(b) Arguments specific to distinction between mandatory law and discretionary law

4.295  The European Communities is of the view that the US arguments are based on a misinterpretation of the legal standard developed by GATT 1947 panels.

4.296  In the view of the European Communities, under the GATT 1947, the United States maintained provisions of its countervailing duty law, pre-dating the provisional application of the GATT 1947, that required its executive authorities to impose countervailing duties without an injury criterion, which was inconsistent with Article VI of the GATT. The United States consistently claimed that these provisions constitute mandatory legislation, even though the executive authorities of the United States could theoretically have acted consistently with Article VI by not making the affirmative determinations required for the imposition of countervailing duties. The GATT Panel on United States - Denial of Most-Favoured-Nation Treatment as to Non-Rubber Footwear from Brazil endorsed the US claim and considered on this basis that part of the relevant US legislation, i.e. Section 303 of the Tariff Act of 1930, was covered by the "existing legislation" clause of the GATT Protocol of Provisional Application.²²²

4.297 The European Communities points out that the United States countervailing duty law that was at issue in that case is comparable to Sections 301-310 to the extent that it also required the executive to make a negative or affirmative determination on the basis of specified factual criteria and mandated a GATT-inconsistent action if the determination was affirmative.

4.298  The European Communities further notes that the fact that the countervailing duty legislation did not preclude GATT-consistent action because there was the possibility for the USTR to determine that there was no basis to impose countervailing duties did not, in the view of United States and the GATT 1947 panel, turn this legislation into discretionary legislation.

4.299 The European Communities is thus of the view that this conclusion was compelled by the fact that there was no basis under the US countervailing duty law to exercise the discretion available under it for the purpose of avoiding inconsistencies with the provisions of Article VI of the GATT 1947 on injury findings. In addition, such an exercise of the discretion would have frustrated the objectives pursued by the US law.

4.300  The European Communities argues that as for the US countervailing duty law, the mere fact that Sections 301-310 provide for the possibility to determine that rights of the United States have not been denied and no failure to implement DSB recommendations has occurred and that these provisions therefore do not "preclude" WTO-consistency does not turn them into discretionary legislation: the discretion in making determinations was not given to the USTR to ensure the WTO-consistency but only to the limited effect to take into account the results of her investigations under Section 302 or the monitoring of implementation under Section 306(b), which constitute the compelling basis of her decisions.

4.301 In rebuttal, the United States points out that the European Communities appears to be unwilling to go so far as Hong Kong in discarding the distinction between mandatory and discretionary legislation. Further, the European Communities opposes the notion that discretionary legislation must include explicit language limiting that discretion so as to "preclud[e] WTO inconsistent actions".²²³ The European Communities thus rejects Hong Kong's argument that legislation which allows for "a potential deviation" from WTO obligations is WTO-inconsistent.²²⁴ Indeed, the European Communities would have significant difficulty complying with such an obligation to avoid "potential deviations".  Having recognised the danger to the WTO system of embarking upon such an interpretation, the European Communities nonetheless seeks a case-specific, results-driven approach to the definition of "mandatory" to ensure that Sections 301-310 be found mandatory.   The EC's approach denies the meaning of GATT/WTO jurisprudence based on the spurious claim that these cases relied on the now inapplicable Protocol of Provisional Application, and argues that the term "mandatory" – and the language of Sections 301-310 – must be interpreted by reference to a new-found obligation to avoid uncertainty and to ensure "security and predictability".

4.302 The United States argues that the European Communities clearly and correctly sets forth the distinction between discretionary and mandatory legislation in its panel request: legislation is mandatory, and actionable, if it "does not allow" a Member's authorities to comply with its WTO obligations.²²⁵ Having offered this clear formulation and using it as the basis for its analysis, the European Communities now appears to realize that Sections 301-310 do, indeed, allow the United States to comply with DSU rules and procedures in every case.  The European Communities therefore attempts to walk away from its earlier formulation, arguing that the United States overstates the conclusion of GATT and WTO panel reports when it points out that laws are not inconsistent with WTO obligations when those laws do not preclude compliance, or may reasonably be interpreted to permit compliance.

4.303  In the view of the United States, to say that a law "does not allow" WTO-consistent action is no different than saying that the law "precludes" such action.   A law allows authorities to comply with their WTO obligations if, under domestic law, there is an interpretation of that law which permits WTO-consistent action.  The US formulation follows directly from that set forth by the European Communities.   Moreover, it is solidly grounded in GATT/WTO jurisprudence and applicable international practice in construing national and international law.

