lakiteksti1_lop.pmd

Nordic Journal of Commercial Law, issue 2004 #1

NON-IMPLEMENTATION OF WTO DISPUTE SETTLEMENT DECISIONS
AND LIABILITY ACTIONS

Mervi Pere

Nordic Journal of Commercial Law
issue 2004 #1

Nordic Journal of Commercial Law, issue 2004 #1

1. INTRODUCTION

1.1. Non-implementation of WTO Dispute Settlement Decisions and Liability Actions

The World Trade Organization was established in 1995 and the European Community and its Mem-
ber States became thereby bound by an over whelming number of international obligations in the
field of international trade. The entering into force of the WTO Agreements has been followed by a
f lood of cases to the European Court of Justice where the applicants have attempted to challenge
Community law provisions on the basis of the international obligations imposed on the Community
by virtue of the provisions of the WTO Agreements and the decisions made in the framework of the
WTO dispute settlement mechanism.

The case law of the ECJ concerning the effect of WTO law in the Community legal order has been
characterised by ‘judicial self-restraint’ and deference to the discretion of the political and executive
institutions of the Community. As a general rule, the possibility of private parties to challenge Com-
munity measures on the basis of WTO law has been ruled out. Under some circumstances WTO
provisions, however, may become available to private parties. The reluctance of the Court to let
private parties to rely on WTO law may, however, sometimes lead to situations the acceptability of
which can be questioned from the point of view of effective judicial protection of the rights of indi-
viduals.

The transatlantic disputes concerning the banana import regime of the EC and the Community’s
ban on importation of beef from cattle treated with hormones are notorious. The WTO dispute
settlement organs condemned the Community measures in the Bananas1 and Hormones2 cases but the
EC failed to amend its legislation to comply with WTO law. As an European, one might to sympathise
with the EC for protecting the health of its citizens and refusing to lift the ban on importation of
hormone-treated meat. There is, however, more at stake than the respect of international commit-
ments. The non-compliance by the Community also causes damage to private businesses operating
within the Community. Most tangibly the consequences of the Community’s WTO-illegal behaviour
have affected the Community businesses that have suffered heavy losses in face of the retaliator y
measures resorted to by the United States under the authorisation of the W TO Dispute Settlement
Body (DSB).

Article 288(2) EC provides that in the case of non-contractual liability, the Community shall be held
liable for the damage caused by its institutions or by its servants in the performance of their duties.
Recently, several actions for damages under this Article have been brought by private parties in order
to claim compensation for the damage they have suffered due to the WTO-illegal behaviour of the
Community. These cases are connected to the non-implementation of the international obligations
imposed on the Community in the Bananas and Hormones cases by the W TO dispute settlement
organs. Only a few of the cases have led to a judgement so far, and these are the first cases dealing
with the issue of whether private entities can invoke WTO law in the context of actions for damages.
These cases and their chances of success are the main subject of this article.

The Court has rejected all the actions it has dealt with so far and the chances of success of the future
actions do not seem very high. First, we are dealing with WTO law and the Court has been ver y
reluctant to let private parties to rely on it. Second, it has been extremely rare that actions for dam-
ages under Article 288(2) EC have succeeded. The problem is, however, worth discussing. First of all,
an Advocate General recently suggested that individuals should be allowed to rely on WTO law in
liability actions under some circumstances where non-implementation by the Community of DSB
decisions is involved3. The ECJ did not explicitly accept or reject such a suggestion but the question

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remains an open one. Moreover, there have recently been some signs of relaxation of the extremely
strict criteria for Community liability.

1.2. Focus and Structure

The relationship between the WTO and the European Community is a complicated issue, as was
already the relationship between the predecessor of WTO, GATT 1947, and the EC. At the interna-
tional level the EC, as all the other signatories, is bound by the WTO Agreements according to the
rules of public international law. The effect of WTO law at the national level is, however, to be
determined by the legal orders of each member (state) of the organisation. In general terms this
article concentrates on the relationship of the two organisations from the point of view of how the
effect WTO law has been seen and determined in the EC legal order.

