ARGUMENT LEGAL BASIS

A. ICJ has jurisdiction

1. FOOTNOTE #2: Article 36, para. 3 UN
- Par. 8
Charter. In making recommendations under
- Both Adawa and Rasasa joined
this Article the Security Council should also
the United Nations in 1947 and
take into consideration that legal disputes
acceded to the Statute of the
should as a general rule be referred by the
International Court of Justice.
parties to the International Court of Justice in
Neither State has filed a
accordance with the provisions of the Statute
declaration accepting the Court’s
of the Court.
compulsory jurisdiction under
Article 36(2) of the Statute. 

2. FOOTNOTE #5: Appellate Body Report,
United States – Standards for Reformulated
and Conventional Gasoline, WT/DS2/AB/R,
adopted 20 May 1996, DSR 1996:I, p 3 p. 17.

1. MEASURE AND PRODUCT AT ISSUE

• Measure at issue: The “Gasoline Rule”

under the US Clean Air Act that set out the
rules for establishing baseline figures

for gasoline sold on the US market (different

methods for domestic and imported
gasoline), with the purpose of regulating the
composition and emission effects of gasoline
to prevent air pollution.

• Product at issue: Imported gasoline and

domestic gasoline.

2. SUMMARY OF KEY PANEL/AB

FINDINGS
• GATT Art. III:4 (national treatment –
domestic laws and regulations): The Panel
found that the measure treated imported
gasoline “less favourably” than domestic
gasoline in violation of Art. III:4, as imported
gasoline effectively experienced less
favourable sales conditions than those
afforded to domestic gasoline. In particular,
under the regulation, importers had to adapt

to an average standard, i.e. “statutory

baseline”, that had no connection to the
particular gasoline imported, while refiners
of domestic gasoline had only to meet a
standard linked to their own product in 1990,
i.e. individual refinery baseline.

• GATT Art. XX(g) (general exceptions –

exhaustible natural resources): In respect of
the US defence under Art. XX(g), the
Appellate Body modified the Panel's
reasoning and found that the measure was
“related to” (i.e. “primarily aimed at”) the
“conservation of exhaustible natural
resources” and thus fell within the scope of
Art. XX(g). However, the measure was still
not

justified by Art. XX because the

discriminatory aspect of the measure
constituted “unjustifiable discrimination” and
a “disguised restriction on international
trade” under the chapeau of Art. XX.

3. OTHER ISSUES2
• GATT Art. III:1 (national treatment –
general principles): The Panel considered it
unnecessary to examine the consistency of
the Gasoline Rule with Art. III:1, given that a
finding of violation of Art III:4 (i.e. more
specific provision than Art. III:1) had already
been made.

• Appeal of an issue (Appellate Body

working procedures): The Appellate Body
held that participants can appeal an issue
only through the filing of a Notice of Appeal
and an “appellant's” submission, but not
through an “appellee's” submission.

• VCLT (general rule of interpretation):

The Appellate Body stated that the general
rule of interpretation under VCLT Art. 31

has attained the status of a rule of customary

or general international law and thus forms
part of the “customary rules of interpretation
of public international law” which the
Appellate Body has been directed, by DSU
Art. 3(2), to apply in seeking to clarify the
provisions of the General Agreement and the
other “covered agreements” of the “WTO
Agreement”. It also said that one of the
corollaries of the “general rule of
interpretation” in VCLT Art. 31 is that
“interpretation must give meaning and effect
to all the terms of a treaty” and an interpreter
may not adopt a reading that would result in
reducing whole clauses or paragraphs of a
treaty to redundancy or inutility.
3. FOOTNOTE #9: Nicaragua v US

Summary
Complaint by Colombia.

On 17 January 2000, Colombia requested

consultations with Nicaragua in respect of
Nicaragua’s Law 325 of 1999, which
provides for the imposition of charges on
goods and services from Honduras and
Colombia, as well as regulatory Decree 129-
99. Colombia claimed that these measures
are inconsistent, inter alia, with Articles I and
II of GATT 1994.

Panel and Appellate Body proceedings:

Further to Colombia’s request, the DSB
established a panel at its meeting of 18 May
2000. Canada, Costa Rica, the EC, Honduras
and the US reserved their third-party rights.
This panel has not yet been composed.

Ruling
5.9 In the light of the above drafting history
and decisions of the CONTRACTING
PARTIES the Panel found that the United
States, as long as the embargo was not found
to be inconsistent with the General
Agreement, was under no obligation to
follow a recommendation by the
CONTRACTING PARTIES to remove the
embargo. 5.10 The Panel noted that in the
past cases under paragraph (b) of Article
XXIII:1, the CONTRACTING PARTIES
had recommended that the contracting party
complained against consider ways and means
to restore the competitive relationship that
existed when the tariff concession was made
(BISD Vol. II/195 and BISD 1S/31).
However, the Panel also noted that these
recommendations had been made only
because they were considered to offer the
best prospect of a mutually agreed settlement
of the dispute. It noted in particular the
following statement in the report of the
Working Party on the Australian Subsidy on
Ammonium Sulphate: L/6053 Page 16 "The
sole reason why the [withdrawal of a
measure not found to be inconsistent with the
General Agreement] is recommended is that,
in this particular case, it happens that such
action appears to afford the best prospect of
an adjustment of the matter satisfactory to
both parties" (BISD Vol. II/195). The Panel
noted that the United States had declared
from the outset that it would not remove the
embargo without a solution to the underlying
political problem (paragraph 4.9 above). It
also noted that Nicaragua had recognized that
"it seemed unfortunately unlikely that the
United States would accept a
recommendation to lift the embargo"
(paragraph 4.10 above). The Panel therefore
considered that a decision of the
CONTRACTING PARTIES under Article
XXIII:2 recommending the withdrawal of the
embargo would not seem to offer the best
prospect of an adjustment of the matter
satisfactory to both parties and that, in these
circumstances, it would not appear to be
appropriate for the CONTRACTING
PARTIES to take such a decision unless they
had found the embargo to be inconsistent
with the General Agreement. 5.11 The Panel
then turned to the second option available to
the CONTRACTING PARTIES under
Article XXIII:2 in the present case, namely a
decision to authorize Nicaragua to suspend
the application of obligations to the United
States. The Panel noted that, under the
embargo imposed by the United States, not
only imports from Nicaragua into the United
States were prohibited but also exports from
the United States to Nicaragua. In these
circumstances, a suspension of obligations by
Nicaragua towards the United States could
not alter the balance of advantages accruing
to the two contracting parties under the
General Agreement in Nicaragua's favour.
The Panel noted that the United States had
stated that an authorization permitting
Nicaragua to suspend obligations towards the
United States "would be of no consequence
in the present case because the embargo had
already cut off all trade relations between the
United States and Nicaragua" (paragraph 4.9
above) and that Nicaragua had agreed that "a
recommendation by the Panel that Nicaragua
be authorized to withdraw its concessions in
respect of the United States would indeed be
a meaningless step because of the two-way
embargo" (paragraph 4.10 above). The Panel
therefore had to conclude that, even if it were
found that the embargo nullified or impaired
benefits accruing to Nicaragua independent
of whether or not it was justified under
Article XXI, the CONTRACTING PARTIES
could, in the circumstances of the present
case, take no decision under Article XXIII:2
that would re-establish the balance of
advantages which had accrued to Nicaragua
under the General Agreement prior to the
embargo. In the light of the foregoing
considerations the Panel decided not to
propose a ruling in this case on the basic
question of whether actions under Article
XXI could nullify or impair GATT benefits
of the adversely affected contracting party.
5.12 The Panel proceeded to consider the
request by Nicaragua that the Panel
recommend that the CONTRACTING
PARTIES grant, in accordance with Article
XXV:5 and footnote 2 to paragraph 2 of the
L/6053 Page 17 Enabling Clause (BISD
26S/203), a general waiver which would
permit the contracting parties which so desire
to compensate the effects of the embargo by
giving, notwithstanding their obligations
under Article I, differential and more
favourable treatment to products of
Nicaraguan origin. 5.13 The Panel examined
whether it was appropriate for a panel
established under Article XXIII to make
recommendations on requests for waivers
under Article XXV. It noted the following
GATT practices and procedures on this
question: Only once in the history of the
GATT, in 1971, has a panel established
under Article XXIII recommended a waiver
pursuant to Article XXV. This waiver
released the party complained against from
an obligation which it had failed to observe
(BISD 18S/33, 183-188). All other panels
have proposed recommendations and rulings
of the CONTRACTING PARTIES under
Article XXIII:2 and not decisions under
Article XXV. This practice is reflected in the
1979 Understanding on dispute settlement
which states that "the function of panels is to
assist the CONTRACTING PARTIES in
discharging their responsibilities under
Article XXIII:2" (BISD 26S/213). The
procedures for waivers adopted by the
CONTRACTING PARTIES in 1956 (BISD
5S/25) provide that requests for waivers are
in principle to be submitted with a thirty-day
notice, must be preceded by consultations
between the applicant contracting party and
other contracting parties having made
representations and should be granted only if
the CONTRACTING PARTIES are satisfied
that the legitimate interests of all contracting
parties are adequately safeguarded. This
procedure ensures that the CONTRACTING
PARTIES do not grant waivers without first
considering the views of the contracting
parties that would be directly affected by the
waiver. 5.14 The Panel recognized that its
mandate was to "... make such findings as
will assist the CONTRACTING PARTIES in
further action in this matter" (paragraph 1.4
above) while panels were normally asked "to
assist the CONTRACTING PARTIES in
making recommendations or rulings, as
provided for in Article XXIII:2" (cf. for
instance BISD 31S/68, 76 and 94 and BISD
32S/56) and that a recommendation on the
waiver proposed by Nicaragua would
therefore not be excluded by the Panel's
terms of reference. However, the Panel
concluded that it would be acting contrary to
the GATT practices and procedures
described in the preceding paragraph if it
were to recommend a change in the
obligations of third contracting parties that
had no part in the Panel's proceedings and
whose views it could therefore not consider.
The Panel wishes to emphasize, however,
that Nicaragua has the right to submit a
proposal for a waiver directly to the
CONTRACTING PARTIES and that the
Panel's decision not to make a
recommendation on the waiver is based on
purely procedural grounds and should
therefore in no way be interpreted as
prejudging a decision by the
CONTRACTING PARTIES on such a
request. In this respect, the Panel also recalls
that the consequences of the embargo on
Nicaragua's trade and economy were severe
and that, as noted in paragraph 5.6 above, the
embargo had seriously upset the competitive
relationship between the embargoed products
and other directly competitive products.
L/6053 Page 18 5.15 The Panel wishes to
note that in the course of the Panel
proceedings Nicaragua had maintained that
GATT could not operate in a vacuum and
that the GATT provisions must be interpreted
within the context of the general principles of
international law taking into account inter
alia the judgement by the International Court
of Justice and United Nations resolutions.
While not refuting such argumentation, the
Panel nevertheless considered it to be outside
its mandate to take up these questions
because the Panel's task was to examine the
case before it "in the light of the relevant
GATT provisions", although they might be
inadequate and incomplete for the purpose.
5.16 The Panel, noting that it had been given
not only the mandate to prepare a decision of
the CONTRACTING PARTIES under
Article XXIII:2 but the wider task of
assisting the CONTRACTING PARTIES in
further action in this matter, examined the
effects of the embargo on Nicaragua's
economy and on the international trading
system. The Panel noted that the embargo
had brought the trade between two
contracting parties to a standstill and that it
had a severe impact on the economy of a
less-developed contracting party. The Panel
further noted that embargoes imposed for
security reasons create uncertainty in trade
relations and, as a consequence, reduce the
willingness of governments to engage in
open trade policies and of enterprises to
make trade-related investments. The Panel
therefore concluded that embargoes such as
the one imposed by the United States,
independent of whether or not they were
justified under Article XXI, ran counter to
basic aims of the GATT, namely to foster
non-discriminatory and open trade policies,
to further the development of the less-
developed contracting parties and to reduce
uncertainty in trade relations. The Panel
recognized that the General Agreement
protected each contracting party's essential
security interests through Article XXI and
that the General Agreement's purpose was
therefore not to make contracting parties
forego their essential security interests for the
sake of these aims. However, the Panel
considered that the GATT could not achieve
its basic aims unless each contracting party,
whenever it made use of its rights under
Article XXI, carefully weighed its security
needs against the need to maintain stable
trade relations. 5.17 The above
considerations and the conclusions to which
the Panel had to arrive, given its limited
terms of reference and taking into account
the existing rules and procedures of the
GATT, raise in the view of the Panel the
following more general questions: If it were
accepted that the interpretation of Article
XXI was reserved entirely to the contracting
party invoking it, how could the
CONTRACTING PARTIES ensure that this
general exception to all obligations under the
General Agreement is not invoked
excessively or for purposes other than those
set out in this provision? If the
CONTRACTING PARTIES give a panel the
task of examining a case involving an Article
XXI invocation without authorizing it to
examine the justification of that invocation,
do they limit the adversely affected
contracting party's right to have L/6053 Page

