Document: Report of the Appellate Body
Date: 16 January 1998
Document codes: WT/DS26/AB/R; WT/DS48/AB/R
Complainant: U.S.
Respondent: EU
Third parties: Australia, Canada, New Zealand, Norway
Dispute stage: Implementation & Compliance
Agreements cited: Art. III, XI  GATT 1994Art. 2  Technical Barriers to Trade (TBT)Art. 4  AgricultureArt. 2, 3, 5  Sanitary and Phytosanitary Measures (SPS)

Appellate Body

EC MEASURES CONCERNING MEAT AND MEAT PRODUCTS
(HORMONES)

AB-1997-4

Report of the Appellate Body

I.

Il.

Page i
Introduction: Statement of the Appeal... ...... 0... 00.0.0... eee eee eee 1
Arguments of the Participants and Third Participants ..............-...0.0-. 4
A. Claims of Error by the European Communities - Appellant ............ 4
i. Burden of Proof... 2.2... eee es 4
2. Standard of Review ........... 0... cee ees 6
3. The Precautionary Principle .............. 000000000005 7
4. Objective Assessment of the Facts ...............0.0000. 7
5. Temporal Application of the SPS Agreement ................ 8
6. Article 3.1 0.0... eee 9
7. Article 3.3 2.0... eee ee ees 10
8. Article 5.1 0.0. ee eee 10
9. Article 5.5 0... eens 13
10. Procedural Issues ... 1... ee ee 15
B. Arguments by the United States - Appellee... 0... ee 16
1. Burden of Proof... 1... ee eee 16
2. Standard of Review... 2.0... eee 17
3. The Precautionary Principle ........... 0.0.0 eee eee 18
4. Objective Assessment of the Facts ..............2 000000. 18
5. Temporal Application of the SPS Agreement ...... Lee ee eee 18
6. Article 3.1 2... ee ee 19
7. Article 3.300... ee ee 19
8. Article 5.1 2.0... ce ee eee 19
9. Article 5.5 20. ee eee 20
10. Procedural Issues ... 2.2... .. ee ee 21
C. Arguments by Canada - Appellee . 1... ees 23
1. Burden of Proof... 2.2... ce ee eee 23
2. The Precautionary Principle ............ 2... 23
3. Objective Assessment of the Facts .................0000. 24
4. Temporal Application of the SPS Agreement ................ 24
5. Article 3.10.0... ee ee 24
6. Article 3.30... ee eee 25
7. Article 5.1 2... ee eee 25
8. Article 5.5 2. eee 26
9. Procedural Issues ......-.--. 02-0 eee eee eee eee eee 26
D. Claims of Error by the United States - Appellant .................. 27
1. Article2.2 2... 0... eee 27
2. Article 5.6 2.0... 2. eee ee eee 28
E. Claims of Error by Canada - Appellant ... 1... 0. eee 29

1. Article 5.6 2... 29

Page ii
F. Arguments by the European Communities - Appellee ................
1. Article 2.2 2. ee ee tenes
2. Article 5.6 2... 1. cc ee ee ee ee ee
G. Arguments by the Third Participants ........ 0. ccc cee eee eee
1. Australia 2... ee ee eee eee ees
2. New Zealand... 0... ee ete ee eee ees
3. Norway ...... cece ee ee eee eee
Ii. Issues Raised in this Appeal .. 2.2... 2. ee eee ee
IV. Allocating the Burden of Proof in Proceedings Under the SPS Agreement ........
V. The Standard of Review Applicable in Proceedings Under the SPS Agreement .....
VI. The Relevance of the Precautionary Principle in the Interpretation of the SPS
AQTeCMeNnt 2... ees
Vil. Application of the SPS Agreement to Measures Enacted Before 1 January 1995 ...
VII. The Requirement of Objective Assessment of the Facts by a Panel Under Article 11
of the DSU .. 1... eee eee eee eee
A. Evidence with Regard to MGA .... 0... .. cc cece cece ee ee ee eee
B. Evidence with Regard to the Five Other Hormones ..............+44-
C. Evidence with Regard to the Issue of Control .............0 ce eevee
D. Evidence on Article 5.5 2.0... 00 ee eee
IX. Certain Procedures Adopted by the Panel ................. ee eee eee
A. The Selection and Use of Experts .. 0... 0. cee ees
B. Additional Third Party Rights to the United States and Canada .........
C. The Difference Between Legal Claims and Arguments ...............
X. The Interpretation of Articles 3.1 and 3.3 of the SPS Agreement ..............
A. The Meaning of "Based On" as Used in Article 3.1 of the SPS Agreement . . .
B. Relationship Between Articles 3.1, 3.2 and 3.3 of the SPS Agreement .....
C. The Requirements of Article 3.3 of the SPS Agreement ............04.-
XI. The Reading of Articles 5.1 and 5.2 of the SPS Agreement: Basing SPS Measures

on a Risk Assessment ........-.--.- cee eee eee eee ee ee ee
A. The Interpretation of "Risk Assessment” .. 1... 0. ce ee ees

1. Risk Assessment and the Notion of "Risk" ...............45
2. Factors to be Considered in Carrying Out a Risk Assessment .....