More specifically, the article will focus on the issue whether private parties can invoke WTO dispute
settlement decisions in liability actions. The jurisprudence of the European Courts concerning the
possibility of private parties to challenge Community law provisions on the basis of WTO law and
the effect of the case law on liability actions will be in the centre of the attention. Of particular
importanc for the purposes of this article are the cases involving W TO dispute settlement decisions.

It is also necessary to examine the rules governing the non-contractual liability of the Community to
some extent. This will be done mainly to explain what requirements those rules set on the rule to be
relied on in a liability action and whether the WTO law provisions can fulfil such requirements.
There are three general conditions that have to be met in order for the Community to incur liability:
unlawfulness of the conduct of the institutions, the existence of damage and a causal link between
the first two. As the fulfilment of the two latter conditions may depend significantly on the circum-
stances of an individual case, they will be only briefly described in order to give a full picture of the
conditions of liability but remain otherwise outside the scope of this study. The condition of unlaw-
fulness will be given more attention, especially as to what requirements they set on the nature of the
rule breached.

The applicants that have brought liability actions and claimed compensation for the damage they
have suffered due to the non-implementation by the Community of WTO dispute settlement deci-
sions have also relied on fundamental principles of Community law as a foundation for their actions.
Such pleas will, however, mainly remain outside the scope of the article as it concentrates on invoca-
tion of W TO law.

The main purpose of the article is to assess the problem whether, and under what circumstances, can
private parties benefit from WTO dispute settlement outcomes in liability actions that involve non-
implementation by the Community of a ruling or recommendation made by the WTO Dispute
Settlement Body.

To be able to examine this problem properly, it is necessary to first shed some light on the position of
individual in respect to WTO law in the Community legal order and assess how private parties may
benefit from the WTO law in general. Second, and more importantly, it will be analysed if, and how,
the means available to invoke WTO can be used by individuals to enforce adopted WTO panel and
Appellate Body reports in case the EC does not comply with them. The analysis thereby also attempts
to shed some light on the level of judicial protection of the individual in the European Community
legal order with regard to WTO law and WTO dispute settlement decisions in particular. The aim is
to find out whether a “judicial deficit” exists in the Community system for the protection of individu-
als in case of adopted WTO panel and Appellate Body reports and whether there is a need for the

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remedy under Article 288(2) EC as one of its functions of which has considered to be to compensate
for such a “judicial deficit”.

The Parts 2 and 3 also describe and explain the rather special characteristics of the jurisprudence of
the ECJ relating to the general lack of justiciability of WTO law. In order to assess the chances of
success of liability actions brought by private parties against the Community institutions to get com-
pensated for the loss they have suffered due to the non-implementation by the EC of WTO dispute
settlement findings, it is necessary to assess how these decisions have been treated by the Court and
what arguments have been brought up. Some attention will be given to the underlying reasons for the
stance taken by the Court but the purpose of this paper is not to go very deep into the discussion of
the reasons in political-economic level.

Part 4 discusses some relevant characteristics of the action for damages under Article 288 (2) EC. It
attempts to give a general over view to the position of the form of action in the Community system of
judicial protection and takes into account the recent developments in the case law. The conditions
for bringing a successful liability action will be described briefly in order to get a full picture of the
requirements to be fulfilled. It is necessary to describe the general characteristics of the action in
order to illuminate what is at issue in the actions for damages brought due to the non-implementa-
tion of DSB decisions by the Community and how such actions differ from actions for annulment.

Part 5 presents the most important cases that deal with the issue of whether private parties may rely
on W TO law in the context of liability actions and involve non-implementation by the Community
of DSB decisions given in Bananas and Hormones cases. Particularly important are the recent Biret
cases4 and they will be given particular attention.

Part 6 deals the issue of invocation of WTO law in actions for damages in more detail. It discusses
how the general rules developed in the actions under Art. 230 and Art. 234 EC affect liability ac-
tions. First it is determined, whether it is necessary for a provision of international law to be directly
effective to be invoked in a liability action. The second issue is whether private parties can benefit
from the Nakajima doctrine in liability actions in case of non-implementation of DSB decisions. The
third issue relates to the Biret cases, which could be interpreted to imply that private parties might be
allowed to rely on DSB decision in actions for damages under some circumstances. Such a potential
effect of DSB decisions will be discussed in light of the reasoning on which the Court has based its
stance to the effect of WTO law. Of great importance to this discussion is the Opinion of Advocate
General in Biret.