B. Lis pendens not a cil
- Par. 45
- In October 2018, Adawa formally
requested consultations with
Rasasa pursuant to Articles 1 and
4 of the Understanding on Rules
and Procedures Governing the
Settlement of Disputes (DSU) of
the WTO. Government officials
from both Adawa and Rasasa met,
but were unable to resolve the
dispute amicably. 
 level of control over international tribunals
19 its complaint investigated in accordance
with Article XXIII:2? Are the powers of the
CONTRACTING PARTIES under Article
XXIII:2 sufficient to provide redress to
contracting parties subjected to a two-way
embargo? 5.18 The Panel noted that in 1982
the CONTRACTING PARTIES took a
"Decision Concerning Article XXI of the
General Agreement" which refers to the
possibility of a formal interpretation of
Article XXI and to a further consideration by
the Council of this matter (BISD 29S/23-24).
The Panel recommends that the
CONTRACTING PARTIES, in any further
consideration of this matter in accordance
with that Decision, take into account the
questions raised by the Panel above.
1. FOOTNOTE #10: Higgins, R., A Babel
of Judicial Voices: Ruminations from the
Bench, 55 INT'L & COMP. L.Q. 791 (2006).
Clearly, to have several fora available
is a boon for complainants. It may also
guarantee that all elements of a
multi-faceted dispute are actually resolved,
such as a dispute over territorial
delimitation at the International Court of
Justice (ICJ) and a related trade
restriction at the WTO.16 A healthy level of
competition among tribunals
may also improve the quality of rulings and
the expediency of proceedings.
One tribunal keeping a critical eye over
another can, finally, offer a welcome
and indirectly enhance
their legitimacy. 17
That said, there is no doubt that sequential or
overlapping proceedings
before international tribunals can, and do,
raise concerns. Those concerns
can be divided in two broad types: party-
related concerns and society-or
system-related-concerns. The tables below
summarize these concerns
and compare them as they arise under
domestic law and international law.

The biggest concern with forum

shopping among international tribunals
seems to be, therefore, the concern
of inconsistent rulings because:
1) inconsistent rulings may leave the dispute
unresolved (a partyrelated
concern amplified in international law
because of the
absence of a hierarchy of courts); and
2) inconsistent rulings can threaten the
stability and legitimacy of the
broader "system" within which the tribunals
operate (of course,
only if such a "system" exists in the first
place).
Note, however, that even if no "system"
exists and the concern of system
stability or legitimacy does not arise, the
party-concern of inconsistent rulings
and of not seeing the dispute settled remains.
24 The party-concern of
inconsistent rulings (point 1) may, therefore,
dominate the system-concern
of inconsistent rulings (point 2).25
Two further elements specific to international
law may limit the problem
of sequential or overlapping proceedings
before international tribunals.
These elements often lead international
tribunals to decide cases that
other fora have already decided, or might
decide, in the future.
First, international tribunals traditionally
operate under the principle
of party consent. In domestic law, by
contrast, courts operate on constitutional
or statutory authority. As a result, if parties
give an international
tribunal explicit jurisdiction to decide a
dispute, the tribunal often feels
hard-pressed to fulfill its mandate and to
decide the case, even if a second
tribunal is competent or a parallel or
sequential proceeding is, or can be,
initiated. The tribunal may then be inclined
to decide the case anyway
because "that is what the parties asked it to
do."'

Second, there is no top-down division of

labor among international
tribunals. The "international judiciary" is
such that the authority of each
body is limited by its own governing
instruments, and there is no statute
defining the authority of tribunals in relation
to each other. Further, in
practice, the jurisdiction of international
tribunals is specific and depends,
not on geographical factors (as is often the
case in domestic law), 27 but
rather on the treaty it is enforcing (e.g., WTO
panels enforce WTO agreements,
NAFTA panels enforce NAFTA). The treaty-
based jurisdiction of
international tribunals often means that even
where there is overlapping
jurisdiction, each tribunal decides a different
aspect of the dispute (say, the
ICJ decides issues of territorial delimitation
and the WTO decides issues of
trade). 28 Even if different tribunals decide
the same issue, they often do so
from a distinct legal angle (for example,
national treatment under the
GATT versus national treatment under
NAFTA Chapter 11). In many
cases, therefore, overlapping jurisdictions
among international tribunals
are less of a concern as compared to
overlapping jurisdictions of domestic
courts.
In sum, whether or not forum shopping
before international tribunals
is of genuine concern depends on at least
three variables. First, the more a
tribunal considers itself as operating within a
broader "system" of interconnected
tribunals (rather than a self-contained
"regime" limited to, say,
the WTO), the more problematic forum
shopping becomes (the regime vs.
system variable referred to earlier). In
particular, the system-based concerns
of inconsistent rulings (between, for
example, a WTO panel and a
MERCOSUR tribunal) and the threat to
stability and legitimacy that such
inconsistent rulings may bring about could
necessitate better coordination.
Second, the more international tribunals shift
from ad hoc consent-based
jurisdiction (as in a compromis before the
ICJ) to compulsory jurisdiction
(as in the WTO or BITs), the more forum
shopping will raise concerns and
the more tribunals will be forced to look
beyond the increasingly weak
argument that they must decide the case

C. Imposition of Tariffs on Helian Products
Violates CHC Treaty
- Par. 10
Five years later, that arrangement was
formalized in a treaty, signed on 20 June 1969
and promptly ratified by all six Member States,
declaring the formation of the Crosinian Helian
Community (CHC). The parties to the CHC
agreed to impose no customs duties within the
CHC on Helian spice or the equipment and
materials used to harvest or process the Helian
hyacinth. Relevant portions of the CHC Treaty
are attached as Annex B.
because "this is what the parties
asked us to do." This is illustrated in the
consensual vs. compulsory jurisdiction
variable that Cesare Romano recently
highlighted, 29 a variable that
also dovetails with the move from party-
focused to legality-focused international
dispute settlement. Third, the more that
international courts move
away from specific jurisdiction towards
broader bases of jurisdiction.
1. FOOTNOTE #12 and #25: United
States–Measures Affecting Imports of
Softwood Lumber from Canada, 41 B.I.S.D.
413–15 (1993).
Facts
1. On 8 October 1991, Canada requested
consultations with the United States
under Article 3:1 of the Agreement on
Interpretation and Application of
Articles VI, XVI and XXIII of the
General Agreement on Tariffs and Trade
(hereinafter: "the Agreement"). This
request followed an announcement made
by the United States on 4 October that
the United States Department of
Commerce intended to self-initiate a
countervailing duty investigation of
imports of softwood lumber from
Canada and action taken on the same
date by the United States Trade
Representative (USTR) to withhold or
extend liquidation of entries of softwood
lumber products from Canada and to
impose a bonding requirement.
Consultations between Canada and the
United States were held on 16 October
1991. On 31 October 1991, the United
States self-initiated a countervailing duty
investigation of import of softwood
lumber products from Canada.
2. On 1 November 1991, Canada
requested that a special meeting of the
Committee on Subsidies and
Countervailing Measures be convened
for conciliation under Article 17 of the
Agreement on the matter described by
Canada in document SCM/128. On 7
November 1991, the Committee
received a communication from the
United States in response to this request
for conciliation (SCM/131). The
Committee held a meeting under the
conciliation procedure of Article 17 in
this matter on 15 and 18 November 1991
(SCM/M/55).

3. On 2 December 1991, Canada

requested the Committee to establish a
panel in this matter under Article 17:3 of
the Agreement (SCM/133). The
Committee met on 16 December 1991
and established a panel. The Committee
authorized the Chairman to consult with
the parties to the dispute on the terms of
reference of this Panel and to decide the
Panel's composition, in consultation with
the parties (SCM/M/56, paragraph 8).
The representative of Japan reserved his
delegation's right to intervene in the
Panel's proceedings.

