INDONESIA – RECOURSE TO ARTICLE 22.2 OF THE DSU IN THE US – CLOVE CIGARETTES DISPUTE REQUEST FOR CONSULTATIONS BY THE EUROPEAN UNION
Document: REQUEST FOR CONSULTATIONS BY
Date: 19 June 2014
Document codes: WT/DS481/1; G/L/1072
Complainant: EU
Respondent: Indonesia
Dispute stage: Consultation

INDONESIA – RECOURSE TO ARTICLE 22.2 OF THE DSU IN THE
US – CLOVE CIGARETTES DISPUTE
REQUEST FOR CONSULTATIONS BY THE EUROPEAN UNION
The following communication, dated 13 June 2014, from the delegation of the European Union to
the delegation of Indonesia and to the Chairperson of the Dispute Settlement Body, is circulated in
accordance with Article 4.4 of the DSU.

My authorities have instructed me to request consultations with the Government of the Republic of
Indonesia ("Indonesia") pursuant to Articles 1 and 4 of the Understanding on Rules and Procedures
Governing the Settlement of Disputes ("DSU") and Article XXII:1 of the General Agreement on
Tariffs and Trade 1994 ("GATT 1994") with particular respect to Indonesia's unilateral recourse to
Article 22.2 of the DSU in the context of the comp liance and arbitration panel proceedings in Case
DS406 US – Clove Cigarettes , and the exclusion of third parties from those proceedings. We
consider this to be inconsistent with Articles 21.5, 22.2, 23.1 and 23.2(a) of the DSU, as well as
Articles 10.1, 10.2 and 10.3 of the DSU. As the Appellate Body has clearly stated:

 … before obtaining the DSB's authorization to suspend concessions, a Member must
initiate a dispute settlement process in which it challenges the consistency with the
covered agreements of a measure taken by another Member. The Member initiating
the process will only be authorized to suspend concessions when the measure is found
by the panel (and the Appellate Body, if appealed) to be inconsistent with the covered
agreements and the Member taking the me asure fails to implement the panel's (or
Appellate Body's) findings within a reasonable period of time or, if it takes a measure
to comply, that measure is found by the panel (and the Appellate Body) in compliance
proceedings not to have brought the Memb er concerned into compliance. In other
words, the Member will only be able to suspend concessions pursuant to the DSB's
authorization after having had extensive recourse to, and abided by, the rules and
procedures of the DSU, consistent with the requirements of Article 23.1.
1
Background to the dispute

At its meeting on 24 April 2012 the Dispute Settlement Body (DSB) adopted the Appellate Body
Report on United States – Measures Affecting the Production and Sale of Clove Cigarettes
(WT/DS406/AB/R) and the Panel report (WT/DS406/R), as modified by the Appellate Body
Report.2 Following the recommendations from the Panel and Appellate Body, the DSB requested
the United States to bring its measure, found in the Appellate Body Report and in the Panel Report
as modified by the Appellate Body Report, to be inconsistent with the TBT Agreement, into
conformity with its obligations under that Agreement.
3 Pursuant to Article 21.3(b) of the DSU,
Indonesia and the United States agreed that the reasonable period of time for the United States to
comply would be 15 months from 24 April 2012, expiring on 24 July 2013.4

1 Appellate Body Report, US-Continued Suspension, para. 374.
2 Action by the Dispute Settlement Body, WT/DS406/9, 1 May 2012.
3 Panel Report, US – Clove Cigarettes, para. 8.6; Appellate Body Report, US – Clove Cigarettes,
para. 299.
4 Agreement under Article 21.3(b) of the DSU, WT/DS406/10, 19 June 2012.
WT/DS481/1 • G/L/1072

