2.1 Introduction to the Scope of Jurisdiction of the WTO Adjudicative Bodies and the Law Applicable to WTO Disputes

Under the DSU, all disputes brought before the WTO DSS must be based on claims arising out of the ‘covered agreements’.²¹ The jurisdiction of a panel is established in each dispute by its terms of reference, which specify the legal basis of the complaint and define the precise claims at issue.²² The function of panels, is to ‘make an objective assessment of the matter before [them], including … the applicability of and conformity with the relevant covered agreements, and … assist the DSB in making the recommendations or in giving the rulings provided for in the covered agreements’.²³ It thus becomes clear that WTO panels and the AB are not adjudicative bodies of general jurisdiction,²⁴ i.e. they cannot be asked to adjudicate on any claim under international law. Their jurisdiction extends only to findings of inconsistency with the WTO provisions cited by the parties in the terms of reference.²⁵

Nonetheless, it is less clear, once jurisdiction of a panel is properly established, what law it may apply to settle the dispute.²⁶ As the International Law Commission’s (ILC) Study Group on Fragmentation points out

A limited jurisdiction does not … imply a limitation of the scope of the law applicable in the interpretation and application of … treaties…. While the [DSU] limits the jurisdiction [of the WTO adjudicative bodies] to claims which arise under the WTO covered agreements only, there is no explicit provision identifying the scope of applicable law.²⁷

Indeed, the DSU is silent on this matter. Although it is plainly clear that panels and the AB shall apply the provisions of the covered agreements,²⁸ it is not clear whether they should determine disputes solely on this basis. In fact, it is not uncommon in international law to have a court or tribunal vested with limited jurisdiction, whilst having no limits on the rules of international law that it may apply in settling disputes properly brought before it.²⁹

The only DSU provision that bears any resemblance to an applicable law clause is Article 7,³⁰ which stipulates the following:

1. Panels shall have the following terms of reference unless the parties to the dispute agree otherwise … To examine, in the light of the relevant provisions in (… the covered agreement(s) cited by the parties to the dispute), the matter referred to the DSB …

2. Panels shall address the relevant provisions in any covered agreement or agreements cited by the parties to the dispute.

Some scholars, relying on the wording of Article 7 and the exclusive reference to the covered agreements throughout the DSU,³¹ argue that WTO adjudicative bodies may only apply directly WTO law.³² Nonetheless, Article 7 does not really provide any information on applicable law. It confirms the self-evident, i.e. that Panels shall examine the dispute in the light of the covered agreements and address the WTO provisions invoked by the parties; but it does not necessarily prevent them from also addressing rules from other sources in settling the dispute at hand.³³ Besides, a Panel may, in principle, be established with special terms of reference and thus be mandated to apply sources other than the covered agreements.³⁴ Similarly, an arbitrator under Article 25 DSU may also be mandated to apply legal rules other than the WTO Agreements as, under this provision, the parties ‘shall agree on the procedures to be followed’.

However, it cannot be denied that the questions of jurisdiction and applicable law are inter-linked. A broad definition of the law applicable to WTO disputes might indeed ‘evolve towards a general jurisdiction for the WTO dispute settlement system’.³⁵ Although it is entirely possible to empower an adjudicative body to apply any relevant rule of international law in settling a dispute before it, in the absence of such an explicit conferral of power, it is contested whether and to what extent the adjudicative body can assert such broader competence. This is because, in cases of treaty-based disputes brought before an adjudicative body on the basis of a compromissory clause,³⁶ as is the case in WTO disputes, the adjudicative body would necessarily exceed the limits of its subject-matter jurisdiction by making findings on the application of substantive rules that are external to the treaty to the conduct in question. In view of this, in the absence of a clear applicable law provision, there seems to be a presumption that the law to be applied stems primarily from the treaty under which the dispute has arisen.³⁷ Even if the same conduct is also regulated by other substantive rules of international law, the adjudicative body that asserts jurisdiction over the dispute on the basis of a specific instrument can, in principle, examine this conduct only against the treaty provisions properly invoked by the claimant. An adjudicative body can be bestowed with jurisdiction to deal only with certain aspects of a larger, more complex dispute that falls within the ambit of more than one sources of law. However, as the International Court of Justice (ICJ) has affirmed several times in its jurisprudence, to the extent that the act in question might constitute breach of certain obligations under the instrument at hand, the jurisdiction of said adjudicative body can be properly exercised.³⁸

In view of the above, it seems that, in the absence of an explicit applicable law clause in the WTO Agreements, the WTO adjudicative bodies are prevented from applying directly substantive rules external to the covered Agreements as this would necessitate the making of findings that exceed their subject-matter jurisdiction. As the AB pronounced in Mexico – Soft Drinks, ‘WTO panels and the Appellate Body [cannot] become adjudicators of non-WTO disputes’ as this is not their function as intended by the DSU.³⁹ In other words, the jurisdictional constraints of the WTO adjudicative bodies result in a presumption that the law applicable to WTO disputes is primarily the WTO Agreements, as they are prevented from addressing claims that do not arise thereunder.

