Private Standardization and the SPS and TBT Agreements
Attribution and breach: an analysis of the conditions for responsibility in relation to private standards within the framework of the WTO
Thesis submitted in partial fulfillment of the requirements for the degree of Master of Laws
in
International and European Law: International Trade and Investment Law
University of Amsterdam
Supervisor: E. Partiti Due date: 31 July 2015 12 EC
Alexander Schurink UvA ID: 6180981
Abstract
The Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) and the Agreement on Technical Barriers to Trade (TBT), both trade agreements within the framework of the World Trade Organization (WTO), aim to prevent, respectively, sanitary and technical requirements from constituting unnecessary obstacles to international trade. Not only States require compliance with such standards; individual firms, consortia and NGOs develop and apply sanitary and technical standards independently in pursuit of commercial purposes. These private standards serve a variety of desirable economic and social functions but may come to constitute impediments to market access. While WTO rules are not applicable to private conduct, this thesis finds that WTO Members may under certain circumstances be held responsible for the trade restrictive effects of private standards. It is suggested that the obligations in Article 4 TBT extend to private standards developed and applied by all actors that pursue regulatory influence over others; thus including associations of firms and NGOs. The obligations do not cover standardization activities by individual firms; interference with their standardization processes may frustrate competition and its virtues. The nature of the obligation to “take such reasonable as may be available” under Article 4 TBT and the autonomy of the bodies it is directed at suggest that there are certain limits to what may be expected of a Member.
Keywords: WTO; State responsibility; attribution; SPS; TBT; measures; product requirements; labeling; private standards; standardization; “reasonable measures as may be available”.
Table of Contents
1. Introduction ... 1
2. Methodology ... 3
3. Private standard-setting and international trade ... 4
3.1. Classifying private standard-setters... 7
3.2. Market access v. freedom of contract... 9
3.3. Trade concerns ... 11
4. State responsibility: attribution and breach... 12
4.1. State responsibility under general international law ... 13
4.1.1. Articles 4, 5, 8 and 11 ASR ... 16
4.2. Attribution by GATT/WTO dispute settlement bodies ... 18
4.2.1. Attribution based on the exercise of governmental authority ... 18
4.2.2. Attribution based on instruction, direction or control ... 21
4.3. Actionable measures and scope of application: detrimental effects generated by private actors ... 22
4.3.1. Private standards as requirements under Article III:4 GATT ... 24
5. The special regimes of the SPS and TBT ... 25
5.1. SPS measures ... 26
5.2. Private standards as SPS measures ... 27
5.3. The special rules of attribution and responsibility in Article 13 SPS ... 28
5.4. TBT measures: technical regulations and standards ... 31
5.5. Private standards as technical regulations ... 33
5.6. The special rules of attribution and responsibility in Article 3 TBT ... 34
5.7. Private standards as standards ... 36
5.8. The special regime of Article 4 TBT: “reasonable measures as may be available” in relation to private standard-setters... 42
6. Conclusion ... 45 7. References ... 48 7.1. Literature ... 48 7.2. GATT/WTO cases ... 50 7.3. GATT/WTO Materials ... 53 7.4. Other Materials ... 54
1. Introduction
Non-governmental bodies, ranging from individual retail chains and industry associations to transnational environmental organizations, employ standards relating to products characteristics, processes and production methods to regulate conduct in their supply chains or sector. Such product standards are used for issues of efficiency and coordination, competition, or as a response to consumer demand and global regulatory gaps. The term private standard is used to designate product standards developed and applied by non-governmental bodies, and with which compliance is not mandatory as a matter of law. While private standards may serve important and legitimate economic and social functions, there are a number of concerns with regard to their effects on international trade.
Private standards may skew the conditions for competition and undermine the market access concessions WTO Members have made. Non-governmental bodies may create barriers to trade by setting product standards that are unnecessarily burdensome, discriminate, or constitute disguised restrictions on trade. Also, traders incur additional costs as a result of the multiplicity, overlap and lack of recognition of equivalence in private schemes, and are often unable to voice complaints as a result of a lack of transparency in the formulation and application of private schemes. In addition, the private nature of a standard scheme may be employed to circumvent the disciplines of the WTO Agreements; governments may mandate, require or create certain conditions in which private actors set product standards that have trade-restricting effects.
The SPS and TBT primarily set out to deal with requirements for product characteristics, processes and production methods that governments impose in order to be marketed or to determine eligibility for certain treatment, such as bearing certain labels. Both types of measures are prominent in domestic regulation; the average country imposes SPS measures on about 15 per cent of products and trade, and TBT measures on about 30 per cent of products and trade.1 The Agreements aim to preserve the equality of opportunities for competition and recognize the, often unnecessary, obstacles that diverging domestic regulations impose on international trade and aim to achieve harmonization in their respective regulatory areas.
1
World Trade Report 2012: Trade and Public Policies: A Closer Look at Non-Tariff- Measures in the 21ste Century (World Trade Organization 2012) 111.
The SPS aims to minimize the negative effects on international trade in relation to measures which are intended to protect human, animal or plant life or health, against either food-borne or pest- or disease- related risks within the territory of a WTO Member.2 The TBT deals more generally with documents that set out requirements, mandatory or voluntary, for product characteristics, their related processes and production methods, the use of symbols, marking or labeling, and the procedures that assess the conformity with such requirements.3 For manufactured goods private standards often relate to technical requirements of design or performance, but increasingly also pertain to non-product related concerns such as labor conditions, animal welfare, and environmental concerns.4 The TBT covers non-product related requirements only to the extent that they relate to the labeling of products.
The Agreements within the framework of the WTO are binding only on the Contracting States; they are not applicable to conduct of private actors.5 The covered Agreements can thus not serve to discipline private standards directly. Nonetheless, under certain circumstances may WTO Members incur responsibility for conduct by private actors. This thesis explores the conditions under which WTO Members may be held responsible for private standards that constitute barriers to international trade. Fundamental in this analysis is the concept of attribution, which determines for whose actions the State may be held responsible for the purposes of international law.
The customary international law on attribution requires private conduct to have a clear nexus with government action to render it attributable. Correspondingly, in the context of the GATT dispute settlement bodies have assessed government involvement in private conduct to determine whether the responsibility of the State
2
See Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) Art. 1 and Annex A.1.
3
See Agreement on Technical Barriers to Trade (TBT) Annex 1.1/1.2/1.3.
4
Private Standards and the SPS Agreement: Note by the Secretariat, Committee on Sanitary and Phytosanitary Measures, 24 January 2007, G/SPS/GEN/746 para 13; W Mattli & T Büthe, The New Global Rulers: The Privatization of Regulation in the World Economy (Princeton University Press 2012) 5; C Vidal-León, Corporate Social Responsibility, Human Rights, and the World Trade Organization, (2012) 16 Journal of International Economic Law 893–920, 894.