4.304  The United States argues that several statements from the panel reports it cited demonstrate the clear line drawn between mandatory and discretionary legislation.   In US – Tobacco, the panel found against the complaining party because it had "not demonstrated that [the US law at issue] could not be applied in a [GATT-consistent] manner".²²⁶ In other words, the complaining party had not demonstrated that the law precluded authorities from complying with their GATT obligations.  Moreover, the Tobacco panel's finding turned on the fact that the term "comparable" in the US legislation was "susceptible of a range of meanings", including one which permitted GATT-consistent action.²²⁷ The US – Tobacco panel report thus rests squarely on a finding that the burden is on the complaining party to demonstrate that domestic law does not allow an interpretation permitting a party to comply with its international obligations.

4.305  The United States further contends that likewise, in US – Superfund, the panel found, "since the Superfund Act also gives [US authorities] the possibility to avoid the need to impose [a GATT-inconsistent penalty] tax by issuing regulations [not yet issued or drafted], the existence of the penalty rate provisions as such does not constitute a violation of the United States obligations under the General Agreement".²²⁸ It is difficult to conceive of any reading of this finding other than that drawn by the United States, namely, that a law which provides for the possibility of GATT-consistent action provides authorities with adequate discretion to comply with their GATT/WTO obligations.   Again – unlike Sections 301-310 – the Superfund Act explicitly provided for a GATT-inconsistent tax; yet the panel found it sufficient that the statute also provided for the possibility that authorities might take action in the future that would be GATT-consistent.  The panel did not assume that they would not.

4.306  The United States also points out that similarly, in Thai – Cigarettes, the panel was unfazed by a provision in the statute explicitly authorizing a tax which would, if implemented, have constituted a violation of Thailand's GATT obligations.  The panel concluded that "the possibility that the Tobacco Act might be applied contrary to Article III:2 was, by itself, not sufficient to make it inconsistent with the General Agreement".²²⁹ Again, the possibility of deviation from a party's international obligations does not render mean that law is WTO inconsistent.  To the contrary, the very fact that there is a possibility of compliance is dispositive of whether the law is discretionary, and its mere existence is not a WTO violation.   If the law permits a party to comply with its international obligations, it must be assumed that it will.   

4.307  The United States is of the view that all of these GATT findings are consistent with the ordinary meaning of "mandatory", which is "obligatory in consequence of a command, compulsory".²³⁰ If a law does not make it compulsory for authorities to act so as to violate their international obligations, that law may not be said to command such action.  This can be illustrated through a simple example.  A law which provides, "the Trade Representative shall take a walk in the park on Tuesdays, unless she chooses not to" does not oblige the USTR to walk in the park on Tuesdays.   She has complete discretion not to take a walk in the park on Tuesdays; the law in no way obliges or commands her to do so.  This remains true despite the use of the word "shall" in that law.

4.308 The United States maintains that the clear distinction in GATT/WTO jurisprudence between discretionary and mandatory legislation is also consistent with general international practice in interpreting domestic legislation in light of international law, and of US practice in particular.  Under the principles set forth in India - Patents (US), the relevant facts of this case are to be found in US municipal law, which includes not only the language of Sections 301-310, but also how those provisions would be interpreted under US law.²³¹ It is both general international practice and that of the United States that statutory language is to be interpreted so as to avoid conflicts with international obligations.  There is thus a presumption against a conflict between international and national law.   In general,

"[A]lthough national courts must apply national laws even if they conflict with international law, there is a presumption against the existence of such a conflict.  As international law is based upon the common consent of the different states, it is improbable that a state would intentionally enact a rule conflicting with international law.  A rule of national law which ostensibly seems to conflict with international law must, therefore, if possible always be so interpreted as to avoid such conflict".²³²

4.309  The United States further notes that in US law, it is an elementary principle of statutory construction that "an act of Congress ought never to be construed to violate the law of nations if any other possible construction remains". Murray v. Schooner Charming Betsy, 6 U.S. (2 Cranch) 64, 118 (1804).  While international obligations cannot override inconsistent requirements of domestic law, "ambiguous statutory provisions . . . [should] be construed, where possible, to be consistent with international obligations of the United States". Footwear Distributors and Retailers of America v. United States, 852 F. Supp. 1078, 1088 (CIT), appeal dismissed, 43 F.3d 1486 (Table) (Fed.  Cir. 1994), citing DeBartolo Corp. v. Florida Gulf Coast Building and Trades Council, 485 U.S. 568 (1988). 