Nonetheless, it is important to note that WTO adjudicative bodies, as any other adjudicative body,⁴⁰ enjoy certain inherent jurisdictional powers that derive directly from their nature as judicial bodies,⁴¹ regardless of the specialised character of their subject matter jurisdiction. Although WTO panels and the AB are often referred to as ‘quasi-judicial’ bodies, this ‘quasi-judicial’ character of the system is ‘more form than substance’.⁴² They fulfil all criteria for their characterisation as international adjudicative bodies.⁴³ Firstly, they have, de facto, the power to issue legally binding decisions. Their reports, although they are technically recommendations aiming to ‘assist the DSB in discharging its responsibilities’, can only be rejected in the DSB by consensus.⁴⁴ Thus, their adoption is semi-automatic. Secondly, their constituent instrument, i.e. the WTO Agreements, more generally, and the DSU, more specifically, is governed by international law. Thirdly, they principally apply international law, i.e. the WTO Agreements, to resolve disputes brought before them. And lastly, they comprise individuals who sit in their own personal capacity and not as government representatives.⁴⁵ In view of their nature as adjudicative bodies, as the AB itself has recognised, they have ‘a margin of discretion to deal, always in accordance with due process, with specific situations that may arise in a particular case and that are not explicitly regulated’ in the covered agreements.⁴⁶ Such inherent powers include, first and foremost, the right to determine whether they have jurisdiction in a given case (known as compétence de la compétence).⁴⁷ But, they further extend to all findings that are necessary in order ‘to ensure that the exercise of [their] jurisdiction over the merits, if and when established, shall not be frustrated’ and ‘to provide for the orderly settlement of all matters in dispute’.⁴⁸ Thus, an adjudicative body can always make certain interim findings on matters that are indispensable for the purposes of ruling on the main claims in dispute.

Applying this in the context of WTO adjudication suggests that, in the exercise of their inherent powers, WTO adjudicative bodies are entitled to apply certain rules of international law other than the covered agreements, and to make relevant findings, which are not per se findings on the claims of alleged inconsistency with the WTO provisions cited by the parties but are indispensable for the purposes of addressing such claims. The following Sections discuss which other rules of international law, in addition to the WTO Agreements, may be applied in this context.

2.2 General International Law and the WTO Dispute Settlement System

The previous Section demonstrated that, although the WTO Agreements have no applicable law clause that explicitly mandates the WTO adjudicative bodies to apply exclusively the WTO Agreements, due to the limited subject-matter jurisdiction of WTO adjudicative bodies there is a presumption that WTO disputes must be settled primarily on the basis of WTO law. Nonetheless, it was further demonstrated that, despite the specialised and limited character of their subject-matter jurisdiction, WTO adjudicative bodies, like any other adjudicative body, have the inherent power to make interim findings on certain issues that are not explicitly regulated in the WTO Agreements, to the extent that they are necessary for the purposes of ruling on a dispute properly brought before them under the DSU, i.e. a dispute over an alleged inconsistency with certain provisions of the WTO Agreements. Thus, there is some room for the application of non-WTO law in the context of WTO disputes. This Section aims to discern which non-WTO rules can fit in this room.

The only express reference to non-WTO law in the covered agreements is found in Article 3.2 DSU, which states that

The dispute settlement system of the WTO is a central element in providing security and predictability to the multilateral trading system. The Members recognize that it serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law …⁴⁹

This provision, like Article 7 DSU, is not an applicable law clause. It rather describes the role and purpose of the dispute settlement system within the WTO organisational structure and provides guidance as to how dispute settlement bodies should go about fulfilling this role. In this context, the provision instructs dispute settlement bodies to interpret the WTO Agreements in accordance with ‘customary rules of interpretation of public international law’, that is, primarily, the rules codified in Articles 31 and 32 VCLT.⁵⁰ Thus, this is a provision about interpretation, but it also specifies the rules that must be applied by WTO adjudicative bodies in this particular context.

A narrow, literal interpretation of Article 3.2 DSU suggests that only the customary rules on treaty interpretation can be applied in the context of a WTO dispute, to the exclusion of all other non-WTO rules of international law. Indeed, the DSU in all other provisions, such as Article 7 discussed above, refers exclusively to the covered agreements. Article 3.2 DSU itself highlights that ‘[r]ecommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreements’, an instruction repeated in Article 19.2 DSU.⁵¹ It could be argued that by applying extraneous rules the WTO adjudicative bodies would add further obligations to WTO members than those envisaged in the covered agreements. Thus, the context of Article 3.2 DSU could indeed support such a narrow interpretation. Some DSU negotiators also assert that this solitary reference to non-WTO law in the DSU manifests their intention to introduce into the WTO system, only this specific set of customary rules, i.e. the rules on treaty interpretation.⁵²

