking". Article II:2oftheWTO Agreement
provides thattheMultilateral Trade Agreements inAnnexes 1,2and3are"integral parts" oftheWTO
Agreement ,binding onallMembers. Annex 1Acontains thirteen multilateral agreements relating to
trade ingoods, including theGATT 1994 which wasincorporated byreference intothatAnnex. A
general interpretative notewasincluded inAnnex 1Ainorder toclarify thelegalrelationship ofthe
GATT 1994withtheother agreements inAnnex 1A.Itprovides thatintheevent ofaconflict between
14Bytheendof1994, theGATT 1947had128contracting parties, whereas theTokyo Round SCMCode had24signatories.
15Canadian Countervailing Duties onGrain Corn fromtheUnited States ,BISD 39S/411, adopted 26March 1992; United
States -Definition ofIndustry Concerning Wine andGrape Products ,BISD 39S/436, adopted 28April 1992; United States -
Measures Affecting Imports ofSoftwood Lumber fromCanada ,SCM/162, adopted 27October 1993; Brazil -Imposition
ofProvisional andDefinitive Countervailing Duties onMilkPowder andCertain Types ofMilkfromtheEuropean Economic
Community ,SCM/179, adopted 28April 1994; United States -Imposition ofCountervailing Duties onImports ofFresh
andChilled Atlantic Salmon From Norway ,SCM/153, adopted 28April 1994; United States -Countervailing Duties on
Non-Rubber Footwear fromBrazil, SCM/94, adopted 13June1995; EEC-Subsidies onExports ofWheat Flour ,SCM/42,
21March 1983, unadopted; EEC -Subsidies onExports ofPasta Products ,SCM/43, 19May 1983, unadopted;
Canada -Imposition ofCountervailing Duties onImports ofBoneless Manufacturing BeeffromtheEEC,SCM/85, 13October
1987, unadopted; German Exchange Rate Scheme forDeutsche Airbus, SCM/142, 4March 1992, unadopted; United
States -Imposition ofCountervailing Duties onCertain Hot-Rolled Lead andBismuth Carbon Steel Products Originating
inFrance, Germany andtheUnited Kingdom ,SCM/185, 15November 1994, unadopted.WT/DS22/AB/R
Page13
aprovision oftheGATT 1994andaprovision ofanother agreement inAnnex 1A,thelattershallprevail
totheextent oftheconflict. Article II:4oftheWTO Agreement provides thattheGATT 1994 "as
specified inAnnex 1A...islegally distinct fromtheGeneral Agreement onTariffs andTrade, dated
30October 1947 ...".
Thesingle undertaking isfurther reflected intheprovisions oftheWTO Agreement dealing
withoriginal membership, accession, non-application oftheMultilateral Trade Agreements between
particular Members, acceptance oftheWTO Agreement ,andwithdrawal from it.16Within this
framework, allWTO Members arebound byalltherights andobligations intheWTO Agreement and
itsAnnexes 1,2and3.
TheDSUprovides anintegrated dispute settlement mechanism applicable todisputes arising
under anyofthe"covered agreements". Article 2oftheDSUprovides thattheDSBhasthe"authority
toestablish panels, adopt panel andAppellate Body Reports, maintain surveillance andimplementation
ofrulings andrecommendations, andauthorize suspension ofconcessions andother obligations under
thecovered agreements". The"covered agreements" include theWTO Agreement, theAgreements
inAnnexes 1and2,aswellasanyPlurilateral Trade Agreement inAnnex 4where itsCommittee
ofsignatories hastaken adecision toapply theDSU.17Inadispute brought totheDSB, apanel may
dealwithalltherelevant provisions ofthecovered agreements citedbytheparties tothedispute in
oneproceeding.18
C. GATT 1994 within theWTO Agreement
TheWTO Agreement isasuccessor treaty totheGATT 1947, theTokyo Round SCM Code
andtheother agreements andunderstandings which formed theprevious GATT system. Although
itisanewtreaty which theWTO Members accepted definitively, Article XVI:1 oftheWTO Agreement
provides asfollows:
Except asotherwise provided under thisAgreement ortheMultilateral
Trade Agreements, theWTO shall beguided bythedecisions,
procedures andcustomary practices followed bytheCONTRACTING
PARTIES toGATT 1947andthebodies established intheframework
ofGATT 1947.
