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enforcement that creates the predictability needed to plan future trade. The Appellate Body reversed portions of the panel report on the issue of legitimate expectations, but clearly upheld the "sound legal basis" principle.34
Japan claims that its position is supported not only by India - Patents, but also by the United States - Superfund proceeding.35 The fact that the US courts have interpreted the 1916 Act in a WTO-inconsistent fashion demonstrates the absence of a "sound legal basis". Accordingly, the mere potential of WTO-inconsistency is sufficient to establish a violation in the context of the WTO's provisions relating to anti‑dumping.36
Japan reminds the Panel and the United States of the fact that the United States itself successfully advanced a similar argument in India – Patents. The panel noted that, in that proceeding, the United States argued as follows:
"[…] The Superfund case was thus relevant to this matter because it clarified that Members were obligated "to protect expectations" of other Members as to the "competitive relationship" between their respective products. […] [T]here was no need to wait for a violation to take place or speculate on whether it would take place, since the present case concerned a failure to take an affirmative action to implement a specific obligation in a WTO agreement."37
The United States notes that both Japan and the European Communities argue that the 1916 Act mandates a violation of WTO obligations. Although Japan did not further elaborate on this point, the European Communities argues in its third party submission that "several panel reports under GATT 1947 have found domestic legislation to run afoul of Article III GATT even before it had actually been applied, and, therefore, before any actual discrimination had taken place."
The United States considers that the European Communities misses the point with this argument. The European Communities is confusing an unenforced mandatory measure with a non‑mandatory measure. The United States does not dispute that a mandatory measure may be found to be WTO‑inconsistent before actual application or enforcement. The key question is whether the measure is mandatory or non‑mandatory.
The United States recalls that the European Communities also argues that "mandatory measures are those which, under national law, require the executive authority to impose a measure" implying that only measures enforced through the executive branch could ever be considered under the mandatory/non‑mandatory distinction. The European Communities cites the United States - Denial of Most-Favoured-Nation Treatment As to Non-Rubber Footwear from Brazil case as support.38
34 Japan refers to the Appellate Body Report on India – Patents, paras. 56-57.
35 Japan refers to United States – Taxes on Petroleum and Certain Imported Substances, adopted on 17 June 1987, BISD 34S/136, para. 5.2.2. Japan notes that the panel emphasized the need for certainty and predictability.
36 In response to a question of the United States regarding what is the legal basis for Japan's statement that "the mere potential of WTO inconsistency is sufficient to establish a violation […]," Japan notes that the legal basis can be found in the panel and the Appellate Body reports on India Patents (on "sound legal basis") and United States – Tobacco (and panel reports cited therein) as well as Article XVI:4 of the WTO Agreement and Article 18.4 of the AntiDumping Agreement. The mere potential of WTO-inconsistency establishes a violation in light of these WTO provisions and precedents.
37 Panel Report on India - Patents, Op. Cit., para. 4.28.
38 The United States refers to the Panel Report on United States ‑ Denial of Most-Favoured-Nation Treatment As to Non-Rubber Footwear from Brazil, adopted on 19 June 1992, BISD 39S/128 (hereinafter "United States – Non-Rubber Footwear").