4. On 21 February 1992, the Chairman

of the Committee informed the
signatories of the Agreement in
SCM/141 of the Panel's terms of
reference:

"To review the facts of the

matter referred to the
Committee by Canada in
document SCM/133 and, in
light of such facts, to present to
the Committee its findings
concerning the rights and
obligations of the signatories
party to the dispute under the
relevant provisions of the
General Agreement as
interpreted and applied by the
Agreement on interpretation
and Application of Articles VI,
XVI and XXIII of the General
Agreement."

In the same communication, signatories

of the Agreement were informed of the
Panel's composition:

Chairman: Mr. Michael D. Cartland

Members: Mr. Luzius Wasescha
Mr. David Hayes

5. The Panel met with the parties to the

dispute on 18-19 March, 20-21 May and
15 June 1992. The Panel received a
written submission from Japan as
interested third party.

6. The Panel submitted its findings and

conclusions to the parties on 7
December 1992.

II. FACTUAL ASPECTS

7. The dispute before the Panel

concerned (i) the suspension of
liquidation and imposition of bonding
requirements by the United States on 4
October 1991 under Section 304 of the
Trade Act 1974 with respect to imports
of softwood lumber from Canada, and
(ii) the initiation by the United States on
31 October 1991 of a countervailing
duty investigation on imports of
softwood lumber from Canada. In taking
these actions, the United States referred
to the termination by Canada on 4
October 1991 of a Memorandum of
Understanding on trade in softwood
lumber, concluded between Canada and
the United States on 30 December 1986,
a brief description of certain aspects of
the conclusion and implementation of
this Memorandum of Understanding is
therefore appropriate.

8. On 5 June 1986, the United States

Department of Commerce initiated a
countervailing duty investigation on
imports of softwood lumber from
Canada. 1 An affirmative preliminary
determination of the existence of injury
was made in this investigation by the
United States International Trade
Commission (USITC) on 29 June 1986.
On 16 October 1986, the Department of
Commerce made an affirmative
preliminary determination of the
existence of subsidization, as a result of
which the liquidation of entries of
softwood lumber from Canada was
suspended and a cash deposit or bond
equal to 15 per cent ad valorem required
for each entry of this product. The notice
of this preliminary determination
indicated that a final determination was
expected to be made by 30 December
1986.

9. On 1 August 1986, the Committee on

Subsidies and Countervailing Measures,
acting at the request of Canada,
established a panel in a dispute between
Canada and the United States with
respect to the initiation by the United
States of the above-mentioned
countervailing duty investigation. 2

10. On 30 December 1986, Canada and

the United States concluded a
Memorandum of Understanding
(hereinafter "MOU") "to resolve
differences with respect to the conditions
affecting trade in softwood lumber
products". This MOU provided in
Article 4 for the collection by Canada of
an export charge on exports of softwood
lumber to the United States; Article 5
provided for the possible reduction or
elimination of these export charges upon
introduction of "replacement measures".
Article 3(b) of the MOU provided that
the MOU was "without prejudice to the
position of either Government as to
whether the stumpage programmes and
practices of Canadian governments
constitute subsidies under United States
law or any international agreement".

11. Three provisions of the MOU

explicitly related to the countervailing
duty investigation initiated in June 1986.
First, Article 3(a) provided that the
MOU would be implemented when the
countervailing duty petition on certain
softwood lumber products from Canada
was withdrawn and a notice of
termination of the investigation signed.
Second, under Article 3(c), the United
States undertook to release bonds and
refund deposits made pursuant to the
preliminary affirmative countervailing
duty determination made in October
1986. Finally, under Article 3(d) the
United States undertook to state in the
notice of termination of the investigation
that the affirmative preliminary
countervailing duty determination on
certain softwood lumber products from
Canada was henceforth without legal
force and effect.

12. In a side letter, the Government of

Canada indicated that the objective of
the MOU, "to resolve differences with
respect to the conditions affecting trade
in certain softwood lumber products",
involved not only settlement of the
dispute over the countervailing duty
investigation initiated in June 1986, but
also avoiding the enactment of legislated
restrictions or further investigations
under US trade law and that, in either
eventuality, it might exercise its right to
terminate the MOU. Article 9 of the
MOU provided for the right of either
party to terminate the MOU at any time
upon thirty days written notice.

13. On 30 December 1986, immediately

after signature of the MOU, the
petitioner in the countervailing duty
investigation, the Coalition for Fair
Lumber Imports, withdrew its petition,
"based upon the entry into force of the
agreement between the Governments of
Canada and the United States concerning
trade in softwood lumber". At the same
time, the petitioner indicated that this
withdrawal was "without prejudice to
the filing of another petition based upon
the same Canadian acts and practices,
should the Coalition determine at any
time that it is in its interest to do so". 3

14. On 5 January 1987, the Department

of Commerce published in the Federal
Register a notice of termination of the
countervailing duty investigation on
softwood lumber from Canada, based
upon the withdrawal of the petition on
30 December 1986. The relevant part of
the notice reads as follows:

"In a letter dated December 30,

1986, petitioner notified the
Department that it is
withdrawing its May 19, 1986,
petition. Under section 704(a)
of the Act, as amended by
section 604 of the Trade and
Tariff Act of 1984, upon
withdrawal of a petition, the
administering authority may
terminate an investigation after
giving notice to all parties to
the investigation and after
assessing the public interest.
We have determined that
termination would be in the
 public interest. We have
notified all parties to the
investigation of petitioner's
withdrawal and our intention to
terminate. For these reasons,
we are terminating our
investigation." 4

On 26 January 1987, this notice was

amended to add the following sentence:

"The preliminary affirmative

countervailing duty
determination on certain
softwood lumber products from
Canada is henceforth without
legal force and effect." 5

15. In an Agreed Minute to the MOU,

Canada and the United States agreed
that, promptly after implementation of
the MOU, both parties would notify the
GATT secretariat "that a mutually
satisfactory settlement has been reached
in the dispute concerning the
countervailing duty proceeding by the
United States of America on certain
softwood lumber products from
Canada". In letters dated 13 and 29
January 1987, Canada and the United
States, respectively, informed the
Chairman of the Panel established by the
Committee on Subsidies and
Countervailing Measures in August
1986 that a mutually satisfactory
resolution of the dispute before the Panel
had been reached. Canada provided the
Panel with a copy of the MOU. The
Report of the Panel contained a brief
summary of the provisions of the MOU
and noted that a copy of the MOU was
available in the secretariat for
consultation by interested delegations. 6

16. In its semi-annual report submitted

under Article 2:16 of the Subsidies Code
on countervailing duty actions taken in
the period 1 January-30 June 1987, the
United States notified the Committee on
Subsidies and Countervailing Measures
that, in the investigation of certain
softwood lumber products from Canada,
the "case" had been "withdrawn" on 5
January 1987. 7
17. In the exchange of Notes of 30
December 1986 effecting the MOU, the
United States informed Canada that the
MOU was "a trade agreement for
purposes of United States law". 8 On the
same date, the United States, by
Presidential Proclamation 5595, imposed
a temporary surcharge on imports of
certain softwood lumber products from
Canada, on the basis of a determination
by the President under Section 301 of
the Trade Act of 1974 that Canada's
inability to collect an export charge on
softwood lumber exported to the United
States until at least 8 January 1987 was
unjustifiable or unreasonable and
constituted a burden or restriction of US
commerce. 9 This temporary surcharge
was suspended on 8 January 1987 when
Canada began collecting the export tax.
Also on 30 December 1986, the US
President, acting under Section 301 of
the Trade Act of 1974, instructed the
Secretary of Commerce to determine
periodically whether the Government of
Canada and the Canadian provincial
governments were fully imposing the
export charge and any replacement
measures therefor. The President
announced that:

"If the Secretary of Commerce

determines that such export
charges are not being fully
imposed, I will take action
(including the imposition of an
increase in the tariff on
softwood lumber imported from
Canada) to offset any shortfall
in the full imposition of the
export charge or of the
replacement measures
therefor." 10

18. On 17 January 1987, Canada

submitted a diplomatic note to the
United States in which it objected to the
imposition of this duty under Section
301 as well as to the determination by
the President to use Section 301 to offset
any shortfall in the full imposition of the
export charge or the replacement
measures.

19. On 16 December 1987, Canada and

the United States agreed to amend the
MOU inter alia to exempt from the
payment of export charges exports to the
United States of certain softwood lumber
products produced in New Brunswick,
Newfoundland, Nova Scotia and Prince
Edward Island. It was also agreed that
replacement measures described in an
Appendix to the amendments for the
Province of British Columbia would
constitute full replacement of the export
charge upon the fulfilment of the
conditions described in this Appendix.
Provisions to monitor these replacement
measures in British Columbia were also
put in place. In a subsequent amendment
to the MOU, Canada and the United
States agreed to reduce the export charge
with respect to exports of certain
softwood lumber products produced in
Quebec as of 1 April 1988, as a
consequence of replacement measures
instituted by that Province. Finally,
Canada and the United States agreed to
exempt 365 million board feet of lumber
produced from logs of US-origin from
the export charge annually.

20. In a diplomatic note dated 3

September 1991, Canada gave the
United States formal notice of its
intention to terminate the MOU, as
provided for in Article 9 of the MOU,
effective 4 October 1991. This notice
followed a series of informal ministerial
discussions between Canada and the
United States which occurred over a
period of several months.