16WTO Agreement ,Articles XI,XII,XIII, XIVandXV,respectively.
17DSU,Article 1andAppendix 1.
18DSU,Article 7.WT/DS22/AB/R
Page14
TheGATT 1994 wasincorporated byreference intoAnnex 1AoftheWTO Agreement .The
reference language includes theprovisions oftheGATT 1947, asrectified, amended ormodified before
theentry intoforce oftheWTO Agreement ;theprovisions oflegalinstruments thatentered intoforce
under theGATT 1947 prior totheentry intoforce oftheWTO Agreement ,suchasprotocols and
certifications relating totariffconcessions, protocols ofaccession (excluding theprovisions concerning
provisional application and"grandfather rights"), decisions onwaivers granted under Article XXV
oftheGATT 1947andother decisions oftheCONTRACTING PARTIES totheGATT 1947; aswell
astheUnderstandings which amended specific articles oftheGATT 1947 asaresult oftheUruguay
Round Multilateral Trade Negotiations. Inmany ways, therefore, theprovisions oftheGATT 1994
differ from theprovisions oftheGATT 1947.
Therelationship between theGATT 1994 andtheother goods agreements inAnnex 1Ais
complex andmustbeexamined onacase-by-case basis. Although theprovisions oftheGATT 1947
wereincorporated into,andbecame apartoftheGATT 1994, theyarenotthesumtotaloftherights
andobligationsofWTOMembersconcerningaparticularmatter.Forexample,withrespecttosubsidies
onagricultural products, Articles II,VIandXVIoftheGATT 1994 alone donotrepresent thetotal
rights andobligations ofWTO Members. TheAgreement onAgriculture andtheSCMAgreement reflect
thelateststatement ofWTO Members astotheirrights andobligations concerning agricultural subsidies.
Thegeneral interpretative notetoAnnex 1Awasadded toreflect thattheother goods agreements in
Annex 1A,inmany ways, represent asubstantial elaboration oftheprovisions oftheGATT 1994,
andtotheextent thattheprovisions oftheother goods agreements conflict withtheprovisions ofthe
GATT 1994, theprovisions oftheother goods agreements prevail. Thisdoesnotmean, however,
thattheother goods agreements inAnnex 1A,suchastheSCMAgreement ,supersede theGATT 1994.
AsthePanel hassaid:
...thequestion forconsideration isnotwhether theSCM Agreement
supersedes Article VIofGATT 1994. Rather, itiswhether Article VI
creates rules which areseparate anddistinct from those oftheSCM
Agreement, andwhich canbeapplied without reference tothat
Agreement, orwhether Article VIofGATT 1994 andtheSCM
Agreement represent aninseparable package ofrights anddisciplines
thatmust beconsidered inconjunction.19
19Panel Report, para. 227.WT/DS22/AB/R
Page15
D. Principle ofNon-Retroactivity ofTreaties
Thefundamentalquestioninthiscaseisoneofthetemporalapplicationofonesetofinternational
legalnorms,orthesuccessorsetofnorms,toaparticularmeasuretakenduringtheperiodofco-existence
oftheGATT 1947andtheTokyo Round SCMCode withtheWTO Agreement .Article 28oftheVienna
Convention contains ageneral principle ofinternational lawconcerning thenon-retroactivity oftreaties.
Itprovides asfollows:
Unless adifferent intention appears from thetreaty orisotherwise
established, itsprovisions donotbindaparty inrelation toanyact
orfactwhich tookplace oranysituation which ceased toexistbefore
thedateoftheentry intoforce ofthetreaty withrespect tothatparty.
Article 28states thegeneral principle thatatreaty shallnotbeapplied retroactively "unless
adifferent intention appears fromthetreaty orisotherwise established". Absent acontrary intention,
atreaty cannot apply toactsorfactswhich tookplace, orsituations which ceased toexist, before the
dateofitsentry intoforce. Article 32.3oftheSCM Agreement isanexpress statement ofintention
which wewillnowexamine.
