India
– Certain Measures Relating to Solar Cells
and
Solar Modules
AB-2016-3
Report of
the Appellate Body
Table of Contents
1 Introduction.. 7
2 Arguments of the Participants. 10
3 Arguments of the Third Participants. 10
4 Issues Raised in this Appeal. 10
5 Analysis of the Appellate Body. 11
5.1 Article III:8(a)
of the GATT 1994. 11
5.1.1 ........................................................................................................... The
Panel's findings. 11
5.1.2 ..................................................................................................... India's
claims on appeal 14
5.1.3 ............................................. The
scope of application of Article III:8(a) of the GATT 1994. 16
5.1.4 India's
challenge to the Panel's approach to India's claims under Article III:8(a)
of the GATT 1994 18
5.1.5 ......................................................................................................................... Conclusion. 23
5.1.6 ...................................... The
remaining elements under Article III:8(a) of the GATT 1994. 23
5.2 Article XX(j)
of the GATT 1994 – "general or local short supply". 24
5.2.1 ........................................................................................................... The
Panel's findings. 24
5.2.2 . India's
claims on appeal 26
5.2.3 .................................................... The
legal standard under Article XX(j) of the GATT 1994. 27
5.2.4 Whether
the Panel erred in finding that solar cells and modules are not products in
short supply in India 32
5.2.5 Whether
the Panel acted inconsistently with Article 11 of the DSU in addressing India's
arguments and evidence regarding the domestic manufacturing capacity. 35
5.2.6 ......................................................................................................................... Conclusion. 36
5.3 Article
XX(d) of the GATT 1994. 37
5.3.1 ........................................................................................................... The
Panel's findings. 37
5.3.2 ................................................... The
legal standard under Article XX(d) of the GATT 1994. 41
5.3.3 Whether
the Panel erred in its assessment of the domestic instruments identified by
India 43
5.3.4 Whether
the Panel erred in its assessment of the international instruments identified
by India 49
5.3.5 ......................................................................................................................... Conclusion. 53
5.4 "Essentiality"
and "necessity" under Articles XX(j) and XX(d), and the chapeau of Article
XX of the GATT 1994. 53
5.5 Separate
opinion of one Appellate Body Member 54
6 Findings And Conclusions. 56
6.1 Article
III:8(a) of the GATT 1994. 56
6.2 Article
XX(j) of the GATT 1994. 57
6.3 Article
XX(d) of the GATT 1994. 58
ABBREVIATIONS USED IN THIS REPORT
Abbreviation
|
Description
|
c-Si
|
crystalline silicon
|
DCR measures
|
Domestic content requirements imposed under
Phase I (Batch 1), Phase I (Batch 2), and Phase II (Batch 1-A) of India's
Jawaharlal Nehru National Solar Mission
|
DSB
|
Dispute Settlement Body
|
DSU
|
Understanding on Rules and Procedures
Governing the Settlement of Disputes
|
Electricity Act, 2003
|
Parliament of India, The Electricity Act,
2003 [No. 36 of 2003] (26 May 2003) (Panel Exhibit USA-20)
|
GATT 1994
|
General Agreement on Tariffs and Trade 1994
|
National Action Plan on Climate Change
|
Government of India, National
Action Plan on Climate Change (June 2008) (Panel Exhibit
IND-2)
|
National Electricity Plan
|
Government of India, Ministry of Power,
Central Electricity Authority, National Electricity
Plan, Vol. 1 – Generation (January
2012) (Panel Exhibit IND-16)
|
National Electricity Policy
|
Government of India, Ministry of Power, National Electricity Policy, Resolution
No. 23/40/2004-R&R (Vol. II) (12 February 2005)
(Panel Exhibit IND-14)
|
National Solar Mission,
or NSM
|
Jawaharlal Nehru
National Solar Mission
|
Panel
|
Panel is
these proceedings
|
Panel Report
|
Panel
Report, India – Certain Measures Relating to Solar Cells
and Solar Modules, WT/DS456/R
|
PPA
|
power purchase agreement
|
PV
|
photovoltaic
|
SPD
|
solar power developer
|
TRIMs Agreement
|
Agreement on Trade-Related Investment
Measures
|
Working Procedures
|
Working Procedures for Appellate Review,
WT/AB/WP/6, 16 August 2010
|
WTO
|
World Trade Organization
|
WTO Agreement
|
Marrakesh Agreement
Establishing the World Trade Organization
|
PANEL EXHIBITS CITED IN THIS REPORT
Panel
Exhibit(s)
|
Description
|
IND-2
|
Government of India, National
Action Plan on Climate Change (June 2008)
|
IND-3
|
United Nations Framework Convention on
Climate Change, done at New York, 9 May 1992, UN
Treaty Series, Vol. 1771, p. 107
|
IND-14
|
Government of India, Ministry of Power, National Electricity Policy, Resolution
No. 23/40/2004-R&R (Vol. II) (12 February 2005)
|
IND-16
|
Government of India, Ministry of Power,
Central Electricity Authority, National Electricity
Plan, Vol. 1 – Generation (January
2012)
|
IND-28
|
United Nations General Assembly Resolution A/RES/66/288 (adopted 27
July 2012) (Rio+20 Document: "The Future We Want")
|
IND-35
|
Rio Declaration on Environment and
Development, adopted by the UN General Assembly in 1992
|
IND-36
|
G. Sundarrajan v. Union of India and
Others, 2013 (6) SCC 620 (excerpts)
|
USA-4
|
Government of India, Ministry of New and Renewable
Energy, Resolution No. 5/14/2008, Jawaharlal Nehru National Solar Mission
(11 January 2010)
|
USA-20
|
Parliament of India, The Electricity Act,
2003 [No. 36 of 2003] (26 May 2003)
|
CASES
CITED IN THIS REPORT
Short Title
|
Full Case Title and
Citation
|
Argentina – Financial Services
|
Appellate Body Report, Argentina
– Measures Relating to Trade in Goods and Services, WT/DS453/AB/R and Add.1, adopted 9 May 2016
|
Australia – Salmon
|
Appellate
Body Report, Australia – Measures Affecting Importation
of Salmon, WT/DS18/AB/R, adopted 6 November 1998, DSR
1998:VIII, p. 3327
|
Brazil – Retreaded Tyres
|
Appellate
Body Report, Brazil – Measures Affecting Imports of
Retreaded Tyres, WT/DS332/AB/R, adopted 17 December 2007, DSR
2007:IV, p. 1527
|
Canada – Periodicals
|
Panel
Report, Canada – Certain Measures Concerning Periodicals,
WT/DS31/R and Corr.1, adopted 30 July 1997, as modified by
Appellate Body Report WT/DS31/AB/R, DSR 1997:I, p. 481
|
Canada
– Renewable Energy / Canada – Feed-in Tariff Program
|
Appellate Body Reports, Canada – Certain
Measures Affecting the Renewable Energy Generation Sector / Canada – Measures
Relating to the Feed-in Tariff Program, WT/DS412/AB/R / WT/DS426/AB/R, adopted 24 May 2013, DSR 2013:I, p. 7
|
Canada
– Renewable Energy / Canada – Feed-in Tariff Program
|
Panel
Reports, Canada – Certain Measures Affecting the Renewable
Energy Generation Sector / Canada – Measures Relating to the Feed-in Tariff
Program, WT/DS412/R and Add.1 / WT/DS426/R and Add.1, adopted 24 May 2013, as
modified by Appellate Body Reports WT/DS412/AB/R / WT/DS426/AB/R, DSR 2013:I, p. 237
|
Canada – Wheat Exports and Grain Imports
|
Appellate
Body Report, Canada – Measures Relating to Exports of
Wheat and Treatment of Imported Grain, WT/DS276/AB/R, adopted 27 September 2004, DSR
2004:VI, p. 2739
|
Canada
– Wheat Exports and Grain Imports
|
Panel Report, Canada – Measures
Relating to Exports of Wheat and Treatment of Imported Grain, WT/DS276/R, adopted 27 September 2004, upheld by
Appellate Body Report WT/DS276/AB/R, DSR 2004:VI, p. 2817
|
Chile – Price Band System (Article 21.5 –
Argentina)
|
Appellate
Body Report, Chile – Price Band System and Safeguard
Measures Relating to Certain Agricultural Products – Recourse to Article 21.5
of the DSU by Argentina, WT/DS207/AB/RW, adopted 22 May 2007, DSR 2007:II, p.
513
|
China
– Auto Parts
|
Appellate Body Reports, China – Measures
Affecting Imports of Automobile Parts, WT/DS339/AB/R / WT/DS340/AB/R / WT/DS342/AB/R, adopted 12 January 2009, DSR
2009:I, p. 3
|
China – Auto Parts
|
Panel Reports, China – Measures Affecting Imports of Automobile Parts, WT/DS339/R, Add.1 and Add.2 / WT/DS340/R, Add.1 and Add.2 / WT/DS342/R, Add.1 and Add.2, adopted 12 January
2009, upheld (WT/DS339/R) and as modified (WT/DS340/R / WT/DS342/R) by
Appellate Body Reports WT/DS339/AB/R / WT/DS340/AB/R / WT/DS342/AB/R, DSR
2009:I, p. 119
|
China – Rare Earths
|
Appellate
Body Reports, China – Measures Related to the
Exportation of Rare Earths, Tungsten, and Molybdenum, WT/DS431/AB/R / WT/DS432/AB/R / WT/DS433/AB/R, adopted 29 August 2014, DSR 2014:III,
p. 805
|
China
– Rare Earths
|
Panel Reports, China – Measures Related
to the Exportation of Rare Earths, Tungsten, and Molybdenum, WT/DS431/R and Add.1 / WT/DS432/R and Add.1 / WT/DS433/R and Add.1, adopted 29 August 2014,
upheld by Appellate Body Reports WT/DS431/AB/R / WT/DS432/AB/R /
WT/DS433/AB/R, DSR 2014:IV, p. 1127
|
China – Raw Materials
|
Appellate Body Reports, China – Measures Related to the Exportation of Various Raw Materials,
WT/DS394/AB/R / WT/DS395/AB/R / WT/DS398/AB/R, adopted 22 February 2012, DSR
2012:VII, p. 3295
|
Colombia
– Ports of Entry
|
Panel Report, Colombia – Indicative
Prices and Restrictions on Ports of Entry, WT/DS366/R and Corr.1, adopted 20 May 2009, DSR
2009:VI, p. 2535
|
Colombia – Textiles
|
Appellate
Body Report, Colombia – Measures Relating to the
Importation of Textiles, Apparel and Footwear, WT/DS461/AB/R and Add.1, adopted 22
June 2016
|
Dominican Republic – Import and Sale of
Cigarettes
|
Appellate
Body Report, Dominican Republic – Measures Affecting
the Importation and Internal Sale of Cigarettes, WT/DS302/AB/R, adopted 19 May 2005, DSR 2005:XV, p.
7367
|
EC – Fasteners (China)
|
Appellate Body Report, European
Communities – Definitive Anti-Dumping Measures on Certain Iron or Steel
Fasteners from China, WT/DS397/AB/R, adopted 28 July 2011, DSR 2011:VII,
p. 3995
|
EC – Hormones
|
Appellate
Body Report, EC Measures Concerning Meat and Meat
Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998, DSR 1998:I,
p. 135
|
EC – Poultry
|
Appellate
Body Report, European Communities – Measures Affecting
the Importation of Certain Poultry Products, WT/DS69/AB/R, adopted 23 July 1998, DSR 1998:V, p.
2031
|
EC –
Seal Products
|
Appellate Body Reports, European Communities –
Measures Prohibiting the Importation and Marketing of Seal Products,
WT/DS400/AB/R / WT/DS401/AB/R, adopted 18 June 2014, DSR 2014:I, p. 7
|
EC – Trademarks and Geographical Indications (US)
|
Panel Report, European Communities – Protection of Trademarks and Geographical
Indications for Agricultural Products and Foodstuffs, Complaint by the United
States, WT/DS174/R,
adopted 20 April 2005, DSR 2005:VIII, p. 3499
|
EEC – Parts and Components
|
GATT Panel Report, European
Economic Community – Regulation on Imports of Parts and Components,
L/6657, adopted 16 May 1990, BISD 37S, page 132
|
India – Solar Cells
|
Panel
Report, India – Certain Measures Relating to Solar Cells
and Solar Modules, WT/DS456/R and
Add.1, circulated to WTO Members 24 February 2016
|
Japan – Alcoholic Beverages II
|
Appellate
Body Report, Japan – Taxes on Alcoholic Beverages,
WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996, DSR 1996:I, p. 97
|
Korea – Various Measures on Beef
|
Appellate
Body Report, Korea – Measures Affecting Imports of Fresh,
Chilled and Frozen Beef, WT/DS161/AB/R, WT/DS169/AB/R, adopted 10 January 2001, DSR 2001:I,
p. 5
|
Korea – Various Measures on Beef
|
Panel Report, Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef,
WT/DS161/R, WT/DS169/R, adopted 10 January 2001, as modified
by Appellate Body Report WT/DS161/AB/R, WT/DS169/AB/R, DSR 2001:I, p. 59
|
Mexico
– Taxes on Soft Drinks
|
Appellate Body Report, Mexico – Tax Measures on
Soft Drinks and Other Beverages, WT/DS308/AB/R, adopted 24 March 2006, DSR 2006:I, p.
3
|
Mexico
– Taxes on Soft Drinks
|
Panel Report, Mexico – Tax Measures on
Soft Drinks and Other Beverages, WT/DS308/R, adopted 24 March 2006, as modified by
Appellate Body Report WT/DS308/AB/R, DSR 2006:I, p. 43
|
Philippines – Distilled Spirits
|
Appellate
Body Reports, Philippines – Taxes on
Distilled Spirits, WT/DS396/AB/R / WT/DS403/AB/R, adopted 20 January 2012, DSR
2012:VIII, p. 4163
|
US – Carbon Steel (India)
|
Appellate Body Report, United States – Countervailing Measures on Certain Hot-Rolled Carbon
Steel Flat Products from India, WT/DS436/AB/R, adopted 19 December 2014, DSR 2014:V, p. 1727
|
US – Continued Zeroing
|
Appellate
Body Report, United States – Continued Existence and
Application of Zeroing Methodology, WT/DS350/AB/R, adopted 19 February 2009, DSR
2009:III, p. 1291
|
US –
Corrosion-Resistant Steel Sunset Review
|
Appellate Body Report, United States – Sunset
Review of Anti-Dumping Duties on Corrosion-Resistant Carbon Steel Flat
Products from Japan, WT/DS244/AB/R, adopted 9 January 2004, DSR 2004:I,
p. 3
|
US –
Countervailing and Anti-Dumping Measures (China)
|
Panel Report, United States –
Countervailing and Anti-Dumping Measures on Certain Products from China,
WT/DS449/R and Add.1, adopted 22 July 2014, as modified by
Appellate Body Report WT/DS449/AB/R, DSR 2014:VIII, p. 3175
|
US – Gambling
|
Appellate
Body Report, United States – Measures Affecting the
Cross-Border Supply of Gambling and Betting Services, WT/DS285/AB/R, adopted 20 April 2005, DSR 2005:XII,
p. 5663 (and Corr.1, DSR 2006:XII, p. 5475)
|
US –
Gasoline
|
Appellate Body Report, United States –
Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, p. 3
|
US – Hot-Rolled Steel
|
Appellate
Body Report, United States – Anti-Dumping Measures on
Certain Hot-Rolled Steel Products from Japan, WT/DS184/AB/R, adopted 23 August 2001, DSR 2001:X,
p. 4697
|
US – Large Civil Aircraft (2nd complaint)
|
Appellate Body Report, United States – Measures Affecting Trade in Large Civil Aircraft
(Second Complaint), WT/DS353/AB/R, adopted 23 March 2012, DSR
2012:I, p. 7
|
US – Shrimp
|
Appellate
Body Report, United States – Import Prohibition of
Certain Shrimp and Shrimp Products, WT/DS58/AB/R, adopted 6 November 1998, DSR
1998:VII, p. 2755
|
US – Softwood Lumber IV
|
Appellate Body Report, United States – Final Countervailing Duty Determination with Respect
to Certain Softwood Lumber from Canada, WT/DS257/AB/R, adopted 17 February 2004, DSR
2004:II, p. 571
|
US – Stainless Steel (Mexico)
|
Appellate Body Report, United States – Final Anti-Dumping Measures on Stainless Steel from
Mexico, WT/DS344/AB/R, adopted 20 May 2008, DSR 2008:II, p.
513
|
US –
Steel Safeguards
|
Appellate Body Report, United States –
Definitive Safeguard Measures on Imports of Certain Steel Products,
WT/DS248/AB/R, WT/DS249/AB/R, WT/DS251/AB/R, WT/DS252/AB/R, WT/DS253/AB/R, WT/DS254/AB/R, WT/DS258/AB/R, WT/DS259/AB/R, adopted 10 December 2003, DSR 2003:VII, p. 3117
|
US – Tyres (China)
|
Appellate
Body Report, United States – Measures Affecting Imports
of Certain Passenger Vehicle and Light Truck Tyres from China, WT/DS399/AB/R, adopted 5
October 2011,
DSR 2011:IX, p. 4811
|
World Trade Organization
Appellate Body
India – Certain Measures Relating to Solar Cells and Solar Modules
India, Appellant
United States, Appellee
Brazil, Third Participant
Canada, Third Participant
China, Third Participant
Ecuador, Third Participant
European Union, Third Participant
Japan, Third Participant
Korea, Third Participant
Malaysia, Third Participant
Norway, Third Participant
Russia, Third Participant
Saudi Arabia, Third Participant
Separate Customs Territory of Taiwan, Penghu, Kinmen and
Matsu, Third Participant
Turkey,
Third Participant
|
AB-2016-3
Appellate
Body Division:
Van
den Bossche, Presiding Member
Chang,
Member
Graham,
Member
|
1.1. India appeals certain issues of law and legal interpretations
developed in the Panel Report, India – Certain Measures
Relating to Solar Cells and Solar Modules[1] (Panel Report). The Panel was established on 23 May 2014 to consider
a complaint by the United States[2] against certain domestic
content requirements (DCR measures) imposed by India on solar power developers
(SPDs) selling electricity to governmental agencies under its Jawaharlal Nehru
National Solar Mission (NSM).[3] The DCR measures at
issue require that certain types of solar cells and modules used by SPDs be
made in India.[4]
1.2. The NSM was launched by the Central Government of India in 2010, and
aims to generate 100,000 megawatts of grid-connected solar power capacity by
2022.[5] The stated objective of
the NSM is "to establish India as a global leader in solar energy, by
creating the policy conditions for its diffusion across the country as quickly
as possible."[6] The NSM is being
implemented in several successive "Phases", with each phase thus far initiated
being further divided into "Batches".
1.3. The DCR measures in Phase I (Batch 1), Phase I (Batch 2), and Phase
II (Batch 1-A) are each set forth, reproduced, or otherwise reflected in a
series of different documents, including the so-called "Guidelines" and "Request for
Selection" documents[7], the model power purchase
agreement (PPA), and the individually executed PPAs between the relevant Indian
governmental agencies[8] and the SPDs.[9] Each individually executed
PPA sets out a guaranteed rate for a 25-year term at which the electricity
generated by the SPD will be bought by the Central Government. The government
resells the electricity that it purchases to downstream distribution companies,
which in turn resell it to the ultimate consumer.[10]
1.4. The Panel, having reviewed all of the evidence provided relating to
each Batch, carried out its analysis on the understanding that, for each Batch,
the measure at issue is the DCR measure reflected or incorporated in the
various documents for each Batch, read together in a "holistic"
manner.[11] The Panel therefore did
not treat the separate documents in each Batch as distinct measures.[12]
1.5. A mandatory DCR was imposed on SPDs participating in Phase I (Batches
1 and 2) and Phase II (Batch 1-A) of the NSM. The scope and coverage of
the DCR differed, however, across the different Batches.[13] Under Phase I (Batch 1),
it was mandatory for all projects based on crystalline silicon (c-Si)
technology to use c-Si modules manufactured in India, while the use of foreign
c-Si cells and foreign thin-film modules or concentrator photovoltaic (PV)
cells was permitted.[14] Under Phase I (Batch 2),
it was mandatory for all projects based on c‑Si technology to use c-Si
cells and modules manufactured in India, while the use of domestic or foreign
modules made from thin-film technologies or concentrator PV cells was
permitted.[15] Under Phase II (Batch
1-A), any solar cells and modules used by the SPDs had to be made in India,
irrespective of the type of technology used.[16]
1.6. The United States claimed before the Panel that the DCR measures
imposed by India are inconsistent with Article III:4 of the General Agreement
on Tariffs and Trade 1994 (GATT 1994) and Article 2.1 of the Agreement on
Trade-Related Investment Measures (TRIMs Agreement). The United States further
requested the Panel to recommend that India bring its measures into conformity
with its WTO obligations pursuant to Article 19.1 Understanding on Rules and
Procedures Governing the Settlement of Disputes (DSU).[17]
1.7. India requested the Panel to find that the DCR measures at issue are
not inconsistent with Article III:4 of the GATT 1994 or Article 2.1 of the
TRIMs Agreement. India further requested the Panel to find that the derogation
under Article III:8(a) of the GATT 1994 is applicable to the measures
at issue in this dispute. In the event that the Panel were to find that the
measures at issue are inconsistent with any of the obligations under
Article III:4 of the GATT 1994 or Article 2.1 of the TRIMs Agreement,
India requested that the Panel determine that any such inconsistency would be
justified under Article XX(j) and/or Article XX(d) of GATT 1994.[18]
1.8. In the Panel Report, circulated to Members of the World Trade
Organization (WTO) on 24 February 2016, the Panel found that:
a. the DCR measures are inconsistent with Article 2.1 of the TRIMs
Agreement and Article III:4 of the GATT 1994[19];
b.
the DCR measures
are not covered by the derogation in Article III:8(a) of the
GATT 1994[20]; and
c.
the DCR measures
are not justified under the general exceptions in Article XX(j) or Article
XX(d) of the GATT 1994.[21]
1.9. On 20 April 2016, India notified the Dispute Settlement Body (DSB),
pursuant to Articles 16.4 and 17 of the DSU, of its intention to appeal
certain issues of law covered in the Panel Report and certain legal interpretations
developed by the Panel and filed a Notice of Appeal[22] and an appellant's
submission pursuant to Rule 20 and Rule 21, respectively, of the Working
Procedures for Appellate Review[23] (Working Procedures).
1.10. On 2 May 2016, the United States sent a letter to the Appellate Body
Division hearing this appeal requesting an extension of the deadline for the
filing of its appellee's submission in this appeal by one day. The
United States noted that its appellee's submission in another pending
appellate proceeding, namely, United States –
Anti-Dumping and Countervailing Measures on Large Residential Washers from
Korea (DS464), was also due on 9 May 2016, i.e. the same day as
the deadline for filing its appellee's submission in the present appeal.
Referring to the size of the appeals in these two disputes, the United States
indicated that its submissions may be significant in scope. The United States
also pointed to the large number of print copies of its appellee's submissions
to be prepared for the Divisions and to be served on the participants and third
participants in these two appeals. The United States therefore requested
that the deadline for the filing of the appellee's submission in this appeal be
extended by one day, such that it would be due on 10 May 2016.
1.11. On 3 May 2016, the Appellate Body Division hearing this appeal
invited India and the third parties to comment on the United States'
request. No objections to the United States' request were received by the
Division. Norway submitted, that if the United States' request were granted,
the deadline for the filing of the third participants' submissions should
similarly be extended to ensure that the third participants could contribute in
an informed and efficient manner in the appellate proceedings.
1.12. On 4 May 2016, the Division issued a Procedural Ruling, extending
the deadline for the United States to file its appellee's submission by one day
to 10 May 2016.[24] The Division considered
the reasons identified by the United States, in particular the need for the
United States to file appellee's submissions in two separate appeal
proceedings on the same day, to be relevant factors in its assessment of
"exceptional circumstances, where strict adherence to a time-period …
would result in a manifest unfairness" pursuant to Rule 16(2) of the
Working Procedures. The Division also noted that neither India, nor the
third parties, had raised any objections to the United States' request.
Moreover, in order to provide the third participants sufficient time to
incorporate reactions to the appellee's submission into their third
participants' submissions, the Division decided, pursuant to Rule 16(2) of
the Working Procedures, to extend the deadline for the filing of the third
participants' submissions and third participants' notifications to 12 May 2016.
1.13. On 10 May 2016, the United States filed an appellee's submission.[25] On 12 May 2016,
Brazil, the European Union, and Japan each filed a third participant's
submission.[26] On the same day, Canada,
China, Malaysia, Norway, Russia, and Saudi Arabia notified their intention
to appear at the oral hearing as a third participant.[27] Subsequently, the Separate
Customs Territory of Taiwan, Penghu, Kinmen and Matsu; Ecuador; Korea; and Turkey
each notified its intention to appear at the oral hearing as a third
participant.[28]
1.14. By letter of 17 June 2016, the Chair of the Appellate Body notified
the Chair of the DSB that the Appellate Body would not be able to circulate its
Report in this appeal within the 60-day period pursuant to Article 17.5 of
the DSU, or within the 90-day period pursuant to the same provision. The Chair
of the Appellate Body explained that this was due to a number of factors,
including the substantial workload of the Appellate Body in 2016, scheduling
difficulties arising from overlap in the composition of the Divisions hearing
the different appeals, the number and complexity of the issues raised in this
and concurrent appellate proceedings, together with the demands that these
concurrent appeals place on the WTO Secretariat's translation services, and the
shortage of staff in the Appellate Body Secretariat.[29] By letter of 8 July 2016,
the Chair of the Appellate Body informed the Chair of the DSB that the
Appellate Body Report in these proceedings would be circulated no later than 16
September 2016.[30]
1.15. The oral hearing in this appeal was held on 4-5 July 2016. The
participants and three of the third participants (the European Union, Japan,
and Norway) made opening and/or closing oral statements. The participants and
third participants responded to questions posed by the Members of the
Appellate Body Division hearing the appeal.
2.1. The claims and arguments of the participants are reflected in the
executive summaries of their written submissions provided to the Appellate
Body.[31] The Notice of Appeal and
the executive summaries of the participants' written submissions are contained,
respectively, in Annexes A and B of the Addendum to this Report.[32]
3.1. The arguments of Brazil, the European Union, and Japan, as third
participants, are reflected in the executive summaries of their written
submissions provided to the Appellate Body[33],
and are contained in Annex C of the Addendum to this Report.[34]
4.1. The following issues are raised in this appeal:
a.
with respect to
Article III:8(a) of the GATT 1994:
i.
whether the Panel
acted inconsistently with Article 11 of the DSU in finding that the DCR
measures at issue in this dispute are not covered by the derogation under
Article III:8(a), and that consequently India could not rely on that
provision to exclude the application of Article III:4 of the GATT 1994 and
Article 2.1 of the TRIMs Agreement to the DCR measures; and
ii.
if the Appellate
Body reverses the Panel's finding that the DCR measures are not covered by the
derogation under Article III:8(a) of the GATT 1994, then whether the
Appellate Body can complete the legal analysis and find that they satisfy the
remaining legal elements under that provision;
b.
with respect to
Article XX(j) of the GATT 1994:
i.
whether the Panel
erred in its interpretation and application of Article XX(j), and under
Article 11 of the DSU, in finding that solar cells and modules are not
"products in general or local short supply" in India, and that
consequently the DCR measures are not justified under Article XX(j); and
ii.
if the Appellate
Body reverses the Panel's finding that solar cells and modules are not
"products in general or local short supply" in India within the
meaning of Article XX(j), then whether the Appellate Body can complete the
legal analysis and find that the DCR measures meet the requirements for
provisional justification under Article XX(j) and satisfy the requirements of
the chapeau of Article XX of the GATT 1994; and
c.
with respect to
Article XX(d) of the GATT 1994:
i.
whether the Panel
erred in its interpretation and application of Article XX(d) in finding
that the DCR measures are not measures "to secure compliance with laws or
regulations which are not inconsistent with the provisions of [the GATT
1994]" within the meaning of Article XX(d); and that consequently the
DCR measures are not justified under that provision; and
ii.
if the Appellate
Body reverses the Panel's finding that the DCR measures are not measures
"to secure compliance with laws or regulations which are not inconsistent
with the provisions of [the GATT 1994]" within the meaning of Article
XX(d), then whether the Appellate Body can complete the legal analysis and find
that the DCR measures meet the requirements for provisional justification
under Article XX(d) and satisfy the requirements of the chapeau of
Article XX of the GATT 1994.