Nonetheless, this is not a convincing interpretation of the DSU. As Pauwelyn suggests,⁵³ even if many negotiators, often economists and trade diplomats,⁵⁴ did not think of public international law when drafting the WTO Agreements, this is not a good enough reason to consider an international treaty as detached from its natural normative environment, i.e. the framework of international law. Rather, this explains why the WTO Agreements do not deal more explicitly with the relationship between WTO rules and other rules of international law.⁵⁵ The Panel in Korea – Government Procurement, addressing the arguments in favour of a restrictive reading of Article 3.2 DSU, observed that they

can see no basis … for an a contrario implication that rules of international law other than rules of interpretation do not apply. The language of 3.2 in this regard applies to a specific problem that had arisen under the GATT to the effect that, among other things, reliance on negotiating history was being utilized in a manner arguably inconsistent with the requirements of the rules of treaty interpretation of customary international law.⁵⁶

Indeed, as suggested by its context, the express reference in Article 3.2 DSU to the customary rules on treaty interpretation was included ex abundante cautela⁵⁷ to ensure that WTO adjudicative bodies always use the same set of rules to interpret (‘clarify’) the WTO Agreements. Article 3.2 reiterates the need for a principled interpretation under the holistic test of Articles 31 and 32 VCLT, which honours the common intentions of the parties, provides legal certainty (‘security and predictability’) and does not ‘add to or diminish the rights and obligations provided in the covered agreements’.⁵⁸ In other words, it is a word of caution against ‘judicial activism’.⁵⁹ It does not purport to define the law applicable to WTO disputes.

But even if we conclude that indeed, Article 3.2 does not imply an exclusion of other rules of public international law through its exclusive reference to the customary rules of interpretation and that therefore, other extraneous rules may also be applied in the context of WTO disputes, the question remains: which other rules? The Panel in Korea – Government Procurement proclaimed that there is room for the application of customary international law to the extent that the WTO Agreements do not ‘contract out’ of its application.⁶⁰ The Panel expressed the view that ‘to the extent that there is no conflict or inconsistency, or an expression in a covered WTO agreement that implies differently, … the customary rules of international law apply to the WTO treaties and to the process of treaty formation under the WTO.’⁶¹ This is reminiscent of the general ‘presumption against normative conflict’ in international law.⁶² Indeed, in international law the absence of explicit derogation must be regarded as a continuation or implicit acceptance of existing customary rules.⁶³ As the arbitral tribunal explained in Georges Pinson: ‘Toute convention internationale doit être réputée s’en référer tacitement au droit international commun, pour toutes les questions qu’elle ne résout pas elle-même en termes exprès et d’une façon différente.’⁶⁴

However, this presumption does not imply that all customary rules are directly applicable in the context of a WTO dispute, simply because the WTO Agreements do not explicitly derogate from them. Rather, it suggests that adjudicative bodies should interpret the text of a treaty in a manner harmonious with other relevant international obligations of the parties, to the extent possible. As the ICJ stipulated in Right of Passage: ‘It is a rule of interpretation that a text emanating from a Government must, in principle, be interpreted as producing and intended to produce effects in accordance with existing law and not in violation of it.’⁶⁵ Article 31(3)(c) VCLT reflects precisely this principle, also known as the principle of systemic integration,⁶⁶ which is considered as one of the most important tools for addressing the phenomenon of fragmentation in international law.⁶⁷ It allows the judge to bridge the gap between a certain legal rule and the system, i.e. the normative environment, in which it was created.⁶⁸ Admittedly, the line between directly applying a rule and taking it into consideration under Article 31(3)(c) VCLT in interpreting the text of an applicable treaty is often blurred.⁶⁹ However, it is important to distinguish between interpretation and application in this context. The use of Article 31(3)(c) VCLT requires the existence of a textual foothold for the consideration of a rule external to the treaty at hand, whereas a rule directly applicable to the dispute could be applied even in the absence of any relevant treaty provision. There are inherent limitations to the process of interpretation, which can only be employed in the context of clarifying the meaning of a specific treaty term.⁷⁰

In view of the above, this paper argues that, whereas the pool of rules under customary international law relevant to the interpretation of the WTO Agreements may be larger, only the rules of ‘general international law’, including, most prominently, the law of treaties and the law on state responsibility, are directly applicable, in their own name, to WTO disputes. The term ‘general international law’ is used here in a dual sense: it denotes rules that are general both in terms of their scope ratione personae, i.e. they are binding on and, in principle, applicable to all States,⁷¹ and their scope ratione materiae, i.e. they apply to the whole field of the international obligations of States regardless of their content and their source.⁷² These rules have no ‘autonomous substantive content’:⁷³ they are the ‘toolbox’ for the creation, operation, interplay, and enforcement of other rules of international law.⁷⁴ In other words, rules of general international law have a ‘parasitical character’: they only assist in the process of applying other rules of a substantive character, which set out the rights and obligations of States under international law. For example, the law of treaties assists in assessing the existence, validity and continuous operation, as well as in interpreting the content, of other international rules. Similarly, the law on state responsibility assists in assessing whether other substantive rules have been breached, what are the consequences of such breach and how the ensuing responsibility is implemented. The application of these rules happens ‘in the subordinate levels of legal argument’⁷⁵ for the purpose of reaching a final verdict on the application and implementation of the substantive rules under consideration. It is precisely for this reason that the limited jurisdictional scope of an adjudicative body does not prevent it from addressing such rules and making relevant interim findings: these findings cannot be considered as independent verdicts as they are dependent upon the adjudicative body’s analysis on the rules brought before it by the parties for an overall finding of breach. The final ruling will be one that addresses the main claim brought by the parties in accordance with applicable jurisdictional rules. As Judge Higgins explained in her separate opinion in the Oil Platforms, by reference to the Court’s prior judgment in the Arrest Warrant case, the non ultra petita rule ‘does not operate to preclude the Court from dealing with certain other matters “in the reasoning of its Judgment, should it deem this necessary or desirable”’.⁷⁶

