66 Brazil Exhibit 1 (hereinafter Brazil will refer to its exhibits as “Exhibit Bra-1, 2 , 3 etc.”) Excerpt of Draft Understanding on Rules and Procedures Governing the Settlement of Disputes, Job No. 968, 15 June 1992.
67 Exhibit Bra-2. Excerpt of Draft Understanding on Rules and Procedures Governing the Settlement of Disputes, 15 November 1993.
68 MTN/FA II/A1A-3, Arts. 13, 19.
69 MTN/FA II/A2, Appendix 2.
70 TRIPs Article 6 reads: “For the purposes of dispute settlement under this Agreement, subject to the provisions of Articles 3 and 4 nothing in this Agreement shall be used to address the issue of the exhaustion of intellectual property rights.”
76 By contrast, the United States did not invoke the peace clause defence in US - FSC even though the EC request for the establishment of a panel included claims under ASCM Article 3.1(a) with respect to export subsidies for agricultural products. AoA Article 13(c) conditionally exempts those claims from “actions.”
77 The Panel asked the parties to address: “[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.”
78 Brazil’s Brief on Preliminary Issue Regarding the “Peace Clause” of the Agreement on Agriculture, para. 2 (5 June 2003) (“Brazil’s Initial Brief”) (emphasis added).
82 Initial Brief of the United States of America on the Question Posed by the Panel, paras. 6 10 (5 June 2003) (“US Initial Brief”).
83 See DSU Article 3.2 (The dispute settlement system “serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law.”).
84 The customary rules of interpretation of public international law are reflected in part in Article 31(1) of the Vienna Convention, which reads: “A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.”
86 Brazil has quoted the definition of the word “exempt” when used as a verb. See The New Shorter Oxford English Dictionary, vol. 1, at 878 (1993 ed.) (first definition as transitive verb: “Grant immunity or freedom from or from a liability to which others are subject”) (italics in original). However, if used as a verb in the Peace Clause, the correct form of “exempt” would be “shall be exempted from actions.” See id., vol. 1, at 878 (examples for first definition of “exempt” as verb: “J. A. Froude Clergy who committed felony were no longer exempted from the penalties of their crimes. R. D. Laing I was exempted from military service because of asthma.”) (italics added). As used in the Peace Clause in the construction “shall be . . . exempt from actions,” “exempt” is an adjective. See id., vol. 1, at 878 (examples of “exempt” as used in first definition as adjective: “R.C. Trench They whom Christ loves are no more exempt than others from their share of earthly trouble and anguish. J. Berger He is exempt on medical grounds from military service.”) (italics added). Therefore, the correct definition of “exempt” as used in the Peace Clause is “[n]ot exposed or subject to something unpleasant or inconvenient; not liable to a charge, tax, etc. (Foll. by from, of.).” Id., vol. 1, at 878 (first definition as adjective) (italics in original).
87 Brazil’s Initial Brief, para. 9; see id., para. 8.
88 Regrettably, none of the third parties (save Australia) even attempts to read the Peace Clause – and in particular the phrase “exempt from actions” – according to the customary rules of interpretation of public international law. Australia does offer an interpretation of “exempt from actions based on” purportedly using the ordinary meaning of the terms, but it appears that Australia has interpreted “exempt from actions” merely by quoting a definition for “ exempt.” Compare Comments of Australia on Question Posed by Panel, para. 7 & n. 3, with Black’s Law Dictionary at 593 (7th ed. 1999) (definition of “exempt” as adjective: “Free or released from a duty or liability to which others are held.”). That is, Australia’s interpretation ascribes no meaning to the words “from actions,” reducing them to inutility. In addition to failing to provide any definition for “actions,” Australia also fails to examine any context for that term in the DSU and the Subsidies Agreement. SeeUS Initial Brief, paras. 7 10.