5.1. India appeals the Panel's finding
that the DCR measures are not covered by the government procurement derogation
under Article III:8(a) of the GATT 1994 because India's government
purchases electricity, and the discrimination under the DCR measures relates to
solar cells and modules.[35]
India argues that the Panel acted inconsistently with its obligations under
Article 11 of the DSU by failing to make an objective assessment of the matter
before it, including of India's arguments and related evidence that: (i) solar
cells and modules are indistinguishable from solar power generation; (ii) solar
cells and modules can be characterized as inputs for solar power generation;
and (iii) Article III:8(a) cannot be applied in a narrow manner that would
require direct acquisition of the product purchased in all cases.[36]
India requests us to reverse the Panel's finding and find that the DCR measures
are covered by the derogation under Article III:8(a).[37]
5.2. In the event that we find that the
DCR measures are covered by the government procurement derogation under
Article III:8(a), India further requests that we complete the legal
analysis of the remaining elements under this provision.[38]
In particular, India requests that we reaffirm the Panel's findings that the
DCR measures are laws, regulations or requirements "governing"
procurement and that the procurement under the DCR measures is "by
governmental agencies", and that we find that the procurement under the
DCR measures is of products purchased "for governmental purposes" and
"not with a view to commercial resale".[39]
5.3. We begin by summarizing
the Panel's findings and the issues appealed. We then address the
interpretation of Article III:8(a) of the GATT 1994, before turning to consider
the Panel's analysis as challenged by India on appeal.
5.4. The Panel began by reviewing the
requirements set out in the text of Article III:8(a) of the GATT 1994
in order for a measure to be exempted from the national treatment obligations
of Article III:4 of the GATT 1994 and Article 2.1 of the TRIMs
Agreement.[40]
The Panel observed that, in addition to those factors, there is a
"threshold matter" of the applicability of Article III:8(a) in
respect of the "products purchased" under the DCR measures.[41]
For the Panel, this was the "dispositive" factor of the Appellate
Body's analysis in Canada ‒ Renewable Energy / Canada – Feed-in
Tariff Program,
and the pertinence, or distinguishability, of the Appellate Body's findings and
reasoning in those cases was a primary issue of contention between the parties during
the Panel proceedings in the present dispute.[42]
The Panel noted, in this regard, that the Appellate Body framed the
applicability of Article III:8(a) "according to whether the
particular products subject to discrimination are in a 'competitive
relationship' with the products purchased under the measures in question".[43]
Recalling that the products subject to discrimination in the present dispute
are solar cells and modules originating in the United States and that
India purchases the electricity generated from solar cells and modules, rather
than the solar cells and modules themselves, the Panel observed that
"an approach paralleling that of the Appellate Body in Canada ‒ Renewable Energy / [Canada – ] Feed-in Tariff
Program would entail a comparison of solar cells and modules with
the generated electricity that is purchased in order to ascertain whether these
products are in a 'competitive relationship'."[44]
5.5. The Panel further noted that India
had not argued that electricity, on the one hand, and solar cells and modules, on
the other hand, are in a competitive relationship, and had not requested that
the Panel depart from the reasoning of the Appellate Body in Canada – Renewable Energy /
Canada – Feed-in Tariff Program. Rather, India sought to
distinguish the DCR measures from the measures at issue in those cases by
submitting that the Central Government was "effectively procuring"
solar cells and modules by purchasing electricity generated from such cells and
modules.[45]
5.6. Regarding India's contention that
Article III:8(a) of the GATT 1994 does not require in every case a
"competitive relationship" between the product that is procured and
the product that is discriminated against, the Panel observed that the
Appellate Body in Canada –
Renewable Energy / Canada – Feed-in Tariff Program referred
to "consideration of inputs and processes of production" as being
potentially relevant to "[w]hat constitutes a
competitive relationship between products".[46]
For the Panel, this reference to "inputs and processes of production"
seemed to elaborate, rather than displace, what the Appellate Body had referred
to as the "competitive relationship" standard, leaving open the
possibility that a consideration of inputs and processes of production would
inform an assessment of whether the products subject to discrimination are
"like" and/or "directly competitive to or substitutable with the
product purchased under the challenged measure".[47]
The Panel did not understand India to disagree with this proposition.[48]
Instead, it understood India to argue that, "when
the Appellate Body … referred to (and expressly declined to decide) whether
'the cover of Article III:8(a) may also extend to discrimination relating to
inputs and processes of production used in respect of products purchased by way
of government procurement', it was no longer referring to the question of '[w]hat constitutes a competitive
relationship between products', but was rather introducing the possibility of
an alternative to the 'competitive relationship' standard in a situation
involving discrimination against 'inputs and processes of production'."[49]
The Panel, however, did not find it necessary "to resolve whether the
Appellate Body left room for an alternative to the 'competitive
relationship' standard", considering that, "[i]n applying
Article III:8(a) to closely analogous facts that involved the purchase of
electricity and discrimination against generation equipment, the
Appellate Body stated that the derogation 'extends' to products in a
'competitive relationship' and disposed of the case on the grounds that
'electricity' and 'generation equipment' are not in such a relationship."[50]
5.7. Concerning the issue of whether
solar cells and modules can be characterized as "inputs" in relation
to electricity, the Panel recalled the United States' argument that India
"relies on a factual assumption that solar panels and modules are an input
to the generation of solar power, but they are actually capital equipment that
is not consumed or incorporated in the power generated".[51]
The Panel further noted the United States' position that an "input"
should be "incorporated into or otherwise physically detectable" in a
finished product, and India's position that it could "refer to any
resources or materials that are required to obtain a desired output".[52]
The Panel considered that the parties' disagreement turned on issues that the
Appellate Body did not consider necessary to resolve in Canada – Renewable Energy / Canada – Feed-in
Tariff Program, and found that it was similarly unnecessary
to resolve these issues in the present dispute.[53]
5.8. The Panel noted that India's
arguments also hinge upon whether "solar cells and modules are integral inputs for the generation system", as
contrasted with "all other components of a PV generation plant [that] can
be classified as ancillary equipment".[54]
The Panel stated that the "generation equipment" at issue in Canada – Renewable Energy /
Canada – Feed-in Tariff Program included the "exact
same" products, i.e. solar cells and modules, which were used to generate electricity
purchased by the government.[55]
The Panel found it noteworthy that the Appellate Body had given "no
indication of these, or any other type of equipment, being an 'input' that
would be relevant to the analysis under Article III:8(a) of the
GATT 1994, nor did it make any distinction between inputs of an 'integral'
or 'ancillary' nature."[56]
Furthermore, the measures in those cases effectively imposed a requirement to
use domestically sourced "goods" or "generation equipment and
components" in order to achieve the necessary level of domestic content.[57]
5.9. On this basis, the Panel concluded
that "Canada – Renewable Energy / [Canada – ] Feed-in
Tariff Program entailed discrimination against the same 'generation
equipment' that is at issue in the present dispute, namely solar cells and
modules".[58]
Referring to the panel and Appellate Body reports in those disputes, the Panel was
not persuaded that India's arguments in the present case rose to "anything
more than the 'close relationship' between generation equipment and electricity
that the Appellate Body rejected as the relevant standard under Article
III:8(a)" in those proceedings.[59]
The Panel added that, "[t]o whatever extent Article III:8(a) applies
to 'inputs' (however that term is defined) that are not in a competitive
relationship with the product purchased by way of procurement, … the
Appellate Body did not find such considerations germane to its evaluation
of electricity and generation equipment that included solar cells and
modules."[60]
5.10. The Panel also addressed India's
concern that, to read "procurement" in Article III:8(a) as
requiring "direct acquisition of the product", would be an
unnecessary intrusion into the nature and exercise of governmental actions
relating to procurement of solar power.[61]
The Panel reasoned that it is by no means self-evident that the scenarios
referred to by India[62]
involving the "direct acquisition" of solar cells and modules by
governmental agencies would meet the other requirements of
Article III:8(a), notably the requirements for products to be purchased
"for governmental purposes and not with a view to commercial resale or
with a view to use in the production of goods for commercial sale".[63]
5.11. Having "considered the
specific basis" upon which India sought to distinguish the facts and
circumstances of the present dispute, the Panel was not persuaded that the DCR
measures are "distinguishable in any relevant respect" from the
measures examined by the Appellate Body in Canada – Renewable Energy / Canada – Feed-in
Tariff Program.[64]
Referring to the "Appellate Body's legal interpretation of
Article III:8(a) as applied to the governmental purchase of electricity
and discrimination against foreign generation equipment", the Panel thus
found that "the discrimination relating to solar cells and modules under
the DCR measures is not covered by the derogation of Article III:8(a)."[65]
5.12. India appeals the Panel's conclusion that the DCR measures at issue are not
covered by the derogation under Article III:8(a) of the GATT 1994. Central
to India's appeal is its contention that the Panel acted inconsistently
with its duties under Article 11 of the DSU because it "mechanically
applied the Appellate Body's test of competitive relationship"
developed in Canada –
Renewable Energy / Canada – Feed-in Tariff Program[66]
and "refused to consider the facts, evidence and legal arguments advanced
by India"[67]
in this case.[68]
5.13. India presents
several arguments in support of its contention. India
maintains that the Panel "ignored a fundamental basis of India's
argument" that solar cells and modules are "indistinguishable"
from solar power generation.[69]
India also submits that the Panel erred "in its factual and legal
assessment that it is not necessary to consider whether solar cells and modules
qualify as 'inputs' for solar power generation" and "in its
application of the relevant tests for consideration regarding whether or not
solar cells and modules can be characterized as inputs".[70]
Furthermore, India alleges that the Panel erred in dismissing its arguments
that sole reliance on the "competitive relationship" test would
unduly restrict the scope of Article III:8(a), and that
Article III:8(a) should not be interpreted to envisage direct acquisition
of products purchased, in all cases.[71]
Finally, India contends that the Panel erred in "reasoning that it cannot
go beyond the tests applied by the Appellate Body in Canada – Renewable Energy / Canada – Feed-in Tariff
Program since India had not asked it to deviate from this
reasoning"[72],
and thus failed to ensure "a meaningful interpretation of Article III:8(a)".[73]
5.14. For its part, the United States
considers that India's arguments under Article 11 of the DSU "are without
merit, because … the Panel thoroughly engaged [with] all of the evidence and
arguments advanced by India", even though it did not accord "such
evidence the weight India thought it should have".[74]
The United States further submits that the Panel's interpretation of
Article III:8(a) is consistent with its text and accords with the legal
standard articulated by the Appellate Body in Canada – Renewable Energy / Canada – Feed-in
Tariff Program, and that the Panel properly understood that
provision as "exempting from Article III only procurements of products
directly competitive with the import subject to discrimination".[75]
In the United States' view, "[h]aving rejected the proposition that India
could be understood to 'procure' solar cells and modules without actually
purchasing, acquiring, or otherwise taking custody of any solar cells and
modules, it was unnecessary for the Panel to consider or resolve the
theoretical question of whether solar cells and modules can be distinguished
from solar power generation."[76]
5.15. We recall that Article 11 of the
DSU imposes upon panels a comprehensive obligation to make an "objective
assessment of the matter", which embraces all aspects of a panel's
examination of the "matter", both factual and legal.[77]
Thus, panels are required to make an objective assessment of "the
facts", the "applicability" of the covered agreements, and the
"conformity" of the measure at issue with the covered agreements.[78]
With respect to "the applicability of and conformity with the relevant
covered agreements", a panel is required to conduct an objective
assessment of whether the obligations in the covered agreements, with which an
inconsistency is claimed, are relevant and applicable to the case at hand, and
whether the measures at issue conform to, or are inconsistent with, the
specific obligations provided for in those agreements.[79]
That said, a panel has the discretion "to address only those arguments it
deems necessary to resolve a particular claim", and "the fact that a
particular argument relating to that claim is not specifically addressed in the
'Findings' section of a panel report will not, in and of itself, lead to the
conclusion that that panel has failed to make the 'objective assessment of the
matter before it' required by Article 11 of the DSU."[80]
Finally, a challenge to a panel's assessment of the facts cannot be sustained
simply by asserting that a panel did not agree with arguments or evidence that
had been presented before it, but must be clearly articulated and substantiated
with specific arguments, including an explanation of why the alleged error has
a bearing on the objectivity of the panel's factual assessment.[81]
5.16. As noted, the Panel did not
consider it necessary in the present dispute "to resolve whether the
Appellate Body left room for an alternative to the 'competitive relationship'
standard, or to decide, in the abstract, the meaning of 'inputs and processes
of production' as used by the Appellate Body in Canada –
Renewable Energy / [Canada – ] Feed-In Tariff Program."[82]
This was because the Panel concluded that the DCR measures at issue in this
dispute are not "distinguishable in any relevant respect from those
examined by the Appellate Body" in those earlier disputes.[83]
Under Article 11 of the DSU, the Panel was required, in making an objective
assessment of the matter before it, to consider all factual and legal arguments
of the parties that were pertinent for ruling on whether the DCR measures are
covered by the derogation under Article III:8(a). As a first step in
addressing India's challenge to the Panel's analysis, we will examine the scope
of application of Article III:8(a) of the GATT 1994.
5.17. Article III:8(a) of the
GATT 1994 provides:
The provisions of this
Article shall not apply to laws, regulations or requirements governing the procurement by governmental agencies of
products purchased for governmental purposes and not with a view to commercial
resale or with a view to use in the production of goods for commercial sale.
5.18. We recall that
Article III:8(a) sets out a derogation from the national treatment
obligation contained in Article III of the GATT 1994, exempting from
that obligation certain measures that contain rules regarding the process by
which governmental agencies purchase products. The measures within the scope of
Article III:8(a) are "laws, regulations or requirements governing … procurement",
and the entity purchasing products needs to be a
"governmental agency". Furthermore, the scope of
Article III:8(a) is limited to "products purchased for governmental
purposes", and "not with a view to commercial resale or with a view
to use in the production of goods for commercial sale".[84]
5.19. As noted, a primary issue of
contention between the parties in the Panel proceedings was the pertinence of
the reasoning and findings of the Appellate Body in Canada – Renewable Energy / Canada – Feed-in Tariff
Program regarding the scope of Article III:8(a) of the
GATT 1994 with respect to "products purchased". For India, the
test of competitive relationship between the product discriminated against and
the product purchased "is not a single inflexible rule to be applied in all
circumstances for consideration under Article III".[85] India recalls, in this regard, that the Appellate Body explicitly
noted that "[w]hether the derogation in Article III:8(a) can extend
also to discrimination [relating to inputs and processes of production used in
respect of products purchased by way of procurement] is a matter we do not
decide in this case."[86] According to India, this "left space for legal reasoning on the
issue of inputs".[87]
5.20. For its part, the United States
underscores that the Appellate Body has found that "Article III:8(a)
does not apply when a Member purchases one product, but discriminates against
another, different product" and, as read in conjunction with the other
paragraphs of Article III, requires that the product "subject to discrimination"
and the "product that is purchased" by the government must be:
"(1) identical products; (2) 'like' products; or (3) products that are
directly competitive or substitutable", or, in other words, "products
that are in a competitive relationship".[88] The United States argues that the Panel was properly guided in the
present case by the Appellate Body's interpretation of Article III:8(a) in
Canada – Renewable Energy /
Canada – Feed-in Tariff Program, given that both those and the present dispute
involve measures under which the government purchases electricity, but
discriminates against foreign generation equipment.[89]
5.21. As observed by the
Appellate Body in Canada –
Renewable Energy / Canada – Feed-in Tariff Program, Article III:8(a) begins with the phrase "[t]he provisions
of this Article shall not apply to …". This introductory clause
of Article III:8(a) establishes "a linkage with
the remainder of Article III", and the words "[t]he provisions
of this Article" encompass the overarching principle in Article III:1
that internal measures "should not be applied … so as to afford protection
to domestic production".[90] For government procurement activities falling within its scope,
Article III:8(a) establishes a derogation from the national treatment
obligation under Article III.[91] That is why, as the Appellate Body stated, the derogation in
Article III:8(a) "becomes relevant only
if there is discriminatory treatment of foreign products that are covered by
the obligations in Article III".[92] In this regard, the Appellate Body stated:
Because
Article III:8(a) is a derogation from the obligations contained in other
paragraphs of Article III, … the same discriminatory treatment must be
considered both with respect to the obligations of Article III and with
respect to the derogation of Article III:8(a). Accordingly, the scope of
the terms "products purchased" in Article III:8(a) is informed
by the scope of "products" referred to in the obligations set out in
other paragraphs of Article III. Article III:8(a) thus concerns, in
the first instance, the product that is subject to the discrimination.[93]
5.22. The coverage of
Article III:8(a) thus extends to products purchased that are
"like" the products discriminated against under Article III:2 and
III:4, or, in accordance with the Ad Note to
Article III:2, to products that are "directly competitive" with
or "substitutable" for such products. It is these products that the
Appellate Body described as "products that are in a competitive
relationship"[94], using the term "competitive relationship" as a shorthand for
delineating the scope of "like", or "directly competitive or
substitutable"[95]. In other words, since "the derogation of Article III:8(a)
must be understood in relation to the obligations stipulated in
Article III", the product of foreign origin must be either
"like", or "directly competitive" with or "substitutable"
for – i.e. in a "competitive relationship" with – "the product
purchased".[96] We do not consider that the scope of a derogation can extend beyond the
scope of the obligation from which derogation is sought.
5.23. India submits that the Panel erred
in equating India's argument that solar cells and modules constitute
"inputs" for solar power generation with the "close
relationship" standard that was used by the panel in Canada – Renewable Energy / Canada – Feed-in
Tariff Program.[97] In those disputes, the panel found that "the very same equipment"
was "needed and used to produce the electricity that [was] allegedly
procured" and that there was "very clearly a close
relationship between ... renewable energy generation equipment"
and the product purchased (electricity).[98] While the Appellate Body agreed that a "close relationship"
could be relevant for a separate element of Article III:8(a) – i.e.
assessing whether a measure can be said to be "governing" procurement
of products purchased – it did not consider this dispositive of whether
Article III:8(a) applied, because the products purchased were not in a
"competitive relationship" with the products being discriminated
against.[99]
5.24. On appeal in this dispute, India
argues that the Appellate Body in Canada – Renewable Energy / Canada – Feed-in Tariff Program
suggested that the scope of Article III:8(a) may extend, in some cases, to
"inputs" and "processes of production", regardless of
whether the product subject to discrimination is in a competitive relationship
with the product purchased. We disagree with India's reading of the Appellate
Body report in Canada ‒ Renewable Energy / [Canada
– ] Feed-in Tariff Program.[100] The Appellate Body explicitly
stated that it was not deciding whether "the cover of Article III:8(a) may
also extend to discrimination relating to inputs and processes of production
used in respect of products purchased by way of procurement."[101] This question arises only after
the product subject to discrimination has been found to be like, directly
competitive with, or substitutable for – in other words, in a competitive
relationship with – the product purchased. In respect of the latter issue,
although a consideration of inputs and processes of production may inform the question of whether the product purchased is in a
competitive relationship with the product being discriminated against, it does
not displace the competitive relationship standard.
Under Article III:8(a) of the GATT 1994, the foreign product discriminated
against must necessarily be in a competitive relationship with the product
purchased by way of procurement.
5.25. India's appeal under
Article III:8(a) of the GATT 1994 hinges largely on its reading of
that provision, and in particular on what India sees as the limited scope of
the competitive relationship standard, as developed by the Appellate Body in Canada – Renewable Energy /
Canada – Feed-in Tariff Program. We have rejected India's
reading of Article III:8(a) above and have found that a competitive
relationship between the product discriminated against and the product purchased
must be established in all cases. We further recall that India did not argue
before the Panel that a competitive relationship exists between electricity, on
the one hand, and solar cells and modules, on the other hand, or that the government
takes title or custody of solar cells and modules.[102]
This is sufficient to address India's appeal to the extent that its arguments
rely on the existence of an alternative to the competitive relationship standard.
However, in order to dispose fully of the issues raised by India on appeal, we
proceed to examine India's arguments to the extent that they relate to the
approach taken by the Panel in its review of India's claims under Article III:8(a).
5.26. We recall that the Panel did not
consider it necessary in the present dispute to resolve whether the
Appellate Body in Canada –
Renewable Energy / Canada – Feed-in Tariff Program had left
room for an alternative to the "competitive relationship" standard,
since, in applying Article III:8(a) to "closely analogous"
facts, the Appellate Body had disposed of the relevant issue in those
disputes on the ground that "electricity" and "generation
equipment" are not in a competitive relationship.[103]
The Panel also found it unnecessary to decide the issue of whether solar cells
and modules can be characterized as "inputs" for electricity. The
Panel noted, in this regard, that the considerations advanced by India did not
rise "to anything more than the 'close relationship' between generation
equipment and electricity that the Appellate Body rejected as the relevant
standard under Article III:8(a)" in those disputes.[104]
Ultimately, the Panel found:
To whatever extent Article III:8(a) applies to "inputs"
(however that term is defined) that are not in a competitive relationship with
the product purchased by way of procurement, it is evident that the Appellate
Body did not find such considerations germane to its evaluation of electricity
and generation equipment that included solar cells and modules. We therefore
reject India's argument under Article III:8(a) that solar cells and modules "cannot
be treated as distinct from solar power" and that, "by purchasing
electricity generated from such cells and modules, [India] is effectively
procuring the cells and modules".[105]
5.27. The Panel focused its analysis on
the issue of "how the Appellate Body's findings and reasoning under
Article III:8(a) should apply to the DCR measures at issue in this
dispute"[106],
instead of "whether the Appellate Body left room for an alternative to the
'competitive relationship' standard".[107]
The Panel's approach appears to have been prompted by the arguments of the
parties that focused on drawing parallels with, or distinctions from, Canada – Renewable Energy /
Canada – Feed-in Tariff Program.[108]
The Panel also found that the facts in the present case were not
"distinguishable in any relevant respect" from those before the
Appellate Body in Canada –
Renewable Energy / Canada – Feed-in Tariff Program.[109]
5.28. India submits that the Panel failed
to consider "the fundamental characteristics of solar cells and
modules" and disregarded India's argument that solar cells and modules
"are indistinguishable from solar power generation", and hence failed
to make an objective assessment of the matter before it.[110]
Contrary to what India appears to suggest, the Panel noted India's explanation
that, while the government "does not take title or custody of solar cells
and modules, by purchasing electricity generated
from such cells and modules, it is effectively procuring" them.[111]
The Panel observed that India's argument rests on what India considered
"to be a 'key factual distinction' with Canada –
Renewable Energy / [Canada – ] Feed-in Tariff Program" involving "the nature of the products in
question".[112]
The Panel proceeded to examine the generation equipment at issue in Canada – Renewable Energy /
Canada – Feed-in Tariff Program, and explained why it considered that those
cases "entailed discrimination against the same 'generation equipment'
that is at issue in the present dispute".[113]
In doing so, the Panel explicitly rejected India's argument that "solar
cells and modules 'cannot be treated as distinct from solar power'"[114]
and that, "by purchasing electricity generated from such cells and
modules, [the government] is effectively procuring the cells and modules."[115]
5.29. The Panel also recognized the close
connection between India's arguments that solar cells and modules are
"indistinguishable from", and/or "inputs" for, solar power
generation. In particular, the Panel noted that India had used "various
formulations in its characterization of solar cells and modules, for example
referring to them as 'so fundamental, integral and intrinsic to generation of
electricity, they cannot be treated as distinct or separate from the purchase
of electricity itself'".[116]
While the Panel referred in more detail to India's argument that solar cells
and modules can be characterized as "inputs" for solar power
generation, it seems to us that the Panel sufficiently considered India's
arguments and evidence regarding the fundamental characteristics of these
products and their "indistinguishable" nature from the generation of
solar power.[117]
5.30. In a related line of argumentation,
India contends that the Panel erred by summarily dismissing its argument that
solar cells and modules can be characterized as "inputs" for solar
power generation and, in particular, that they are "integral
inputs for the generation system" as contrasted with
"all other components of a PV generation plant [that] can be
classified as ancillary equipment".[118]
However, the Panel observed that the "generation equipment" at issue
in Canada ‒ Renewable Energy / [Canada – ] Feed-in
Tariff Program included the exact same products, i.e. solar cells
and modules, which were used to generate electricity purchased by the
government.[119]
The Panel further recalled that the measures at issue in Canada ‒ Renewable
Energy / [Canada – ] Feed-in Tariff Program, similarly to the
present case, involved a requirement to use
domestically sourced "generation equipment and components" in order
to achieve the necessary level of domestic content[120],
and noted that neither the panel nor the Appellate Body in those disputes had
found any type of equipment "being an 'input' that would be relevant to
the analysis under Article III:8(a)".[121]
5.31. Moreover, the Panel discussed the
parties' arguments over the nature of the "integral" and
"ancillary" inputs, and pointed to the tension between India's
classification of certain equipment as "ancillary" and its
descriptions of solar power generation.[122]
The Panel further explained that it was not "persuaded that the inclusion
of other equipment and services under the measure in [Canada – Renewable Energy / Canada – Feed-in Tariff
Program] was of any relevance to the Appellate Body's
implicit finding that the solar cells and modules subject to the measure did
not constitute 'inputs and processes of production' for the purposes of
Article III:8(a)."[123]
We therefore consider that the Panel sufficiently considered this aspect of
India's argumentation.
5.32. India also maintains that the Panel
"selectively cited" the parties' arguments, and simply dismissed
India's arguments on the basis that the Appellate Body did not draw a
distinction between the particular categories of equipment or goods specified
under the measure at issue in Canada – Renewable Energy / Canada – Feed-in Tariff Program.[124]
Contrary to what India suggests, the Panel recognized the parties' disagreement
regarding the concept of "inputs", but found that this disagreement
"turns on issues that the Appellate Body considered it unnecessary to
resolve in Canada –
Renewable Energy / Canada – Feed-in Tariff Program", and which the Panel
similarly considered unnecessary to resolve for the purposes of the present
dispute.[125]
The Panel rightly relied on the interpretation of Article III:8(a)
developed by the Appellate Body in Canada – Renewable Energy / Canada – Feed-in Tariff Program, and therefore properly
rejected India's argument on the relevance of "inputs" for the
analysis of the competitive relationship under Article III:8(a).[126]
5.33. India also contends that the Panel
erred in dismissing India's arguments that an overly restrictive interpretation
of Article III:8(a) would result in imposing "unnecessary fetters" on
governmental actions and that the term "procurement" should not be
read to require "direct acquisition" of the product purchased in all
cases.[127]
India pointed in particular to its concern regarding the consequences of
reading Article III:8(a) in a manner that "would mean that for a
government to effectively procure solar cells and modules under
Article III:8(a)", it would need to purchase these products and
either generate electricity from them itself, or provide them to SPDs for power
generation.[128]
5.34. In rejecting India's argument
regarding "direct acquisition", the Panel did not consider it evident
that the scenarios proffered by India "would necessarily meet all of the
requirements of Article III:8(a)"[129],
notably because, "to fall within the scope of Article III:8(a), products
must be purchased 'for governmental purposes and not with a view to commercial
resale or with a view to use in the production of goods for commercial
sale'."[130]
We understand the Panel to have simply pointed out that, even if
"procurement" were not read to require "direct acquisition of
the product", the competitive relationship standard is only one among
other requirements under Article III:8(a), and therefore India's concerns would
not necessarily be addressed by a broader reading of the scope of that
provision.
