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THE RELATIONSHIP BETWEEN WORLD TRADEORGANIZATION LAW, NATIONAL AND

REGIONAL LAWt

by Thomas Cottier* and Krista Nadakavukaren Schefert

INTRODUCTION

THm establishment of the World Trade Organization (WTO) and the recentcases submitted to the European Court of Justice and national courts relat-ing to the application and interpretation of WTO rules have drawn renewedattention to the relationship between international law, national law, andEuropean Community law, respectively, in the field of international traderelations. This forms part of a broad and complex issue in constitutional andinternational treaty law.' There are more questions than answers, particu-larly with respect to the issue of giving or denying direct effect to WTO rulesin national or regional courts of law (in particular the European Court ofJustice). The relationship, however, is not limited to these fora. Problemsequally arise within the WTO on the international level. Essentially, two lev-els may be distinguished,2 each of them entailing two subjects. The first oneaddresses the relationship of WTO law and national and regional law ininternational relations: (i) in general; and (ii) in dispute settlement beforepanels and the Appellate Body of the WTO. The second level deals with the

* Professor of Law, Institute of European and International Economic Law, University of Berne,

Switzerland.

t Research Fellow, Institute of European and International Economic Law, University of Berne,Switzerland.

* This article is based on a discussion paper submitted in June 1997 to the International Trade Law(ITM) Committee of the International Law Association which had timely placed the issue on itsagenda with a view to elaborating gradually a common position. The authors are indebted to thecolleagues of the ILA Trade Law Committee, Frederick Abbott, Wolfgang Benedek, Patricia Colan,Meinhard Hilf, Gary Horlick and Giorgio Sacerdoti, for suggestions and written comments on theILA discussion paper.For a recent account see P.M. Eisenmann (ed.), The Integration of International and European

Community Law into the National Legal Order (Kluwer Law International: Deventer, Boston1996); S.R- Riesenfeld and F.M. Abbott (eds), Parliamentary Participation in the Making andOperations of Treaties: A Comparative Study (Martinus NiihoffPubL: Dordrecht, Boston, London1994) also in 67 Chic Kent L Rev 293 (1991). See also F. Jacobs and S. Roberts (eds), The Effectsof Treaties in Domestic Law (Sweet & Maxwell: London 1987); for the United States see LHenkin, Foreign Affairs and the United States Constitution 198-211 (2nd edn, Clarendon Press:Oxford 1996).

2 See M. Hilf, 'The Role of National Courts in International Trade Relations', 18 Mich J Int'l L324 (1997).

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84 Journal of Intenational Economic Law 1 (1998) 83-122

relationship between WTO law and national and regional law in a domesticcontext: (i) interpretation and application of national and regional law inaccordance with WTO rules, and (ii) the problem of giving direct effect toWTO rules in cases of conflict between WTO rules and national or regionalrules.

This article attempts to address these four issues. It briefly discusses thefirst, second and third of the problems mentioned before turning to the con-tentious concept of direct effect. The study compares the legal situation inthe USA and the European Union (EU) as examples of large trading bod-ies, and that in Switzerland as an example of a medium-sized trading nation.It seeks to submit options on how the present impass in academia and prac-tice could be overcome with respect to the issue of direct effect and howprogress can be made in national and regional courts.

It is submitted at the outset that the issue is not a technical one of merejusticiability. It involves the unresolved issue of the proper constitutional roleof courts' external economic relations in a context of separation of powersand checks and balances. In a longer term perspective, the normative posi-tion and role of WTO rules cannot be addressed without addressing at thesame time the methods and ways these rules are being shaped: as elsewhere,we need to develop adequate structure-substance pairings in WTO law,matching substantive rules and appropriate procedures for law-making andimplementation at the international and national or regional level.3

1. THE RELATIONSHIP BETWEEN WORLD TRADE ORGANIZATION

RULES AND NATIONAL OR REGIONAL RULES IN INTERNATIONAL LAW

In general

This level addresses the relationship of WTO rules and national or regionalrules in international relations. The legal situation is settled in this regardand does not need extensive discussion. International law clearly prevailsover national law. This is expressed by the fundamental general principle ofpacta sunt sevanda found in Article 26 of the Vienna Convention on theLaw of Treaties. 4 It is further expressed in Article 27 of this Convention bythe rule that no state can justify disobedience and disrespect for internationalobligations on the grounds that domestic law is incompatible with such ob-ligations. Disregard of international obligations triggers state responsibiltyvis-d-vis impaired members of the WTO under the Agreements, in line withgeneral international law.

However, it is contentious in general international law whether obligations

For this constitutional approach see T. Corder, 'Constitutional Trade Regulation in National andInternational Law: Structure-Substance Pairings in the EFIA Experience', in M. Hill and E.U.Petersmann (eds), National Constitutions and International Economic Law 409 (Kluwer Law andTaxation Publ.: Deventer, Boston, 1993).

4 8 JUL 679 (1969), entered into force 27 January 1980 (hereinafter the Vienna Convention).


THE RELATIONSHIP BETWEEN WTO LAW, NATIONAL AND REGIONAL LAW 85

need to be honoured by specific performance, or whether the principle ofpacta sunt servanda is less far reaching and can be disposed of by paying ade-quate compensation.5 In WTO law, the issue is specifically addressed. Thesystem, as it currently stands, basically obliges members to specific perfor-mance:6 WTO-inconsistent measures and practices under national law haveto be brought into compliance with WTO obligations within a reasonableperiod of time.7 In most cases, this can only be achieved by removal of themeasures concerned. The system, however, continues to grant the possibil-ity of temporary compensation or withdrawal of concessions until the basicobligation to correct inconsistent practices and rules can be practicallyassumed. 8 It is unclear how long such a period extends. Under current law,there is no such obligation to perform in non-violation cases, and remediesare limited to compensation9 which may form part of a final settlement. 0

Yet another limitation to implementation exists in relation to members ofa federal state Member to the WTO. Unlike the responsibilities of a statetoward other states, enforcement of international rules by a state is notassured with respect to subnational levels. World Trade Organization mem-bers are obliged to enforce obligations internally only to the extent that theydispose of the necessary constitutional powers." On the one hand, this pro-vision is an exceptional feature in international law which generally coversall political entities of a state. It will need to be re-examined if a proper bal-ance of basic obligations to perform between unitarian and federal statemembers of the WTO is to be maintained. On the other hand, the excep-tion clearly reiterates the obligation to enforce WTO rules in matters fallingwithin the jurisdiction of the central government.

In sum, it is clearly established both under international law and WTO

5 See R. Hyland, 'Pacta Sum , Sevanda: A Meditation', 34 Va J Int'l L 405, 427-8 (1994).6 See J. H. Jackson, 'The WTO Dispute Settlement Understanding - Misunderstandings on the

Nature of Legal Obligations', 91 Am J Int'l L 60, 63 (1997).7 Article 21:1 Understanding on Rules and Procedures Governing the Settlement of Disputes (here-

inafter DSU) in: World Trade Organization, The Results of the Uruguay Round of MultilateralTrade Negotiations: The Legal Texts 404, 422 (WTO 1995) (hereinafter Legal Texts).

8 Article 21:3, 22:1 DSU.

9 Article. 26:1:b DSU.10 Article. 26:1:d DSU. While such settlement is equally enforceable by means of suspension of con-

cessions and cross-sanctions (Art. 22:3 DSU), the absence of an obligation to perform in non-violation cases amounts to a weakening of protection of legitimate expectations. It treats violationsof good faith less effectively and should eventually be removed, see T. Cottier and K. NadakvukarenSchefer, 'Non-violation Complaints in WTO/GATI Dispute Settlement: Past, Present and FutureILA' in E.U. Petermann (ed.), International Trade Law and the GATT-WTO Dispute SettlementSystem (Kluwer Law International: Boston 1997).

"Article XXIV:12 GATr, Understanding on the Interpretation of Article XXIX of the GeneralAgreement on Tariffs and Trade, paras 13-15, in Legal Tws at 31, 34. The exemption is con-strued narrowly, see in particular Canada - Import Distribution and Sale of Certain Alcoholic Drinksby Pnvindal Marketing Agencies, BISD 39S127, WTO, 2 Analytical Index: Guide to GAT Lawand Practice 830-836 (1995). The general relationship of states in federacy and international lawwas analysed by V. Zeliweger, V6lkerrecht und Bundesstaat (Duncker & Humblot: Berlin, 1992).


86 Journal of International Fconomi Law 1 (1998) 83-122

rules that international law trade obligations prevail over national or regionalrules. Except for non-violation complaints and subfederal regulations, suchobligation entails a basic duty to perform and to remedy a situation incon-sistent with WTO obligations, subject to temporary compensation and thewithdrawal of concessions in cases of non-compliance. Disrespect triggersinternational state responsibility which eventually may lead to retaliatoryaction as approved by the WTO members in the Dispute Settlement Body.

In World Trade Organization dispute settlementDespite a relatively clear relationship between WTO law and national orregional law, important issues remain to be discussed. With the advent ofstandard setting, beyond the yardsticks of negative integration such as most-favoured nation and national treatment obligations and other prohibitionssetting out the scope of lawful national conduct, the standard of review ofnational rules and practices, and the mannerby which they are applied, callsfor further discussion. It is clear from the review of national and regional anti-dumping measures and more recently from safeguard measures under theAgreement on Textiles and Clothing, that it is not a matter of do novoreview.1 2 Interpretation of national or regional rules by respective authoritiesshould essentially be recognized as questions of fact and be treated withdeference.

Panels have no authority to construe rules of national or regional law denovo and to substitute their reading for what national or regional authori-ties, whether delegations, administrations, or courts, have found to be theproper meaning of the law. Yet, a problem arises if it is apparent that theinterpretation of national or regional law is manifestly incompatible with thetext and/or context of national or regional rules. How should a panel andthe Appellate Body react in this situation? What standard of review shouldbe applied? Should the assessment of national or regional law be recognizedunless found to be 'patently unreasonable' (or 'arbitrary and capricious' orsome such standard)? While the question of standard of review traditionallyrelated to factual aspects, it increasingly relates to norms. This is true in theGeneral Agreement on Tariffs and Trade (GATT), in the General Agree-ment on Trade in Services (GATS), and in particular in the Agreement onTrade-Related Aspects of Intellectual Property Rights (TRIPs) (wherenational standards have to satisfy international standards). Panels are calledupon to declare whether national or regional rules, and the way they areapplied, are compatible with those set out in the WTO agreements.

It should be recalled that national or regional bodies apply national orregional law. Except where WTO rules have direct effect, national and

12 United States - Restriaions on Imports of Cotton and Man-Made Fibre Underwear, WT/DS24/R (1996)(panel report). See also S. P. Croley and J. H. Jackson, 'WTO Dispute Procedures, Standard ofReview, and Deference to National Governments', 90 Am J Int'l L 193 (1996).



regional courts do not primarily rely on the WTO in decision-making.Instead, these courts examine their administrative bodies' opinions, givingthem the weight required by national administrative procedure law. The taskof WTO panels, however, does primarily consist of construing WTO rulesand deciding if the results produced on the basis of national or regional laware consistent with such obligations. The panel examination entails a com-prehensive interpretation of WTO rules because there is no one to whomdeference could be given. In assessing whether the national or regional legalsituation is in compliance with WTO obligations, as established by inter-pretation in accordance witht the Vienna Convention on the Law of Treaties,the panel should rely upon the test of nullification and impairment of ben-efits. Thus, a panel within the jurisdiction of Article XXII of the GATTand the Understanding on Rules and Procedures Governing Settlement ofDisputes (DSU) should examine whether the application and interpretationof a national or regional measure, as set out by a national or regional author-ity, adequately responds to legitimate expectations created by the interna-tional rule. The examination should focus on the issue of whether the nationalrule, as applied and construed, provides, or can be construed to provide, aresult compatible with international obligations in a sufficiently clear, pre-dictable and impartial manner. The obligations of publication, transparency,and reasonable application 13 are as instrumental in making the (factual)assessment of national or regional law as is the substantive rule at stake. Itis submitted that the assessment of national or regional rules, and their appli-cation and interpretation, should be guided by these provisions on trans-parency. The crucial test consists of asking whether national or regional rulesas invoked, construed, and applied protect trading partners' legitimate expec-tations under the WTO agreements. 14 This approach is more nuanced, essen-tially deriving its rationale from good faith protection rather than standardsof review which are limited to patent unreasonableness or arbitrary and capri-cious interpretation of national or regional law.

A different approach would consist of essentially abstaining from constru-ing national law and providing answers to compatibility indirectly by settingup the criteria to which national law has to respond.'5 Article 177 of the ECTreaty requires additional findings by national courts based upon the reviewand cannot readily fit into the present system of dispute settlement in the

13 Article X GATT, Article 62 TRIPs, Article VI GATS and related provisions in other agreements.14 This approach was essentially followed in the first panel construing and applying the TRIPs

Agreement. India - Patent Protection for Pharmaceutical and Agricultural Chemical Products,WT/DS50/R, 5 September 1997 para 7.34 e passim. Unfortunately, it was misunderstood by theAppellate Body and confused with the doctrine of non-violation complaints, India - Patent Protectionfor Pharmaceutical and Agricultural Chemical Products, report of the Appellate Body, 19 December1997 WTIDS5O/AB/R para 33-48.

Is This is the approach used in European Community law. See, e.g., Case C-55194, Reinhard Gebhardv Consiglio ddl'ordine degli avvocati e procuratori di Milano [1995] ECR 1-4165; Case 6164 CostaFlaminio v Enel [1994] ECR 585.


88 Journal of Inte-national Economic Law 1 (1998) 83-122

WTO which operates independently of national court proceedings. However,the idea could be pursued in the context of a future system of advisory opin-ions and preliminary rulings for national or regional courts and administra-tive authorities within the WTO.

