Juridiska institutionen Vårterminen 201 Examensarbete i folkrätt15 högskolepoäng

On the Applicability of nonLaw in WTO Dispute Settlement Författare: Marcus PetterssonHandledare: Inger Österdahl

Juridiska institutionen 2012

Examensarbete i folkrätt 15 högskolepoäng

On the Applicability of non-WTO Law in WTO Dispute Settlement

Marcus Pettersson andledare: Inger Österdahl

WTO Law in WTO Dispute Settlement

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Table of contents

Abbreviations ........................................................................................................................................... 3

1. Introduction.......................................................................................................................................... 4

2. Previous Decisions by Panels and the Appellate Body ....................................................................... 6

3. Public International Law ...................................................................................................................... 8

3.1 The WTO Legal System as Part of Public International Law ....................................................... 8

3.2 Conflict Rules under Public International Law ............................................................................. 9

4. Arguments based on article 3.2 and 19 of the DSU ........................................................................... 11

4.1 Second sentence of article 3.2 ...................................................................................................... 11

4.2 Third sentence of article 3.2 and article19.2 ................................................................................ 12

5. Arguments based on article 7 and 11 of the DSU .............................................................................. 15

5.1 Arguments in favor of Applying Non-WTO Law ....................................................................... 16

5.2 Arguments in favor of Precluding Non-WTO Law ..................................................................... 18

6. Are Inter se Modification of Covered Agreements Lawful? ............................................................. 20

6.1 Would a Modification Affect Third Party Rights or Obligations? .............................................. 21

6.2 Would a Modification be Incompatible with the Object and Purpose of the Covered Agreements? ...................................................................................................................................... 23

7. Concluding Remarks ......................................................................................................................... 25

References.............................................................................................................................................. 27

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Abbreviations

AB Appellate Body

DSB Dispute Settlement Body

DSS Dispute Settlement System

DSU Dispute Settlement Understanding

EC European Communities (Predecessor to the European Union)

GATS General Agreement on Trade in Services

GATT General Agreement on Tariffs and Trade

ICJ International Court of Justice

IMF International Monetary Fund

MEA Multilateral Environmental Agreement

MFN Most favored Nation

MTA Multilateral Trade Agreement

SPS Agreement on the Application of Sanitary and Phytosanitary Measures

TRIPS Agreement on Trade-Related Intellectual Property Rights

UN United Nations

UNCLOS United Nations Convention on the Law of the Sea

VCLT Vienna Convention on the Law of Treaties

WTO World Trade Organization

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1. Introduction

The aim of this paper is to answer the question of to what extent international law, created

outside of the realm of the World Trade Organization (WTO), can be applied in disputes

before the WTO’s Dispute Settlement System (DSS). The question has increased in

importance along with the proliferation of, especially, environmental and human rights

treaties, whose goals – or means to attain those goals – often contradict the aim of the WTO

agreements.

To propose that non-WTO international law can, and even should, be used for

interpretation of the provisions of the WTO agreements is totally uncontroversial. Already in

its first report the Appellate body of the WTO stated that the WTO agreement could not be

read in clinical isolation from general international law.1 This conclusion is furthermore

supported by article 3.2 of the Dispute Settlement Understanding (DSU) which explicitly

states that interpretation of the covered agreements2 should be done “in accordance with

customary rules of interpretation of public international law”. It is also uncontroversial to

state that non-WTO law can be applied through reference in covered agreements.3 However,

whether non-WTO international law can be directly applied as a source of substantive law,

without such a reference, is a different matter.

The issue of the applicability of non-WTO law can essentially be broken down into two

sub sets. The first is the question of whether non-WTO norms can be used to fill gaps in the

WTO-law system, and the second is whether non-WTO can be allowed to prevail over

existing WTO law when the two cover the same subject matter but imply different outcomes.

In turn, also a sub situation of the latter of these issues should be noted. This is when

two or more members of the WTO have set out to modify a specific WTO agreement as

between themselves through an inter se agreement. The new agreement must be viewed as a

non-WTO agreement as it has not gone through the necessary process of amendment in

accordance with article X of the WTO-agreement. The conflict arises because the general

erga omnes partes agreement, of course, still exists, and covers the same subject matter. A

question that must be discussed in this regard is whether the inter se modification is at all

lawful; because if it is not, it can of course not be applied.

In essence the questions that will be discussed in this paper are, hence, (i) can non-WTO

law be used to fill gaps in the WTO norm system, (ii) can non-WTO law supersede WTO law 1 Appellate Body Report, United States – Standards for Reformulated and Conventional Gasoline, para. 18. 2 The term ‘covered agreements’ refers to the agreements listed in Appendix 1 of the DSU. 3 Trachtman ’The Domain of WTO Dispute Resolution’ (1999) p. 343. As an example of such a reference see article 1.3 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

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and (iii) are inter se modifications of WTO norms lawful. The DSU is surprisingly vague on

these issues and the few decisions from panels and the Appellate Body on the matter are

inconclusive, which has led different authors to reach remarkably varied conclusions. While

some have suggested that WTO law is unaffected by general international law, apart from as

guidance in the process of interpretation,4 others have suggested that international law is, in

fact, incorporated into the WTO system through article 3.2 of the DSU.5 Also the middle road

is represented, by one commentator suggesting that all public international law, in principle, is

applicable, but WTO provisions must always prevail in the event of a conflict.6 It has also

been submitted that the adjudicating bodies have been given implied powers, both to take any

international rule into account,7 as well as even deciding in non-WTO matters that are

intertwined with the dispute before the adjudicating body.8

This paper will argue that substantive non-WTO law could be applied within the DSS.

This is the case both when no WTO law covers the subject matter, and when there is. The

conflicts that arise in the latter case should be solved with the general rules of conflict

resolution under public international law.

The rest of the paper will be structured according to the following. Section 2 presents

and discusses pertinent case law from the panel and Appellate body. As shall be seen this

body of case law presents a quite ambiguous picture as to how non-WTO law should be

treated. Section 3 discusses the view of the WTO system as a branch of international law and

the implications that this has on the stipulated question. It will be argued that the WTO system

is a part of the corpus of public international law in the same way as any other set of treaties

and any organization, entailing that, unless the Members have agreed on otherwise, the WTO

system is open to, and affected by, other law sources in the same way as any other treaty. The

next natural step in the investigation is therefore to interpret the relevant articles in order to

discern whether the Members, indeed, have restricted the applicability of non-WTO law.

Thus, section 4 and 5 interprets relevant articles of the DSU and discusses previous views on

this question in the academic literature. Section 6 analyzes whether inter se modifications of

the covered agreements can be lawful. And finally, section 7 concludes.

