Write Up of Class Presentation on Interaction between WTO and General International Law

Dispute Settlement Mechanism (DSM) Presentation Interaction between WTO and General International Law By: Mainan Ray Roll 374 INTRODUCTION The most imperative dimension of the World Trade Organisation (WTO) is that its inception lies in the womb of International Law. The overall functionality of WTO, perhaps, has drifted away the focus from its source and the input given by the field of international law as, specifically in Public International Law towards its formation. Nevertheless, the exploration of WTO along with the moral fibre of international law has always been a stirred concern and also assists the learners in learning and understanding the relation as well as interplay of WTO and international law. Critical views and comprehensive study may raise intricate questions as to interrelation and interdependence of WTO and International law. No doubt, the vastness of the topic has created many thought provoking researches over a number of years to trace out the true scope of interaction between WTO and International law. One of the finest scholarly article in this regard is How far can we GO? By eminent exponent Joost Pauwelyn in which he has portrayed a vivid picture of this interaction which has facilitated easy understanding. In this submission, an effort has been made to show again the interaction taking inference from Joost Pauwelyns article which has clearly argued that WTO is part of International law, specifically in Public International law. Since its inception of WTO to the role of Dispute Settlement Understanding Body (DSB), every aspect of WTO owe a great number of attributes of International law that may be in terms of treaty interpretation or invoking the other non-WTO rules in handling the dispute between the members to it or whenever requires necessary. However, this submission shall step into the topic gradually with detailed discussion. Basic Fundamentals and Definitions First of all we shall look at the following definitions for our easy understanding

International Law: Very Common perception as to international law is the law that regulates relations
between the nations or states. In other words, International Law consists of the rules and principles of general application dealing with the conduct of States and of international organizations in their international relations with one another and with private individuals, minority groups and transnational companies.1 As per Joost Pauwelyn, international law is created by the states and states are creators as well as subjects of international laws. As a result, international law has no central legislator unlike domestic law. The law

Robert Beckman and Dagmar Butte, Introduction to International Law,p1

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Write Up of Class Presentation on Interaction between WTO and General International Law created by state A and state B has the same legal values as that created by state C and State D.2 That means every international law s created by each state is on the same footing. No supremacy or no option of subordination exists. It is generally accepted that Article 38 of the Statute of the International Court of Justice is a complete statement of the sources of international law. Article 38 describes the following four sources: 1. International conventions and treaties that establish rules that States expressly recognise; 2. International custom as evidence of general practice(s) accepted by States as law; 3. General principles of law; and 4. Judicial decisions and the teachings of highly qualified publicists of various nations. The International Court of Justice (ICJ), which is the principal judicial organ of the United Nations, is authorised to consider these sources when deciding disputes. However, a decision of the ICJ has no binding force except between parties and in respect of that particular case: Article 59, Statute of the International Court of Justice.3 Customary international law describes general practices accepted as law by States. The development of customary international law is an ongoing process, making it more flexible than law contained in treaties. The task of identifying or describing customary international law, involves consideration of the following elements: > the degree of consistency and uniformity of the practice; > the generality and duration of the practice; > the interests of specially affected States; and > the degree to which the States who adopt the practice do so from a recognition that the practice is required by, or consistent with prevailing international law. The shorthand for the belief that the practice is required by law is opinio juris et necessitates, a Latin phrase.4 Treaties A treaty is an express agreement under international law entered into by actors in international law, namely sovereign states and international organizations. A treaty may also be known as an (international) agreement, protocol, covenant, convention or exchange of letters, among other terms. Regardless of terminology, all of these forms of agreements are, under international law, equally considered treaties and
2

Joost Pauwelyn, THE ROLE OF PUBLIC INTERNATIONAL LAW IN THE WTO:HOW FAR CAN WE GO? page-536 available at www.asil.org/ajil/pauwelyn.pdf
3

http://www.legalanswers.sl.nsw.gov.au/hot_topics/pdf/international_69.pdf Ibid

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Write Up of Class Presentation on Interaction between WTO and General International Law the rules are the same 5The reference in (a) to international conventions is to bilateral and multilateral treaties. For the moment it is enough to say that, as with domestic legislation, treaties now play a crucial role in international law, important areas of customary international law having now been codified in widely accepted treaties. In consequence, custom and the other sources of international law are no longer as important as they used to be. But that does not mean that custom is on a lower level than treaties. There is no formal hierarchy of the sources of international law. As between parties to a treaty, the treaty binds them. As between a party to a treaty and a non-party, custom will apply, including custom derived from treaties.6

