First WTO appeal initiated utilizing the procedures under the Multi-Party Interim Appeal Arbitration Arrangement (MPIA)

On 6 October 2022 a notification of appeal was filed by Colombia of the Report of the Panel in Colombia – Anti-Dumping Duties on Frozen Fries from Belgium, Germany and the Netherlands (DS591). This is the first notification of appeal under Article 25 of the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) pursuant to the Multi-Party Interim Appeal Arbitration Arrangement (MPIA). The parties have requested the arbitrators to issue the award within 90 days of the filing of the notice (4 January 2023).

The award will be the first issued under the MPIA. On 25 July 2022, an appeal arbitration award was issued in Turkey – Certain Measures Concerning the Production, Importation and Marketing of Pharmaceutical Products Arbitration Under Article 25 of the DSU (DS583). That was the first appeal arbitration to be concluded in light of the inability of the Appellate Body to hear appeals. Although it was not conducted under the MPIA (as Turkey is not a participating Member), it was conducted pursuant to agreed procedures under Article 25 of the DSU that were very similar to those established for the purposes of the MPIA.

The MPIA is an interim contingency measure based on Article 25 of the DSU in order to preserve the essential principles and features of the WTO dispute settlement system, which include its binding character and two levels of adjudication through an independent and impartial appellate review of panel reports. It was established by 16 WTO Members on 27 March 2020, and has since grown to 25 Members, including: Australia; Benin; Brazil; Canada; China; Chile; Colombia; Costa Rica; Ecuador; European Union; Guatemala; Hong Kong, China; Iceland; Macao, China; Mexico; Montenegro; New Zealand; Nicaragua; Norway; Pakistan; Peru; Singapore; Switzerland; Ukraine; and Uruguay. The pool of 10 standing arbitrators was recently extended for two years, and the next review is scheduled for 31 July 2024.

Tereposky & DeRose LLP regularly provides advice and acts as counsel in international trade disputes, including WTO dispute settlement proceedings. If you have any questions about the foregoing subject, please do not hesitate to contact us.

Daniel Hohnstein
613.237.9005
dhohnstein@tradeisds.com

Greg Tereposky
613.237.1210
gtereposky@tradeisds.com

 

 

 

 

Daring to challenge Dairy: New Zealand challenges Canada’s implementation of Dairy Quotas under the CPTPP

The first dispute has been initiated under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). On 12 May 2022, New Zealand requested consultations concerning Canada’s implementation of its obligations regarding tariff rate quotas (TRQs).  Rather than the high tariffs otherwise applicable to dairy imports, the TRQs provide duty-free access for specified annual quantities of the following dairy products:

TRQ-CA1: Milk

TRQ-CA2: Cream

TRQ-CA3: Skim Milk Powders

TRQ-CA4: Milk Powders

TRQ-CA5: Cream Powders

TRQ-CA6: Concentrated Milk

TRQ-CA7: Yogurt and Buttermilk

TRQ-CA8: Powdered Buttermilk

TRQ-CA9: Whey Powder

TRQ-CA10: Products Consisting of Natural Milk Constituents

TRQ-CA11: Butter

TRQ-CA12: Industrial Cheese

TRQ-CA13: Mozzarella and Prepared Cheese

TRQ-CA14: Cheeses of All Types

TRQ-CA15: Ice Cream and Mixes

TRQ-CA16: Other Dairy

New Zealand is a large exporter of dairy products. It claims that Canada’s implementation of the diary TRQs:

“is impacting New Zealand exporters who are not able to fully benefit from the market access that was negotiated under the agreement. Many of Canada’s dairy TRQs remain unfilled and this represents a tangible loss to New Zealand’s dairy exporters.  The value to New Zealand of this lost market access is estimated to be approximately $68 million over the first two years, with this expected to increase year on year as the size of these quotas increase under CPTPP”.

Under the CPTPP dispute settlement procedure, Canada has until 19 May 2022 to reply in writing to the request and then has until 11 June 2022 to enter into consultations with New Zealand. If consultations fail to resolve the dispute, New Zealand could request the establishment of a dispute settlement panel as early as 11 July 2022. Assuming the normal timeframes are followed, the panel process will take approximately eight months with a final report issued around March 2023.

