I. INTRODUCTION
In 2017 Qatar initiated consultations with Saudi Arabia, Bahrain and the United Arab Emirates (UAE) concerning measures that allegedly violated numerous WTO-covered agreements. Saudi Arabia, Bahrain and UAE invoked security exceptions and stated that their measures were taken in response to Qatar's involvement in financing terrorism in breach of United Nations (UN) Security Council Resolutions and of agreements under the Gulf Cooperation Council.Footnote 1 Two of these procedures led to the establishment of a Panel,Footnote 2 but only the Panel in Saudi Arabia–IP Rights (2020)Footnote 3 has adopted a Report at the time of writing. This is only the second time a WTO Panel has interpreted and applied the security exceptions under a WTO-covered agreement, following the historic first in the Panel Report in Russia–Traffic in Transit (2019).Footnote 4
There is no evidence that Saudi Arabia argued before the Panel that its trade restrictions were lawful countermeasures under customary international law, although the measures taken by Saudi Arabia (and others) could be seen as paradigmatic countermeasures. In relation to similar facts, Saudi Arabia, along with Bahrain, Egypt, and UAE, argued before the International Court of Justice (ICJ) in an appeal relating to the jurisdiction of the ICAO Council under Article 84 of the Convention on International Civil AviationFootnote 5 that their restrictive measures against Qatar in breach of that Convention were lawful countermeasures owing to Qatar's prior breach of the above anti-terrorism obligations.Footnote 6 The fact that the respondent WTO Members did not raise countermeasures as a defence in the WTO procedures, but did do so in other fora, raises a pivotal question: Are countermeasures in the form of suspending compliance with WTO obligations permissible in response to prior breaches of international law concerning non-WTO obligations, such as the prohibition of use of force, anti-terrorism obligations, the law of the sea, human rights, and so on?
From a WTO perspective, this question seems to have been answered negatively by the Appellate Body (AB) in Mexico—Soft Drinks (2006).Footnote 7 In that case, Mexico adopted measures that were inconsistent with its WTO obligations in response to alleged violations by the US of international obligations under NAFTA. Mexico sought to justify its measures against the US as a general exception under GATT Article XX(d) on the basis that they were intended to secure compliance with the US's international obligations. Article XX(d) reads as follows:
… nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures:
…
(d) necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement, including those relating to customs enforcement, the enforcement of monopolies …, the protection of patents, trade marks and copyrights, and the prevention of deceptive practices.
The AB upheld the Panel's finding that Mexico's measures did not constitute measures ‘to secure compliance with laws or regulations’ within the meaning of GATT Article XX(d). The AB held that ‘“laws or regulations” within the meaning of Article XX(d) refer 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.’Footnote 8 In other words, countermeasures in response to a violation of international obligations by another WTO Member cannot be justified under the general exception in Article XX(d).
Moreover, the AB accepted the US's additional argument that if WTO Members were permitted to invoke Article XX(d) to justify unilateral measures taken to secure compliance with another Member's international obligations, that ‘would logically imply’ they could also invoke Article XX(d) to justify unilateral measures to secure compliance with another Member's WTO obligations. Mexico's interpretation would thus ‘allow WTO Members to adopt WTO-inconsistent measures based upon a unilateral determination that another Member has breached its WTO obligations, in contradiction with Articles 22 and 23 of the DSU [Dispute Settlement Understanding]’.Footnote 9 It can be inferred from this that the AB considered that permitting unilateral trade countermeasures for breaches of international obligations might undermine the WTO's dispute settlement system.
The AB also stated that Mexico's interpretation implies ‘that, in order to resolve the case, WTO panels and the Appellate Body would … have to assess whether the relevant international agreement has been violated [thus becoming] adjudicators of non-WTO disputes …’, which ‘is not [their function] as intended by the DSU’.Footnote 10 In other words, since the WTO bodies are not competent to make determinations of breaches of non-WTO obligations, a Member State cannot rely on the defence that it suspended compliance with its WTO obligations as a trade countermeasure in response to a violation of non-WTO international law obligations.
In 1991, in relation to 1947 GATT, Hahn argued that unilateral trade countermeasures would endanger stability in international economic relations.Footnote 11 But there is a particular need to revisit the AB's twofold argument in Mexico—Soft Drinks (2006) against unilateral countermeasures for breaches of international obligations outside the WTO, ie that they open the door to unilateral countermeasures for breaches of WTO obligations, contrary to DSU Articles 22–23, and that WTO adjudication bodies do not have jurisdiction to address whether a WTO Member has violated a non-WTO obligation.
Psychologists and sociologists suggest that ‘cultural shocks’, a state of disorientation brought about by sudden subjection to an unfamiliar culture,Footnote 12 may lead to ‘introvert’ outcomes, just as ‘nationalism’ can be a reaction to ‘alien influences’.Footnote 13 The WTO is experiencing what can be called a ‘cultural shock’, which may lead to such an ‘introvert’ reaction against international law and which may cement the Mexico—Soft Drinks (2006) mantra.
Until the early 2000s WTO law ‘managed a relative insulation from the “outside” world of international relations’.Footnote 14 However, since 2017, the invocation of security exceptions has increased,Footnote 15 including in relation to trade disputes that WTO Members have framed as security disputes.Footnote 16 This has led to the establishment of WTO Panels in respect of these disputes and the adoption of two reports so far.
Many of these cases involve measures taken in response to what the WTO Member concerned considers to be a breach of non-WTO obligations that are not based on regional trade agreements (and as such can be distinguished from Mexico—Soft Drinks which concerned breaches of NAFTA). They concern security-related or human rights issues (and in some instances prior breaches of such obligations). Russia–Traffic in Transit (2019) involved Russian measures taken in the context of its conflict with Ukraine over Crimea (unlawfully annexed by Russia). Saudi Arabia–IP Rights (2020) is one of numerous disputes brought by Qatar concerning measures taken against it by Saudi Arabia; and, in 2019, Venezuela requested consultations with the US concerning allegedly WTO-inconsistent measures which it had taken in response to Venezuela's alleged human rights violations.Footnote 17
This increased invocation of security exceptions means that WTO bodies are increasingly confronted with scenarios that are outside their traditional areas of competence and this has prompted some authors to argue that WTO adjudication should avoid addressing ‘sensitive matters’,Footnote 18 including unilateral WTO restrictions taken in response to non-WTO breaches.
Concerns about WTO adjudication expanding into sensitive areas are exacerbated by long-term criticisms, from some quarters, that WTO adjudicators have become too interventionist. Indeed, the WTO AB's ‘demise’ has been blamed (at times unpersuasively) on its alleged tendency to engage in ‘judicial activism’.Footnote 19
At the same time, the EU, in light of the WTO AB's ‘paralysis’, has been accused of encouraging unpredictability and undermining multilateralism,Footnote 20 by proposing amendments which would permit it to take unilateral countermeasures under customary international law for breaches of WTO law.Footnote 21 Against this background, unilateral trade countermeasures for breaches of non-WTO law may also be seen to threaten the predictability of the WTO. Thus, their prohibition may be appealing to those in favour of WTO adjudication.
