EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES
Document: ARB-2004-1/17 Arbitration under Article 21.3(c) of the Understanding on Rules and Procedures Governing the Settlement of Disputes
Date: 20 September 2004
Document codes: WT/DS246/14
Complainant: India
Respondent: EU
Third parties: Bolivia, Plurinational State of, Brazil, Colombia, Costa Rica, Cuba, Ecuador, El Salvador, Guatemala, Honduras, Mauritius, Nicaragua, Pakistan, Panama, Paraguay, Peru, Sri Lanka, Venezuela, U.S.
Dispute stage: Appellate Body
Agreements cited: Art. I:1  GATT 1994

EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING
OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES

ARB-2004-1/17

Arbitration
under Article 21.3(c) of the
Understanding on Rules and Procedures
Governing the Settlement of Disputes

Award of the Arbitrator
John Lockhart

AWARD OF THE ARBITRATOR

Parties:

European Communities
India

 ARB-2004-1/17

 Arbitrator:

 John Lockhart

I. Introduction
1. On 20 April 2004, the Dispute Settlement Body (the "DSB") adopted the Appellate Body
Report
1 and the Panel Report 2, as modified by the Appellate Body Report, in (" EC –
 Tariff Preferences").3 At the DSB meeting of 19 May 20 04, the European Communities confirmed
its intention to implement the recommendations and ruli ngs of the DSB in this dispute and stated that
it would require a "reasonable period of time" in which to do so, pursuant to Article 21.3 of the
Understanding on Rules and Procedures Governing the Settlement of Disputes (the "DSU").4
2. On 16 July 2004, India informed the DSB that consultations with the European Communities
had not resulted in agreement on the reasonable peri od of time for implementation. India therefore
requested that such period be determined by binding arbitration, in accordance with Article 21.3(c) of
the DSU.5
3. The European Communities and India were unable to agree on an arbitrator within 10 days of
the matter being referred to arbitration. Therefore, on 26 July 2004, India requested that the Director-
General appoint an arbitrator pursuant to footnote 12 to Article 21.3(c) of the DSU. The Director-

1Appellate Body Report, WT/DS246/AB/R.
2Panel Report, WT/DS246/R.
3WT/DS246/10.
4WT/DSB/M/169, para. 34.
5WT/DS246/12.

General appointed me as arbitrator on 4 August 2004, after consulting the parties.
6 I informed the
parties of my acceptance of the appointment by letter dated 6 August 2004.
4. The European Communities and India have agreed that this award will be deemed to be an
arbitration award under Article 21.3(c) of the DSU, notwithstanding the expiry of the 90-day period
stipulated in Article 21.3(c). 7 The parties have also agreed, pursu ant to Article 21.4 of the DSU, that
"exceptional circumstances" in this dispute justify the determination of the reasonable period of time
more than 18 months after the establishment of the Panel.8
5. The European Communities and India provided their written submissions to me on
18 August 2004. I requested additional informati on from the European Communities by letter dated
24 August 2004, and the European Communities provided a written response on 1 September 2004. 9
An oral hearing was held on 2 September 2004.
II. Arguments of the Parties
A. European Communities
6. The European Communities requests that I dete rmine the "reasonable period of time" for
implementation of the recommendations and rulings of the DSB in this dispute to be 20 months and
10 days from the date of adoption by the DSB of the Panel and Appellate Body Reports, which it
calculates as being "until 1 January 2006".10
7. The European Communities descri bes the "general standard" for determining the reasonable
period of time under Article 21.3(c) of the DSU as that set out in the Award of the Arbitrator in EC –
Hormones. That is, the reasonable period of time "shoul d be the shortest period possible within the
legal system of the Member to implement the recommendations and rulings of the DSB". 11 T h e
European Communities submits that subsequent arbitrators have confirmed that this standard does not

6WT/DS246/13.
7The 90-day period following adoption of the Panel and Appellate Body Reports expired on
19 July 2004.
8The Panel was established on 27 January 2003. (WT/DS246/5)
9"Responses of the European Communities to the Advance Questions of the Arbitrator",
1 September 2004.
10European Communities' submission, paras. 2 and 43. In response to questioning at the oral hearing,
the European Communities indicated that it calculates the reasonable period of time in the following manner:
the period begins to run on 21 April 2004 (that is, the day after the adoption of the Panel and Appellate Body
Reports); 20 months and 10 days later is 31 December 2005; the period ends at "zero hours" on
1 January 2006.

require the use of "an expeditious or extraordinary legislative procedure" 12 and that the particular
circumstances of implementation need to be consid ered, including: the nature of the implementing
measure as legislative and/or administrative; the legislative complexity of the implementing measure;
the intricacy of the lawmaking process; and "whe ther the measure concerned is so fundamentally
integrated into the domestic system that opposition to changes reflects a serious debate". 13 T h e
European Communities maintains that each of these particular circumstances is relevant to this
arbitration.
8. The European Communities contends that th e "legislative task" of implementing the
recommendations and rulings in this dispute is "v ery complex" because of "the intricacy of the
Appellate Body findings". 14 According to the European Comm unities, implementation will require
the following two steps, in turn:
(a) First, modification of the special arrangements to combat drug production and
trafficking (the "Drug Arrangements") contained in the European Communities'
existing Generalized System of Preferences ("GSP") scheme, which is embodied in
Council Regulation (EC) No. 2501/2001 of 10 December 2001 ("Regulation 2501").
15
The European Communities submits that, as th e current GSP scheme is due to expire
on 31 December 2005 16, it is "[m]ost logical" for the modification of the Drug
Arrangements to coincide with the adopti on of a new GSP scheme "in order to avoid
any gap for granting the additional tariff preferences to affected beneficiary
developing countries". 17 The European Communities highlights the "practical
absurdity" of modifying the Drug Arrangements and then, shortly after, adopting a
new GSP scheme.
18

12European Communities' submission, para. 6.
13Ibid., para. 7, referring to Award of the Arbitrator, Chile – Price Band System, para. 48.
14Ibid., para. 10.
15Official Journal of the European Communities, L Series, No. 346 (31 December 2001), p. 1. (Exhibit
EC-1 submitted by the European Communities to the Arbitrator)
16Council Regulation (EC) No. 2 211/2003 of 15 December 2003, Official Journal of the European
Union, L Series, No. 332 (19 December 2003), p. 1. (Exh ibit EC-2 submitted by the European Communities to
the Arbitrator)
17"Responses of the European Communities to the Advance Questions of the Arbitrator",
1 September 2004, p. 5.
18European Communities' statement at the oral hearing.