2. THE RELATIONSHIP BETWEEN WORLD TRADE ORGANIZATIONRULES AND NATIONAL OR REGIONAL LAW BEFORE NATIONAL ORREGIONAL AUTHORITIES AND COURTS OF LAW

Interpretation and application of national or regional rules inaccordance with World Trade Organization rules: the doctrine ofconsistent interpretation

Before turning to the difficult issue of direct effect, attention should be drawnto the important rule of consistent interpretation. According to this doctrine,where a national rule allows for different interpretations, national or regionallaw has to be construed in accordance with international obligations. In manyinstances, conformity in interpretation allows bridging alleged divergencesbetween international, national or regional law, making adherence to both atreaty and national law possible. Jurisprudence from both the USA, theEuropean Communities, and Switzerland adhere to this principle.

In the USA, the doctrine of consistent interpretation was introduced earlyin the history of the Supreme Court. In the case Charming Betsy, Chief JusticeMashall held, 'an act of Congress ought never to be construed to violate thelaw of nations if any other construction is possible'. 6

The European Court of Justice (ECJ) used a similar reasoning in Wernerand Leifer, referring to Article XI of GATT to confirm and support its find-ings.17 In Commission v Federal Republic of Germany,' the Court, inspired byMarleasing and succcessive case law,' 9 explicitly stated the rule of consistentinterpretation to apply to external relations based on international agree-ments. The Court referred first to the general rules of treaty interpretation'requiring the parties to any agreement to do so in good faith in its perfor-mance' and that 'the Community must interpret [the International Dairy

"' 2 Cranch 64 (1804).17 Case C-70/94, Wmrnerv Germany [1995] ECR 1-3189; Case C-83/94, Leifer and others [1995] ECR

1-3231 para. 24. ('That finding is supported by Article XI of the General Agreement on Tariffsand Trade, which can be considered to be relevant for the purposes of interpreting a Communityinstrument governing international trade'). See P. Eeckhout, 'The Domestic Legal Status of theWTO Agreements: Interconnecting Legal Systems', 34 CMLR 11, 40-2 (1997).

' Case C-61/94, [1996] ECR I 3989 (judgment of 10 September 1996) (case involving the inter-pretation of the GATT International Dairy Arrangement (IDA)).

19 Case C-106189 Marleasing SA c La Comercial Internacional de Alimenmion [1990] ECR 1-4135 atpara. 48, and Case C-135/93, Spain v Commission [1995] ECR 1-1651 para. 37: 'It is settled lawthat where the wording of secondary Community law is open to to more than one interpretation,preference should be given to the interpretation which renders the provision consistent with theTreaty rather than the interpretation which leads to its being incompatible with the Treaty'.


THE RELATIONSHIP BETWEEN WTO LAW, NATIONAL AND REGIONAL LAW

Arrangement's] terms in such a way as to encourage the attainment ofthe objectives pursued'.2 1 It then held that Community legislation ought tobe construed in a manner consistent with the international agreementconcerned:

When the wording of secondary Community legislation is open to more thanone interpretation, preference should be given as far as possible to the inter-pretation which renders the provision consistent with the [EC] Treaty.Likewise, an implementing regulation must, if possible, be given the inter-pretation consistent with the basic regulation (see C-90/92 Dr Trener vHauptzollamt Stuttgart-Ost [1993] ECR 1-3569 paragraph 11). Similarly, theprimacy of international agreements concluded by the Community over pro-visions of secondary Community legislation means that such provision must,so far as possible, be interpreted in a manner that is consistent with thoseagreements.

21

Given the reasoning of the Court on the primacy of international law, therule of consistent interpretation should also apply to rules of the EC Treatyand not be limited to secondary legislation. The doctrine, on the other hand,finds its limitation in constellations where the wording and purpose of EClaw cannot be found compatible with international obligations. It is here thatthe issue of direct effect will come into play.

In its 1968 decision Figero v EVED, the Swiss Supreme Court establishedthat national law has to be applied and construed in accordance with inter-national obligations whenever there are doubts as to the proper meaning ofthe domestic statutory language.2 2 This also applies to WTO law. In ChanelS.A. the Swiss Supreme Court, in deciding a fundamental issue on parallelimportation in trademarks, took recourse, inter alia, to Article 16 of theTRIPs Agreement in order to construe Swiss trademark law which had beentextually modelled after the 1988 First Trade Mark directive of the EuropeanCommunities.

23

As Ernst-Ulrich Petersmann urged national and Community courts tointerpret laws to be GATT-conform, we assert now that this doctrine of

20 Ibid. at 1-4015 paras 30 and 31.21 Ibid. at 14021 para. 52.22 Bundesgerichts Entscheid (Swiss Supreme Court Decision, hereinafter 'BGE') 941669, 678 (1968).

See also Eidg. Smuervenaltung g Erben X BGE 117 lb 367, 373 (1991).23 Chanel S.A. Genive et aL c EPA AG Zarich BGE (Federal Court Reporter) 122 1i 469, 480

(1996).

Au demeurant, on ne peut pas dkduire de l'art. 16 ch. I de 1'accord TRIPS une interdictionsystematique des importations paralliles. En effect, cette disposition privoit que le titutaired'une marque enregistr6 aura le droit exclusif d'empacher tous les tiers agissant sans son con-sentement de faire usage, au cours d'op6rations commerciales, de signes identiques ou sim-ilaires A ceux pour lesquels Ia largue est enrregistrie, dans lea cas oil un tel usage entraineraitun risque de confusion, qui est pr6sum6 en ca d'usage d'un signe identique pour des pro-duits ou services identiques. It est donc toujours loisible i l'importateur parallle de prouverl'inexistence d'un risque de confusion, auquel cas son activiti ne serait pas contraire i l'art.16 de l'accord TRIPS.


90 Journal of International Economic Law 1 (1998) 83-122

conformity in interpretation remains.of paramount importance in the con-text of the WTO.2 4 Courts are able to take international obligations intoaccount when national law is broadly framed and where there is no funda-mental conflict between national and international rules. The WTO traderules are often more detailed than those in national legislation (particularlythe legislation of the civil law tradition). More detailed language can be foundin the agreements and it should be used to define the content of rights andobligations. 25 In our view, interpreting domestic laws in conformity with theWTO avoids the traditional or statutory prohibitions on courts to base deci-sions on international law. The concept therefore can assist all members ofthe 'WTO alike in honouring the principle of pacta sunt servanda. Moreover,the principle of consistent interpretation not only applies to WTO membersoperating under a monist tradition. It is an equally useful and necessary con-cept for courts with a dualist approach to international law. Judges shouldnot apply and construe national rules without giving regard to pertinent inter-national obligations within the bounds of national law. They share in theresponsibility of all state bodies under the principle of pacta sunt servanda toavoid, to the utmost extent possible, conflicts and clashes with internationallaw and therefore the risks of international disputes and retaliation.

The WTO rules, so far, have not been frequently involved before courtsof law. This is partly because worldwide the subject is not widely taught atlaw schools and neither attorneys nor judges are sufficiently familiar with thematter in order to argue their cases consistently with detailed WTO obliga-tions, as construed by WTO panels and the Appellate Body. In dualist coun-tries, the gap is even larger and WTO rules are sometimes treated with benignneglect or even amused disrespect.26 The doctrine of consistent interpreta-tion clearly needs to be further spread as the prime inroad of WTO rules in

The Court implicitely followed its tradition of construing Swiss intellectual property law in lightof, and consistent with, international intellectual property agreements to which Switzerland is aparty, without necessarily deciding whether this is a matter of applying the principle of consistentinterpretation or of direct effect. For a leading case see Suisa c Rediffusion AG, BGE 107 II 57(1981) with respect to the Berne Convention for the Protection of Literary and Artistic Works; seealso Gemeinschaftsantenne A fdorf c Suisa und Suissimage, BGE 110 1[ 61 (1984), Firma X c FirmaZ, BGE 113 II 190 (1987). For recourse to the Paris Convention for the Protection of IndustrialProperty see e.g. Chemiewerkstoff-Technik c Eidg. Amifar Geistiges Eigentum, BGE 101 lb 132 (1985);P.C.C. B. V. c Eidg. Amtfir Ge snges Eigenrum, BGE 104 lb 65 (1978). CE also below n. 77.

24 Ermst-Ulhich Petersmann, 'Strengthening the Domestic Legal Framework of the GATT MultilateralTrade System: Possibilities and Problems of Making GATT Rules Effective in Domestic LegalSystems' 85-93, 113 in E.-U. Petersmann and M. Hilt (eds), The New GATT Round ofMultilateral Trade Negotiations: Legal and Economic Relations (2d edn, Kuwer Law and TaxationPublishers: The Hague 1991) 33-113.

2 This is particularly true in the field of intellectual property. The TRIPs agreement provides ampleguidance in the interpretation of national rules. Many more examples could be given where theprecise content of rules cannot be determined without recourse to detailed analysis of the Agreement.See A. Staehelin, Das TRIPs-Abkommen: Immaterialgalterrechte im Lichte der globalisiertenHandetspolitik (Stimpfli: Berne, 1997).

^6 Cf. ex parte Lenzing, AG, below n. 79.



daily operations of national or regional authorities and courts of law. Muchdepends on the successful education and training of lawyers in WTO law;the doctrine of consistent interpretation is bound to remain largely irrele-vant, despite Charming Betsy, Commission v Germany, Frigerio or Chanel, untilbasic knowledge of and sensitization to WTO rules has taken place in thelegal community at large. All this can be done without treading on the moresensitive grounds of direct effect. This problem, to which we now turn,should no longer impair the potential of the principle of consistent inter-pretation in international law.

The relationship of World Trade Organization rules and inconsistentnational or regional rules: the problem of direct effect

1. The concept of direct effectIn cases of explicit conflict between WTO rules and national or regionalrules (situations which cannot be remedied by consistent interpretation), asituation of conflict exists in a domestic context and with domestic law. Whileinternational law clearly prevails as a matter of international relations understate responsibility discussed above, the matter is controversial and unre-solved as a matter of domestic or EC law. It is generally addressed underthe doctrine of direct effect or self-executing effect of international law rules,these terms being used interchangeably in the present context.2 7

In this study, 'direct effect' is used to mean that a private person in a state(or Union, respectively) may base a claim in, and be granted relief from, thedomestic courts of that state against another private person or the state on thebasis of the state's obligations under an international treaty. Such claims canbe made without a transformation of the obligation by national or regionalrule-makers. They may equally be made against implementing legislation ongrounds that such legislation is not compatible with international law.

Direct effect brings about the empowerment of three actors: the adminis-tration, private actors, and the courts. The administration is empowered toact without specific internal legislation, directly relying upon treaty provi-sions, provided that the legislator or the government decides to act this way.Private actors directly derive rights and assume obligations under a self-executing treaty. Importantly, they may use such rights and obligations tochallenge domestic law. But foremost, the position of courts is reinforcedvis-a-vis government and national or regional legislators to the extent thatthe courts may overrule national or regional rules inconsistent with treatyobligations based upon supremacy of international law. Direct effect, in otherwords, has a fundamental impact on constitutional power relations amongdomestic actors, private and public.

27 The term 'direct effect' is similar, and although some authors have distinguished between 'direct

effect' and 'self-executing', for this article, the difference is more subtle than is necessary to explainthe ideas set out. As a result, the terms will be used interchangeably.


92 Journal of International Econwmic Law 1 (1998) 83-122

Whether or not a rule is apt for such an application has been a matter ofnational or regional law and doctrine. The issue only exists under constitu-tions that follow the monist doctrine. It does not come up in dualist sys-tems, absent explicit treaty or statutory provisions which empower authoritiesto rely directly upon international law.3 Nevertheless, state practice in monistcountries has developed comparable criteria which rely upon intention, con-text and purpose of the treaty. The criteria centre, explicitly or implicitly,around the precision ('Bestimmtheit') of the rule concerned.2 9 Moreover, thematter of direct effect is not one of the entire treaty, but rather focuses onindividual provisions. Behind the criteria of sufficient precision we find theconcept, often unexpressed, of justiciability of the rule. The rights and oblig-ations of a rule, in other words, need to be of a quality which can be under-stood and applied by courts within their competences. Thus, obligations ofa clearly programmatic nature (e.g., a negotiating programme30 ) which needfurther work on the international level or by national or regional legislationcannot be self-executing.

Justiciability cannot be determined merely on the basis of the wording ofa norm. In many instances, courts have applied and construed broad prin-ciples, such as general human rights guarantees. They have done so becausethe application of such broad rules and principles has been considered to bewithin the competence of courts of law in determining individual rights andobligations. Such determination may be made by looking at the wording andcontext of the provision, but it can also be found in the intent of negotia-tors and national legislators. 3

1

Looking at WTO rules, there can be little doubt that most of them aresufficiently precise to be construed by courts. This is equally true for excep-tions which do not show structural differences to comparable norms innational or regional law. Moreover, to the extent that principles, rules and

2' For an example in point see the Irish case relating to the TRIPs Agreement Allen and Hansbury vControllr of Patents, Designs and Trademarks [1997] Fleet Street Reports 1 (application of TRIPsAgreement, in particular Articles 27:1, 65:1 and 70:6, due to Sec. 46:3 of the Patents Acts 1964prohibiting the making of an order which 'would be at variance with any treaty, convention, arrange-ment or engagement applying to the State and any convention country').

: It should be noted, however, that recent comparative work on Western European States concludedthat the criteria are neither precise nor uniformly applied. See J.A. Frowein and K. Oellers-Fram,L'application des traitis dans l'ordre juridique interne', in P. M. Eisenmann, The Integration ofInternational and European Community Law into the National Legal Order, above n. I at 18.

"' See, e.g., Part IV of the Agreement on Rules of Origin, Legal Texts at 241, 248. Other examplesof programmatic norms include Article 24 TRIPs Agreement (obligations to negotiate more exten-sive protection of geographical indications), ibid. at 377.

