The chapeau of the general exceptions in the WTO GATT and GATS agreements: a reconstruction.

Author:Bartels, Lorand Alexander
Position:General Agreement on Trade in Services

One of the most important issues in the law of the World Trade Organization is the right of WgTO members to adopt measures for nontrade purposes. In the WTO's General Agreement on Tariffs and Trade (GATT 1994) and General Agreement on Trade in Services (GATS), this right is secured in general exceptions provisions, (1) which permit WTO members to adopt measures to achieve certain objectives, notwithstanding any other provisions of these agreements and also, in some cases, other WTO agreements. (2) These objectives include, most importantly, the protection of public morals, the maintenance of public order, (3) the protection of human, animal, or plant life or health, the enforcement of certain domestic laws, and the conservation of exhaustible natural resources. (4)

The right to adopt measures for these purposes is subject to various conditions, some of which are specific to the objective at issue. For example, a measure for conserving exhaustible natural resources needs to "relate to" that objective and be "made effective in conjunction with domestic restrictions on production or consumption of those resources," (5) whereas a measure for protecting public morals must be "necessary" to that objective. (6) In addition--and this is the topic of this article--the right to adopt these measures is subject, in both GATT 1994 and GATS, to a set of conditions in an introductory paragraph to their general exceptions provisions, known as the "chapeau." The chapeau provides that a measure that is adopted for one of the legitimate objectives listed in the subparagraphs of these provisions not be "applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade." (7)

The conditions in the chapeau have proved decisive in a number of disputes in which the measures at issue, though adopted for legitimate reasons by the respondent WTO members, were found to discriminate arbitrarily or unjustifiably, or both, against the products or services of the complainant WTO members. For example, in U.S.--Gasoline, the United States was permitted to impose certain standards on gasoline in order to protect clean air, but it had done so in a manner that discriminated unjustifiably against Venezuelan gasoline. (8) In U.S.--Shrimp, the United States was entitled to prohibit imports of shrimp so as to protect sea turtles, but it had done so in a manner that discriminated arbitrarily and unjustifiably against shrimp from India, Malaysia, Pakistan, and Thailand. (9) In U.S.--Gambling, the United States was allowed to prohibit online gambling services from Antigua and Barbuda on public morals grounds, but its measure violated the chapeau because it permitted some domestic remote horserace-betting services. (10) In Brazil--Retreaded Tyres, Brazil was allowed to prohibit imports of retreaded tires in order to combat the spread of malaria and dengue fever, but it had arbitrarily and unjustifiably made an exception for imports of retreaded tires from MERCOSUR countries. (11) Most recently, in EC--Seal Products, the European Union was permitted to prohibit seal products on public morals grounds, but because of certain exceptions in its measure, including an exception for seal products resulting from traditional indigenous hunts, it had discriminated arbitrarily and unjustifiably against seal products from Canada and Norway, including seal products hunted by Canadian traditional indigenous hunters. (12)

These disputes have given the chapeau a high profile, and yet it is still not clear what it requires. In the first of these disputes, U.S.--Gasoline, the Appellate Body made two statements about the chapeau that have acquired doctrinal status. The first was that a measure's "specific contents" are to be appraised under the subparagraphs of the general exceptions, whereas the chapeau is concerned with "the manner in which that measure is applied." (13) The second statement, taken to be an implication of the first, was that "[it] is, accordingly, important to underscore that the purpose and object of the introductory paragraph of Article XX [that is, the chapeau] is generally the prevention of 'abuse of the [general] exceptions.'" (14)

It is the contention of this article that neither of these statements accurately captures the various functions of the chapeau. Indeed, these statements do not even explain how the Appellate Body has applied the chapeau to the facts of any of the disputes before it, including, notably, U.S.--Gasoline itself.

Instead, it is suggested, the chapeau can be understood as comprising a set of standard economic and policy tests. These tests are in the form of two conditions. The first condition prohibits measures that discriminate arbitrarily or unjustifiably between countries where the same conditions prevail. This condition involves, in the first instance, a prohibition on any measure that has a disproportionately worse (or "disparate") economic impact on products from certain countries when compared to its impact on competitive products from other countries. (15) This prohibition applies, however, only to disparate impacts on competitive products from countries in which the "same conditions prevail." Assuming that these "conditions" are based on factors relevant to the objective of the measure, (16) the "same conditions" will not prevail in countries where these factors are relevantly different, and the chapeau's discrimination test will not be applicable. In this sense, the "same conditions" requirement functions as a justification, based on the objective of the measure, for disparate impacts that are rationally related to that objective. But even where the "same conditions" do "prevail," it is still possible to justify the disparate (now, almost certainly, "discriminatory") effects of the measure. That is because the chapeau explicitly prohibits discrimination only if it is "unjustifiable or arbitrary discrimination." This second justification for discrimination, it is argued, is necessarily independent of the objective of the measure, and may even--and should be able to--undermine that objective. The effect of these dual justifications is to enhance the regulatory autonomy of WTO members.

The second condition in the chapeau prohibits measures that are applied in a manner constituting a "disguised restriction on international trade." This condition has so far mainly been ignored by WTO panels and the Appellate Body, perhaps because of a lack of certainty as to its meaning. It has, for example, been thought that a restriction on trade is "disguised" by not being published. Such interpretations, it is suggested, miss the point. It seems far more likely that this condition concerns illegitimate restrictions on international trade that are "disguised" by an ostensible legitimate objective. It remains to be seen what would render a restriction on international trade illegitimate for these purposes, but it might be suggested that, at a minimum, a measure that is adopted for explicit protectionist reasons would be illegitimate for these purposes.

This article proceeds as follows. Part I considers the Appellate Body's approach to the chapeau. It argues that the Appellate Body has incorrectly distinguished between the "contents" and "application" of a measure, and it explains why the doctrine of abuse of rights does not generate any bright line between the subparagraphs and the chapeau. Part II highlights the functional similarities of the conditions in the subparagraphs and in the chapeau. It argues that both sets of conditions function to limit the right to adopt measures for legitimate reasons and that the only reason that some of these conditions are located in the subparagraphs and others in the chapeau is that some conditions are specific to measures adopted for certain reasons, whereas others are horizontally applicable to all measures adopted under the general exceptions. More specifically, this second part argues that it is inappropriate to consider a measure's discriminatory aspects under the subparagraphs and that this question should be left for analysis under the chapeau. This conclusion sets the stage for an analysis, in part III, of the meaning of the discrimination test in the chapeau, and of the relationship of that test to the discrimination tests in the substantive obligations of GATT 1994 and GATS. Part IV presents in more detail the argument, summarized above, that the chapeau contains two independent, policy-based justifications for measures with discriminatory effects. This fourth part also expands on the meaning of "arbitrary" discrimination. It argues that this concept does not have any procedural dimension but simply refers to discrimination without any rationale, as opposed to discrimination that has some rationale, albeit insufficient to serve as a justification. Part V addresses the second chapeau condition concerning measures that constitute a "disguised restriction on international trade," and draws out its implications for measures with mixed proper and improper purposes. Part VI concludes with some observations on the implications of this analysis for WTO jurisprudence to date, and for the types of measures that are likely to be analyzed under the chapeau in the future.


    The Appellate Body's approach to the chapeau essentially resolves into two propositions. The first is that the subparagraphs of the general exceptions are concerned with a measure's "contents" and the chapeau with its "application" in practice. The second is that the subparagraphs are concerned with the right to adopt measures for nontrade reasons and that the chapeau is concerned with the abuse of that right. It is contended that the first proposition is without foundation, while the second proposition does not generate the...

To continue reading