Among the arguments against permitting unilateral trade countermeasures under customary international law in response to breaches of non-WTO law is the fact that there are three alternative avenues:
First, non-WTO obligations could be enforced by interpreting the text of the general exceptions (eg GATT Article XX) so as to include countermeasures that are WTO-consistent.Footnote 22 However, relying on GATT Article XX may be possible only for some countermeasures in response to breaches of some international law obligations, such as some obligations of human rights law or environmental law. Even then, the restrictive thresholds of necessity in GATT Article XX(a)–(b) and of proportionality in that Article's chapeau make such an option unlikely.Footnote 23
Second, non-WTO obligations could be enforced by relying on security exceptions. GATT Article XXI (and security exceptions in other WTO-covered agreements) provides that WTO Members may take measures ‘in times of war or other emergency in international relations’, a term which captures situations where countermeasures under customary international law may be taken. However, in Russia–Traffic in Transit and Saudi Arabia–IP Rights, the Panels considered that the term ‘emergency in international relations’ must be understood as ‘a situation of armed conflict, or of latent armed conflict, or of heightened tension or crisis, or of general instability engulfing or surrounding a state’, eliciting ‘defence and military interests, as well as maintenance of law and public order interests’.Footnote 24 Urgent or serious ‘political or economic differences’ between WTO Members are insufficient of themselves to constitute an emergency in international relations, unless they give rise to defence and military interests, or maintenance of law and public order interests.Footnote 25 The narrow scope of ‘emergency in international relations’ means that the security exception does not cover numerous situations where countermeasures would be allowed.
Third, the customary international law rules on countermeasures may be read into GATT Article XXI by virtue of ‘systemic integration’ (reflected in Article 31(3)(c) of the Vienna Convention on the Law of Treaties (VCLT)).Footnote 26 However, including countermeasures in the requirement of ‘times of war or other emergency in international relations’ waters down the strict requirements of this provision set out in Russia–Traffic in Transit and Saudi Arabia–IP Rights. Additionally, reading into this provision the customary international law conditions of lawfulness of countermeasures replaces (rather than interprets) the text of GATT Article XXI with the extraneous rules on countermeasures.Footnote 27
This article, after explaining the function of countermeasures under customary international law (Part II), argues that prohibiting unilateral trade countermeasures for breaches of non-WTO obligations has the potential to undermine the enforcement and normative integrity of international law outside of the WTO, and it should not easily be presumed that this outcome was the intention of WTO Members.
This article argues that the WTO Agreement has not displaced unilateral trade countermeasures in response to breaches of non-WTO obligations (Part III) and that the predictability of trade is not threatened by the availability of such countermeasures (Part IV). It explains that the WTO dispute settlement system has jurisdiction over trade disputes in which the respondent invokes as a defence the right to take lawful countermeasures under customary international law for prior breaches of non-WTO obligations. Thus such defences are subject to legal argumentation by WTO Members and judicial scrutiny.
Finally, the article concludes that trade countermeasures for breaches of non-WTO law may support multilateral obligations outside the WTO, since they enable their enforcement and ensure their normative preservation (Part V).
II. THE FUNCTION OF COUNTERMEASURES IN CUSTOMARY INTERNATIONAL AW
This section explains the function of countermeasures under the law of State responsibility and their relationship to lex specialis (Section II.A), their wider function in enforcing and preserving the integrity of primary rules of international law (Section II.B), and the conditions of lawfulness of countermeasures under customary international law (Section II.C).
A. Countermeasures as Circumstances Precluding Wrongfulness and Lex Specialis
As set out in the 2001 ILC Draft Articles on Responsibility of States for Internationally Wrongful Acts (ARSIWA), countermeasures are a means of implementing responsibility for a breach of international obligations: they are intended to induce the responsible State to comply with its obligation to cease its wrongful act and to make reparation.Footnote 28 Countermeasures involve conduct that is itself prima facie in breach of international law but because they are taken in response to a prior wrongful act their wrongfulness is precluded.Footnote 29 Thus, the conduct is lawful. This has also been termed ‘justification’ of otherwise wrongful conduct.Footnote 30 Scholarship,Footnote 31 State practiceFootnote 32 and international jurisprudenceFootnote 33 support the conclusion that countermeasures are circumstances precluding wrongfulness (or justifications). The ARSIWA classify rules on countermeasures in the same way as all other rules on State responsibility: namely, not as primary rules that prescribe the conduct of States, but as secondary rules concerned with the consequences of a breach of primary rules.Footnote 34
Customary international law rules on State responsibility, including those on countermeasures, can be displaced by treaty lex specialis (ARSIWA Article 55). For this to be the case, there must be an overlap in subject matter between the customary international law rules and the rules established in the treaty, as well as a discernible intention by the treaty parties to deviate from the customary international law rules.Footnote 35
The established view in WTO practice and literature is that unilateral responses (such as countermeasures) to breaches of WTO law have been displaced by WTO lex specialis in the form of the DSU, especially its Article 23 and its system of ‘WTO countermeasures’.Footnote 36 However, a less settled question is whether WTO law has displaced unilateral trade countermeasures in response to breaches of extra-WTO law. The answer to this question is a matter of interpreting the WTO Agreement (discussed in Part III).
B. Countermeasures as a Means of Enforcing and Preserving Primary Rules of International Law
Countermeasures enable and strengthen the enforcement and normative integrity of international law outside of the WTO. Countermeasures are not the only or the most effective way of enforcing international law.Footnote 37 However, in the frequent cases where State consent to international adjudication is lacking (including by virtue of reservations), countermeasures may be the only effective, and at times the only available, means of self-help against a responsible State. The position is further exacerbated by the fact that, in recent years, some States have seemed keener to withdraw from treaties establishing the compulsory jurisdiction of international courts and tribunals.Footnote 38 While the ICJ is witnessing a rise in erga omnes (partes) claims, Gambia v Myanmar being the most recent example,Footnote 39 such claims are still exceptional and rare. They presuppose that the ICJ has jurisdiction and often it does not; they also depend on the discretion of the State that has standing to bring the complaint.
More generally, the scope of WTO trade obligations is comprehensive, with 98 per cent of world trade being governed by WTO-covered agreements. In addition, the membership of the WTO has expanded to 164 Members and a further 20 States are seeking to join.Footnote 40 In the UN era, where forcible countermeasures are prohibited, trade countermeasures are a persuasive means for enforcing international obligations. If trade countermeasures are unavailable to over 160 States, the enforcement of international law, including jus cogens norms, will be threatened.
Further, removing the right to take trade countermeasures may affect the likelihood that a responsible State will participate in dispute resolution processes (including adjudication) in relation to other areas of international law. Under customary international law, unilateral countermeasures must cease once an international court or tribunal is seised and the responsible State has ceased the wrongful conduct. Until then, countermeasures are a significant tool for injured States, especially to preserve their rights and to convince the responsible State to participate in international adjudication.