" The United States Supreme Court has long held to the principle of looking to intent of the nego-tiators to assist in determining whether a treaty should be given direct effect. S. A. Riesenfeld, 'TheDoctrine of Self-Executing Treaties and GATT: A Notable German Judgment', 65 Am J Int'l L548, 550 n.8 and accompanying text (1971) (citing Foster v Neilson, 27 US 253 (829) and UnitedStates v Pereheman, 32 US 51 (1833)).



exceptions are being applied and legally construed by panels and theAppellate Body - and indeed made more precise by this very process ofcreating precedents - they can be increasingly applied, and relied upon, bynational courts in many instances. The basic problem lies in determiningwhether these rules are in a national court's competence as set out withinthe national structures of government and the separation of powers. It canbe readily seen, therefore, that the underlying issue (except for clearly pro-grammatic norms) again is a problem of national or regional constitutionallaw. Answers cannot be found on the level of international law and theWTO.

2. The academic discussionSeveral authors have written excellent articles addressing the implicationsand potential effects of recognizing treaty provisions as having direct effectbeing self-executing. Their opinions will be heavily relied upon here in anattempt to reiterate the importance of looking to the structural importancethe use of direct effect has within a government.

Among the scholars writing on the topic of direct effect of internationaltrade agreements, there are three that stand out as the main proponents ofthe two schools of thought on the issue: Jan Tumlir and Ernst-UichPetersmann advocating direct effect and John H. Jackson for the critics ofdirect effect. A fourth author, Piet Eeckhout, has set out what we call an'intermediate position' on the issue. The many other excellent authors thathave considered the question of self-execution do not merely mimic the ideasof the three authors, but for the sake of simplicity, they will be dealt withwithin the summaries of the principal proponents as needed.

Advocates of the direct effect of World Trade Organization rules The late JanTumlir, whose main thesis supporting direct effect is followed by Ernst UlrichPetersmann, looks at the direct effect of trade treaties as a weapon againstinherently protectionist tendencies in domestic law systems. Tumlir andPetersmann set forth the idea of 'constitutionalizing' international trade prin-ciples, elevating the rights of an individual to trade freely with foreigners tothe level of a fundamental human right. To prevent the erosion of a state'ssovereignty, Tumlir suggests granting individuals the right to invoke treatyprovisions in front of their domestic courts.32 Allowing for standing in thisway would be available to those citizens harmed by protectionist national

31 See J. Tumlir, 'International Economic Order and Democratic Constituionalism', 34 ORDO 71,82 (1993) ('One can imagine the international economic policy commitments of a government tobe undertaken in the form of self-executing or directly effective treaty provisions, creating imme-diate private rights enforceable against one's own government. . . These rights would be enforce-able in national courts only, with no sacrifice of legal sovereignty').



policies put into effect by other national interest groups. Thus, direct effectwidely defined 'helps to correct the asymmetries in the political process'. 33

Ernst-Ulrich Petersmann has written numerous articles that reinforce theneed for using the GATr, and now the WTO, system for what he calls 'con-stitutional restraints' on protectionist behavior.34 Sharing Tumlir's viewpoint,Professor Petersmann brings in the political theory of public choice to sup-port his position that the WTO's reciprocal trade rules must be available toindividuals to ensure that governments adhere to their international obliga-tions of non-discrimination and liberalized access to their markets.3 5 Otherauthors who support the direct effect of trade rules base their beliefs onquasi-economic arguments. One author explains the idea of 'compliance

" P. Moser, The Political Economy of the GATT 37 (Verlag Rilegger. Graisch, Switzerland 1990);see also E.-U. Petersmann, 'Grey Area Trade Policy and the Rule of Law', 22 J World Trade23-25, 24 (1988):

The domestic foreign trade laws of most states circumscribe the discretionary trade policypowers of governments only in vague terms, and protection of individual rights and judicialreview are often less developed in the trade policy area than in other fields of domestic eco-nomic regulation. Trade restrictions can also be used as a means of escaping the legal disci-plines in other areas of domestic economic law... and cause harmful 'external effects' notonly to domestic consumers and export industries, but also to foreign trading nations.

... Mhe precise and unconditional GATT prohibitions... go far beyond the legal disci-plines provided for in the autonomous domestic foreign trade laws of states, and of the EEC,and protect the individual freedoms of domestic citizens to buy and sell gods [sic] in the bestforeign markets.

(parentheticals omitted; reference to E.-U. Petersmann, Constitutional Functions of PublicInternational Economic Law, in 'Restructuring the International Economic Order', Proceedingsof a Conference on the occasion of the 350th anniversary of the University of Utrecht 49, 64ff.(1987)).

34 In a recent article, Professor Petersmann hints that the ECJ's refusal to directly apply theGATT/WTO endangers the Court's legitimacy. E.-U. Petersmann, 'Dadf die EG das V6lkerrechtignorieren?' 11 Europ Zeitschrift fir Wirtschafrsrecht 325, 330 (1997) ('Aus der Sicht der betrof-fenen Bfirger und ihrer demokratisch gewAlilten Parlamente hingt die Legitimitit der Ausfibungnationaler und auch intemationaler Regierungsgewalt davon ab, dass sie den grundrechtlichdefinierten Allgemeininteressen der Bfirger dienen und parlamentarisch ratifizierteV61kerrechtsabkommen respektieren').

3 See, E.-U. Petersmann, 'Rights and Duties of States and Rights and Duties of Their Citizens' in

U. Beyerlin et al. (eds), Recht zwischen Umbruch und Bewahrung Festschrift fur Rudolf Bernhardt1087-1128, 1103 (Springer-Verlag: Berlin 1995) ('"Public choice" theory offers important legalinsights: Governments need reciprocal international guarantees of freedom of trade and non-dis-crimination primarily for domestic policy reasons in order to overcome the asymmetries in theirdomestic policymaking processes'); E.-U. Petersmann, 'The Dispute Settlement System of theWorld Trade Organization and the Evolution of the GATT Dispute Settlement System Since 1948'31 CMILR 1157, 1242 (1994) ('Domestic foreign trade laws are generous in granting "rights toprotection" but hardly ever grant individual "rights to liberal trade .... Reciprocal internationalguarantees of liberal trade and non-discriminatory competition . . . are the most precise legalrestraints on protectionist abuses of trade policy powers. Their reciprocal enforcement through themultilateral dispute settlement proceedings... promotes the effectiveness of these internationalguarantees of freedom and non-discrimination in the international trade transactions of domesticcitizens'); E.-U. Petersmann, 'Grey Area Trade Policy and the Rule of Law' 22 J World Trade 23,24 (1988) (see above n. 33).



capital' which in essence translates into benefits deriving from reliability andthe protection of legitimate expectations.3 6

Still other authors look to the textual arguments of courts' refusals to applyGATT rules and urge an end to this practice on the grounds that the moredetailed and firmer obligations of the WTO Agreements make the argumentsinvalid.3 7 Meinhard Hilf, postulating that governments may be the more legit-imate body for developing trade policies, 38 nevertheless rejects the argumentsmade by some adjudicators that the WTO Agreements are too flexible toapply. Comparing GATT general principles to pertinent provisions of theTreaty of Rome, he cannot discern any difference in justiciablity. Moreover,the possibilty to take safeguard or procedures of authoritative interpretationcannot rule out direct effect. 39 Pleading for keeping the possibility of judi-cial review open to individuals, Jacques Bourgois put it quite bluntly: 'Quitesimply, what is in the end the use of making law, also international law,designed to protect private parties, if these private parties cannot rely onit?,Mo

Looking to regional integration mechanisms, 4' Frederick Abbott is one ofa handful of Americans who support the direct effect of trade provisions.Abbott does so not only because direct effect would encourage the imple-mentation of market regulations, but more importantly because direct effect

36 See P. Moser, above n. 33 at 15fE:

If one citizen can refuse to carry out his contractual obligations in international transactionswithout being punished by his national enforcement agent, foreigners will take into accountin future transactions involving members of this society the fact that this enforcement insti-tution does not protect foreign claims appropriately. Ceteris panbnrs, foreigners will be morereluctant to enter into a contract with members of this society than if their claims are strictlyenforced. The nonenforcement or infrequent enforcement of foreign claims reduces the 'com-pliance capital' of all citizens acting under the same enforcement institution.... The default-ing citizen produces a national public bad.

It should be noted that this approach, from a legal point of view, needs further clarification in termsof enforcing private contract rights and market access rights vis-i-vis the WTO Member State.

7 See S. Griller, 'Direct Effect of WTO Rules within the Community Legal System?' 8-12 (manu-script on file with author) (argues WTO Agreements are detailed enough for national courts to beable to apply them); A. Staehelin, 'Zur Frage der unmittelbaren Anwendbarkeit der WTOJTRIPs-Normen', 12 AJP 1496 (1996) (urging that despite a possible incohesion in interpretations, theTRIPs rules can and should be given direct effect in order to broaden their implementation). SeeF. M. Abbott, 'Regional Integration Mechanisms in the Law of the United States: Starting Over',1 Ind J Global Leg Stud 155 (1993) (combining textual references and intent arguments with thepolicy of furthering the implementation of international obligations to support a self-executing natureof the North American Free Trade Agreement).

38 M. Hilt, above n. 2 at 352.

39 Ibid. at 337-43 (discussing the European Court of Justice's approach to the direct effect ofWTO/GATT law).

40 J.H.J. Bourgois, 'The Uruguay Round of GAT: Some General Comments from an ECStandpoint', in N. Emilou and D. O'Keeffe (eds), The European Union and World Trade Lawafter the GATT Uruguay Round 81, 90 (John Wiley & Sons: Chichster, New York 1996).

4' See F. M. Abbott, above n. 37 at 157 (using the term 'regional integration mechanisms', 'regionalintegration treaties, and 'regional trade arrangements with apparent interchangeability').


96 Journal of Intrnational Economic Law 1 (1998) 83-122

would in his view encourage a 'deeper', or social and political, integrationin addition to economic integration.42 He writes:

(t]his policy preference for deepened integration is based upon the beliefs thatsuch integration enhances regional wealth generation and, with appropriatecare, will not result in adverse global welfare effects; that such integrationincreases social tolerance by facilitating personal interaction; that it enhancesthe prospects for political maturation and cooperation through the creationof regional political structures.41

If one would view the WTO as a very large regional integration mechanism,which given the depth of the members' commitments is not unreasonable,the same arguments can be used for allowing self-execution of the WTOAgreements in each member state.44

Finally, it would seem interesting to note that authors from smaller andmedium-sized trading nations, heavily depending on the rule of law in inter-national relations, have advocated direct effect of GATT for a number ofyears. This is particularly true for Switzerland. Under GAIT, the argumentof one of the authors was essentially founded on the following: (i) the needto secure the rule of law in international economic relations and possiblepioneering by smaller countries; (ii) the need to prevent disputes within theEC by securing import regulations compatible with GATT; (iii) practicalconsiderations (no need to transformation); (iv) the possibility to exclude,as a safeguard, direct effect by the legislator where such effects are deliber-ately excluded or a rule is introduced later in time; and finally (v) that delib-erate choices on direct effect by Parliament render trade law more transparent

42 Ibid. at 157.43 Ibid. at 157-8.4 Within the European Union, the uproar caused by the European Court's Bananas judgement (in

which the Court refuses to allow Germany to invoke the Community's GATT obligations as aground for protesting regulation governing the sale of bananas and finds the German government'sallegations of fundamental rights violations invalid based on a discretionary-oriented view of pro-portionality) gives one pause when faced with an opinion such as Professor Abbott's. While thegeneral trend toward deeper integration certainly exists, the process of harmonization, and theinstruments used to achieve this harmonization, may well lead to life-threatening division betweenMember States and Union.

There have been many articles written on the Bananas Judgement. See, e.g., U. Everling, 'WillEurope Slip on Bananas? The Bananas Judgment of the Court of Justice and National Courts', 33CMLR 401 (1996) (former European Court judge criticizes decision); W. Meng, 'IndividuelleKlagerechte und die Steuerungsfunktion des IWR' (1997) (manuscript on file with author); M.Montaiii i Mora, 'Equilibrium: A Rediscovered Basis for the Court of Justice of the EuropeanCommunities to Refuse Direct Effect to the Uruguay Round Agreements?', 30 J World Trade 43(1996) (critizing the Court's reliance 'ad nauseam on the structural weakness of GATT law to refuseconsidering... direct effect...' at 56, but hopeful that the Banana judgment might have someprogress in bringing GATT considerations into the EU); P. Lee and B. Kennedy, 'Potential DirectEffect of GATT 1994 in European Community Law', 30 J World Trade 69 (1996) (stating thatthe Court is acting more as an 'arbiter of disputes. . . than as a positive force for integration' at89, and that in cases such as the Banana one show how the Court has to consider the 'consider-able political ramifications of granting direct effect,.. . [and] it becomes clear why the Court maydecline to do so' ibid.).



and secure.4 5 The approach was essentially endorsed by Olivier Jacot-Guillarmod, now a Supreme Court Judge and a principled supporter of directeffect.46 More recent arguments under the WTO add the idea in regard toSwitzerland that: (i) direct effect is an important element of checks and bal-ances in direct democracy which tends to be open to protectionist arguments;(ii) that the absence of global foreign policy responsibilities renders directeffect more feasible than elsewhere; and finally we argued that (iii) WTO ruleswhich had passed the test of direct democracy (possible referendum) enjoy thesame democratic legitimation as national statutes. Direct democracy there-fore considerably enlarges the basis for direct effect and renders Switzerlanda well-suited candidate to take the lead unilaterally in this matter under WTOlaw.47 Daniel Thilrer, finally, carefully balanced the pros and cons of directeffect. He concluded in favour of it, subject to the possibility of a 'politicalquestion' doctrine as recognized by the Swiss Supreme Court.48

Critics of direct effect of World Trade Organization rules John Jackson has writ-ten several highly differentiated works on the dangers of self-execution, andbasically supports US trade policies of denying direct effect due to the imbal-ances in the institutional balance of government it would cause domestically.His approach considerably deviates from US scholars emphasizing theSupremacy Clause (Article VI clause 2 US Const.) and its interpretationcontaining a strong presumption of direct effect of any treaty, thus alsoincluding WTO law.49 Jackson separates the concept of direct effect intothree parts which can be categorized as: self-execution narrowly defined (theincorporation of the treaty into national law); standing of individuals (theright of the individual to invoke treaty provisions before domestic courts);and hierachy of norms (what rank the treaty provisions have with respect todomestic federal legislation and the domestic constitution). Because he seeseach of the three aspects as important, Jackson neither vigorously nor uni-versally either supports or denies self-execution narrowly defined. He does,however, find the idea of granting standing and allowing for an international

45 See T. Cottier, 'Die Bedeurung des GATT ffir die europ ische Integration' in 0. Jacot Guillarmod,D. Schindler and T. Cortier (eds), EG-Recht und schweizerische Rechtsordnung 141, 175-8(Helbing & Uichtenhahn: Basel 1990).