(b) Secondly, selection of the developing country beneficiaries under special or
additional arrangements to address particular development needs within the new GSP
scheme, taking into account the interests of the current beneficiaries of the Drug
Arrangements in accordance with Article 21.2 of the DSU. The European
Communities maintains that it can only comply with Article 21.2 and ensure "that all
developing countries which have similar development needs continue to enjoy special
tariff preferences" if the step of selecting beneficiaries is included in the calculation
of the reasonable period of time.
19 The European Communities supports its argument
by stating that "the Appellate Body explicitly acknowledged that developing
countries with special needs might enjoy additional tariff preferences".20
9. According to the European Communities, the fi rst step in implementation will involve the
adoption by the Council of the European Union (t he "Council") of a regulation to modify the Drug
Arrangements and, concurrently, establish a new GSP scheme (the "Council Regulation"). 21 T h i s
process will involve several steps, which the European Communities describes as follows:
(a) Proposal by the Commission of the European Communities (the "Commission")
 The Commission is a "political body" with "the exclusive right of legislative initiative". 22 The
Commission began discussing the recommendations and rulings in the present dispute shortly
after they were adopted, and it subsequently issued guidelines on this matter as part of a
communication to the Council and other relevant institutions regarding the new GSP scheme
to commence in 2006.
23 The next step is for the Commission services 24 to prepare a proposal
for presentation to the Commissioners, taking into account the views expressed by "all
relevant stakeholders"
25 on the initial communication to th e Council. The cabinet of each

19European Communities' submission, para. 14.
20Ibid., para. 13.
21Ibid., para. 12, as clarified by the European Communities at the oral hearing.
22Ibid., para. 17.
23Communication from the Commission to the Council, the European Parliament and the European
Economic and Social Committee, Developing countries, international trade and sustainable development: the
function of the Community's generalised system of preferences (GSP) for the ten-year period from 2006 to 2015,
COM(2004) 461 final, 7 July 2004, pp. 6, 9, and 10. (Exhibit EC-5 submitted by the European Communities to
the Arbitrator)
24In response to questioning at the oral hearing, the European Communities explained that the
Commission "services" are similar to ministries or agencies of the Commission.
25European Communities' statement at the oral hearing.

Commissioner26 conducts a "political review" 27 of the proposal, and then the Commissioners
adopt the proposal by majority vote. The propo sal is then translated into the 20 official
languages and transmitted to the Council. The European Communities estimates that the
Commission could adopt a proposal regarding the Council Regulation in October 2004.
(b) Opinion of the European Parliament on the Commission's proposal
The European Parliament is the "co-legislat or" of the European Communities, comprising
"representatives of the peoples of Member States". 28 According to "established practice" 29
and in the light of a Framework Agreement between the European Parliament and the
Commission30, the Council consults the European Par liament on "all trade matters unless they
are confidential or of minimal political or economic importance". 31 The Council "normally"32
delays consideration of a proposal by th e Commission regarding such matters until the
European Parliament has provided an opinion on the proposal. Previously, the European
Parliament has given its opinion on "the most important ... regulations" 33 concerning the
European Communities' GSP scheme.
The relevant committee of the European Par liament examines the proposal and hears from
"representatives of the Commission or other re levant economic and political stakeholders". 34
The committee then adopts a report and submits it to the European Parliament, sometimes
including suggested amendments to the pr oposal. The "full European Parliament
Assembly"35, which usually meets monthly, votes on the committee's report. The report is
then translated into the 20 official languages and transmitted to the Council as an opinion of
the European Parliament. The European Communities estimates that the European Parliament
could provide to the Council its opinion on th e Commission's proposal regarding the Council
Regulation in January 2005.

26In response to questioning at the oral hearing, the European Communities explained that the cabinet
of a Commissioner is similar to a "private office" of the Commissioner, comprising four to six individuals
working under the Commissioner's authority.
27European Communities' submission, para. 17.
28Ibid., para. 18.
29Ibid., para. 20.
30Official Journal of the European Communities , C Series, No. 121 (24 April 2001), p. 122.
(Exhibit EC-7 submitted by the European Communities to the Arbitrator)
31European Communities' submission, para. 20.
32Ibid.
33Ibid., para. 22.
34Ibid., para. 21.
35Ibid.

(c) Opinion of the Economic and Social Committee (the "ECOSOC") on the
Commission's proposal
The ECOSOC is an "advisory body" 36 comprising "representatives of the various economic
and social components of organised civil society". 37 In the light of a "Cooperation Protocol"
agreed between the Commission and the ECOSOC 38, the Council has always sought an
opinion from the ECOSOC about proposals concerning the European Communities' GSP
scheme. The European Communities estimates that the ECOSOC could provide to the
Council its opinion on the Commission's propo sal regarding the Council Regulation in
January 2005.
(d) Adoption of the Council Regulation
The Council comprises representatives of the member States of the European Union at
ministerial level, with votes weighted according to size. 39 Various Council working groups
and the Committee of the Permanent Representa tives of the Member States ("Coreper")
prepare the Council's decision to adopt a regulation based on the Commission's proposal,
taking into account any opinions provided by the European Parliament or the ECOSOC. The
Council then votes to adopt the decision. The Council must adopt the decision unanimously
if, on its own, it changes the proposal originally presented by the Commission.
40 This would
rarely occur, however, because in practice th e Council changes the proposal in consultation
with the Commission. Thus, the Council would normally adopt the decision by qualified
majority. As from 1 January 2005, a member State of the Council may request verification
that the decision was taken by at least 62 pe r cent of the total population of the European
Union. If not, the decision is not adopted. 41 The European Commun ities estimates that the

36European Communities' submission, para. 23.
37Treaty Establishing the European Community, Art. 257, Official Journal of the European
Communities, C Series, No. 325 (24 December 2002), p. 136. (Exhibit EC-10 submitted by the European
Communities to the Arbitrator)
38European Communities' submission, para. 24, referring to Exhibit EC-11 submitted by the European
Communities to the Arbitrator.
39Ibid., para. 26, referring to the Treaty Establishing the European Community, Art. 205, Official
Journal of the European Communities, C Series, No. 325 (24 December 2002), p. 118 (Exhibit EC-15 submitted
by the European Communities to the Arbitrator), "in conjunction with" the Protocol on the Enlargement of the
European Union, Art. 3, Official Journal of the European Communities, C Series, No. 325 (24 December 2002),
p. 164. (Exhibit EC-17 submitted by the European Communities to the Arbitrator)
40Treaty Establishing the European Community, Art. 250(1), Official Journal of the European
Communities, C Series, No. 325 (24 December 2002), p. 132. (Exhibit EC-16 submitted by the European
Communities to the Arbitrator)
41Protocol on the Enlargement of the European Union, Art. 3, Official Journal of the European
Communities, C Series, No. 325 (24 December 2002), pp. 164 and 165. (Exhibit EC-17 submitted by the
European Communities to the Arbitrator)

Council Regulation could be adopted in May 2005 and that it would then enter into force after
it is signed by the President of the Council and published in the Official Journal of the
European Union.
10. According to the European Co mmunities, the second step in implementation will involve the
adoption by the Commission of a regulation identify ing the beneficiaries of special or additional
arrangements to address particular development needs under the new GSP scheme (the "Commission
Regulation"). The Commission Regulation will implement the Council Regulation by providing
instructions to customs authorities indicating wh ich countries are to benefit from the special or
additional arrangements under the new GSP scheme. The Commission Regulation will be adopted in
accordance with a specific regulatory procedure 42, which the European Communities describes as
follows:
(a) Proposal by the Commission
The Commission submits a proposal for the Commission Regulation to a regulatory
committee comprising member States' representa tives. The European Communities estimates
that the Commission could submit such a proposal in September 2005.
(b) Adoption of the Commission Regulation
If the regulatory committee votes in favour of th e proposal, the Commission adopts by simple
majority the Commission Regulation proposed. The European Communities estimates that
the committee could complete deliberations on th e proposal in October 2005 and that, if the
committee approves, the Commission could adopt the Commission Regulation in
November 2005.
If the regulatory committee votes against the proposal or does not provide an opinion, the
Commission submits the proposal to the Council and informs the European Parliament. The
Council may adopt a regulation based on the prop osal by qualified majority within three
months. If the Council neither adopts the proposal nor indicates its opposition to the proposal
within this three-month period, the Commission adopts the proposed Commission Regulation.
If the Commission submits the proposal to the Council, the European Communities estimates
that the selection of beneficiaries will be delayed by approximately six or seven months.

