4.823  The European Communities considers that a request to suspend concessions must be consistent with the decision of the arbitrator and must be submitted at least ten days before the meeting of the DSB. Thus, even if the arbitrator's decision is made within the 60-day period, 70 days can elapse between the expiry of the implementation period and the DSB authorization.⁴³⁰ USTR is nevertheless required under Section 305 to determine unilaterally the level and the nature of the suspension of concessions or other obligations within 60 days. The European Communities notes that the United States has not argued that the EC's assumptions in respect of the 70-day period are incorrect.

4.824  The European Communities points out that the United States contests the EC's claim that WTO Members are required to request the establishment of a Panel under Article 21.5 whenever implementation is at issue. The United States affirms that:

"This claim is not correct, as is abundantly clear from the discussions in the ongoing DSU Review, where members are currently struggling with proposals to amend the DSU on this very point. … [I]n authorizing US retaliation in the Bananas dispute based only on the decision of Article 22.6 arbitrators, the DSB implicitly rejected this argument.  Moreover, the Article 22.6 arbitrators themselves explicitly refused to accept the EC position …".

4.825  The European Communities addresses this issue in the framework of the answer to this question since it is related to the issue of the duration of the dispute settlement procedures and the failure of Sections 301-310 to conform to US WTO obligations under the DSU.

4.826  The European Communities firstly contends that it is incorrect to state that the DSB implicitly rejected the EC argument while authorizing the suspension of concessions in the "Banana III" procedure. The DSB authorized by reversed consensus the decision of the Arbitrators concerning the level of suspension in equivalence with the level of nullification or impairment. That was the task of the DSB under Article 22.7 of the DSU, which constitutes the mirror image of the terms of reference of the arbitrator Panel under the same provision. The DSB never adopted the arbitrator's decision,⁴³¹ nor explicitly or implicitly warranted its content, with the exception of the authorization of the level of suspension of concessions. In fact, most Members participating in the DSB meeting on 19 April 1999 considered that, when addressing substantive arguments concerning the consistency of the measures adopted by the European Communities to comply with the recommendations and rulings of the DSB, the arbitrator Panel went clearly ultra vires. The European Communities considers therefore that part of its decision as taken outside its terms of reference and thus legally non-existent.

4.827 The European Communities secondly argues that as was recalled also by Brazil, "the logical way forward adopted in the banana arbitration is not a precedent for the interpretation of the sequence between Articles 21.5 and 22 of the DSU".⁴³² The statement by the United States according to which the DSB "implicitly rejected" the views of the majority of members of the WTO concerning Article 21.5 misrepresents the reality. As Brazil pointed out, "it would suffice to read the long records of minutes related to the banana dispute to confirm that there never was any implicit rejection of the obligatory sequence".⁴³³

4.828 Thirdly, the European Communities notes that Article 21.5 of the DSU provides that

"where there is a disagreement as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings such dispute shall be decided through recourse to these dispute settlement procedures, including whenever possible resort to the original Panel. The Panel shall circulate its report within 90 days after the date of referral of the matter to it"

4.829 In the view of the European Communities, this provision, and in particular the terms "shall", "Panel" and "these dispute settlement procedures" must be interpreted in accordance with the principles of the Vienna Convention on the Law of Treaties, i.e. it must 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" (Article 31.1).

4.830 The European Communities states that it is the EC view, supported by the vast majority of WTO Members, that the ordinary meaning of the term "shall" is "expressing a command or duty" (Oxford English Reference Dictionary). In the WTO context, the term "Panel" is defined in Articles 6, 7 and 8 of the DSU. The terms "these dispute settlement procedures" interpreted in "good faith" in the context of Article 21.5 mean nothing else than a dispute settlement procedure under the DSU, which includes a Panel as defined in Articles, 6, 7 and 8 (and thus not an arbitration procedure).