89 Argentina reads “exempt from actions” as meaning 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.” Comments by Argentina on Question Posed by Panel, para. 5. However, in making this assertion, Argentina neither provides nor attempts to distinguish the ordinary meaning of “action” as the “taking of legal steps to establish a claim or obtain a remedy.” Nor does Argentina explain why, if Members only meant to preclude “a finding of inconsistency” with specified provisions, they did not simply use the word “finding” – for example, “measures . . . shall be . . . exempt from findings based on” certain specified provisions – when the term “finding” is used at least 12 times in the DSU. See, e.g., DSU Article 7.1 (standard panel terms of reference include “mak[ing] such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in that/those agreement(s)”); DSU Article 11 (panel should make an objective assessment of matter before it, including “such other findings as will assist the DSB in making the recommendations or in giving the rulings provided for in the covered agreements”); DSU Article 12.7 (panel “shall submit its findings in the form of a written report to the DSB”). There is no basis in the text or context of the Peace Clause to read “actions” to be limited to “panel findings”.
90 US Initial Brief, para. 7.
91 Indeed, this necessarily follows from the fact that, if a party cannot take legal steps to establish a claim, it will also be precluded from obtaining a remedy.
92 We also note that Brazil’s approach of interpreting “exempt from actions” as “cannot receive authorization . . . to obtain a remedy” appears to overlook the “taking of legal steps” component of even the “remedy” portion of the definition of “ action”.
94 Brazil also asserts that “‘[a]ctions’ include decisions made by the Dispute Settlement Body (DSB) to adopt rulings and recommendations of panels and the Appellate Body” but provides no reference to a provision of the DSU to support the assertion. Neither DSU Article 16.4 (on adoption of panel reports) nor DSU Article 17.14 (on adoption of Appellate Body reports) uses the term “action” to describe a DSB decision to adopt panel and Appellate Body rulings and recommendations.
95 Brazil’s Initial Brief, para. 6.
96 For example, Brazil quotes DSU Article 2.1, which states that “[w]here the DSB administers the dispute settlement provisions of a Plurilateral Trade Agreement, only those Members that are parties to that Agreement may participate in decisions or actions taken by the DSB with respect to that dispute.”
97 See US Initial Brief, paras. 8 9.
98 Members are obligated to “take all necessary steps to ensure that the imposition of a countervailing duty on any product of the territory of any Member imported into the territory of another Member is in accordance with the provisions of Article VI of GATT 1994 and the terms of this Agreement.” Subsidies Agreement, Article 10 (footnote omitted). See also GATT 1994 Article VI:6 (requiring multilateral approval of certain exceptional anti dumping and countervailing duties).
99 We note that Argentina implicitly concedes that relevant context in the Subsidies Agreement for the phrase “exempt from actions” suggests that the term is not limited to decisions or actions taken by the DSB. Argentina recognizes that “[i]t is true that Article 7 of the SCM Agreement states that the request of consultations is subject to Article 13 of the AoA”. Argentina’s Third Party Initial Brief, para. 13. This would appear to contradict its reading of “the word ‘actions’ in the context of Article 13 of the AoA [as] refer[ring] to decisions of WTO competent bodies, such as the DSB when it discharges its duties by establishing a panel,” id., para. 6. That is, if the Peace Clause precludes a request for consultations by a Member under Article 7 of the Subsidies Agreement, the term “actions” in the Peace Clause cannot solely refer to “decisions of WTO competent bodies”.
100 See, e.g., GATT 1994 Article XVI:1 (“In any case in which it is determined that serious prejudice to the interests of any other contracting party is caused or threatened by any such subsidization, the contracting party granting the subsidy shall, upon request, discuss with the other contracting party or contracting parties concerned, or with the Contracting Parties, the possibility of limiting the subsidization.”); DSU Article 22.6 (“When the situation described in paragraph 2 occurs, the DSB, upon request, shall grant authorization to suspend concessions or other obligations within 30 days of the expiry of the reasonable period of time unless the DSB decides by consensus to reject the request.”).
101 See GATT 1994 Article XXV (“Wherever reference is made in this Agreement to the contracting parties acting jointly they are designated as the Contracting Parties. ”).
