TURKEY – CERTAIN MEASURES CONCERNING THE PRODUCTION, IMPORTATION AND MARKETING OF PHARMACEUTICAL PRODUCTS ARBITRATION UNDER ARTICLE 25 OF THE DSU AWARD OF THE ARBITRATORS
Document: AWARD OF THE ARBITRATOR
Date: 25 July 2022
Document codes: WT/DS583/ARB25
Complainant: EU
Respondent: Turkey
Third parties: Brazil, Canada, China, India, Indonesia, Japan, Russia, Switzerland, Ukraine, U.S.
Dispute stage: Panel
Agreements cited: Art. III:4, X:1, XI:1  GATT 1994Art. 3.1(b)  Subsidies and Countervailing Measures (SCM)Art. 2.1  Trade-Related Investment Measures (TRIMs)

TURKEY – CERTAIN MEASURES CONCERNING THE PRODUCTION,
IMPORTATION AND MARKETING OF PHARMACEUTICAL PRODUCTS
ARBITRATION UNDER ARTICLE 25 OF THE DSU
AWARD OF THE ARBITRATORS

LIST OF ANNEXES
ANNEX A
WORKING PROCEDURES FOR THE ARBITRATION
Contents
Annex A-1 Agreed Procedures for Arbitration under Article 25 of the DSU, notified by the parties to the
Dispute Settlement Body on 22 March 2022 ()
Annex A-2 Working Procedures for Arbitration under Article 25 of the DSU, adopted by the Arbitrators on

ANNEX B
NOTICE OF RECOURSE TO ARBITRATION UNDER ARTICLE 25 OF THE DSU
Contents
Annex B-1 Türkiye's notice of recourse to arbitration under Article 25 of the DSU
ANNEX C
ARGUMENTS OF THE PARTIES
Contents
Annex C-1 Executive summary of Türkiye's written submission
Annex C-2 Executive summary of the European Union's written submission
ANNEX D
ARGUMENTS OF THE THIRD PARTIES
Contents
Annex D-1 Executive summary of the Russian Federation's third party's written submission
Annex D-2 Executive summary of Switzerland's third party's written submission

ABBREVIATIONS USED IN THIS AWARD
Abbreviation Description
Agreed Procedures Agreed Procedures for Arbitration under Article 25 of the DSU, notified by
the parties to the Dispute Settlement Body on 22 March 2022

DSB Dispute Settlement Body
DSU Understanding on Rules and Procedures Governing the Settlement of
Disputes
GATS General Agreement on Trade in Services
GATT 1994 General Agreement on Tariffs and Trade 1994
GPA Agreement on Government Procurement
Panel Report Final Panel Report as issued to the parties in Turkey – Certain Measures
Concerning the Production, Importation and Marketing of Pharmaceutical
Products, attached to Türkiye's notice of recourse to arbitration
( and )
SCM Agreement Agreement on Subsidies and Countervailing Measures
SSI Social Security Institution
TMMDA Turkish Medicines and Medical Devices Agency
TPA Turkish Pharmacists' Association
TRIMs Agreement Agreement on Trade-Related Investment Measures
Vienna Convention Vienna Convention on the Law of Treaties, done at Vienna, 23 May 1969,
Working Procedures Working Procedures for Arbitration under Article 25 of the DSU, adopted
by the Arbitrators on 10 May 2022
WTO World Trade Organization

CASES CITED IN THIS AWARD
Short title Full case title and citation
Australia – Salmon Appellate Body Report, Australia – Measures Affecting Importation of Salmon,
WT/DS18/AB/R, adopted 6 November 1998, DSR 1998:VIII, p. 3327
Brazil – Retreaded
Tyres
Appellate Body Report, Brazil – Measures Affecting Imports of Retreaded Tyres,
WT/DS332/AB/R, adopted 17 December 2007, DSR 2007:IV, p. 1527
Brazil – Retreaded
Tyres
Panel Report, Brazil – Measures Affecting Imports of Retreaded Tyres,
WT/DS332/R, adopted 17 December 2007, as modified by Appellate Body Report
WT/DS332/AB/R, DSR 2007:V, p. 1649
Brazil – Taxation Panel Reports, Brazil – Certain Measures Concerning Taxation and Charges,
WT/DS472/R, Add.1 and Corr.1 / WT/DS497/R, Add.1 and Corr.1, adopted
11 January 2019, as modified by Appellate Body Reports WT/DS472/AB/R /
WT/DS497/AB/R, DSR 2019:II, p. 345
Canada – Aircraft Appellate Body Report, Canada – Measures Affecting the Export of Civilian Aircraft,
WT/DS70/AB/R, adopted 20 August 1999, DSR 1999:III, p. 1377
Canada – Renewable
Energy / Canada –
Feed-in Tariff Program
Appellate Body Reports, Canada – Certain Measures Affecting the Renewable
Energy Generation Sector / Canada – Measures Relating to the Feed-in Tariff
Program, WT/DS412/AB/R / WT/DS426/AB/R, adopted 24 May 2013, DSR 2013:I,
p. 7
Canada – Renewable
Energy / Canada –
Feed-in Tariff Program
Panel Reports, Canada – Certain Measures Affecting the Renewable Energy
Generation Sector / Canada – Measures Relating to the Feed-in Tariff Program,
WT/DS412/R and Add.1 / WT/DS426/R and Add.1, adopted 24 May 2013, as
modified by Appellate Body Reports WT/DS412/AB/R/ WT/DS426/AB/R,
DSR 2013:I, p. 237
China – HP-SSST (EU) Appellate Body Reports, China – Measures Imposing Anti-Dumping Duties on High-
Performance Stainless Steel Seamless Tubes ("HP-SSST") from Japan / China –
Measures Imposing Anti-Dumping Duties on High-Performance Stainless Steel
Seamless Tubes ("HP-SSST") from the European Union, WT/DS454/AB/R and Add.1
/ WT/DS460/AB/R and Add.1, adopted 28 October 2015, DSR 2015:IX, p. 4573
China – Rare Earths Appellate Body Reports, China – Measures Related to the Exportation of Rare
Earths, Tungsten, and Molybdenum, WT/DS431/AB/R / WT/DS432/AB/R /
WT/DS433/AB/R, adopted 29 August 2014, DSR 2014:III, p. 805
China – Rare Earths Panel Reports, China – Measures Related to the Exportation of Rare Earths,
Tungsten, and Molybdenum, WT/DS431/R and Add.1 / WT/DS432/R and Add.1 /
WT/DS433/R and Add.1, adopted 29 August 2014, upheld by Appellate Body
Reports WT/DS431/AB/R / WT/DS432/AB/R / WT/DS433/AB/R, DSR 2014:IV,
p. 1127
Colombia – Textiles Appellate Body Report, Colombia – Measures Relating to the Importation of
Textiles, Apparel and Footwear, WT/DS461/AB/R and Add.1, adopted 22 June 2016,
DSR 2016:III, p. 1131
EC – Asbestos Appellate Body Report, European Communities – Measures Affecting Asbestos and
Asbestos-Containing Products, WT/DS135/AB/R, adopted 5 April 2001,
DSR 2001:VII, p. 3243
EC – Asbestos Panel Report, European Communities – Measures Affecting Asbestos and Asbestos-
Containing Products, WT/DS135/R and Add.1, adopted 5 April 2001, as modified by
Appellate Body Report WT/DS135/AB/R, DSR 2001:VIII, p. 3305
EC – Fasteners
(China)
Appellate Body Report, European Communities – Definitive Anti-Dumping Measures
on Certain Iron or Steel Fasteners from China, WT/DS397/AB/R, adopted
28 July 2011, DSR 2011:VII, p. 3995
EC – Hormones Appellate Body Report, European Communities – Measures Concerning Meat and
Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R, adopted
13 February 1998, DSR 1998:I, p. 135
EC – Seal Products Appellate Body Reports, European Communities – Measures Prohibiting the
Importation and Marketing of Seal Products, WT/DS400/AB/R / WT/DS401/AB/R,
adopted 18 June 2014, DSR 2014:I, p. 7
EC – Tariff Preferences Panel Report, European Communities – Conditions for the Granting of Tariff
Preferences to Developing Countries, WT/DS246/R, adopted 20 April 2004, as
modified by Appellate Body Report WT/DS246/AB/R, DSR 2004:III, p. 1009
EC and certain
member States –
Large Civil Aircraft
Appellate Body Report, European Communities and Certain Member States –
Measures Affecting Trade in Large Civil Aircraft, WT/DS316/AB/R, adopted
1 June 2011, DSR 2011:I, p. 7

Short title Full case title and citation
EU – Biodiesel
(Argentina)
Appellate Body Report, European Union – Anti-Dumping Measures on Biodiesel from
Argentina, WT/DS473/AB/R and Add.1, adopted 26 October 2016, DSR 2016:VI,
p. 2871
EU – Energy Package Panel Report, European Union and its member States – Certain Measures Relating
to the Energy Sector, WT/DS476/R and Add.1, circulated to WTO Members
10 August 2018 [appeal/adoption pending]
India – Agricultural
Products
Appellate Body Report, India – Measures Concerning the Importation of Certain
Agricultural Products, WT/DS430/AB/R, adopted 19 June 2015, DSR 2015:V,
p. 2459
India – Solar Cells Appellate Body Report, India – Certain Measures Relating to Solar Cells and Solar
Modules, WT/DS456/AB/R and Add.1, adopted 14 October 2016, DSR 2016:IV,
p. 1827
India – Solar Cells Panel Report, India – Certain Measures Relating to Solar Cells and Solar Modules,
WT/DS456/R and Add.1, adopted 14 October 2016, as modified by Appellate Body
Report WT/DS456/AB/R, DSR 2016:IV, p. 1941
Indonesia – Chicken Panel Report, Indonesia – Measures Concerning the Importation of Chicken Meat
and Chicken Products, WT/DS484/R and Add.1, adopted 22 November 2017,
DSR 2017:VIII, p. 3769
Indonesia – Import
Licensing Regimes
Appellate Body Report, Indonesia – Importation of Horticultural Products, Animals
and Animal Products, WT/DS477/AB/R, WT/DS478/AB/R, and Add.1, adopted
22 November 2017, DSR 2017:VII, p. 3037
Japan – Alcoholic
Beverages II
Appellate Body Report, Japan – Taxes on Alcoholic Beverages, WT/DS8/AB/R,
WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996, DSR 1996:I, p. 97
Mexico – Taxes on
Soft Drinks
Appellate Body Report, Mexico – Tax Measures on Soft Drinks and Other Beverages,
WT/DS308/AB/R, adopted 24 March 2006, DSR 2006:I, p. 3
Peru – Agricultural
Products
Appellate Body Report, Peru – Additional Duty on Imports of Certain Agricultural
Products, WT/DS457/AB/R and Add.1, adopted 31 July 2015, DSR 2015:VI, p. 3403
Philippines – Distilled
Spirits
Appellate Body Reports, Philippines – Taxes on Distilled Spirits, WT/DS396/AB/R /
WT/DS403/AB/R, adopted 20 January 2012, DSR 2012:VIII, p. 4163
US – COOL
(Article 21.5 – Canada
and Mexico)
Appellate Body Reports, United States – Certain Country of Origin Labelling (COOL)
Requirements – Recourse to Article 21.5 of the DSU by Canada and Mexico,
WT/DS384/AB/RW / WT/DS386/AB/RW, adopted 29 May 2015, DSR 2015:IV,
p. 1725
US – Gasoline Appellate Body Report, United States – Standards for Reformulated and
Conventional Gasoline, WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, p. 3
US – Gasoline Panel Report, United States – Standards for Reformulated and Conventional
Gasoline, WT/DS2/R, adopted 20 May 1996, as modified by Appellate Body Report
WT/DS2/AB/R, DSR 1996:I, p. 29
US – Shrimp
(Article 21.5 –
Malaysia)
Appellate Body Report, United States – Import Prohibition of Certain Shrimp and
Shrimp Products – Recourse to Article 21.5 of the DSU by Malaysia,
WT/DS58/AB/RW, adopted 21 November 2001, DSR 2001:XIII, p. 6481
US – Sonar Mapping GATT Panel Report, United States – Procurement of a Sonar Mapping System,
GPR.DS1/R, 23 April 1992, unadopted [91SONARM]
US – Tuna II (Mexico)
(Article 21.5 – Mexico)
Appellate Body Report, United States – Measures Concerning the Importation,
Marketing and Sale of Tuna and Tuna Products – Recourse to Article 21.5 of the
DSU by Mexico, WT/DS381/AB/RW and Add.1, adopted 3 December 2015,
DSR 2015:X, p. 5133

Parties:

European Union
Türkiye1

Arbitrators:

Mateo Diego-Fernández Andrade,
Chairperson
Seung Wha Chang
Guohua Yang
Third Parties:

Brazil
Canada
China
India
Indonesia

Japan
Russian Federation
Switzerland
Ukraine
United States

1 INTRODUCTION
1.1. This Arbitration concerns issues of law and legal interpretations developed in the Panel Report,
Turkey – Certain Measures Concerning the Production, Importation and Marketing of Pharmaceutical
Products.2 These issues of law and legal interpretations relate to certain provisions of the General
Agreement on Tariffs and Trade 1994 (GATT 1994) applied in the context of Türkiye's "localisation
requirement".
1.2. The Panel was established on 30 September 2019 to consider a complaint by
the European Union with respect to the consistency of the localisation requirement and certain other
measures for pharmaceutical products adopted by Türkiye with provisions of the GATT 1994, the
Agreement on S ubsidies and Countervailing Measures (SCM Agreement), and the Agreement on
Trade-Related Investment Measures (TRIMs Agreement).3
The Panel Report was issued to the parties on 11 November 2021 . In ruling on the
European Union's claims regarding the localisation requirement, the Panel found that:
a. the European Union had established the existence of the localisation requirement as a
"single measure", whereby (i) Türkiye required foreign producers to commit to localise in
Türkiye their production of certain pharmaceutical products; and (ii) where commitments
were not g iven, accepted, or fulfilled, relevant products were no longer reimbursed by
Türkiye's Social Security Institution (SSI)4;
b. the localisation requirement was not covered by the government procurement derogation
in Article III:8(a) of the GATT 1994, and was therefore subject to the national treatment
obligation in Article III:4 of the GATT 1994 and Article 2.1 of the TRIMs Agreement5;
c. the localisation requirement was inconsistent with the national treatment obligation in
Article III:4 of the GATT 19946; and

1 Formerly "Turkey". (See Membership of the World Trade Organization (Revision), WT/INF/43/Rev.23,
4 June 2022) For ease of reference, we refer to Türkiye in this Award, except when quoting from the
Panel Report or submissions preceding this change of name and when referring to the title of a Panel Exhibit.
2 We refer to the Final Report issued by the Panel to the parties on 11 November 2021 as the
"Panel Report". In accordance with paragraph 5 of the Agreed Procedures for Arbitration under Article 25 of the
DSU (Agreed Procedures), the Panel Report in the three working languages of the WTO was attached to
Türkiye's notice of recourse to arbitration. (WT/DS583/12 and WT/DS583/12/Add.1)
3 Request for the Establishment of a Panel by the European Union, WT/DS583/3.

d. Türkiye had not established that the localisation requirement was justified under
Article XX(b) or Article XX(d) of the GATT 1994.7
The Panel also made findings of inconsistency with the GATT 1994 in respect of another
measure challenged by the European Union, namely Türkiye's "prioritization measure". In this
respect, the Panel found that:
a. the European Union had established the existence of an overarching measure whereby
Turkish authorities gave priority to the review of applications for inclusion in the
"Annex 4/A list " 8 and to good manufacturing practices and marketing authorization
applications concerning domestic pharmaceutical products over the review of applications
of like imported products9; and
b. the prioritization measure was inconsistent with Article III:4 of the GATT 1994.10
The Panel concluded that, to the extent that the y were inconsistent with the GATT 1994, the
measures at issue nullified or impaired benefits accruing to the European Union under that
Agreement.11 The Panel recommended that Türkiye bring its measures into conformity with its
obligations under the GATT 1994.12
1.6. At the request of t he parties, the Panel suspended its wor k before the circulation of the
Panel Report to Members.13
1.7. On 22 March 2022, Türkiye and the European Union notified Agreed Procedures for Arbitration
under Article 25 of the DSU (Agreed Procedures) to the Dispute Settlement Body (DSB).14 Under the
Agreed Procedures, "[t]aking into account that the Appellate Body is not presently able to hear an
appeal in this dispute", the parties agreed "to enter into arbitration under Article 25 of the DSU to
decide any appeal from any final panel report as issued to the parties in dispute DS583". 15 The
parties further agreed t o "abide by the arbitration award, which shall be final" 16 , with the
understanding that "un-appealed" panel findings would form an integral part of such an award.17

7 Panel Report, para. 8.1.b.iv. In light of these findings, the Panel declined to rule on
the European Union's alternative and conditional claim under Article 3.1(b) of the SCM Agreement and
exercised judicial economy over the European Union's additional claims under Article 2.1 of the
TRIMs Agreement and Article X:1 of the GATT 1994. In addition, the Panel exercised judicial economy over the
European Union's claim that the localisation requirement applied in conjunction with the Turkish rules for
approving the importation and marketing of pharmaceutical products (which had been referred to by the
European Union as the "import ban on localised products") was inconsistent with Article XI:1 of the GATT 1994.
(Ibid., paras. 8.1.b.v and 8.1.c)
8 As explained further below, to be reimbursable, a pharmaceutical product must be included as "active"
in the list in Annex 4/A to the Health Implementation Communiqué. (See para. 6.4. below)
11 Panel Report, para. 8.2.
12 Panel Report, para. 8.3. The Panel also made findings regarding a request for a preliminary ruling by
Türkiye pertaining to its terms of reference. In that regard, the Panel found that: (i) Türkiye's request for a
preliminary ruling was not untimely; (ii) the localisation requirement, the import ban on localised products, and
the prioritization measure had been identified with sufficient specificity to comply with Article 6.2 of the DSU;
and (iii) the European Union had provided a brief summary of the legal basis of the complaint sufficient to
present the problem clearly with respect to its claims under Article X:1 of the GATT 1994 and Article 3.1(b) of
the SCM Agreement, so that both claims were properly within the Panel's terms of reference. (Ibid.,
para. 8.1.a.i-iii)
13 On 22 December 2021, the Panel informed the parties that it had granted the European Union's
request that the Panel suspend its work, pursuant to Article 12.12 of the DSU, for a period of one month.
(WT/DS583/6) On 21 January 2022, 10 February 2022, and 24 February 2022, the Panel informed the parties
that it had agreed to the European Union's requests for extensions of the suspension of the Panel's work.
(WT/DS583/7, WT/DS583/8, and WT/DS583/9) On 24 March 2022, the Panel agreed to the parties' joint
request for a further indefinite suspension of the panel proceedings, and extended the suspension of the
Panel's work indefinitely. (WT/DS583/11)
14 WT/DS583/10.
16 Agreed Procedures, para. 15.
17 Agreed Procedures, para. 9.

1.8. On 25 April 2022, Türkiye notified the DSB of its decision to initiate an arbitration under
Article 25 of the DSU through a notice of recourse to arbitration, attaching the Panel Report, in
accordance with paragraph 5 of the Agreed Procedures.18 On the same day, Türkiye filed its written
submission.
1.9. On 28 April 2022, three arbitrators were selected in accordance with paragraph 7 of the Agreed
Procedures. On 30 April, 1 May, and 3 May 2022, we accepted our appointment and confirmed that
we had no conflict of interest . On 4 May 2022, Members were informed of our appointment as
Arbitrators.19 On 5 May 2022, Mr Diego -Fernández Andrade was elected as Chairperson for th e
Arbitration.20 The next day, the parties were informed that he would act as Chairperson.
1.10. Following an organizational meeting with the parties on 10 May 2022, we adopted Working
Procedures for Arbitration under Article 25 of the DSU (Working Procedures)21, including a Working
Schedule for the Arbitration, to be read in conjunction with the DSU , the Agreed Procedures, and
relevant provisions of the Working Procedures for Appellate Review .22 Annex A-2 of the Addendum
to this Award, WT/DS583/ARB25/Add.1, contains these Working Procedures, including the Working
Schedule.
1.11. In accordance with the adopted Working Schedule, t he European Union filed its written
submission on 13 May 2022. On 16 May 2022, the Russian Federation (Russia) and Switzerland each
filed a third party's written submission.23 On the same day, Brazil, Canada, China, Japan, Ukraine,
and the United States each notified its intention to appear at the hearing as a third party.24
Subsequently, on 15 June 2022, Indonesia notified its intention to appear at the hearing as a
third party.25
1.12. On 3 June 2022, the Chairperson sent a letter to the parties and third parties with relevant
preliminary information regarding the hearing. In thi s letter, among other things, the Chairperson
confirmed that the hearing would be held in-person, with a possibility to attend remotely via Webex.
In this connection, the Chairperson informed that Mr Yang would participate in the hearing remotely
since, due to COVID-19-related restrictions, he would have difficulties travelling to Geneva for the
hearing. The Chairperson also indicated that we would endeavour to send parties and third parties
a list of questions or topics in advance of the hearing. On 10 June 2022, the Chairperson sent a
subsequent letter to the parties and third parties providing additional information regarding remote
access to the hearing.
1.13. On 15 June 2022, parties and third parties shared their delegation lists, indicating in -person
and remote participants.26 On 16 June 2022, we shared a list of questions with the parties and
third parties to facilitate the conduct of the hearing and assist them in preparing for the hearing.
1.14. The hearing was held on 21-22 June 2022. The parties and eight third parties (Brazil, Canada,
China, Japan, Russia, Switzerland, Ukraine, and the United States) made oral statements and/or
responded to questions.
1.15. The Award is being issued to the parties in English on 21 July 2022, within 90 days of the
commencement of the Arbitration. Pursuant to Article 25.3 of the DSU, we will notify the Award in
English, French, and Spanish to the DSB, the Council for Trade in Goods, the Committee on Subsidies
and Countervailing Measures, and the Committee on Trade-Related Investment Measures.

