Introduction*
The remedial regimes established by international treaties exhibit considerable diversity. Some treaties merely provide review mechanisms and do not permit further action against the violating state, while others allow for the imposition of punitive fines. Some agreements respond to non-compliance with individually tailored packages of incentives and disincentives, while others provide for the award of compensatory damages enforceable in domestic courts. This Article examines the remedial regime established under what is arguably the most complex multilateral treaty arrangement in the world today: the World Trade Organization (“WTO”) Agreements.
Within the WTO system, the remedy for a continuing violation of WTO obligations is the right granted to the affected WTO Member State to suspend “concessions or other obligations” owed to the violating WTO Member State. Thus, WTO remedies take the form of a response “in kind” — the remedy for one violation of the treaty is an offsetting violation of the treaty. In domestic law, one rarely encounters situations where the remedy for a violation of law is a right granted to the affected party to violate the law as well. In contrast, remedies in international law frequently take this form. In fact, given the absence of coercive and centralised enforcement mechanisms at the international level, the ultimate remedy for the breach of an international treaty will usually take the form of a further violation, or “countermeasure.”
This Article examines a basic issue that is confronted in every instance in which this remedy is sought: How far can the retaliating state go in responding to the breach of WTO obligations owed to it? It analyzes the limitations on retaliation in the WTO Agreements and the manner in which WTO arbitral panels have confronted and resolved this issue.
The limitations on the right to retaliate are important for a variety of reasons. First, they determine the dimensions of any ensuing retaliation and, therefore, are of considerable practical significance for WTO Members in making decisions about whether to comply with their obligations and whether to seek to enforce their rights. Second, these limitations are important because they shed light on broad theoretical questions about the nature of WTO rights and obligations. Finally, an understanding of the WTO regime may carry lessons both for negotiators of remedial regimes for other trade treaties and for those called upon to apply similar remedial regimes installed in bilateral or regional trade agreements.
The Article is organized as follows. Parts I and II outline the procedural and substantive context in which WTO arbitrators make assessments about the permissible intensity of retaliation. Part III explores the negotiating history of current WTO remedial regime. Part IV scrutinizes the manner in which arbitral panels have assessed the permissible intensity of retaliation to date. It organizes the jurisprudence into two broad approaches and analyzes the issues that arise when these approaches are applied in concrete cases. Part V then considers the possible purposes that may be served by the WTO remedial regime and examines whether this regime coherently promotes any or all of these purposes. The Article argues that the remedial regime and the jurisprudence are difficult to justify by reference to instrumental purposes such as ensuring compliance, providing compensation, rebalancing the bargain or facilitating efficient conduct. A retributive rationale can justify the regime but this rationale is difficult to defend. It concludes by arguing that the true value of arbitral review lies in its escalation prevention function. Part VI explores certain implications of the absence of a guiding rationale for the WTO remedial regime. . . .
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