5
SM Villalpando, Attribution of Conduct to the State: How the Rules of State
Responsibility May Be Applied Within the WTO Dispute Settlement System, (2002) 5(2)
Journal of International Economic Law 393-420, 394/400; RJ Zedalis, When do the
Activities of Private Parties Trigger WTO Rules?, (2007) 10(2) Journal of International
may be incurred. The SPS and TBT explicitly provide for obligations in relation to non-governmental bodies; thereby the Agreements create special rules for holding WTO Members responsible for conduct by private actors. These observations lead to the following research question: what are the conditions for attribution and the subsequent responsibility of a WTO Member in relation to private standards within the context of the SPS and TBT and what do the obligations in Article 13 SPS and Articles 3 and 4 TBT entail?
2. Methodology
This thesis’ research is concerned with the legal conditions that apply to hold WTO Members responsible for private product standards. This qualitative analysis founds itself on the relevant works of academics selected through the snowballing method and searches in relevant databases, the relevant WTO Agreements, documents and jurisprudence, and other international agreements and decisions. First some preliminary issues in relation to standardization by private actors are assessed through the perspective of some economic, legal and International Relations theories of private governance to provide some background for the legal analysis.
As the research question is concerned with an issue of WTO-law the concept of attribution will be addressed from the internal perspective of the WTO. Nonetheless, parallels with the broader body of public international law will be provided. Chapter II of the International Law Commission’s (ILC) Articles on State Responsibility (ASR) contains the codification of the customary international law on attribution, and will therefore serve as the authority to draw these parallels. 6
The application and interpretation of the provisions of the SPS and TBT is addressed entirely from a WTO perspective. Where available the research relies on decisions by WTO dispute settlement bodies. In the absence of WTO case law the relevant provisions are interpreted according to the rules of customary international law on treaty interpretation as promulgated in the Vienna Convention on the Law of Treaties (VCLT).
6
Articles on Responsibility of States for Internationally Wrongful Acts, adopted by the International Law Commission at its fifthy-third session (2001), Official Records of the UN
3. Private standard-setting and international trade
Private actors create and employ standards for a variety of reasons, often fulfilling important economic functions.7 It is useful to distinguish between two types of standards: those relating to quality and those relating to compatibility of products.8 On one side of a continuum standards signal certain qualities, and thereby increase efficiency of economic transactions by solving information asymmetries between buyers and sellers.9 In this sense standards serve to differentiate between products by informing about compliance with certain e.g. health, safety, social or environmental qualify levels.
Compatibility standards on the other side of the continuum are used to secure compatibility, governing technological and transactional interconnectivity of goods.10 Thereby standards may be used to enhance efficiency for internal operations and communication, and resolve issues of coordination.11 Compatibility standards are essential for economic growth, innovation and competitiveness. Standardization provides the infrastructure to benchmark technological advances and is thereby essential for technological progress.12 First-mover advantages provide incentives for firms to innovate, and standardization is often regarded as a significant driver for economic development.13
Private actors are the driving force behind technical standardization, both quality and compatibility, in most national systems as technical expertise and flexibility of private actors is essential to keep standards effective and relevant.14 Governments employ different systems of technical standard setting. The United
7
A Link, Market Structure and Voluntary Product Standards, (1983) 15(3) Applied
Economics 393-401, 393-395. 8
P David & S Greenstein, The Economics of Compatibility Standards: An Introduction to Recent Research, (1990) 1(2) Economics of Innovation and New Technology 3-41, 4.
9
ibid; Link (n 7) 393.
10
ibid; KW Abbott & D Snidal, International Standards and International Governance, (2001) 8(3) Journal of European Public Policy 345-370, 347.
11
Link (n 7) 395; Abbott & Snidal (n 10) 355; F Cafaggi, A Renda & R Schmidt,
Transnational Private Regulation, (2013) 1 OECD International Regulatory Co-operation:
Rules for a Globalized World 9-58, 21. 12
P Delimatsis, ‘Relevant International Standards’ and ‘Recognized Standardization Bodies’ under the TBT Agreement, (2014) TILEC Discussion Paper No. 2014-031 (available at http://ssrn.com/abstract=2489934) 2/ FN 4.
13
Link (n 7) 393; Delimatsis (n 12) 2; Summary Report of the TBT Workshop on the Role of
International Standards in Economic Development, Note by the Secretariat, Committee on
Technical Barriers to Trade, 20 May 2009, G/TBT/W/310 para 4.
14
States’ (US) system relies on market solutions where competition is believed to lead to the most effective and efficient outcomes.15 Misuse of standards for anti-competitive practices is dealt with through competition law. Technical standardization in the US is constituted by a fragmented set of private actors regulated through voluntary private measures.16 Where the government regulates it is often required, such as in the National Technology Transfer and Advancement Act, to adopt standards developed by private standardizing bodies.17
European countries on the national level and the European Union (EU) on the regional level employ a hierarchical and publicly coordinated system, securing openness and due process in order to achieve optimal outcomes.18 Under the New Approach to technical standardization in the EU, compliance with private standards may serve as a presumption of conformity with applicable legislation.19 In such instances European legislation merely sets out essential requirements which are further elaborated by the European Committee for Standardization (CEN), the private federation of national standardizing bodies, acting on standardization mandates.20 In this framework standards remain voluntary in the sense that they are merely one way that compliance with the legal requirements may be demonstrated.21
It is in this context that the references that the TBT makes to non-governmental bodies with activities in standardization must be assessed. Indeed, the travaux préparatoires of the TBT shows that negotiating Members recognized the complications arising from the involvement of the private actors in technical standardization.22 In this regard the European Communities noted that there was an
15
W Mattli & T Büthe, Setting International Standards: Technological Rationality or Primacy of Power?, (2003) 56(1) World Politics 1-42, 23.
16
ibid 24.
17
J Bohanes & ID Sandford, The (Untapped) Potential of WTO Rules to Discipline Private Trade-Restrictive Conduct, Society of International Economic Law (SIEL) Inaugural
Conference 15-17 July 2008 (available at http://ssrn.com/abstract=1166623) 30. 18
Malti & Büthe (n 14) 25-26.
19
See Council Resolution (EC) of 7 May 1985 On a New Approach to Technical Harmonization and Standards [1985] OJ C136/1 s B (III) Annex II.
20
Bohanes & Sandford (n 17) 30; H Schepel, Private Regulators in Law, in: J Pauwelyn, R Wessel & J Wouters (eds.), Informal International Lawmaking (Oxford University Press 2012) 356-367.
21
Schepel (n 20) 359.
