EUROPEAN COMMUNITIES - REGIME FOR THE IMPORTATION, SALE AND DISTRIBUTION OF BANANAS
Document: Arbitration under Article 21.3(c) of the Understanding on Rules and Procedures Governing the Settlement of Disputes Award of the Arbitrator Said El-Naggar
Date: 7 January 1998
Document codes: WT/DS27/15
Complainant: Ecuador, Guatemala, Honduras, Mexico, U.S.
Respondent: EU
Third parties: Belize, Cameroon, Canada, Colombia, Costa Rica, Dominica, Dominican, Ghana, Grenada, India, Jamaica, Japan, Mauritius, Nicaragua, Panama, Philippines, Saint Lucia, Saint Vincent and the Grenadines, Senegal, Suriname, Venezuela, Côte d’Ivoire, Brazil, Madagascar
Dispute stage: Mutually Agreed Solution
Agreements cited: Art. I, II, III, X, XI, XIII  GATT 1994Art. 1, 3  Import LicensingArt. II, XVI, XVII  Services (GATS)Art. 2  Trade-Related Investment Measures (TRIMs)Art. 19  Agriculture

EUROPEAN COMMUNITIES - REGIME FOR THE IMPORTATION,
SALE AND DISTRIBUTION OF BANANAS
Arbitration
under Article 21.3(c) of the
Understanding on Rules and Procedures
Governing the Settlement of Disputes
Award of the Arbitrator
Said El-Naggar

I. Introduction
1. On 25 September 1997, the Dispute Settlement Body (the "DSB") adopted the Appellate Body
Report1 and the Panel Reports2, as modified, in European Communities - Regime for the Importation,
SaleandDistribution ofBananas, complaintby Ecuador, Guatemala, Honduras, Mexico and the United
States (the "Complaining Parties"). On 16 October 1997, the European Communities informed the
DSB, pursuant to Article 21.3 of the Understanding on Rules and Procedures Governing the Settlement
of Disputes (the "DSU"), that it would fully respect its international obligations with regard to this
matter.3 At the same meeting, the European Communities stated that -- while intending to act
expeditiously -- it would, in view of the complexity of the matter at issue, require a reasonable period
of time in which to examine all the options to meet its international obligations.4
2. On 24 October 1997, the European Communities requested consultations with the Complaining
Parties in order to reach agreement on a "reasonable period of time" for the implementation of the
recommendations andrulingsofthe DSBadoptedon25September1997. These consultations,however,
did not lead to an agreement. The Complaining Parties therefore requested, on 17 November 1997,
that the "reasonable period of time" be determined by binding arbitration pursuant to Article 21.3(c)
of the DSU.5
3. In the absence of an agreement between the parties on the appointment of an arbitrator within
10 days after referring the matter to arbitration, the Complaining Parties requested, on 1 December 1997,
the Director-General of the ("WTO") to appoint the arbitrator, as provided
for in footnote 12 to Article 21.3(c) of the DSU. After consultation with the parties, the Director-General
decided, on 8 December 1997, to appoint me as the Arbitrator.6 He indicated to the parties that, as
a Member of the Appellate Body, I would consult with the other Members of the Appellate Body in
accordance with its practice of collegiality.
1WT/DS27/AB/R.
2ComplaintbyEcuador, WT/DS27/R/ECU; Complaintby Guatemalaand Honduras, WT/DS27/R/GTM, WT/DS27/R/HND;
Complaint by Mexico, WT/DS27/R/MEX; Complaint by the United States, WT/DS27/R/USA.
3WT/DSB/M/38, p. 3.
4Ibid.
5WT/DS27/13, G/L/209, 20 November 1997.
6WT/DS27/14, 12 December 1997.

