First and foremost, the principal prerequisite for the current research is the presupposition that Article XX of GATT [General Agreement on Tariffs and Trade] allows WTO Member States to perform acts inconsistently with their GATT obligations in order to pursue particular designated policies. Hence, a number of developing countries make an assertion that the aforementioned provision of the GATT has abetted the use of unilateral environmental, health and other policies as a means of disguised protectionism.
In light of this, the main objective of the present study is to evaluate the accuracy and significance of the prescribed statement that the provision of Article XX of GATT [General Agreement on Tariffs and Trade] ‘has promoted the use of unilateral environmental, health and other policies as means of disguised protectionism’.
The estimation of the viability and importance of the aforesaid provision for international trade law will be conducted through providing comprehensive answers to a series of prescribed questions. These research questions should be enumerated as follows:
1). What particular legal issues and obligations are likely to guide the member state in determining whether to use or abandon Article XX of GATT?
2). Had the Appellate Body in US-Shrimp dispute effectively struck a balance between the right of a member to invoke an exception under Article XX and the duty of that same Member to respect the treaty rights of the other members?
3). To what extent the role of the Appellate Body in dealing with public morals in the US-Gambling DS285 may (or may not) persuade the trading nations to utilise the system?
Besides, it needs to be clarified that the research is going to be conduced largely as a doctrinal study augmented by the qualitative research method of the case study. The appropriateness of the aforesaid methodology lies in the necessity to investigate the real law cases from the perspective of the question of law on a particular issue.
II. Fundamental rationales for derogation of GATT obligation under Article XX. An answer to the first research question.
To provide a comprehensive answer to the first research question, a clear definition of the term derogation should be given. Thus, in its broad sense, the term derogation means ‘the partial repeal or abrogation of a law by a latter act that limits its scope or impairs its utility and force.’ This general definition of derogation emphasizes the following salient features of the concept. First, derogation is either a partial repeal or abrogation of a law. Second, the repeal or abrogation of a law may be imposed by a latter act. Third, derogation reduces the scope of a law or weakens its utility and force.
The general conception of derogation creates the basis for the analysis of Article XX of the GATT. The definition of the derogation from the Black’s Law Dictionary is going to be juxtaposed with the analyzed provision of Article XX of the GATT in order to ascertain whether the latter imposes derogation and, if it does, what scope of a law is limited or what utility and force are impaired. Thus, Article XX of the GATT particularly provides that ‘[...] nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures [...].’
This regulation corresponds with the definition of derogation in the Black’s Law Dictionary. Thus, the provision of Article XX of the GATT articulates that other Articles of the GATT cannot be interpreted as the means of preventing the adoption or enforcement by any member state of a series of specified measures. In other words, the aforesaid provision of Article XX of the GATT reduces the scope of the GATT as an international agreement.
Also, it weakens the utility and force of the GATT. The fact is that Article XX of the GATT permits member states to depreciate the value of their obligations under the GATT by having recourse to the unilateral adoption and enforcement of specific measures.
In addition to this, Article XX of the GATT allows a partial repeal of the GATT as an international agreement. The partiality rather than the absoluteness of the repeal may be explained by a range of provisos determined in the same Article XX of the GATT. These provisos are expressed as follows: ‘subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade [...].’
The aforesaid provisos clearly show that the repeal of the GATT under its Article XX is partial, because in the case of actual arbitrary or unjustifiable discrimination, as well as in the case of actual disguised restriction on international law, the regulative force of Article XX of the GATT is void. Hence, it follows that the analyzed provisos characterize legal issues and obligations which must always guide the member state in determining whether to use or abandon Article XX of GATT. Thus, the answer to the first research question originates from the provisos of Article XX of the GATT.
To put it briefly, the first proviso articulates that the member states must not have recourse to Article XX of the GATT if the specified measures give rise to arbitrary or unjustifiable discrimination between countries in which the same conditions prevail. This reservation correlates with the provision of Article XIII of the GATT and other norms regulating the question of non-discriminatory policies. In like manner, the preamble of the GATT provides that the Agreement was signed particularly because of the desire to eliminate discriminatory treatment in international commerce.
To elaborate further, the proviso of Article XX of the GATT concerning disguised restriction on international trade is also reciprocal to non-discriminatory provisions of Article XIII of the GATT and other pertinent norms. As the matter of fact, any unlawful restrictions, whether manifest or latent, are prohibited by the provisions of the GATT. Thus, for instance, Article XI of the GATT is conceived to eliminate quantitative restrictions.