22
Negotiating History of the Coverage of the Agreement on Technical Barriers to Trade
with regard to Labeling Requirements, Voluntary Standards, and Processes and Production Methods Unrelated to Product Characteristics: Note by the Secretariat, Committee on
“imbalance of the obligations of the TBT between Members with highly centralized and those having only limited responsibilities in the area of standardization”.23 It recognized that as a result of “reduced direct involvement in technical standardization there was an increasing importance of private standardizing bodies” and therefore found appropriate “to ensure that Parties effectively carry out their responsibility to ensure similar levels of transparency and non-discrimination in the private and public sector.”24 The discussion relating to the balance of obligations in the TBT led to first level obligations (“shall ensure”) for the central government level bodies and second level obligations and (“reasonable measures as may be available”) in regard to local and non-governmental bodies.25 In addition the drafters included a Code of Good Practice for standardizing bodies on all levels.26
Technical standardization by private bodies is thus clearly envisaged in the TBT. Private actors engage in compatibility standardization mostly as a result of the incentives technological and transactional interconnectivity provide, while quality standards are used to differentiate between products. Quality standards relate mostly to product characteristics responding to consumer tastes and preferences, however, a relatively new area of private standards relates to consumer concerns regarding corporate social responsibility (CSR)27 and food-safety.28
An increased sense of social awareness of consumers about business practices and process and production methods in relation e.g. labor conditions animal welfare and effects on the environment have led corporations and civil society organizations to adopt standards addressing these issues.29 Firms apply private standards to satisfy consumer demand, secure consumer confidence, and aim to limit reputational risks
23
Second Three-Year Review of the Operation and Implementation of the Agreement, Committee on Technical Barriers to Trade, 13 November 1985, TBT/23 paras 1-2.
24
ibid.
25
See TBT Arts. 3 and 4.
26
See TBT Annex 3.
27
In its note on private standards the Secretariat of the WTO employs the following definition of CSR: “the concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”, see WTO Secretariat (n 4) FN 4.
28
WTO Secretariat (n 4) para 6; T Wlostowski, Selected Observations on Regulation of Private Standards by the WTO, (2010) 30 Polish Yearbook of International Law 205-233, 213; J Wouters & D Geraets, Private Food Standards and the World Trade Organization: Some Legal Considerations, (2012) 11 World Trade Review 479-489, 480.
29
regarding these sensitivities. 30 In the food sector specifically retailers set high food-safety standards as means to avoid liability, fulfill due diligence requirements for risk prevention and respond to consumer concerns regarding the insufficiency of government regulation as a result of high profile food scandals.31
As noted above, the TBT clearly envisages private parties engaging in technical standardization and therefore contains specific obligations for WTO Members with regard to non-governmental bodies. However, the extent of these obligations remains unclear. In addition, the consumer demand with regard to issues of private-food-safety and CSR is a phenomenon that largely post-dates the negotiation of the TBT and the SPS.32 The ever-increasing focus on processes and production methods has led to controversy regarding their relevance in the WTO regime. With regard to the SPS it is unclear whether the negotiators considered private actors engaging in setting SPS type measures for their own objectives when drafting the SPS.33 While the SPS like the TBT creates obligations for Members with regard to non-governmental entities within their territories whether these obligations extend to private standard-setters is contentious.34
3.1. Classifying private standard-setters
Based on the standard-setter four categories of private standards can be distinguished: (i) company specific standards, developed internally and applied to the whole supply chain of a company, e.g. large retailer codes as such Tesco Nature's Choice, Carrefour Filiere Qualite or the H&M Code of Conduct, but also smaller initiatives as the Tony’s Chocolonely’s Code (ii) consortia standards, which are often developed by a sector-specific consortium, e.g. GlobalGAP or British Retail Consortium (BRC) (iii) expert-led standards, developed by non-profit expert organizations aiming to achieve consensus and dealing mostly with technical issues, e.g. National Fire Protection
30
WTO Secretariat (n 4) para 4; Włostowski (n 28) 213; MN Moody, Warning: May Cause
Warming Potential Trade Challenges to Private Environmental Labels, (2012) 65(5) Van der
Law Review, 1401-1446, 1414. 31
WTO Secretariat (n 4) para 6; Wouters & Geraets (n 28) 480.
32
D Gascoine, Private voluntary standards within the WTO multilateral framework, Report for the United Kingdom Department for International Development, in: WTO, Committee on
Sanitary and Phytosanitary Measures, Private Voluntary Standards Within the WTO Multilateral Framework: Submission by the United Kingdom, 9 October 2007,
G/SPS/GEN/802, 21.
33
ibid.
34
WTO Secretariat (n 4) para 13; D Prévost, Balancing Trade and Health in the SPS
Association (NFPA) but also national standardizing bodes, CEN and the International Organization for Standardization (ISO); and (iv) civil society standards, established as an initiative by a non-profit organization mostly regarding social and environmental concerns acting nationally or internationally, e.g. Forest Stewardship Council (FSC), Marine Stewardship Council (MSC) and UTZ.35
Within and between these categories private standards schemes have different levels of cooperation and stakeholder participation.36 In company specific and consortium standard-setting the regulator and the regulated overlap, while the beneficiaries, the suppliers and retailers affected by the standard, are outside the regulatory body.37 Especially in the food-sector various overlapping and competing consortium standard schemes have been developed over the last 15 years.38 Also, company and consortium standards may include civil society standards developed by NGOs.
The dividing line between consortium and expert-led standardizing organizations may not always be obvious. Expert-led standards organizations generally consist of industry representatives and may be open for capture by powerful industry participants.39 Although, supposedly, expert-led organizations employ more formalized procedures and stakeholder involvement to secure objectivity.40 Expert standardizing organizations such as ISO and CEN may be formally private but derive their authority from the participation of national standardizing bodies. Through such participation, formalized procedures and opportunities for consensus they achieve a somewhat inclusive model where the subjects regulated and the beneficiaries of the standard are represented.41
Civil society standards promulgated by NGOs regulate conduct of firms through accreditation schemes to benefit consumers. NGO regulators involve in varying degrees other stakeholders; while NGOs like the FSC and MSC employ
35
See the classification of the United Nations Industrial Development Organization: http://www.unido.org/en/what-we-do/trade/quality-and-compliance-infrastructure/standards-and-conformity/private-standards.html (accessed 15/04/15).
36
F Cafaggi, New Foundations of Transnational Private Regulation, (2011) 38(1) Journal of
Law and Society 20-49, 32-38; Cafaggi, Renda & Schmidt (n 11) 8. 37 Cafaggi (n 36) 32. 38 ibid 33. 39 ibid 34. 40 ibid 33. 41 ibid 34.
multistakeholder models ensuring a high degree of procedural accountability others may be exclusionary in the interest they represent.42
The development and application of private standards increasingly transcends national borders. ISO is the most prominent example showing the efforts in harmonizing standards on the international level. In addition, the activities of firms and NGOs are not confined to national borders; their standards may be developed and applied transnationally. The globalization and tendency towards vertical integration of supply chains has increasingly led private standards to be applied and enforced across countries through direct contracts between suppliers and retailers.43 Further, a variety of bodies and organizations such as GlobalGAP, FSC and UTZ or their competitors operate within and across numerous jurisdictions. The enormous amount of private standard schemes has even led to the emergence of meta-regulators, like the ISEAL Alliance, setting out best practices for the design and implementation of social and environmental standards initiatives.44
3.2. Market access v. freedom of contract
Not only private standards relating to issues of compatibility or efficiency may be trade enhancing; CSR and private food-standards may drive investments and infrastructure improvements in developing countries.45 Further, compliance with a private standard that is used internationally, or applied by firms operating internationally, may open access to multiple markets.46 The opening of niche markets may also allow for a price premium on products complying with a private standard.47 Notwithstanding these potential benefits, contentions may arise when WTO Members experience that their exporters fulfill the minimum standards imposed by the importing WTO Member but are still not able to get access to that market.