Countermeasures also play a role in ‘normative dynamics’ (law-making).Footnote 41 If States fail to respond to conduct that violates existing norms, that silence may (under certain conditions) constitute acceptance of the conduct, thus enabling normative change vis-à-vis customary international law rules, through treaty interpretation or treaty modification.Footnote 42 Thus countermeasures provide an important means of protest against conduct that deviates from existing norms.Footnote 43 As a means of protest, countermeasures can prevent the weakening and eventual change or termination of international law norms and they can establish and maintain a persistent objector stance vis-à-vis new customary international law.Footnote 44
The argument that WTO Members have alternative means at their disposal (other than trade countermeasures) to enforce and preserve the normative integrity of their rights, because they can rely on diplomatic protest and retorsion, fails to consider the limited capacity of small and developing countries to enforce international obligations. Resorting to countermeasures depends on the resources of the particular State, and its trade relationship and power dynamics with the target State. Inequalities in the economic, political and institutional capacities of States mean that countermeasures by small and developing countries are unlikely to be feasible and thus unlikely to be taken. However, the influence of diplomatic protest also depends heavily on the power dynamics between the responsible State and the reacting State. If countermeasures are not available to small and developing countries they are unlikely to only protest verbally, because they risk aggravating their relationship with a powerful responsible State without the possibility of taking action that might persuade the responsible State to cease the wrongful conduct (such as countermeasures).
Suggesting that WTO Members may not take trade countermeasures but may still take countermeasures in other fields risks significantly aggravating international relations in specific fields of international law. Furthermore, countermeasures in other fields can still have an effect on trade flows but without the WTO system being able to review the restrictive measures. For example, the law of the sea governs numerous economic activities at sea, including navigation, but WTO law may not apply in some maritime zones.
The argument that trade countermeasures in response to breaches of non-WTO obligations are unavailable rests on the proposition that over 160 WTO Members have intended to curtail extensively (in terms of the type of countermeasures available to them) their general ability and entitlement to enforce and preserve the normative content of non-WTO international law obligations. For this reason, arguments that the WTO Agreement has displaced this type of countermeasures should be approached with caution.
C. Conditions of Lawfulness of Countermeasures under Customary International Law
This section sets out the conditions for the lawfulness of countermeasures under customary international law. Under the ARSIWA, countermeasures have to fulfil certain conditions in order to be lawful. First, countermeasures must be taken in response to a previous internationally wrongful act and it is axiomatic that they may be taken by an injured State.Footnote 45 Where the internationally wrongful act is a breach of erga omnes (partes) obligations, there has been much debate on whether States other than the injured State are entitled to resort to countermeasures against the responsible State.Footnote 46 This is important because all jus cogens norms (such as the prohibition of torture or of genocide) are of such nature. In 2001, the ILC explained that there was embryonic practice of States other than the injured State taking lawful measures against the responsible State.Footnote 47 However, since 2001, some argue that there has been abundant practice of ‘third party countermeasures’.Footnote 48
Second, countermeasures must be targeted only against the responsible State—they presuppose the existence of an internationally wrongful act: a breach of an international obligation attributed to that State.Footnote 49 Third, the injured State must call upon the State acting wrongfully to comply with its obligations of cessation and reparation, notify it of the decision to take countermeasures, and offer to negotiate.Footnote 50 Fourth, countermeasures have to be temporary and reversible.Footnote 51 Fifth, they have to be proportionate to the injury suffered taking into account the gravity of the breach and the rights in question.Footnote 52 Sixth, forcible countermeasures are prohibited and countermeasures may not affect ‘fundamental human rights’ obligations, obligations of a humanitarian character prohibiting reprisals, or obligations derived from jus cogens norms.Footnote 53 Seventh, countermeasures may not be taken if the internationally wrongful act has ceased and the dispute is pending before a court which has the authority to make decisions binding on the parties.Footnote 54
III. THE WTO AGREEMENT AND COUNTERMEASURES IN RESPONSE TO BREACHES OF NON-WTO OBLIGATIONS
Having explained the function and conditions of lawfulness of countermeasures under customary international law (Part II), this Part considers and rejects two lex specialis arguments which are used to support the proposition that trade countermeasures for breaches of non-WTO obligations have been displaced. First, that GATT Article XXI, entitled ‘Security Exceptions’, displaces such countermeasures (Section A). Second, that the WTO Agreement in general displaces such countermeasures (Section B).
A. Security Exceptions and Countermeasures Do Not Overlap in Subject Matter
This Section counters Hahn's argument (1991) that countermeasures have been superseded by the GATT security exceptions.Footnote 55 The following analysis focuses on GATT Article XXI(1)(b)(iii), this being an example of a security exception in a WTO-covered agreement that could overlap in content with situations of countermeasures under customary international law.Footnote 56 GATT Article XXI(1)(b)(iii) reads:
Nothing in this Agreement shall be construed …
(b) to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests …
(iii) taken in time of war or other emergency in international relations … .
The ordinary meaning of the terms in GATT Article XXI(b)(iii)—‘nothing shall be construed to prevent … from taking any action’—suggests that conduct falling within the security exception is not prohibited. In contrast, countermeasures involve conduct that is prima facie inconsistent with an obligation (ie prohibited), but the wrongfulness of the conduct is precluded. Thus, the two play different roles: countermeasures are a justification for breaking the rules; Article XXI is an exception to the rules.
No GATT/WTO case has specifically considered whether GATT Article XXI is lex specialis as regards countermeasures suspending compliance with GATT obligations in response to breaches of non-WTO obligations. The two recent Reports of the Panels in Russia–Traffic in Transit (2019) and in Saudi Arabia–IP Rights (2020) both applied security exceptions. However, as will be shown in Sections III.A.1 and III.A.2 respectively, they provide no conclusive evidence that countermeasures under customary international law overlap with and are displaced by security exceptions in WTO-covered agreements.
Section III.A.3 argues that even if security exceptions can be understood as providing justifications for breach similar to countermeasures under customary international law, this does not mean that they are a form of lex specialis. Security exceptions have different aims and different content from countermeasures under customary international law.
Section III.A.4 argues that the subsequent practice concerning the application of 1994 GATT and of 1947 GATT does not provide support for the proposition that countermeasures for breaches of non-WTO obligations overlap with and are intended to be excluded by security exceptions.
1. Russia–Traffic in Transit (Panel, 2019)
In 2019, the Panel in Russia–Traffic in Transit issued an historic Report that for the first time dealt with the content and operation of a security exception in a WTO-covered agreement, more specifically, GATT Article XXI (as well as security exceptions referred to in Russia's Working Party Report).
The Panel found that it had jurisdiction to review Russia's invocation of GATT Article XXI(b)(iii),Footnote 57 and to assess whether Russia, as the invoking WTO Member, had satisfied the requirements enumerated in the subparagraphs of GATT Article XXI(b).Footnote 58 Having found that ‘the situation between Ukraine and Russia since 2014 constitutes an emergency in international relations, within the meaning of subparagraph (iii) of Article XXI(b)’,Footnote 59 and that Russia's measures had been taken ‘in time of’ this emergency,Footnote 60 the Panel examined whether the conditions in the chapeau of GATT Article XXI(b) had been satisfied.
