CHILE – PRICE BAND SYSTEM AND SAFEGUARD MEASURES RELATING TO CERTAIN AGRICULTURAL PRODUCTS ARB-2002-2/15
Document: Arbitration under Article 21.3(c) of the Understanding on Rules and Procedures Governing the Settlement of Disputes Award of the Arbitrator John Lockhart
Date: 17 March 2003
Document codes: WT/DS207/13
Complainant: Argentina
Respondent: Chile
Third parties: Australia, Brazil, Canada, China, Colombia, Costa Rica, EU, Ecuador, El Salvador, Guatemala, Honduras, Japan, Nicaragua, Paraguay, Peru, Thailand, Venezuela, U.S.
Dispute stage: Implementation & Compliance
Agreements cited: Art. XIX:1, II  GATT 1994Art. 4  AgricultureArt. 2, 3, 4, 5, 6, 12  Safeguards

CHILE – PRICE BAND SYSTEM AND SAFEGUARD MEASURES
RELATING TO CERTAIN AGRICULTURAL PRODUCTS
ARB-2002-2/15
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
Chile – Price Band System and Safeguard
Measures Relating to Certain Agricultural
Products
Parties:
Argentina
Chile
ARB-2002-2/15
Arbitrator:
John Lockhart
I. Introduction
1. On 23 October 2002, the Dispute Settlement Body ("DSB") adopted the Appellate Body
report1 and the panel report 2, as modified by the Appellate Body report, in Chile –
Price Band System and Safeguard Measures Relating to Certain Agricultural Products ("Chile –
Price Band System ").3 At the DSB meeting of 11 November 2002, pursuant to Article 21.3 of the
Understanding on Rules and Procedures Go verning the Settlement of Disputes (the "DSU"), Chile
informed the DSB of its ongoing consultations with Argentina to find a mutually agreeable solution
and that it would require a "reasonable period of time", pursuant to the terms of Article 21.3, to
implement the recommendations and rulings of the DSB in this dispute.
4
2. On 6 December 2002, Chile notified the DSB that consultations with Argentina had not
resulted in agreement on the reasonable period of time for implementation, and therefore, Chile
requested that such period be determined by binding arbitration, in accordance with Article 21.3(c) of
the DSU.
5 By joint letter dated 16 December 2002, Chile and Argentina requested that I serve as
arbitrator.6 They also indicated in that letter that they had agreed to extend the deadline for the
completion of the arbitration until 90 days after the date of appointment of the Arbitrator. 7 T h e y
agreed further that, notwithstanding this extension of the 90-day period of time stipulated in

1Appellate Body Report, WT/DS207/AB/R, adopted 23 October 2002.
2Panel Report, WT/DS207/R, 3 May 2002, adopted 23 October 2002, as modified by the Appellate Body
Report, WT/DS207AB/R.
3WT/DS207/8.
4WT/DSB/M/136.
5WT/DS207/9.
6WT/DS207/11.
7Ibid.

Article 21.3(c) of the DSU, the arbitration aw ard would be deemed to be an award under
Article 21.3(c) of the DSU. 8 My acceptance of the designation as Arbitrator was conveyed to the
parties by letter dated 17 December 2002.9
3. Written submissions were received from Chile and Argentina on 27 January 2003, and an oral
hearing was held on 17 February 2003. Chile and Argentina each submitted additional documentation
during the oral hearing. Neither raised any objection to the submission of such documentation by the
other party. The parties were permitted to file written comments on each other's submissions by
Thursday, 20 February. Both parties submitted comments, but raised no objection to my
consideration of the new documentation. That documentation has accordingly been included in the
record of this arbitration.
II. Arguments of the Parties
A. Chile
4. Chile requests that I determine the "reasonable period of time" to be 18 months from the date
of the DSB's adoption of the panel and the Appellate Body reports in this dispute, so that the period
would expire on 23 April 2004.
10
5. According to Chile, implementation of the recommendations and rulings of the DSB will
entail passage of a new law to modify appropriately the price band system ("PBS") found to be WTO-
inconsistent by the panel and the Appellate Body in this case. 11 Chile states that, as a tariff measure,
the PBS has the status of a tax under Chilean law.12 The imposition or modification of a tax is subject
to substantive and procedural limitations prescribed by the Constitution of Chile, which provides that
all taxes (including the imposition and modification thereof) shall be regulated by a law passed by the
National Congress.
13 This legislative prerogative may not be delegated to the President, thereby
precluding the possibility that the PBS could be amended solely by Executive action.14

8WT/DS207/11.
9WT/DS207/12.
10Chile's submission, para. 61.
11Ibid., para. 18.
12Ibid., para. 19.
13Ibid.
14Ibid., para. 20.

1. Implementation Process in Chile
6. Chile identifies a "pre-legislative" phase through which any proposed legislation must first
proceed. This phase is not governed or mandated by law in Chile. 15 In practice, extensive
consultations take place at this stage "between the authorities and the representatives of institutions
and agencies, both public and private, particularly the various organizations or associations
representing the interests that will be affected by the new legislation."
16 For a measure modifying the
PBS, discussion will involve the Interministeri al Committee on International Economic Relations, a
committee comprised of various government agencies whose portfolios relate to finance, agriculture,
and/or foreign affairs.
17 Consultations at this stage include development of "technical, political, social
and legal studies" on the issue to be the subject of legislation, as well as analysis and preparation of
the text of a new measure.18
7. Chile says that the pre-legislative phase concerning the implementation required in this
dispute has special difficulties, and emphasizes that the PBS has served as a "cornerstone" of Chile's
agricultural policy for almost 20 years.
19 According to Chile, the PBS is intended to respond to price
fluctuations stemming from market interventions by agricultural exporting countries. Chile maintains
that the consequent reliance of the Chilean agricultural sector on the PBS renders the pre-legislative
phase very critical, as evidenced by (i) the concern expressed by leading public officials and private
sector interests at the prospect of any modification of the PBS, and (ii) "in general the irritation caused
by the conclusions of the [panel and Appellate Body] reports" in this case.
20
8. Given these considerations, Chile notes that "all of the Ministries and government
departments involved have undertaken to ensure that the sectors in question are aware that Chile is
required to make a number of adjustments to the PBS as a result of its international commitments."
21
To this end, the Ministry of Agriculture has held ongoing discussions with agricultural trade
associations on the consequences of the panel and Appellate Body reports in this dispute for the
current PBS.
22 Furthermore, according to Chile, until the end of 2002, Chile and Argentina were
engaged in consultations with a view to arriving at a mutually satisfactory solution, not only as