Undoubtedly, the discussed provisos of Article XX of the GATT can be associated with the correspondent legal issues and obligations, which must determine the decisions of the member state on whether to use or abandon Article XX of the GATT.
The analysis of legal issues and obligations whereby member states have recourse to Article XX of the GATT is connected with the question of the fundamental rationales for derogation. Apparently, the starting point should be the list of measures specified in Article XX of the GATT. According to the legal rationale of the Article, the derogation may be employed in the forms of either adoption or enforcement by any contracting party specific measures.
These measures include the following policies: a) necessary for the protection of public morals; b) necessary for the protection of either human lives or lives of animal, plants or health; c) concerning the import or export of silver and god; d) necessary for guaranteeing compliance with regulations or laws which are inadequate to the provisions of the Agreement; e) respecting the products manufactured in prisons; f) imposed for the purposes of protecting national treasures of archaeological, historic or artistic value; g) relating to the preservation of exhaustible natural resources; h) followed for the purposes of carrying out of duties under any intergovernmental commodity agreement; i) essential for guaranteeing sufficient quantities of domestic materials to a domestic processing industry for specific period; j) necessary for the distribution or acquisition of products in general or local short supply.
As the case stands, the range of the specified measures is very wide, while their definitions are very abstract and uncertain. From the legal formulation provided in Article XX of the GATT, it is impossible to clearly identify to what concrete measures the application of Article XX of the GATT is spread. In this sense, it is required to secure the aid of scholars in order to comprehend the meaning of Article XX of the GATT.
Thus, Sanford Gaines assays that it is incumbent on the World Trade Organization (WTO) not only to guarantee open and non-discriminatory multilateral trading conditions, but also to offer the protection of the environmental issues. In the researcher’s opinion, such dual commitment of the World Trade Organization eliminates the possibility of policy contradiction. This position was officially proclaimed at the United Nations Conference on Environment and Development.
The enunciation of the aforesaid duality may serve as a rationale for the justification of the members’ decisions to derogate their obligations under Article XX of the GATT. Following the analysis of Sanford Gaines, it is possible to notice that Article XX of the GATT contains a series of abstract exceptions from the international trade obligations. These abstract exceptions are adherent to the above analyzed provisos. Gaines considers the provisos to be ‘the chapeau’ of Article XX of the GATT.
In this connection, it is possible to agree with Gaines that the chapeau of Article XX of the GATT specifies no concrete conditions which may be recognized as the fundamental rationales for national governments to have policy space to pursue environmental objectives by way of limiting international trade in specific goods ‘in order to promote the conservation of environmental resources harmed by production of those goods’.
This means that Article XX of the GATT contains no formulation of concrete rationales. In this sense, it is mandatory to look for the rationales in some other treaties and laws. Feasibly, answers to the next research questions will involve the discussion of the fundamental rationales.
III. Critical examination of the nature and purpose of Article XX of GATT with special reference to US-Shrimp dispute. An answer to the second research question.
The principal goal of the present section is to perform the critical examination of the nature and purpose of Article XX of the GATT with special emphasis laid upon the US-Shrimp dispute. Taking into consideration that the preceding analysis of Article XX of the GATT has identified only a negligible number of rationales for derogation of GATT obligations under Article XX, it is expected that the current critical examination of the US-Shrimp dispute will extend the findings of the previous section.
To that end, a concise analysis of the US-Shrimp dispute must be conducted first. Thus, United States -import prohibition of certain shrimp and shrimp products (hereinafter referred to as US-Shrimp dispute) is an international trade law case which concerns US import prohibition of shrimp and shrimp products from non-certified states (i.e. countries which had not employed a specific net in catching shrimp).
The core findings of the case may be summarized in the following statements:
First, the panel disclosed that the US ban on imported shrimp and shrimp products contravened Article XI of the GATT. Actually, the United States acknowledged the fact of violating Article XI of the GATT by not providing any defending arguments in this concern. It should be clarified that Article XI of the GATT regulates prohibition on quantitative restrictions.
Second, the Appellate Body ruled that the US import prohibition was carried out in accordance with the provision of Article XX of the GATT, regulating the conservation of exhaustible natural resources. Nevertheless, the Appellate Body clearly articulated that the aforesaid action of the US could not be justified under Article XX of the GATT because the prohibition formed arbitrary and unjustifiable discrimination under the chapeau of Article XX of the GATT.