Public International Law:

There is wide variation in the practice of governments with regard to the rules of origin. While the requirement of substantial transformation is universally recognized, some governments apply the criterion of change of tariff classification, others the ad valorem percentage criterion and yet others the criterion of manufacturing or processing operation. In a globalizing world it has become even more important that a degree of harmonization is achieved in these practices of Members in implementing such a requirement. Relation between WTO and Public international Law i) The creation and Interplay of rules in Public International Law a. Mr. Pauwelyn clearly mentions that international law is decentralised or it has no central legislators unlike the domestic law. Laws created between states , more generally, law created by each state has same value or they stand on the same footing. Say for example , if we take the example given in the aforesaid article that The law created by state A and state B has the same legal value as that created by state C and state D. that means, international law is created by the consent of states and on the other hand, states are the subject of international law. He clearly mentions again that International law is a law of cooperation, not subordination. And to the exclusion of consent by a state no law could be framed and imposed upon the state. (pacta tertiis nec nocent nec prosunt) Besides, he mentioned that international law does include an element with features of international legislation, namely general international law, composed of general customary international law and general international law and in any case any gap fills the gap left by treaties.7 As we already mention that WTO is a multilateral treaty emerge for facilitating trade system by the consents of several member countries (Right now 153 member countries) for trade facilitation. So, its clear that WTO deals with specifically trade related issues and administer the trade related issues taking the reference from International law (as international law created by the states).
5

Definition as available at http://en.wikipedia.org/wiki/Treaty Anthony Aust,Excerpt, Cambridge University Press0521823498 - Handbook of International Law

Joost Pauwelyn,Supra page-536

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Write Up of Class Presentation on Interaction between WTO and General International Law From that point of view, every treaty like United nations Environment Programme(UNEP), World Intellectual Property Organization(WIPO),WTO are on the same footing as all are created by the states i.e. no hierarchy exists in international law. Every treaty is part of international law. Therefore, WTO is also part of international law. b. If we think a bit on the aforesaid contentions, the first thing will come in our mind that the states are the only creator of international laws. So all the powers vests in the hand of the states and in doing so the states can contract out (not participating) or exclude general international law as per their choice.(only exception is jus cogens)[as mentioned in Art. 53 and 64 of Vienna Convention]. In so far again the question of interplay come the treaty and customary law are having the same force but in some cases treaty and in some cases customary laws prevail over each other. If the treaty prevails then treaty must prevail as lex specialis (law governing the specific subject matters). So , in resembling to WTO is also a treaty and on the other hand lex specialis (as specifically deals with trade related issues) and keep the interplay with international law. ii) WTO Rules as Rules of Public International Law It is clear that WTO is part of public international law. So, what about WTO rules8 ? If WTO is established for specifically for trade related purpose, then its quiet sure that WTO rules are especially for administering trade related issues. In making the treat state may contract out or deviate or exclude any general international law but that does not mean that the state contarcts out all general international law rather in making such specific treaty the state needs to fall back or to be dependent on many provisions of general international law. Thus, so, it is implicated that WTO like any other treaty plays within the system of Public International law. And no question of status of self-regime of any treaty law ever fits. The Relationship between WTO rules and other rules of International law: Under this heading, Mr. Pawleyn , has portrayed following provisions included in WTO rules in the back ground of International Law: i) ii) The rights and obligations of the state existed before the existence of WTO rules of
international law (such as non-discrimination principles in trade in services);

WTO rules that contract out of general international law or deviate from, or even replace, other pre-existing rules of international law (such as bilateral quota or tariff arrangements and the Tokyo Round codes); WTO rules that confirm pre-existing rules of international law, be they of general International law (such as DSU Article 3.2 confirming that WTO covered agreement are to be interpreted in accordance with customary rules of interpretation of public International law) or pre-existing treaty law (such as GATT 1994 incorporating GATT 1947 and the TRIPS Agreement incorporating parts of certain WIPO conventions);

iii)

WTO rules,includes the 1994 WTO treaty as well as all subsequent WTO rules,not just those in subsequent agreements between WTO members, but also those constituted by acts of the WTO as an international organization (such as waivers and decisions of the Dispute Settlement Body [hereinafter DSB]),unilateral acts of WTO members, and, potentially, customary law specific to WTO members and the WTO treaty.

