United States – Continued Suspension of Obligations in the EC – Hormones Dispute (DS320)

Canada - Continued Suspension of Obligations in the EC – Hormones Dispute (DS321)

Third participant submission of Australia

Geneva, 26 June 2008

TABLE OF CONTENTS

Table of cases. ii

i. Introduction. 1

ii. Obligations of parties in dispute settlement. 2

iii. Issues arising from the panels’ application of the dsu.. 2

1. First Series of EC Claims. 3

1.1 Availability of Article 21.5 of the DSU to the implementing party. 3

1.2 Requirement to initiate compliance procedures under Article 21.5 of the DSU.. 4

1.3 Conclusion. 5

2. Second Series of EC Claims. 5

2.1 Breach of Article 23.1, read in light of Articles 22.8 and 3.7 of the DSU.. 5

2.2 What is required by Article 22.8 of the DSU?. 5

2.3 Article 3.7 of the DSU.. 6

2.4 Panels’ terms of reference and jurisdiction. 6

2.5 Conclusion. 7

iv. issues arising from the panels’ application of the sps agreement. 7

1 Standard of Review under the SPS Agreement. 8

1.1 Introduction. 8

1.2 The appropriate standard of review is informed by the relevant obligation and covered agreement at issue 8

1.3 The SPS Agreement reflects a balance of jurisdictional competences. 9

1.4 Panels must show considerable deference to the findings of a risk assessment relied upon by a WTO Member10

1.5 The Panels in the present dispute misunderstood their role in regards to reviewing the risk assessment at issue 12

1.6 Members may base SPS measures on a credible view from a qualified and respected source 13

2. Experts. 14

2.1 Due process. 14

3. Other issues under the SPS Agreement. 15

3.1 The role of international standards under the SPS Agreement15

Table of cases

Short Title

Full Case Title and Citation

Australia — Salmon

Appellate Body Report, Australia – Measures Affecting Importation of Salmon, WT/DS18/AB/R, adopted 6 November 1998, DSR1998:VIII, 3327

Australia – Salmon (Article 21.5 – Canada)

Panel Report, Australia – Measures Affecting Importation of Salmon – Recourse to Article 21.5 of the DSU by Canada, WT/DS18/RW, adopted 20 March 2000, DSR2000:IV, 2031

Canada – Dairy (Article 21.5 – New Zealand and US II)

Appellate Body Report, Canada – Measures Affecting the Importation of Milk and the Exportation of Dairy Products – Second Recourse to Article 21.5 of the DSU by New Zealand and the United States, WT/DS103/AB/RW2, WT/DS113/AB/RW2, adopted 17 January 2003, DSR2003:I, 213

Canada – Hormones Retaliation

Canada – Continued Suspension of Obligations in the EC – Hormones Dispute, WT/DS321/R, adopted 31 March 2008

Chile – Price Band System

Appellate Body Report, Chile – Price Band System and Safeguard Measures Relating to Certain Agricultural Products, WT/DS207/AB/R and Corr.1, adopted 23 October 2002, DSR2002:VIII, 3045

EC – Asbestos

Panel Report, European Communities – Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/R and Add.1, adopted 5 April 2001, as modified by Appellate Body Report, WT/DS135/AB/R, DSR2001:VIII, 3305

EC – Bananas III

(Article 21.5 – EC)

Panel Report, European Communities – Regime for the Importation, Sale and Distribution of Bananas – Recourse to Article 21.5 of the DSU by the European Communities, WT/DS27/RW/EEC and Corr.1, 12 April 1999, unadopted, DSR1999:II, 783

EC – Biotech Products

Panel Report, European Communities – Measures Affecting the Approval and Marketing of Biotech Products, WT/DS291/R, WT/DS292/R, WT/DS293/R, Corr.1 and Add.1, 2, 3, 4, 5, 6, 7, 8 and 9, adopted 21 November 2006

EC - Hormones

Appellate Body Report, EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998, DSR1998:I, 135

EC – Hormones (Canada)

Panel Report, EC Measures Concerning Meat and Meat Products (Hormones), Complaint by Canada, WT/DS48/R/CAN, adopted 13 February 1998, as modified by Appellate Body Report, WT/DS26/AB/R, WT/DS48/AB/R, DSR1998:II, 235

EC – Hormones (US)

Panel Report, EC Measures Concerning Meat and Meat Products (Hormones), Complaint by the United States, WT/DS26/R/USA, adopted 13 February 1998, as modified by Appellate Body Report, WT/DS26/AB/R, WT/DS48/AB/R, DSR1998:III, 699

Japan – Agricultural Products II

Appellate Body Report, Japan – Measures Affecting Agricultural Products, WT/DS76/AB/R, adopted 19 March 1999, DSR1999:I, 277

Japan – Alcoholic Beverages II

Appellate Body Report, Japan – Taxes on Alcoholic Beverages, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996, DSR1996:I, 97

Japan – Apples (Article 21.5 – United States)