5.35. In further support of its argument, India relied on the
Appellate Body's statement in Canada ‒ Renewable
Energy / [Canada – ] Feed-in Tariff Program that, "if
procurement was understood to refer simply to any acquisition, it would not add
any meaning to Article III:8(a) in addition to what is already expressed
by the word 'purchased'".[131]
India argued that the term "procurement" should therefore not be read
to require direct acquisition of the product in all cases.[132]
The Panel rejected India's argument, noting that the conceptual distinction
between "procurement" and "purchase" made by the Appellate Body
was simply an expression of the principle of effective treaty interpretation.[133]
As noted by the Panel, the Appellate Body has explained that "the
concepts of 'procurement' and 'purchase' are not to be equated", and the
term "procurement", in Article III:8(a), "refer[s] to the
process pursuant to which a government acquires products", while the
concept of "purchase" relates to "the type of transaction used
to put into effect that procurement".[134]
Therefore, the fact that "procurement" may refer to "the process of obtaining
products, rather than … to an acquisition itself" does not mean that, in
order to be covered under Article III:8(a), government procurement
can be effectuated by means of a contractual arrangement other than a
"purchase", as India appears to suggest.[135]
5.36. Moreover, as we see it, in arguing that the term "procurement"
should not be read to require "direct acquisition" of a product[136],
India reiterates, in essence, its argument that Article III:8(a) should
cover situations where the discrimination involves inputs or processes of
production, regardless of whether the product discriminated against is in a
"competitive relationship" with the product purchased. However, we
recall that, in order for Article III:8(a) to apply, the product purchased
should always be in a competitive relationship with the product discriminated
against.[137]
5.37. India also contends that, because of its reliance on Canada – Renewable Energy / Canada – Feed-in Tariff Program, the Panel refused to consider the issue of why a separate
consideration of solar cells and modules from other generation equipment is
necessary.[138]
As we see it, in stating that "India's consequentialist arguments do not
establish that the measures at issue in this case are distinguishable in any
relevant respect from those considered by the Appellate Body"[139],
the Panel correctly found that India's arguments do not have a bearing on the
proper determination of the scope of Article III:8(a) of the GATT 1994.[140]
5.38. Finally, India argues that the
Panel erred in its reasoning that "India did not submit reasons for why a
different approach" than the one in Canada – Renewable Energy / Canada – Feed-in Tariff Program
"should be considered under the facts before the Panel", and that it
could not therefore "go beyond the tests applied by the
Appellate Body" in those disputes.[141]
We note that the Panel elaborated on the issue before it, as follows:
… the arguments on the interpretation of
Article III:8(a) advanced by the parties in this case appear to be based on
their opposing understandings of the Appellate Body's findings and reasoning in
Canada ‒ Renewable Energy / [Canada – ] Feed-in
Tariff Program. We are therefore not presented with the question of
whether we should deviate from the Appellate Body's findings and reasoning
in that case[*]; rather, we are presented with the question of how the
Appellate Body's findings and reasoning under Article III:8(a) should
apply to the DCR measures at issue in this dispute.[142]
_______________________________
[*fn
original]295 The present case is therefore distinguishable from
other cases in which one of the disputing parties argued that a panel should
deviate from a legal interpretation of the covered agreements arrived at by the
Appellate Body. For example, see Appellate Body Reports, US –
Stainless Steel (Mexico), paras. 154-162; US –
Continued Zeroing, para. 358-365; and Panel Reports, China – Rare Earths, paras. 7.55-7.61; US –
Countervailing and Anti-Dumping Measures (China), paras.
7.311-7.317.
5.39. The cases referred to by the Panel in the footnote cited above
concern the issue of whether a panel should "resolve the same legal
question in the same way in a subsequent case" and whether it can depart
for "cogent reasons" from previous Appellate Body findings on the
same issue of legal interpretation.[143]
As we understand it, India sought to distinguish from Canada ‒ Renewable
Energy / Canada – Feed-in Tariff Program on the facts of those
cases, rather than to have the Panel re-assess the merits of the
Appellate Body's legal standard and reasoning.[144]
Contrary to what India suggests, we do not understand the Panel to have applied
"as 'binding' a principle evolved by the Appellate Body", or to
have disregarded India's arguments because India did not ask "that the
Panel set aside in its entirety the principle of competitive relationship".[145]
Rather, as noted above, the Panel was properly guided by the
Appellate Body's clarification and application of Article III:8(a) in Canada – Renewable Energy / Canada – Feed-in Tariff Program, having found that India's arguments were insufficient to
distinguish the facts at issue in the present case from those before the
Appellate Body in Canada – Renewable Energy /
Canada – Feed-in Tariff Program.
5.40. We have found above that, under Article III:8(a), the product
purchased by way of procurement must necessarily be "like", or
"directly competitive" with or "substitutable" for – in
other words, in a "competitive relationship" with – the foreign
product subject to discrimination. Although a consideration of inputs and
processes of production may inform the question of whether the product
purchased is in a competitive relationship with the product being discriminated
against, it does not displace the competitive relationship standard. The
question of whether the cover of Article III:8(a) may also extend to
discrimination relating to inputs and processes of production used in respect
of products purchased arises only after the product purchased has been found to
be in a competitive relationship with the product subject to discrimination.
Based on our review of the Panel's analysis and approach, we consider that the
Panel properly addressed India's arguments and conducted its own objective
assessment of the matter before it, including the facts of the case and whether
the DCR measures are covered by the derogation under Article III:8(a). As we
understand it, it was on the basis of its analysis of the facts before it,
including the characteristics of solar cells and modules, as well as both
parties' legal arguments, that the Panel reached its ultimate conclusion that
India's arguments did "not establish that the measures at issue in this
case are distinguishable in any relevant respect from those considered by the
Appellate Body" in Canada – Renewable Energy
/ Canada – Feed-in Tariff Program. We therefore find that the Panel
was properly guided by the Appellate Body report in Canada –
Renewable Energy / Canada – Feed-in Tariff Program in finding that
the DCR measures are not covered by the derogation under Article III:8(a).
5.41. In light of the foregoing, we reject India's claim that the Panel
acted inconsistently with Article 11 of the DSU in assessing India's arguments
regarding the scope of application of Article III:8(a) of the GATT 1994.
Consequently, we uphold the Panel's findings, in paragraphs 7.135 and
7.187 of its Report, that the DCR measures are not covered by the derogation
under Article III:8(a) of the GATT 1994.
5.1.6 The remaining elements under Article III:8(a) of the GATT 1994
5.42. We recall that, apart from the
applicability of Article III:8(a) of the GATT 1994 in respect of
"products purchased", several other cumulative requirements must be
met under that provision[146]:
(i) the measures in question are "laws, regulations or requirements
governing … procurement"[147];
(ii) the procurement is "by governmental agencies"[148];
(iii) the procurement is of products purchased "for governmental
purposes"[149];
and (iv) the products purchased are not procured "with a view to
commercial resale or with a view to use in the production of goods for
commercial sale".[150]
Although the Panel found that the discrimination relating to solar cells and
modules under the DCR measures is not covered by the government procurement derogation
under Article III:8(a) because of the absence of a competitive
relationship between the product purchased and the product discriminated against,
it considered it useful to proceed with a limited analysis of the remaining
legal elements under that provision.[151]
In particular, the Panel found that the DCR measures are "laws,
regulations or requirements governing the procurement" of electricity[152],
and that the procurement of electricity is "by governmental
agencies".[153]
The Panel also summarized – but did not make legal findings regarding – the
arguments of the parties and addressed, in a limited manner, the questions of
whether electricity under the DCR measures is purchased "for governmental
purposes" and "not with a view to commercial resale".[154]
5.43. India requests that we complete the
legal analysis of the remaining elements of Article III:8(a) described
above, should we find that the DCR measures are covered by the derogation
under that provision.[155]
In particular, India asks that we reaffirm the Panel's findings that the DCR
measures are "laws, regulations or requirements governing … procurement",
and that the procurement under the DCR measures is "by governmental
agencies", and that we complete the legal analysis by ruling that the
procurement is of products purchased "for governmental purposes", and
that the procurement of products is "not with a view to commercial
resale".[156]
5.44. We note that India's request for
completion of the legal analysis is premised on the condition that we reverse
the Panel's finding that the DCR
measures are not covered by the government procurement derogation under Article III:8(a) of the
GATT 1994.[157]
Having upheld this finding by the Panel, we need not, and do not, address
India's further claims and related arguments concerning the Panel's
interpretation and application of the remaining elements under Article III:8(a) of the GATT 1994. We express no
view on the Panel's reasoning and analysis in this regard.
5.45. We have upheld the Panel's finding that the government procurement
derogation under Article III:8(a) of the GATT 1994 does not cover the DCR
measures at issue in the present case, and therefore turn to address India's
conditional appeal of the Panel's finding that the DCR measures are not
justified under the general exception in Article XX(j) of the GATT 1994
for measures "essential to the acquisition or distribution of products in
general or local short supply". In this appeal, India claims that the
Panel erred in its interpretation and application of Article XX(j) and acted
inconsistently with its obligations under Article 11 of the DSU.[158]
Below, we summarize the Panel's findings and the issues appealed. We then
address the interpretation of Article XX(j) before turning to consider the
Panel's analysis as challenged by India on appeal.[159]
5.46. As a general matter, regarding the
scope of Article XX(j) of the GATT 1994, India claimed before the
Panel that a situation of short supply can exist where a product that is
available internationally is nevertheless "in short supply in certain
local markets"[160],
and that "general or local short supply" could exist in circumstances
where a "product is not produced or manufactured in a particular
market".[161]
Specifically, in the context of the present dispute, India explained that it
did not seek to argue that Article XX(j) is "available to address any
situation where a country's indigenous manufacturing capacity for any product
is low".[162]
Rather, India argued that a "justification for invoking Article XX(j)
would need to rest on whether a measure is essential to
redress such a situation of general or local short supply"[163],
which, for India, is a question "to be examined in the context of the
overall objectives of energy security and ecologically sustainable growth for
which acquisition or distribution of indigenously manufactured solar cells and
modules is essential."[164] India
further submitted that
"sole dependence on imported solar cells and modules brings risks
associated with supply side vulnerabilities and fluctuations"[165],
and that, "[i]n order to achieve energy security, India needs to achieve
domestic resilience to such risks."[166]
5.47. The Panel determined that
"[t]he logical starting point of an assessment under Article XX(j) is the
identification of the products that are alleged to be in 'general or local
short supply'"[167],
which the Panel noted that India had identified to be "solar cells and
modules".[168]
The Panel then interpreted the phrase "products in general or local short
supply" in Article XX(j). With respect to the notion of "short
supply", the Panel considered that "the terms 'products in … short
supply' … refer to products in respect of which the quantity of available
supply does not meet demand."[169]
Regarding the terms "general or local" short supply, the Panel
indicated that "these words relate to the extent of the geographical area
or market in which the available quantity of supply of a product does not meet
demand", such that these terms "give Article XX(j) a wide ambit, and
… cover product shortages within a region inside a country, a single country as
a whole, an area including several countries, or even global shortage of a
product".[170]
The Panel thus concluded that "the ordinary meaning of the terms 'products
in general or local short supply' refers to a situation in which the quantity
of available supply of a product does not meet demand in the relevant
geographical area or market."[171]
5.48. The Panel then turned to determine
whether a lack of domestic manufacturing capacity amounts to solar cells and
modules being in "general or local short supply" within the meaning
of Article XX(j). In response to India's argument that "its 'lack of
manufacturing capacity of solar cells and modules amounts to a situation of
local and general short supply of solar cells and modules in India'"[172],
the Panel noted that "the words 'products in general or local short
supply' do not refer to 'products of national origin
in general or local short supply'."[173]
Unlike other provisions of the GATT 1994, such as Article III:4[174],
Articles II:1(b) and II:1(c)[175],
Article XX(g)[176],
and Article XX(i)[177],
the Panel noted that it did not see any language in Article XX(j) that speaks
to the source of the products concerned, or to the question of where those
products are produced.[178]
The Panel further noted that "India's interpretation of Article XX(j)
would be tantamount to interpreting the words 'products in general or local short
supply' … as though they meant 'products in general or local short production'", which would amount to "a
far-reaching principle that all Members are entitled to an equitable share in
the international production of products in short
supply".[179]
5.49. The Panel also considered that, for
the purposes of making a determination under Article XX(j) of the GATT
1994, "there must be some objective point of reference to serve as the
basis for an objective assessment of whether there is a 'deficiency' or 'amount
lacking' in the 'quantity' of a product that is 'available'"[180]. However, "India's
alternative interpretation of Article XX(j) does not present any objective
point of reference to serve as the basis for an objective assessment of whether
a product is in 'short supply'", given that "India ha[d] not
adequately explained what would constitute a 'lack' of domestic manufacturing
capacity amounting to a 'short supply'".[181]
The Panel concluded that "the terms 'products in general or local short
supply' refer to a situation in which the quantity of available supply of a
product, from all sources, does not meet demand in a relevant geographical area
or market."[182]
5.50. In response to what the Panel
considered to be an alternative argument raised by India, that "the risk
of a disruption in imports, and the risk of a resulting shortage of solar cells
and modules for Indian SPDs, makes these 'products in general or local short
supply'"[183],
the Panel determined that "[t]he immediate context of the terms 'products
in … short supply' does not lend support to the view that they cover products
at risk of being in short supply."[184]
The Panel further determined that "even assuming for the sake of argument
that the concept of 'products in general or local short supply' in Article
XX(j) could be interpreted to include products at risk of being in short supply",
the Panel considered that "only imminent risks of such shortage would be
covered"[185], which it noted that India had not
established.[186]
For these reasons, the Panel concluded that the DCR measures do not involve the
acquisition of "products in general or local short supply" in India
within the meaning of Article XX(j), and that they are therefore not justified
under the general exception in that provision.[187]
Noting, however, that its findings involved "novel issues of law and legal
interpretation" under Article XX(j), and that the Appellate Body might
reverse those findings on appeal, the Panel proceeded with a limited analysis
and review in order to provide the Appellate Body with factual findings regarding
whether the DCR measures are "essential" within the meaning of
Article XX(j) of the GATT 1994.[188]
5.51. India appeals the Panel's analysis
and findings under Article XX(j) of the GATT 1994, and requests us to find
that the lack of manufacturing capacity of solar cells and modules in India
"amounts to a situation of local and general short supply", and that
the DCR measures are measures relating to the acquisition of such products for
the purposes of Article XX(j).[189]
India contends that the Panel erred in its interpretation of the phrase
"products in general or local short supply" because it did not read
"'short supply' in Article XX(j) in the context of the specific terms
used in that provision, i.e., 'general or local'", and instead adopted an
"approach that interpreted the words 'general or local' in isolation of
the words 'short supply'."[190]
According to India, the use of the terms "general or local short
supply" in Article XX(j) "contemplates short supply that is
distinct from situations that can be addressed by 'international supply'."[191]
India submits that an "interpretation that Article XX(j) cannot be
applied when imports are available fundamentally veers towards the position
that only export restraints will qualify for consideration under
Article XX(j), and not import restraints", and that, if such
interpretation had been intended by the drafters, they "would have
explicitly stated this, as was done in the context of Article XI:2 of the
GATT 1994".[192]
Regarding the question of risks associated with dependence on imports, India
argues that the Panel mischaracterized its argument as an "alternate
argument"[193],
adding that it did not intend "to place the concept of 'risk' as central
to [its] defence, as concluded by the Panel".[194]
Rather, India "reiterates its fundamental argument that 'general or local
short supply' exists in the first place due
to low domestic manufacturing" and its vulnerability "to the risks
associated with international supply and market fluctuations".[195]
5.52. India further alleges that the
Panel acted inconsistently with Article 11 of the DSU in rejecting India's
arguments regarding the concept of "sufficient manufacturing
capacity" and the context in which India referred to that concept, namely,
to argue that the DCR measures do not seek to "maximize"
self-sufficiency or "minimize" dependence on imports, but rather to
"reduce" the risks linked to such dependence.[196]
India contends that it presented evidence of what would constitute
"sufficient manufacturing capacity" that would "enable
discontinuation of the DCR measures"[197],
and maintains that "India does not intend for the DCRs to be applied
indefinitely".[198]
According to India, "[t]he Panel's refusal to take into account India's
arguments" amounts to a breach of the Panel's duties under Article 11
of the DSU.[199]
India concludes by requesting us to find that "India's lack of
manufacturing capacity of solar cells and modules amounts to a situation of
local and general short supply of such products in India, and that the DCR
measures are measures relating to the acquisition of such products for the
purposes of Article XX(j)."[200]
5.53. For its part, the United States
requests us to uphold the Panel's findings. According to the United States, the
Panel correctly interpreted the terms "general or local short
supply", in their context and in light of their object and purpose[201],
and properly rejected India's argument that a lack of domestic production can
constitute a situation of "short supply" within the meaning of
Article XX(j).[202]
The United States submits that the term "products" in
Article XX(j) "is unqualified by origin, indicating that it addresses
supply of that product without respect to origin or 'source of supply'"[203],
adding, by way of contrast, that other "provisions of the GATT 1994
that address products of a particular origin identify that fact
explicitly", such as Article III:4, Articles II:1(b) and II:1(c),
and Article XX(i).[204]
The United States also disagrees with India's contention that the Panel erred
under Article 11 of the DSU in assessing India's arguments relating to the
lack of domestic manufacturing capacity for solar cells and modules.[205]
5.54. We turn next to India's appeal as
it relates to the Panel's interpretation of Article XX(j) of the GATT 1994, and
in particular the phrase "products in general or local short supply".
We begin by examining key aspects of the legal standard to be applied in
determining whether a measure can be provisionally justified under Article XX
of the GATT 1994.
5.55. Article XX(j) provides, in relevant
part, that nothing in the GATT 1994 shall be construed to prevent the adoption
or enforcement by any Member of measures:
essential to the acquisition or distribution of products in general or
local short supply; Provided that
any such measures shall be consistent with the principle that all Members are
entitled to an equitable share of the international supply of such products,
and that any such measures, which are inconsistent with the other provisions of
the Agreement shall be discontinued as soon as the conditions giving rise to
them have ceased to exist.[206]
5.56. The Appellate Body has explained
that the evaluation of a defence under Article XX of the GATT 1994 involves
a two-tiered analysis, in which a measure must first be provisionally justified
under one of the paragraphs of Article XX, and then shown to be consistent
with the requirements of the chapeau of Article XX.[207] This "sequence of steps" in the analysis of a claim under
Article XX reflects "not inadvertence or random choice, but rather
the fundamental structure and logic of Article XX of the GATT 1994".[208]
5.57. Regarding the first part of the
analysis, it is well established that, for a responding party to justify
provisionally a measure under an Article XX exception, two elements must be
shown: first, that the measure addresses the particular interest specified in
that paragraph[209];
and, second, that there is a sufficient nexus between the measure and the
interest protected, which is specified through the use of terms such as
"necessary to" in Article XX(d), and, in the case of Article XX(j),
"essential to". [210]
5.58. Since this is the first case in
which the Appellate Body is called upon to interpret Article XX(j) of the
GATT 1994, we review briefly our jurisprudence under the other paragraphs of
Article XX, and in particular our recent jurisprudence under Article XX(d), for
the purpose of assessing its possible relevance to Article XX(j). As to the
first element of the analysis contemplated under Article XX(d), the Appellate
Body has stated that the responding party has the burden of demonstrating that:
there are "laws or regulations"; such "laws or regulations"
are "not inconsistent with the provisions of" the GATT 1994; and the
measure sought to be justified is designed "to secure compliance"
with such "laws or regulations". An examination of a defence under
Article XX(d) thus includes an initial, threshold examination of the
relationship between the challenged measure and the "laws or
regulations" that are not GATT-inconsistent so as to determine whether the
former is designed "to secure compliance" with specific rules,
obligations, or requirements under the relevant provisions of such "laws
or regulations".[211]
If the assessment of the design of a measure, including its content, structure,
and expected operation, reveals that the measure is "incapable" of
securing compliance with specific rules, obligations, or requirements under the
relevant provisions of such "laws or regulations" that are not
GATT-inconsistent, then the measure cannot be justified under Article XX(d),
and this would be the end of the inquiry.[212]
5.59. As to the second element of the
analysis contemplated under Article XX(d), the Appellate Body has stated
that a determination of whether a measure is "necessary" entails a
more in-depth and holistic examination of the relationship between the
inconsistent measure and the relevant laws or regulations. This involves, in
each case, a process of "weighing and balancing" a series of factors,
including: the extent to which the measure sought to be justified contributes
to the realization of the end pursued (i.e. securing compliance with specific
rules, obligations, or requirements under the relevant provisions of "laws
or regulations" that are not GATT‑inconsistent); the relative importance
of the societal interest or value that the "law or regulation" is
intended to protect; and the trade-restrictiveness of the challenged measure.[213]
In most cases, a comparison between the challenged measure and reasonably
available alternative measures should then be undertaken.[214]
5.60. The analytical framework for the "design" and
"necessity" elements of the analysis contemplated under Article XX(d)
is relevant mutatis mutandis also under Article
XX(j). As with Article XX(d), the examination of a defence under Article XX(j)
would appear to include an initial, threshold examination of the "design"
of the measure at issue, including its content, structure, and expected
operation. In the case of Article XX(j), the responding party must identify the
relationship between the measure and "the acquisition or distribution of
products in general or local short supply", whereas, in the case of
Article XX(d), a panel must examine the relationship between the measure
and "securing compliance" with relevant provisions of laws or
regulations that are not GATT‑inconsistent.[215]
If the assessment of the design of a measure, including its content, structure,
and expected operation, reveals that the measure is "incapable", in
the case of Article XX(j), of addressing "the acquisition or
distribution of products in general or local short supply", or, in the
case of Article XX(d), "secur[ing] compliance with [relevant
provisions of] laws or regulations that are not inconsistent" with the
GATT 1994, there is no relationship that meets the requirements of the
"design" element. In either situation, further analysis with regard
to whether the measure is "necessary" or "essential" would
not be required.[216]
This is because there can be no justification under Article XX(j) for a
measure that is not "designed" to address the "acquisition or
distribution of products in general or local short supply", just as there
can be no justification under Article XX(d) for a measure that is not
"designed" to secure compliance with relevant provisions of laws or
regulations that are not GATT‑inconsistent.[217]
5.61. We recall that, while the "design"
and "necessity" elements may provide a useful analytical framework
for assessing whether a measure is provisionally justified under Article XX(d),
they are "conceptually distinct".[218] Yet, they are related aspects of the overall inquiry to be carried out
into whether a respondent has established that the measure at issue is
"necessary to secure compliance with laws or regulations which are not
inconsistent" with the GATT 1994[219], and that the structure of the analysis under
Article XX(d) therefore does not have to follow a "rigid path".[220] Thus, the way a panel
organizes its examination of these elements may be influenced not only by the
measures at issue or the laws or regulations identified by the respondent, but
also by the manner in which the parties present their respective arguments and
evidence.[221] These considerations are equally relevant for the analysis under
Article XX(j) in assessing whether a measure is "essential to the
acquisition or distribution of products in general or local short supply".
5.62. The participants in the present
case disagree as to whether the term "essential" in Article XX(j)
introduces a more stringent legal threshold than the necessity analysis under Article XX(d).[222]
The Appellate Body has explained in this regard that, in a continuum ranging
from "indispensable" to "making a contribution to", a
"necessary" measure is "located significantly closer to the pole
of 'indispensable' than to the opposite pole of simply 'making a contribution
to'".[223]
The word "essential" in turn is defined as "[a]bsolutely
indispensable or necessary".[224]
The plain meaning of the term thus suggests that this word is located at least
as close to the "indispensable" end of the continuum as the word
"necessary".
5.63. Having said this, we recall that a
"necessity" analysis under Article XX(d) involves a process of "weighing
and balancing" a series of factors. We consider that the same process of
weighing and balancing is relevant in assessing whether a measure is
"essential" within the meaning of Article XX(j). In particular,
we consider it relevant to assess the extent to which the measure sought to be
justified contributes to: "the acquisition or distribution of products in
general or local short supply"; the relative importance of the societal
interests or values that the measure is intended to protect; and the
trade-restrictiveness of the challenged measure. In most cases, a comparison
between the challenged measure and reasonably available alternative measures
should then be undertaken.[225]
5.64. As noted, Article XX(j) establishes
a general exception for measures "essential to the acquisition or
distribution of products in general or local short supply". The
"products" at issue are the ones that must be "in … short
supply". It must therefore be established that there are "products in
general or local short supply", and that the challenged measures are
"essential to the acquisition or distribution of" such products. We
also note that Article XX(j) provides that measures covered by the general
exception under Article XX(j) are subject to the requirement that they
"shall be consistent with the principle that all Members are entitled to
an equitable share of the international supply of such products"[226],
and that Members may take GATT-inconsistent measures essential to the
acquisition or distribution of products "in general or local short
supply", subject to the requirement that such measures "shall be
discontinued as soon as the conditions giving rise to them have ceased to
exist". In light of this language in Article XX(j), we consider that a
proper interpretation of that provision, including the phrase "products in
general or local short supply", requires careful consideration of how the
different terms used in that provision inform one another, and should thus be
holistic in nature.
5.65. Beginning with the phrase
"products in … short supply", we note that this language refers
generally to products "available only in limited quantity, scarce".[227]
We understand the phrase "products … in short supply" to refer
therefore to products in respect of which there is a "shortage", that
is, a "[d]eficiency in quantity; an amount lacking".[228]
This understanding is reinforced by the fact that the French and Spanish
versions of Article XX(j) refer to "pénurie"
and "penuria", respectively, which
translate best as "shortage" in English.
5.66. We note that "supply" is
defined as the "amount of any commodity actually
produced and available for purchase", and that, in its ordinary
meaning, the word "supply" is the "correlative" of the word
"demand".[229]
An assessment of whether there is a "deficiency" or "amount
lacking" in the "quantity" of a product that is available would therefore appear to involve a comparison
between "supply" and "demand", such that products can be
said to be "in short supply" when the "quantity" of a
product that is "available" does not meet "demand" for that
product.
5.67. This brings us to the question as
to the extent of the geographical area or market in which the quantity of
"available" supply of a product should be compared to demand. Article
XX(j) refers, in this regard, to products in "general or
local" short supply. The dictionary definitions of "local" include
"in a particular locality or neighbourhood, esp. a town, county, etc., as
opp. to the country as a whole" and "limited or peculiar to a
particular place or places".[230] The word "general", in
turn, is relevantly defined as "all or nearly all of the parts of a
(specified or implied) whole, as a territory, community, organization, etc.;
completely or nearly universal; not partial, particular, local, or
sectional".[231]
Their ordinary meanings thus suggest that the terms "general or
local" refer to a range of product shortages, which may cover shortages
that occur locally, within a region, or a territory within a country, or
continuing beyond the boundaries of a particular country. In the context of
Article XX(j), however, we understand the phrase "products in general or
local short supply" to be focused on products for which a situation of
short supply exists within the territory of the Member invoking Article XX(j).