This ‘parasitical character’ is what differentiates general international law from other substantive obligations of States under customary international law, such as obligations relating the protection of human rights. Such rules have an autonomous substantive legal content and their direct application necessarily implies that the adjudicative body in question, in our case a WTO panel or the AB, would be called to determine whether the content of this rule has been breached. This is not within the subject matter jurisdiction of the WTO adjudicative bodies. However, substantive obligations of WTO States under international law, such as in the field of human rights, can still be taken into consideration in interpreting relevant provisions of the WTO Agreements and can inform their scope and content under Article 31(3)(c) VCLT.

The case of Bosnian Genocide before the ICJ provides a good example of this operation of the rules of general international law in the context of treaty-based disputes. The ICJ acknowledged that its jurisdiction was founded in that case on Article IX of the Genocide Convention and that the disputes subject to that jurisdiction are those ‘relating to the interpretation, application or fulfilment’ of the said Convention,⁷⁷ much like in the case of WTO disputes. However, it stipulated that the determination of a breach and its legal consequences requires recourse ‘to the rules of general international law on treaty interpretation and on responsibility of States for internationally wrongful acts’.⁷⁸ Similarly, the WTO adjudicative bodies, as further demonstrated below through an overview of relevant case law, may also apply rules of general international law and make relevant findings, in the exercise of their inherent powers, to the extent that it is necessary to properly exercise their function and to the extent that such rules are not displaced by the text of the WTO Agreements.

WTO law is a special treaty regime because it indicates itself the consequences of its breach and the means by which the ensuing responsibility is implemented.⁷⁹ In other words, it includes not only primary obligations but also secondary rules on state responsibility, which constitute lex specialis to the relevant rules of general international law.⁸⁰ Due to this special characteristic, WTO law was characterised in its early years as a ‘self-contained regime’, a term that implied a disconnection from the rest of public international law. However, this approach to the WTO regime and the relevant debates have now largely subsided.⁸¹ The prevailing view is that the WTO constitutes a specialised sub-system of public international law,⁸² which includes a number of ‘treaty-based derogations’ from the rules of general international law.⁸³ It simply displaces some rules on state responsibility through the establishment of special rules that regulate the same subject matter for the purposes of the WTO Agreements. The determination of such ‘derogation’ or displacement is an interpretative exercise which should be done by reference to each rule separately.

In sum, the analysis in this Section suggests that rules of ‘general international law’ are applicable by default to WTO disputes, subject only to the application of the lex specialis principle in the process of interpreting the WTO Agreements. The case law of the WTO adjudicative bodies, analysed in the following Section, provides further evidence in support of this direct, albeit residual, applicability of the rules of general international law on state responsibility to WTO disputes.

3.1 Direct Application of the Rules on State Responsibility Under General International Law

With respect to the first group, there are at least 6 instances where WTO Panels had direct recourse to rules of general international law. These instances are in the context of discussing issues of legal interest and attribution.

The first instance was in the case of EC – Bananas. The Panel acknowledged that a WTO member’s ‘potential interest in trade in goods or services and its interest in a determination of rights and obligations under the WTO Agreement’ suffice to establish a right to initiate dispute settlement proceedings.⁸⁴ Accordingly, it found that the United States had indeed a legal interest in that case, despite the fact that the US banana production and exports were minimal and has therefore suffered no nullification or impairment of WTO benefits in respect of trade in bananas. The Panel’s conclusion echoes the general international law rules on legal interest and the right to invoke international responsibility.⁸⁵ In support of this finding the Panel referred in a footnote to Draft Article 40, which later developed into Articles 42 and 48 ARSIWA.⁸⁶

Similarly, the Panel in Turkey – Textile applied directly the rules of general international law on attribution of conduct in cases of joint organs.⁸⁷ Turkey argued that the challenged quantitative restrictions on imports resulted from the implementation of its duly notified customs union with the European Communities (EC). As a result, it cannot be held individually liable for the restrictions; it is rather the Turkey-EC customs union, as a separate legal entity, that implemented the measures. The Panel noted that even if the customs union had a legal personality distinct from that of its constituent countries, ‘in public international law, in the absence of any contrary treaty provision, Turkey could reasonably be held responsible for the measures taken by the union.’⁸⁸ In support of this statement the Panel referred to the ILC commentary to Draft Article 27 (now Article 16 ARSIWA), which stipulates that ‘[a]ccording to the principles on which the articles of chapter II of the draft are based, the conduct of the common organ cannot be considered otherwise than as an act of each of the States whose common organ it is.’⁸⁹