4.310  In the view of the United States, GATT jurisprudence distinguishing between mandatory and discretionary legislation does no more than apply the general practice of nations, including the United States, that there is a presumption against conflicts between national and international law.   If a law provides discretion not to violate international obligations, there is a presumption that domestic authorities will interpret that law so as to avoid a conflict with those obligations.   Likewise, this presumption may be seen as underlying the US – Tobacco panel's finding that a domestic law susceptible of multiple interpretations would not violate a party's international obligations so long as one possible interpretation permits action consistent with those obligations.²³³

4.311  The United States explains that the mandatory/discretionary distinction in GATT/WTO jurisprudence is clear and unequivocal:  a law which allows WTO-consistent action is not WTO-inconsistent.  The EC's attempt to qualify this principle to satisfy its political objectives would have the Panel presume bad faith on the part of the United States in its observance of its international obligations.  Such a presumption would clearly be contrary to this jurisprudence and to the international practice underlying it.

4.312  In support of its argument, the United States refers to the text of DSU Article 23.2(a).  That Article deals with "determinations to the effect that a violation has occurred".  It prohibits Members from making these determinations without following DSU rules and procedures, and these determinations must be consistent with findings in panel and Appellate Body reports adopted by the DSB.

4.313  In the view of the United States, there is no "determination to the effect that a violation has occurred" before the Panel in this case.  The European Communities does not challenge a determination which has actually been made.  It is therefore not possible to analyze whether such a determination meets the requirements of Article 23.2(a).  One cannot say whether, in making such a determination, the United States followed DSU rules and procedures, nor whether the United States made a determination consistent with DSB-adopted findings.  Neither the findings nor the determination exist.

4.314 The United States asks how the Panel can perform its analysis under these circumstances.  In the absence of a concrete determination, how is it possible to know whether a Member has breached its obligations under Article 23.2(a)?  It is not permissible to speculate about how the Member will make its determination in the future.  It is not permissible to look at determinations made in the past which are not within the terms of reference.  It is not permissible to assume that certain Members are not to be trusted.   It is not permissible to assume that they will act in bad faith.  Under these circumstance, must the conclusion be that without a concrete determination, there can be no violation of Article 23.2(a)?

4.315  The United States points out that over 10 years ago, in 1987, a GATT panel wrestled with this type of question.  It looked at a statute which would not go into effect for another three years and asked, may a panel determine whether this law is inconsistent with a party's GATT obligations when it is possible that the party may change the law before it goes into effect?  The panel's conclusion was that it could, but it was very careful in how it drew this conclusion.  The panel found that only if a statute commands a party's authorities to violate a specific GATT obligation could that statute be found inconsistent with that obligation.   In enacting such legislation, the party crossed a line.  It left itself with no choice but to violate its obligations, even if only at some point in the future.   Conversely, the panel found, if a statute does not command the party's authorities to violate a specific GATT obligation, it is not possible to conclude that the statute violates that obligation.  The party may exercise its discretion so as to comply with its international obligations.  Any other conclusion would be speculation as to whether the party will act in bad faith, speculation with no more foundation than if the statute did not exist at all.

4.316  The United States again states that the reasoning of the Superfund panel made very good sense.  It was so good that at least five GATT panels adopted it as their own.   At least three WTO panels have also adopted it.  And none of those panels in any way revised the core question asked by the Superfund panel: does the statute command, does it mandate, a violation of a specific agreement obligation?

4.317  The United States further argues that the Superfund analysis is not an analysis of character.  It is not necessary to examine whether the character of the Member enacting the legislation is bad, whether that party had a WTO-inconsistent motive.  Nor is it necessary to examine whether the "character" of the legislation is bad, whether the legislation reflects an intent to breach WTO-obligations.   All that matters is whether the law commands an action which violates a specific textual obligation.   Absent such a command, the Panel is left with the fundamental problem – there is nothing that can be said to violate a specific textual obligation.  Legislation which leaves open the possibility of a violation cannot be considered a violation, any more than may a constitutional system which provides broad authority to act.   However, by including a specific command in legislation to violate a specific obligation, the legislation itself becomes that violation.