4 Trachtman, supra note 3, p. 343; Weiss ‘Security and Predictability under WTO law’ (2003) p. 193. 5 Palmeter & Mavroids ‘The WTO Legal System: Sources of Law’ (1998) p. 399. 6 Bartels ‘Applicable Law in WTO Dispute Settlement Proceedings’ (2001) p. 499. 7 Pauwelyn, ‘Conflicts of Norms in Public International Law. How WTO Law Relates to other Rules of International Law’ (2003) pp.468-469. 8 Schoenbaum, ‘WTO Dispute Settlement: Praise and Suggestions for Reform’ (1998) pp. 653.

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2. Previous Decisions by Panels and the Appellate Body

As mentioned in the introduction the few decisions from the panels and the Appellate Body

have been far from consistent as to whether non-covered agreements are to be accounted for

in dispute settlement. The first relevant decision on the matter came in EC-Hormones in 1998.

The Appellate Body dealt inter alia with the question of whether the “precautionary

principle”, could be invoked as a defense by the EC. The AB stated that it was not clear

whether the principle at all was a recognized principle under customary international law, but

regardless of this the principle could not, “without a clear textual reference to that effect”,

override the articles of the covered agreement (in casu the SPS agreement).9 This blatant

rejection of principles under international law, undoubtedly seems to imply that the Appellate

Body does not allow non-WTO law to prevail over WTO norms.

In Argentina – Footware the Appellate body took a very different approach than it did

in EC – Hormones. The dispute concerned a tax on imports introduced by Argentina; a clear

breach of article VIII of the General Agreement on Tariffs and Trade (GATT). In its defense

Argentina stated that the tax had been introduced as a result of a conflicting obligation that the

country had towards the IMF.10 Argentina, thus, in fact, contended that article VIII of the

GATT had been superseded by the IMF obligation. In contrast to the EC-Hormones case –

where the Appellate body simply discarded the non-WTO norm as being not capable of

overriding the covered agreement – the body here actually dealt with the IMF obligation and

sought to discern its nature. Its conclusion was, first, that it was not possible for it to establish

whether the contested conflicting obligation in fact was legally binding, and, second, that

Argentina had not shown that there existed an “irreconcilable conflict” between the two

treaties.11 From this decision it seems as if the Appellate Body was ready to apply non-WTO,

and what is more, even let it prevail over WTO-rules. Because, even if the AB in the end did

not conclude that the rules were applicable and did override the GATT provision, it took the

first step of analyzing the nature of the IMF norm. And, as Vranes states, why would it go

through all this work if it was not ready to also take the second step of actually applying the

norm?12

9 Appellate Body report, EC – Measures Affecting Livestock and Meat (Hormones), para 124. 10 Appellate Body report, Argentina – Certain Measures Affecting Imports of Footwear, Textiles, Apparel and Other Items, para. 65. 11 Ibid paras. 70-72. 12 Vranes, Trade and the Environment. Fundamental Issues in International Law, WTO Law and Legal Theory (2009) p. 81. But quite surprisingly Trachtman uses the decision as an indication that non-covered agreements cannot supersede WTO-law, Trachtman supra note 3, p. 343.

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The third and last relevant case is Korea – Procurement where the applicability of

customary international law came into question. The Panel stated that

“Such international law applies to the extent that the WTO treaty agreements do not “contract out” from

it. To put it another way, to the extent there is no conflict or inconsistency, or an expression in a covered

WTO agreement that implies differently, we are of the view that customary rules of international law

apply to the WTO treaties and to the process of treaty formation under the WTO”.13

It seems quite clear that this panel viewed non-WTO law as potentially applicable, but

whenever it conflicts with WTO law the latter shall prevail. It should be mentioned that

Vranes interprets the decision in a different and very restrictive manner. He claims that the

panel only established that non-WTO law is potentially applicable, but that it refrained from

elaborating on the outcome of a potential conflict.14 Indeed, with a strictly textual

interpretation of the decision one could possibly reach this conclusion. However, it seems as

if the panel, in fact, only had wished to express itself on the potential applicability of non-

WTO, but not on the outcome of a conflict, it would have stated this clearer.

Thus, in conclusion, the relevant decisions from the panels and the Appellate Body

present a quite sprawling picture on the matter. In the EC-Hormones case, the panel

concluded that the precautionary principle was not applicable, without a clear textual directive

to that effect. In Argentina-Footware, on the other hand, the Appellate Body even seemed to

be ready to accept the prevalence of non-WTO law in favor of WTO law. And, finally in

Korea-Procurement the panel took the middle road and stated that non-WTO law in principle

can be applied, but will always be superseded by WTO law in case of a conflict.

Importantly, however, in neither of the cases the specific adjudicating body offers any

clear support for their conclusions. This is what will be sought in the rest of the paper.

13 Panel report, Korea – Measures Affecting Government Procurement, para. 7.96. 14 Vranes supra note 12, p. 82.

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3. Public International Law

There seems to be little controversy in the doctrine over the fact that the WTO regime is part

of the international legal system as a whole.15 According to Pauwelyn only one academic

author claims that the WTO rules are part of the larger corpus of public international law.16 It

is therefore suitable to start the analysis with a description of the international legal system,

where the WTO system fits in and the consequences that this will have on the question of

applicable law within WTO proceedings.

3.1 The WTO Legal System as Part of Public International Law

The international legal system is founded on the principles of state sovereignty and state

equality. As sovereign entities the states have the right to enter into agreements with each

other concerning practically all matters. This is done either through explicit treaties or through

customs that originate from the states’ interaction with each other. All new treaties are, hence,

concluded with already existing treaties and customs as a backdrop. This is very important for

the present thesis as it implies that the founders of a new treaty do not have to explicitly state

the specific rules from other parts of the international legal system that shall be applicable in

relation to the treaty. On the contrary, by default, all rules are potentially applicable, and if the

founders wish to exclude rules from other areas of the international legal system, this has to

be manifested, either explicitly or implicitly.17

As a natural consequence of the principle of state sovereignty the states are also, with a

few exceptions, free to change their minds and amend, modify, suspend or terminate an

already concluded agreement. The most prominent exception to this possibility is reflected in

article 53 of the VCLT. This exception regards peremptory norms (jus cogens), which are

deemed so fundamental to the international community that any agreement that contravenes it

will be void.18 But a state’s treaty making power can also be limited by its own consent

through a prohibition or a conflict rule in a preceding treaty.19

15 See, e.g., Marceau ‘Conflicts of Norms and Conflicts of Jurisdictions: The Relationship between the WTO Agreement and MEAs and other Treaties’ (2001) p 1081; Pauwelyn ‘The Role of Public International Law in the WTO: How Far Can We Go?’ (2001) p. 538; Palmeter & Mavroidis supra note 5, p. 413. 16 “The possible exception is Judith Bello, ‘The WTO Dispute Settlement Understanding: Less Is More’ (1996) p. 416; (stating that “WTO rules are simply not ‘binding’ in the traditional sense”)”, Pauwelyn supra note 15, p. 538. 17 Pauwelyn supra note 15, p. 541. 18 Article 53 VCLT. 19 See, for example, article 41 of the VCLT, according to which the members of a treaty can prohibit the modification of the same treaty.

