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1 World Trade Organization Panel Proceedings Australia Certain Measures Concerning Trademarks, Geographical Indications and other Plain Packaging Requirements Applicable to Tobacco Products and Packaging (WT/DS435/441/458/467) European Union Geneva 3 June 2015
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3 1. Mr. Chairman, distinguished Members of the Panel. 2. In this Oral Statement the European Union would like to draw attention to certain aspects of the recent Appellate Body Report in US COOL (Article 21.5 Canada and Mexico), circulated after the date of the Third Party Written Submissions, particularly with respect to Article 2.2 of the TBT Agreement, and their potential implications for this case. 3. The Appellate Body emphasised that the assessment under Article 2.2 is holistic. 1 A consideration of whether or not a proposed alternative achieves an equivalent degree of contribution to the relevant legitimate objective is essential. 2 There is a logical sequence to the analysis, 3 albeit one that is flexible rather than rigid. 4 Precise quantification may not always be possible 5 and the assessment may be qualitative and based on what the measure is apt to achieve at some point in time. 6 A panel should proceed with weighing and balancing all the relevant factors even if a particular factor, such as the measure's contribution to its objective, cannot be quantified with precision or can only be assessed in qualitative terms. 7 The Panel 1 Appellate Body Reports, US COOL (Article 21.5 Canada and Mexico), para : ("The assessment of whether a technical regulation is more trade restrictive than necessary under Article 2.2 involves the holistic weighing and balancing of the factors as set out above.") (original emphasis). 2 Appellate Body Reports, US COOL (Article 21.5 Canada and Mexico), para : ("An assessment of whether a proposed alternative measure achieves an equivalent degree of contribution to the relevant legitimate objective is essential for a panel to determine whether the technical regulation at issue restricts international trade beyond what is necessary to achieve the degree of contribution that it makes to the achievement of a legitimate objective."). 3 Appellate Body Reports, US COOL (Article 21.5 Canada and Mexico), para : ("Article 2.2 does not explicitly prescribe, in rigid terms, the sequence and order of analysis in assessing whether the technical regulation at issue is more trade restrictive than necessary. As we explain below, a certain sequence and order of analysis may, nonetheless, flow logically from the nature of the examination under Article 2.2..") (footnote omitted). 4 Appellate Body Reports, US COOL (Article 21.5 Canada and Mexico), para : ("Nonetheless, the particular manner of sequencing the steps of this analysis is adaptable, and may be tailored to the specific claims, measures, facts, and arguments at issue in a given case."). 5 Appellate Body Reports, US COOL (Article 21.5 Canada and Mexico), para : ("In assessing the relevant factors in respect of the technical regulation itself, we note that, while a complainant must be held to fulfil its burden to present a prima facie case that the technical regulation is more trade restrictive than necessary under Article 2.2, it will not always be possible to quantify a particular factor, or to do so with precision."). 6 Appellate Body Reports, US COOL (Article 21.5 Canada and Mexico), para : (" it sufficed to demonstrate in qualitative terms that the measure was "apt to produce a material contribution" to its objective at some point in time."). 7 Appellate Body Reports, US COOL (Article 21.5 Canada and Mexico), para : ("A panel should proceed with this weighing and balancing even if a particular factor under Article 2.2, such as the challenged technical regulation's degree of contribution to its objective, cannot be quantified with precision or can only be assessed in qualitative terms."); and paras
4 in that case did not err in the way in which it approached and carried out this particular aspect of the so-called relational and comparative analyses Thus, we think that the Appellate Body report supports the view that this Panel will likely engage in both a relational and a comparative analysis, as part of an holistic assessment of the measure at issue. The provisions of Article 2.5, to the extent that they may be relevant, and in any event the FCTC guidelines, will form an integral part of that holistic assessment. We further think that the Panel will have to assess whether or not the measure and the alternatives are apt to contribute to the objective not only on the basis of evidence relating to the actual application of the measure but also on the basis of what the measure and the alternatives are apt to achieve within an appropriate long term temporal perspective, that being one that permits or would permit the relevant instrument to produce its intended effects. 5. In examining the actual effects of the measure, this Panel will need to consider whether or not there is a genuine and substantial relationship of cause and effect between the measure and the observed effects. In this respect, it is possible that a particular phenomenon, such as a reduction in the prevalence of smoking, may have a genuine and substantial relationship of cause and effect with more than one variable (that is, the measure at issue, assessed in the context of the suite of relevant measures, and another variable, such as demographic changes). It is also possible that the Panel is unable to separate and distinguish these causal relationships. In such circumstances, the measure contributes to the objective within the meaning of Article 2.2 of the TBT Agreement. 