XI.

XIII.

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B. The Interpretation of "Based On" .. 1... 0.0. ce es

1. A "Minimum Procedural Requirement" in Article 5.1? .........
2. Substantive Requirement of Article 5.1 - Rational Relationship Between
an SPS Measure and a Risk Assessment ...................

The Reading of Article 5.5 of the SPS Agreement: Consistency of Levels of Protection
and Resulting Discrimination or Disguised Restriction on International Trade .....

General Considerations: the Elements of Article 5.5 ......0...0.0-0.004.
Different Levels of Protection in Different Situations ................
Arbitrary or Unjustifiable Differences in Levels of Protection...........
Resulting in Discrimination or a Disguised Restriction on International

Trdd@ 1... eee eee

DAW S

Appeals by the United States and Canada: Articles 2.2 and Article 5.6 of the SPS
AQreeMent ©. eee

Findings and Conclusions .. 2... 0... ee es

APPELLATE BODY

EC Measures Concerning Meat and Meat AB-1997-4

Products (Hormones)

Present:
European Communities, Appellant/Appellee

Feliciano, Presiding Member
United States, Appellant/Appellee Ehlermann, Member
Canada, Appellant/Appellee Matsushita, Member

Australia, New Zealand and Norway, Third
Participants

I. Introduction: Statement of the Appeal

1. The European Communities, the United States and Canada appeal from certain issues of law
and legal interpretations in the Panel Reports, EC Measures Concerning Meat and Meat Products
(Hormones).' These two Panel Reports, circulated to Members of the World Trade Organization
("WTO") on 18 August 1997, were rendered by two Panels composed of the same three persons.”
These Panel Reports are similar, but they are not identical in every respect. The Panel in the
complaint brought by the United States was established by the Dispute Settlement Body (the "DSB")
on 20 May 1996. On 16 October 1996, the DSB established the Panel in the complaint brought by
Canada. The European Communities and Canada agreed, on 4 November 1996, that the composition
of the latter Panel would be identical to the composition of the Panel established at the request of the

United States.

2. The Panel dealt with a complaint against the European Communities relating to an EC prohibition
of imports of meat and meat products derived from cattle to which either the natural hormones:

oestradiol-178, progesterone or testosterone, or the synthetic hormones: trenbolone acetate, zeranol

‘Complaint by the United States, WT/DS26/R/USA, (the "US Panel Report") and Complaint by Canada, WT/DS48/R/CAN,
(the “Canada Panel Report").

7As the composition of both Panels was identical, we will refer to the Panels as "the Panel".

or melengestrol acetate ("MGA"), had been administered for growth promotion purposes. This import
prohibition was set forth in a series of Directives of the Council of Ministers that were enacted before

1 January 1995. Those Directives were:

1. Council Directive 81/602/EEC of 31 July 1981 ("Directive 81/602")°;
2. Council Directive 88/146/EEC of 7 March 1988 ("Directive 88/146")*; and
3. Council Directive 88/299/EEC of 17 May 1988 ("Directive 88/299").°

3. Directive 81/602 prohibited the administration to farm animals of substances having a hormonal
action and of substances having a thyrostatic action. It also prohibited the placing on the European
market of both domestically produced and imported meat and meat products derived from farm animals
to which such substances had been administered. Two exceptions to this prohibition were provided
for. One exception covered substances with an oestrogenic, androgenic or gestagenic action when
used for therapeutic or zootechnical purposes and administered by a veterinarian or under a veterinarian’s
responsibility. The other exception related to three natural hormones (oestradiol - 176, progesterone
and testosterone) and two synthetic hormones (trenbolone acetate and zeranol) used for growth promotion
purposes if allowed under the regulations of the Member States of the European Economic Community
("EEC"), until a detailed examination of the effects of these substances could be carried out and until
the EEC could take a decision on the use of these substances for growth promotion. The sixth hormone
involved in this appeal, MGA, was not included in the second exception; it was covered by the general

prohibition concerning substances having a hormonal or thyrostatic action.

4. Seven years later®, Directive 88/146 was promulgated prohibiting the administration to farm
animals of the synthetic hormones: trenbolone acetate and zeranol, for any purposes, as well as the
administration of the natural hormones: oestradiol - 178, progesterone and testosterone, for growth

promotion or fattening purposes. This Directive permitted Member States of the EEC to authorize,

3Official Journal, No. L 222, 7 August 1981, p. 32.
‘Official Journal, No. L 70, 16 March 1988, p. 16.
Official Journal, No. L 128, 21 May 1988, p. 36.