The Panel considered whether the chapeau ‘qualifies both the determination of the invoking Member's essential security interests and the necessity of the measures for the protection of those interests, or simply the determination of their necessity’.Footnote 61 It found that (a) it is left to every WTO Member to define what it considers to be its essential security interests,Footnote 62 but that this discretion is limited by an obligation to interpret and apply GATT Article XXI(b)(iii) in good faith,Footnote 63 which entails an obligation upon the invoking State ‘to articulate the essential security interests said to arise from the emergency in international relations sufficiently enough to demonstrate their veracity’.Footnote 64 There also has to be a connection between the essential security interests invoked and the measures at issue.Footnote 65 Additionally, it found (b) that ‘it is for Russia to determine the “necessity” of the measures for the protection of its essential security interests’.Footnote 66
The Panel was not asked to and did not consider the relationship between GATT Article XXI(b)(iii) and countermeasures or any other circumstance precluding wrongfulness under customary international law. However, its reasoning may give guidance as to the relationship of this provision with customary international law countermeasures.
First, the Panel considered whether the measures complained of fell within the scope of GATT Article XXI. It explained that it would only examine whether the measures allegedly breached GATT provisions if the requirements of GATT Article XXI had not been met. This sequencing gives the impression that the Panel considered that when Article XXI applies, there is no GATT obligation. This means that it did not consider GATT Article XXI as a justification for what would otherwise have been a breach, as previous Panels and the AB have done in relation to the general exceptions in GATT Article XX. The Panel explained this choice of sequencing by virtue of the ‘particularity of the exceptions specified in GATT Article XXI(b)(iii)’ as compared to GATT Article XX:Footnote 67
This provision acknowledges that a war or other emergency in international relations involves a fundamental change of circumstances which radically alters the factual matrix in which the WTO-consistency of the measures at issue is to be evaluated. [A]n evaluation of whether measures are covered by Article XXI(b)(iii), … (unlike measures covered by the exceptions under Article XX) does not necessitate a prior determination that they would be WTO-inconsistent if they had been taken in normal times … because … there is no need to determine the extent of the deviation of the challenged measure from the prescribed norm in order to evaluate the necessity of the measure … .Footnote 68
Given the sequence of reasoning and the explanation of the special nature of GATT Article XXI, the Panel's Report does not support the argument that GATT Article XXI(b)(iii) is a justification for breach that operates in the same way as GATT Article XX. In any event, there is no evidence in the Panel's report that countermeasures are excluded owing to this provision—irrespective of whether this provision functions as a justification or not.
2. Saudi Arabia–IP Rights (Panel, 2020)
In Saudi Arabia–IP Rights, Qatar complained that Saudi Arabia failed to provide adequate protection of intellectual property (IP) rights held or applied for by entities based in Qatar, thus violating the TRIPS Agreement. Saudi Arabia invoked the security exception in Article 73(b)(iii) of the TRIPS Agreement (the wording of which is identical to GATT Article XXI(b)(iii)). There is no indication in the Panel's Report that Saudi Arabia argued that its measures were countermeasures, taken in response to Qatar's alleged violation of the Gulf Cooperation Council Agreement. The Panel found that the requirements for invoking Article 73(b)(iii) were met in relation to the inconsistency with Articles 42 and 41.1 of the TRIPS Agreement, which require fair and equitable procedures, and enforcement procedures permitting effective action against any act of infringement of intellectual property rights respectively. However, they were not met in relation to the inconsistency with Article 61 in relation to criminal procedures.Footnote 69
Contrary to the approach in Russia–Traffic in Transit, the Panel in Saudi Arabia–IP Rights followed ‘the traditional approach’ of first examining the consistency of the impugned conduct with WTO provisions, and then considering the exceptions. This was because the parties to the dispute had expressly agreed on this approach.Footnote 70 It implicitly supports the argument that the security exceptions are justifications for conduct which would otherwise be wrongful, and thus overlapping with the function of countermeasures as circumstances that preclude wrongfulness.
The background of Saudi Arabia–IP Rights was not an armed conflict, as in Russia–Traffic in Transit, but a complete severance by Saudi Arabia of all diplomatic and economic relations with Qatar. The Panel in Saudi Arabia–IP Rights did not find that only complete severance of diplomatic and economic relations meets the ‘emergency in international relations’ requirement. The Panel repeated the reasoning in Russia–Traffic in Transit that ‘emergency in international relations’ is ‘a situation of armed conflict, or of latent armed conflict, or of heightened tension or crisis, or of general instability engulfing or surrounding a state’, eliciting ‘defence and military interests, as well as maintenance of law and public order interests’.Footnote 71 It is clear from this narrow definition that security exceptions apply to a much narrower range of circumstances than have traditionally given rise to countermeasures. If the security exception disallows countermeasures under customary international law, then there will be many situations in which WTO Members will not be able to engage lawfully in any form of response.
However, apart from the sequencing of the reasoning, there is no evidence in Saudi Arabia–IP Rights to support the conclusion that the security exceptions in TRIPS (or GATT) exclude countermeasures under customary international law.
3. ‘Function’ is not the only criterion for determining overlap in subject matter
It is well established in the jurisprudence of Panels and the AB that GATT Article XX (general exceptions) provides justifications for prima facie breaches of GATT; ie that it contains circumstances that preclude wrongfulness, as is the function of countermeasures under customary international law. For instance, in China—Audio-visual Products, the AB found that regulatory requirements adopted by WTO Members may be consistent with WTO rules in two ways: ‘First, they may simply not contravene any WTO obligation. Second, even if they contravene a WTO obligation, they may be justified under an applicable exception.’Footnote 72
Since the general exceptions (GATT Article XX) are the immediate context of the security exceptions (GATT Article XXI), it is arguable that the latter should have the same function as justifications. On such a reading, GATT Article XXI(b)(iii) and countermeasures under customary international law overlap because they fulfil the same function, as circumstances that preclude wrongfulness, and WTO Members intended to exclude the applicability of the general law of countermeasures.
However, if overlap in function is sufficient to exclude countermeasures, this would imply that the mere inclusion of general exceptions in GATT and other covered agreements also entails that WTO Members consented to losing a central—if not, in some cases, the only—means of enforcing international obligations, including jus cogens norms. Attributing such extreme exclusionary effects to exceptions should not be based only on the silence of the treaty text.
Furthermore, function is not the sole criterion when determining whether there is overlap for the purposes of determining if a rule is lex specialis. This is supported by the Annulment Committee's finding in CMS v Argentina that a state of necessity under customary international law and treaty exceptions do not overlap as there are substantive differences between them.Footnote 73
GATT Article XXI and countermeasures differ substantially in content and aims. GATT Article XXI protects the ‘essential security interests’ of the invoking State in times of ‘war or other emergency in international relations’. In Russia–Traffic in Transit, the Panel explained that ‘essential security interests’ ‘refer to those interests relating to the quintessential functions of the state, namely, the protection of its territory and its population from external threats, and the maintenance of law and public order internally’.Footnote 74 In contrast, countermeasures are concerned with inducing compliance of a responsible State with its obligations to cease the wrongful conduct and to make reparation, irrespective of whether the ‘essential security interests’ of the State taking the countermeasure are being protected, and irrespective of whether they are taken in time of war or other emergency in international relations.