42
Cafaggi, Renda & Schmidt (n 11) 36; S Gandhi, Regulating the Use of Voluntary Environmental Standards Within the World Trade Organization Legal Regime: Making a Case for Developing Countries, (2005) 39(5) Journal of World Trade 855-880, 859.
43
WTO (n 4) para 6; Cafaggi, Renda & Schmidt (n 11) 10/21.
44
Cafaggi, Renda & Schmidt (n 36) 11; Private standards schemes with high degrees of (government) stakeholder involvement and procedural accountability may come to constitute international standards in the context of the WTO, see E Partiti, The Appellate Body Report in US – Tuna II and Its Impact on Eco-Labelling and Standardization, (2013) 40(1) Legal
Issues of Economic Integration 73–94, 91-93; Appellate Body Report, United States – Measures Concerning the Importation, Marketing and Sale of Tuna Products,
WT/DS381/AB/R, adopted 16 May 2012 (ABR, US – Tuna II) paras 352-380.
45
Wouters & Geraets (n 28) 482.
46
WTO Secretariat (n 4) para 11.
47
To get their products on the shelves producers are required to meet another set of criteria promulgated by private actors. Especially when one or several standards are applied by large retailers with significant market shares or by a large number of firms, suppliers may have very limited options other than compliance. A voluntary private standard may even become a de facto requirement to access a market.48 These requirements may have the same or a similar purpose as the requirements the producers already comply with but have diverging or more stringent criteria.49 In addition, as addressed above, private standards may focus on non-product related processes or production methods (npr-PPMs). By imposing more stringent and additional requirements compliance with private standards may be difficult and costly to meet and thereby function as serious impediments to international trade. Consequently, private standards may undermine the market access that the WTO guarantees.
There are different views on the concept of market access that may be adopted in this regard: formal market access, i.e. the guarantee that exporters are able to offer products on a market without any disadvantage, and actual market access i.e. actual sales in the importing country.50 While the WTO regime aims to guarantee the equality of competitive opportunities by disciplining formal market access, it leaves actual sales as an issue for the market to decide. This distinction highlights the importance of the notion of freedom of contract in the debate. Private standards driven by consumer demand serve to differentiate between products that have, objectively or subjectively, superior qualities than those products that merely fulfill the minimum requirements governments impose.51 In a free market private actors are free to determine the criteria to select the products they distribute.
Government interference beyond the pursuit of public policy objectives, such as health, safety, deceptive practices and anti-competitive behavior, would extend WTO rules too far into the ambit of the free market. Within the confines of acceptable practices, as defined by public policy, the freedom of contract allows private actors to
48
ibid 859-860; WTO Secretariat (n 4) para 9; S Bernstein & E Hannah, Non-State Global Standard Setting and the WTO: Legitimacy and the Need for Regulatory Space, (2008) 11
Journal International Economic Law, 575–608, 586; Włostowski (n 28) 213; Vidal-León (n
4) 913. 49 Włostowski (n 28) 213 50 ibid 214. 51 ibid 210.
make their own business and marketing considerations. Once a government imposes limitations on the selectiveness of private actors the ability to meet demand and distinguish themselves from competitors may be affected, potentially frustrating innovation and development. In addition, it might not be socially desirable or even achievable to limit the criteria producers use to distinguish products. The issue of disciplining private standards, and specifically demand-driven standard setting, is thus linked with the freedom of contract, and the limits of government regulation.
3.3. Trade concerns
A number of specific concerns with regard to the effects of private standards on trade can be identified. Concerns with regard to content include the lack of scientific justification for requirements relating to processes and production methods, and the (unnecessary) divergence from relevant international standards.52 The focus on npr-PPMs such as CSR issues relating to the environment, animal welfare or labor conditions raises concerns especially in developing countries. 53 Distinguishing between products on the basis of npr-PPMs is sometimes regarded as in inherently discriminatory, cutting away competitive advantages by the inability of developing countries to meet such requirements, and culturally inappropriate.54
Unnecessary impediments to trade may occur also as a result of the multiplicity of private standard schemes both within and between markets, without the possibility for demonstrating equivalence between schemes.55 Further, the cost that accompany third party certification and the fact that such certification is often limited to certain specified bodies may proof considerably burdensome for suppliers from developing countries.56 Adjustment costs to comply with substantially and procedurally diverging private standard schemes may be prohibitive for suppliers to comply with the requirements of multiple importers.57 Many of such difficulties and additional cost unnecessarily hinder trade. These difficulties are often accompanied
52
WTO Secretariat (n 4) para 14; Wouters & Geraets (n 28) 481.
53
Gandhi (n 42) 858; WTO Secretariat (n 4) para 13; Vidal-León (n 4) 894.
54
Gandhi (n 42) 857; Vidal-León (n 4) 897.
55
WTO Secretariat (n 4) para 14; Vidal-León (n 4) 897.
56
ibid.
57
M Hopkins, Criticism of the Corporate Social Responsibility Movement, in: R Mullerat (ed), Corporate Social Responsibility; The Corporate Governance of the 21st Century (Wolters Kluwer 2011) 533.
by a lack of transparency, stakeholder involvement and or other possibilities to voice complaints
A private standard scheme that takes a one-size-fits-all approach fails to take into account specific characteristics of the suppliers it regulates and may become de facto discriminatory.58 Private standards can unintentionally be discriminatory in design or application but may even involve protectionist elements constituting a disguised restriction on trade.59 While many of these concerns relate to companies and industries independently creating trade barriers, private standards also have the potential to serve as vehicle for the circumvention of the SPS and TBT disciplines by States. While it is important to recognize the differences in actors and objectives, the fact that private standards, whether intentional or not, may create significant barriers to trade marks the need for efforts in disciplining private standardization in the WTO context.
4. State responsibility: attribution and breach
The trade agreements under the auspices of the WTO discipline the conduct of the Contracting States; the obligations provided therein are binding only on them. Private actors are not subjected to WTO rules, which are thus not directly applicable to private conduct.60 The annexed Agreements can thus not serve to discipline private standards directly. Nonetheless may WTO Members under certain circumstances be held responsible for conduct by private actors. Consequently is the following analysis concerned with the conditions that may give rise to such responsibility. The process of attribution defines the contours of the State for the purposes of international law. It entails the determination of the conduct that may be regarded belonging to the
58
Gandhi (n 42) 859.