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It is in this context that the rules of WTO should be understood. As an international

organization it was established by treaties, manifesting the consent of the member states, and

is, hence, just as its creators, existing and operating within the universe of public international

law. The treaties that created the organization as well as those establishing the rules within the

organization do therefore not remain unaffected by other parts of the international law, but are

rather evolving together with the rest of the international law universe. The implication of this

is that as long as the members have not, explicitly or implicitly, agreed on otherwise,

customary law, principles of international law and non-WTO treaties between the members

should be potentially applicable also within the WTO.

3.2 Conflict Rules under Public International Law

As all treaties and all customary rules within the international legal system – apart from

peremptory norms (jus cogens) – have the same origin, namely the consent of the states

themselves, there can be no hierarchical difference between them.20 A problem therfore arises

when two (or more) norms deal with the same subject matter but imply opposing outcomes.21

As a ground rule in such a situation the adjudicating body shall try to interpret the rules in a

matter that will avoid a conflict between them.22 However, if the norms are irreconcilable, a

decision has to be made as to which rule shall prevail and which shall be deemed superseded.

How this should be done is inter alia stipulated in article 30 of the VCLT. Article 30:3 holds

that if all signatories of the earlier treaty are also parties to the later, the earlier treaty shall

only apply to the extent that its provisions are compatible with those of the later. This is a

manifestation of the general principle of lex posterior derogat legi priori (later legislation

supersedes earlier legislation). The principle emanates from the assumption that the parties

have full knowledge of all their existing obligations and rights, and since they still have

established a new agreement whose content in some aspects contravenes that of the prior, the

parties are believed to wish to suspend the former.23

If, instead, only some of the signatories to the former treaty are parties to the later,

article 30:4 holds that the later shall prevail only as between the parties to both treaties; in

essence a consequence of the principle of pacta tertiis (third party cannot be bound) but also a

20 Pauwelyn supra note 15, p.536. 21 It should be noted that the notion of conflict is far from resolved. The issue of conflict definition is however beyond the scope of this paper and will therefore not be dealt with in any more detail in the following. 22 See Marceau, supra note 15, p. 1089 23 Mus, ‘Conflicts between Treaties in International Law’ (1998) p. 219.

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manifestation of the possibility of a modification inter se.24 A final important conflict rule,

that indeed is not mentioned in the VCLT, but has nevertheless been recognized in many

cases before international bodies as well as by academic authors as a principle of international

law is lex specialis derogat legi generali (the special provision prevails over a general

provision).25

In addition to these principles that are based on assumptions about the parties’ intent the

VCLT also opens up for explicit conflict clauses by the parties. Thus, article 30:2 holds that if

a treaty specifies that it is subject to, or that it shall not be considered as incompatible with

another treaty, the other treaty shall prevail. But also treaties that “claim priority” are

generally accepted, even though article 30:2 does not explicitly refer to them.26 Two examples

of this are article 103 of the Charter of the United Nations, which provides that the Charter

shall prevail over any other treaty, and article 28:1 of the European Convention on

Extradition, which states that the Convention shall supersede any bilateral treaty governing

the same subject matter.27

It should be noted that these provisions also work as preventions of inter se

modification as discussed previously, since any such modification will be superseded by the

original treaty. Also the WTO law body actually contains explicit and clear conflict clauses,

but only with regards to internal conflicts; that is, between different WTO treaties. According

to article XVI:3 the WTO agreement shall namely prevail in the event of a conflict with any

of the Multilateral Trade Agreements (MTA), found in Annex 1 to 3 of the WTO agreement.

Unfortunately, no equally unequivocal statement exists with regards to conflicts with non-

WTO treaties.

To sum up, the WTO legal system is part of the body of public international law,

implying that if the members have not agreed on anything else, the WTO system should be

considered an open system where all international law is potentially applicable. Modifications

of the covered agreements are feasible in accordance with the conditions of article 41 of the

VCLT, and conflicts between sources are resolved by the general conflict rules of lex

posterior and lex specialis.

24 The conditions for a valid requirement are laid down in article 41 of the VCLT, and will be dealt with later on in the paper. 25 Marceau, supra note 15, p. 1092. 26 Mus, supra note 23, p. 215. 27 Article 103 of the Charter of the United National (1945), and article 28:1 European Convention on Extradition (1957). Note also that the superiority of the UN Charter has been confirmed through article 30:1 of the VCLT.

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The next pertinent question is therefore whether the WTO-agreements can be

interpreted as restricting such influence from non-WTO law in WTO disputes. The most

important treaty in this regard is the Dispute Settlement Understanding (DSU) which sets out

the rules and procedures to be followed in disputes concerning the covered agreements.28 The

provisions of the DSU that in the literature have been contended to give advice on this matter

are 3.2 and 19.2, on the one hand, and article 7 and 11 on the other. In the next section an

interpretation of these provisions is therefore presented that seeks to discern whether they, in

fact, do infringe the applicability of non-covered agreements in WTO-proceedings and

whether the Members have limited their ability to modify the covered agreements.

4. Arguments based on article 3.2 and 19 of the DSU

Article 3.2 DSU states:

“The dispute settlement system of the WTO is a central element in providing security and predictability to

the multilateral trading system. The Members recognize that it 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.

Recommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided

in the covered agreements.”

This provision has by some authors been cited as evidence that panels and the Appellate Body

cannot apply material rules found outside of the covered agreements. The argumentation has

foremost focused on the second sentence on the one hand, and the last sentence in conjunction

with article 19 on the other.

4.1 Second sentence of article 3.2

Trachtman submits that the fact that “customary rules of interpretation of public international

law” are expressly mentioned as sources of law should be given an a contrario implication to

the effect that all other non-WTO sources are precluded. That is, Trachtman means that only

non-WTO law that regulates interpretation should be applicable, whereas other rules, such as

substantive rules, should be precluded.29

28 Article 1 DSU. 29 Trachtman, supra note 3, p. 2.

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It is, however, hard to see that there is enough evidence for such a conclusion. Just the

fact that a certain action is permitted by a provision does not necessarily mean that all others

are prohibited. Quite the contrary, as argued in the previous section, the WTO system is part

of the larger corpus of international law and not a self-contained regime.30 It is therefore not

the case that non-WTO law must be explicitly incorporated in the covered agreements to be

applicable in WTO proceedings. Instead non-WTO law is by default applicable, and must,

hence, be either prohibited through an explicit or implicit manifestation of the founders, or

superseded by WTO-law, in order not to be applicable. This does, of course, not mean that no

provision covering this issue can ever be read a contrario. It is just that there must be clear

indications that this implication was the wish of the signatories. And in this particular matter

the prerequisite is hardly fulfilled. I would argue that if the founding members had wished to

preclude substantive rules from non-WTO sources, they would have stated it clearer than by

just implying it through a permission to apply non-WTO rules of interpretation!