Part 7 makes some observations on whether the applicant can establish the unlawfulness of the
behaviour of the Community institutions in a case where the DSB has confirmed the WTO-noncon-
formity of Community action as the criteria for Community liability require. First, it will be dis-
cussed whether the condition that the rule of law relied on is intended to confer rights on individuals
can be met when a WTO rule is invoked. This condition is crucial for the purposes of this article.
Second, it will be discussed the main aspects that have to be taken into account in establishing that
the breach has been sufficiently serious for the purposes of a liability action. This is important mainly
to understand whether unlawfulness could be established when the Community institutions have
failed to implement a WTO dispute settlement decision.

1.3. Method and Sources

The article is based on the analysis of the case law of the European Court of Justice and the Court of
First Instance and on the interpretations presented by commentators of that jurisprudence. Most

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important cases dealt with are the ones establishing the rules on the relationship between the WTO
law and the Community legal order on the one hand, and the ones determining the conditions of the
non-contractual liability of the Community on the other. In the centre of the focus are the cases,
which deal with both issues. Particular attention is given to the recent Biret case and to the Opinion
of Advocate General Alber preceding the judgement of the ECJ in that case.

The relationship between the WTO and the EU is a controversial issue, which is well illustrated by
the occasionally peculiar, and most certainly debatable case law of the ECJ. It has provoked intense
discussion and an abundance of articles. Most helpful in f leshing out how private parties can rely on
WTO law in Community courts has been a recent and comprehensive article by Snyder5. The present
author will attempt to use other articles in such a way that the main lines of reasoning are taken into
account. By contrast, the potential liability of the Community for infringements of its international
agreements has been a neglected issue in the literature. The liability of the EC for non-implementa-
tion of DSB decisions has been discussed by Zonnekeyn6 and Reinisch7 and also briefly by Peers8 and
Davies9, and these articles provide for the main guidance of the analysis. Several articles and books
concerning the conditions of Community (also Member State) liability in general will be used to
obtain a more profound picture of the problem10.

2. WTO AGREEMENTS AND THE INDIVIDUAL IN THE EC LEGAL ORDER

2.1. The Status of International Agreements in the EC Legal Order

The EU’s constituent Treaties lack provisions clearly stating the relationship between international
law and Community law. Article 300(7) EC provides that international agreements of the Commu-
nity “shall be binding on the institutions of the Community and on Member States.” As to the
effects of international law in the Community legal order, the Treaties remain silent. Neither are
there provisions on how international law should enter the EC legal order, or of possible review of
legality in the light of international law.11 In the absence of legislative guidance, it has been up to the
European Court of Justice to determine the relationship between international and Community law.

One of the basic rules developed in the jurisprudence of the ECJ relates to the hierarchical position
of the international agreements of the Community. On one hand, the provisions of international
agreements should be compatible with the founding Treaties. On the other hand, they are superior
to the secondar y legislation of the Community12. Infringement of the international obligations of
the Community is thus, in principle, one of the possible grounds for finding acts of the institutions
invalid. Moreover, international agreements concluded under Article 300 EC have been considered
as acts of institutions. Their provisions form “an integral part of Community law” from the moment
of their coming into force13.

When an international agreement of the Community becomes a part of Community law, it also is
touched by the unique features of the system. Thereby it can be attributed with direct effect if certain
conditions are met14. In the Kupferberg case the Court ruled that a provision of a free trade agreement
with Portugal was directly effective, since the provision was unconditional, sufficiently precise, and
its direct application was within the purpose of the agreement15. If direct effect is established, the
agreements become enforceable also at the domestic level, and not only at a purely international
level, and individuals become able to invoke the provisions of such treaties before national and
Community courts.16

2.2. Routes of Action

Private parties may attempt to challenge Community law provisions on the basis of WTO law mainly
in three ways. First, private parties are non-priviledged applicants in an action for annulment pro-

Nordic Journal of Commercial Law, issue 2004 #1

vided in Article 230 EC. The conditions for admissibility have been difficult to fulfil and the situa-
tion remains the same also in the light of the recent case law17. Second form of action available is the
action for damages under Article 288(2) EC. Liability actions for a breach of WTO law, based in
particular on the rulings made in the context of WTO dispute settlement mechanism, have lately
increased in number. The third and a common route has been an indirect action. Private parties can
initiate proceedings in national courts and claim that national or Community measure are incompat-
ible with W TO law. The domestic court may, or in some occasions must, then make a referral to the
ECJ.