42Council Decision of 28 June 1999, Art. 5, Official Journal of the European Communities , L Series,
No. 184 (17 July 1999), p. 25. (Exhibit EC-18 submitted by the European Communities to the Arbitrator)

(c) Publication of the Commission Regulation

The Commission Regulation is published in the Official Journal of the European Union .
According to "established practice", regulations that must be implemented by the customs
authorities, such as the Commission Regulation, "should normally" be published at least six
weeks before they enter into force.
43
(d) Entry into force of the Commission Regulation
Regulations to be implemented by the customs authorities, such as the Commission
Regulation, enter into force on 1 January in any year, or "exceptionally" on 1 July.44
11. The European Communities points to several a dditional factors that it argues may delay the
completion of the steps for implementation described above. First, the decision-making process "has
become more cumbersome and time consuming since the enlargement of the European Union from 15
to 25 Member States on 1 May 2004". 45 Secondly, the European Communities indicates that the
current Commission will present a legislative proposal "as soon as possible" 46, but that a new
Commission will take over from 1 November 2004. The new Commission will have to discuss the
proposal with the European Parliament and the Council. Thirdly, the European Communities explains
that a new European Parliament was elected in June 2004.
12. Finally, the European Communities states that "the Drug Arrangements are an integral and
essential part of its development policy". 47 According to the European Communities, preferences of
the kind provided under the Drug Arrangements were first granted to four countries in 1990 and have
subsequently been extended to other countries. The European Communities submits that the Drug
Arrangements reflect its consistent approach of supporting "alternative trade possibilities ... to break
the vicious circle of drug [addic tion] and development problems". 48 According to the European
Communities, changes to the Drug Arrangements w ill be politically sensitive and subject to "very
close scrutiny by the relevant stakeholders" 49, particularly because of the implications for several
developing countries. The European Communities sugg ests that this could increase the time taken to

43European Communities' submission, para. 36, referring to Council Resolution of 27 June 1974,
Official Journal of the European Communities , C Series, No. 79 (8 July 1974), p.1. (Exhibit EC-19 submitted
by the European Communities to the Arbitrator)
44Ibid.
45Ibid., para. 29.
46Ibid., para. 30.
48European Communities' submission, para. 41.
49Ibid., para. 42.

reach a solution because, for example, further discu ssions with the member States of the European
Union and among various bodies of the European Communities will be required. The European
Communities refers to the Award of the Arbitrator in Chile – Price Band System 50 to support its
contention that I should take this circumstance in to account in determining the reasonable period of
time for implementation.
B. India
13. India requests that I determine the "reasonabl e period of time" for implementation of the
recommendations and rulings of the DSB in this dispute to be no more than six months and two weeks
from the date of adoption by the DSB of the Panel and Appellate Body Reports, so that the period
would expire no later than 3 November 2004.51
14. India submits that the implementation period in this dispute should be the shortest period
possible within the legal system of the European Communities. 52 India argues that the European
Communities has the burden of proving that immediat e implementation is impracticable and that the
period of time proposed by the European Communitie s is reasonable in view of the particular
circumstances of this case; also, the European Communities must prove that the period proposed is
the shortest period possible within the legal system of the European Communities. India argues that
this burden is increased if the period proposed is longer than 15 months.
15. India recognizes that it is not the Arbitrator's task to determine the means by which the
European Communities implements the relevant re commendations and rulings. Nevertheless, India
submits that "the European Communities is not f aced with the problem of choosing between various
implementing measures". 53 Furthermore, India argues that the "intricacy of the Appellate Body's
findings" is not relevant to the determin ation of the reasonable period of time. 54 India refers to
Articles 3.7 and 21.1 of the DSU to demonstrate that the European Communities must comply
promptly with the recommendations and rulings of the DSB, either by withdrawing the measure found
to be inconsistent with the covered agreements , or by amending that measure to remove the
inconsistency.

50Award of the Arbitrator, Chile – Price Band System, para. 48.
51India's submission, para. 66.
52Ibid., paras. 2 and 43-44, referring to Award of the Arbitrator, EC – Hormones, para. 26 and Award
of the Arbitrator, US – Offset Act (Byrd Amendment), para. 44.
53Ibid., para. 3.
54India's statement at the oral hearing.

16. India emphasizes that the measure that th e European Communities must bring into
conformity, in implementing the recommendations and rulings of the DSB in this dispute, is the
measure that the Panel and Appellate Body found to be inconsistent with the European Communities'
obligations under the covered agreements. India notes that the European Communities is working on
a new GSP scheme for the years 2006 to 2015 and that the Commission has referred to the Appellate
Body Report in EC – Tariff Preferences in relation to this new scheme.
55 However, India maintains
that the present arbitration relates to only one co mponent of the European Communities' GSP scheme,
namely the Drug Arrangements. India argues that a "wholesale review" 56 of the European
Communities' GSP scheme is not necessary to implem ent the relevant recommendations and rulings,
and therefore it is not relevant to the dete rmination of the reasonable period of time for
implementation that the European Communities may wish to "work on the larger task of revising its
general GSP Scheme". 57 India also contends that the availability of various options for
implementation is not a "particular circumstance" relevant to the determination of the reasonable
period of time for implementation.58
17. According to India, in order to implement the recommendations and rulings of the DSB, the
European Communities needs to bring the Drug Arrange ments into conformity with Article I:1 of the
General Agreement on Tariffs and Trade 1994 (the "GATT 1994"). Thus, India states, the reasonable
period of time does not encompass the time required for the European Communities to demonstrate
that the Drug Arrangements are justified under the Enabling Clause or any other exception.
18. India refers to conclusions by previous arb itrators that the steps that the implementing
Member takes towards implementation in the period between adoption of the relevant reports and an
arbitration under Article 21.3(c) of the DSU are re levant in determining the reasonable period of time
for implementation.
59 India argues that the European Communities has had "ample time to initiate
and complete the preliminary phase of adopting implementing legislation".60

55Communication from the Commission to the Council, the European Parliament and the European
Economic and Social Committee, Developing countries, international trade and sustainable development: the
function of the Community's generalised system of preferences (GSP) for the ten-year period from 2006 to 2015,
7 July 2004, p. 5. (Exhibit India-3 submitted by India to the Arbitrator)
56India's submission, para. 31.
57Ibid., para. 32, referring to Award of the Arbitrator, Argentina – Hides and Leather and Award of the
58Ibid., para. 34, referring to Award of the Arbitrator, US – Offset Act (Byrd Amendment), para. 59.
59India's submission, paras. 37 and 38, referring to Award of the Arbitrator, Chile – Price Band
System, para. 43 and Award of the Arbitrator, US – Section 110(5) Copyright Act, para. 46.
60Ibid., para. 36. (original emphasis)