15Chile's submission, para. 23.
16Ibid., para. 24.
17Ibid., para. 27.
18Ibid., paras. 24 and 26.
19Ibid., para. 7.
20Ibid., para. 25.
21Ibid., para. 26.
22Chile's response to questioning at the oral hearing.

regards the reasonable period of time for implementation of the reports, but also with respect to the
changes to the PBS that would be required by such implementation. 23 Also during this time, the
Interministerial Committee has begun discussions on the requirements for implementation and the
nature of amendments that may be needed to the PBS.
24 Chile states that this pre-legislative phase of
consultations concerning the measure required to amend the PBS has not yet been completed.25
9. Regarding the legislative phase, Chile explains that all tax measures must be passed by the
National Congress, but the President alone possesses the authority to "initiate" tax legislation. 26 The
draft law is then sent to one house of the National Congress, the Chamber of Deputies. 27 "[A]nalysis
of [the bill's] general aspects and main ideas" is undertaken by the Commission on Finance of the
Chamber of Deputies.
28 The Commission's conclusions are transmitted to the full Chamber. 29 The
Chamber then engages in a "general discussion" of the proposed law to "decide whether to approve or
reject the idea of legislating" on the particular subject.
30
10. After the bill is approved by the Chamber of Deputies in general discussion, it is sent to
various legislative commissions that have jurisdiction over the bill. 31 In the case of a measure
modifying the PBS, the following commissions will examine the specific content of the proposed law:
Commission on Finance; Economic Commission; Commission on Agriculture; and Foreign
Relations Commission.32 After commission review, the Chamber as a whole studies the law in greater
detail during its "specific discussion".33 When the Chamber approves the bill, it is sent to the second
house of the legislature, the Senate, where the bill undergoes an identical process of review.34

23Chile's submission, para. 26.
24Chile's response to questioning at the oral hearing.
25Ibid.
26Chile's submission, paras. 19 and 30.
27Ibid., para. 31.
28Ibid., para. 34.
29Ibid., para. 35.
30Ibid.
31Ibid., para. 36.
32Ibid., para. 33.
33Ibid., para. 36. During the specific discussion, the Chamber may introduce amendments or return the
bill to the commissions for further study. (Chile's submission, para. 36)
34Chile's submission, para. 36. If the Senate approves an amended version of the bill, both versions are
discussed by a joint Chamber-Senate Commission and then a compromise version is voted upon by each house.
(Chile's response to questioning at the oral hearing)

11. Once approved by both houses of the National Congress, the bill is sent to the President for
approval.35 Upon "endorsement" of the bill 36, the President issues a decree of promulgation and
submits the bill for constitutional review by the Comptroller-General. 37 After the bill has been
declared constitutionally sound by the Comptroller-General 38, the President has the bill published as
law in the Official Journal.39 Publication of the law is the final step required in the legislative process.
12. Chile states that the average period of time for passage of "regulatory" 40 legislation is
approximately 24 months41, and the corresponding time for tax legislation is about 19 months. 42 The
"urgency" procedures 43 have no bearing on the "reasonable period of time" for implementation
because under Chilean law use of these procedures is left to the discretion of the President and, in any
event, either house may reject the urgency request.
44 More importantly, as recognized by the
Arbitrators in Chile – Alcoholic Beverages , and Korea – Alcoholic Beverages , implementing
Members are not required to employ procedures outside the normal legislative processes when
implementing the recommendations and rulings of the DSB.
45
2. Chile's Proposal for a Reasonable Period of Time
13. Chile argues that the "reasonable period of time" for implementation provided for in
Article 21.3(c) of the DSU should be read in the light of Article 22, which deals with the
consequences of a Member's failure to comply with the recommendations and rulings of the DSB

35Chile's submission, para. 38. If the President does not approve the bill, he or she returns it to the
National Congress, with relevant comments, within thirty days. The National Congress may then approve the
comments or, by special majority, reject some or all of them. It may also reject the bill in its entirety. If
approved, the bill is returned to the President for promulgation. (Chile's submission, para. 38)
36Endorsement may be explicit or implicit, as when the President does not return a bill within 30 days
of its transmission. (Chile's submission, para. 39)
37Chile's submission, paras. 40 and 42.
38Chile also notes that constitutional review by the Constitutional Court may be requested at any
previous legislative stage, but that such "request does not suspend the processing of the draft [law]." (Chile's
submission, para. 46)
39Chile's submission, paras. 43–44.
40"Regulatory" laws are laws which directly or indirectly regulate public institutions, including their
establishment, their operations and functioning, their rights and obligations to citizens, and certain other matters.
(Chile's response to questioning at the oral hearing)
41Chile's submission, para. 48.
42Chile's response to questioning at the oral hearing.
43Argentina argues that Chile should be expected to employ the constitutionally-authorized "urgency
modalities", whereby the President may seek expedited review of draft legislation. By designating a bill as
"urgent", "very urgent", or "for immediate discussion", when submitting the bill to the National Congress, the
President may request that the time period for the particular step of the legislative process be limited to 30 days,
10 days, or 3 days, respectively. (Argentina's submission, para. 36)
44Chile's response to questioning at the oral hearing.
45Chile's statement at the oral hearing.