2.3. Exclusion of ‘Direct Effect’ of WTO Agreements

2.3.1. ‘Legalisation’ of the GATT/WTO System

Ever since the International Fruit Company case18 decided in 1972 the Court has been reluctant to let
individuals to rely on GATT/WTO law. In that case the ECJ held that the GATT 1947 agreement
was not directly effective and upheld its case law firmly during the existence of the old system. The
establishment of the WTO and the new GATT 1994 provoked many scholars to argue that the
premise on which the GATT was held to lack direct effect could no longer exist due to the significant
‘legalisation’ of the system19.

The main argument of the Court regarding the old GATT was that the dispute settlement provisions
were characterised by a great degree of flexibility. The W TO Agreements certainly are a significant
upgrade of the old GATT system, with several new extensions.20 First and foremost, the dispute
settlement system was dramatically reformed and virtually turned into a (quasi-)judicial procedure21.

2.3.2. Portugal v. Council

The Portugal v. Council case22 was an action for annulment under Article 230 EC introduced by
Portugal against a 1996 Council Decision23 on the conclusion of agreements between the Commu-
nity and India and Pakistan concerning the arrangements in the area of market access for textile
products. The Portuguese Government alleged that the implementation of these agreements adversely
affected its textile industry and claimed that the contested decision constituted a breach of WTO
law, in particular of certain rules and fundamental principles of GATT 1994, the Agreement on
Textiles and Clothing and the Agreement on Import Licensing Procedures.

The ECJ decided in its judgement in 1999 to uphold its old GATT 1947 case law and refused to
review Community law in light of WTO obligations. It came into a firm conclusion that “having
regard to their nature and structure, the WTO agreements are not in principle among the rules in the
light of which the Court is to review the legality of measures adopted by the Community institu-
tions24.” It is notable that the Court did not explicitly use the term direct effect in its final conclusion.
Neither were the arguments of Portugal based on the claim that the WTO Agreements had direct
effect. Instead, it tried to distinguish the whole question of direct effect from its assertion that Mem-
ber States should be allowed to assert WTO law as a basis for evaluating the validity of Community
law.25

Although the procedure concerned a direct action brought by a Member State, it is clear that the
reasoning of the ECJ was so fundamental that the position it took can be applied in all relevant
procedures. The same rules are applied when individuals challenge EC law in actions for annulment
or when they bring an action to national courts relying on W TO law and the domestic court refers
the case to the ECJ26. It is now utterly clear that the main rule is that the WTO agreements cannot

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be relied on by individuals to review the legality of the acts of the European Community in national
or in Community courts.

The jurisprudence of the Court concerning GATT/WTO law has, on occasion, been harshly criticised
by commentators partly on the basis that it differs significantly from how other international agree-
ments have been dealt with in the case law. Why is the Court so reluctant as regards recognising the
direct effect of WTO agreements? Are there sound (legal) reasons for such reluctance?27 The Court
based its judgement in Portugal partly on new arguments as the Uruguay Round Agreements had
done away with many of the arguments relied on by the Court to deny direct effect to GATT provi-
sions. It underlined the nature of the WTO as a forum for intergovernmental negotiation between its
members, and that the WTO Agreements themselves did not determine how they should be imple-
mented but let this to be determined according to the national legal orders of its Members.

