1. Duration of the Peace Clause: The “Implementation Period” 5. The Peace Clause is in force at present. The first words of the Peace Clause (“During the implementation period”) establish the duration of the treatment afforded by this provision. Article 1(f) of the Agriculture Agreement defines “implementation period” as “the six year period commencing in the year 1995” but goes on to specify that “for purposes of Article 13, it means the nine year period commencing in 1995”. That is, Members determined that exempting certain measures from certain actions based on otherwise applicable WTO provisions was desirable for a time period longer than the period for the phase in of all other commitments under the Agriculture Agreement. Thus, the Peace Clause currently continues to exempt conforming measures – whether US, Brazilian, or of any other Member – from actions under the corresponding provisions of the GATT 1994 and the Subsidies Agreement.
2. Effect of the Peace Clause: “Exempt from Actions” 6. For purposes of this dispute, all of the relevant provisions of the Peace Clause utilize the same language and construction: conforming measures “shall be . . . exempt from actions based on” specified provisions of the WTO agreements. The critical phrase “exempt from actions” is not defined in the Agriculture Agreement. According to the customary rules of interpretation of public international law18, these terms should be interpreted according to their ordinary meaning in their context, in light of the object and purpose of the Agreement.19
7. The ordinary meaning of the word “exempt” is “[n]ot exposed or subject to something unpleasant or inconvenient; not liable to a charge, tax, etc. (Foll. by from, of.)".20 The ordinary meaning of the word “action” is “[t]he taking of legal steps to establish a claim or obtain remedy; the right to institute a legal process” and “[a] legal process or suit".21 A legal dictionary provides further explanation of the term “action”:
Term in its usual legal sense means a lawsuit brought in a court; a formal complaint within the jurisdiction of a court of law. . . . . The legal or formal demand of one's right from another person or party made and insisted on in a court of justice. An ordinary proceeding in a court of justice by which one party prosecutes another for the enforcement or protection of a right, the redress or prevention of a wrong, or the punishment of a public offence. It includes all the formal proceedings in a court of justice attendant upon the demand of a right made by one person of another in such court, including an adjudication upon the right and its enforcement or denial by the court.22
Thus, according to the ordinary meaning of the terms, “exempt from action” means “not exposed or subject to” the “taking of legal steps to establish a claim”, such as a “formal complaint” or any “formal proceedings”, including an “adjudication” of the claim. An even simpler formulation would be “not liable to” a “legal process or suit”.
8. Relevant context for the phrase “exempt from actions” includes the Understanding on Rules and Procedures Governing the Settlement of Disputes (“DSU”), which applies to “disputes brought pursuant to the consultation and dispute settlement provisions of the agreements listed in Appendix 1 to this Understanding (referred to in this Understanding as the ‘covered agreements’)”. The covered agreements, of course, include the Agriculture Agreement and the Subsidies Agreement. Article 3.7 of the DSU states: “Before bringing a case, a Member shall exercise its judgement as to whether action under these procedures would be fruitful” (emphasis added). Similarly, Article 4.5 of the DSU states: “In the course of consultations in accordance with the provisions of a covered agreement, before resorting to further action under this Understanding, Members should attempt to obtain satisfactory adjustment of the matter” (emphasis added). Thus, these provisions suggest that “action” based on the relevant provisions would include all stages of a dispute, including the “bringing [of] a case”, consultations, and panel proceedings.23
9. In addition, Article 7, which forms part of Part III of the Subsidies Agreement (entitled “Actionable Subsidies”), serves as context for the term “exempt from actions.” Article 7 provides procedures (including consultations, panel proceedings, and remedies) to enforce the legal rights contained in Article 5 (on “adverse effects”) and Article 6 (on “serious prejudice”). Article 7 states in its introductory phrase that its procedures apply “[e]xcept as provided in Article 13 of the Agreement on Agriculture".24 Thus, these provisions also support reading “exempt from actions” in Article 13 to mean “not subject to” the “taking of legal steps to establish a claim”. Footnote 35 of the Subsidies Agreement provides additional context that may help explain that “exempt from action” includes not resorting to dispute settlement. Footnote 35, which deals with “non actionable"25 subsidies, states that “[t]he provisions of Parts III [on actionable subsidies] and V [on countervailing measures] shall not be invoked regarding measures considered non actionable in accordance with the provisions of Part IV".26 As otherwise relevant provisions cannot be “invoked” for non actionable subsidies, footnote 35 supports reading “ exempt from action” as not resorting to dispute settlement by asserting legal claims.
