WORLD TRADE
ORGANIZATIONWT/BFA/W/104
16 July 2003
(03-3863)
Committee on Budget, Finance and Administration
BIENNIAL BUDGETING IN THE WTO
Possible Legal Approaches
1. At its meeting on 11 July 2003, the Committee on Budget, Finance and Administration
requested that the Legal Affairs Division prepare a brief paper addressing different possible legal
approaches to switching from annual to biennial budgeting in the WTO.  This paper is submitted in
response to the Committee's request.
2. Six different "options" are presented and discussed, specifically:  (a) amendment to
Article VII of the Marrakesh Agreement Establishing the World Trade Organization ("WTO
Agreement") pursuant to Article X:3 thereof;  (b) authoritative interpretation of Article VII of the
WTO Agreement pursuant to Article IX:2 thereof;  (c) a decision under Article VI:2 of the WTO
Agreement;  (d) a collective waiver of Article VII of the WTO Agreement pursuant to Article IX:3
thereof;  (e) suspension of relevant parts of Article VII in accordance with Article 57 of the ViennaConvention on the Law of Treaties ("Vienna Convention");  and (f) adapting the practice on
budgeting without taking a formal decision of any kind.  In considering what "options" may be
available to Members, it should be borne in mind that what Members are seeking is not simply a
means to get around the word "annual" in Article VII, but also to establish the new "biennial" practice
on a sound legal basis.
(a) Amendment to Article VII
3. Because the WTO provisions on the preparation and adoption of an annual  budget are treaty
language, specifically, that found in paragraphs 1 and 3 of Article VII of the WTO Agreement, it
could be argued that changing the annual budg et cycle to a biennial cycle would require an
amendment to the treaty, following the specific  procedures set out in Article X of the WTO
Agreement.  The amendment required would be of the type described in Article X:3, i.e., "of a nature
that would alter the rights and obligations of the Me mbers".  It would be subject to the 90-day rule for
submitting the proposed amendment to Members, as provided for in Article X:1.
4. The decision-making procedure for Article X:3 amendments provides in relevant part:
"Amendments [to the WTO Agreement] shall take effect for the Members that have
accepted them upon acceptance by two-thirds of the Members and thereafter for each
other Member upon acceptance by it.  The Ministerial Conference may decide by athree-fourths majority of the Members that any amendment made effective under this
paragraph is of such a nature that any Member which has not accepted it within a
period specified by the Ministerial Conference in each case shall be free to withdraw
from the WTO or to remain a Member with the consent of the Ministerial
Conference".WT/BFA/W/104
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5. The above-quoted language points to the unwieldy possibility that not all Members would
agree to the amendment, meaning that in principle there would need to be two budget cycles, one for
those Members agreeing to the amendment and another for those not so agreeing.  Even more
unwieldy would be the prospect of those Members,  not agreeing to the amendment, being asked to
withdraw from the WTO.
6. Given the likely difficulty in securing agreement by the entire membership on any individual
amendment, even one of such seemingly minor substantive significance as that concerning the budget
cycle, it may be suggested that such an attempted amendment to Article VII should only be attempted
as part of a larger package of amendments, possibly at the conclusion of the current cycle of
multilateral negotiations.  It should be noted that there have been no amendments to any of the WTO
agreements to date.
(b) Authoritative interpretation
7. As an alternative to amending Article VII, the Ministerial Conference or the General Council
could possibly adopt an interpretation of Article VII, pursuant to Article IX:2 of the WTO Agreement.
Article IX:2 provides in this regard:  "The Ministerial Conference and the General Council shall have
the exclusive authority to adopt interpretations of this Agreement and of the Multilateral Trade
Agreements".  In accordance with this paragraph, "[t]he decision to adopt an interpretation shall betaken by a three-fourths majority of the Members".  However, the decision-making practice here, as in
the case of other decisions by these two bodies, is th at of consensus, pursuant to the first sentence of
Article IX:1.
8. Although the basis for switching to a bienni al budget cycle through an authoritative
interpretation under Article IX:2 may be seen to be  less legally secure than the amendment route, it
may well be a more practical approach – and possibly more legally acceptable – than some other
routes discussed further on.  Nonetheless, it is important to note that the last sentence of Article IX:2
provides:  "This paragraph shall not be used in a manner that would undermine the amendment
provisions in Article X".
9. There certainly are precedents that could be characterized as Article IX:2 "interpretations".
Recent examples include some of the decisions taken by Ministers on "Implementation-Related Issues
and Concerns" at Doha (WT/MIN(01)/17).  See, for instance, decisions set out in paragraphs 1.2, 3.1,
3.2, 4.5 5.2 and 12.2 of that document.
