RESTRICTED
PREPARATORY COMMITTEE PC/IPL/W/5
FOR THE 7September 1994
WORLD TRADE ORGANIZATION
(94-1822)
SUB-COMMITTEE ONINSTITUTIONAL ,
PROCEDURAL AND LEGAL MATTERS
TRANSITIONAL ARRANGEMENTS
Note bytheSecretariat
1. Atitsmeeting on31May1994, thePreparatory Committee agreed thattheSub-Committee
onInstitutional, Procedural andLegal Matters begiven thetaskofmaking specific proposals concerning
transitional arrangements todealwithongoing activities under theGATT 1947andtheTokyo Round
Agreements aftertheentry intoforce oftheWTO Agreement forconsideration bythePreparatory
Committee.
2. Atitsmeeting on13June1994, theSub-Committee agreed thattheSecretariat berequested
toprepare afactual notedescribing theissues pertaining totransitional arrangements. Thisnotepresents
theissuesinbroadconceptualtermsleavingthedetailedexaminationofspecifictransitionalarrangements
toanysubsequent notes thatmight berequested bytheSub-Committee orother bodies.
_______________
I. Introduction
3. According toArticle II:4oftheWTO Agreement, theGATT 1947 (theexisting GATT) and
theGATT 1994 (theGATT thathasbeenincorporated intotheWTO Agreement byreference) are
legally distinct andmaythusco-exist. Thiscreates essentially three options foracontracting party
aftertheentry intoforce oftheWTO Agreement. Itmay:
- withdraw from theGATT 1947 andbecome aMember oftheWTO,
- remain acontracting party totheGATT 1947andnotbecome aMember oftheWTO,
or
- remain acontracting party totheGATT 1947 andbecome aMember ofthe
WTO.
Atleastduring atransitional period eachofthese cases islikely toarise. Ineachofthem different
legalissues regarding theapplicability ofthesubstantive andprocedural provisions oftheGATT 1947
andthose oftheWTO Agreement present themselves. There areessentially twocategories ofissues:
(a)issues arising fromthereplacement ofrights andobligations under theGATT 1947bythose under
theWTO Agreement and(b)issues arising from theco-existence oftherights andobligations under
theGATT 1947 andthose under theWTO Agreement. Theissues thatcanarisewithrespect tothe
Tokyo Round Agreements andtheirsuccessor agreements annexed totheWTO Agreement canbe
similarly categorized. Some oftheissues analyzed inthisnotecanonlyberesolved through decisions
oftheCONTRACTING PARTIES totheGATT 1947orthebodies established under theTokyo Round
Agreements. Thisapplies inparticular todecisions tophase outexisting procedures orwaive current
obligations. Totheextent thattheresolution ofissues requires amodification oftheobligations of
theMembers oftheWTO ornewprocedures within theWTO, thedecisions would havetobetaken
bythePreparatory Committee ortheWTO. Thisnotediscusses theissues oftransition irrespective
ofwhich body would eventually havetoresolve them.PC/IPL/W/5
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4. Thereplacement oftheGATT asaninstitution bytheWTO requires thecreation ofalegal
basis forthattransition, thatissome arrangement, endorsed bytheCONTRACTING PARTIES to
theGATT 1947, theInterim Commission fortheInternational Trade Organization andthePreparatory
Committee ortheWTO, transferring assets, liabilities, records andstafffrom onetotheother, as
foreseen inArticle XVI:2 oftheWTO Agreement. Itisassumed thatthelegalissues arising from
thisinstitutional transition willbedealt with intheSub-Committee onBudget, Finance and
Administration. Thisnote, therefore, doesnotaddress them.
II. Withdrawal fromandTermination oftheAgreements tobeReplaced bytheWTO Agreement
5. Accordingtoparagraph5oftheProtocolofProvisionalApplicationandcorrespondingprovisions
intheprotocolsofaccession,eachcontractingpartymaywithdrawfromtheGATT1947.Thewithdrawal
takes effect upontheexpiration ofsixtydaysfromthedayonwhich written notice ofsuchwithdrawal
isreceived bytheSecretary-General oftheUnited Nations. These provisions override Article XXXI
oftheGeneral Agreement, which provides forsix-month withdrawal notice, because theGeneral
Agreement isapplied onlyonthebasis oftheProtocol ofProvisional Application andtheprotocols
ofaccession buthasitself notentered intoeffect. TheTokyo Round Agreements similarly provide
forasixty-day withdrawal notice. During thelegal drafting process theinclusion ofadenunciation
clause intotheFinal Act,according towhich acceptance oftheWTO Agreement would carry
denunciation oftheTokyo Round Agreements (similar totheoneincluded inArticle 16:5oftheAnti-
Dumping Code) wasbriefly considered, buttheideafound nosupport.