19. India states that, in order to implement the recommendations and rulings of the DSB, the
European Communities will have to withdraw th e Drug Arrangements or amend Regulation 2501
according to the procedure set out in Article 133 of the Treaty Establishing the European Community.
According to India, the bodies involved in this procedure are the Commission and the Council, and
"there is no requirement for ot her institutions of the European Communities to be consulted".
61 India
also maintains that the European Communities is able to implemen t measures expeditiously because
of the flexibility in its legislative system and th e absence of "specified timeframes" for completion of
each step.62
20. India describes the specific steps required for the European Communities to implement the
recommendations and rulings of the DSB in this dispute as follows:
(a) Adoption of proposal by the Commission
India contends that the Commission is able to adopt a proposal as soon as it is drafted and to
transmit the proposal to the Council on the day of adoption. India states that the European
Communities indicated before the Panel that cr iteria for the selection of beneficiaries under
the Drug Arrangements already existed, even thou gh they were not published. Therefore, the
Commission does not need time to develop such criteria. According to India, the Commission
has indicated in a press statement that it w ill transmit its proposal regarding the European
Communities' GSP scheme to the rele vant institutions by October 2004.
63 India infers from
this that the Commission has already drafte d a proposal to implement the recommendations
and rulings of the DSB. Moreover, India argues that the European Communities would
require no more than one further month in whic h to refine and adopt a proposal and present it
to the Council. This would make a total of five months from the date on which the DSB
adopted the Panel and Appellate Body Reports in this dispute.

61India's submission, para. 47.
62Ibid., para. 48.
63Ibid., para. 29, referring to "Developing countries: Commission unveils system of trade preferences
for next ten years – simple, transparent and objective", IP/04/860, 7 July 2004, p. 2. (Exhibit India-4 submitted
by India to the Arbitrator)

(b) Adoption of Commission's proposal as a Council regulation

India states that, in the Council, the Commission's proposal will be considered by Coreper, the
committee established under Article 207 of the Treaty Establishing the European Community.
India reiterates that the Council is "not lega lly obliged" to consult either the European
Parliament or the ECOSOC and that, if it does choose to seek opinions from those institutions,
these opinions are "not binding on the Council".
64 India also argues that the Council is able to
consult the European Parliament and the EC OSOC at the same time as the Council is
discussing the Commission's proposal and, theref ore, no additional time is needed for such
consultation. Following Coreper's discussion of the Commission's proposal, the relevant
"measure"
65 is placed on the agenda of the next monthly Council meeting for adoption by
qualified majority. After adoption, according to India, the President of the Council signs the
measure and the measure is published in the Official Journal of the European Communities .
India submits, with reference to the time taken to adopt previous Council regulations
amending Regulation 2501, that the Council is able to consider a proposal by the Commission
and to enact it within one month and two week s, whether or not the Council consults the
European Parliament and the ECOSOC.
21. India contests the European Communities' suggestion that the selection of beneficiaries
should be considered in determin ing the reasonable period of time in this dispute. Rather, India
maintains that only the "framework regulation" 66 of the Council, modifying or withdrawing the Drug
Arrangements, is required to implement the r ecommendations and rulings of the DSB. Any
subsequent selection of countries would simply be part of the implemen tation of the Council's
framework regulation.
22. India rejects the European Communities' contentio n that translation delays and changes in the
composition of the European Parliament and the Co mmission are relevant to the reasonable period of
time for implementation. Moreover, according to In dia, arbitrators under Article 21.3(c) of the DSU
have repeatedly held that mere contentiousness of implementation measures is not relevant to the
determination of the reasonable period of time. India challenges the European Communities' reliance
on the Award of the Arbitrator in Chile – Price Band System . India argues that Chile – Price Band
System involved the removal of "trade advantages enjoyed by [the] broader domestic constituency" of

64India's submission, para. 57.
65Ibid., paras. 58 and 59.
66India's comments at the hearing on the "Responses of the European Communities to the Advance
Questions of the Arbitrator", 1 September 2004.

the implementing Member, which gave rise to "domestic opposition" and "serious debate" 67; the
situation in the present dispute is quite different.
23. Finally, India argues that the Drug Arrangements "affect the interests of many developing
country Members, including India".68 Therefore, according to India, Article 21.2 of the DSU requires
the European Communities to "accord the highest priority to bringing the Drug Arrangements ... into
conformity with its obligations under the GATT 1994". 69 India indicates that the developing country
Members whose interests are to be taken into account under Article 21.2, when read in context, are
the parties to the dispute, and not third parties or any other Members. Moreover, even if Article 21.2
referred to all developing country Members, India ma intains that the interests of India and all other
developing country Members that are not beneficiaries of the Drug Arrangements would prevail to the
extent that they conflict with the interests of the 12 beneficiaries.
III. Reasonable Period of Time
A. General Principles
24. Article 21.3 of the DSU provides that an im plementing Member sha ll have a "reasonable
period of time" in which to comply with the r ecommendations and rulings of the DSB in a given
dispute "[i]f it is impracticable to comply immediat ely". Pursuant to Articles 21.3(a) and 21.3(b), the
reasonable period of time may be a period proposed by the implementing Member and approved by
the DSB or, in the absence of such approval, a period of time mutually agreed by the parties to the
dispute within a specified time period. In th e present dispute, no approval was obtained under
Article 21.3(a) and no agreement was reached under Article 21.3(b) . Accordingly, pursuant to
Article 21.3(c) of the DSU and the agreement of the parties, it is my task as Arbitrator to determine
the "reasonable period of time" for the European Communities to implement the recommendations
and rulings of the DSB in EC – Tariff Preferences.
25. In determining the reasonable period of time for implementation, I am guided by several
provisions of the DSU, including Article 21 in particular. To begin with, Article 21.1 provides that
"[p]rompt compliance with recommendations or rulings of the DSB is essential in order to ensure

67India's statement at the oral hearing.
68India's submission, para. 65.
69Ibid.

effective resolution of disputes to the benefit of all Members".
70 This is consistent with the
expectation in Article 21.3, as me ntioned above, that compliance will be immediate, unless this is
impracticable. In addition, Article 21.3(c) provides a specific "guideline for the arbitrator", which is
that the reasonable period of time "should not exceed 15 months from the date of adoption of a panel
or Appellate Body report", alt hough this period "may be shorte r or longer, depending upon the
particular circumstances".
26. Reading Article 21.3(c) together with Article 21.1, and referring for guidance to the Awards
issued in previous arbitrations under Article 21.3( c), it is clear that the reasonable period of time
should be "the shortest period possible within th e legal system of the Member to implement the
relevant recommendations and rulings of the DSB", in the light of the "particular circumstances" of
the dispute.71 Both parties to this arbitration concur with this general approach.72
27. India has argued that the implementing Memb er—in this case, the European Communities—
bears the burden of demonstrating that the period it proposes is reasonable and that "the already great
burden becomes even greater" if th is period is more than 15 months. 73 In my view, the European
Communities must demonstrate that the period it proposes is reasonable; but I do not find it necessary
in this arbitration to determine whether the burden of proof becomes greater if the period proposed is
more than 15 months. I have found the evidence and arguments presented by both the European
Communities and India very helpful in determining wh ether, in the particular circumstances of this
case, the period of time for implementation should be 15 months or a shorter or longer period.
28. Against this background, I now turn to a di scussion of the measure to be brought into
conformity.