4. Written submissions were received from the European Communities and the Complaining Parties
on 15 December 1997, and an oral hearing was held on 17 December 1997. Consultations with the
other Members of the Appellate Body took place on 19 December 1997.
II. Arguments of the Parties
A. European Communities
5. In its written submission of 15 December 1997, the European Communities requests the
Arbitrator to set a "reasonable period of time", under Article 21.3(c) of the DSU, which would not
expire before 1 January 1999, i.e. a period of 15 months and one week. In justification of this request,
the European Communities notes that amending the existing EC import regime for bananas, as required
by the recommendations and rulings of the DSB, will be a difficult and complex task for a number
of reasons.
6. First, the European Communities points out that in amending its import regime for bananas,
it will have to strike a difficult balance between the co-existing international obligations under the
Marrakesh Agreement Establishing the World Trade Organization (the "WTO Agreement") and the
Fourth ACP-EC Convention of Lomé (the "Lomé Convention")7 with the aim of respecting both.
Furthermore, theEuropeanCommunitiesnotesthatamending itsimportregime forbananas willre-open
the lengthy discussion between the Member States of the European Union on many of the issues that
had been agreed in 1993 when the different national banana markets were transformed into a single
Community-wide market.
7. Secondly, the European Communities explains that the amendment of its banana import regime
will require setting in motion a complex legislative procedure involving: the European Commission,
which has to submit a proposal for the necessary changes; the European Parliament, which will need
to give its opinion on the proposed changes; and the Council of the European Union, which will decide
on the changes, either by qualified majority or by unanimity, depending on whether or not it follows
the proposal of the Commission. The European Communities also notes that once the amended basic
7Signed in Lomé, 15 December 1989, as revised by the Agreement signed in Mauritius, 4 November 1995.

legislation is adopted by the Council, the European Commission will still need to adopt implementing
legislation to make the new import regime operational.
8. Thirdly, the European Communities refers to the fact that Article 12 of the Lomé Convention
imposes a legal obligation on the European Communities to consult the ACP States8 "where [it] intends ...
to take a measure which might affect the interestsof the ACP States as far as this Convention's objectives
are concerned". This obligation to consult certainly applies, in the view of the European Communities,
to an amendment of the banana importregime. The European Communities maintains thatits legislative
procedure will therefore have to allow enough time to consider the observations made by the ACP
States before any final decision on the new banana import regime is taken.
9. Fourthly, the European Communities notes that under its administrative practice, any change
in legislation which directly affects the customs treatment of products in connection with importation
or exportation, enters into force either on 1 January or 1 July of the relevant year. This practice reflects,
according to the European Communities, internal management needs and the economic interests of
the operators on the market to operate under orderly and predictable procedures.
10. Finally, the European Communities argues that an advance notice with a reasonable lead time
of any major changes in legislation should be given to permit those involved in the banana supply chain
to make the necessary adjustments to their planning and logistics.
11. The European Communities notes that, for all the above reasons, the "reasonable period of
time" it proposes is already a tight schedule that will require a great deal of discipline and cooperation
together with a constructive approach at all levels.
12. At the oral hearing on 17 December 1997, the European Communities made it clear that the
"reasonable period of time" it requests, i.e. until 1 January 1999, is for the purpose of implementing
all the recommendations and rulings of the DSB adopted on 25 September 1997 in .
8The term "ACP States" refers to the African, Caribbean and Pacific States which are parties to the Lomé Convention.

B. Complaining Parties
13. The Complaining Parties note that their request to determine the "reasonable period of time"
through binding arbitration followed extensive attempts to reach an agreement with the European
Communities on this matter, and that these attempts failed because the European Communities was
unwilling to confirm that it intends to use the "reasonable period" in order to fully implement the
recommendations and rulings of the DSB. The Complaining Parties argue that a "reasonable period
of time", within the meaning of Article 21.3(c), is a limited right that arises only for the purpose of
implementation. In their opinion, a defending Member which refuses to state its intention to implement
the relevant DSB recommendations and rulings should not be entitled to a "reasonable period of time".
The Complaining Parties believe that of all the "particular circumstances" which an arbitrator should
considerwhen decidingon a "reasonable periodof time", the mostimportant mustbe whether a Member
has stated its intention to comply with the recommendations and rulings of the DSB. Accordingly,
the Complaining Parties argue that the Arbitrator should conclude that the European Communities is
not entitled to the "reasonable period of time", provided for in Article 21.3(c), since it has not clearly
indicated its intention to fully implement the recommendations and rulings of the DSB.
14. In their written submission of 15 December 1997, the Complaining Parties argue, in the
alternative, that even if in the course of the arbitration proceedings the European Communities would
state its intention to implement the recommendations and rulings of the DSB, the "reasonable period
of time" of 15 months and one week, requested by the European Communities, is excessive. They
submit that the European Communities overstates the period of time needed to implement the
recommendations and rulings of the DSB. The Complaining Parties note that most banana measures
found to be WTO-inconsistent were implemented through Commission regulations, which can be amended
through simple and rapid procedures, separate from the amendment of Regulation 404/93 on the common
organization of the market in bananas, which requires action by the Council. Furthermore, the
Complaining Parties note that it took the European Communities less than six months to adopt Council
Regulation404/93after theEuropeanCommission hadsubmitteditsproposaltotheCouncil. According
to them, the current task of amending Regulation 404/93 to make it WTO-consistent is far less
challenging than it was to adopt that Regulation in 1993 in the first place. Finally, the Complaining
Parties submitthatthe EuropeanCommission oftenprepares implementinglegislationwhileitsproposal
for basic legislation is still pending before the Council. Thus, the adoption of implementing legislation
by the Commission, they argue, can be carried out shortly after the adoption of the basic legislation
by the Council.