1  Although these decisions do not expressly alter, but merely
interpret, the treaty language, one could question whether, if viewed as Article IX:2 "interpretations",
they comply with the procedural rules prescribed in Article IX:2 for their adoption, particularly with
respect to (i) exercising their authority on the basis of recommendations from the councils overseeing
the agreements in question, and (ii) not undermining the amendment provisions in Article X.
(c) Decision under Article VI:2
10. It has been suggested that instead of providing an interpretation of Article VII under
Article IX:2, the Ministerial Conference – or the General Council acting in its  place – could take a
decision under Article VI:2, setting out the "duties … of the Director-General".  In principle, there
would be nothing inappropriate with Members taking such a decision, which is expressly provided for
in the treaty.  However, it could be questioned whether an Article VI:2 decision, specifying the
procedures to be followed by the Director-Gener al in presenting annual budget estimates, would in
effect  be a "backdoor" effort at interpreting Article VII treaty language.
                                                     
1 A famous example, out of the past, of a decision effectively – yet not formally – amending the GATT
is the Enabling Clause "decision" taken by the GA TT CONTRACTING PARTIES at the conclusion of the
Tokyo Round.  See L/4903;  BISD 26S/203-205.WT/BFA/W/104
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(d) Collective waiver under Article IX:3
11. An alternative approach that could be explored would be for the Ministerial Conference or the
General Council, pursuant to paragraphs 3 and 4 of Article IX, to waive the annual budget obligation
for all Members collectively .
12. It should be noted that the waiver provisions of the WTO were conceived of – and generally
used – to waiver obligations of individual  Members at their request.  However, it has to be
acknowledged that, on occasion, they have been used to waive the obligations of certain categories of
Members collectively  or to give ex ante  authorization for waivers to individual Members that meet
certain criteria.  Examples of such collective waivers include the Decision on "Preferential Treatment
for Least-Developing Countries", adopted on 15 June 1999 (WT/L/304) and a much earlier GATT
Waiver Decision on GSP, adopted on 25 June 1971 (L /3545, BISD 18S/24).  There was also the draft
Decision on "Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement andPublic Health", submitted to the TRIPS Council on 16 December 2002 (JOB(02)/217).  Nevertheless,
it should also be mentioned that there is no precedent for a collective waiver of the entire WTO
membership.  Moreover, one could question whether the Article IX waiver provisions may even be
resorted to in respect of obligations of the Director-General and of WTO organs , as opposed to
obligations of Members .
(e) Suspension of relevant parts of Article VII
13. There is also the possibility that relevant portions of Article VII of the WTO Agreement could
be suspended, in accordance with Article 57 of the Vienna Convention.  This article provides:  "The
operation of a treaty in regard to all the parties or to a particular party may be suspended:  (a) in
conformity with the provisions of the treaty;  or (b) at any time by consent of all the parties afterconsultation with the other contracting States".  Whereas the WTO Agreement contains no provisions
on suspension, nor are there any precedents in the GATT or the WTO for suspension of articles of the
treaty, in principle this avenue would still be open to the WTO membership.
14. In terms of the practicality of resorting to suspension of the WTO provisions on annual
budgeting, it should be noted that the Vienna Convention calls for agreement by all parties to the
treaty;  such agreement could be difficult to obtain in quick order.  There is also the practical/legal
issue of what Members would do in terms of ensuring a sound legal basis for biennial budgeting, once
they suspended the Article VII provisions calling for annual budget cycles.  On this latter point, see
the discussion under section (f) below.
15. Beyond the practical considerations, there is the possible systemic concern with establishing a
precedent for suspending articles of the WTO treaty.  Switching from annual to biennial budget cycles
may not be very controversial, but would this not lead to demands in the future for suspensions oftreaty provisions on other, more substantive – and more controversial – subjects?
(f) Adapting the practice on budgeting
16. A final option might be for the Secretariat, the Committee and the General Council to simply
adapt to a practice of biennial budgeting.  This co uld be done with or without a formal decision by the
General Council laying out the procedure.  The Director-General would prepare and submit twoannual budgets estimates covering each year of a biennium;  the Committee would consider these
estimates and make recommendations to the General Council once every two years;  and the General
Council would adopt two annual  budgets once every two years.WT/BFA/W/104
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17. Even if concerns might be raised as to the consistency of this "practice" with Article VII, over
time this "practice" could potentially acquire its own legitimacy (e.g., by analogy, this is how
customary international law is created).
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