59
See Gandhi (n 42) 860 who provides some examples of schemes which were allegedly applied in manner that favored domestic producers. One of these examples is the Flower Label Program (FLP) which was a private standard by a German industry-led NGO initiative which allegedly restricted trade under the guise of reducing chemicals in the cultivation of flowers. The exporting WTO Member, Colombia, alleged the scheme to pursue protectionist purposes: it was discriminatory as it was applied only with regard the imports from that Member, was based on subjective criteria at the discretion of the NGO, did not take account of varying production methods between regions, entailed significant costs and was
accompanied with negative pressures. See Colombia's submission to the Commission on Trade and Environment, Environmental Labels and Market Access: Case Study of the
Colombian Flower Growing Industry, WT/CTE/W/76, 9 March 1998 (CTE Submission
Columbia) 60
collective entity, i.e. the State. 61 The conduct of private actors, i.e. actors with a legal personality distinct form that of the State, cannot, in principle, lead to responsibility of the State. However, in some instances may conduct by private actors be regarded as belonging to the State.
Firstly, the concept of attribution in general international law, within the framework of the ASR, and their relevance for WTO disputes is discussed. Secondly, a number of illustrative cases in which GATT/WTO dispute settlement bodies dealt with issues of attribution are examined. While the focus of the current inquiry is on the disciplines of the SPS and TBT this examination provides context and some useful insights for the subsequent analysis. Thirdly, the analysis turns to the SPS and TBT, which it finds to provide for special regimes of State responsibility. The SPS and TBT provide for rules of attribution and responsibility in relation to conduct by non-governmental bodies that deviate from the rules of as formulated by the ASR and the corresponding analysis by dispute settlement bodies.
4.1. State responsibility under general international law
A State incurs international responsibility for every internationally wrongful act.62 Conduct becomes an internationally wrongful act when it is attributable to the State and it constitutes a breach of an international obligation of the State.63 Thus, any attributable breach of an international obligation gives rise to the responsibility of a State; no further conditions apply. Although attribution is a normative process, only the element of breach is concerned with the legality of certain conduct.64 The ILC’s ASR formulate the general principles governing State attribution and subsequent responsibility. The principles relevant for the current analysis, Articles 4, 5, 8 and 11 ASR, may be considered to reflect the customary international law on attribution, and thus binding on all States.65 The ASR are therefore applicable in all fields of
61
L Condorelli & C Kress, The Rules of Attribution: General Considerations, in: J Crawford, A Pellet & S Olleson (eds), The Law of International Responsibility (Oxford University Press 2010) 221.
62
International Law Commission, Articles on Responsibility of States for Internationally Wrongful Acts - with Commentaries, (2001) 2(2) Yearbook of the International Law
Commission 31-141 (ILC ASR) Art. 1. 63
ILC ASR (n 62) Art. 2.
64
Villapando (n 5) 398.
65
The International Court of Justice confirmed in Case Concerning Application of the
Convention on the Prevention and Punishment of the Crime of Genocide (Bosnia &
international law where an issue of State responsibility arises. WTO law is not distinct in this regard; it exists within the broader corpus of public international law. 66 Nonetheless, States are free to contract out rules of general international law other than jus cogens.67 As provided in Article 55 the ASR do not apply where, and to the extent that, States have created lex specialis to govern the conditions for incurring responsibility for wrongful acts.
The WTO, as self-contained regime, has contracted out of various rules of general international law, and employs special rules for determining whether and how the benefits arising out of the multilateral trading system are nullified or impaired and which consequences arise out of that situation. 68 The Dispute Settlement Understanding (DSU) does not contain special rules that determine which conduct may be regarded as that of the State throughout the Agreements.69 However, several of the annexed Agreements internalize the issue of attribution in terms of defining the scope of the substantive provisions.70 It is argued in Chapter 5 that such special rules of attribution ratione materiae, i.e. the co-existence of a primary rule with a special rule of attribution, are found in Article 13 SPS and Articles 3 and 4 TBT.71
Besides applicability per se, the ASR may also become relevant in the WTO framework as an interpretative tool with regard to a certain provision in a covered Agreement. Article 3.2 DSU provides that the WTO Agreements are to be interpreted
(Genocide) para 414 that Articles 4 and 8 ASR reflect customary international law. See also I van Damme, The Appellate Body’s use of the Articles on State Responsibility in US – Anti-dumping and Countervailing Duties (China), in: C Chinkin & F Baetens (eds), Sovereignty,
Statehood and State Responsibility (Cambridge University Press 2015) 386 where the author
points out that a number of international tribunals, among which the Iran – Unites States Claims Tribunal, have considered Part One of the ASR as an authoritative statement of the current international law of State responsibility. In addition, a number of international courts, tribunals and other bodies have referred to the ASR without feeling compelled to comment on the specific nature of the Articles.
66
See for a comprehensive discussion for the role of public international law in the WTO: J Pauwelyn, The Role of Public International Law in the WTO: How Far Can We Go?, (2001) 95(3) American Journal of International Law 535-578.
67
Pauwelyn (n 66) 537.
68
Within the framework of the WTO responsibility may arise when it is established that a Member has nullified or impaired benefits of another Member through the violation of an obligation (violation complaint); the application of a measure whether or not it violates an obligation (non-violation compliant); or any other situation (situation compliant), see Art. XXIII (1) (a)-(c) General Agreement on Tarriffs and Trade (GATT).
69
Villapando (n 5) 394; Condorelli & Kress (n 61) 227.
70
See Van Damme (n 65) 379 where the authors discusses Article 1.1(a)(1) of the
Agreement on Subsidies and Countervailing Measures (SCM) also making an analogy to the TBT in FN 73.
71
in accordance with the customary rules of interpretation of public international law. The Appellate Body (AB) in US – Gasoline stated in this regard, in relation to Article 31 VCLT as a rule of customary international law, that the GATT and the other covered Agreements are “not to be read in clinical isolation from public international law”.72 As confirmed by the AB in US – Anti Dumping and Countervailing Measures (China) the ASR may become relevant in WTO disputes as one among several interpretative elements for deriving the common intention of the parties.73
Article 31(3)(c) of the VCLT provides that in interpreting a treaty any relevant rules of international law applicable in relations between the parties shall be taken into account.74 Insofar as the ASR reflects customary international law or general principles of law they are rules of international law applicable in relations between the parties.75 Such rules of international law become “relevant” when they bear upon the same subject matter as a the provision being interpreted.76 Thus, as the AB noted, where a provision of WTO law concerns the issue of attributing conduct to the State the ASR become relevant for its interpretation.77
In the absence of special rules WTO dispute settlement bodies are to apply the rules of attribution as promulgated by the ASR. Where a provision of WTO law is concerned with attribution and constitutes an actual inconsistency or intentional departure the provision is to be applied in the exclusion of the ASR.78 Nonetheless, in such instances the ASR may form one of several interpretative elements to be “taken
72
Appellate Body Report, United States – Standards for Reformulated and Conventional
Gasoline, WT/DS2/AB/R, adopted 20 May 1996, 17. 73
Appellate Body Report, United States – Definitive Anti-Dumping and Countervailing
Duties on Certain Products from China, WT/DS379/AB/R, adopted 25 March 2011(ABR, US – Anti-Dumping and Countervailing Duties (China)) para 312/316.
74
Zedalis (n 5) 350.