10. This interpretation of “exempt from actions” meshes with the object and purpose of the Agriculture Agreement. The Agreement represents the outcome of long and difficult negotiations to move towards the “long term objective . . . to provide for substantial progressive reductions in agricultural support and protection sustained over an agreed period of time, resulting in correcting and preventing restrictions and distortions in world agricultural markets".27 Members therefore agreed to the Peace Clause, recognizing that agricultural subsidies could not be eliminated immediately and needed, under certain conditions, to be exempted from the Subsidies Agreement and GATT 1994 subsidies disciplines.
C. CONCLUSION: BRAZIL MAY NOT BRING, AND THE PANEL MAY NOT ADJUDICATE, A SUBSIDIES AGREEMENT OR GATT 1994 ARTICLE XVI ACTION AGAINST US MEASURES CONFORMING TO THE PEACE CLAUSE
11. Brazil’s approach – that both the applicability of the Peace Clause and Brazil’s Subsidies Agreement and GATT 1994 Article XVI claims be considered at the same time – would contravene the plain meaning of the Peace Clause by subjecting US measures to the “taking of legal steps to establish a claim”. Under Brazil’s approach, the US measures would be subject to an action based on the corresponding provisions of the Subsidies Agreement and GATT 1994 at the same time that the Panel would be reviewing the applicability of the Peace Clause. Brazil’s approach would ignore the plain meaning of the provisions of the Peace Clause exempting these measures from actions.
12. Accordingly, the United States respectfully requests the Panel to find that measures that conform to the Peace Clause are exempt from any action, including action under the DSU, based on the corresponding provisions of the Subsidies Agreement and the GATT 1994. As a result, the United States is not required to defend those measures in any action based on Brazilian claims exempted by the Peace Clause.
ARGENTINA'S THIRD PARTY INITIAL BRIEF
10 June 2003
1. Argentina would like to thank the Panel for the opportunity to submit, as third party to the dispute, written comments concerning whether Article 13 of the Agreement on Agriculture (AoA) precludes the Panel from considering Brazil´s claims under the Agreement on Subsidies and Countervailing Measures (SCM Agreement) in the absence of a prior conclusion by the Panel that certain conditions of Article 13 remain unfulfilled. To that respect, Argentina states the following:
2. The text of Article 13 of the AoA does not require the Panel to make a preliminary finding on the applicability of the peace clause before examining Brazil´s claims under the SCM Agreement or GATT 1994. If the negotiators had considered such preliminary finding was necessary, they would have set it forth.
3. Indeed, a textual analysis of Article 13 of the AoA reveals that “actions”, and not the analysis of claims under Article XVI of GATT 1994 or Articles 3, 5 or 6 of the SCM Agreement, can only be precluded if all conditions established in paragraphs b) (ii) or c) (ii) of the referred Article 13 are met.
4. To that regard, the Appellate Body has established:
“The duty of a treaty interpreter is to examine the words of the treaty to determine the intentions of the parties. This should be done in accordance with the principles of treaty interpretation set out in Article 31 of the Vienna Convention. But these principles of interpretation neither require nor condone the imputation into a treaty of words that are not there or the importation into a treaty of concepts that were not intended.”28
The terms “exempt from actions” as stated in Article 13 of the Agreement on Agriculture:
5. From Argentina´s point of view, in the context of Article 13 of the AoA the words “exempt from actions” do not amount to an impossibility to request a panel procedure. “Exempt from actions” means that a finding of inconsistency with Articles XVI of GATT 1994 or Articles 3, 5 and 6 of SCM Agreement will not be possible if the legal requirements for the exemption are fulfilled. The immediate context of the terms “exempt from actions” -i.e., paragraphs b) and c)- confirms this interpretation since that exemption require a particular threshold, i.e., that domestic support measures and export subsidies “conform fully” (to different provisions of the AoA).