2.4. Why Are WTO Agreements not Justiciable?

2.4.1. WTO Agreements Do Not Determine How They Should Be Implemented

The Court began in Portugal by indicating that it was only where an international agreement did not
itself settle what effects it has in the internal legal order of the contracting parties that such effects
would fall to be decided by national courts. The Uruguay Round negotiations did not result in any
explicit provision on the effect of WTO Agreements in the domestic legal orders of the contracting
parties. The Court needed thus to examine whether the WTO Agreements otherwise determine how
they should be implemented on the national (or Community) level. It found that, even though the
agreements differ significantly from the provisions of GATT 1947, “in particular by reason of the
strengthening of the system of safeguards and the mechanism for resolving disputes, the system re-
sulting from those agreements nevertheless accords considerable importance to negotiations between
the parties28.”

The ECJ then went on to examine the nature of the WTO dispute settlement mechanism and found
that, although the main purpose of the mechanism is to secure the withdrawal of the measures in
question if they are found to be inconsistent with WTO rules, the W TO Dispute Settlement Under-
standing (DSU) provides that where the immediate withdrawal of the measures is impracticable
compensation may be granted on an interim basis29. Next it concluded that the DSU provides that
when a member fails to fulfil its obligation to implement the rulings, the DSB shall, if so requested,
enter into negotiations, with a view to finding a mutually acceptable compensation30. Consequently,
the Court reached the conclusion that “to require the judicial organs to refrain from applying the
rules of domestic law which are inconsistent with the WTO agreements would have the consequence
of depriving the legislative or executive organs of the contracting parties of the possibility afforded by
Article 22 of that memorandum of entering into negotiated arrangements even on a temporary
basis31.” As a result, the ECJ found that the WTO agreements do not determine the appropriate legal
means of ensuring that they are applied in good faith in the legal order of the contracting parties32.

2.4.2. Lack of Reciprocity

Next, the ECJ turned to the Community legal order and assessed whether it provides grounds for
using WTO agreements as a basis for judicial review of Community acts. It refused the possibility of
such a review relying on the lack of reciprocity on the part of the Community’s trading partners in
the performance of the agreements. According to the Court, WTO agreements are based on recipro-
cal and mutually advantageous arrangements, and the lack of reciprocity in their implementation
might lead to disuniform application of the W TO rules33. Moreover, if the Community judicature
were to ensure that Community law complies with W TO rules, it would “deprive the legislative or

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executive organs of the Community of the scope for manoeuvre enjoyed by their counterparts in the
Community’s trading partners34.”

If the ECJ had opened the door for actions brought by private parties invoking the WTO law it
would have bound the Community far more strongly to the W TO Agreements than is the case in its
main trading partners. Such a strengthened enforceability as the empowerment of individuals would
lead to would be more than the Community is required to do under public international law. The
reciprocity argument is undoubtedly political in nature but, nevertheless, rather convincing. If the
Community judiciar y tied the hands of the political and executive institutions by allowing direct
effect to WTO law the EC could end up in a disadvantageous position. The benefits of its legal
system could be exploited by others while the EC, and the exporters of EC goods, would be faced
with the limited enforceability in domestic courts of other contracting parties. This could also limit
the “bargaining power” of the Community and put it in a more difficult external position.35

2.4.3. Institutional Balance

The ECJ rejected the request of Portugal essentially because a legal review by the Court of WTO
Agreements would bind the legislative and executive organs of the Community so that they would no
longer enjoy similar room for manoeuvre as similar bodies of the Community’s major trading part-
ners36. Reciprocity is the cornerstone of the judgement but, in the end, it is not reciprocity as such
which leads the Court to deny direct effect to W TO law. Instead, it is the constitutional concern of
the impact of potential direct effect on the political institutions of the Union.37

The Court is clearly willing to leave a considerable amount of discretion to the political organs of the
Union with regard to WTO law. The ‘judicial self-restraint’ exercised by the Court is based on the
premise that the legislative and executive institutions should have the dominant roles in the field of
foreign policy38. Empowering private actors (and also courts at the same time) in the enforcement of
WTO law by allowing individuals to rely on the agreements would deprive the legislative and execu-
tive organs of the Community of a considerable part of the discretion they would otherwise enjoy.
There is thus an apparent conf lict between foreign policy discretion and the judicial protection of the
‘rights’ that international law might confer to individuals39.