Consider the situation where a WTO Member violates non-WTO international obligations without generating external threats to another WTO Member's territory or population or undermining the maintenance of legal and public order in another WTO Member State. For instance, where a WTO Member has seised a commercial vessel carrying the flag of another WTO Member during the vessel's innocent passage;Footnote 75 or where a WTO Member commits genocide against its own population.Footnote 76 In these examples, the measures do not call for the protection of the territory, population or legal or public order of another WTO Member and, therefore, GATT Article XXI(b)(iii) does not apply. Where a WTO Member uses force against another WTO Member, it is likely that the ‘essential security interests’ of some WTO Members other than the victim WTO Member are threatened, owing for instance to proximity or ensuing massive refugee flows. But GATT Article XXI(b)(iii) would not apply in relation to a number of WTO Members whose essential security interests would not be threatened. In all such situations trade restrictions are available to WTO Members only and to the extent that they are permissible countermeasures under customary international law.
4. Subsequent practice in the application of 1994 GATT and of 1947 GATT, and subsequent interpretative agreements of 1947 GATT
a) Subsequent practice in the application of 1994 GATT
Under the customary international law rules of treaty interpretation, subsequent practice in the treaty's application that establishes the agreement of all treaty parties as to the treaty's interpretation shall be taken into account together with the context (VCLT Article 31(3(b)).Footnote 77 In the three WTO disputes where security exceptions were invoked and the facts could have involved countermeasures—the Helms-Burton Act dispute between Cuba and the US (1996–2016),Footnote 78 the Colombia/Nicaragua dispute (2000)Footnote 79 and Russia–Traffic in Transit (2019)Footnote 80—the practice of WTO Members does not establish an agreement by all WTO Members that GATT Article XXI(b)(iii) operates as a circumstance precluding wrongfulness and that it excludes countermeasures under customary international law.
Furthermore, although individual understandings as to the interpretation of a treaty provision do not meet the requirements of the interpretation rule in VCLT Article 31(3)(b), according to the ILC they may be relied upon as a supplementary means of interpretation (VCLT Article 32).Footnote 81 In the above disputes, three WTO Members used the term ‘justified’ in relation to GATT Article XXI.Footnote 82 This may suggest their individual understandings that this provision acts as a justification, ie a circumstance that precludes wrongfulness.
However, the use of the word ‘justified’ by the US, Nicaragua and Japan in these three cases does not appear to be used in its legal sense.Footnote 83 Only the EU in its third-party submission in Russia–Traffic in Transit (2019) definitively uses the term in its legal sense. More specifically, the EU indicated that ‘Article XXI … is an affirmative defence, which may be invoked to justify a measure that would be otherwise inconsistent with any of the obligations imposed by the GATT 1994.’Footnote 84 However, none of the statements made in the context of these disputes suggest that security exceptions exclude the applicability of countermeasures under customary international law.
Overall, there is no common understanding of WTO Members that countermeasures overlap with and are excluded by GATT Article XXI. At best, the practice of four WTO Members (EU, Japan, Nicaragua, US) might evidence their individual understanding that security exceptions are justifications in the legal sense. However, there is no evidence of any individual WTO Member taking the view that countermeasures are to be excluded.
b) Subsequent practice in the application of 1947 GATT
The subsequent practice of 1947 GATT Contracting Parties concerning the interpretation of GATT Article XXI may constitute a supplementary means of interpreting this provision (VCLT Article 32). This section examines the practice of GATT Contracting Parties where they either invoked countermeasures or they invoked security exceptions in situations where, on the facts, they could have been understood as countermeasures.
Bartels implies that the fact that GATT Contracting Parties invoked GATT security exceptions where they could have instead invoked countermeasures proves that countermeasures under customary international law are excluded.Footnote 85 Yet, his argument suggests that States should at all times invoke their rights under customary international law if they want to be presumed not to have lost them, even when they have other avenues available to them for vindicating their conduct. This latter approach would not only be burdensome especially for small States, but it would aggravate international relations.
In the three cases under 1947 GATT where the security exception was invoked and the situation could factually be explained as one of countermeasures—US/Czechoslovakia (1951),Footnote 86 Iceland/Germany (1974–75),Footnote 87 Argentina/EEC, Australia and Canada (1982)Footnote 88—no common understanding of GATT Contracting Parties can be detected that countermeasures under customary international law are excluded by virtue of the security exceptions provision.Footnote 89 In Iceland/Germany (1974–75), Germany expressly argued that it took countermeasures, and in Argentina/EEC, Australia, Canada, and other GATT Contracting Parties argued that the measures taken did not have to meet the requirements of GATT Article XXI—implying that these were available to them despite this provision. Since these statements may provide evidence of their individual understandings that may be relied upon as a supplementary means of interpretation, they are discussed here in further detail.
In 1974, Germany imposed port restrictions against fish from Iceland. In the GATT Council, Iceland complained that Germany was violating GATT. Germany did not invoke GATT Article XXI. It stated that its conduct did not violate GATT and that it took countermeasures against Iceland's prior violations of the freedom of the high seas and the prohibition of use of force under customary international law, as well as of an ICJ Judgment.Footnote 90 Iceland responded that Germany's conduct was a GATT violation, and not a permissible countermeasure under international law, and that ‘the GATT could only be concerned with the application or functioning of the [GATT] and not with any other international principles’.Footnote 91 Germany stated that if its ‘ban was justified as a countermeasure under generally recognised rules of international law it could not be illegal under the GATT’.Footnote 92 Germany's explanation suggests that it considered that countermeasures in the form of suspending compliance with GATT obligations in response to breaches of international law outside the GATT were available to it. Since the positions of Germany and Iceland contradict each other, and no other GATT Contracting Party made a relevant statement, these two statements neutralise each other.
In 1982, Argentina complained against measures by EEC, Australia, Canada and other GATT Contracting Parties and stated that ‘in order to justify restrictive measures a contracting party invoking Article XXI [was] required to state reasons of national security’ and that ‘this was not the case with the measures under discussion, which were applied generally and without any reference to … Article XXI’,Footnote 93 The EEC stated that ‘the EEC and its member States had taken certain measures on the basis of their inherent rights, of which Article XXI of the General Agreement was a reflection. The exercise of these rights constituted a general exception, and required neither notification, justification nor approval’.Footnote 94 Against the context in which the term ‘justification’ appears in the EEC's statement, it is not being used in the legal sense (explained in Section II.A); rather it is used in the sense of ‘explanation’. Additionally, this statement may imply that the EEC considered that unilateral countermeasures find treaty reflection in GATT Article XXI.
However, there is no evidence that this treaty ‘reflection’ excludes customary international law countermeasures. Norway stated the EEC, Australia and Canada ‘in taking the measures … did not act in contravention of the [GATT]’.Footnote 95 Canada stated that its ‘actions were consistent with Canada's international obligations, including those under [GATT]’.Footnote 96 New Zealand stated that it ‘had an inherent right to take such action as a sovereign State and that … these actions were in conformity with New Zealand's rights and obligations under the [GATT]’.Footnote 97 None of these statements indicate that customary international law countermeasures have been excluded by GATT Article XXI.