18 WT/DS583/12 and WT/DS583/12/Add.1.
19 WT/DS583/13.
20 Pursuant to paragraph 7 of the Agreed Procedures and paragraph 7 of the Working Procedures.
21 Pursuant to paragraph 11 of the Agreed Procedures.
22 WT/AB/WP/6.
23 Pursuant to paragraph 16 of the Agreed Procedures and paragraph 23 of the Working Procedures.
24 Pursuant to paragraph 16 of the Agreed Procedures and paragraph 24 of the Working Procedures.
25 Pursuant to paragraph 16 of the Agreed Procedures and paragraph 26 of the Working Procedures.
26 Canada, the European Union, and Japan subsequently updated their delegation lists.

2 MEASURES TAKEN TO STREAMLINE THE PROCEEDINGS
2.1. Paragraphs 12 and 13 of the Agreed Procedures read27:
12. The parties request the arbitrators to issue the award within 90 days following the filing
of the Notice of Appeal. To that end, the arbitrators may take appropriate organizational
measures to streamline the proceedings, without prejudice to the proced ural rights and
obligations of the parties and due process. Such measures may include decisions on page
limits, time limits and deadlines as well as on the length and number of hearings required.
13. If necessary in order to issue the award within the 90 day time-period, the arbitrators
may also propose substantive measures to the parties, such as an exclusion of claims based
on the alleged lack of an objective assessment of the facts pursuant to Article 11 of the
DSU.[*]
[* fn original] 5 For greater certainty, the proposal of the arbitrators is not legally binding and it will be
up to the party concerned to agree with the proposed substantive measures. The fact that the party
concerned does not agree with the proposed substantive measures shall not prejudice the consideration
of the case or the rights of the parties.
2.2. In accordance with paragraph 12 of the Agreed Procedures, we adopted organizational
measures to streamline the proceedings. These organizational measures included setting up an
organizational meeting with the parties to consider a draft set of Working Procedures at the outset
of the Arbitration, decisions on page limits for submissions 28, decisions on time limits for opening
and closing statements at the hearing 29, sending questions to parties and third parties in advance
of the hearing to facilitate the conduct of the hearing , and adopting a tight hearing schedule. We
also took internal organizational steps to streamline our work and ensure that our Award could be
issued within 90 days of the commencement of the Arbitration.30
2.3. Moreover, at the organizational meeting with the parties as well as at the hearing, we consulted
with the parties about the possibility of excluding Türkiye's claims raised under Article 11 of the DSU
from the scope of the Arbitration. We eventually did not consider it necessary to propose formally
that these claims be excluded from the scope of the Arbitration for the purpose of issuing our Award
within 90 days.
3 MANDATE OF THE ARBITRATORS
3.1. These Arbitration proceedings took place under Article 25 of the DSU. The Agreed Procedures
define our mandate in this particular dispute. They make clear that the Arbitration is "to decide any
appeal from any final panel report as issued to the parties in dispute DS583" .31 In accordance with
the Agreed Procedures, unless otherwise provided for therein, the Arbitration is governed, mutatis
mutandis, by the provisions of the DSU and other rules and procedures app licable to appellate
review.32
The scope of the Arbitration is further set out in paragraphs 9 and 10 of the Agreed Procedures,
which provide:
9. An appeal shall be limited to issues of law covered by the panel report and legal
interpretations developed by the panel. The arbitrators may uphold, modify or reverse
the legal findings and conclusions of the panel. Where applicable, the arbitration award

27 Agreed Procedures, paras. 12-13. Paragraph 28 of the Working Procedures reads:
The arbitrators shall issue the award within 90 days following the commencement of this
arbitration. If necessary, in order to issue the award within the 90-day time-period, the
arbitrators may propose substantive measures to the parties. (fn omitted)
28 See paragraphs 13, 14, and 25 of the Working Procedures.
29 See paragraph 33 of the Working Procedures. Additional time limits were subsequently set for the
closing statements of third parties.
30 These included meeting frequently, drafting descriptive parts of the Award early in the proceedings,
and setting up a working schedule for the timely exchange of drafts and written comments for the purposes of
preparing questions, conducting our deliberations, and finalizing the Award.
32 Agreed Procedures, para. 11.

shall include recommendations, as envisaged in Article 19 of the DSU. The findings of
the panel which have not been appealed shall be deemed to form an integral part of the
arbitration award together with the arbitrators' own findings.
10. The arbitrators shall only address those issues that are necessary for the resolution
of the dispute. They shall address only those issues that have been raised by the parties,
without prejudice to their obligation to rule on jurisdictional issues.33
We are mindful that our task as Arbitrators under Article 25 of the DSU is to facilitate the
solution of the dispute that has b een submitted to arbitration by the parties. Our Award, to which
the parties agreed to abide34, will not go through the process of being adopted by the DSB. We are
also mindful that the Agreed Procedures mandate us to address only those issues raised by the
parties that are necessary for the resolution of the dispute.35
The following issues are raised in this Arbitration:
a. whether the Panel erred in its interpretation and/or application of Article III:8(a) of the
GATT 1994 in finding that the localisation requirement was not covered by the government
procurement derogation in this provision, and was therefore subject to the national
treatment obligation under Article III:4 of the GATT 1994 and Article 2.1 of the
TRIMs Agreement;
b. whether the Panel's findings under Article III:4 of the GATT 1994 should be declared moot
and of no legal effect or, alternatively, be reversed;
c. whether the Panel erred in its in terpretation and /or application of Article XX(b) of the
GATT 1994 in finding that Türkiye had not established that the localisation requirement
was justified under this provision;
d. whether the Panel failed to make an objective assessment of the matter before it pursuant
to Article 11 of the DSU when addressing Türkiye's claim that the localisation requirement
was justified under Article XX(b) of the GATT 1994; and
e. whether the Panel erred in its application of Article XX(d) of the GATT 1994 in finding that
Türkiye had not established that the localisation requirement was justified under this
provision.
3.5. It is within these parameters that we issue our Award. In reaching our conclusions, we
thoroughly considered all the arguments made by the parti es and third parties . Not all these
arguments are explicitly discussed in this Award and issues are addressed only to the extent
necessary for the resolution of the dispute before us.
4 ARGUMENTS OF THE PARTIES
4.1. The claims and arguments of the parties are ref lected in the executive summaries of their
written submissions.36 Türkiye's notice of recourse to arbitration and the executive summaries of
the parties' claims and arguments are contained in Annexes B and C of the Addendum to this Award,

5 ARGUMENTS OF THE THIRD PARTIES
5.1. The arguments of the third parties that filed a written submission (Russia and Switzerland) are
reflected in the executive summaries of their written submissions 37, and are contained in Annex D
of the Addendum to this Award, WT/DS583/ARB25/Add.1.

33 Agreed Procedures, paras. 9-10.
34 Agreed Procedures, para. 15.
35 Agreed Procedures, para. 10.
36 Pursuant to paragraph 15 of the Working Procedures.
37 Pursuant to paragraph 15 of the Working Procedures.

6 ANALYSIS
6.1. In this Award, we address claims and arguments pertaining to the Panel's findings under
Articles III:4 and III:8(a) of the GATT 1994, before turning to claims and arguments pertaining to
the Panel's fin dings under Article XX(b) and those under Article XX(d). We first provide a brief
overview of relevant background information, including a short description of the localisation
requirement.38
6.1 Relevant background information and the localisation requirement
6.1.1 Reimbursement of pharmaceutical products active in the Annex 4/A list
6.2. Türkiye's Universal Health Insurance Scheme "provides 'comprehensive, fair and equitable
access to healthcare services ', including access to pharmaceutical products, to virtually anyone
residing in Turkey".39 Within the Ministry of Health, the Turkish Medicines and Medical Devices
Agency (TMMDA) is responsible for the registration, marketing approval and authorization, pricing,
legal classification, and inspection of all human medicinal products.40 For its part, the SSI, which is
affiliated with the Ministry of Family, Labour and Social Services, is in charge of implementing social
security policies and is responsible for, inter alia, paying for pharmaceuticals.41
6.3. Pharmaceutical products are prescribed by medical doctors and distributed to outpatients42 by
retail pharmacies, which are private entities. All retail pharmacies are members of the Turkish
Pharmacists' Association (TPA).43
6.4. To be "reimbursable" by the SSI, a pharmaceutical product must be included as "active"44 in a
list included in Annex 4/A to the Health Implementation Communiqué 45 (the Annex 4/A list). The
SSI determines which pharmaceutical products are included in the Annex 4/A list.46 Products in the
Annex 4/A list are put in equivalent groups, and a single "reimbursement price" set for each
equivalent group (the lowest price in the equivalent group increased by 10%).47
6.5. The amounts charged by pharmacies for pharmaceutical products covered by the social security
system are met from payments made by the SSI and out -of-pocket payments by outpatients. 48
According to a Protocol concluded between the SSI and the TPA49, individual retail pharmacies sign
(and annually renew) standard contracts with the SSI. On the basis of these contracts, pharmacies
periodically invoice the SSI for all pharmaceutical products included in the Annex 4/A list that they
have provided to outpatients during the relevant period. The SSI reviews these invoices using a
sampling method and reimburses the reimbursement price.50 If the public price of a pharmaceutical
product is greater than a maximum reimbursement price set by the SSI, outpatients must pay the

38 This overview is based on the Panel's account of the factual aspects of the dispute.
39 Panel Report, para. 2.2 (quoting SSI, "Universal Health Insurance" (Panel Exhibit EU-2) and referring
to Social Insurance and Universal Health Insurance Law, Law No. 5510 (31 May 2006), Official Gazette
No. 26200 of 16 June 2006 (Panel Exhibits EU-1, TUR-2); referring to M. Tatar, "Short PPRI Pharma Profile,
Turkey 2017", WHO Collaborating Centre for Pharmaceutical Pricing and Reimbursement Policy (Panel Exhibit
EU-3), p. 7; Social Security Institution Activity Report 2018 (Panel Exhibits EU-109, TUR-7), p. 1; Türkiye's
first written submission to the Panel, para. 28).
40 Panel Report, para. 2.3 (referring to G. Oner and M. Kecik, "Turkish Medicines and Medical Devices
Agency", presentation at 2014 WHO Technical Briefing Seminar (Panel Exhibit EU-5); Türkiye's first written
41 Panel Report, para. 2.4 (referring to Law on Social Security Institution, Law No. 5502 (16 May 2006),
Official Gazette No. 26173 of 20 May 2006 (Panel Exhibits EU-4, TUR-3), Article 3; Türkiye's first written
submission to the Panel, para. 39; second written submission to the Panel, para. 19).
42 Outpatients are distinguished from inpatients, who receive pharmaceutical products in hospitals.
43 Panel Report, paras. 2.7 and 2.14 (referring to Law on Turkish Pharmacists Association No. 6643
(25 January 1956), Official Gazette No. 9223 of 2 February 1956 (Panel Exhibit TUR-27), Article 1).
44 Panel Report, paras. 2.8 and 2.13.
45 Panel Report, para. 2.8 (referring to Social Security Institution Health Implementation Communiqué,
Official Gazette No. 28597 of 24 March 2013 (Panel Exhibits EU-95, TUR-10)).
46 Panel Report, paras. 2.8 and 2.10-2.12, and fn 79 to para. 2.21.
47 Panel Report, para. 2.9.
48 Panel Report, para. 2.7.
49 TPA Protocol (Panel Exhibits EU-52, TUR-20).
50 Panel Report, para. 2.14 and fn 59 thereto. The reimbursement price of medicines is further detailed
at paragraph 2.15 of the Panel Report.

difference, unless they decide to opt for an equivalent product. In addition, outpa tients generally
also pay a contribution fee and a prescription fee to retail pharmacies.51
6.6. Retail pharmacies and the SSI use an electronic information system , the "Medula system",
which "enables the registration, tracking and invoicing of medicines that a re obtained from
pharmacies through a single application".52
6.1.2 The localisation requirement
6.7. The localisation requirement is a measure, whereby: (i) Türkiye requires foreign producers to
commit to locali se in Türkiye their production of certain pharmaceutical products; and (ii) where
commitments are not given, accepted, or fulfilled, products are no longer reimbursed by the SSI. 53
It has different phases, which progressively target different products depending on thei r market
share and the existence of equivalent products in the domestic market.54
6.8. The localisation process starts with the identification of the relevant products by the Turkish
authorities. Pharmaceutical companies producing these products are informed th at their products
are to be included in the scope of the localisation requirement. The pharmaceutical companies then
enter into discussions with the competent authorities with a view to preparing a transition plan and
submitting commitments to produce locally. Any commitments made by pharmaceutical companies
that have been accepted are followed up through regular progress reports presented by the
pharmaceutical companies to the TMMDA. If a company does not submit a localisation commitment,
the relevant products are no longer reimbursed by the SSI. This is also the case if a commitment is
considered not to be appropriate, or if a company does not fulfil its commitment.55
6.9. The localisation requirement relates to Türkiye's policy objective of achieving the grad ual
transition from imports to domestic manufacturing of pharmaceuticals. 56 The objective is to meet
60% of domestic pharmaceutical demand through domestic production, 60% being the share of
locally produced medicines in terms of sales value of the total domestic demand for medicines.57
6.2 Articles III:4 and III:8(a) of the GATT 1994
6.10. Türkiye's first ground s of challenge in this Arbitration pertains to Article III:8(a) of the
GATT 1994. Türkiye claims that the Panel erred in the interpretation and application o f
Article III:8(a) in finding that the localisation requirement did not involve a "purchase" and thus did
not fall within the ambit of this provision. 58 Türkiye requests us to reverse relevant findings of the
Panel, including its finding that the localisation requirement is not covered by Article III:8(a), and is
therefore subject to the national treatment obligation under Article III:4 of the GATT 1994 and
Article 2.1 of the TRIMs Agreement.59 Türkiye also requests us to declare moot and of no legal effect,
or reverse 60, the Panel's findings under Article III:4, including its finding that the localisation
requirement is inconsistent with that provision.61

51 Panel Report, para. 2.16.
52 Panel Report, para. 2.17 (quoting Social Security Institution, Directorate General for Provision of
Services Healthcare Software Department, "Medula Project" presentation, 2019 (Panel Exhibit TUR-112),
p. 17).
53 Panel Report, para. 7.31.
54 Panel Report, paras. 2.23-2.24.
55 Panel Report, paras. 2.25-2.26.
56 Panel Report, para. 2.20.
57 Panel Report, fn 75 to para. 2.20 (referring to Republic of Turkey, Ministry of Development, Tenth
Development Plan 2014-2018 (2014), approved by Decision No. 1041 of the Grand National Assembly of
Turkey of 2 July 2013 (Tenth Development Plan 2014-2018) (Panel Exhibit EU-12), point 1.16; Türkiye's
responses to the Panel's second set of questions, para. 72).
58 Türkiye's notice of recourse to arbitration, pp. 1-2.
59 Türkiye requests us to reverse the conclusions and findings in paragraphs 7.61-7.107 and 8.1.b.ii of
the Panel Report. (Türkiye's notice of recourse to arbitration, pp. 1-2)
60 In this connection, Türkiye asks us to complete the legal analysis and find that all the elements of
Article III:8(a) are met, although Türkiye considers that the Panel's findings under Article III:4 should be
reversed, irrespective of any completion of legal analysis. (Türkiye's notice of recourse to arbitration, pp. 1-2;
written submission, paras. 8-9 and 114-115)
61 Türkiye's notice of recourse to arbitration, pp. 1-2. Türkiye refers to the Panel's findings in
paragraphs 7.121-7.127 and 8.1.b.iii of the Panel Report. (Ibid, p. 2.)

6.11. The European Union requests that we reject Türkiye's claims and find that the Panel did not
err in its interpretation or application of Article III:8(a).62 Should we find error with the Panel's
interpretation or application of Article III:8(a), the European Union submits that there would be no
basis to declare moot or reverse the Panel's findings under Article III:4, unless we complete the
legal analysis and make a positive finding that the localisation requirement is covered by
Article III:8(a).63 Should we find it appropriate to complete th e legal analysis, we should conclude
that Article III:8(a) does not apply to the localisation requirement.64
6.12. We begin by briefly summarizing key Panel findings, before turning to consider relevant
interpretation and application issues raised in this Arbitration.
6.2.1 Panel findings
6.13. Before the Panel, the European Union claimed that the localisation requirement was
inconsistent with Article III:4 of the GATT 1994 and Article 2.1 of the TRIMs Agreement.65 Türkiye
responded that the localisation requirement fell within the scope of Article III:8(a) of the GATT 1994
and was thus not subject to the provisions invoked by the European Union.66
6.14. In the Panel's own words, the following elements need to be satisfied for a measure to fall
within the scope of Article III:8(a)67: (i) the challenged measure must qualify as "laws, regulations,
or requirements governing … procurement"; (ii) the challenged measure "must involve a 'purchase'
of products by a 'governmental agency'"; (iii) "the products must be purchased 'for governm ental
purposes'"; and (iv) "the products must not be purchased 'with a view to commercial resale or with
a view to use in the production of goods for commercial sale'." 68 The Panel started its assessment
with the second element. The Panel proceeded to set out its interpretation of the term "purchased"
in the context of the phrase "products purchased by governmental agencies"69 and look at whether
the localisation requirement involved "the 'purchase' of pharmaceutical products included in the
Annex 4/A list by governmental agencies".70
6.2.1.1 The Panel's interpretation of the term "products purchased" as requiring a
governmental agency to acquire ownership of the products at issue
6.15. Beginning with the ordinary meaning of the words "products purchased", the Panel considered
that "in everyday usage a person or entity [was] said to purchase a product at the moment that the
person or entity acquire[d] ownership of a product through some kind of payment."71 To the Panel,
the acquisition of ownership (i.e. property rights) was a purchase's defining characteristic,
distinguishing it from renting or leasing a product. 72 Turning to contextual elements, the Panel
recalled that "'procurement' refer[red] to 'the process pursuant to which a government acquire[d]
products', and that the word 'purchased' … refer[red] to 'the type of transaction used to put into
effect' that acquisition."73 Thus, the concept of "purchase" covered only a subset of the various types
of transactions that could be used to put into effect "procurement". The Panel considered that
interpreting the term "purchased" in accordance with its ordinary meaning, i.e. as covering only the
type of transaction through which the government acqui red ownership of the products, gave the
term "purchase" a meaning distinct from the broader concept of "procurement" that could involve

62 European Union's written submission, para. 2.
63 European Union's written submission, paras. 88 and 104-105.
64 European Union's written submission, paras. 3 and 89.
65 Panel Report, para. 3.2.
66 Panel Report, paras. 3.3.b and 7.32.
67 The Panel addressed the "government procurement derogation" in Article III:8(a) before making any
findings under Article III:4 of the GATT 1994 or Article 2.1 of the TRIMs Agreement, on account that measures
satisfying the requirements of Article III:8(a) were not subject to the national treatment obligations set out in
other paragraphs of Article III. (Panel Report, fn 239 to para. 7.32)
68 Panel Report, para. 7.37.
70 Panel Report, para. 7.63.
71 Panel Report, para. 7.70.
72 Panel Report, para. 7.70.
73 Panel Report, para. 7.71 (quoting Appellate Body Reports, Canada – Renewable Energy /
Canada – Feed-in Tariff Program, para. 5.59). (emphasis added by the Panel)

other types of transactions by which products might be procured (e.g. leasing).74 The Panel further
noted the requirement in Article III:8(a) that the products purchased must be for a governmental
purpose. The Panel recalled that this referred to what was consumed by the government or provided
by the government to recipients in the discharge of its public functions.75 The Panel considered that
both of those actions presupposed that the government acquired ownership of the product being
consumed.76
6.16. Next, the Panel considered that, if situations in which a government paid for products used
by non-governmental consumers were t reated as "purchases" by the government simply on the
basis that the government paid for the products, Article III:8(a) would extend to an open -ended
range of protectionist measures. A purchase could then include coupons for food, subsidies for
renovating real estate, and tax credits for environmentally friendly purchases. Recalling that
Article III:8(a) was a limited derogation from the national treatment obligation under Article III, the
Panel considered that such a result would undermine the object and purpose of the GATT 1994.77
6.17. The Panel concluded that, in the context of Article III:8(a), a product was "purchased" by a
government only if the government acquired ownership of that product through some kind of
payment. The Panel thus disagreed with Türkiye's assertion that the SSI "pa[id] for the
pharmaceutical products and thus [was] the ultimate buyer (or the purchaser)" regardless of
whether the SSI ever acquired ownership of those products.78
6.2.1.2 The Panel's finding that the SSI does not purchase pharmaceutical products from
retail pharmacies
6.18. The Panel next assessed whether Türkiye's pharmaceutical reimbursement system involved a
purchase by the SSI, i.e. whether the SSI acquired ownership of pharmaceutical products included
in the Annex 4/A list, whether at the time of approval in t he Medula system or otherwise. 79
Specifically, the Panel sought to determine whether the SSI acquired any legal rights, of the type
typically associated with ownership of goods, over the products, taking into account rights acquired
by the retail pharmacies (that acquired ownership of pharmaceutical products when purchasing them
from wholesalers) and outpatients (who acquired ownership of pharmaceutical products when
obtaining them from pharmacies).80
6.19. The Panel was unable to discern any basis upon which it could conclude that the SSI acquired
any legal rights over the pharmaceutical products it paid for, let alone that it acquired the type of
legal rights typically associated with ownership of goods. The Panel did not see anything to suggest
that the SSI acquired "any right of possession, any right of control, any right of exclusion, any right
to derive income, or any right to freely dispose of the pharmaceutical products". 81 By way of
example, the Panel noted that the SSI did not ever acquire the right to ta ke physical possession of
the pharmaceutical products. While acknowledging that physical possession of goods was not a
constitutive element of a purchase 82, the Panel considered the absence of any such right to take
physical possession to be a strong indicator that the entity paying for these goods had not acquired
any right of ownership. The Panel considered that this was a particularly strong indicator with goods
that could freely be transported and stored, such as pharmaceutical products.83

74 Panel Report, para. 7.71. The Panel agreed with the European Union that the common element of
these other contractual arrangements was that, "while they may lead to the acquisition of products (for
example, in the case of rental, the acquirer takes possession and has the right to use the product for a certain
period of time), they d[id] not lead to the acquisition of property over products." (Ibid. (quoting
European Union's first written submission to the Panel, para. 202) (emphasis original))
75 Panel Report, para. 7.72 (referring to Appellate Body Reports, Canada – Renewable Energy /
Canada – Feed-In Tariff Program, para. 5.68).
76 Panel Report, para. 7.72.
77 Panel Report, para. 7.73.
78 Panel Report, paras. 7.74 and 7.81 (quoting Türkiye's first written submission to the Panel,
paras. 206-208).
79 Panel Report, para. 7.82.
80 Panel Report, para. 7.84.
81 Panel Report, para. 7.85.
82 Panel Report, paras. 7.75, 7.79, 7.83, and 7.86.
83 Panel Report, para. 7.86.