within the reasonable period of time determined pursuant to Article 21.3. 46 In particular, when
determining the "reasonable period of time", Chile co ntends that an arbitrator should allow time for
the implementing Member to take those actions nece ssary for the "full and efficient implementation"
of recommendations and rulings of the DSB, which is the preferred course of action prescribed by
Article 22.47
14. Chile also asserts that Article 21.3(c) does not establish 15 months as a maximum period of
time within which an arbitrator should fix the "reasonable period of time" for implementation. 48
Rather, establishing the reasonableness of the time for implementation requires the arbitrator to
consider the specific circumstances of each case.
49 Chile finds the following circumstances in this
case to warrant a "reasonable period of time" beyond 15 months: (i) the significance of the PBS as a
"cornerstone" of Chile's agricultural policy for almost 20 years and the consequent serious impact of a
modification of the PBS
50; (ii) the intensity of the political opposition, both within the legislature and
in the private sector, to reform of the PBS51; and (iii) the fact that implementation requires passage of
a new law (as opposed to an administrative measure), and the "process" involved in that passage,
namely, the pre-legislative discussions and the stages of legislation outlined by Chile in its
submission.
52
15. Chile points out that it does not raise simply the "contentiousness" of the PBS modification
or the possible need for structural adjustment in the agricultural sector as relevant matters for
consideration in fixing the "reasonable period of time", as Chile acknowledges that matters of that
kind have been discounted by previous arbitrators. Rather, Chile regards the impact of any PBS
modification on the sectors concerned to be relevant to my determination in terms of evaluating the
complexities inherent in the pre-legislative and legislative phases, which impact upon the assessment
of the reasonable period of time for implementation.
53
16. Chile emphasizes Article 21.2 of the DSU, which provides that "[p]articular attention should
be paid to matters affecting the interests of developing country Members with respect to measures
which have been subject to dispute settlement." In the light of the importance of agriculture to the

46Chile's submission, para. 54.
47Ibid.
48Ibid., para. 52.
49Ibid.
50Ibid., para. 51.
51Ibid.
52Ibid., para. 53.
53Chile's statement at the oral hearing.

Chilean economy, and the longstanding role of the PBS in Chilean agricultural and trade policy, Chile
argues that I should take account of its specific interests as a developing country Member when
determining a "reasonable period of time" for implementation.
54
17. Chile rejects the contention of Argentina that implementation in this case will be achieved
only by the repeal of the PBS. Although it has not yet determined precisely what form its new law
will take to implement the rulings in this dispute, Chile asserts that determining the "best" or even
"only" means of implementation is beyond my competence as an arbitrator under Article 21.3(c) of
the DSU. Chile maintains that, as previous arbitrators have observed, the means of implementation
lie exclusively in the discretion of the implementing Member, and my sole task, according to Chile, is
to evaluate what period of time would be "reasonable" for the means of implementation identified by
the Member.
55
18. Furthermore, Chile finds Argentina's comparison to the short periods of time required for
passage of Laws 19.772 (amending the WTO bound sugar tariff) and 19.716 (implementing Chile –
Alcoholic Beverages) to be erroneous. Law 19.772 increased, rather than lowered, the protection for
the sugar industry, and it was also preceded by several bilateral negotiations with trading partners,
both factors thereby facilitating the pre-legislative phase.
56 With regard to Law 19.716, Chile had
been in negotiations with the European Communities for 10 months when the measure was introduced
into the National Congress, and the President made use of the urgency procedure.
57 Therefore, Chile
argues that the experience in the passage of these two laws is not relevant to my determination of a
"reasonable period of time" for implementation in this case.
B. Argentina
19. Argentina requests that I determine nine months and six days to be a "reasonable period of
time" under Article 21.3(c) of the DSU for implementation of the recommendations and rulings of the
DSB in this case.
20. Argentina observes that, under Article 21.1 of the DSU, compliance with the
recommendations and rulings of the DSB must be "prompt".
58 As stated by the Arbitrator in Chile –
Alcoholic Beverages, "reading Articles 21.1 and 21.3 together, 'prompt' compliance is, in principle,

54Chile's submission, paras. 55–59.
55Chile's statement at the oral hearing.
56Ibid.
57Chile's response to questioning at the oral hearing. Chile added that without the "reasonable period of
time" coming to an end, it would not have been necessary to use the urgency procedure.
58Argentina's submission, para. 21.

'immediate' compliance".59 In the light of this fundamental requirement of prompt, or immediate,
compliance, Argentina argues that the "reasonable period of time" provided for implementation in
Article 21.3 constitutes an "exception" to the general principle of prompt compliance, in the sense of
immediate compliance.
21. Accordingly, Argentina agrees with Chile that the 15-month period of time identified in
Article 21.3(c) is a "guideline only of an indicative nature" and that the focus of an arbitrator should
be on the particular circumstances of the case.
60 Recalling that previous arbitrators have found that
implementation should occur in the shortest period of time possible within the legal system of a
Member
61, Argentina submits that Chile bears the burden of establishing that the period of time
proposed by Chile, which goes beyond the "shortest possible period" in its system, is justified
according to the circumstances of the case.
62
22. Argentina argues that "the only appropriate way to implement the DSB recommendations
consists of the elimination of the PBS, inasmuch as the PBS imposes [duties on] the products covered
by the dispute … that do not constitute ordinary customs duties." 63 In the light of the reasoning of the
Appellate Body in this dispute, according to Argentina, the only measure that Chile may implement to
afford protection to the producers of the agricultural products at issue is to apply ordinary customs
duties, as permitted by the Agreement on Agriculture.
64
23. Argentina submits that, Chile has failed to adequately define the methods of implementation
it intends to follow in this case. Although Chile has stated that a tax law will be required, the absence
of further specificity as to the scope or text of the intended measure cannot support the 18 months
requested by Chile, particularly since the implementation of the recommendations and rulings of the
DSB can be achieved only through the relatively "simple" act of repeal of the PBS.
65 Argentina
argues that this absence of further clarification from Chile as to the means of implementation should
result in a shorter, not longer, "reasonable period of time" for implementation.
66

59Argentina's submission, para. 23 (quoting Award of the Arbitrator, Chile – Alcoholic Beverages ,
para. 38).
60Ibid., para. 27.
61Ibid., paras. 28–29.
62Ibid., paras. 29–30; Argentina's statement at the oral hearing.
63Argentina's submission, para. 18.
64Ibid., paras. 19(a)–(e).
65Argentina's statement at the oral hearing.
66Ibid.

