8:45 AM Apr 29, 1997

APPELLATE BODY UPHOLDS PANEL RULING ON ATC

Geneva, 29 Apr (TWN) -- The Appellate Body of the World Trade Organization has upheld the view that in textiles and clothing disputes about use of transitional safeguards, a presumption of violation must first be established by the complainant before the importing country can be asked to rebut the presumption with evidence and argument.

The ruling, upholding the findings of a panel in a case brought by India against the United States and its use of transitional safeguards under the Agreement on Textiles and Clothing (ATC) was handed down last week.

The panel, in the case involving US restrictions on imports of woven wool shirts and blouses from India (imposed by the US on 14 July 1995, but effective retrospectively from 18 April 1995, and extended till 17 April 1997), had upheld the Indian complaint that the US restrictions were a violation of the ATC.

At the interim stage itself, when its findings were communicated to the two parties, the US had withdrawn the transitional safeguard measure as of 22 November 1996, but India asked the panel to complete its work and provide a ruling, which the panel did.

But India was dissatisfied with some remarks of the panel about the role of the Textiles Monitoring Body (TMB), and the panel's legal arguments about the respective burdens of proof - first on India and then on the US - and the failure of the panel (under the doctrine of 'judicial economy') to rule on all the issues raised. India took the case on appeal on these questions.

But the Appellate body ruled against India on all the points.

The appellate body said that though the panel's views on the burden of proof "are not a model of clarity", it was not erroneous in law.

It agreed that insofar as India had brought up a complaint about the US restraints, it was for India to present evidence and argument sufficient to establish a presumption that the transitional safeguard determination made by the US was inconsistent with the US obligations under Article 6 of the ATC.

This India having done, it was then up to the USA to bring evidence and argument to rebut the presumption. While Art. 3.8 of the DSU provides that an infringement of obligations under a covered agreement is a presumption of nullification or impairment under Art. XXIII of GATT 1994, the issue was not what happens when a violation is established, but which party must first show there is or is not a violation.

While several GATT panels had held that a party invoking an exception as in Art. XX or XI:2 (c)(i) bore the burden of proof that its actions came under the exception, these had no application to the issues involving Art. 6 of the ATC.

On the TMB role, the panel had said that in examining a transitional safeguard measure, the TMB was not limited to the initial information provided by the importing member, and that parties may submit additional information which might relate to subsequent events.

On this basis, the TMB had said that though there had been no serious injury, "actual threat of serious damage had been demonstrated" by the US, and that this was attributable to the sharp and substantial increase in imports from India.

While upholding the Indian complaint and ruling against the US on the basis of the facts and evidence that the US had in reaching its determination, the panel had however justified the TMB taking the subsequent information into account, arguing that the TMB's role was different from that of a panel.

On India's appeal against this view of the panel that during a review process of the transitional safeguards, the TMB was not limited to the initial information submitted by the Member, and Parties could submit additional (subsequent) information, the appellate body said this statement of the panel was "purely a descriptive and gratuitous comment" providing background to the Panel's understanding of how the TMB functions. It was not a "legal finding or conclusion" which the Appellate body "may upheld, modify or reverse".

On the judicial economy question, India had argued before the panel that under Art. 11 of the DSU it was entitled to a finding on each of the legal claims made.

The panel had not accepted this contention and had said if "we judge the specific matter in dispute can be resolved by addressing only some of the arguments raised by the complaining party, we can do so. We therefore decide to address only the legal issues needed to make such findings."

India in appeal argued that the objectives of the DSU involved not only dispute resolution but also dispute prevention, and that this last could only be achieved if the panel rules on all the issues (so as to provide a clear ruling to preclude other disputes).

The Appellate body did not agree with this view and said that the dispute settlement system is aimed at preserving the rights and obligations of Members, and to clarify existing provisions of those agreements, and was not meant to encourage panels or the Appellate body to "make law" by clarifying existing provisions of the WTO agreement outside the context of resolving a particular dispute.

As a result, it accepted the 'judicial economy' argument of the panel in not providing answers to all the claims raised by India.

The Appellate body panel that heard the case and gave the ruling consisted of Christopher Beeby of New Zealand, Mr. James Bacchus of the US, and Mitsuo Matsuhita of Japan.

The rules about panels require that panellists not be drawn nationals of countries who are parties to a dispute. But this provision, based on anglo-saxon jurisprudence about principles of natural justice (not being a judge in one's own cause), does not apply to the WTO's appellate body.

Hence, though the US is a party, Mr. Bacchus who is a US national and leading figure in Congress on trade legislation, was on the panel.

But trade officials have argued that with the US, EU and Japan involved in most disputes either as a complainant or defending some actions, applying strictly the rule about nationality would result in appellate body members from the three majors not being to be on any panel, and that role of appellate body (in dealing only with questions of law) was such that the nationality rule need not be applied.