6. Ratherthanindividuallywithdrawingfromatreaty,allpartiestoatreatymaydecidetoterminate
thetreaty evenif,asisthecasefortheGATT 1947andtheTokyo Round Agreements, thetreaty does
notexplicitly provide foritstermination (Article 54oftheVienna Convention ontheLawofTreaties).
Theformalities required fortheentry intoforce ofatreaty neednotbeobserved foritstermination.
Forinstance, theparties toatreaty maydecide ontheoccasion ofanassembly oftherepresentatives
ofallpartiestoterminatethetreaty.ThepartiestotheArrangementRegardingBovineMeathavedecided
toterminate theArrangement asofthedateofentry intooftheWTO Agreement. Such acollective
decision toterminate aTokyo Round Agreement thatistobereplaced byanagreement annexed to
theWTO Agreement permits amore orderly termination thanoneresulting fromindividual withdrawal
notices.
7. Article 59oftheVienna Convention ontheLawofTreaties declares that"Atreaty shallbe
considered tobeterminated ifallparties toitconclude alatertreaty relating tothesame subject matter
and...itappears fromthelatertreaty orisotherwise established thattheparties intended thatthematter
should begoverned bythattreaty...". Thismeans that,onceallcontracting parties totheGATT 1947
orallparties toaTokyo Round Agreement forwhich there isasuccessor agreement annexed tothe
WTO Agreement havebecome Members oftheWTO, theGATT 1947ortherespective Tokyo Round
Agreement could beconsidered tobeterminated.
8. Issues: Should theagreements thataretobereplaced byagreements annexed totheWTO
Agreement beterminated bycollective decisions oftheparties tothem? Ifso,bywhat procedures,
atwhatpoint intimeandunder whatconditions should these agreements beterminated?
III. Effects oftheWithdrawal from, andTermination of,theAgreements tobeReplaced bythe
WTO Agreement
9. Article 70(1) oftheVienna Convention provides that"Unless thetreaty otherwise provides
ortheparties otherwise agree, thetermination ofatreaty under itsprovisions inaccordance withthe
present Convention: (a)releases theparties from anyobligation further toperform thetreaty; (b)
doesnotaffect anyright, obligation orlegalsituation oftheparties created through theexecution ofPC/IPL/W/5
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thetreaty prior toitstermination". Article 70(2) provides thatArticle 70(1) applies totherelations
between aStatewhich denounces orwithdraws fromamultilateral treaty andtheother parties tothe
treaty from thedatewhen suchdenunciation orwithdrawal takes effect. Itwould appear thatthe
principles ofArticle 70apply alsointhecaseforeseen inArticle 59oftheVienna Convention, that
isthecaseofatermination ofatreaty through theconclusion ofanewtreaty. Article 70thusmakes
clearthataparty withdrawing fromatreaty isnolonger obliged toimplement thetreaty butthatcertain
rights, obligations andlegalsituations thathavearisen priortothewithdrawal asaresult oftheexecution
ofthetreaty remain unaffected. Itshould benoted thatArticle 70gives littleguidance onhowto
determine theexact scope ofthese unaffected rights andobligations. Thisdetermination would appear
tobeparticularly difficult inrespect ofprocedural rights andobligations.
10. Article 70oftheVienna Convention provides thattheparties toatreaty mayagree tospecific
rulesregarding theeffects ofawithdrawal ortermination. TheMinisterial Decision ontheApplication
andReview oftheUnderstanding onRules andProcedures Governing theSettlement ofDisputes
(MTN/FA, p.419)canbeseenasasuggestion thatsuchspecific rulesbeadopted bytheGATT Council
andtheCommittees established under theTokyo Round Agreements. TheDecision recalls aprevious
decision of22February 1994thatexisting dispute settlement rulesandprocedures ofGATT 1947shall
remain ineffect untilthedateofentry intoforce oftheWTO Agreement, and"invite[s] therelevant
Councils andCommittees todecide thattheyshallremain inoperation forthepurpose ofdealing with
anydispute forwhich therequest forconsultation wasmade" before thatdate.ThisMinisterial Decision
implies thattheMinisters anticipated thatcertain oftheagreements tobereplaced bytheWTO
Agreement would beterminated orsubject towithdrawals because theneedforacontinued operation
oftheCouncils andCommittees arises onlyinthatcase.TheDecision further implies thattheMinisters
considered thatnotallsubstantive rights andobligations under theagreements would extinguish with
theirtermination orawithdrawal because onlyinthatcasedoesthecontinuation oftheexisting Councils
andCommittees serve apurpose.