6. Nevertheless, it is precisely through the panel procedures that the fulfilment of those legal requirements will be determined. Argentina agrees with Brazil´s statement in paragraph 6 of its Brief that the word “actions” in the context of Article 13 of the AoA refers to decisions of WTO competent bodies, such as the DSB when it discharges its duties by establishing a panel. A different interpretation would imply giving the measures allegedly covered by the Peace Clause a character of absolute immunity, independent of whether the legal requirements established in Article 13 are fulfilled or not. This would contradict the principle of in dubio mitius, constituting a more onerous interpretation of the treaty provisions
7. Therefore, the words “exempt from actions” do not preclude a Panel from considering a claim under the SCM Agreement or GATT 1994 while it decides whether the Peace Clause conditions have been fulfilled.
8. Argentina considers that there is no doubt that “the Peace Clause currently continues to exempt conforming measures from actions under the corresponding provisions of the GATT 1994 and the Subsidies Agreement”.29 Indeed, the key words in Article 13 b) (ii) and c) (ii) of the AoA are “that conform fully” and “provided that” and “that conform fully”, respectively. These words imply that the exception is not absolute, but rather subject to the fulfilment of certain conditions. When considering the interpretative issues for purposes of the Panel's question at paragraph 4 of its Brief, the US seems to omit this issue by stating that what appears to be in dispute is the nature of the treatment of conforming measures under the Peace Clause. However, from Argentina's point of view, what is important here is to determine at this stage of the proceedings the treatment under the Peace Clause of measures that are supposed not to be in conformity with the legal requirements needed to be exempted from actions.
9. In addition, the fulfilment of the legal conditions set forth under Article 13 is a matter of fact that necessarily requires to be elucidated during panel procedures. If not, how can this issue be elucidated where, as in the present case, the US did not state which was its 1992 domestic support level and did not answer the specific questions during the consultations? Only through panel proceedings could those issues be elucidated.
10. On the other hand, as Brazil stated in paragraph 17 of its Brief30, there is no WTO provision obliging a Member to present evidence relating to the Peace Clause in a manner that is divorced from factual evidence and allegations under the SCM Agreement and/or GATT 1994. As stated by Brazil in paragraphs 13 and 14 of its Brief, according to Article 11 of the DSU a panel must make an objective assessment of the facts of the case and not of part of them before examining others, specially when, as in the case at hand, there is an overlap between the evidence related to the requirements of Art. 13 of the AoA and the evidence related to the actionable and prohibited subsidy claims.
11. Argentina considers that the text of Article 13 of the AoA does not ban a Panel from considering altogether a defence invoked under the Peace Clause and the allegations of inconsistency under GATT 1994 or the SCM Agreement. If a preliminary ruling on the applicability of the Peace Clause were necessary before being able to examine Brazil´s claims under the SCM Agreement or GATT 1994, the terms “exempt from actions” would have too broad a sense. It would amount to the creation of a new obligations for Members clearly not envisaged in the text of Art. 13.
12. Finally , the same reasoning could apply to other preliminary issues, such us the objections to the consistency of a Panel´s terms of reference with Article 6.2 of the DSU or the general exceptions under Article XX of GATT 1994. However, different Panels and the Appellate Body have made their findings on those issues altogether with their findings regarding substantive claims.
Other relevant provisions of the covered agreements:
13. The SCM Agreement is applicable both for agricultural and non-agricultural products. It is true that Article 7 of the SCM Agreement states that the request of consultations is subject to Article 13 of the AoA. However, in the case at hand the US did not put it forward neither during consultations nor during the meetings where the establishment of the Panel was requested, thus engaging itself in such procedures.