21. On 4 October 1991, following

Canada's termination of the MOU, the
USTR, acting under Section 304 of the
Trade Act of 1974, determined "(a) That
acts, policies, and practices of the
Government of Canada regarding the
exportation of softwood lumber to the
United States, specifically the failure of
the Government of Canada to ensure the
continued collection of export charges of
softwood lumber envisioned by the
MOU, are unreasonable and burden or
restrict US commerce; and (b) That
expeditious action is required and that
the appropriate action at this time is to
impose contingent, temporary increased
duties on the parties identified in
appendix 1 ( ) that originate on those
provinces and territories listed in
appendix 2 ( )". 11

22. The notice of imposition of these

measures described the reasons for these
measures as follows:

"As a consequence [of the

termination of the MOU], the
United States, which in
December 1986 terminated its
countervailing duty
investigation in reliance upon
Canada's undertakings in the
MOU, will be denied the offset
that had been provided by
Canadian export charges
against possible injurious
Canadian subsidies. Due to the
limited notice provided by
Canada in terminating the
agreement and the amount of
time required for the
Department once again to make
a preliminary subsidy
determination, the Department
is unable in the short period
leading up to that determination
to impose interim protective
measures. Accordingly, action
by the United States is required
during this interim period in
order to restore and maintain
the status quo ante. Since the
Government of Canada has
refused to collect export
charges to offset possible
subsidies during this period, the
United States is compelled to
exercise its rights and to take
enforcement measures arising
out of the MOU by imposing
temporary measures to
safeguard against an influx of
possible injurious subsidized
Canadian softwood lumber." 12

23. The measures decided upon in this

determination took the form of bonding
requirements, the imposition of a duty,
contingent upon affirmative final
determinations of subsidization and
injury, and the withholding or extension
of liquidation of entries of certain
softwood lumber from Canada. These
measures took into account the
replacement measures instituted in
certain Canadian provinces. Thus in the
case of lumber production in British
Columbia, no bonding requirements
were imposed and the rate of the
contingent duty was zero. 13

24. On 16 October 1991, Canada held

consultations with the United States
under Article 3:1 of the Agreement. At
these consultations on the basis of the
provisions of Article 2:1 of the
Agreement, Canada requested from the
United States evidence of the existence
of a subsidy, of injury and of a causal
link between the alleged subsidy and the
alleged injury on which the United
States justified its intent to self-initiate a
countervailing duty investigation.

25. On 31 October 1991, the United

States Department of Commerce self-
initiated a countervailing duty
investigation on imports of certain
softwood lumber products from
Canada. 14 In the notice of the self-
initiation of this investigation, the
Department stated that:

"Canada's unilateral termination

of the MOU, which was the
basis for the withdrawal of the
CVD petition and the
termination of the CVD
investigation in 1986,
constitutes special
circumstances within the
meaning of Article 2.1 of the
Agreement on Interpretation
and Application of Articles VI,
XVI, and XXIII of the General
Agreement on Tariffs and
Trade (Subsidies Code)." 15

The notice further explained that the

practices subject to the investigation
were "stumpage programmes, which are
government programmes through which
individuals and companies acquire the
rights to cut and remove standing timber
from provincial forest lands" 16 and that
the information available to the
Department indicated that the provisions
of stumpage was specific, that discretion
was exercized in the awarding of
stumpage rights and the setting of
stumpage prices, and that stumpage was
preferentially priced. 17 The notice of
initiation also indicated that, while the
Department had information on
restrictions applied by Canadian (federal
and provincial) authorities on exports of
logs, this information was not
considered to be sufficient to warrant the
inclusion of these export restrictions
within the scope of the investigation:

"In the Final Affirmative

Countervailing Duty
Determination and
Countervailing Duty Order;
Leather from Argentina (55 FR
40212 (1990), the Department
determined that programmes
that restrict exports are
countervailable. In Leather
from Argentina, the
Department determined that
export restrictions prohibiting
the export of cattle hides caused
prices to be lower than they
would have been absent the
restrictions, and provided a
countervailing benefit to leather
tanners as the specific users of
cattle hides. Although
economic theory would indicate
that log export restrictions in
Canada artificially lower
domestic log prices, the
Department requires evidence
demonstrating that the
restrictions had measurable
downward effect on log prices
in order to meet the threshold
for initiation ... Presently, the
Department does not have
sufficient evidence to ascertain
the extent to which the log
export restrictions artificially
lower domestic prices for logs,
the major input into the product
under investigation. However,
if an interested party submits
such evidence during the course
of the proceeding, the
Department remains willing to
investigate these
 programmes." 18

26. The notice of the self-initiation of a

countervailing duty investigation on
imports of softwood lumber from
Canada further contained a discussion of
evidence available to the Department of
Commerce which demonstrated "that the
US softwood lumber industry is
currently suffering material injury as a
result of subsidized softwood lumber
imports from Canada, and faces the
threat of further, more extensive,
material injury." 19

27. Finally, the notice of self-initiation

of the investigation exempted from the
scope of the investigation softwood
lumber products produced in New
Brunswick, Newfoundland, Nova Scotia
and Prince Edward Island, on the ground
that, because these Provinces had been
exempted from payment of the export
charges under the MOU, the termination
of the MOU by Canada could not be
considered to constitute "special
circumstances" with respect to these
Provinces. 20

28. A detailed description of the

evidence relied upon by the Department
of Commerce as a basis for the self-
initiation of the countervailing duty
investigation on imports of softwood
lumber from Canada appears in a
Department of Commerce
Memorandum. 21

29. On 3 and 13 December 1991, the

Department of Commerce received
information from interested parties in the
investigation with respect to the price
effects of the export restrictions
maintained by British Columbia,
Alberta, Ontario and Quebec. The
Department found that this information
provided sufficient evidence
demonstrating that these export
restrictions had a measurable downward
effect on prices of logs in these
provinces and therefore decided on 23
December 1991 to investigate these
export restrictions as part of the
countervailing duty investigation on
imports of certain softwood lumber
 products from Canada.

Ruling
412. In light of the considerations set out in
the above findings, the Panel concluded that:

(a) the interim

measures taken by
the United States
on 4 October 1991
with respect to
imports of
softwood lumber
from Canada were
inconsistent with
Article 5:1 and
could not be
justified on the
basis of Article
4:6 of the
Agreement; and

(b) the initiation

of a
countervailing
duty investigation
by the United
States on 31
October 1991 with
respect to imports
of softwood
lumber from
Canada was not
inconsistent with
the requirements
of Article 2:1 of
the Agreement.

413. The Panel noted that Canada had

requested the Panel to recommend to the
Committee that it request the United States to
terminate the bonding requirement, release
the bonds, refund (with interest) any cash
deposits and amounts collected and terminate
the suspension of liquidation of softwood
lumber products from Canada. The Panel
further noted that panels, having found a
measure to be inconsistent with a signatory's
obligation, generally recommended that the
signatory be requested to bring its measure
into conformity with the Agreement. The
Panel considered that such a recommendation
was especially appropriate in those cases
where there were several options available to
a signatory to bring itself into conformity
with the Agreement. The Panel considered
however that such multiple options were not
available to the United States in the present
case and that the only option open to the
United States was, with respect to imports of
softwood lumber from Canada, to terminate
the bonding requirement, release any bonds,
refund any cash deposits and terminate the
suspension of liquidation of entries made
during the period of application of the
inconsistent interim measures imposed in
October 1991 under the authority of Section
304 of the Trade Act of 1974.

414. Moreover, the Panel noted that the

CONTRACTING PARTIES of GATT had
adopted two panel reports which had
recommended the reimbursement of duties
found to have been imposed in a manner
inconsistent with GATT obligations, the first
involving anti-dumping duties 174 and the
second involving countervailing
duties. 175 The Panel considered that such a
recommendation was also appropriate in this
case.

415. The Panel therefore recommends to the

Committee that it request the United States,
with respect to imports of softwood lumber
from Canada, to terminate the bonding
requirement, release any bonds, refund any
cash deposits and terminate the suspension of
liquidation of entries made during the period
of application of the inconsistent interim
measures imposed in October 1991 under the
authority of Section 304 of the Trade Act of
1974.

2. FOOTNOTE #14 AND #15; #19:

But mindful of that qualification, the growing

prevalence of necessity in international law
may be ascribed, in part, to two factors. The
first is the widespread perception of an
imminent crisis or risk, a common
denominator of necessity. Recently, the
number, nature, and scope of potentially
catastrophic, or even existential, threats have
increased. They include potential terrorist
strikes at or surpassing the scale of the
September 11, 2001, attacks; the possibility
that a “rogue state” might develop nuclear
weapons or transfer them to a nonstate
actor;15 severe fiscal crises of a degree
last seen during the Great Depression;16
global warming;17 and pandemics.18

A second, more prosaic factor, which may

nonetheless sometimes interact with the
first—as it did in the context of Argentina’s
fiscal crisis— concerns the Articles on
Responsibility of
States for Internationally Wrongful Acts
(Articles on State Responsibility) by the
International
Law Commission (ILC).19 Article 25
provides:

1. Necessity may not be invoked by a State as

a ground for precluding the wrongfulness
of an act not in conformity with an
international obligation of that State unless
the act:
(a) Is the only way for the State to safeguard
an essential interest against a grave and
imminent peril; and
(b) Does not seriously impair an essential
interest of the State or States towards
which the obligation exists, or of the
international community as a whole.
2. In any case, necessity may not be invoked
by a State as a ground for precluding
wrongfulness if:
(a) The international obligation in question
excludes the possibility of invoking
necessity; or
(b) The State has contributed to the situation
of necessity.20

Necessity, so defined, is one of seven

circumstances precluding wrongfulness
(CPWs) enumerated in the Articles on State
Responsibility.21 Absent a lex specialis,22
Article 25 offers, in the lexicon of the
articles, a uniformly applicable “secondary
rule,” which may preclude the wrongfulness
of state conduct that might otherwise breach
a “primary rule.” In brief, primary rules
govern “the content and the duration of
substantive State obligations,” whereas
secondary rules establish a uniform (and
conceptually and temporally subsequent)
framework setting forth “the consequences of
a breach of an applicable primary
obligation.”23
Because of the predominance of treaty norms
in investment arbitration, most awards to date
have focused on how the presumed
customary defense codified in Article 25
should apply in this special context. Few
awards, if any, have raised the logically
antecedent question whether Article 25
actually codifies custom. Like the ICJ,24
investor-state tribunals have assumed that it
does.25 The virtually exclusive focus on
necessity in the investment context has
tended to eclipse more general or theoretical
questions about Article 25’s positive legal
status and, normatively, the propriety,
prudence, and appeal of necessity, so
defined, in contemporary international law.

These broad inquiries raise a number of

questions. In terms of the ILC’s formal
mandate, does Article 25 codify custom, as
the ICJ, the International Tribunal for the
Law of the Sea, and investment tribunals
have opined, or would it more accurately be
characterized as “progressive
development”?26 If the latter, as I argue
below, in what way is Article 25
progressive? Necessity, after all, is
notoriously subject to abuse,27 although that
does not by itself, of course, counsel against
its legal recognition.28

But might not Article 25—if it is grafted on,

or sequentially applied to, analyses of
primary rules of necessity— effectively give
the invoking state “two bites at the apple” of
necessity? And mindful of the vital role that
effective legal institutions (for example,
legislatures and courts) serve in regulating
necessity in national law, would a
comparable defense be feasible, constructive,
and prudent in a legal system that lacks
reliable analogues
to these institutions?29

3. FOOTNOTE #16: Report of the

International Law Commission on the Work
of Its Fiftieth Session, UN GAOR, 53d Sess.,
Supp. No. 10, para. 224, UN Doc. A/53/10
(1998) [hereinafter Fiftieth Session Report].