Panel Report, Japan – Measures Affecting the Importation of Apples – Recourse to Article 21.5 of the DSU by the United States, WT/DS245/RW, adopted 20 July 2005, DSR 2005:XVI, 7911

Mexico – Corn Syrup (Article 21.5 – US)

Appellate Body Report, Mexico – Anti-Dumping Investigation of High Fructose Corn Syrup (HFCS) from the United States – Recourse to Article 21.5 of the DSU by the United States, WT/DS132/AB/RW, adopted 21 November 2001, DSR2001:XIII, 6675

US – 1916 Act

Appellate Body Report, United States – Anti-Dumping Act of 1916, WT/DS136/AB/R, WT/DS162/AB/R, adopted 26 September 2000, DSR2000:X, 4793

US – Cotton Yarn

Appellate Body Report, United States – Transitional Safeguard Measure on Combed Cotton Yarn from Pakistan, WT/DS192/AB/R, adopted 5 November 2001, DSR2001:XII, 6027

US – Countervailing Duty Investigation on DRAMS

Appellate Body Report, United States – Countervailing Duty Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from Korea, WT/DS296/AB/R, adopted 20 July 2005, DSR 2005:XVI, 8131

US - FSC

Appellate Body Report, United States – Tax Treatment for "Foreign Sales Corporations", WT/DS108/AB/R, adopted 20 March 2000, DSR2000:III, 1619

US - Gasoline

Appellate Body Report, United States – Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R, adopted 20 May 1996, DSR1996:I, 3

US – Hormones Retaliation

United States – Continued Suspension of Obligations in the EC – Hormones Dispute WT/DS320/R, adopted 31 March 2008

US – Hot-Rolled Steel

Appellate Body Report, United States – Anti-Dumping Measures on Certain
Hot-Rolled Steel Products from Japan
, WT/DS184/AB/R, adopted 23 August 2001, DSR2001:X, 4697

US – Lamb

Appellate Body Report, United States – Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia, WT/DS177/AB/R, WT/DS178/AB/R, adopted 16 May 2001, DSR2001:IX, 4051

US – Softwood Lumber VI (Article 21.5 – Canada)

Appellate Body Report, United States – Investigation of the International Trade Commission in Softwood Lumber from Canada – Recourse to Article 21.5 of the DSU by Canada, WT/DS277/AB/RW and Corr.1, adopted 9 May 2006

US – Wheat Gluten

Appellate Body Report, United States – Definitive Safeguard Measures on Imports of Wheat Gluten from the European Communities, WT/DS166/AB/R, adopted 19 January 2001, DSR2001:II, 717

US – Wool Shirts and Blouses

Appellate Body Report, United States – Measure Affecting Imports of Woven Wool Shirts and Blouses from India, WT/DS33/AB/R and Corr.1, adopted 23 May 1997, DSR1997:I, 323

i. Introduction

1. These disputes concern the point at which a party’s right to suspend concessions and other obligations, authorised by the Dispute Settlement Body (DSB), ceases where there is disagreement between the parties as to compliance. This “post-retaliation” situation is currently the subject of negotiations in the Special Session of the DSB on the Understanding on Rules and Procedures Governing the Settlement of Disputes (“DSU Review”). Australia’s submission is made without prejudice to its position in those negotiations.

2. The disputes have major systemic implications for the effective operation of the multilateral trading system. Australia therefore welcomes the opportunity to make submissions to the Appellate Body on the key issues raised in these appeals.

3. In doing so, Australia would like to emphasise the role of the dispute settlement system in promoting stability and confidence in the multilateral trading system for the benefit of all WTO Members. The multilateral, rather than unilateral, determination of WTO non-compliance is a fundamental principle of the dispute settlement system.[1] So too is the principle that, in determining disputes, the burden of establishing a prima facie case of WTO non-compliance lies with the complaining party.[2] A failure to follow the procedures provided for in the DSU risks undermining the system as a whole, with consequent damage to the interests of all Members, not just the parties to the disputes in question.

4. Australia’s submission will first make some general remarks on the obligations of parties engaged in dispute settlement, and on the burden of proof, before addressing issues arising from the Panels’ application of the DSU. In addressing matters raised in the Panels’ reports on the DSU, Australia will follow the grouping of claims accepted by the Panels.

5. Australia believes the Panels erred seriously in their decisions to address the compliance of the European Communities’ Directive 2003/74/EC with the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement). However, in the event that the Appellate Body decides to review the issues of law and legal interpretations developed by the Panels in relation to that Directive, Australia also offers its views on various SPS-related issues.

ii. Obligations of parties in dispute settlement

6. Article 3.10 of the DSU imposes on Members an obligation to “engage in these procedures in good faith in an effort to resolve the dispute.” Accordingly, Members must engage in dispute settlement in a manner that respects and reflects the rights and obligations of Members contained in the DSU and in the other covered agreements, as well as the fundamental principles that underpin the DSU. That obligation applies to all parties to a dispute.