On 23 July 2013 the United States informed the DS B and all WTO Members that, in the opinion of
the United States, it had complied with the recommendations and rulings of the DSB following the
original proceedings.
5 On 12 August 2013 Indonesia informed the DSB and all WTO Members that,
in the opinion of Indonesia, the United States had failed to bring the measure found to be
inconsistent with the covered agreements into compliance therewith or to otherwise comply with
the recommendations and rulings within the reasonab le period of time, and that no satisfactory
compensation had been agreed.
6 Consequently, there is a disagreement between the United States
and Indonesia as to the existence or consistency with a covered agreement of measures taken to
comply with the recommendations and rulings, as provided for in Article 21.5 of the DSU. 7 Article
21.5 provides that such a compliance dispute shall be decided through recourse to the procedures
set out in the DSU, including, wherever possible, resort to the original panel.
Notwithstanding the disagreement with respect to compliance, on 12 August 2013, Indonesia
requested authorisation from the DSB to suspen d the application to the United States of
concessions or other obligations under the covered agreements, pursuant to Article 22.2 of the
DSU.8 The United States objected to the level of suspension proposed and claimed that the
principles and procedures set forth in Article 22.3 had not been followed.9 The DSB agreed that the
matter was referred to arbitration, as required by Article 22.6 of the DSU.10
At the DSB meeting on 23 August 2013 the repres entative of the European Union made the
following statement:
The representative of the European Union sa id that the EU noted the statement made
by the United States that it had taken measures to comply with the DSB's
recommendations and rulings. The EU also noted that Indonesia did not agree that the
United States had brought its measures in to compliance with the TBT Agreement. It
appeared that "there is a disagreement as to the existence or consistency with a
covered agreement of measures taken to comply with the recommendations and
rulings" of the DSB within the meaning of Ar ticle 21.5 of the DSU. The EU wished to
recall that, pursuant to that provision, "such dispute shall be decided through recourse
to these dispute settlement procedures, incl uding wherever possible recourse to the
original panel". In cases of disagreement about the existence or consistency with WTO
rules of compliance measures, concessions or other obligations may be suspended
under the DSU once there was a multilateral determination on the alleged compliance
action. The EU hoped that the United States and Indonesia would ensure that the DSU
procedures with regard to compliance and suspension of obligations in this dispute
could be conducted efficiently and in the right sequence. Finally, the EU recalled that it
had participated as a third party in the Panel and appeal proceedings in this dispute
and, therefore, pursuant to Article 10, para graphs 1, 2 and 3 of the DSU, it reserved
its right to participate as a third party in any subsequent proceedings, including with
respect to any disagreement as to the existence or consistency with a covered

5 Minutes of the DSB Meeting of 23 July 2013, WT/DSB/M/334, 2 October 2013, para. 1.45: " … these
actions by the US health authorities brought the United States into compliance with the DSB's
recommendations and rulings in this dispute within the reasonable period of time for compliance, which expired
on 24 July 2013."; Minutes of the DSB Meeting of 23 August 2013, WT/DSB/M/335, 4 October 2013, para. 1.8:
" … as the United States had notified the DSB at the 23 July 2013 meeting, the United States had complied
with the recommendations and rulings in this dispute."
6 Recourse to Article 22.2 of the DSU by Indonesia, WT/DS406/12, 13 August 2013, page 1: "The
United States failed to implement the recommendations and rulings of the DSB with respect to
Section 907(a)(1)(A) by the end of the reasonable period of time, and no mutually acceptable arrangement for
compensation has been reached. … "; Minutes of the DSB Meeting of 23 August 2013, WT/DSB/M/335, 4
October 2013, para. 1.3 " … the US failure to comply with the DSB's rulings and recommendations in the Clove
Cigarette dispute. …".
7 Article 21.5 of the DSU provides in relevant part: "Where there is disagreement as to the existence or
consistency with a covered agreement of measures taken to comply with the recommendations and rulings
such dispute shall be decided through recourse to these dispute settlement procedures, including wherever
possible resort to the original panel."
8 Recourse to Article 22.2 of the DSU by Indonesia, WT/DS406/12, 13 August 2013.
9 Recourse to Article 22.6 of the DSU by the United States, WT/DS406/13, 23 August 2013.
10 Minutes of the DSB Meeting of 23 August 2013, WT/DSB/M/335, 4 October 2013, para. 1.13.
WT/DS481/1 • G/L/1072

