Retaliation under the WTO system: When does Nullification or Impairment Begin?

Retaliation under the WTO system: When does Nullification or Impairment Begin?

Memorandum issued to the permanent Mission of Canada by Thibault Fresquet, Kai Kan, Farzan Sabet.

Executive Summary

This memorandum deals with the question of how to calculate nullification or impairment (N/I) in retaliation as contained in the understanding on rules and procedures governing the settlement of disputes (DSU). To solve this issue, we look  at the question of the period that extends from the end of the reasonable period of  time (RPT) to the Dispute Settlement Body’s (DSB) authorization on retaliation, what we call the ‘disputed period’. The disputed period and the calculation of N/I are inter- related issues. If the disputed period does not exist, then N/I starts at the end of the RPT. If we solve the status of the disputed period, by stating that it is a second RPT then N/I (that can be retaliated) starts at the authorization of the DSB. We first look at past practices of 22.6 arbitrators and determine that they were not directly relevant to the issue at hand. We then assess the text of the DSU, namely Article 22.4 which is the only provision that deals with the level of retaliation. We proceed to a Vienna Convention interpretation. Out of Article 22.4 we single out the key terms ‘level’ and ‘equivalent’ which in their ordinary meaning do not contain any obvious means of resolving the issue. The context of this Article proves to be inconclusive. We also evaluate the objective and architecture of retaliation in comparison with similar mechanisms in public international law, namely suspension of treaties, compensation and countermeasures and find that retaliation is not comparable to anything; it is sui generis. The next step is to look at State Practice, which could prove to be a supporting argument to the exclusion of the disputed period, however this practice is not directly relevant and too small to really be qualified as a solid practice. Ultimately the last step is to look at relevant rules of International Law, and we focus on ‘appropriate countermeasures’ [WTO SCM Agreement] and ‘proportional countermeasures’ [ILC Draft Articles on State Responsibility]. However, both terms do not contain any time indications which could aid us. Overall from the interpretation of Article 22.4, there are no elements that allow us to firmly take a  stand on the issue, so we conclude by giving elements that are relevant to the issue and that should be taken into account in future negotiations.


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