7. Where, as in the present disputes, the DSU does not expressly state the procedures that should be followed to achieve their resolution, it is Australia’s view that parties’ actions should continue to be guided by those fundamental principles, in particular, (i) multilateral determination of non-compliance and (ii) that the party asserting non-compliance bears the burden of establishing a prima facie case. Australia is concerned that any departure from these principles risks undermining the credibility, and ultimately the viability, of the WTO dispute settlement system. Australia recalls that the procedural rules of WTO dispute settlement are designed to promote “the fair, prompt and effective resolution of trade disputes.”[3]

iii. Issues arising from the panels’ application of the dsu

8. The Panels grouped the claims of the European Communities into two series: the first relating to the alleged violation of Article 23.2(a) of the DSU read together with Articles 21.5 and 23.1; and the second relating to alleged violation of Article 23.1 of the DSU read together with Articles 22.8 and 3.7.

1. First Series of EC Claims

9. Article 23.1 of the DSU establishes an overarching obligation for Members to have recourse to and to abide by the rules and procedures of the DSU, which include Article 21.5. By its express terms, Article 21.5 is the governing provision in cases of disagreement on the consistency of a compliance measure with the covered agreements.

10. Australia endorses the findings of the Panels in relation to Articles 23.1 and 23.2(a), but considers that the Panels erred in their approach to Article 21.5. In particular, Australia considers that the Panels erred in their exercise of judicial economy in relation to the European Communities’ claim concerning Article 21.5.[4] In Australia’s view, findings on the meaning and application of that Article are essential to the proper resolution of these disputes, because of its centrality to the matters at issue.

1.1 Availability of Article 21.5 of the DSU

11. While the Panels made no finding in relation to the issue, they considered that “proceedings under Article 21.5 are [not] open only to the original complainant.”[5]

12. Australia agrees that the language of Article 21.5 does not expressly address the issue of which party can or should initiate proceedings under Article 21.5. However, Australia does not consider the reasoning provided by the Panels in support of their view to be persuasive. The Panels place considerable reliance on EC – Bananas III (Article 21.5 – EC),[6] an unadopted panel report.[7] As the Panels note, the Panel in EC – Bananas III did not “rule out the possibility” of the responding party invoking Article21.5.[8] However, it is clear that the Panel in EC – Bananas III made no finding on this point. That Panel said it had “not considered whether the original respondent in a panel proceeding…. is authorized to initiate an Article 21.5 proceeding.”[9] The Bananas Panel also said that “it is not clear from the provisions of Article 21.5 whether the original respondent in a panel proceeding is, or should be, permitted to ... to establish an Article 21.5 proceeding.”[10]

13. Australia further considers that the Panels erred in relying on an unadopted panel report. The Appellate Body has found that, while unadopted panel reports may provide “useful guidance” to panels, they have no legal status in the WTO system.[11] Australia submits that the Panels appear to have not just viewed EC –Bananas III (Article 21.5 – EC) as providing “useful guidance” but to have relied on it in forming their views on the interpretation of Article 21.5. The Panels cite one statement of the panel in EC – Bananas III and then state “[w]e are therefore not convinced that Article 21.5 is the only avenue available to address a claim of compliance by a Member … Neither do we believe that proceedings under Article 21.5 are open only to the original complainant.”[12] (emphasis added)

1.2 Requirement to initiate compliance procedures under Article 21.5 of the DSU

14. Australia agrees with the European Communities that the language of Article 21.5 of the DSU leaves no doubt that, where “there is disagreement as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings,” Article 21.5 is the applicable provision.[13] When there is such disagreement, and the parties have not agreed to another form of procedure, e.g., pursuant to Article 25 (arbitration), or Article 5 (good offices), Australia considers that the disagreement should be resolved by a compliance panel under Article 21.5.[14]

15. Australia further submits that, where one party asserts the continued right to suspend concessions and other obligations, and the other party challenges that right, consistent with the general principle of interpretation of treaties,[15] Articles 23.1 and 23.2(a) of the DSU must be read in the context of Article 21.5. Australia considers that the requirement in Article 23.2(a) of “recourse to dispute settlement in accordance with the rules and procedures of this Understanding” should be read as a reference to Article 21.5. In Australia’s view, the Panels erred in considering that “the procedure under Article 21.5 of the DSU could be one of the mechanisms available”[16] (emphasis added) to the parties. While disputes may be settled under procedures provided for elsewhere in the DSU (e.g., Article 25), this is done pursuant to “these dispute settlement procedures” referred to in Article 21.5. In the circumstances of these disputes, Australia considers that the disagreement on whether the implementing party had removed the measure found to be WTO-inconsistent should have been resolved through recourse to Panels established under Article 21.5.

1.3 Conclusion

16. Australia considers that the Panels erred in exercising judicial economy in relation to the European Communities’ claim concerning Article 21.5 and that the Appellate Body should complete the legal analysis of that claim.