Overall, up to mid-1982, the practice of GATT Contracting Parties does not indicate a common understanding that security exceptions exclude customary international law countermeasures. At best, it points to an individual understanding of some GATT Contracting Parties that security exceptions are justifications for breach. But it does not point to any individual understanding that they are exclusive justifications.
B. A ‘Diffuse’ Argument that the WTO Agreement has Displaced Trade Countermeasures in Response to Breaches of Non-WTO Obligations
It might be argued that the WTO Agreement in general has displaced countermeasures in response to breaches of non-WTO obligations. This section considers whether the DSU may offer grounds for a lex specialis argument (Section III.B.1), as well as two potentially supporting instances of supplementary means of interpretation of the WTO Agreement: the Havana Charter (Section III.B.2) and the 1982 GATT Ministerial Declaration (Section III.B.3).
1. The DSU
It is undisputed that the DSU displaces countermeasures under customary international law which are taken in response to breaches of the WTO Agreement.Footnote 98 But the DSU does not overlap with customary international law countermeasures that are taken in response to breaches of non-WTO obligations.
Mexico—Soft Drinks concerned Mexico's countermeasures against the US in the form of suspending compliance with WTO obligations in response to alleged prior breaches of NAFTA by the US.Footnote 99 Mexico argued that its countermeasures were justified under GATT Article XX(d).
The AB rejected Mexico's defence, because the terms ‘secure compliance with laws and regulations’ in GATT Article XX(d) ‘refer to the rules … of the domestic legal order of the WTO Member invoking the provision and do not include the international obligations of another WTO Member’. In other words, Article XX(d) does not apply to breaches of international obligations by another WTO Member, which must also mean the provision does not overlap with the function of customary international law countermeasures.
The AB added that:
Mexico's interpretation would allow WTO Members to adopt WTO-inconsistent measures based upon a unilateral determination that another Member has breached its WTO obligations, in contradiction with Articles 22 and 23 of the DSU … .Footnote 100
Thus the AB made it clear that the DSU has expressly displaced the right to take unilateral countermeasures for breaches of WTO obligations. The argument that the DSU must, therefore, also have displaced countermeasures for breaches of non-WTO obligations is based on the silence of the WTO Agreement's text in respect of such countermeasures. However, if WTO Members wanted to exclude countermeasures under customary international law for breaches of non-WTO obligations, why did they not include provisions that displace such countermeasures, in the same way that they did for displacing countermeasures in response to breaches of WTO obligations? Their failure to do so suggests that they have not displaced countermeasures for breaches of non-WTO obligations. The following sections concern supplementary means of interpretation of the WTO Agreement.
2. The Havana Charter
In 2002, Bartels argued that ‘on the assumption that the intentions of the drafters of the [International Trade Organization] were consonant with their intentions for GATT … it was not considered possible for countermeasures [in the form of suspending trade obligations] to be taken outside the [UN] system’.Footnote 101 He bases his argument on two grounds. First, Article 86(3) of the Havana Charter on ‘Relations with the United Nations’, which reads ‘[I]n order to avoid conflict of responsibility between the [UN] and the [ITO] with respect to [political] matters, any measure taken by a Member directly in connection with a political matter brought before the [UN] in accordance with the provisions of Chapters IV or VI of the [UN] Charter … shall not be subject to the provisions of this Charter.’ Second, on the fact that a negotiating State proposed that it would be subject to a condition: ‘provided that this paragraph shall not be construed as permitting unilateral use of sanctions’.Footnote 102 However, Bartels’ interpretation can be contested.
First, according to Article XXIX of the 1947 GATT (adopted 30 October 1947) Part II of the latter would be superseded by the Havana Charter of the International Trade Organization (ITO) (adopted 24 March 1948).Footnote 103 This means that the Havana Charter could have revised the provisions in Part II of 1947 GATT. For this reason, the Havana Charter, which never entered in force, and its preparatory works can be a supplementary means of interpreting Part II of the 1947 GATT, but only to the extent that there is an understanding that the final text agreed upon did not depart from the relevant 1947 GATT provisions. In the absence of evidence that Article 86(3) of the Havana Charter was not intended to revise provisions in 1947 GATT, it cannot be relied on as a supplementary means of interpreting GATT.
Second, the proposal that draft Article 83A, which became Article 86 of the Havana Charter, should not be construed as permitting unilateral sanctions was made after the GATT had been agreed. This proposal about the Charter's interpretation could have been intended to depart from the 1947 GATT. But even if this were not the case, the Report of the Sub-Committee indicates that when this proposal was made by the Union of South Africa,Footnote 104 no other negotiating State objected to it or accepted it. A clear conclusion about the common intention of 1947 GATT Contracting Parties cannot be drawn solely from a proposal of one negotiating State.
Further, even if one were to accept that such silence in the negotiations of the Havana Charter means that unilateral countermeasures were excluded, and that this supplementary means of interpreting 1947 GATT is also a supplementary means of interpreting the 1994 WTO Agreement, the negotiations of the Havana Charter took place in 1948. These were the early years of the functioning of the UN and the Security Council (UNSC). Subsequent experience has shown that the UNSC can be ‘paralysed’ by way of veto (of its permanent members) and that not all disputes concerning breaches of international law find their way or are sufficiently addressed before the UN system of Chapters IV and VI. Instead, in practice, countermeasures can be instrumental in convincing the responsible State to participate in peaceful means of settlement (set out in Article 33 of the UN Charter).Footnote 105
In parallel with the negotiations of the WTO Agreement, the ILC was considering whether dispute settlement obligations prohibited resort to countermeasures. In 1992, during the Uruguay Round negotiations, the ILC was focused on whether a State could resort to countermeasures once a dispute had been submitted to a court or tribunal with competence to impose interim measures.Footnote 106 With respect to the limitations placed on the use of unilateral countermeasures by the UN Charter, the ILC Special Rapporteur on State responsibility was of the view that the powers of the UNSC did not exclude countermeasures altogether.Footnote 107 WTO negotiators were aware of this position since the Sixth Committee was discussing the work of the ILC on this matter during that period. The ILC adopted Article 48 in the Draft ARSIWA on first reading (1996), which set out that:
Provided that the internationally wrongful act has ceased, the injured State shall suspend countermeasures when and to the extent that [the responsible State fulfils its obligations in relation to the dispute settlement procedure set out in the Draft Articles or any other binding dispute settlement procedure in force] in good faith … and the dispute is submitted to a tribunal which has the authority to issue orders binding on the parties.Footnote 108
This article was also retained in the ILC ARSIWA adopted on second reading (2001) but was renumbered as Article 52(3).Footnote 109
Negotiating States were aware of the modern realities of the UN system, and of the parallel discussions in the ILC and in the Sixth Committee which indicated that the UN Charter did not altogether exclude unilateral countermeasures, an assumption that States might have made in 1948 during the negotiations of the ITO. Thus, whatever the ITO preparatory works may offer as supplementary evidence for interpreting the WTO Agreement, with respect to the permissibility of countermeasures, the proposal of one negotiating State in 1948 would be inconsistent with and could not prevail over the circumstances surrounding the negotiations of the 1994 agreement and the assumptions that negotiators made about the relationship between the UN and unilateral countermeasures during the negotiations of the WTO Agreement.