Other considerations that should guide the assessment of this issue :
14. Argentina considers that the provisions contained in Article 13 of the AoA have an exceptional nature. This would imply that the Member who alleges to be protected by the Peace Clause has the burden of proving the fulfilment of its legal requirements. As long as the US does not demonstrates prima facie that it fulfils all the conditions that would allow a protection against a claim by virtue of Article 13 of the AoA, the Panel should consider as appropriate the claims under Article XVI of GATT 1994 or Articles 3, 5 and 6 of the SCM Agreement.
15. Finally, as stated by Brazil in paragraphs 13 and 14 of its Brief, according to DSU Article 11 a panel must make an objective assessment of the facts of the case and not of part of them before examining others, specially when, as in the case at hand, there is a need to clarify closely related issues of fact that relate both to the fulfilment of the conditions set forth by the Peace Clause and to the substantive claims regarding actionable and prohibited subsidies.
Conclusion 16. According to the above statements, Argentina considers that Article 13 of the AoA does not preclude the Panel from hearing evidence and considering Brazil´s claims under the SCM Agreement or GATT 1994 while it decides whether the Peace Clause conditions of Article 13 have or have not been met.
AUSTRALIA'S WRITTEN COMMENTS
10 June 2003
1. I refer to your faxed letter of 28 May 2003 in which you invited third parties to the dispute to submit any written comments they may have in relation to the following:
whether Article 13 of the Agreement on Agriculture precludes the Panel from considering Brazil’s claims under the Agreement on Subsidies and Countervailing Measures in these proceedings in the absence of a prior conclusion by the Panel that certain conditions of Article 13 remain unfulfilled. In particular, the Panel invite the parties to explain their interpretation of the words “exempt from action” as used in Article 13 of the Agreement on Agriculture, as well as bringing to the Panel’s attention any other relevant provisions of the covered agreements and any other relevant considerations which the parties consider should guide the Panel’s consideration of this issue. For greater clarity, the Panel invites the parties, during this initial stage of the proceedings, to focus on matters of legal interpretation, rather than upon the submission of any factual evidence that might be associated with the substantive elements of Article 13.
2. Please note that, for the purposes of Australia’s comments in relation to the issues identified in the previous paragraph, references to “Article 13” refer to Article 13(a)(ii), 13(b)(ii) and 13(c)(ii).
There is nothing in Article 13 of the Agreement on Agriculture – nor indeed in the Dispute Settlement Understanding (“the DSU”) – that would preclude the Panel from considering claims under the Agreement on Subsidies and Countervailing Measures in the absence of a prior conclusion by the Panel that certain conditions of Article 13 remain unfulfilled.
3. Article 13 of the Agreement on Agriculture provides a limited, conditional and time-limited exemption from actions based on Article XVI of GATT 1994 and certain provisions of the Agreement on Subsidies and Countervailing Measures (“the specified provisions”) in respect of measures which conform fully to the respective provisions of the Agreement on Agriculture and to Article 13 itself. Article 13 does not preclude per se claims based on the specified provisions, that is, Article 13 does not prevent the specified provisions being invoked. Rather, Article 13 is in the nature of an “affirmative defence” for measures which are inconsistent with the specified provisions.31 4. Viewing Article 13 of the Agreement on Agriculture as an affirmative defence gives proper meaning to that provision, as well as to Article 21 of the Agreement on Agriculture and Articles 3.1, 6.9 and 7.1 of the Agreement on Subsidies and Countervailing Measures. This view would also be consistent with the interpretive principle of effectiveness, which the Appellate Body has found should guide the interpretation of the WTO Agreement.32 5. In assessing an affirmative defence based on Article 13 of the Agreement on Agriculture, the proper application of that provision would require the Panel to consider the conditions listed in Article 13 (“the prescribed conditions”), that is:
as appropriate, whether the measure at issue constitutes a domestic support measure or an export subsidy within the meaning of Annex 2 to, or Articles 6 or 1(e) of, the Agreement on Agriculture; and, if so,
as appropriate, whether the measure at issue conforms fully to the provisions of Annex 2 to, or Article 6 or Part V of, the Agreement on Agriculture; and
as appropriate, whether measures falling within the provisions of Article 6 of the Agreement on Agriculture grant support to a specific commodity not in excess of that decided during the 1992 marketing year.