6.20. In addition, the Panel found no basis to support Türkiye's assertion that the SSI obtained the
right to dispose of the pharmaceutical products that it paid for, according to its own choices. In this
connection, the Panel observed that, following approval in the Medula system, the pharmaceutical
product needed to be provided to the individual outpatient named in the prescription. All relevant
decisions and choices associated with the disposition of pharmaceutical products were made by the
prescribing doctor, the pharmacy, and the outpatient. The Panel did not discern any SSI involvement
in choosing who received and consumed pharmaceutical products that the SSI paid for: "Neither the
SSI nor any other governmental agency played any role in directing, or redirecting, pharmaceutical
products to recipients of their choosing."84
6.21. The Panel was not persuaded by Türkiye's argument that the SSI could be deemed to acquire
title to pharmaceutical products included in the Annex 4/A list and prescribed to patients at the time
of approval in the Medula system. The Panel observed that approval through the Medula system
served as confirmation that the patient was within SSI coverage and that the prescribed
pharmaceutical products were in the Annex 4/A list. That approval confirmed, inter alia, that the
pharmaceutical product may be invoiced by the pharmacy to the SSI at the previously set price. 85
In the Panel's view, it would require an artificial and strained construction of the facts to characterize
this confirmation as a transaction thr ough which "the SSI acquire[d] the right to dispose of those
medicines by dispensing them, through the retail pharmacies, to patients", and "the title to those
medicines [was] then immediately transferred to patients." 86 The Panel also observed that Türkiy e
had not pointed to any reference to the SSI acquiring "title" over pharmaceutical products in the
Protocol signed between the SSI and the TPA or any other evidence on record.87 The Panel concluded
that the SSI did not acquire ownership of pharmaceutical products included in the Annex 4/A list
and therefore the SSI's reimbursement of part or all of the cost of those products did not qualify as
a "purchase" by the SSI in the context of Article III:8(a).88
6.2.1.3 The Panel's finding that retail pharmacies are not governmental agencies
purchasing products on behalf of the SSI
6.22. The Panel next addressed Türkiye's alternative argument that there was a "purchase" covered
by Article III:8(a) of the GATT 1994 because retail pharmacies purchased medicines from
wholesalers on behalf of the SSI, and were, to that extent, "governmental agencies".89
6.23. The Panel agreed with Türkiye that Article III:8(a) did not necessarily preclude a
governmental agency from purchasing products through an intermediary. However, to fall within the
scope of Article III:8(a), a governmental purchase effected through an intermediary needed to lead
to the government acquiring ownership of the product purchased.90
6.24. In the circumstances of this case, it was clear that the pharmacies' purchases of
pharmaceutical products from wholesalers did not entail, or result in, the acquisition of ownership
of those products by the SSI. The Panel recalled that the SSI did not acquire ownership of
pharmaceutical products and, therefore, the SSI's reimbursements of part or all of the cost of those
products did not qualify as a "purchase" by the SSI. Rather, the retail pharmacies acquired and
retained ownership until it was transferred to outpatients. To the Panel, this sufficed to establish
that retail pharmacies did no t qualify as "governmental agencies". 91 The Panel noted the parties'
arguments about the extent to which the SSI controlled the actions of retail pharmacies. To the
Panel, even if it could be said that the SSI instructed and directed pharmacies what to do, this would
not make them "governmental agencies" or mean that there are purchases by the government, so

84 Panel Report, para. 7.87.
85 Panel Report, para. 7.88 (referring to Türkiye's responses to the Panel's first set of questions,
para. 26; European Union's responses to the Panel's first set of questions, paras. 10-22; opening statement at
the Panel meeting, para. 24).
86 Panel Report, para. 7.88 (quoting and referring to Türkiye's second written submission to the Panel,
para. 73; responses to the Panel's first set of questions, paras. 32-34; closing statement at the Panel meeting,
para. 23; responses to the Panel's second set of questions, para. 43).
87 Panel Report, para. 7.88.
88 Panel Report, para. 7.90.
89 Panel Report, paras. 7.92 and 7.94.
90 Panel Report, para. 7.96.
91 Panel Report, para. 7.98.

long as the pharmacies acquired ownership of pharmaceutical products independently of
the government.92
6.25. Based on the foregoing and recalling its earlier finding that the SSI never acquired ownership
of the pharmaceutical products that it paid for, the Panel concluded that the private retail pharmacies
did not qualify as "governmental agencies" in the context of Article III:8(a).93
6.2.1.4 The Panel's conclusion
6.26. Having found that the localisation requirement did not involve the "purchase" of relevant
pharmaceutical products by governmental agencies, the Panel found that "the localisation
requirement [was] not covered by the government procurement derogation in Article III:8(a) of the
GATT 1994, and [was] therefore subject to the national treatment obligation in Article III:4 of the
GATT 1994 and Article 2.1 of the TRIMs Agreement".94 The Panel ultimately found the localisation
requirement to be inconsistent with Article III:4 of the GATT 1994.95
6.2.2 Whether the Panel erred in its interpretation of Article III:8(a) of the GATT 1994
6.27. In this Arbitration, Türkiye claims that the Panel erred in its interpretation of the "purchase
requirement" in Article III:8(a) of the GATT 1994, which led to errors in the application of that
provision to the facts of the case. Türkiye alleges two interpretation errors. First, the Panel erred in
considering that Article III:8(a) required that a purchase be made by a governmental ag ency.
Second, the Panel erred in finding that a purchase necessarily implied a transfer of ownership of the
product from the seller to the entity purchasing the products.96
6.28. The European Union requests us to dismiss these claims. The European Union notes that the
interpretative arguments made by Türkiye in this Arbitration were not before the Panel. 97 The
European Union also contends that Article III:8(a) only applies to purchases by a governmental
agency.98 Therefore, the Panel was correct to consider whether there was governmental purchasing
for the purposes of its analysis under Article III:8(a). The Panel was also correct to find that the
concept of "purchase" entailed a transfer of ownership to the purchaser.99
6.2.2.1 Overview of Article III:8(a) of the GATT 1994
6.29. Article III is a cornerstone of the multilateral trading system. The general principle, which is
articulated in the first paragraph, postulates that internal measures "should not be applied so as to
afford protection to domestic production". 100 Other paragraphs of Article III constitute specific
expressions of this overarching, general principle. 101 Article III:4 of the GATT 1994, in particular,
prohibits Members from treating imported products less favour ably than like products of national
origin in respect of all laws, regulations, and requirements affecting their internal sale, offering for
sale, purchase, transportation, distribution, or use.
6.30. Article III:8(a) of the GATT 1994 establishes a derogation fr om the national treatment
obligation under Article III 102 , including Article III:4. As such, Article III:8(a) provides for a
carve-out from a cornerstone principle of the GATT 1994, but does so only for specific types of
measures dealing with government procurement. It reads:

92 Panel Report, para. 7.100.
93 Panel Report, para. 7.103.
94 Panel Report, para. 8.1.b.ii. See also ibid., paras. 7.104 and 7.107.
95 Panel Report, para. 8.1.b.iii. See also ibid., para. 7.127. In light of this finding and other findings
under Article XX of the GATT 1994, the Panel exercised judicial economy over the European Union's claim
under Article 2.1 of the TRIMs Agreement. (Ibid., paras. 7.245 and 8.1.b.v)
96 Türkiye's written submission, paras. 8 and 19. See also Türkiye's notice of recourse to arbitration,
pp. 1-2; written submission, paras. 31-32 and 50.
97 European Union's written submission, para. 32; opening statement at the hearing, para. 12.
98 European Union's written submission, para. 33.
99 European Union's written submission, para. 53.
100 Appellate Body Report, Japan – Alcoholic Beverages II, p. 18, DSR 1996:I, p. 111.
101 Appellate Body Report, EC – Asbestos, para. 93.
102 Appellate Body Reports, Canada – Renewable Energy / Canada – Feed-in Tariff Program, para. 5.56.

The provisions of this Article shall not apply to laws, regulations or requirements
governing the procurement by governmental agencies of products purchased for
governmental purposes and not with a view to commercial resale or with a view to use
in the production of goods for commercial sale.
6.31. Article III:8(a) contains several elements d escribing the types and the context of measures
falling within the ambit of this provision. It describes the types of measures falling within its ambit
as "laws, regulations or requirements governing the procurement" of products. Article III:8(a) also
specifies what is procured and by whom. The subject matter of the procurement is a "product", and
it is being procured "by governmental agencies" . Moreover, t here needs to be procurement of
"products purchased for governmental purposes" . Finally, Article III:8(a) refers to procurement of
products purchased "not with a view to commercial resale or with a view to use in the production of
goods for commercial sale".
6.32. These various elements inform each other and Article III:8(a) should be interpreted
holistically.103 These elements are also cumulative in nature, such that a measure failing to meet
any one of those requirements will not be exempted from the national t reatment obligations of
Article III:4 of the GATT 1994 and Article 2.1 of the TRIMs Agreement.104
6.2.2.2 Whether the Panel wrongly assumed Article III:8(a) of the GATT 1994 to require
a purchase by governmental agencies
6.33. As summarized above, the Panel focused its analysis on whether the localisation requirement
involved a "purchase" of pharmaceutical products included in the Annex 4/A list by governmental
agencies (i.e. the SSI or retail pharmacies on behalf of the SSI). The Panel di d not elaborate on
whether Article III:8(a) of the GATT 1994 should be interpreted as requiring a purchase by
governmental agencies or whether a purchase could be made by a different entity. We understand
the Panel to have simply assumed that Article III:8(a) required a purchase by governmental
agencies.105
6.34. The Panel's approach seems to have been guided by the manner in which Türkiye presented
its arguments in the panel proceedings. Before the Panel, Türkiye submitted that the SSI purchased
pharmaceutical p roducts included in the Annex 4/A list because the SSI paid for those
pharmaceutical products or because it acquired title to those products. In the alternative, Türkiye
argued that the purchase of pharmaceutical products from wholesalers by retail pharmac ies was
made on behalf of the SSI and this meant that the retail pharmacies were themselves "governmental
agencies" purchasing pharmaceutical products.106
6.35. In this connection, the European Union argues that the Panel cannot be faulted for focusing
on whether there was governmental purchasing since Türkiye's case before the Panel was either
that the SSI purchases products as a governmental agency or that pharmacies purchase products
as governmental agencies on behalf of the SSI. 107 The European Union noted that new arguments
are not per se excluded from the scope of our review. However, to the European Union, we would
need to exclude new arguments that, like those of Türkiye, would require us to solicit, receive, and
review new facts.108
6.36. Under paragraph 9 of the Agreed Procedures, "[a]n appeal shall be limited to issues of law
covered by the panel report and legal interpretations developed by the panel." Having reviewed the
parties' submissions before the Panel, we agree with the European Union that the first interpretative

103 Appellate Body Reports, Canada – Renewable Energy / Canada – Feed-in Tariff Program, para. 5.57.
104 Appellate Body Reports, Canada – Renewable Energy / Canada – Feed-In Tariff Program,
paras. 5.57, 5.69, and 5.74.
105 By way of example, the Panel referred to: Article III:8(a) as requiring "a 'purchase' of products by a
'governmental agency'"; "the phrase 'products purchased by governmental agencies'" in Article III:8(a); "the
term 'purchase' in Article III:8(a)"; "the concept of a 'purchase' by a government"; "the limitation in
Article III:8(a) that a product is 'purchased' by a government if the government acquires ownership of it"; and
"the fact that Article III:8(a) is limited to the acquisition of products, through procurement and 'purchase' by
the government". (Panel Report, paras. 7.37, 7.65, 7.71, 7.73, and 7.97)
106 Panel Report, para. 7.64.
107 European Union's written submission, para. 32; opening statement at the hearing, para. 12.
108 The European Union referred to the Appellate Body Report in Canada – Aircraft. (European Union's
responses to questions at the hearing)

issue raised by Türkiye in this Arbitration was not raised as such in the panel proceedings. Türkiye's
argument at the panel stage was that there was a purchase by governmental agencies : the SSI or
retail pharmacies acting on behalf of the SSI.109 In this Arbitration, Türkiye argues more broadly on
interpretation that the purchase does not need to be made by a governmental agency. 110 At the
same time, Türkiye is raising a legal argument relating to the proper interpretation of the words
"products purchased" in Article III:8(a), which were before the Panel and which the Panel interpreted
and applied. Since the Panel considered that the words "products purchased" in Article III:8(a),
which were properly before it, implied a purchase by a governmental agency, Türkiye's first
interpretation claim in the Arbitration covers an issue of law covered by the Panel Report.
Importantly, the arguments raised by Türkiye relate to the proper interpretation of Article III:8(a)
and do not require us to solicit, receive, or review new facts. We thus proceed to analyse , in
accordance with customary rules of interpretation of public international law as foreseen in
Article 3.2 of the DSU, whether the Panel wrongly assumed that a purchase of products for
governmental purposes must be made by a governmental agency.111
6.37. According to Türkiye, "the plain reading of Article III:8(a) indicates that it is the procurement
that must be made by [a] governmental agency", not the purchase. 112 Therefore, provided
procurement is made by a governmental agency, the relevant products might be purchased by
another entity.113 Türkiye further argues that the words "procurement" and "purchase" necessarily
have different meanings, or Article III:8(a) would have referred to "laws, regul ations or
requirements governing the purchase by governmental agencies of products for governmental
purposes". 114 Türkiye concludes "[p]recisely because all essential elements of the purchase
transaction have already been set by the procuring governmental a gency, the actual purchase can
be entrusted to a non-governmental agency."115
6.38. The European Union considers that, by its own terms, and as was confirmed by the
Appellate Body in prior disputes 116 , Article III:8(a) only applies to purchases by government
agencies.117 The European Union argues that "procurement" refers to the process pursuant to which
the government acquires or obtains products while "purchase" refers to the specific transaction by
which the government acquires or obtains the products. It follow s that the entity purchasing the
products must also be the government.118 To the European Union, the mere fact that a government
closely regulates certain products, or their price, does not mean that it procures or purchases
them.119 The European Union also finds it telling that Türkiye fails to clearly specify which other
entity, other than the government itself, purchases in a government procurement scenario.120

109 Türkiye's main argument was that the SSI, as a governmental agency, purchased medicines itself.
Türkiye also stated that the purchase did not necessarily need to be made by a governmental agency in the
sense that "nothing in Article III:8(a) precludes the intervention of another entity as long as that entity
intervenes on behalf of the relevant governmental agency." This was in the context of Türkiye's alternative
argument that retail pharmacies purchased medicines on behalf of the SSI and were therefore themselves
governmental agencies. (Türkiye's first written submission to the Panel, para. 209; responses to the Panel's
second set of questions, paras. 44 and 47-49. See also Panel Report, paras. 7.64 and 7.93-7.94)
110 Türkiye's notice of recourse to arbitration, pp. 1-2; written submission, paras. 8, 19, 31, and 50. In
Türkiye's view, the entity purchasing products can be any entity, not necessarily an entity acting as an
intermediary on behalf of the government, as long as the other elements of Article III:8(a) are met. (Türkiye's
written submission, para. 31; responses to questions at the hearing)
111 Our approach accords with that of the Appellate Body, which considered that new arguments are not
per se excluded from the scope of appellate review to the extent they do not require the consideration of new
facts. (Appellate Body Reports, Canada – Aircraft, para. 211; Peru – Agricultural Products, para. 5.88) In
US – COOL (Article 21.5), it considered the argument that Article IX of the GATT 1994 constituted relevant
context for the interpretation of Article III:4 of the GATT 1994. While this was a new argument on appeal, the
Appellate Body considered that it related to the proper interpretation of the term "treatment no less
favourable" in Article III:4, which was before the panel and addressed in the panel report. (Appellate Body
112 Türkiye's written submission, para. 21. (emphasis original)
116 European Union's written submission, paras. 18-25 and 28.
117 European Union's written submission, para. 33.
118 European Union's written submission, para. 26.
119 European Union's written submission, para. 31.
120 European Union's written submission, para. 17.