The issue of the unjustifiable discrimination was substantiated with the fact that the US prohibition had a deliberate and practically coercive effect on the certain policy decisions made by foreign governments as members of the WTO. On the other hand, the arbitrary constituent of the alleged discrimination was associated with the inflexibility and rigidity in the application of the prohibition coupled with the lack of procedural fairness and transparency in the management of trade regulations.
In the ultimate analysis, the Appellate Body reached the same finding on Article XX as the panel; however, the Appellate Body altered the panel’s legal interpretation of Article XX with regard to the accurate sequence of steps in analyzing Article XX. Thus, according to the Appellate Body, the proper sequence of steps is, first, to evaluate whether a measure can be temporarily justified in one of the paragraphs and, then, to further assess the same measure under the Article XX chapeau.
All things considered, the jurisprudence in the US-Shrimp dispute gives insight into the nature and purpose of Article XX of the GATT. Thus, according to the findings of the Appellate Body, the wish of a member state to invoke an exception under Article XX of the GATT must be legalized by a negotiation towards a conclusion of an international agreement. In the context of US-Shrimp dispute, the Appellate Body found out that the United States failed to engage both appellees and other members of the WTO in relevant international negotiations ‘with the objective of concluding bilateral or multilateral agreements for the protection and conservation of sea turtles’.
In other words, the Appellate Body regulated that, before enforcing the import prohibition against the shrimp exports, the United States had to negotiate with the exporters of shrimp products so as to reach a mutually acceptable settlement on the issue concerning the protection and conservation of sea turtles.
Otherwise, the reluctance of the United States to negotiate provided reasonable grounds to claim that the US’s prohibition on shrimp products constituted the unjustifiable discrimination within the context of the chapeau of Article XX. In this connection, it is possible to make an inference that the Appellate Body considered the procedure of negotiation to be a necessary step towards legalizing the wish to invoke an exception under Article XX. The negotiation, rather than the conclusion of an agreement, was deemed a necessary step in having recourse to Article XX of the GATT.
Hence, it follows that Article XX of the GATT has a dualistic nature. On the one hand, the provisions of the Article provide member states of the WTO with the right to invoke an exception, whereas, on the other hand, the same Article imposes on member states the duty to cooperate with other states and respect the treaty rights of the other members.
In summary, the Appellate Body characterized the chapeau of Article XX of the GATT as ‘the delicate one in locating and marking out a line of equilibrium’. Following the rationale of the Appellate Body, it should be asserted that the main purpose of Article XX of the GATT is to provide the line of equilibrium to guarantee that neither of competing entitlements will derogate the other nor do they nullify, distort or reduce the balance of rights and obligations.
Following the reasoning of the Appellate Body, it is possible to return to the first question of the present study. Thus, the previous section was purposed to identify the fundamental rationales for derogation of GATT obligations under Article XX. However, the analysis of Article XX could not provide enough data for making substantial inferences on the issue in question. Therefore, the examination of the US-Shrimp dispute helped to extend the dimensions of the research and to disclose more profound rationales for derogation of the GATT obligations under Article XX of the GATT.
Thus, the logic of Article XX of the GATT shows that there must be the equilibrium between collective interests and obligations of all member states and the specific interests and entitlements of individual governments. Moreover, the decision in the US-Shrimp dispute construed the problem of rigidity and inflexibility. It was ascertained that the United States had violated the requirement of the chapeau of Article XX of the GATT concerning flexibility of the derogation. After the Appellate Body’s report had been adopted, the United States proposed insignificant amendments to its guidelines for conducting its policy. According to Gaines, the real-life winner of the US-Shrimp dispute is the United States because the Appellate Body conducted a very broad interpretation of Article XX of the GATT and permitted all member states to rely on the abstract nature of the Article.
Assuredly, the Appellate Body had not effectively struck the balance between the right of a member to invoke an exception under Article XX and the duty of that member to respect the treaty rights of the other members. The fact is that the Appellate Body’s broad interpretation of the provisions of Article XX of the GATT contributed to the promotion of the actual public’s lack of trust in the ability of the multilateral trading system to adjust even the most primary and generally acceptable prescriptions of the environmental protection. Gaines correctly assays that the legal approach in the US-Shrimp dispute ‘jeopardizes the larger objectives and benefits of the multilateral trading system, including the environmental benefits that can be gained from reducing subsidies to such activities as fishing and agriculture.’