That Trachtman’s reading does not hold has furthermore been concluded – but for a

different reason – by the panel in the dispute Korea – Government Procurement. According to

the panel the specific language of that sentence was used in order to avoid a problem that had

been common during the GATT period, which had the effect that negotiating history was

utilized for interpretation in a manner inconsistent with the international rules of

interpretation. 31 The panel, thus, made clear that the sentence only regulates the use of rules

of interpretation and not rules of substantive law.

4.2 Third sentence of article 3.2 and article19.2

In addition to the second sentence, attention has also been given to the last sentence of the

article, which – together with article 19.2 – establishes that neither panels, the Appellate Body

nor the DSB can “add to or diminish the rights and obligations provided in the covered

agreements”. This has been interpreted as a prohibition for the adjudicating bodies to apply

non-WTO law in their proceedings, as that would either add to or diminish the rights or

obligations of the Members.32 Also this reasoning is, however, flawed in my view. After all,

an adjudicating body applying a set of rules neither adds to nor diminishes any rights or

obligations, it merely upholds the rights and obligations that were created by the law makers

(in casu the Member states).

30 See Pauwelyn, supra note 15, p. 539. 31 Panel report, Korea – Government Procurement, para. 7.96, note 753. 32 Trachtman, supra note 3, pp. 342-343; Weiss, supra note 4, p. 193.

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Two different but related interpretations are submitted by Bartels and Marceau. Bartels

claims that article 3.2 should not be read as a total prohibition against the application of non-

WTO law (and neither should any other provision of the Understanding), but instead the

article should be viewed as a type of conflict rule, safeguarding the primacy of the covered

agreements in any dispute settlement. However, Bartels suggests that it is not an ordinary

conflict rule that establishes the supersession of one provision over the other. Rather, it

merely prohibits the adjudicating bodies from applying rules that are in conflict with any

covered agreement; but then outside of the DSS the other treaty might still be the prevailing

one.

In a sense, Bartels interprets the article in much the same way as Trachtman. Also he,

namely, suggests that an adjudicating body adds to or diminishes rights and obligations when

applying law. But he disagrees with Trachtman as to when this is done. Whereas Trachtman

means that the line is crossed whenever non-WTO law is applied (for other reasons than for

interpretation), Bartels suggests that this is only done when the norm that is being applied,

contravenes those of the covered agreements.

In addition to a direct textual interpretation of article 3.2, Bartels bases his conclusion

on an analogy with the United Nations Convention on the Law of the Sea (UNCLOS) where

this type of atypical conflict rule is explicitly provided for. Article 293(1) namely states that

the Tribunal of the Law of the Sea shall apply the Convention as well as “other international

rules not incompatible with the Convention”.33

Marceau reads the last sentence of 3.2 in conjunction with article 19.1, which states that

“[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 brings the measure into

conformity with that agreement” (emphasis added). From this phrase she concludes that it is

not the applicable law that is limited but rather the conclusions that the bodies may reach. In

other words, Marceau claims that the normal conflict rules under international law should, in

principle, prevail also within the WTO system. However, whenever the conflict rules entail

that a non-covered agreement is applied in favor of a covered agreement, and this, in turn,

implies that the obligations or rights provided for in the covered agreement are not upheld, the

body has no constitutional capacity to reach a standard recommendation.34

The suggestions from Bartels and Marceau are indeed very interesting and creative, but

against both submissions I would, first of all, state much the same argumentation as above.

33 Bartels, supra note 6, p. 507. 34 Marceau, supra note 15, p. 1107.

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An adjudicating body does not create rights or obligations by applying law, it merely upholds

those rights and obligations established by the law makers. As for Bartels’ contribution one

should remember that the main objective of treaty interpretation is to find the intention of the

founders. Considering that – as he himself points out – the type of conflict rule suggested by

him is an anomaly within the international legal system35 one might wonder if not even more

compelling evidence should be required to accept this interpretation, than had such conflict

rules been common.

Furthermore, the particular conflict rule that Bartels suggests would create a more

fragmented international legal system, which seems to be a great concern among many

publicists.36 The cause of the fragmentation can be described as follows. When a normal

conflict clause is used, the result of this rule is the same everywhere within the international

legal system. That is, if a certain provision renders the effect that norm A shall prevail over

norm B, this is the case regardless of whether the forum for settlement is the DSS or the

International Court of Justice. But, with the type of conflict clause that Bartels is suggesting

norm A will prevail within the realm of the WTO but might be superseded outside of it. The

consequence is, hence, uncertainty about prevailing law as well as increased possibilities of

forum shopping; both of which are recognized as problems within any legal system.37 This

fact would, then arguably put even more doubt on the idea that Bartels’ interpretation was

intended by the founders. Thus, even though provisions like these demonstrably are used, as

in UNCLOS, I would argue that there should be a presumption against them, why more

compelling reasons for accepting such an interpretation of the article should be required. And

in this regard Bartels provides very little.

I would, thus, reject all of the above mentioned interpretations of articles 3.2 and 19.

Instead I would concur with Vranes and submit that the articles should be given a much more

straight forward interpretation than those presented above. Reading the whole paragraph it

seems clear that it does not deal with the applicability of law before the DSS (apart from

interpretational rules), rather it regulates the function of the DSS. The first sentence holds that

"the DSS is a central element in providing predictability and security to the multilateral

trading system”. The article goes on to provide that “[the DSS] serves to preserve the rights

and obligations of the Members under the covered agreements and to clarify the existing 35 Bartels, supra note 6, p. 507. 36 See, e.g., Charney, Is International Law Threatened by Multiple International Tribunals? (1998); Guillaume, ‘The Future of International Judicial Institutions’ (1995); Kingsbury, ‘Foreword: Is the Proliferation of International Courts and Tribunals a Systemic Problem?’ (1999); Jennings, ‘The Proliferation of Adjudicatory Bodies: Dangers and Possible Answers’ (1995). 37 Ibid.

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provisions of those agreements”. A more compelling understanding of the sentence, than

those presented above, is therefore that it seeks to restrict the competence of the adjudicating

bodies to mere adjudication, as opposed to law making. Instead of dealing with the question

of applicable law, the article is, hence, concerned with the division of power between the

adjudicating bodies, and the Member states (through the Ministerial conference)38.

To summarize the chapter, it has been submitted that neither article 3.2 nor 19 restrict

the applicability of substantive non-WTO law, neither for gap filling nor for the prevalence

over covered agreements. Rather the second sentence of article 3.2 regulates the applicability

of rules of interpretation, and the last sentence of article 3.2 in conjunction with article 19

safeguards the division of power between the DSS and the Member states.