(c) Arguments specific to "Security and Predictability"

4.318  The European Communities claims that the second legal standard that Sections 301-310 must meet has been developed by two panels²³⁴ and the Appellate Body in the India – Patents (US) case. In this case, the Appellate Body interpreted Article 70:8(a) of the TRIPS Agreement to require Members "to provide a legal mechanism for the filing of mailbox applications that provides a sound legal basis to preserve both the novelty of the inventions and the priority of the applications as of the relevant filing and priority dates".²³⁵

4.319  The European Communities contends that there was in this case no dispute that India had a "mailbox" system based on administrative instructions in place. The dispute was on the question whether this system rested on a legal basis in Indian law sufficiently sound to ensure that the patent applications could not be invalidated by Indian courts.

4.320  In the view of the European Communities, one of the issues before the panel was whether a provision in India's Patent Act requiring the rejection of certain patent applications permitted the Patent Office to act consistently with the TRIPS Agreement by simply not acting on the patent application.

4.321  According to the European Communities, another issue was whether, under Indian law, the competitors of a patent applicant had the right to challenge a patent application in the courts or whether they had to wait until the patent was actually granted.

4.322  The European Communities contends that the panel ruled against India because, based on the evidence submitted by the parties, "it had reasonable doubts that the administrative instructions would prevail over the mandatory provisions of the Patents Act if a challenge were brought in an Indian court".²³⁶ As the United States correctly stated before the Appellate Body in this case:

"Protection of legitimate expectations of WTO Members regarding conditions of competition is as central to trade relating to intellectual property as it is to trade in goods that do not relate to intellectual property".²³⁷

4.323  The European Communities argues that there must consequently be a sound legal basis in domestic law for the executive actions required to implement WTO obligations also in the area of trade in goods.

4.324  The European Communities further points out that the India – Patents (US) Appellate Body report sets an important precedent that should guide the resolution of the present case if the Panel were to conclude that Sections 301-310 do not mandate WTO-inconsistent determinations or actions.

4.325  According to the European Communities, in this case, the question would arise whether Sections 301-310 provide the USTR with a sufficiently sound legal basis for the implementation of the US obligations under the DSU and the GATT 1994. The European Communities submits that, to the extent that there is uncertainty on the mandatory nature of Sections 301-310, this legislation does not provide a sound legal basis for the implementation of the US obligations under the DSU and the GATT 1994 by the USTR.

4.326  The European Communities cites Professor Robert E. Hudec as writing:

"Section 301 is an intricate maze of mandatory commands in one place and extremely wide loopholes in the other. One needs a wiring diagram to trace whether mandatory commands given in one part will actually reach their final target without passing through at least one discretionary exit point. Even with the aid of such a diagram, one cannot predict actual outcomes".²³⁸

4.327  The European Communities also points out that Professor John H. Jackson testified before the Senate Foreign Relations Committee as follows:

"Although there are plausible ways to interpret the statutory provisions of regular Section 301 so as to give the President discretion to act consistently with the Uruguay Round dispute settlement rules, in a few cases, particularly in Section 301(a) (mandatory provision) the interpretations to do this are a bit strained …".²³⁹

4.328  According to the European Communities, if the United States' two foremost scholars on international trade law are unable to identify a sound legal avenue in Sections 301-310 permitting the USTR to act consistently with the DSU and the GATT 1994, nobody else can do it.

4.329  The European Communities maintains that the legislative history of the 1988 Omnibus Trade and Competitiveness Act, which is at the origin in particular of the present version of Sections 301-310, demonstrates that the lack of a sound legal avenue was deliberate.

4.330  In the view of the European Communities, the United States now attempts to benefit from the creation of this legal "maze" by claiming that it is for the European Communities to prove that it is not possible to interpret Sections 301-310 as permitting WTO-consistent implementation.

4.331  The European Communities contends that the fundamental objective of the WTO - namely to create security and predictability in international trade relations - could not be achieved if WTO Members were permitted to maintain domestic legislation that fails to provide the executive authorities with a sound legal basis for the measures required to implement their WTO obligations.

4.332  The European Communities is therefore of the view that, in a panel's examination of whether domestic legislation stipulates WTO-inconsistent determinations or action, the defendant should not be able to hide behind legal uncertainties arising from its own law, in particular if these uncertainties have been deliberately created. In accordance with the approach endorsed by the Appellate Body in India - Patents (US), a panel should rule against the defendant if it concludes, on the basis of the evidence before it, that there is an objective (and thus reasonable) uncertainty on whether the domestic law permits WTO-consistent determinations or actions.

4.333  The European Communities argues that if the panel has reasonable doubts, so will economic operators planning their future trade. No legitimate interest would be protected if Members were entitled to retain law lacking such a basis. In fact, as the case before the Panel demonstrates, this would be an invitation to Members to restrict trade by exposing it deliberately to legal uncertainties.