4 0. Jacot Guillarmod, Le juge face au droit europien: Perspective suisse et communautaire (Helbing& Lichtenhahn: Basel, 1993) 177-8. See also ibid., 'L'application directe des trait~s internationauxen Suisse: un dtour inutile', 45 Schweizerisches Jahrbuch fu-r intemationales Recht 129 (SchulthessPolygraphischer. Zurich 1989).

47 T. Cottier and K. Nadakavukaren Schefer, 'Switzerland: The Challenge of Direct Democracy', inJ. H. Jackson and A. Sykes (eds), Implementing the Uruguay Round (Oxford University Press:Oxford 1997) 333, 361-2.

48 D. Thfirer, 'WTO - Teilordnung im System des V6lker- und Europarechts', in D. Thfirer and S.KUX (eds), GATT 1994 und die Welthandelsorganisation: Herausforderungen fir die Schweiz undEuropa (Schukhess Polygraphischer Verlag: Zurich 1996) 41, 50-7.

49 See L. Henkin, above n. I at 198-203; S. A. Riesenfeld and F. Abbott, above n. 1 at 2-3 (all,however, without explicitly referring to GATT or WTO law).



treaty law to be superior to federal legislation (let alone the constitution) tobe dangerous to the idea of democracy and democratic representation ofindividuals.

John Jackson's analysis begins with an overall look at the 'landscape' oftreaty-making in the domestic arena: the role of the citizen and the answer-ability of the treaty-making parts of government are important factors indetermining the desirability of allowing treaties to be self-executing. 0 Thenhe turns to policy reasons for and against direct effect. While Jacksonacknowledges that governments have an obligation to abide by internationalcommitments they undertake, direct effect is not necessary to ensure this.

The stronger reasons for denying direct effect are what Jackson calls 'func-tional arguments'.51 These functional arguments include the fact that '[s]omeconstitutions provide for very little democratic participation in the treaty-making process; for example, by giving no formal role to Parliaments orstructuring the government so that control over foreign relations is held bycertain elites'. 52 There are also legitimate desires of legislatures to adapt inter-national treaty language to the domestic legal system (such as translating theobligations into thc native language, using local terms for legal principles, orfurther explaining certain provisions).53 And, some governments may wantthe opportunity to implement the obligations in a national legislative processbecause 'the act of transformation sometimes becomes part of a purely inter-nal power struggle, and may be used by certain governmental institutions toenhance their powers vis-A-vis other governmental entities' 54 or 'even, per-haps, ... the legislature desires to preserve the option to breach the treaty inits method of application'. 5' Even such uses of the separate implementationprocess are legitimate in Professor Jackson's mind because 'some breachesmay be "minor" and therefore preferable to the alternative of refusing to join thetreaty altogether'.56 Finally, Jackson argues that if treaties are given direct effectautomatically, the characteristic of direct effect itself will not necessarily guar-antee that the national courts will apply the treaty rules.5 7

so J. H. Jackson, 'Status of Treaties in Domestic Legal Systems: A Policy Analysis', 86 Am J Int'l L310, 315-319 (1992).

51 Ibid. at 323.51 Ibid. (footnotes omitted); see also below n. 79 ('Apart from formal and explicit governmental struc-

tures... a "foreign policy establishment" can be found in certain governments and the criticismhas been made that such elites are not in tune with the political will of the nation').

13 Ibid. at 324.

54 Ibid. at 325.

5 Ibid.56 Ibid. (emphasis supplied).

5Ibid. at 327 ('Even when the rule of direct application covers most, or theoretically all, treaties orcertain broad categories of treaties, courts will find ways to avoid applying the treaty norm in par-ticular cases, perhaps by relying on one or another concept that can be lumped under the rubricof invocability (e.g., standing), or by holding that the treaty norm is designed to constrain or assistcertain government agencies and not private litigants') (footnote omitted).


THE RELATIONSHIP BEwEEN WTO LAW, NATIONAL AND REGIONAL LAW 99

Ultimately, Jackson believes that the question of direct effect broadlydefined must be decided by each government for itself. Depending on thetreaty-making process, the national constitutional framework, the character-istics of the legal system, and the policies a particular government wants topromote, direct effect may or may not be the optimal policy for implementingtrade rules.58 These arguments, in the final analysis, do not necessarily onlyrelate to the WTO. They question the doctrine of direct effect for constitu-tional reasons in a general manner.

In the European Union, critics of direct effect mainly rely upon argumentsand concerns of reciprocity in light of the fact that direct effect is not avail-able in most members of the WTO, and in particular the USA. It is an arms'length argument in trade policy. Jan Peter Kuijper expressed what perhapsamounts to predominant thinking in the European Union:

In the case of [the WTO] treaty, the party whose constitutional and judicialsystem does not know the mechanism of direct effect of treaty provisions -or worse still, specifically excludes such direct effect - places itself in suchfavourable position that it becomes fundamentally unfair to its trading part-ners. In this way it shields itself against what was called above the most pow-erful enforcement mechanism for treaties, and its negotiators, when discussinginterpretation and application of the treaty, arrive with free hands at the table,contrary to their counterparts from countries with direct effect, whose handsare tied by the interpretation of their courts.5 9

The argument, thus is not directed against direct effect as such, and thebasic quality of applying WTO rules is not put into question. It is an argu-ment of realpolitik. It recalls that the discussion of direct effect in the law ofmajor trading powers - despite economic and legal arguments in favour ofunilateral liberalization and direct effect - cannot be successfully and realis-tically dissociated from the status of WTO law abroad.

Another basis for disagreeing with the idea of direct effect is based on aconcern for the WTO's consistency. Piet Eeckhout, speaking in terms of'judicial policy' in the context of the European Union and its member states,warns that multiple national courts interpreting the WTO Agreements inde-pendently may reduce the effectiveness of the WTO rules and its disputesettlement procedures. The argument echos concerns of diverging applica-tion of the Anti-dumping Agreement by different national authorities.0 Hewrites:

" Ibid. at 337-40.

51 J.P. Kuljper 'The New WTO Dispute Settlement System - The Impact on the EuropeanCommunity', 29:6 J World Trade 49, 64 (1995), also in J. Bourgois e aL (eds), The UruguayRound Results (European University Press: Brussels, 1995) 87, 105. See also F. C. de la Torre,'The Status of GATT in EC Law, Revisited - The Consequences of the Judgment on the BananaImport Regime for the Enforcement of the Uruguay Round Agreements', 29:1 J World Trade 53,63-4 (1995) (with further references).

60 See S. P. Crowley and J.H. Jackson, above n. 12 at 209.



The need to ensure an efficient interconnection between, on the one hand,the legal systems of the Community and the Member States and, on the other,the WTO system seems at first sight an argument in support of granting directeffect. However, I have some doubts whether at the present stage full-scaledirect effect would be the best device for ensuring such interconnection.Attention was drawn above to the complex character of the GATT'srules aid mechanisms. That complexity is, if anything, increased by theWTO Agreement. It explains why the agreement contains such a fill-blowndispute settlement mechanism, which aims to reach legally justified decisionsmade by competent bodies. It is therefore questionable whether domesticcourts . . . should become day-to-day operators and interpreters of theWTO Agreement.... [I]n my view, the argument of the appropriate forum,namely that disputes concerning the implementation of the WTO Agreementwill often give rise to intricate legal questions which are best resolved at theappropriate level (WTO panels and the Appellate Body), is a forceful argu-ment against direct effect. 6'

Similar concerns were equally raised by Wolfgang Benedek, in particular inthe wake of the Austrian Supreme Court erring, in his view, in interpretingthe Tokyo Round Agreement on Subsidies and Countervailing Duties. 62

These concerns go to the heart of direct effect in general since the poten-tial of diverging interpretation of rules in different member states, of course,cannot be denied. On the other hand, the problem is not unique to inter-

national law, and legal systems have found ways to avoid it by means ofappeal mechanisms, in particular in federal states. The problem shows that

direct effect and procedural issues cannot be dissociated.

Intermediate positions The debate on direct effect has mainly developed twoopposite positions. Tertium Von datur, it would seem. The revision, however,of the GATT dispute settlement system has widened the options.. Neitherthe establishment of a panel, nor the adoption of a report can be blockedany longer. 63 Unlike before, the issue of complying with specific decisions of

01 P. Eeckhout, above n. 17 at 57-8 (footnotes omitted).12 W. Benedek, 'Importausgleich und Ausgleichszoll: Fehlinterpretation des GATT-Subventionskodex

durch den VfGH', 4 Ecolex 328 (1996). Professor Benedek finds that the mistake that the courtmade in its interpretation of a provision that has direct effect in Austria results in the opposite ofwhat the GATF ideals would promote. He writes, 'Angesichts der protektionistischen Wirkung sindderartige Verfahren such nicht im Sinne der vor GAT angestrebten Handelsliberalisierung. Urnjedoch protektionistische Missbriuche hintanzuhalten, verlangt der Subventionskodex des GATTdie Einhaltung bestirnmter Verfahrensschritte als Voraussetzung fu-r die Erhebung vonAusgleichsz6llen. Der Hauptzweck der Bestimmung des § 5 GfIWG 1988 war tatsichlich einanderer damit sollte fiir den Fall der Vereinbarung anderer GAIT-Z6lle im Bereich des GflWGVorsorge getroffen werden, dass diese bei der Festsemung des Importausgleichs beraicksichtigt wer-den.' Ibid. at 331. See also ibid., Die Rechtsordnung des GATT aus v~lkerrechtlicher Sicht 87(Springer Verlag: Berlin, Heidelberg 1990) (discussing the issue of consistency as an unresolvedquestion of the constitutional approach to GATT).

A Articles 6, 16:4 and 17:14. Understanding on Rules and Procedures Governing the Settlement ofDisputes (DSU), in WTO, The Results of the Uruguay Round of Multilateral Trade Negotiations:The Legal Texts 404 (WTO: Geneva, 1995).


T1E RELATIONSHIP BETWEEN WTO LAW, NATIONAL AND REGIONAL LAW 101

the Dispute Settlement Body by national or regional courts therefore willarise. This is an issue which legally speaking is separate from direct effect inthe traditional sense. It is not a matter of applying general rules, but of com-plying with a specific ruling arrived by quasi-judicial procedures respectingdue process of law.

Differentiating his argument opposing direct effect, Piet Eeckhout even-tually argues that if a case has been specifically settled by WTO disputesettlement procedures, domestic effect should be given to the decision:

Where a violation is established the binding character of the agreement andthe principle of legality should in my view trump any lack of direct effect.That may be the only acceptable result if those principles are to be more thanmere rhetoric. The reasons for not granting direct effect - whether it is theagreement's flexibility, or the division of powers between the legislature andthe judiciary, or the respect of appropriate dispute settlement forum - ceaseto be valid where a violation is established."

Eeckhout's idea is most interesting as it is an intermediate position and goesbeyond the critics of direct effect in the USA and Europe to balance thecompeting ideas on direct effect's acceptability. It is supported by MeinhardHilf as at least a minimal standard of granting direct effect:

No flexibility seems to be left to the discretion of the contracting parties if,in a given dispute, a panel procedure has concluded with a final consentexpressed by the GAT Council. The relevant GATF law will then have beenstated and clarified. At least in such a situation the ECJ would have safegrounds to apply the relevant GATT law directly.

This intermediate approach provides an important option which deservesfurther examination in the light of remedies available in WTO law. An oblig-ation to enforce adopted reports in casu in particular removes the possibil-ity to choose not to perform and instead pay compensation or acceptretaliations, if this option is deemed to be more favourable. It therefore willbe necessary to develop nuanced judicial policies building and explore theinteraction between courts and government in cases of compensation. 6

The present status of World Trade Organization Agreements innational and regional law systems

The judicial history of direct effect of GATI" rules in court practice is welldocumented. Such effect was formerly accorded in a limited number of cases

6 P. Eeckhout, above n. 17 at 53.65 See M. Hil, above n. 2 at 341-2 (referring to Hans-Dieter Kuschel, 'Die Bananenmarktordnung

vor deutschen Gerichten' 6 EuZW 689, 691 (1995)).

"See T. Cottier, 'Dispute Settlement in the World Trade Organization: Characteristics and StructuralImplications for the European Union' CMLR (forthcoming); ibid., 'Die Durchsetrung derPrinzipien und Beschlilsse der WTO: das Streitbeilegungsverfahren und seine Auswirkungen' inF1W Schriftenreihe vol 173, Die Bedeutung der WTO fu-r die europiische wirtschaft (CarlHeymanns: K6In 1997).



only, in particular in Italy and exceptionally in the USA prior to the TokyoRound. 67 The doctrine of direct effect, however, did not succeed in shapinggeneral relations between GATT and national or regional law since such effectwas denied in International Fruit by the European Court of Justice in 1972.68We briefly look at three typical jurisdictions: The EC as a constitution-in-the-making, the USA as a superpower, and Switzerland as an example of amedium-sized trading nation.