agreement of measures taken to comply with the DSB's recommendations and
rulings.11
By communication dated 2 September 2013 the WTO Members were informed that the matter
referred to the compliance/arbitration panel would be dealt with by the original panel, pursuant to
Article 22.6 of the DSU.12
By communication dated 4 September 2013 the European Union requested that appropriate
provision be made in the Working Procedures an d Timetable of the compliance/arbitration panel
proceedings in order to facilitate the exercise by the European Union of its third party rights in this
dispute.
By communication dated 18 December 2013 the compliance/arbitration panel informed the
European Union of its decision, taking into account the views expressed by Indonesia, not to
accord the European Union third party rights in the compliance/arbitration panel proceedings.
The compliance/arbitration panel has not informed WTO Members that the compliance/arbitration
proceeding has been suspended.
At the DSB meeting on 22 January 2014 the EU made a statement explaining that it considered
that there had been a breach of its third party rights, and that what had occurred was inconsistent
with Articles 22.2, 23.1 and 23.2(a) of the DSU, which was followed by a discussion.
13 The
European Union subsequently requested the circulat ion of a communication explaining its point of
view,14 which was also discussed at the following regular DSB meeting on 26 February 2014.15
The First Written Submission of the United States of America in the compliance/arbitration panel
proceedings (19 December 2013) devotes the first 39 of its 55 pages to explaining that the United
States has fully implemented the recommendations and rulings of the DSB. Similarly, the US
Reponses to the compliance/arbitration panel qu estions in advance of the substantive meeting
(11 March 2014), the US Opening Oral Statement (27 March 2014) and the US Responses to the
compliance/arbitration panel questions foll owing the substantive meeting (10 April 2014) 16 all
demonstrate that compliance proceedings are in progress.
The measures at issue
The measures at issue are Indonesia's decision to have recourse to Article 22.2 of the DSU and its
request to that effect, as evidenced by WT/DS406/12, notwithstanding the existence of a
disagreement with the United States as to compliance, together with Indonesia's omission in not
initiating and pursuing compliance proceedings pursuant to Article 21.5 and Indonesia's omission
in not requesting and procuring suspension of the arbitration panel proceedings pending the
outcome of the compliance panel proceedings.
The measures at issue also include Indonesia's request that the European Union be unlawfully
excluded from the compliance/arbitration panel proceedings, which was a genuine and substantial
cause of that exclusion, as evidenced by the communication dated 18 December 2013 from the
compliance/arbitration panel.
Any act or omission attributable to a WTO Member may be a measure for the purposes of WTO
dispute settlement.
17 The measures referred to by the European Union are acts or omissions
attributable to Indonesia.

11 Minutes of the DSB Meeting of 23 August 2013, WT/DSB/M/335, 4 October 2013, para. 1.10.
12 Recourse to Article 22.6 of the DSU by the United States, Constitution of the Arbitrator,
WT/DS406/14, 2 September 2013.
13 Minutes of the DSB Meeting of 22 January 2014, WT/DSB/M/341, 25 April 2014, paras. 8.1-8.20.
14 WT/DS406/15, 14 February 2014.
15 Minutes of the DSB Meeting of 26 February 2014, WT/DSB/M/342, 16 May 2014, paras. 5.1-5.22.
16 All documents available at: http://www.ustr.gov/node/6356 (last visited on 28 May 2014).
17 Appellate Body Report, US-Corrosion-Resistant Steel Sunset Review, para. 81: "… any act or omission
attributable to a WTO Member can be a measure of that Member for purposes of dispute settlement
proceedings."
WT/DS481/1 • G/L/1072

A WTO Member bringing a case under the DSU does not have to demonstrate any special interest
over and above the fact of a WTO inconsistency. 18 The measures at issue are WTO inconsistent for
the reasons set out below. In any event, in this particular case, the European Union was a third
party in the original panel proceedings and a third participant in the original Appellate Body
proceedings. In addition, the European Union is engaged in the production, trade and regulation of
cigarettes, including the types of cigarettes that ha ve been referenced in this case. Furthermore,
the European Union has a systemic interest in the correct and consistent interpretation and
application of the covered agreements, also and pa rticularly with respect to any suspension of
concessions and possible effects on the European Union, including trade deflection or diversion
effects. We have a close interest in these compliance/arbitration panel proceedings.
The WTO inconsistency of the measures at issue
Article 21.5 of the DSU 19 refers to a situation where there is disagreement as to the existence or
consistency with a covered agreement of measur es taken to comply with the recommendations
and rulings of the DSB. In these circumstances, this provision unconditionally provides for the
obligation to have recourse to the dispute settlement procedures of the DSU (" such dispute shall
be decided through recourse to these dispute se ttlement procedures, including wherever possible
resort to the original panel").
Articles 21.5 and 2220 indicate that Article 22 is premised on a situation of non-compliance, which
the Appellate Body has indicated must be based on a multilateral determination to that effect. In
this context, Indonesia's request for authorization from the DSB to suspend the application to the
United States of concessions or other obligations under the covered agreements, pursuant to
Article 22.2 of the DSU, together with Indonesi a's omission in not initiating and pursuing
compliance proceedings pursuant to Article 21.5 and its omission to request and procure
suspension of the arbitration panel proceedings, was premised, by operation of law, on the
proposition that the United States has failed to bring the measure found to be inconsistent with a
covered agreement into compliance therewith or otherwise comply with the recommendations and
rulings within the reasonable period of time de termined pursuant to paragraph 3 of Article 21.
However, there has not yet been any multilateral determination on the question of compliance.
Rather, as recalled above, there is a disagreement between the United States and Indonesia as to
the existence or consistency with a covered agreement of measures taken to comply with the
recommendations and rulings, as provided for in Article 21.5 of the DSU.
Article 22.6 of the DSU
21 is premised on the situation described in paragraph 2 occurring. The
situation in paragraph 2 includes a situation in which the Member concerned has failed to comply,