In Korea – Government Procurement, the Panel rejected Korea’s arguments that the Ministry of Commerce, which was tasked with answering questions during the negotiations for its accession to the GPA,⁹⁰ should not be charged with knowledge about actions taken by the Ministry of Transportation. The Panel stipulated that the answers were on behalf of the whole of the Korean government and that such conclusion is ‘supported by the long established international law principles of State responsibility’ by which ‘the actions and even omissions of State organs acting in that capacity are attributable to the State as such and engage its responsibility under international law’.⁹¹ On this point the Panel cited Draft Articles 5 and 6 (now Article 4 ARSIWA).⁹² Similarly, in Australia – Salmon, the Panel found that the Tasmanian ban on imports of salmonids is ‘a measure for which Australia, under both general international law and relevant WTO provisions, is responsible’.⁹³ On a footnote to this finding the Panel referred to Draft Article 6 (now Article 4).

A few years later, and after the final adoption of the ARSIWA, the Panel in US – Gambling explicitly recognised the customary character of Article 4 ARSIWA,⁹⁴ which was applied to prove the attributability of the actions of the United States International Trade Commission (USITC), an agency of the US federal government, to the State. The Panel, by reference to Article 4 ARSIWA and its commentary,⁹⁵ found that official pronouncements by the USITC in an area where it has delegated powers are to be attributed to the United States, and, thus, its documents can legitimately be considered as probative of the US interpretation of its GATS Schedule, which was under dispute in that case.⁹⁶ An explicit recognition of the customary character of Article 4 ARSIWA is also found in Thailand – Cigarettes, where the Panel reaffirmed the principle that WTO members are responsible for the actions of their government officials.⁹⁷

In the instances above, the panels resort to well-established rules of general international law in order to rule on issues of international responsibility that are not directly regulated by the WTO Agreements. The panels’ findings support the direct applicability of rules of general international law to WTO disputes to the extent that they are not displaced by relevant WTO provisions, and clearly situate WTO law under the umbrella of general public international law.

3.2 Taking into Consideration the General International Law on State Responsibility Through Interpretation

With respect to the second group of reports, there are several instances where general international law, as codified in the ARSIWA, was taken into consideration by panels or the AB in interpreting the WTO provisions. These reports vary significantly as to the methodology followed and the extent of the discussion on general international law.

Most of the reports take into consideration the general rules on attribution of conduct in interpreting more specific WTO provisions, which explicitly or implicitly regulate this matter. The first of such reports was in the case of Canada – Dairy. The Panel discussed whether the Canadian provincial marketing boards were ‘agencies’ of the Canadian government for the purposes of Article 9.1(a) Agriculture Agreement.⁹⁸ It found that the boards ‘act under the explicit authority delegated to them by either the federal or a provincial government’ and can thus be presumed to be an ‘agency’ of such governments. In support of this finding the Panel referred in its footnote to Draft Article 7.2 (now Article 5 ARSIWA), which ‘might be considered as reflecting customary international law’.⁹⁹ The reference was rather vague and did not specify whether the rule was taken into account as ‘relevant rule of international law applicable between the parties’ in the sense of Article 31(3)(c) VCLT. Still, it seems that the panel interpreted the term ‘governments or their agencies’ in Article 9.1(a) Agriculture Agreement in light of the test under general international law, now codified in Article 5 ARSIWA.

In US – DRAMS, the AB referred more elaborately to the ARSIWA in the context of interpreting Article 1.1 SCM.¹⁰⁰ Article 1.1 defines a subsidy as a ‘financial contribution by a government or any public body’, including cases where ‘a government … entrusts or directs a private body to carry out … functions … which would normally be vested in the government and the practice, in no real sense, differs from practices normally followed by governments.’ The AB acknowledged that the terms ‘entrusts’ and ‘directs’ in this context ‘identify the instances where seemingly private conduct may be attributable to a government’ and confirmed that, for this purpose, there must be a demonstrable link between the government and the conduct of the private body.¹⁰¹ On this point it referred on a footnote to the commentary to Article 8 ARSIWA.¹⁰² It then proceeded to interpret the terms ‘entrusts’ and ‘directs’ and concluded that ‘entrustment’ occurs where a government gives responsibility to a private body, and ‘direction’ refers to situations where the government exercises its authority over a private body.¹⁰³ The determination of entrustment or direction, according to the AB, will hinge on the particular facts of the case.¹⁰⁴ On this point, in a footnote, the AB referred once more to the commentary to Article 8 ARSIWA which ‘similarly states’ that the appreciation of whether a certain conduct is carried out under the control of a State should be done on a case-by-case.¹⁰⁵ The legal basis for these references is once more unclear but the AB findings suggest that Article 1.1(a)(1)(iv) SCM mirrors the attribution test under general international law as enshrined in Article 8 ARSIWA. It thus seems to take into consideration general international law in interpreting the specific attribution rule in Article 1.1 SCM.