1. European UnionPerhaps no other court of law is more aware of the liberalizing and power-ful results of direct effect than the European Court of Justice (ECJ or theCourt). Ever since van Gend en Loos, the Court has construed textually pro-grammatic EC norms as constituting individual rights having direct effect.This, together with the doctrine of primaut6 (Costa v. Eneo, gave EU lawpredominance over national law. In parallel the Court developed a doctrineof direct effect and effet utile for regional trade agreements, in particular theEFTA Agreements and Association Agreements. This reinforced the marketaccess rights of foreign exporters into the Community to a considerabledegree. Foreigners are now in a position to invoke the provisions of theseAgreements before the ECJ notwithstanding the fact that there exists inter-national dispute settlement machinery. 69

The Court's case law with respect to the GATI' presents a stark contrastto its doctrine of effet utile within the European context. There are two mainarguments the Court has consistently used for denying the direct effect ofthe GAIT: (i) the GAT has been considered to be an instrument of nego-tiations, rather than adjudication; and (ii) the GAT's provisions are not

61 See J. H. Jackson, 'The General Agreement of Taiff and Trade in United States Domestic Law'

66 Mich L R (1967); G. Sacerdoti, 'The Application of GATT by Domestic Courts, European andItalian Case Law', 2 Italian YB Int'l L 225 (1976); G. Sacerdoti and G. Venturini, 'GATr as aSelf-Executing Treaty in the Italian Case Law' in E. U. Petersmann and G. Jaenicke (eds),Adjudication of International Trade Disputes in International and National Economic Law(University Press Fribourg: Fribourg, 1992) 339-55; M. Zuleeg, 'Die innerstaatliche Anwendbarkeitvnlkerrechlicher Vernige am Beispiel des GATT und der Europiischen Sozialcharta', 35 Za6rV341 (1975).

' Joined cases 21 to 24/72 [1972), ECR 1219. See generally J. Kuilwijk, The European Court ofJustice and the GAIT Dilemma: Public Interest versus Individual Rights? (Nexed EditionsAcademic Publishers: The Hague, 1996); M. Hil above n. 2 at 337-47; P. Lee and B. Kennedy,'The Potential Direct Effect of GATI" 1994 in European Community Law' 30 J World Trade 69(1996); M. MontafU i Mora 'Equilibrium: A Rediscovered Basis for the Court of Justice of theEuropean Communities to Refuse Direct Effect to the Uruguay Round Agreements?' 30 J WorldTrade 43 (1996). For further references see P. Eeckhout, above n. 17 at n. 4 at 12 (1997).

6' Case 10481, Hauprzolamt Mainz v C.A. Kupferberg & Cie. KG [1982], ECR 3641; Case C-207191,Eurim Pharm GmbH v Bundesge.sundhduamr [1993]. See also T. Cornier, 'Das Problem derParallelimporte im Freihandelsabkommen Schweiz-EG und im Recht der WTO-GATT' 1Schweizerische Mitteilungen fiber Immaterialgiterrecht 37 (1995); ibid., 'Constitutional TradeRegulation in National and International Law: Structure Substance Pairings in the EFTAExperience', above n. 3 at 410, 418-23.



considered to be sufficiently precise for the purpose of direct effect. 70 Thisassessment is not merely applied in order to determine direct effect in termsof the rights of individuals before the courts of law, but also in the contextof disputes brought by a member state against the Community,71 where cri-teria of denying direct effect strictly speaking are not in place.

On the other hand, it is important to note that the Court's attitudes toGATT (and presumably to the WTO) rules are nuanced. Besides applyingthe important doctrine of consistent interpretation, the Court has takenrecourse to GATT law where an EC instrument directly refers to GATTrules on anti-dumping.72 Moreover, the Court did not find any difficulty inconstruing GATT rules in the context of assessing the trade practices of

10 A 1995 decision on the direct effect of GATT by the European Court is found at Case C-469/93,

Amministrazione dee Finanze defli Stato v Chiquita Italia SpA [1995], ECR 1-4558. There the Courtreaffirms its past reasoning as to why the GATT should not be given direct effect within theCommunity.

As regards the GAIT, the Court has consistently held, most recently in Case C-280/93Germany v Council [1994] ECR 1-4973, paragraph 106, that the GATT, which according toits preamble is based on the principle of negotiations undertaken on 'the basis of reciprocaland mutually advantageous arrangements', is characterized by the great flexibility of its pro-visions, in particular those conferring the possibility of derogation, the measures to be takenwhen confronted with exceptional difficulties and the settlement of conflicts between the con-tracting parties.

The Court stated (at paragraph 107) that those measures included, for the settlement ofconflicts, depending on the case, written recommendations or proposals which are to be 'givensympathetic consideration', investigations possibly followed by recommendations, consulta-tions between or decisions of the contracting parties, including that of authorizing certaincontracting parties to suspend the application to any others of any obligations or concessionsunder the GATT, and, finally, in the event of such suspension, the power of the party con-cemed to withdraw from the agreement.

It also noted (at paragraph 108) that where, by reason of an obligation assumed underthe GAT or of a concession relating to a preference, some producers suffered or werethreatened with serious damage, Article XIX gave a contracting party power unilaterally tosuspend the obligation and to withdraw or modify the concession, either after consulting thecontracting parties jointly and failing agreement between the contracting parties concerned,or even, if the matter was urgent and on a temporary basis, without prior consultations (seethe judgments in Joined Cases 21/72 to 24/72 International Fruit Company, cited above, para-graphs 21, 25 and 26; Case 9/73 Schlrter v Hauptzollamr Lrrach [1973] ECR 1135, para-graph 29; Case 266/81 SIOT v Ministero delle Finanze [1983] ECR 731, paragraph 28; andJoined Cases 267181, 268/81 and 269/81 SPI and SAMI [1983] ECR 801, paragraph 23).

Consequently, those features preclude an individual from invoking provisions of the GATTbefore the national courts of a Member State in order to challenge the application of nationalprovisions.

Ibid. at 4565-6, paras 26-29.See also Cases 21-24/72, International Fruit Company NVv Produktschap oorgroentcn en fruit [1972],ECR 1219, 1227, para. 21 ('This agreement which, according to its preamble, is based on theprinciple of negotiations undertaken on the basis of "reciprocal and mutually advantageous arrange-ments" is characterized by the great flexibility of its provisions, in particular those conferring thepossibility of derogation, the measures to be taken when confronted with exceptional difficultiesand the settlement of conflicts between the contracting parties'); Case 266181, SlOT v Afinitndelle finanze et aL [1983] ECR 731.

71 Case C-280/93, Germany v Council [1994] ECR 1-4973.

72 Case C-69/89, Nakajima AU Precision Co. Ltd v Council [1991] ECR 1-2069.



trading partners within the 1984 'New Instrument' (now the Trade BarriersRegulation).3 Finally, in a dispute involving national measures of a mem-ber state, the Court found no difficulty construing in great detail the GATTInternational Dairy Arrangement.74

With the advent of the WTO, the Court may re-evaluate the argumentsset out in prior case law. First, the traditional argument of vagueness losescredibility in light of (a) additional concretization of GATT and (b) anincreasing number of panel reports elaborated under judicial proceedingsand providing specific guidance for interpretation. Second, the major changesin dispute settlement, in particular the introduction of the Appellate Body,cannot remain without an impact.7 5 Third, the qualification of GATS andTRIPs as being mixed agreements, to be ratified both by the EU and themember states, raises the issue of independent interpretation and quali-fication of these agreements by the national courts of law in their own right.

It is not entirely clear whether the judicial policy of the Court and theCouncil is binding upon the member states of the EU. It should be empha-sized that TRIPs and GATS are mixed agreements. They were ratified bythe European Communities as well as the Member States in accordance withAdvisory Opinion 1/94 of the European Court of Justice. 76 Courts of theMember States, in particular those in Germany and Austria (as well as Swisscourts), have taken recourse to the provisions of the Berne and ParisConventions 7 - provisions which are now being incorporated into the TRIPsAgreement. It is difficult to see why such rules should alter their quality (themore so since obligations have been clarified by the 'plus Berne and Parisapproach' of the TRIPs Agreement). Clearly, most of them are not merelyapt for the purpose of consistent interpretation of national laws, but also fordirect effect. Interestingly, the German government partly acknowledgeddirect effect of substantive standards of the TRIPs Agreement. 78 The matter,

" Case 70187, Fediol lI v Commission (1989] ECR 1781.14 Case C-61/94 Commission v Federal Republic of Germany [1996] ECR 3989, 4003-10 paras 3-8,

4015-17 paras 31-40.15 See J. Maria Beneyto, 'The EU and the WTO: Direct Effect of the New Dispute Settlement

System?', 10 Europ Zeitschrift flir Wirtschaftsrecht 295, 298 (1996) (' . .. the traditional case-law of the ECJ denying the direct effect of the GATT provisions may change in the future; let usrecall that one of the main arguments used by the Court was the diplomatic nature (non-adjudi-catory) of the dispute settlement mechanism.... the situation has changed radically under theWTO Agreement ... ') (footnote omitted).

11 Opinion pursuant to Article 228(6) of the EC Treaty, [1994] ECR 1-5267.

7For an analysis see F.M. Abbott, WTO Dispute Settlement and the Agreement on Trade-RelatedAspects of Intellectual Property Rights, in ILA, International Trade Law and the GATT/WTODispute Settlement System, above n. 10 at 394/395. Professor Abbott cites and discusses the fol-lowing cases of consistent intepretation in his article: SUISA v Rediffsion AG, above n. 23 in fine);Re Cross-Border Copyright in Television Works (Case 4 Ob 19/91), Oberster Gerichtshof (Austria)[1992] ECC 456, May 28, 1991.

'a Bundesregierung, Entwurfeines Gesetzes zu den Uebereinkoinmen vom 15. 4. 1994 zur Errichtungeiner Welthandelsorganisation, Deutscher Bundestag, Drucksache 12/7655 (neu) 1994 S. 335, 337,344, 347 (except for enforcement, Part Ill TRIPs Agreement). For Switzerland see below n. 103.



however, is far from uniformly settled in the EU. Courts in the UK havedenied direct effect not only on grounds of UK law, but also on grounds ofEU law.79 In his judgment, the High Court Judge particularly emphasizedarguments and consideration of reciprocity in rejecting the proposition ofdirect effect of the TRIPs Agreement by way of EU law.80

The dual membership of the EU and the Member States to the WTO isperhaps the most important policy argument in favour of reassessing judi-cial policies in the EU. The effects of protecting instruments inconsistentwith WTO obligations are interesting to observe. While the issue of directeffect of GATT rules (and the relationship of GATT and EU law underArticle 234 para. I EC Treaty) has been controversial among lower Germanadministrative courts,8 1 defence strategies against GATT inconsistent instru-ments have shifted towards constitutional arguments. The cost of denyingdirect effect to GATT rules is potential turmoil within the EU's legal order.Following the German Bundesverfassungsgericht in its decision on theMaastricht treaty, 2 the Verwaltungsgericht Frankfurt am Main has held EUregulation 404/93 partly inapplicable on grounds of German constitutional

79 R v Comptroller of Patents, Designs and Trade Marks e parte Lenzing AG v Courtauld (Fibres) Ltdand others (1996] RPC 245 at 31 ('I conclude that Art. 32 even if in principle some provisions ofTRIPs are potentially capable of having direct effect, is not sufficiently clear and precise to do so.Again I think the point is so clear as to fall within the acte claire doctrine'); Azrak-HamtayInternational Inc's License of Right Application [1997] RPC 134 (28 October 1996) (' . . . havingcarefully considered all the arguments put to me, I conclude in relation to my question (a) thatTRIPs is not directly applicable in United Kingdom law in the field of industrial designs...').

11 'Why should the Treaty be offered direct effect within the national laws of EU States but not (as

is accepted to be the case) in the USA? This would produce a lopsided result. . .' Ex parte LenzingAG above n. 79 at 25.

St Direct effect and priority of GATT under Art. 234 para. 1 was denied by the Administrative Courtof Frankfurt am Main in Atlanta Frichthandsgselschaft mbH et aL c Bundesansaltifr Landmirtschaftund Ernahnng, Case 1 E 798195 (v), 1 E 2929193 (v) (undated) at 36, 59-64; FinanzgerichtHamburg, decision of 19.5.1995 (EuwZ 1995 at 689) (direct effect affirmed). See A. Weber, 'DieBananenmarktordnung unter Aufsicht des BVerfG?' 6 Europ Zeitschrift fur Wirtschaftsrecht 165(1997) ('Eine "ultra-vires"-Kontrolle von Gemeinschaftsrechtsakten dutch nationale Gerichte istnicht nur mit dem Gemeinschaftsrecht unvereinbar, weil es die Funktionenteilung zwischenGemeinschaftsgerichtsbarkeit und nationaler Jurisdiktion unzulissig verschiebt, zur Segmentierungdes Gemeinschaftsrechts flrt und damit die Einheit des Gemeinschaftsrechts gefahrdet, sondemgabe ein denkbar schlechtes Beispiel f-ur anderen europlischen Verfassungsgerichte, die bislang auchnicht annfhemd eine vergleichbare Kontrolle iiber Gemeinschaftsrecht ausgeaibt haben') (footnoteomitted); E.-U. Petersmann, 'Dadf die EG das V61kerrecht ignorieren?', 11 Europ Zeitschrift furWirtschaftsrecht 325, 326 (1997) ('Die fortdauemden Konflikte zwischen den v61kerrechtlichen,gemeinschaftsrechtlichen und nationalen Rechtsschutzverfahren gegenriber dem EG-Bananen-pro-tekdionismus verdeutlichen, dass - ihnlich wie die Einhaltung des V61kerrechts die Markt- undPolitikintegration in der EG gefo-rdert hat - die Ignorierung der V61kerrechtsbindungen der EG dieMarkt-, Rechts- und Politikintegration der EG gefahrden'); H.-D. Kuschel, 'Die EG-Bananenmarktordnung vor deutschen Gerichten', 20 Europ Zeitschrift fur Wirtschaftsrecht 689(1995); ibid., 'Wie geht es weiter mit der Bananenmarktordnung?', 21 Europ Zeitschrift furWirtschaftsrecht 645 (1996).