2. Second Series of EC Claims

2.1 Breach of Article 23.1, read in light of Articles 22.8 and 3.7 of the DSU

17. The overarching obligation established by Article 23.1 of the DSU, to have recourse to and to abide by the rules and procedures of the DSU, also extends to those rules and procedures set out in Articles 22.8 and 3.7. A failure to have recourse to, and to abide by these (or any other DSU) procedures, would amount to a breach of the obligation set out in Article 23.1.

2.2 What is required by Article 22.8 of the DSU?

18. Article 22.8 requires, in relevant part, that a suspension of concessions or other obligations be temporary and only be applied until the measure found to be inconsistent with a covered agreement has been removed. In the context of the present disputes, the key issue concerning Article 22.8 is the meaning of the words “…until … the measure … has been removed …”. The “measure” that is to be removed is the “measure [that has previously been] found to be inconsistent with a covered agreement”[17] and in respect of which the suspension of concessions or other obligations has been authorised to be applied.

19. In Australia’s view, in the circumstances of these disputes, where there is disagreement as to whether the European Communities, as the implementing party, has indeed removed the measure previously found to be WTO inconsistent, that disagreement must be resolved through multilateral determination by an Article 21.5 panel. Australia acknowledges that this relationship between Articles 22.8 and 21.5 is not specifically stated in the DSU. But, as the Appellate Body has previously observed:

[o]ne of the corollaries of the ‘general rule of interpretation’ in the Vienna Convention is that interpretation must give meaning and effect to all the terms of a treaty. An interpreter is not free to adopt a reading that would result in reducing whole clauses or paragraphs of a treaty to redundancy or inutility.[18] (footnotes omitted)

20. Australia submits that its interpretation allows both Articles 21.5 and 22.8 to be applied harmoniously and in a manner fully consistent with the Appellate Body’s statement. To adopt any other interpretation would deprive Article 21.5 of its full meaning. Further, such an interpretation is fully consistent with the fundamental principles informing the DSB: that non-compliance must be determined multilaterally; and that the party asserting non-compliance with a covered agreement bears the burden of establishing a prima facie case.

21. Australia notes that the DSU is silent on when retaliation should cease in circumstances involving the concurrent application of Articles 21.5 and 22.8. In Australia’s view, it is open to a Member to continue to impose retaliatory measures pending the outcome of a compliance proceeding pursuant to Article 21.5.

2.3 Article 3.7 of the DSU

22. Article 3.7 provides relevant context to Article 22.8 and Article 23.1. As noted by the Appellate Body in US–Gasoline, the “general rule of interpretation” requires all terms of a treaty to be given “meaning and effect”.[19] Article 3.7 provides the possibility of retaliation as a “last resort”. In Australia’s view, Article 3.7 makes clear that retaliation is a means to an end, not an end in itself, and that the existence of DSB authorisation for retaliation does not negate the express terms of Article 21.5.

2.4 Panels’ terms of reference and jurisdiction

23. Under Article 7 of the DSU, unless agreed otherwise by the parties within 20 days of the establishment of a panel, a panel’s terms of reference are determined by the complaining party. As the European Communities note, the Appellate Body has clarified that panels cannot rule on legal claims which have not been brought by the complaining party.[20]

24. The terms of reference in the present disputes were accepted by the Panels as including the EC’s approach to its claims as outlined in its first submission.[21] This included the EC’s structuring of its claims such that claims of direct violation under Article 22.8 were made only in the alternative and on condition that the Panels did not establish any violations under 23.1, 23.1(a), 3.7, 22.8 and 21.5 of the DSU.[22] The Panels recognised that it would be inappropriate to address the direct claims under Article 22.8 except in these circumstances.[23]

25. In any event, in neither case did the Panels’ terms of reference include any provisions of the SPS Agreement. Further, claims of violation of the SPS Agreement – a separate covered Agreement – cannot be used to justify breaches of the DSU. To consider such claims effectively reverses the burden of proof between the parties and is inconsistent with the fundamental principle informing the DSU that the party asserting non-compliance with a covered agreement bears the burden of establishing a prima facie case. Accordingly, Australia considers that the Panels had no jurisdiction to consider the compliance of the European Communities’ Directive 2003/74/EC with the SPS Agreement, and that the Panels erred seriously in taking this step.

2.5 Conclusion

26. Australia considers the Panels erred in their findings on claims made by the European Communities on Article 23.1 of the DSU, read together with Articles 22.8 and 3.7.

iv. issues arising from the panels’ application of the sps agreement

27. Australia offers the following views in the event that the Appellate Body decides to review the issues of law and legal interpretations developed by the Panels in relation to the European Communities’ Directive 2003/74/EC. Australia does not comment on the factual question of whether the Directive complies with the SPS Agreement, but offers general views on the legal issues raised. Australia has chosen to focus on a select few SPS issues raised in the Panels’ reports. However, failure to address any particular SPS issues should not be taken as acceptance by Australia of the Panels’ positions on those issues.

