Gujarat National Law University

WTO AND INTERNATIONAL LAW SHRUTI DAS

ABSTRACT: International Trade Law which is a result of customary practice and after the advent of WTO only its validy is checked and implementation of the rules of International trade are followed by all the member nations. The project in its complete view shows respect of WTO for the principle stated in the United Nations Charter of Good faith, State Sovereignty and dispute settlement. WTO agreement which is a matured and formalized form of GATT after the failure of International Trade Organisation works under the rules states in Vienna Convention on Law of Treaties, 1969 for all the treaties entered into by all the nation states who enter into any bilateral or multilateral treaty.

Gujarat National Law University

INTRODUCTION Trade as a practice is found at the origin of every segment of public international law, and it prevails for one of its main sources that is the treaty. One of the first international legal instruments to leave a sketch in history was commercial treaty between Egyptian Pharaoh Amenophis IV and the King of Alasia (Cyprus) way back in the 14th century BC1. This treaty exempted traders of Cyprus from customs duty on exchange of the importation of a certain quantity of copper and wood 2 . Fundamentally nothing has changed since that time. Standing in the 21st century, our so called modern age, we still have bilateral trade agreements. But the change that occurred is that they now need to be reported to the World Trade Organisation, for their validity under the international trade rules. The international legal order has been evolved dramatically. The great empires of the ancient and medieval periods, have disappeared into annals of history. Jurists like Philippe le Bel and Jean Bodins progressively conceptualized the notion of state sovereignty; the treaties of Westphalia defined the pre-eminence of sovereign states. Later in the year 1815 came Congress of Vienna which lays down the foundations of multilateralism3, followed by the first international organizations, League of Nations, come in 19th century and eventually came United Nations in 20th Century.4 Then the world witnessed the advancement from customary international law between states towards universal international law open to new members, which included international organizations and nongovernmental organizations. The international legal order has experienced a number of turmoil. Which was neither linear nor homogeneous. As a metaphorical illustration, we can take the three physical states of matter: gas, liquids and, finally, solids. 5 Todays international legal order is
1 2

http://www.wto.org/english/news_e/sppl_e/sppl46_e.htm http://www.wto.org/english/news_e/sppl_e/sppl46_e.htm 3 Thomas George Weiss, Sam Daws, The Oxford handbook on the United Nations, Oxford Publication, 2007 p:702 4 Ibid 5 Pascal Lamy The Place of the WTO and its Law in the International Legal Order The European Journal of International Law Vol. 17 no.5, EJIL 2007

Gujarat National Law University

simultaneously composed of these three states. 6 Gas is the coexistence of particles devoid of any hierarchical differentiation7: the Westphalian order made up of sovereign states organized according to an essentially horizontal logic with a decentralized responsibility mechanism. 8 The solid state is reflected in the European Union, the perfect example of an international integration organization which produces rules that it interpretsautonomously and whose primacy and direct applicability is guaranteed through a system of judicial remedy. 9 The judicialization of responsibility of Member States for violations of Community law is a cornerstone of this integrated legal order. Between the gaseous state and the solid state, there remains the liquid state.10 It is to this category that the World Trade Organization belongs. 11 Neither entirely vertical nor entirely horizontal in essence, resembling an organization for intergovernmental cooperation in certain respects while being closer to an international integration organization in others, the WTO represents a unique legal order or system of law.12 The WTO, an international organization, that brings together two concepts of international law of cooperation and intergration. WTO is a permanent negotiating forum between sovereign states and is therefore assisting in cooperation parallel to that of international conferences established under traditional international law. But WTO also comprises a dispute settlement mechanism making it a integration organization, which is rooted in contemporary international law and also evolves it as a distinctive and unique organization.