For all intents and purposes, the US-Shrimp dispute brings into light the eagerness of the Appellate Body to highlight the line of equilibrium between the right of a member to suspend its obligations under Article XX of the GATT and the duty of the same member to respect the treaty rights of the other member. This so-called line of equilibrium gives rise to a wide range of policy contradictions between environmental protection and international trading rules. That is, the decision of the Appellate Body in the US-Shrimp dispute intensified the existent contradictions antagonistic to the spirit of the Marrakesh Ministerial Decision. All these circumstances speak of the necessity to reinterpret Article XX of the GATT in order to eliminate the enrooted policy contradictions.
IV. Critical analysis of the role of the Appellate Body in dealing with ‘public morals’ in the US-Gambling DS285. An answer to the third research question.
The main objective of this section is to conduct a critical analysis of the role of the Appellate Body in dealing with ‘public morals’ in the US-Gambling DS285 under the WTO dispute settlement system. Before making any conclusions with regard to the issues in question, it is necessary to outline the main arguments and peculiarities of the US-Gambling case.
In light of this, it is possible to notice that the US-Gambling case was provoked by the US decision to prohibit gambling and betting services. To that end, the US-Gambling DS285 concerned the measures which influenced the cross-border supply of gambling and betting services. The case was triggered by Antigua and Barbuda after they had brought a complaint before the WTO Dispute Settlement Body, claiming that the US illegally banned cross-border gambling and betting services. The main argument of the complainants was the assertion that the US laws prohibiting cross-border gambling and betting services, including the federal Wire Act, the Travel Act, and the Illegal Gambling Business Act, were illegal under the provision of the GATS.
The aforesaid assertion was the material factor in initiating the dispute. The core issues of the dispute stemmed from the different US measures taken against gambling and betting services, ‘including federal laws such as the “Wire Act”, the “Travel Act” and the “Illegal Gambling Business Act” (“IGBA”). According to the WTO, the case emphasized issues which were connected with cross-border supply of gambling and betting services.
Before an analysis of the case starts, it is prudent to explain the provisions of the GATS which are pertinent to the issues in dispute. Thus, according to Article XIV of the GATS, nothing in the GATS prevents the adoption or enforcement by any member of a series of specific measures, including measures ‘[...] necessary to protect public morals or to maintain public order [...]’. That is, Article XIV of the GATS provides member states of the WTO with the right to derogate from their obligations under the GATS in order to undertake specific measures and attain specific objectives. The concept of public morals is delineated in the aforesaid Article XIV as one of the reasons for the employment of specific measures.
As far as the problem of ‘public morals’ is concerned, it might be appropriate to note that, during the time when the case was brought before the WTO, nobody expected that the dispute would raise any discourse on the public morals exception clause. According to Mark Wu, only after the first oral argument the United States had recourse to the defence of public morals. This may be exemplified by the Executive Summary of the Second Written Submission of the United States.
As the case might be, the United States claimed that the prohibition of the cross-border gambling was justified with the necessity to prevent intensified threats which could be connected with organized crime, fraud and other consumer related crimes (money laundering, pathological gambling, and children and youth (underage gambling).
The aforesaid justification was countered by the arguments of the complainants that the public moral concerns were artificial, forced, and unnatural. Besides, Antigua claimed that the United States had provided no evidence of organized crime involvement in the gambling industry of Antigua, nor had it submitted any proof that Antigua would not collaborate with the United States in the field of criminal investigations and prosecutions.
The first legal interpretations of the issues in dispute were issued by the panel of the WTO in 2004. In its decision, the panel started giving its explications by defining the term public morals first. Thus, according to the panel, the concept of public morals should be understood as ‘standards of right and wrong that can be described as belonging to, affecting, or concerning the community or nation.’
On these grounds, the panel made inference that the concepts of public morals and public order were correlative and directly associated with restrictions on gambling. Thus, the primal use of public morals in the GATT preceded the series of multilateral trade negotiations ‘in which it was well-understood that restrictions on the importation of lottery tickets - the forerunner of modern restrictions on cross-border gambling - would fall within the public moral exception.’
In the final analysis, the panel clarified that it was incumbent on the United States to examine possible alternatives together with Antigua before imposing the prohibition. Further, the panel purported that the US federal laws could not pass the panel’s test of necessity because the United States declined Antigua’s invitation to explore all possible alternatives to the prohibition.
Additionally, the panel ruled that the United States presented no convincing evidence that it treated domestic and foreign suppliers of gambling services in an equal and adequate manner. In this sense, the panel found itself impotent to verify the non-discriminatory nature of the US statutes in accordance with the requirements of the GATS Article XIV chapeau.