82 Bundesverfassungsgericht (German Constitutional Court Decision) 89, 155 (12 October 1993).


106 Journal of International Economic Lazo 1 (1998) 83-122

law.83 This correlation is of great importance. The policy of the ECJ of ignor-ing the GATT for the sake of securing secondary EU law may undermineEU law from a different angle and lead to an erosion of the primacy ofEU law over national law and to Rechtszersplitterung serious fragmentation, dis-ruption and weakening of the emerging internal federal structure of EU law.

Politically, the courts have been discouraged from reassessing the situationunder the WTO Agreements by the Council Decision Implementing theUruguay Round.8 4 Preambular language qualifies the Uruguay Round agree-ments as unfit for direct effect; and it is unclear to what extent the recitalis binding on either the EGJ or the national courts. In Lenzing AG, the state-ment was given considerable weight in refuting direct effect of the TRIPsAgreement by way of EU law in the UK. 5 On the other hand, it should benoted that the Dublin II proposals for a new Article 113a EC Treaty, plainlybanning the direct effect of multilateral trade agreements in the new areas(TRIPs, investment and services) as a matter of primary, and thus consti-tutional, EU law 6 was not retained at the Amsterdam ministerial conferenceof 1997. The situation thus is controversial and far from settled.

2. United States of AmericaPrevailing attitudes within the EU are a clear reflection of the legal situationin the USA. In the field of trade regulation, the USA adopted a 'non-pol-icy' of applying some treaty provisions directly and refusing to apply othersin national courts, with no very clear method of analysis.

The Comments to the Restatement (Third) of Foreign Relations Law ofthe United States suggests that in the case of no express request by theExecutive or Congess for implementing legislation, a treaty signed by theUSA is presumed to be self-executing.8 7 Those studying the courts' appli-cations of direct effect nevertheless are often faced with examining the judges'

" Atlanta Fruchthanddsgeselsehafr mbH et aL c Bundesanstdrf r Landwirtschaft und Erndhrung, aboven. 31 at 42 (the court finds the lack of transitional arrangements violates the German Constitution'sprotection of private property rights).Council Decision of 22 December 1994 concerning the conclusion on the behalf of the EuropeanCommunity, as regards matters within its competence, of the agreements reached in the UruguayRound negotiations (1986-1994), OJ No. 336/1 23.12.94.

" Above n. 79 at 24 ('So, in the face of the fact that TRIPs (one of the Annexes) is an agreementwhich all Member States explicitly considered (through the recital) not to create direct effect, it issaid that the Court of Justice may nonetheless hold otherwise. I think that is fantastic.')

' CONF/2500196 CAB at 79 (on file with author).s' See Restatement (rhird) of Foreign Relations Law of the United States § 111, Reporters' Notes:

... Since generally the United States is obligated to comply with a treaty as soon as it comesinto force for the United States, compliance is facilitated and expedited if the treaty is self-executing.... Therefore, if the Executive Branch has not requested implementing legisla-tion and Congress has not enacted such legislation, there is a strong presumption that thetreaty has been considered self-executing by the political branches, and should be consideredself-executing by the courts. (This is especially true if some time has elapsed since the treatyhas come into force.)

in B. Carter and P. Trimble, International Law (Little, Brown and Company: Boston 1991) 151.



analyses of the negotiators' intent. A decision from the Ninth Circuit explain-ing the judicial interpretation of self-execution in the USA has become thestandard reference for US lawyers. The opinion states:

The extent to which an international agreement establishes affirmative andjudicially enforceable obligations without implementing legislation must bedetermined in each case by reference to many contextual factors: the purposesof the treaty and the objectives of its creators, the implementation, the avail-ability and feasibility of alternative enforcement methods, and the immediateand long-range social consequences of self-execution or non-self-execution"8

Trade treaties have historically been granted self-executing status in UScourts. Individuals victim to unlawful expropriations, for instance, havesuccessfully invoked the USA's Friendship, Commerce and Navigationtreaties with the offending foreign state to protest such actions.8 9 Recently,however, ratification of the USA's three most important free trade agree-ments was made contingent upon the inclusion of an explicit denial of eachagreement's self-execution. 0 Such is also the case with the WTOAgreements. In the field of trade regulation, we observe a signficant depar-ture from established traditions of direct effect under the US constitution.While denial of such effect by the President or the Senate through meansof a mere 'declaration' or 'condition' is controversial, 9 the exclusion was

People of Saipan v United States Department of Interior, 502 F.2d 90 (9th Cir. 1974) reproduced in:B. Carter and P. Trimble, above n. 87 at 153.

s' See F. M. Abbott, above n. 37 at 167-9; see particularly at 169, footnote 35 and accompanying text.90 The United States-Israel Free Trade Agreement, the United States-Canada Free Trade Agreement,

and the North American Free Trade Agreement all have explicit provisions in the implementinglegislation to deny individuals a cause of action under the treaty itself. See Agreement ofEstablishment of a Free Trade Area Between the Government of the United States of America andthe Government of Israel (signed 22 April 1985), Pub.L No. 99-47, 99 Star. 82 (1985);Canada-United States Free Trade Agreement (signed 2 January 1988); North American Free TradeAgreement (signed 17 December 1992), Pub.L. No. 103-182, 107 Star. 2057 (1993).

91 S. A. Riesenfeld and F. Abbott above n. 1 at 3 argue:

We believe that the Senate lacks the constitutional authority to declare the non-self-execut-ing character of the treaty with effects on US courts. The Senate has unicameral power onlyto consent to the ratification of treaties, not to pass domestic legislation. A declaration is notpart of the treaty in the sense of modifying the legal obligations created by it. A declarationis merely an expression of an interpretation of a policy or position.

L Henkin above n. I at 202-3 writes in the second edition:

In my view, that recent practice, accepted without significant discussion, is 'anti-Constitutional' in spirit and highly problematic as a matter of law. In the Supremacy Clause,the Constitution declared treaties - generally, presumably all treaties - to be the law of theland. John Marshall read an exception into that Article in respect of treaties that by theircharacter could not be self-executing, nothing in the Constitution, or in Chief Justice JohnMarshall's opinion, suggested that treaties which the Constitution declares to be law of theland need not be 'faithfully executed' by the President, or enforced by the courts, becausethe President or the Senate (or both) so decided. If the treaty-makers thought it was neces-sary or desirable to include a role for Congress in special cases, such as in taking the UnitedStates into war pursuant to the North Atlantic Treaty, there was no suggestion - until thehuman rights conventions of recent date - that there was a general power for one or both ofthe treaty-makers to do so for any treaty, at will. (footnotes omitted)



introduced by way of implementing congressional legislation in the case ofthe WTO.

The language of the US WTO implementing legislation explicitly prohibitsthe direct reliance on the Agreement by the courts in cases brought by oragainst individuals or states.92 While the federal government may, looking tothe implementing legislation, sue a federal agency or state based upon analleged violation of WTO obligations,9" an individual's case based on GATT,GATS, or TRIPs will be dismissed for lack of standing.94 It would beinteresting to study whether courts would even be allowed to hear argumentsbased on WTO rules, under the Betsy doctrine of consistent intepretation,if brought forth in a private suit.

The foreseeable future does not seem to hold much promise for a changein the USA's views on direct effect of the WTO Agreements. Attorney GaryHorlick, a close observer of US trade policy, notes that political leaders inthe USA have cast doubt on whether the WTO should have any effect inUS law, most notably the Clinton Administration, which claims that it wouldignore any inconvenient panel rulings and prefer to pay compensation. Moreinternationally minded members of the Bar would probably be supportive,others (either because of protectionist clients or out of genuine conviction)would oppose direct effect loudly enough for the public to believe that thereis no consensus in the legal community.9 5

3. SwitzerlandWhile direct effect is strongly discouraged by the major trading partners anddominant powers within the WTO system, it is interesting to observe thatthese attitudes are not necessarily shared by governments of medium-sizedtrading nations. Switzerland is a monistic nation in terms of internationallegal obligations. Indeed, Swiss courts have perhaps been generally morewilling than other nations' judiciaries to recognize treaty provisions asself-executing, and international law prevails over domestic legislation. 96

"2 1994 Uruguay Round Agreements Act, 19 USCS § 3511, Pub.L No. 104-305 (1996), S 102(c).

,' Ibid. § 102(a) (US federal law prevails over conflicting WTO provisions); 102(b) (Uruguay Roundagreements' provisions prevail over conflicting State law in federal government actions against Stategovernments).

' The Statement of Administrative Action provides:... through its approval and implementation of the Uruguay Round agreements Congress

will have 'occupied the field' with respect to any cause of action or defence that seeks, directlyor indirectly, the private enforcement of those agreements....

In sum, the language of section 102(c)(2) is intended to make clear that Congress seeksthe complete preclusion of Uruguay Round agreement-related actions and defenses in respectof state law in any action or proceeding brought by or against private parties.

Office of the United States President, Statement of Administrative Action Accompanying the 1994Uruguay Round Agreement Act at 20.

G' G. Horlick, Esq., correspondence to T. Corder, 10 July 1997 (emphasis in original).

, Cf. C. Dominic6 and F. Voeffirey, 'SuissetSwitzerland', in The Integration of International andEuropean Community Law into the National Legal Order 529, 548, above n. 1. For standard criteriafor assessing direct effect see also Caisse cantonale v Canton du Valais BGE 119 V 171, 177 (1993).



However, in actuality, the Swiss' application of internationally negotiatedrules is not without important exception in case law. The Supreme Courthas met demands of direct effect of international trade rules with utmostcaution. While it was affirmed with regard to the EFTA Convention, 97 it hadbeen denied to private operators for the Swiss EC Free Trade Agreementof 1972 on several accounts. 98 In 1986, the Swiss Federal Court held (inline with the ECJ) the GATT to be not available to an individual in Swisscourts of law. 99 The Court's reasoning was that the language of the provi-sions in question was too vague to be applied by the courts. Such grounds,say many commentators, m were not well-founded at the time of the deci-sion, and would be even less valid for the much more detailed WTOAgreements. Beyond wording, it is evident that direct effect of trade agree-ments was, at the time, at odds with weak legislation on competition lawand a high density of cartels as a main trait of the Swiss economy. This haschanged in the mean-time.

In this context, the language of the Executive found in the explanatory notesof the Uruguay Round implementing legislation is telling. Policies of affirm-ing the possibility of direct effect, strongly argued for by the government inthe context of the Swiss EC Free Trade Agreement' 0' and of primacy of inter-national law'02 were upheld, albeit more moderately, in the case of global WTOlaw. With respect to private claims based upon the TRIPs Agreement provi-sions, the Executive, supported by scholars, has stated that direct effect is tobe afforded the Agreement. 0 3 For the other Agreements, the Executive impliesthat it would want the Court to recognize at least some of the provisions of

" Banque de Cridit International c Consei d'Etat du Canton de Genive BGE 98 Ia 385 (1972), even-tually affrmed in subsequent unpublished decisions.

98 Adams c Staatsanwalschaft des Kantons Basel-Stadt BGE 104 IV 175 (1978); Bosshard PartnrsIntertrading AG c Sunlight AG BGE 105 1149 (1979); Association pour le Rezyclage du PVC c Cons ild'Etat du Canton de Fribourg BGE 118 Ib 367 (1992) For a recent assessment see, e.g., T. Cottier,above n. 2 at 418-23.

Maison G. Sprl. c Direction gniral d&s dounanes BGE 112 Ib 183, 189-90.

'o See above nn. 37-40 and accompanying text. It is noteworthy that even the critics of direct effectdo not deny the courts' ability to apply the provisions of the WTO Agreements. The critics merelydeny the advisability of such application.

101 See 'Bericht iber die Stellung der Schweiz im euroipaischen Integrationsprozess', 24 August 1988

(Doc. 88.045) Bundesblatt 1988 III 249 at 348.

102 See Botschaft zur Genehmigung des Abkommens iber den Europlischen Wirtschaftsraum,Bundesblatt 1992 IV 1 at 87-93, 113-14.

1o1 Botschaft zur Genehmigung der GAITIWTO-Obereinkommen, Bundesblatt 1994 V 286-288

(19 September 1994) (discussing the legal character of the TRIPs Agreement); see particularlyibid. at 287 (setting out that TRIPs Articles 10, 12, 14:5, 15, 16, 18, 26:3, 28, 33, 38, and50 are self-executing). See also Staehlin, above n. 25 at 138-50 (direct effect likely to beaccepted by Swiss courts), ibid. above n. 37; see also M. J. Lutz and W. Heinzelmann, 'Staats-vertrige im Immaterialgiiterrecht', Il Schweizerisches Immaterialgiter- und Wettbewerbsrecht,in R. von Bfiren and I- David (eds) (Helbing & Lichtenhahn: Basel and Franfurt a.M., 1995)39, 69.



the specific agreements as self-executing.'0 4 The Executive first reaffrms itscommitment to the general principles used to determine whether a treaty pro-vision has direct effect - referring as well to the Swiss Court's earlier GATTdecision analysis'0 5 - and then declares that each WTO Agreement's treatyprovision must be examined separately to make such a determination. 106

Without further indicating its position on particular obligations, the Executivestates that 'for certain provisions in the various Agreements, the possibility[that they will be given direct effect] cannot be excluded'. 10 7

While leaving the matter to the courts, the Swiss Executive, and unlike theEC Council, has not, at any rate, discouraged the judiciary from develop-ing a doctrine of direct effect. Moreover, unlike the US Congress, directeffect of the WTO Agreement has not been an issue before Parliament andno attempt to exclude it by statutory language was ever undertaken.