102 Under DSU Article 19, “[w]here a panel or the Appellate Body concludes that a measure is inconsistent with a covered agreement, it shall recommend that the Member concerned bring the measure into conformity with that agreement.” DSU Article 19 (emphasis added) (footnote omitted).
103 Under DSU Article 16, a panel report “shall be adopted at a DSB meeting unless a party to the dispute formally notifies the DSB of its decision to appeal or the DSB decides by consensus not to adopt the report”. DSU Article 16.4 (footnote omitted).
104 When a Member “fails to bring the measure found to be inconsistent with a covered agreement into compliance therewith or otherwise comply with the recommendations and rulings” and compensation cannot be agreed, the complaining party Member may request authorization from the DSB to suspend concessions, DSU Article 22.2, and “the DSB, upon request, shall grant authorization to suspend concessions or other obligations within 30 days of the expiry of the reasonable period of time unless the DSB decides by consensus to reject the request”, DSU Article 22.6.
106 See Comments by the European Communities on certain issues raised on an initial basis by the Panel, para. 8 (“In conclusion, the Panel has substantial discretion in deciding how it will manage these issues. Article 12.1 DSU makes it quite clear that the Working Procedures set out in Appendix 3 of the DSU may be departed from if the Panel decides this is appropriate.”).
107 DSU Article 12.1 (“Panels shall follow the Working Procedures in Appendix 3 unless the panel decides otherwise after consulting with the parties to the dispute. ”).
108 DSU Article 12.2 (“Panel procedures should provide sufficient flexibility so as to ensure high quality panel reports, while not unduly delaying the panel process.”).
109 Letter from Ambassador Luiz Felipe de Seixas Corrêa, Permanent Mission of Brazil, to Mr. Dariusz Rosati, Chairman of Panel, at 3 (23 May 2003) (emphasis added). The carry over paragraph continues: “Where preliminary objections have been resolved in advance of other claims, normally they have been resolved in the panel’s first meeting, on the basis of the first round of submissions and oral statements.”
110 See Appellate Body Report, European Communities – Regime for the Importation, Sale and Distribution of Bananas, WT/DS27/AB/R, para. 144.
111 See Appellate Body Report, Canada – Measures Affecting the Importation of Milk and the Exportation of Dairy Products, WT/DS103/AB/RW2, WT/DS113/AB/RW2, paras. 67 75 (second recourse to DSU Article 21.5).
112 See Brazil’s Initial Brief, paras. 11 16.
113 Brazil’s Initial Brief, para. 16; see id., para. 11 (“Thus, resolution of the ‘peace clause’ issues . . . must be resolved using normal DSU rules and procedures.”).
114 Brazil’s Initial Brief at 7 (heading IV).
115 Brazil’s Initial Brief, para. 21.
116 For example, arguments that a particular claim is not within a panel’s terms of reference under DSU Article 6.2 do not involve any textual mandate that measures “shall be . . . exempt from actions.” What Brazil calls the “closest case to the peace clause issue presented here” involved Articles 27.2(b) and 27.4 of the Subsidies Agreement, neither of which says that measures “shall be . . . exempt from actions based on” specified provisions. See Brazil’s Initial Brief, para. 19 (quoting Appellate Body discussion of Subsidies Agreement Articles 27.2(b) and 27.4 in Brazil – Export Financing Programme for Aircraft, WT/DS46/AB/R; Subsidies Agreement Article 27.2 states that the “prohibition of paragraph 1(a) of Article 3 shall not apply to” developing country Members in compliance with Article 27.4). Other provisions cited by Brazil (Article 1 of the General Agreement on Trade in Services, Article 2 of the Agreement on Technical Barriers to Trade, and Annex I of the Agreement on Government Procurement) similarly do not provide a legal right not to be subject to actions.
117 See Brazil's Initial Brief, paras. 18-21.
118 See Brazil’s Initial Brief, paras. 17.
119 Brazil’s Initial Brief, para. 22.
120 To put it simply, “Brazil exhibit 419” (for example) would remain “Brazil exhibit 419” – it would not change simply because it was now being cited in a different argument.
