Implications of recent SPS dispute settlement cases
Article 5.7: provisional measures
Article 5.7 of the SPS Agreement permits Members to adopt provisional measures. Where relevant scientific evidence is
24 WT/DS26/AB/R, para. 128.
25 WT/DS26/AB/R, para. 129.
insufficient, Members may provisionally adopt SPS measures on the basis of available pertinent information. In such circumstances, Members shall seek to obtain the additional information necessary for a more objective assessment of risk and review the measure accordingly within a reasonable period of time.
While the burden of proof in a WTO dispute lies with the complainant, the responding Member bears the burden in invoking Article 5.7 to rebut claims of inconsistency with Articles 5.1 and 2.2.
The Appellate Body in Japan – Varietals considered that Article 5.7
"operates as a qualified exemption from the obligation under Article 2.2 not to maintain SPS measures within sufficient scientific evidence".26 Article 5.7 sets out four requirements, relating to initial application of the measure and continuing compliance:
i. the measure is adopted where relevant scientific information is insufficient;
ii. the measure is adopted on the basis of available pertinent information;
iii. the Member seeks to obtain the additional information necessary for a more objective assessment of risk"; and
iv. the Member reviews the measure accordingly within a reasonable period of time.
Given that WTO obligations do not have retrospective application, the fact that a pre-1995 measure did not satisfy the first two requirements of Article 5.7 at the time it was introduced does not preclude justification under Article 5.7. It is however uncertain when or even if the first two requirements must be satisfied in relation to pre-1995 measures. Neither the Panel nor the Appellate Body in Japan – Varietals examined the first two elements of Article 5.7.
One interpretation is that a Member is required to demonstrate, as on 1 January 1995, that all pre-1995 measures were continuing to be
26 WT/DS76/AB/R, para. 80.
maintained in a situation where relevant scientific information was insufficient and that the measure was maintained on the basis of available pertinent information. This ignores the practical impossibility of such compliance. An alternate interpretation is that a Member must demonstrate at the time of a WTO dispute panel, that the measure was being maintained according to the first two requirements.
Where a panel does proceed to examine the first two requirements of Article 5.7, it is uncertain what must be demonstrated in terms of the scientific evidence. The term "sufficient" under Article 2.2 has been interpreted to be a relational concept, which "requires the existence of a sufficient or adequate relationship between two elements, in casu, between the SPS measure and the scientific evidence".27 Extrapolating the reverse interpretation in relation to
"insufficiency" is however unhelpful.
It is nevertheless clear from the Article 5.1 jurisprudence in Salmon and Hormones that the scientific evidence does not have to be conclusive. Experts advising a panel would probably be asked about the sufficiency of scientific data that might be available in order to arrive at a scientific judgment. A complainant could also be expected to document available data and to compare the
"sufficiency" of such data drawn upon in risk assessments on other products by the importing Member and other Members. A panel could well be influenced by evidence that other WTO Members had undertaken risk assessments based on the same data.
The Appellate Body noted that the SPS Agreement did not set out explicit prerequisites on the additional information to be collected, a specific collection procedure, or what actual results must be achieved. However, Article 5.7 states that the additional information is to be sought in order to allow the Member to conduct "a more objective assessment of risk". The information sought must therefore be germane to conducting a risk assessment, i.e. the evaluation of the likelihood of entry, establishment or spread of a pest or disease,
27 WT/DS76/AB/R, para. 73.
according to the measures which might be applied.28 In Japan – Varietals, the information collected by Japan was found not to examine the appropriateness of the SPS measure at issue and did not address the core issue as to whether varietal characteristics cause a divergence in quarantine efficacy.29
On the fourth requirement, it is noted that "review the measure"
within the reasonable period of time does not equate to "complete a risk assessment". "Review the measure" only requires that Members commence a risk assessment - if there was sufficient scientific evidence for a more objective assessment of risk - within a reasonable period of time.