In July of 1997, the Swiss Federal Court once again addressed a claim argu-ing in part that a national regime for auctioning import licenses was a violationof Switzerland's GAIT obligations. 0 8 While the Court explicitly refrained fromdeciding obiter dictum whether the WTO Agreements are to be considereddirectly effective in Switzerland, the current Court - unlike the High Court inthe UK09 - did acknowledge the changed circumstances under the new WTOAgreement as significant. However, the Court also commented that several ofthe new WTO Agreements still have unclear or flexible provisions, leaving opensufficient doubt of what direction the future decisions will take as to preventthe making of reliable predictions. The Court did rely to a large extent on aca-demic writings on the various WTO provisions, and with Swiss jurists favour-ing direct effect combined with changing general attitudes in legislation towardscompetition policy and the abolition of internal trade barriers since the 1992rejection of the European Economic Area (EEA) Agreement, it is not unlikelythat many provisions of the WTO Agreements will be recognized as self-exe-cuting in Swiss courts of law.

The political economy of denying direct effect

The recent and predominant attitudes towards direct effect in the EU andthe USA, as well as by the Swiss Supreme Court, can be explained in terms

114 Botschaft zur Genebmigung der GATr/WTO-Obereinkommen, above n. 103 at 417-19, 418.

'o' BGE 119 V 171 above n. 92. The Executive also cites Banque de Cridit International c Consedd'Etat du canton de Genkve BGE 98 Ib 385 (1972).

'" Botschaft zur Genehmigung der GATF/WTO-Ubereinkomnien, above n. 103 at 418.

'o' Ibid. (translation by authors).', Decision 2A.496/1996 (14 July 1997) (on file with authors). In violation of Article X GATT, the

ruling will not be officially published, see Neue Zircher Zeirung, 4 August 1997 at 11.

' Ex parte Lenz'ng AG, above n. 79 at 27-8 ('I do not see any of this as altering the fundamentalcharacter of the WTO and TRIPS as merely an agreement between nations. In the end there isstill great flexibility').



of political economy which explains the frequently hidden agenda of actorsand authors. Much of the following has already been set forth by the authorsreferred to above. It is apparent that in the USA and the EuropeanCommunities, as well as in many other countries, the effect of WTO rulesis intended to be limited to international responsibility without threateningthe predominance of national (or Community) rules in a domestic context.It is a strategy of combining the utmost effect of WTO law abroad with aview to foster market access rights while leaving traditional constitutionalallocations of power at home as unimpaired as possible. Also, it is apparentthat none of even the major players is in a position to impose its domesticconsensus or majority rule on any of the other members. Divergence withnational law therefore cannot be excluded, and WTO may impair nationalregulations. Denial of direct effect therefore offers an exit route to escapesuch divergencies.

To a large extent the political economy of denying direct effect reflectspredominant producers' interests in major trading nations, and the unilat-eral granting of procedural rights and domestic enforcement of WTO oblig-ations is bound to be seen as the equivalent of a trade concession. From aneconomic or individual rights' point of view, it is difficult to sustain the denialof direct effect of suitable rules. The matter, however, is more than an expres-sion of protectionism. Constitutional structural issues are involved. This iswhat John Jackson categorizes as a 'hierachy of norms' problem, and is inour opinion of tremendous practical importance for coming to a consensuson what to do about the direct effect of the WTO Agreements.

The maintenance of the domestic constitution's primacy within a nationalsystem can be justified by a number of arguments and structural concernsof 'constitutional economy' which need to be carefully examined and bal-anced against apparent economic advantages of direct effect. First, as theWTO Agreements reach more deeply into national legal systems and moredirectly affect the life of the individual, distribution of powers within nationalor regional governance will be altered. Direct effect not only enhances thepowers of private actors in foreign policy, but it also enhances the powersof courts vis-a-vis rule-making authorities and the executive branch. Givingdirect effect to WTO rules in agriculture, for example, fundamentally shiftspowers from the EC Council and Parliament not only to the Commission,but also the European Courts. In the USA, direct effect would be to thedetriment of Congress and its constitutional power to regulate foreign com-merce, arguably the most important foreign policy perogative of the 21stcentury. Direct effect might give courts a role for which neither the judgesnor the constitutional framework are sufficiently prepared.

Second, foreign policy and economic policy are increasingly indistinguish-able. Constitutional shifts induced by direct effect not only affect foreignrelations, but have equally profound impacts on traditional allocations ofdomestic constitutional powers.


112 Journal of Intrnational Economic Law 1 (1998) 83-122

Third, limitations imposed by courts on the basis of the direct effect ofWTO provisions may either hinder foreign policy goals which no longer canbe pursued by other (military) means or spur a formal or, more likely, infor-mal retreat from WTO membership.The USA and the European Union havea great deal of global responsibility. Both depend on effective instrumentsof foreign policy to negotiate and to fulfill these responsibilities. They havepotentially extensive retaliatory powers. In this context, considerations of alevel playing field in external relations, particularly among the major pow-ers, is paramount. Considerations of reciprocity in terms of enforcement ofrights and obligations essentially drive executive and judicial foreign policiesin order to keep a balance of power. Few are prepared to accept that WTOrules have more bite at home than abroad.

The implications of direct effect on the constitutional economy need tobe carefully examined for all countries. The shift of essential regulatoryactivities to the international level of WTO law does not leave any memberunimpaired. Yet, concerns of global responsibility and foreign policy are lessimportant for most countries. Importantly, they do not dispose of signficantretaliatory powers. The market is too small, and dependence on foreign mar-kets paramount. These qualities and strong reliance on the law to securemarket access abroad successfully make direct effect easier to offer.Switzerland, like many of the smaller trading nations, therefore, is in a bet-ter position to employ the doctrine of direct effect by virtue of having lessindividual weight in influencing global affairs. Direct effect should help rem-edy the inherently protectionist interests that often dominate domestic pol-itics. Smaller countries may set an example to others by emphasizing thebenefits of judicially securing market access. They are in a better position toadd yet another element to the constitutional doctrine of checks and bal-ances: vertical separation of powers. To the same degree as interstate com-merce is protected by means of individual constitutional rights in a domesticcontext, international commerce can be secured by granting effective check-ing rights to the international systems as applied by international bodies andby national courts.

Legal problems of direct effect in World Trade Organization law

The legal doctrine of direct effect and the political economy depending onoverall foreign policy responsibilities reaffirm that we are dealing with a prob-lem currently addressed primarily at the national or regional level. Yet thereare unsolved problems on the level of WTO law as well. These problemsare not mainly found on the level of substantive rules. Most norms of WTOLaw can be construed as readily by national courts as they can be by pan-els and the Appellate Body. And nothing prevents a court from denyingdirect effect where norms are considered to be of a programmatic and non-judicial nature because it is thought that they need further elaboration in the



process of negotiations or implementation by the legislative or executivebranch. The problem lies in the system of enforcing WTO rights.

Under the DSU and Article XXIII of the GATT, the Members of theWTO have a primary obligation to remedy laws and practices held to beinconsistent with their obligations under the treaties. Nevertheless, a Membermay offer adequate compensation in diplomatic negotiations until a solutionto the problem can be found domestically. While no obligation exists toaccept such an offer, there is no right to seek immediate removal of the mea-sure. The Member whose benefits were nullified and impaired may merelywithdraw concessions, if necessary by means of cross-sanctions.

A court giving direct effect to WTO rules cannot offer the intermediatestage of granting temporary compensation. Upon ruling that a national orregional rule or practice is inconsistent with WTO obligations, the court willhave to remedy the inconsistency immediately by refusing to apply nationallaw. Given the legal effect of precedent in common law, such rulings willhave far-reaching consequences. To a lesser extent, this is true in civil lawtraditions as well. In both traditions, legislators will be practically obliged tochange the law to take the court's ruling into account, or will have to passa new law overriding the WTO provision in the national context. The optionsof temporary compensation and of accepting sanctions instead are no longeravailable.

Whether such effects are compatible with rights and obligations ofMembers under the WTO is questionable. On one hand, it may be arguedthat the existence of international remedies under a treaty does not rule outdirect effect. If this is generally denied, direct effect could not take place atall: all treaties are subject to state responsibility and therefore are subject tointernational remedies.110 The ECJ (unlike the Swiss Supreme Court') cor-rectly held in Kupferberg that the existence of international dispute settle-ment machinery does not exclude direct effect of Free Trade Agreements." 2

On the other hand, direct effect curtails options for state conduct on theinternational level from the point of view of assuring level playing fields intrade policy. The ECJ concluded in International Fruit for reasons ofreciprocity that direct effect of GATT rules cannot be granted.

By granting direct effect, a member may generally waive effective recourseto temporary compensation and be subjected to sanctions instead of reme-dying inconsistencies of its law. In many instances, this can be done with-out harm, in particular if the dispute does not bear upon touchy politicalissues. While this considerably reinforces the WTO system, such a furthermove to a strict concept of pacta sunt servanda would possibly require fur-ther changes to the DSU in coming negotiations or the designing of new

110 See also P. Eeckhout, above n. 17 at 54-5.

"1' Bosshard Partners Intertrading AG c Sunlight BGE 105 II 49 (1979).I2 Case 104181 Hauptzollamt Mainz v C.A. Kupferberg & Cie [19821 ECR 3641.



responses open to courts of law. Unilateral waiver of rights to compensationand options to prefer sanctions are unlikely in the light of level playing fieldarguments and political needs for reciprocity in the case of major tradingpartners. Moreover, non-violation complaints and the present lack of oblig-ations to perform pose particular problems in regard to direct effect. All thisdemonstrates that the issue implies the elaboration of appropriate rules co-ordinating political actions and judicial avenues, in the WTO and/or unilat-erally within the Members of the Organization.

It was seen that similar issues arise in the context of implementing adju-dicated dispute settlement decisions of the WTO. However, the problemhere is limited to a specific case and the interaction between compensationand domestic judicial enforcement of the decision can be developed andsolved more readily.'1 3

Legal research required

There are many open questions which require indepth research of the com-plex issues involved - issues that go beyond a 'purely' legal view of directeffect. We need to recognize that globalization and the shift of regulatoryactivities to the international level necessarily affects the 'constitutional econ-omy' of all countries, i.e., the structure and operation of government.Traditional constitutional structures are changing. They cannot be sustainedmerely by denying direct effect in order to preserve established values ofdemocratic governance and national identities. The problem needs to beplaced in an overall context. Constitutional issues need to be defined in amanner which looks at national, regional and international* levels alike andat the same time. It is of utmost importance that the studies should not startfrom a premise in favour of or against direct effect. Rather, it is an attempt topair and match structures and substance of the law in an adequate manner.

It is first of all a matter of studying and assessing the proper role of courts ina globalizing economy. We agree with Meinhard Hilf that this cannot be donestrictly in a context of national constitutions. Studies in this area should focuson what courts can and cannot do in international economic relations." 4

Development of relevant theories needs to go beyond the promulgation ofindividual rights and expansion of liberal doctrines shaped for the nationstate, as we are not taking up the cause of forming a world government. Weneed to assess whether it makes much sense to distinguish domestic andexternal economic relations and then accord constitutional roles to courtsbased on the answer.

At the same time, we need to understand better that perogatives offoreignpolicy are likely to remain different in a global system still relying on nationstates. We need to study the roles of private actors and main users of the court

11 See text accompanying nn. 64 and 65."1 For his comprehensive approach see M. Hil, above n. 2.



system in foreign policy, in particular multinational corporations and indus-try, labour and consumer associations. We need to develop doctrines of appro-priate standards of review in transnational problems, and seek to clarify wherejudicial activism is required and where judicial restraint vis-d-vis governmentis wise in international economic relations. Courts of law have developeddifferent standards to cope with the needs of foreign policy. Nothing impairsdoing the same in the field of trade law. One might consider studyingtraditional political question doctrines to see if they could be applicable, forinstance. There are many areas where direct effect will politically be possi-ble without much difficulty (e.g., assessing tariffs, origins, taxes, etc.), whilein other areas the fate of entire sectors or regions or policies is at stakeand matters may not be fully justiciable. We have seen that appropriate pro-cedural escape or exit routes and thus concepts of safeguards need to bedeveloped.

We further need to look into processes of WITO rule-making. If the processof rule-making is legitimized by the subjects, the results of the process andthe implementation of those results will share this legitimacy. Only rulesenjoying high levels of legitimacy are worthy of direct effect. We recall thatWTO rules which in Switzerland were subject to a referendum right, aremore open to direct effect than mere approval of the package by Parliament.There is a close relationship between law-making and direct effect, andjudicial powers come under pressure to the extent that the rules applied arenot solidly shared and accepted in society at large." 5 Further, while we oftenfocus on the ECJ in matters regarding direct effect, it is primarily the USCongress that has to be convinced to give broader effects to WTO law. ForCongress and other Parliaments, however, this is much more a questionof control and democratic input to rule-making, than it is an issue ofjusticiability.

Transparency of rule-making and adequate representation of interests beyondgovernmentally filtered positions need to be further studied and advanced.Both giving direct effect to and improving the democratic quality of rule-making are essential parts of a constitution building process, and thereforeare important characteristics to bring into the WTO system with a view topromote direct effect of its rules.

