WORLD TRADE WT/DS27/15
7January 1998
ORGANIZATION(98-0013)
EUROPEAN COMMUNITIES -REGIME FOR THE IMPORTATION,
SALE AND DISTRIBUTION OFBANANAS
Arbitration
under Article 21.3(c) ofthe
Understanding onRules andProcedures
Governing theSettlement ofDisputes
Award oftheArbitrator
SaidEl-NaggarWT/DS27/15
Page1
I. Introduction
1. On25September 1997, theDispute Settlement Body (the"DSB") adopted theAppellate Body
Report1andthePanel Reports2,asmodified, inEuropean Communities -Regime fortheImportation,
SaleandDistribution ofBananas ,complaint byEcuador, Guatemala, Honduras, Mexico andtheUnited
States (the"Complaining Parties"). On16October 1997, theEuropean Communities informed the
DSB, pursuant toArticle 21.3oftheUnderstanding onRules andProcedures Governing theSettlement
ofDisputes (the"DSU"), thatitwould fullyrespect itsinternational obligations withregard tothis
matter.3Atthesame meeting, theEuropean Communities stated that--while intending toact
expeditiously --itwould, inviewofthecomplexity ofthematter atissue, require areasonable period
oftimeinwhich toexamine alltheoptions tomeetitsinternational obligations.4
2. On24October 1997, theEuropean Communities requested consultations withtheComplaining
Parties inorder toreach agreement ona"reasonable period oftime" fortheimplementation ofthe
recommendations andrulings oftheDSBadopted on25September 1997. These consultations, however,
didnotleadtoanagreement. TheComplaining Parties therefore requested, on17November 1997,
thatthe"reasonable period oftime" bedetermined bybinding arbitration pursuant toArticle 21.3(c)
oftheDSU.5
3. Intheabsence ofanagreement between theparties ontheappointment ofanarbitrator within
10daysafterreferringthemattertoarbitration,theComplainingPartiesrequested,on1December1997,
theDirector-General oftheWorld Trade Organization ("WTO") toappoint thearbitrator, asprovided
forinfootnote12toArticle21.3(c)oftheDSU.Afterconsultationwiththeparties,theDirector-General
decided, on8December 1997, toappoint meastheArbitrator.6Heindicated totheparties that,as
aMember oftheAppellate Body, Iwould consult withtheother Members oftheAppellate Body in
accordance with itspractice ofcollegiality.
1WT/DS27/AB/R.
2Compl aintbyEcuador ,WT/DS27/R/ECU; Compl aintbyGuatemalaandHondur as,WT/DS27/R/GTM, WT/DS27/R/HND;
Complaint byMexico, WT/DS27/R/MEX; Complaint bytheUnited States, WT/DS27/R/USA.
3WT/DSB/M/38, p.3.
4Ibid.
5WT/DS27/13, G/L/209, 20November 1997.
6WT/DS27/14, 12December 1997.WT/DS27/15
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4. WrittensubmissionswerereceivedfromtheEuropeanCommunitiesandtheComplainingParties
on15December 1997, andanoralhearing washeldon17December 1997. Consultations withthe
other Members oftheAppellate Body tookplace on19December 1997.
II. Arguments oftheParties
A. European Communities
5. Initswritten submission of15December 1997, theEuropean Communities requests the
Arbitrator toseta"reasonable period oftime", under Article 21.3(c) oftheDSU, which would not
expire before 1January 1999, i.e.aperiod of15months andoneweek. Injustification ofthisrequest,
theEuropean Communities notes thatamending theexisting ECimport regime forbananas, asrequired
bytherecommendations andrulings oftheDSB, willbeadifficult andcomplex taskforanumber
ofreasons.
6. First, theEuropean Communities points outthatinamending itsimport regime forbananas,
itwillhavetostrike adifficult balance between theco-existing international obligations under the
Marrakesh Agreement Establishing theWorld Trade Organization (the"WTO Agreement ")andthe
Fourth ACP-EC Convention ofLomé (the"Lomé Convention")7withtheaimofrespecting both.
Furthermore, theEuropean Communities notesthatamending itsimport regime forbananas willre-open
thelengthy discussion between theMember States oftheEuropean Union onmany oftheissues that
hadbeenagreed in1993 when thedifferent national banana markets were transformed intoasingle
Community-wide market.