The Appellate Body in Japan - Varietals considered that what constitutes a '"easonable period of time" has to be established on a case-by-case basis and depends on the specific circumstances of each case, including the difficulty of obtaining the additional information necessary for the review and the characteristics of the provisional SPS measure.30 In that case, the scientific experts had advised that studies to determine whether varietal differences mattered for quarantine efficacy could be carried out relatively easily, i.e. it was relatively easy to collect the necessary additional information. While the obligation "to review" the varietal testing requirement has only been in existence since 1 January 1995, Japan had not reviewed the measure "within a reasonable period of time".31
Practical implications for WTO members
The Appellate Body in Hormones recognised the practical difficulties associated with pre-1995 measures and appeared to leave open some flexibility for Members in interpreting "as appropriate to the circumstances" under Article 5.1. This does not, however, displace the Article 5.1 requirement that there must be some sort of risk assessment on which the measures are based on. "As appropriate to
28 WT/DS76/AB/R, para. 92.
29 WT/DS76/AB/R, para. 92; WT/DS76/R, para. 8.56.
30 WT/DS76/AB/R, para. 93.
31 WT/DS76/AB/R, para. 93; WT/DS76/R, para. 8.56.
the circumstances" therefore qualifies the standard of the risk assessment and not whether there should be a risk assessment per se.
Article 5.7 is therefore the relevant provision in respect of pre-1995 measures.
There is insufficient jurisprudence to determine the extent to which Article 5.7 provides a plausible defence or justification for pre-1995 measures. A strictly literal interpretation of Article 5.7 - read in the context of the Appellate Body’s statements that SPS provisions do not confer "grandfather rights" – would preclude Article 5.7 as such a defence. Balanced against this is the impossibility of Members' compliance – given practical and economic realities – under this interpretation.
It will ultimately be a question of "reasonableness" to be determined on a case-by-case basis, balancing the rights and obligations of the importing Member and the Member seeking quarantine access.
Relevant factors might include: the bona fides of the parties, i.e.
whether the measure was being maintained as a disguised restriction to trade; the technical and economic capacity of the importing Member to conduct only a limited number of risk assessments at any one time; the number of import requests received; when the import request was first brought to the attention of the importing Member; and the ease of collecting additional information and reviewing the measure.
In practice, WTO panel and appeal processes could take up to 14 months from the date of the request for consultations to the date of adoption of the panel/Appellate Body reports by the DSB. A Member will then have a reasonable period of time to implement the DSB findings. Given that full WTO processes could take anywhere between 18 to 28 months, Members would be reluctant to initiate complaints which could well be overtaken by events, i.e. the completion of a proper risk assessment.
In cases where a risk assessment is scheduled or in progress, WTO panels are likely to accord a Member time to complete it. Article 5.7 only requires Members to "review ... the measure accordingly within a reasonable period of time", it does not provide that Members must
conduct risk assessments within this period. Where no risk assessment was scheduled or in progress, the question will turn on what constitutes the reasonable period of time for reviewing the measure. On a balance of rights and obligations, there is little economic detriment to an exporting Member in respect of a pre-1995 measure maintained by a Member, but for which no import requests have been made. It is also a question of reasonableness, given the practical and economic constraints on Members, whether a Member is required to review all pre-1995 measures regardless of whether or not there is any economic interest in importing a particular product.
A number of practical conclusions can be made. Firstly, the refusal to conduct simultaneous risk assessments may not, by itself, preclude the application of Article 5.7. A panel interpreting the 'reasonable period of time' may take into account the practical constraints on Members conducting risk assessments on all requested products of all Members at the one time. Where resources are limited, it may be reasonable for a Member to refuse simultaneous risk assessments to maintain equity between importing Members. However, this will only be one factor to be considered in the "reasonableness" matrix.
Secondly, while Members are likely to be accorded time to complete a risk assessment, it is uncertain what this period of time is.
'reasonable period of time' in Article 5.7 only relates to the requirement to "review" the measure. It does not provide guidance on the time to conduct a proper risk assessment. Panels are likely to consider the practice of other WTO Members, the complexity of the subject matter and the resource constraints on the importing Member. Panels may also take into account domestic legal processes such as delays from Australian Administrative Decisions Judicial Review challenges.
Finally, in terms of an importing Member’s work program, priority for conducting risk assessments should be given to products for which import requests have been received, according to their economic significance, and with priority to the earlier requests. This reflects the likelihood of WTO challenge by exporting Members.
There is little risk of a WTO challenge with respect to historical
measures covering products for which there was little or no interest in trade.