4.831 The European Communities points out that as the Appellate Body stated in the India - Patents (US) case, paragraph 45:

"The duty of a treaty interpreter is to examine the words of the treaty to determine the intentions of the parties. This should be done in accordance with the principles of treaty interpretation set out in Article 31 of the Vienna Convention. But these principles of interpretation neither require nor condone the imputation into a treaty of words that are not there or the importation into a treaty of concepts that were not intended".

4.832 The European Communities then argues that "where there is a disagreement as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings" there is an obligation (unless the complainant decides not to proceed as it is allowed under Article 3.7, first sentence, of the DSU) to pursue a Panel procedure whose duration is determined by the DSU itself to be at least 90 days. Sections 301-310, and in particular Section 306, unilaterally set time limits and mandate compulsory determinations and actions that are clearly incompatible with this provision. Consequently, they also breach Article 23 of the DSU.

4.833 The European Communities considers that the term "determination" in Article 23.2(a) of the DSU must be interpreted in accordance with the principles of the Vienna Convention on the Law of Treaties, i.e. it must 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" (Article 31.1).

4.834 The European Communities contends that the ordinary meaning of "determination" is "the process of deciding, determining or calculating"; (in a legal context) "the conclusion of a dispute by the decision of an arbitrator"; "the decision reached"; "a judicial decision or sentence"; in the figurative sense: "firmness of purpose, resoluteness". The verb "determine" means "to find out or establish precisely"; "to decide or settle"; "make or cause a person to make a decision", (in a legal context) "bring or come to an end" (Oxford English Reference Dictionary). These explanations of the term "determination" are unequivocally turning around the idea of a formal and definitive decision with legal consequences made in the framework of a formal proceeding.

4.835 The European Communities further argues that the immediate context of this provision is Article 23.1 of the DSU that describes the object and purpose of the more detailed rules in paragraph 2 of the same Article.⁴³⁴

4.836 The European Communities points out that Article 23.1 of the DSU starts with the temporal conjunction "when" and establishes a link with a situation in which a Member seeks the

"redress of a violation of obligations or other nullification or impairments of benefits under the covered agreements or an impediment to the attainment of any objective of the covered agreements".

4.837 The European Communities then claims that a public statement or a report made outside the context of seeking redress of an alleged violation or other nullification or impairment of benefits or any impediment to the attainment of any objective of the covered agreements would not be relevant in the context of Article 23.1 or 23.2 of the DSU.

4.838 According to the European Communities, the context makes also clear that decisions taken to exercise the rights under the DSU are not determinations covered by Article 23 because the very purpose of this provision is to ensure that Members make use of the DSU. Article 3.7 first sentence of the DSU is also part of the context of Article 23.2 (a). This provision indicates that

"[b]efore bringing a case, a Member shall exercise its judgement as to whether action under these procedures would be fruitful".

4.839 In the view of the European Communities, this provision is complemented by provisions in other covered agreements concerning the initial steps to be taken in case of a dispute.⁴³⁵

4.840 The European Communities argues that in these provisions, reference is made to a Member considering that another Member has failed to carry out its obligations under the relevant covered agreement. This type of "consideration" is clearly permissible under WTO law as a prerequisite to starting a dispute settlement procedure under the relevant procedural rules; indeed it is necessary to "play by the rules". It is thus obvious that a distinction must be drawn under WTO law⁴³⁶ between the terms "determination" and "consideration".

4.841  The European Communities then concludes that a consideration is no more than an allegation, a view expressed by a WTO Member. A mere consideration does not by itself entail any legal consequences, because it forms at best the basis for a further procedural step that must still be taken (by submitting a complaint to an outside adjudicatory body, the so-called "third-party adjudication"). In this sense, it is an expression of an opinion subject to confirmation by the exclusively competent WTO bodies.