3. The 1982 GATT Ministerial Declaration and practice subsequent to it
On 29 November 1982, the 1947 GATT Contracting Parties adopted a Ministerial Declaration according to which:
7. In drawing up the work programme and priorities for the 1980's, the contracting parties undertake, individually and jointly … (iii) to abstain from taking restrictive trade measures, for reasons of a non-economic character, not consistent with the General Agreement … .Footnote 110
Given the wording of this part of the Ministerial Declaration, it constitutes a subsequent agreement of GATT Contracting Parties concerning the interpretation of 1947 GATT (VCLT Article 31(3)(a)).Footnote 111 However, as regards the 1994 GATT and the WTO Agreement, this Ministerial Declaration qualifies as a supplementary means of interpretation (VCLT Article 32). The declaration uses open-ended wording. It focuses on GATT-inconsistent measures taken ‘for reasons of a non-economic character’ and thus excludes countermeasures under customary international law taken in response to the breach of any non-GATT obligation.
However, the subsequent practice of GATT Contracting Parties in relation to the 1982 Ministerial Declaration focused on economic coercion, not on countermeasures.Footnote 112 In relation to Nicaragua v US, at a meeting of the GATT Council in 1984, Nicaragua (along with Venezuela, Mexico and Argentina) expressed the opinion that a reduction in the sugar import quota allocated by the US to Nicaragua contravened the 1982 Ministerial Declaration.Footnote 113 This view was reiterated by Nicaragua (along with Cuba, Argentina, Peru, Brazil, Spain, Czechoslovakia, Romania, Yugoslavia and Portugal) at a 1985 meeting of the Council.Footnote 114 The statements condemned ‘economic coercion’, ‘coercive political measures’, ‘economic measures for the purpose of exerting political pressure’, and measures that were inconsistent with the principle of non-intervention.Footnote 115 A decade after the Ministerial Declaration (1982), when the EC adopted trade restrictions against Yugoslavia regarding the civil war,Footnote 116 Yugoslavia complained, invoking the Ministerial Declaration.Footnote 117 No other GATT Party did.Footnote 118 In none of these instances, did GATT Parties condemn countermeasures specifically.
The chapeau of the quoted paragraph of the 1982 Declaration makes clear that this was an undertaking related to the circumstances that existed in the 1980s. However, the circumstances surrounding the conclusion of the WTO Agreement, which constitute a supplementary means of the latter's interpretation, differed radically from those in 1982. The WTO Agreement was negotiated at the end of the Cold War and was concluded after it, a time when Western liberalism became a beacon for many countries and enthusiasm for multilateralism and liberalism was prevalent.Footnote 119 Against this background, it may be argued that the rejection of unilateral countermeasures might not have been of continued concern to the drafters of the WTO Agreement.
Additionally, while it could be argued that until 1992 GATT Contracting Parties were concerned about both economic coercion and countermeasures alike, the law on countermeasures became increasingly clear throughout the 1990s, culminating in the ILC's adoption of the ARSIWA in 2001. Indeed, the ILC was preparing the ARSIWA, including the rules on countermeasures, while the Uruguay Round negotiations were ongoing.
Although the ARSIWA were adopted after the conclusion of the Marrakesh Agreement, negotiating States were aware that the work of the ILC was ongoing and that countermeasures were subjected to strict and clear conditions of lawfulness (as discussed in Part II above) in an effort to minimise abuse. The conditions relating to countermeasures were considered by the ILC (and its Report was submitted to the UNGA Sixth Committee) in 1992.Footnote 120
Therefore, even if the 1982 Ministerial Declaration is a supplementary means of interpreting the WTO Agreement, the increasing clarity of the law on countermeasures may have led WTO Members to change their position on whether the WTO Agreement excluded countermeasures specifically. This assumption is consistent with the above assessment of the WTO Members’ practice, examined in Section V.A.4.a above, which does not indicate the common or individual understanding of WTO Members that countermeasures are excluded by the WTO Agreement in general, or by the security exceptions in particular.
IV. THE PREDICTABILITY OF THE WTO SYSTEM
Scholars and GATT Contracting Parties during the 1947 GATT era feared that unilateral trade restrictions, such as countermeasures for breaches of non-GATT obligations, would undermine the predictability of the trade system.Footnote 121 Today, the close relationship between countermeasures and national security, gives rise to concerns that, if permitted, they would open a Pandora's box of further politicisation of trade affairs.Footnote 122
This line of reasoning is based on three flawed premises: (a) unwarranted prioritisation of particular objectives of the WTO Agreement over others; (b) inaccurate perceptions of the risks of abuse and of the number of customary international law countermeasures that would be available to WTO Members; and (c) the mistaken belief that banning customary international law countermeasures for breaches of non-WTO obligations will ensure the predictability of the WTO system.
It is argued here that such countermeasures do not pose a real threat, as long as they are subject to stringent conditions under customary international law and to the scrutiny of WTO adjudication. On the contrary, the unavailability of such countermeasures may lead to a backlash in the form of ‘expanding’ the narrow limits of the security exceptions.
A. The Prioritisation of WTO Agreement Objectives
The purposes of the WTO Agreement include raising standards of living and the sustainable use of the world's resources, as well as the underlying objectives of 1947 GATT to bring peace and to enhance world economic welfare.Footnote 123 The proposition that countermeasures taken to enforce international obligations that protect these objectives must be excluded due to the need for predictability of the WTO system would amount to prioritising the predictability of the system over the other objectives of the WTO Agreement. Yet there is no evidence in the WTO Agreement that such a priority is to be given to ‘predictability’ at the expense of the Preamble's express objectives.
B. Countermeasures Are Subject to Stringent Conditions
The proposition that customary international law countermeasures would lead to rampant politicisation and unpredictability of trade affairs presumes that WTO Members would be allowed to rely on unilateral customary international law countermeasures in an unlimited and abusive manner. Yet countermeasures only apply if and when general and security exceptions are not met and do not apply,Footnote 124 and they are subject to strict conditions under customary international law. Countermeasures are available only against a responsible State; they have to be proportionate to the injury suffered; and they cannot affect fundamental human rights obligations (as discussed in Part II above).Footnote 125
Indeed, countermeasures under customary international law involve a risk—the State taking countermeasures determines for itself whether the target State has violated international law and whether its measures meet the conditions of lawfulness of countermeasures under customary international law. But, as argued in Part V below, the WTO Panels and the AB have jurisdiction over claims of violations of WTO-covered agreements and over defences raised by respondents, such as countermeasures under customary international law. Thus, the room for political narrative and abuse in relation to unilateral countermeasures can be minimised. Moreover, since only a limited number of countermeasures would be permissible, it is unlikely that the ‘floodgates’ of politicisation would have the opportunity to open.
C. Unavailability of Trade Countermeasures May Lead to Long-Term Unpredictability in the WTO System
In the long run, the unavailability of customary international law trade countermeasures would risk bringing more unpredictability and politicisation into the WTO system. If such countermeasures were unavailable, WTO Members might be encouraged to justify their conduct through security exceptions, such as GATT Article XXI(b)(iii). Increased reliance on these exceptions in the subsequent practice of WTO Members in the application of WTO-covered agreements could, over time, result in lowering the thresholds of ‘emergency in international relations’ and ‘essential security interests’ below those established in Russia–Traffic in Transit and Saudi Arabia–IP Rights.
