The legal effect of WTO agreements in the European Community

The WTO was born from Marrakesh Agreement in 1995 when in addition, the EU joined this Organization . The Agreement meant a deep change in GATT , principally because of the establishment of a strict and previously nonexistent system of dispute settlement which is binding for all members. Briefly, the process can be summarized as follow: Firstly, parties in dispute must enter in consultations and, if after 60 days, any solution is found, a panel must be formed to analyze the question if complaining party requests it  (DSU art. 4.7)[1]. If panel finds one party violating a Treaty’s provision, it shall request the end of the violation and the implementation of its judgement within a fixed time (DSU art. 19.1)[2]. If the losing party does not carry out the panel’s statement, it could be subject to a proportional suspension of trade concession, but an agreement of compensation can be reached by the parties (DSU art.23).[3]

However, the European Court of Justice (ECJ) has always maintained a critical position towards this international agreement and its legal effect in the European Community (EC) has been clarified by several cases:

Portuguese Republic v Council[4]: Portugal attempted to obtain annulment of Regulation, that implemented a Memoranda signed between India, Pakistan and the Community. The two points on which claim was based, were breach of WTO provisions and violation of European rules. Regarding to the first one, Portugal argued the implementation of DSU rules to resolve the conflict because the Regulation was implementing rules belonging to the field of WTO.

However, ECJ stated that direct effect was not admitted to WTO because the Organization was based on the principle “of negotiations with a view to entering into reciprocal and mutually advantageous arrangements”[5]. This would mean a limitation of scope of manoeuvre for the European Organs, favouring the other counterparts. The purpose of EC is different to WTO purpose: whereas GATT and WTO were created to induce parties to negotiate trade aspects in a non discriminatory way, EC seeks the integration between it and its partners.[6]

The Van Parys case[7]: A Belgium company challenged domestic provisions after an unsatisfactory implementation of a panel decision which established a breach of WTO rules in banana import EC legislation. ECJ refused judicial review and assessed, citing International Fruits case[8], that WTO rules could not be invoked by individuals and did not have direct effect.[9]

This resolution clearly means an EC´s rejection in compliance with its binding obligations as a WTO member and a reinforcement of EC institutions power.

Biret[10]: A company, which imported meat, asked compensation for damages provoked by European Law that forbade importation of hormone-treated meat. The Court of First Instance denied payment of damages, admitting that individuals could not invoke WTO provisions. However, the ECJ subsequently recognised general possibility of payment for damages caused by European rules in breach of WTO provisions, if the time to comply with the report of a judicial panel was expired.[11]

These cases show that EC does not recognise the WTO foundational agreement and its implied obligations clearly and strongly because, ECJ rejects direct effect of WTO´s rules within EC law system. The only way which WTO could receive application is through the possibility of a compensation if European Community fails to implement a WTO rule. Then, which is the real meaning of WTO agreements to EC? Citizens can not invoke them in a process between private parties. They can just do it if they are affected by a contrary or wrong EC implementation of WTO agreements. Are these decisions protectionist which means contrary to WTO policy? Is it beneficial or detrimental for European tradesmen?

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[1] Understanding on rules and procedures governing the settlement of disputes (DSU)1995, 4(7)

[2] DSU 1995, 19(1)

[3] DSU 1995, 23

[4] Case C-149/96, Portugal v Council, [1999]

[5]n 4, par42

[6]J Berkey, 'The European Court of Justice and Direct Effect for the GATT: A Question Worth Revisiting'[1998] 9(4) EJIL 626 <http://ejil.oxfordjournals.org/content/9/4/626.full.pdf+html>

[7] Case C-377/02, Van Parys, [2005]

[8]Case 21-24/72,  International Fruit Company and others NV and others v. Produktschap voor Groenten, [1972]

[9] Craig and de Bùrca, EU Law, (OUP, Oxford 2007) 208.

[10] Case C-93/02 and C-94/02, P Biret International SA v Council, [2003]

[11] n 10, par 54-67