11. Issues: Towhat extent arethesubstantive andprocedural rights andobligations under the
GATT 1947andtheTokyo Round Agreements unaffected bytheirtermination? Towhatextent should
theyremain unaffected? Should anyspecific rules beyond those suggested intheabove-mentioned
Ministerial Decision governing theconsequences ofterminations orwithdrawals beagreed?
IV. Relationship Between theRights andObligations under theGATT 1947 oraTokyo Round
Agreement andthose under theWTO
12. Intherelations between WTO Members thathaveremained contracting parties totheGATT
1947 ortotheTokyo Round Agreements these earlier agreements continue toapply, however only
totheextent thattheyarecompatible withthose ofthelaterWTO Agreement. Thisfollows fromthe
rulesofgeneral international lawontheapplication ofsuccessive treaties relating tothesame subject
matter (Article 30oftheVienna Convention).
13. Intherelations between WTO Members thathaveremained contracting parties totheGATT
1947andcontracting parties thathavenotyetbecome WTO Members, theGATT 1947willcontinue
tobefullyapplicable. Themost-favoured-nation clause oftheGATT 1947would inprinciple require
thatbenefits extended toWTO Members alsobeextended tothecontracting parties non-Members of
theWTO. Inthiscontext itshould benoted that,while themost-favoured-nation clause oftheGATT
1947doesnotapply totrade inservices andtoTRIPS, many ofthetighter disciplines ontrade policy
measures andaccess tomarkets forgoods agreed intheUruguay Round would havetobeapplied to
imports from contracting parties notbound bythese disciplines. Afurther, andperhaps more basic,
problem arises from thefactthataWTO Member which remained acontracting party totheGATT
1947 could notinvoke vis-à-vis other contracting parties totheGATT 1947thathavenotyetbecomePC/IPL/W/5
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Members oftheWTO those provisions oftheWTO Agreement thatjustify departures fromtheGATT
1994.
14. Intherelations between theWTO Members thathavewithdrawn from theGATT 1947 ora
TokyoRoundAgreementandtheStatesorseparatecustomsterritoriesthathavenotyetbecomeMembers
oftheWTO, neither theGATT 1947ortheTokyo Round Agreement northeWTO Agreement applies.
Theonlyrights andobligations under theGATT 1947 ortheTokyo Round Agreement thatwould
continue toapply inthese relations arethose created through theexecution oftheGATT 1947 orthe
Tokyo Round Agreement prior tothewithdrawal (Article 70oftheVienna Convention). However,
suchremainingrightsandobligationsmaybeoflimitedvalueintherelationsbetweenStatesandcustoms
territories thatarenolonger bound tofurther perform theGATT 1947 andhavetherefore nolonger
anyobligation under theGATT 1947 torefrain from imposing newrestrictive trade measures.
15. Issue: Should theobligations under theGATT 1947 ofWTO Members thatwishtoremain
contracting parties totheGATT 1947 bemodified, and,ifso,bywhatprocedures?PC/IPL/W/5
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V. Summary
16. Thefollowing tablesummarizes thediscussion intheprevious paragraphs onthevarious legal
relationships thatmayexistbetween contracting parties totheGATT 1947and/or WTO Members after
theentry intoforce oftheWTO Agreement taking intoaccount Articles 30and70oftheVienna
Convention ontheLawofTreaties. Theindications inthetableapply, mutatis mutandis, alsointhe
relations between parties toaTokyo Round Agreement and/or WTO Members.
