The Russia - Traffic in Transit panel report was circulated today. The big systemic issue here is the interpretation of GATT Article XXI, and the question of to what extent panels or the AB can scrutinize challenged measures when Article XXI has been invoked. Recall that GATT Article XXI says:
Article XXI: Security Exceptions
Nothing in this Agreement shall be construed
(a) to require any contracting party to furnish any information the disclosure of which it considers contrary to its essential security interests; or
(b) to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests(i) relating to fissionable materials or the materials from which they are derived;
(ii) relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment;
(iii) taken in time of war or other emergency in international relations; or(c) to prevent any contracting party from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security.
First up for the panel was the question of jurisdiction:
7.57. Russia argues, however, that the Panel lacks jurisdiction to review Russia's invocation of Article XXI(b)(iii). For Russia, the invocation of Article XXI(b)(iii) by a Member renders its actions immune from scrutiny by a WTO dispute settlement panel. ...
Examining the ordinary meaning, context, object and purpose, and negotiating history, the panel rejected Russia's argument:
7.101. The Panel concludes that the adjectival clause "which it considers" in the chapeau of Article XXI(b) does not extend to the determination of the circumstances in each subparagraph. Rather, for action to fall within the scope of Article XXI(b), it must objectively be found to meet the requirements in one of the enumerated subparagraphs of that provision.
7.5.3.2 Conclusion on whether the Panel has jurisdiction to review Russia's invocation of Article XXI(b)(iii) of the GATT 1994
7.102. It follows from the Panel's interpretation of Article XXI(b), as vesting in panels the power to review whether the requirements of the enumerated subparagraphs are met, rather than leaving it to the unfettered discretion of the invoking Member, that Article XXI(b)(iii) of the GATT 1994 is not totally "self-judging" in the manner asserted by Russia.
The next step was "to determine whether the measures are covered by subparagraph (iii) of Article XXI(b), i.e. whether the measures were in fact taken during time of war or other emergency in international relations." (Para. 7.109) On this issue:
7.111. The Panel recalls its interpretation of "emergency in international relations" within the meaning of subparagraph (iii) of Article XXI(b) as a situation of armed conflict, or of latent armed conflict, or of heightened tension or crisis, or of general instability engulfing or surrounding a state.
Here, the Panel found:
7.126. ...
a. As of 2014, there has existed a situation in Russia's relations with Ukraine that constitutes an emergency in international relations within the meaning of subparagraph (iii) of Article XXI(b) of the GATT 1994; and
b. each of the measures at issue was taken in time of this emergency in international relations within the meaning of subparagraph (iii) of Article XXI(b) of the GATT 1994.
Now we get to "Whether the conditions of the chapeau of Article XXI(b) of the GATT 1994 are satisfied." On this issue, the Panel said the following:
7.132. However, this does not mean that a Member is free to elevate any concern to that of an "essential security interest". Rather, the discretion of a Member to designate particular concerns as "essential security interests" is limited by its obligation to interpret and apply Article XXI(b)(iii) of the GATT 1994 in good faith. ...
7.133. The obligation of good faith requires that Members not use the exceptions in Article XXI as a means to circumvent their obligations under the GATT 1994. A glaring example of this would be where a Member sought to release itself from the structure of "reciprocal and mutually advantageous arrangements" that constitutes the multilateral trading system simply by re-labelling trade interests that it had agreed to protect and promote within the system, as "essential security interests", falling outside the reach of that system.
7.134. It is therefore incumbent on the invoking Member to articulate the essential security interests said to arise from the emergency in international relations sufficiently enough to demonstrate their veracity.
7.135. What qualifies as a sufficient level of articulation will depend on the emergency in international relations at issue. In particular, the Panel considers that the less characteristic is the "emergency in international relations" invoked by the Member, i.e. the further it is removed from armed conflict, or a situation of breakdown of law and public order (whether in the invoking Member or in its immediate surroundings), the less obvious are the defence or military interests, or maintenance of law and public order interests, that can be generally expected to arise. In such cases, a Member would need to articulate its essential security interests with greater specificity than would be required when the emergency in international relations involved, for example, armed conflict.
...
7.138. The obligation of good faith ... applies not only to the Member's definition of the essential security interests said to arise from the particular emergency in international relations, but also, and most importantly, to their connection with the measures at issue. Thus, as concerns the application of Article XXI(b)(iii), this obligation is crystallized in demanding that the measures at issue meet a minimum requirement of plausibility in relation to the proffered essential security interests, i.e. that they are not implausible as measures protective of these interests.
Applying this reasoning to the measures at issue, the Panel found:
7.5.6.1 Conclusion
7.148. The Panel finds that Russia has satisfied the conditions of the chapeau of Article XXI(b) of the GATT 1994.
7.5.7 Overall conclusion
7.149. Accordingly, the Panel finds that Russia has met the requirements for invoking Article XXI(b)(iii) of the GATT 1994 in relation to the measures at issue, and therefore the measures are covered by Article XXI(b)(iii) of the GATT 1994.
Summing up, roughly speaking, the sub-paragraphs of Article XXI(b) involve an "objective" analysis (i.e. a good deal of scrutiny), whereas the chapeau of (b) relies on "good faith" and thus a little less scrutiny.
The question on everyone's mind is, what does this ruling mean for the Section 232 tariffs? Perhaps very little, because I think it's unlikely the United States would comply with a ruling that the Section 232 measures are in violation (and anyway, retaliation is already happening, so I'm not sure the litigation in that case matters much for practical purposes).
I'll be interested to see the extent of the U.S. participation in the Section 232 WTO litigation. Will the United States participate at all in the proceedings? Will it simply note its view that Article XXI is non-justiciable and say nothing else? Will it argue in the alternative that if you apply the Russia - Traffic in Transit panel's reasoning, the Section 232 measures satisfy that standard?
My view might be a minority one, but it seems to me that an "emergency in international relations" does exist for the United States ("heightened tension or crisis, or ... general instability engulfing or surrounding a state" seems like a low standard). Perhaps you could argue that the United States created the emergency, but as the panel here noted, "7.121. ... it is not relevant to this determination which actor or actors bear international responsibility for the existence of [the] situation ... ."
On the other hand, I think it will be more difficult for the United States to prove a connection between the tariffs and its "essential security interests." The Panel's standard was a pretty loose one ("a minimum requirement of plausibility") but it may still be hard to meet based on the facts here. But I can see how the United States has an argument in this regard, so it will be interesting to see if they engage with the standard and try to make that argument.
ADDED: I'm sensing there is some confusion about why I think there is an "emergency in international relations" for the United States. What I had in mind here was any of the various military operations the United States is currently engaged in around the world. In my view, any of those would qualify.
However, I also think that connecting the "essential security interests" related to those military operations with the Section 232 tariffs will be very difficult.