E. Interpretation ofArticle 32.3oftheSCM Agreement
1. Text
Article 32.3oftheSCM Agreement reads asfollows:
...theprovisions ofthisAgreement shallapply toinvestigations, and
reviews ofexisting measures, initiated pursuant toapplications which
havebeenmade onorafterthedateofentry intoforce foraMember
oftheWTO Agreement.
Examination oftheordinary meaning ofthisprovision alone could leadustotheconclusion
thattheterm, "thisAgreement", inArticle 32.3means theSCMAgreement .However, itisnecessary
alsotoconsider thisprovision initscontext andinlightoftheobject andpurpose oftheWTOAgreement .WT/DS22/AB/R
Page16
2. Context
Therelationship between theSCMAgreement andArticle VIoftheGATT 1994 issetoutin
Articles 10and32.1oftheSCM Agreement .Article 10reads asfollows:
Application ofArticle VIofGATT 1994
Members shalltakeallnecessary steps toensure thattheimposition
ofacountervailing duty36onanyproduct oftheterritory ofany
MemberimportedintotheterritoryofanotherMemberisinaccordance
withtheprovisions ofArticle VIofGATT 1994 andtheterms ofthis
Agreement. Countervailing duties mayonlybeimposed pursuant to
investigations initiated andconducted inaccordance withtheprovisions
ofthisAgreement andtheAgreement onAgriculture.
_____________36Theterm"countervailing duty" shallbeunderstood tomean aspecial dutylevied
forthepurpose ofoffsetting anysubsidy bestowed directly orindirectly upon the
manufacture, production orexport ofanymerchandise, asprovided forinparagraph 3
ofArticle VIofGATT 1994.
Article 32.1reads asfollows:
Nospecific action against asubsidy ofanother Member canbetaken
except inaccordance withtheprovisions ofGATT 1994, asinterpreted
bythisAgreement.56
_____________56Thisparagraph isnotintended topreclude action under other relevant provisions
ofGATT 1994, where appropriate.
From reading Article 10,itisclearthatcountervailing duties mayonlybeimposed inaccordance
withArticle VIoftheGATT 1994 andtheSCM Agreement .Acountervailing dutybeing aspecific
action against asubsidy ofanother WTO Member, pursuant toArticle 32.1, itcanonlybeimposed
"inaccordance withtheprovisions ofGATT 1994, asinterpreted bythisAgreement". Theordinary
meaning ofthese provisions taken intheircontext leads ustotheconclusion thatthenegotiators of
theSCMAgreement clearly intended that,under theintegrated WTO Agreement ,countervailing duties
mayonlybeimposed inaccordance withtheprovisions ofPartVoftheSCMAgreement andArticle
VIoftheGATT 1994, taken together. Ifthere isaconflict between theprovisions oftheSCM
Agreement andArticle VIoftheGATT 1994, furthermore, theprovisions oftheSCMAgreement would
prevail asaresult ofthegeneral interpretative notetoAnnex 1A.WT/DS22/AB/R
Page17
Weturntotheomission ofnote2tothepreamble oftheTokyo Round SCM Code from the
SCM Agreement .Thatnotereads:
Wherever inthisAgreement there isreference to"theterms ofthis
Agreement" orthe"articles" or"provisions ofthisAgreement" itshall
betaken tomean, asthecontext requires, theprovisions oftheGeneral
Agreement asinterpreted andapplied bythisAgreement.