220. It was also noted that some matters of

substance had been raised in the presentation
of
practice, such as the question whether
conditionality was compatible with a
unilateral act stricto sensu. Conditionality
could be a determining factor in the motives
for the formulation of
a unilateral act. The purpose of the act also
had to be taken into consideration, since it
was
indicative of the political or legal nature of
the act; the Commission should, of course,
confine
itself to investigating legal unilateral acts; in
addition, the purpose of an act might
determine whether it was autonomous and
that, in turn, was crucial for the very
qualification of an act as unilateral. Any
future regime should contain a provision that
was equivalent to article 18 of the
Vienna Convention on the Law of Treaties in
order to ensure a balance between freedom of
action and the security of inter-State
relations. Other aspects, such as the
withdrawal of a unilateral act, possibly
subject to the beneficiary’s consent, might
also be considered.

221. The autonomy of a unilateral act thus

precludes any act undertaken in the
framework of conventional or joint relations
or connected with customary or institutional
law. The specific nature of a unilateral act as
a source of international law depended on
criteria such as the intention of the author
State and the status of the addressee as a
subject of international law and the
modalities whereby and the framework
within which the act was formulated.

222. It was also pointed out that, although

practice contained a wealth of examples and
constituted an unavoidable reference source,
it was still necessary to explore the reactions
prompted by such acts, particularly promises,
and especially in the case when they had not
been honoured. Could the international
responsibility of the author of the promise be
invoked? An examination of practice from
that standpoint might reveal whether
unilateral acts could give rise to international
legal obligations for the author State. The
International Court of Justice had considered
the legal scope of such acts (Military and
Paramilitary Activities in and against
Nicaragua case481 or Frontier Dispute
(Burkina Faso/Republic of Mali) case482).
Protests against unilateral acts, such as that
lodged by the United States of America in
1993 against maritime claims contained in
the Islamic Republic of Iran’s legislation,
should also be analysed in greater detail.
Even when protests were filed on the basis of
a treaty (for example, the United Nations
Convention on the Law of the Sea), they
were still, in certain cases, a source of
international law. A comprehensive study of
the “lifespan” of, or background to, a
unilateral act would therefore shed light on
its particular features and might make it
possible to identify the legal rules applicable
to them.

223. In that respect, it would be necessary to

consider unilateral acts stricto sensu, i.e.
those
which purported to produce legal effects.
There was no reason to abide scrupulously by
the
categories of unilateral acts mentioned by the
Special Rapporteur, but it would be advisable
to
determine how best to pursue the study of
unilateral acts.

224. It was also noted that the criterion for

unilateral acts should be the concept of an
international legal obligation and not that of
their legal effects, which was a broader and
vaguer concept applying to all unilateral acts
of States, whether or not they were
autonomous, since all those acts produced
legal effects which varied considerably from
one act to another.

4. FOOTNOTE #20: Gabcˇı´kovo-

Nagymaros Project, para. 59-61.

59. In the light of the conclusions reached

above, the Court, in reply to the question put
to it in Article 2, paragraph 1 (a), of the
Special Agreement (see paragraph 27 above),
finds that Hungary was not entitled to
suspend and subsequently abandon, in 1989,
the works on the Nagymaros Project and on
the part of the GabEikovo Project for which
the 1977 Treaty and related instruments
attributed responsibility to it.

60. By the terms of Article 2, paragraph 1

(h), of the Special Agreement, the Court is
asked in the second place to decide
"(6) whether the Czech and Slovak Federal
Republic was entitled
to proceed, in November 1991, to the
'provisional solution' and to put into
operation from October 1992 this system,
described in the Report of the Working
Group of Independent Experts of the
Commission of the European Communities,
the Republic of Hungary and the Czech and
Slovak Federal Republic dated 23 November
1992 (damming up of the Danube at
river kilometre 185 1.7 on Czechoslovak
territory and resulting consequences on water
and navigation course)".

61. The Court will recall that, as soon as

Hungary suspended the
works at Nagymaros on 13 May 1989 and
extended that suspension to
certain works to be carried out at Dunakiliti,
Czechoslovakia informed
Hungary that it would feel compelled to take
unilateral measures if Hungary were to
persist in its refusa1 to resume the works.
This was inter alia
expressed as follows in Czechoslovakia's
Note Verbale of 30 October
1989 to which reference is made in paragraph
37 above:
"Should the Republic of Hungary fail to meet
its liabilities and
continue unilaterally to breach the Treaty and
related legal documents then the
Czechoslovak party will be forced to
commence a
provisional, substitute project on the territory
of the Czechoslovak
Socialist Republic in order to prevent further
losses. Such a provisional project would
entail directing as much water into the
Gabtikovo dam as agreed in the Joint
Construction Plan."
As the Court has already indicated (see
paragraph 23), various
alternative solutions were contemplated by
Czechoslovakia. In September 1990, the
Hungarian authorities were advised of seven
hypothetical
alternatives defined by the firm of
Hydroconsult of Bratislava. All of
those solutions implied an agreement
between the parties, with the exception of
one variant, subsequently known as "Variant
C", which was presented as a provisional
solution which could be brought about
without
Hungarian CO-operation. Other contacts
between the parties took place,
without leading to a settlement of the dispute.
In March 1991, Hungary
acquired information according to which
perceptible progress had been
made in finalizing the planning of Variant C;
it immediately gave expression to the

D. Adawa is entitled to compensatory damages
- Par. 57
On 1 July 2019, after negotiations between the
parties, the Adawan Ambassador to the
Kingdom of the Netherlands submitted an
Application instituting proceedings on behalf of
Adawa against Rasasa, invoking the
compromissory clause of the 1929 Treaty of
Botega. Adawa contested the legality of the
installation of the WALL, and also alleged that
Rasasa’s Helian tariffs violated the CHC,
seeking monetary reparation for the resulting
financial harm, a remedy that it characterized as
“not typically awarded by WTO Panels.”
concern this caused.
1. FOOTNOTE #23: Mercurio, B. Why compensation cannot
replace trade retaliation in the WTO dispute settlement understanding.
W o r l d T r a d e R e v i e w, 8 : 2 , 1 – 2 4. 2009.
One of the more frequently heard criticisms of the current system of
trade retaliation is that the imposition of retaliatory trade measures is
economically inefficient for both the country imposing the retaliatory
measures as well as for the target nation. The reason for the
inefficiency stems from the fact that trade retaliation causes
consumers (or businesses in the case of inputs) in the nation imposing
the trade retaliation – that is, the importing country – to pay more for
the imported goods (whether they be goods subject to the additional
tariff rate from the non-compliant country or higher priced substitute
products from less efficient producers).13 Moreover, it is also
significant that any considerable rise in tariff levels to a segment of
imports has the potential to increase political considerations, such as
increased lobbying efforts and rent-seeking from a multitude of
domestic interests. The problem of increased tariff levels as retaliation
is particularly troublesome for smaller developing country Members,
who more often than not depend upon one (larger developed) country
for a large percentage of their total trade and rely upon imports for
both consumer goods and necessary imports. In such a circumstance,
implementing traditional retaliatory measures is counterproductive as
there may not be an alternative supplier or the additional costs
associated with a new supplier may make the goods inaccessible to
the local market.14 Additionally, as both trading partners understand
that retaliation will likely harm the smaller partner more than it harms
the larger partner, the threat of retaliatory measures often lacks
credibility.15 Without credibility, a threat of retaliation loses any
potential coercive effect. Without a credible threat of retaliation to
perhaps persuade a non-complying Member to withdraw its offending
practices, most developingcountry Members are limited in their
capacity to retaliate.16 India summed up this position in a proposal to
the DSU Review:
[T]he tremendous imbalance in the trade relations between developed
and developing countries places severe constraints on the ability of
developing countries to exercise their rights under Article 22. The
economic cost of withdrawal of concessions in the goods sector
would have a greater adverse impact on the complaining developing-
country Member than on the defaulting developed country Member
and would only further deepen the imbalance in their trade relations
already seriously injured by the nullification and impairment of
benefits.
Even if a small-sized Member does decide to implement retaliatory
measures (regardless of whether it is economically inefficient), it will
likely lack the economic strength to exercise any real pressure on the
Member concerned. This problem is at its most severe when the
complaining Member relies upon the responding Member for a
substantial amount of its trade. In such a circumstance, the non-
compliant measure not only might affect a large percentage of the
complaining Member’s exports, and thus a large number of industries
and/or workers, but it is also very difficult for the complaining
Member to select industries or goods to subject to retaliatory
measures without harming its own industries (particularly necessary
inputs) or consumers. This is true not only for smaller developing
countries but is equally applicable to smaller developed country
Members. In fact, the economic strength argument could even extend
to trading relationships between larger, developed countries.

Another criticism often made against trade retaliation is that it is

incongruous to the aims and objectives of the WTO. More
specifically, as an institution based on the principle that the expansion
of trade through reduced barriers leads to growth, development, and
poverty reduction, the sanctioning of the imposition of higher trade
barriers in an attempt to remedy another Members transgression (or
perhaps to punish the offending Member) seems contradictory as the
higher trade barriers resulting from the retaliatory measures will
inevitably lead to a reduction of trade between the parties
concerned.19 In this regard, reduced trade resulting from retaliatory
measures could have the effect of contracting trade, limiting or
reducing growth, and stymieing poverty reduction. An additional
criticism is that retaliatory measures do not benefit the aggrieved
party but instead damage the innocent.21 Stated more clearly, the
imposition of retaliatory measures does not necessarily offer any
relief to the aggrieved industry and, in most instances, the suspended
concessions (or retaliation targets) bear no relationship to the industry
subject to the dispute.

2. FOOTNOTE #27: Arzt, D. The Right to Compensation: Basic

Principles under International Law. Compensation as part of a
comprehensive solution to the Palestinian refugee problem. 1999.