4.334  The European Communities further contends that each Member is required to perform its WTO obligations in good faith. No additional policy constraint is therefore imposed on Members by requiring them to create a sound legal basis in their domestic law for the performance of their WTO obligations. If it is the intention of the United States to perform its WTO obligations in the framework of the Section 301-310 procedures, why does it object to the EC's demand to create a sound legal basis for the performance of these obligations? If the legal uncertainties under Sections 301-310 are an expression of the contrary intention, why should they nevertheless be considered to be a sound legal basis for a good faith performance of the United States' WTO obligations? 

4.335  In the view of the European Communities, the legal standard applicable to domestic law that the United States defended so vigorously when Indian patent law was at issue is equally applicable to United States trade law.

4.336  The European Communities indicates that it would be extremely regrettable if the unjustifiably low standard for the evaluation of the WTO-consistency of domestic law that the United States opportunistically defends in the present proceedings were to be endorsed as the generally applicable standard. United States law should be adapted to WTO law, not vice versa. Otherwise, the considerable legal progress of the WTO legal system endorsed by the Appellate Body in India - Patents (US) would be lost.

4.337  The United States argues that the Statement of Administrative Action and accompanying legislation are the definitive congressional materials with respect to the WTO-consistency of Sections 301-310 before the adoption of the Uruguay Round Agreements Act by the Congress.  Page 360 of the Statement of Administrative Action (US Exhibits 3 and 11) outlines the changes considered necessary to ensure compliance.  In addition, the United States directs the Panel's attention to the testimony on this topic of Professor John Jackson when he appeared before the Senate Finance Committee.²⁴⁰

4.338  The United States points out that Professor Jackson concluded that, "There may need to be some alterations to some time limits, or transition measures, but the basic structure of 301 is not necessarily inconsistent with the Uruguay Round results".  He also concluded that even when Section 301 is considered "in its current statutory form" (i.e. before the 1994 amendments), "the Executive appears to have the discretion to apply actions under Section 301 in a manner consistent with the proposed new rules of the Uruguay Round dispute settlement understanding".²⁴¹ Professor Jackson thus considered that with only minor changes, Section 301 would be clearly consistent with the WTO obligations of the United States.  Moreover, his emphasis on the fact that the Executive had adequate discretion to apply Section 301 in a WTO-consistent manner reflects the fact that he took for granted that the reasoning applied in the Superfund line of cases would continue to apply under the WTO.

4.339  The United States notes that Professor Jackson believed that sufficient clarity could be provided to the interpretation of the statute through the inclusion of language in the Statement of Administrative Action.²⁴²

4.340  The United States further points out that the India - Patents (US) discussion of a "sound legal basis" comes in the context of an analysis of the specific textual obligation at issue in that case, TRIPs Article 70.8(a).  This provision affirmatively requires Members to provide in their domestic legal systems a mechanism for the filing of applications for patents which protects their novelty and priority.  India instead had on its books a law explicitly prohibiting such applications, that is, specifically mandating a violation of India's TRIPs obligations.   India claimed that unwritten, unpublished "administrative instructions" never produced for the panel took priority over the mandatory law, but the panel and Appellate Body found nothing to support this claim.   It was in this context, the context of TRIPs Article 70.8(a)'s requirement for a domestic legal mechanism accomplishing specific ends, that the panel and Appellate Body concluded that the "administrative instructions" failed to provide a sound legal basis.   The concept was not analyzed in the abstract as somehow derived independently of Article 70.8(a) and, as noted, the Appellate Body reversed panel findings relating to "legitimate expectations" generally and removal of "reasonable doubts" because these findings were not textually based.

4.341  In response to the Panel's request for clarification on the US reference to "security and predictability" as an objective, not an obligation, the United States notes that Article 31(1) of the Vienna Convention on the Law of Treaties provides:

"1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose".