This does not mean that a situation of "general" short supply cannot
extend beyond the boundaries of that territory, as long as it also occurs
within that territory. We further read the terms "general" and
"local", together with the disjunctive "or", to suggest
that there is no requirement for a Member to demonstrate that the shortage
extends to all parts of its territory, but that, depending on the circumstances,
it may be sufficient to demonstrate that the existence of such a situation of
shortage occurs locally, or is limited to certain parts of its territory.
5.68. Moving on to consider whether
Article XX(j) speaks to the origin of products that may be
"available" in a particular geographical area or market, we note that
the phrase "products in general or local short supply" is immediately
preceded by the terms "acquisition or distribution of". The word
"acquisition" refers generally to "[t]he action of acquiring something"[232],
and "distribution" is defined as "[t]he action of spreading or
dispersing throughout a region".[233]
Article XX(j) therefore contemplates measures that seek to redress
situations of "short supply" by providing for the "acquisition
or distribution of" given products. By its terms, Article XX(j) does not
limit the scope of potential sources of supply to "domestic" products
manufactured in a particular country that may be "available" for
purchase in a given market. Nor does it exclude the possibility that products
from sources outside a particular geographical area or market may also be
"available" to satisfy demand. In this sense, the language in Article XX(j), which
does not speak to the origin of products that may be "acquired" or
"distributed", may be contrasted with, for example,
Article III:4 of the GATT 1994, which refers expressly to "products of the
territory of any Member" and "like products of national origin";
and with Article XX(g) of the GATT 1994, which refers to "domestic
production or consumption".[234]
5.69. In determining whether products are
in general or local short supply, it is relevant to consider the quantity of
products produced in the particular geographical
area or market where the alleged shortage exists. There is, however, no reason
not to give due regard to the quantity of products that is produced in other
parts of a particular country, as well as in other countries, provided that
such quantities are "available" for purchase in the relevant
geographical area or market. Further, while an increase in manufacturing
capacity or production in a particular geographical area may lead to an
increase in the total quantity of a product available for purchase in that
area, it does not follow from such increase that domestic manufacturers will necessarily
sell their production to domestic buyers, as opposed to exporting their
production by selling to buyers abroad. An assessment of whether there is a
situation of "products in general or local short supply" should not
focus exclusively on availability of supply from "domestic", as
opposed to foreign or "international" sources.
5.70. Turning to consider whether there
is a temporal dimension to the phrase "products in general or local short
supply", we recall that Article XX(j) stipulates that any measures taken
under paragraph (j) "shall be discontinued as soon as the conditions
giving rise to them have ceased to exist". We read this language in
Article XX(j) to contemplate situations of "short supply" that may
continue over time, but are nonetheless expected not to last indefinitely. An
analysis of whether a respondent has identified "products in general or
local short supply" is therefore not satisfied, in our view, by
considering only whether there is a mathematical difference at a single point
in time between demand and the quantity of supply that is "available"
for purchase in a particular geographical area or market. Instead, Article
XX(j) requires a careful scrutiny of the relationship between supply and demand
based on a holistic consideration of trends in supply and demand as they evolve
over time, as well as whether the conditions giving rise to short supply have
ceased to exist.
5.71. In light of the above, we read
Article XX(j) of the GATT 1994 as reflecting a balance of different
considerations to be taken into account when assessing whether products are
"in general or local short supply". In particular, a panel should
examine the extent to which a particular product is
"available" for purchase in a particular geographical area or market,
and whether this is sufficient to meet demand in the relevant area or market.
This analysis may, in appropriate cases, take
into account not
only the level of domestic production of a particular product and the nature of
the product that is alleged to be "in general or local short supply"[235], but also such factors as the
relevant product and geographic market[236], potential price fluctuations
in the relevant market, the purchasing power of foreign and domestic consumers,
and the role that foreign and domestic producers play in a particular market,
including the extent to which domestic producers sell their production abroad. Due
regard should be given to the total quantity of imports that may
be "available" to meet demand in a particular geographical area or
market. It may thus be relevant to consider the extent to which international
supply of a product is stable and accessible, including by examining factors
such as the distance between a particular geographical area or market and
production sites, as well as the reliability of local or transnational supply
chains. Whether and which factors are relevant will necessarily depend on the particularities of each case. Just as
there may be factors that have a bearing on "availability" of imports
in a particular case, it is also possible that, despite the existence of
manufacturing capacity, domestic products are not "available" in all
parts of a particular country, or are not "available" in sufficient
quantities to meet demand. In all cases, the responding party has the
burden of demonstrating that the quantity of "available"
supply from both domestic and international sources in the relevant
geographical market is insufficient to meet demand.
5.72. Our interpretation of Article XX(j)
of the GATT 1994 is in consonance with the preamble of the Marrakesh
Agreement Establishing the World Trade Organization (WTO Agreement), which refers to the
"optimal use of the world's resources in accordance with the objective of
sustainable development, seeking both to protect and preserve the environment
and to enhance the means for doing so in a manner consistent with [Members']
respective needs and concerns at different levels of economic development".
The different levels of economic development of Members may, depending on the
circumstances, impact the availability of supply of a product in a given
market. Developing countries may, for example, have less domestic production,
and may be more vulnerable to disruptions in supply than developed countries.
Such factors may be relevant in assessing the availability
of a product in a particular case, and thus in assessing whether a product is
in "general or local short supply".[237]
5.73. We recall that the Panel considered
that "the terms 'products in … short supply' … refer to products in
respect of which the quantity of available supply does not meet demand."[238]
The Panel thus concluded that "the ordinary meaning of the terms 'products
in general or local short supply' refers to a situation in which the quantity
of available supply of a product does not meet demand in the relevant
geographical area or market."[239]
Based on its analysis of the text and context of Article XX(j) of the GATT
1994, together with relevant jurisprudence, the Panel found that "the
terms 'products in general or local short supply' refer to a situation in which
the quantity of available supply of a product, from all
sources, does not meet demand in a relevant geographical area or
market"[240]
and that they "do not refer to products in respect of which there merely
is a lack of domestic manufacturing capacity".[241]
The Panel added that "India ha[d] not argued that the quantity of solar
cells and modules available from all sources, i.e. both international and
domestic, is inadequate to meet the demand of Indian SPDs or other
purchasers."[242]
5.74. As we have explained above, an
assessment of whether a Member has identified "products in general or
local short supply" requires a case-by-case analysis of the relationship between
supply and demand based on a holistic consideration of all relevant factors.[243]
We agree with India to
the extent that it suggests that an increase in domestic manufacturing
"capacity" may lead to an increase in the total quantity of available
supply of a product. However, we disagree that a lack of "sufficient"
domestic manufacturing "capacity" will necessarily constitute a
product "shortage" in a particular market, as India appears to
suggest. Nor does it follow from an increase in domestic production capacity
that domestic manufacturers will necessarily sell their production to domestic
buyers, rather than exporting to buyers abroad.
5.75. This brings us to India's argument
that continued dependence on imports of solar cells and modules exposes it to
risks related to continued dependence on imports. Before the Panel, India
submitted that "[a]ny dependence on imports brings with it risks
associated with supply side vulnerabilities and fluctuations"[244]
and that, since "India's solar PV installations predominantly rely on
imported cells and modules", this "exposes India to the risks of
market fluctuations in international supply".[245]
According to India, governmental intervention was thus "required in order
to minimize dependence on imports" and to "ensure domestic resilience
in addressing any supply side disruptions".[246]
India reiterated on appeal these arguments relating to the risks associated with
continued dependence on imports of solar cells and modules.[247]
5.76. We understand India's arguments
regarding the alleged risks inherent to the continued dependence on imported
solar cells and modules to relate to the issue of supply availability,
and agree that such considerations could, in principle, be relevant in
assessing whether a situation of "short supply" exists. While a
consideration of potential risks of disruption in supply of a given product may
inform the question of whether a situation of "short supply" exists,
we note the Panel's finding that India "ha[d] not identified any actual
disruptions in imports of solar cells and modules to date", and that SPDs
in India had not "experienced an actual disruption in the supply of
affordable foreign solar cells and modules".[248]
5.77. We further disagree with India to
the extent that it appears to assume, first, that all imports, in and of
themselves, entail supply-related risks and, in that sense, are not
"available" to meet demand[249];
and, second, that such risks are intolerable, as long as a sufficient level of
domestic manufacturing capacity of solar cells and modules has not been met,
such that a situation of "short supply" exists, as long as domestic
manufacturing capacity lies below this level.[250]
In any event, even assuming that there may be risks of disruption in the supply
of imports to a particular market, it may equally be the case that such risks
exist in relation to domestic production. Thus, in assessing whether products
are "available" in a particular area or market, consideration must be
given to all relevant factors, such that an analysis of whether a respondent
has identified a situation of "short supply" is carried out on a case‑by‑case
basis for each and every source of supply concerned, both foreign and domestic supply.
5.78. We further note that, during the
present dispute, India has sought to justify its DCR measures on the basis
of the policy objectives underlying them. India has argued that the DCR
measures should be seen in light of the policy objectives of: "(i) Energy
Security and Sustainable Development; and (ii) Ecologically sustainable growth,
while addressing the challenges of climate change."[251]
India argues, for instance, that "[i]t is not India's case … that Article
XX(j) is an exception that would allow countries to impose import restrictions
for any and all products which it cannot produce or manufacture by itself",
but that a "justification for invoking Article XX(j) would need to rest on
whether a measure is essential to
redress such a situation of general or local short supply", which relates
to the "relationship between a measure and its objective of acquisition or
distribution of products in general or local short supply".[252]
India further argues that the DCR measures are consistent with Article
XX(j) because they "need to be examined in the context of the overall
objectives of energy security and ecologically sustainable growth for which
acquisition or distribution of indigenously manufactured solar cells and
modules is essential."[253]
5.79. While policy considerations such as
those referred to by India may inform the nature and extent of supply and
demand, they do not relieve the responding party invoking the exception in
Article XX(j) from the burden to demonstrate that imported products are not
"available" to meet demand and that the products at issue are
"in general or local short supply".
5.80. India further contends that, under
the Panel's interpretation of Article XX(j), import restrictions could not
be justified under that provision.[254]
India suggests that, if the drafters had intended this result, they "would
have explicitly stated this, as was done in the context of Article XI:2 of
the GATT 1994"[255],
as well as Article XX(i).[256]
While the Panel provided illustrations of non-export-related measures that
could presumably be justified under Article XX(j)[257],
India suggests that the examples provided by the Panel do "not address the
question of how import restraints on the product would apply in such
situations".[258]
As we understand it, India suggests that, under the Panel's interpretation of
the phrase "products in general or local short supply", measures
taken to redress a situation of short supply can only take the form of export
restrictions, and, hence, that the Panel's interpretation of Article XX(j)
cannot be correct.
5.81. As India correctly notes, the text
of Article XI:2(a) and Article XX(i) of the GATT 1994 contain express language
referring to export restrictions. By contrast, Article XX(j) does not
contain express language referring to either import or export restraints. The
interpretation of the phrase "products in general or local short
supply" must begin with the text of Article XX(j) and in light of the
substantive requirements within the provision where this phrase is located.
Contrary to what India appears to suggest, a proper interpretation of the
phrase "products in general or local short supply" cannot be based
merely on textual differences or similarities between Article XX(j) and some
other provisions of the GATT 1994.
5.82. In any event, we disagree with
India that it follows from the Panel's interpretation of the phrase
"products in general or local short supply" that export restrictions
are the only type of measure that may be used to redress a situation of
"short supply", or that it follows from this interpretation that
Article XX(j) cannot cover measures taking the form of import restrictions. The
Panel noted, for example, that, "where the quantity of available supply of
a product does not meet demand for that product in a given Member, it is
conceivable that this Member might establish a temporary monopoly in respect of
the sale of that product as a measure essential to the distribution of such
products within its territory" and that such "a monopoly could be
enforced and given effect through restrictions on both the exportation and the
importation by private traders of the product concerned."[259]
5.83. Based on
the foregoing, we disagree with India to the extent that it argues that "short supply" can be
determined without regard to whether supply from all sources is sufficient to
meet demand in the relevant market. Rather, as noted, we read Article XX(j) of
the GATT 1994 as reflecting a balance of different considerations to be taken
into account when assessing whether products are "in general or local
short supply". This analysis may, in appropriate cases, take into account
not only the level of domestic production of a particular product and the
nature of the products that are alleged to be "in general or local short
supply", but also such factors as the relevant product and geographic
market, potential price fluctuations in the relevant market, the purchasing
power of foreign and domestic consumers, and the role that foreign and domestic
producers play in a particular market, including the extent to which domestic
producers sell their production abroad. Due regard should be given to the total
quantity of imports that may be "available" to meet demand in a
particular geographical area or market. Whether and which factors are relevant
will necessarily depend on the particularities of each case.
5.84. India also challenges, under
Article 11 of the DSU, the manner in which the Panel dealt with India's
arguments and evidence regarding the notion of "sufficient domestic
manufacturing capacity".[260]
India argues that the Panel erred in the assessment of India's argument and the
evidence it presented to demonstrate that it currently does not possess a
"sufficient manufacturing capacity". India states, for example, that
it has explained that it "cannot afford to remain dependent on the import
of components intrinsic to solar power development … [since] [s]olar energy is
critical to [its] long-term energy security, and this cannot be achieved if
India does not have an indigenous manufacturing capacity of solar cells and
modules … [which] is necessary in order to reduce the risks arising from
complete dependence on imports of critical components."[261]
5.85. India argues that it submitted
relevant evidence indicating "what will constitute 'sufficient manufacturing
capacity'", at which point there would no longer be a need for the DCR
measures, since "the conditions giving rise to them [would] have ceased to
exist".[262]
India further argues that "the Panel's conclusion that India does not seek
to maximize 'self-sufficiency' or 'self-reliance', negates India's need for
maintaining 'sufficient manufacturing capacity', is not based on an objective
assessment of facts and legal arguments presented before it … [and] goes
against the basic mandate of Article 11 of the DSU that a panel must consider
all the evidence presented to it, assess its credibility, determine its weight,
and ensure that its factual findings have a proper basis in that
evidence."[263]
The United States responds that "[t]he absence of an evidence‑based baseline
and a reasoned comparison in India's argument prevent any conclusion as to
whether a situation of short supply existed" and that "[i]t is this
legal flaw in India's interpretation that led the Panel to reject India's
Article XX(j) defense, and not a mistaken conclusion that India had
neglected to provide any estimate of the level of capacity it considered
sufficient."[264]
5.86. We recall
that the Panel found, with regard to India's arguments pertaining to the
"sufficient domestic manufacturing capacity" requirement, that, in
order to assess whether a situation of "short supply" exists within
the meaning of Article XX(j) of the GATT 1994, "there must be some
objective point of reference to serve as the basis for an objective assessment
of whether there is a 'deficiency' or 'amount lacking' in the 'quantity' of a
product that is 'available'."[265]
The Panel determined, in this regard, that "India's alternative
interpretation of Article XX(j) [did] not present any objective point of
reference to serve as the basis for an objective assessment of whether a
product is in 'short supply' within the meaning of Article XX(j) [since] India
ha[d] not adequately explained what would constitute a 'lack' of domestic
manufacturing capacity amounting to a 'short supply' under its interpretation
of Article XX(j)."[266]
The Panel further found that "India ha[d] not itself articulated what
would constitute 'sufficient' manufacturing capacity for the purposes of
Article XX(j) under its alternative interpretation of this provision" and
that it was "also not clear whether India [was] arguing that it would fall
under the discretion of each Member concerned to determine what 'sufficient'
manufacturing capacity would be, or whether the point of reference for
assessing the level of 'sufficient' manufacturing capacity would vary from case-to-case,
depending on the policy objective being pursued."[267]
The Panel thus determined that India's interpretation of Article XX(j) is
"problematic because it does not reflect an objective point of reference
that can be used for the purpose of making an objective assessment of whether a
product is in 'short supply' within the meaning of Article XX(j)."[268]
5.87. As noted, a panel is required under
Article 11 of the DSU to "consider all the evidence presented to it,
assess its credibility, determine its weight, and ensure that its factual
findings have a proper basis in that evidence".[269]
At the same time, panels "are not required to accord to factual evidence
of the parties the same meaning and weight as do the parties".[270]
Moreover, "[i]t is … unacceptable for a participant effectively to recast
its arguments before the panel under the guise of an Article 11
claim", and an appellant "must [instead] identify specific errors
regarding the objectivity of the panel's assessment".[271]
5.88. India's claim under Article 11 of
the DSU relies for its validity on India's reading of Article XX(j) of the
GATT 1994, and in particular India's contention that the existence of a
situation of "short supply" within the meaning of Article XX(j) is to
be determined exclusively by reference to whether there is
"sufficient" domestic manufacturing of a given product. The fact that
India does not agree with the conclusion the Panel reached does not mean that
the Panel committed an error amounting to a violation of Article 11 of the DSU.
India is "merely" recasting its arguments before the Panel under the
guise of an Article 11 claim. We therefore reject India's claim that the
Panel acted inconsistently with Article 11 of the DSU.
5.89. We have found above that Article
XX(j) of the GATT 1994 reflects a balance of different considerations to be
taken into account when assessing whether products are "in general or
local short supply". In particular, a panel should examine the extent to which a particular product is
"available" for purchase in a particular geographical area or market,
and whether this is sufficient to meet demand in the relevant area or market.
This analysis may, in
appropriate cases, take into account not only the level of domestic
production of a particular product and the nature of the products that are
alleged to be "in general or local short supply", but also such
factors as the relevant
product and geographical market, potential price fluctuations
in the relevant market, the purchasing power of foreign and domestic consumers,
and the role that foreign and domestic producers play in a particular market,
including the extent to which domestic producers sell their production abroad. Due regard should be given to the total quantity of imports that may
be "available" to meet demand in a particular geographical area or
market. It may thus be relevant to consider the extent to which international
supply of a product is stable and accessible, by examining factors such as the
distance between a particular geographical area or market and production sites,
as well as the reliability of local or transnational supply chains. Whether and which factors are relevant will necessarily depend on the
particularities of each case. Just as there may be factors that have a bearing
on "availability" of imports in a particular case, it is also
possible that, despite the existence of manufacturing capacity, domestic
products are not "available" in all parts of a particular country, or
are not "available" in sufficient quantities to meet demand. In all
cases, the responding party has the
burden of demonstrating that the quantity of "available" supply from both domestic and
international sources in the relevant geographical market is insufficient to
meet demand. For these reasons, we have
disagreed with India to the extent that it argues that "short supply" can be determined
without regard to whether supply from both domestic and international sources
is sufficient to meet demand in the relevant market. We have also rejected India's
claim that the Panel acted inconsistently with Article 11 of the DSU.
5.90. In light of our interpretation of
Article XX(j), as well as the evidence and arguments presented to the Panel, we
find that India has not established that solar cells and modules are
"products in general or local short supply" in India. Consequently,
we uphold the Panel's findings in paragraph 7.265 of its Report, that
solar cells and modules are not "products in general or local short
supply" in India within the meaning of Article XX(j) of the GATT 1994
and that the DCR measures are therefore not justified under Article XX(j)
of the GATT 1994.
5.91. We have upheld the Panel's finding that the government procurement
derogation under Article III:8(a) of the GATT 1994 is not applicable to
the DCR measures at issue in the present case.[272] We have also upheld the Panel's finding that solar cells and modules are not
"products in general or local short supply" in India within the
meaning of Article XX(j) of the GATT 1994 and that the DCR measures are
therefore not justified under that provision.[273] We turn
therefore to address India's conditional appeal of, first, the Panel's finding
that India has not demonstrated that the DCR measures are measures "to
secure compliance with laws or regulations which are not inconsistent with the
provisions of [the GATT 1994]" within the meaning of Article XX(d) of the
GATT 1994; and, second, the Panel's ultimate finding that the DCR measures are
not justified under that provision.[274]
5.92. India claims that the Panel erred in its interpretation and
application of Article XX(d) in finding that the international instruments
identified by India do not have direct effect in India and are therefore not
"laws or regulations" within the meaning of Article XX(d).[275] India further argues that the Panel erred, first, in finding that
three of the domestic instruments identified by India, namely, the National
Electricity Policy[276], the National Electricity Plan[277], and the National Action Plan on Climate Change[278], do not constitute "laws or regulations"; and, second, by
consequently focusing its analysis on a fourth domestic instrument, namely,
Section 3 of India's Electricity Act of 2003[279], in isolation of these three other instruments.[280] India requests that we reverse the
Panel's findings, complete the legal analysis, and find that the relevant
instruments are "laws or regulations" within the meaning of Article
XX(d); that the DCR measures are "necessary to secure compliance"
with these "laws or regulations"; and that they meet the requirements
of the chapeau of Article XX.[281]
5.93. India's appeal therefore focuses on the Panel's assessment of
whether the international and domestic instruments identified by India are
"laws or regulations" within the meaning of Article XX(d). We
begin by summarizing the Panel's findings before setting out the legal standard
applicable under Article XX(d) of the GATT 1994 and considering
the Panel's analysis as challenged by India on appeal.
5.94. Before the Panel, India argued that
it has the obligation "to ensure ecologically sustainable growth while
addressing India's energy security challenge, and ensuring compliance with its
obligations relating to climate change".[282] According to India, this obligation is "reflected in four international
instruments, and four domestic instruments"[283], and both sets of instruments
qualify as "laws or regulations" within the meaning of Article XX(d)
of the GATT 1994. India claimed that its DCR measures "secure
compliance" with these "laws or regulations" because they
"reduce the risk of a disruption in Indian SPDs' access to a continuous
and affordable supply of the solar cells and modules needed to generate solar
power".[284] India further argued that its DCR measures
are "necessary" because they are the only means it has to incentivize
local manufacturing of solar cells and modules, and thereby reduce this risk.[285] The United States, for its part,
argued that India had failed to demonstrate that the DCR measures are necessary
to comply with any law or regulation for purposes of Article XX(d).[286]
5.95. The Panel began by examining
whether the international instruments identified by India are "laws or
regulations" within the meaning of Article XX(d), before turning to
consider the domestic instruments that India had identified. The Panel
explained that it would proceed in this manner because India had distinguished
between its "international and domestic obligations", and also
"because different issues are raised in relation to these two different
groups of instruments".[287]
5.96. The Panel recalled that India had
argued that its "international law obligations" are embodied in the
following international instruments: (i) the preamble of the WTO Agreement;
(ii) the United Nations Framework Convention on Climate Change; (iii)
the Rio Declaration on Environment and Development (1992); and (iv) UN
Resolution A/RES/66/288 (2012) (Rio+20 Document: "The
Future We Want").[288]
5.97. Having reviewed the relevant text of the instruments identified by
India, the Panel turned to consider whether "laws or regulations"
within the meaning of Article XX(d) includes international instruments, as
opposed to domestic instruments. Based on its review of the Appellate Body's
reasoning and findings in Mexico – Taxes on Soft
Drinks, the Panel recalled that the terms "laws or
regulations" in Article XX(d) refers to "rules that form part of the
domestic legal system of a WTO Member".[289] The Panel added that "[i]nternational agreements (or other
sources of international law) may constitute 'laws or regulations' only insofar
as they have been incorporated, or have 'direct effect', within a Member's
domestic legal system."[290]
5.98. Turning to examine whether the international instruments identified
by India form a part of India's domestic legal system, the Panel recalled India's
position that such instruments have "direct effect" in India because
rules of international law are accommodated into India's domestic legal system
"without express legislative sanction, provided they do not run into
conflict with laws enacted by the Parliament".[291] The Panel also noted India's explanation that, "[u]nder the
Constitution of India, acts of the executive are not confined to areas where
there is a pre-existing law" and that such acts "extend to aspects
over which the Parliament has power to enact laws".[292] The Panel accepted India's explanations regarding how its domestic
legal system functions.[293] The Panel found, however, based on India's explanations, that
"international law obligations are not 'automatically incorporated' into
Indian law, but rather that they may possibly be acted upon and implemented by
certain domestic authorities", and that India had therefore failed to
demonstrate that the relevant international instruments have "direct
effect" in India.[294] The Panel further noted India's argument that principles of
international environmental law and the concept of sustainable development
"are fundamental to the environmental and developmental governance in
India" and "that the concept of sustainable development is a part of
customary international law".[295] The Panel did not, however, consider that this spoke "to the
question of whether international obligations are automatically incorporated
into domestic law and have 'direct effect' in India".[296] The Panel therefore found that India had failed to demonstrate that
the international instruments it had identified can be characterized as
"laws or regulations" within the meaning of Article XX(d) in the
present dispute.[297]
5.99. The Panel then turned to consider
whether the domestic instruments that India had identified qualify as
"laws or regulations". The Panel recalled India's assertion that its
obligation "to ensure ecologically sustainable growth" is embodied in
Section 3 of India's Electricity Act, 2003, "read with" paragraph
5.12.1 of the National Electricity Policy; subsection 5.2.1 of the National
Electricity Plan; and the National Action Plan on Climate Change.[298]
5.100. The Panel began by noting that the
dictionary definitions of the terms "law" and "regulation"
make clear that they refer to "rules"[299], and that, throughout its report
in Mexico ‒ Taxes on Soft Drinks,
the Appellate Body had understood "laws or regulations" to refer to
"rules".[300] The Panel further noted that, by its terms, Article XX(d) refers to "laws or regulations"
in respect of which "compliance" can be secured, and considered that,
"by necessary implication, the 'laws or regulations' referred to in
Article XX(d) must therefore be rules in respect of which conduct would, or
would not, be in 'compliance'."[301] Referring to the
"context" provided by the illustrative list in Article XX(d), the
Panel found this to imply that the "laws or regulations" under
Article XX(d) "must be legally enforceable".[302] Based on its analysis, the Panel
concluded that the terms "laws or regulations" in Article XX(d) refer
to "legally enforceable rules of conduct under the domestic legal system
of the WTO Member concerned, and do not include general objectives".[303]
5.101. In respect of the domestic
instruments identified by India, the Panel began by assessing whether Section 3
of the Electricity Act, 2003 constitutes a "law or regulation" within
the meaning of Article XX(d). The Panel noted that the Electricity Act, 2003
"has formal characteristics that are normally associated with a
statute", in the sense that "it contains a date of entry into force,
a section defining the terms used in the instrument", and that it "is
divided into numbered parts, sections and subsections that consist of rules
cast in binding language".[304] The Panel further observed that
Section 3 of the Electricity Act, 2003 "appears to constitute a legally
enforceable rule of conduct under the domestic legal system of India"[305], in the sense that it
"establishes the legal basis" for the development of the National
Electricity Plan and the National Electricity Policy and "identifies the
entities involved in the periodic preparation, publication, and review of the
National Electricity Policy and the National Electricity Plan".[306] The Panel added, however, that
Section 3 "does not address the content or substance of either the
National Electricity Policy or the National Electricity Plan, other than to
state that the Policy to be prepared from time to time will be 'based on
optimal utilisation of resources such as coal, natural gas, nuclear substances
or materials, hydro and renewable sources of energy'."[307]
5.102. Drawing a contrast with Section 3
of the Electricity Act, 2003, the Panel observed that the National Electricity
Policy, the National Electricity Plan, and the National Action Plan on Climate
Change are each expressly entitled a
"policy" or "plan", and that the language of the provisions
and passages in these instruments identified by India "does not suggest
the existence of any legally enforceable rules", and is instead
"hortatory, aspirational, declaratory, and at times solely
descriptive".[308] The Panel further noted that India
had not suggested that the National Electricity Policy, the National
Electricity Plan, or the National Action Plan on Climate Change are
"legally binding", or that they are substantively similar to
legislative acts or other instruments under its domestic legal system.[309] The Panel saw "no reason
to doubt" that these instruments were adopted by the Central Government in
exercise of its powers under the Constitution of India[310], but did not consider this to be a
decisive criterion in determining whether these instruments qualify as
"laws or regulations" within the meaning of Article XX(d).[311] Based on
its analysis, the Panel found that "the Electricity Act, and in
particular Section 3 thereof, constitutes a 'law' for the purposes of Article
XX(d)"[312], while the other domestic
instruments identified by India do not quality as "laws or
regulations" within the meaning of that provision.[313]
5.103. With
respect to Section 3 of the Electricity Act, 2003, the Panel referred to past GATT/WTO
jurisprudence, and recalled that the phrase "to secure compliance with
laws or regulations" in Article XX(d) refers to measures "to enforce
obligations under laws or regulations", and not to measures "to
ensure the attainment of the objectives of the laws and regulations".[314] The Panel, however, saw "no link or nexus"
between the DCR measures and Section 3 of the Electricity Act, 2003.[315] In particular, the Panel said it
failed "to see how the DCR measures could be said to secure compliance
with the obligations in Section 3 of the Electricity Act, which are to
periodically prepare the National Electricity Policy and the National
Electricity Plan."[316] The Panel added that "India
ha[d] not suggested that the DCR measures are aimed at preventing the Central
Government of India or the Central Electricity Authority from acting
inconsistently with their obligations to periodically prepare the National
Electricity Policy and the National Electricity Plan."[317] The Panel therefore found that
India had failed to demonstrate that its DCR measures are measures "to
secure compliance" with the legal obligations in Section 3 of the
Electricity Act, 2003.[318] For all these reasons, the Panel
concluded that India had failed to demonstrate that its DCR measures are
provisionally justified under Article XX(d) of the GATT 1994.[319]
5.104. Having recalled the Panel's analysis and findings, we turn to
consider the legal standard that applies under Article XX(d) of the GATT 1994. Article XX(d) sets out a general
exception for measures that are:
necessary to secure compliance with laws or regulations
which are not inconsistent with the provisions of this Agreement, including
those relating to customs enforcement, the enforcement of monopolies operated
under paragraph 4 of Article II and Article XVII, the protection of
patents, trade marks and copyrights, and the prevention of deceptive practices;
5.105. Having already surveyed, in the
context of our discussion on Article XX(j) of the GATT 1994, the general
analytical framework that applies under Article XX(d)[320], we turn immediately to examine
the proper interpretation of the terms "laws or regulations" in the
context of the phrase "to secure compliance with laws or regulations"
in Article XX(d).