6. The Appellate Body also concluded that the contribution of the alternative need only be equivalent, not identical. 9 However, the contribution may not be less, because the regulating Member sets its own appropriate level of protection (ALOP). 10 This assessment involves a margin of appreciation. 11 The proposed 8 Appellate Body Reports, US COOL (Article 21.5 Canada and Mexico), paras Appellate Body Reports, US COOL (Article 21.5 Canada and Mexico), para : ("We do not consider that a complainant must demonstrate that its proposed alternative measure achieves a degree of contribution identical to that achieved by the challenged technical regulation in order for it to be found to achieve an equivalent degree.") (original emphasis). 10 Appellate Body Reports, US COOL (Article 21.5 Canada and Mexico), para
5 alternative may achieve equivalence in ways that are different from the measure at issue. 12 Furthermore, measures may separately or jointly contribute to the objective, it being the overall contribution that matters. 13 A measure may also operate as part of a more complex suite of measures directed at the same objective There must be a conceptual alignment between what is taken into account in the relational and comparative analyses. 15 A technical regulation must be assessed in its entirety, 16 including any relevant elements that are not directly challenged. 17 A proposed alternative must be assessed on the same basis, including any relevant elements that the proposal would leave unchanged. 18 An element is relevant when it interacts with the measure at issue Appellate Body Reports, US COOL (Article 21.5 Canada and Mexico), para : ("Rather, in our view, there is a margin of appreciation in the assessment of whether a proposed alternative measure achieves an equivalent degree of contribution, the contours of which may vary from case to case."). 12 Appellate Body Reports, US COOL (Article 21.5 Canada and Mexico), para : ("We emphasize, in this respect, that a proposed alternative measure may achieve an equivalent degree of contribution in ways different from the technical regulation at issue."). 13 Appellate Body Reports, US COOL (Article 21.5 Canada and Mexico), para : (" a technical regulation and the proposed alternative measures may deploy various methods or techniques that jointly or separately contribute to achieving the objective pursued, which may not each be quantifiable in an isolated manner. For the purpose of assessing the equivalence between the respective degrees of contribution of the challenged technical regulation and the proposed alternative measures, it is the overall degree of contribution that the technical regulation makes to the objective pursued that is relevant, rather than any individual isolated aspect or component of contribution."). (footnotes omitted) (original emphasis). 14 Appellate Body Reports, US COOL (Article 21.5 Canada and Mexico), footnote 660: ("In stating this, we do not exclude that there may be aspects of a technical regulation that may be manifestly immaterial in a given case in the light of the specific products, processes, or labels at issue, or that a technical regulation may operate as part of a more complex suite of measures directed at the same objective."). 15 Appellate Body Reports, US COOL (Article 21.5 Canada and Mexico), para : ("We agree with the Panel that it is important to ensure a conceptual alignment between a challenged technical regulation and proposed alternatives in assessing their respective degrees of contribution in order to preserve the integrity of the subsequent comparison."). 16 Appellate Body Reports, US COOL (Article 21.5 Canada and Mexico), para : (" a challenged technical regulation should be considered in its entirety "). 17 Appellate Body Reports, US COOL (Article 21.5 Canada and Mexico), paras and 5.241: (" the Panel considered that "the complainants have unequivocally stated that in this compliance dispute they are not bringing claims with respect to Labels D and E" ".) ("It would also have ensured that all relevant elements of the measure at issue and the proposed alternative measures were properly taken into account in assessing the respective overall degrees of contribution."). 18 Appellate Body Reports, US COOL (Article 21.5 Canada and Mexico), footnote 718: ("In this respect, we note the Panel's finding that the complainants' proposed alternative measures would not cover ground meat or muscle cuts from foreign-slaughtered animals, and would not change the amended COOL measure's Labels D and E."). 19 Appellate Body Reports, US COOL (Article 21.5 Canada and Mexico), para : ("In our view, a challenged technical regulation should be considered in its entirety even when particular elements of the technical regulation are common to both the technical regulation and the proposed alternative measures. This is because the manner in which such common elements interact with other elements of a challenged 3
