New Issue: TL&D on WTO Dispute Settlement

Trade, Law and Development, a scholarly journal published by National Law University Jodhpur, has published its latest issue on dispute settlement at the WTO. As Prof. Joel Trachtman rightly notes in his editorial, legitimacy and development are the two underlying themes of the special issue. On legitimacy, Gabrielle Marceau and Mikella Hurley discuss transparency and public participation in WTO dispute settlement proceedings. Particularly interesting is their attempt at comparing transparency at the WTO with other fora. Arthur Daemmrich writes about epistemic contests and the legitimacy of the WTO. Based upon a case study of the Brazil — Upland Cotton dispute, Daemmerich presents an expertise based account of the contemporary legitimacy of the WTO. On the theme of development, Jan Bohanes and Fernanda Garza present a comprehensive study on the participation of developing countries in WTO dispute settlement, arguing that the greatest constraints for developing country participation in WTO dispute settlement are at the domestic level. Sonia Rolland presents a developmental account of the implementation stage of WTO disputes. Also in the issue, Simon Lester discusses the development of standards of appellate review and Claus Zimmerman discusses the absence of retrospective remedies at the WTO — legal and institutional issues which remain relatively under-explored.

It’s a great issue, and you should head here to browse through the entire content.

I should perhaps also point out that TL&D has been ranked as the best law journal in India, as well as the fifteenth best in the world in the field of international trade, by the Washington & Lee Law Journal Rankings (the most comprehensive of this sort). Congratulations to the editors and staff of the journal — it is heartening to see such efforts towards improving legal scholarship in India.

India Requests WTO Panel in CVD Dispute with the US

Following the US request for the establishment of a panel to adjudicate on the dispute with India over a ban on the import of certain poultry products, Reuters reports that India has also requested for the establishment of a panel in a dispute against the US over certain countervailing duty imposed by the latter on steel products imported from India (noted previously here). This certainly seems to be another episode in the saga of tit-for-tat disputes actions at the WTO. If that be the case, in addition to China, the US is now active on a second front (of course, there are many differences between the actions and motivations of India and China).

Back from Break, with a Summer Update!

Apologies for the extended summer break (not for the lack of thoughts or developments, though).

Let’s begin with a recap of what’s been happening for India at the international stage over the summer:

The ICJ and Justice Bhandari’s election:

1. Justice Bhandari was finally sworn-in as a judge of the International Court of Justice on 19 June 2012 (right before the Diallo judgment was read). For those interested, here’s a photo of Justice Bhandari being sworn in, and a video of him making the (rather short) solemn declaration (the oath).

2. On the debate surrounding Justice Bhandari’s nomination (see this for some background), two main criticisms have been leveled against Justice Bhandari’s nomination by India for the ICJ. The first, as reflected here, argues that as a national judge with little or no real experience in international law, Justice Bhandari’s nomination by the Indian national group of the PCA reflected absurd decision making. From an international legal perspective, the underlying assumption of this view is thus: “a judge may be well-versed with domestic legal traditions, but one assumes that a Judge at the International Court of Justice, the principal judicial organ of the United Nations, responsible for adjudicating on questions of international law (Article 38), would possess knowledge of international law!” The second criticism, as argued by Arghya Sengupta in an OpEd in The Hindu, takes issue with the nomination of Justice Bhandari, a sitting Supreme Court Judge, by the government of India on grounds of undermining the independence of the Supreme Court Judge (Justice Bhandari). As much as I understand, and perhaps even agree with, some of the sentiments behind these arguments, I still disagree with several individual arguments inherent in these criticisms, especially in light of the rather inchoate state of the international legal profession in India. However, I’d save my thoughts on this for later.

3. I’ve blogged about a right to Information application seeking information on Justice Bhandari’s nomination earlier. In response, the Ministry of External Affairs denied some information on Justice Bhandari’s nomination on the ground that the RTI Act allows withholding information related to strategic interests of the country, and besides it would also affect canvassing for Justice Bhandari. Now, the Central Information Commission has asked the MEA to provide the requested information. Interestingly, the CIC has also asked for the Indian national group of the PCA to answer some of the queries (could an argument be made here that the national group is not a “public authority” for the purposes of the RTI Act?).

Moving on to the Enrica Lexie incident (covered previously here and here):

There’s been considerable discussion on the international legal aspects of the incident.