The Court has been criticised for its concern of tying the hands of the EU’s legislative and executive
institutions. It allegedly went so far that the respect for the principle of trias politica can hardly be
traced in the judgement40. Perhaps the reluctance of the Court to interfere with the political institu-
tions of the Union can be seen as overt judicial policy-making but, as Eeckhout suggests, the large
discretion the Court had in the case could only be filled through judicial policy-making41.

Considerations of a level playing field in external relations, have been claimed to be especially crucial
concerning the EU since it is one of the major powers, and therefore bears a lot of global responsibil-
ity42. By denying direct effect to WTO agreements, the EU reserves itself a chance to take into ac-
count non-economic values in its actions to a wider extent than it could if a categorically monist
approach to WTO norms would have been accepted. It is clear that the W TO as it is now concen-
trates clearly on trade issues. Human rights, labour and environmental issues, on the other hand,
have been taken into consideration in a rather modest way, at least compared to the EU, although it
is clear that such an extremely comprehensive trade regime inevitably has effects on those concerns.43

Thus, by limiting the enforceability of the WTO law on the national level, the EC reserves itself the
right to take those values, or public interest, into account44.

The interpretation of the Court corresponds with the explicitly stated will of the Council expressed

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in the preamble of its decision concluding the WTO agreement. It declared as follows: “by its nature,
the Agreement establishing the World Trade Organisation, including the annexes thereto, is not
susceptible to being directly invoked in Community or Member State courts”45. Advocate General
Saggio doubted the legal relevance of the statement at the Community level46. He concluded that it is
the responsibility of the judiciary to ensure that the international obligations of the Community are
respected by the institutions and the Member States and the Council may not by an act of secondary
legislation limit the Court’s jurisdiction. Thus, the preambular statement is, according to Saggio,
simply a policy statement and cannot affect the jurisdiction of the Community or national courts to
interpret and apply the WTO Agreements.47

The Court stated that it found its interpretation to correspond with what was stated in the preamble
to the Council Decision on the effect of the agreements. The Court was rather careful though, and
did not rely on the wording of the statement as a decisive factor for its conclusion but merely stated
that its conclusion corresponds with it, which still leaves the significance of the Council declaration
debatable.48 It appears to be in any case more relevant in the Court’s view than many would argue.

2.4.4. The Nature of the W TO Agreement

The ECJ pointed out in Portugal that the WTO Agreement is founded “on the principle of negotia-
tions with a view to entering into reciprocal and mutually advantageous arrangements and is thus
distinguished, from the point of view of the Community, from the agreements concluded between
the Community and non-member countries which introduce a certain asymmetry of obligations, or
create special relations of integration with the Community49.” By this statement the Court attempted
to distinguish the W TO Agreements from other Community agreements, to which significantly
different rules seem to apply.

The EC’s bilateral agreements have concerned trading partners with which the EC traditionally has
close ties with, such as parties to Association Agreements50 or parties to the Yaound– Convention51.
In contrast to the WTO Agreements, the parties to such agreements were in a weaker bargaining
position than the Community, so that the EC has the economic and political means of encouraging
compliance. Often in the case of the agreements in question it has also been an intention of the
Community to create specific rights and advantages for the other party. 52

Even though there are features that characterise the international agreements that have been consid-
ered directly effective that distinguish them from the multilateral WTO Agreements, the reasoning
of the Court is not difficult to criticise53. For instance Eeckhout finds it the least convincing part of
the judgement54. The legal reasoning of the ECJ may be poor but the scope importance of the new
organisation is undoubtedly enormous. The Uruguay Round Agreements, indeed, are fundamen-
tally different from the other international agreements of the Community. They brought enormous
subject areas of national economic regulation under GATT/WTO discipline and subjected the whole
to a new and far more binding dispute resolution system55. The agenda of the WTO is also expand-
ing and unpredictable, especially since the decision-making power of the WTO panels and Appellate
Body are relatively autonomous56. The agreements therefore require a complex balance of powers
among the Community institutions57.