6 7

Ibid Ibid 8 Ibid 9 Ibid 10 Ibid 11 Ibid 12 Ibid

Gujarat National Law University

LINK BETWEEN THE LEGAL SYSTEM OF THE WTO AND THE LEGAL SYSTEMS OF OTHER INTERNATIONAL ORGANIZATIONS The effectiveness and legitimacy of the WTO depend on how it relates to norms of other legal systems and on the nature and quality of its relationships with other international organizations. The Place And The Role Of The WTOs Legal System In The International Legal Order Normative Point Of View and institutional perspective. In normative sense the WTO participates in the construction of international coherence and reinforces the international legal order. The WTO in its treaty provisions and their interpretation confirms that the absence of any hierarchy between WTO norms and those norms that are developed in other forums. WTO norms do not supersede other international norms.13 In fact WTO, which incorporated the provisions of GATT, recognizes explicitly that the trade is not the only policy consideration that Members can favour. The WTO contains a number of exception provisions which refers to policy objectives supplementary to trade, most often in the responsibility of other international organizations. Appellate Body of WTO has managed to bring in operation the exception provisions to provide Members with necessary policy space to ensure that their actions in various forums are coherent. The WTO is of course an organization specifically concerned with trade. Hence, it comprises provisions that favour trade opening and discipline trade restrictions. The basic philosophy behind WTO is that trade opening obligations are good, and even necessary, to increase peoples standards of living and well-being. But, at the same time WTO, contains provisions of exceptions to these market access obligations. The old but still in force Article XX of GATT provides that nothing prevents a Member from setting aside market access obligations when a Member decides, unilaterally,
13

http://www.wto.org/english/news_e/sppl_e/sppl26_e.htm

Gujarat National Law University

that considerations other than those of trade must prevail. This can happen when, for instance, a Member has made commitments in other forums, say on an environmental issue, when such an environmental commitment may lead to market access restrictions. The revolution brought about by WTO jurisprudence was to offer a new teleological interpretation of the WTO that recognizes the place of trade in the overall scheme of states actions and the necessary balance that ought to be maintained between all such policies. The WTO treaty was considered and interpreted as a treaty. In the very first WTO dispute, an environment-related dispute (US Gasoline) 14 , the Appellate Body concluded that the Panel had overlooked a fundamental rule of treaty interpretation, expressed in the Vienna Convention on the Law of Treaties (Vienna Convention). The Appellate Body first recalled that this general rule on treaty interpretation had attained the status of a rule of customary or general international law. It was important to do so because, as you may know, neither the USA nor the EC have ratified the Vienna Convention on Treaties. Then, the Appellate Body made its first statement, now famous, on the nature of the relationship between the WTO and the international legal order: the GATT is not to be read in clinical isolation from public international law. Recalling that pursuant to Article 31 of the Vienna Convention 15, terms of treaties are to be given their ordinary meaning, in their context and in the light of the Treatys object and purpose, the Appellate Body noted that the Panel Report had failed to take adequate account of the different words actually used for each of the Article XX exceptions. This led to a reading that offered much more flexibility in the so-called environment exception and a categorical turnabout in 50 years of GATT jurisprudence. In relying on the steps and principles of the Vienna Convention 16, panels as well as the Appellate Body have since often referred to the context of the WTO treaty and to non-WTO norms when

14 15

United States - Standards for Reformulated and Conventional Gasoline AB-1996-1 Vienna Convention on Treaties, 1969 16 Ibid

Gujarat National Law University

relevant. I have been told that no other international dispute system is so attached to the Vienna Convention. The linkage between the WTO and other sets of international norms was also reinforced when the Appellate Body stated that in the WTO, exception provisions referring to such non-trade concerns (environment, morality, religion, and so on) are not to be interpreted narrowly: exceptions should be interpreted according to the ordinary meaning of the terms of such exceptions. In this context, WTO Appellate Body has insisted that exceptions cannot be interpreted and applied so narrowly that they have no relevant or effective application. The Appellate Body further expanded the availability of WTO exceptions in the following manner. In the WTO, exceptions are subject to what we call a necessity test, a test having features of a proportionality requirement. When assessing whether a measure is necessary for any non-WTO concern, a new and additional balancing test is to be used. (1) the value protected by such a measure and the more important this value, the easier it will be to prove the necessity (and the importance of the value will affect the entire balancing process); (2) the choice of the measure selected to implement such a nontrade concern is it a complete or partial ban on trade? Is it a labelling requirement? Is it a discriminatory tax?; and, (3) the trade impact of the restriction. Once a measure prioritizing a non-trade value or standard is considered necessary, there is always an assessment as to whether the measure is indeed applied in a non-protectionist manner, pursuant to the chapeau of Article XX. Here again the Appellate Body has said that when assessing whether a measure complies with Article XX, a balance between WTO market access obligations and a governments right to favour policies other than trade must always be kept.