The Legal Basis for Compensation - State Responsibility

Claims for relief under international law always begin with the law of
state responsibility, which is considered to consist of the "secondary
rules" that determine the legal consequences of failure to fulfill
substantive legal obligations, which are considered the "primary
rules." (Examples of "primary" rules include the obligation not to
cause persons to become refugees and the obligation not to use force
to invade the territory of another state.) According to the International
Law Commission (ILC)'s 1996 Draft Rules on State Responsibility,
every act by a state which is wrongful under some "primary" rule of
international law imposes international responsibility on that state.
Wrongful acts occur when an injury is a) caused by conduct
consisting of an action or omission which is attributable to the State
under international law; and b) that conduct constitutes a breach of an
international obligation of the State. It does not matter whether the
"primary" international obligation is found in customary law or treaty;
nor does it matter whether the same act is considered lawful by the
state's own internal law. However, a breach only occurs "if the act
was performed at the time when the obligation was in force for that
State."4
A state that has committed such an internationally wrongful act is
obligated to a) discontinue the act and restore the situation to the
status quo ante; b) apply remedies provided under its internal law (if
they exist) and to pay appropriate compensation if restoration of the
pre-existing status is impossible; and c) provide guarantees that the
act will not recur.5 A state to which a claim is made must negotiate in
good faith to resolve it. "[F]ailure of a state to respond in good faith to
a request for negotiation may itself constitute a breach of an
international obligation."6

CASES

(i) FOOTNOTE NO. 21 – Gabcˇı´kovo-Nagymaros Project

(Hungary v Slovakia)

FACTUAL ASPECTS

On 2 July 1993 the Governments of the Republic of Hungary and of

the Slovak Republic notified jointly to the Registry of the Court a
Special Agreement, signed at Brussels on 7 April 1993, for the
submission to the Court of certain issues arising out of differences
which had existed between the Republic of Hungary and the Czech
and Slovak Federal Republic regarding the implementation and the
termination of the Budapest Treaty of 16 September 1977 on the
Construction and Operation of the Gabčíkovo-Nagymaros Barrage
System and on the construction and operation of the “provisional
solution”. The Special Agreement records that the Slovak Republic is
in this respect the sole successor State of the Czech and Slovak
Federal Republic. In Article 2 of the Special Agreement, the Court
was asked to say : (a) whether the Republic of Hungary was entitled
to suspend and subsequently abandon, in 1989, the works on the
Nagymaros project and on that part of the Gabčíkovo project for
which the Treaty attributed responsibility to the Republic of Hungary
; (b) whether the Czech and Slovak Federal Republic was entitled to
proceed, in November 1991, to the “provisional solution” and to put
into operation from October 1992 this system (the damming up of the
Danube at river kilometre 1,851.7 on Czechoslovak territory and the
resulting consequences for the water and navigation course) ; and (c)
what were the legal effects of the notification, on 19 May 1992, of the
termination of the Treaty by the Republic of Hungary. The Court was
also requested to determine the legal consequences, including the
rights and obligations for the Parties, arising from its Judgment on the
above-mentioned questions. Each of the Parties filed a Memorial, a
Counter Memorial and a Reply accompanied by a large number of
annexes.

In June 1995, the Agent of Slovakia requested the Court to visit the
site of the Gabčíkovo-Nagymaros hydroelectric dam project on the
Danube for the purpose of obtaining evidence. A “Protocol of
Agreement” was thus signed in November 1995 between the two
Parties. The visit to the site, the first such visit by the Court in its 50-
year history, took place from 1 to 4 April 1997 between the first and
second rounds of oral pleadings.
In its Judgment of 25 September 1997, the Court asserted that
Hungary was not entitled to suspend and subsequently abandon, in
1989, the works on the Nagymaros project and on the part of the
Gabčíkovo project for which it was responsible, and that
Czechoslovakia was entitled to proceed, in November 1991, to the
“provisional solution” as described by the terms of the Special
Agreement. On the other hand, the Court stated that Czechoslovakia
was not entitled to put into operation, from October 1992, the barrage
system in question and that Slovakia, as successor to Czechoslovakia,
had become Party to the Treaty of 16 September 1977 as from 1
January 1993. The Court also decided that Hungary and Slovakia
must negotiate in good faith in the light of the prevailing situation and
must take all necessary measures to ensure the achievement of the
objectives of the said Treaty, in accordance with such modalities as
they might agree upon. Further, Hungary was to compensate Slovakia
for the damage sustained by Czechoslovakia and by Slovakia on
account of the suspension and abandonment by Hungary of works for
which it was responsible, whereas, again according to the Judgment
of the Court, Slovakia was to compensate Hungary for the damage it
had sustained on account of the putting into operation of the dam by
Czechoslovakia and its maintenance in service by Slovakia.

On 3 September 1998, Slovakia filed in the Registry of the Court a

request for an additional Judgment in the case. Slovakia considered
such a Judgment necessary because of the unwillingness of Hungary
to implement the Judgment delivered by the Court on 25 September
1997. In its request, Slovakia stated that the Parties had conducted a
series of negotiations of the modalities for executing the 1997
Judgment and had initialled a draft Framework Agreement, which had
been approved by the Slovak Government. However, according to the
latter, Hungary had decided to postpone its approval and had even
disavowed it when the new Hungarian Government had come into
office. Slovakia requested the Court to determine the modalities for
executing the Judgment, and, as the basis for its request, invoked the
Special Agreement signed at Brussels on 7 April 1993 by itself and
Hungary. After the filing by Hungary of a statement of its position on
Slovakia’s request, the Parties resumed negotiations and informed the
Court on a regular basis of the progress in them.

PARAGRAPHS 59-61

59. In the light of the conclusions reached above, the Court, in reply
to the question put to it in Article 2, paragraph 1 (a), of the Special
Agreement (see paragraph 27 above), finds that Hungary was not
entitled to suspend and subsequently abandon, in 1989, the works on
the Nagymaros Project and on the part of the GabEikovo Project for
which the 1977 Treaty and related instruments attributed
responsibility to it.

60. By the terms of Article 2, paragraph 1 (h), of the Special

Agreement, the Court is asked in the second place to decide "(6)
whether the Czech and Slovak Federal Republic was entitled to
proceed, in November 1991, to the 'provisional solution' and to put
into operation from October 1992 this system, described in the Report
of the Working Group of Independent Experts of the Commission of
the European Communities, the Republic of Hungary and the Czech
and Slovak Federal Republic dated 23 November 1992 (damming up
of the Danube at river kilometre 185 1.7 on Czechoslovak territory
and resulting consequences on water and navigation course)".

61. The Court will recall that, as soon as Hungary suspended the
works at Nagymaros on 13 May 1989 and extended that suspension to
certain works to be carried out at Dunakiliti, Czechoslovakia
informed Hungary that it would feel compelled to take unilateral
measures if Hungary were to persist in its refusa1 to resume the
works. This was inter alia expressed as follows in Czechoslovakia's
Note Verbale of 30 October 1989 to which reference is made in
paragraph 37 above: "Should the Republic of Hungary fail to meet its
liabilities and continue unilaterally to breach the Treaty and related
legal documents then the Czechoslovak party will be forced to
commence a provisional, substitute project on the territory of the
Czechoslovak Socialist Republic in order to prevent further losses.
Such a provisional project would entail directing as much water into
the Gabtikovo dam as agreed in the Joint Construction Plan."

As the Court has already indicated (see paragraph 23), various

alternative solutions were contemplated by Czechoslovakia. In
September 1990, the Hungarian authorities were advised of seven
hypothetical alternatives defined by the firm of Hydroconsult of
Bratislava. All of those solutions implied an agreement between the
parties, with the exception of one variant, subsequently known as
"Variant C", which was presented as a provisional solution which
could be brought about without Hungarian CO-operation. Other
contacts between the parties took place, without leading to a
settlement of the dispute. In March 1991, Hungary acquired
information according to which perceptible progress had been made
in finalizing the planning of Variant C; it immediately gave
expression to the concern this caused.

(ii) FOOTNOTE NO. 25 – United States–Measures Affecting

Imports of Softwood Lumber from Canada, 41 B.I.S.D. 413–15
(1993)

FACTUAL ASPECTS

7. The dispute before the Panel concerned (i) the suspension of

liquidation and imposition of bonding requirements by the United
States on 4 October 1991 under Section 304 of the Trade Act 1974
with respect to imports of softwood lumber from Canada, and (ii) the
initiation by the United States on 31 October 1991 of a countervailing
duty investigation on imports of softwood lumber from Canada. In
taking these actions, the United States referred to the termination by
Canada on 4 October 1991 of a Memorandum of Understanding on
trade in softwood lumber, concluded between Canada and the United
States on 30 December 1986, a brief description of certain aspects of
the conclusion and implementation of this Memorandum of
Understanding is therefore appropriate.

8. On 5 June 1986, the United States Department of Commerce

initiated a countervailing duty investigation on imports of softwood
lumber from Canada. 1 An affirmative preliminary determination of
the existence of injury was made in this investigation by the United
States International Trade Commission (USITC) on 29 June 1986. On
16 October 1986, the Department of Commerce made an affirmative
preliminary determination of the existence of subsidization, as a result
of which the liquidation of entries of softwood lumber from Canada
was suspended and a cash deposit or bond equal to 15 per cent ad
valorem required for each entry of this product. The notice of this
preliminary determination indicated that a final determination was
expected to be made by 30 December 1986.

9. On 1 August 1986, the Committee on Subsidies and Countervailing

Measures, acting at the request of Canada, established a panel in a
dispute between Canada and the United States with respect to the
initiation by the United States of the above-mentioned countervailing
duty investigation. 2

10. On 30 December 1986, Canada and the United States concluded a

Memorandum of Understanding (hereinafter "MOU") "to resolve
differences with respect to the conditions affecting trade in softwood
lumber products". This MOU provided in Article 4 for the collection
by Canada of an export charge on exports of softwood lumber to the
United States; Article 5 provided for the possible reduction or
elimination of these export charges upon introduction of "replacement
measures". Article 3(b) of the MOU provided that the MOU was
"without prejudice to the position of either Government as to whether
the stumpage programmes and practices of Canadian governments
constitute subsidies under United States law or any international
agreement".

11. Three provisions of the MOU explicitly related to the

countervailing duty investigation initiated in June 1986. First, Article
3(a) provided that the MOU would be implemented when the
countervailing duty petition on certain softwood lumber products
from Canada was withdrawn and a notice of termination of the
investigation signed. Second, under Article 3(c), the United States
undertook to release bonds and refund deposits made pursuant to the
preliminary affirmative countervailing duty determination made in
October 1986. Finally, under Article 3(d) the United States undertook
to state in the notice of termination of the investigation that the
affirmative preliminary countervailing duty determination on certain
softwood lumber products from Canada was henceforth without legal
force and effect.