6.39. The interpretative issue raised by Türkiye is framed as one concerning the words "products
purchased", the notion of "purchase", or what Türkiye has called the "purchase requirement". 121 At
the outset, we note that the noun "purchase" is not found in Article III:8(a). In addition, we recall
that the words of Article III:8(a) should not be read in isolation from the remaining text of that
provision.
6.40. Starting our interpretation with the text of Article III:8(a), this provision excludes from the
scope of the national treatment obligation under Article III, "laws, regula tions or requirements
governing the procurement by governmental agencies of products purchased for governmental
purposes…". In relevant part, the French text of Article III:8(a) refers to "l'acquisition, par des
6.41. The phrase "products purchased by governmental agencies" tha t the Panel proceeded to
interpret123 is not found verbatim in Article III:8(a). In the English, French, and Spanish versions of
Article III:8(a), the noun "procurement" is directly followed by the term "by governmental agencies".
The plain reading of Artic le III:8(a) indicates that it is the procurement that is qualified by the
proposition "by governmental agencies". Considering the text and grammatical structure of the
provision, we are of the view that the reference to "governmental agencies" relates to t he identity
of the entity carrying out the procurement. This reading of Article III:8(a) accords with the
Appellate Body's observations in the context of its interpretation of various elements of this
provision. The Appellate Body observed that "'procurement' is the operative word in Article III:8(a)
describing the process and conduct of the governmental agency", and "[t]he reference to
'governmental agencies' defines the identity of the entity carrying out the procurement."124
6.42. The text of Article III:8(a) also suggests that "procurement" is to be distinguished from a
"purchase". 125 Conceptually, procurement may be put into effect through different types of
transactions, such as purchase, lease, or rent. 126 In other words, not every procurement needs to
be effectuated by way of a purchase. We thus agree with the Panel that the concept of "purchase"
covers only a subset of the various types of transactions that could be used to put into effect
"procurement".127
6.43. Procurement refers generally to "[t]he action of obtaining something; acquisition; an instance
organismos gubernamentales" in the French and Spanish versions of Article III:8(a) confirm that, in
the context of that provision, "procurement" refers to a governmental agency acquiring products.129
The express reference to "the procurement … of products purchased" ("acquisition … de produits
achetés" and "adquisición … de productos comprados" ) indicates that, for the purpose s of
Article III:8(a), such acquisition has to be put into effect through a purchase transaction. This also
stems from the lack of any reference to other types of transactions (such as lease or rent). The word
"procurement" in Article III:8(a) therefore refers to the process pursuant to which the government

121 Türkiye's notice of recourse to arbitration, pp. 1-2; written submission, paras. 2 and 18-19.
122 The WTO Agreement provides that the English, French, and Spanish languages each are authentic.
According to Article 33 of the Vienna Convention, "[w]hen a treaty has been authenticated in two or more
languages, the text is equally authoritative in each language" and "[t]he terms of the treaty are presumed to
have the same meaning in each authentic text."
124 Appellate Body Reports, Canada – Renewable Energy / Canada – Feed-in Tariff Program, para. 5.59.
125 The principle of effective treaty interpretation requires us to give meaning to every term of the
provision. (Appellate Body Report, US – Gasoline, p. 23, DSR 1996:I, p. 21)
126 This is, for example, reflected in the Agreement on Government Procurement (GPA). Article II.2 of
the GPA, which deals with the scope of that Agreement, indicates that "covered procurement means
procurement for governmental purposes … by any contractual means, including: purchase; lease; and rental or
hire purchase, with or without an option to buy". We are mindful of the fact that the GPA is plurilateral in
nature and that Türkiye is not a party to that Agreement. We consider, however, that the GPA reflects some
general understanding that a purchase is one of the ways in which procurement may occur.
127 Panel Report, para. 7.71.
128 Oxford English Dictionary online, https://www.oed.com/view/Entry/151913, accessed on
1 July 2022.
129 Emphasis added. In its French and Spanish versions, Article III:8(a) does not refer to "marchés
publics" and "contratación pública", but to "acquisition" and "adquisición".

acquires or obtains products and the words "products purchased" are used to describe the type of
transaction used to put into effect that procurement.130
6.44. The verb in the past participle form "purchased" links the "products" being procured by
governmental agencies with the remaining part of Article III:8(a), namely the phrase "for
governmental purposes and not w ith a view of commercial resale …". The French version refers to
públicos". The wording "for governmental purposes" can be contrasted with the wording of
Article XVII:2 of the GATT 1994 on State Trading Enterprises.131 Article XVII:1 stipulates obligations
for state trading enterprises and Article XVII:2 sets out a derog ation from those obligations for
certain government procurement transactions. Article XVII:2 provides that "[t]he provisions of
paragraph 1 of this Article shall not apply to imports of products for immediate or ultimate
consumption in governmental use and not otherwise for resale or use in the production of goods for
sale." Article XVII:2 thus more narrowly refers to "imports of products for immediate or ultimate
consumption in governmental use". Article III:8(a) does not refer to governmental use or
governmental consumption. In our view, the broader language "for governmental purposes" does
not necessarily refer to government as the end to which the products procured and purchased are
directed. It rather refers to the products procured and purchased f or the needs ("purposes",
"besoins", "necesidades") of the government. We agree with the statement in the Appellate Body
reports cited by the parties that the phrase procurement of products purchased "for governmental
purposes" in Article III:8(a) refers to what is consumed by the government or what is provided by
the government to recipients in the discharge of its public functions.132
6.45. In its analysis of the words "products purchased", the Panel noted, and we agree, that cases
of governmental procurement will typically involve situations where a government obtains products
for its own use or consumption.133 An obvious example is where a governmental agency purchases
a good, uses it to discharge its governmental functions, and the good is totally consumed in the
process. This would typically involve a purchase by the government. Government procurement
through a purchase of products to be provided by the government to recipients in the discharge of
its public function (when the government is not the end user of the products) may also typically, but
not necessarily, involve a purchase by the government of those products.
6.46. Importantly, nothing in the text of Article III:8(a) explicitly specifies which entity purchases
products for the purposes of government procurement. When a provision omits to further qualify an
action, this can serve as an indication that no limitation is intended to be imposed on the manner or
circumstances in which such action may be taken. If we were to read into Article III:8(a) a
requirement that a purchase necessarily needs to be made by a governmental agency, we would be
adding to the text of Article III:8(a) or moving the preposition "by governmental agencies" to relate
to the words "products purchased" in this provision. The text and structure of the phrase
"procurement by governmental agencies of products purchased" together with the contextual
elements discussed above suggest to us that while a typical government procurement scenario under
Article III:8(a) would involve a purchase by governmental agencies of the products being procured,
there is no such requirement in Article III:8(a). We cannot exclude that another entity may purchase
the relevant products, so long as there is procurement by a governmental agency and procurement
of products purchased for governmental purposes.

130 This accords with the Appellate Body's interpretation of Article III:8(a). It understood "the word
'procurement' to refer to the process pursuant to which a government acquires products" and "[t]he word
'purchased' … to describe the type of transaction used to put into effect that procurement". (Appellate Body
Reports, Canada – Renewable Energy / Canada – Feed-in Tariff Program, para. 5.59) It also accords with the
parties' understanding of the concept of procurement. According to Türkiye, procurement is "the process of
obtaining products". (Türkiye's written submission, para. 27; responses to questions at the hearing) The
European Union understands procurement as the governmental agency obtaining or acquiring products.
(European Union's written submission, para. 29; responses to questions at the hearing)
131 We consider that Article XVII:2 of the GATT 1994 provides relevant interpretative context. This is
consistent with the Appellate Body's approach. (Appellate Body Reports, Canada – Renewable Energy /
Canada – Feed-in Tariff Program, para. 5.68)
132 Appellate Body Reports, Canada – Renewable Energy / Canada – Feed-in Tariff Program, para. 5.68.
See also Türkiye's written submission, para. 99; European Union's written submission, para. 97.
133 Panel Report, para. 7.66.

6.47. We emphasize that, for the derogation in Article III:8(a) to apply, different requirements need
to be met. In particular, Article III:8(a) requires a procurement by governmental agencies of
products purchased for governmental purposes. Our interpretation set out above does not extend
the scope of the derogation contained in Article III:8(a) beyond what is set by the provision itself.134
In other words, Article III:8(a) would not extend to an open-ended range of protectionist measures
and allow Members to circumvent their national treatment obligations, simply because the possibility
is not excluded that, in certain circumstances, the relevant purchase transaction might be entered
into by a non-governmental agency. Our understanding takes into account the fundamental purpose
of Article III to avoid protectionism in the application of internal tax and regulatory measures135 and
reflects the carefully drafted balance between the national treatment obligation under Article III and
the derogation contained in Article III:8(a).
6.48. Both parties extensively refer to the Appellate Body reports in Canada – Renewable Energy /
Canada – Feed-in Tariff Program and India – Solar Cells .136 In particular, the European Union
considers the Appellate Body to have clarified that the entity purchasing products needs to be a
governmental agency. 137 We carefully read the panel and Appellate Body reports in these two
disputes. In Canada – Renewable Energy / Canada – Feed-in Tariff Program , the Appellate Body
considered that "[t]he reference to 'governmental agencies' defines the identity of the entity carrying
out the procurement" and "'procurement' is the operative word in Article III:8(a) describing the
process and conduct of the governmental agency."138 The word "purchased" is then used to describe
the type of transaction used to put into effect that procurement. 139 Our understanding of
Article III:8(a) properly accords with these observations. The Appellate Body in India – Solar Cells
"recall[ed]", without more, that "the entity purchasing products needs to be a 'governmental
agency'."140 This statement was not the result of an interpretation of Article III:8(a) by the
Appellate Body. It is found in a short paragraph briefly summari zing the various elements of
Article III:8(a) in reference to the Appellate Body reports in Canada – Renewable Energy /
Canada – Feed-in Tariff Program. Yet, whether a non-governmental entity could be the purchasing
entity for the purpose s of Article III:8(a) was not at issue in either of these two disputes. The
Appellate Body did not discuss the proper interpretation of the words "products purchased" with
respect to the interpretative issue raised by Türkiye in this Arbitration. The key interpretative issue
in both disputes related to the word "products" in Article III:8(a), not to the notion of "purchase" or
who purchases products.141 While certain statements, taken out of context, could arguably suggest
that the Appe llate Body read Article III:8(a) to cover only purchases by governmental agencies,
these statements are, in our reading, a reflection that, in those disputes, governmental agencies
were both procuring and purchasing the product at issue. To that extent, these Appellate Body
reports provide only limited assistance to the interpretative issue raised in this Arbitration.142

134 We also consider that merely characterizing a treaty provision as a "derogation" does not justify a
stricter or narrower interpretation of that provision than would be warranted by applying the normal rules of
treaty interpretation. (See e.g. Appellate Body Report, EC – Hormones, para. 104)
135 See e.g. Appellate Body Report, Japan – Alcoholic Beverages II, pp. 16-17, DSR 1996:I,
pp. 109-110.
136 See e.g. Türkiye's written submission, para. 25; European Union's written submission,
para. 19 et seq.; parties' responses to questions at the hearing.
137 European Union's written submission, paras. 18-19. To the European Union, the Appellate Body
made a general interpretative finding that is directly relevant to this dispute, and it was appropriate for the
Panel to follow this clear legal interpretation. (Ibid., paras. 21-22 and fn 18 to para. 22 (referring to
Appellate Body Report, US – Shrimp (Article 21.5 – Malaysia), paras. 108-109); opening statement at the
hearing, para. 15)
138 Appellate Body Reports, Canada – Renewable Energy / Canada – Feed-in Tariff Program, paras. 5.59
and 5.66.
139 Appellate Body Reports, Canada – Renewable Energy / Canada – Feed-in Tariff Program, para. 5.59.
140 Appellate Body Report, India – Solar Cells, para. 5.18 (referring to Appellate Body Reports,
Canada ‒ Renewable Energy / Canada – Feed-in Tariff Program, para. 5.74).
141 The disputes concerned the imposition of domestic content requirements, which mandated electricity
generators to source a certain amount of renewable energy equipment domestically. The discrimination
relating to generation equipment contained in the domestic content requirements was found not to be covered
by the derogation of Article III:8(a) on the basis that the product discriminated against under Article III:4 (the
electricity generation equipment) was not in a competitive relationship with the product procured by way of
purchase under Article III:8(a) (electricity). (Appellate Body Reports, Canada – Renewable Energy /
Canada – Feed-in Tariff Program, paras. 5.63, 5.79, and 5.84; India – Solar Cells, para. 5.40)
142 As indicated in paragraph 6.44. and fn 130 above, our interpretation accords with the observations
that the Appellate Body made on interpretation with respect to the words "procurement" and "products
purchased".

6.49. For the reasons set out above, we consider that the "procurement by governmental agencies
of products purchased for governmental purposes" would typically involve the procurement of
products through a purchase by a governmental agency. However, Article III:8(a) does not contain
an unequivocal requirement to that effect. We do not foreclose the possibility that, in certain
circumstances, the relevant purchase transaction may be entered into by a non-governmental entity
so long as the products are procured by a governmental agency and procurement is of products
purchased for governmental purposes. We therefore find that the Panel erred in considering, as a
starting point for its analysis in paragraph 7.65 of the Panel Report, that Article III:8(a) required a
purchase by governmental agencies.
6.50. As further explained in paragraph 6.70. below, having agreed with Türkiye in respect of its
first interpretation challenge, and given our analysis of Türkiye's related application claim, we do not
consider it necessary for the resolution of this dispute to address Türkiye's second interpretation
challenge in this Arbitration.
6.2.3 Application of Article III:8(a) of the GATT 1994
6.51. Türkiye makes several clai ms regarding the Panel's application of Article III:8(a) of the
GATT 1994. Türkiye's first application claim is that, as a result of its erroneous interpretation that
there needed to be a purchase by a governmental agency, the Panel erred in finding that
Article III:8(a) did not apply on the basis that there was no purchase of pharmaceutical products by
the SSI.143 Türkiye raises three additional application claims. Türkiye submits that, as a result of its
erroneous interpretation that a purchase implied a transfer of ownership to the purchaser, the Panel
erred in finding that there was no purchase of pharmaceutical products by the SSI because the SSI
did not acquire ownership of those products. In addition, Türkiye submits that, even if the Panel's
interpretation were correct, the Panel should have concluded that there was a transfer of ownership
to the SSI through the Medula system and thus a purchase by the SSI. Finally, in the alternative,
Türkiye claims that the Panel erred in finding that retail pharmacies did not purchase pharmaceutical
products from wholesalers on behalf of the SSI.144
6.52. The European Union requests us to reject these claims. The European Union considers Türkiye
to be mostly taking issue with factual findings of the Panel. Since Türkiye has not invoked Article 11
of the DSU, the European Union considers that any challenge of factual findings by the Panel is
outside the scope of our review. The E uropean Union also disputes the allegations put forward by
Türkiye in support of each of its application claims.145
6.53. Starting with Türkiye's first application claim, we note that this claim is premised on us
disagreeing with the Panel's assumption that Artic le III:8(a) required a purchase by governmental
agencies. We concluded above that "procurement by governmental agencies of products purchased
for governmental purposes" would typically involve the procurement of products through a purchase
by a governmental agency. However, Article III:8(a) does not contain an unequivocal requirement
to that effect. 146 We thus agreed with Türkiye that the Panel's assumption that Article III:8(a)
required a purchase by governmental agencies was incorrect.
6.54. According to Türkiye, Article III:8(a) applies in this case because retail pharmacies purchase
the medicines included in Annex 4/A list, and the procurement is made by the SSI.147 Türkiye argues
that the SSI and other governmental agencies (the TMMDA) decide the legal framewo rk governing
the acquisition of medicines to be provided in the discharge of their public function, leaving no room
for market-based or profit-maximizing price negotiations. Türkiye contends that the SSI: (i) decides
which medicines are included in the Annex 4/A list; (ii) sets the price of those medicines (together
with the TMMDA); (iii) signs the Protocol with the TPA and individual contracts with the retail
pharmacies tasking them with ensuring the availability and distribution of those medicines
throughout the country; (iv) approves the provision of medicines to be dispensed to patients through

143 Türkiye's notice of recourse to arbitration, pp. 1-2; written submission, para. 52.
144 Türkiye's notice of recourse to arbitration, pp. 1-2; written submission, paras. 56, 61, and 75.
145 European Union's written submission, paras. 3, 13-16, 58-59, 62-64, 67-75, and 78-84.
146 See para. 6.49. above.
147 Türkiye's written submission, paras. 52 and 55 (referring to Panel Report, para. 7.98;
European Union's first written submission to the Panel, para. 15; second written submission to the Panel,
para. 101).

the Medula system; and (v) pays for the dispensed medicines based on invoices it receives from
retail pharmacies.148
6.55. The European Union responds that no govern mental agency of Türkiye engages in
procurement since no governmental agency obtains or acquires the medicines included in the
Annex 4/A list.149 To the European Union, whether the SSI or other governmental agencies decide
which medicines to reimburse, set the price of medicines, enter into contracts with pharmacies,
approve reimbursements in the Medula system, and pay pharmacies' invoices for reimbursement,
or more generally decide the legal framework for medicines does not show that they engage in the
procurement of those medicines. 150 The European Union emphasizes that "procurement" refers to
"the process pursuant to which the government acquires or obtains products, as opposed to merely
financing or regulating their acquisition".151
6.56. Central to Türkiye's first application claim is whether there is procurement by a governmental
agency of products purchased for governmental purposes within the meaning of Article III:8(a),
i.e. whether the SSI procures the pharmaceutical products included in the Annex 4/A list.152 The
Panel did not make a finding on this issue. As summari zed above, the Panel noted that there were
several elements in Article III:8(a) and decided to start its analysis with the second element it had
identified, looking at whether the localisation requirement involved "the 'purchase' of pharmaceutical
products included in the Annex 4/A list by governmental agencies".153 The Panel did not consider it
necessary to assess the other elements of Article III:8(a), including that relating to procurement.
Given that the issue of procurement is central to Türkiye's first application claim, for us to determine
whether this claim has merit, we must ascertain whether the SSI procures the pharmaceutical
products included in the Annex 4/A list.154 The parties agree tha t there are sufficient Panel factual
findings or uncontested facts on the panel record for us to complete the analysis in this respect. 155
In addition, neither party has raised any due process concerns. The parties, however, disagree on
the conclusion we should reach upon completion of our analysis.156
6.2.3.1 Whether there is procurement by the SSI of pharmaceutical products included in
the Annex 4/A list
6.57. As reflected in para graphs 6.41. -6.44. above, "procurement" is the operative word in
Article III:8(a) of the GATT 1994 describing the process and conduct of the governmental agency.
It is to be distinguished from a "purchase", which refers to the type of transaction to put into effect
procurement under Article III:8(a). As further discussed above, conceptually, procurement may be
put into effect through different types of transactions, but Article III:8(a) specifically refers to

149 European Union's written submission, para. 59 (referring to Panel Report, paras. 7.84, 7.86-7.88,
and 7.100).
150 European Union's written submission, para. 59.
151 European Union's written submission, para. 29. (emphasis original)
152 Türkiye does not clearly identify the purchase transactions through which procurement allegedly
occurs. In the context of its first application claim, Türkiye refers to procurement by the SSI through the
purchase by retail pharmacies from wholesalers. (Türkiye's written submission, para. 55) Elsewhere in its
submission, Türkiye refers to the procurement by the SSI "through purchase transactions by the retail
pharmacies or between the SSI and the retail pharmacies". (Ibid., para. 98) At the hearing, Türkiye stated that
procurement is the process whereby the SSI obtains medicines for governmental purposes through the private
retail pharmacies acting as an intermediary between the wholesalers and the outpatients. (Türkiye's responses
to questions at the hearing)
153 Panel Report, para. 7.63.
154 The Panel noted that the work of the Appellate Body had been suspended for nearly two years and
that Members remained unable to reach consensus on any selection process to fill the vacancies required for
the Appellate Body to function. (Panel Report, para. 7.104 and fn 436 thereto) In the present case, given the
Panel's factual findings and uncontested facts on the record, we find that we can complete the analysis on the
issue of procurement. (See para. 6.59. et seq. below.) We are wary of the systemic concerns raised by
Türkiye and Switzerland. Türkiye submits that the Panel's approach, should it have led us to decline completing
the analysis, would have effectively precluded its right to have effective recourse to the WTO dispute
settlement, "including an appeal review through Article 25 arbitration or otherwise". (Türkiye's written
submission, para. 91) Switzerland notes the parties' right to appeal, including through an "appeal arbitration"
under Article 25 of the DSU. (Switzerland's third party's submission, para. 15)
155 The parties confirmed that our mandate includes the possibility of completing the legal analysis.
(Parties' responses to questions at the hearing)
156 See e.g. Türkiye's written submission, paras. 55 and 94-95; European Union's written submission,
paras. 59 and 91-92.