Gujarat National Law University

WTO jurisprudence has determined that the control exercised by the chapeau of Article XX of GATT, against disguised protectionist measures, is in fact an expression of the good faith general principle or an expression of the principle against the abus de droit. the task of interpreting and applying the chapeau is, hence, essentially the delicate one of locating and marking out a line of equilibrium between the right of a Member to invoke an exception . . . and the rights of the other Members under varying substantive provisions . . . The location of the line of equilibrium . . . is not fixed and unchanging; the line moves as the kind and the shape of the measures at stake vary and as the facts making up specific cases differ.17 Faced with tensions between Members market access obligations and the right to favour non-WTO considerations (and norms of other legal systems), the Appellate Body has introduced a form of balancing test or proportionality test between sets of values, or between sets of rights and obligations. The WTO provisions themselves recognize the existence of non-WTO norms and other legal orders and attempts to limit the scope of application of its own provisions, thereby nourishing sustainable coherence within the international legal order. Another fundamental principle of the WTO is that Members can set national standards at the level they wish, as long as such Members are consistent and coherent. For example, in the dispute between Canada and the European Communities18 over the importation of asbestos-related material, the Appellate Body stated clearly that France was entitled to maintain its ban since it was based on authentic health risks and standards recognized in other forums and no alternative measures could guarantee zero risk as required by the EC regulation. An additional feature of the WTO that confirms its integration into the international legal order, is the legal value and status it provides to international standards and norms developed in other forums. For instance, the Sanitary and Phytosanitary (SPS) Agreement
17 18

Appellate Body Report on US Shrimp, at para. 159 AB 2001

Gujarat National Law University

states that Members measures based on standards developed in Codex Alimentarius, the International Office of Epizootics and the International Plant Protection Convention are presumed to be compatible with the WTO. So, while Codex, and others do not by any means legislate in the normal or full sense, the norms that they produce have a certain authority in creating a presumption of WTO compatibility when such international standards are respected. The SPS Agreement provisions thus provide important incentives for states to base their national standards on, or conform their national standards to, international standards. Therefore the WTO encourages Members to negotiate norms in other international forums, which they will then implement coherently in the context of the WTO. Preamble of the Marrakesh Agreement Establishing the WTO which is contrary to that of the GATT, explicitly refers to sustainable development as an objective of the WTO. While it is not yet clear whether sustainable development has crystallized into a general principle of law, the reference to such an important non-trade principle shows that the signatories of the WTO were, in 1994, fully aware of the importance and legitimacy of environmental protection as a goal of national and international policy. In the famous US Shrimps19 dispute, this preambular language was considered to indicate that further flexibility should be introduced when interpreting natural resources in the environment exception, and that it added, I quote: colour, texture and shading to the rights and obligations of WTO provisions. It also made explicit reference to the need to interpret WTO provisions and especially the old GATT provisions in an evolutionary manner, taking into account the ordinary meaning of the terms of the WTO at the time of the dispute, rather than at the time of their drafting in 1947. This allowed the Appellate Body to consider contemporary treaties that define natural resources and to conclude that these definitions should also be used in the WTO so as to ensure some international coherence with respect to natural resources. According to Professor Abi-Saab, a member of Appellate Body of WTO, that in using general principles of public international law in
19

Supra

Gujarat National Law University

its interpretation of the WTO provisions, the Appellate Body has confirmed that the WTO is operating within the compound of the international legal order. The WTO does, therefore, take into account other norms of international law. Absent protectionism, a WTO restriction based on non-WTO norms will trump WTO norms on market access. In so doing, it expands coherence between systems of norms or legal order. Moreover, I believe that in leaving Members with the necessary policy space to favour non-WTO concerns, the WTO also recognizes the specialization, expertise and importance of other international organizations. In sum, the WTO is well aware of the existence of other systems of norms and of the fact that it is not acting alone in the international sphere. Existing relations between the WTO and other international organizations again reflect efforts of coherence within the international legal order. Now that the WTO is an authentic international organization with full legal personality, it has set up an important network of formal and de facto arrangements with other actors on the international scene. The greater the coherence within the international legal order, the stronger the international community. There are explicit WTO provisions on IMF/World Bank/WTO coherence with an explicit mandate to the Director General. There exists a series of inter-agency cooperation on technical assistance and capacity-building with several international organizations. Indeed the current Round of negotiations is to some extent premised on coherence, as we are suggesting a new Aid-for-Trade programme which brings together several multilateral organizations and regional development banks to assist developing countries in reaping the benefits of trade opening. WTO also have formal cooperation agreements with other international organizations. For example, in the area of standardsetting, we now have a mechanism the Standards and Trade Development Facility involving the WTO, World Bank, Food and Agriculture Organization (FAO), World Health Organization and the World Organization for Animal Health. Some 75 international organizations have regular or ad hoc observer status in WTO