This noterelated toaprovision inthepreamble totheTokyo Round SCM Code which
demonstrated theTokyo Round signatories 'desire "toapply fullyandtointerpret theprovisions of
Articles VI,XVIandXXIII" oftheGATT 1947. Thepreamble wasnotretained inthenewtextof
theSCM Agreement .Consequently, thenotealsodisappeared. TheSCM Agreement contains aset
ofrights andobligations thatgowellbeyond merely applying andinterpreting Articles VI,XVIand
XXIII oftheGATT 1947. ThetitletotheSCM Agreement wasalsomodified inthisrespect. Like
thePanel, "wedonotconsider thattheexclusion ofthisprovision from theSCM Agreement sheds
much lightonthequestion before us".20
IfArticle32.3isreadinconjunctionwithArticles10and32.1oftheSCMAgreement,itbecomes
clearthattheterm"thisAgreement" inArticle 32.3means "thisAgreement andArticle VIoftheGATT
1994". Weagree withthePanel that:
Article VIofGATT 1947andtheTokyo Round SCM Code represent,
asamong Code signatories, apackage ofrights andobligations
regarding theuseofcountervailing measures, andArticle VIofGATT
1994andtheSCM Agreement represent anewanddifferent package
ofrights andobligations, asamong WTO Members, regarding theuse
ofcountervailing duties. Thus, Article VIandtherespective SCM
Agreements impose obligations onapotential userofcountervailing
duties, intheform ofconditions thathavetobefulfilled inorder to
impose aduty, buttheyalsoconfer therighttoimpose acountervailing
dutywhen those conditions aresatisfied. TheSCM Agreements do
notmerely impose additional substantive andprocedural obligations
onapotential userofcountervailing measures. Rather, theSCM
Agreements andArticle VItogether define, clarify andinsome cases
modify thewhole package ofrights andobligations ofapotential user
ofcountervailing measures.21
20Panel Report, para. 236, note62.
21Panel Report, para. 246; weunderstand thePanel'sreference to"SCM Agreements "inthisparagraph tomean the
SCM Agreement andtheTokyo Round SCM Code.WT/DS22/AB/R
Page18
3. Object andPurpose oftheWTO Agreement
ThefactthatArticle VIoftheGATT 1947could beinvoked independently oftheTokyo Round
SCM Code under theprevious GATT system22doesnotmean thatArticle VIofGATT 1994 canbe
applied independently oftheSCMAgreement inthecontext oftheWTO. Theauthors ofthenewWTO
regime intended toputanendtothefragmentation thathadcharacterized theprevious system. This
canbeseenfrom thepreamble totheWTO Agreement which states, inpertinent part:
Resolved ,therefore, todevelop anintegrated, more viable anddurable
multilateral trading system encompassing theGeneral Agreement on
Tariffs andTrade, theresults ofpasttrade liberalization efforts, and
alloftheresults oftheUruguay Round ofMultilateral Trade
Negotiations.
Article II:2oftheWTO Agreement alsoprovides thattheMultilateral Trade Agreements are
"integral parts" oftheWTO Agreement ,"binding onallMembers". Thesingle undertaking isfurther
reflected inthearticles oftheWTO Agreement onoriginal membership, accession, non-application,
acceptance andwithdrawal. Furthermore, theDSUestablishes anintegrated dispute settlement system
whichappliestoallthe"coveredagreements",allowingalltheprovisionsoftheWTOAgreementrelevant
toaparticular dispute tobeexamined inoneproceeding.
TheAppellate Body seesArticle 32.3oftheSCM Agreement asaclear statement thatfor
countervailing dutyinvestigations orreviews, thedividing linebetween theapplication oftheGATT
1947 system ofagreements andtheWTO Agreement istobedetermined bythedateonwhich the
application wasmade forthecountervailing dutyinvestigation orreview. Article 32.3haslimited
applicationonlyinspecificcircumstanceswhereacountervailingdutyproceeding,eitheraninvestigation
orareview, wasunderway atthetimeofentry intoforce oftheWTO Agreement .Thisdoesnotmean
thattheWTO Agreement doesnotapply asof1January 1995 toallother acts,factsandsituations
which come within theprovisions oftheSCMAgreement andArticle VIoftheGATT 1994. However,
theUruguay Round negotiators expressed anexplicit intention todraw thelineofapplication ofthe
newWTO Agreement tocountervailing dutyinvestigations andreviews23atadifferent point intime
22Asdemonstrated bytheUnited States -Pork panel.