1. Duncan Hollis, over on Opinio Juris, takes a look at the incident through the prism of the SS Lotus case decided by the PCIJ.

2. A debate in The Hindu captures the essential position and arguments both for and against the jurisdiction of Indian courts over the Italian marines. Samir Saran and Samya Chatterjee argue that the Indian courts do not have jurisdiction. Prabir Purkayastha and Rishabh Bailey, referring to Article 97 of the UNCLOS and the SS Lotus judgment, argue that Indian courts “also” have jurisdiction over the incident (as opposed to exclusive jurisdiction of Italy). Finally, Samir Saran disputes the above interpretation of Article 97 and also makes a very interesting argument based on the Indian Merchant Shipping Act.

3. Meanwhile, and perhaps more importantly, Judge Gopinath of the Kerala High Court has rendered (a reasonably well crafted) judgment in the writ petition filed by the Italian marines arguing that Indian courts do not have jurisdiction. The Court ruled that the Indian courts can exercise jurisdiction over the Italian marines under the Indian Penal Code and the Code of Criminal Procedure as they were within India’s contiguous/exclusive economic zone. It addressed a number of other important matters such as the sovereign immunity of the marines (held no sovereign immunity), the “compatibility” of several national laws (including the SUA Act) with the UNCLOS (held are “compatible”), and the relevance of past precedence (the Raymund Genacio case — differentiated on facts). Particularly interesting is the Court’s interpretation of the UNCLOS. For example, in defining valid exercise of sovereign authority by India in the territorial-, contiguous-, and exclusive economic zones under the UNCLOS, it notes:

To hold that a coastal state has no right whatsoever to protect its nationals exercising their legitimate rights inside the coastal state’s CZ/EEZ, would be nothing but a total travesty of justice and an outrageous affront to the nation’s sovereignty. Such a view would mean that any day, any passing-by ship can simply shoot and kill, at its will, fishermen engaged in earning their livelihood; and then get away with its act on the ground that it happened beyond the territorial waters of the coastal state. Such a view will not merely be a bad precedent, but a grossly unjust one, and will go against all settled principles of law. (para. 33)

At the WTO:

1. On 25 June, the DSB established a Panel with standard terms of reference in the poultry dispute between the US (complainant) and India (DS430: India — Measures Concerning the Importation of Agricultural Products).

2. According to news reports, the US has threatened to challenge India’s compulsory license for Nexavar at the WTO. This comes after reports that India’s commerce minister had defended the WTO consistency of the license.

Bilateral Investment Treaties/Arbitration:

1. The Sistema dispute appears to be moving forward, with the six-month notice period nearing its end and the selection of a legal team by India. Several names have been suggested, including Mr. Rodman Bundy, Prof. Donald McRae and Senior Advocate A K Ganguli.

2. Several NGO’s have written a letter to Prime Minister Manmohan Singh expressing concern over the ongoing US-India BIT negotiations. Their main attack appears to be against investor-state dispute settlement provisions.

3. In Nepal, a breakaway faction of the Unified Communist Party of Nepal (Maoist) has said that it will work towards scrapping of the recently concluded BIT with India.

4. The latest on the Vodafone BIT dispute is that it is moving forward with India not agreeing to Vodafone’s demands. Reports suggest that Prime Minister Singh would soon take a decision on Vodafone’s plea “seeking an undertaking that the [retrospective] amendment would not apply to it.”

And, finally, here’s the quote of the summer by none other than India’s (“underachieving“) Prime Minister:

“there are no international solutions to India’s problems”

- Prime Minister Manmohan Singh, returning from his trip to Los Cabos for the G20 and Rio.

A Freudian slip now, Mr Singh? : )

US Requests WTO Panel in Poultry Dispute with India

According to a USTR press release, the US is pressing ahead with a request for the establishment of a panel in DS430 to decide upon US claims “regarding the Government of India’s restrictions on imports of various U.S. agricultural products, including poultry meat and chicken eggs.” (I have discussed the dispute and the request for consultation previously.)

Although the panel request is not yet up on the WTO website, the USTR press release provides the following background:

India is asserting it has the right to impose import restrictions on countries whenever they report outbreaks of low pathogenic avian influenza (LPAI), the only kind of avian influenza found in the United States since 2004. The relevant international guidelines as well as the relevant science do not support the imposition of measures of the type India is maintaining on account of LPAI.