70See also Article 3.3 of the DSU, which provides:
The prompt settlement of situations in which a Member considers that any
benefits accruing to it directly or indi rectly under the covered agreements are
being impaired by measures taken by another Member is essential to the
effective functioning of the WTO and the maintenance of a proper balance
between the rights and obligations of Members.
71Award of the Arbitrator, Chile – Price Band System , para. 34, citing Award of the Arbitrator, US –
1916 Act, para. 32. See also Award of the Arbitrator, US – Offset Act (Byrd Amendment), para. 42.
72European Communities' submission, paras. 5 and 6; India's submission, paras. 19 and 20.
73India's statement at the oral hearing.

B. The Measure to be Brought into Conformity
29. The parties agree74 that the subject of the original dispute in EC – Tariff Preferences, and the
specific measure that the Panel and Appellate Body found inconsistent with the GATT 1994 75, was
the Drug Arrangements. 76 Accordingly, in implementing the recommendations and rulings of the
DSB in this dispute, the European Communities is required to bring the Drug Arrangements into
conformity with its WTO obligations. Neverthele ss, the European Commun ities argues that it would
be "impracticable" to dissociate the Drug Arra ngements from the European Communities' overall
GSP scheme by modifying the Drug Arrangements alone, given that the current GSP scheme
(including the Drug Arrangements) will be replac ed by a new GSP scheme from 1 January 2006.
Accordingly, the European Communities proposes to bring the Drug Arrangements into conformity as
part of its reform of the GSP scheme as a whole.77
30. It is, of course, beyond the scope of my mandate to determine how the European
Communities should implement the recommendations and ru lings of the DSB. It is for the European
Communities to choose the method of implementation, provided that the method chosen is consistent
with the relevant recommendations and rulings an d with the provisions of the covered agreements. 78
Within these limitations, the European Communities is thus entitled to bring the Drug Arrangements
into conformity through whatever method it deems a ppropriate, be it at the same time and within the
same instrument as its GSP scheme, or otherwise.
31. However, as the European Communities itsel f acknowledges, the relevant recommendations
and rulings of the DSB require the European Commun ities to bring into conformity solely the Drug
Arrangements, and not any other part of the Eur opean Communities' GSP scheme. Therefore, my
determination as to the reasonable period of time fo r implementation in this arbitration must have
regard only to the shortest period possible within the legal system of the European Communities to
bring the Drug Arrangements into conformity with its WTO obligations. The mere fact that the
European Communities has decided to incorporate the task of implementation within the larger

74European Communities' submission, para. 10, as clar ified at the oral hearing; India's submission,
para. 31, as clarified at the oral hearing.
75Panel Report, EC – Tariff Preferences , paras. 3.1 and 8.1(f); Appellate Body Report, EC – Tariff
Preferences, paras. 4 and 190(g).
76Supra, para. 8(a).
77European Communities' statement and response to questioning at the oral hearing.
78See, for example, Award of the Arbitrator, Korea – Alcoholic Beverages , para. 45; Award of the
Arbitrator, Chile – Price Band System , para. 32; and Award of the Arbitrator, US – Offset Act (Byrd
Amendment), para. 48. In addition, "[t]he choice and the timing of the detailed operating steps in enacting a new
law are properly left to the Member concerned". (Award of the Arbitrator, Chile – Alcoholic Beverages ,
para. 42)

objective of reforming its overall GSP scheme cannot lead to a determination of a shorter, or longer,
period of time. In other words, my task is no t to determine the reasonable period of time for
reforming the overall GSP scheme. Rather, my dete rmination must be confined to the reasonable
period of time for implementing the recommendations and rulings of the DSB with respect to the
Drug Arrangements.
32. India has pointed out
79 that the Arbitrator in Canada – Autos declined to take into account the
fact that "it might be more convenient for Canada to implement the DSB's recommendations in this
case on the same timeline as it has planned for the reform of its customs administration regime". 80 I
have reached a similar conclusion here with respect to the European Communities' argument as to the
practicability of associating the modification of th e Drug Arrangements with the replacement of the
overall GSP scheme.
33. Turning to a different but related matter, Indi a contends that the European Communities is
simply required to bring the Drug Arrangements in to conformity with "Article I:1 of the GATT". 81 I
note that the Appellate Body in EC – Tariff Preferences recommended that the DSB request the
European Communities to bring its inconsistent me asure "into conformity with its obligations under
the GATT 1994". 82 The Panel made a similar recommendation. 83 These recommendations are
consistent with Article 19.1 of the DSU, whic h provides for panels and the Appellate Body to
recommend that Members bring measures that are f ound "inconsistent with a covered agreement ...
into conformity with that agreement". Similarly, Article 22.1 of the DSU refers to implementation of
a recommendation to bring a measure "into confor mity with the covered agreements". These
provisions, and the recommendations and rulings of the DSB in this dispute, are contrary to India's
argument that the European Communities is simply required to bring the Drug Arrangements into
conformity with Article I:1 of the GATT 1994. A ccordingly, in determining the reasonable period of
time, I do not take this into account.

79India's submission, para. 32.
80Award of the Arbitrator, Canada – Autos, para. 55.
81India's statement at the oral hearing.
82Appellate Body Report, EC – Tariff Preferences, para. 191.
83"The Panel recommends that the Dispute Settlement Body request the European Communities to
bring its measure into conformity with its obligations under GATT 1994". (Panel Report, EC – Tariff
Preferences, para. 8.2)

C. Implementation Process
34. I now address the specific process through which the European Communities states that it will
comply with the recommendations and rulings of the DSB in this dispute, beginning with some
general observations about that process.
1. Overall Process
35. The European Communities asks me to determin e that the reasonable period of time for
implementation lasts until 1 January 2006, which is the same day that the European Communities
expects its new GSP scheme to enter into force.
36. As several previous arbitrators have noted 84, flexibility in a Member's legislative system may
enable the Member to effect a legislative amendmen t in a shorter period of time than might otherwise
be possible. In the present case, India submits that the European Communities' legislative system "is
characterised by considerable flexibility". 85 I agree, in the sense that no mandatory minimum time
periods are imposed for any particular step in th e implementation process as outlined by the European
Communities. The European Co mmunities has used this flexibility to modify Regulation 2501
(modifying or extending the GSP scheme) promptly in the past. 86 I take into account, as a relevant
matter, the flexibility in the Eur opean Communities' legislative system; but it does not, of itself,
determine the question of the reasonable period of time for implementation.
37. In this arbitration, the European Communitie s referred to the "intricacy" of the Appellate
Body's findings in EC – Tariff Preferences , arguing that they lead to complexity in the "legislative
task for implementation".87 I would not describe the Appellate Body's findings as "intricate"; nor am
I persuaded that they necessarily impose a complex implementation process or a complex

84Award of the Arbitrator, US – 1916 Act, para. 39; Award of the Arbitrator, Canada – Patent Term,
paras. 63 and 64.
85India's submission, para. 48.
86See, for example, Council Regulation (EC) No. 2211/2003 of 15 December 2003, Official Journal of
the European Union , L Series, No. 332 (19 December 2003), p. 1. (Exhibit EC-2 submit ted by the European
Communities to the Arb itrator) This regulation extended the GSP scheme to 31 December 2005 and amended,
among other things, the special incentive arrangements for the protection of labour rights. India relies on this
regulation in arguing that the Council is able to adopt a proposal by the Commission within one month and two
weeks. (India's submission, paras. 60 and 61) Ac cording to the European Communities, the Commission
adopted the proposal leading to this regulation on 29 October 2003; the European Parliament completed its
opinion on the Commission's proposal on 4 December 2003; the ECOSOC completed its opinion on the
Commission's proposal on 10 December 2003; the Coun cil adopted the regulation based on the Commission's
proposal on 15 December 2003. ("Re sponses of the European Communities to the Adva nce Questions of the
Arbitrator", 1 September 2004, para. 7)
87European Communities' submission, para. 10.