15. The Complaining Parties submit that the assertion by the European Communities that the
"controversial" nature of the issue requires a more prolonged procedure should be disregarded. In
their opinion, an arbitrator's enquiry must avoid the issue of what implementation period would be
acceptable to domestic political constituencies, and examine instead the "practicable" time needed to
accomplish the legislative and regulatory changes involved. Under the circumstances of this case,
the Complaining Parties argue that full implementation of the recommendations and rulings of the
DSB is "practicable" by 1 July 1998, i.e. within nine months.
16. Ecuador, Guatemala, Honduras and Mexico also argue that Articles 21.2, 21.7 and 21.8 of
the DSUrequire thatspecial attentionbe paidtomattersaffecting the interestsof complainingdeveloping
country Members with respect to measures that have been subject to dispute settlement. In their reply
to my question, whether the interests of other developing countries, and in particular the banana
producing ACP States, were not also affected, Ecuador, Guatemala, Honduras and Mexico maintained
thattheirinterestscarrygreaterweightsincetheyare requestingtheimplementationofaWTO-consistent
import regime. Finally, the developing country Complaining Parties point out that the country allocations
and export certificates provided for in the Framework Agreement on Bananas9 were implemented by
Commission, not Council, regulation and could, therefore, be amended easily.
17. In its closing remarks at the oral hearing, the United States, speaking on behalf of the
Complaining Parties, noted the statement made by the European Communities during the oral hearing
that it intends to implement all the recommendations and rulings of the DSB within the "reasonable
period of time" it has requested, i.e. by 1 January 1999.
III. Award
18. Article 21.1 of the DSU stipulates that "prompt compliance with recommendations or rulings
of the DSB is essential in order to ensure effective resolution of disputes to the benefit of all Members".
This obligation is further elaborated in Article 21.3 of the DSU, where it is provided that "[i]f it is
impracticable to comply immediately with the recommendations and rulings, the Member concerned
shall have a reasonable period of time in which to do so". When the "reasonable period of time" is
determined throughbindingarbitration,as providedfor underArticle 21.3(c) of the DSU, thisprovision
9Marrakesh Protocol to the General Agreement on Tariffs and Trade 1994, Schedule LXXX - European Communities,
pp. 16373-16377.

states that a "guideline" for the arbitrator should be that the "reasonable period of time" should not
exceed 15 months from the date of the adoption of a panel or Appellate Body report. Article 21.3(c)
of the DSU also provides, however, that the "reasonable period of time" may be shorter or longer
than 15 months, depending upon the "particular circumstances".
19. The Complaining Parties have not persuaded me that there are "particular circumstances" in
this case to justify a shorter period of time than stipulated by the guideline in Article 21.3(c) of the
DSU. At the same time, the complexity of the implementation process, demonstrated by the European
Communities, would suggest adherence to the guideline, with a slight modification, so that the
"reasonable period" of time for implementation would expire by 1 January 1999.
20. Therefore, I conclude that, pursuant to Article 21.3(c), the "reasonable period of time" for
the European Communities to implement the recommendations and rulings of the DSB adopted on 25
September 1997 in , shall be the period from 25 September 1997 to 1 January 1999.
Signed in the original, at Geneva, this 23rd day of December 1997 by:
Said El-Naggar