6. Only if the Panel determines that Article 13 of the Agreement on Agriculture is relevant because the prescribed conditions are met would it need to consider whether the measures at issue are “exempt from actions based on” the specified provisions. In that event, the Panel would need to consider whether the measures at issue are “free or released from a duty or liability to which others are held”33 in relation to a proceeding “found[ed], buil[t] or construct[ed] on”34 the specified provisions. In other words, if the prescribed conditions are met, a Member will be immune from liability for a measure’s inconsistency with the specified provisions for the period for which Article 13 applies.
7. In this dispute, there is disagreement between the parties to the dispute whether the measures at issue conform fully to the respective provisions of the Agreement on Agriculture. However, disagreement between the parties to the dispute does not serve to limit the Panel’s mandate. There is no provision in the covered agreements that a disagreement between the parties to the dispute about conformity would serve as a barrier to a Panel’s legal mandate to examine claims in accordance with the provisions of Article 3.2 and 11 of the DSU. There is, therefore, no requirement that the Panel reach a conclusion that certain conditions of Article 13 of the Agreement on Agriculture remain unfulfilled before considering claims under the Agreement on Subsidies and Countervailing Measures.
COMMENTS BY THE EUROPEAN COMMUNITIES ON CERTAIN
ISSUES RAISED ON AN INITIAL BASIS BY THE PANEL
10 June 2002
TABLE OF CONTENTS
I. Introduction 20
II. The Question at issue falls within the Panel’s Discretion as to the organization of its own procedures 21
III. Several factors militate in favour of examining the evidence and arguments presented in respect of Article 13 of the Agreement on Agriculture at the same time as the other claims 23
A. The application of Article 13 of the Agreement on Agriculture is dependent on the examination of questions of substance 23
B. Assessing the applicability of Article 13 as a preliminary measure may delay the issuance of the report 23
C. Third party due process rights may be infringed by a decision to split the procedure into three stages 23
IV. Conclusion 24
I. INTRODUCTION 1. The Panel has asked the Parties to this dispute, together with the third parties, to comment on the following question:
[W]hether Article 13 of the Agreement on Agriculture precludes the Panel from considering Brazil’s claims under the Agreement on Subsidies and Countervailing Measures in these proceedings in the absence of a prior conclusion by the Panel that certain conditions in Article 13 remain unfulfilled. In particular, the Panel invites the parties to explain their interpretation of the words “exempt from actions” as used in Article 13 of the Agreement on Agriculture, as well as bringing to the Panel’s attention any other relevant provisions of the covered agreements and any other relevant considerations which the parties consider should guide the Panel’s consideration of this issue.
2. The European Communities understands the positions of the two parties as follows. The United States is arguing for a multi stage procedure – first the Panel should deal with this initial issue, second, it should examine whether the US measures at issue fall under Article 13 of the Agreement on Agriculture, and finally, and only if the measures do not fall under Article 13 of the Agreement on Agriculture, should the Panel examine whether these measures are consistent with the Agreement on Subsidies and Countervailing Duties (SCM Agreement).35 On the other hand, Brazil considers that the Panel should, after settling this initial issue, examine Brazil’s claims under Article 13 of the Agreement on Agriculture and the SCM Agreement simultaneously, treating Brazil’s claims under Article 13 of the Agreement on Agriculture as a threshold issue.36 Neither party appears to suggest that this issue is anything other than a substantive issue.37
3. The parties submissions concern the manner in which the Panel should organise its procedures. In other words, should it hear arguments and evidence on Brazil’s claims under Article XVI GATT and the SCM Agreement before it has decided whether the United States can avail itself of Article 13 of the Agreement on Agriculture. The European Communities considers that this issue falls within the Panel’s discretion as to the organization of its procedures. Such discretion is, nevertheless, not without its limits. The European Communities considers that there are a number of factors which require the Panel to exercise its discretion so as to examine the evidence and arguments presented by the parties with respect to both Article 13 of the Agreement on Agriculture and Article XVI GATT and the SCM Agreement at the same time. The European Communities sets out its arguments on these issues in more detail in the sections below.