In US – Anti-Dumping-China,¹⁰⁶ the Panel was called again to interpret Article 1.1 SCM. The Panel report included an extensive discussion on the relevance of the ARSIWA to WTO disputes and sparked disagreement with the AB, which later reversed the Panel’s findings on this matter. This time the contention concerned the term ‘any public body’ in Article 1.1(a)1 SCM. The Panel interpreted the provision based on the VCLT, reaffirming that under Article 31 the interpretative process is a holistic one which begins with the specific terms of the treaty.¹⁰⁷ Having examined the ordinary meaning and context of the term and the object and purpose of the SCM, the Panel concluded that for the purposes of the SCM the term ‘any public body’ extends to all entities controlled by governments, and is not limited to government agencies and other entities vested with and exercising governmental authority as argued by China.¹⁰⁸

The Panel then proceeded to examine other arguments raised by China based on ‘other international instruments that it consider[ed] relevant context’, to see ‘whether any of these other instruments would override [its] analysis and conclusions based on the text of the SCM itself’.¹⁰⁹ The first of such instruments relied on by China was the ARSIWA, which China considered as ‘codifying customary international law with respect to certain principles of state responsibility’ and thus ‘relevant rules of international law applicable in the relations between the parties’ in the sense of Article 31(3)(c) VCLT.¹¹⁰ According to China, the panel ‘must as a matter of law interpret the SCM provisions at issue in conformity with language and concepts in certain provisions of the Draft Articles’.¹¹¹ China argued in its oral and written submissions that the customary character of these principles has been repeatedly recognised by panels and the AB and that the term ‘public body’ must be interpreted in a manner analogous to Article 5 ARSIWA.¹¹²

The panel opined that the ARSIWA do not constitute ‘relevant rules of international law’ under Article 31(3)(c) VCLT and are thus irrelevant to the issue at hand.¹¹³ Firstly, the panel found that

China significantly overstates the status that has been accorded to [ARSIWA] where they have been referred to by panels and the Appellate Body. Indeed, in not a single instance of such citations identified by China has a panel or the Appellate Body identified the Draft Articles as ‘relevant rules of international law applicable in the relations between the parties’ in the sense of Article 31(3)(c), such that they should be ‘taken into account together with the context’ when interpreting the treaty. Rather, in our view, the various citations to [ARSIWA] have been as conceptual guidance only to supplement or confirm, but not to replace, the analyses based on the ordinary meaning, context and object and purpose of the relevant covered Agreements.¹¹⁴

The Panel then discussed certain reports cited by China. It referred to the US – DRAMS, which was ‘at the heart of China’s arguments’, stipulating that despite the references to ARSIWA in the footnotes, the AB said ‘nothing whatsoever about the status of the Draft Articles vis-à-vis the WTO Agreement’.¹¹⁵ Indeed, as demonstrated above, this is a fair statement with respect to the AB’s non-committal language. The Panel noted further that, in fact, panels and the AB have made it explicit in certain cases that the ARSIWA are not binding.¹¹⁶ Surprisingly, the Panel on this point refers to US – Gambling and US – Line Pipe, which are two of the scarce examples in WTO case law where the customary character of the rules reflected in the Articles under discussion is explicitly recognised.¹¹⁷

Secondly, the Panel opined that the provisions of ARSIWA are not ‘relevant’ to the interpretation of the term in question because Article 1.1 SCM is ‘at heart … an attribution rule’ and as such, constitutes lex specialis with respect to the ‘the content or implementation of the international responsibility of a State’ for the purposes of the SCM and supersedes the relevant provisions in ARSIWA, in accordance with Article 55 ARSIWA.¹¹⁸

The AB a few months later re-examined the Panel’s findings. It disagreed with both the interpretation of the term ‘any public body’ in Article 1.1 SCM and the findings regarding the role of the ARSIWA in WTO disputes. It noted that the ARSIWA are not a treaty but ‘insofar as they reflect customary international law or general principles of law [they] are applicable in the relations between the parties.’¹¹⁹ It then confirmed that Article 5 ARSIWA concerns the same subject matter as Article 1.1 SCM and is thus ‘relevant’ in the sense of Article 31(3)(c) VCLT.¹²⁰ It disagreed directly with the Panel and clarified that Article 31(3)(c) VCLT is one of several means to ascertain the common intention of the parties and is not meant to ‘override’ results reached based on other elements of this interpretative exercise.¹²¹ It further disagreed with the Panel’s finding that WTO adjudicative bodies have used the ARSIWA as ‘conceptual guidance’. According to the AB, past case law suggests that the rules codified in the ARSIWA are indeed used in the sense of Article 31(3)(c) VCLT either ‘as containing similar provisions to those in certain areas of the WTO Agreement … [or] by way of contrast with the provisions of the WTO Agreement’.¹²² It seems that the AB treats the, rather vague, references to ARSIWA examined above as instances of Article 31(3)(c) VCLT interpretation of the WTO Agreements.