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Write Up of Class Presentation on Interaction between WTO and General International Law iv) non-WTO rules that already existed when the WTO treaty was concluded (on April 15, 1994) and that are (a) relevant to and may have an impact on WTO rules; and (b) have not been contracted out of, deviated from, or replaced by the WTO treaty. These non-WTO rules consist mainly of general international law, in particular rules on The law of treaties, state responsibility, and settlement of disputes, but also of other treaty rules that regulate or have an impact on the trade relations between states (such as certain rules in international rules in environmental or human rights conventions and customs unions or free trade arrangements); and v) non-WTO rules that are created subsequently to the WTO treaty (postApril 1994) and (a) are relevant to and may have an impact on WTO rules; (b) either add to or confirm existing WTO rules or contract out of, deviate from, or replace aspects of existing WTO rules; and (c) if the latter is the case, do so in a manner consistent with interplay and conflict rules in the WTO treaty and general international law9 . Thus it seems that the above mentioned provisions being included for formation of WTO rules indicate the analogous to accumulation of norms in international law.

So, undoubtedly it is proved that WTO rules are even part of general International law. One thing might have unnoticed in this respect that confirming some rules of general international law does not amount to excluding all other laws. Say for instance, if Art.3.2 of DSU is brought off in terms of the rules of customary interpretation of public international law in case of interpreting WTO-covered agreement, that does not mean and affirm that only Art 3.2 will only come into the picture of interpretation, if necessary other rules of international law be applicable but that has to be done cautiously and carefully. In George Pinson(Fr.) v. United Mexican States [5R.I.A.A 327,427] it was held that, Treaties must be applied and interpreted against the background of general principles of international law. Corroborating the same both the Permanent Court of Justice and the International Court of Justice expressed their view in the same line of thinking. Pawleyns view in this respect is that WTO panels can apply general principles of international law where the WTO Agreement is silent, for example on burden of proof and the treatment of municipal law in dispute settlement proceedings. The principle can be formulated in different ways. One way is to say that for those areas on which the treaty remains silent, other norms of international law (in particular, general international law) continue to apply. Another is to say that in case [the treaty in question] has not regulated the issue differently or contracted out of pre-existing lawthe rules of general international law regulating the issue continue to apply. In the aforementioned Georges Pinson case: Every international convention must be deemed tacitly to refer to general principles of international law for all questions which it does not itself resolve in express terms and in a different way.21 In the WTO context, the Panel in India-Autos has noted that, it

Joost Pauwelyne,Supra page(540-541)

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Write Up of Class Presentation on Interaction between WTO and General International Law is certainly true that certain widely recognized principles of international law have been found to be applicable in WTO dispute settlement, particularly concerning fundamental procedural matters.10 Treaty Interpretation Treaty Interpretation is the most key concept in actual understanding the relation, interaction or interdependency of WTO and International law. Perhaps, on the whole elementary concern designed for the DSB is how to interpret WTO covered agreements. All interpretation of the WTO Covered agreements is no exception .Although the general principle of interpretation specifies that the terms of the treaty may be interpreted in their context; it is choice of the interpreter to decide how context comes in to play. Art. 31 and 32 of VCLT (Vienna Convention of Law of Treaty) have a crucial role in interpreting the covered agreement because habitually the root of a dispute is originated in understandings of certain provisions. Panel body and Appellate Body have slotted into the essence of the Vienna Convention on the Law of Treaties (VCLT) into interpretation and for easy understanding of dispute. Article 3:2 of the DSU declares that WTO agreements are to be interpreted as per the customary rules of interpretation of public international law. Just the once, it has been referred as serving the only rules of interpretation of the WTO Agreements. Besides, Under the DSB system, it is very important that the foundation for interpretation and submission of GATT rules be laid down for negotiation, decision making and for any necessary purpose held by the Panel or appellate Body. Abiding by the principles, the dispute resolution process is recognized to be more proficient and WTO agreements are more clearly understood. In Us-Gasoline case both Venezuela and Brazil brought a complaint concerning the effects of rules prescribed under the U.S. Clean Air Act to foreign exported gasoline. Before the Panel, the U.S. attempted to justify its measure under Article XX of the GATT 1994, because it related to conserving natural resources pursuant to Article XX(g). The Panel was criticised by the Appellate Body for not giving full effect to Article 31 of the VCLT in interpreting the crucial phrase in Article XX(g) of the GATT 1994, whether the rule constituted a measure relating to the conservation of exhaustible natural resources. Relying on GATT 1947 jurisprudence, the Panel interpreted the term relating to as meaning primarily aimed at.31 The Appellate Body disagreed with the Panels finding that the calculation of baseline levels of clean gasoline qualities, applicable to foreign producers, could be isolated from the overall policy objective of the legislation, so that the measure was not, on its own, primarily aimed at conservation. It was erroneous to conclude that baseline rules, in the context of lawmakers intention, were not measures relating to the conservation of an exhaustible natural resource. 11In that the Appellate body immediately addressed the question of the relationship of international law to the WTO, and emphatically pronounced that , with respect to treaty interpretation , general principle of customary international law were binding on members of the WTO. The appellate body also noted that many