5.106. Beginning with the ordinary meaning
of the terms "laws" and "regulations", we note that the
term "law" is generally understood to refer to "a rule of
conduct imposed by authority"[321], while the term
"regulation" is defined as "[a] rule or principle governing
behaviour or practice; esp. such
a directive established and maintained by an authority".[322] In Mexico –
Taxes on Soft Drinks, the Appellate Body said that the terms
"laws or regulations" in Article XX(d) refer to "rules that form
part of the domestic legal system of a WTO Member, including rules
deriving from international agreements that have been incorporated into the
domestic legal system of a WTO Member or have direct effect according to that
WTO Member's legal system."[323] As to the illustrative list
contained in Article XX(d), the Appellate Body observed that the matters listed
as examples in Article XX(d) – namely, customs
enforcement, the enforcement of monopolies, the protection of patents, trade
marks and copyrights, and the prevention of deceptive practices – involve the regulation by a government
of activity undertaken by a variety of economic actors (e.g. private firms and
State enterprises), as well as by governmental agencies.[324] The illustrative list contained in
Article XX(d) reinforces the notion that "laws or regulations" refer
to rules of conduct and principles governing behaviour or practice that form
part of the domestic legal system of a Member.[325]
5.107. Furthermore, as noted by the
Appellate Body, "laws or regulations" encompass "rules adopted
by a WTO Member's legislative or executive branches of government".[326] In ascertaining whether an alleged
rule falls within the scope of "laws or regulations" for purposes of
Article XX(d), it may therefore be relevant to assess whether the rule at issue
has been adopted or recognized by an authority that is competent to do so under
the domestic legal system of the Member concerned.
5.108. Turning to the immediate context of
the terms "laws or regulations", we note that the text of
Article XX(d) refers to "laws or regulations" in respect of
which "compliance" can be "secure[d]". The "laws or
regulations" referred to in Article XX(d) must therefore be ones in
respect of which conduct would, or would not, be in "compliance". As
to the term "secure", we understand that, in Mexico –
Taxes on Soft Drinks, the Appellate Body disagreed with the panel's
interpretation that "'to secure compliance' is to be read as meaning to enforce compliance".[327] The Appellate Body explained that
absolute certainty in the achievement of a measure's stated goal, as well as
the use of coercion, are not necessary components of a measure designed
"to secure compliance" within the meaning of Article XX(d).[328] Instead, a
measure can be said "to secure compliance" with "laws or
regulations" when it seeks to secure observance of specific rules, even if
the measure cannot be guaranteed to achieve such result with absolute
certainty.[329]
5.109. We do not consider that the scope
of "laws or regulations" is limited to instruments that are legally
enforceable (including, e.g. before a court of law), or that are accompanied by
penalties and sanctions to be applied in situations of non-compliance. Instead,
as we see it, the concept is broader and may, in appropriate cases, include
rules in respect of which a Member seeks to "secure compliance", even
when compliance is not coerced, for example, through the imposition of
penalties or sanctions. In
assessing whether a rule falls within the scope of "laws or regulations"
under Article XX(d), a panel should consider the degree to which an instrument
containing the alleged rule is normative in nature. It is therefore relevant
for a panel to examine whether a rule is legally enforceable, as this may
demonstrate the extent to which it sets out a rule of conduct or course of
action that is to be observed within the domestic legal system of a Member. It
also may be relevant for a panel to examine whether the instrument provides for
penalties or sanctions to be applied in situations of non-compliance.
5.110. The Appellate Body has stated that
a "measure can be said 'to secure compliance' with laws or regulations
when its design reveals that it secures compliance with specific
rules, obligations, or requirements under such laws or
regulations".[330] It is important, in this regard,
to distinguish between the specific rules, obligations, or requirements with
respect to which a measure seeks to secure compliance, on the one hand, and the
objectives of the relevant "laws or regulations", which may assist in
"elucidating the content of specific rules, obligations, or requirements"
of the "laws or regulations", on the other hand.[331] The "more precisely" a
respondent is able to identify specific rules, obligations, or requirements
contained in the relevant "laws or regulations", the "more
likely" it will be able to elucidate how and why the inconsistent measure
secures compliance with such "laws or regulations".[332] Thus, in assessing whether an
instrument constitutes a "law or regulation" within the meaning of
Article XX(d), a panel should also consider the degree of specificity or
precision with which the relevant instrument lays down a particular rule of
conduct or course of action within the domestic legal system of a Member, as
opposed to simply providing a legal basis for action that may be consistent
with certain objectives.
5.111. In certain cases, a respondent may be able to identify a specific
provision of a single domestic instrument that contains a given rule,
obligation, or requirement with which it seeks "to secure compliance"
for purposes of Article XX(d). However, it is also possible to envisage
situations where a respondent seeks to identify a given rule, obligation, or
requirement by reference to, or deriving from, several elements or parts of one
or more instruments under its domestic legal system. In Argentina –
Financial Services, the Appellate Body acknowledged this possibility
when it said that a respondent "may choose to demonstrate that the measure
is designed and necessary to secure compliance with an obligation or
obligations arising from several laws or regulations operating together as part
of a comprehensive framework".[333] Indeed, we do not see anything in the text of Article XX(d) that
would exclude, from the scope of "laws or regulations", rules,
obligations, or requirements that are not contained in a single domestic
instrument or a provision thereof. In a given domestic legal system, several
elements of one or more instruments may function together to set out a rule of
conduct or course of action. In such a scenario, in order to understand
properly the content, substance, and normativity of a given rule, a panel may
be required to examine together the different elements of one or more
instruments identified by a respondent. Of course, insofar as a respondent
seeks to rely on a rule deriving from several instruments or parts thereof, it
would still bear the burden of establishing that the instruments or the parts
that it identifies actually set out the alleged rule.
5.112. Ultimately, a panel's scrutiny of
whether a responding party has identified "laws or regulations"
within the meaning of Article XX(d) should focus on the specific features and
characteristics of the instruments at issue, including the alleged rules that
they may contain. While the form and title given to an
instrument may shed light on its legal status and content, a determination of
whether an alleged rule falls within the scope of "laws or
regulations" for purposes of Article XX(d) cannot be made simply by
reference to the label given to an instrument under the domestic law of a
Member.[334]
5.113. To sum up, in determining whether a
responding party has identified a rule that falls within the scope of
"laws or regulations" under Article XX(d) of the GATT 1994, a panel
should evaluate and give due consideration to all the characteristics of the
relevant instrument(s) and should avoid focusing exclusively or unduly on any
single characteristic. In particular, it may be relevant for a panel to
consider, among others: (i) the degree of normativity of the instrument and the
extent to which the instrument operates to set out a rule of conduct or course
of action that is to be observed within the domestic legal system of a Member;
(ii) the degree of specificity of the relevant rule; (iii) whether the rule is
legally enforceable, including, e.g. before a court of law; (iv) whether
the rule has been adopted or recognized by a competent authority possessing the
necessary powers under the domestic legal system of a Member; (v) the form and
title given to any instrument or instruments containing the rule under the
domestic legal system of a Member; and (vi) the penalties or sanctions that may
accompany the relevant rule.
5.114. In some cases, such as those involving a specific, legally
enforceable rule under a single provision of a domestic legislative act,
determining whether a respondent has identified "laws or regulations"
within the meaning of Article XX(d) may be a relatively straightforward
exercise. In others, however, the assessment may be more complex. Importantly, this assessment must
always be carried out on a case-by-case basis, in light of the specific
characteristics and features of the instruments at issue, the rule alleged to
exist, and the domestic legal system of the Member concerned.
5.115. Having identified the legal
standards under Article XX(d), we turn to address India's claims on appeal, beginning
with the arguments directed at the Panel's analysis of whether the domestic
instruments and the alleged rules thereunder, as identified by India, fall
within the scope of "laws or regulations" under Article XX(d). We
note that the Panel adopted a different sequence, beginning, first, by
considering whether the international instruments identified by India are
"laws or regulations", before turning to the domestic instruments
identified by India. We nonetheless consider it useful
to begin our assessment with the Panel's analysis of India's domestic
instruments, because it is in the course of this analysis that the Panel
developed its interpretation of "laws or regulations" under Article
XX(d).[335]
5.116. With respect to the Panel's
analysis of the alleged rule set out in the domestic instruments identified by
India, India appeals the Panel's findings that India had failed to demonstrate
that its DCR measures are designed "to secure compliance with laws or
regulations" within the meaning of Article XX(d) of the GATT 1994. As we
see it, India's appeal is based on three main grounds.
5.117. First, India contends that the
Panel erred under Article XX(d) in finding that the National Electricity
Policy, the National Electricity Plan, and the National Action Plan on Climate
Change do not constitute "laws or
regulations".[336] According to India, these
admittedly "non-binding" instruments are nonetheless "laws"
within the meaning of Article XX(d) under India's domestic legal system because
the "legal framework in India" comprises both "binding"
laws, and policies and plans, that provide the "framework for executive
action".[337]
5.118. Second, India disagrees with the
Panel to the extent that it suggested that the phrase "to secure
compliance" limits the scope of Article XX(d) to measures that
"prevent" actions that would be "illegal" under the laws or
regulations at issue.[338]
5.119. Third, India submits that the Panel
erred in examining Section 3 of India's Electricity Act, 2003,
"in isolation" from the other "non-binding" instruments it
had identified, given that India had argued that all the domestic instruments
it had identified, taken together, set out the obligation to ensure
"ecologically sustainable growth"[339] and that the DCR measures are
required in order to secure compliance with this obligation.[340] India adds, in this regard, that
the fact that the instruments to which it referred "leave open flexibility
for India to design its implementation measures does not mean they constitute
objectives that need not be complied with, or that compliance with such
obligations need not be secured".[341]
5.120. The United States responds that the
fact that the domestic instruments that India had identified lay out important
and even "critical" objectives does not make them "laws or
regulations" within the meaning of Article XX(d). The United States
asserts that "to secure compliance" under Article XX(d) means to
"enforce" obligations under laws and regulations and not to
"ensure" the attainment of the objectives of the laws and
regulations.[342] According to the United States,
India does not even attempt to argue that its DCR measures are necessary to
comply with any Indian laws or regulations "as such", but only with
the objectives embodied in the laws identified by India.[343] Moreover, the United States
recalls that the Panel considered that Section 3 of the Electricity Act, 2003
requires the Central Government to prepare the National Electricity Policy, and
that the DCR measures do nothing to enforce this legal requirement.[344] Noting India's argument on appeal
that it did not mean to cite Section 3 on its own, but as one element of its
laws or regulations, the United States further submits that India does not
directly appeal the Panel's findings with respect to Section 3 of the
Electricity Act, 2003.[345]
5.121. We address India's arguments below,
beginning with India's contention that the Panel erred in its interpretation of
the terms "laws or regulations" in Article XX(d) as referring to
"legally enforceable rules of conduct under the domestic legal
system" of a Member.[346] As discussed above, a
determination of whether an instrument qualifies as a "law or
regulation" within the meaning of Article XX(d) includes an assessment of
whether the responding party has identified specific rules, obligations, or
requirements that operate with a sufficient degree of normativity under its
domestic legal system so as to set out a rule of conduct or course of action.
The legal enforceability of an instrument under the domestic legal system of a
Member may be an important, even determinative, factor in demonstrating that
such an instrument operates with a high degree of normativity within the
domestic legal system of that Member. Depending on the domestic legal system of
a Member, as well as the characteristics of the instrument at issue, there may,
however, be other ways to demonstrate that an instrument operates with a
sufficient degree of normativity. Insofar as Article XX(d) is susceptible of
application in respect of a wide variety of "laws or regulations"[347], we recall that the degree of
normativity of an instrument is one of the relevant factors in assessing
whether such instrument qualifies as a "law or regulation" under
Article XX(d). The Panel goes some way in acknowledging this by stating that the
diversity of Members' domestic legal systems should be taken into account in
determining whether an instrument can be characterized as a "law or
regulation" for purposes of Article XX(d).[348] We, however, disagree with the Panel
to the extent that it may have suggested that the scope of "laws or
regulations" under Article XX(d) is limited to
"legally enforceable rules of conduct under the domestic legal
system" of a Member.[349]
5.122. We next consider the Panel's
interpretation of the phrase "to secure compliance" in
Article XX(d). Having summarized the position of prior panels[350], the present Panel
"consider[ed] it unnecessary to resolve the question of precisely what
type of link or nexus would be required to establish that the DCR measures
'secure compliance' with [Section 3 of the Electricity Act, 2003]", given
that the Panel saw "no link or nexus between the DCR measures and Section
3 of the Electricity Act".[351] Contrary to what India argues on
appeal, we therefore do not see the Panel to have found that "to secure
compliance" in Article XX(d) restricts the scope of that provision only to
measures that "prevent" actions that would be illegal under the "laws
or regulations" at issue.
5.123. We turn now to consider India's
argument that the Panel erred in its application of Article XX(d) by
examining Section 3 of India's Electricity Act, 2003 "in isolation",
although India had argued that the domestic instruments that it had identified,
when considered together, "mandate achieving ecologically sustainable
growth" and that the DCR measures are required for securing compliance
with this rule.[352]
5.124. We recall that the Panel began its
analysis by summarizing India's position as follows:
India also submits that its "domestic …
obligations to ensure ecologically sustainable growth while addressing India's
energy security challenge, and ensuring compliance with its obligations
relating to climate change" are embodied in: (a) the Electricity Act
"read with"; (b) the National
Electricity Policy; (c) the National Electricity Plan; and (d) the National
Action Plan on Climate Change.[353]
5.125. The Panel noted that India's defence under Article XX(d) was based
on the "domestic obligations" of India as reflected in the Electricity
Act, 2003, "read with" the National Electricity Policy, the
National Electricity Plan, and the National Action Plan on Climate Change.
Subsequently, the Panel structured its analysis in a manner whereby it assessed
the relevant passages and provisions of each of these instruments individually,
in order to determine whether any of them fall within the scope of "laws
or regulations" under Article XX(d). The Panel found the relevant
passages and provisions of the National Electricity Policy, the National
Electricity Plan, and the National Action Plan on Climate Change to be outside
the scope of "laws or regulations". By contrast, the Panel found
Section 3 of the Electricity Act, 2003 to be a "law" within the
meaning of Article XX(d), and therefore proceeded to analyse whether the
DCR measures are designed "to secure compliance" with Section 3 of
the Electricity Act, 2003, finding, ultimately, that this is not the case.
5.126. The rule that India sought to
identify, with respect to which the DCR measures seek to secure compliance, is
that of "ensur[ing] ecologically sustainable growth while addressing
India's energy security challenge, and ensuring compliance with its obligations
relating to climate change".[354] This rule, India alleged, is set
out in the passages and provisions of the domestic instruments that were identified
by it, and falls within the scope of "laws or regulations" under
Article XX(d) with which compliance is sought to be secured.
5.127. As discussed above, a respondent
may be able to identify a specific provision of a single domestic instrument
that contains a given rule, obligation, or requirement with which it seeks
"to secure compliance" for purposes of Article XX(d). However, a
respondent may also identify a given rule, obligation, or requirement by
reference to, or deriving from, several elements or parts of one or more
instruments under its domestic legal system. In the latter scenario, the
respondent would bear the burden of demonstrating that the instruments, or
parts thereof, that it identifies actually set out the rule alleged by it.
Additionally, a respondent would also have to demonstrate that such rule falls
within the scope of "laws or regulations" under Article XX(d) by
reference to all the factors that may be relevant for such an assessment. As
explained above, such factors may include, among others: (i) the degree of
normativity of the instrument and the extent to which the instrument operates
to set out a rule of conduct or course of action that is to be observed within
the domestic legal system of a Member; (ii) the degree of specificity of the
relevant rule; (iii) whether the rule is legally enforceable, including,
e.g. before a court of law; (iv) whether the rule has been adopted or
recognized by a competent authority possessing the necessary powers under the
domestic legal system of a Member; (v) the form and title given to any
instrument or instruments containing the rule under the domestic legal system
of a Member; and (vi) the penalties or sanctions that may accompany the
relevant rule.
5.128. We recall that the Panel analysed
each of the domestic instruments that India had identified to assess whether
they qualify as "laws or regulations" within the meaning of Article XX(d).
The Panel found that, whereas the passages and provisions of the National
Electricity Policy, the National Electricity Plan, and the National Action Plan on Climate
Change are not "laws or regulations"
within the meaning of Article XX(d), Section 3 of the Electricity Act, 2003
is a "law" for purposes of that provision. In our view, given how
India presented its case alleging the existence of the obligation of ensuring
ecologically sustainable growth deriving from several instruments, it may have
been appropriate for the Panel to have begun by assessing whether the passages
and provisions of the domestic instruments that India had identified, when considered together, set out the rule alleged by India.
Were the Panel satisfied that India had established the existence of such a
rule, it could then have considered whether this rule embodied in the domestic
instruments identified by India qualified as a "law or regulation"
under Article XX(d).
5.129. Although we acknowledge that the
Panel could have carried out its analysis differently, we do not consider that
the approach outlined by us above, i.e. considering the different instruments together, would ultimately have led the
Panel to a different conclusion as to whether the DCR measures are
measures "to secure compliance with laws or regulations" within the
meaning of Article XX(d) for the reasons set out below.[355]
5.130. We recall that, with respect to the
National Electricity Policy, India identified paragraph 5.12.1 of the
Policy as containing the "specific obligation" with which the DCR
measures are designed to secure compliance.[356] Paragraph 5.12.1 of the National
Electricity Policy reads as follows:
Non-conventional sources of energy being the most
environment friendly there is an urgent need to promote generation of
electricity based on such sources of energy. For this purpose, efforts need to
be made to reduce the capital cost of projects based on non-conventional and
renewable sources of energy. Cost of energy can also be reduced by promoting
competition within such projects. At the same time, adequate promotional
measures would also have to be taken for development of technologies and a sustained
growth of these sources.[357]
5.131. As to the National Electricity
Plan, India referred to subsection 5.2.1 of the Plan as containing the
obligation with which the DCR measures are designed to secure compliance.[358] Subsection 5.2.1 reads:
5.2.1 Sustainable
Development
Sustainable Development of our country is our ultimate
goal which encompasses economic development, maintaining environmental quality
and social equity. This would also ensure that development takes place to
fulfil our present needs without compromising the needs of our future
generations. The importance and relevance of power development within the
confines of Clean and Green Power is the most essential element. Such a growth
depends upon the choice of an appropriate fuel / technology for power generation.
Accordingly, the Plan takes into account the development of projects based on
renewable energy sources as well as other measures and technologies promoting
sustainable development of the country.
The foremost Low Carbon Strategy Initiative is the
choice of resources for power generation. Projects in the Plan based on
Conventional Sources i.e. Hydro, Nuclear & thermal are selected as a result
of Studies carried out using Capacity Expansion Software programmes to meet the
demand as stipulated by the draft 18th EPS Report. Power from
Renewable Energy Sources has also been considered while carrying out these
studies.
The demand adopted for planning purpose is the draft 18th
EPS demand projections. This demand is based on use of energy efficient technologies
being used and energy conservation measures being adopted. Therefore, the
planning strategy adopted is in accordance with low carbon strategy growth.[359]
5.132. Finally, with respect to the
National Action Plan on Climate Change, based on the summary provided by India,
the Panel identified three excerpts from the Plan to which it understood India was
referring.[360] On appeal, India does not take
issue with the Panel's identification of these excerpts. These excerpts read as
follows:
Recognizing that climate change is a global challenge,
India will engage actively in multilateral negotiations in the UN Framework
Convention on Climate Change, in a positive, constructive and forward-looking
manner. Our objective will be to establish an effective, cooperative and equitable
global approach based on the principle of common but differentiated
responsibilities and respective capabilities, enshrined in the [UN Framework Convention on Climate Change].
… Finally, our approach must also be compatible with our role as a responsible
and enlightened member of the international community, ready to make our
contribution to the solution of a global challenge, which impacts on humanity
as a whole.
- - -
The National Solar Mission would promote the use of
solar energy for power generation and other applications. …
Solar based power technologies are an extremely clean
form of generation with practically no form of emissions at the point of
generation. They would lead to energy security through displacement of coal and
petroleum.
- - -
Rural solar thermal applications would also be pursued
under public-private partnerships where feasible. Commensurate local
manufacturing capacity to meet this level of deployment, with necessary
technology tie-ups, where desirable, would be established. Further, the Mission
would aim for local Photovoltaic (PV) production from integrated facilities at
a level of 1000 [megawatts]/annum within this time frame. It would also aim to
establish at least 1000 [megawatts] of Concentrating Solar Power (CSP)
generation capacity, again, with such technical tie-ups as essential within the
stated time frame.[361]
5.133. Looking at the passages and
provisions of the National Electricity Policy, the National Electricity Plan,
and the National Action Plan on Climate Change identified by India, we fail to
see how these instruments, taken together, could be read to set out a
"rule" to ensure ecologically sustainable growth that India alleges.[362] The National Electricity Policy
states that it "aims at laying guidelines" for the attainment of
certain objectives.[363] The National Electricity Plan is
described as a "reference document".[364] The National Action Plan on
Climate Change "updates India's national programmes relevant to addressing
climate change"; it "identifies measures that promote [India's]
development objectives, while also yielding co-benefits for addressing climate
change effectively"; and it "lists specific opportunities to
simultaneously advance India's development and climate related objectives of
both adaptation as well as greenhouse gas (GHG) mitigation."[365] We note that there are differences
in the substantive content of the passages and provisions of these three instruments,
on the one hand, and the substance of the rule that India alleges they contain,
on the other hand. In addition, the relevant texts of these instruments,
whether seen in isolation or read together, do not set out, with a sufficient
degree of normativity and specificity, a "rule" to ensure
ecologically sustainable growth, as alleged by India. Instead, we note, as did
the Panel, that the text of these passages and provisions "is hortatory,
aspirational, declaratory, and at times solely descriptive".[366]
5.134. We now turn to Section 3 of the
Electricity Act, 2003, which reads as follows:
3. (1) The Central Government shall, from time to time,
prepare the national electricity policy and tariff policy, in consultation with
the State Governments and the [Central Electricity Authority] for development
of the power system based on optimal utilisation of resources such as coal, natural
gas, nuclear substances or materials, hydro and renewable sources of energy.
(2) The Central Government shall publish National
Electricity Policy and tariff policy from time to time.
(3) The Central Government may, from time to time, in
consultation with the State Governments and the [Central Electricity
Authority], review or revise, the National Electricity Policy and tariff policy
referred to in sub-section (1).
(4) The [Central Electricity Authority] shall prepare a
National Electricity Plan in accordance with the National Electricity Policy
and notify such plan once in five years:
Provided that the [Central Electricity Authority] in
preparing the National Electricity Plan shall publish the draft National
Electricity Plan and invite suggestions and objections thereon from licensees,
generating companies and the public within such time as may be prescribed:
Provided further that the [Central Electricity
Authority] shall -
(a) notify the plan after obtaining the approval of the
Central Government;
(b) revise the plan incorporating therein the
directions, if any, given by the Central Government while granting approval
under clause (a).
(5) The [Central Electricity Authority] may review or
revise the National Electricity Plan in accordance with the National
Electricity Policy.[367]
5.135. Section 3(1) of the
Electricity Act, 2003 thus stipulates that the Central Government
"shall" prepare the National Electricity Policy. Section 3(2)
requires the Central Government to publish this policy from time to time.
Section 3(3) allows the Central Government to review and revise this policy.
Section 3(4) requires that the Central Electricity Authority "shall"
prepare a National Electricity Plan in accordance with the National Electricity
Policy and notify such plan once in five years. Section 3 therefore sets out
the obligation, and empowers the relevant entities to periodically prepare,
publish, and review the National Electricity Policy, and the National
Electricity Plan.[368] This obligation is different in
content from the rule that India seeks to derive from Section 3 of the
Electricity Act, 2003, i.e. to ensure ecologically sustainable growth while
addressing India's energy security challenge, and ensuring compliance with its
obligations relating to climate change.[369]
5.136. While Section 3 sets out the legal
basis and authority for the development of the National Electricity Policy and
the National Electricity Plan, it does not speak to the degree of normativity
of these instruments. Thus, for example, Section 3 does not
speak to the extent to which these instruments are to be observed or complied
with under the domestic legal system of India. Whereas the National Electricity
Policy and the National Electricity Plan may well have been enacted by the
authorities competent to do so under India's domestic legal system, it is not
clear to us how Section 3 of the Electricity Act, 2003 would have the effect of
adding to the degree of normativity of these otherwise "non-binding"
domestic instruments.
5.137. For all these reasons, we disagree
with India's contention that the passages and provisions of the domestic
instruments identified by India, when read together, set out the rule "to
ensure ecologically sustainable growth while addressing India's energy security
challenge, and ensuring compliance with its obligations relating to climate
change", as alleged by India.