4.842  The European Communities notes that a determination by contrast is a formal and final decision with clearly defined legal consequences. It is not subject to confirmation and is meant to have a direct legal consequence under domestic law, e.g. as a step in the process leading to retaliatory action. Since it has legal consequences, it is self-sufficient and is capable of becoming the subject matter of a dispute, both domestically and internationally.

4.843  The European Communities underlines that a determination of the absence of a violation is of course the mirror image of a determination that a violation has occurred. It is not possible to make a determination (in the above-mentioned WTO legal meaning) in one direction without at least the possibility of coming to a different conclusion. A law that requires a determination in all cases whether a violation of WTO law has occurred therefore comprises the requirement to determine in certain cases that a violation of WTO law has occurred. Such a law therefore mandates determinations that are inconsistent with Article 23.

4.844  The European Communities indicates that it firmly believes that the final word concerning either the presence or the absence of a violation must lie in the hands of the multilateral dispute settlement system. The prohibition contained in Article 23.2(a) of the DSU must be read to outlaw any formal and legally binding decision by a WTO Member regarding the WTO-consistency or otherwise of measures taken by another WTO-Member. The United States effectively argues that, because Members need to take position on the WTO-consistency of a measure adopted by another Member in order to assert their rights under the DSU, they may also adopt determinations for the purpose of deciding whether or not to impose unilateral sanctions. This reasoning turns the requirements of Article 23 on their head.

4.845  According to the European Communities, what a WTO Member can and must legitimately decide upon is whether or not it will submit an alleged WTO-inconsistency to the multilateral dispute settlement system. But this is a matter covered by a different DSU provision, i.e. Article 3.7, first sentence.

4.846  The European Communities considers that it is true that Article 23.2(a) of the DSU was drafted with Sections 301-310 of the 1974 US Trade Act in mind. But this means, of course, that the Uruguay Round participants had also in mind the threat to the security and predictability of the international trade relations created by the text of the Trade Act as it was drafted in the 1988 version. They had therefore in mind the need to insert in the covered agreements language that would constitute the second leg of what the European Communities has proposed in its oral statement of 29 June to call the "Marrakech deal".

4.847  The European Communities then maintains that the terminology used in Sections 301-310 cannot be decisive for the categorisation of the different provisions under WTO law. Quite to the opposite, the amendment of the Trade Act adopted by the US Congress in 1994 should have adjusted the US legislation to the new WTO rules. It is well known that the US Congress failed to do so. Any suggestion that Article 23 of the DSU must be read in the light of section 306 of the 1974 Trade Act as amended in 1994, after the conclusion of the Uruguay Round, would of course amount to an absurdity.

4.848  In the view of the European Communities, the objective of Article 23 of the DSU is ensuring multilateral dispute resolution, as the title of Article 23 of the DSU suggests ("Strengthening of the Multilateral System"). The mere fact that Section 306(b)(2) uses the verb "considers" does not mean that this corresponds to a "consideration" in the sense of WTO law.⁴³⁷ The distinguishing feature under WTO law is whether the WTO Member takes a formal and final position with regard to the WTO-consistency of another Member's measures, on which substantive legal consequences (e.g. trade action) can be based domestically, without awaiting the final result of the WTO dispute settlement system.

4.849  The European Communities claims that the word "considers" in Section 306(b)(2) falls in this latter category, because of the existence of a "determination" of further action under Section 306(b)(1). In the text of Section 306, this "consideration" leads to further actions (listed under Section 301) within pre-determined time limits irrespective of the conclusion of the dispute settlement procedures under the WTO. This situation occurred, as an example, in the final phase of the "bananas" dispute and led to retaliatory trade action (withholding of customs liquidation and increase of bonds for imports of a large number of items from the EC) before the conclusion of the arbitration procedure under Article 22.6 of the DSU.

4.850  The European Communities claims that the choice of the wording in the US legislation is misleading and should not constitute the standard to interpret Article 23 of the DSU. Rather, the opposite is the correct interpretative approach, which the Panel should follow.

