The long-awaited Appellate Body (AB) report on the Seal dispute has just come out. There have already been several postings on this report. Let me focus on one particular issue: the “chapeau” test.
In a nutshell, the AB integrated two strands of case law on the chapeau test (one in Gasoline/Shrimp-Turtle and the other in Brazil-Tyres), while it denied (at least in a formalist sense) the convergence of the “evenhandedness” test under TBT Article 2.1 with the chapeau test under GATT Article XX.
First, the AB summarized three main AB reports on the chapeau test (Gasoline, Shrimp-Turtle and Brazil-Tyres). (This summary is indeed very useful.) In Gasoline, the “impracticality” imposed on foreign producers in complying with the rigid U.S. regulation was a source of arbitrariness (para. 5.304). In Shrimp-Turtle, three factors (rigid regulatory unilateralism; the failure to consider foreign circumstances; the failure to negotiate) provided the criteria for arbitrariness (para. 5.305). In Brazil-Tyres, the “rational relationship” between policy objectives and the measure in question was a source for arbitrariness (para. 5.306). Based on this set of precedents, the AB highlighted the massive ambiguities and nearly abusive discretion therefrom embedded in the EU Seal Regime. (5.326) The AB held that:
Given the ambiguities in the criteria of the IC exception and the broad discretion that the recognized bodies consequently enjoy in applying these criteria, we consider that seal products derived from what should in fact be properly characterized as "commercial" hunts could potentially enter the EU market under the IC exception. (5.328)
Also, the AB viewed that “the European Union has not pursued cooperative arrangements to facilitate the access of Canadian Inuit to the IC exception.” (5.337) This train of findings smacks of “due process” review under domestic administrative law proceedings.
Second, the AB revered the panel’s finding that appeared to adopt the theme of convergence between TBT Article 2.1 and the chapeau under GATT Article XX. The AB viewed that legal standards applicable to these two situations are significantly different despite textual similarities. (para. 5.312) I beg to differ. One of the reasons that the AB cited in differentiating the chapeau under GATT Article XX from the TBT Article 2.1 standard was the existence of a “balance” between free trade and regulatory autonomy under GATT. Yet isn’t this (balance) the most important goal of the TBT Agreement as well? One may find the same spirit of balance or reconciliation in the so-called “evenhandedness” test or the “legitimate regulatory distinction” standard under TBT Article 2.1. After all, I believe this convergence thesis should not be so easily dismissed. On the contrary, one might welcome the convergence between the evenhandedness test (TBT) and the chapeau test (GATT) as an emerging sign of Trade Constitution 2.0, which might shed light on the interpretation of other relevant WTO provisions in the future.