Aisacontracting party toorMember of
onlyGATT
1947GATT 1947
andWTOonlyWTO
Bisacontracting
party toorMember
ofonlyGATT
1947GATT 1947 fully
appliesGATT 1947 fully
applies; WTO
Agreement must be
implemented
consistently withthe
GATT 1947Neither theGATT
1947 northeWTO
Agreement applies;
rights, obligations
andlegal situations
created through the
execution ofGATT
1947 prior tothe
termination of
GATT 1947 byA
remain unaffected
GATT 1947
andWTOGATT 1947 fully
appliesWTO Agreement
applies; GATT 1947
continues toapply to
theextent thatits
provisions are
compatible withthose
oftheWTO
AgreementWTO Agreement
fullyapplies; rights,
obligations andlegal
situations created
through theexecution
ofGATT 1947 prior
toitstermination by
Aremain unaffected
onlyWTONoobligation to
further perform
GATT 1947
obligations; rights,
obligations andlegal
situations created
through theexecution
oftheGATT 1947
prior totermination
ofGATT 1947 byB
areunaffectedWTO Agreement
applies; GATT 1947
must beimplemented
consistently withthe
WTO Agreement;
rights, obligations and
legal situations created
through theexecution
oftheGATT 1947
prior totermination of
GATT 1947 byBare
unaffectedWTO Agreement
applies; noobligation
tofurther perform
GATT 1947
obligations; rights,
obligations andlegal
situations created
through theexecution
oftheGATT 1947
prior totermination
ofGATT 1947 byB
areunaffected
VI. Procedural Issues
(a) Dispute Settlement Procedures
17. TheWTO Dispute Settlement Understanding (DSU) applies onlytodisputes forwhich
consultations were requested onorafterthedayofentry intoforce oftheWTO Agreement. Asto
priordisputes, "therelevant dispute settlement rulesandprocedures ineffect immediately prior tothePC/IPL/W/5
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entryintoforceoftheWTOAgreementshallcontinuetoapply"(Article3:11oftheDSU).TheMinisters
decided inMarrakesh "toinvite therelevant Councils andCommittees todecide thattheyshallremain
inoperation forthepurpose ofdealing withanydispute forwhich therequest forconsultation was
made before [thedateofentry intoforce oftheWTO Agreement]." Nosuchdecisions haveasyet
beentaken. ThisruleoftheDSU andthecorresponding Ministerial decision, oncecarried outbythe
GATT Council andthebodies established under theTokyo Round Agreements, settle some ofthe
procedural andinstitutional aspects ofthetransition from onedispute settlement system totheother
forthecases inwhich theGATT ortheTokyo Round Agreement stillapplies, butnotanyofthe
substantive issues arising inthecaseofthetermination of,orwithdrawal from, oneoftheseagreements.
18. Inmostpanel proceedings thecomplaining party sought thecessation ofanillegal measure
andtherefore requested thepanel torecommend thattheparty complained against bring themeasure
intoconformity withitsobligations. Totheextent thatthetermination ofanagreement renders the
challenged measure consistent withtheinternational obligations oftheparty concerned, therightto
acessation ofthemeasure lapses. Such arecommendation maytherefore nothavetobecarried out
aftertheparty complained against withdraws fromtheagreement. Cases might ariseinwhich apanel's
recommendation relates totheperformance ofobligations under aTokyo Round Agreement thathave
beentaken overwithout modification intotheWTO. Inthiscaseagoodfaithperformance ofthenew
obligations mayrequire thecarrying outofapanel recommendation relating toaprovision bywhich
theparty isnolonger formally bound. However, therighttoperformance arises inthiscasefromthe
WTO Agreement andwould havetobeenforced through itsprocedures. Inthecaseofrecommendations
byGATT 1947 panels, ithastobetaken intoaccount thatthedecisions bytheCONTRACTING
PARTIES before theentry intoforce oftheWTO Agreement areincorporated intotheGATT 1994
andaretherefore incorporated intotheWTO Agreement. There mayalsobecases inwhich the
recommendation relates toameasure thatwasinconsistent withtheGATT 1947 oraTokyo Round
Agreement butnotwiththeWTO Agreement, inwhich casetheparty maynothavetoimplement the
panel'srecommendations inrelation toother Members oftheWTO.
19. Inafewpanel proceedings thecomplaining party sought retrospective remedies, suchasthe
revocation ofacountervailing dutyorder. Insome cases thecomplaining party primarily sought
satisfactionorassurancesagainstrepetitionthroughafindingthatameasuretakenwasillegal.Aspointed
outinparagraphs 9-10above, aright tosuchremedial actions maypossibly continue beyond the
termination ofatreaty. TheDSU rules onprior disputes maytherefore beparticularly relevant for
suchcomplaints.
20. Article 18:3oftheAgreement onAnti-dumping annexed totheWTO Agreement provides
that"theprovisions ofthisAgreement shallapply toinvestigations, andreviews ofexisting measures,
initiated pursuant toapplications which havebeenmade onorafterthedateofentry intoforce for
theMember oftheWTO Agreement". Article 32:3 oftheWTO Agreement onSubsidies and
Countervailing Measures contains asimilar provision. Complaints related toanti-dumping or
countervailing dutyinvestigations initiated pursuant toanapplication prior totheentry intoforce of
theWTO Agreement could therefore notbebrought under theWTO Agreement onAnti-Dumping
orSubsidies andCountervailing Measures. Ifsuchcomplaints were based ontheGATT 1947 ora
Tokyo Round Agreement, thedispute settlement procedures oftheWTO would notapply: theDSU
applies onlytospecified agreements ("covered agreements"), andtheGATT 1947andtheTokyo Round
Agreements donotfigure among them. Itisnoted inthiscontext thattheSecretariat ispreparing at
therequest oftheCommittee onAnti-Dumping Practices anoteontheissues relating todisputes in
thefieldofanti-dumping andcountervailing duties.