2.5. Nakajima Doctrine

2.5.1. Establishment and Reconfirmation of the Doctrine

The application of the Nakajima doctrine involves a situation where a provision lacking direct effect
becomes applicable for other reasons58. The exceptional situations where the WTO law has been

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allowed a stronger enforceability in EC law were introduced in the Fediol59 and Nakajima60 cases. The
continued relevance of the doctrine after the establishment of the WTO was confirmed in Portugal.
There the exception to the general rule that the Court does not review the lawfulness of Community
measures in the light of WTO rules was defined in the following terms:

“It is only where the Community intended to implement a particular obligation assumed in the
context of the W TO, or where the Community measure refers expressly to the precise provisions of
the WTO agreements, that it is for the Court to review the legality of the Community measure in
question in the light of the WTO rules61.”

The first limb of the exception deals with a situation where the Community has intended to imple-
ment a particular obligation deriving from WTO law. This type of effect of the GATT/WTO law was
introduced by the Court in the Nakajima case, which concerned anti-dumping measures62. The claim
was that the Community’s basic anti-dumping legislation did not comply with the rules of the GATT
Anti-Dumping Code. Its purpose was to get individual anti-dumping measures annulled as unlawful
and inapplicable pursuant to Article 241 EC. The ECJ did not consider direct effect relevant in the
case but held that the Community was under an obligation to ensure compliance with the GATT
provisions and its implementing measures. Therefore it could review the latter in the light of their
parent measure.63

Private parties are also allowed to challenge Community measures on the basis of WTO law where
the implementation measure explicitly refers to a precise WTO law provision. This second limb of
the exception derives from the Fediol case. The case concerned the so-called New Commercial Policy
Instrument by virtue of which companies could bring complaints to the Commission alleging that
third countries engaged in illicit commercial practices incompatible with GATT rules. The ECJ ruled
that such companies are entitled to request the Court to exercise its powers of review over the legality
of the respective Commission decisions in light of the GATT rules64.

Even though the Court has frequently recognised the Nakajima principle, they have tended to avoid
applying it by their interpretation of WTO law65. It is of great importance to note that the ECJ
recently strengthened the principle in Petrotub66 where it applied the principle to a Council regulation
imposing definitive anti-dumping duties. The case is an example of the application of the first limb of
the exception. The Court found that the Community adopted the concerned basic regulation in
order to satisfy its obligations arising from the 1994 Anti-Dumping Code and intended to implement
particular obligations laid down in it. Consequently, it was for the Court to review the legality of the
Regulation imposing definitive anti-dumping duties in the light of those particular obligations of the
GATT Anti-Dumping Code.67 Most striking and unusual element of the case is that the ECJ, indeed,
found that there was an inconsistency between the Community measure and the WTO provision
and, consequently, annulled the Regulation.

2.5.2. Scope of Application

The scope of application of the Nakajima doctrine is not entirely clear. When does an intention to
implement a particular obligation undertaken in the framework of the WTO exist? Could the Com-
munity institutions prevent the application of the exception by simply keeping in mind not to explic-
itly refer to the international obligation in Community legislation? There are two approaches to the
Nakajima doctrine, which give somewhat different answers to these questions.

According to the first approach, even under the first limb of the exception the source of the particu-
lar obligation must be identified with reference to the relevant WTO Agreement or the dispute

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settlement report68. In this view the second limb would apply where reference is made to a precise
provision in an Agreement, or to precise findings made in a report. This view, arguably, finds support
in the Nakajima and Petrotub cases as the Court ruled in both cases that there was an “intention to
implement” because there was a reference to the GATT Anti-Dumping Code in the Preamble of the
basic anti-dumping regulation69. This approach means that the scope for application of the doctrine
can be controlled by preambular language and is thus within the discretion of the institutions.70

The second approach is more receptive towards the principle. It suggests that the Nakajima exception
may apply when the intent to implement can be determined from the context of the adoption of a
measure. Consequently, there may be cases of intention to implement even where there is no refer-
ence to a particular WTO provision71. This is supported by the fact that the Court consistently refers
to two distinct implementation exceptions72. Zonnekeyn advocates for this view and suggests that a
rational reading of Nakajima reveals that the ECJ used a contextual and teleological approach in the
case. Consequently, an omission to refer to a particular WTO law obligation in a Community act
would not suffice to prevent the application of the exception.73 The case Italy v. Council supports this
approach since there the intention to implement was determined from the context of the adoption of
a measure74. Moreover, the requirement of an express referral would appear to conflict also with the
case law on the duty to state reasons of the institutions75.