24. Argentina acknowledges that, under the Chilean Constitution and the Constitutional Organic
Law of the National Congress, the passage of legislation requires Presidential initiation and discussion
in the National Congress, followed by Pr esidential endorsement and promulgation before
publication.
67 According to Argentina, Chilean law provides that this legislative process may "extend
up to five months". 68 With regard to the "pre-legislative" phase described by Chile, however,
Argentina argues that no such phase is mandated by Chilean law, and therefore, it should not be taken
into account in my determination of the "reasonable period of time" for implementation.
69 Should I
find the pre-legislative phase to be relevant, Argentina requests that I accord little weight to this step
in the legislative process.
25. Argentina also notes that Article 52 of the Chilean Constitution establishes "urgency
modalities" whereby the President may seek expedited review of draft legislation.
70 Under this
urgency procedure, the President may designate a bill as "urgent", "very urgent", or "for immediate
discussion", when submitting the bill to the National Congress.
71 Such designation limits the period
of time for the particular step of the legislative process to 30 days, 10 days, or 3 days, respectively. 72
Argentina submits that, in complying with its inte rnational obligations, Chile should reasonably be
expected to employ the urgency procedure, which factor should be considered in my determination of
the "reasonable period of time" for implementation.
73
26. Notwithstanding the nomenclature of "urgency" attached to this procedure, Argentina
suggests that this practice is indeed a "normal and usual" part of Chile's legislative process. 74
Referring to 23 laws that it states were passed in 2002 under the urgency procedure, Argentina argues
that this option is exercised by the President with sufficient regularity, when seeking to expedite
legislation, to justify its employment by Chile in the present matter.
75 Argentina argues that I should
therefore take the availability of the urgency procedure into account when fixing the "reasonable
period of time" for implementation of the recommendations and rulings of the DSB.

67Argentina's submission, para. 35.
68Ibid.
69Argentina's statement at the oral hearing.
70Argentina's submission, para. 36.
71Ibid.
72Ibid.
73Ibid., Argentina's statement at the oral hearing.
74Argentina's statement at the oral hearing.
75Ibid.

27. That legislation may be passed far more expeditiously than suggested by Chile is evident,
according to Argentina, when examining the passage of Chilean Law 19.772, which, inter alia ,
amended Chile's WTO bound tariff rate for certain sugars. 76 Only 69 days passed between the
submission of the bill to the National Congress and its publication in the Chilean Official Journal. 77
As a tariff measure, that law was subject to the same legislative procedures as would be followed by
any draft law modifying the PBS, and therefore, in Argentina's submission, serves as a useful
comparison to evaluate how long a "reasonable period of time" should be for implementation in this
case.
28. Argentina similarly points to Chile's rapid implementation of the legislation modifying the tax
law found to be WTO-inconsistent in Chile – Alcoholic Beverages. That new law was passed within
approximately one month of presentation before the National Congress, due to the President's resort to
the urgency procedure provided for by the Chilean Constitution.
78
29. Rejecting the relevance of the longstanding importance of the PBS to the agricultural sector in
Chile, Argentina argues that previous arbitrators have specifically rejected similar claims of
difficulties stemming from political opposition to implementation. To permit such a rationale for
assessing the "reasonable period of time", in Argentina's submission, would indefinitely postpone
implementation, contrary to the DSU's requirement of prompt compliance.
79
30. With regard to Chile's claim for consideration as a developing country Member, Argentina
says it is "surprised" that such a claim has been made, because both parties agreed during the
Appellate Body hearing that their respective developing country status had no relevance in this
dispute.
80 Nevertheless, Argentina states that the plain text of Article 21.2 makes no distinction
between complainants and respondents when providin g that particular attention should be paid to
matters affecting the interests of developing countries. In this regard, Argentina submits that its own
status as a developing country warrants particular attention in this determination, as Argentina's rights
have been nullified and impaired by the continued operation of the PBS.
81 In any event, says
Argentina, no specific economic difficulties face Chile as a developing country in this case, in

76Argentina's submission, para. 38 and Annex ARG-3.
77Ibid., para. 35 and Annex ARG-3.
78Argentina's statement at the oral hearing.
79Ibid.
80Ibid.
81Ibid.

contrast to the financial situation of Indonesia found to be relevant under Article 21.2 in Indonesia –
Autos.82
31. Finally, Argentina states that Chile has been aware of its international obligation to comply
with the recommendations and rulings of the DSB at least since the adoption of the panel and
Appellate Body reports on 23 October 2002. More than four months have passed since then and,
Argentina argues, Chile has not undertaken sufficient steps towards implementation during that time.
Accordingly, Argentina submits that this lack of progress, particularly with regard to the pre-
legislative consultations, should be taken into account in my determination, as stated by the Arbitrator
in US – Section 110(5) Copyright Act.
83
III. Reasonable Period of Time
32. My task in this arbitration is to determine the "reasonable period of time" (the term used in
Article 21.3 of the DSU) for the implementation of the recommendations and rulings of the DSB in
Chile – Price Band System. In doing so, I recognize that I am not asked to determine or even suggest
the manner in which a Member should implement its international obligations. My function is to fix a
"reasonable period of time" appropriate to the means proposed by the implementing Member.
84 I
therefore agree with the statement by the Arbitrator in Korea – Alcoholic Beverages, that "[c]hoosing
the means of implementation is, and should be, the prerogative of the implementing Member, as long
as the means chosen are consistent with the recommendations and rulings of the DSB and the
provisions of the covered agreements."
85
33. Article 21.1 of the DSU, which provides relevant context for understanding the remaining
paragraphs of Article 21, states that "[p]rompt compliance with recommendations or rulings of the
DSB is essential in order to ensure effective reso lution of disputes to the benefit of all Members."
Recognizing that "prompt compliance" may not al ways be "immediate" compliance, however, the
chapeau of Article 21.3 provides, "If it is impracticable to comply immediately with the
recommendations and rulings [of the DSB], the Member concerned shall have a reasonable period of

82Argentina's statement at the oral hearing.
83Ibid.
84Award of the Arbitrator, Canada – Pharmaceutical Patents, para. 43.
85Award of the Arbitrator, Korea – Alcoholic Beverages, para. 45.