18 Appellate Body Report, EC – Bananas III, paras. 132-138.
19 Article 21.5 of the DSU provides as follows: "Where there is disagreement as to the existence or
consistency with a covered agreement of measures taken to comply with the recommendations and rulings
such dispute shall be decided through recourse to these dispute settlement procedures, including wherever
possible resort to the original panel. The panel shall circulate its report within 90 days after the date of referral
of the matter to it. When the panel considers that it cannot provide its report within this time frame, it shall
inform the DSB in writing of the reasons for the delay together with an estimate of the period within which it
will submit its report."
20 Article 22.2 of the DSU provides as follows: "If the Member concerned fails to bring the measure
found to be inconsistent with a covered agreement into compliance therewith or otherwise comply with the
recommendations and rulings within the reasonable period of time determined pursuant to paragraph 3 of
Article 21, such Member shall, if so requested, and no later than the expiry of the reasonable period of time,
enter into negotiations with any party having invoked the dispute settlement procedures, with a view to
developing mutually acceptable compensation. If no satisfactory compensation has been agreed within 20
days after the date of expiry of the reasonable period of time, any party having invoked the dispute settlement
procedures may request authorization from the DSB to suspend the application to the Member concerned of
concessions or other obligations under the covered agreements."
21 Article 22.6 of the DSU provides as follows: "When the situation described in paragraph 2 occurs, the
DSB, upon request, shall grant authorization to suspend concessions or other obligations within 30 days of the
expiry of the reasonable period of time unless the DSB decides by consensus to reject the request. However, if
the Member concerned objects to the level of suspension proposed, or claims that the principles and
procedures set forth in paragraph 3 have not been followed where a complaining party has requested
authorization to suspend concessions or other obligations pursuant to paragraph 3(b) or (c), the matter shall
be referred to arbitration. Such arbitration shall be carried out by the original panel, if members are available,
or by an arbitrator
21 appointed by the Director-General and shall be completed within 60 days after the date of
expiry of the reasonable period of time. Concessions or other obligations shall not be suspended during the
course of the arbitration." (footnote omitted)
WT/DS481/1 • G/L/1072

and, in case of disagreement, that there has be en a multilateral determination to that effect.
Article 22.7 of the DSU 22 provides for a determination to be made as to whether the level of the
concessions or other obligations to be suspended is equivalent to the level of nullification or
impairment, whether the proposed suspension is allowed under the covered agreement, and
whether the principles and procedures set forth in paragraph 3 of Article 22 of the DSU have been
followed. In this case, these tasks are also to be carried out by the original panel. Thus, Articles
22.3-22.8 as a whole are premised on a situation of non-compliance. They all refer directly or
indirectly to the nullification or impairment arising from non-compliance. If the DSB would,
pursuant to Article 22.7 of the DSU, by negative consensus or automatically, authorise suspension
of concessions in circumstances where compliance has been achieved, it would necessarily act
inconsistently with Article 22.5 of the DSU.
23
In this respect, the European Union recalls that the Appellate Body has found that the question of
whether a measure found inconsistent with a covered agreement has been removed, as provided
for in Article 22.8 of the DSU, necessitates a multilateral determination. Specifically, the Appellate
Body has made the following findings:
Article 21.5 provides for specific procedures for adjudicating a disagreement as to the
consistency with the covered agreements of measures taken by a Member to
implement the DSB's recommendations and rulings. Thus, panel proceedings under
Article 21.5 is the proper procedure for resolving the disagreement as to whether
Directive 2003/74/EC has achieved substantive compliance and whether,
consequently, the resolutive condition in Article 22.8 that requires the termination of
the suspension of concessions has been met. …
24
… Article 21.5 is cast in obligatory language. … 25
In sum, we consider that recourse to Article 21.5 panel proceedings is the proper
course of action within the procedural structure of the DSU in cases where, as in this
dispute, a Member subject to the suspension of concessions has taken an
implementing measure and a disagreement arises as to whether "the measure found
to be inconsistent with a covered agreement has been removed" within the meaning
of Article 22.8. Therefore, we share the Eu ropean Communities' view that Article 21.5
panel proceedings are the procedures to be followed where there is disagreement as
to whether Directive 2003/74/EC has achieved substantive compliance. …
26
As the Appellate Body has explained, Article 23.1 lays down the fundamental
obligation of WTO Members to have recourse to the rules and procedures of the DSU
when seeking redress of a violation of the covered agreements. Article 23 restricts
WTO Members' conduct in two respects. First, Article 23.1 establishes the WTO
dispute settlement system as the exclusive forum for the resolution of such disputes
and requires adherence to the rules of the DSU. Secondly, Article 23.2 prohibits
certain unilateral action by a WTO Member. Thus, a Member cannot unilaterally: (i)
determine that a violation has occurred, benefits have been nullified or impaired, or
that the attainment of any objective of the covered agreements has been impeded;