Gujarat National Law University

bodies. The WTO also participates as an observer in many international organizations. Although the extent of such cooperation varies, coordination and coherence between the work of the WTO and that of other international organizations continue to evolve in a pragmatic manner. The WTO Secretariat maintains working relations with almost 200 international organizations in activities ranging from statistics, research, standard-setting, to technical assistance training. International cooperation is one of the United Nations objectives, as stated in Article 1 of the UN Charter. The efforts towards international coherence are the only way to ensure the peaceful evolution of international relations and of our international legal system. But international coherence is also crucial to ensuring the legitimacy of the WTO and the effectiveness of trade rules. The WTOs mantra in favour of trade openness plays a vital role in Members growth and development, but it is not a panacea for all the challenges of development; neither is it necessarily easy to accomplish, nor in many circumstances can it be effective unless it is embedded in a supportive economic, social and political context and a coherent multi-faceted policy framework. Trade opening can only be politically and economically sustainable if it is complemented by policies which address, at the same time, capacity problems (whether human, bureaucratic or structural); the challenges of distribution of the benefits created by freer trade; the need for a sustainable environment; respect for public morals, and so forth. This is also about international legal coherence. All of these policies are intertwined with the other treaty obligations of WTO Members. Hence, further international coherence will only assist in getting the best out of the WTO! Since WTO norms are not hierarchically superior or inferior to any other norms (except jus cogens) states must find ways to coordinate all of these policies in a coherent manner. WTO favours and encourages such coherence. This is the view of a pragmatic practitioner pragmatic practitioner. Moreover, as treaties proliferate, so do dispute settlement systems as well as the potential for clashes with the WTOs compulsory and binding dispute settlement mechanism. One example to crack the

10

Gujarat National Law University

coherence of international legal order. The EC Swordfish 20 dispute was concerned with the following situation. In 1999, Chile enacted swordfish conservation measures, by regulating gear and limiting the level of fishing through the denial of new permits. Chile effectively prohibited the utilization of its ports for landing and service to EC long liners and factory ships that disregarded minimum conservation standards. The EC challenged those measures as being contrary to its WTO transit. Chile demanded that the EC enact and enforce conservation measures for its fishing operations on the high seas, in accordance with the United Nations Convention on the Law of the Sea (UNCLOS). Chile responded to the ECs WTO challenge by initiating the dispute settlement provisions of UNCLOS and invited the EC to the International Tribunal on the Law of the Sea (ITLOS). The substantive issues before the WTO included the right of Chile to benefit from the application of Article XX of GATT on the conservation of natural resources, when acting pursuant to UNCLOS. The issue before UNCLOS could have included whether or not Chile was entitled to regulate and limit access to swordfish as part of a conservation programme. In such a situation, it is conceivable that both instances would have examined whether UNCLOS effectively requires, authorizes or tolerates Chiles measures, and whether the Chilean measures were compatible with UNCLOS, an element that could influence a WTO panel in its decision as to whether or not Chile may benefit from the application of the exception provision on the environment. It is, therefore, conceivable that the two forums may reach different conclusions on the same facts or on the interpretation of the applicable law. In that dispute, the parties reached an agreement to suspend both their disputes before ITLOS and before the WTO. But in the absence of a mutual agreement, the WTO panel would have proceeded much faster than that of ITLOS. Short of any agreement between the parties and in the absence of any international rule as to how these two different mechanisms should interact, many scenarios may emerge. In light of the quasiautomaticity of the compulsory and binding WTO dispute mechanism, it is unlikely that a WTO panel would decline
20

AB 1999

11

Gujarat National Law University

jurisdiction because another dispute process albeit more relevant and better equipped has been seized for a similar or related dispute. And if both processes were triggered at the same time, it is quite probable that the WTO panel process would proceed much faster than any other process. This is where part of the imbalance of our international legal order remains. Although the WTO, through its dispute settlement system, can show that it does take into account the norms of other legal orders, many still challenge the fact that it will be for the WTO judge to determine the balance, the line of equilibrium between trade norms and norms of other legal orders. Indeed, at present, if a measure has an impact on trade, the matter can always be taken to the WTO dispute settlement system fairly simply and quickly. The WTO adjudicating body will then have to determine whether the trade restriction can find justification in the exception provisions of the WTO. In assessing the invocation of such WTO exception justification, the WTO judge may in fact be deciding on the relative hierarchical value between two sets of norms. Indeed, if a WTO Member invokes the environment exception to justify a trade restriction adopted pursuant to a multilateral environment agreement (MEA), in practice, it is the WTO judge who will determine whether, and the extent to which, compliance with such an MEA can provide a WTO justification for trade restriction. If, in support of its invocation of the WTO exception for public morals, a Member points to an International Labor Organization (ILO) resolution condemning a specific state for violation of core labour standards, it is the WTO judge who will finally decide on the legal value and impact of such an ILO resolution on international trade and its opposability to trade rules. There is no reason to provide the WTO with the exclusive authority to operate the much-needed coherence between norms from different legal orders. The lack of coherence of our international legal system is amplified by the relative power of the WTO and in particular its dispute settlement mechanism. This shows the discrepancy between the WTOs very powerful enforcement mechanism and the traditional decentralized system of countermeasures still used in several legal orders. The solution doesnt lies in weakening dispute system. Many aspects of the