5.138. India appeals the Panel's finding that India had failed to
demonstrate that the international instruments it had identified have
"direct effect" in India, and are therefore "laws or
regulations" within the meaning of Article XX(d) of the GATT 1994.[370] First, India submits that the Panel's analysis was based on a
"complete misunderstanding" of India's arguments regarding the
"implementation" of legal obligations.[371] India asserts that the international instruments it had identified
have "direct effect" in India, because the executive branch of the Central
Government can take actions to "implement" or "execute"
these international instruments without the need for the legislature to enact a
domestic law incorporating the international instruments.[372] For India, it is because these international instruments have
"direct effect" in India that the executive is required to take
implementing action.[373] Second, India submits that the "direct effect" of the identified
international instruments under its domestic legal system is established by the
fact that "the principles of sustainable development under
international environmental law have been recognized by the Supreme Court of
India to be part of the environmental and developmental governance in
India."[374] India therefore requests that we reverse the Panel's finding that
the international instruments India had identified do not fall within the scope
of "laws or regulations" under Article XX(d). India also requests
that we find that, "because these instruments of international law have a
direct effect in India, … the executive needs to secure compliance with such
laws."[375]
5.139. The United States responds that, in Mexico –
Taxes on Soft Drinks, the Appellate
Body found that an international agreement is not a "law or
regulation" under Article XX(d) if a Member's legal system calls for
"domestic legislative or regulatory acts" to implement the agreement.[376] According to the United States, "where a 'regulatory act'
intervenes, an international agreement is not in and of itself part of a
Member's laws and regulations."[377] Highlighting India's acknowledgment that the international instruments
it had identified require executive "implementation", the United
States asserts that these international instruments do not have "direct
effect" in India and are therefore outside the scope of Article XX(d),
because that provision does not distinguish between executive or legislative
action in matters of implementing international law.[378] Moreover, the United States submits that India has failed to
discharge its burden of proof under Article XX(d), as its arguments consist of
"broad generalizations about Indian law, with no supporting
evidence".[379] With respect to the Decisions of the Supreme Court of India that
India relies upon, the United States points out that one of them merely
recounts the "history of international agreements regarding sustainable development"
and "provides no guidance whatsoever on the role the referenced agreements
play in Indian law".[380] The United States also submits that India did not provide a
copy of the Supreme Court Decision cited in its first written submission to the
Panel, thereby preventing an evaluation of the extent to which it supports
India's position.[381]
5.140. As set out above, a respondent seeking to justify an otherwise
GATT-inconsistent measure under Article XX(d) is required to establish the
existence of rules that form part of its domestic legal system and that such
rules fall within the scope of "laws or regulations" under that
provision.[382] In Mexico – Taxes on Soft Drinks,
the Appellate Body stated that "the terms 'laws or regulations' cover
rules that form part of the domestic legal system of a WTO Member, including rules deriving from international agreements that
have been incorporated into the domestic legal system of a WTO Member or have
direct effect according to that WTO Member's legal system".[383] Rules deriving from international agreements may thus become part
of the domestic legal system of a Member in at least two ways. For example,
Members may incorporate such rules, including
through domestic legislative or executive acts intended to implement an
international agreement[384]; and, certain international rules may have direct
effect within the domestic legal systems of some Members without
specific domestic action to implement such rules.[385] Subject to the domestic legal system of a Member, there may well be
other ways in which international instruments or rules can become part of that
domestic legal system. An assessment of whether a given
international instrument or rule forms part of the domestic legal system of a
Member must be carried out on a case-by-case basis, in light of the nature of
the instrument or rule and the subject matter of the law at issue, and taking
into account the functioning of the domestic legal system of the Member in
question.
5.141. We emphasize that, even if a particular international instrument can
be said to form part of the domestic legal system of a Member, this does not,
in and of itself, establish the existence of a rule, obligation, or requirement within the domestic legal system of the Member that falls
within the scope of a "law or regulation" under Article XX(d).
Rather, as set out above, an assessment of whether an instrument operates with
a sufficient degree of normativity and specificity under the domestic legal
system of a Member[386] so as to set out a rule of conduct or course of action, and thereby
qualify as a "law or regulation", must be carried out on case‑by‑case
basis, taking into account all the other relevant factors relating to the
instrument and the domestic legal system of the Member.
5.142. We now turn to India's contention that the international instruments
it had identified have "direct effect" in India, and fall within the
scope of "laws or regulations" under Article XX(d), because the
Indian legislature "is not required to legislate on a domestic law
incorporating the international law into domestic law" before the
executive branch can take action to "implement" or
"execute" the international instruments.[387] According to India, legislative
action to incorporate an international instrument is required only when there
is "conflicting" domestic legislation, which is not the case with
respect to the international instruments that India has identified in this
case.[388] India
asserts that the very fact that the executive branch can take action to
"execute" the international instruments at issue, e.g. by enacting
the DCR measures, shows that these international instruments and rules are
already a part of its domestic legal system and therefore may be acted upon by
the executive branch.[389] According to India's reading of Article XX(d), international instruments
that can be "implemented" or "executed" in the domestic
legal system of a particular Member exclusively through executive action,
without any prior domestic legislative basis, have "direct effect"
within the legal system of the Member in question, form a part of that legal
system, and therefore fall within the scope of "laws or regulations"
under Article XX(d).
5.143. We recall that the Panel accepted India's explanation of how its
domestic legal system functions and the allocation of powers under the Constitution
of India:
We have taken careful note of India's explanation of
how its domestic legal system functions. We accept India's explanation of the
allocation of powers under the Constitution of India, and we accept its
explanation that the executive branch may take implementing actions to secure
compliance with India's international law obligations under the afore-mentioned
instruments. We also accept India's explanation that the executive branch may
take implementing actions without express sanction by the legislative branch,
provided those implementing actions do not run into conflict with laws enacted
by the Parliament.[390]
5.144. In the Panel's view, however, India's explanation suggests that,
under its domestic legal system, either the executive or the legislative
branch, or both, as appropriate, must take "implementing actions" to
incorporate and implement India's international obligations into its domestic
legal system.[391] Given that India's explanation established that India's
international law obligations may possibly be acted upon and implemented by
certain domestic authorities in India, the Panel considered this to suggest
that these obligations do not have "direct effect" in India.[392] The Panel also saw no basis, either in the text of Article XX(d) or
in the Appellate Body's report in Mexico – Taxes on Soft
Drinks, for drawing a distinction between implementing actions taken
by the legislative branch versus implementing actions taken by the executive
branch, such that the question of whether an international agreement would be
found to have "direct effect" for purposes of Article XX(d) would
depend on "whether the executive branch, as opposed to the legislative
branch, takes implementing measures to incorporate them into the domestic legal
system".[393]
5.145. Like the Panel, we see no reason to question India's explanation of
the allocation of powers between the executive and legislative branches under
the Constitution of India. We also take note of India's submission that the
very fact that the executive branch can take action to "execute" the
international instruments or rules at issue, e.g. by enacting the DCR measures,
because they are not in conflict with domestic legislation shows that these
international instruments may already form part of its domestic legal system
and therefore may be acted upon by the executive branch.[394] However, the issue of which branch of the Central Government has
the power to implement, execute, or otherwise give effect to an international
instrument within the domestic legal system is not, in and of itself,
determinative of whether such an instrument falls within the scope of
"laws or regulations" under Article XX(d). Rather, as explained
above, whether a rule set out in an international instrument forms part of the
domestic legal system of a Member and falls within the scope of "laws or
regulations" under Article XX(d) has to be determined in light of all the
relevant factors in a given case, including the characteristics of the
instrument at issue and the features of the domestic legal system of the Member
concerned.
5.146. We now turn to consider India's contention that the "direct
effect" of the identified international instruments under its domestic
legal system is established by the fact that "the principles of
sustainable development under international environmental law have been
recognized by the Supreme Court of India to be part of the environmental and
developmental governance in India."[395]
5.147. The Panel noted India's submission that the Supreme Court of India
"has held that principles of international environmental law, and the
concept of sustainable development, 'are fundamental to the environmental and
developmental governance in India', and 'has also noted that the concept of
sustainable development is a part of customary international law'".[396] In the Panel's view, however, India's arguments and evidence do not
speak "to the question of whether international obligations are
automatically incorporated into domestic law and have 'direct effect' in
India".[397] The Panel also recalled India's opening statement at the first
meeting of the Panel, where India, referring to a Decision of the Supreme Court
of India, explained:
The Supreme Court of India, in the context of exercise
of the Central Government's executive power of establishing a power plant,
recently ruled that the decision-making power by the executive in that case was
based on the touchstone of sustainable development and its impact on ecology
following national and international environmental principles. The principles
on sustainable development in that case were inferred from the provisions of
several instruments of international environmental law, including the[United Nations Framework Convention on Climate
Change], the principles arrived at the other conventions concluded at
the United Nations Conference on Environment and Development in 1992, including
Agenda 21 and the Convention on Biological Diversity, as well as the Rio+5
Summit of 1997, which adopted the Programme for Further Implementation of
Agenda 21. The court did not go into whether or not the provisions or
principles were legally binding or non-binding in nature. It simply noted the
relevance of international environmental law, as enshrined in several legal
instruments that states, in the exercise of their sovereign power, have adhered
to. It is in exercise of these powers that the policies referred to in India's
submission were formulated by the Government, including the National [Action
Plan on Climate Change], the National Electricity Policy.[398]
5.148. While these Decisions and observations by the Supreme Court may
serve to highlight the relevance of the international instruments and rules
identified by India for purposes of interpreting provisions of India's domestic
law, as well as for guiding the exercise of the decision-making power of the
executive branch of the Central Government, we do not consider that this is
sufficient to demonstrate that the international instruments India identified
are rules that form part of its domestic legal system and fall within the scope
of "laws or regulations" under Article XX(d). To the extent that
India relies on these Decisions by the Supreme Court to reinforce its point
that the executive branch, by enacting the DCR measures, was
"executing", or giving effect to, the international instruments identified
by India, we recall that the mere fact that the executive branch takes actions
in pursuance of the international instruments at issue is not sufficient, in
and of itself, to demonstrate that such international instruments fall within
the scope of "laws or regulations" under Article XX(d).
5.149. For the above reasons, we uphold the Panel's finding, in
paragraph 7.301 of its Report, that India failed to demonstrate that the
international instruments identified by it – namely, the preamble of the WTO Agreement, the United Nations Framework
Convention on Climate Change, the Rio Declaration on Environment and
Development (1992), and UN Resolution A/RES/66/288 (2012) (Rio+20 Document: "The
Future We Want") – qualify as "laws or regulations" under
Article XX(d) of the GATT 1994 in the present dispute.
5.150. We have found above that, in determining whether a
responding party has identified a rule that falls within the scope of
"laws or regulations" under Article XX(d) of the GATT 1994, a panel
should evaluate and give due consideration to all the characteristics of the
relevant instrument(s) and should avoid focusing exclusively or unduly on any
single characteristic. In particular, it may be relevant for a panel to
consider, among others: (i) the degree of normativity of the instrument and the
extent to which the instrument operates to set out a rule of conduct or course
of action that is to be observed within the domestic legal system of a Member;
(ii) the degree of specificity of the relevant rule; (iii) whether the rule is
legally enforceable, including, e.g. before a court of law; (iv) whether the
rule has been adopted or recognized by a competent authority possessing the
necessary powers under the domestic legal system of a Member; (v) the form and
title given to any instrument or instruments containing the rule under the
domestic legal system of a Member; and (vi) the penalties or sanctions that may
accompany the relevant rule. In some cases, such as
those involving a specific, legally enforceable rule under a single provision
of a domestic legislative act, determining whether a respondent has identified
"laws or regulations" within the meaning of Article XX(d) may be a
relatively straightforward exercise. In other cases, however, the assessment may
be more complex. Importantly, this assessment must
always be carried out on a case-by-case basis, in light of the specific
characteristics and features of the instruments at issue, the rule alleged to
exist, and the domestic legal system of the Member concerned.
5.151. We recall that India has not
demonstrated that the passages and provisions of the domestic instruments it identified,
when read together, set out the obligation "to ensure ecologically
sustainable growth while addressing India's energy security challenge, and
ensuring compliance with its obligations relating to climate change", as
alleged by India.[399] We have
also concluded that the Panel did not err in finding that India did not
demonstrate that the international instruments it had identified fall within the scope of
"laws or regulations" under Article XX(d) in the present
dispute.[400] Consequently, we uphold the Panel's finding, in paragraph
7.333 of its Report, that India has not demonstrated that the DCR measures are
measures "to secure compliance with laws or regulations which are not
inconsistent with the provisions of [the GATT 1994]", and the Panel's
ultimate finding, in paragraph 8.2.b of its Report, that the DCR measures are
not justified under Article XX(d) of the GATT 1994.
5.4 "Essentiality" and "necessity" under Articles XX(j) and XX(d), and the chapeau of Article XX of
the GATT 1994
5.152. We recall the Panel's finding that the DCR measures do not
involve the acquisition of "products in general or local short
supply" within the meaning of Article XX(j) of the GATT 1994[401], and that India did not demonstrate that its DCR measures are
measures "to secure compliance with laws or regulations" that are not
GATT-inconsistent within the meaning of Article XX(d) of the
GATT 1994.[402] The Panel therefore considered it unnecessary to make any
additional findings as to whether the same measures would be
"essential" to the acquisition of solar cells and modules within the
meaning of Article XX(j), or "necessary" to secure compliance
within the meaning of Article XX(d).[403] The Panel explained that, were it to find that the measures at
issue "are not 'essential' or 'necessary'" within the meaning of
those provisions, this would merely establish a "separate and additional
basis for the overall conclusion", which the Panel had already reached, i.e.
"that the DCR measures are not justified under Articles XX(j) or
XX(d)".[404] The Panel decided, however, to continue its review and to make
additional findings that may assist the Appellate Body should it later be
called upon to complete the legal analysis under either Article XX(j) or
Article XX(d).[405] As the Panel pointed out, its approach is consistent with the
approach that has been taken in the past by other panels.[406]
5.153. With regard to the requirements of the chapeau of Article XX,
the Panel further recalled that "India ha[d] failed to demonstrate that
the DCR measures fall within the scope of Articles XX(j) or
XX(d)" and that "the arguments that India advance[d] in connection
with the requirements of the chapeau of Article XX [were] essentially a repetition
of the arguments that it present[ed] in relation to the issue of whether solar
cells and modules are 'essential to the acquisition or distribution of products
in general or local short supply' under Article XX(j), and 'necessary to
secure compliance with laws or regulations' under Article XX(d)."[407] Consequently, the Panel saw "no compelling reason to proceed
with any further examination of the DCR measures under the chapeau of
Article XX of the GATT 1994", and therefore refrained from doing
so.[408]
5.154. We have addressed India's appeal of the Panel's findings regarding
threshold legal elements under Articles XX(j) and XX(d) of the GATT 1994
above, and have upheld the Panel's finding, in paragraph 7.265 of its Report,
that solar cells and modules are not "products in local or general short
supply" in India, within the meaning of Article XX(j), as well as the
Panel's finding, in paragraph 7.333 of its Report, that India did not
demonstrate that the DCR measures are measures "to secure compliance with
laws or regulations which are not inconsistent with the provisions of [the GATT
1994]". We have also upheld the Panel's conclusion, in paragraph 8.2.b of its
Report, that the DCR measures are not justified under either Article XX(j) or
Article XX(d) of the GATT 1994.
5.155. Given these findings, we do not consider it necessary further to
examine India's claims on appeal pertaining to the Panel's "limited
review and analysis" of whether the DCR measures are "essential"
to the acquisition of solar cells and modules for the purpose of Article XX(j),
or whether they are "necessary" within the meaning of
Article XX(d). Nor do we consider it necessary to examine India's
arguments as they relate to the requirements of the chapeau of Article XX of
the GATT 1994.
5.5 Separate opinion of one Appellate Body Member
5.156. Having upheld the Panel's findings
under Article III:8(a), Article XX(j) and Article XX(d) of the
GATT 1994, the Division hearing this appeal has determined that it is not
necessary further to
address India's claims regarding the remaining legal elements under those
provisions. While fully agreeing with my colleagues in this regard, I wish to
offer some remarks regarding why I consider that it was appropriate to end our
analysis, without further disposing of the other issues raised by India on
appeal. My remarks relate mainly to the adjudicatory function of the
Appellate Body in general, and I begin therefore by reflecting on the
Appellate Body's function as contemplated under the DSU.
5.157. Article 17.1 of the DSU
describes the Appellate Body's function in broad terms: to "hear
appeals from panel cases". In particular, Article 17.12 of the DSU
provides that the Appellate Body "shall address" each of the
issues raised by the parties to a dispute during an
appellate proceeding, and Article 17.6 delineates the scope of appeals as "issues of law covered in the
panel report and legal interpretations developed by the panel". Thus, the
Appellate Body is called upon to review any aspect of a panel's analysis,
including a panel's legal reasoning, provided that it has been properly raised
by the parties on appeal in accordance with Article 17.6. This
language in the DSU limits the scope of appellate review to the issues raised by the parties in the context of a given dispute.
Once raised by the parties on appeal, however, it is the legal "duty" of
the
Appellate Body to "address" each of those issues.
5.158. In deciding
how to "address" each of the
issues raised by the parties, the Appellate Body is guided
by certain overarching principles. First, the Appellate Body, as a part of
the WTO dispute settlement mechanism, contributes to the objectives of the
"prompt settlement" of a dispute or "positive solution to a
dispute", which are enunciated in the DSU.[409] Thus, the Appellate Body may,
for example, decline to make specific findings regarding an issue raised on
appeal, and "address" the issue only to the extent necessary to
ascertain that, in light of the other rulings under a different, but related,
claim on appeal that resolve the dispute, there was no need to rule on that
particular additional issue in question.[410] Whether making such an additional
finding would serve the goal of facilitating the prompt settlement and
effective resolution of a dispute is a matter for the Appellate Body to
decide in light of the particular circumstances of each case, including the
nature of, and relationship between, the relevant claims on appeal, as well as
their implications for implementation.
5.159. In addition, a necessary
incident of the adjudicative function conferred upon the Appellate Body is
that it must ensure that the parties have the
opportunity fully to present their arguments and evidence, and that they enjoy
"due process" throughout the appellate proceeding.[411] Thus, the need to safeguard the
due process rights of the parties in cases where, for example, a particular
issue has not been sufficiently explored before the panel is an important
constraint on the Appellate Body's ability to rule on particular issues
raised on appeal.[412]
5.160. That said, the
Appellate Body's decision on how to
"address" each of the issues on appeal should be understood as an
extension of its duty to properly exercise its
adjudicative function. Given the express language contained in
Article 17.12 of the DSU, i.e. "shall address", the
Appellate Body is not required to provide reasons as to why it adjudicates a particular issue properly raised by the
parties on appeal in accordance with Article 17.6 of the DSU. However,
when the Appellate Body considers,
for example, that further findings on issues appealed are not necessary
in order to facilitate the prompt settlement and
effective resolution of the dispute, it will explain this in its report.[413]
5.161. This brings me to Article 3.2
of the DSU, which provides that the "dispute settlement system of the WTO
… serves … to clarify the existing provisions of [the covered] agreements in
accordance with customary rules of interpretation of public international
law". As the Appellate Body has noted, there is nothing in
Article 3.2 that would
encourage "the Appellate Body to 'make law' by clarifying existing
provisions of the WTO Agreement outside the context of resolving a particular
dispute."[414] The
Appellate Body cannot be expected to offer interpretative guidance
regarding provisions of the covered agreements in an abstract manner beyond the
scope of what is required in a particular dispute. To do so would go beyond the
Appellate Body's adjudicatory function as contemplated under the DSU.
5.162. At the same
time, WTO Members including the third parties to a dispute have a systemic interest
in receiving an Appellate Body report that properly clarifies the existing
provisions of the covered agreements.[415] Moreover,
an Appellate Body report that appropriately disposes of the matter at
issue, which ultimately serves to clarify the relevant provisions of the
covered agreement, is not only required under the DSU, it is also important in
that it allows the DSB to make sufficiently precise recommendations and rulings
"in order to ensure effective resolution of disputes to the benefit of all
Members".[416]
5.163. Through this separate opinion, I
hope to be able to shed light on how I view the Appellate Body's function,
as well as its limits, both in the context of the present appeal, as well as
others on which I have been working with my distinguished colleagues at the
Appellate Body.
6.1. For the reasons set out in this
Report, the Appellate Body makes the following findings and conclusions.
6.2. With respect to the Panel's finding under Article III:8(a) of the
GATT 1994, we consider that, under Article III:8(a) the product purchased by way of
procurement must necessarily be "like", or
"directly competitive" with or "substitutable" for – in
other words, in a "competitive relationship" with – the foreign product
subject to discrimination. Although a consideration of inputs and processes of
production may inform the question of whether
the product purchased is in a competitive relationship with the product being
discriminated against, it does not displace the competitive
relationship standard. The question of whether the cover of Article III:8(a)
may also extend to discrimination relating to inputs and processes of
production used in respect of products purchased arises only after the product
purchased has been found to be in a competitive relationship with the product
subject to discrimination. Based on our review of the Panel's analysis and
approach:
a. We find that the Panel was properly guided by the Appellate
Body report in Canada – Renewable Energy / Canada – Feed-in Tariff
Program in finding that the DCR measures are
not covered by the derogation under Article III:8(a).
b. We reject India's claim
that the Panel acted
inconsistently with Article 11 of the DSU in assessing India's arguments
regarding the scope of application of Article III:8(a) of the GATT 1994.
c. Consequently, we uphold the Panel's findings, in paragraphs 7.135 and
7.187 of the Panel Report that the DCR measures are not covered by the
derogation under Article III:8(a) of the GATT 1994 and that, therefore,
the DCR measures are inconsistent with Article 2.1 of the TRIMs Agreement and
Article III:4 of the GATT 1994.
6.3. India's request for completion of the legal analysis is premised on
the condition that we reverse the Panel's finding that the DCR measures are not covered by the derogation under
Article III:8(a) of
the GATT 1994. Having upheld this finding by the
Panel, we need not, and do not, address India's further claims and related
arguments regarding the remaining elements under Article III:8(a). We therefore
express no view on the Panel's reasoning and analysis in this regard.
6.4. With respect to the Panel's findings under Article XX(j) of the GATT
1994, we consider that,
in assessing whether products are "in general or local short supply"
within the meaning of Article XX(j), a panel should examine the extent to which a particular product is
"available" for purchase in a particular geographical area or market,
and whether this is sufficient to meet demand in the relevant area or market.
This analysis may, in
appropriate cases, take into account not only the level of domestic
production of a particular product and the nature of the products that are
alleged to be "in general or local short supply", but also such
factors as the relevant
product and geographic market, potential price fluctuations
in the relevant market, the purchasing power of foreign and domestic consumers,
and the role that foreign and domestic producers play in a particular market,
including the extent to which domestic producers sell their production abroad. Due regard should be given to the total quantity of imports that may
be "available" to meet demand in a particular geographical area or
market. It may thus be relevant to consider the extent to which international
supply of a product is stable and accessible, including by examining factors
such as the distance between a particular geographical area or market and
production sites, as well as the reliability of local or transnational supply
chains. Whether and which factors are
relevant will
necessarily depend on the particularities of each case. Just as there may be
factors that have a bearing on "availability" of imports in a
particular case, it is also possible that, despite the existence of
manufacturing capacity, domestic products are not "available" in all
parts of a particular country, or are not "available" in sufficient
quantities to meet demand. In all cases, the responding party has the burden of demonstrating
that the quantity of
"available" supply from both domestic and international sources in
the relevant geographical market is insufficient to meet demand.
a. We
therefore disagree with India to the extent that it argues that "short supply" can be
determined without regard to whether supply from all sources is sufficient to
meet demand in the relevant market.
b. We reject India's claim that
the Panel acted inconsistently with Article 11 of the DSU. As we see it,
India's claim under Article 11 of the DSU relies for its validity on India's
reading of Article XX(j), and in particular India's contention that the
existence of a situation of "short supply" within the meaning of
Article XX(j) is to be determined exclusively by reference to whether there is
"sufficient" domestic manufacturing of a given product. The fact that
India does not agree with the conclusion the Panel reached does not mean that
the Panel committed an error amounting to a violation of Article 11 of the DSU.
c. Consequently, we uphold
the Panel's finding, in
paragraph 7.265 of the Panel Report, that solar cells and modules are not
"products in general or local short supply" in India within the
meaning of Article XX(j) of the GATT 1994, and the
Panel's ultimate finding, in paragraph 8.2.b of its Report, that the DCR
measures are not justified under Article XX(j) of the GATT 1994.
6.5. Having upheld the Panel's finding, in paragraph 7.265 of the Panel
Report, that solar cells and modules are not "products in local or general
short supply" in India, within the meaning of Article XX(j), we do not
consider it necessary further to examine India's claims on appeal
pertaining to the Panel's "limited review and analysis" of whether
India's DCR measures are "essential" to the acquisition of solar
cells and modules for the purpose of Article XX(j). Nor do we consider it
necessary to examine India's arguments as they relate to the requirements
of the chapeau of Article XX of the GATT 1994.
6.6. With respect to the Panel's findings under Article XX(d) of the GATT
1994, we consider that,
in determining whether a responding party has identified a rule that falls
within the scope of "laws or regulations" under Article XX(d) of the
GATT 1994, a panel should evaluate and give due consideration to all the
characteristics of the relevant instrument(s) and should avoid focusing
exclusively or unduly on any single characteristic. In particular, it may be
relevant for a panel to consider, among others: (i) the degree of normativity
of the instrument and the extent to which the instrument operates to set out a
rule of conduct or course of action that is to be observed within the domestic
legal system of a Member; (ii) the degree of specificity of the relevant rule;
(iii) whether the rule is legally enforceable, including, e.g. before a court
of law; (iv) whether the rule has been adopted or recognized by a competent
authority possessing the necessary powers under the domestic legal system of a
Member; (v) the form and title given to any instrument or instruments
containing the rule under the domestic legal system of a Member; and (vi) the
penalties or sanctions that may accompany the relevant rule. Importantly, this
assessment must always be carried out on a case-by-case basis, in light of the
specific characteristics and features of the instruments at issue, the rule
alleged to exist, as well as the domestic legal system of the Member concerned.
a. We therefore find that India
has not demonstrated that the passages and provisions of the domestic
instruments identified by India, when read together, set out the rule "to
ensure ecologically sustainable growth while addressing India's energy security
challenge, and ensuring compliance with its obligations relating to climate
change", as alleged by India.
b. We find that that the Panel did not err in finding that India
failed to demonstrate that the international instruments it identified fall within the scope of
"laws or regulations" under Article XX(d) in the present
dispute.
c. Consequently, we uphold the Panel's finding, in paragraph
7.333 of the Panel Report, that India has not demonstrated that the DCR
measures are measures "to secure compliance with laws or regulations which
are not inconsistent with the provisions of [the GATT 1994]", and the
Panel's ultimate finding, in paragraph 8.2.b of the Panel Report, that the DCR
measures are not justified under Article XX(d) of the GATT 1994.
6.7. Having upheld the Panel's finding, in paragraph 7.333 of the Panel Report,
that India did not demonstrate that the DCR measures are measures "to
secure compliance with laws or regulations which are not inconsistent with the
provisions of [the GATT 1994]", we do not consider it necessary further
to examine India's claims on appeal pertaining to the Panel's "limited
review and analysis" of whether the DCR measures are "necessary"
within the meaning of Article XX(d). Nor do we consider it necessary to
examine India's arguments as they relate to the requirements of the chapeau
of Article XX of the GATT 1994.
6.8. The Appellate Body recommends that the DSB request India to
bring its measures, found in this Report, and in the Panel Report as modified
by this Report, to be inconsistent with the TRIMs Agreement and the GATT 1994,
into conformity with its obligations under those Agreements.
Signed
in the original in Geneva this 22nd day of August 2016 by:
_________________________
Peter Van den Bossche
Presiding Member
_________________________ _________________________
Seung
Wha Chang Thomas
Graham
Member Member
[1] WT/DS456/R, 24 February 2016.
[2] Request for the Establishment of a Panel by the United States of 14
April 2014, WT/DS456/5.
[3] Panel Report, para. 2.1.
[4] Solar cells are photovoltaic (PV) devices that are components of
solar modules, also known as solar panels. Solar PV technology transforms sunlight
directly into electricity.