"products purchased". We also noted that procurement refers generally to "[t]he action of obtaining
something; acquisition; an instance of this". 157 To us, the words " acquisition, par des organes
gouvernementaux" and "adquisición, por organismos gubernamentales" in the French and Spanish
versions of Article III:8(a) confirm that, in the context of that provision, "procurement" refers to a
governmental agency acquiring products.158 Therefore, as we concluded above, "procurement"
refers to the process pursuant to which a government acquires or obtains products. This is in line
with the parties' own understanding of procurement.159
6.58. The parties both consider, and we agree, that procurement is not limited to scenarios of
ownership acquisition of the products. 160 A governmental agency acquiring or obtaining products
means that the governmental agency would , however, need to have a certain level of control over
the products purchased for governmental purposes. Depending on the particular circumstances of
each case, the following elements could be relevant to whether there is procurement by a
governmental agency: ownership of the products by the governmental agency or other proper ty
rights or title over the products; the governmental agency holding or exercising other legal or
contractual rights associated with the products; price setting and payment by the governmental
agency; use of the products by the governmental agency; physic al possession of the products by
the governmental agency; control by the governmental agency over the products; ultimate benefit
of the products by the governmental agency; and the governmental agency bearing risks, such as
commercial risks, associated wit h the products. We consider th is list to be non-exhaustive and
relevant elements should be taken into account in a holistic manner . We also emphasize that
acquiring or obtaining products cannot be equated with merely financing or regulating the acquisition
of products.161
6.59. Having carefully reviewed the Panel Report and having engaged with the parties at the hearing
regarding the nature of certain Panel findings, we consider that the Panel made a number of factual
findings relevant to the issue of procurement. The Panel made these factual findings in the context
of its assessment of whether the SSI (itself or through retail pharmacies) purchased pharmaceutical
products. Although procurement cannot be equated with purchase, given the Panel's understanding
of the concept of "purchase" as requiring a transfer of ownershi p to the purchaser and our
understanding of the word "procurement" in the context of Article III:8(a) as requiring a certain

157 Oxford English Dictionary online, https://www.oed.com/view/Entry/151913, accessed on
1 July 2022.
158 Emphasis added.
159 Türkiye's written submission, para. 27; European Union's written submission, para. 29; parties'
responses to questions at the hearing. See also fn 130 above.
160 At the hearing, Türkiye noted that what matters is that, through procurement, the government
obtains goods for governmental purposes. The European Union stated that acquiring or obtaining products
could mean different things in different contexts. Typically, for movable goods, acquiring goods would mean
taking physical possession of the goods, but there could be other ways in which the government acquires
products (e.g. through an entitlement). Japan also considered that governmental agencies procuring products
needed to acquire a certain entitlement over the product, but that this was not necessarily limited to property
rights. Japan referred to the right to bring a legal action for non-performance of a contract. (Parties' and
third parties' responses to questions at the hearing)
161 Our understanding of "procurement by governmental agencies" accords with the GATT panel's
understanding of government procurement in the (unadopted) GATT panel report in US – Sonar Mapping. In
the context of Article I:1(a) of the Tokyo Round Government Procurement Code, the GATT panel stated that
"the following characteristics, none of which alone could be decisive, provide guidance as to whether a
transaction should be regarded as government procurement", namely "payment by government, governmental
use of or benefit from the product, government possession and government control over the obtaining of the
product". (GATT Panel Report, US – Sonar Mapping, para. 4.7) There were a number of factors which, taken
together, led the GATT panel to conclude that the purchase of a sonar mapping system by a private company
was in fact government procurement: (i) payment for the system would be made with government money, and
the amount of the purchase was determined by the government; (ii) a government agency would take title to
the sonar mapping system; that agency, at the expiry of the contract, would be able to choose whether to
continue to use, or to dispose of, the system; and that agency would enjoy the benefits of the system's
purchase; (iii) the selection of the system was subject to the final approval of the government agency, which
also retained the right to cancel the contract between the purchaser and the supplier of the sonar mapping
system, with compensation, at its convenience; and (iv) the private entity would have no commercial interest
in the transaction in the sense of a profit motive or a commercial risk. The GATT panel concluded that, in light
of the government's payment for, ownership of, and use of the sonar mapping system and given the extent of
its control over the obtaining of the system, there was government procurement. (Ibid., paras. 4.9-4.13)

level of control over products, factual elements explored by the Panel for the purpose of looking at
the issue of purchase are equally relevant to our assessment of the issue of procurement.
6.60. On the facts, and as summarized in paragraphs 6.2. -6.5. above, the Panel found that to be
reimbursable, a pharmaceutical product needed to be included in the Annex 4/A list and the SSI
determined which pharmaceutical products are included in that list. 162 Pharmaceutical products
included in the Annex 4/A list are distributed to outpatients by retail pharmacies, which are private
entities.163 The SSI signed a Protocol with the TPA. According to the Protocol, individual retail
pharmacies sign and annually r enew standard contracts with the SSI. The amounts charged by
pharmacies for pharmaceutical products covered by the social security system are met from
payments by the SSI and out -of-pocket payments by outpatients. On the basis of their individual
contracts with the SSI, pharmacies periodically invoice the SSI for all pharmaceutical products
included in the Annex 4/A list that they have provided to outpatients during the relevant period. The
SSI reviews invoices using a sampling method and reimburses the rei mbursement price.164 If the
public price of a pharmaceutical product is greater than a maximum reimbursement price,
outpatients must pay the difference, unless they decide to opt for an equivalent product. Outpatients
generally also pay a contribution fee and a prescription fee to retail pharmacies.165
6.61. The Panel further found, as a matter of fact, that the SSI did not take physical possession of
the products at any stage; retail pharmacies took physical possession of the products when
purchasing pharmaceutical products from warehouses, with outpatients subsequently taking physical
possession when receiving those products from the retail pharmacies. 166 It was undisputed before
the Panel and is undisputed in this Arbitration that the SSI does not ever acquire th e right to take
physical possession of the pharmaceutical products that it pays for.167
6.62. The Panel also made factual findings regarding the electronic information system (the Medula
system) used by the SSI and retail pharmacies to register, track, and invoice medicines.168 Following
approval in the Medula system, the pharmaceutical product must be provided to the individual
consumer (i.e. outpatient) named in the prescription.169 Importantly:
[A]ll relevant decisions and choices associated with the dispo sition of pharmaceutical
products are made by the prescribing doctor, the pharmacy, and the ultimate consumer
(i.e. the outpatient). The Panel is unable to discern any SSI involvement in choosing
who receives and consumes any of the pharmaceutical products that the SSI pays for.
Put differently, all of the pharmaceutical products paid for by the SSI would be disposed
of in exactly the same manner in a counterfactual scenario in which the SSI did not pay
for all or part of the cost of those products. Neither the SSI nor any other governmental
agency plays any role in directing, or redirecting, pharmaceutical products to recipients
of their choosing.170
6.63. The Panel emphasi zed that "[a]pproval through the Medula system [was] essentially a
confirmation that the patient is within SSI coverage and that the prescribed pharmaceutical products
[were] on the Annex 4/A list." 171 That approval confirms, among other things, that the
pharmaceutical product may be invoiced by the pharmacy to the SSI at the previously set price. 172
In light of these factual elements, the Panel found no basis to support T ürkiye's assertion that the
SSI obtained the right to dispose of the pharmaceutical products that it paid for according to its own

162 Panel Report, para. 2.8.
163 Panel Report, para. 2.7.
164 Panel Report, para. 2.14 and fn 59 thereto.
165 Panel Report, para. 2.16.
166 Panel Report, para. 7.86.
167 Panel Report, para. 7.86. In the Arbitration, Türkiye takes issue with the Panel's approach to look at
whether the SSI acquired possession over the products in the context of its analysis of "products purchased",
but does not challenge the Panel's finding that the SSI did not acquire the right to take physical possession of
the pharmaceutical products. (Türkiye's written submission, paras. 64-65. See also paragraph 6.65. below)
168 Panel Report, para. 2.17.
169 Panel Report, para. 7.87.
170 Panel Report, para. 7.87.
171 Panel Report, para. 7.88.
172 Panel Report, para. 7.88 (referring to Türkiye's responses to the Panel's first set of questions,
para. 26; European Union's responses to the Panel's first set of questions, paras. 10-22, opening statement at
the Panel meeting, para. 24).

choices.173 The Panel observed that "Turkey ha[d] not directed the Panel to any reference to the SSI
acquiring 'title' to pharmaceutical products in the Protocol signed between the SSI and the Turkish
Pharmacists Association or to any other evidence on record."174 More generally, the Panel found that
"there [was] nothing in the parties' description of Turkey's pharmaceutical reimbursement system
to suggest that the SSI acquire[d] any right of possession, any right of control, any right of exclusion,
any right to derive income, or any right to freely dispose of the pharmaceutical products that it
acquire[d]."175
6.64. In addition to these Panel findings, there are uncontested facts on the record that could
potentially be relevant to the issue of procurement. In particular, we understand the parties to have
both rel ied on the fact, before the Panel, that pharmacies control their own stock 176, although
wholesale prices are regulated.177
6.65. Moreover, we observe that it was undisputed before the Panel that retail pharmacies acquire
ownership of medicines when obtaining them from wholesalers 178 and final consumers
(i.e. outpatients) subsequently acquire ownership when obtaining pharmaceutical products from
retail pharmacies.179 Türkiye does not challenge this in the Arbitration but argues that the Panel
should have nonetheless concluded that there is a transfer of ownership from the pharmacies to the
SSI through the Medula system.180 In this context, Türkiye argues that the Panel unduly focused on
the physical possession of the products, thereby contradicting its finding that physical possession is
not a constitutive element of a purchase.181 As summarized above, the Panel assessed whether the
SSI acquired ownership of pharmaceutical products. The Panel was unable to discern any basis upon
which it could conclude that the SSI acquired any legal rights over the pharmaceutical products it
paid for. Only by way of example, did the Panel note that the SSI did not ever acquire the right to
take physical possession of the pharmac eutical products. The Panel then proceeded to address, in
some detail, T ürkiye's assertion that the SSI obtained the right to dispose of the pharmaceutical
products. Ultimately, the Panel found that the SSI did not acquire such right or any other right
typically associated with a transfer o f ownership.182 We do not see any contradiction in the Panel's
reasoning, nor do we consider that the Panel would have focused on who acquires the physical
possession of the medicines to draw decisive guidance from it. In relation to the Panel's conclusion
that there is no transfer of ownership of the pharmaceutical products to the SSI, Türkiye otherwise
makes allegations that go to the Panel's assessment of the facts and its appreciation of evidence. In
the absence of a claim under Article 11 of the DSU, these allegations are outside of the scope of our

173 Panel Report, para. 7.87.
174 Panel Report, para. 7.88.
175 Panel Report, para. 7.85. This particular finding rests on the Panel's review of Türkiye's
pharmaceutical reimbursement system, as described by the parties. We read this finding to be an intermediate
finding of fact by the Panel, which led the Panel to conclude that the SSI does not acquire ownership over the
pharmaceutical products. We note that Türkiye takes issue with the Panel's finding that the SSI does not obtain
the right to dispose of medicines. In this context, Türkiye takes issue with the Panel's description of the Medula
system and asserts that the Panel "completely disregarded … evidence" reflected in Panel Exhibit TUR-117 as
well as "completely ignored [the] fact" that the SSI pays a service fee to retail pharmacies for dispensing
medicines to approved patients. (Türkiye's written submission, paras. 69 (referring to Panel Report,
para. 7.87) and 71-73) With these allegations, Türkiye is in effect challenging the Panel's assessment of the
facts and its appreciation of evidence. In the absence of a claim under Article 11 of the DSU, these challenges
are outside of the scope of our review.
176 Panel Report, fn 411 to para. 7.84 (referring to European Union's second written submission to the
Panel, paras. 106-107; Türkiye's closing statement at the Panel meeting, para. 23).
177 Parties' responses to questions at the hearing.
178 Panel Report, paras. 7.84 and 7.98.
179 Panel Report, paras. 7.84 and 7.98. We also note Türkiye's statement in the context of its first
application claim in this Arbitration that "it is not disputed that the retail pharmacies purchase the medicines
included in Annex 4/A." (Türkiye's written submission, para. 55 (referring to Panel Report, para. 7.98;
European Union's first written submission to the Panel, para. 15; second written submission to the Panel,
para. 101))
181 Türkiye's written submission, paras. 62-65 (referring to Panel Report, paras. 7.83 and 7.86;
Panel Reports, Canada – Renewable Energy / Canada – Feed-in Tariff Program, para. 7.228).

review.183 We thus see no reason to disturb the Panel's conclusion that there is no transfer of
ownership of the pharmaceutical products to the SSI.184
6.66. A close reading of the Panel Report further makes clear that the Panel considered the
pharmacies to acquire ownership over pharmaceutical products "independently" of the
government.185 At the hearing, the parties extensively discussed paragraphs 7.99 and 7.100 of the
Panel Report and the Panel's statement that even if the Panel were to accept Türkiye's assertion that
the SSI controls all the elements concerning the acquisition of pharmaceutical products, "this would
not make pharmacies 'governmental agencies' for the purposes of Article III:8(a), or transform their
purchases into purchases by the government, so long as the pharmacies acquire ownership over
pharmaceutical products independently of the government."186 In our view, this statement has to be
read in conjunction with the remaining analysis of the Panel regarding whether the SSI acquired
ownership of the products. Given the Panel's detailed assessment of the facts of the case, including
its factual findings recalled above, we consider the Panel to have reached the correct conclusion that
pharmacies acquire ownership of the pharmaceutical products independently from the government.
It is on this basis that the Panel concluded that the SSI did not acquire owne rship of the
pharmaceutical products through the purchase by retail pharmacies of those products from
wholesalers.
6.67. Türkiye points to the level of control of the SSI over the retail pharmacies.187 Türkiye argues
that "the SSI controls the entire process of obtaining and dispensing medicines included in Annex 4/A
to patients."188 While we do not exclude that procurement by a governmental agency may occur
through an intermediary, it remains that, for the purpose s of the derogation under Article III:8(a),
there needs to be a process whereby governmental agencies acquire or obtain products purchased
for governmental purposes.189 Türkiye did not explain how, through any such alleged control, the
SSI would acquire or obtain medicines through a purchase of medicines. Türkiye has not pointed to
elements showing a sufficient level of control by the SSI over the pharmaceutical products included
in the Annex 4/A list when they are purchased by the retail pharmacies or otherwise. The fact that
the SSI decides which pharmace utical products are included in the Annex 4/A list and sets their
price, enters into individual contracts with retail pharmacies, and pays the invoices that are
periodically sent by the retail pharmacies 190 does not show, in light of the Panel's findings se t out
above, that there is procurement by the SSI. We note Türkiye's argument, as clarified at the hearing,
that the SSI signs a Protocol with the TPA and individual contracts with the retail pharmacies tasking
them with the distribution of those medicines and that, to comply with their obligations regarding
such provision of medicines, retail pharmacies need to purchase the medicines.191 This element most
directly relates to the provision of medicines to outpatients, rather than to procurement through a
purchase of medicines. We also recall the Panel's factual finding that all relevant decisions and
choices associated with the disposition of pharmaceutical products are made by the prescribing
doctor, the pharmacy, and the ultimate consumer, without SSI invol vement: "[A]ll of the
pharmaceutical products paid for by the SSI would be disposed of in exactly the same manner in a
counterfactual scenario in which the SSI did not pay for all or part of the cost of those products."192
6.68. In our view, the various elements set out above, taken together, indicate that there is no
procurement by the SSI of products purchased for governmental purposes, whether at the moment
when retail pharmacies purchase products from wholesalers or otherwise. While the SSI pays for
pharmaceutical products when they are obtained by outpatients subject to certain conditions, sets
their price, and decides which pharmaceutical products are included in the Annex 4/A list, retail

183 See fn 175 above. Türkiye also argues that medicines are "essential for human health, require
specific storage conditions" and their provision must be "ensured by trained professionals". (Türkiye's appellant
submission, para. 60) Türkiye has, however, not explained how this should affect our analysis of whether there
is procurement by the SSI.
184 Panel Report, paras. 7.84-7.88.
185 Panel Report, para. 7.100.
186 Panel Report, para. 7.100.
187 Türkiye's written submission, paras. 42, 53-54, and 95; responses to questions at the hearing.
189 We recall that the Appellate Body understood a "governmental agency" within the meaning of
Article III:8(a) to be "an entity acting for or on behalf of government and performing governmental functions
within the competences conferred on it". (Appellate Body Reports, Canada – Renewable Energy / Canada –
Feed-in Tariff Program, paras. 5.60-5.61)
190 These factual elements appear uncontested between the parties.
191 Türkiye's written submission, paras. 53 and 79; responses to questions at the hearing.
192 Panel Report, para. 7.87.

pharmacies and/or outpatients, rather than the SSI, obtain physical possession of the products,
dispose of and control the products , benefit from and use the products, obtain ownership of the
products, and manage the stocks of products. We also recall the Panel's finding that " there [was]
nothing in the parties' description of Turkey's pharmaceutical reimbursement system to suggest that
the SSI acquire[d] any right of possession, any right of control, any right of exclusion, any right to
derive income, or any right to freely dispose of the pharmaceutical products t hat it acquire[d]."193
Therefore, we conclude that there is no procurement , within the meaning of Article III:8(a) of the
GATT 1994, by the SSI of the pharmaceutical products included in the Annex 4/A list.
6.2.4 Conclusion
6.69. In light of the considerations above, w e find that the localisation requirement does not fall
within the ambit of the derogation in Article III:8(a) of the GATT 1994 on the basis that there is no
procurement by governmental agencies within the meaning of that provision. Consequently, we
uphold, albeit for different reasons, the Panel's finding, in paragraph s 7.107 and 8.1.b.ii of the
Panel Report, that the localisation requirement is not covered by the government procurement
derogation in Article III:8(a) of the GATT 1994, and is therefore subje ct to the national treatment
obligation in Article III:4 of the GATT 1994 and Article 2.1 of the TRIMs Agreement.
6.70. We do not consider it necessary, for the purpose of resolving this dispute, to address further
Türkiye's remaining claims under Article III:8(a) set out in paragraph 6.51. above. Procurement is
an essential element of Article III:8(a) and our finding on procurement is sufficient to conclude that
the localisation requirement is not covered by Article III:8(a). Addressing further Türki ye's
remaining application claims, as they pertain to the issue of "products purchased" within the meaning
of Article III:8(a), would not alter our conclusion t hat there is no procurement by the SSI of the
pharmaceutical products included in the Annex 4/A list, whether at the time when retail pharmacies
purchase pharmaceutical products from wholesalers or otherwise. Accordingly, t he Panel's
intermediate findings, in paragraphs 7.66-7.81 of the Panel Report, regarding the interpretation of
the term "products purchased", as well as its intermediate finding, in paragraphs 7.90, 7.103, and
7.104, that the localisation requirement does not involve the purchase of pharm aceutical products
included in the Annex 4/A list by governmental agencies, are moot.194
6.71. We also do not consider it necessary to address Türkiye's request that we moot or reverse
the Panel's findings under Article III:4 of the GATT 1994 as this request was conditional upon a
reversal of the Panel's finding under Article III:8(a). Therefore, the Panel's finding , in
paragraph 8.1.b.iii of the Panel Report, that the localisation requirement is inconsistent with the
national treatment obliga tion in Article III:4 of the GATT 1994, remains undisturbed. Since this
finding of inconsistency with Article III:4 stands, we proceed to address Türkiye's claims pertaining
to the general exceptions in Article XX of the GATT 1994.
6.3 Article XX(b) of the GATT 1994
In the event that we "do not conclude that the localisation [requirement] is covered by the
government procurement derogation under Article III:8(a) of the GATT 1994 and/or do not reverse
the Panel's findings under Article III:4 of the GATT 1994", Türkiye requests us to find that the Panel
erred in concluding that the localisation requirement is not justified under Article XX(b) of the
GATT 1994. 195 Türkiye claims that the Panel erred in the interpretation and application of
Article XX(b) in finding that the localisation requirement is not "designed to" protect human, animal,
or plant life or health.196 Türkiye also claims that the Panel failed to make an objective assessment
of the matter before it, as required by Article 11 of the DSU, when addressing Türkiye's claim that
the localisation requirement is justified under Article XX(b).197 Türkiye requests us to reverse
relevant findings by the Panel, including its finding that the localisation requirement is not justified

193 Panel Report, para. 7.85.
194 The parties confirmed that our mandate includes the possibility to moot Panel findings. (Parties'
responses to questions at the hearing)
196 Türkiye's notice of recourse to arbitration, p. 2; written submission, paras. 5-6 and 116.
197 Türkiye's notice of recourse to arbitration, p. 3; written submission, paras. 6, 116, 129, and
196-209.

under Article XX(b).198 Türkiye also requests us to complete the legal analysis and find that the
localisation requirement is justified under Article XX(b).199
The European Union disagrees with Türkiye's claims and requests us to find that the Panel did
not err in its interpretation and application of Article XX(b).200 In the alternative, the European Union
argues that Türkiye's claims regard ing the application of Article XX(b) implicate the Panel's
appreciation of facts and evidence and therefore fall outside the scope of our review to the extent
that Türkiye has not alleged a violation of Article 11 of the DSU in respect of these claims. 201 The
European Union also argues that the Panel did not act inconsistently with Article 11 of the DSU in its
assessment of the matter before it, when addressing Türkiye's claim that the localisation
requirement is justified under Article XX(b).202
We begin by briefly summarizing key Panel findings, before turning to consider relevant
interpretation and application issues raised in this Arbitration.
6.3.1 Panel findings
With respect to Türkiye's invocation of the general exception in Article XX(b) of the
GATT 1994, the Panel found that the localisation requirement was not a measure taken to protect
human, animal, or plant life or health.203
6.3.1.1 Order of analysis
In its analysis of Türkiye's defence under Article XX(b) of the GATT 1994, the Panel proceeded
in the following order. First, the Panel looked at whether the objective invoked by Türkiye (ensuring
adequate access to affordable medicines) was an objective that related to the protection of "human
life or health" under Article XX(b).204 Second, the Panel considered wheth er the measure at issue
was taken to (i.e. was designed to) protect human life or health. This part of the analysis consisted
of two steps: (i) whether there was evidence of the existence of the risk to human life or health
(health risk) that the measure aimed to reduce; and (ii) if the alleged health risk was found to exist,
whether the measure was taken for the purpose of protecting human life or health by reducing that
risk, or was instead taken for other reasons. 205 Third, assuming that the measure was found to be
"designed to" protect human life or health, the Panel would have considered whether the measure
was "necessary" to protect human life or health. This part of the analysis would have required the
Panel weighing and balancing several factors, including the importance of the objective sought, the
contribution of the measure to the achievement of that objective, and the trade -restrictiveness of
the measure, as well as comparing the measure with possible alternative measures identified by the
European Union.206 Fourth, assuming that the measure was found to be provisionally justified under
subparagraph (b), the Panel would have considered whether it also satisfied the requirements of the
chapeau of Article XX (i.e. whether the measure was appli ed in a manner that did not constitute
arbitrary or unjustifiable discrimination between countries where the same conditions prevailed and
whether the measure was a disguised restriction on international trade).207
6.3.1.2 The declared objective of the measure and its importance
With respect to the first issue, looking at the GATT 1994 and other covered agreements, as
well as previous statements by panels and the Appellate Body, the Panel noted that the preservation
of human life and health was an objective that was "both vital and important in the highest

198 Türkiye requests us to reverse the Panel's findings in paragraphs 7.157-7.214, 7.219, and 8.1.b.iv of
the Panel Report. (Türkiye's notice of recourse to arbitration, p. 3; written submission, paras. 117 and 250)
199 Türkiye's notice of recourse to arbitration, p. 3; written submission, paras. 117, 210-213, and 250.
200 European Union's written submission, paras. 2, 4, 112, 114-158, and 163-176.
201 European Union's written submission, paras. 159-162.
202 European Union's written submission, paras. 4 and 177-181.
203 Panel Report, para. 7.211.
204 Panel Report, paras. 7.157-7.161.
205 Panel Report, paras. 7.134-7.135 and 7.165 et seq.
206 Panel Report, para. 7.136.
207 Panel Report, para. 7.138.