10

IndiaMeasures Affecting the Automotive Sector (2002), WTO Doc. WT/DS146/R and Corr.1, WTODoc. WT/DS175/R and Corr.1 at para. 7.57 (Panel Report and Report of the Appellate Body),online: WTO <http://docs-online.wto.org/gen_search/asp.>
11

United States-Standards for Reformulated and Conventional Gasoline ,WTO Doc, WT/DS2/AB/R at 17(Mar.20,1996)

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Write Up of Class Presentation on Interaction between WTO and General International Law countries deemed the text of the VCLT appropriately to articulate customary international law of treaty interpretation and the Appellate body quoted article 31 and 32 of VCLT.12 In one step more furtherance, the Appellate body in the aforesaid case acknowledged that direction [in art. 3.2 of DSU] reflects a measure of recognition that the General Agreement [GATT] is not to be read in clinical isolation from Public International Law. So, it seems that the non accepting the truth that WTO is part of international law is nothing but foolishness because Art.3.2 is clearly a death blow to those non thinkers. However, another instance of relationship of international law to the WTO law is raised in the JapanAlchoholic Breverage Case, where the appellate body report is coming to grips with the impact of a prior opinion or report of either its own or a GATT dispute settlement panel , on a case then before the Appellate Body .Should it be bound by the ruling of a prior case in an adopted report ?....there is not such a strict precedent requirement , but the Vienna Convention does speak of practice under the agreement as important to interpreting a treaty. 13 a. Conflicts in International law

The well known presumption is International law is against the conflicts and intends to avoid the conflict as there is no hierarchy in international law. In the context of conflict between two treaties, whether two particular treaty norms are in conflict, it means that states agreeing a new treaty will have effect of the old treaty in mind and will keep continuation to follow it unless unambiguous wording to the contrary explains the intention of the drafter to deviate from it. In that case application of interpretation can mitigate the conflict and for that reasons any relevant rules of international law applicable in between the parties to the dispute will be forwarded. Mr. Pauwlyne , however, opines that the definition of conflict is too strict and the definition of international law is ambiguous and the rules of lex posterior (Art.30 of VCLT) will not be activated. That means the concept of prevalence of new treaty over the old treaty somehow gets strike. Now please turn to the environment issues as exception to So in the same line, the relation between MEA and WTO. Even if, not a classic appreciation of MEAs as a explanation in support of arguing an exception beneath Article XX, it allows that global environmental concerns can be decided during multilateral agreements and, leading to consensus, be able to trump trade commitments under the WTO organism. The connection between MEAs and GATT was searched and promoted in the Tuna II Panel Report. In this case The Panel believed whether MEAs could be taken into consideration while doing the interpretation the GATT 1947, or on the other hand, whether an MEA comprised a successive concurrence in order to interpretation of treaty. The Panel observed that MEAs were not finished off by the parties to the GATT 1947 were unrelated and inappropriate to the interpretation of the provisions of GATT 1947. One thing was crystal clear that Practice by the parties in persuasion of any kind of treaties (Bilateral or multilateral treaties) was held not to be on the equal footing to exercise under the GATT
12