121 Brazil’s Initial Brief, para. 23.
122 Brazil argues that its “non peace clause claims include . . . Article XVI:3 of GATT 1994 involving all domestic and export subsidies challenged by Brazil.” Brazil’s Initial Brief, para. 23. However, the Peace Clause explicitly states that conforming “export subsidies . . . shall be . . . exempt from actions based on Article XVI of GATT 1994.” Agriculture Agreement, Article 13(c)(ii).
123 Brazil’s Initial Brief, para. 15.
124 Letter from Ambassador Luiz Felipe de Seixas Corrêa, Permanent Mission of Brazil, to Mr. Dariusz Rosati, Chairman of Panel, at 4.
125 See Brazil’s Initial Brief, para. 9 (“In sum, ‘exempt from actions’ means that a complaining Member cannot receive authorization from the DSB to obtain a remedy against another Member’s domestic or export support measures that are ‘peace clause’ protected.”).
126 See Appellate Body Report, Brazil – Export Financing Programme for Aircraft, WT/DS46/AB/R, paras. 142 44 (finding that panel should have considered threshold Article 27.4 issue before examining whether export subsidy had been provided under Subsidies Agreement Article 3.1(a)); European Communities – Regime for the Importation, Sale and Distribution of Bananas, WT/DS27/AB/R, para. 144 (noting that panels would be better served by adopting working procedures providing for preliminary rulings to deal with threshold jurisdictional issues).
127 We also note that this potential question relating to whether a panel could have been established given the applicability of the Peace Clause could arise even under Brazil’s interpretation of “exempt from actions”. Brazil states that “actions are multilaterally agreed decisions of WTO bodies including the DSB”. However, “exempt from actions” would then seem to reach DSU Article 6.1, under which the DSB takes a “multilaterally agreed decision” to establish a panel to consider a matter. Thus, under Brazil’s own logic, “exempt from actions” in the Peace Clause should also preclude a decision by the DSB to establish a panel and not just a decision to authorize remedies. Argentina implicitly concedes the point when it states that it “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”. Argentina’s Third Party Initial Brief, para. 6 (emphasis added).
128 However, the United States notes that Argentina (in paragraph 13 of its “Third Party Initial Brief”) accepts that under Article 7 of the Subsidies Agreement, a Member is not to request consultations on measures conforming to the Peace Clause.
129 See Comments by Australia, para. 4 (10 June 2003); Comments by the European Communities on certain issues raised on an initial basis by the Panel, para. 6 (dated 10 June “2002” on first page, 2003 in the heading).
130 "Brazil´s First Submission to the Panel regarding the 'Peace Clause' and Non-Peace Clause Related Claims", 24 June 2003. (Hereinafter "Brazil's Submission").
131 Representatives of 38 governments and eight international organizations took part in the meeting. MEMBER GOVERNMENTS: Argentina, Australia, Belgium, Brazil, Burkina Faso, Cameroon, Chad, Chinese Taipei, Colombia, Côte d'Ivoire, Egypt, Finland, France, Germany, Greece, India, Iran, Israel, Italy, Japan, Republic of Korea, Mali, Netherlands, Nigeria, Pakistan, Paraguay, Philippines, Poland, Russia, South Africa, Spain, Sudan, Switzerland, Syria, Tanzania, Togo, Turkey, Uganda, United Kingdom, United States, Uzbekistan and Zimbabwe.
132 According to data from "Cultivating Poverty: The Impact of U.S. Cotton Subsidies on Africa", Oxfam Briefing Paper 30, 27 September 2002 (See Exhibit Bra-15) and ICAC Secretariat.
133 "Cotton: World Statistics". Bulletin of the International Cotton Advisory Committee, September 2002. (Exhibit Bra-9).
134 As stated by Brazil at paragraph 32 of its Submission, the cost of production in Argentina averaged 59 cents/lb of cotton, according to the ICAC study (See Exhibit Bra-9).