21. TheMinisters haveinvited therelevant Councils andCommittees todecide thattheyremain
inoperation forthepurpose ofdealing withanydispute forwhich therequest forconsultation was
made before thedateofentry intoforce oftheWTO Agreement. Adecision according towhich thesePC/IPL/W/5
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bodies would dealonlywithdisputes forwhich therequest forconsultations hasbeenmade before
theentry intoforce would create alegalgapinrespect ofmeasures taken aftertheentry intoforce
oftheWTO Agreement under anti-dumping andcountervailing investigations initiated pursuant to
applications thathave beenmade before theentry intoforce: theprovisions onanti-dumping and
countervailing duties intheWTO Agreement would notapply because theinvestigation resulted from
anapplication before theentry intoforce andthedispute settlement procedures oftheTokyo Round
Agreements would notapply because theconsultations onthemeasure wererequested aftertheentry
intoforce. Itwould notbemeaningful iftheGATT Council andthebodies established under theTokyo
Round Agreements weretodecide toremain inoperation inaccordance withtheMinisterial Decision
buttheparties todisputes thathadwithdrawn fromtheGATT 1947 ortheTokyo Round Agreement
could notparticipate inthemeetings ofthese bodies. Thedecisions toremain inoperation should
therefore perhaps betaken inconjunction withadecision ontherights ofparticipation ofaparty to
adispute thathadwithdrawn from theagreement atissue.
22. Issues: Howshould theMinisterial Decision onthecontinued operation ofbodies todealwith
disputes thatarose before theentryintoforceoftheWTO Agreement beimplemented? Should adecision
onthecontinued operation ofthebodies besupplemented byadecision ontheprocedural rights of
parties todisputes thathavewithdrawn from anagreement?
(b) Other Procedures
23. Many ofthenotification andconsultation requirements under theprovisions oftheGATT 1947
andtheTokyo Round Agreements canalsobefound intheprovisions oftheWTO Agreement. AWTO
Member thathasremained aparty totheGATT 1947 oraTokyo Round Agreement maytherefore
belegally required tomake twonotifications andconsult twice, forinstance bothunder thebalance-of-
payments provisions oftheGATT 1947andunder those under theWTO Agreement. IfonlytheWTO
weretoreceive thenotifications andholdtheconsultations, therights ofthecontracting parties that
havenotyetjoined theWTO tobeinformed andconsulted would beabridged.
24. Thebodies andprocedures established bydecisions oftheGATT CONTRACTING PARTIES
prior totheentry intoforce oftheWTO Agreement willinprinciple continue bothunder theGATT
1947 andtheGATT 1994, which isdefined ascomprising alldecisions oftheCONTRACTING
PARTIES priortotheentryintoforce. Inthecaseoftheirdecisions onthedispute settlement procedures
andtheTrade Policy Review Mechanism, theCONTRACTING PARTIES havetaken thisintoaccount:
these decisions willlapseasofthedateofentry intoforce oftheWTO Agreement. Buttherearemany
other bodies andprocedures, suchastheTechnical Group onQuantitative Restrictions andother Non-
TariffMeasuresandthenotificationrequirementsestablishedinconnectionwithit,thatwouldinprinciple
continue aslegally separate bodies andprocedures under theGATT 1947 andtheWTO Agreement.
25. Issues: Should arrangements benegotiated according towhich thenotification andconsultation
procedures under theGATT 1947(oraTokyo Round Agreement) andthose under theWTO Agreement
arecombined?Whichbodies,proceduresandrequirementsestablishedbytheCONTRACTINGPARTIES
totheGATT 1947 orbyaCommittee orCouncil under aTokyo Round Agreement should:
(a)cease toexistaltogether asoftheentry intoforce oftheWTO Agreement;
(b)continue onlyintheWTO;
(c)continue onlyintheGATT 1947 ortheTokyo Round Agreement;
(d)continue bothunder theGATT 1947 ortheTokyo Round Agreement andtheWTO?