An interesting debate in the IELP blog regarding the Clove Cigarettes case in the WTO is about what should be the next steps in terms of the US compliance with the Appellate Body decision in the Clove Cigarette case at the WTO. The AB found the legislative ban of the US on clove cigarettes as inconsistent with US obligations under the TBT Agreement. Ofcourse, the DSU provides for a process of compliance, often cumbersome and lengthy. But that is not the matter of debate here.
The possible options before the US in terms of compliance of the AB ruling are as follows:
1. Immediately revoke the ban on flavoured cigarettes (including clove). This would allow Indonesian imports of clove cigarettes into the US.
2. Immediately extend the ban to menthol cigarettes. This would satisfy the test of "like products" whether imported or domestic being treated no less favourably. Hence, both imported clove cigarettes and domestic menthol cigarettes are treated similarly. The ban on Indonesian cigarettes would continue.
3. Maintain status quo and not modify the legislative ban on clove cigarettes on the ground that Article 21.5 of the DSU provides for new evidence (based on studies) to be brought before the Panel to justify that obligations under the TBT Agreement are not violated. there is a view that Article 21.5 provides ample scope for the US to put forth evidence in the form of new studies to show that banning menthol cigarettes has a vastly different social impact than clove cigarettes.
I have a different understanding of the compliance issue in the Cloves cigarettes matter.Article 21.1 of the DSU clearly mandates that prompt compliance with recommendations or rulings of the DSB is essential in order to ensure effective resolution of disputes to the benefit of all Members. Article 21.2 also envisions that particular attention should be paid to matters affecting the interests of developing country Members (Indonesia, in this case) with respect to measures which have been subject to dispute settlement. Article 21.3 does provide a "reasonable period" of time to comply with the decision when it is "impracticable" to comply immediately which should not exceed 15 months. The US could, ofcourse, take recourse to this.
Article 21.5 covers situations where there is a disagreement as to the existence or consistency with a covered agreement "of measures taken to comply with the recommendations and rulings". My understanding is that when a country undertakes a measure or measures to "comply" with the recommendations and rulings, the very existence of these measures (a factual question) or consistency of these measures with covered agreements (factual or/and legal question) can be brought into question.However, could this imply that the original decision as to the violation of WTO obligations itself is reopened? Does'nt this create a situation wherein the "finality" to a proceedings after the AB decision is called in question. For instance, while studies or a series of studies can be undertaken to study the social impact of the ban on menthol cigarettes,how can the result of this study have a bearing on the substantive point of menthol and clove cigarettes being "like products" which has already been decided by the Panel and AB based on submitted evidence? While 21.5 allows a challenge on the EXISTENCE of a measure taken to comply or its consistency with covered Agreements, does it allow for a challenge of the grounds or rationale on which the AB or Panel based its decision? This would in effect be re-opening the case on merits while Article 21.5 is purely to cover disagreements of measures taken to comply. Article 21.5 does not cover disagreements as to the existence of "conditions" that prompted the decision. While Indonesia may be able to use Article 21.5 to challenge the existence of "measures" undertaken by the US to comply with the AB ruling in terms of a ban of menthol or a revocation of clove cigarettes, would it not be beyond the scope of Article 21.5 to argue that the US can produce additional scientific studies/evidence to establish the disparate impacts of clove and menthol cigarettes? Would it not amount to a "review" of the AB ruling?
" I am certainly not suggesting that a 21.5 review could be used to challenge the findings of law of the Appellate Body. Malaysia attempted this in Shrimp/Turtle and was rightly rebuffed. However, the jurisprudence clearly indicates that a 21.5 review is to determine whether a WTO Member is in compliance based on the facts available at the time of the review, not the original ruling, to the extent that there is a difference. I have cited some of the precedent on this in my post above. I can't imagine that it would make sense to require a Member to forever refrain from regulating a risk by a certain measure, regardless of new evidence about the seriousness of the risk, just because the evidence was inadequate at the time at which the matter was adjudicated. Understanding of risk evolves all the time, sometimes dramatically (tobacco is in fact a good example).
I suppose that some kind of spurious "finality" could be achieved by withdrawing the existing regulation found in violation and then passing a new "measure" of the same kind, based on new evidence, which would then arguably be the subject of de novo panel proceedings. But the AB has rightly rejected such artificiality. For one thing, it does no service to the original claimants, because it requires them to go back to square one, as it were."
Interesting analysis of the interpretation of Article 21.5 of the DSU. Non-compliance by the US can also lead to Indonesia getting compensation or resorting to retaliation in terms of suspension of concessions subject to the approval of the DSB. Hence, the US may not amend its law and maintain status quo, but it could result in the above action being taken against it. Scott has a brilliant blogpost on this issue here:
"Of course, there's nothing in WTO rules preventing a WTO Member from implementing a less-than-perfect regulation which seeks to achieve some perceived social good yet has been watered down for political reasons (and thus discriminates against imports - intentionally or not). And, as noted above, there's nothing preventing a WTO Member from refusing to comply with a dispute settlement decision against that regulation for similar political reasons. (Indeed, the EU for years refused to comply with multiple WTO rulings against its ban on hormone-fed beef for largely political reasons; it instead chose to accept retaliatory US and Canadian tariffs on EU exports rather than face the political consequences. And, surprisingly enough, the WTO never dispatched an army of flying Genevan monkeys to stop the EU from pursing this course of action.)
Would be interesting to see how the US "measure" would pan out in this case and even more pertinent to see Indonesia's reaction to it. Will the US (i) comply by banning menthol cigarettes or revoking the ban on flavoured cigarettes, (ii) maintain status quo and argue that changed circumstances do not require compliance or (iii) maintain status quo and face the consequences under the WTO Agreements? Either of the three may be valid steps as per international law but to reject the WTO per se and the multilateral trading system as unjust and against public health on the basis of a decision against one's interest would be an over reaction.On the other hand, it's simply not for the WTO to make subjective determinations as to the political feasibility or motivations behind a clearly discriminatory law or government practice. WTO rules, like the GATT before it, are designed to objectively define, adjudicate and discourage discrimination - in law and in fact - against imports. In the present case, the US ban on flavored cigarettes (because it exempts menthols) discriminates against imports of other "flavored" cigarettes. The United States could comply with WTO rules by including methols in the ban, but if that or any other method of compliance isn't politically feasible, then the US government can simply sit back and watch Indonesia impose commensurate countermeasures against US exports. What the United States can't do is impose the partial ban and then expect the WTO to sanction the regulation because it was, according to the US government, the "best they could do," given the political climate. And groups like Public Citizen certainly shouldn't slander the WTO for refusing to do so."