An additional incentive in this direction is the fact that once WTO Members find themselves within the scope of GATT Article XXI(b)(iii), they do not have to meet the stringent requirements of proportionality, the prohibition on affecting human rights and the requirement of only targeting the responsible State.Footnote 126 A WTO Member invoking security exceptions does not have to target a responsible WTO Member, but can take measures under the security exception which may have an effect on all WTO Members.
There is no requirement that security exceptions have to be applied so as not to affect fundamental human rights obligations of the WTO Member invoking them and/or of the WTO Members affected. Thus trade restrictions justified by security exceptions may affect the right to health, life or the right to be free from inhuman treatment.Footnote 127 For instance, trade in water, energy or even staple foods necessary for human survival could be affected by export or transit restrictions.Footnote 128 While such measures could—under certain factual circumstances—render countermeasures unlawful, GATT Article XXI is agnostic to such effects.Footnote 129 Neither Russia–Traffic in Transit nor the subsequent Saudi Arabia–IP Rights have recognised a proportionality requirement in GATT Article XXI(b)(iii).Footnote 130
Furthermore, the measures under GATT Article XXI(b)(iii) only have to meet a minimum requirement of plausibility in relation to the proffered essential security interests.Footnote 131 The interpretation of significant elements of GATT Article XXI(b)(iii) is left exclusively to the discretion of the WTO Member invoking the security exception, including the necessity of the measures taken.Footnote 132 Whereas, the customary international law rule that countermeasures have to be proportionate to the injury suffered is subject to third party determination.Footnote 133
Overall, arguing that customary international law countermeasures have been displaced may encourage WTO Members to water down the strict thresholds in GATT Article XXI(b)(iii). It encourages reliance on increasingly wide interpretations of GATT Article XXI(b)(iii),Footnote 134 and contributes to an approach that reduces cooperationFootnote 135 and increases politicisation. This is not hyperbole. One can already observe a trend in the practice of WTO Members to interpret security exceptions broadly to include measures taken for commercial purposes.Footnote 136
V. WTO ADJUDICATION CAN ASSESS WHETHER TRADE RESTRICTIONS ARE LAWFUL COUNTERMEASURES UNDER CUSTOM
This section confronts the second argument of the AB in Mexico–Soft Drinks (2006): that the DSU was not intended to enable WTO adjudication of whether a breach of non-WTO law has taken place. It is argued here that WTO bodies have jurisdiction to assess the lawfulness of customary international law countermeasures when they are raised as a defence in a dispute concerning a breach of a WTO-covered agreement. To make such an assessment, WTO bodies must be able to determine whether there has been a breach of an extra-WTO obligation that precludes wrongfulness.
The WTO dispute settlement system only has compulsory jurisdiction over claims regarding agreements annexed to the WTO Agreement.Footnote 137 One could argue that in cases where the respondent invokes countermeasures under customary international law as a defence, the dispute overall falls entirely outside the jurisdiction of WTO adjudication. However, such an approach would deprive the DSU system of its effectiveness. A disputing party could set aside the jurisdiction of the WTO over a WTO Agreement dispute merely by invoking a different legal rule as the basis for its conduct. Another option would be to separate different parts of the dispute, ie limit WTO adjudication to the aspect of the dispute that concerns the application of the WTO Agreement.Footnote 138 However, DSU Article 11 foresees that other findings can be made to assist the DSB in making a ruling about the WTO-covered agreements; implying that other aspects of the dispute should not be excluded. Additionally, declining jurisdiction over customary international law defences produces incoherent results: lawful conduct under customary international law will be found in breach of a WTO-covered agreement. This may lead to non-compliance with WTO adjudication decisions.
The better argument is that the WTO dispute settlement system has jurisdiction over claims concerning breaches of WTO-covered agreements, including where the defence of countermeasures is raised by the respondent.Footnote 139 That the defence of countermeasures directs WTO adjudicators to make a determination about whether there has been a violation of an extraneous rule of international law (as a condition of lawfulness of countermeasures)Footnote 140 can be covered by the implied or incidental jurisdiction of the WTO body to decide all matters linked to the exercise of its main jurisdiction and inherent to its judicial function (such as due process and international responsibility matters),Footnote 141 and to make ancillary findings about a rule of international law necessary in order to be able to exercise jurisdiction over the WTO dispute.Footnote 142
Finally, outright rejection of jurisdiction on the basis of ‘judicial propriety’, because WTO adjudication would address extra-WTO rules, is inappropriate.Footnote 143 It is reasonable that WTO adjudication proceedings should be suspended in the exceptional situation where a) the decision on the countermeasures defence rests on the existence of a previously wrongful act outside the WTO, and b) the existence of that previously wrongful act is already the subject of proceedings pending before another international tribunal.Footnote 144 Suspension is part of the inherent judicial function of WTO adjudication bodies in order to avoid reaching contradictory results and to promote consistency in international law. In all other cases, WTO adjudicators should exercise jurisdiction.
Once jurisdiction over the defence of countermeasures is established, the question is whether WTO adjudicators can apply extra-WTO rules to determine whether there is a breach of international law outside the WTO.Footnote 145 In this case, WTO adjudication is not resolving a dispute outside the WTO (as the AB suggested in Mexico-Soft Drinks).Footnote 146 Rather, it is taking a preliminary step that is essential to determining whether the wrongfulness of suspending compliance with a WTO obligation can be precluded by applying customary international law.Footnote 147 DSU Article 11 implies that WTO Members contemplated that international law beyond the WTO would be applicable. While WTO adjudicators are ‘known for [their] reticence to apply non-WTO law as a substantive defense for an alleged violation of WTO rules’,Footnote 148 WTO jurisprudence has not excluded extra-WTO rules from the applicable law and has applied them in some cases.Footnote 149
VI. CONCLUSIONS
Not all problems of enforcement of international law should be addressed through the WTO systemFootnote 150 or through trade countermeasures. This article does not seek to encourage WTO Members, WTO adjudication or scholarship to move in this direction.
Rather, this article cautions that arguing that trade countermeasures in response to breaches of non-WTO obligations are unavailable has wider implications for international law and for multilateralism, because countermeasures are a significant (albeit not the only) means of enforcing and of preserving the normative integrity of international obligations outside the WTO, including erga omnes and erga omnes partes obligations, such as the prohibition of use of force.
In light of these wider implications, arguments supporting the ‘displacement’ of trade countermeasures have to be based on clear evidence. This article shows that there is no strong evidence in the WTO Agreement to this effect. It also attempts to soothe the understandable but perhaps exaggerated ‘fear’ that such countermeasures may undermine the predictability of the WTO system. Trade countermeasures for breaches of extra-WTO obligations are subject to stringent conditions under customary international law and to the jurisdiction of and thus judicial scrutiny by WTO adjudication bodies, both of which minimise the space for abuse and the risk of unpredictability within the WTO.
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