23There isanidentical provision toArticle 32.3oftheSCM Agreement contained inArticle 18.3oftheAgreement on
Implementation ofArticle VIoftheGeneral Agreement onTariffs andTrade 1994 (the"Anti-dumping Agreement ").Similarly,
there aremirror transitional decisions approved bytheTokyo Round Committee onAnti-dumping Measures, intheDecision
onTransitional Co-Existence oftheAgreement onImplementation ofArticle VIoftheGeneral Agreement onTariffs and
Trade andtheMarrakesh Agreement Establishing theWorld Trade Organization, ADP/131, 16December 1994; andthe
Decision onConsequences ofWithdrawal from orTermination oftheAgreement onImplementation ofArticle VIofthe
General Agreement onTariffs andTrade, ADP/132, 16December 1994.WT/DS22/AB/R
Page19
fromthatforother general measures.24Because acountervailing dutyisimposed onlyasaresult of
asequence ofacts,alinehadtobedrawn, anddrawn sharply, toavoid uncertainty, unpredictability
andunfairness concerning therights ofstates andprivate parties under thedomestic lawsinforce when
theWTO Agreement came intoeffect.
Weagree withthePhilippines thatthetransitional decisions approved bytheTokyo Round
SubsidiesandCountervailingMeasuresCommitteeandtheCONTRACTINGPARTIES25donotmodify
thescope ofrights andobligations under theWTOAgreement .Webelieve, however, thattheycontribute
tounderstanding thesignificance ofArticle 32.3oftheSCM Agreement asatransitional rule. The
Decision onTransitional Co-Existence oftheGATT 1947andtheWTO Agreement andtheDecision
onTransitional Co-Existence oftheTokyo Round SCM Code andtheWTO Agreement provide for
thelegaltermination oftheGATT 1947 andtheTokyo Round SCM Code oneyearafterthedateof
entry intoforce oftheWTO Agreement ,i.e.by31December 1995. They alsopermit WTO Members,
during theperiod ofco-existence oftheGATT 1947 andtheTokyo Round SCMCode withtheWTO
Agreement ,tobring theirdisputes under theDSUwhere themeasure inissueisonetowhich theWTO
Agreement applies.
TheDecision onConsequences ofWithdrawal fromorTermination oftheTokyo Round SCM
Code,adoptedbytheTokyoRoundSubsidiesandCountervailingMeasuresCommittee,extendeddispute
settlement under theTokyo Round SCM Code fortwoyears, oneyearbeyond thelegal termination
oftheTokyoRoundSCMCode.TheTokyoRoundCommitteeonSubsidiesandCountervailingMeasures
wastoremain inoperation byagreement ofthesignatories totheTokyo Round SCM Code until
31December 1996, todealwithdisputes arising outofcountervailing dutyinvestigations orreviews
initiated pursuant toapplications made prior to1January 1995. Signatories totheTokyo Round SCM
Code agreed tomake their bestefforts toexpedite domestic investigations anddispute settlement
procedures topermit theTokyo Round Subsidies andCountervailing Measures Committee toconsider
24Initsappellant 'ssubmission dated 9January 1997, atp.37,para. 59,thePhilippines argues thatinUnited
States -Gasoline ,boththepanel andtheAppellate Body assessed thepre-WTO domestic regulatory process thatledtothe
imposition oftheUnited States 'environmental measure atissue inthatdispute. Wenotethat,inthatcase, there wasno
issue withrespect tothetemporal application ofthemeasure indispute, nordidthepanel ortheAppellate Body examine
theapplicability oftheAgreement onTechnical Barriers toTrade .
25TheDecision onTransitional Co-Existence oftheGATT 1947 andtheWTO Agreement (PC/12-L/7583, 13December
1994) wasadopted bytheCONTRACTING PARTIES totheGATT 1947 (6SS/SR/1); theDecision onTransitional Co-
Existence oftheTokyo Round SCM Code andtheWTO Agreement (SCM/186, 16December 1994) wasadopted bythe
Tokyo Round Committee onSubsidies andCountervailing Measures andnoted bytheCONTRACTING PARTIES (6SS/SR/1)
andtheWTO Committee onSubsidies andCountervailing Measures (G/SCM/M/1). TheDecision onConsequences of
Withdrawal from orTermination oftheTokyo Round SCM Code (SCM/187, 16December 1994) wasadopted bytheTokyo
Round Committee onSubsidies andCountervailing Measures andnoted bytheCONTRACTING PARTIES (6SS/SR/1) and
theWTO Committee onSubsidies andCountervailing Measures (G/SCM/M/1).WT/DS22/AB/R
Page20
covered disputes within thistwo-year period. ThisDecision avoided theapplication ofArticle 70of
theVienna Convention ,which provides thatthetermination ofatreaty releases theparties from any
obligation further toperform thetreaty.