7. Secondly, theEuropean Communities explains thattheamendment ofitsbanana import regime
willrequire setting inmotion acomplex legislative procedure involving: theEuropean Commission,
which hastosubmit aproposal forthenecessary changes; theEuropean Parliament, which willneed
togiveitsopinion ontheproposed changes; andtheCouncil oftheEuropean Union, which willdecide
onthechanges, either byqualified majority orbyunanimity, depending onwhether ornotitfollows
theproposal oftheCommission. TheEuropean Communities alsonotes thatoncetheamended basic
7Signed inLomé, 15December 1989, asrevised bytheAgreement signed inMauritius, 4November 1995.WT/DS27/15
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legislation isadopted bytheCouncil, theEuropean Commission willstillneedtoadopt implementing
legislation tomake thenewimport regime operational.
8. Thirdly, theEuropean Communities refers tothefactthatArticle 12oftheLomé Convention
imposesalegalobligationontheEuropeanCommunitiestoconsulttheACPStates8"where[it]intends...
totakeameasure which might affect theinterests oftheACPStates asfarasthisConvention 'sobjectives
areconcerned". Thisobligation toconsult certainly applies, intheviewoftheEuropean Communities,
toanamendment ofthebanana import regime. TheEuropean Communities maintains thatitslegislative
procedure willtherefore havetoallow enough timetoconsider theobservations made bytheACP
States before anyfinaldecision onthenewbanana import regime istaken.
9. Fourthly, theEuropean Communities notes thatunder itsadministrative practice, anychange
inlegislation which directly affects thecustoms treatment ofproducts inconnection withimportation
orexportation, enters intoforceeither on1January or1Julyoftherelevant year. Thispractice reflects,
according totheEuropean Communities, internal management needs andtheeconomic interests of
theoperators onthemarket tooperate under orderly andpredictable procedures.
10. Finally, theEuropean Communities argues thatanadvance notice withareasonable leadtime
ofanymajor changes inlegislation should begiven topermit those involved inthebanana supply chain
tomake thenecessary adjustments totheirplanning andlogistics.
11. TheEuropean Communities notes that,foralltheabove reasons, the"reasonable period of
time" itproposes isalready atightschedule thatwillrequire agreatdealofdiscipline andcooperation
together withaconstructive approach atalllevels.
12. Attheoralhearing on17December 1997, theEuropean Communities made itclearthatthe
"reasonable period oftime" itrequests, i.e.until1January 1999, isforthepurpose ofimplementing
alltherecommendations andrulings oftheDSB adopted on25September 1997 inEuropean
Communities -Regime fortheImportation, SaleandDistribution ofBananas .
8Theterm"ACP States" refers totheAfrican, Caribbean andPacific States which areparties totheLomé Convention.WT/DS27/15
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B. Complaining Parties
13. TheComplaining Parties notethattheirrequest todetermine the"reasonable period oftime"
through binding arbitration followed extensive attempts toreach anagreement withtheEuropean
Communities onthismatter, andthatthese attempts failed because theEuropean Communities was
unwilling toconfirm thatitintends tousethe"reasonable period" inorder tofullyimplement the
recommendations andrulings oftheDSB. TheComplaining Parties argue thata"reasonable period
oftime", within themeaning ofArticle 21.3(c), isalimited rightthatarises onlyforthepurpose of
implementation. Intheiropinion, adefending Member which refuses tostateitsintention toimplement
therelevant DSBrecommendations andrulings should notbeentitled toa"reasonable period oftime".
TheComplaining Parties believe thatofallthe"particular circumstances" which anarbitrator should
consider when deciding ona"reasonable period oftime", themostimportant mustbewhether aMember
hasstated itsintention tocomply withtherecommendations andrulings oftheDSB. Accordingly,
theComplaining Parties argue thattheArbitrator should conclude thattheEuropean Communities is
notentitled tothe"reasonable period oftime", provided forinArticle 21.3(c), since ithasnotclearly
indicated itsintention tofullyimplement therecommendations andrulings oftheDSB.