1 Standard of Review under the SPS Agreement

1.1 Introduction

28. The SPS Agreement recognises the protection of human, animal or plant life or health as a fundamental non-trade right. It balances the exercise of that right against the trade liberalisation goals of the WTO by requiring SPS measures to be science-based, non-discriminatory and not more trade-restrictive than required. This balance cannot be maintained if panels fail to apply appropriate standards of review. Accordingly, Australia strongly supports the European Communities’ submission that application of the appropriate standard(s) of review by panels is fundamental to their assessment of a Member’s consistency with its obligations under the SPS Agreement.[24]

29. For the purposes of this appeal, Australia understands “standard of review” to refer to a panel’s fact-finding role. It addresses the nature and appropriate intensity of scrutiny of a panel’s evaluation of a Member’s regulatory judgment or an assessment made by a competent body relied upon by that Member. It goes to the threshold circumstances in which a panel may legitimately interfere in that judgment or factual assessment.[25] A panel does not have discretion as to the standard of review it may apply to its assessment of a measure’s consistency with a particular provision because, as the Appellate Body has noted, “[a] failure to apply the proper standard of review constitutes legal error under Article 11 of the DSU.”[26]

1.2 The appropriate standard of review is informed by the relevant obligation and covered agreement at issue

30. In EC – Hormones, the Appellate Body stated that “Article 11 of the DSU lays down the standard of review for panels in disputes under the covered agreements”[27] and explained that Article 11 of the DSU precludes both a de novo review or “total deference” by a panel to the findings of a national authority.[28] Instead, Article 11 of the DSU requires panels to make an “objective assessment of the facts.”

31. Like the European Communities[29], Australia considers that the appropriate standard of review is informed by both Article 11 of the DSU and the particular covered agreement(s) and obligation(s) at issue in a given dispute. Australia finds support for its view from the statement by the Appellate Body in US – Softwood Lumber VI (Article 21.5 – Canada), that:

[T]he proper standard of review to be applied by a panel must … be understood in the light of the specific obligations of the relevant agreements that are at issue in the case.[30]

32. The need to apply standard(s) of review specific to the SPS Agreement was specifically recognised by the Appellate Body in the EC – Hormones dispute when it stated that panels must “adopt a standard of review … clearly rooted in the text of the SPS Agreement itself.[31]

1.3 The SPS Agreement reflects a balance of jurisdictional competences

33. In EC – Hormones, the Appellate Body recognised that a balance was struck between Members in relation to the distribution of decision-making authority under the SPS Agreement as follows:

[T]he standard of review appropriately applicable in proceedings under the SPS Agreement … must reflect the balance established in that Agreement between the jurisdictional competences conceded by the Members to the WTO and the jurisdictional competences retained by the Members for themselves.[32]

34. Accordingly, the appropriate standard of review may vary between different obligations under the SPS Agreement. In areas where jurisdiction was retained by Members, Australia submits that certain jurisdictional limitations are imposed on the scrutiny that panels may apply in relation to their assessment of factual matters. It is incumbent upon panels not to disturb that balance between regulatory autonomy and international supervision, in determining and exercising an appropriate standard of review.[33]

1.4 Panels must show considerable deference to the findings of a risk assessment relied upon by a WTO Member

The mandatory requirement for Members to obtain a risk assessment excludes panels from conducting the required risk assessment

35. Australia submits that the most significant limitation imposed by the text of the SPS Agreement on the jurisdiction of panels as to their fact-finding role is in relation to their review of risk assessments. Risk assessments go to providing an underlying justification for the adoption of SPS measures and are required to evaluate certain factual material including the available scientific evidence. The requirement for Members to “base” SPS measures on a risk assessment means that Article 5.1 of the SPS Agreement imposes a positive obligation on Members to obtain and rely upon a risk assessment that is appropriate to the circumstances.[34]

36. The obligation to base SPS measures on a risk assessment means that a rigorous investigative and fact-finding process compulsorily precedes any assessment by a WTO panel of the relevant information. Panels may not usurp the role of a risk assessor by conducting the assessment themselves.[35] If a panel were to perform (or re-do) the risk assessment required under Article 5.1, the jurisdictional competence expressly retained by Members in this regard would be nullified. Furthermore, it would amount to a prohibited de novo review. Therefore, where a Member has obtained and relied upon a comprehensive and transparent risk assessment, panels must accord considerable deference (but not total deference) to that assessment.

37. This view is also supported by the requirement that a risk assessment be “as appropriate to the circumstances.”[36] That is, a risk assessor’s evaluation of risk must be tailored to the specific circumstances of the particular case, which include the characteristics of the product, its origin and destination, and other country-specific matters such as climate, geography and established production processes.[37] Australia submits that it would be inappropriate for a panel to attempt to choose between such an assessment and an alternative account of the risk which is not similarly embedded in the particular circumstances.

Panels may not interfere in a risk assessment solely on the basis that the assessment does not reflect their preferred view of the available evidence

38. Australia submits that in circumstances where the scientific evidence available may be susceptible to more than one interpretation by a “qualified and respected source”[38], a panel must accord deference by not attempting “to settle a scientific debate” or to be an “arbiter of the opinions expressed by the scientific community”[39], even where its preferred view appears to be supported by the “‘preponderant’ weight of the evidence.”[40] A panel may not intervene in the assessment of risk relied upon by a Member solely on the basis that it may have drawn different conclusions on the available evidence from those reflected in the risk assessment.[41] It is not up to a panel to attempt to ascertain the most “correct” view (which suggests very little, if any, deference).