12. In a side letter, the Government of Canada indicated that the

objective of the MOU, "to resolve differences with respect to the
conditions affecting trade in certain softwood lumber products",
involved not only settlement of the dispute over the countervailing
duty investigation initiated in June 1986, but also avoiding the
enactment of legislated restrictions or further investigations under US
trade law and that, in either eventuality, it might exercise its right to
terminate the MOU. Article 9 of the MOU provided for the right of
either party to terminate the MOU at any time upon thirty days
written notice

13. On 30 December 1986, immediately after signature of the MOU,

the petitioner in the countervailing duty investigation, the Coalition
for Fair Lumber Imports, withdrew its petition, "based upon the entry
into force of the agreement between the Governments of Canada and
the United States concerning trade in softwood lumber". At the same
time, the petitioner indicated that this withdrawal was "without
prejudice to the filing of another petition based upon the same
Canadian acts and practices, should the Coalition determine at any
time that it is in its interest to do so". 3

14. On 5 January 1987, the Department of Commerce published in the

Federal Register a notice of termination of the countervailing duty
investigation on softwood lumber from Canada, based upon the
withdrawal of the petition on 30 December 1986. The relevant part of
the notice reads as follows:

"In a letter dated December 30, 1986, petitioner notified the

Department that it is withdrawing its May 19, 1986, petition. Under
section 704(a) of the Act, as amended by section 604 of the Trade and
Tariff Act of 1984, upon withdrawal of a petition, the administering
authority may terminate an investigation after giving notice to all
parties to the investigation and after assessing the public interest. We
have determined that termination would be in the public interest. We
have notified all parties to the investigation of petitioner's withdrawal
and our intention to terminate. For these reasons, we are terminating
our investigation." 4

On 26 January 1987, this notice was amended to add the following

sentence:

"The preliminary affirmative countervailing duty determination on

certain softwood lumber products from Canada is henceforth without
legal force and effect." 5

15. In an Agreed Minute to the MOU, Canada and the United States
agreed that, promptly after implementation of the MOU, both parties
would notify the GATT secretariat "that a mutually satisfactory
settlement has been reached in the dispute concerning the
countervailing duty proceeding by the United States of America on
certain softwood lumber products from Canada". In letters dated 13
and 29 January 1987, Canada and the United States, respectively,
informed the Chairman of the Panel established by the Committee on
Subsidies and Countervailing Measures in August 1986 that a
mutually satisfactory resolution of the dispute before the Panel had
been reached. Canada provided the Panel with a copy of the MOU.
The Report of the Panel contained a brief summary of the provisions
of the MOU and noted that a copy of the MOU was available in the
secretariat for consultation by interested delegations. 6

16. In its semi-annual report submitted under Article 2:16 of the

Subsidies Code on countervailing duty actions taken in the period 1
January-30 June 1987, the United States notified the Committee on
Subsidies and Countervailing Measures that, in the investigation of
certain softwood lumber products from Canada, the "case" had been
"withdrawn" on 5 January 1987. 7

17. In the exchange of Notes of 30 December 1986 effecting the

MOU, the United States informed Canada that the MOU was "a trade
agreement for purposes of United States law". 8 On the same date, the
United States, by Presidential Proclamation 5595, imposed a
temporary surcharge on imports of certain softwood lumber products
from Canada, on the basis of a determination by the President under
Section 301 of the Trade Act of 1974 that Canada's inability to collect
an export charge on softwood lumber exported to the United States
until at least 8 January 1987 was unjustifiable or unreasonable and
constituted a burden or restriction of US commerce. 9 This temporary
surcharge was suspended on 8 January 1987 when Canada began
collecting the export tax. Also on 30 December 1986, the US
President, acting under Section 301 of the Trade Act of 1974,
instructed the Secretary of Commerce to determine periodically
whether the Government of Canada and the Canadian provincial
governments were fully imposing the export charge and any
replacement measures therefor. The President announced that:

"If the Secretary of Commerce determines that such export charges

are not being fully imposed, I will take action (including the
imposition of an increase in the tariff on softwood lumber imported
from Canada) to offset any shortfall in the full imposition of the
export charge or of the replacement measures therefor." 10

18. On 17 January 1987, Canada submitted a diplomatic note to the

United States in which it objected to the imposition of this duty under
Section 301 as well as to the determination by the President to use
Section 301 to offset any shortfall in the full imposition of the export
charge or the replacement measures.

19. On 16 December 1987, Canada and the United States agreed to

amend the MOU inter alia to exempt from the payment of export
charges exports to the United States of certain softwood lumber
products produced in New Brunswick, Newfoundland, Nova Scotia
and Prince Edward Island. It was also agreed that replacement
measures described in an Appendix to the amendments for the
Province of British Columbia would constitute full replacement of the
export charge upon the fulfilment of the conditions described in this
Appendix. Provisions to monitor these replacement measures in
British Columbia were also put in place. In a subsequent amendment
to the MOU, Canada and the United States agreed to reduce the
export charge with respect to exports of certain softwood lumber
products produced in Quebec as of 1 April 1988, as a consequence of
replacement measures instituted by that Province. Finally, Canada and
the United States agreed to exempt 365 million board feet of lumber
produced from logs of US-origin from the export charge annually.

20. In a diplomatic note dated 3 September 1991, Canada gave the

United States formal notice of its intention to terminate the MOU, as
provided for in Article 9 of the MOU, effective 4 October 1991. This
notice followed a series of informal ministerial discussions between
Canada and the United States which occurred over a period of several
months.

21. On 4 October 1991, following Canada's termination of the MOU,

the USTR, acting under Section 304 of the Trade Act of 1974,
determined "(a) That acts, policies, and practices of the Government
of Canada regarding the exportation of softwood lumber to the United
States, specifically the failure of the Government of Canada to ensure
the continued collection of export charges of softwood lumber
envisioned by the MOU, are unreasonable and burden or restrict US
commerce; and (b) That expeditious action is required and that the
appropriate action at this time is to impose contingent, temporary
increased duties on the parties identified in appendix 1 ( ) that
originate on those provinces and territories listed in appendix 2 ( )".
11

22. The notice of imposition of these measures described the reasons

for these measures as follows:

"As a consequence [of the termination of the MOU], the United

States, which in December 1986 terminated its countervailing duty
investigation in reliance upon Canada's undertakings in the MOU,
will be denied the offset that had been provided by Canadian export
charges against possible injurious Canadian subsidies. Due to the
limited notice provided by Canada in terminating the agreement and
the amount of time required for the Department once again to make a
preliminary subsidy determination, the Department is unable in the
short period leading up to that determination to impose interim
protective measures. Accordingly, action by the United States is
required during this interim period in order to restore and maintain the
status quo ante. Since the Government of Canada has refused to
collect export charges to offset possible subsidies during this period,
the United States is compelled to exercise its rights and to take
enforcement measures arising out of the MOU by imposing
temporary measures to safeguard against an influx of possible
injurious subsidized Canadian softwood lumber." 12

23. The measures decided upon in this determination took the form of
bonding requirements, the imposition of a duty, contingent upon
affirmative final determinations of subsidization and injury, and the
withholding or extension of liquidation of entries of certain softwood
lumber from Canada. These measures took into account the
replacement measures instituted in certain Canadian provinces. Thus
in the case of lumber production in British Columbia, no bonding
requirements were imposed and the rate of the contingent duty was
zero. 13

24. On 16 October 1991, Canada held consultations with the United

States under Article 3:1 of the Agreement. At these consultations on
the basis of the provisions of Article 2:1 of the Agreement, Canada
requested from the United States evidence of the existence of a
subsidy, of injury and of a causal link between the alleged subsidy
and the alleged injury on which the United States justified its intent to
self-initiate a countervailing duty investigation.

25. On 31 October 1991, the United States Department of Commerce

self-initiated a countervailing duty investigation on imports of certain
softwood lumber products from Canada. 14 In the notice of the self-
initiation of this investigation, the Department stated that:

"Canada's unilateral termination of the MOU, which was the basis for
the withdrawal of the CVD petition and the termination of the CVD
investigation in 1986, constitutes special circumstances within the
meaning of Article 2.1 of the Agreement on Interpretation and
Application of Articles VI, XVI, and XXIII of the General Agreement
on Tariffs and Trade (Subsidies Code)." 15

The notice further explained that the practices subject to the

investigation were "stumpage programmes, which are government
programmes through which individuals and companies acquire the
rights to cut and remove standing timber from provincial forest lands"
16 and that the information available to the Department indicated that
the provisions of stumpage was specific, that discretion was exercized
in the awarding of stumpage rights and the setting of stumpage prices,
and that stumpage was preferentially priced. 17 The notice of
initiation also indicated that, while the Department had information
on restrictions applied by Canadian (federal and provincial)
authorities on exports of logs, this information was not considered to
be sufficient to warrant the inclusion of these export restrictions
within the scope of the investigation:

"In the Final Affirmative Countervailing Duty Determination and

Countervailing Duty Order; Leather from Argentina (55 FR 40212
(1990), the Department determined that programmes that restrict
exports are countervailable. In Leather from Argentina, the
Department determined that export restrictions prohibiting the export
of cattle hides caused prices to be lower than they would have been
absent the restrictions, and provided a countervailing benefit to
leather tanners as the specific users of cattle hides. Although
economic theory would indicate that log export restrictions in Canada
artificially lower domestic log prices, the Department requires
evidence demonstrating that the restrictions had measurable
downward effect on log prices in order to meet the threshold for
initiation ... Presently, the Department does not have sufficient
evidence to ascertain the extent to which the log export restrictions
artificially lower domestic prices for logs, the major input into the
product under investigation. However, if an interested party submits
such evidence during the course of the proceeding, the Department
remains willing to investigate these programmes." 18

26. The notice of the self-initiation of a countervailing duty

investigation on imports of softwood lumber from Canada further
contained a discussion of evidence available to the Department of
Commerce which demonstrated "that the US softwood lumber
industry is currently suffering material injury as a result of subsidized
softwood lumber imports from Canada, and faces the threat of further,
more extensive, material injury." 19

27. Finally, the notice of self-initiation of the investigation exempted

from the scope of the investigation softwood lumber products
produced in New Brunswick, Newfoundland, Nova Scotia and Prince
Edward Island, on the ground that, because these Provinces had been
exempted from payment of the export charges under the MOU, the
termination of the MOU by Canada could not be considered to
constitute "special circumstances" with respect to these Provinces. 20

28. A detailed description of the evidence relied upon by the

Department of Commerce as a basis for the self-initiation of the
countervailing duty investigation on imports of softwood lumber from
Canada appears in a Department of Commerce Memorandum. 21

29. On 3 and 13 December 1991, the Department of Commerce

received information from interested parties in the investigation with
respect to the price effects of the export restrictions maintained by
British Columbia, Alberta, Ontario and Quebec. The Department
found that this information provided sufficient evidence
demonstrating that these export restrictions had a measurable
downward effect on prices of logs in these provinces and therefore
decided on 23 December 1991 to investigate these export restrictions
as part of the countervailing duty investigation on imports of certain
softwood lumber products from Canada.