75
Only parts of the ASR may be considered customary international law, though including the Articles on attribution discussed here, see note 65. Where a rule of international law is considered customary international law the element “applicable in relations between the parties” is obsolete, see Van Damme (n 65) 374. See for contention about “the parties”: Appellate Body Report, European Communities and Certain Member States
– Measures Affecting Trade in Large Civil Aircraft, WT/DS316/AB/R, adopted 1 June 2011;
The AB in US – Anti Dumping and Countervailing Measures (China) (n 73) did not find itself compelled to examine whether Art. 5 ASR constitutes customary international law. Van Damme notes that this avoidance may stem from a self-perception of lacking competence in relation to other international adjudicatory bodies, especially the ICJ, see (n 65) 385-388; Nonetheless, the AB did consider Art. 5 ASR “relevant” and arguably “took it into account” in the sense of Article 31(3)(c) VCLT, see para 311/313 and Van Damme (n 65) 383-387.
76
ABR, US – Anti-Dumping and Countervailing Duties (China) (n 73) para 308.
77
ibid para 308/309.
78
into account” in discerning the meaning of the WTO rule. That is not to say that the ASR are determinative for the meaning of the provision in an annexed Agreement. 79 While it is unclear what the normative weight of the concept of “take into account” entails, it is imaginable that in the case of divergence the ASR may serve to confirm a departure, and its extent, by a certain provision form the secondary rules of State responsibility.
4.1.1. Articles 4, 5, 8 and 11 ASR
The principles of attribution as promulgated by Articles 4, 5, 8 and 11 ASR are evaluated below. The latter three appear most relevant for the current inquiry, as private standards are presupposed to stem from non-governmental bodies. Article 4 ASR sets out the notion of “the unity of the State for international law” which defines the core cases of attribution.80 It provides that conduct of any organ of the State, regardless of its functions or position in the organization of the State, is deemed as an act of the State for international law. What constitutes an organ of the State is autonomously assessed from the perspective of international law, though at least including bodies with public status under the State’s internal law.81
Article 5 ASR sets out that the conduct of an entity that is not an organ of the State is to be regarded as the conduct of the State if the entity involved is (i) empowered by the law of that State (ii) to exercise elements of governmental authority and is acting (iii) in that capacity in the particular instance. Article 5 ASR would thus require that the law of the State empowers a private actor to prepare, adopt or apply a SPS or TBT measure. In addition, the powers conferred must qualify as public powers, i.e. powers normally exercised by the State.82 No clear set of criteria exists to determine the exact scope of such powers, but include: the content of the powers, their purpose and the extent the body is accountable to the government.83
79
See e.g. Appellate Body Report, European Communities – Customs Classification of
Frozen Boneless Chicken Cuts, WT/DS269/AB/R, WT/DS286/AB/R, adopted 27 September
2005 para 176.
80
J Crawford, The International Law Commission’s Articles on State Responsibility:
Introduction, Text and Commentaries (Cambridge University Press 2002) 94. 81
See ILC ASR (n 62) Art. 4.2; Panel Report, United States – Measures Affecting the
Cross-Border Supply of Gambling and Betting Services, WT/DS285/R, adopted 20 April
2005, as modified by Appellate Body Report WT/DS285/AB/R paras 6.123-6.130; Genocide (n 65) paras 392-393.
82
See ILC ASR (n 62) Art. 5 commentary para 2.
83
When government mandates a, formally private, standardizing body to develop a standard its conduct in fulfilling that mandate is clearly attributable under Article 5 ASR. In developing the standard the standardizing body exercises governmental authority, in specifying the technical characteristics of a product or production method accepted by the government. Even if such standards remain voluntary, such as under the EU New Approach, the standard has public authority, as it constitutes a legally recognized means for fulfilling legal requirements.84
Article 8 ASR formulates that in the absence of empowerment by law private conduct may be attributable to the State if the private entity was in fact acting on instructions of, or under the direction or control of the State in carrying out the conduct. Article 8 ASR is potentially more relevant for the current inquiry as it also covers situations in which explicit empowerment absent; it covers situations in which a factual relationship may justify attribution. Attribution on the basis of factual relationships requires that the State has effective control over a private body and an immediate and tight nexus with the private conduct. Merely a general situation of dependence and support is not sufficient to justify attribution.85 The International Court of Justice (ICJ) clarified in Nicaragua and Genocide that general activities such as planning, direction, support or influence are not sufficient for attribution is this regard.86
Articles 4, 5 and 8 ASR assume that the private actor was acting on behalf of the State at the time of the conduct. If a private actor did not act on behalf of the State conduct may not be attributed, irrespective of the circumstances or the interest affected by the conduct.87 Thus, the fact that a private standard scheme would align with the trade objectives of a State cannot justify attribution of that scheme. In contrast, Article 11 ASR establishes that conduct by private actors that occurred independently from any government involvement may be attributed if the State acknowledges and adopts the conduct as its own. Article 11 ASR requires establishing that the State identifies private conduct and makes it its own, fundamentally
84
See EMC/ European Cement Producers (Case COMP/F-2/38.401) Commission Decision SG-Greffe D/205249 (2005) paras 73-74.
85
ILC ASR (n 62) Art. 8 commentary para 4.
86
International Court of Justice, Case Concerning Military and Paramilitary Activities in
and Against Nicaragua (Nicaragua v United States of America), Judgment of 27 June 1986,
ICJ Reports 1986, 14 (Nicaragua) para 86; Genocide (n 65) paras 410-413.
87
transforming the legal nature of that act.88 The threshold for transforming a private act into an act of the State is high. The mere acknowledgement of the existence and the approval of certain private conduct are not sufficient. Obvious is the situation where a WTO Member subsequently adopts a private standard in its legislation. This will render the preceding conduct, such as the inconsistency with obligations relating to the process of development of the standard, attributable.
4.2. Attribution by GATT/WTO dispute settlement bodies
“There have been a number of trade disputes in relation to which Panels have been faced with making sometimes difficult judgments as to the extent to which what appear on their face to be private actions may nonetheless be attributable to a government because of some governmental connection to or endorsement of those actions.”89
Attribution is not often an issue in dispute settlement proceedings as it is obvious that legislation and action of State organs may, in principle, give rise to the responsibility of the respective WTO Member. 90 The issue of attributing conduct of private parties to the State has been addressed in the GATT/WTO framework in a limited number of cases; several of them will be discussed below to provide some insights into the considerations relating to the issue of attribution in the context of international trade law. As will be evident from the analysis below the requirements employed by Panels and the AB parallel the principles as set out in the ASR.
4.2.1. Attribution based on the exercise of governmental authority
In the 1960 Review Pursuant to Article XVI:5 a GATT ’47 Panel held that subsidy schemes exercised by private parties “dependent for their enforcement on some form of government action” with as a “result that the practice would in no real sense differ from those normally followed by governments” had to be notified as a subsidy for the purpose of Article XVI:5 GATT ’47. 91 In EEC – Apples a GATT ’47 Panel found
88
International Court of Justice, Case Concerning United States Diplomatic and Consular
Staff in Tehran, (United States of America v. Iran), Judgement of 24 May 1980, ICJ Reports
1980, 3 paras 73-74; ILC ASR (n 62) Art. 11 commentary para 6.
