INDONESIA
– CERTAIN MEASURES AFFECTING THE AUTOMOBILE INDUSTRY
Arbitration
under Article 21.3(c) of the
Understanding on Rules and Procedures
Governing the Settlement of Disputes
Award of the Arbitrator
Christopher Beeby
I.
Introduction
1.
On 23 July 1998, the Dispute
Settlement Body (the "DSB") adopted the Panel Report[1]
in Indonesia – Certain Measures Affecting
the Automobile Industry. With
respect to the 1993 Programme[2], the Panel found that
the local content requirements linked to certain sales tax benefits and customs
duty benefits violate the provisions of Article 2 of the Agreement on Trade-Related Investment Measures (the "TRIMs Agreement") and that the
sales tax discrimination aspects violate Article III:2 of the GATT 1994.[3] With respect to the 1996 National Car
Programme[4],
the Panel found, inter alia, that
Indonesia had acted inconsistently with Article 2 of the TRIMs Agreement and Articles I and III:2 of the GATT 1994, and that
the European Communities had demonstrated that Indonesia had caused serious
prejudice to the interests of the European Communities within the meaning of
Article 5(c) of the Agreement on
Subsidies and Countervailing Measures.[5] The Panel recommended "that the Dispute
Settlement Body request Indonesia to bring its measures into conformity with
its obligations under the WTO Agreement."[6]
2.
In a communication dated 21
August 1998, Indonesia informed the DSB, pursuant to Article 21.3 of the Understanding on Rules and Procedures
Governing the Settlement of Disputes (the "DSU"), that it would
"fully comply" with the recommendations and rulings of the DSB
adopted on 23 July 1998.[7] Indonesia also stated its belief that
measures taken by it on 21 January 1998 to repeal the February 1996 Programme
constituted "appropriate implementation of the recommendations and rulings
of the DSB" concerning the February 1996 Programme.[8] With regard to the 1993 Programme, Indonesia
stated the following:
[1]Adopted 23 July 1998, WT/DS54/R, WT/DS55/R, WT/DS59/R, WT/DS64/R.
[2]The Panel Report (paras. 2.4-2.14) lists the following as the
measures comprising the 1993 Programme:
Minister of Industry Decree No. 114/M/SK/6/1993, 9 June 1993 ("The
Determination of Local Content Levels of Domestically Made Motor Vehicles or
Components") ("Decree 114/1993"); Minister of Finance Decree No.
645/KMK.01/1993, 10 June 1993 ("The Relief of Import Duty on the Import of
Certain Parts and Accessories of Motor Vehicles for the Purpose of Automotive
Assembling and/or Manufacture") ("Decree 645/1993"); Minister of Finance Decree No.
647/KMK.04/1993, 10 June 1993 ("The Kinds and Types of Motor Vehicles
Subject to Sales Tax on Luxury Goods") ("Decree 647/1993");
Minister of Finance Decree No. 223/KMK.01/1995, 23 May 1995 ("The
Improvement of Decree of the Minister of Finance Number. 645/KMK.01/1993
on the Relief of Import Duty on Parts and Accessories of Motor Vehicles for the
Purpose of Automotive Assembly and/or Manufacture") ("Decree
223/1995"); and Minister of Finance Decree No. 36/KMK.01/1997,
21 January 1997 ("The Granting of Import Duty Relief to Certain Parts
and Accessories of Motor Vehicles for the Assembly and/or Manufacturing of
Motor Vehicles") ("Decree 36/1997"). The parties confirmed that these were the
measures at issue in this arbitration. I
note that Decree 36/1997 declared "null and void" the Decrees
645/1993 and 223/1995.
[3]Panel Report, para. 15.1(a) and (b).
[4]For a description of the measures comprising the 1996 National Car
Programme – consisting of the February 1996 Programme and the June 1996
Programme -- see paras. 2.15-2.41 of the
Panel Report. All parties agree that
these measures are not at issue in this arbitration.
[5]Panel Report, para. 15.1(a)-(d).
[6]Panel Report, para. 15.4.
[7]WT/DS54/12, WT/DS55/11, WT/DS59/10, WT/DS64/9, 27 August 1998.
[8]WT/DS54/12, WT/DS55/11, WT/DS59/10,
WT/DS64/9, 27 August 1998.