(iii) FOOTNOTE NO. 31 – Chorzow Factory Case (Germany v.

Poland), 1928 PCIJ (Ser. A) No. 17 (Judgment of Sept. 13, 1928)

SUMMARY OF FACTS

• Mar. 1915 - The German Reich (“Germany”) entered

into a contract with Bayerische Stickstoffwerke A.-G. (“Bayerische”)
for, among others, the construction of a nitrate factory in Chorzów,
Upper Silesia.

• Dec. 1919 - Another company, Oberschlesische

Stickstoffwerke A.-G. (“Oberschlesische”), was formed.
Oberschlesische would own the land and improvements of the factory
while Bayerische would continue handling the management and
operations. Oberschlesische was duly entered in the land register as
owner of the property constituting the nitrate factory.

• July 1922 - The Polish Court of Huta Krolewska

nullified the registration of Oberschlesische as owner of the factory,
and restored the right of ownership to the name of the Polish
Treasury.

o Court’s basis: Since the German Government owned all

of the shares of the Oberschlesische, what happened was merely a
transformation of an ordinary State enterprise into a State enterprise
with a share capital, and this falls within the category of “property
and possessions belonging to the Empire” acquired by Poland under
Art. 256 of the Treaty of Versailles.

• M. Ignacy Moscicki was delegated by the Polish

government with full powers to take charge of the factory. He took
possession of the immovable and movable property (licenses, patents,
etc.) therein.

• Oberschlesische and Bayerische brought separate

actions to recover possession of the factory before the German-Polish
Mixed Arbitral Tribunal at Paris, but both later withdrew.
Obersclensische then brought an action for the recovery of the
movable property, but this led to no decision on the merits.

• Germany initiated direct negotiations with Poland.

Germany saw the impracticability of restoring the factory, and opted
to demand reparations. However, negotiations were unsuccessful
because, among others, Poland believed that some of its claims
against Germany should be considered in offsetting the indemnity to
be awarded to the latter.

• Germany submitted a suit to the Permanent Court of

International Justice (PCIJ) demanding reparation from the Polish
Government, claiming that according to PCIJ Judgment No. 7,
Poland’s acts contradicted Art. 6 of the Geneva Convention. On
receipt of Germany’s complaint, Poland denied the PCIJ’s
jurisdiction, and submitted that the Court should declare that it had no
jurisdiction. This was overruled.

GERMANY ARGUES: Poland should pay the two companies the

compensation due for the taking possession of the working capital of
the factory from July 3, 1922, to the date of judgment. However, this
is not an ordinary action for damages but a dispute between
governments; the German Government has not brought this suit as
representative of the individuals who have suffered injury, but it may
estimate the damage for which it claims reparation on its own behalf,
according to the measure provided by the losses suffered by the
companies whose case it has taken up. Finally, Poland should not be
allowed to demand a set-off of claims.

POLAND ARGUES: Germany is modifying the subject of the

dispute; the German claim assumed another aspect if it was no longer
a question of compensating the companies, but of compensating the
State for the injury suffered by it. Poland admits the existence of
injury to Bayerische, but denies the existence of any injurty to
Oberschlesische (since its ownership was null and void) and
consequently submits that Germany's claim should be dismissed.

Preliminary: Whether Germany altered the subject of the dispute by

claiming on its own behalf. Answer: NO.

• It is a principle of IL that the reparation of a wrong may

consist in an indemnity corresponding to the damage which the
nationals of the injured State have suffered as a result of the act which
is contrary to IL. This is even the most usual form of reparation; it is
the form selected by Germany in this case and the admissibility of it
has not been disputed.

• The rules of law governing the reparation are the rules

of IL in force between the two States concerned, not the law
governing relations between the State and the individual. However,
rights or interests of an individual are always in a different plane to
rights belonging to a State. The damage suffered by an individual is
never identical in kind with that which will be suffered by a State; it
can only afford a convenient scale for the calculation of the reparation
due to the State.

• IL does not prevent one State from granting to another

the right to have recourse to international arbitral tribunals in order to
obtain the direct award to nationals of the latter State of compensation
for damage suffered by them as a result of infractions of IL by the
first State.

• Germany has been consistent in its submissions; the

indemnities were always payable to the German Government. The
request to pay to the account of the 2 companies with the Deutsche
Bank at Berlin relates only to the locus solutionis ("law of the place
where performance occurs").

Decision

1. That an expert enquiry shall be held with a view to enabling the

Court to fix, with a full knowledge of the facts, in conformity with the
principles laid down in Judgment No. I3, the amount of the indemnity
to be paid by the Polish Government to the German Government
under the terms of the aforesaid Judgment No. 13.

2. The expert enquiry shall relate to the following points:

I. A. What was the value, on July 3rd, 1922, expressed in

Reichsmarks current at the present time, of the undertaking for the
manufacture of nitrate products of which the factory was situated at
Chorzów in Polish Upper Silesia, in the state in which that
undertaking (including the lands, buildings, equipment, stocks and
processes at its disposal, supply and delivery contracts, goodwill and
future prospects) was, on the date indicated, in the hands of the
Bayerische and Oberschlesische Stickstoffwerke ?

B. What would have been the financial results, expressed in

Reichsmarks current at the present time (profits or losses), which
would probably have been given by the undertaking thus constituted
from July 3rd, 1922, to the date of the present judgment, if it had been
in the hands of the said Companies?

II. What would be the value at the date of the present judgment,
expressed in Reichsmarks current at the present time, of the same
undertaking (Chorzów) if that undertaking (including lands,
buildings, equipment, stocks, available processes, supply and delivery
contracts, goodwill and future prospects) had remained in the hands
of the Bayerische and Oberschlesische Stickstoffwerke, and had
either remained substantially as it was in 1922, or been developed
proportionately on lines similar to those applied in the case of other
undertakings of the same kind, controlled by the Bayerische, for
instance, the undertaking of which the factory is situated at Piesteritz?

3. The expert enquiry will be entrusted to a committee composed as

follows: the President of the, Court shall appoint [p101] by order
three experts. Each of the Parties shall have the right to appoint,
within fifteen days from the date of that order, an assessor who will
take part in the work of the committee in an advisory capacity. The
experts appointed by the President of the Court shall elect the
chairman of the committee from amongst themselves.
4. Upon accepting the task entrusted to them under the terms of
paragraph 2 above, the experts and assessors shall make the following
solemn declaration, either orally before the President, or by letter
addressed to the President :

"I solemnly declare that I will perform the duties of expert (assessor)
entrusted to me by virtue of the Order of the Permanent Court of
International justice dated September 13th, 1928, honourably and
faithfully, impartially and conscientiously, and that I will abstain from
divulging or turning to my own use any secrets of an economic or
technical nature which may. come to my knowledge in the
performance of this task."

5. The Registrar shall be responsible for the secretarial arrangements

of the committee of experts and for liaison between it and the Court.
For this purpose he shall in particular detach, for duty with the
committee of experts, one of the higher officials of the Registry. This
official shall act as intermediary for all communications between the
Court and its services on the one hand and the committee of experts
on the other.

6. The Registrar shall communicate to the communicate of experts the

full record of the proceedings leading up to the Court's Judgment No.
13, as also that of the proceedings leading up to its Judgment No. 6.
He is authorized also to hold at the disposal of the committee of
experts, upon its request, the records of the proceedings leading up to
the Court's judgments Nos. 7, 8 and 11.

7. The committee of experts shall be entitled to ask for the production

of any document and any explanations which it may consider useful
for the fulfilment of its task; in this respect, its decisions shall be
taken by a majority. Such requests shall be addressed to the Registrar
of the Court, who will comply with them within the limits fixed by
Article 24 [p102] of the Rules or, if necessary, submit them to the
President of the Court for the purposes of Article 49 of the Statute.

8. The committee of experts shall likewise be entitled to ask for any

other facilities which it may consider useful for the fulfilment of its
task; in particular it may ask for authorization to inspect the premises
; in that case, the procedure laid down in paragraph 7 shall be applied.

9. A first meeting of the committee of experts shall be convened by

the President of the Court. The Committee shall file its report, in two
original copies, with the Registrar of the Court, within a period,
commencing from this first meeting, to be fixed by the President after
hearing the views of the experts. The report, to which shall be
attached all documents referred to therein, shall contain the reasoned
opinion in regard to each question put of each member of the
committee. It shall be communicated, with the attached documents,
by the Registry to the members of the Court and to the Agents of the
Parties. The Court, or if it is not sitting, the President, shall fix a date
for a public sitting of the Court, which the experts will be summoned
 to attend and the object of which will be to enable the Agents of the
Parties to discuss the report and to enable the Court and the said
Agents to ask the experts for explanations.

10. The fees of the experts appointed by the President of the Court,
the amount of which shall be fixed by the President after hearing the
views of the experts, shall be paid to the latter by the Registrar at the
conclusion of the enquiry. The fees shall include subsistence and
entertainment expenses of the experts but not travelling expenses, etc.
Such expenses shall be refunded to those concerned by the Registrar
upon the production of accounts submitted at the conclusion of the
enquiry, subject to the deduction of any advances made on account of
such expenses.

Each Party shall pay the expenses and fees of the assessor appointed
by it. All other fees, costs and expenses, including secretariat and
establishment expenses, as also expenses for the services of technical
staff which the committee may secure with the consent of the
President of the Court, shall be advanced by the Court and refunded
by the Parties in the [p103] proportion to be fixed by the Court in
accordance with Article 64 of the Statute.

The Parties are invited to pay to the Registrar of the Court, within
fifteen days from the date of this Order, the sum of 25,000 florins
each on account towards the expenses of the expert enquiry.