6 8. Thus, we think that the Appellate Body report supports the view that, for the purposes of the relational and comparative analyses, this Panel will first have to identify what the technical regulation is in its entirety, including any relevant elements that are not directly challenged. We think that an element will be relevant when it interacts with the measure at issue. This suggests that the trademark requirements and the format requirements, to the extent they interact, should be considered together together with the interaction itself - both for the purposes of assessing trade-restrictiveness and for the purposes of assessing contribution to the legitimate objective. The proposed alternative will then have to be assessed on the same basis, including any elements that the proposal would leave unchanged. Thus, the measure at issue and the alternatives will have to be assessed in their context, as part of the complex suite of measures of which they form a part. There is, in this assessment, a margin of appreciation for the regulating Member. 9. The Appellate Body also concluded that, in giving active and meaningful consideration to the risks that non-fulfilment would create, the nature of the risks and gravity of the consequences need to be identified, which may be done qualitatively 20 and in a conjunctive analysis. 21 However, it is not necessary to weigh in abstract terms, as a separate factor, the relative importance of the objective pursued In particular, the Appellate Body found that the Panel did not err in considering the possibility that the alternative measure could inform a broader range of consumers, but provide less specific or accurate information, and still make an equivalent contribution to the legitimate objective. 23 It is the duty of a panel to technical regulation or other elements of the proposed alternatives, respectively, may differ. Hence, even if such common elements are excluded from the assessment of the contribution of both the technical regulation and the proposed alternatives, this may distort the result of that assessment.") 20 Appellate Body Reports, US COOL (Article 21.5 Canada and Mexico), paras Appellate Body Reports, US COOL (Article 21.5 Canada and Mexico), paras Appellate Body Reports, US COOL (Article 21.5 Canada and Mexico), paras Appellate Body Reports, US COOL (Article 21.5 Canada and Mexico), para : ("Thus, we do not consider that the Panel erred in contemplating that adjustments made in the proposed alternative measures with respect to one variable of the amended COOL measure's contribution to its objective, namely, the range of "consumers" informed, could compensate for adjustments made with respect to another such element, namely, the specificity and accuracy of the "information" provided, and that such interplay might have an impact on the assessment of the equivalence of the respective degrees of contribution."). 4
7 consider the interplay between these variables, in either quantitative or qualitative terms, based on the evidence presented to it Thus, we think that the Appellate Body report supports the view that this Panel may assess the nature of the risks at issue in this dispute and the gravity of the consequences qualitatively and in a conjunctive manner, with respect to all products and all types of consumers. Furthermore, this Panel must consider how the proposed alternative measures contribute to the objective of the measure, taking into account the possible interplay between different variables that are pertinent to the objective being pursued. This is an extremely important part of the case. It is universally recognised that effective tobacco control strategies necessarily consist of a number of mutually supporting measures, and that long term changes in attitudes are effectively achieved only through gradual, incremental and regular refinements. In this respect, the burden is on the complainants to demonstrate their assertion that the measure at issue does not contribute to the objective. The burden is also on the complainants to demonstrate that any proposed alternative makes an equivalent contribution to the objective. 12. In closing, we would like to emphasise in the strongest possible terms that the rights of Members to regulate in order to pursue important public health policies must be fully taken into account in these proceedings. This is reflected in the design and architecture of the TBT Agreement and the SPS agreement in several ways: the central principle that the regulating Member sets the ALOP; the fact that international harmonisation is encouraged but not unconditionally mandated; the fact that it may be better to prevent something as opposed to palliating the consequences at great cost - once they have arisen; the fact that, whilst there is a careful weighing and balancing exercise within the necessity test, there is no pure proportionality rule (that is, no trade-off between the ALOP and any trade restriction); and the fact that the burden of proof rests with the complainants. We equally wish to emphasise that, irrespective of whether or not the FCTC guidelines 24 Appellate Body Reports, US COOL (Article 21.5 Canada and Mexico), para : ("In assessing the equivalence of the respective degrees of contribution made by the technical regulation at issue and the proposed alternative measures, it is the duty of a panel to consider the implications of the interplay between these variables, on the basis of the evidence presented, in either quantitative or qualitative terms, as appropriate."). 5
8 relating to plain packaging are a relevant international standard within the meaning of Article 2.5 of the TBT Agreement, they must be given appropriate weight in these proceedings. 13. Mr. Chairman, distinguished Members of the Panel, we thank you for your attention and we look forward to answering any questions that you may have. 6
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