[...] India appears to have acted inconsistently with its obligations under the SPS Agreement, including by failing to base its measures on international guidelines or a valid risk assessment and by failing to ensure that its measures do not unfairly discriminate against imports from countries such as the United States.

Benn McGrady offers some thoughts on this development over on the O’Neill Institute Blog.  Referring to the other dispute recently initiated by India against the US over CVDs on certain steel products from India, McGrady notes, that “[t]his consultation [CVD] was initiated by India shortly after the consultation concerning agricultural imports was initiated by the US, suggesting something of a tit-for-tat claim and counterclaim dynamic”. In fact, recent reports continue to suggest that India could soon file another dispute against the US over certain visa fees imposed by the latter, which would only further the perception of such a dynamic at work between the two countries. McGrady also makes a reference to India’s protest against the US placing it on the “Priority Watch List” in the US Special 301 Report (Recall also the voices of protest against India’s first compulsory license issued earlier this year). As of now, such a reactionary dynamic seems to be confined to the realm of WTO disputes, however, it will be interesting to see if it ends up defining India-US economic relations in other areas (such as the proposed bilateral investment treaty, for example).

Korean Professor Appointed to WTO Appellate Body

According to latest reports, Prof. Seung Wha Chang, a professor of law at Seoul National University, has been appointed as a member of the WTO Appellate Body. Prof. Chang will fill in the vacancy arising out of the resignation of Mr. Shotaro Oshima, a Japanese national and diplomat who resigned from the AB on January 7. Here is his unofficial biography from the Harvard website:

Seung Wha Chang has been a Professor of Law at Seoul National University School of Law since 1995 and has taught international trade, international business transactions, and international arbitration. Professor Chang also taught as Visiting Professor of Law at Harvard, Yale, Stanford, NYU, Duke, Georgetown, UCLA, NUS and other law schools. Prior to teaching, he practiced at Covington & Burling and was a Judge of the Seoul District Court. Professor Chang served as a WTO Panelist for seven highly profiled dispute settlement proceedings including US-FSC and Canada-Aircraft II. He is one of the leading arbitrators in the Asia-Pacific region and regularly serves as an arbitrator (sole, co-arbitrator or chair) for ICC and other leading arbitral institutions. Professor Chang is currently Co-President of APRAG and also serves as Chairman of Korean Council for International Arbitration and Member of the ICC International Court of Arbitration.

ILCurry wishes Prof. Chang the best for his term at the AB. Our best wishes also to Mr. Oshima for a healthy and fulfilling post-AB life!

Weekly Update: Investment Arbitration, BRICS, WTO, Tulbul and More….

Here are some of the major international legal developments of relevance to India and South Asia for the week ending 31 March 2012:

Investment Arbitration

  • Vodafone may file a claim against India under the India-Netherlands BIT for the capital gains tax sought to be retrospectively imposed by India against it: Indian Express, Independent, DNA, Wall Street Journal (paywalled).
  • Norwegian telecom operator Telenor, faced with the prospect of its Indian joint venture losing 22 2G mobile licences due to the Supreme Court judgment in the 2G case, has filed a notice of dispute  against India under the India-Singapore BIT seeking damages to the tune of USD 14 billion: Economic Times. [With a notice of dispute already filed by the Russian company Sistema against India, this makes it two investment treaty disputes arising out of the Supreme Court’s 2G judgment]

WTO Disputes

  • India is preparing to file a dispute against the US at the WTO over the visa fee charged by the latter for Indian software companies. The claim: “discrimination” against the Indian software companies which are being asked to pay higher H1B and L1 visa fee for their employees than the American firms for bringing more number of skilled immigrants to their country at lesser costs:  Economic Times.
  • The US called upon India to accede to the government procurement agreement — a plurilateral WTO agreement.
  • The US and EU have come out against the local content requirements in India’s Jawaharlal Nehru Solar Mission, which requires requires solar mission investors to use Indian manufactured solar modules and source 30 percent of their inputs from India: Hindustan Times. The Indian government is already reported to be preparing its strategy in case a dispute is filed at the WTO.

International River Water Disputes

EU Emissions Scheme

  • The Indian government has confirmed that it will be directing Indian airlines not to participate in the EU’s controversial aviation emissions rule. (Recall that China has already boycotted the EU scheme, as well): ICTSD.

