“The main point is that the EU had challenged the legality of the U.S. and Canadian sanctions, and when all is said and done the sanctions were not found to be illegal.”
—Brendan McGivern, partner,White & Case
“This is an important decision,” EU trade spokesman Peter Power said. “The panel had no sound basis for questioning the WTO-legality of the new EU hormones directive. These clarifications will strengthen WTO members’ ability to protect citizens.”
The Appellate Body “confirmed the EU's views that the panel made very serious legal errors when it assessed the new EU Hormones Directive and found that it does not comply with the WTO Agreement on Sanitary and Phytosanitary Measures (SPS Agreement),” Power added.
Brendan McGivern, a partner with the law firm White & Case LLP specializing in international trade issues, said that while the ruling could be seen as a procedural win for the United States and Canada, neither side could claim victory on the scientific arguments over whether the existing EU bans are justified.
“I'd call it a draw,” McGivern said. “The EU is probably glad the Appellate Body overruled the panel finding that the scientific basis for the bans was inadequate, but the Appellate Body did not go farther, as the EU wanted.”
“But the bottom line is that the U.S. and Canadian sanctions can remain in place,” he added. “The main point is that the EU had challenged the legality of the U.S. and Canadian sanctions, and when all is said and done the sanctions were not found to be illegal.”
The EU initiated the panel proceedings in February 2005 after the United States and Canada refused to initiate new WTO proceedings to prove that the 2003 directive violated WTO rules. Washington and Ottawa insisted the directive maintained the same measures found illegal by the earlier WTO panel.
The EU argued that the directive was based on new scientific studies proving that the hormones in question may cause cancer in humans, and that the measure brought it in line with the earlier WTO ruling, thus obliging the United States and Canada to lift the sanctions.
The panel made its ruling public on March 31, with the United States, Canada and the EU subsequently challenging the findings that went against them (25 ITR 470, 4/3/08).
300-Page Opinion.
In a lengthy decision running more than 300 pages, the Appellate Body said the panel erred in ruling that the United States and Canada breached WTO dispute procedures by unilaterally determining that measures taken by the EU to comply with the original 1998 WTO ruling against the EU hormone ban were insufficient.
The authorization to impose retaliatory duties on EU imports stems from the inconsistency of the EU's original 1996 directive imposing the hormone ban with WTO rules “continued to be legally valid until the measure found to be inconsistent … was removed,”
the Appellate Body declared.
“Thus, until the removal of the [EU's] inconsistent measure was determined through WTO dispute settlement, the United States’
and Canada's authorization to suspend concessions did not lapse,”
it added.
The Appellate Body went on to say that its finding “does not mean that the United States and Canada do not have an obligation to engage in the dispute settlement procedures in a cooperative manner. Rather, the United States, Canada, and the (EU) have an obligation to engage in (compliance) proceedings in order to obtain objective ascertainment of whether substantive compliance has been achieved in this case.”
Ban on Oestradiol 17.
In regard to the scientific basis for the EU's permanent ban on oestradiol 17, the Appellate Body reversed the panel's finding that the EU had failed to satisfy the requirements under Article 5.1 of the SPS in its risk assessment on the hormones. In specific, the panel said that studies carried out by the EU's own Scientific Committee on Veterinary Measures relating to Public Health did not support the EU's conclusions that the use of the hormone for growth-promotion purposes leads to an increased cancer risk in humans.
Under Article 5.1, WTO members “shall ensure that their sanitary or phytosanitary measures are based on an assessment, as appropriate to the circumstances, of the risks to human, animal or plant life or health, taking into account risk assessment techniques developed by the relevant international organizations.”
“A panel reviewing the consistency of an SPS measure with Article 5.1 must determine whether that SPS measure is ‘based on‘
a risk assessment,” the Appellate Body declared. “It is the WTO Member's task to perform the risk assessment. The panel's task is to review that risk assessment. …Therefore, the review power of a panel is not to determine whether the risk assessment undertaken by a WTO Member is correct, but rather to determine whether that risk assessment is supported by coherent reasoning and respectable scientific evidence and is, in this sense, objectively justifiable.”
“The Appellate Body has observed that a WTO Member may properly base an SPS measure on divergent or minority views, as long as these views are from qualified and respected sources,” it continued. “In other words, while the correctness of the views need not have been accepted by the broader scientific community, the views must be considered to be legitimate science according to the standards of the relevant scientific community.”
In the current dispute, the panel should have limited itself to determining whether the scientific basis which the EU relied upon in its risk assessment of oestradiol 17 came from a respected and qualified source. Instead, the panel “seems to have conducted a survey of the advice presented by the scientific experts and based its decisions on whether the majority of the experts, or the opinion that was most thoroughly reasoned or specific to the question at issue, agreed with the conclusion drawn in the risk assessment,” the Appellate Body declared. “This approach is not consistent with the applicable standard of review under the SPS Agreement.”
The Appellate Body went on to say it was unable to complete the analysis whether the EU's risk assessment on oestradiol 17 was consistent with Article 5.1 of the SPS Agreement.
“In the past, the Appellate Body has completed the analysis when there were sufficient factual findings by the panel or undisputed facts on the Panel record to enable it to do so.” However, “in light of the numerous flaws we have found in the Panel's analysis, and the highly contested nature of the facts, we do not consider it possible to complete the analysis in this case.”
Insufficiency of Data Discussed.
In regard to the panel's findings that the EU failed to show there was insufficient or missing scientific information allowing it to conduct a complete risk assessment on the other five hormones subject to the provisional bans, the Appellate Body said the panel made numerous errors in its interpretation of Article 5.7 of the SPS Agreement.
Article 5.7 states that, in cases where relevant scientific evidence is insufficient, a WTO member may provisionally adopt measures “on the basis of available pertinent information, including that from the relevant international organizations as well as from sanitary or phytosanitary measures applied by other Members.” In such circumstances, members “shall seek to obtain the additional information necessary for a more objective assessment of risk and review the sanitary or phytosanitary measure accordingly within a reasonable period of time.”
The Appellate Body said the panel erred in declaring that, where international standards exist, a “critical mass of new evidence and/or information that calls into question the fundamental precepts of previous knowledge and evidence” is required to render the relevant scientific evidence “insufficient” under Article 5.7.
This test imposes an “excessively high threshold” requiring, in effect, a “paradigm shift” in scientific thinking, the Appellate Body declared. As a result of this, the panel failed to attribute significance to evidence which could cast doubt as to whether the relevant scientific evidence still permits of a sufficiently objective assessment of risk.
One example was the panel's analysis of the EU's claim that the relevant scientific evidence concerning the effects of the hormones on certain categories of the population, in particular pre-pubertal children, was “insufficient” within the meaning of Article 5.7. The Appellate Body noted that the EU argued such children were at increased risk from exposure to hormones based on results of a new, more sensitive detection method that identified lower levels of endogenous oestradiol in the children than previously thought.
Nevertheless, the panel seemed to rely on two pieces of evidence in concluding that the new detection method had not yet been validated
(one being testimony from the experts whose impartiality was challenged by the EU), and that “at least some” of the scientific experts consulted by the panel seemed to agree with the EU's arguments, the Appellate Body declared.
As with the risk assessment for oestradiol 17, the Appellate Body said the “numerous flaws” of the panel in regard to its assessment made it impossible to complete its analysis whether there was insufficient relevant scientific evidence to justify the provisional bans.
By Daniel Pruzin
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