degree". 208 The Panel then referred to the more specific objective of ensuring access to
pharmaceutical products, which it found to be recognized in the WTO covered agreements, as well
as by various international au thorities through different international instruments, and through
multiple international initiatives and publications by international organizations. 209 The Panel noted
no disagreement between the parties that: (i) the lack of access to pharmaceutical products posed
a risk to human life and health; (ii) the objective of ensuring adequate access to pharmaceutical
products was one that relate d to the protection of human life or health under Article XX(b) of the
GATT 1994, and was vital and important; (iii) WTO Members were free to decide how to organize
their social security and healthcare systems; (iv) governmental policies of covering all or part of the
cost of pharmaceutical products were linked to the objective of providing universal healthcare,
ensuring access to pharmaceutical products and protecting human health; and (v) Members may, in
the context of Article XX(b), take measures to address the risk of future shortages of supplies before
such shortages actually arise.210
6.3.1.3 The Panel's finding that the measure was not taken to (not designed to) pursue
the declared objective
The Panel subsequently turned to the second issue, namely, whether Türkiye had
demonstrated that the localisation requirement was a measure that was taken to protect human life
or health and, more specifically, taken to prevent a risk of long -term shortage of supply of safe,
effective, and affordable medicines.
The Panel focused first on whether Türkiye had properly identified a risk to human life or
health (health risk) that the lo calisation requirement aimed to reduce. In this respect, the Panel
noted that "[w]here there is no sufficient evidence as to the existence of a health risk, a challenged
measure is not necessary to protect human, animal or plant life or health."211
The Panel referred to Türkiye's argument that its over -reliance on imported pharmaceutical
products created a risk of long-term shortage of supply of safe, effective, and affordable medicines
because of several factors relating to the cost of imported pharmaceutical products in Türkiye. These
factors included, most notably: (i) low prices of medicines on the Turkish market carried the risk
that foreign producers might decide to supply other countries where they could receive a higher
price for their products; and (ii) imported pharmaceutical products might become unaffordable for
the SSI if a foreign currency gained in value or the Turkish lira depreciated. 212 By localising the
production of pharmaceutical products, the localisation requirement would b e a measure designed
to address this risk and to ensure uninterrupted access to safe, effective, and affordable
pharmaceutical products for all patients in Türkiye.213
In the Panel's view, the risk identified by Türkiye (a risk of long -term shortage of supply of
safe, effective, and affordable pharmaceutical products caused by an over -reliance on imported
pharmaceutical products), without establishing any substantial degree of probability, appeared to
be theoretical, abstract, and hypothetical.214 Looking at the evidence provided by Türkiye, the Panel
found that Türkiye had not identified any instance of shortage of supply of a specific product caused
by foreign producers deciding to stop supplying medicines to Türkiye to instead sell in other countries
where they can receive a higher price for their products, or caused by a medicine becoming
unaffordable for the SSI because of a foreign currency gaining in value or the Turkish lira
depreciating.215
In addition to the situation described by Türkiye being merely hypothetical, the Panel found
that this situation could be present in any sector and concern any market. It was not specific to the
pharmaceutical sector or to Türkiye, and was therefore characterized by a level of temporal and

Indonesia – Chicken, para. 7.225).
209 Panel Report, paras. 7.158-7.160.
210 Panel Report, paras. 7.161-7.162.
211 Panel Report, para. 7.134 (referring to Panel Report, EC – Asbestos, para. 8.170; Appellate Body
Reports, EC – Seal Products, para. 5.197). (emphasis original)
212 Panel Report, paras. 7.165 and 7.172.
213 Panel Report, paras. 7.165 and 7.170.
215 Panel Report, paras. 7.173-7.177.

sectoral generality that was at odds with the concept of risk under Article XX(b). In the Panel's view,
the generality of Türkiye's underlying argument would lead to the conclusion that there was a
permanent risk of shortage of products concerning every sector of any WTO Member's eco nomy.
Following this logic, international trade liberalization in products and sectors that are necessary for
the protection of human life or health created a permanent risk to human life or health under
Article XX(b).216
In the Panel's view, the hypothetical and overly general nature of the alleged risk casts serious
doubt on Türkiye's assertion that the localisation requirement was taken to protect against a future
shortage of supply of safe, effective, and affordable pharmaceutical products in Türkiye.217 The Panel
considered further that most of the legal instruments putting into place the localisation requirement
did not refer to a public health objective or, to the extent that some of them did, such references
were cast at a general level and were not li nked with the localisation requirement or the declared
objective of preventing a shortage of supply of safe, effective, and affordable medicines arising from
an over -reliance on imports. 218 The Panel found that those same documents, as well as other
documents pertaining to the implementation of the localisation requirement, did not contain any
contemporaneous references to a public health objective that could support the argument that the
localisation requirement was a measure taken to protect human health o r life. They suggested
instead that the localisation requirement appeared to pursue an industrial policy objective.219
The Panel acknowledged Türkiye's ongoing aim to improve the performance of its domestic
pharmaceutical industry by meeting a higher share of domestic demand for pharmaceutical products.
In the Panel's view, however, the evidence did not seem to relate this objective to specific public
health concerns such as improving the safety or affordability of available pharmaceutical products,
or addressing a risk that domestic pharmaceutical demand may not be met by supply from the
international market.220 The Panel found that this cast further doubt on Türkiye's assertion that the
localisation requirement was taken to protect against a future shortage of supply of safe, effective,
and affordable pharmaceutical products in Türkiye.221
The Panel found further support for its view in the fact that the objective of the localisation
requirement, as it appeared in several official documents, had no rational relationship to the invoked
objective of ensuring a continuous supply of safe, effective, and affordable pharmaceutical
products.222 The Panel did not find evidence of such rational relationship between the stated
objective of the localisation requirement (in creasing domestic production from meeting 40% to
covering 60% of domestic demand) and the declared objective of ensuring a continuous supply of
safe, effective, and affordable pharmaceutical products. 223 In the Panel's view, a measure adopted
in pursuit of developing a WTO Member's pharmaceutical sector could only be seen as having a
public health objective if there was a rational relationship between the objective set by that
WTO Member for developing its pharmaceutical sector and the specific public health objective
invoked.224 The lack of such rational relationship was, in the Panel's view, a further indication that
the localisation requirement was not a measure taken to protect human life or health.225
6.3.1.4 The Panel's conclusion
Having found that the localisat ion requirement was not a measure taken to protect human,
animal, or plant life or health226, the Panel considered it did not need to assess the remaining legal
elements of Article XX(b) of the GATT 1994 to determine the applicability of this exception. 227
Because the localisation requirement did not fall under Article XX(b) and therefore was not
provisionally justified under this subparagraph, the Panel also found it unnecessary to assess
whether the localisation requirement had been applied consistently wit h the requirements of the

216 Panel Report, para. 7.178.
217 Panel Report, para. 7.180.
218 Panel Report, paras. 7.184-7.191.
219 Panel Report, paras. 7.191-7.198.
220 Panel Report, para. 7.199.
221 Panel Report, para. 7.200.
222 Panel Report, para. 7.201.
223 Panel Report, paras. 7.201-7.208.
224 Panel Report, para. 7.203.
225 Panel Report, para. 7.208.
226 Panel Report, para. 7.211.
227 Panel Report, para. 7.212.

chapeau of Article XX.228 The Panel refrained from making additional findings or observations on any
disputed issues in respect of the remaining elements under Article XX(b).229
6.3.2 Whether the Panel erred in its interpretation of Article XX(b) of the GATT 1994
Article XX(b) of the GATT 1994 provides:
Subject to the requirement that such measures are not applied in a manner which would
constitute a means of arbitrary or unjustifiable discrimination between countries where
the same conditions prevail, or a disguised restriction on international trade, nothing in
this Agreement shall be construed to prevent the adoption or enforcement by any
Member of measures:
 …
(b) necessary to protect human, animal or plant life or health[.]
With respect to the Panel's interpretation of Article XX(b), the following issues have been
brought before us:
a. whether the Panel erred by confusing the "design" and "necessity" steps of the legal test
under Article XX(b);
b. whether the P anel erred by requiring that a measure address a health risk that has "a
substantial degree of probability" of materializing for that measure to be "designed to"
protect human, animal, or plant life or health; and
c. whether the Panel erred by relying on the legal tests under Articles XX(a) and XX(j) of the
GATT 1994 and Article XIV(a) of the GATS, as interpreted by previous panels.
We note at the outset that Article XX(b) allows Members to maintain measures that are
otherwise inconsistent with obligations under the GATT 1994, to the extent that those measures are
necessary to protect human, animal, or plant life or health, and are applied in a manner that is
compatible with the requirements in the chapeau of Article XX. For an exception such as that
contained in Article XX(b) to apply, the responding party bears the burden of invoking the provision
and demonstrating that the measure in question meets the requirements of that provision.
Starting with the text of the provision, to be justified under Article XX(b), a measure must be
necessary to protect human, animal, or plant life or health. In order to assess whether a measure is
"necessary" to achieve that objective, a panel may first assess, as an initial question, whether the
measure is even related to, or not incapable of, protecting human, animal, or plant life or health.
Logically, unless a measure is "not incapable" of protecting human, animal, or plant life or health,
then the measure cannot be justified under Article XX(b), and this would be the end of the inquiry.
In order to ascertain whether a measure is not incapable of protecting human, animal, or
plant life or health, a panel should focus on examining the relationship between the challenged
measure, considering its design (including its content, stru cture, and expected operation) and the
proclaimed objective. The prior examination is used to assess whether the measure can be
considered to have been "taken to", or "designed to", protect human, animal, or plant life or health.
If the response to this qu estion is affirmative, a panel may move to assess whether the measure
can be considered to be "necessary" for the proclaimed objective, considering factors such as the
extent of the contribution to the achievement of the objective, the measure's trade-restrictiveness,
and the importance of the interests or values at stake, as well as comparing the measure with
possible alternative measures identified by the complainant.
This two-step analysis of the design and the necessity of a measure has been used in previous
disputes230 and corresponds to the manner in which parties articulated their arguments both before

228 Panel Report, para. 7.213.
229 Panel Report, para. 7.214.
230 See e.g. Panel Report, EC – Tariff Preferences, paras. 7.198-7.199.

the Panel as well as in the Arbitration. 231 Having said that, panels have been cautioned in the past
not to structure their analysis of the "design" elem ent in such a way as to lead it to truncate such
analysis prematurely and thereby foreclose consideration of crucial aspects of the respondent's
defence relating to the "necessity" of the measure.232
6.3.2.1 Whether the Panel erred by confusing the "design" and "ne cessity" steps of the
legal test under Article XX(b) of the GATT 1994
Regarding the question under Article XX(b) of the GATT 1994 of whether a challenged
measure is "designed" to protect human, animal, or plant life or health, Türkiye submits that the
Panel erred in its interpretation of the provision, because it adopted an erroneous legal standard to
assess the "design requirement". Türkiye argues that past panels and the Appellate Body have
shown a significant degree of deference in accepting that the pol icy objective of a measure is to
protect human life or health. In light of this deferential legal standard applied in the assessment of
a measure's design, panels must simply determine if the policy at issue falls within the range of
policies designed to protect human life or health.233
In Türkiye's view, the Panel's interpretation mixes the threshold analysis of a measure's
"design" under Article XX(b) with that of the measure's "necessity" and thereby limits WTO Members'
regulatory autonomy to pursue public health policies under this provision.234
In response, the European Union argues that the Panel did not err in its interpretation of
Article XX(b) in finding that the localisation requirement is not "designed to" protect human life or
health.235
In paragraph 7.135 of its report, the Panel articulated a reasonable legal standard to assess
whether the challenged measure was "taken for" the purpose of protecting human, animal, or plant
life or health or was instead taken for other reasons:
To determine whether a challenged measure is "designed to" protect human, animal or
plant life or health, a panel must examine all the evidence before it, including the text
of the relevant legal instruments, the legislative history, and other evidence regarding
the design, structure and expected operation of the challenged measure . … If this
threshold enquiry reveals that the challenged measure is incapable of meeting the
stated objective, the analysis need not go further to determine whether this measure is
necessary to protect this objective.236
The Panel also noted in its report:
When assessing whether a measure is taken to protect human, animal or plant life or
health, prior panels have often commenced their analysis by determining the existence
of the risk to hum an, animal or plant life or health (health risk) that the challenged
measure aims to reduce. Where there is no sufficient evidence as to the existence of a
health risk, a challenged measure is not necessary to protect human, animal or plant
life or health.237
In its assessment of whether the localisation requirement is a measure "taken to" protect
human, animal, or plant life or health, the Panel made the following intermediate findings:

231 Türkiye's first written submission to the Panel, paras. 419-420 and 441-463; second written
submission to the Panel, paras. 162-174; written submission, paras. 165-195; European Union's second
written submission to the Panel, paras. 143-157; written submission, para. 120.
232 See e.g. Appellate Body Report, Colombia – Textiles, para. 5.77.
233 Türkiye's written submission, paras. 135-138 and 168.
234 Türkiye's written submission, paras. 127 and 141-146.
235 European Union's written submission, paras. 4, 112, and 116.
237 Panel Report, para. 7.134 (referring to Panel Reports, EC – Asbestos, paras. 8.170, 8.182,
and 8.185-8.194; Brazil – Retreaded Tyres, paras. 7.42 and 7.53-7.93; China – Rare Earths,
para. 6.21; EC – Tariff Preferences, paras. 7.180 and 7.200; Appellate Body Reports, EC – Seal Products,
para. 5.197). (fns omitted)

a. First, Türkiye, as the party invoking the general exception in Article XX(b), had failed to
substantiate its assertion that its alleged over -reliance on imported pharmaceutical
products created a risk of long -term shortage of supply of safe, effective, and affordable
medicines. In the absence of evidence, the Panel found that the risk identified by Türkiye,
more specifically the factors that gave rise to a risk of future shortages in respect of any
and all pharmaceutical products, could only be characterized as theoretical, abstract, and
hypothetical.238
b. Second, considering the evidence before it, including the legal instruments serving as a
basis for the localisation requirement and the documents pertaining to its implementation,
there were no contemporaneous references to a specific public health objective that could
directly support the argument that the localisation requirement was a measure taken to
protect human health or life. In the Panel's view, no evidence related the implementation
of the localisation requirement to specific public health concerns , such as improving th e
safety or affordability of available pharmaceutical products or addressing a risk that
domestic pharmaceutical demand might not be met by supply from the international
market. The relevant documents indicated instead that the localisation requirement
appeared to pursue an industrial policy objective.239
c. Third, there was no evidence of a rational relationship between the localisation
requirement's stated objective of increasing domestic production from meeting 40% to
covering 60% of domestic demand, and the declared objective of ensuring a continuous
supply of safe, effective, and affordable pharmaceutical products.240
Based on those three intermediate findings, the Panel found that the localisation requirement
was not a measure "taken to" protect human, anim al, or plant life or health within the meaning of
Article XX(b).241 Accordingly, it found that it did not need to assess further whether the same
measure was "necessary" to protect human, animal, or plant life or health within the meaning of
Article XX(b) o r whether it was being applied consistently with requirements of the chapeau of
Article XX.242
Having described the Panel's approach, we turn our attention to considering whether, as
argued by Türkiye, the Panel adopted an erroneous legal standard to assess the "design" element
in Article XX(b).
We recall in this regard, first, that in its report the Panel articulated a reasonable standard
to assess whether the challenged measure was "taken for" the purpose of protecting human, animal,
or plant life or healt h.243 Second, the Panel made three intermediate findings, all of which were
relevant for its analysis, namely, that: (i) the risk identified by Türkiye could only be characterized
as theoretical, abstract, and hypothetical; (ii) the implementation of the lo calisation requirement
appeared to pursue an industrial policy objective rather than specific public health concerns; and
(iii) there was no evidence of a rational relationship between the localisation requirement and the
stated objective of ensuring a con tinuous supply of safe, effective, and affordable pharmaceutical
products. Although the Panel did not explicitly indicate it in these terms, these findings could allow
the Panel to reasonably conclude that the relevant legal standard for the design requirement under
Article XX(b) had not been met, namely, that there was no evidence of the existence of the health
risk that the localisation requirement was alleged ly seeking to reduce and that the localisation
requirement was incapable of meeting the alleged public health objective.
While it may be true, as Türkiye argues, that the Panel considered aspects relating to the
manner in which the localisation requirement could contribute to its proclaimed objective, it seems
to us that this was done in the context o f examining the expected operation of the challenged

238 Panel Report, paras. 7.165-7.180.
239 Panel Report, paras. 7.181-7.200.
240 Panel Report, paras. 7.201-7.208.
241 Panel Report, para. 7.211.
242 Panel Report, paras. 7.212-7.214.
243 See para. 6.96. above. It should be noted that Türkiye has challenged in this Arbitration neither the
two-step analysis of the design and the necessity of a measure nor the standard articulated by the Panel in
paragraphs 7.134 and 7.135 of its report.

measure, which is relevant in the "design" analysis.244 We note in this respect that the "design" and
the "necessity" analyses are not entirely disconnected exercises and that there can be some overlap
in the evidence and the considerations that are relevant for each step.245
For the reasons indicated above, we do not consider that the Panel committed legal error by
confusing the "design" and the "necessity" steps of the legal analysis under Artic le XX(b) of the
GATT 1994.246
6.3.2.2 Whether the Panel erred by requiring that a measure address a health risk that
has "a substantial degree of probability" of materializing for that measure to be "designed
to" protect human, animal, or plant life or health
According to Türkiye, "the Panel … set out a legal standard requiring a 'substantial degree
of probability' of risk and thereby erroneously introduced a quantitative dimension in the notion of
risk under Article XX(b) of the GATT 1994."247 In Türkiye's view , the Panel erroneously concluded
that in cases where a responding party cannot demonstrate that there is a "substantial degree of
probability" that the asserted risk to human life or health will materialize, the evidentiary threshold
to be met for establi shing that the challenged measure is taken to protect human life or health
becomes more burdensome. Türkiye argues that this interpretation regarding the measure's
"design" introduces a quantitative dimension to the notion of risk to human life or health that unduly
limits the range of public health measures that fall within the scope of Article XX(b).248
With respect to the interpretation of Article XX(b), the European Union submits that the
Panel did not say that, in order to prove that a measure was taken to prevent a certain risk, a
responding party was required to demonstrate a substantial degree of probability of the asserted
risk. Rather, the Panel stated that such demonstration would make it easier for the responding party
to discharge its burden of p roof; the responding party could , however, meet its burden of proof
differently. In the European Union's view, the term "substantial degree of probability of risk" does
not require the responding party to provide a quantitative assessment of the risk.249
The European Union also argues that, with respect to the application of this evidentiary
standard, the Panel did not find that Türkiye had failed to discharge its burden of proof on the
existence of the asserted risk because it had not provided a quantification of the alleged risk. Instead
the Panel considered that Türkiye had asserted the existence of a risk without establishing any
substantial degree of probability, such that the risk appeared to be theoretical, abstract, and
hypothetical. This "hypothetical and overly general nature" was one of the factors relied upon by the
Panel to conclude that Türkiye had not discharged its burden to prove that the measure was taken
to protect human life or health.250
In the relevant sections of its report, the Panel not ed Türkiye's assertion that "its
over-reliance on imported pharmaceutical products create[d] a risk of long-term shortage of supply
of safe, effective and affordable pharmaceutical products". Türkiye's argument in this regard was
that "the localisation requirement, by localising the production of pharmaceutical products, [was] a
measure designed to address this risk ." The Panel indicated that, as the party invoking a general
exception under Article XX(b), Türkiye had the burden of identifying "some degree o f probability