4.851  The European Communities recalls in this context that it drew the Panel's attention to the following discrepancy in the following statements of the USTR. The United States asserts that:

"Contrary to the EC's claims, the language of Section 306(b) does not 'imply' - let alone state - that the Trade Representative is required to make a determination in violation of Article 23. Section 306 (b) sets forth steps the Trade Representative should take to assert US rights under DSU Article 22 when she considers that there has not been full implementation by another WTO Member … this judgement … is not a 'determination' …"

4.852  The European Communities point out that the public notice requesting comments on the planned 3 March 1999 action contains the following sentence:

"Given that the reasonable period of time for the EC's implementation of the WTO recommendations concerning the EC banana regime expires on January 1, 1999, the USTR must make the determination required by section 306(b) no later than January 31, 1999, and, in the event of an affirmative determination, must implement further action no later than 30 days thereafter". (emphasis added)

4.853  The European Communities considers that it is thus clear from the above that the USTR describes herself the consideration she must make under Section 306(b) as a determination and the action to be taken as a result of this determination as mandatory.

4.854  In rebuttal, the United States notes that the determination referred to in the notice is the determination indicated in Section 306(b) – to propose action to be taken if the USTR considers non-implementation to have occurred. It is not a determination that US agreement rights have been denied. While, under Section 306(b), the USTR must make the determination of proposed action if she considers that another Member has not implemented DSB rulings and recommendations, the USTR has complete discretion on the question of whether she considers non-implementation to have occurred.

4.855  In response to the Panel's question as to the definition of "determination" in the context of Article 23.2(c), the United States contends that it may be difficult to distinguish such determinations on their face.⁴³⁸ The ordinary meaning of "determination" is: "The settlement of a suit or controversy by the authoritative decision of a judge or arbiter; a settlement or decision so made, an authoritative opinion"; "The settlement of a question by reasoning or argument"; "The action of coming to a decision; the result of this; a fixed intention"; "The action of definitely locating, identifying, or establishing the nature of something; exact ascertainment (of); a fact established, a conclusion or solution reached".⁴³⁹

4.856  The United States claims that this ordinary meaning must be read within the context of this term in Article 23 and the DSU and in light of the object and purpose of Article 23.2(a). Article 23 is captioned "Strengthening the Multilateral System", and Article 23.1 emphasises that Members seeking redress of violations shall have recourse to, and abide by, the (multilateral) rules and procedures of the DSU. Read in this light, for purposes of Article 23.2(a), the term "determinations" must not be read so broadly as to frustrate, rather than promote, the goal of multilateral dispute settlement. The Panel's question recognises that Members pursuing multilateral dispute settlement will frequently need to take positions in order to conduct dispute settlement. It would be absurd and at odds with the object and purpose of Article 23 to include the taking of positions necessary to the pursuit of dispute settlement within the definition of "determinations" for purposes of Article 23.2(a).

4.857  In the US view, for this reason, the term "determination" in Article 23.2(a) can not include decisions reflecting a Member's belief that another Member has failed to comply with its obligations, since Members will frequently undertake dispute settlement procedures based on such a belief.

4.858  The United States goes on to explain that notwithstanding the above explanation, for purposes of this dispute, it is not necessary to delineate the precise boundaries of the term "determination". The European Communities has characterized two actions in Sections 301-310 as "determinations": when the USTR issues her "determination" under Section 304, and when the USTR "considers" under Section 306 whether implementation has occurred in order to decide whether to pursue DSB authorization pursuant to Article 22. Even if Section 304 involves a "determination", the European Communities has failed to prove it is a determination in violation of Article 23.2(a) since, among other reasons, it need not be a determination that a violation has occurred. However, Section 306 does not involve a determination for purposes of Article 23.2(a). The United States argues that the use of the term "considers" in Section 306 parallels that in the DSU, and is used in both places to indicate the belief that recourse to multilateral dispute settlement procedures is necessary. In the view of the United States, Article 22 requires that a Member seeking DSB authorization to suspend concessions must propose how it intends to do so no later than 30 days following the expiration of the reasonable period of time, and Section 306 reflects this fact in US law.