5. Arguments based on article 7 and 11 of the DSU

Article 7 provides the terms of reference for panels:

1. Panels shall have the following terms of reference unless the parties to the dispute agree otherwise

within 20 days from the establishment of the panel:

"To examine, in the light of the relevant provisions in (name of the covered agreement(s) cited

by the parties to the dispute), the matter referred to the DSB by (name of party) in document ...

and to make such findings as will assist the DSB in making the recommendations or in giving the

rulings provided for in that/those agreement(s)."

2. Panels shall address the relevant provisions in any covered agreement or agreements cited by the

parties to the dispute.

3. In establishing a panel, the DSB may authorize its Chairman to draw up the terms of reference of the

panel in consultation with the parties to the dispute, subject to the provisions of paragraph 1. The

terms of reference thus drawn up shall be circulated to all Members. If other than standard terms of

reference are agreed upon, any Member may raise any point relating thereto in the DSB.

And article 11 regulates the function of the panel:

“The function of panels is to assist the DSB in discharging its responsibilities under this Understanding

and the covered agreements. Accordingly, a panel should make an objective assessment of the matter

before it, including an objective assessment of the facts of the case and the applicability of and

conformity with the relevant covered agreements, and make such other findings as will assist the DSB in

making the recommendations or in giving the rulings provided for in the covered agreements…”

38 See article X of the WTO-agreement.

16

Interestingly articles 7 and 11 of the DSU have been used to support the views of authors of

totally opposing opinions. On the more permissive side it has been suggested both that the

articles incorporate public international law into the WTO system and that they work as an

implied power clause enabling the DSS to decide in matters that otherwise would be outside

of its jurisdiction. At the same time commentators on the other strand have used the articles as

evidence for their view that non-WTO law is precluded from the DSS. The following two

subsections will discuss and examine these arguments.

5.1 Arguments in favor of Applying Non-WTO Law

On the more permissive side Palmeter and Mavroidis claim that article 7, in conjunction with

3.2, effectively brings in article 38(1) ICJ statute into WTO legislation, which in turn

incorporates public international law. Unfortunately they provide no real evidence for their

view, apart from reciting the pertinent phrases.39

Pauwelyn reads the expression “make an objective assessment of…the applicability

of…the relevant covered agreement” of article 11, as an implied confirmation that the panel is

to take non-WTO law into account. He contends that if the adjudicating body were to

disregard non-WTO law when assessing the applicability of the covered agreements, the

assessment would not be objective.40 When doing this the panel may, thus, reach the

conclusion that WTO rules have been superseded by other rules, in which case they do not

apply. He also views the terms “make such findings” and “make such other findings” of

article 7 and 11, respectively as an indication of the implied permission to apply general

international law.41

Schoenbaum goes even further and submits that the expression “make such other

findings” constitutes an implied power clause in the sense that it allows panels and the

Appellate Body to decide in matters not regulated in WTO-law, but intertwined with the

matter in dispute before panel or Appellate Body.42 As an example of such a scenario

Schoenbaum mentions the case US – The Cuban Liberty and Solidarity Act, in which the EC

claimed that the US trade restrictions on goods of Cuban origin, as well as the possible refusal

of visas and the exclusion of non-US nationals from US territory, were inconsistent with the

US obligations under the WTO Agreement. In this case Schoenbaum suggests that article 11

39 Palmeter & Mavroidis, supra note 5, p. 399. 40 Pauwelyn, supra note 7, pp. 468-469. 41 Ibid. p. 469. 42 Schoenbaum, supra note 8, p. 653.

17

would not only have granted the adjudicating body the right to deal with the scope of article

XXI of the GATT, but also with issues of non-WTO law such as economic coercion and non-

intervention, because the latter issues are intertwined with the former.43 He, thus, goes even

further than just stating that article 11 makes general international law applicable in disputes

concerning trade, and submits that the article expands the judicial competence of the WTO-

adjudicating bodies to embracing non-trade issues.

All of these submissions are however in my view quite speculative and founded on

weak grounds. As already mentioned Palmeter and Mavroidis’ provide no real argumentation

for their suggestion that 38(1) is effectively incorporated in the DSU through 3.2 and 7, but

merely recite the relevant wording of the articles.44 As for the ideas that the term “to make

such other findings” should either be read as an implicit instruction for the panels to take

account of public international law – as contested by Pauwelyn – or as an implied power

clause – as submitted by Schoenbaum – must also be viewed as fairly unsupported. Both are

based only on the textual interpretation of the terms, which, as pointed out by Bartels,45 are

quite inconclusive and vague. If anything, I would submit that the words “make such other

findings” are merely used to give some flexibility in the work of the panel, but not intended to

regulate applicable law. After all, the article is set out to deal with the function of the panel. It

can, indeed, not be a simple task for the founders to ex ante stipulate all the considerations

and actions that a panel must undertake in order to enable an appropriate dispute settlement,

and thereby provide a “mutually satisfactory solution” for the parties, as envisioned in article

11. In order to facilitate this, somewhat more “open” terms of reference and function

description can be used to provide some leeway for the panel.

Neither can the requirement in article 11 that an objective assessment of the

applicability of the covered agreements, in my opinion, be taken as an incorporation of

international law. As mentioned, Pauwelyn contends that in order to conduct an objective

assessment the panels have to take account of non-WTO law; otherwise it would not be

entirely objective. It, indeed, seems appropriate to require that an objective assessment takes

into account all potentially applicable law when assessing the applicability of a specific

covered agreement. It thus follows that Pauwelyn’s suggestion would be correct if (but only

if) non-WTO law, in fact, is applicable. However, whether non-WTO law, in fact, is

applicable is a different matter, and that issue is not resolved by the mentioned paragraph.

43 Ibid. 44 Palmeter & Mavroidis, supra note 5, p. 399. 45 Bartels, supra note 6, p. 504.

18

I would, thus, submit that neither article 7 nor article 11 incorporates public

international law into WTO law. However, as has been pointed out previously, according to

the thesis promoted in the current article there is no need for such an implicit or explicit

incorporation of non-WTO law to make such law potentially applicable to the DSS. Since

WTO law is just a branch of the international legal system non-WTO law could both be used

to fill gaps as well as supersede provisions found in any of the covered agreements, unless this

possibility has – either implicitly or explicitly – been precluded by the Members.

5.2 Arguments in favor of Precluding Non-WTO Law

As already mentioned, also authors from the other side of the spectrum have found support for

their views in the mentioned provisions. The fact that article 7.1 expressly points out the

covered agreements as a “source of light”, in which the matter should be examined, have by

some commentators been taken as an indication that only covered agreements can be applied

by panels and the Appellate body.46 This interpretation is in their view further supported by

article 7.2, which requires the panel to address relevant provision in the covered agreement, as

well as article 11 which states that the panel should inter alia make an objective assessment of

the applicability of relevant covered agreements. The suggestion is, thus, once again that these

provisions shall be read a contrario, implying that all other sources than the covered

agreements are precluded from being applied as substantive law.