We do not mean to say that WTO rules presently do or do not enjoy suf-ficient legitimacy for direct effect. The basic principles upon which the sys-tem is based are widely accepted by those in the upper echelons of theinternational trade system's various institutions. Yet, as the WTO moves into

115 It is no coincidence that the direct effect of Community rules was developed in the early stageswhere law making was essentially controlled by consensus and even unanimity. It is no coinci-dence that direct effect and the powerful position of the European Court of Justice has been undersiege since majority voting was introduced in 1986 and that complaints of the lack of democraticlegitimacy of EC rules have been forwarded. Cf. J.H.H. Weiler, 'The Transformation of Europe's100 Yale Q 2403, 2456-64 (1991).



standard setting, these internationally created rules are increasingly affectingmatters of domestic policy in areas far beyond transboundary regulation. Equalefforts must now be made to improve the transparency and openness of deci-sion-making processes if more than just a few countries are to accept thedirect effect of the WTO Agreements in the longer term.

Direct effect is also closely related to the content and quality of rules and theoverall quality of the system. Given the powerful impact direct effect of theWTO provisions would have, the trading system needs to demonstrate thatit adequately deals with all relevant interests on an equal footing. While theGAIT primarily has been an instrument of trade liberalization, valuing eco-nomic efficiency (as defined in classical western economic theory) and pro-ducers' interest, the WTO needs to evolve into a constitutional systemcapable of promoting environmental, consumer, developmental, and otherpublic interests. It is not sufficient to promulgate constitutional trading rightswithout demonstrating at the same time how the system can successfullycope with other global concerns.

Consistency of WTO law will face a problem with increasing autonomousinterpretation of WTO rules by national or regional courts. We need todesign appropriate mechanisms of information, consultation (such as amicuscuriae functions by the WTO Secretariat) and perhaps even the elaborationof advisory opinions or proceedings of preliminary rulings by a WTO Courtof Law.

Finally, it will be necessary to develop and clarifly legal techniques andoptions to bring about direct effect. The matter can be unilaterally left tocourts, or prescribed (or restricted) by legislation. It can, however, be equallyprescribed by international law. The use of such options will largely dependon the use of following options and approaches.

Policy options

The need for academic research does not mean that the consideration ofdirect effect should end for courts and politicians. The many pros and cons(see compilation in Annex) indicate that the problem is primarily one ofpolitical preference and convictions. Research can assist by clarifying theimplications of going one way or the other. Decisions will eventually needto be taken by courts and political decision-makers. If one would decide thatthe long-term advantages of a principled approach of direct effect is benefi-cial for individual states in the global trading system in the long term, thereare, in our view, basically two options.

1. Unilateral implementation of direct effectCountries with monist traditions are in a position to adopt policies of directeffect unilaterally and develop, at the same time, necessary safeguards.Governments and Parliaments may encourage it, and courts of law are con-stitutionally empowered to grant direct effect to WTO rules. Countries like



Switzerland are in an excellent position to lead the way towards direct effectof WTO rules before domestic courts, irrespective of reciprocity. Smallercountries can benefit from the advantages of direct effect by establishing atool against protectionism resulting from domestic political process. At thesame time, they contribute to strengthening the multilateral system uponwhich they heavily depend. Because economic policy does not amount to amajor tool of strategic responsibilities, conflicts with foreign policy preroga-tives are less likely to occur. Securing open markets by judicial means is inthe interest of competitiveness of the economy.

Moreover, medium-sized and small traders may unilaterally develop addi-tional qualitative criteria of direct effect, taking into account the basic require-ments of democracy, sustainable development and adequate protection oflegitimate interests not yet sufficiently protected under WTO law under theconcept of ordre public. Their courts may shape appropriate doctrines ofjudicial activism and restraint alike. Appropriate cases therefore should bebrought and the issue tested, preferably in the context of politically less con-troversial issues. A body of law should emerge and experience should begained.

With respect to the implementation of decisions of the Dispute SettlementBody in specific and adjudicated cases in WTO dispute settlement,116 uni-lateral implementation and clarification of the relationship of courts andpolitical bodies with regard to perfomance and compensation is reasonablyopen also to large trading powers. This is particularly true for the EU inlight of disruptive effects on the internal legal order if judicial policies to theopposite are pursued. 1 7 Yet, from a different angle and school of thought,the move may also be made subject to reciprocity and thus bilateral- or mul-tilaterally agreed disciplines on judicial enforcement. Domestic advantagesof unilateral implementation and trade policy considerations to bring aboutmore efficient enforcement abroad, in particular in the USA, therefore willbe carefully balanced within the Union and elsewhere.

2. Bilateral or multilateral development of direct effect of World TradeOrganization rulesFor reasons discussed above, matters of direct effect of WTO rules are morecomplicated for the large trading powers. Foreign policy perogatives and con-gressional sovereign powers in trade regulation perhaps constitute the mainobstacles to direct effect in the USA, and thus the focus would have to beon how to change the attitudes and policies of the US Congress. In the EU,the issue has been dominated by differences in CAP and GATT rules onagriculture. They are further complicated by a constitution-in-the-makingwith unstable allocations of powers. Foreign policy prerogatives, in particu-lar keeping equal level playing fields with the USA and other markets, in

16 See above Chapter 2(c).117 Above, text accompanying nn. 81-83.


118 J7ournal of International Economic Law 1 (1998) 83-122

particular Japan, but also an increasing use of trade policy for strategic pur-poses within the common foreign policy, add to the resistence of grantingexpanding powers to the EQJ. Finally, short of political support, the Courtitself may not feel sufficiently powerful to challenge fundamental policy deci-sions by the Council and the European Parliament without jeopardizing itsimportant role in creating a common market at home.

Other Members of the WTO are not in a position to even contemplatedirect effect due to long established dualist traditions. It is unlikely thatParliaments would unilaterally cede sovereign powers in a key area.

For such reasons, the issue of direct effect and of an enhanced role of therule of law and of national or regional courts in international trade regula-tion should be approached by way of international consultation and negoti-ations. Significant progress cannot be achieved short of a careful balance inparticular between the major trading partners. Such consultation may firstbe held outside the framework of the WTO (e.g., in the transatlanticdialogue) to the extent that it is a matter of coordinating policies and basicapproaches regarding reciprocal roles of national courts in trade regulation.Such consultation may result in formal or informal understanding. To theextent, however, that it affects the WTO dispute settlement, the matter even-tually has to be brought within the Organization. Such talks may essentiallycomprise the topics addressed above. They need to focus on:

" Shared perceptions as to the role of the judiciary in international traderegulation;

" Standards of review and political question doctrines and qualitative aspectsof direct effect beyond mere justiciability (procedural safeguards andescape clauses, including the problem of later-in-time-rule);

* Direct effect, judicial review and enforcement of WTO rules, possiblyincluding the issue of enforcing adopted dispute settlement reports indomestic law (the problem of temporary compensation and sanctions inWTO law);

" The problem of diverging interpretation by national courts (the options ofadvisory opinions and preliminary rulings);

" Transparency and democratic legitimation of WTO law: the problem ofrepresentation.

It may be argued that the prospects of widespread acknowledgement of thedirect effect of WTO provisions are dim. Indeed, neither most executivebranches nor most Parliaments have an interest in sharing powers with courtsin the field of foreign economic rule-making. A Swiss proposal suggestingfirst steps toward direct effect was met with silence in the Uruguay Round.Courts, moreover, may not feel comfortable in dealing with foreign policyissues. Negotiations may be bound to fail under present conditions.Certainly, movement toward direct effect is a long-term project. We maylearn from the evolution of Community law and its success. We may startwith implenetation of adjudicated disputes by national courts. We might



succeed with a step-by-step, provision-by-provision approach to negotiations,achieving a gradual direct effect of most, if not all, of the WTOAgreements." 8 The Agreement on Government Procurement may serve asan example in point, as it entitles private actors to invoke the provisions ofthe treaty before national authorities." 9 At the same time, we may buildupon the approach of the TRIPs Agreement which obliges Members toempower courts to enforce intellectual property rights covered by theAgreement, 120 and expand Article X(3) of the GATT and Article VI(2) ofthe GATS accordingly.

The coming years will remain an educational conceptualizing and learn-ing process for the analysis of direct effect of international trade law. Withglobalization, practicing lawyers will, and indeed already do, more often turnto the rules of WTO and wish to rely upon them before courts of law. Thismovement works toward making these instruments practically relevant andtherefore may move us towards direct effect and beyond the doctrine of con-sistent interpretation. Politically, this will not remain without impact.

A triangular approach of providing academic research, gaining unilateralexperience of direct effect and judicial implementation of adjudicated WTOdecisions in Member states where domestic conditions to do so exist, andenhancing the interest of lawyers in the subject may provide a longer termbasis for successful negotations by governments in shaping the role of courtsin future international trade regulation.

" While remaining sceptical of the US accepting the concept of direct effect overtly, Gary Horlicksuggested the possibility of gaining some of direct effects 'benefits on a piecemeal basis.... Ifdirectly bargained for, and not presented as a general principle, and supported by powerful busi-ness forces (such as the TRIPs lobby), it might world'. G. Horlick, Esq., correspondence to T.Cottier, 10 July 1997.

119 Article XX: 2 GPA provides: 'Each Party shall provide non-discriminatory, timely, transparentand effective procedures enabling suppliers to challenge alleged breaches of the Agreement arising inthe context of procurements in which they have, or have had, an interest' (emphasis added). Seealso E.U. Petersmann, The GATr/WTO Dispute Settlement System: International Organizationsand Dispute Settlement (Kiuwer Law International: London, the Hague, Boston 1997) 21.

120 Article 42 TRIPs Agreement. Oral and written suggestions by M. Bronckers and G. N. Horlick,correspondence to T. Corder, 17 September 1997.


120 J7ournal of Intemrational Economic Law I (1998) 83-122

APPENDIX

SYNOPSIS OF UNDERLYING ARGUMENTS FOR AND AGAINST DIRECTEFFECT OF WORLD TRADE ORGANIZATION RULES

The following is a schematic setting out of some of the arguments for andagainst affording the WTO Agreements' provisions direct effect. They arenot set out in any particular order, and are only presented for discussionpurposes.

pro:1. In monist countries, direct effecthas a long tradition. It is difficult tosee why it should not apply to tradeand economic relations.

2. Direct effect is in the economicinterest of each Member. Reciprocitybased arguments follow the mercan-tilist tradition.

3. Direct effect is a powerful tool torender WTO rules effective and effi-cient.

4. Most WTO rules are sufficientlyprecise to be given direct effect, theconcept does not exclude denyingthe direct effect of programmaticrules.

5. The WTO offers a system of prin-ciples and exceptions which is capa-ble of balancing diverging interests.

6. Direct effect stimulates effectivenegotiations because inadequaterules need to be changed on theinternational level.

con:

Trade regulation is special because itincreasingly tends to intrude ondomestic legislation more than otherareas of international law.

The global system requires overallreciprocity of rights and obligations.Direct effect cannot be granted aslong as dualism remains an optionfor WTO Members.

Direct effect takes away the option togrant temporary compensation andto prefer santions. It reduces the roleof WTO as a negotiating forum.

The problem lies with exceptions andsafeguards that are too flexible to beconsidered justiciable. Application ofWTO rules by multiple nationaljudges will result in different, possi-bly inconsistent interpretations.

The WTO Agreements are not com-parable to a constitution. They arebiased toward freer trade and do notallow for other policy goals to be con-sidered on an equal footing.

It is necessary to keep national lawto remedy the deficiencies of WTOlaw which often cannot or will not bechanged by Members.



7. Direct effect reinforces the globaltrading system as it grants rights toprivate actors to balance protection-ist producer interests predominant innational regulations.

8. Direct effect stimulates legal edu-cation. WTO law will trickle intolegal thinking and daily practice.

9. Direct effect reduces the power ofhegemons.

10. Direct effect reinforces the roleof courts of law. It is a check on pro-tectionist interests and balances thesystem as above.

11. Direct effect is not absolute. Itdoes not exclude primacy of consti-tutional law, the later-in-time rule orother exceptions to primacy of inter-national law. Direct effect does notexclude nuanced judicial approachesand doctrines of judicial restraint.

12. Courts of law have learned todeal with domestic economic regula-tion. They will also learn to do sowith international regulation.

13. The WTO rules are ratifiedupon approval by Parliament uponnegotiation by elected and account-able government. They are not inher-ently different from domestic rules.

14. The WTO rules are negotiatedby consensus, so smaller countriescan block unacceptable propositions.

15. The power and influence of lob-bies is no different in the process ofrule-making domestically or interna-tionally.

Private actors should be limited torights granted by national law sinceotherwise they upset government for-eign policy goals or restrict the effec-tive pursuance of such goals.

The lawyers and judges are not suf-ficiently familiar with WTO rules towork with them effectively.

If direct effect is mandatory, hege-mons will refuse to ratify interna-tional rules in the first place. Thiswill damage the international systemmore than would ratification withoutdirect effect.

Direct effect in international traderegulations fundamentally alters thebalance of powers set out in nationalconstitutions.

Given the increasing degree of inter-national trade regulation, courts willtake on the duties of legislators andside-step the democratic rule-makingprocess.

Foreign policy, including trade pol-icy and international economic regu-lation is not a proper province ofcourts of law.

Democratic representation is largelyabsent in the negotiating process.Fast track and package dealapproaches to procedures furtherlimit the impact of elected represen-tation.

In reality, the trade game is domi-nated by a small number of nations.

The WTO rules are being shaped bya few elite interests.



16. With increasing awareness ofWTO law, the protection of traderules will become available to indi-viduals who are unable to make theirvoices heard internationally.

17. Courts have judicial tools toensure that only legitimate claimsreach trial. These claims ought to bedecided by a court to further socialharmony, regardless of the costs tothe judicial system.

Direct effect of WTO rules will onlybenefit the already-privileged largecorporations, because individualswill not have the resources to bringarguments before the court based onsophisticated WTO law.

Allowing direct effect of WTO ruleswould cause a flood of individualclaims to be filed (at least some forharassment purposes), fatherswamping the docketts of nationaland local courts.


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