JOHN H. JACKSON, Soverignity, the WTO and Changing Fundamentals of International Law,(p.165166)Cambridge University Press,2006
13

Id, JOHN H. JACKSON,page-166

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Write Up of Class Presentation on Interaction between WTO and General International Law 1947 and for that reason did not influence its interpretation .However, the implication was that MEAs were not applicable as a main way of interpretation of the passage of the GATT 1947, in accordance with Article 31 of the VCLT. A treaty consented by WTO members is possibly subsequent practice. Article 30 of the VCLT distinguishes between successive treaties including the same parties concerning the same subject matter with identical membership and successive treaties dealing with the same subject matter but having different membership. Subsequent agreements signed by the parties to the original treaty, providing that they relate to the same subject matter, are binding between those parties. Where a MEA is entered into which explicitly outlines its relationship with the WTO regime, it may have an interpretative significance and possibly a binding effect.14 It is evident from the flow of the aforesaid article that WTO panels should interpret the WTO Agreement in light of and so as to evade conflicts with other international rules keeping in mind the Common intentions of the members or parties to the dispute. There are several other ways by the virtue of which, treaty interpretation as a means of introducing other rules of international law into WTO dispute settlement reveals a careful and traditional approach. We get his corroborating view in respect of the above discussed view, the role of non-WTO rules in the interpretation of WTO covered agreements must be rather limited b. The Role of Public International Law in WTO dispute settlement We already discussed that the international law is creation by the state and state is the subject of international law. Like the international legislature there is no central international judiciary. All depends on the consent of the states. The jurisdiction of an international adjudicator depends on the parties consent. States may make a decision to empower an ad hoc arbitrator to resolve their dispute. In that case they will habitually identify, by assent, both the subject matter in dispute and the applicable law. States may also come to a decision to form a standing judicial entity (such as the ICJ, the International Tribunal for the Law of the Sea [ITLOS], and the WTO Appellate Body) as well as grant their assent ex ante for hearing a certain type of dispute but not all kind of disputes. (For example, disputes on certain subjects or claims under a given convention). When doing so, states are called for to stipulate, in progress, certain general procedural rules to be tagged by the parties and the court in question and to decide applicable law. The WTO Panel body has two types of jurisdictions namely Substantive Jurisdictions and Imperative jurisdiction, the most two important avenues for invoking international law. However, another point that takes serious discussion that in the event of a conflict between the WTO Agreement and another rule of international law (whether treaty or customary), a WTO panel could in some cases resolve the conflict in favour of the non-WTO rule. Say for Instance, if there is conflict between Environment Rules or Human Rights laws with WTO trade law, then the resolve of the conflict should be in favour of environment or human rights law.

14

JAMES CAMERON AND KEVIN R. GRAY, PRINCIPLES OF INTERNATIONAL LAW IN THE WTO DISPUTE SETTLEMENT BODY,VOL.50, International and Comparative Law Quarterly, April 2004

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Write Up of Class Presentation on Interaction between WTO and General International Law I am sure, right now, many people will become sceptical about the prevalence of non-WTO rules but I must inculcate them to think that a generally a WTO panel could only resolve the conflict in favour of the non- WTO rule when both of the parties to the dispute are on focal point of introducing the other nonWTO rules. But it does not merely includes the parties to the dispute rather will involve the intention and view of other States party to the other treaty (or where both have agreed to the customary rule). Thus, this argument is only obtainable in the certain limited situation. In Conclusion portion, he arguably raises the point that both the WTO treaty and WTO dispute settlement are integral parts of public international law. They are not closed or self-contained regimes; they were created in the wider context of general international law, as well as other treaties.15 As before discussed, although the substantive jurisdiction of WTO panels is limited to claims under WTO covered agreements (combined with elements of implied jurisdiction), nevertheless in resolving these claims all potential rules of international law may be applicable, if required so. In practice, this inclusiveness means that a defendant should be allowed to invoke non-WTO rules as a justification for breach of WTO rules, even if the WTO treaty itself does not offer such justification (say, with respect to human rights). However, such a justification should be recognized only when both disputing parties are bound by the non-WTO rule and that rule prevails over the WTO rule pursuant to conflict rules of international law.16 Another interesting point as discussed by Mr. Pauwlyne that WTO treaty must be interpreted in the light of other rules of international law. Interpretation does not merely resolve the conflicts between WTO rules and other rules of international law finding out the common intention of all WTO members, not merely those of the disputing parties. He also put the emphasis on distinguishing between (1) panel jurisdiction, (2) applicable law, and (3) the process of interpreting the WTO treaty as well as distinction between amending the WTO treaty and accepting inter se modifications to it. The limited jurisdiction of panels has created many questions and erroneous perception amongst the thinkers and eminent exponent as to embracing of non-WTO rules. Subsequently, Mr. Pauwlyne argues that accepting even non-WTO rules that do not reflect the common intentions of all WTO members as reference material in interpreting WTO treaty terms. In his view ,WTO treaty is a continuing treaty with lex generalis features vis--vis many other non trade agreements, and setting out reciprocal rights and obligations that allow for a variety of inter se modifications in a context of regulatory diversity. He again mentions that the interaction between WTO law and public international law is not one-sided. It is a continuing process of cross-fertilization. Cross fertilization senses firstly, in case of treaty interpretation is that "[p]articular provisions are to be interpreted so as to give them the fullest weight and effect consistent with the normal meaning of the words and with other parts of the text."17
15