India-Pakistan Trade

UN Special Rapporteur on AFSPA in Kashmir

  • After a visit to Kashmir, rhe UN Special Rapporteur on extrajudicial, summary or arbitrary executions stated that the Indian Armed Forces (Special Powers) Act has become a symbol of “excessive state power” and has “no role to play in a democracy”: NDTV, Hindustan Times. The official press release can be found here.

BRICS

  • The past week saw the leaders from Brazil, Russia, India, China and South Africa assemble in Delhi for the fourth BRICS Summit. The theme of the summit was “BRICS Partnership for Global Stability, Security and Prosperity”.
  • The countries were called upon to support a common developing country candidate as the successor of DG Lamy.
  • In addition, the heads of state of the BRICS countries signed two agreements supporting trade in local currencies between them. The two agreements are: (i) the Master Agreement on Extending Credit Facility in Local Currencies; and, (ii) the BRICS Multilateral Letter of Credit Confirmation Facility Agreement. More details can be found in a MEA document here.
  • In culmination of the summit, the BRICS countries issued the “Delhi Declaration“. Here are some excerpts from the Declaration:
  • On the Doha Round at the WTO:

16. We will continue our efforts for the successful conclusion of the Doha Round, based on the progress made and in keeping with its mandate. Towards this end, we will explore outcomes in specific areas where progress is possible while preserving the centrality of development and within the overall framework of the single undertaking. We do not support plurilateral initiatives that go against the fundamental principles of transparency, inclusiveness and multilateralism. We believe that such initiatives not only distract members from striving for a collective outcome but also fail to address the development deficit inherited from previous negotiating rounds. Once the ratification process is completed, Russia intends to participate in an active and constructive manner for a balanced outcome of the Doha Round that will help strengthen and develop the multilateral trade system.

  • On Syria:

21. We express our deep concern at the current situation in Syria and call for an immediate end to all violence and violations of human rights in that country. Global interests would best be served by dealing with the crisis through peaceful means that encourage broad national dialogues that reflect the legitimate aspirations of all sections of Syrian society and respect Syrian independence, territorial integrity and sovereignty. Our objective is to facilitate a Syrian-led inclusive political process, and we welcome the joint efforts of the United Nations and the Arab League to this end. We encourage the Syrian government and all sections of Syrian society to demonstrate the political will to initiate such a process, which alone can create a new environment for peace. We welcome the appointment of Mr. Kofi Annan as the Joint Special Envoy on the Syrian crisis and the progress made so far, and support him in continuing to play a constructive role in bringing about the political resolution of the crisis.

  • On Iran:

22. The situation concerning Iran cannot be allowed to escalate into conflict, the disastrous consequences of which will be in no one’s interest. Iran has a crucial role to play for the peaceful development and prosperity of a region of high political and economic relevance, and we look to it to play its part as a responsible member of the global community. We are concerned about the situation that is emerging around Iran’s nuclear issue. We recognize Iran’s right to peaceful uses of nuclear energy consistent with its international obligations, and support resolution of the issues involved through political and diplomatic means and dialogue between the parties concerned, including between the IAEA and Iran and in accordance with the provisions of the relevant UN Security Council Resolutions.

WTO Dispute Settlement in the Indian Parliament

Yesterday in the Lok Sabha a Member of Parliament inquired about India’s participation in  dispute settlement at the WTO over the last three years (pp. 569-570 here):

Breach of WTO Obligations
1904. SHRI ARUN YADAV:

Will the Minister of COMMERCE AND INDUSTRY be pleased to state:
(a) whether the Government has moved the Disputes Settlement Body of the World Trade Organisation (WTO) against the breach of WTO obligations by other countries during the last three years;

(b) if so, the details thereof, Sector-wise along with outcome of these steps; and

(c) the adverse impact on the export of the affected sectors on account of such
breach?