244 As noted above, in order to ascertain whether a measure is not incapable of protecting human life or
health, a panel should focus on examining the relationship between the challenged measure, considering its
design (including its content, structure, and expected operation) and the proclaimed objective. See
para. 6.91. above.
245 See e.g. Appellate Body Report, Colombia – Textiles, para. 5.76.
246 We are mindful that, in conducting its assessment of the design of a measure, a panel should not
truncate its analysis prematurely and thereby foreclose consideration of crucial aspects of a respondent's
defence relating to the "necessity" analysis. However, we do not consider that the Panel made such an error.
247 Türkiye's written submission, para. 137. (fn omitted)
248 Türkiye's written submission, paras. 127 and 130-140.
249 European Union's written submission, paras. 114-127.
250 The other two factors considered by the Panel were that: (i) the documents pertaining to the
implementation of the localisation requirement did not contain any contemporaneous references to the specific
risk and objective invoked by Türkiye; and (ii) there was no rational relationship between the localisation
requirement's stated objective of meeting 60% (by value) of domestic pharmaceutical demand through
domestic production and the objective of ensuring a continuous supply of safe, effective, and affordable
pharmaceutical products. (European Union's written submission, para. 129 (quoting Panel Report,
para. 7.210))

that the alleged risk [existed]". More specifically, Türkiye had the burden of demonstrating "the
existence of a risk of shortage of supply arising from its over -reliance on imported pharmaceutical
products".251
The Panel further noted that there was no "rigid or pre-determined threshold or evidentiary
standard that should be applied in this respect" and "[i]nsofar as a responding party present [ed]
evidence and arguments demonstrating that there [was] a substantial degree of probability of a
specified risk to human life or health materializing, it [would] be easier for [that] party to discharge
its burden of proving that the challenged measure was taken to protect against that risk". It
continued: "Conversely, insofar as a responding party assert[ed] the existence of a risk without
establishing any substantial degree of probability, such that the risk appear [ed] to be theoretical,
abstract or otherwise hypothetical, it [would] be more difficult for [that] party to discharge its burden
of proving that the challenged measure was taken to protect against that risk."252
After having considered Türkiye's arguments and the available evidence, the
Panel concluded that Türkiye had asserted "the existence of a risk without establishing any
substantial degree of probability, such that the risk appear [ed] to be theoretical, abstract and
hypothetical. In the Panel's view, the hypothetical and overly general nature of the alleged risk, as
asserted by Turkey, cast[] serious doubt on Turkey's assertion that the localisation requirement was
taken to protect against a future shortage of supply of safe, effective and affordable pharmaceutical
products in Turkey".253
Looking at the statements of the Panel identified by Türkiye254, we do not consider that the
Panel set out a legal standard requiring a substantial degree of probability of risk for assessing
whether a measure has been taken to protect human, animal, or plant life or health, in accordance
with Article XX(b). The reference to a "substantial degree of probability" of the existence of the risk
alleged by the responding party was made by the Panel, not as a proposed legal standard, but rather
as an indicator of the existence of a risk that is not merely theoretical, abstract, or hypothetical. The
Panel did not foreclose the possibility that a responding party might still be able, despite the lack of
a "substantial degree of probability" of the existence of the alleged risk, to show that a challenged
measure was taken to protect human life or health under Article XX(b). The Panel only stated that,
lacking such evidence, the task for the responding party to discharge its burden of proof that the
challenged measure was taken to protect against that risk would be "more difficult". 255 We do not
consider that this sta tement should be construed as setting out an incorrect legal standard and
thereby constitutes an error of interpretation.
In the same vein, given that the Panel did not require a substantial degree of probability of
risk as a legal standard for the "design " analysis, we are also unconvinced that the statements of
the Panel identified by Türkiye and referred to above introduce any quantitative dimension to the
notion of risk to human life or health that unduly limited the range of public health measures that
fall within the scope of Article XX(b).
6.3.2.3 Whether the Panel erred by relying on previous panel reports dealing with other
provisions
Türkiye claims that, despite the textual differences with Article XX(b) of the GATT 1994, the
Panel erroneously relied on pr evious panel reports dealing with Articles XX(j) and XX(a) of the
GATT 1994 and Article XIV(a) of the GATS to support its incorrect legal standard.256
Türkiye also argues that the Panel's reading of the report in Brazil – Taxation was incorrect
and did not support the Panel's erroneous interpretation of Article XX(b). Türkiye notes that, in the
relevant sections of this report (dealing with Article XX(a) of the GATT 1994), the panel had found
that, notwithstanding its deep reservations regarding the design o f the challenged measure, it was

252 Panel Report, para. 7.171.
253 Panel Report, para. 7.180.
254 Türkiye's written submission, para. 137 (referring to Panel Report, paras. 7.165-7.171).
255 Panel Report, para. 7.171.
256 Türkiye's written submission, paras. 127 and 147-161.

not in a position to find that this measure was incapable of contributing to the proclaimed
objective.257
The European Union responds that there are commonalities between Article XX(b) and the
provisions addressed in the rep orts cited by the Panel in the context of the discussion of the
assessment of the existence of a risk as part of the "design" analysis, so that the contextual
relevance of those references cannot be excluded per se. The European Union adds that, even if the
Panel's reference to those panel reports was incorrect, such error would be inconsequential because
the Panel's interpretation of the relevant evidentiary standard under Article XX(b) was not dependent
on a reference to those panel reports. 258 The European Union adds that the Panel also referred to
panel reports relating to disputes concerning the interpretation of Article XX(b).259
The European Union also argues that the Panel's reference to the panel report in
Brazil – Taxation is not incorrect as it is cited as an example of the type of enquiry to be conducted
by panels for the purpose of evaluating the existence of a risk, when such evaluation is required by
the applicable legal standard.260
We will consider first Türkiye's argument that the Panel set up an incorrect standard by
improperly relying on prior panel and Appellate Body reports that dealt with provisions other than
Article XX(b). We will subsequently turn, if necessary, to the additional argument that the Panel
misinterpreted the findings in the panel report in Brazil – Taxation.
In the paragraphs identified by Türkiye261, the Panel referred to the findings in India – Solar
Cells (under Articles XX(j) and XX(d) of the GATT 1994), EU – Energy Package (under Articles XIV(a)
of the GATS and XX (j) of the GATT 1994), and Brazil – Taxation (under Article XX(a) of the
GATT 1994). The Panel's citations to those reports were made in the context of the Panel's assertion
that "[t]his is not the first case in which a responding party has argued that a c hallenged measure
was taken to prevent a risk of supply-side disruptions that could arise from its alleged over-reliance
on imports of essential goods and/or services, to ensure a continuous and affordable supply of those
goods or services."262
The Panel no ted that "[i]n prior cases, panels and the Appellate Body [had] consistently
required the responding party to demonstrate, at a minimum, that the asserted risk arising from
over-reliance on imports was more than a merely hypothetical possibility."263 The Panel added, that
"in the context of Article XX(b), as in the context of the other subparagraphs of Article XX, a party
invoking a general exception must identify some degree of probability that the alleged risk
exist[ed]."264
Looking at the references to pre vious panel reports that Türkiye has identified, we do not
believe that these general observations made by the Panel are unreasonable or an incorrect
description of the cited reports. We also recall that we have already found that the Panel articulated
a proper legal standard to assess whether the challenged measure was "taken for" the purpose of
protecting human, animal, or plant life or health.265 We find no indication that the Panel's references
to the cited panel reports, based on provisions other than A rticle XX(b), were determinative in the
articulation of that standard.
Türkiye additionally argues that the Panel misread the report in Brazil – Taxation and, as a
consequence, erroneously interpreted Article XX(b).266

257 Türkiye's written submission, paras. 162-164 (referring to Panel Report, Brazil – Taxation,
paras. 7.569, 7.571, 7.573-574, and 7.581-7.582).
258 European Union's written submission, para. 154.
259 European Union's written submission, paras. 151-152.
260 European Union's written submission, para. 153.
261 Türkiye's written submission, paras. 147-148 (referring to Panel Report, paras. 7.167-7.171 and
fn 609 to para. 7.170).
262 Panel Report, para. 7.166.
263 Panel Report, para. 7.166.
264 Panel Report, para. 7.170.
265 See para. 6.96. above.
266 Türkiye's written submission, paras. 162-164.

We note in this regard that the Panel Report's reference to Brazil – Taxation was made in
the context of the discussion on whether the localisation requirement is a measure "designed to"
protect human life or health. The Panel noted that in Brazil – Taxation the responding party had
been found to have provided no evidence to substantiate its assertion regarding the alleged risk.267
The Panel's reference to that case as to how the responding par ty had been unable to
demonstrate the existence of an alleged risk is not incorrect. Moreover, we have already noted that
there is no indication that the Panel's references to panel reports cited by Türkiye, including the one
in Brazil – Taxation, were determinative in the articulation by the Panel of the applicable standard
to assess whether the challenged measure was "taken for" the purpose of protecting human, animal,
or plant life or health.
For the reasons indicated, we do not consider that the Panel e rred by relying on previous
panel reports dealing with provisions other than Article XX(b).
6.3.3 Whether the Panel erred in its application of Article XX(b) of the GATT 1994
Türkiye submits that, "as a result of its erroneous interpretation of Article XX(b) of the
GATT 1994, the Panel also failed to properly apply Article XX(b) to the localisation [requirement]" in
finding that this measure was not designed to protect human life or health. 268 Türkiye also argues
that the Panel erred "in the assessment of the risk to human life or health underlying the localisation
[requirement]", by narrowing the health risk asserted by Türkiye and focusing on a narrower risk.269
In response, the European Union argues that Türkiye's contention that the Panel erred in
the application of Article XX(b) is entirely predicated and dependent upon Türkiye's prior claim that
the Panel made an erroneous interpretation of that provision. In the European Union's view, since
the Panel did not make any of the errors of interpretation of Article XX(b) alleged by Türkiye,
Türkiye's assertion that the Panel misapplied Article XX(b) should also be dismissed. 270 In the
alternative, the European Union argues that Türkiye's claim regarding the application of Article XX(b)
implicates the Panel's appreciat ion of facts and evidence and, absent a specific challenge on this
issue under Article 11 of the DSU, falls outside the scope of our review.271 The European Union adds,
in the further alternative, that the Panel did not make the assessment errors alleged by Türkiye.272
We start by noting that, at the hearing, Türkiye asserted that its claim regarding the Panel's
alleged errors in the application of Article XX(b) was independent from its claims regarding the
Panel's interpretation of the provision. In Türkiye's words , "this claim is not entirely dependent on
its claim of erroneous interpretation".273
Despite this assertion, the manner in which Türkiye has articulated its claim regarding the
Panel's alleged erroneous application of Article XX(b) seems to be consequential to its claims
regarding the Panel's interpretation of the same provision. Türkiye in essence repeats the arguments
made with respect to the Panel's all eged errors of interpretation and argues that, had the Panel
adopted and applied the correct legal standard requiring a determination of whether the localisation
requirement is not incapable of protecting human life or health, it would have concluded that the
localisation requirement was "designed to" protect human life or health.274

267 Panel Report, para. 7.168 (referring to Panel Report, Brazil – Taxation, paras. 7.573 and 7.582).
268 Türkiye's written submission, para. 128. See also ibid., paras. 165 and 195.
269 Türkiye's written submission, paras. 172-194.
270 European Union's written submission, paras. 156-158.
271 European Union's written submission, paras. 159-162.
272 European Union's written submission, paras. 163-176.
273 Türkiye's opening statement at the hearing, para. 32.
274 Türkiye's written submission, paras. 193-195. In support of this argument, Türkiye states that:
(i) the assessment of the "design requirement" is a threshold examination and not a particularly demanding
step and that panels and the Appellate Body have in the past shown a significant degree of deference in
accepting that the policy objective of a measure is to protect human life or health; (ii) the Panel should have
concluded that the localisation requirement falls within the range of policies designed to protect human life or
health within the meaning of Article XX(b); (iii) the Panel erred in assessing the risk to human life or health;
and (iv) the Panel should have concluded that the localisation requirement was not incapable of ensuring
uninterrupted access to safe, effective, and affordable pharmaceutical products in Türkiye. (Ibid.,
paras. 166-183 and 187-192)

The one notable exception to the above is Türkiye's allegation that "the Panel erred in the
application of Article XX(b) because it re -defined the risk addressed by the localis ation
[requirement]".275 Türkiye argues in this respect that the Panel failed to properly consider the
arguments and evidence submitted by Türkiye with respect to the public health objective underlying
the localisation requirement.276 Türkiye specifically submits that, despite its "express and repeated
statements, the Panel significantly narrowed the health risk asserted by Turkey and proceeded to
assess whether the evidence presented by Turkey showed that the localisation [requirement ] was
taken to address that narrower risk".277
Türkiye's allegation that the Panel failed to consider its arguments and evidence with respect
to the public health objective underlying the localisation requirement is not a mere claim that the
Panel failed to properly apply the provision to the localisation requirement. It is instead a claim that
goes to the Panel's appreciation of facts and evidence. This is an allegation that can be properly
examined only in the context of a claim under Article 11 of the DSU, a provision that has not been
invoked by Türkiye in this regard.278
For these reasons, to the extent that we have found no reversible error in the Panel's
interpretation of Article XX(b), and considering the nature of Türkiye's application claims, we
consider that Türkiye has failed to establish that the Panel erred in its application of Article XX(b).
6.3.4 Article 11 of the DSU
As an additional ground s of challenge, Türkiye submits that the Panel failed to make an
objective assessment of the matter as required by Article 11 of the DSU. 279 Türkiye raises two
arguments in this regard. First, Türkiye argues that the Panel looked only at the documents
implementing the localisation requirement, but wilfully disregarded some arguments and relevant
evidence put forward by Türkiye with respect to the measure's design and structure and with respect
to the authorities responsible for its design and implementation. Second, Türkiye argues that the
Panel looked individually at documents pertaining to the implementation of the localisation
requirement but failed to make a "holistic assessment" of those documents when determining
whether the measure was taken to protect human life or health.280
The European Union submits that the Panel did not make any of the errors alleged by Türkiye
and, in any event, those errors, whether considered singly or together, would not amount to a breach
of Article 11 of the DSU. The European Union recalls that panels enjoy a margin of discretion as
triers of fact and are not required to accord to factual evidence of the parties the same meaning and
weight as do the parties. 281 Moreover, the mere fact that the Panel did not address explicitly each
and every component of the challenged measure does not amount to an error, let alone an egregious
error.282
In relevant part, Article 11 of the DSU reads as follows:
Article 11
Function of Panels
The function of panels is to assist the DSB in discharging its responsibilities under this
Understanding and the covered agreements. Accordingly, a panel should make an
objective assessment of the matter before it, including an objective assessment of the
facts of the case and the applicability of and conformity with the relevant covered

275 Türkiye's opening statement at the hearing, paras. 32-33.
276 Türkiye's written submission, paras. 172-194.
278 We note that Türkiye invoked Article 11 of the DSU with respect to other aspects of the Panel's
assessment. See Section 6.3.4 below.
279 Türkiye's written submission, paras. 6 and 116.
280 Türkiye's written submission, paras. 129, 196-202, 205, and 209.
281 European Union's written submission, paras. 177-179.
282 European Union's written submission, paras. 180-185.

agreements, and make such other findings as will assist the DSB in making the
recommendations or in giving the rulings provided for in the covered agreements.
As has been indicated in the past, panels are required under Article 11 of the DSU to consider
all evidence before them, assess its credibility, determine its weight, and ensure that their findings
have a proper basis in that evidence. 283 It is generally within the discretion of panels, however, to
decide which evidence to utilize in making findings, and, as long as they make an objective
assessment of the matter before them , panels are not required to accord to factual evidence the
same meaning and weight as do the parties.284 In previous cases, the Appellate Body has highlighted
the gravity of an allegation that a panel has failed to make an "objective assessment of the matt er
before it" and stated that it is incumbent on a party raising a claim under Article 11 of the DSU to
identify specific errors regarding the objectivity of the panel's assessment and "to explain why the
alleged error meets the standard of review under that provision".285
We will look first at Türkiye's argument that the Panel failed to examine all of the evidence
relating to the design and structure of the localisation requirement and to the authorities responsible
for its design and implementation.
With r espect to the arguments and evidence related to the design and structure of the
localisation requirement, we look at Türkiye's argument that the Panel failed to take into account
the measure's implementation in five phases, which according to Türkiye pursu ed "[t]he aim of
[encouraging] local production within a predictable period of time, rather than removing the
imported products from reimbursement".286
The Panel noted in its report that, by design, the localisation requirement had five phases
"which progressively target different products depending on their market share and the existence of
equivalent products in the domestic market".287 The Panel described the design of the measure and
each of these phases, noting at the same time that, according to Türkiye, "only Phase 1 and Phase 2
[had] been implemented so far" 288 and that "the implementation of Phases 1 and 2 [had] already
resulted in the identification of products that [would] no longer be reimbursed by the SSI."289 There
is extensive discussion in the Panel Report with respect to the localisation requirement and its
implementation in phases, as well as to the respective arguments of the parties in this regard.
With respect to the authorities responsible for the localisation requirement's design and
implementation, Türkiye argues that the Panel disregarded relevant evidence. According to Türkiye,
"the public health objective of the localisation [requirement] is further evinced by the fact that it has
been designed and implemented by the authorities responsible for public health policies ."290 The
Panel Report notes the main legal instruments, as identified by the parties, that were the basis for
the localisation requirement, namely: (i) the Tenth Development Plan 2014-2018; (ii) the Structural
Transformation Program for Healthcare Industries Action Plan; and (iii) the 2016 Action Plan of the
64th Government.291 The Panel also describe d the authorities responsible for implementing the
localisation requirement, including the role of the TMMDA, the SSI, and the Ministry of Health.

283 Appellate Body Reports, India – Solar Cells, para. 5.87; Philippines – Distilled Spirits, para. 135;
Brazil – Retreaded Tyres, para. 185; EC ‒ Hormones, paras. 132-133.
284 Appellate Body Reports, India – Solar Cells, para. 5.87; Australia – Salmon, para. 267; EC and
certain member States – Large Civil Aircraft, para. 1317.
285 Appellate Body Report, Indonesia – Import Licensing Regimes, para. 5.28 (quoting Appellate Body
Reports, China – Rare Earths, para. 5.178; EC – Fasteners (China), para. 442). (emphasis original) See also
Appellate Body Reports, EU – Biodiesel (Argentina), para. 6.200; US – Tuna II (Mexico) (Article 21.5 –
Mexico), para. 7.191; China – HP-SSST (Japan) / China – HP-SSST (EU), para. 5.244; Peru – Agricultural
286 Türkiye's written submission, para. 203 (quoting Türkiye's first written submission to the Panel,
paras. 452-453, in turn quoting Public Announcement concerning the Localisation Process of 4 March 2016 by
the TMMDA, the SSI and the Ministry of Health (Panel Exhibit EU-49)).
288 Panel Report, fn 89 to para. 2.24 (quoting Türkiye's first written submission to the Panel, para. 140).
291 Panel Report, para. 7.185 (referring to Tenth Development Plan 2014-2018 (Panel Exhibit EU-12);
Ministry of Health and Ministry of Development, Structural Transformation Program for Healthcare Industries

Accordingly, there is no indication that the Panel disregarded arguments and relevant
evidence put forward by Türkiye with respect to either the design and structure of the localisation
requirement or the authorities responsible for its design and implementation.
We now turn to Türkiye's argument that, with respect to the documents pertaining to the
implementation of the localisation requirement, the Panel focused on each document individually,
instead of analysing the way these documents interacted with each other.292 In this respect, Türkiye
is not arguing that the Panel failed to examine documents pertaining to the implementation of the
localisation requirement. Instead, Türkiye suggests that, by considering each of these documents
individually, the Panel failed to ascertain the public health objective of the measure.
In essence, Türkiye's claim that the Panel failed to make an "objective assessment of the
matter before it" is based on Türkiye's disagreement with the Panel's interpretation and application
of Article XX(b) and with the Panel's assessment of the facts of the case. In this respect, the Panel
derived different conclusions from the localisation requirement's design and structure and from the
authorities responsible for its design and implementati on than those proposed by Türkiye. Neither
this fact nor the fact that the Panel considered documents pertaining to the implementation of the
localisation requirement individually impl ies by itself that the Panel failed to make an objective
assessment of the matter as required by Article 11 of the DSU. As noted above, it is generally within
the discretion of a panel to decide which evidence to utilize in making its findings, and, as long as
the panel makes an objective assessment of the matter before it, the panel is not required to accord
to factual evidence the same meaning and weight as do the parties. Türkiye also fails to explain why
and how a "holistic assessment" of the same documents would have resulted in a different result for
the Panel's analysis.293
For the above reasons, we do not consider that the panel exceeded its authority as the trier
of facts and thereby failed to make an objective assessment of the matter before it, as required by
Article 11 of the DSU.
6.3.5 Conclusion
In light of the considerations above, we find that Türkiye has not established that the Panel
erred in the interpretation or application of Article XX(b) of the GATT 1994 in finding that Türkiye
had not demonstrated that the localisation requirement was a measure taken to protect h uman,
animal, or plant life or health and was therefore justified under Article XX(b).
Having found that the localisation requirement was not a measure taken to protect human,
animal, or plant life or health, the Panel did not need to assess the remaining legal elements of
Article XX(b) to determine the applicability of this exception, namely, whether the measure was
"necessary" to achieve that objective. Moreover, because the localisation requirement did not fall
under Article XX(b) and therefore was not provisionally justified under this subparagraph, it was also
unnecessary for the Panel to assess whether the localisation requirement was being applied
consistently with the requirements of the chapeau of Article XX.
The Panel also did not fail to make an objective assessment of the matter before it. We
therefore reject Türkiye's claim under Article 11 of the DSU.