time in which to do so." The allowance of a "reasonable period of time" for implementation,
therefore, is premised on it being impracticable for the Member to comply "immediately".86
34. Article 21.3(c) provides for an arbitrator a "guideline" of a maximum of 15 months from the
date of adoption of the panel and Appellate Body reports when establishing a "reasonable period of
time" for implementation. Notwithstanding this "guideline", I must ultimately be informed, as
Article 21.3(c) instructs, by the "particular circumstances" of a given case, which may counsel in
favour of shorter or longer periods.
87 As previous arbitrators have observed, the controlling principle
is that the "reasonable period of time" should be "the shortest period possible within the legal system
of the Member to implement the relevant recommendations and rulings of the DSB"
88, in the light of
the "particular circumstances" of the dispute.
35. The following issues arise in this arbitration:
(a) whether there is only one possible course of action which Chile, as the implementing
Member, can follow in order to comply with the recommendations and rulings of the
DSB, namely, eliminating the PBS in respect of the products in dispute;
(b) whether pre-legislative consultations, being engaged in by Chile, but not mandated by
the law of Chile, are relevant considerations and, if so, in what respects and to what
extent;
(c) whether the action taken by Chile to implement those recommendations and rulings
or its delay in taking such action, since the adoption of the panel and Appellate Body
reports, should be taken into account in fixing the reasonable period of time;
(d) whether domestic political and industry opposition in Chile to the modification of the
PBS is relevant, and if so, to what extent;

86Award of the Arbitrator, Canada – Pharmaceutical Patents , para. 45; Award of the Arbitrator,
Australia – Salmon, para. 30; Award of the Arbitrator, US – Hot-Rolled Steel, para. 25. I note that both parties in
this arbitration argue that new legislation is necessary for implementation of the recommendations and rulings of
the DSB, and therefore, appear to agree that "imm ediate" compliance by Chile is impracticable. The
impracticability of Chile's immediate compliance has not been raised as an issue for decision in this arbitration.
87Award of the Arbitrator, Canada – Patent Term, para. 36; Award of the Arbitrator, Korea – Alcoholic
Beverages, para. 36.
88See for example, Award of the Arbitrator, US – 1916 Act , para. 32 (citing, inter alia , Canada –
Pharmaceutical Patents, para. 47).

(e) what relevance and weight should be attached to procedures within Chile's legal
system for expediting legislation, the passage of which is necessary to comply with
the recommendations and rulings of the DSB; and
(f) of what significance in this arbitration are the interests of developing countries, which
here includes both Chile and Argentina.
36. Argentina argues that "the only appropriate way to implement the DSB recommendations
consists of the elimination of the PBS, inasmuch as the PBS imposes [duties on] the products covered
by the dispute … that do not constitute ordinary customs duties."
89 The straightforward nature of this
action, in Argentina's submission, contradicts Chile's claim for a significant period of time to draft a
replacement law after discussion with and input from other agencies and interest groups. Whether
elimination of the PBS, in so far as it impacts upon the relevant products, is the "only appropriate"
means of implementation (as opposed to a modification of the PBS) is not an issue for decision in this
arbitration.
90 As discussed above, the focus of my inquiry and determination relates to the period of
time needed to implement the recommendations and rulings of the DSB, not to the manner in which
Chile intends to implement them.91 I therefore do not accept Argentina's argument.
37. The fact that an Article 21.3(c) arbitration focuses on the period of time for implementation,
however, does not render the substance of the implementation, that is, the precise means or manner of
implementation, immaterial from the perspective of the arbitrator. In fact, the more information that
is known about the details of the implementing measure, the greater the guidance to an arbitrator in
selecting a reasonable period of time, and the more likely that such period of time will fairly balance
the legitimate needs of the implementing Memb er against those of the complaining Member.
Nevertheless, the arbitrator should still avoid deciding what a Member must do for proper
implementation.
92 I accept Chile's stated intention to pass new legislation modifying the PBS so as to
render it consistent with Chile's WTO obligations. How it does this is a matter for Chile.
38. Chile identifies a "pre-legislative" phase followed by an extensive lawmaking procedure
through which any law implementing the DS B's recommendations and rulings must pass. 93 T h e
multi-step process of legislating, which involves the participation of several legislative committees

89Argentina's submission, para. 18.
90The Arbitrator in Canada – Pharmaceutical Patents rejected a similar challenge by the European
Communities, which had claimed that Canada was required to repeal a provision of its Patent Act instead of
implementing new regulations in order to comply with the recommendations and rulings of the DSB. Award of
the Arbitrator, paras. 37–40.
92Award of the Arbitrator, US – Hot-Rolled Steel, para. 30.
93See supra, paras. 37–43 of this Award.

with at least two rounds of review ("general" and "s pecific", as labelled by Chile) by not only those
committees, but also by each house of Congress itself, highlights the complexity of the process Chile
will undergo during implementation. I find the intricacy of the lawmaking process relevant to my
determination
94, and I agree with the observation of previous arbitrators that implementation through
legislation is likely to require a longer time for implementation than administrative rulemaking or
other exclusively Executive action.95
39. That said, however, I am also conscious of the fact that most steps in Chile's lawmaking
procedure, while required by law, are not subject to statutory or constitutional time limits. Therefore,
there appears to be a certain amount of "flexibility"
96 within the normal legislative process,
particularly in terms of steps such as the "general discussions" and Presidential endorsement, that
Chile may fairly be expected to utilize in good faith so that it may promptly develop a new law
repealing or modifying the PBS and otherwise ensure that it conforms with its WTO obligations.
40. According to Chile, in the time since the adoption of the panel and Appellate Body reports on
23 October 2002, it has begun to implement the recommendations and rulings of the DSB. When
questioned at the oral hearing, Chile identified the following as actions it has undertaken
in furtherance of implementation: (i) consultations with Argentina, in addition to other trading
partners, on a reasonable implementation period and on possible actions required for implementation;
(ii) discussions between the Chilean Ministry of Agriculture and agricultural trade associations;
(iii) deliberations within the Interministerial Committee on changes to the PBS that may be
necessitated by virtue of the panel and Appellate Body reports.
41. These actions that have been undertaken by Chile in the last several months constitute part of
the "pre-legislative" phase of Chile's lawmaking proce ss. Chile argues that this phase is an integral
component of its implementation of the recommendations and rulings of the DSB. Argentina submits
that, because this phase is not mandated by Chilean law, Chile should be expected to use its
"flexibility" to pass over or minimize the time required for this phase. Accordingly, Argentina
suggests that time requested by Chile for the pre-legislative phase should not be relevant to my
determination of a "reasonable period of time" for implementation.