The AB also addressed the Panel’s finding that Articles 4, 5 and 8 ARSIWA are, in any event, superseded by Article 1.1 SCM pursuant to Article 55 ARSIWA and the lex specialis principle. The AB clarified that the Panel misconceived the operation of Article 55 ARSIWA. In the case at hand there was no doubt that the applicable provision was Article 1.1 SCM.¹²³ The question was not whether the rule codified in ARSIWA should be applied instead of the SCM. It was, rather, whether ‘when interpreting the terms of Article 1.1(a)(1), the relevant provisions of the ILC Articles may be taken into account as one among several interpretative elements.’¹²⁴ According to the AB, Article 55 ‘does not speak to the issue of how the latter should be done’.¹²⁵ The AB did not address further the specific arguments of China and the United States on whether there is an ‘actual inconsistency’ between the rules of attribution under the ARSIWA and those in the SCM, which would activate the lex specialis principle and displace the rule under general international law.¹²⁶ Its analysis, however, implied that there is no such inconsistency because it proceeded to examine Article 1.1 SCM in view of Article 5 ARSIWA. It concluded that the test under Article 5 ARSIWA yields the same results as its own interpretation based on the ordinary meaning, context and object and purpose of the SCM. In view of this, the AB noted that ‘it is not necessary … to resolve definitively the question of to what extent Article 5 [ARSIWA] reflects customary international law’.¹²⁷ The analysis in US – Anti-Dumping-China and the debate outlined above provides a good example of how a dispute can turn on the relevance of general international law to the interpretation of a WTO provision, as taking relevant rules of general international law into consideration may yield a very different interpretative result.

Most recently, in Saudi Arabia – IPR, the Panel made explicit reference to Articles 4, 8 and 11 ARSIWA. The Panel assessed whether the challenged actions were ‘measures taken by [a WTO] Member’ under Article 3.3 DSU. It stipulated that in this assessment it ‘is guided by [certain] legal considerations’ and, in this context, it discussed the rules of attribution codified in the ARSIWA.¹²⁸ It confirmed that ‘the responsibility of Members under international law applies irrespective of the branch of government at the origin of the action’, that acts or omissions of a private party may be attributed to a Member ‘insofar as they reflect decisions that are not independent of one or more measures taken by a government’ and that even unofficial, non-government acts (in that case certain tweets that promoted public screenings of pirated broadcast) may be attributable to the State to the extent that the State acknowledges and adopts them as its own.¹²⁹

There are several more instances where the general rules on attribution of conduct, especially the rule enshrined in Article 4 ARSIWA, have been taken into consideration in interpreting the WTO Agreements.¹³⁰ Most of the times, the Panels or AB cite the ARSIWA in the footnotes of their reports. These references are rather vague and do not specify the legal basis upon which the ARSIWA are taken into consideration. Nonetheless, they imply that the rules of general international law support the interpretative conclusions of the panel or the AB. In other words, they confirm the relevance of the general international law on state responsibility in the interpretation of the WTO Agreements. However, it should also be noted that the relevant footnotes often explain that the ARSIWA were invoked by one of the parties to the dispute in their submissions, implying that this is why they are addressed in the report.¹³¹ This perhaps indicates a reluctance of WTO adjudicative bodies to engage with general international law proprio motu.

There are also a number of cases that make reference to Articles 49 to 53 ARSIWA, on countermeasures and their requirements. In US – Cotton Yarn, the AB referred to the ‘general international law on state responsibility’, and more specifically to Article 51 ARSIWA and the requirement of proportionality, to further support its conclusions regarding attribution of serious damage to individual members under Article 6.4 ATC¹³² for the purposes of imposing a safeguard restraint.¹³³ The AB found that, by analogy to the law on countermeasures, ‘the part of the total serious damage attributed to an exporting Member must be proportionate to the damage caused by the imports from that Member’.¹³⁴ It further added that, if ‘a WTO Member would be subject to a disproportionate and, hence, “punitive” attribution of serious damage not wholly caused by its exports’ it would be an ‘exorbitant derogation from the principle of proportionality’, which ‘could be justified only if the drafters of the ATC had expressly provided for it, which is not the case’.¹³⁵ The AB here implicitly recognises the customary character of the rule enshrined in Article 51 ARSIWA which was found to be relevant in the interpretation of the WTO provision in question. The reference further supports the presumption against conflict in international law, as it suggests that WTO provisions should be interpreted in harmony with applicable rules of general international law, save only in cases of express derogation in the WTO Agreements.¹³⁶ A few months later, the AB in US – Line Pipe referred again to Article 51 ARSIWA, expressly recognising its customary character.¹³⁷ The reference was made in the context of interpreting Article 5.1 of the Safeguards Agreement¹³⁸ to support the conclusion that safeguard measures may be applied only to the extent that they address serious injury attributed to increased imports.¹³⁹