At first glance, all this reference to the covered agreements undoubtedly seems to

preclude the applicability of non-WTO law. However, against this interpretation objections

can be made. As for article 7 the panel in Korea – Government Procurement noted that the

purpose of the terms of reference is to “properly identify the claims of the party and therefore

the scope of a panel's review”.47 The panel thereafter stated: “We do not see any basis for

arguing that the terms of reference are meant to exclude reference to the broader rules of

customary international law in interpreting a claim properly before the Panel”.48 In Brazil –

Desiccated Coconut the Appellate Body concluded that the term of reference serves two

purposes. “First, terms of reference fulfill an important due process objective — they give the

parties and third parties sufficient information concerning the claims at issue in the dispute in

order to allow them an opportunity to respond to the complainant’s case. Second, they

46 Trachtman, supra note 3, p. 345; Weiss, supra note 4, p. 193. 47 Panel report, Korea – Government Procurement, para. 7.101, n.755. 48 Ibid.

19

establish the jurisdiction of the panel by defining the precise claims at issue in the dispute.”49

Thus, in the view of the panel and Appellate body the article serves as a means to block any

subsequent unannounced claims from the claimant by properly identifying the claim, as well

as setting out the jurisdiction of the DSS, which must be based on the covered agreements.50

But importantly, the panel and Appellate Body did not view the provision as regulating

applicable law.

Even though neither the panel nor the Appellate Body offer any rationale for their

conclusions they do seem reasonable in my view. First, one should note that these articles

only refer to the panels’ operations, and not those of the Appellate body. Article 7, namely,

draws up the terms of reference for the panel and article 11 the function of the same. One may

thus wonder if the intention of the founders, indeed, had been to regulate applicable law,

would this not have been done through a more general clause relevant for the entire DSS, as

was done for the rules of interpretation in article 3.2. If instead, the panel and Appellate Body

were correct in stating that the article serves to provide due process for the parties by blocking

unannounced claims, it would seem logical to regulate this in a panel specific clause. The

reason is that every settlement begins before the panel where the claims must be identified,

and since only claims that have been tried before the panel subsequently can be appealed to

the Appellate Body, a claim that has been blocked in the panel is effectively also barred from

the Appellate body.

Furthermore, as noted by Bartels, paragraph 7.1 merely provides the standard terms of

reference for any given panel. These can, however, be altered by the parties to the dispute, in

accordance with article 7.3.51 This implies that if 7.1, in fact, were to preclude non-WTO law,

the same prohibition could nevertheless be contracted away ad hoc, which would hence

render the preclusion totally ineffective. It therefore appears improbable that the provision at

all seeks to restrict applicable law.

As for article 11, a closer look at the terms makes it clear that also this provision gives

scant guidance as to whether non-WTO law is applicable in dispute settlement. As mentioned

above, the relevant terms state that, in the purpose of assisting the DSB, the panel shall inter

alia make an objective assessment of the applicability of the covered agreement. The question

is then whether this implies that only covered agreements can be applicable. I would contend

that it does not. Instead these words should be read in the context of articles 1.1 and 7.1,

49 Appellate Body report, Brazil – Measures Affecting Desiccated Coconut, para. 22. 50 More on this further down. 51 Bartels, supra note 6, p. 505.

20

which, in conjunction, regulate the jurisdiction of the DSS. Article 1.1 provides that “[t]he

rules and procedures of this Understanding shall apply 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")”. Since the

panels, Appellate Body and Dispute Settlement Body were created through the DSU, and

cannot exist outside of its realm, it is clear that their jurisdiction is limited by the scope of the

DSU; i.e. to claims based on the covered agreements. As we have just seen, article 7 sets out

the standard terms of reference. These include identifying the claims brought by the claimant,

in order to inter alia establish the jurisdiction of the panel. In the same vein article 11

provides that one of the functions of the panels is to examine the applicability of the covered

agreement that a given claim is based on. This is, thus, done in order to determine whether the

issue is at all within the panel’s jurisdiction. But, importantly for the thesis of this paper,

article 11 does not purport to infringe the applicability of non-WTO law.

Thus, to sum up this far, none of the provisions of the DSU preclude non-WTO law

from WTO proceedings. Since the WTO legal system is part of the corpus of international law

non-WTO law should in principal be applicable within the DSS. Non-WTO law can, hence,

be used to fill gaps in the covered agreements, and in the event of a conflict, the conflict

resolution rules described in section 3.2 should be used. As mentioned in the introduction,

however, a special case of conflicts is when the non-WTO rule constitutes an attempt by a

group of Members to modify the WTO law as between themselves; i.e. an inter se

modification. In order for such rules to be applicable the modification also has to be lawful

under general international law. Whether this is at all possible regarding WTO law is

discussed in the next section.

6. Are Inter se Modification of Covered Agreements Lawful?

Article 41 of the VCLT provides that an inter se modification of a multilateral agreement is

lawful if (a) the possibility is provided for by the treaty, or (b) it is not prohibited by the

treaty; and (i) it does not affect a third party’s right or obligations under the treaty, and (ii) it

does not relate to a provision that is essential for the object and purpose of the article. As has

been discussed in the previous sections of this paper there are no regulations in the DSU

either permitting or prohibiting modifications. The same is also true for the covered

agreements themselves, with the exception of article XXIV of the GATT and article V of the

21

GATS, which provide for the possibility of custom unions and free trade areas.52 For other

modifications than establishments of custom unions or free trade areas, the relevant questions

are therefore whether a modification would either affect the rights or obligations under the

treaty, or impair the object or purpose of the treaty. Even though this question in the end will

have to be answered on a cases-by-case basis, a discussion of the general conditions for this

will proceed in the following.

6.1 Would a Modification Affect Third Party Rights or Obligations?

At the root of the issue whether inter se modifications affect the rights or obligations of third

party is the question of whether the obligations and rights under the different covered

agreement are bilateral/reciprocal or multilateral/integral (erga omnes partes) in nature.53 The

difference between bilateral and multilateral obligations is simply that the former are owed

towards a single contracting party, whereas the latter are owed towards all contracting parties.

It is important to note that just because the obligations of concern stem from a multilateral

agreement (such as the WTO agreement) they do not necessarily have to be multilateral in

nature. On the contrary a multilateral agreement may very well consist of a “compilation of

bilateral treaty relations”, in the words of Pauwelyn.54

As an example of a multilateral treaty with bilateral obligations Fitzmaurice mentions

the 1961 Vienna Convention on Diplomatic Relations; whereas the 1948 Genocide

Convention is an example of a treaty with integral obligations.55 From these examples one

difference should become clear. Since a breach of the Genocide Convention would amount to

an attack on a “higher value” that all states of the world community have a responsibility and

obligation to protect, it would simultaneously constitute a breach of an obligation towards all

states, regardless of where or against whom the crime is committed. In contrast, a breach

against the Vienna Convention on Diplomatic Relations would only directly affect the state,

against which the breach is committed, and, then, on a more pragmatic level.