4.342  The United States also notes that the Appellate Body explained the proper role of an examination of an agreement's object and purpose in US - Shrimp as follows:

"A treaty interpreter must begin with, and focus upon, the text of the particular provision to be interpreted.   It is in the words constituting that provision, read in their context, that the object and purpose of the states parties to the treaty must first be sought.  Where the meaning imparted by the text itself is equivocal or inconclusive, or where confirmation of the correctness of the reading of the text itself is desired, light from the object and purpose of the treaty as a whole may usefully be sought".²⁴³

4.343  The United States then concludes that while the terms of an agreement are to be examined in light of the object and purpose of the agreement, it is the ordinary meaning of those terms which must first be analyzed in interpreting an agreement provision, and relied upon in applying that provision to a given set of facts.  The object and purpose cannot change the ordinary meaning of the agreement terms.   Where the terms are ambiguous, and their meaning is not clear on their face or in their context, a consideration of the object and purpose of the agreement can be productive.  However, a consideration of the object and purpose of an agreement is secondary to, and cannot serve as substitute for, an analysis of the ordinary meaning.   Nor can an examination of the object and purpose of an agreement be made to the exclusion of an analysis of the ordinary meaning of the agreement text.

4.344  The United States further states that in US - Shrimp the Appellate Body chastised the panel in that case for not examining the ordinary meaning of the words of the chapeau of GATT 1994 Article XX, the chapeau's context within Article XX, or the chapeau's object and purpose, and for instead focusing on the "object and purpose of the whole of the GATT 1994 and the WTO Agreement".²⁴⁴    Just as the European Communities asks the Panel to focus on "security and predictability", the US - Shrimp panel focused on the very same concept of security and predictability in the context of its discussion of an overall goal of the WTO Agreement to avoid "undermin[ing] the multilateral trading system".   According to the US - Shrimp panel, "we must determine . . . whether [the type of measure in US - Shrimp] would threaten the security and predictability of the multilateral trading system".²⁴⁵

4.345  The United States further notes that in response, the Appellate Body drew the clear distinction between objectives and obligations that the United States is asking the Panel to recognise again in this dispute.   According to the Appellate Body:

"Maintaining, rather than undermining, the multilateral trading system is necessarily a fundamental and pervasive premise underlying WTO Agreement; but it is not a right or obligation, nor is it an interpretive rule which can be employed in the appraisal of a given measure under the chapeau of Article XX".²⁴⁶

4.346  According to the United States, just as maintaining the multilateral system is a premise – an objective – underlying the WTO Agreement as a whole, "security and predictability" are explicitly set forth in Article 3.2 as a premise, an objective, underlying the DSU: "The dispute settlement system of the WTO is a central element in providing security and predictability to the multilateral trading system".²⁴⁷ Security and predictability are thus the objective which the DSU itself helps to achieve. 

4.347  In the view of the United States, to put this in its most fundamental terms, Article 3.2 does not state "Members shall provide security and predictability to the multilateral trading system".   This would impose an obligation.  Rather, Article 3.2 states, the DSU is a central element in providing security and predictability to the multilateral system.   In other words, the DSU is premised on the need for security and predictability, and itself helps to provide it.

4.348  The United States points out that the European Communities does not claim that Sections 301-310 are inconsistent with Article 3.2 precisely in recognition of the fact that it does not impose an obligation to provide security and predictability.   However, neither does DSU Article 23 impose such an obligation.

4.349  The European Communities stresses that the US comparison of this case with the US - Shrimp case is incorrect.  The legal error which the panel committed in that case was that it formulated a broad standard or an a priori test which found no basis in the text²⁴⁸ of the Treaty. By contrast, in the present case, the Panel's task is to provide an interpretation of the text of several provisions of the WTO agreements (i.e. Article 3.2 of the DSU, Article XVI:4 of the Marrakech Agreement, Article 23 of the DSU).

4.350  The United States challenges the EC claim that while US – Shrimp involved a panel formulating a new, broad test which found "no basis in the text of the Treaty", the EC proposal in this case for a new, broad test involves "an interpretation of the text of several provisions".   However, as explained earlier, there is no basis in the text of any of these provisions to conclude that Article 23 imposes an obligation to provide "security and predictability".   The situation is thus precisely analogous to that in US – Shrimp, and the EC’s proposal to create new obligations must be rejected for the same reasons.

4.351  In response to the Panel's further question whether providing "security and predictability" to other Members in respect of avoiding determinations and actions prohibited under Article 23 of the DSU – read in light of Article 3.2 of the DSU and Article XVI:4 of the WTO Agreement – is part of the legal obligation imposed in Article 23, the United States indicates that providing security and predictability to other Members is not part of the obligation set forth in DSU Article 23.  Rather, the obligation set forth in DSU Article 23 itself helps to provide that security and predictability.   Any reading of Article 23 which creates an obligation to provide security and predictability would repeat the error of the panel in US - Shrimp.