A panel may only interfere in the findings of a risk assessment in limited circumstances

39. The appropriate role of a panel is to review the risk assessment relied upon by the Member concerned, rather than to assess the risk, per se.[42]Australia submits that, when a panel reviews a risk assessment, its duty to make an “objective assessment of the facts” requires it not to ask “is there a risk?” but to ask “was the risk assessor’s decision objective and credible?”

40. Australia supports the approach taken by the Panel in Australia – Salmon (Article 21.5 – Canada), which took the view that:

[T]he level of objectivity to be achieved in a risk assessment must be such that one can have reasonable confidence in the evaluation made, in particular in the levels of risk assigned.[43]

That Panel recognised that the mere identification of “methodological flaws and alleged inconsistencies” would not be sufficient to render a risk assessment improper for the purposes of Article 5.1; such flaws must be shown to be “so serious as to prevent [the panel] from having reasonable confidence” in the risk assessment.[44]

1.5 The Panels in the present dispute misunderstood their role in regards to reviewing the risk assessment at issue

41. Australia agrees with the European Communities[45] that the Panels in the present disputes misunderstood how the appropriate standard of review bore upon their role under Article 5.1. This is apparent, in particular, from the Panels’ assumption that they were in a similar situation to that of a risk assessor under Article 5.1. The Panels opined:

Although the Panel is not carrying out its own risk assessment, its situation is similar in that it may benefit from hearing the full spectrum of experts’ views and thus obtain a more complete picture both of the mainstream scientific opinion and of any divergent views.[46]

42. Indeed, the Panels may have benefited from obtaining a more complete picture of the divergence of scientific views for the purpose of their background understanding, but this is quite different to deliberately placing themselves in a position whereby they could choose the scientific opinion they preferred. That this was the Panels’ object is supported by the following statement:

While, on some occasions, we followed the majority of experts expressing concurrent views, in some others the divergence of views were such that we could not follow that approach and decided to accept the position(s) which appeared, in our view, to be the most specific in relation to the question at issue and to be best supported by arguments and evidence.[47]

That sentence clearly suggests that the Panels considered their role was to choose a position from among the different scientific views available to it, rather than to focus on whether the European Communities’ risk assessment represented an objective and credible view.

1.6 Members may base SPS measures on a credible view from a qualified and respected source

43. Australia submits that a Member may base its SPS measures on any proper risk assessment (that complies with the various requirements set out in the SPS Agreement) as long as it is derived from “qualified and respected sources”[48], and it is objective and credible. Australia strongly agrees with the European Communities[49] that a Member has discretion to choose between different accounts of the evidence, and that it may choose to rely upon a risk assessment that reflects a “divergent” view of the evidence.[50]

44. Also, a particular risk assessment may support a range of possible measures, and it is up to the Member concerned to select the most appropriate measure(s) to address a particular risk, taking into account the relevant circumstances and its appropriate level of protection. The Panel in EC – Biotech Products recognised this point, as follows:

[T]he mere fact that relevant scientific evidence is sufficient to perform a risk assessment does not mean that the result and conclusion of the risk assessment are free from uncertainties (e.g., uncertainties linked to certain assumptions made in the course of the performance of a risk assessment). Indeed, we consider that such uncertainties may be legitimately taken into account by a Member when determining the SPS measure, if any, to be taken. In view of these uncertainties, a given risk assessment may well support a range of possible measures. Within this range, a Member is at liberty to choose the one which provides the best protection of human health and/or the environment, taking account of its appropriate level of protection, provided that the measure chosen is reasonably supported by the risk assessment and not inconsistent with other applicable provisions of the SPS Agreement, such as Article 5.6.[51]

45. The fundamental importance of the non-trade objectives of SPS measures – to protect human, animal or plant life or health – warrants considerable deference being shown by panels to the regulatory decision-making of Members, particularly where the scientific evidence available is capable of more than one credible interpretation.

2. Experts

46. The European Communities claims on appeal that the Panels have breached Article 11 of the DSU by failing to respect the principle of due process when selecting, and seeking the advice of, scientific experts. Australia strongly agrees with the argument of the European Communities that panels must observe due process in both selecting and consulting with experts.[52] The European Communities is correct to state that:

It is inherent in the principle of due process that the parties to a dispute are given a fair hearing including that the experts a court, tribunal or panel hears or consults are independent and impartial.[53]

47. Australia offers the following views on due process to assist the Appellate Body in its consideration of this element of the European Communities’ appeal.