94Award of the Arbitrator, EC – Bananas III , para. 19; Award of the Arbitrator, US – 1916 Act ,
paras. 38–39.
95See for example, Award of the Arbitrator, US – Section 110(5) Copyright Act , para. 34; Award of the
Arbitrator, Australia – Salmon, para. 38; Award of the Arbitrator, Canada – Patent Term, para. 41.
96Award of the Arbitrator, Canada – Patent Term , para. 64; Award of the Arbitrator, US – 1916 Act ,
para. 39; Award of the Arbitrator, US – Section 110(5) Copyright Act, paras. 38–39.

42. The absence of a requirement under Chile's laws to engage in pre-legislative consultations is
not sufficient, in my view, to dismiss the relevance of such consultations for purposes of this
Article 21.3(c) arbitration. As other arbitrators have noted
97, and as Chile has emphasized, the
consultation phase is important for laying the foundation upon which a proposed law passes through
the legislative process. Although not mandated by law, consultations within government agencies as
well as with the affected sectors of society are typically a concomitant of lawmaking in contemporary
polities, and such consultations should be taken into account when fixing a "reasonable period of
time" for implementation.
43. Even if the "pre-legislative" phase is treated as relevant, Argentina additionally requests that I
interpret Chile's actions thus far as a lack of progress in implementation by Chile, as more than four
months have passed since the DSB's adoption of the panel and Appellate Body reports in this dispute
and little positive progress appears to have been made. A Member's obligation to implement the
recommendations and rulings of the DSB is triggere d by the DSB's adoption of the relevant panel
and/or Appellate Body reports. Although Ar ticle 21.3 acknowledges circumstances where
immediate implementation is "impracticable", in my view the implementation process should not be
prolonged through a Member's inaction (or insufficient action) in the first months following adoption.
In other words, whether or not a Member is able to complete implementation promptly, it must at the
very least promptly commence and continue concrete steps towards implementation. Otherwise,
inaction or dilatory conduct by the implementing Member would exacerbate the nullification or
impairment of the rights of other Members caused by the inconsistent measure. It is for this reason
that arbitral awards under Article 21.3(c) calculate "reasonable period[s] of time" as from the date of
adoption of panel and/or Appellate Body reports.
44. Therefore, in the light of the importance of prompt compliance in WTO dispute settlement, I
concur with the Arbitrator in US – Section 110(5) Copyright Act:
… an implementing Member must use the time after adoption of a
panel and/or Appellate Body report to begin to implement the
recommendations and rulings of the DSB. Arbitrators will scrutinize
very carefully the actions an implementing Member takes in respect of
implementation during the period after adoption of a panel and/or
Appellate Body report and prior to any arbitration proceeding. If it is
perceived by an arbitrator that an implementing Member has not
adequately begun implementation after adoption so as to effect
"prompt compliance", it is to be expe cted that the arbitrator will take
this into account in determining the "reasonable period of time".
98

97Award of the Arbitrator, Chile – Alcoholic Beverages , para. 43; Award of the Arbitrator, US – Hot-
Rolled Steel, para. 38.
98Award of the Arbitrator, para. 46.

45. Based on Chile's description of the steps it has taken towards implementation, it is unclear to
me what results have been achieved by the various consultations thus far. Almost five months have
passed between adoption of the panel and Appellate B ody reports and issuance of this award. Chile
states that the pre-legislative phase is "by no means over".99 As discussed above, I realize the value of
thorough pre-legislative activities, particularly so as to ensure passage of final legislation and thereby
achieve "full implementation".100 I also recognize that consultations, discussions and deliberations, by
their very nature, are indeterminate and cannot be subject to arbitrary time limits, particularly because
the extensiveness of these activities may change with each measure in issue. Nevertheless, for
purposes of calculating a "reasonable period of time" under Article 21.3(c), such activities should not
be assumed to be without reasonable limits.
101 I do not suggest that Chile's pre-legislative activities in
this case should necessarily have concluded by this time; but, in my view, this phase should
reasonably have proceeded further than it has.
46. Chile emphasizes that the PBS has served as a "cornerstone"
102 of its agricultural policy for
almost 20 years, its purpose having been to mitigate price fluctuations in the world markets for certain
Chilean products. These price fluctuations, according to Chile, are attributable to the interventionist
policies of other agricultural exporting States. Furthermore, Chile claims that the PBS was well-
known to exist by Chile's trading partners during the Uruguay Round and that such partners provided
assurances of the consistency of the PBS with Chile's commitments under the Agreement on
Agriculture. As a result, Chile identifies a large opposition in Chile, that resists the modification of
the PBS in the light of what Chile says such o pposition views to be a defensive measure used to
counteract others' distortive policies and a fully transparent mechanism previously understood and
accepted by other WTO Members.
103
47. Argentina does not dispute the existence of significant opposition in Chile to repeal or reform
of the PBS, nor does it contest the implications of such opposition for the passage of a WTO-
consistent implementing measure. Instead, Argentina refers to previous arbitrators that have rejected
the domestic "contentiousness" of a proposed measure as a basis for granting longer implementation
periods.
104 In this regard, it has been rightly said that "[a]ll WTO disputes are 'contentious'
domestically at least to some extent; if they were not, there would be no need for recourse by WTO

99Chile's response to questioning at the oral hearing.
100Article 22.1 of the DSU.
101Award of the Arbitrator, Canada – Autos, para. 49.
102Chile's submission, para. 7.
103Ibid., paras. 8–9, 51, and 57–58.
104See for example, Award of the Arbitrator, Canada – Patent Term, para. 58; Award of the Arbitrator,