implementing measure. Therefore, I do not consid er it necessary to take into account what the
European Communities describes as the "intricacy" of the findings of the Appellate Body in this case.
2. Individual Steps in Implementation

(a) Adoption of a Regulation by the Council
38. The parties agree that the Council needs to adopt a regulation in order to modify the Drug
Arrangements, and that this regulation would be based on a proposal to be adopted by the
Commission.88 However, subject to certain reservations , the European Communities estimates that
the necessary Council regulation could be adopted in May 2005 89, whereas India maintains that it
could be adopted by 3 November 2004.90
39. An initial reason for this discrepancy in the par ties' submissions relates to the date on which
the Commission is expected to adopt a proposal. The European Communiti es estimates that the
Commission could do so in October 200491, which corresponds with the estimate contained in a "press
statement" by the Commission that India pr ovides as an exhibit in this arbitration. 92 However, based
on this press statement, India states that it would be "reasonable to assume that the Commission has
already drafted a proposal to amend or repeal" Re gulation 2501, and thus little additional time is
required to adopt it. In any case, according to India, the Commission would need no more than 5
months from the adoption of the Panel and Appe llate Body Reports on 20 April 2004 to present a
proposal to the Council
93 (that is, according to my calculation, until 20 September 2004).
40. In assessing this early stage of the implementation process, I take note, first, of the steps that
the European Communities has already taken sin ce the adoption of the Panel and Appellate Body
Reports in EC – Tariff Preferences . The European Communities confirmed, in response to
questioning at the oral hearing, that the Comm ission began discussions regarding implementation in
early May 2004 and that the Commission decided in the course of those discussions to "embed" the

88European Communities' submission, paras. 12 and 17 ; India's submission, paras. 49 and 60. The
parties differ as to whether a regulation by the Council is the only instrument required for implementation, as
described further below in paras. 44 and 45.
89"Responses of the European Communities to the Advance Questions of the Arbitrator",
1 September 2004, p. 3.
90India's submission, paras. 54, 60, and 66.
91"Responses of the European Communities to the Advance Questions of the Arbitrator",
1 September 2004, p. 3.
92India's submission, para. 29; "Developing countries: Commission unveils system of trade
preferences for next ten years – simple, transparent and objective", IP/04/860, 7 July 2004, p. 2. (Exhibit India-4
submitted by India to the Arbitrator)
93Ibid., paras. 53 and 54.

implementation process into the process of establis hing a new GSP scheme from 1 January 2006. In
addition, the European Communities and India ha ve both presented to me a communication from the
Commission to the Council (and other institutions ), outlining the new GSP scheme, including
modifications to the Drug Arrangements. 94 This communication, which the European Communities
describes as containing "guidelines" for discussion by relevant inst itutions in advance of the adoption
by the Commission of a formal legislative proposal 95, is dated 7 July 2004. I am prepared to accept,
in all the circumstances, that the Commission coul d reasonably be expected to adopt a proposal to
modify the Drug Arrangements in October 2004.
41. Another reason for the discrepancy in the par ties' submissions is their assessment of the
necessity for participation of the European Parlia ment and the ECOSOC in the process leading to
adoption of the Council regulation. First, India submits that the Council is not legally bound by
Article 133 of the Treaty Establishing the European Community 96 to seek an opinion from the
European Parliament and the ECOSOC, and I ndia therefore excludes this step from the
implementation process.97 In contrast, the European Communities contends that, although this is not
an express requirement in Article 133, it is an "e stablished practice" and effectively a requirement
within the European Communities' system and shou ld therefore be included in the implementation
process.98 Secondly, India submits that, even if the Council were to seek an opinion from the
European Parliament and the ECOSOC, these in stitutions and the Council could examine the
Commission's proposal at the same time, rather than sequentially. 99 The European Communities
responds that, even if the three institutions examin e the proposal at the same time, the Council will
nevertheless require additional time subsequent to th is examination to discuss the proposal further,
because it needs to make a decision on the proposal in the light of opinions provided by the European
Parliament and the ECOSOC. 100 Accordingly, the European Communities estimates that the
European Parliament and the ECOSOC could prov ide their opinions in January 2005 and the Council

94Communication from the Commission to the Council, the European Parliament and the European
Economic and Social Committee, Developing countries, international trade and sustainable development: the
function of the Community's generalised system of preferences (GSP) for the ten-year period from 2006 to 2015,
COM(2004) 461 final, 7 July 2004. (Exhibit EC-5 subm itted by the European Communities to the Arbitrator;
see also Exhibit India-3 submitted by India to the Arbitrator)
95European Communities' response to questioning at the oral hearing.
96Official Journal of the European Communities , C Series, No. 325 (24 December 2002), pp. 90
and 91.
97India's submission, paras. 47 and 57.
98European Communities' submission, paras. 18-20 a nd 24, as clarified at the oral hearing. The
European Communities also refers to certain agreements between the Commission and the European Parliament,
and the Commission and the ECOSOC. (Exhibits EC-7 and EC-11 submitted by the European Communities to
the Arbitrator)
99India's submission, para. 57.
100European Communities' response to questioning at the oral hearing.

could adopt a regulation based on the Commission' s proposal, taking into account those opinions, in
May 2005.
101
42. It is not unusual for domestic or other legal syst ems to follow procedural conventions that are
not explicitly mandated by legal instruments. Moreover, I find relevant that the Council has sought an
opinion from the European Parliament and the EC OSOC before adopting the great majority of
regulations related to the European Communities' GSP scheme over the years. 102 The European
Communities has also suggested that the consequenc es of failing to seek such opinions in the present
implementation process would be a matter to be determ ined by the Court of Justice of the European
Communities. It appears, therefore, that adop tion of the regulation in question without seeking
opinions from the European Parliament and the ECOSOC would be an "extraordinary" procedure. I
agree with previous arbitrators that implementing Members are not required to adopt "extraordinary
legislative procedures" in every case.
103 In my view, seeking the opinions of the European Parliament
and the ECOSOC should be included in de termining the reasonable period of time for
implementation.
43. On the question of the time required for ta king this step, I also accept the European
Communities' assertion that the Council needs time to consider the opinions of the European
Parliament and the ECOSOC before it makes its own decision on the Commission's proposal. If no
such time were provided for this, it would defeat the purpose of seeking the opinions. However, I
agree with India that the Council could begin its ex amination of the Commission's proposal before it
receives the opinions of the European Parliament and the ECOSOC. The European Communities
does not appear to dispute this, and it indicates th at these institutions have sometimes conducted their
examinations "in parallel" in the past. 104 With this in mind, the European Communities has not
demonstrated why the Council would need to examine the proposal from October 2004 until
January 2005 and then, after recei ving the opinions of the European Parliament and the ECOSOC, to
continue its examination until May 2005. In my view, based on the evidence before me, the Council
could reasonably be expected to make a decision on the Commission's proposal by adopting a
regulation, taking into account the opinions of th e European Parliament and the ECOSOC, before
May 2005.
105

101"Responses of the European Communities to the Advance Questions of the Arbitrator",
1 September 2004, p. 3.
102European Communities' submission, paras. 22 and 25, as clarified at the oral hearing.
103See, for example, Awar d of the Arbitrator, US – Section 110(5) Copyright Act , para. 32 and Award
of the Arbitrator, US – Offset Act (Byrd Amendment), para. 74.
104European Communities' response to questioning at the oral hearing.
105See supra, para. 36.