2.1 Due process

48. In Australia’s view, “fundamental fairness, or what in many jurisdictions is known as due process of law or natural justice”[54] permeates all aspects of the WTO dispute settlement process, including a panel’s use of experts. The Appellate Body has clarified that “[d]ue process is an obligation inherent in the WTO dispute settlement system”[55] and that “the principles of fundamental fairness and due process…underlie and inform the provisions of the DSU.”[56] It has emphasised that, in making “an objective assessment of the matter before it” as required by Article 11 of the DSU, a panel is “duty bound to ensure that due process is respected.”[57]

49. Just as Article 11 of the DSU is informed by the principle of due process, so is Article 13.2 of the DSU. Accordingly, Australia submits that, in seeking information from any relevant source or consulting experts under that provision, a panel is duty bound to ensure that due process is respected. Given that Article 11.2 of the SPS Agreement also deals with the use of experts in disputes, Australia contends that, in choosing experts and seeking advice from those experts under that provision, a panel is also duty bound to ensure that due process is respected.

50. Australia also refers to the Appellate Body’s Report in US – 1916 Act in which it stated that the decision on granting of enhanced participatory rights to third parties is a matter that is “within the discretionary authority” of a panel.[58] The Appellate Body emphasised that such authority is “not unlimited” being “circumscribed, for example, by the requirements of due process”.[59] Australia submits that, as both Article 13.2 of the DSU and Article 11.2 of the SPS Agreement engage the discretion of panels, that discretion must be circumscribed by the requirements of due process.

51. As the Appellate Body observed in EC – Hormones,[60] both Article 13.2 of the DSU and Article 11.2 of the SPS Agreement require panels to consult with the parties during the selection of experts. Australia submits that, in order to respect due process in the consultation process, a panel must seek, and take full account of, the views of the parties on the types of experts required and the suitability of individual experts. In regard to the latter point, Australia recalls that WTO Members have recognised in the Rules of Conduct for the Understanding on Rules and Procedures Governing the Settlement of Disputes[61] that experts, including those covered by Article 13.2 of the DSU and Article 11.2 of the SPS Agreement, are to be “independent and impartial” and “avoid direct and indirect conflicts of interest.”

52. Australia further submits that, in seeking advice from experts selected under Article 13.2 of the DSU or Article 11.2 of the SPS Agreement, a panel, in order to respect due process, must ensure that it takes full account of the views of the parties on the substance of the advice to be sought from the experts and that it does not seek advice from any particular expert on matters outside their field of expertise.

3. Other issues under the SPS Agreement

3.1 The role of international standards under the SPS Agreement

53. Australia shares the European Communities’ concerns regarding the Panels’ analysis of the role given to international standards, guidelines or recommendations (“international standards”) under the SPS Agreement.[62]

54. In Australia’s view, panels must constantly bear in mind that the WTO-consistency of a respondent’s measures must be assessed against the relevant provisions of the SPS Agreement. While international standards may be relevant to interpreting these provisions they are not dispositive of the meaning of the provisions.[63] Panels must not inadvertently elevate the status of international standards to the same level as legally binding treaty obligations.

55. Australia agrees with the European Communities that the existence of an international standard is not determinative of whether there is sufficient scientific evidence to conduct a risk assessment under the first requirement of Article 5.7.[64]

56. Like the European Communities, Australia believes that the Panels’ analysis of the role of international standards fails to adequately deal with Article 3.3 of the SPS Agreement.[65] According to this provision, as a consequence of their appropriate level of protection, Members may take SPS measures which result in a higher level of protection than would be achieved by measures based on the relevant international standards.

[1] DSU Article 23.

[2] The Appellate Body in EC - Hormones said “[t]he initial burden lies on the complaining party, which must establish a prima facie case of inconsistency,” para. 98.

[3] US – FSC, para. 166.

[4] US – Hormones Retaliation, para. 7.249; Canada – Hormones Retaliation, para. 7.242.

[5] US – Hormones Retaliation, para. 7.355; Canada – Hormones Retaliation, para. 7.353.

[6] EC – Bananas III (Article 21.5 - EC).

[7] US – Hormones Retaliation, paras. 7.354-5; and Canada – Hormones Retaliation, paras. 7.352-3.

[8] US – Hormones Retaliation, para 7.354; Canada – Hormones Retaliation, para. 7.352.

[9] EC –Bananas III (Article 21.5 – EC), para 4.18.

[10] EC –Bananas III (Article 21.5 – EC), para 4.14 (emphasis added).

[11] Japan – Taxes on Alcoholic Beverages II,pages 14-15.

[12] US – Hormones Retaliation, para. 7.355 (emphasis added); Canada – Hormones Retaliation, para. 7.353 (emphasis added).

[13] European Communities Appellant Submission, para. 61.

[14] European Communities Appellant Submission, para. 57.

[15] Vienna Convention on the Law of Treaties, 1969, Article 31(1).

[16] US – Hormones Retaliation, para. 7.247; Canada – Hormones Retaliation, para. 7.240.

[17] In accordance with Articles 15.3, 17.13 and 19.2 of the DSU, “findings” are findings of panels or the Appellate Body.

[18] US - Gasoline, page 23.

[19] US - Gasoline, page 23.