Members to dispute settlement."105 Simple contentiousness may thus not be a sufficient consideration
under Article 21.3(c) for a longer period of time.
48. Nevertheless, the facts of this dispute, as identified by Chile and uncontested by Argentina,
raise special concerns that warrant my taking them into account in my determination. I am of the
view that the PBS is so fundamentally integrated into the policies of Chile, that domestic opposition to
repeal or modification of those measures reflects, not simply opposition by interest groups to the loss
of protection, but also reflects serious debate, within and outside the legislature of Chile, over the
means of devising an implementation measure when confronted with a DSB ruling against the
original law. In the light of the longstanding nature of the PBS, its fundamental integration into the
central agricultural policies of Chile, its price-determinative regulatory position in Chile's agricultural
policy, and its intricacy, I find its unique role and impact on Chilean society is a relevant factor in my
determination of the "reasonable period of time" for implementation.
49. Previous arbitrators have noted that an implementing Member "may reasonably be expected
to use all the flexibility available within its normal legislative procedures to enact the required
legislation as speedily as possible."
106 Argentina refers to the "urgency procedure" provided for in the
Constitution of Chile as the "flexibility" to which Chil e should be expected to resort in this case and
thus more promptly achieve implementation.107 Both parties agree that Article 71 of the Constitution
of Chile authorizes the President to denote befo re the National Congress the "urgency for passing a
bill" ("la urgencia en el despacho de un proyecto ")108, and that this procedure is governed in greater
detail by Law 18.918. 109 This "urgency procedure" permits (but does not require) the President, at
each stage of the legislative process, to designate a bill as "urgent", "very urgent", or "for immediate
discussion"110, and thereby seek to reduce the time for consideration of the bill at such stage to
30 days, 10 days, or 3 days, respectively.111 Notwithstanding the President's designation, either house
of the National Congress may reject the President's request for speedier consideration of the bill and
revert to unlimited time for analyzing the bill.
112 If the President's designation is accepted by the

105Award of the Arbitrator, Canada – Pharmaceutical Patents, para. 60.
106Award of the Arbitrator, US – 1916 Act , para. 39. See also Award of the Arbitrator, US –
Section 110(5) Copyright Act, paras. 38–39; Award of the Arbitrator, Canada – Patent Term, para. 64.
107Argentina's statement at the oral hearing.
108Constitution of Chile, Art. 71, attached as Annex ARG-2 to Argentina's submission.
109Argentina identified the Chilean Constitution and Law 18.918 as the basis for the urgency procedure,
and Chile did not contest this characterization. Argentina's and Chile's statements and responses to questioning
at the oral hearing.
110Article 26 of Law 18.918, attached as Annex ARG-4 to Argentina's statement at the oral hearing.
111Article 27 of Law 18.918, attached as Annex ARG-4 to Argentina's statement at the oral hearing.
112Chile's response to questioning at the oral hearing.

particular house of the National Congress, review of the bill at such stage will be subject to these time
limits, in contrast to the lack of time constraints generally governing each stage of the legislative
process.
113 The "urgency procedure" is thus envisioned by Chilean law as an expedited means of
legislative review, distinct from the typical process because of the additional limitations accepted by
the legislature.
50. Although referred to by the Chilean Constitution as an "urgency" measure, Argentina argues
that the President's designation of a bill as "urgent" is, in fact, a "standard procedure" under Chilean
law to which the President "regularly" makes recourse.
114 In support of its argument, Argentina
identifies 23 laws promulgated in Chile in 2002 following Presidential invocation of the urgency
procedure.
115 Whether these 23 laws evidence a consistent practice of using the "urgency procedure"
so as to render it a de facto normal part of the Chilean legislative process cannot be determined on
the basis of the evidence before me. The regularity of the "urgency procedure" cannot be evaluated
without knowing, inter alia, how many laws in all were promulgated in Chile in 2002, for Argentina's
argument is implicitly premised on the fact that the "urgency procedure" was employed for a
statistically significant percentage of laws. In addition, the static portrait revealed by an examination
of laws in one legislative year may not provide sufficient basis to deduce the "standard" nature of
Executive practice in the process of lawmaking in Chile.
51. I referred earlier to the special status of the PBS in Chile's agricultural policy and the
consequent difficulties imposed on the formulation of legislation to implement the recommendations
and rulings of the DSB in this case.
116 Having recognized the need for thorough discussion on any
implementing measure modifying the PBS, it would not be right for me to expect that the President
of Chile will necessarily seek truncated review of such a measure in the very legislative body intended
for deliberation and debate on behalf of the public it represents. This severe reduction of legislative
deliberation is precisely what Argentina seeks when suggesting that I factor the strict time limits of
the "urgency procedure" into my determination of the "reasonable period of time" for implementation.
Therefore, I find it unreasonable for me to expect or assume that Chile will necessarily make use of
the "flexibility" arguably provided by the extr aordinary "urgency procedure" when implementing
legislation that modifies the PBS. Indeed, there is sufficient flexibility within the ordinary
legislative procedure of Chile to enable it to implement the recommendations and rulings of the DSB
in this case within a time frame of less than the 18 months which it seeks.

113Chile's response to questioning at the oral hearing.
114Argentina's comments on the document presented by Chile at the oral hearing, 20 February 2003.
115Annex ARG-5 to Argentina's statement at the oral hearing.
116See supra, paras. 46–48 of this Award.

52. Nevertheless, the relevant laws of Chile, namely, the Constitution and Law 18.918, appear to
enable Chile to resort to this "extraordinary" legislative procedure when proposing a law to modify
the PBS. Because of the significant passage of time since adoption of the panel and Appellate Body
reports in this case, and the lack of progress made thus far in implementing the recommendations and
rulings of the DSB
117, Chile may itself decide to resort to the "urgency procedure" at certain stages of
the legislative process. Chile recognizes that it must implement those recommendations and rulings in
good faith towards other Members of the WTO. It must therefore do everything it reasonably can to
act expeditiously in this process of implementation. Perhaps this will call for Chile to invoke its
"urgency procedure". Perhaps it will not. On the facts of this case and the evidence before me, I
believe that whether and at what stages Chile utilizes the "urgency procedure" are questions for Chile
to determine for itself. But, whatever it does, Chile must implement the recommendations and rulings
of the DSB promptly.
53. Argentina refers to the passage of Laws 19.772 and 19.716 as examples of analogous
situations in which the Chilean legislature acted promptly when it was sufficiently motivated to do so.
Law 19.772 established, inter alia , a new bound tariff rate for sugar. The law was passed by the
National Congress subsequent to a series of consultations with Chile's trading partners because Chile
had invoked GATT Article XXVIII.
118 Pursuant to those discussions, Chile raised its bound tariff
rate on sugar beyond that which had been established in the Uruguay Round as part of Chile's GATT
Article II tariff bindings.
119 Law 19.772, in this regard, focused on one particular product (that is,
sugar) and provided increased protection to sugar producers by raising the maximum possible tariff
that Chile could apply to sugar imports. In contrast, compliance with the recommendations and
rulings of the DSB in this case, as Chile observes, will require modifications to the price band system,
thereby possibly affecting a much larger portion of the agricultural sector, and will be unlikely to