(b) Adoption of a Regulation by the Commission
44. According to the European Communities, the regulation adopted by the Council will establish
a new GSP scheme, including criteria to govern the sel ection of beneficiaries of special or additional
arrangements to address particular development needs within that sch eme. The European
Communities submits that, after the Council establish es these criteria, a further important step must
occur, namely, the Commission w ill need to select the bene ficiaries under those additional
arrangements and then adopt anot her regulation identifying these beneficiaries. The European
Communities describes this regulation of the Commission as an administrative act that will implement
the regulation of the Council, by providing specific instructions to customs authorities. 106 T h e
European Communities estimates that, assuming the Council adopts the overarching regulation in
May 2005, the Commission will be able to adopt an implementing regulation in November 2005.107
45. India submits that the European Communities can and should implement the
recommendations and rulings in this dispute purel y through the adoption of a regulation by the
Council, without the need for an additional regulation by the Commission identifying the relevant
beneficiaries. India states that the selection of beneficiaries is not necessary to implement the
recommendations and rulings.
108
46. As I understand the European Communities' argument 109, as elaborated at the oral hearing,
after the Council adopts a regulation in May 2005, the Commission will need time to assess which
developing countries meet the new criteria establis hed by the Council. The European Communities
has not explained which countries it will examine or how it will identify those countries. However, it
seems clear from the European Communities' submi ssions that the current 12 beneficiaries of the
Drug Arrangements will be among the countries examin ed. Indeed, it appears that the European
Communities is keen to ensure that any current beneficiary of the Drug Arrangements that remains
eligible for benefits under special or additional arrangements within the new GSP scheme suffers no
interruption of tariff preferences―that is, such a country would con tinue to receive benefits under the
Drug Arrangements until 31 December 2005, and then it would receive benefits under the new GSP
scheme from 1 January 2006.

106European Communities' submission, para. 13, as clarified at the oral hearing.
107"Responses of the European Communities to the Advance Questions of the Arbitrator",
1 September 2004, p. 3.
108India's comments at the hearing on the "Responses of the European Communities to the Advance
Questions of the Arbitrator", 1 September 2004.
109Supra, para. 10.

47. Although the European Communities indicated at the oral hearing that it does not have the
objective of ensuring that all 12 current beneficiar ies of the Drug Arrangements continue to benefit
from special or additional arrangements under the ne w GSP scheme, India argues that the European
Communities has a certain "preoccupation"
110 with those 12 beneficiaries. I note that the European
Communities contends, in connection with Article 21.2 of the DSU 111, that "[a]s all current
beneficiary countries of the Drug Arrangements are developing countries the EC implementing
measure must pay particular a ttention to their situation". 112 The European Communities also states
that the modification of the Drug Arrangements s hould coincide with the adoption of the new GSP
scheme "in order to avoid any gap for granting the additional tariff preferences to affected
beneficiary developing countries". 113 The European Communities submits that India's proposal of
modifying the Drug Arrangements before the new GSP scheme comes into force could mean, "[i]n the
worst of all scenarios, ... that additional preferences would be interrupted for beneficiary developing
countries for a certain time".114 Finally, the European Communities suggested at the oral hearing that,
in determining how to implement the recommendations and rulings in this dispute, the European
Communities "should ensure there is no interruption for legitimately granted additional
preferences".115
48. As I have said, it is for the European Comm unities to decide how it should implement the
recommendations and rulings of the DSB, subject to certain restrictions. 116 However, as I have also
stated, my task is not to determine the reas onable period of time for reforming the overall GSP
scheme; rather, it is to determine the re asonable period of time for implementing the
recommendations and rulings of the DSB with respect to the Drug Arrangements.117
49. I am not satisfied that the period of time fo r implementation should be determined having
regard to the desirability of ensuring that certain Me mbers, to the exclusion of others, can continue to
benefit from tariff preferences that have been found to be inconsistent with the covered agreements.
As the European Communities itself points out, ma ny more developing countries exist than the

110India's response to questioning at the oral hearing.
111The implications of this provision are discussed further infra, paras. 57-59.
112European Communities' submission, para. 14.
113"Responses of the European Communities to the Advance Questions of the Arbitrator",
1 September 2004, p. 5. (emphasis added)
114European Communities' statement at the oral hearing. (emphasis added)
115European Communities' response to questioning at the oral hearing. (emphasis added)
116Supra, para. 30.
117Supra, para. 31.

current 12 beneficiaries of the Drug Arrangements. 118 If I were to include within the period required
for implementation the process of assessing all of those countries against the new criteria to be
established by the Council, this could potentially add many months, indeed several more years, to the
reasonable period of time. The process of assessing countries could even extend indefinitely, if the
European Communities implemented a mechanism wh ereby developing countries could apply on an
 ad hoc basis to become a beneficiary under the special or additional arrangements.119
50. According to the European Communities, the final step in the implementation process
involves the publication of the regulation adopted by the Commission and its entry into force. The
European Communities submits that, pursuant to "established practice under the [European
Communities'] internal legislative procedure" as reflected in a Council Resolution of 1974, the
regulation should enter into force on 1 January or "exceptionally" on 1 July, and publication should
normally take place at least six weeks before entry into force.120 Although the European Communities
makes this submission in the context of the prop osed regulation to be adopted by the Commission
identifying certain beneficiaries under a new GSP scheme 121, I understand that the requirements of
advance publication and entry into force on 1 January or 1 July apply more generally, to "measures
which must be implemented by the customs authorities", including "tariff changes". 122 In other
words, these requirements would apply to an y tariff changes necessary to bring the Drug
Arrangements into conformity with the GATT 1994, wh ether these changes are made effective solely
through a regulation adopted by the Council, or through a regulation adopted by the Council followed
by a regulation adopted by the Commission.
51. I note that the Arbitrator in Korea – Alcoholic Beverages determined that it was reasonable
to include in the reasonable period of time the "t hirty-day grace period for enforcement of certain ...
instruments" provided in a Korean statute. 123 The Arbitrator in EC – Bananas III also appears to
have taken into account the European Communities' st atement that "any change in legislation which
directly affects the customs treatment of products in connection with importation or exportation,

118European Communities' response to questioning at the oral hearing.
119Such a mechanism appears to exist in connection with tariff preferen ces provided under the "special
incentive arrangements for the protection of labour righ ts" and the "special incentive arrangements for the
protection of the environment" within the current GSP scheme. See Appellate Body Report, EC – Tariff
Preferences, para. 182.
120European Communities' submission, para. 36, referring to Council Resolution of 27 June 1974,
Official Journal of the European Communities , C Series, No. 79 (8 July 1974), p.1. (Exhibit EC-19 submitted
by the European Communities to the Arbitrator)
121European Communities' response to questioning at the oral hearing.
122European Communities' submission, paras. 36 and 37.
123Award of the Arbitrator, Korea – Alcoholic Beverages, para. 47.