4.859  In response to a Panel question concerning statements in annual reports, and whether such statements can be "determinations", the United States considers that the question highlights the fact that only a limited sub-set of statements will constitute "determinations" under Article 23. As discussed earlier, this sub-set cannot include statements merely indicating a belief regarding another Member's practices.

4.860  In the view of the United States, it is difficult in the abstract to answer the question of whether statements in annual reports or public statements would rise to the level of determinations without knowledge of the specific context and statements made. Ultimately, a decision on whether a given statement constitutes a "determination" would have to be addressed on a case-by-case basis.

4.861  In rebuttal, the European Communities notes that the United States claims that the "consideration" of the USTR under Section 306(b) is not a determination within the meaning of Article 23 of the DSU but a logical pre-condition for the exercise of the rights under Article 22 of the DSU. This would be correct if the only consequence of the "consideration" of the USTR was an invocation of Article 22.

4.862  The European Communities points out that the plain language of the law however shows that this is clearly not the case. If the USTR makes an affirmative determination under Section 306(b), she shall simultaneously determine what further action she will take.

4.863  The European Communities considers that the USTR shall treat the determination on further actions as a determination made under Section 304(a)(1), which is subject to the provisions of Section 305 governing the implementation of sanctions.

4.864  The European Communities then concludes that the "consideration" is thus a formal determination in the framework of a domestic procedure through which the United States seeks redress of a violation of WTO obligations, and that determination must be made and implemented even when the WTO proceedings on which such a determination or action could be based have not been completed.

4.865  The European Communities argues that a mere requirement that the USTR monitors the implementation of DSB recommendations and decides to invoke Article 22 if appropriate would, of course, not be inconsistent with Article 23. However, the "consideration" and the simultaneous determination of further action the USTR is obliged to make under Section 306(b) are inconsistent with Article 23 because they constitute the first step in a domestic proceeding under which sanctions must be imposed even in the absence of a DSB authorization to this effect.

4.866  The United States further responds that as with its claim regarding Section 304, it can meet its burden with respect to its Section 306(b) claim only by establishing that Section 306(b) mandates: (1) a determination to the effect that a violation has occurred; (2) which has not been made through recourse to DSU rules and procedures, or is not consistent with adopted panel or Appellate Body findings or an arbitral award.

4.867  The United States argues that the EC's concession that Section 304 allows the USTR to make a determination of consistency must be considered to include an acknowledgement that the USTR is free under Section 306(b) to "consider" that another Member has implemented its commitment to comply with DSB rulings and recommendations. The European Communities reasoned that the language of Section 304(a)(1) provided for an "either/or" determination, including the option of determining that US agreement rights had not been denied. While the United States rejects the EC's conclusion that only two determinations are possible under Section 304, at least these two must be considered possible under Section 306(b). Section 306(b) provides "if the USTR considers [non-implementation to have occurred]", with no constraint whatsoever on what might lead her to consider otherwise, or how she may characterize that belief. This is a purely discretionary decision, and Section 306(b) cannot be read to mandate in any way what the USTR will "consider", let alone a "determination" that a violation has occurred.  The EC's claim regarding Section 306(b) must fail for this reason.  Without a determination that a violation has occurred, or a law mandating such a determination, there can be no violation of DSU Article 23.2(a).

4.868  The United States considers that the EC's claim must also fail because what the USTR may "consider" is not a determination.  The term "considers" is used throughout the DSU in precisely the same manner as it is used in Section 306(b):  to indicate a belief concerning another Member's actions calling for the invocation of multilateral dispute settlement proceedings. To characterise such a belief as a "determination" for purposes of DSU Article 23.2(a) would undermine the objective of multilateral determinations underlying Article 23.

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