In response, Jyotiraditya Scindia, the Indian Minister of State for Commerce and Industry, provided the following information:

During the last three years, India has sought consultations under the Dispute Settlement Understanding (DSU) of the World Trade Organisation (WTO) against the breach of WTO obligations by other countries in two cases as per following details:

Dispute DS 408: India sought consultations with the European Union (EU) on 11 May, 2010 on the repeated instances of detention of Indian generic medicines in the EU ports. The detentions were made by invoking the EC’s Regulation 1383/2003 which contains customs procedures for taking action against goods suspected of infringing intellectual property rights (IPRs). The detention by the EU’s custom authorities of these generic medicine consignments was in violation of the obligations of EU and the Netherlands under Article V of GATT which enshrines freedom of transit of goods through the territory of each contracting party of GATT via the routes most convenient for international transit. These detentions were also inconsistent with EU and its Member States’ obligations under Articles 41 and 42 of the TRIPS Agreement. India held extensive consultations with the EU and during these consultations EU showed willingness to resolve the dispute without resorting to the need to go the WTO dispute panel. India and EU reached an interim settlement in July, 2011 wherein, the EU agreed to the core principle that the mere fact that medicines are in transit through EU territory, and that there is a patent title applicable to such medicines in the EU territory, does not in itself constitute enough grounds for customs authorities in any Member State to suspect that the medicines at stake infringe patent rights. The EU also agreed to reflect the core principle in the proposed revision of the EC’s regulation to replace the existing Regulation relating to customs procedures for taking action against goods suspected of infringing intellectual property rights.

Dispute DS 428: India sought consultation with Turkey on 13 February, 2012 on the imposition of safeguard measures on cotton yarn which are inconsistent with the WTO’s Agreement on Safeguards. Consultations were held with Turkey on 12-13 March, 2012 in Ankara and Turkey’s further response is awaited.

(c) As regards dispute relating to detention of Indian generic medicines with the EU, there was no adverse impact on exports of these products due to the urgent steps taken by the Government of India. As regards imposition of Safeguard duty on cotton yarn by Turkey, there was decline in exports to Turkey due to fluctuating market conditions and safeguard measures taken by Turkey.

International IP, RTI and India’s Legal Representation at the WTO

I recently got back from National Law University, Jodhpur, after attending the Indian Ministry of Human Resource Development’s Roundtable on IP protection. The event was fantastic: from the concept of the roundtable itself (something not very popular with Indian law schools yet), to the organization, and the very interesting discussions. My session, with Mr. Anand Grover and Prof. Madhukar Sinha, on international IP protection was quite useful and provoking. From a pedagogical perspective, this was my first roundtable discussion (as opposed to conference presentations) and I personally think it is a much more engaging and meaningful format of dialogue for the participants and the audience.  I believe the organizers will be putting up videos and a podcast of the event — I will post a link as soon as I have one.

My talk at the roundtable was on unilateralism in international IP regulation, where I also revisited the generics seizures dispute. I will not go on to discuss that here, but just wanted to note a post by Prashant Reddy over on Spicy IP. Prashant had filed a right to information request regarding India’s legal repersentation and strategy for the WTO seizures dispute (DS409). I found the information he received from the government to be quite useful and telling. Here are some excerpts from the responses and his comments (the full RTI response is here):