22 Article 22.7 of the DSU provides as follows: "The arbitrator acting pursuant to paragraph 6 shall not
examine the nature of the concessions or other obligations to be suspended but shall determine whether the
level of such suspension is equivalent to the level of nullification or impairment. The arbitrator may also
determine if the proposed suspension of concessions or other obligations is allowed under the covered
agreement. However, if the matter referred to arbitration includes a claim that the principles and procedures
set forth in paragraph 3 have not been followed, the arbitrator shall examine that claim. In the event the
arbitrator determines that those principles and procedures have not been followed, the complaining party shall
apply them consistent with paragraph 3. The parties shall accept the arbitrator's decision as final and the
parties concerned shall not seek a second arbitration. The DSB shall be informed promptly of the decision of
the arbitrator and shall upon request, grant authorization to suspend concessions or other obligations where
the request is consistent with the decision of the arbitrator, unless the DSB decides by consensus to reject the
request." (footnote omitted)
23 Article 22.5 of the DSU provides as follows: "The DSB shall not authorize suspension of concessions or
other obligations if a covered agreement prohibits such suspension."
24 Appellate Body Report, US-Continued Suspension, para. 338.
25 Appellate Body Report, US-Continued Suspension, para. 340.
26 Appellate Body Report, US-Continued Suspension, para. 345.
WT/DS481/1 • G/L/1072

(ii) determine the duration of the reasonable period of time for implementation; or (iii)
decide to suspend concessions and determine the level thereof.27 (footnote omitted)
… before obtaining the DSB's authorization to suspend concessions, a Member must
initiate a dispute settlement process in which it challenges the consistency with the
covered agreements of a measure taken by another Member. The Member initiating
the process will only be authorized to suspend concessions when the measure is found
by the panel (and the Appellate Body, if appealed) to be inconsistent with the covered
agreements and the Member taking the me asure fails to implement the panel's (or
Appellate Body's) findings within a reasonable period of time or, if it takes a measure
to comply, that measure is found by the panel (and the Appellate Body) in compliance
proceedings not to have brought the Memb er concerned into compliance. In other
words, the Member will only be able to suspend concessions pursuant to the DSB's
authorization after having had extensive recourse to, and abided by, the rules and
procedures of the DSU, consistent with the requirements of Article 23.1.
28
Accordingly, Indonesia's decision and request pursuant to Article 22.2 of the DSU, together with its
omission in not initiating and pursuing compliance proceedings pursuant to Article 21.5 and its
omission in not requesting and procuring suspensi on of the arbitration panel proceedings pending
the outcome of the compliance pa nel proceedings, are inconsistent with that provision and with
Articles 21.5, 23.1
29 and 23.2(a) 30 of the DSU because Indonesia has proceeded unilaterally, in
circumstances in which there is a dispute with respect to compliance, without any multilateral
determination of non-compliance.
In addition, Indonesia's request that the Euro pean Union be unlawfully excluded from the
compliance/arbitration panel proceedings, which was a genuine and substantial cause of that
exclusion, is inconsistent with: Article 10.1 of the DSU, because it does not ensure that the
interests of other Members are fully taken into account; Article 10.2 of the DSU because the
European Union has a substantial interest in the matter before the compliance/arbitration panel
and has notified that interest to the DSB, but will not have an opportunity to be heard or to make
written submissions; and Article 10.3 because the European Union has not received and will not
receive all the submissions of the parties to the dispute to the first meeting.

For the reasons stated, Indonesia's measures appear to nullify or impair benefits accruing to the
European Union directly or indirectly under all of the above-cited agreements and provisions.
The European Union reserves the right to address additional measures and claims regarding the
above matters in the course of the consultations.
The European Union looks forward to receiving Indonesia's reply in due course to this request for
consultations. The European Union is ready to consider with Indonesia mutually convenient dates
and modalities for organising the consultations.

Understanding, and shall make any such determination consistent with the findings contained in the panel or
Appellate Body report adopted by the DSB or an arbitration award rendered under this Understanding;"