®It should be noted that on 31 December 1985 the Council of Ministers adopted Directive 85/649/EEC prohibiting the
use in livestock farming of certain substances having a hormonal action, Official Journal, No. L 382, 31 December 1985,
p. 228. This Directive prohibited the use of all the hormones (except MGA, the use of which had been previously prohibited)
for growth promotion purposes and established more detailed provisions concerning authorized therapeutic uses. This Directive
was challenged in the Court of Justice of the European Communities, which annulled it on procedural grounds in its Judgment
of 23 February 1988, [1988] E.C.R. 855. Shortly afterwards, the European Commission submitted to the Council a proposal
for a substantively identical Directive, which the Council adopted on 7 March 1988 as Directive 88/146/EEC.

under specified conditions, the use of the three natural hormones for therapeutic and zootechnical
purposes. Directive 88/146 explicitly prohibited both the intra-EEC trade and the importation from
third countries of meat and meat products obtained from animals to which substances having oestrogenic,
androgenic, gestagenic or thyrostatic action had been administered. Trade in meat and meat products
derived from animals treated with such substances for therapeutic or zootechnical purposes was allowed

only under certain conditions. Those conditions were set out in Directive 88/299.

5. Effective as of 1 July 1997, Directives 81/602, 88/146 and 88/299 were repealed and replaced
with Council Directive 96/22/EC of 29 April 1996 ("Directive 96/22").’ This Directive maintains
the prohibition of the administration to farm animals of substances having a hormonal or thyrostatic
action. As under the previously applicable Directives, it is prohibited to place on the market, or to
import from third countries, meat and meat products from animals to which such substances, including
the six hormones at issue in this dispute, were administered. This Directive also continues to allow
Member States to authorize the administration, for therapeutic and zootechnical purposes, of certain
substances having a hormonal or thyrostatic action. Under certain conditions, Directive 96/22 allows
the placing on the market, and the importation from third countries, of meat and meat products from

animals to which these substances have been administered for therapeutic and zootechnical purposes.

6. The Panel circulated its Reports to the Members of the WTO on 18 August 1997. The US Panel

Report and the Canada Panel Report reached the same conclusions in paragraph 9.1:

(i) The European Communities, by maintaining sanitary measures
which are not based on a risk assessment, has acted inconsistently with
the requirements contained in Article 5.1 of the Agreement on the
Application of Sanitary and Phytosanitary Measures.

(ii) The European Communities, by adopting arbitrary or
unjustifiable distinctions in the levels of sanitary protection it considers
to be appropriate in different situations which result in discrimination
or a disguised restriction on international trade, has acted inconsistently
with the requirement contained in Article 5.5 of the Agreement on the
Application of Sanitary and Phytosanitary Measures.

(iii) | The European Communities, by maintaining sanitary measures
which are not based on existing international standards without
justification under Article 3.3 of the Agreement on the Application
of Sanitary and Phytosanitary Measures, has acted inconsistently with
the requirements of Article 3.1 of that Agreement.

Official Journal, No. L 125, 23 May 1996, p. 3.

In both Reports, the Panel recommended in paragraph 9.2:

... that the Dispute Settlement Body requests the European Communities
to bring its measures in dispute into conformity with its obligations
under the Agreement on the Application of Sanitary and Phytosanitary
Measures.

7. On 24 September 1997, the European Communities notified the DSB of its decision to appeal
certain issues of law covered in the Panel Reports and certain legal interpretations developed by the
Panel, pursuant to paragraph 4 of Article 16 of the Understanding on Rules and Procedures Governing
the Settlement of Disputes (the "DSU"), and filed two notices of appeal® with the Appellate Body pursuant
to Rule 20 of the Working Procedures for Appellate Review (the "Working Procedures"). Pursuant
to Rule 21 of the Working Procedures, the European Communities filed an appellant’s submission on
6 October 1997. On 9 October 1997, the United States and Canada filed appellants’ submissions pursuant
to Rule 23(1) of the Working Procedures. On 20 October 1997, the United States and Canada each
filed an appellee’s submission pursuant to Rule 22 of the Working Procedures and the European
Communities filed its own appellee’s submission pursuant to Rule 23(3) of the Working Procedures.
On the same day, Australia, New Zealand and Norway filed separate third participants’ submissions

in accordance with Rule 24 of the Working Procedures.
8. The oral hearing was held on 4 and 5 November 1997. The participants and third participants

presented oral arguments and responded to questions put to them by the Members of the Division hearing

this appeal. The participants and third participants also gave oral concluding statements.

II. Arguments of the Participants and Third Participants

A. Claims of Error by the European Communities - Appellant
1. Burden of Proof
9. The European Communities argues that the Panel erred in its allocation of the burden of proof

in this dispute in three respects. In the view of the European Communities, the Panel erred on the

5WT/DS26/9, 25 September 1997, and WT/DS48/7, 25 September 1997.