[5] Panel Report, para. 7.1.
[6] Panel
Report, para. 7.1 (quoting Government of India, Ministry of New and Renewable Energy, Resolution
No. 5/14/2008, Jawaharlal Nehru National Solar Mission (11 January 2010)
(Panel Exhibit USA-4), para. 2).
[7] Panel Report, para. 7.8 and fn 81 thereto.
[8] Under Phase I (Batch 1) and Phase I (Batch 2), Vidyut Vyapar Nigam Limited was the
agency responsible for implementing the solar power project selection process. Under
Phase II (Batch 1-A), the Solar Energy Corporation of India was selected to
perform the same functions. (Panel Report, para. 7.4)
[9] Panel Report, para. 7.2.
[10] Panel Report, para. 7.2.
[11] In response to India's request for a preliminary ruling on the
scope of the measures at issue, the United States confirmed that, with respect
to Phase I (Batch 1), Phase I (Batch 2), and Phase II (Batch 1-A), the
measures at issue are only the specific DCRs imposed under each Batch, and do
not include any other element of the NSM. (Panel Report, para. 7.22)
[12] Panel
Report, paras. 7.29-7.31.
[13] Panel Report,
para. 7.7.
[14] Panel Report, para. 7.8.
[15] Panel Report, para. 7.9.
[16] Panel Report, para. 7.10. Under Phase II (Batch 1-A), the SPDs
could bid for a PPA "Part A" (subject to a DCR), "Part B" (not subject to a DCR), or both.
The United States challenged only the DCR measure imposed under Part
A. (Ibid.)
[17] Panel Report, para. 3.1.
[18] Panel Report, para. 3.2.
[19] Panel Report, para. 8.2.a.
[20] Panel Report, para. 8.2.a.
[21] Panel Report, para. 8.2.b.
[23] WT/AB/WP/6, 16 August 2010.
[24] Contained in Annex D-1 of the Addendum to this Report
(WT/DS456/AB/R/Add.1).
[25] Pursuant
to Rule 22 of the Working Procedures.
[26] Pursuant
to Rule 24(1) and Rule 16(2) of the Working Procedures.
[27] Pursuant
to Rule 24(2) of the Working Procedures.
[28] On 28 June, 30 June, 30 June, and 29 June 2016, respectively, the
Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu; Ecuador; Korea;
and Turkey each
submitted its delegation list for the oral hearing to the Appellate Body
Secretariat and the participants and third participants in this dispute. For
the purposes of this appeal, we have interpreted these actions as notifications
expressing the intention of the Separate Customs
Territory of Taiwan, Penghu, Kinmen and Matsu; Ecuador; Korea; and Turkey to attend the oral hearing pursuant to Rule 24(4) of the Working Procedures.
[31] Pursuant
to the Appellate Body Communication on "Executive Summaries of Written
Submissions in Appellate Proceedings" and "Guidelines in Respect of
Executive Summaries of Written Submissions in Appellate Proceedings".
(WT/AB/23, 11 March 2015)
[32] WT/DS456/AB/R/Add.1.
[33] Pursuant
to the Appellate Body Communication on "Executive Summaries of Written
Submissions in Appellate Proceedings" and "Guidelines in Respect of
Executive Summaries of Written Submissions in Appellate Proceedings".
(WT/AB/23, 11 March 2015)
[34] WT/DS456/AB/R/Add.1.
[35] India's appellant's submission, para. 35(a).
[36] India's appellant's submission, para. 35(b).
[37] India's appellant's submission, para. 35(c).
[38] India's appellant's submission, para. 36.
[39] India's appellant's submission, paras. 61-62.
[40] Panel Report, para. 7.105 (referring to Appellate Body
Reports, Canada ‒ Renewable
Energy / Canada – Feed-in Tariff Program, paras. 5.57, 5.69, and 5.74).
[41] Panel Report, para. 7.106.
[42] Panel Report, para. 7.106.
[43] Panel Report, para. 7.113.
[44] Panel Report, para. 7.113.
[45] Panel Report, para. 7.114 (quoting India's opening statement at the
first Panel meeting, para. 26). In particular, India argued that the fundamental characteristics of
solar cells and modules in absorbing light energy, which releases electrons and
thereby generates electricity, define their integral role in solar power
generation. (Panel Report, fn 292 to para. 7.114 (referring to
India's first written
submission to the Panel, para. 110; second written submission to the
Panel, para. 19; and comments to the United States' response to Panel
Question No. 43, para. 11))
[46] Panel Report, para. 7.118 (quoting Appellate Body Reports, Canada – Renewable Energy /
Canada – Feed-in Tariff Program, para. 5.63). (emphasis added
by the Panel)
[47] Panel Report, para. 7.118 (quoting Appellate Body Reports, Canada – Renewable Energy /
Canada – Feed-in Tariff Program, para. 5.63). The Panel
referred to the
United States' suggestion that this could be understood to mean that,
"where product A and product B are comprised of similar inputs (or
manufactured through similar processes), this might
suggest that product A and product B are 'like products' or in a competitive
relationship". (Ibid., fn 300 to para. 7.118 (quoting
United States' response to Panel question No. 41, para. 4
(emphasis original)))
[48] Panel
Report, para. 7.118.
[49] Panel Report, para. 7.119.
[50] Panel Report, para. 7.120 (quoting Appellate Body Reports, Canada – Renewable Energy / Canada – Feed-in Tariff Program,
paras. 5.63 and 5.79,
respectively).
[51] Panel Report, para. 7.121 (quoting United States' second written submission to
the Panel, para. 17).
[52] Panel Report, para. 7.121 (referring to United States' second written submission
to the Panel, para. 20; and quoting India's response to Panel
question No. 42, paras. 8 and 10).
[53] Panel Report, para. 7.121.
[54] Panel Report, para. 7.122 (quoting India's second written submission to the Panel,
para. 20 (emphasis original)).
[55] Panel Report, para. 7.123.
[56] Panel Report, para. 7.123.
[57] Panel Report, para. 7.125 (quoting Panel Reports, Canada – Renewable Energy / Canada – Feed-in Tariff
Program, para. 7.163). For the Panel, although the
requirements in Canada –
Renewable Energy / Canada – Feed-in Tariff Program pertained
to other activities for the development and construction of facilities that are
not covered by the DCR measures in the present dispute, such other activities
could not alone meet the "Qualifying Percentages" for the Minimum
Required Domestic Content Level. (Ibid.)
[58] Panel Report, para. 7.126.
[59] Panel Report, para. 7.128.
[60] Panel Report, para. 7.128. Similarly, the Panel rejected India's argument
that, since the tariff for the power purchased under the PPAs incorporates
within it the cost for the solar cells and modules, "India's purchase of
electricity generated from solar cells and modules … constitutes an effective purchase of the cells and modules
themselves", considering that the argument seemingly conflicted with
India's primary argument that "integral inputs", but not other
"ancillary equipment" whose costs also may be reflected in the
electricity tariff, are "effectively procured". (Panel
Report, para. 7.129 (quoting India's response to Panel question No. 41, para. 7 (emphasis added
by the Panel))
[61] Panel
Report, para. 7.130 (referring to India's first written submission to the Panel,
paras. 118 and 120; and opening statement at the first Panel meeting, para. 29).
[62] According
to India, for a government to procure effectively solar cells and modules under
Article III:8(a), it would need to either purchase these products by
itself and generate the electricity from them, or purchase the products and
provide them to SPDs for power generation. (Panel Report, para. 7.130 (quoting India's
first written submission to the Panel, para. 117))
[63] Panel Report, para. 7.132. India also argued that "procurement"
should not be interpreted to require direct acquisition in view of the
Appellate Body's statement in Canada – Renewable Energy / Canada – Feed-in Tariff Program
that, "if procurement was understood to refer simply to any acquisition,
it would not add any meaning to Article III:8(a) in addition to what is already
expressed by the word purchased." The Panel, however, considered that this
reference is misplaced and "reverses the logic of the Appellate Body"
by subsuming the concept of "purchase" under a broader category of
"procurement". (Panel Report, para. 7.133 (quoting Appellate
Body Reports, Canada – Renewable Energy / Canada – Feed-in Tariff
Program, para. 5.59; and European Union's third-party submission to the
Panel, para. 40))
[64] Panel
Report, para. 7.135.
[65] Panel
Report, para. 7.135.
[66] India's appellant's submission, para. 6. See also paras. 17 and 26.
[67] India's appellant's submission, para. 24.
[68] Thus, we understand India to argue that, in relying on the Appellate Body's finding in
those disputes and not coming to any conclusions with regard to India's claims
and arguments relating to solar cells and modules, the Panel failed
"to make an objective assessment of the facts of the case, and the
applicability of and conformity with the relevant provisions of the covered
agreements". (India's appellant's submission, paras. 24 and 28; and
responses to questioning at the oral hearing)
[69] India's appellant's submission, paras. 6 and 8, respectively. In
particular, India argues that "Article III:8(a) would apply in
situations where the physical form of the product purchased by the government
is not identical to the product discriminated against, when it is established
that there is really no difference between the products discriminated against
(i.e. solar cells and modules) and the product purchased (i.e. solar
power)." (Ibid.)
[70] India's appellant's submission, heading IIB, and para. 10, respectively.
(emphasis original)
[71] India's appellant's submission, paras. 21-23.
[72] India's appellant's submission, heading IIE.
[73] India's
appellant's submission, para. 34.
[74] United
States' appellee's submission, para. 47.
[75] United
States' appellee's submission, para. 62.
[76] United
States' appellee's submission, para. 52. (emphasis original)
[77] Appellate Body
Report, Colombia – Textiles, para. 5.17
(referring to Appellate Body Report, US – Hot‑Rolled Steel,
para. 54).
[78] Appellate Body
Report, Colombia – Textiles, para. 5.17
(referring to Appellate Body Report, US – Hot‑Rolled Steel,
para. 54).
[79] See
Appellate Body Report, Colombia – Textiles,
para. 5.17. In order to make an "objective assessment of the applicability
of specific provisions of the covered agreements to a measure properly before
it", a panel must "thoroughly scrutinize the measure before it, both
in its design and in its operation, and identify its principal
characteristics". (Appellate Body Reports, China – Auto
Parts, para. 171)
[80] Appellate Body
Report, EC – Poultry, para. 135. (emphasis
omitted) See also Appellate Body Report, EC –
Fasteners (China), para. 511. Furthermore, with regard to a
panel's evaluation of the evidence, a panel is required to "consider all
the evidence presented to it, assess its credibility, determine its weight, and
ensure that its factual findings have a proper basis in that evidence".
(Appellate Body Report, Brazil –
Retreaded Tyres, para. 185 (referring to Appellate Body
Report, EC ‒ Hormones,
paras. 132 and 133)) Within these parameters, however, "it is
generally within the discretion of the [p]anel to decide which evidence it
chooses to utilize in making findings", and the mere fact that a panel
does not explicitly refer to each and every piece of evidence in its reasoning
is insufficient to support a claim of violation under Article 11 of the
DSU. (Appellate Body Reports, EC –
Hormones, para. 135. See also Appellate Body Report, EC – Fasteners (China), para. 442)
[81] Appellate
Body Reports, China – Rare Earths, para. 5.227
(referring to Appellate Body Reports, Chile – Price Band System
(Article 21.5 – Argentina), para. 238; US – Steel
Safeguards, para. 498; US – Tyres (China), para. 321; and EC – Fasteners (China), paras. 499 and 500). See also Appellate
Body Report, US – Large Civil Aircraft (2nd
complaint),
para. 722 (referring to Appellate Body Report, EC – Fasteners (China),
para. 442).
[82] Panel Report, para. 7.120.
[83] Panel Report, paras. 7.120 and 7.134-7.135.
[84] See Appellate Body
Reports, Canada ‒ Renewable
Energy / Canada – Feed-in Tariff Program, para. 5.74.
[85] India's appellant's submission, para. 9. See also para. 4.
[86] Appellate Body Reports, Canada – Renewable Energy /
Canada – Feed-in Tariff Program, para. 5.63.
[87] India's appellant's submission, para. 4. See also para. 9 (quoting
Appellate Body Reports, Canada – Renewable Energy /
Canada – Feed-in Tariff Program, para. 5.63).
(fn omitted)
[88] United
States' appellee's submission, paras. 38 and 42 (referring to Appellate Body
Reports, Canada – Renewable Energy / Canada – Feed-in Tariff
Program, para. 5.63).
[89] United
States' appellee's submission, para. 66 (referring Panel Report, para. 7.120)
and para. 69 (referring to Panel Report, para. 7.135).
[90] Appellate Body Reports, Canada – Renewable Energy /
Canada – Feed-in Tariff Program, para. 5.55 (quoting
Appellate Body
Report, Japan – Alcoholic Beverages II,
p. 18, DSR 1996:I, p. 111; and referring to Appellate Body Report, EC ‒ Asbestos, para. 93).
[91] Appellate Body Reports, Canada – Renewable Energy /
Canada – Feed-in Tariff Program, para. 5.56.
[92] Appellate Body Reports, Canada – Renewable Energy /
Canada – Feed-in Tariff Program, para. 5.63.
[93] Appellate Body Reports, Canada – Renewable Energy /
Canada – Feed-in Tariff Program, para. 5.63.
[94] Appellate Body Reports, Canada – Renewable Energy /
Canada – Feed-in Tariff Program, paras. 5.62‑5.63.
[95] See Appellate Body Reports, Canada – Renewable Energy / Canada –
Feed-in Tariff Program, para. 5.74.
[96] See Appellate Body Reports, Canada – Renewable Energy / Canada – Feed-in Tariff Program,
para. 5.74.
[97] India's
appellant's submission, para. 19.
[98] Panel Reports, Canada – Renewable Energy /
Canada – Feed-in Tariff Program, para. 7.127.
(emphasis added)
[99] See Appellate Body
Reports, Canada – Renewable Energy / Canada – Feed-in Tariff
Program, paras. 5.78-5.79.
[100] Appellate Body Reports, Canada – Renewable Energy /
Canada – Feed-in Tariff Program, para. 5.63.
[101] Appellate Body Reports, Canada – Renewable Energy /
Canada – Feed-in Tariff Program, para. 5.63. (fn
omitted) Conditions
imposed in the context of government procurement relating to inputs and
processes of production of products purchased, such as conditions regarding
"the environmental profile or the environmental attributes that a
particular product may incorporate … could legitimately form part of the
requirements of the product purchased that are closely related to the subject
matter of the contract." Such conditions may thus be relevant to the
analysis under Article III:8(a) insofar as they can be said to be
"governing" the relevant procurement process. (Ibid., fn 499 to para.
5.63)
[102] Panel
Report, para. 7.114 (referring to India's opening statement at the first Panel
meeting, para. 28). See also para. 7.129.
[103] Panel Report, para. 7.120 (referring to Appellate Body
Reports, Canada – Renewable Energy / Canada – Feed-in Tariff
Program, para. 5.79).
[104] Panel Report, para. 7.128.
[105] Panel Report, para. 7.128. (fns omitted)
[106] Panel Report, para. 7.115.
[107] Panel Report, para. 7.120.
[108] See Panel Report, paras. 7.107‑7.109 and 7.115.
[109] Panel Report, para. 7.135.
[110] India's appellant's submission, para. 6 and heading IIA, respectively.
[111] Panel Report, para. 7.114 (quoting India's opening statement at the
first Panel meeting, para. 28).
[112] Panel Report, para. 7.114. (fn omitted)
[113] Panel
Report, para. 7.126.
[114] Panel
Report, para. 7.128 (quoting India's responses to Panel questions No. 19, and
No. 41, para. 7; opening statement at the second Panel meeting,
para. 8; and opening
statement at the first Panel meeting, para. 28). (further text in fn omitted)
[115] Panel
Report, para. 7.128 (quoting India's opening statement at
the first Panel meeting, para. 28). The Panel was similarly unpersuaded by India's argument
that "[t]he tariff for the power purchased under the PPAs incorporates
within it the cost for the solar cells and modules", and that "India's purchase
of electricity generated from solar cells and modules therefore constitutes an effective purchase of the cells and modules
themselves." (Ibid., para. 7.129 (quoting India's response to Panel
question No. 41, para. 7) (emphasis added by the Panel))
[116] Panel
Report, fn 326 to para. 7.128 (quoting India's second written submission to the
Panel, para. 23).
[117] See Panel
Report, paras. 7.114 and 7.120-7.129.
[118] Panel Report, para. 7.122 (quoting India's second written
submission to the Panel, para. 20 (emphasis original)). In this regard,
India pointed to the "indispensability" of solar cells and modules
for the generation of solar power and the exclusivity of their function for
that purpose. (Panel Report, para. 7.122 (referring to India's second
written submission to the Panel, para. 21))
[119] Panel
Report, para. 7.123.
[120] Panel
Report, para. 7.125 (quoting Panel Reports, Canada – Renewable Energy / Canada – Feed-in Tariff
Program, para. 7.163).
[121] Panel Report, para. 7.123. See also para. 7.126.
[122] See Panel
Report, fn 320 to para. 7.127 (referring to India's comments on the
United States' response to Panel question No. 41-43, para. 11). The
Panel observed inter alia that India's contention
that "silicon" and "silicon ingots and wafer" are
"ancillary" equipment is "in tension with its descriptions of
solar energy generation", including the essentiality of
"silicon" for the functioning of solar cells and modules, and
"reflective of the difficulty of drawing a distinction between 'integral'
and 'ancillary' inputs" (Ibid., fn 320 to para. 7.127)
[123] Panel
Report, para. 7.128. (fn omitted)
[124] India's appellant's submission, paras. 11-14 and 16.
[125] Panel Report, para. 7.121.
[126] We recall,
in this regard, that it was not India's argument before the Panel that
electricity and solar cells and modules are in a competitive relationship.
Furthermore, it was undisputed that the government does not take title or custody
of solar cells and modules. (Panel Report, para. 7.114 (referring to India's
opening statement at the first Panel meeting, para. 28); see also para. 7.129)
[127] India's
appellant's submission, paras. 21-23.
[128] Panel
Report, para. 7.130.
[129] Panel Report, para. 7.132.
[130] Panel Report, para. 7.132.
[131] India's appellant's submission, para. 22 (quoting Appellate Body Reports, Canada – Renewable Energy /
Canada – Feed-in Tariff Program, para. 5.59).
[132] See also
Panel Report, para. 7.133 (referring to Appellate Body Reports, Canada – Renewable Energy / Canada
– Feed-in Tariff Program, para. 5.59).
[133] Panel
Report, para. 7.133.
[134] Panel
Report, para. 7.133 (quoting Appellate Body Reports, Canada – Renewable Energy / Canada – Feed-in Tariff Program, para. 5.59).
[135] India's
appellant's submission, paras. 21-23. (emphasis omitted) See also European
Union's third participant's submission, para. 36. We observe that, although the
Appellate Body in Canada –
Renewable Energy / Canada – Feed-in Tariff Program did not
rule on the precise range of contractual arrangements that are encompassed by
the concept of "purchase", in the present case, it is India's
position that the government does not "purchase" solar cells and
modules as it "does not physically acquire or take custody of the
solar cells and modules, and instead chooses to buy the solar power generated
from such cells and modules". (Panel Report, para. 7.113 (quoting India's first written submission to
the Panel, para. 114))
[136] Panel
Report, para. 7.130 (referring to India's first written submission to the
Panel, para. 120).
[137] See para. 5.24. of this Report.
[138] India's
appellant's submission, para. 24.
[139] Panel
Report, para. 7.134.
[140] See Panel Report, para. 7.130.
[141] India's
appellant's submission, para. 32 and heading IIE, respectively.
[142] Panel
Report, para. 7.115.
[143] Appellate
Body Report, US – Stainless Steel (Mexico),
para. 160. (fn omitted)
[144] India's
responses to questioning at the oral hearing.
[145] India's appellant's submission, para. 34.
[146] See Panel
Report, para. 7.105 (referring to Appellate Body Reports, Canada – Renewable Energy / Canada – Feed-in Tariff Program, paras.
5.57, 5.69, and 5.74),
and para. 7.106.
[147] With
respect to this element, the Appellate Body in Canada – Renewable Energy / Canada – Feed-in
Tariff Program found that Article III:8(a)
requires "an articulated connection between the laws, regulations, or
requirements and the procurement, in the sense that the act of procurement is
undertaken within a binding structure of laws, regulations, or
requirements." (Appellate Body Reports, Canada – Renewable Energy / Canada – Feed-in Tariff Program,
para. 5.58)
[148] The
Appellate Body in Canada –
Renewable Energy / Canada – Feed-in Tariff Program concluded
that "governmental agency" is "an entity acting for or on behalf
of government and performing governmental functions within the competences
conferred on it". (Appellate Body Reports, Canada – Renewable Energy / Canada – Feed-in Tariff Program,
para. 5.61)
[149] The
Appellate Body in Canada –
Renewable Energy / Canada – Feed-in Tariff Program found that
the phrase "products purchased for governmental purposes"
"refers to what is consumed by government or what is provided by
government to recipients in the discharge of its public functions" and
that there should be "a rational relationship between the product and the
governmental function being discharged". (Appellate Body
Reports, Canada – Renewable Energy / Canada – Feed-in Tariff
Program, para. 5.68)
[150] The
Appellate Body in Canada –
Renewable Energy / Canada – Feed-in Tariff Program understood
the term "commercial resale" to mean "a resale of a product at
arm's length between a willing seller and a willing buyer", and explained
that this "must be assessed having regard to the entire transaction",
both from the seller's and the buyer's perspective. (Appellate Body Reports,
Canada – Renewable Energy /
Canada – Feed-in Tariff Program, paras. 5.70-5.71)
[151] Panel
Report, para. 7.137.
[152] Panel Report, para. 7.145.
[153] Panel
Report, para. 7.151.
[154] Panel Report, paras. 7.162 and 7.186.
[155] India's appellant's submission, para. 36.
[156] India's appellant's submission, para. 61.
[157] India's appellant's submission, para. 36.
[158] India's
appellant's submission, paras. 90 and 99.
[159] Our
analysis focuses on India's arguments as they relate to the Panel's
interpretation and application of the phrase "products in general or local
short supply" in Article XX(j) of the GATT 1994. We address India's
arguments regarding whether the DCR measures are "essential" within
the meaning of Article XX(j) in the final section of this Report, where we
also address India's arguments concerning whether those measures are
"necessary" within the meaning of Article XX(d) of the GATT 1994.
[160] Panel
Report, Add.1, Annex B-3, para. 41.
[161] Panel
Report, Add.1, Annex B-3, para. 42.
[162] Panel
Report, Add.1, Annex B-3, para. 42.
[163] Panel
Report, Add.1, Annex B-3, para. 43. (emphasis original)
[164] Panel
Report, Add.1, Annex B-3, para. 43.
[165] Panel
Report, Add.1, Annex B-3, para. 49.
[166] Panel
Report, Add.1, Annex B-3, para. 49.
[167] Panel Report, para. 7.199.
[168] Panel
Report, paras. 7.199-7.200.
[169] Panel
Report, para. 7.205.
[170] Panel
Report, para. 7.206.
[171] Panel
Report, para. 7.207. (fn omitted)
[172] Panel
Report, para. 7.220 (quoting India's first written submission to the Panel,
para. 213).
[173] Panel
Report, para. 7.223. (emphasis original)
[174] Article III:4
refers to "products of the territory of any Member".
[175] Article II:1(b)
designates "products of territories of other Members" and
Article II:1(c) refers to "products of territories entitled under
Article I to receive preferential treatment upon importation".
[176] Article XX(g)
speaks of "domestic production or consumption".
[177] Article XX(i)
refers to "restrictions on exports of domestic materials".
[178] Panel
Report, para. 7.223.
[179] Panel
Report, para. 7.224. (emphasis original)
[180] Panel
Report, para. 7.225. (fn omitted)
[181] Panel
Report, para. 7.226.
[182] Panel
Report, para. 7.234.
[183] Panel
Report, para. 7.237. (emphasis omitted)
[184] Panel
Report, para. 7.245.
[185] Panel
Report, para. 7.255.
[186] Panel
Report, paras. 7.263-7.264.
[187] Panel
Report, para. 7.265. Having found that solar cells and modules are not
"products in general or local short supply" in India, the Panel did
not consider it necessary to examine whether the DCR measures involve the
"acquisition or distribution" of those products. (Ibid., fn 629
to para 7.265)
[188] See Panel
Report, para. 7.335.
[189] India's
appellant's submission, para. 106.
[190] India's
appellant's submission, para. 73.
[191] India's
appellant's submission, para. 86.
[192] India's
appellant's submission, para. 87. (fn omitted)
[193] India's
appellant's submission, para. 100 (quoting Panel Report, para. 7.237).
[194] India's
appellant's submission, para. 102.
[195] India's
appellant's submission, para. 104. (emphasis original)
[196] See India's
appellant's submission, paras. 91-101.
[197] India's
appellant's submission, para. 94.
[198] India's
appellant's submission, para. 94. (fn omitted)
[199] India's
appellant's submission, para. 99.
[200] India's
appellant's submission, para. 106.
[201] See United
States' appellee's submission, para. 88.
[202] United
States' appellee's submission, paras. 93-94.
[203] United
States' appellee's submission, para. 91.
[204] United
States' appellee's submission, para. 91.
[205] United
States' appellee's submission, para. 103.
[207] See
Appellate Body Report, US – Gasoline,
p. 22, DSR 1996:I, p. 20. See also Appellate Body Reports, Dominican Republic – Import and Sale of Cigarettes, para.
64; US ‒ Shrimp,
paras. 119‑120; and EC – Seal Products,
para. 5.169.
[208] Appellate
Body Report, US – Shrimp, para. 119.
[209] This would consist of "secur[ing] compliance with laws or
regulations" in the case of Article XX(d), and "acquisition or
distribution of products in general or local short supply" in the case of
Article XX(j).
[210] Appellate
Body Report, Argentina – Financial Services, para.
6.202. See also Appellate Body Reports, Colombia – Textiles, para. 5.67; EC – Seal Products,
para. 5.169; US – Gambling, para. 292; and Korea – Various Measures on Beef, para. 157.
[211] Appellate
Body Report, Colombia – Textiles, para. 5.126
(referring to Appellate Body Report, Argentina – Financial
Services, para. 6.203). See also Appellate Body Report, Colombia – Textiles, paras. 5.68‑5.69 (referring to
Appellate Body Reports, Argentina – Financial Services,
para. 6.203; Mexico – Taxes on Soft Drinks, para. 72; US – Shrimp,
paras. 135-142; and EC – Seal Products,
para. 5.144).
[212] See Appellate Body Report, Colombia – Textiles,
para. 5.126. However, as indicated by the Appellate Body, "[a]
panel must not … structure its analysis of the ['design' step] in such a way as
to lead it to truncate its analysis prematurely and thereby foreclose
consideration of crucial aspects of the respondent's defence relating to the
'necessity' analysis." (Appellate Body Report, Colombia –
Textiles, para. 5.126 (quoting Appellate Body Report, Argentina – Financial Services, para. 6.203))
[213] See Appellate
Body Reports, Colombia – Textiles, paras.
5.71-5.73 and 5.77; and Korea – Various Measures
on Beef, paras. 162-164.
[214] The
Appellate Body has explained that, in most cases, a panel must compare the
challenged measure and possible alternative measures that achieve an equivalent
level of protection while being less trade restrictive. (Appellate Body Report,
Colombia – Textiles, para. 5.74) See also Appellate Body
Reports, EC – Seal Products, para. 5.169
(referring to Appellate Body Report, US – Gambling,
para. 307, in turn referring to Appellate Body Report, Korea – Various Measures on Beef, para. 166).