4.352  In the view of the United States, the consideration of the object and purpose of an agreement cannot serve as a substitute for an analysis of the ordinary meaning.  Even worse would be the consideration of the object and purpose of an agreement to the apparent exclusion of an analysis of the ordinary meaning of the text of an agreement provision.  Yet that is what the European Communities asks the Panel to do.  Without regard to the ordinary meaning to be ascribed to the term "determination to the effect that a violation has occurred", read in the context of requirements in Article 23.2(a) applicable to that specific type of determination, the European Communities instead asks this Panel to find an obligation "to provide security and predictability", and to analyze whether the very act of making a determination would breach this new-found obligation.

4.353  The United States notes that DSU Article 23.2(a) does not state, "Members shall provide security and predictability".  Nor does this provision even state, "Members should provide security and predictability".  Nor does Article 23.2(a) state, "Members shall/should make determinations so as to provide security and predictability", or "so as to avoid insecurity and unpredictability".  The WTO Members agreed to none of these formulations.  They agreed that they "shall not make determinations to the effect that a violation has occurred" unless specified conditions have been met.   That is all they agreed to.  Nowhere does the term "security and predictability" appear in Article 23, nor is Article 3.2 cross-referenced.  Like the rest of the substantive obligations of the WTO Agreement, the provisions of DSU Article 23 itself, enforced through the dispute settlement system, help to provide security and predictability.

4.354  The United States claims that the ordinary meaning of the words of Article 23.2(a) are that it relates only to certain determinations, that is, "determinations to the effect that a violation has occurred".  As Brazil and Canada have noted, it does not apply to determinations that a violation has not occurred, or even to determinations that a violation of  a non-WTO agreement has occurred. Nothing in the ordinary meaning of "determination to the effect that a violation has occurred" would permit a panel to examine such other determinations against the requirements of Article 23.2(a), or to examine the very act of making determinations generally.

4.355  In the view of the United States, likewise, nothing in the ordinary meaning of Article 23.2(a)'s requirements permits an analysis of whether the very act of making determinations harms "security and predictability".  Article 23.2(a) imposes the requirement that a determination to the effect that a violation has occurred not be made without recourse to dispute settlement "in accordance with the rules and procedures" of the DSU, and the requirement that any such determination be consistent with DSB-adopted findings.  Nothing in the ordinary meaning of the language setting forth these requirements imposes an additional, independent requirement to provide "security and predictability".  There is no "rule" of the DSU which requires that security and predictability be provided.   Again, Article 3.2 states that the rules themselves help to provide security and predictability.

4.356  The United States further considers that an examination of Article 23.2(a)'s context supports the conclusion to be drawn from an examination of the ordinary meaning of its language.  The immediate context of Article 23.2(a) is provided by paragraphs (b) and (c) and by Article 23.1.  Like paragraph (a), paragraphs (b) and (c) impose requirements to follow DSU procedures when undertaking dispute settlement proceedings or when taking action.  The references in these provisions are to specific DSU requirements which must be met, just as paragraph (a) refers to following DSU rules and procedures and to DSB adopted panel and appellate body findings.  Similarly, Article 23.1 requires recourse to DSU rules and procedures, none of which impose a separate obligation to provide security and predictability.  There is thus nothing in the context of Article 23.2(a) which supports the notion that there is an independent obligation to provide security and predictability in making determinations generally. 

4.357  The United States argues that given the fact that nothing in "the meaning imparted by the text itself[, read in its context,] is equivocal or inconclusive",²⁴⁹ there is no need to examine the object and purpose of Article 23.2(a).  However, such an examination confirms the meaning yielded by the ordinary meaning of the language of that provision.  To avoid the mistake of US - Shrimp,²⁵⁰ it is necessary to look to the object and purpose of Article 23, which is "strengthening the multilateral system".  It does nothing to strengthen the multilateral system to restrict determinations that a violation has not occurred, or to restrict determinations not relating to WTO agreement rights and obligations.   Looking to the broader purpose of providing "security and predictability" to the multilateral trading system, security and predictability is affirmatively harmed when the text of agreement provisions may be disregarded and new obligations created out of thin air.

4.358  The United States further maintains that the obligations set forth in DSU Article 23, enforced through the dispute settlement system, thus themselves help to provide the security and predictability referred to in Article 3.2.  The ordinary meaning of the language of Article 23, read in its context, is unambiguous that there is no separate obligation imposed by that article to provide security and predictability.