Similarly, the arbitrators in US – FSC and US – Upland Cotton interpreted the term ‘countermeasure’ in Articles 4 and 7 SCM in view of Article 49 ARSIWA. According to their analysis, the term ‘as understood in public international law, may usefully inform our understanding of the same term as used in the SCM Agreement’.¹⁴⁰ The arbitrators agreed that the nature of countermeasures is the same under both general international law and the SCM: they are temporary measures that would otherwise be contrary to a State’s international obligations (the WTO Agreements in the case at hand), which an injured State may take in response to breaches of obligations under international law (the SCM in this case).¹⁴¹ Both reports refer to the application of the lex specialis principle in this respect. Indeed, ‘the term “countermeasures” has a specific meaning in the SCM Agreement as regards their nature and application’.¹⁴² ARSIWA ‘by their own terms … do not purport to prevail over any specific provision relating to the areas it covers that would be contained in specific legal instruments’ but can still ‘inform [the Panel’s] understanding of the same term as used in the SCM’.¹⁴³ Accordingly, the arbitrators took into consideration Articles 49 and 51 ARSIWA in interpreting the SCM. It should be noted, however, that none of the decisions refers to the provisions in question as customary international law. In US – FSC, the arbitrators explained in a footnote that ‘the ILC’s work is based on relevant State practice as well as on judicial decisions and doctrinal writings, which constitute recognized sources of international law under Article 38 of the Statute of the International Court of Justice’.¹⁴⁴ Notwithstanding the legal error of equating the ‘subsidiary means for the determination of rules of law’ with the rest of the sources listed in Article 38 ICJ Statute,¹⁴⁵ the note further shows the reluctance of the arbitrators to characterise the norms codified in ARSIWA as rules of customary international law. Seven years later in US – Upland Cotton, the arbitrators adopted clearer language in their use of the ARSIWA as a means of interpreting the SCM, but still fell short of explicitly recognising the customary character of the provisions in questions.

Last, but not least, in Mexico – Soft Drinks, the panel and AB, in addressing Mexico’s arguments, discussed Article 49 ARSIWA and its relationship with the general exceptions in Article XX GATT. This was the first and only time that a WTO dispute settlement body has dealt with the interaction of the defences codified in Part I, Chapter V ARSIWA with the WTO Agreements, and more specifically with the potential relevance of the customary rules on countermeasures to WTO disputes. Mexico argued that Article XX(d) GATT which reads ‘… nothing in this Agreement shall be construed to prevent the adoption or enforcement … of measures: … (d) necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement …’, incorporates the defence of countermeasures under general international law. According to Mexico, the term ‘laws and regulations’ includes international obligations of WTO members and thus, Article XX(d) can be invoked to justify measures designed ‘to secure compliance’ with such obligations, in that case the US obligations under NAFTA.

The Panel and AB held that Article XX(d) refers to ‘enforcement action within a particular domestic legal system, and [does] not extend to international action of the type taken by Mexico’.¹⁴⁶ Interpreting the provision in its context and in accordance with the ordinary meaning of the terms, they found that the term ‘laws and regulations’ ‘refer[s] to the rules that form part of the domestic legal order of the WTO Member invoking the provision and do not include the international obligations of another WTO Member.’¹⁴⁷ Thus, they found that Article XX(d) does not encompass action taken as a countermeasure in response to an internationally wrongful act. As Mexico’s arguments did not relate to other subparagraphs of Article XX, the panel and AB did not elaborate further on the potential relationship between countermeasures and the rest of the provision.

However, two further arguments were raised in the Mexico – Soft Drinks reports which suggest, more generally, that the defence of countermeasures under the general law on state responsibility cannot be invoked in the context of a WTO dispute.

Firstly, the AB stressed that, if the term ‘laws and regulations’ included international obligations then it would also include obligations under the WTO Agreements.¹⁴⁸ Accordingly, Article XX(d) could also be used to justify measures taken in response to a member’s breach of WTO obligations. This would be contrary to Articles 22 and 23 DSU which provide for the obligation to have recourse to the DSU instead of taking unilateral action in order to seek redress for any alleged WTO breach and for the possibility of WTO-mandated suspension of concessions in cases of non-compliance with a DSB ruling within reasonable time.¹⁴⁹

Secondly, the Panel and AB rejected the applicability of countermeasures from the viewpoint of jurisdiction. They pointed out that in order to examine whether a measure is justified as a countermeasure, panels and the AB would have to determine whether the non-WTO obligation in question (in that case, obligations under NAFTA) has been violated.¹⁵⁰ ‘WTO panels and the Appellate Body would thus become adjudicators of non-WTO disputes’, which, according to the AB, is not their function as intended by the DSU.¹⁵¹ The AB recited to this end Article 3(2) DSU according to which the WTO DSS ‘serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements’.¹⁵² Accordingly, it cannot ‘be used to determine rights and obligations outside the covered agreements.’¹⁵³ Thus, it seems that in the only case where the issue has arisen, the AB held that responding States cannot rely on the defence of countermeasures under general international law in a WTO dispute due to jurisdictional limitations of the WTO adjudicative bodies.¹⁵⁴

The case of Mexico – Soft Drinks shows the potential relevance of the law on state responsibility in the interpretation of the WTO general and security exceptions and raises the interesting issue of the potential applicability of the defences under the law on state responsibility, which has not be discussed extensively in the context of the WTO. The following Section discusses the Mexico – Soft Drinks findings further, in view of the rest of the case law discussed above and the proposed methodology for approaching the relationship between general international law and the WTO Agreements. It identifies some flaws in the line of reasoning in Mexico – Soft Drinks, which suggest that the final conclusion on the availability of the defence of countermeasures in WTO disputes may be very different. This would have significant practical implications with respect to the defences available to a WTO responding State.