117See supra, paras. 43–45 of this Award.
118Chile's response to questioning at the oral hear ing. Article XXVIII of GATT provides, in part, as
follows:
… a contracting party … may, by negotiation and agreement with any
contracting party with which such concession was initially negotiated and
with any other contracting party determined by the CONTRACTING
PARTIES to have a principal supplying interest … and subject to
consultation with any other contracting party determined by the
CONTRACTING PARTIES to have a substantial interest in such
concession, modify or withdraw a concession included in the appropriate
schedule annexed to this Agreement. (footnotes omitted)
119Chile's response to questioning at the oral hearing.

provide greater protection than that afforded by the status quo. 120 I therefore do not find the passage
of Law 19.772 to be of guidance in calculating the period of time for passage of a measure to modify
the PBS for the purposes of this dispute.
54. Law 19.716 was enacted to modify Chile's spirits taxes in accordance with the findings of the
panel and Appellate Body in Chile – Alcoholic Beverages . The Article 21.3(c) arbitration in that
dispute established 14 months and nine days as the "reasonable period of time" for implementation.
121
Chile engaged in consultations with the European Communities, the complainant in that case, for
approximately ten months as part of the pre-legislative phase discussed earlier.122 Additionally, in the
light of the short time remaining within the "reaso nable period of time" determined by the Arbitrator
in Chile – Alcoholic Beverages , the President employed the urgency procedure to seek particularly
expeditious consideration of the proposed implementing legislation.123 As noted earlier, the use of the
urgency procedure in a previous instance does not convince me that Chile should be expected to
employ the same means of truncated review when passing a law to modify what I find to be a
significantly more complex and systemic measure than that at issue in Chile – Alcoholic Beverages ,
that is, the PBS. Accordingly, I find the an alogy to the passage of Law 19.716 inapposite to my
determination of the "reasonable period of time" for implementation in this dispute. However, what
the passage of that law does show is that the legislative processes of Chile are sufficiently tractable to
enable Chile to adopt the urgency procedure in an appropriate case.
55. Finally, the DSU renders relevant to my dete rmination the developing country status of
Members involved in dispute settlement. Article 21.2 of the DSU 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.
I agree with the following statement by the arbitrator in Chile – Alcoholic Beverages that "an
arbitrator functioning under Article 21.3(c) [must] be generally mindful of the great difficulties that a
developing country Member may, in a particular case, face as it proceeds to implement the
recommendations and rulings of the DSB."
124 This arbitration is, however, the first arbitration under
Article 21.3(c) to include developing countries as both complainant and respondent. The period of

120Chile's statement at the oral hearing.
121Award of the Arbitrator, Chile – Alcoholic Beverages, para. 46.
122Chile's response to questioning at the oral hearing.
123Ibid. Chile reported the use of the urgency procedure by its President in Chile's status report to the
DSB on implementation. See Status Report by Chile: Addendum , WT/DS87/17/Add.1, WT/DS110/16/Add.1,
19 January 2001.
124Award of the Arbitrator, Chile – Alcoholic Beverages, para. 45 (emphasis added).

time for implementation of the recommendations and rulings of the DSB in this case is thus a
"matter[] affecting the interests" of both Members: the general difficulties facing Chile as a
developing country in revising its longstanding PBS, and the burden imposed on Argentina as a
developing country whose access to the Chilean agricultural market is impeded by the PBS, contrary
to WTO rules.
56. Furthermore, Chile has not pointed to additional specific obstacles that it faces as a
developing country under present circumstances. This is a matter which I should take into account in
evaluating whether a longer period of time may be needed for implementation. The absence of
presently-existing, concrete difficulties in Chile's position as a developing country stands in contrast
to previous arbitrations, wherein Members have identified, not simply their positions as developing
countries, but also "severe"
125 or "dire"126 economic and financial situations existing at the time of the
proposed period of implementation. In contrast, the acuteness of Argentina's burden as a developing
country complainant that has been successful in establishing the WTO-inconsistency of a challenged
measure, is amplified by Argentina's daunting financ ial woes at present. Accordingly, I recognize
that Chile may indeed face obstacles as a developing country in its implementation of the
recommendations and rulings of the DSB, and that Argentina, likewise, faces continuing hardship as a
developing country so long as the WTO-inconsistent PBS is maintained. In the unusual
circumstances of this case, therefore, I am not swayed towards either a longer or shorter period of
time by the "[p]articular attention"
127 I pay to the interests of developing countries.
57. Looking at the matter sensibly, reasonably, and fairly, and having reviewed the shortest
period possible in which Chile may be expected to implement the recommendations and rulings of the
DSB, and evaluating the particular circumstances claimed by the parties in this dispute, I do not find
Chile's proposal of 18 months to be necessary, nor do I find Argentina's proposal of nine months and
six days to be a sufficiently "reasonable" period within which Chile should complete implementation.

125Award of the Arbitrator, Argentina – Hides and Leather, para. 51.
126Award of the Arbitrator, Indonesia – Autos, para. 24.
127Article 21.2 of the DSU.

IV. The Award
58. For the reasons set out above, I determine that the "reasonable period of time" for Chile to
implement the recommendations and rulings of the DSB in this case is 14 months from the date of
adoption of the panel and Appellate Body reports by the DSB, namely, 23 October 2002. The
"reasonable period of time" will therefore expire on 23 December 2003.
Signed in the original at Geneva this 28th day of February 2003 by:
John Lockhart
Arbitrator