LikethePanel, "wearehesitant, ininterpreting theWTO Agreement, togivegreat weight
totheeffect ofdecisions thathadnotyetbeentaken atthetimetheWTO Agreement wassigned".26
Weagree withthePanel'sstatement that:
Theavailability ofArticle VIofGATT 1994asapplicable lawinthis
dispute isamatter tobedetermined onthebasis oftheWTO
Agreement, rather thanonthebasis ofasubsequent decision bythe
signatories oftheTokyo Round SCM Code taken attheinvitation of
thePreparatory Committee.27
While weagree withthePanel thatthese transitional decisions areoflimited relevance in
determining whether Article VIoftheGATT 1994canbeapplied independently oftheSCMAgreement ,
theyreflect theintention oftheTokyo Round SCM Code signatories toprovide aforum fordispute
settlement arising outofdisputes under theTokyo Round SCM Code foroneyearafter itslegal
termination date. AtthetimetheTokyo Round SCMCode signatories agreed tothese decisions, they
were fullycognizant oftheimplications oftheoperation ofArticle 32.3oftheSCM Agreement .
Weagree withthePanel thatthecomplaining party inthisdispute, thePhilippines, hadlegal
options available toit,and,therefore, wasnotleftwithout arightofaction asaresult oftheoperation
ofArticle 32.3oftheSCMAgreement .Until 31December 1995, theGATT 1947continued toco-exist
with theWTO Agreement ,anddispute settlement wasavailable tothePhilippines pursuant to
Articles VIandXXIII oftheGATT 1947. Until 31December 1996, asaresult oftheDecision on
Consequences ofWithdrawal from orTermination oftheTokyo Round SCM Code approved bythe
signatories totheTokyo Round SCM Code,dispute settlement wasavailable under theprovisions of
theTokyo Round SCM Code.Within areasonable period oftimeafterthedefinitive countervailing
dutywasimposed, thePhilippines hadtheright torequest areview pursuant toArticle 21.2ofthe
SCM Agreement --arightwhich remains available tothePhilippines today.
26Panel Report, para. 270.
27Panel Report, para. 272.WT/DS22/AB/R
Page21
AnyWTO Member, which wasnotasignatory totheTokyo Round SCM Code,hadaright
ofaction under Articles VIandXXIII oftheGATT 1947 until31December 1995, and,likethe
Philippines, hasacontinuing righttorequest areview under Article 21.2oftheSCM Agreement .
Webelieve thatthesituation ofaprospective Member oftheWTO, which accedes under the
provisions ofArticle XIIoftheWTO Agreement ,isdifferent from thatofformer contracting parties
totheGATT 1947 orsignatories totheTokyo Round SCM Code because those agreements didnot
apply previously toitstrading relations withotherstates. Article XII:1 oftheWTOAgreement provides,
furthermore, thatastatemayaccede "onterms tobeagreed between itandtheWTO".
Inlightoftheabove, webelieve thatitisnotnecessary todetermine whether applying Article
VIoftheGATT 1994 independently oftheSCM Agreement would bemore onerous thanapplying
them together.
V. Applicability ofArticles IandIIoftheGATT 1994
Wehaveconcluded that,asaresult oftheintegrated nature oftheWTO Agreement andthe
specific language inArticles 10and32.1oftheSCMAgreement ,theprovisions oftheSCMAgreement
relating tocountervailing dutyinvestigations arenotseparable fromtherights andobligations ofthe
GATT 1994 ortheWTO Agreement taken asawhole. Wefind,therefore, thatthePanel didnoterr
inconcluding atparagraphs 280and281ofthePanel Report thattheapplicability ofArticle VIof
theGATT 1994 tothecountervailing dutyinvestigation which isthesubject ofthisdispute, also
determines theapplicability ofArticles IandIIoftheGATT 1994 tothatinvestigation. Inthesame
manner asthePanel found that"themeasures areneither ‘consistent ’nor‘inconsistent ’withArticle VI
ofGATT 1994; rather, theyaresimply notsubject tothatArticle",28webelieve thatthemeasures
hereareneither "consistent" nor"inconsistent" withArticles IandIIoftheGATT 1994, because those
Articles arealsonotapplicable lawforthepurposes ofthisdispute.