Tereposky & DeRose LLP regularly provides advice and acts as counsel in international trade disputes. If you have any questions about the foregoing subject, please do not hesitate to contact us.

Daniel Hohnstein
613.237.9005
dhohnstein@tradeisds.com

Greg Tereposky
613.237.1210
gtereposky@tradeisds.com

The First WTO Appeal Arbitration is Initiated, Although Not Directly Under the MPIA

On 28 April 2022, Turkey notified the WTO Members that is was appealing the report of the panel in the Turkey – Pharmaceutical Products dispute (DS583) using the arbitration procedures under Article 25 of the Dispute Settlement Understanding (DSU). Although similar in procedure, this appeal was not initiated under the recently established Multi-Party Interim Appeal Arbitration Arrangement (MPIA).

The MPIA was established on 30 April 2020 between 19 Members, including Australia, Brazil, Canada, China, Chile, Colombia, Costa Rica, the European Union, Guatemala, Hong Kong (China), Iceland, Mexico, New Zealand, Norway, Pakistan, Singapore, Switzerland, Ukraine, and Uruguay. Subsequently, Ecuador, Nicaragua, Benin, Montenegro, Macao (China), and Peru also joined the MPIA (see JOB/DSB/1/Add.12 and its seven supplements). The MPIA establishes a framework for appeal arbitration procedures on the basis of Article 25 of the DSU, which provides for “resort to arbitration” by mutual agreement of the disputing parties “as an alternative means of dispute settlement”.

While Turkey has not formally joined the MPIA, it agreed with the EU on a similar appeal arbitration arrangement under Article 25 of the DSU for the purposes of this dispute (WT/DS583/10) (and also for another dispute between the EU and Turkey, European Union – Safeguard Measures on Certain Steel Products (DS595) (WT/DS595/10). The agreed arbitration procedures are very similar to those in the MPIA, although they have been adjusted to reflect the circumstances of each dispute.

This is the first appeal to get underway using an alternative appeal arbitration mechanism under Article 25 of the DSU. The panel proceeding that led to the report was first suspended in December 2021 and, pursuant to the arbitration agreement between Turkey and the European Union, it will remain suspended indefinitely. The panel report has not been formally “circulated” to the WTO Members (the normal procedural step) and, instead, was attached to the notification of appeal and made public in that alternative manner.

As is the case in the MPIA, paragraph 16 of the agreed procedures provides that the “parties agree to abide by the arbitration award, which shall be final”, and that the award shall be notified to the DSB (pursuant to Article 25.3 of the DSU), but not adopted. Also, as with the MPIA, paragraph 17 provides that, pursuant to Article 25.4 of the DSU, the compliance requirements and procedures under Articles 21 and 22 of the DSU will apply the arbitration award.  This means that even though the arbitration award and the panel report will not be formally adopted, prompt compliance with any recommendations or rulings in the award will be required, and the enforcement tools of compliance proceedings under Article 21.5 of the DSU and/or countermeasures authorized under Article 22 of the DSU will be available.

In contrast to the initiation of an appeal arbitration process in Turkey – Pharmaceutical Products, neither Turkey nor the EU decided to file a Notice of Appeal in European Union – Safeguard Measures on Certain Steel Products. Although the Panel’s work was suspended by agreement of the parties to accommodate the possibility, the agreed procedures provided that the Panel would resume its work if neither party took steps to initiate an appeal arbitration process by 25 April 2022. Neither party filed a Notice of Appeal, so the Panel resumed its work and issued its report on 29 April 2022.

Tereposky & DeRose LLP regularly provides advice and acts as counsel in international trade disputes, including WTO dispute settlement proceedings. If you have any questions about the foregoing subject, please do not hesitate to contact us.

Daniel Hohnstein
613.237.9005
dhohnstein@tradeisds.com

Greg Tereposky
613.237.1210
gtereposky@tradeisds.com

Yet another approach to WTO dispute settlement – binding arbitration procedures replace the panels in the US and EU steel and aluminum disputes

On 21 December 2021, the European Union and the United States notified the WTO Dispute Settlement Body that they have agreed to terminate the WTO panel proceedings in United States – Certain Measures on Steel and Aluminum Products (DS548) and European Union – Additional Duties on Certain Products from the United States (DS559). These disputes concern the European Union’s challenge of US steel and aluminum tariffs and the United States’ challenge of the EU’s retaliatory duties against those tariffs.

