The WTO and FCTC dispute settlement systems: friends or foes?

Our readers may recall Trade Pacts’ trip to Africa this summer where we participated in a SIEL Panel – presenting various issues arising at the intersection of international health and trade. The topic always attracts a lot of attention from States, private sector and scholars.

This weighty topic also prompted our own expert Prof. Lukasz Gruszczynski to publish his observations in a working paper submitted to the Social Sciences Research Network (SSRN). The paper, aptly titled The WTO and FCTC dispute settlement systems: friends or foes?, examines the relationship between the WTO and Framework Convention on Tobacco Control (FCTC) dispute settlement systems.

The FCTC Dispute Settlement

While the WTO has a well-established dispute settlement system, the FCTC contains its own mechanism that may be used with respect to the interpretation or application of the Convention. According to Article 27.1 of FCTC, the parties are obliged to seek settlement of their disputes through diplomatic methods such as negotiation, good offices, mediation, or conciliation. For disputes not resolved through diplomatic means, the convention envisages a compulsory ad hoc arbitration with the exclusive jurisdiction of an arbitration panel. The mechanism is, however, available only to those countries that have explicitly accepted the FCTC dispute settlement. Only three countries have submitted such declarations and the mechanism has so far not been used. The FCTC Parties requested that the Secretariat prepares a report investigating possible procedures for settling disputes within the FCTC and their interaction with other international mechanisms. While this FCTC Report, published in July 2016, is broad on a number of points, Prof. Gruszczynski’s paper bridges the gaps and sheds light on this often turbulent relationship.

The issue of multiple fora

The existence of multiple international dispute settlement systems may give rise to a number of issues, including conflict of jurisdictions, inconsistent rulings from different tribunals and forum shopping by States. Prof. Gruszczynski observes that since the FCTC and WTO regimes relate to distinctive legal obligations, the relationship between their respective dispute settlement mechanisms cannot be described in terms of conflict of jurisdictions. A conflict of this type would arise where the adjudication in two forums concerns the ‘same dispute’ or ‘related aspects of the same dispute’. Even if one accepts that there is such a conflict, the existence of an alternative, the FCTC system, does not preclude a WTO panel/the Appellate Body from examining a case concerning a tobacco measure’s compatibility with the WTO. A WTO panel is simply not entitled to refuse such a claim on the grounds that another dispute settlement mechanism is available. The case will be examined irrespective of the preference of a defendant for using an alternative dispute settlement system, as per that under the FCTC. Although the WTO Dispute Settlement Understanding does not directly regulate this issue, it contains several provisions which suggest that jurisdiction of WTO panels is a quasi-absolute one.

Lessons from WTO jurisprudence

In the recent Peru-Agricultural Products case, the Appellate Body agreed that WTO Members can waive their right for recourse to the WTO dispute settlement system. Such an agreement must, however, be clearly formulated and should relate only to the settlement of a specific dispute. Any general clause that would preclude the use of other dispute settlement systems (including the WTO one) applying to a whole category of disputes will not meet this requirement (e.g. a provision that would remove all disputes relating to national tobacco control measures from adjudication at WTO). Finally, a waiver agreement of this type would always need to be made by the parties after the emergence of a specific dispute, i.e. it cannot be agreed before the emergence of the dispute in question. Thus, even if the FCTC Parties introduced a clause in the FCTC stating that its dispute settlement mechanism has priority over the WTO’s, this will neither affect the jurisdiction of the WTO adjudicator nor will it make a case inadmissible at WTO on these grounds.

In addition, such a waiver agreement cannot lead to the violation of applicable WTO provisions, meaning that the WTO panel will need to examine the merit of the contested measure anyway. Under WTO law this limits the relevance of any waiving clause that may be introduced by the FCTC Parties in the future.

Implications

The above does not mean that a decision of an ad hoc FCTC arbitration tribunal is completely irrelevant in the context of the WTO. Such an external ruling can be taken into account by a panel or the Appellate Body as confirmation of certain factual determinations. For example, it may provide a basis for the conclusion that a specific national tobacco control measure, such as a law requiring health warnings of a specific size, is effective and relates to genuine risk. This, in turn, may help the regulating government (the defendant) to justify its measure as necessary under the GATT’s general exception.

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Trade Pacts experts serve in numerous areas of international law associated with the WTO, including those of trade, health, and the environment.

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