14. Intheir written submission of15December 1997, theComplaining Parties argue, inthe
alternative, thatevenifinthecourse ofthearbitration proceedings theEuropean Communities would
stateitsintention toimplement therecommendations andrulings oftheDSB, the"reasonable period
oftime" of15months andoneweek, requested bytheEuropean Communities, isexcessive. They
submit thattheEuropean Communities overstates theperiod oftime needed toimplement the
recommendations andrulings oftheDSB. TheComplaining Parties notethatmostbanana measures
foundtobeWTO-inconsistentwereimplementedthroughCommissionregulations,whichcanbeamended
throughsimpleandrapidprocedures,separatefromtheamendmentofRegulation404/93onthecommon
organization ofthemarket inbananas, which requires action bytheCouncil. Furthermore, the
Complaining Parties notethatittooktheEuropean Communities lessthansixmonths toadopt Council
Regulation 404/93 aftertheEuropean Commission hadsubmitted itsproposal totheCouncil. According
tothem, thecurrent taskofamending Regulation 404/93 tomake itWTO-consistent isfarless
challenging thanitwastoadopt thatRegulation in1993 inthefirstplace. Finally, theComplaining
Parties submit thattheEuropean Commission oftenprepares implementing legislation while itsproposal
forbasiclegislation isstillpending before theCouncil. Thus, theadoption ofimplementing legislation
bytheCommission, theyargue, canbecarried outshortly aftertheadoption ofthebasic legislation
bytheCouncil.WT/DS27/15
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15. TheComplaining Parties submit thattheassertion bytheEuropean Communities thatthe
"controversial" nature oftheissue requires amore prolonged procedure should bedisregarded. In
theiropinion, anarbitrator 'senquiry must avoid theissue ofwhatimplementation period would be
acceptable todomestic political constituencies, andexamine instead the"practicable" timeneeded to
accomplish thelegislative andregulatory changes involved. Under thecircumstances ofthiscase,
theComplaining Parties argue thatfullimplementation oftherecommendations andrulings ofthe
DSBis"practicable" by1July1998, i.e.within ninemonths.
16. Ecuador, Guatemala, Honduras andMexico alsoargue thatArticles 21.2, 21.7and21.8of
theDSUrequire thatspecial attention bepaidtomatters affecting theinterests ofcomplaining developing
country Members withrespect tomeasures thathavebeensubject todispute settlement. Intheirreply
tomyquestion, whether theinterests ofother developing countries, andinparticular thebanana
producing ACPStates, werenotalsoaffected, Ecuador, Guatemala, Honduras andMexico maintained
thattheirinterests carrygreater weight sincetheyarerequesting theimplementation ofaWTO-consistent
importregime.Finally,thedevelopingcountryComplainingPartiespointoutthatthecountryallocations
andexport certificates provided forintheFramework Agreement onBananas9wereimplemented by
Commission, notCouncil, regulation andcould, therefore, beamended easily.
17. Initsclosing remarks attheoralhearing, theUnited States, speaking onbehalf ofthe
Complaining Parties, noted thestatement made bytheEuropean Communities during theoralhearing
thatitintends toimplement alltherecommendations andrulings oftheDSBwithin the"reasonable
period oftime" ithasrequested, i.e.by1January 1999.
III. Award
18. Article 21.1oftheDSU stipulates that"prompt compliance withrecommendations orrulings
oftheDSBisessential inorder toensure effective resolution ofdisputes tothebenefit ofallMembers".
Thisobligation isfurther elaborated inArticle 21.3oftheDSU, where itisprovided that"[i]fitis
impracticable tocomply immediately withtherecommendations andrulings, theMember concerned
shallhaveareasonable period oftimeinwhich todoso". When the"reasonable period oftime" is
determined through binding arbitration, asprovided forunder Article 21.3(c) oftheDSU, thisprovision
9Marrakesh Protocol totheGeneral Agreement onTariffs andTrade 1994,Schedule LXXX -European Communities,
pp.16373-16377.WT/DS27/15
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states thata"guideline" forthearbitrator should bethatthe"reasonable period oftime" should not
exceed 15months fromthedateoftheadoption ofapanel orAppellate Body report. Article 21.3(c)
oftheDSU alsoprovides, however, thatthe"reasonable period oftime" maybeshorter orlonger
than15months, depending upon the"particular circumstances".
19. TheComplaining Parties havenotpersuaded methatthere are"particular circumstances" in
thiscasetojustify ashorter period oftimethanstipulated bytheguideline inArticle 21.3(c) ofthe
DSU. Atthesametime, thecomplexity oftheimplementation process, demonstrated bytheEuropean
Communities, would suggest adherence totheguideline, withaslight modification, sothatthe
"reasonable period" oftimeforimplementation would expire by1January 1999.
20. Therefore, Iconclude that,pursuant toArticle 21.3(c), the"reasonable period oftime" for
theEuropean Communities toimplement therecommendations andrulings oftheDSBadopted on25
September 1997 inEuropean Communities -Regime fortheImportation, SaleandDistribution of
Bananas ,shallbetheperiod from 25September 1997 to1January 1999.
Signed intheoriginal, atGeneva, this23rddayofDecember 1997 by:
________________________
SaidEl-Naggar