[20] Chile – Price Band System, paras. 155-165, cited in the European Communities Appellant Submission, para 167.

[21] US – Hormones Retaliation, para.7.164; Canada –Hormones Retaliation, para. 7.151.

[22] First Written Submission of the European Communities to the Panels, para.133.

[23] US – Hormones Retaliation, para. 7.164; Canada – Hormones Retaliation, para 7.151.

[24] European Communities Appellant Submission, paras. 11 & 13.

[25] Australia considers that Article 11 of the DSU disciplines multiple distinct aspects of a panel’s fact-finding role, including both its appreciation of evidence, and the standard of review it applies in judging particular factual questions. In regard to the former aspect, Australia notes that the Appellate Body has stated that: “[d]etermination of the credibility and weight properly to be ascribed to (that is, the appreciation of) a given piece of evidence is part and parcel of the fact finding process and is, in principle, left to the discretion of a panel as the trier of facts.” (EC – Hormones, para. 132; also, see US – Wheat Gluten, para. 151) Australia submits that a panel’s discretion is limited by the appropriate standard of review.

[26] US – Countervailing Duty Investigation on DRAMS, para. 187.

[27] US – Cotton Yarn, para. 68.

[28] EC – Hormones, para. 117.

[29] The European Communities asserts: “[T]he European Communities is of the view that panels must apply the generally applicable standard of review in the light of the specific issues before them as the interpretation of a given provision of the SPS Agreement often requires panels to follow specific parameters set out by the text of the agreement and the jurisprudence of he Appellate Body. Panels cannot simply hide behind the general formulation of Article 11 of the DSU.” (European Communities Appellant submission, para. 224.)

[30] US – Softwood Lumber VI (Article 21.5 – Canada), para. 92. Also, see: US – Countervailing Duty Investigation on DRAMS, para. 184. Similarly, in US – Lamb, the Appellate Body explained that the standard of review applicable to a panel’s assessment under Article 4.2(a) of the Agreement on Safeguards, “stems, in part, from the panel’s obligation to make an ‘objective assessment of the matter’ under Article 11 of the DSU and, in part, from the obligations imposed by Article 4.2, to the extent that those obligations are part of the claim.” (US – Lamb, paras. 104-5)

[31] EC – Hormones, para. 115.

[32] EC – Hormones, para. 115.

[33] EC – Hormones, para. 115.

[34] Australia acknowledges that a Member may not have to obtain or rely upon a risk assessment where relevant international standards, guidelines or recommendations exist (Article 3 of the SPS Agreement), or in the circumstances set out in Article 5.7 of the SPS Agreement.

[35] US – Hormones Retaliation, para. 7.443; Canada – Hormones Retaliation, para. 7.432; EC – Hormones (Canada), para. 8.104; EC – Hormones (US), para. 8.101; Japan – Apples (Article 21.5 – United States), para. 8.137.

[36] Article 5.1 of the SPS Agreement.

[37] Australia - Salmon, para. 8.71.

[38] EC – Hormones, para. 194.

[39] EC – Asbestos, para. 8.181.

[40] EC – Asbestos, para. 178.

[41] US – Softwood Lumber VI (Article 21.5 – Canada), para.99; US – Lamb, para. 106; US – Cotton Yarn, para.74.

[42] US – Countervailing Duty Investigation on DRAMS, para. 188, explained a similar distinction in regard to the role of panels when reviewing the determination of a domestic investigating authority under the SCM Agreement, as follows: “[A] panel examining a subsidy determination should bear in mind its role as reviewer of agency action, rather than as initial trier of fact.” See also US – Hot-Rolled Steel, para. 55.

[43] Australia – Salmon (Article 21.5 – Canada), para. 7.51.

[44] Australia – Salmon (Article 21.5 – Canada), para. 7.57. (emphasis added)

[45] See: European Communities Appellant Submission, paras. 232-6.

[46] US – Hormones Retaliation, para. 7.418; Canada – Hormones Retaliation, para. 7.409. (emphasis added)

[47] US – Hormones Retaliation, para. 7.420; Canada – Hormones Retaliation, para. 7.411.

[48] EC – Hormones, para. 194.

[49] European Communities Appellant Submission, paras. 226-229.

[50] EC – Hormones, para. 194.

[51] EC – Biotech Products, para. 7.1525. (emphasis added)

[52] European Communities Appellant Submission, para. 188.

[53] European Communities Appellant Submission, para. 188.

[54] EC – Hormones, para. 133.

[55] Chile – Price Band System, para. 176.

[56] Mexico – Corn Syrup (Article 21.5 – US), para. 107.

[57] Chile – Price Band System, para. 176.

[59] US – 1916 Act, para. 150.

[60] EC – Hormones, para. 148.

[61] WT/DSB/RC/1, 11 December 1996.

[62] European Communities Appellant Submission, paras. 386-406.

[63] EC – Biotech Products, paras. 7.241, 7.300 & 7.314.

[64] European Communities Appellant Submission, paras. 392-393.

[65] European Communities Appellant Submission, paras. 405-406.

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