In parallel with the termination of the panel proceedings, the United States and the European Union mutually agreed to resort to arbitration pursuant to Article 25 of the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) for the purposes of ultimately resolving these two disputes (if necessary). The provisions of Article 25 provide for arbitration as an alternative means of dispute settlement, subject to the mutual agreement of the disputing parties. The parties are granted wide latitude to agree on the procedures to be followed, and the arbitration awards are subject to the compliance and enforcement procedures under Article 21 and 22 of the DSU. The same provisions have also been utilized recently to establish the Multi-Party Appeal Arbitration Arrangement.

In the case of the new EU-US arbitration arrangement, the panel of arbitrators comprises the same panelists of the terminated panels. Once the panel of arbitrators was composed, the arbitration proceedings were suspended “immediately and indefinitely” pursuant to the procedures agreed by the United States and the European Union. The proceedings shall remain suspended, unless and until either the European Union or the United States triggers their resumption (which cannot occur before 1 November 2022). Upon resumption, the arbitrators will begin where the panels left off, following the rules, procedures and practices on panel proceedings that would have applied to the panel proceedings, except as otherwise provided in the arbitration agreement. The arbitration agreement specifies that the maximum 12-month period for the suspension of panel proceedings under Article 12.12 of the DSU does not apply, removing any impediment to the suspension of the arbitration proceedings for an indefinite period of time.

The replacement of the panel proceedings with arbitration proceedings in this manner is noteworthy because it may eliminate the ability of either party to block the adoption of the outcomes by appealing the panel report(s) “into the void” of the non-functioning Appellate Body. Unless provided in the arbitration agreement, there are no adoption and appeal procedures for arbitrations under Article 25 of the DSU. Article 25.3 provides that the “parties to the proceeding shall agree to abide by the arbitration award”. This provision is supported by Article 25.4, which provides that the arbitration award is subject to the compliance and enforcement provisions in Articles 21 and 22 of the DSU. In this case, the European Union and the United States have not provided for any appeal process in their arbitration agreement.  Thus, it appears the two parties have agreed to binding dispute settlement if either or both decide to resume the disputes in this new format.

The relevant notifications to the WTO Dispute Settlement Body are as follows:

United States – Certain Measures on Steel and Aluminum Products (DS548)

WT/DS548/19

WT/DS548/20

WT/DS548/21

WT/DS548/22

European Union – Additional Duties on Certain Products from the United States (DS559)

WT/DS559/7

WT/DS559/8

WT/DS559/9

WT/DS559/10

Tereposky & DeRose LLP regularly provides advice and acts as counsel in international trade disputes, including WTO dispute settlement proceedings.

Daniel Hohnstein
613.237.9005
dhohnstein@tradeisds.com

Greg Tereposky
613.237.1210
gtereposky@tradeisds.com

Canada’s Ban of Certain Single Use Plastic Items will have to Comply with the WTO TBT Agreement and other Trade Obligations

On 7 October 2020, Canada released its preliminary list of banned single-use plastic items. The list is included in Table 3a of Environment Canada’s Discussion paper: A proposed integrated management approach to plastic products to prevent waste and pollution. The listed products are:

plastic checkout bags
stir sticks
6-pack rings
food service ware made from problematic plastics
straws
cutlery

While Canada’s trade obligations permit measures necessary to protect the lives and health of people, animals and plants, where such measures are trade restrictive or discriminatory, detailed requirements must be met.  Among other things, the measures must be the least trade restrictive means of achieving the public health and/or environmental objectives and must not be designed or applied in an arbitrary manner (i.e., a manner that is not rationally connected to the objective or does not contribute to the fulfilment of the objective). Canada’s measure, including its preliminary list of banned products, will have to be carefully scrutinized against these requirements.