Action Plan, November 2014 (Structural Transformation Program for Healthcare Industries Action Plan)
(Panel Exhibits EU-14, TUR-37); Republic of Turkey, Office of the Prime Minister, 2016 Action Plan of the
64th Government (Implementation and Reforms), 10 December 2015 (2016 Action Plan of the
64th Government) (Panel Exhibit EU-15)). The Tenth Development Plan 2014-2018 was approved by Türkiye's
Grand National Assembly, the Structural Transformation Program for Healthcare Industries Action Plan was
coordinated by Türkiye's Ministry of Health and Ministry of Development, and the 2016 Action Plan of the
64th Government was approved by the Office of the Prime Minister. (Panel Report, fns 75 to para. 2.20, and
637 and 638 to para. 7.185. See also European Union's written submission, para. 187)
292 Türkiye's written submission, paras. 203-204 and 206-208.
293 Türkiye states that "[t]hese errors were material and affected the Panel's finding that the localisation
[requirement] is not 'designed to' protect human life or health" but did not further elaborate on this assertion.
(Türkiye's written submission, para. 6. See also ibid., paras. 206-208)

Consequently, we uphold the Panel's finding , in paragraphs 7.219 and 8.1.b.iv of the
Panel Report, that Türkiye has not established that the loca lisation requirement is justified under
Article XX(b) of the GATT 1994.
Having upheld the Panel's finding that the localisation requirement is not justified under
Article XX(b), we proceed to address Türkiye's alternative claim pertaining to Article XX(d) of the
GATT 1994.
6.4 Article XX(d) of the GATT 1994
In the event that we do not find that Türkiye has established that "the localisation
[requirement] falls within the scope of Article III:8(a) of the GATT 1994 and/or is not inconsistent
with Ar ticle III:4 of the GATT 1994", and if we also do not reverse the Panel's findings under
Article XX(b) of the GATT 1994 and do not find that the measure is justified under Article XX(b),
Türkiye submits that the Panel erred in finding that the localisation requirement is not justified under
Article XX(d) of the GATT 1994.294
We begin by briefly summarizing the Panel 's findings, before turning to consider relevant
issues raised in this Arbitration.
6.4.1 Panel findings
With respect to Türkiye's invocation of the ge neral exception in Article XX(d) of the
GATT 1994, the Panel found that Türkiye had failed to demonstrate that the localisation requirement
was taken to (designed to) secure compliance with laws requiring Türkiye to ensure "accessible,
effective and financially sustainable healthcare" for its population.295
In the Panel's view, Türkiye's argument under Article XX(d) was substantially the same as
its argument under Article XX(b). The essence of Türkiye's arguments was that the localisation
requirement was jus tified under Article XX(b) because it was necessary to ensure uninterrupted
access to safe, effective, and affordable medicines in Türkiye, and under Article XX(d) because it
was necessary to secure compliance with laws requiring Türkiye to ensure accessible, effective, and
financially sustainable healthcare. The Panel found that, given the overlap, its assessment under
Article XX(b) extended mutatis mutandis to the analysis of the defence under Article XX(d).296
6.4.2 Whether the Panel applied the wrong legal standard in rejecting Türkiye's defence
under Article XX(d) of the GATT 1994
Türkiye submits that the Panel's finding that the localisation requirement is not justified
under Article XX(d) of the GATT 1994 is vitiated by legal error because it is bas ed on an incorrect
legal standard.297 By relying exclusively on its legal analysis under Article XX(b) when examining
Türkiye's defence under Article XX(d), the Panel disregarded the important differences between
these two subparagraphs and failed to address key elements of the legal test under Article XX(d).298
Türkiye requests us to carry out the legal analysis under Article XX(d) and conclude that the
localisation requirement is justified under that provision.299
The European Union disagrees with Türkiye's arguments and submits that the Panel did not
err by relying on an incorrect legal standard under Article XX(d). In the European Union's view, the
Panel correctly limited its analysis to whether the localisation requirement was designed to secure
compliance with laws and regulations requiring Türkiye to ensure accessible, effective, and financially
sustainable healthcare. The Panel correctly considered that it followed from its assessment of the

294 Türkiye's written submission, para. 251. Türkiye requests us to reverse the Panel's findings in
paragraphs 7.217-7.219 and 8.1.b.iv of the Panel Report. (Türkiye's notice of recourse to arbitration, p. 3)
295 Panel Report, para. 7.218.
296 Panel Report, para. 7.217-7.218.
297 Türkiye's written submission, paras. 252, 256-260, and 279.
298 Türkiye's written submission, paras. 261-278. At the hearing, Türkiye referred to its assertion before
the Panel that its defence under Article XX(d) is distinct from its defence under Article XX(b). (Türkiye's
responses to questions at the hearing (referring to Türkiye's responses to the Panel's first set of questions,
para. 72))
299 Türkiye's written submission, paras. 252 and 280-311.

evidence under Article XX(b) that Türkiye had failed to demonstrate that the localisation requirement
was designed to secure compliance with laws requiring Türkiye to ensure "accessible, effective and
financially sustainable healthcare" for its population. The Panel was not required to analyse the other
components of the analysis under Article XX(d).300 Should we conclude that the Panel adopted an
erroneous legal standard in examining Türkiye's defence under Article XX(d), the European Union
submits in the alternative that the factual findings of the panel and the undisputed facts on the panel
record do n ot provide us with a sufficient basis to complete the analysis of the measure under
Article XX(d).301 Should we conclude that we can complete the analysis under Article XX(d), the
European Union submits in the further alternative that the localisation requi rement is not justified
under Article XX(d).302
Article XX(d) of the GATT 1994 provides:
Subject to the requirement that such measures are not applied in a manner which would
constitute a means of arbitrary or unjustifiable discrimination between countries where
the same conditions prevail, or a disguised restriction on international trade, nothing in
this Agreement shall be construed to prevent the adoption or enforcement by any
Member of measures:
 …
(d) necessary to secure compliance with laws or regulati ons which are
not inconsistent with the provisions of this Agreement, including those
relating to customs enforcement, the enforcement of monopolies operated
under paragraph 4 of Article II and Article XVII, the protection of patents,
trade marks and copyrights, and the prevention of deceptive practices[.]
Article XX(d) allows Members to maintain measures that are otherwise inconsistent with
obligations under the GATT 1994, to the extent that those measures are necessary to secure
compliance with laws or regulations which are not inconsistent with the provisions of the GATT 1994,
and are applied in a manner that is compatible with the requirements in the chapeau of Article XX.
Like in the case of Article XX(b), for an exception under Article XX(d) to apply, the responding party
bears the burden of invoking the provision and demonstrating that the measure in question meets
the requirements of that provision.
Starting with the text of the provision, to be justified under Article XX(d), a measure must
be necessary to secure compliance with laws or regulations which are not inconsistent with the
provisions of the GATT 1994. In order to assess whether a measure can be justified under
Article XX(d), a panel may first assess, as an initial question, whether the measu re is even related
to, or not incapable of, securing compliance with the specific rules, obligations, or requirements.
Logically, unless a measure is "not incapable" of securing compliance with specific rules, obligations,
or requirements under the relevan t provisions of the relevant "laws or regulations", then the
measure cannot be justified under Article XX(d), and this would be the end of the inquiry.
In order to ascertain whether a measure is not incapable of securing compliance with specific
laws or re gulations, a panel should focus on examining the relationship between the challenged
measure, considering its design (including its content, structure, and expected operation) and the
proclaimed objective. The prior examination is used to assess whether th e measure can be
considered to have been "taken to", or "designed to", secure compliance with relevant laws or
regulations. If the response to this question is affirmative, a panel may move to assess whether the
measure can be considered to be "necessary" for the proclaimed objective, considering factors such
as the extent of the contribution to the achievement of the objective, the measure's
trade-restrictiveness, and the importance of the interests or values at stake, as well as comparing
the measure with possible alternative measures identified by the complainant.

300 European Union's written submission, paras. 209 and 211-223.
301 European Union's written submission, paras. 210 and 224-228.
302 European Union's written submission, paras. 210 and 229-241.

This two -step analysis of the design and the necessity of a measure has been used in
previous disputes303 and corresponds to the manner in which the parties articulated their arguments
both before the Panel as well as in the Arbitration.304
As noted above, the Panel found that Türkiye had failed to establish that the localisation
requirement was taken to (designed to) secure compliance with laws requiring Türkiye to ensure
"accessible, effective and financially sustainable healthcare" for its population. In light of the required
elements for analysis under Article XX(d), normally such a conclusion would have been preceded by
an examination of: (i) whether Türkiye had properly identified relevant laws or regulations that can
qualify as "laws or regulations" within the meaning of Article XX(d)305; (ii) whether those laws or
regulations were not found to be "inconsistent with the provisions of the [GATT 1994]"; and
(iii) whether there was a r ational relationship between the localisation requirement and the
proclaimed objective, namely, whether the localisation requirement was not incapable of securing
compliance with the specific rules and obligations under the relevant laws or regulations. Th ese
elements are cumulative, so that the lack of even one of them would have been sufficient for the
Panel to reject the Article XX(d) defence.
In our view, it would have been more prudent had the Panel followed the order of the
relevant analysis and artic ulated the applicable legal standard in assessing Türkiye's invocation of
Article XX(d) of the GATT 1994. In other words, logically and analytically, it would have been more
reasonable for the Panel to consider first which specific legal instruments were identified by Türkiye
as the relevant "laws or regulations" , whether such instruments qualified as "laws or regulations"
within the meaning of Article XX(d), and whether they were not inconsistent with provisions of the
GATT 1994, before turn ing to the examination of the relationship between the localisation
requirement and the specific laws or regulations for the purposes of its "design" analysis.
The Panel did not follow the order of analysis suggested above. Specifically, there is no
express confirmation in the Panel Report of the relevant laws or regulations cited by Türkiye, nor
any examination of the characteristics of those instruments to confirm whether they could qualify
as "laws or regulations" within the meaning of Article XX(d). The Panel also did not address whether
the relevant laws or regulations were not inconsistent with the GATT 1994. In addition, the
Panel Report is silent on the applicable legal standard for the Article XX(d) defence.
In this connection, at the Panel stage, the European Union disputed that the legal
instruments cited by Türkiye had the required degree of specificity and normativity to qualify as
"laws or regulations" within the meaning of Article XX(d).306 Nevertheless, the Panel seem s to
implicitly have assumed, for the sake of focusing its analysis on the relationship issue 307, that the
legal instruments cited by Türkiye could qualify as "laws or regulations" for the purposes of Türkiye's
Article XX(d) defence308 and that, as argued by Türkiye, the relevant obligation contained in those

303 See e.g. Appellate Body Report, India – Solar Cells, para. 5.58.
304 See e.g. Türkiye's first written submission to the Panel, paras. 539-548; second written submission
to the Panel, paras. 235-246; written submission, paras. 258 and 268; European Union's second written
submission to the Panel, paras. 202-203; written submission, paras. 213-214.
305 Some relevant elements in this regard could include: the degree of normativity of the instrument and
the extent to which the instrument operates to set out a rule of conduct or course of action that is to be
observed within the domestic legal system of a Member; the degree of specificity of the relevant rule; whether
the rule is legally enforceable; whether the rule has been adopted or recognized by a competent authority
possessing the necessary powers under the domestic legal system of a Member; the form and title given to any
instrument or instruments containing the rule under the domestic legal system of a Member; and the penalties
or sanctions that may accompany the relevant rule. (See e.g. Appellate Body Reports, India – Solar Cells,
306 European Union's second written submission to the Panel, paras. 207-213.
307 At the Panel stage, when considering the justification of Türkiye's invocation of Article XX(d), the
parties to an important degree focused on whether there was evidence of a relationship between the
localisation requirement and the proclaimed objective (i.e. securing compliance with laws requiring Türkiye to
ensure accessible, effective, and financially sustainable healthcare for its population). (European Union's
second written submission to the Panel, paras. 203-206; Türkiye's second written submission to the Panel,
paras. 235-246) In this Arbitration, Türkiye has not challenged the legal standard applicable under
Article XX(d).
308 Panel Report, para. 7.218.

legal instruments was for Türkiye to ensure accessible, effective, and financially sustainable
healthcare.309
On the basis of those assumptions, the Panel considered whether the loc alisation
requirement could be found to be a measure taken to secure compliance with the laws and
regulations cited by Türkiye. The Panel noted the overlap between the arguments advanced by
Türkiye in its allegation that the localisation requirement is justified under Article XX(b) because it
is necessary to ensure uninterrupted access to safe, effective, and affordable medicines in Türkiye,
and those advanced in the allegation that the same measure is justified under Article XX(d) because
it is necessary to secure compliance with laws requiring Türkiye to ensure accessible, effective, and
financially sustainable healthcare.310
Given the overlap between both defences, the Panel was of the view that the considerations
made in its assessment of Türkiye's defence under Article XX(b) in this case could be extended
mutatis mutandis to the analysis of Türkiye's defence under Article XX(d).311 To recall, the Panel had
concluded that Türkiye had failed to demonstrate that the localisation requirement was a measure
designed to (taken to) protect human life or health. 312 With respect to Türkiye's invocation of
Article XX(d), the Panel concluded that Türkiye had failed to demonstrate that the localisation
requirement was taken to secure compliance with laws requiring T ürkiye to ensure "accessible,
effective and financially sustainable healthcare" for its population.313
We now turn to examine whether the method of analysis followed by the Panel as described
above constitutes a legal error. We do not consider that it does for the following reasons.
To begin with, the Panel appears to have taken Türkiye's description of the relevant legal
instruments at face value, and assumed arguendo that the legal instruments cited could be said to
"require Türkiye to ensure ac cessible, effective, and financially sustainable healthcare " for its
population. 314 Considering this assumption, the Panel focused on whether the localisation
requirement was taken to (designed to) secure compliance with laws requiring Türkiye to ensure the
proclaimed objective.
On the basis of its prior finding under Article XX(b) that the localisation requirement pursues
industrial policy rather than the alleged objective of ensuring a continuous supply of safe, effective,
and affordable pharmaceutical pro ducts, and considering the equivalent arguments advanced by
Türkiye in its Article XX(d) defence, the Panel seems to have implicitly but necessarily reached an
intermediate finding that there is no rational relationship between the localisation requirement and
the proclaimed objective of securing compliance with laws or regulations requiring Türkiye to ensure
accessible, effective, and financially sustainable healthcare. We also understand the Panel's mutatis
mutandis application to suggest that a similar i ntermediate finding may apply in the context of
Article XX(d). In light of the manner in which Türkiye articulated its justification for the localisation
requirement under Article XX(d), it does not seem to constitute a legal error for the Panel to have
extended elements of its assessment under Article XX(b) mutatis mutandis to the analysis of
Türkiye's defence under Article XX(d).
We note once again that all the conditions and relevant elements for Article XX(d) are
cumulative in nature. Hence, even without the Panel's examination of the laws or regulations cited
by Türkiye and their qualification under Article XX(d), the Panel's intermediate finding on the lack of
rational relationship between the localisation requirement and the proclaimed objective, whic h was
made on the basis of the Panel's mutatis mutandis application, was sufficient for the Panel to
conclude that the localisation requirement was not taken to secure compliance with the relevant
laws or regulations, even if taken at face value as described by Türkiye.

309 Panel Report, para. 7.217.
310 Panel Report, para. 7.218.
311 Panel Report, para. 7.218.
312 Panel Report, para. 7.211.
313 Panel Report, para. 7.218.
314 Türkiye's first written submission to the Panel, para. 515. (emphasis added) "The essence of Turkey's
arguments is that the measure is justified … under Article XX(d) because it is necessary to secure compliance
with laws requiring Turkey to ensure accessible, effective and financially sustainable healthcare."
(Panel Report, para. 7.218)

6.4.3 Conclusion
In light of the considerations above, we find that Türkiye has not established that the Panel
applied an incorrect legal standard under Article XX(d) in finding that Türkiye had failed to
demonstrate that the localisation requirement was taken to secure compliance with laws requiring
Türkiye to ensure accessible, effective, and financially sustainable healthcare and was therefore
justified under Article XX(d) of the GATT 1994.
Having found that the localisation requirement was not a measure taken to secure
compliance with laws or regulations, the Panel did not need to assess the remaining legal elements
of Article XX(d) to determine the applicability of this exception, namely, whether the measure was
"necessary" to secure such compliance. Moreover, because the localisation requirement did not fall
under Article XX(d) and therefore was not provisionally justified under this subparagraph, it was also
unnecessary for the Panel to assess whether the localisation requirement was being applied
consistently with the requirements of the chapeau of Article XX.
Consequently, we uphold the Panel's finding , in paragraphs 7.219 and 8.1.b.iv of the
Panel Report, that Türkiye has not established that the localisation requirement is justified under
Article XX(d) of the GATT 1994.
7 AWARD
7.1. In light of the foregoing considerations, we make the following findings and conclusions. We
recall that, pursuant to paragraph 9 of the Agreed Procedures, the findings of the Panel that have
not been "appealed" in the context of this Arbitration shall be deemed to form an integral part of the
Award together with our own findings.
7.1 Articles III:4 and III:8(a) of the GATT 1994
7.2. On interpretation, we consider that, under Article III:8(a) of the GATT 1994, "procurement by
governmental agencies of pr oducts purchased for governmental purposes" would typically involve
the procurement of products through a purchase by a governmental agency. However,
Article III:8(a) does not contain an unequivocal requirement to that effect. We do not foreclose the
possibility that, in certain circumstances, the relevant purchase transaction may be entered into by
a non-governmental entity so long as the products are procured by a governmental agency and
procurement is of products purchased for governmental purposes. We therefore find that the Panel
erred in considering, as a starting point for its analysis in paragraph 7.65 of the Panel Report, that
Article III:8(a) required a purchase by governmental agencies.
7.3. On application, central to Türkiye's first claim under Article III:8(a) is whether there is
procurement by a governmental agency of products purchased for governmental purposes w ithin
the meaning of Article III:8(a). On the basis of the Panel's factual findings and uncontested facts on
the panel record, we conclude that there is no procurement , within the meaning of Article III:8(a),
by the SSI of the pharmaceutical products included in the Annex 4/A list.
7.4. For these reasons:
a. we find that the localisation requirement does not fall within the ambit of the derogation
in Article III:8(a) of the GATT 1994 on the basis that there is no procurement by
governmental agencies within the meaning of that provision;
b. consequently, we uphold, albeit for different reasons, the Panel's finding, in
paragraphs 7.107 and 8.1.b.ii of the Panel Report, that the localisation requirement is not
covered by the government procurement derogation in Article III:8(a) of the GATT 1994,
and is therefore subject to the national treatment obligation in Article III:4 of the
GATT 1994 and Article 2.1 of the TRIMs Agreement; and
c. we declare the Panel's intermediate findings, in paragraphs 7.66-7.81 of the Panel Report,
regarding the interpretation of the term "products purchased", as well as its intermediate
finding, in paragraphs 7.90, 7.103, and 7.104, that the localisation requirement does not

involve the purchase of pharmaceutical products included in the Annex 4/A list by
governmental agencies to be moot and of no legal effect.
7.5. Having upheld the Panel's finding that the localisation requirement does not fall within the
ambit of Article III:8(a), it is not necessary for us to address Türkiye's conditional requests that we
moot or reverse the Panel's findings under Article III:4 of the GATT 1994. Therefore:
a. we find that the Panel's finding, in paragraph 8.1.b.iii of the Panel Report, that the
localisation requirement is inconsistent with the national treatment obligation in
Article III:4 of the GATT 1994, remains undisturbed.
7.2 Article XX(b) of the GATT 1994
7.6. On interpretation, we do not consider that the Panel committed legal error by confusing the
"design" and the "necessity" steps of the legal analysis under Article XX(b) of the GATT 1994. We
also do not consider that the Panel set out a legal standard requiring a s ubstantial degree of
probability of risk for assessing whether a measure has been taken to protect human, animal, or
plant life or health, in accordance with Article XX(b) of the GATT 1994, nor that the Panel introduced
any quantitative dimension to the notion of risk to human life or health that unduly limited the range
of public health measures that fall within the scope of Article XX(b). Finally, we disagree that the
Panel erred by relying on previous panel reports dealing with provisions other than Article XX(b).
7.7. On application, to the extent that we have found no reversible error in the Panel's interpretation
of Article XX(b), and considering the nature of Türkiye's application claims, we consider that Türkiye
failed to establish that the Panel erred in its application of Article XX(b).
7.8. With respect to Article 11 of the DSU, we do not consider that the Panel exceeded its authority
as the trier of facts and thereby failed to make an objective assessment of the matter before it.
7.9. For these reasons:
a. we uphold the Panel's finding, in paragraphs 7.219 and 8.1.b.iv of the Panel Report, that
Türkiye has not established that the localisation requirement is justified under
Article XX(b) of the GATT 1994.
7.3 Article XX(d) of the GATT 1994
7.10. In light of the manner in whi ch Türkiye articulated its justification for the localisation
requirement under Article XX(d) of the GATT 1994, we consider that it did not constitute legal error
for the Panel to have extended elements of its assessment under Article XX(b) mutatis mutandis to
the analysis of Türkiye's defence under Article XX(d). Even without the Panel's examination of the
laws or regulations cited by Türkiye and their qualification under Article XX(d), the Panel's
intermediate finding on the lack of rational relationship between the localisation requirement and
the proclaimed objective, which was made on the basis of the Panel's mutatis mutandis application,
was sufficient for the Panel to conclude that the localisation requirement was not taken to secure
compliance with the relevant laws or regulations, even if taken at face value as described by Türkiye.
7.11. For these reasons:
a. we uphold the Panel's finding, in paragraphs 7.219 and 8.1.b.iv of the Panel Report, that
Türkiye has not established that the localisation requirement is justified under
Article XX(d) of the GATT 1994.

7.4 Recommendation
7.12. Pursuant to Article 19.1 of the DSU315, we recommend that Türkiye bring into conformity with
its obligations under the GATT 1994 its measures that were found to be inconsistent in this Award
and in the Panel Report316 as modified by this Award.