It should, however, be noted that also obligations of the integral type can be based on

more pragmatic considerations than those behind the Genocide Convention. For example,

many MEAs, such as the Vienna Convention for the Protection of the Ozone Layer – but also 52 See Cottier, Thomas, ‘The Legal Framework for Free Trade Areas and Custom Unions in WTO law’ (2004) et passim, for a discussion on this matter. 53 This division was first expressed by Fitzmaurice in the draft to the VCLT; Third Report on the Law of Treaties by Gerald Fitzmaurice, UN doc. A/CN.4/115, Yearbook of the International Law Commission, Vol. II, 20, 27, Art. 18, para. 2. 54 Pauwelyn, ‘The Nature of WTO obligations’ (2002) p. 1. 55 Second Report on the Law of Treaties by Gerald Fitzmaurice, UN doc. A/CN.4/107, Yearbook of the International Law Commission, Vol. II, 16, para. 54.

22

other treaties such as the Treaty on the Non-Proliferation of Nuclear Weapon – are based on

pragmatic considerations in the same way as the Convention on Diplomatic Relations, but are

nevertheless of the integral type. If one state emits Freon gases this, of course, directly and

necessarily affects all other members of the treaty through the depletion of the ozone layer.

Correspondingly, the associated threat that emerges when a country breaks its obligations

under the Non-Proliferation Treaty and attains nuclear weapons is a concern of all states.

What is important here is that, as pointed out by Pauwelyn, since the obligations and

rights under integral provisions are owed towards all member states, the provisions cannot be

modified inter se, unless all parties join in on the modification. But, on the other hand, if the

provisions are bilateral, the agreement can be seen as a compilation of bilateral agreements,

which individually could be modified between two or more members without affecting the

rights and obligations of the others.56

There has been much debate as to whether the WTO provisions are bilateral or

multilateral. Both Marceau and Cho claim, without giving any real support for their view, that

WTO obligations must be integral in nature because they are always the same for all

members.57 If Marceau and Cho indeed were right, an inter se modification would obviously

be impossible. Considering that the principle of most favored nation (MFN) tends to uniform

the trade restrictions between the member countries, this statement might at first seem

reasonable. However, one must not forget that both the GATT and the GATS explicitly

provide for the possibility to establish custom unions and free trade areas.58 This possibility

entails that the obligations between the countries within these areas are, in fact, not the same

as with countries outside of it.

In contrast, Hahn and Pauwelyn have, separately, examined the rights and obligations of

the covered agreements and concluded that they are bilateral in nature.59 If we take a step

back and compare the WTO provisions with the examples of bilateral and multilateral

obligations mentioned earlier they do, indeed, resemble bilateral obligations. The rationale

behind the WTO agreements is a pragmatic one, unlike the Genocide Convention. As

Pauwelyn notes, free trade is not an end to itself, but rather a means to attain the aim of

56 Pauwelyn, supra note 54, p. 1. 57 Marceau, supra note 15, p. 1105; ‘Cho, WTO’s identity crisis’, Review of Joost Pauwelyn’s book ‘Conflicts of Norms in Public International Law. How WTO Law Relates to other Rules of International Law’, p 5. 58 Article XXIV of the GATT and article V of the GATS. 59 Hahn, Die einseitige aussetzung von GATT-verpflichtungen als repressalie, (1996). p. 396

23

prosperity, full employment and increased standards of living, as envisioned in the preamble

of the WTO agreement.60

Furthermore a breach of the treaty only affects the country against which the trade

restriction was introduced in a direct and necessary manner. Admittedly, as pointed out by

Cho, in our highly globalized and integrated world a trade restriction most likely affects other

countries as well. However, this effect is only indirect and not necessary; it is even likely that

some countries are positively affected by the restriction due to increased export possibilities to

the country that imposed the restriction. In the same manner a breach of the Convention on

Diplomatic Relations may in numerous ways indirectly affect others than the state against

which the breach was aimed. But that does not mean that the obligation is owed towards

them. In contrast, as already pointed out, a breach of most MEAs or of the Non-Proliferation

Treaty would necessarily and directly affect all parties to the specific treaty. This is true for

MEA:s since the environment is a global common and for Non-Proliferation Agreements

since the threat of a nuclear weapon is a concern of all states of the world.

Yet another method of discerning the nature of the obligations is to observe the way

they are enforced. Pauwelyn notes that bilateral obligations can be enforced bilaterally, while

integral cannot.61 As for the WTO obligations the enforcement is executed in a bilateral

manner. According to article XXIII:2 of the GATT a contracting party that has been the

subject of an illegal trade measure may suspend its substantive WTO obligations vis-à-vis the

state in breach of the GATT provisions. This possibility of bilateral retaliation can, in

contrast, not be found in MEAs or the Non-Proliferation Treaty. It is, after all, not the case

that a party to these agreements is allowed to emit Freon gases or procure nuclear weapons in

response to another party’s breach. Taking these considerations together one has to conclude

that inter se modifications are bilateral and therefore do not necessarily affect the rights or

obligations of third parties under the WTO agreements.

6.2 Would a Modification be Incompatible with the Object and Purpose of the Covered Agreements?

It has also been claimed that a modification inter se must be illegal since it would impede the

entire object and purpose of the agreements. For example, Weber states: “If two states would

be entitled to change their obligations inter se […] the objective of the WTO-Agreements

could become compromised and the purpose to provide a comprehensive basis for all trade 60 Pauwelyn, supra note 54, pp. 15-16; Preamble of WTO agreement (1994). 61 Ibid. pp.17-18.

24

relationships between the Members would be undermined”62 Also Trachtman is of this view.

He claims that the purpose – in the sense of article 41 of the VCLT – is recited in the

preamble of the WTO agreement, and is to “increase standard of living, employment and

demand”.63 The mentioned visions are indeed found in the preamble, but Trachtman fails to

mention that the same paragraph goes on to state that the Members shall seek to “protect and

preserve the environment”.64 Since it hardly can be claimed that the protection and

preservation of the environment is part of the “object and purpose” of the WTO, the task of

finding the “object and purpose” is clearly not as straightforward as just reciting the preamble.

I would, instead, contend that Trachtman’s interpretation put a too broad meaning on

the phrase “object and purpose”. I would rather claim that the “object and purpose” of the

WTO is the narrower goal of facilitating a mutual reduction of trade restrictions between the

members of the organization. The fact that the rationale for this reduction is to improve

standard of living, employment and demand is a different matter.

