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

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.