Tereposky & DeRose is Canada’s most experienced law firm in advising on compliance with Canada’s international trade obligations and one of the top firms in the world on compliance with the WTO Agreement on Technical Barriers to Trade (TBT Agreement). Our lawyers were counsel before the WTO Appellate Body in the trilogy of WTO disputes that defined the interpretation and application of the provisions in the TBT Agreement and the General Agreement on Tariffs and Trade, 1994 (GATT 1994) that prohibit discriminatory treatment and trade-restrictive measures (United States – Measures Affecting the Production and Sale of Clove Cigarettes (DS406); United States – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products (DS381); and United States – Certain Country of Origin Labelling (DS384, DS386)). These provisions will be directly applicable to Canada’s new ban on certain single-use plastics.

If you have any questions about the ban, please do not hesitate to contact us.

Daniel Hohnstein
613.237.9005
dhohnstein@tradeisds.com

Greg Tereposky
613.237.1210
gtereposky@tradeisds.com

Canada’s Ban of Certain Single Use Plastic Items will have to Comply with The WTO TBT Agreement and other Trade Obligations (7 October 2020)

WTO Panel Rules that U.S. Section 301 Tariffs on Imports from China are WTO-Inconsistent

On 15 September 2020, the report of the World Trade Organization (WTO) Panel in United States – Tariff Measures on Certain Goods from China (DS543) was released. This dispute concerned China’s challenge of US “Section 301” tariff measures that impose additional ad valorem customs duties on certain products imported into the United States from China. This was the first WTO ruling related to the current US administration’s practice of applying additional import tariffs to further US trade policy objectives.

The tariff measures at issue were implemented in June and September 2018, further to an investigation conducted by the United States Trade Representative (USTR) under Section 301 of the Trade Act of 1974 (see USTR, China–Section 301) which concluded that China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation amounted to “state-sanctioned theft and misappropriation of U.S. technology, intellectual property, and commercial secrets”.

China claimed that these measures, which impose additional customs duties at a rate of 25 percent on certain products, are inconsistent with the United States’ obligations under Articles I:1 and II:1(a) and (b) of the General Agreement on Tariffs and Trade 1994 (GATT 1994). In response, the United States asserted that any inconsistency was justified as necessary to protect US public morals pursuant to Article XX(a) of the GATT 1994. The United States argued that the Section 301 tariff measures were adopted to “‘obtain the elimination’ of conduct that violates U.S. standards of rights and wrong, namely China’s unfair trade acts, policies, and practices”.

The Panel ruled that the Section 301 tariffs are inconsistent with the United States’ GATT 1994 obligations and that this inconsistency was not justified under the general exception in Article XX(a) for “measures necessary to protect public morals”.

The Panel acknowledged that the public morals objective invoked by the United States in its Article XX(a) defence “reflects societal interests and values that appear to be highly important in the United States”. However, the Panel considered that the United States had not provided an explanation demonstrating how the section 301 tariff measures contribute to this objective. More specifically, the Panel found that the United States had failed to demonstrate that a genuine relationship of ends and means exists between the section 301 tariff measures and the public morals objective pursued by the United States. On this basis, the Panel concluded that the measures could not be provisionally justified as necessary to protect US public morals under subparagraph (a) of Article XX. Having arrived at this conclusion, the Panel determined that it would not be necessary to further consider whether the measures satisfy the requirements of the chapeau of Article XX (i.e., whether they are being applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade).

In rare “concluding comments” after the rulings and recommendations, the Panel explained that, although it was “very much aware of the wider context in which the WTO system currently operates, which is one reflecting a range of unprecedented global trade tensions”, the Panel’s role was not to draw any legal conclusions or make recommendations on any matters other than those it had been specifically tasked to deal with in this dispute. The Panel emphasized that it had “sought to perform diligently its adjudicatory role” in relation to the matters falling within its terms of reference and expressed encouragement to the United States and China to “pursue further efforts to achieve a mutually satisfactory solution” (i.e., a negotiated settlement).

Tereposky & DeRose LLP regularly provides advice and acts as counsel in international trade disputes, including WTO dispute settlement proceedings.

Daniel Hohnstein
613.237.9005
dhohnstein@tradeisds.com

Greg Tereposky
613.237.1210
gtereposky@tradeisds.com

WTO Panel Rules that U.S. Section 301 Tariffs from China are WTO-Inconsistent (18 September 2020)