[215] See
Appellate Body Report, Colombia – Textiles,
para. 5.126. The Appellate Body has remarked that the objectives of, or
the common interests or values protected by, the relevant law or regulation may
assist in elucidating the content of specific rules, obligations, or
requirements in such law or regulation. (Appellate Body Report, Colombia – Textiles, fn 272 to para 5.126 (referring to
Appellate Body Report, Argentina – Financial
Services, fn 495 to para. 6.203))
[216] See
Appellate Body Report, Colombia – Textiles,
para. 5.126.
[217] See
Appellate Body Report, Colombia – Textiles,
para. 5.126 (referring to Appellate Body Reports, Argentina – Financial Services, para. 6.203; and Mexico – Taxes on Soft Drinks, para. 72).
[218] Appellate Body
Report, Colombia – Textiles, para. 5.125.
[219] See
Appellate Body Reports, Colombia – Textiles,
para. 5.125; and Argentina – Financial Services, para. 6.205.
[220] Appellate
Body Report, Argentina – Financial Services,
para. 6.205.
[221] Appellate
Body Report, Argentina – Financial Services,
para. 6.205.
[222] India
argues, based on dictionary definitions, that the term "necessary" is
a synonym for "essential", and that the requirement that a measure be
"essential" "is not limited to what is 'absolutely
indispensable' but also encompasses situations that are 'necessary'".
(India's appellant's submission, para. 120) For its part, the United
States submits that "essential" suggests a "higher level of
indispensability" than the term "necessary", and that a
demonstration that a measure is "essential" therefore "requires
a higher threshold than proving that a measure is merely 'necessary'".
(United States' appellee's submission, para. 122)
[223] Appellate
Body Report, Korea – Various Measures on Beef,
para. 161.
[224] See Shorter Oxford English Dictionary, 6th edn, W.R. Trumble, A.
Stevenson (eds.) (Oxford University Press, 2007), Vol. 1, p. 865.
[225] See Appellate Body
Reports, EC – Seal Products, para. 5.169
(referring to Appellate Body Report, US – Gambling,
para. 307, in turn referring to Appellate Body Report, Korea – Various Measures on Beef, para. 166).
[227] Shorter Oxford English Dictionary, 6th edn, W.R. Trumble, A.
Stevenson (eds.) (Oxford University Press, 2007), Vol. 2, p. 3115. See also
Appellate Body Reports, China – Raw Materials,
para. 325.
[228] Shorter Oxford English Dictionary, 6th edn, W.R. Trumble, A.
Stevenson (eds.) (Oxford University Press, 2007), Vol. 2, p. 2813. See also
Appellate Body Reports, China – Raw Materials,
para. 325.
[229] See Shorter Oxford English Dictionary, 5th edn, W.R. Trumble, A.
Stevenson (eds.) (Oxford University Press, 2002), Vol. 2, p. 3118.
(emphasis added)
[230] Panel
Report, para. 7.206 (quoting Shorter Oxford English
Dictionary, 5th edn, W.R. Trumble, A. Stevenson (eds.)
(Oxford University Press, 2002), Vol. 1, p. 1619).
[231] Panel
Report, para. 7.206 (quoting Shorter Oxford English
Dictionary, 5th edn, W.R. Trumble, A. Stevenson (eds.)
(Oxford University Press, 2002), Vol. 1, p. 1081).
[232] Shorter
Oxford English Dictionary, 6th edn, W.R. Trumble, A. Stevenson (eds.) (Oxford
University Press, 2007), Vol. 1, p. 20.
[233] Shorter
Oxford English Dictionary, 6th edn, W.R. Trumble, A. Stevenson (eds.) (Oxford
University Press, 2007), Vol. 1, p. 720.
[234] We further note that Article XX(j)
requires that measures to be justified under this exception "shall be
consistent with the principle that all Members are entitled to an equitable
share of the international supply of such products". This language further
supports the view that an assessment of whether "products are in general
or local short supply" requires consideration of all sources
of supply that may be "available" in a given geographical area or
market, and that "international supply" is not to be excluded from
consideration.
[235] It may be relevant, for example, to consider whether the measure
concerns perishable goods or foodstuffs, or products that may be difficult to
transport.
[236] A consideration of factors such as product homogeneity, supply-side
and demand-side substitutability may also be relevant in order to assess
properly whether there is shortage of a particular product in a given market.
[237] We recall that it must also be established that the challenged
measure is "essential to the acquisition or distribution of" such
products.
[238] Panel
Report, para. 7.205.
[239] Panel
Report, para. 7.207. The Panel then confirmed its interpretation of the phrase
"products in general or local short supply" by having recourse to the
negotiating history of the GATT 1994.
[240] Panel
Report, para. 7.234. (emphasis added)
[241] Panel
Report, para. 7.236.
[242] Panel
Report, para. 7.236.
[243] See para. 5.71. of this Report.
[244] Panel
Report, Add.1, Annex B-3, para. 33.
[245] Panel
Report, Add.1, Annex B-3, para. 35.
[246] Panel
Report, Add.1, Annex B-3, para. 35.
[247] We note
that India "reiterates its fundamental argument that 'general or local
short supply' exists in the first place due
to low domestic manufacturing" and its vulnerability "to the risks
associated with international supply and market fluctuations". (India's
appellant's submission, para. 104 (emphasis original))
[248] Panel Report, para. 7.262.
[249] See
India's appellant's submission, para. 101.
[250] See
India's appellant's submission, para. 93.
[251] Panel
Report, Add.1, Annex B-3, para. 34.
[252] India's
appellant's submission, para. 68. (emphasis original; fn omitted)
[253] India's
appellant's submission, para. 68. (emphasis original; fn omitted)
[254] India's
appellant's submission, para. 87.
[255] India's
appellant's submission, para. 87. (fn omitted)
[256] India's
appellant's submission, para. 88.
[257] See Panel
Report, para. 7.230 and fn 566 thereto.
[258] India's
appellant's submission, para. 89.
[259] Panel
Report, fn 566 to para. 7.230. The Panel also suggested that, even in the
absence of a monopoly, a Member might "take other measures to control both
the importation and distribution of the product in a manner as part of a plan
for the rationing of the product". (Ibid.)
[260] India's appellant's submission, section IVA.5.
[261] India's
appellant's submission, para. 93(a). (fns omitted)
[262] India's appellant's submission, para. 94.
[263] India's
appellant's submission, para. 98 (referring to Appellate Body Report, Brazil – Retreaded Tyres, para. 185, in turn referring to
Appellate Body Report, EC – Hormones,
paras. 132-133).
[264] United
States' appellee's submission, para. 102. (fn omitted)
[265] Panel
Report, para. 7.205. (fn omitted)
[266] Panel
Report, para. 7.226.
[267] Panel
Report, para. 7.226. (fn omitted)
[268] Panel
Report, para. 7.227.
[269] Appellate
Body Reports, Philippines – Distilled Spirits,
para. 135 (quoting Appellate Body Report, Brazil –
Retreaded Tyres, para. 185, in turn referring to Appellate Body
Report, EC ‒ Hormones, paras. 132‑133).
[270] Appellate
Body Report, Australia – Salmon,
para. 267.
[271] Appellate Body
Report, EC – Fasteners (China), para. 442.
[272] See para. 5.41. of this Report.
[273] See para. 5.90. of this Report.
[274] India's
Notice of Appeal, Section III, para. 1 (referring to Panel Report, paras.
7.284-7.333 and 7.337‑7.390); appellant's submission, para. 164.
[275] India's appellant's submission, paras. 166 and 170-173. India
identified the following international instruments: (i) the preamble of the WTO
Agreement; (ii) the United Nations Framework Convention on Climate
Change, done at
New York, 9 May 1992, UN Treaty
Series, Vol. 1771, p. 107 (Panel Exhibit IND-3); (iii)
the Rio Declaration on Environment and Development, adopted by the United
Nations General Assembly in 1992 (Panel Exhibit IND-35); and (iv) United Nations General Assembly
Resolution A/RES/66/288 (adopted 27 July 2012) (Rio+20 Document: "The
Future We Want") (Panel Exhibit IND-28). (See
Panel Report, paras. 7.269-7.274)
[276] Government of India, Ministry of Power, National
Electricity Policy, Resolution
No. 23/40/2004-R&R (Vol. II) (12 February 2005)
(Panel Exhibit IND-14).
[277] Government of India, Ministry of Power, Central Electricity
Authority, National Electricity Plan, Vol. 1 – Generation (January 2012)
(Panel Exhibit IND-16).
[278] Government of India, National Action Plan on
Climate Change (June 2008) (Panel Exhibit IND-2).
[279] Parliament of India, The Electricity Act, 2003 [No. 36 of 2003] (26 May
2003) (Panel Exhibit USA‑20).
[280] See India's
appellant's submission, paras. 164-167 and 171. At the oral hearing, India
confirmed that it is not challenging the Panel's findings under Article 11 of
the DSU.
[281] India's
appellant's submission, paras. 178 and 180-181.
[282] Panel Report, para. 7.268 (quoting India's first written submission
to the Panel, para. 240; opening statement at the first Panel meeting, para.
54; and opening statement at the second Panel meeting, para. 35).
[283] Panel Report, para. 7.268. Noting that "a central issue in
this case is whether the materials identified by India are 'laws or
regulations' within the meaning of Article XX(d)", the Panel explained
that, in referring to these materials as "instruments", its intention
was to "adopt a nomenclature that is neutral with respect to that
issue". (Ibid., fn 635 to para. 7.268) We see merit in the Panel's
approach and continue to use the term "instruments" to refer to the
materials identified by India.
[284] Panel Report, para. 7.191 (quoting India's first written
submission to the Panel, para. 255: stating that "[t]he DCR Measures have been designed
to secure compliance with India's obligations under its law and regulations
which require it to ensure ecologically sustainable growth and sustainable
development. The DCR Measures seek to achieve this by creating a local
manufacturing base for solar PV cells and modules, in order to ensure the
ability of satisfy the requirements for such cells and modules without being
susceptible to the risks of imports, such as price fluctuations, and
geo-political factors").
[285] Panel Report, para. 7.191 (quoting India's first written submission to the Panel,
para. 262: stating, in the context of Article XX(d), that "India does not
have any reasonably available alternatives to achieve its objectives of
building a domestic manufacturing base for solar cells and modules with a view
to ensuring domestic resilience to the fluctuations and uncertainties
associated with imports").
[286] Panel Report, para. 7.194 (referring to United States' opening
statement at the first Panel meeting, paras. 48-52).
[287] Panel
Report, para. 7.284.
[288] See Panel
Report, paras. 7.269-7.274. More specifically, India
referred to: (i) the first recital of the preamble of the WTO Agreement; (ii)
Articles 3, 4(1)(b), and 4(1)(f) of the United Nations Framework Convention
on Climate Change (Panel
Exhibit IND-3); (iii) the Rio Declaration on
Environment and Development, adopted by the UN General Assembly in 1992 (Panel
Exhibit IND-35); and (iv) paras. 3, 4, and 127 of United Nations General Assembly Resolution
A/RES/66/288 (adopted 27 July 2012) (Rio+20 Document: "The Future We Want")
(Panel Exhibit
IND-28).
[289] Panel
Report, paras. 7.290 and 7.293 (quoting Appellate Body Report, Mexico – Taxes on Soft Drinks, paras. 69-70 and 79).
(emphasis omitted)
[290] Panel
Report, para. 7.293.
[291] Panel
Report, para. 7.285 (quoting India's response to Panel question No. 35; and
first written submission to the Panel, para. 180).
[292] Panel
Report, para. 7.295 (quoting India's opening statement at the first Panel
meeting, para. 60). The same language is reproduced in para. 7.296
(quoting India's response to Panel question No. 35).
[293] Panel
Report, para. 7.297.
[294] Panel
Report, para. 7.298.
[295] Panel
Report, para. 7.298 (referring to India's first written submission to the Panel,
para. 180, in turn referring to Supreme Court of India,
Judgment, Vellore
Citizens Welfare forum v. Union of India and Others (1996) 5 SCC 647, paras.
10-15).
[296] Panel
Report, para. 7.298.
[297] Panel Report, paras. 7.301 and 7.333.
[298] Panel
Report, paras. 7.275-7.283.
[299] Panel Report,
para. 7.308.
[300] Panel Report, para. 7.308.
[301] Panel Report, para. 7.308 (referring to Appellate Body Report, Mexico –
Taxes on Soft Drinks, paras. 69-70, 75, 77, and 79).
[302] Panel
Report, para. 7.309.
[303] Panel
Report, para. 7.311.
[304] Panel Report, para. 7.312. (fns omitted)
[305] Panel Report, para. 7.312.
[306] Panel Report, para. 7.327.
[307] Panel Report, para. 7.276 (quoting Electricity Act, 2003
(Panel Exhibit USA-20), Section
3(1).
[308] Panel
Report, para. 7.313.
[309] Panel
Report, para. 7.314.
[310] Panel Report, para. 7.317.
[311] Panel
Report, para. 7.317.
[312] Panel
Report, para. 7.312.
[313] Panel
Report, para. 7.318.
[314] Panel
Report, para. 7.330 (referring to GATT Panel Report, EEC – Parts
and Components, para. 5.17; Panel Reports, Canada –
Periodicals, para. 5.9; Canada – Wheat Exports and
Grain Imports, para. 6.248; EC ‒ Trademarks
and Geographical Indications (US), para. 7.447; Mexico ‒ Taxes
on Soft Drinks, para. 8.175; and Colombia – Ports of Entry,
para. 7.538).
[315] Panel
Report, para. 7.329.
[316] Panel
Report, para. 7.329. (fn omitted)
[317] Panel
Report, para. 7.329.
[318] Panel
Report, para. 7.332.
[319] Panel
Report, para. 7.333.
[320] See paras. 5.56-5.61. of this Report.
[321] Oxford
English Dictionary online, definition of the word "law" ,
accessed 23 August 2016.
[322] Oxford
English Dictionary online, definition of the word "regulation" ,
accessed 23 August 2016. (italics original)
[323] Appellate
Body Report, Mexico – Taxes on Soft Drinks, para.
79.
[324] Appellate
Body Report, Mexico – Taxes on Soft Drinks,
para. 70.
[325] See Appellate
Body Report, Mexico – Taxes on Soft Drinks,
para. 70.
[326] Appellate
Body Report, Mexico – Taxes on Soft Drinks,
para. 69.
[327] Appellate Body Report, Mexico – Taxes on Soft
Drinks, paras. 73-74 (quoting Panel Report, Mexico –
Taxes on Soft Drinks, para. 8.175). (emphasis added)
[328] Appellate Body Report, Mexico – Taxes on Soft
Drinks, para. 74.
[329] See Appellate
Body Reports, Colombia – Textiles, paras. 5.69,
5.126, and 5.131; and Argentina ‒ Financial
Services, para. 6.203.
[330] Appellate
Body Report, Argentina – Financial Services,
para. 6.203. (emphasis added; fn omitted)
[331] Appellate
Body Report, Argentina – Financial Services,
fn 495 to para. 6.203.
[332] Appellate
Body Report, Argentina – Financial Services,
para. 6.203.
[333] Appellate
Body Report, Argentina – Financial Services, fn
505 to para. 6.208.
[334] Appellate
Body Report, US – Corrosion-Resistant Steel Sunset Review,
fn 87 to para. 87. See also Panel Report, fn 749 to
para. 7.314.
[335] See Panel Report, paras. 7.306-7.311.
[336] India's
appellant's submission, para. 171.
[337] India's
appellant's submission, para. 171.
[338] India's
appellant's submission, para. 174 (referring to Panel Report, para. 7.328 and
fn 770 thereto; and India's second written submission to the Panel, paras. 131‑133).
[339] According
to India, "ecologically sustainable growth" means "economic
growth in an ecologically sustainable manner". In India's view, the
"concept of 'sustainable development' … encompasses within it the concept
of 'ecologically sustainable growth'". India also clarifies that
"ecologically sustainable growth is fundamental to India's strategy to
address its energy security objective as well" and "they cannot be
seen as distinct from each other". (India's appellant's submission, para.
176 (referring to India's second written submission to the Panel, paras. 138
and 140, and fn 172 thereto))
[340] India's
appellant's submission, para. 173.
[341] India's
appellant's submission, para. 173. (fn omitted)
[342] United
States' appellee's submission, para. 158 (referring to Panel Report, Canada ‒ Wheat Exports and Grain Imports, para.
6.248).
[343] United
States' appellee's submission, para. 158.
[344] United
States' appellee's submission, para. 159 (referring to Panel Report, para.
7.330).
[345] United
States' appellee's submission, para. 159.
[346] Panel
Report, para. 7.311. See also India's appellant's submission, paras. 171-172.
[347] Appellate
Body Report, Korea – Various Measures on Beef,
para. 162.
[348] See Panel
Report, fn 749 to para. 7.314.
[349] Panel
Report, para. 7.311.
[350] Panel
Report, para. 7.328 (quoting GATT Panel Report, EEC – Parts
and Components, para. 5.15; and Panel Reports, China – Auto
Parts, para. 7.315 and fn 572 thereto, in turn citing Panel Report, Korea – Various Measures on Beef, paras. 655 and 658).
[351] Panel
Report, fn 773 to para. 7.329.
[352] India's
appellant's submission, para. 173 (referring to India's response to Panel
question No. 34(a); and second written submission to the Panel, paras.
136-137).
[353] Panel
Report, para. 7.275 (referring to India's first written submission to the Panel,
para. 240). (emphasis added)
[354] Panel
Report, para. 7.275 (referring to India's first written submission to the Panel,
para. 240).
[355] Panel Report, para. 7.333.
[356] Panel
Report, para. 7.279.
[357] National Electricity Policy (Panel Exhibit IND-14), para. 5.12.1.
[358] Panel
Report, para. 7.281 (referring to India's response to Panel question No. 34(a)).
[359] National Electricity Plan (Panel Exhibit IND-16), subsection 5.2.1, pp.
90-91.
[360] Panel
Report, para. 7.283.
[361] National Action Plan on Climate Change (Panel Exhibit IND-2), pp. 1,
20, and 22, respectively.
[362] India
acknowledges that the National Electricity Policy, the National Electricity
Plan, and the National Action Plan on Climate Change are, in and of themselves,
"non-binding legal instruments". (India's appellant's submission,
para. 172; see also Panel Report, para. 7.314)
[363] National
Electricity Policy (Panel Exhibit IND-14), para. 1.8.
[364] National
Electricity Policy (Panel Exhibit IND-14), para. 3.1.
[365] National
Action Plan on Climate Change (Panel Exhibit IND-2), p. 13.
[366] Panel
Report, para. 7.313.
[367] Electricity Act, 2003 (Panel Exhibit USA-20), Section 3.
[368] See Panel
Report, paras. 7.312 and 7.327.
[369] Insofar as
Section 3 of the Electricity Act, 2003 requires that the "Central
Government shall, from time to time, prepare the national electricity policy
and tariff policy … based on optimal
utilisation of resources such as coal, natural gas, nuclear substances or
materials, hydro and renewable sources of energy" (emphasis
added), India agreed, at the oral hearing, with the Panel's view that the
"optimal utilisation of resources such as coal, natural gas, nuclear
substances or materials, hydro and renewable sources of energy" are
objectives referenced in Section 3 of the Electricity Act, 2003. (See Panel
Report, paras. 7.330-7.332) We also note the Panel's finding, not challenged on
appeal, that India did not put forth the argument that the DCR measures are
designed to secure compliance with the obligations under Section 3 of the
Electricity Act, 2003 to periodically prepare the National Electricity
Policy and the National Electricity Plan. The Panel also stated that it
"faile[d] to see how the DCR measures could be said to secure compliance
with the obligations in Section 3 of the Electricity Act, which are to periodically
prepare the National Electricity Policy and the National Electricity
Plan". (Ibid., para. 7.329)
[370] India's
appellant's submission, para. 170.
[371] India's
appellant's submission, para. 167.
[372] India's
appellant's submission, paras. 167-168. According to India, legislative action
to incorporate the international instrument is required only when there is a
"conflicting" domestic legislation, which is not the case with
respect to the international instruments that India has identified in this
case.
[373] India's
appellant's submission, para. 167.
[374] India's
appellant's submission, para. 168 (referring to India's first written
submission to the Panel, para. 180 and fn 172 thereto).
[375] India's
appellant's submission, para. 170.
[376] United
States' appellee's submission, para. 155.
[377] United
States' appellee's submission, para. 155 (referring to Appellate Body Report, Mexico – Taxes on Soft Drinks, para. 69).
[378] United
States' appellee's submission, para. 155.
[379] United
States' appellee's submission, para. 156.
[380] United
States' appellee's submission, para. 156. (fn omitted)
[381] United
States' appellee's submission, para. 156.
[382] See supra paras. 5.106-5.114.
[383] Appellate Body Report, Mexico – Taxes on Soft
Drinks, para. 79. (emphasis added)
[384] Appellate Body Report, Mexico – Taxes on Soft
Drinks, para 69.
[385] Appellate Body Report, Mexico – Taxes on Soft
Drinks, fn 148 to para. 69.
[386] In the context of India's argument that the "DCR measures … have been designed to
secure compliance with India’s obligations under international law" (India's
appellant's submission, para. 169), we note that the degree of normativity of an international
instrument or rule under the domestic legal system of a Member may be different
from the degree of normativity of such an instrument or rule under public international
law. Thus, for example, while the principle of pacta sunt
servanda under public international law, as codified in Article 26
of the Vienna Convention on the Law of Treaties (done at Vienna, 23 May 1969, UN Treaty
Series, Vol. 1155, p. 331), requires that
"[e]very treaty in force is binding upon the parties to it and must be performed
by them in good faith", this does not mean that, in and of itself, there
is a rule, requirement, or obligation within the domestic legal system of a
Member that falls within the scope of "laws or regulations".
[387] India's appellant's submission, para. 167.
[388] India's
appellant's submission, paras. 167-168. India explained before the Panel that,
"[u]nder Indian law, rules of international law are accommodated into
domestic law without express legislative sanction, provided they do not run
into conflict with laws enacted by the Parliament". (Panel Report, para. 7.294 (quoting India's first written submission
to the Panel, para. 180))
[389] India's response to questioning at the oral hearing.
[390] Panel Report, para. 7.297.
[391] Panel Report, para. 7.298.
[392] Panel Report, para. 7.298.
[393] Panel Report, para. 7.299 (quoting Appellate Body Report, Mexico – Taxes on Soft Drinks, para. 79).
[394] India's response to questioning at the oral hearing. See also
India's appellant's submission, para. 167: stating that "[t]he fact
that the executive takes 'implementing' actions, does not mean that the
international law instrument has no direct effect. On the contrary, it is
because the international law has direct effect, that the executive wing of the
government is required to take implementation action in the first place".
[395] India's
appellant's submission, para. 168 (referring to India's first written
submission to the Panel, para. 180 and fn 172 thereto). At the
oral hearing, India appeared to suggest that the international instruments it had
identified can form an independent and exclusive basis for a cause of action
before the domestic courts of India. This position, however, is not supported
by the Panel's findings or the Panel record.
[396] Panel Report, para. 7.298 (quoting India's first written submission
to the Panel, para. 180, in turn referring to Supreme Court of India, Judgment,
Vellore Citizens Welfare Forum v. Union of India and Others (1996) 5 SCC 647,
paras. 10-15).
[397] Panel Report, para. 7.298.
[398] Panel Report, fn 715 to para. 7.295 (quoting India's opening
statement at the first Panel meeting, para. 61, in turn referring to Supreme
Court of India, Decision, G. Sundarrajan v. Union of India and Others (2013)
(6) SCC 620 (Panel Exhibit IND-36 (excerpts)), paras. 161‑174).
[399] See para. 5.137. of
this Report. We clarify that, while such an obligation
may exist under the domestic legal system of India, our conclusion is limited
to India's failure to demonstrate that the passages and provisions of the
domestic instruments identified by it set out the obligation alleged by it.
[400] See para. 5.149. of
this Report.
[401] Panel
Report, para. 7.265.
[402] Panel
Report, para. 7.333.
[403] Panel
Report, para. 7.334.
[404] Panel
Report, para. 7.334.
[405] See Panel
Report, para. 7.335.
[406] As noted
by the Panel, the Appellate Body has confirmed that, "[j]ust as a panel
has the discretion to address only those claims
which must be addressed in order to dispose of the matter at issue
in a dispute, so too does a panel have the discretion to address only those arguments it deems necessary to resolve a
particular claim". (Appellate Body Report, EC – Poultry,
para. 135 (emphasis original)) The Panel noted that the "logical
corollary of this proposition is that a panel has the discretion based on the
circumstances of each case to address certain claims and arguments even where
it is not strictly necessary to do so to
resolve the matter at issue", and that "the Appellate Body has
confirmed that panels have the discretion to make alternative findings,
including alternative factual findings." (Panel Report, fn 214 to para.
7.76 (referring to Appellate Body Reports, US – Softwood Lumber IV,
para. 118; Canada – Wheat Exports and Grain Imports,
para. 126; China – Auto Parts,
para. 208; and US – Carbon Steel (India),
para. 4.274) (emphasis original))
[407] Panel
Report, para. 7.389. (fn omitted)
[408] Panel
Report, para. 7.390.
[409] Article 3.3
of the DSU provides, in this regard, that the aim of the WTO's dispute
settlement system is the "prompt settlement of situations in which a
Member considers that any benefits accruing to it directly or indirectly under
the covered agreements are being impaired by measures taken by another Member".
Article 3.4 stipulates that DSB recommendations or rulings "shall be
aimed at achieving a satisfactory settlement of the matter under
consideration." Article 3.7 of the DSU further states that "[t]he
aim of the dispute settlement mechanism is to secure a positive solution to a
dispute".
[410] In US – Upland Cotton, the Appellate Body
stated as follows: "although we recognize that there may be cases in which
it would be useful for us to review an issue, despite the fact that our ruling
would not result in rulings and recommendations by the DSB, we find no
compelling reason for doing so in this case." The Appellate Body
added that an interpretation of a particular phrase in the SCM Agreement was "unnecessary
for purposes of resolving" that dispute. (Appellate Body Report, US – Upland Cotton, paras. 510-511) In relation to another
claim in that case, the Appellate Body stated that it failed to see how an
examination of that "claim would contribute to the 'prompt' or
'satisfactory settlement' of this matter or would contribute to 'secure a
positive solution' to this dispute." (Appellate Body Report, US – Upland Cotton, para. 747)
[411] Third parties are conferred relatively more limited
rights under Article 10 of the DSU.
[412] See e.g. Appellate Body Report, EC – Export
Subsidies on Sugar, para. 339, where the Appellate Body
observed that "the question of the applicability of the SCM Agreement to the export subsidies in this dispute raises
a number of complex issues" and that "in the absence of a full
exploration of these issues, completing the analysis might affect the due
process rights of the participants". See also
Appellate Body Reports, EC ‒ Seal
Products, para. 5.69.
[413] See e.g. Appellate Body Reports, Australia –
Salmon, paras. 117-118; US – Wheat Gluten,
paras. 80‑92; and Canada – Aircraft (Article 21.5
– Brazil), paras. 43-52. In addition, if the Appellate Body
considers that it is
not in a position to complete the legal analysis as requested by a party on
appeal, for instance, due to a lack of sufficient factual findings by a panel,
it will state this reason in its Report.
[414] Appellate Body Report, US – Wool Shirts and
Blouses, p. 19, DSR 1997:I, p. 323 at 340.
[415] The Appellate Body has explained, "[w]hile the application of a provision
may be regarded as confined to the context in which it takes place, the
relevance of clarification contained in adopted Appellate Body reports is
not limited to the application of a particular provision in a specific
case." Appellate Body report, US ‒ Stainless Steel (Mexico), para. 160.
[416] Article 21.1 of the DSU.