enters into force either on 1 January or 1 July of the relevant year"
124 in determining the reasonable
period of time in that dispute. 125 In the present case, I regard the administrative practice of the
European Communities, as it pertains to advance publication of tariff changes and the date on which
such changes take effect, as a relevant factor in determining the reasonable period of time for
implementation.
3. Institutional Changes
52. The European Communities argues that the reasonable period of time for implementation in
this dispute should be extended because of changes occurring in certain institutions of the European
Communities that play a role in the implementation process. Specifically, the European Communities
states that the European Union itself grew from 15 to 25 member States on 1 May 2004, a new
European Parliament was elected in June 200 4, and a new Commission will take charge from
1 November 2004.126
53. To start with the European enlargement, the European Communities argues that considerable
time will be needed to translate into the 20 offi cial languages certain instruments connected with
implementation.127 I agree that this circumstance is likely to increase the period of time reasonably
required to complete certain steps in the implementation process. Therefore, I have taken this into
account in my determination. I also agree with th e European Communities that, if a member State of
the European Union requested verification that th e Council adopted the implementing regulation by a
qualified majority representing at least 62% of the population of the European Union, this could add
to the time required for implementation.
128
54. I turn to the election of a new European Par liament in June 2004 and the commencement of a
new Commission on 1 November 2004. According to the European Communities' estimates, the
Commission will complete its proposal on a Counc il regulation modifying the Drug Arrangements,
and that proposal will be transmitted to the European Parliament, in October 2004. 129 The fact that a
new Commission takes charge on 1 November 2004 woul d not appear to increase the time required to

124Award of the Arbitrator, EC – Bananas III, para. 9.
125Ibid., para. 19. The Arbitrator concluded, in paragraph 20, that the reasonable period of time should
be "from 25 September 1997 to 1 January 1999".
126European Communities' submission, paras. 29 and 30.
127Ibid., paras. 17 and 29.
128Ibid., para. 27, referring to the Protocol on the Enlargement of the European Union, Art. 3, Official
Journal of the European Communities, C Series, No. 325 (24 December 2002), pp. 164 and 165. (Exhibit EC-17
submitted by the European Communities to the Arbitrator)
129"Responses of the European Communities to the Advance Questions of the Arbitrator",
1 September 2004, p. 3, as clarified at the oral hearing.

complete that proposal. Similarly, if the Commission's proposal is transmitted to the European
Parliament in October 2004, this should allow suffi cient time for the European Parliament to become
"operational"130 before it examines the proposal.
D. Nature of the Drug Arrangements
55. The European Communities suggests that th e "political sensitivities" of the Drug
Arrangements and the GSP scheme will increase the time required to implement the recommendations
and rulings in this dispute. 131 The European Communities acknowledges 132 that previous arbitrators
have typically refused to treat mere contentious ness or political sensitivity as a factor warranting a
longer period of time for implementation. 133 However, the European Co mmunities maintains that the
Drug Arrangements are analogous to the measure that needed to be brought into conformity in Chile
– Price Band System because the Drug Arrangements are "an integral and essential part of its
development policy".134
56. I am not persuaded by the statements of the Eu ropean Communities that the particular nature
of the Drug Arrangements within the GSP scheme and the development policy of the European
Communities warrants any increase in the reasonable pe riod of time for implementation. Although a
modification to the Drug Arrangements may well be d escribed as "politically sensitive", this factor
does not distinguish the Drug Arrangements from any othe r measure that is likely to be the subject of
a WTO dispute. The measure examined in Chile – Price Band System was quite different. That
measure had a "unique ... impact on Chilean society" (that is, the society of the implementing
Member); "domestic opposition" to its repeal or m odification reflected "serious debate, within and
outside the legislature of Chile, over the means of devising an implementation measure" and "not
simply opposition by interest groups to the loss of protection".135

130European Communities' response to questioning at the oral hearing.
131European Communities' submission, paras. 31 and 42.
132European Communities' response to questioning at the oral hearing.
133See, for example, Award of the Arbitrator, Canada – Pharmaceutical Patents , para. 60; Award of
the Arbitrator, Canada – Patent Term , para. 58; and Award of the Arbitrator, US – Offset Act (Byrd
Amendment), para. 61.
134European Communities' submission, paras. 38 an d 39, referring to Award of the Arbitrator, Chile –
135Award of the Arbitrator, Chile – Price Band System, para. 48.

E. Article 21.2 of the DSU
57. In their submissions, both parties rely on Article 21.2 of the DSU, which provides:
Particular attention should be paid to matters affecting the interests of
developing country Members with respect to measures which have
been subject to dispute settlement.
58. India appears to suggest that, in order to comp ly with this provision in connection with the
interests of India (among other countries), the Eu ropean Communities should take less time to
implement the recommendations and rulings of the DSB in this dispute.
136 Conversely, the European
Communities suggests that, in order to comply with this provision in connection with the interests of
the current beneficiaries of the Drug Arrangements, the European Communities will need more time
for implementation.137 India rejects the European Communities' approach, arguing that, in relation to
an Article 21.3(c) arbitration, the obligation in Article 21.2 relates only to developing country
Members that are party to the arbitration. 138 The European Communities, however, responds that
Article 21.2 refers to "developing country Members" and not only to the parties to any particular
dispute.139
59. Previous arbitrators have not found it necessary to determine the precise boundaries of
Article 21.2 of the DSU. Some arbitrators have taken this provision into account in assessing the
difficulties faced by an implementing Member that is a developing country 140, or where both parties
were developing countries. 141 No arbitrator has determined wh ether the reference to "developing
country Members" in Article 21.2 should be interprete d to include, in the context of an Article 21.3(c)
arbitration, Members that are not party to the arbitrat ion. It is unnecessary for me to decide this issue

136India's submission, para. 65.
137European Communities' submission, para. 14.
138India's statement at the oral hearing.
139European Communities' response to questioning at the oral hearing.
140See, for example, Award of the Arbitrator, Indonesia – Autos, para. 24; Award of the Arbitrator,
Chile – Alcoholic Beverages, para. 45; and Award of the Arbitrator, Argentina – Hides and Leather, para. 51.
141Award of the Arbitrator, Chile – Price Band System , paras. 55 and 56. See also Award of the
Arbitrator, US – Offset Act (Byrd Amendment), para. 81.

in the present dispute. Although India has identified itself as a developing country 142, and the
European Communities has identif ied the current beneficiaries of the Drug Arrangements as
developing countries 143, neither party has provided a satisfactory explanation or evidence of the
precise manner in which these countries are particular ly affected, as developing country Members, by
the European Communities' implementation of the r ecommendations and rulings in this dispute, nor
how this should affect the reasonable period of time for implementation.
IV. The Award
60. For the reasons set out above, I determine that the "reasonable period of time" for the
European Communities to implement the recommendations and rulings of the DSB in this dispute is
14 months and 11 days from 20 April 2004, being th e date of adoption of the Panel and Appellate
Body Reports by the DSB. The "reasonable period of time" will therefore expire on 1 July 2005, such
that implementation must be completed on or before that date.144

Signed in the original at Geneva this 10th day of September 2004 by:

John Lockhart
Arbitrator

142India's submission, para. 65.
143European Communities' submission, para. 14.
144I have calculated the reasonable period of time in the following manner. 14 calendar months from
20 April 2004 is 20 June 2005, plus 11 additional days brings us to 1 July 2005. Thus, the last day of the
reasonable period of time is 1 July 2005.