Now, of course, also if the interpretation of the “object and purpose” presented here is

accepted, an inter se modification that allows for some sort of trade restriction would still, to

some degree, counteract the “object and purpose”. Importantly, however, article 41:1 (b) of

the VCLT is rather permissive; it states that the derogation cannot be “incompatible with the

effective execution of the object and purpose of the treaty” (emphasis added). This seems to

imply that derogations are not allowed from provisions so necessary to the entire agreement

that the effect of the agreement would be seriously diminished. If we put this in comparison

with the reintroduction of a restriction between two members, we are clearly not talking about

the same magnitude.

If the WTO obligations outlawed every trade restriction it would, of course, be hard to

claim that an agreement that establishes such a restriction could be legal. However, this is not

the case. Instead, innumerable restrictions are in existence in all kinds of areas of trade. So, if

two, or more, countries were to negotiate, inter se, that in a certain event a trade restriction

would be legal, the effect on the “object and purpose” of the specific covered agreement

would most likely be marginal. It is therefore doubtful if one could claim that it would be

“incompatible with the effective execution of the object and purpose of the treaty”.

Furthermore, it should be remembered that the same wordings that are used in article

41:1 b (ii) appear in article 19 of the VCLT, which provides for the possibility of reservation

62 Weber, Rolf H. ‘Cultural Diversity and International Trade – Taking Stock and Looking Ahead’ (2008) p. 835. 63 Trachtman, ‘Review of Joost Pauwelyn, Conflicts of Norms in Public International Law. How WTO Law Relates to other Rules of International’ (2004) p. 860. 64 See preamble of the WTO agreement.

25

to specific provisions of a multilateral treaty. This possibility was established in order to

facilitate the accession of states to agreements that they would otherwise never have

acceded.65 It can therefore not be too insignificant matters that a state can reserve itself

against. For example, considering the last decades’ international focus on environmental and

human rights issues and the associated proliferation of multilateral agreements in these areas,

it seems rather likely that if the WTO were established today, a quite common request from

the signatories would be to reserve themselves against the prohibition of trade restrictions

emanating from agreements on human rights or environmental protection. One can then

question if it is likely that these requests had been denied – with the risk of losing these

signatories – because the reservations were deemed so detrimental to the efficiency of the

WTO agreements that it would jeopardize the whole “object and purpose” of the organization.

To me this seems very unlikely. Thus, if the wordings are to be given similar meaning in the

two provisions this ought to mean that a modification of the same purpose would be lawful;

especially considering that an inter se modification does not affect third parties, whereas a

reservation applies vis-à-vis all contracting states.

I would, thus, submit that inter se modifications of the covered agreements cannot a

priori be rejected as unlawful. Instead there does seem to be a significant scope for lawful

modifications. However, as previously stated, one can neither state in general terms that the

modifications are always legal; rather, this question has to be answered on a case-by-case

basis.

7. Concluding Remarks

In conclusion it can be stated that there is nothing in the WTO agreements that precludes

international law from being applied in WTO dispute settlement proceedings. As the WTO

agreements are to be seen as normal treaties within the system of international law, non-WTO

law can be used to fill gaps in the covered agreements and conflicts between WTO and non-

WTO law should be resolved through the application of conflict rules under general

international law. Furthermore, the prerequisites for lawful inter se modifications, stipulated

in article 41 of the VCLT, could be fulfilled for any given modification of the covered

agreements.

65 Linderfalk, ‘On the Meaning of the ‘Object and Purpose’ Criterion, in the Context of the Vienna Convention on the Law of Treaties’ (2003) p. 429.

26

It should be made clear, however, that just because non-WTO law in principle is

applicable in WTO disputes, the Dispute Settlement System does not become “a court of

general international law” in the sense that any claim can be brought before the bodies, as

appears to be the fear of Trachtman.66 Instead, the jurisdiction of an adjudicating body and the

applicable law in its proceedings are two totally different issues.67 This distinction is clearly

upheld in other bodies of law. In, for example, the UNCLOS articles 288 (1) and 293(1),

provide that the Tribunal has “jurisdiction over any dispute concerning the interpretation of

this Convention”, and to this aim the Tribunal “shall apply this Convention and other rules of

international law not incompatible with this Convention”.68 It is thus clear that while the

jurisdiction of the Tribunal is limited to disputes relating to the Convention on the Law of the

Sea, the applicable law is in principal unlimited. The same goes for the WTO system. While

all international law in principle could be applied by panels and the Appellate Body, the

jurisdiction of the same will always be limited to disputes concerning the provisions of the

covered agreements.

66 Trachtman, supra note 3, p. 342 note 41. 67 Vranes, supra note 12, p. 84; Bartels, supra note 6, p. 502. 68 Articles 288 (1) and 293 (1) of the United Nations Convention on the Law of the Sea (1994).

27

References

Case-law

Appellate Body report, Argentina – Certain Measures Affecting Imports of Footwear, Textiles, Apparel and Other Items, WT/DS56/R, adopted on 22 April 1998.

Appellate Body report, Brazil – Measures Affecting Desiccated Coconut, WT/DS22/AB/R, adopted on 21 February 1997.

Appellate Body report, EC – Measures Affecting Livestock and Meat (Hormones), WT/DS26/AB/R and WT/DS48/AB/R, adopted on 13 February 1998.

Appellate Body report, United States – Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R, adopted on 20 May 1996.

Panel report, Korea – Measures Affecting Government Procurement, WT/DS163/R, adopted on 19 June 2000.

US – The Cuban Liberty and Solidarity Act, WT/DS38/R, the panel suspended its work, at the request of the EC, dated 21 April 1997.

Statutes, Charters and Agreements

Agreement Establishing the World Trade Organization, 15 April 1994.

Agreement on the Application of Sanitary and Phytosanitary Measures, 15 April 1994.

Agreement on Trade-Related Intellectual Property Rights, 15 April 1994.

Charter of the United Nations, 26 June 1945.

Convention on the Prevention and Punishment of the Crime of Genocide, 9 December 1948.

European Convention on Extradition, 13 December 1957.

General Agreement on Trade in Services, 15 April 1994.

General Agreement on Trade and Tariffs, 30 October 1947.

Statute of the International Court of Justice, 26 June 1945.

United Nations Convention on the Law of the Sea, 16 November 1994.

Vienna Convention on Diplomatic Relations, 18 April 1961.

28

Vienna Convention on the Law of Treaties, 23 May 1969.

Vienna Convention for the Protection of the Ozone Layer, 22 March 1985.

International Law Commission Reports

Second Report on the Law of Treaties by Gerald Fitzmaurice, UN doc. A/CN.4/107, Yearbook of the International Law Commission, Vol. II, 16, p. 54.

Third Report on the Law of Treaties by Gerald Fitzmaurice, UN doc. A/CN.4/115, Yearbook of the International Law Commission, Vol. II, 20, 27, Art. 18, para. 2.

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