4.359  The European Communities states the US argument based on the assertion that nowhere do the terms "'security and predictability' appear in Article 23, nor is Article 3.2 cross-referenced", is both new and incorrect.  All the provisions of the DSU, including of course Article 23, must be read in the light of Article 3.2 of the DSU which informs the interpretation of the obligations of the WTO Members contained in the more detailed provisions. In fact, Article 3.2 of the DSU is part of the "General Provisions" contained in Article 3 and thus is applicable throughout the whole dispute settlement understanding without the need for cross-references in each and every Article.

4.360  The United States rebuts the EC claim that Article 3.2 is a general provision, applicable throughout the whole dispute settlement proceeding.  However, as noted earlier, Article 3.2 does not set forth an obligation to provide security and predictability.  Instead, Article 3.2 explains that the dispute settlement system itself provides security and predictability.  The general applicability of this explanation does not create an obligation under Article 23.2(a) to provide security and predictability.  However, Article 3.2 does, in fact, impose a generally applicable obligation – on panels:  not to add to or diminish the rights and obligations under the covered agreements.  This provision mandates that the Panel reject the EC’s proposal to add a new obligation not found in the text of the WTO Agreement.

TO CONTINUE WITH UNITED STATES – SECTIONS 301-310 OF THE TRADE ACT OF 1974

²²² Panel Report on Brazilian Non-Rubber Footwear, op. cit., para. 2.3.

²²³ The United States quotes the EC following argument: "[I]t would be inappropriate to interpret Article XVI:4 of the WTO Agreement so extensively as to require WTO Members to include specific language in their domestic law precluding WTO-inconsistent action".

²²⁴ The United States points out, according to the European Communities, "[T]his does not mean that all domestic law that does not preclude WTO inconsistent measures and thus provides for the possibility of actions deviating from WTO law (a "potential deviation") is WTO inconsistent".

²²⁵ See EC Panel Request, Circulated on 2 February 1999 as document WT/DS152/11.

²²⁶ Panel Report on US – Tobacco, op. cit., para. 123. (emphasis added)

²²⁷ Ibid.

²²⁸ Panel Report on US – Superfund, op. cit., para. 5.2.9. (emphasis added)

²²⁹ Panel Report on Thai – Cigarettes, op. cit., para. 86.

²³⁰ The New Shorter Oxford English Dictionary, at 1683 (1993).

²³¹ Appellate Body Report on India – Patents (US), op. cit., para. 65.

²³² Oppenheim's International Law, 9th ed., at 81-82 (footnote omitted).

²³³ Panel Report on US – Tobacco, op. cit., para. 123.

²³⁴ Panel Report on India – Patents (US), op. cit. and Panel Report on India – Patent Protection for Pharmaceutical and Agricultural Chemical Products ("India – Patents (EC)"), adopted 2 September 1998, WT/DS79/R.

²³⁵ Appellate Body Report on India – Patents (US), op. cit.,  para. 58.

²³⁶ Ibid., para. 74.

²³⁷ Ibid., para. 15.

²³⁸ Robert E. Hudec, Thinking About the New Section 301: Beyond Good and Evil, in:. Jagdish Bhagwati and Hugh T. Patrick, Editors, Aggressive Unilateralism. America's 301 Trade Policy and the World Trading System (Harvester Wheatsheaf 1990), p. 122.

²³⁹ Senate Committee on Foreign Relations, Hearing on the World Trade Organization, June 14, 1994 (testimony of Professor John H. Jackson).

²⁴⁰ Results of the Uruguay Round Trade Negotiations: Hearings Before the Senate Committee on Finance, 103d Cong. 195 (1994) (statement of Professor John Jackson) (US Exhibit 24).  The European Communities excerpts this testimony.

²⁴¹ Ibid. at 200.

²⁴² Ibid.

²⁴³ Appellate Body Report on US – Shrimp, op. cit., para. 114. (emphasis added)

²⁴⁴ Ibid., para. 116 (emphasis in original).

²⁴⁵ Panel Report on US - Shrimp, op. cit., para. 7.44 (underlining added), quoted in Appellate Body Report on US - Shrimp, op. cit., para. 112.

²⁴⁶ Appellate Body Report on US - Shrimp, op. cit., para. 116 (underlining added).

²⁴⁷ DSU Article 3.2 (emphasis added).

²⁴⁸ Appellate Body Report on US – Shrimp, op. cit., para. 121.

²⁴⁹ Appellate Body Report on US - Shrimp, op. cit., para. 114.

²⁵⁰ See ibid., para. 116 (criticizing the panel for examining the objectives of the WTO Agreement as a whole (maintaining the multilateral trading system) rather than the object and purpose of the chapeau to Article XX).