89
Panel Report, Japan – Measures Affecting Consumer Photographic Film and Paper, WT/DS44/R, adopted 22 April 1998 (PR, Japan – Film) para 10.52.
90
Van Damme (n 65) 379.
91
GATT Panel Report, Review Pursuant to Article XVI:5, L/1160, adopted May 24, 1960 para 12.
that the withdrawals of apples from the market by private producer groups, restricting the quantities marketed, could be considered as governmental measures. 92 The responsibility of private actors to restrict quantities was established by legislation and the functioning of the scheme depended on government financing for its operation.93 These two decisions examined both the governmental nature and the source of authority in relation to the functions exercised.
The Panel in Japan – Film examined whether certain distribution and promotion measures had effectively prevented foreign producers from accessing Japan’s photographic film market. Its analysis included whether “government involvement” could justify attribution of a code of conduct by a private retailer’s council.94 The Panel took note of governmental collaboration in developing and adopting the code.95 It found the retailer’s code to be of (quasi–)governmental character, and the retailers to possess delegated public authority.96 The Panel noted that the government involvement created the sufficient likelihood that private parties conformed to the retailer’s code.97
In Canada – Dairy the AB clarified more concretely what it regarded as “governmental”. The AB held the essence of “government” to be the “effective power to ‘regulate’, ‘control’ or ‘supervise’ individuals, or otherwise ‘restrain’ their conduct, through the exercise of lawful authority.”98 The private actors in the dispute, which were found to act in a capacity created and delegated by the government, exercised functions that were inherently governmental. The private actors where found to have regulatory control over the dairy sector which was exercised to further the interests of that sector, thereby promoting the perceived interests of the State.99 The AB’s
92
GATT Panel Report, EEC Restrictions on Imports of Apples from Chile, L/5047, adopted 10 November 1980 (EEC – Apples) para 12.9.
93
ibid 12.8.
94
PR, Japan – Film (n 89) para 10.327.
95 ibid.
96
ibid paras 10.327-10.328; Bohanes & Sandford (n 17) 24/ FN 58. 97
PR, Japan – Film also exhibits features of Art. 8 ASR in it analysis of other distribution and promotion measures see paras 10.180/10.194//10.299/10.314. The “government involvement” analysis followed in that regard corresponds to GATT Panel Report, Japan –
Trade in Semi-Conductors, L/6309, adopted 4 May 1988 (PR, Japan – Semi-Conducers) as
evaluated below; See also Zedalis (n 5) 345-347/356-362.
98
Appellate Body Report, Canada – Measures Affecting the Importation of Milk and the
Exportation of Dairy Products, WT/DS103/AB/R, WT/DS113/AB/R and Corr.1, adopted
27 October 1999 (ABR, Canada – Dairy) para 97.
99
approach corresponds to Article 5 ASR; it established “empowerment” and adopted a rather broad meaning of “governmental authority” by linking it to furthering the interests of the State.
In US – Anti Dumping and Countervailing Measures (China) the AB examined the term “public body” in Article 1.1(a)(1) of the Agreement on Subsidies and Countervailing Measures (SCM). China had contended that the term, as separate concept form “government”, corresponds to Article 5 ASR.100 The AB acknowledged coincidence of the essence of Article 5 ASR with its interpretation of the term “public body”; both concerning an entity exercising governmental authority.101 Nonetheless, the AB’s analysis did not “turn on” Article 5 ASR and was not continued.102 While the context of the terminology of the SCM must be appreciated, the AB stated generally that it considered whether a body is vested with governmental authority more important than how this is achieved; noting that the absence of explicit statutory delegation would not necessarily impede attribution when an entity is in fact exercising governmental functions.103 Nonetheless, the AB added that mere formal links are insufficient to establish the possession of governmental authority.104
In sum, the cases examined above demonstrate the analysis of investigating bodies to depend on the nature of the functions exercised and the source of authority that gives rise to the possibility to do so. The feature to be established is the private actor’s power to regulate, control or otherwise restrain conduct of other private actors. It seems that the analysis would focus on whether a private actor possesses this public
100
ABR, US – Anti-Dumping and Countervailing Duties (China) (n 73) para 305.
101 ibid para 310. 102 ibid para 311. 103 ibid para 318. 104
ibid; The AB’s “attribution analysis” in this case is quite controversial, see e.g. Van Damme (n 65) and J Lee, State Responsibility and Government-Affiliated Entities in International Economic Law: The Danger of Blurring the Chinese Wall between ‘State Organ’ and ‘Non-State Organ’ as Designed in the ILC Draft Articles, (2015) 49(1) Journal of
World Trade 117-151. Lee argues that the AB “conflates” Art. 4 ASR on the one hand and
Arts. 5 and 8 ASR on the other hand by the misplaced assessment of ownership and functions in relation to a state organ. While it is not clear whether the term “public body” would indeed correspond to a state organ under Art. 4 ASR, it does seem that the AB does not appreciate fully the differences between the modes of attribution in the ASR. It’s remarks on conduct being the sole connecting factor in the ASR seem unfitting, also the emphasis on control for determining governmental authority seems to conflate Arts. 5 and 8 ASR. See US –
Anti-Dumping and Countervailing Duties (China) (n 73) para 309/318; See also Van Damme (n
authority rather than how this is vested in it, nonetheless mere formal links such as ownership or general associations would be insufficient to conclude so.
4.2.2. Attribution based on instruction, direction or control
In Japan – Semi-Conductors a GATT ’47 Panel found a governmental administrative framework to constitute a restriction on exports, notwithstanding the non-binding nature of the measures.105 The operation of the measures in the framework was “depended on governmental action” and the government had created “sufficient incentives and disincentives created for the measures to take effect”.106 The scheme of incentives and disincentives was sufficient to control private actors in making them carry out the governmentally proposed measures and their conduct was therefore found attributable to the State.
In Argentina – Hides and Leather a governmental measure authorized the participation of certain private industry association representatives in customs-control procedures. While both parties agreed that the private actors did not have the delegated public authority to restrict exports, allegedly the presence of the industry association created pressure and other “chilling effects” resulting in de facto restrictions on exports.107 The Panel found the presence of the industry association to be unusual but added that Article XI:1 of the GATT does not require a due diligence obligation to exclude any possibility that governmental measures may enable private parties, directly or indirectly, to restrict trade, where those measures themselves are not trade-restrictive.108
The Panel found insufficient evidence to establish a restriction on exports as the presence of industry representatives could not be assumed to have that effect. 109 Nonetheless, the Panel noted that, hypothetically, “a government could implement a measure which operated to restrict exports because of its interaction with a private cartel.”110 The Panel clarified that for responsibility for such private restriction on exports to arise it would then have to be established that “there was or needed to be
105
Bohanes & Sandford (n 17) 21.
106
PR, Japan – Semi-Conducers (n 97) para 117.
107
Panel Report, Argentina – Measures Affecting the Export of Bovine Hides and Import of
Finished Leather, WT/DS155/R and Corr.1, adopted 16 February 2001 (PR, Argentina – Hides and Leather) paras 11.10/11.20/11.22.