VI. Terms ofReference
Brazil argues initsappellant 'ssubmission thattheissue ofconsistency ofitscountervailing
dutymeasures withArticles IandIIoftheGATT 1994isnotwithin theterms ofreference ofthePanel,
28Panel Report, para. 280, note71.WT/DS22/AB/R
Page22
and,therefore, should nothavebeenaddressed bythePanel.29Inthisappeal, theparties tothedispute,
thePhilippines andBrazil, agreed onthefollowing special terms ofreference pursuant toArticle 7.3
oftheDSU:
Toexamine, inthelightoftherelevant provisions inGATT 1994and
theAgreement onAgriculture, thematter referred totheDSBbythe
Philippines indocument WT/DS22/5, taking intoaccount the
submission made byBrazil indocument WT/DS22/3 andtherecord
ofdiscussions atthemeeting oftheDSBon21February 1996, and
tomake such findings aswillassist theDSB inmaking the
recommendations oringiving therulings provided forinthose
agreements.30
Apanel'sterms ofreference areimportant fortworeasons. First, terms ofreference fulfil
animportant dueprocess objective --theygivetheparties andthird parties sufficient information
concerning theclaims atissue inthedispute inorder toallow them anopportunity torespond tothe
complainant 'scase. Second, theyestablish thejurisdiction ofthepanel bydefining theprecise claims
atissue inthedispute.
Weagree, furthermore, withtheconclusions expressed byprevious panels under theGATT
1947, aswellasunder theTokyo Round SCM Code andtheTokyo Round Anti-dumping Code,that
the"matter" referred toapanel forconsideration consists ofthespecific claims stated bytheparties
tothedispute intherelevant documents specified intheterms ofreference.31Weagree withtheapproach
taken inprevious adopted panel reports thatamatter, which includes theclaims composing thatmatter,
doesnotfallwithin apanel’sterms ofreference unless theclaims areidentified inthedocuments referred
toorcontained intheterms ofreference.
Inthepresent case, because weagree withtheconclusions ofthePanel concerning applicable
law,webelieve itisnotnecessary todetermine whether thePhilippines 'claims under Articles Iand
IIoftheGATT 1994 were within thePanel'sterms ofreference.
29Brazil 'sappellant 'ssubmission, dated 14January 1997, p.1,para. 2.
30WT/DS22/6, 18April 1996.
31United States -Denial ofMost-Favoured-Nation Treatment astoNon-Rubber Footwear fromBrazil ,BISD 39S/128,
adopted 19June1992, para. 6.2;EC-Imposition ofAnti-dumping Duties onImports ofCotton YarnfromBrazil ,ADP/137,
adopted 30October 1995, para. 456; United States -Imposition ofCountervailing Duties onImports ofFresh andChilled
Atlantic Salmon from Norway ,SCM/153, adopted 28April 1994, para. 212; United States -Imposition ofAnti-Dumping
Duties onImports ofFresh andChilled Atlantic Salmon from Norway ,ADP/87, adopted 26-27 April 1994, para. 336.WT/DS22/AB/R
Page23
VII. Findings andConclusions
Forthereasons setoutinthisReport, theAppellate Body upholds thelegal findings and
conclusions ofthePanel.
TheAppellate Body recommends thattheDispute Settlement Body make aruling consistent
withthelegalfindings andconclusions inthePanel Report andthisReport.WT/DS22/AB/R
Page24
Signed intheoriginal atGeneva this14thdayofFebruary 1997 by:
_______________________
SaidEl-Naggar
Presiding Member
_______________________ _______________________
Claus-Dieter Ehlermann Julio Lacarte-Muró
Member Member