–Policy considerations

The main focus of the proposed amendment is to cater for situations where, after the Union has succeeded in obtaining a favourable ruling from a WTO dispute settlement panel, the process is blocked because the other party appeals a WTO panel report “into the void” and has not agreed to interim appeal arbitration under Article 25 of the WTO DSU. In such a situation, there will be no binding outcome of the dispute settlement process.

In addition, the proposed amendment caters for similar situations that may arise under other international trade agreements, in particular regional or bilateral agreements, when a third country does not cooperate, as necessary, for dispute settlement to function. For example, the third country may fail to appoint an arbitrator and there is no fall-back mechanism for arbitration provided to nevertheless be able to proceed.

The proposal covers the two situations together for reasons of coherence and efficiency. Both situations share the same root causes and bring the same negative consequences for the Union’s economic interests. The common feature is that the Union should be able to enforce its rights, that this should be done to the utmost extent possible through independent adjudication. Where this is not possible and the other party is responsible for blocking the operation of binding independent adjudication, the Union should nevertheless be able to enforce its rights.

The present proposal ensures that the Union is equipped with the necessary tools to protect its economic interests, should that prove necessary. The course of action is a reflection of the Union’s commitment to multilateralism and binding independent adjudication.

If the Union opted for not taking this action, the consequence in the situations of blocked dispute settlement described above would be that the Union could not protect its rights in a timely fashion. This could even create an incentive for third countries to thwart adjudication when the Union has rights under an international agreement, which the third country infringes.

Working on the framework that already exists in the form of the Regulation would secure an ability of the Union to act expeditiously. Speed of action is vital. This course of action, as with the logic of the Regulation itself, is therefore preferable to envisaging an ordinary legislative procedure for the enactment of trade policy measures in each individual case in which a third country maintains a measure of the type that routinely goes to dispute settlement but blocks the adjudication procedure.

The commercial policy measures taken under the Regulation notably serve to induce a third country to terminate a breach of a trade agreement of the Union after the Union’s successful recourse to dispute settlement. The proposed amendment creates a possibility for the Union to impose measures under the Regulation in particular to induce the termination of a breach also without full recourse to an adjudicative dispute settlement procedure where the third country prevents that recourse.

The envisaged measures would be compatible with the international obligations of the Union. general public international law allows, under certain conditions such as proportionality and prior notice, the imposition of countermeasures, i.e. of measures that would otherwise be contrary to the international obligations of an injured party vis-à-vis the country responsible for a breach of international law, and that are aimed at procuring cessation of the breach or reparation for it. This customary international law has been codified by the International Law Commission, a United Nations body, in its Draft Articles on Responsibility of States for Internationally Wrongful Acts. In principle, a party taking countermeasures is not relieved from fulfilling its obligations under any applicable dispute settlement procedure. Those provisions constitute lex specialis in relation to the provisions of general international law on countermeasures. However, where the responsible party fails to cooperate in good faith in the dispute settlement procedures, thereby preventing the injured party from completing such procedures, the possibility to resort to countermeasures in accordance with the requirements of general public international law necessarily revives. The International Law Commission notes that the revival of that possibility arises when one Party “fails to implement the dispute settlement procedures in good faith” or “where a State party fails to cooperate in the establishment of the relevant tribunal”. These are the situations in which the current amendment would operate.