WT/DS162/R/Add.1 Page 124
The European Communities notes that the cases that the United States portrays as prevailing weight of US judicial interpretation are witnesses of the legal insecurity and unpredictability resulting from the 1916 Act. On the contrary, in these latter decisions one is not even any longer in the realm of lack of security and predictability for the respect of WTO obligations. One has entered the realm of secure and predictable violations of those obligations.
The European Communities argues that Article XVI:4 of the WTO Agreement makes clear that the United States has an obligation to ensure that such conflicts cannot arise by amending the 1916 Act and intervening to correct interpretations which it considers to be erroneous and in conflict with WTO obligations. The United States has taken no steps to fulfil its obligation under Article XVI:4. It has not amended the 1916 Act, it has not intervened in the cases referred to to ensure that the 1916 Act is not applied in a manner contrary to the United States' WTO obligations. It has not even said that it disagrees with the decisions adopted by its courts in these two cases. Its very defence is to deny that there is any step to take.
For the European Communities, this is even more evident since the 1916 Act is definitely a mandatory piece of legislation within the meaning of GATT 1947 and WTO practice. But even aside from this, Article XVI:4 confirms what was already made clear by GATT 1947 panel practice, i.e. that a Member's legislation may breach GATT 1947/WTO obligations independent of concrete applications (this is precisely why Article XVI:4 requires the elimination of inconsistencies which are already on Members' statute books). Article XVI:4 provides this confirmation on a general basis. It draws no distinction between mandatory and discretionary legislation. It makes no exception for discretionary legislation. It is not limited to final judgments.
4. Good faith application of treaty obligations
The European Communities first of all recalls that the fundamental rule of treaty interpretation in Article 31 of the Vienna Convention on the Law of Treaties starts off by providing that "[a] treaty shall be interpreted in good faith […]".
Second, the European Communities notes that Article VI of the GATT 1994 is not a prohibition in the same way as most other GATT 1994 provisions, such as Article III or Article XI or even Article I. Article VI acknowledges the existence of a particular problem in international trade and then proceeds to provide the solution. It regulates what may be done about it by defining the conditions that need to be fulfilled for the application of remedial measures, such as the existence of injury and authorising the remedial measures which can be taken to deal with dumping.
The European Communities asserts that, as a consequence, the rationale for the mandatory/discretionary distinction, assuming it still to be valid, does not apply to regulatory measures as opposed to prohibitions. When a provision regulates behaviour, it is not a good faith interpretation of the text to claim that if a Member's measure deviates from it in one important respect, or allows its authorities to take alternative measures on a discretionary basis, then the other disciplines automatically do not apply. Yet this is exactly what the United States is claiming.
For this reason the European Communities considers that both the US claim that the 1916 Act escapes the disciplines of Article VI and the Anti‑Dumping Agreement because it specifies a remedy other than duties, as well as the US claim that it escapes WTO inconsistency because it is in some sense discretionary, must fail.
The European Communities also argues that when a text regulates a certain problem, there is a legitimate expectation by a party that other parties will not reserve for themselves the option of taking non-infringing measures. The US approach to the interpretation of its obligations under Article VI of the GATT 1994 and the Anti‑Dumping Agreement is not in good faith and it is therefore wrong.