(i) The first question pertained to the names of the lawyers/law-firms/law-professors engaged by the Government to advise it on the dispute: 
Ans. The Government had engaged the professional services of two Supreme Court lawyers and one foreign law professor to advise it on the dispute. The names and the fees charged by these lawyers are as follows:
(a) Mr. Krishnan Venugopal, Senior Advocate, Supreme Court.
Fees charged: Rs. 8.375 lakhs (Approx. US $ 16,500)
(b) Mr. Uday Nath Tiwari, Advocate, Supreme Court.
Fees charged: Rs. 2.01 lakhs (Approx. US $4,000)
(c) Professor Frederick M. Abbot, Professor of International Law at Florida University, College of Law.
Fees charged: Rs. 25.22 lakhs (Approx. US $50,000)
(ii) The second question pertained to the process adopted by the Government to select the above lawyers/law-professors: 
Ans. “The Department obtained opinion about the legal aspects of the case from the Advisory Centre for WTO Law (ACWL), Geneva and Indian law firm on the panel of the Dept. of Commerce. Dept. consulted the Permanent Mission of India (PMI), Geneva in selecting the foreign expert based on the recognized expertise in the IPR matters.
From amongst the Indian law firms/advocates the Deptt. considered their expertise in handling the WTO disputes and trade law matters. After short-listing the legal experts the Dept. took the approval of the Dept. of Legal Affairs for their engagement and payment terms.”
Comment: While Prof. Abbot is definitely a renowned expert on IP and WTO law, one does wonder why the Indian Government does not engage any Indian professors to advise it on such issues. For example Professor N.S. Gopalakrishnan, CUSAT has in the past advised the government on the TRIPs & ‘data exclusivity’. I don’t see the U.S. Government engaging Indian academics and their only hope of developing an expertise in the area is if their own government decides to engage them for advisory work. I do not understand the Indian Government’s obsession with foreigners. Aren’t Indians smart enough people? Moreover, even while selecting amongst Indians, the Government has to adopt a more transparent mechanism to select Indian lawyers.
(iii) The third question pertained to copies of the legal opinions submitted by the above lawyers to the Indian government. 
Ans. The Government denied us this information on grounds that it would hurt India’s economic interests. Please note that the Government has given us access to files pertaining to the 1999 Indo-E.U.-U.S. pharma trade dispute. I do not understand how these files suddenly become confidential especially when the Govt. claims that the dispute has been settled.
(iv) The fourth question pertained to the status of the dispute and as to why India was not pressing the dispute on the WTO stage. 
Ans. The Government replied with the answer that they had reached an ‘interim settlement’ with the E.U., as mentioned in the beginning of the post. Are ‘interim settlements’ allowed for under WTO law? I have no clue. The politics over this dispute are slightly complicated since India is in the middle of negotiating its biggest trade Free Trade Agreement (FTA) with the E.U. If the FTA does go through, it will be one of the biggest of its kind especially since the E.U. is already India’s largest trading partner. Since the door is still open, India should push ahead with the dispute and attempt to clarify the law on seizure of ‘in-transit’ consignments before such a provision is brought to the ACTA negotiating table.
I completely agree with Prashant on the availability of Indian experts in the field. Again, this is not to say that this is about Prof. Abbott — an excellent scholar in the field of WTO and international IP law. But this simply isn’t about that. The issue here involves the legal capacity of India, which can only truly be developed by engaging domestic lawyers and academics, for there is no such learning as experiential learning for international and WTO lawyers. I also agree with Prashant on the need for greater transparency in the selection of Indian lawyers, as well — I am sure that we’d be surprised by the talent we can find amongst a billion plus. Finally, I am surprised by the huge gap between the fees paid to the Indian lawyers versus Prof. Abbott. Here too, Prof. Abbott’s fee is rather reasonable by international standards, but what strikes me instead is the low fee of the Indian lawyers. I am sure WTO litigation does not form a bread and butter practice for these lawyers, and so there may be a sense of national service and prestige involved in such cases. Nevertheless, I see no cogent reason for such a discriminatory financial treatment between Indian and foreign experts. Of course, if Prof. Abbott was doing considerably more work and the Indian lawyers were only assisting, this could have been justified. But we don’t know if that was the case.

India’s Export Ban on Cotton under International Law

On 5 March 2012, the Indian Central Government notified an immediate ban on the export of cotton from India. What’s more, the ban was given a retrospective effect such that export against registration certificates already issue was also prohibited. Although the official notification does not state the reason for the ban, it appears from news reports that the justification offered by the central government was based upon “the trend of domestic consumption and depletion of domestic availability”. The ban generated several sharp responses. Indian farmers and politicians, particularly from Maharashtra, Gujarat, Andhra Pradesh and Karnataka opposed the ban as it led to a decline in domestic cotton prices from INR 4,200 (per 100 kgs) last month to INR 3,000. The China Cotton Association also came down heavily upon the ban, hoping that “the Indian government will rectify this market-disrupting and mistaken policy in a timely fashion and comply with global trade rules”. China is the largest importer of Indian cotton. The Chinese government also seems to have taken the matter up formally with its Indian counterpart.

With all these voices against the ban, the (empowered) group of ministers of the Government of India today revisited the ban, and decided that it will be removed. So, of course, the ban will be revoked soon and the sun will shine again (soon). Nevertheless, this incident provides a useful instance to analyze Indian practice on export bans under international law. Specifically, India, as  a party to the WTO Agreement and the GATT 1994, has undertaken several commitments under WTO law. Also, this incident provides an apt opportunity to revisit the WTO Appellate Body’s report ruling on the inconsistency of China’s restrictions on the export of certain raw materials (China — Raw Materials).