12

Gujarat National Law University

WTO need to be improved, but the WTO dispute settlement system works well. The solution to the potential imbalance but there should be efforts for strengthening the enforcement (the effectiveness) of other legal orders so as to rebalance the relative power of the WTO in the international legal order. This would not solve all problems because then find ourselves with several powerful legal orders for which coordination would still be lacking. It is needed to address the fragmentation of international law and the disorganized multiplication of international legal subsystems. Until then, legal orders and legal systems will continue to co-exist and coherence will depend on ad hoc solutions based on the goodwill and interests of the jurisdictions concerned. Several unsatisfactory solutions have been suggested, including a referral to the International Court of Justice (ICJ) in situations of concurrent jurisdictions. A call for order has already been made by the ICJ against the dangers of fragmented and contradictory international law. The International Law Commission has undertaken important work in that direction.

13

Gujarat National Law University

CONCLUTION Todays international legal order will be able to evolve peacefully only to the extent that the existing legal orders evolve through mutual respect. There is no exception to this rule, and the WTO is well aware of its importance. The WTO has evolved from the GATTs closure. States signatories to the GATT wanted to reinforce the status of the international trading system and provided it with a formal international organization: the WTO. This international organization is now up and running well; it even produces effective norms of derivative law (droit driv). The legal value and enforcement of those norms adopted by WTO bodies are matters for debate but the WTO normative capacity, including as a forum for permanent negotiations and its powerful but open dispute settlement mechanism, confirms the sui generis nature of its legal order. In addition, the WTO makes full use of its international legal personality and is now collaborating actively with other international organizations. But there is more. In setting up a system whereby good faith norms developed in other forums are presumed to be WTO-consistent, the WTO not only gives due deference to other legal systems but it also stimulates negotiations in such other specialized forums and reinforces the coherence of our legal order. In this sense the WTO is an engine, a motor energizing the international legal order. This is the place and role of the WTO and its legal order in the international legal order: a catalyst for international mutual respect towards international coherence and even for increased global governance, which is needed if we want the world we live in to become less violent, be that social, political, economic or environmental violence.

14

Gujarat National Law University

BIBLIOGRAPHY
Books Referred: John H. Jackson, The World Trading System: Law and Policy of International Economic Relations (Cambridge: MIT Press, 1998). Autar Krishen Koul, The General Agreement on Tariffs and Trade (GATT)/World Trade Organisation (WTO): Law, Economics and Politics (New Delhi: Satyam Books, 2005). Daniel Bethlehem, Donald McRae and others, (eds.), The Oxford Handbook of International Trade Law (New York: Oxford University Press, 2009). John H. Jackson, The Jurisprudence of GATT and the WTO: Insights on Treaty Law and Economic Relations (Cambridge: Cambridge University Press, 2000). Articles referred: Thomas A. Zimmermann, WTO Dispute Settlement: General Appreciation and the Role of India, in K. Padmaja, (ed.) WTO and Dispute Resolution (Hyderabad: The Icfai University Press, 2007), pp.147-201. Thomas George Weiss, Sam Daws, The Oxford handbook on the United Nations, Oxford Publication, 2007 p:702 Pascal Lamy The Place of the WTO and its Law in the International Legal Order The European Journal of International Law Vol. 17 no.5, EJIL 2007 Websites Referred:
http://www.asil.org/ajil/pauwelyn.pdf http://www.hindu.com/op/2004/06/08/stories/2004060800331500.htm

15

Gujarat National Law University

http://www.worldtradelaw.net/articles/grayprinciples.pdf http://jiel.oxfordjournals.org/content/3/1/27.abstract http://www.wto.org/english/forums_e/public_forum2007_e/session2_trachtm an_e.pdf

16