108 ibid para 11.19/ FN 336/11.35. 109 ibid para 11.32. 110 ibid para 10.51.
knowledge of the cartel practices on the part of the government”, it added, “it would need to be established that the actions are properly attributed to the Argentinean government under the rules of state responsibility.”111 Such hypothetical interaction with a private cartel would underlie a governmental “decision” to restrict trade.112 A factual link manifesting that decision, in the form of instruction, direction or control would have to be established for attribution under Article 8 ASR to arise.
In US – Countervailing Duty Investigation on DRAMs and AB examined the provision of Article 1.1(a)(1)(iv) SCM where the terms “entrust” and “direct” are used to denote situations in which private conduct may be attributable to the government. 113 In drawing parallels with Article 8 ASR the AB clarified “entrustment” to be the transfer of responsibility to a private body while “direction” entails “situations where the government exercises its authority over a private body.”114 Further it added that “in most cases, one would expect entrustment or direction of a private body to involve some form of threat or inducement, which could, in turn, serve as evidence of entrustment or direction.”115
In sum, following the cases discussed it seems that in case a Panel were confronted with an issue of government involvement allegedly controlling or directing private conduct it would assess whether (i) private conduct was dependent on government action; (ii) the government measures would involve “some form of threat or inducement”; (iii) which would constitute “sufficient incentives or disincentives” for private actors to carry out that conduct. WTO Members do not have a due diligence obligation to exclude the possibility that their measures enable private actors to restrict trade, rather, attribution of such trade restrictive conduct presupposes a “sufficient” level of control and a close and tight nexus with the wrongful conduct. 4.3. Actionable measures and scope of application: detrimental effects generated by private actors
The covered Agreements discipline the conduct of WTO Members and consequently only their conduct is actionable in the WTO regime. Article 3.3 DSU employs the 111 ibid. 112 Zedalis (n 5) 356. 113
Appellate Body Report, United States – Countervailing Duty Investigation on Dynamic
Random Access Memory Semiconductors (DRAMS) from Korea, WT/DS296/AB/R, adopted
20 July 2005( ABR, United States – Countervailing Duty Investigation on DRAMs) para 108.
114
ibid para 116.
115
phrase “measures taken by another Member” to designate the actionable conduct by WTO Members. In US – Corrosion-Resistant Steel Sunset Review the AB noted that the phrase “identifies the relevant nexus, for purposes of dispute settlement proceedings, between a ‘measure’ and a ‘Member’.”116 Therefore only measures “taken by” a WTO Member may constitute the basis for a dispute before a dispute settlement body.117 Allegedly attributable trade restrictive private conduct cannot be considered to be “taken by” a WTO Member without an assessment of the government involvement in that private conduct. While it remains unclear it seems that the scope of what may constitute a “measure” for the purpose of dispute settlement proceedings is therefore limited to acts or omissions by organs of the State.118
In principle, a complainant may challenge any governmental measure that exhibits a nexus with private trade restrictive conduct. This nexus is assessed in light of the concept of attribution. As is clear from the analysis above, attribution can be justified when it is established that the challenged governmental measure vests the private actor with the governmental authority exercised, or when it is established that the State controlled the private conduct. Private conduct is not actionable nor can it by itself lead to State responsibility, however where a governmental measure has a certain connection with private conduct may the State be held responsible for the detrimental effects of that conduct.119
116
Appellate Body Report, United States – Sunset Review of Anti-Dumping Duties on
Corrosion-Resistant Carbon Steel Flat Products from Japan, WT/DS244/AB/R, adopted
9 January 2004 (ABR, US – Corrosion-Resistant Steel Sunset Review) para 81.
117
Note that Art. XXIII (b) GATT uses the phrase “application … of any measure” which applies mutatis mutandis to the SPS and TBT, see Arts. 11 SPS and 14.1 TBT.
118
The AB’s remarks in ABR, US – Corrosion-Resistant Steel Sunset Review (n 116) para 81 that the concept “measure” may, in principle, be any act or omission attributable to a WTO Member is somewhat misleading as it seems that the scope is narrower than all conduct attributable under Chapter II of the ASR.
119
See Argentina – Hides and Leather (n 107); In contrast the cases, Appellate Body Report, Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef,
WT/DS161/AB/R, WT/DS169/AB/R adopted 10 January 2001 and Appellate Body Reports,
United States – Certain Country of Origin Labelling (COOL) Requirements,
WT/DS/384/AB/R, WT/DS/386/AB/R, adopted 23 July 2012 evince that when governmental measures directly require or induce private actors to act in certain ways their decisions are not independent of the governmental measure. In both cases the measure was found to cause the trade restrictive effect, notwithstanding the intervention of some private element. Such instances are not concerned with the issue of attribution; they merely address a question of causality and show how a Member’s measure and private conduct may be intertwined.
Article 3.3 DSU is not determinative for the application of the substantive obligations in the covered Agreements; the language varies within and between them.120 Thus, to show the breach of an obligation the allegedly trade restrictive conduct must fall within its scope of application. The term “requirement” in Article III.4 GATT is discussed in the next section as for a complaint relating to attributable discriminatory private conduct under the GATT this is the hurdle to be taken. Chapter 5 will discuss the special regimes of the SPS and TBT. The SPS and TBT contain specific obligations for WTO Members with regard to non-governmental bodies preparing, adopting or applying measures falling within the scope of the Agreements. In setting out the scope of application the Agreements internalize rules of attribution. The analysis below finds that these provisions create special rules of attribution and responsibility for WTO Members in relation to conduct by private actors, deviating from the rules as set out in the ASR and attribution analysis examined above.
4.3.1. Private standards as requirements under Article III:4 GATT
The national treatment requirement of Article III:4 GATT assures the non-discriminatory treatment of imported products as compared to domestic products “with respect to all laws, regulations, or requirements that affect the internal sale…”. The phrase “laws, regulations, or requirements” has been interpreted to include a wide range of government action, but also private conduct attributable to the government.121 In Canada – Autos the Panel found that the determination of whether private conduct may come to constitute a “requirement” rests on the finding that there is a nexus between that conduct and conduct of a government such that the government must be held responsible for that conduct.122 The Panel noted that the term “requirement” in III:4 GATT entails “government action involving a demand, request or the imposition of a condition but in our view this term does not carry a particular connotation with respect to the legal form of that action”.123 As the most favored nation treatment requirement of Article I:1 GATT, ensuring non-discrimination between exporting Members, applies to the internal matters covered by
120
See e.g. Art. III:4 and XI GATT; Annex 1.A SPS; Annex 1.1/1.2 TBT.
121
Gandhi (n 42) 869; See also: PR, Japan – Film (n 89) para 10.376; Panel Report, Canada
– Certain Measures Affecting the Automotive Industry, WT/DS139/R, WT/DS142/R, adopted
19 June 2000, as modified by Appellate Body Report WT/DS139/AB/R, WT/DS142/AB/R (PR, Canada – Autos) para 10.105.
122
PR, Canada – Autos (n 121) para 10.107.
123