To elaborate further, it should be noted that, on appeal, the Appellate Body overruled the results of the panel that the US trade restriction was not necessary. As a matter of fact, the Appellate Body concluded that the panel misapplied the necessity test. According to the opinion of the Appellate Body, the panel had no reasonable grounds to consider the existence of an alternative. The Appellate Body found that the evidentiary record was insufficient for the panel to make an inference that the US laws failed the necessity test. In other words, the case lacked sufficient proofs that the United States’ enforcement of its laws was discriminatory and contravened the public moral clause’s chapeau. This notwithstanding, the Appellate Body ruled that the panel correctly held that the United States had not illustrated that its prohibition did not discriminate against foreign gambling service providers.
In this sense, the decision of the Appellate Body seems to be ambivalent and uncertain. Thus, on the one hand, the Appellate Body followed the rationale of the panel that the United States’ prohibition of foreign gambling service providers was discriminatory. Nevertheless, on the other hand, the US restrictions would be allowed to stand if they were adopted in a non-discriminatory manner. This means that the Appellate Body satisfied the interests of every party in the dispute. Thus, Antigua considered itself to be victorious because the Appellate Body protected it from the discriminatory policy of the United States. Similarly, the United States believed in its victory because the Appellate Body had acknowledged its right to adopt a prohibition on gambling services on moral grounds.
In summary, it is necessary to point out that the Appellate Body played a crucial role in dealing with ‘public morals’ in the US-Gambling DS285 under the WTO dispute settlement system. The role of the Appellate Body in the US-Gambling DS285 was predetermined largely by the status and obligations of the Appellate Body under the WTO’s Dispute Settlement Understanding and other international law documents.
Thus, according to the WTO’s Dispute Settlement Understanding (hereinafter referred to as DSU), the increasing faith of developing countries in the WTO’s dispute settlement system is prompted by the diligent and unprejudiced functioning of panels and the Appellate Body.
The fact is that the Appellate Body is conceived not only to settle issues in question but also to construe the rights and obligations of the parties under the WTO’s legal documents. For example, Article 3.2 of the DSU clearly articulates that, among other things, the Appellate Body is a constituent of the WTO’s dispute settlement system which operates to elucidate the existent prescriptions of the treaties in accordance with customary rules of interpretation of the public international law.
To continue, the Appellate Body plays a very significant role in every dispute because of its specific status. In contrast to panels, the Appellate Body is a permanent institution of seven members, which are empowered by the WTO to review legal facts of the reports issued by panels. Hence, it follows that the Appellate Body is the final stage in the adjudicatory part of the WTO’s dispute settlement system. Moreover, the significance of this final instance lies in its innovative nature. The previous dispute settlement system under the GATT 1947 had no stage of appeal. Thus, the introduction of the Appellate Body as a relatively new adjudicatory institution should be recognized as a major novelty of the Uruguay Round of Multilateral Trade Negotiations.
Taking into consideration the aforesaid facts, it is possible to presuppose that the Appellate Body has enough power and reputation to persuade the trading nations to utilise the system. Appellate Body decision in the US-Gambling dispute is very cautious. It clarified only those things which were issues in dispute, while deterring most of the sophisticated doctrinal questions for the future deliberations. Nonetheless, the Appellate Body made evident that the previous interpretative principles which had been applied to other cases of general exceptions of the WTO’s agreements should also be extended to the public morals clause of the GATS.
After everything has been given due consideration, it should be generalized that the provision of Article XX of the GATT has truly promoted the use of unilateral health, environmental and other policies as a means of disguised protectionism. Therefore, the prescribed problem statement was verified as true. The conducted research shed some light on the nature and scope of the aforesaid provision of Article XX of the GATT.
Moreover, it was ascertained that the Appellate Body as the permanent adjudicatory authority of the WTO was reluctant to regulate against the exceptional provisions of the GATT and GATS which concern the right of a member state to derogate from its obligations under the WTO agreements. It was detected that the Appellate Body adopted a series of rules of interpretation, which were conceived to explicate the meaning of exceptional provisions from the perspective of doctrinal law.
Also, it was found that the Appellate Body endeavoured to establish the line of equilibrium between the duty of a member state to respect the treaty rights of other members and the right of the same member state to invoke exceptions under the provisions of the WTO treaties. Notwithstanding the efficient role of the Appellate Body as an interpreter, this adjudicatory authority failed to guarantee that the exceptional provisions would always be used for a just cause. Moreover, the Appellate Body unconsciously promoted the application of the WTO’s exceptional clauses for the purposes of disguised protectionism by way of making compromising and flexible decisions in landmark disputes such as the US-Shrimp dispute and the US-Gambling dispute.
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