Implementation of WTO dispute settlement findings
Article 21.3 of the Disputes Settlement Understanding (DSU) provides that in the event of a finding of WTO-inconsistency - for example that an SPS measure was not based on a proper risk assessment - the Member has a 'reasonable period of time' to bring its measures into conformity.
Where parties fail to agree on a period, this is determined by binding arbitration. The guideline for arbitration is that the reasonable period of time should not exceed 15 months from the date of adoption of a panel or Appellate Body report. This period may be shorter or longer, depending upon the particular circumstances (Article 21.3 (c) DSU).
Arbitrators have to date interpreted 15 months to be the outer limit for the reasonable period of time. In both Korea – Alcoholic Beverages and Australia – Salmon, the arbitrators noted that the 15 month period was a guideline and not an obligation.32 According to the arbitrators, the reasonable period of time is the minimum period at which a Member can implement within its legal system. Where implementation could be effective by purely administrative and non-legislative means, the reasonable period of time could be considerably shorter. Conversely, arbitrators have provided parties longer time frames where implementation necessitated legislative amendment.
This distinction between legislative and administrative implementation arbitrarily discriminates between different Members on their systems of government. It is also incorrect to assume that administrative implementation is necessarily faster than legislative implementation. Most non-legislative systems embrace strong natural justice and administrative law requirements, for example Australia’s Administrative Decisions (Judicial Review) Act
32 WT/DS75/16, para. 36; WT/DS18/9, para. 38.
1977. These impose minimum time-frames and consultation requirements for administrative decision-making and acceleration of processes could give rise to risks of judicial challenge.
Importantly, the reasonable period of time does not take into account economic factors such as the resources and time necessary to conduct a proper risk assessment.33 Implementation may be bywithdrawal of the measure. This is consistent with Article 21.1 of the DSU which declares the prompt compliance with recommendations and rulings of the DSB as essential for the effective resolution of disputes.
In Australia – Salmon, the arbitrators repeated that the reasonable period of time should be the shortest period possible within the legal system of the Member to implement the WTO findings.
Conducting risk assessments was not pertinent to the determination of the reasonable period of time. Given that implementation could be effected by administrative means, the reasonable period of time was determined to be eight months i.e. 6 July 1999. The then AQIS conducted accelerated import risk analysis processes for salmonids, other marine finfish and live ornamental fish, and new measures were announced on 19 July 1999.
Conclusion
It has been shown that economic considerations are very much a part of, and are not inconsistent with, science-based quarantine decision-making under the SPS Agreement. Firstly, a Member’s appropriate level of protection reflects economic considerations such as the economic benefits of trade and the potential economic impact of pest or disease establishment.
Secondly, in conducting a risk assessment a Member must evaluate the likelihood of entry, establishment or spread of the pest or disease, as well as the associated potential biological and economic consequences. Article 5.3 of the SPS Agreement expressly requires Members to take into account economic considerations in risk
33 WT/DS26/15, para. 41.
assessment and risk management such as: the potential damage in terms of loss of production or sales from the entry, establishment or spread of a pest or disease; the costs of control or eradication in the territory of the importing Member; and the cost-effectiveness of alternative approaches to limiting risks.
The SPS Agreement is however less accommodating of economic considerations on the technical and economic capacity of Members to implement WTO-consistent measures. Firstly, the legal test of Article 5.5 gives rise to a presumption of inconsistency where a Member adopts different measures on different products and does not reflect scientific or economic practice. Secondly, pre-1995 measures remain a potentially serious issue for importing Members.
However, panels and Members are likely to adopt a flexible approach to pre-1995 measures to take into account the practical and economic constraints on full compliance. Finally, the reasonable period of time for implementing WTO findings does not include the time or resources necessary to conduct a proper risk assessment.
This reflects the fundamental object of the DSU which is the prompt settlement of disputes.
References
ABARE (1999) Potential market penetration of salmon imports into Australia. Report prepared by Heaney A., C. Cox and A. Abdalla, November.
AQIS (1999a) Import risk analysis on viable salmonids and non-salmonid marine finfish, Canberra: Australian Quarantine Inspection Service, July.
AQIS (1999b) Animal quarantine policy memorandum 1999/26, Canberra: Australian Quarantine Inspection Service.
OIE (1999) Animal health code, Chapter 1.4.2.2. Paris: Office International des Epizooties
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