Article XI:1 of the GATT 1994, titled “general restrictions on quantitative restrictions”, states:

1.       No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licences or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party.

Now clearly, this seems to apply to India’s prohibition on the export of cotton.

As the AB noted in China — Raw Materials (para. 320), the title of Article XI “suggests that Article XI of the GATT 1994 covers those prohibitions and restrictions that have a limiting effect on the quantity or amount of a product being imported or exported.”

However, although this is a general obligation, its scope is delimited by Article XI:2, which lays down situations in which export and/or import restrictions may be imposed. Importantly, Article XI:2 begins with the chapeau that the “provisions of paragraph 1 of this Article shall not extend to the following…”, suggesting that it does not carve out an exception (like Article XX, e.g.), but instead circumscribes the scope of the obligation contained in Article XI:1 above.

Returning to the scenario at hand, as noted earlier, even though the notification itself does not provide any reasons, it appears that the ban was imposed as a result of rising domestic demand and decreasing supply. Article XI:2, in fact, contemplates such a situation by permitting

(a)      Export prohibitions or restrictions temporarily applied to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party;

At first, the ban may then seem consistent with India’s obligation under international law: The prohibition on imposing export restrictions contained in Article XI:1 does not extend to situations where such restrictions are applied “temporarily”, “to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party”. Clearly, this would be India’s justification for the ban under international law.

There are several problems with such a justification, however. In particular, I am not sure if the domestic conditions in India amounted to a critical shortage. I am not concerned so much about the non-temporary nature of the ban (the notification itself doesn’t prescribe an end date, but that may instead flow from the quantitative restriction provision in the Foreign Trade (Development & Regulation) Act of 1992, as amended in 2010), or even the essentiality of cotton (as the AB noted in para. 326: “[b]y including, in particular, the word “foodstuffs”, Article XI:2(a) provides a measure of what might be considered a product “essential to the exporting Member” but it does not limit the scope of other essential products to only foodstuffs.”).

On the issue of whether the shortage cited by India amounts to a “critical shortage” as used under Article XI:2(a), it is important to remember that the phrase is only self-judging in the first instance. In other words, India cannot finally decide what constitutes critical shortage for it, for WTO law shall decide this question. And indeed this is exactly what the Appellate Body did in China — Raw Materials, wherein it assessed the consistency of an export ban on raw materials imposed by China. China sought to justify the need for the ban as a critical shortage. On the meaning of a critical shortage the AB noted:

Taken together, “critical shortage” thus refers to those deficiencies in quantity that are crucial, that amount to a situation of decisive importance, or that reach a vitally important or decisive stage, or a turning point.

Importantly, according to the AB, the kind of shortages that fall under Article XI:2(a) are “narrower” than “general or local short supply” (para. 325). As an example, the AB noted:

It would seem that Article XI:2(a) measures could be imposed, for example, if a natural disaster caused a “critical shortage” of an exhaustible natural resource, which, at the same time, constituted a foodstuff or other essential product.

Thus, the definition of “critical shortages” under Article XI:2(a) is quite narrow, and does not include shortages resulting from regular fluctuations of domestic demand and supply. It seems that a critical shortage signifies a degree of acuteness.

With this definition as the standard, India’s export ban on cotton seems inconsistent with its obligation under Article XI:1 of the GATT 1994 not to impose quantitative restrictions simply because the shortage does not seem to be acute, out of the ordinary, or of decisive importance. The fact that the shortage sought to be fulfilled by the export ban is not critical or severe is confirmed by the steep decline in domestic prices and estimates that 30 per cent of the cotton produced is still lying with the farmers and an equal amount with the local ginners and traders after the ban. This means that there’s very little domestic demand. If there was a critical shortage, there certainly wouldn’t have been surplus lying around in warehouses. Of course, even with this, it would still need to be analyzed whether the ban could be justified under Article XX of the GATT 1994, which contains the general exceptions to the obligations under the GATT 1994. Let’s save that for another day, though.

All said, the export ban seems to have been a hasty and ill-advised step on part of the Indian government. Everyone, including the domestic constituencies and industry, as well as foreign industries and governments opposed the ban, which was promptly revoked by the government almost within a week of its notification. In the light of what WTO law has to say on such bans, let’s hope that India at least fully considers the AB’s guidance on export restrictions, before imposing another. Predictability, stability and certainty, are the catch words : )