Joost Pauwelyne,Supra page, 577 Ibid,Joost Pauwelyne

16

17

CHESTER BROWN, The Cross-Fertilization of Principles Relating to Procedure and Remedies inthe Jurisprudence of International Courts and Tribunals, page 232 available at http://ilr.lls.edu/issues/30/documents/30LoyLAIntlCompLRev219.pdf

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Write Up of Class Presentation on Interaction between WTO and General International Law Second, international courts have adopted an evolutional approach to interpreting their constitutive instruments. This approach recognizes that certain terms are not static, and their meanings may change with time." It also permits international courts to take account of developments elsewhere.18 Third, international courts have taken account of international judicial practice. International courts do this by referring to article 31(3)(c) of the Vienna Convention on the Law of Treaties when n interpreting provisions of statutes and rules. The Convention provides that in interpreting treaties, "[t]here shall be taken into account, together with the context.., any relevant rules of international law applicable in the relations between the parties." Again, this approach has been interpreted as permitting international courts to consider the practice of other international tribunals.19 The last but not the least , I must say WTO treaty is a outcome of tireless efforts of the states concerning their interest for better trade regime through the mode of Trade facilitation and liberalization of trade. Who knew that WTO will get prominence while GATT 1947 was in the middle of pick hours for serving trade related purposes? Who knew after TRIPS, TRIPS Plus would have come? The moral what we find that WTO treaty is neither a stagnant process nor a full stop process rather every pace of time enriches the WTO in learning new lessons from the International law as WTO evolves a legal system and for rendering the justice, the Panel or Appellate Body should not confine only within the cover agreements of WTO or WTO rules with respect to questions of law(Jura novit curia: The judges know the Law). Besides, the principle of Natural Justice, (Ubi Jus Ibi remedium:Where there is the right, there is the remedy) will be hitting out any unfairness, any unjust and un reasonableness which thus must lead to the proliferation of interaction between WTO and International Law. List of References for the presentation Commentaries: Raj Bhalla, Modern GATT Law: A treatise on the GATT, (London, Sweet and Maxwell Publications) 2005. Matsushita, Schoenbaum and Mavroidis, The World Trade Organization: Law, Practice and Policy, (Oxford University Press, 2003) References: Books: John H. Jackson Sovereignty ,The WTO and Changing Fundamentals of International Law (Cambridge University Press) Michael J.Trebilcock ,(The Regulation of International Trade ) Articles: Joost Pauwelyn .THE ROLE OF PUBLIC INTERNATIONAL LAW IN THE WTO: HOW FAR CAN WE GO?

18

Ibid.page-232 Ibid,page-233

19

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Write Up of Class Presentation on Interaction between WTO and General International Law John Barcelo, Harmonizing preferential rules of origin in the WTO, Cornell law faculty publications, 2006 Rajan Sudesh Ratna, GSTP, rules of origin: A developing countries perspective, UNCTAD, 2005 Newspapers Indian faces rules of origin troubles, The Hindu, August, 2005 Case laws: EC-US gasoline Case JAPAN-TEXAS case George Pinson case Online references www.wto.org www.cbes.com www.srcibd.com

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