In my view, it cannot be ruled out that the Court could in the future apply the exception in the
absence of a referral to a particular obligation under WTO law. Even though such referral has been
involved in Nakajima and Petrotub, it cannot be concluded that the ECJ has limited its own discretion
in this regard and excluded the possibility of judicial review in the absence of such a referral. The first
approach clearly fully respects the discretion of the political institutions, which appears to be a cru-
cial element in the application of the exception. However, the institutions probably could also pre-
vent the doctrine as it is considered in the second approach from applying by avoiding all reference to
WTO law.76

The discussion described above shows that a reformulation of the Nakajima doctrine would be wel-
come to clarify under which circumstances it can be applied. In addition to the ambivalence of the
formulation “intended to implement”, the exact meaning of “a particular obligation assumed in the
context of the W TO” remains unclear and would require a more precise definition. Moreover, at its
present form, referring to obligations “the Community intended to implement” the formulation
seems to emphasise the intentions of the Community institutions rather than any legal obligations
that might be involved77. The last consideration might, though, correspond to the level of judicial
deference the Court has been willing to show to the political institutions of the Community.

The Nakajima case law78 can be seen to reflect the way the Court is seeking a balance between sover-
eign international discretion for the EC on one hand and judicial control and private interests on the
other79. The doctrine only applies where the Court is certain that the Community institutions have
legislated in order to transpose an international obligation into Community law. Making WTO law
available to private applicants under these exceptional circumstances does thus not limit the margin
of discretion the Court has been willing to leave to the political organs of the Community. The task
of assessing whether the international obligation has been correctly and completely transposed should,
however, be considered to be within the remit of the Court.80

The application of the Nakajima doctrine by the Court has, until recently, been minimalist. The re-
confirmation of the doctrine in Petrotub might imply, though, that the importance of the exception is
increasing and the ECJ is pointing the way for private parties to rely on it when they challenge
Community measures on the basis of WTO law. Such direction of the case law would be preferable

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as the doctrine offers a possibility for the Court to develop its case law to a more justifiable direction.

2.6. Other Exceptional Ways to Rely on WTO Rules

2.6.1. Consistent Interpretation

While the Nakajima doctrine deals with a clear conflict between Community law and WTO law, the
principle of consistent interpretation offers a less drastic approach. It sets the obligation to interpret
Community law, as far as possible, in the light of the obligations arising from international agree-
ments binding on the Community. The obligation derives from the primacy of international agree-
ments concluded by the Community over provisions of secondary Community legislation. The ECJ
has acknowledged that the WTO law forms a part of Community law for the purposes of this prin-
ciple and the obligation of WTO law consistent interpretation is thus well established as regards
interpretation of provisions of Community law81.

More recently, the obligation has been extended to cover also interpretation of national law in the
light of the W TO law. In Hermes International82, a case concerning TRIPS, the ECJ set an obligation
for the domestic courts to interpret national rules “in the light of the wording and purpose” of non-
directly effective provisions of international agreements. Thus, such provisions should operate in the
same way as in the case of non-directly effective directives.83

Consistent interpretation means that the interpretation of national or Community law should be
adapted to the international obligations of the Community irrespective of whether the obligation has
direct effect or not. As known from the context of indirect effect of directives, in certain circum-
stances the results of direct and indirect effect may very well be similar84. Even though indirect effect
is far less efficient in creating legal certainty than direct effect, it provides for an important way to
enforce WTO law if applied effectively.

The importance of consistent interpretation is, however, limited. The relevant EC or national legisla-
tion to be interpreted must, first of all, exist. If a provision exists, it must be sufficiently flexible to be
interpreted. The obligation does not apply if there is a manifest conflict between WTO law and the
provisions to be interpreted.85 Moreover, the ECJ has not usually been inclined to apply the principle
of consistent interpretation in cases involving challenges by private applicants to the validity of Com-
munity measures, which are allegedly contrary to international obligations. On the contrary, it has
been more typical for the Court to use the obligation to require Member States and their courts to
follow or give effect to international obligations.86 The issue of institutional balance arises again here.
A possible explanation for the selective use of the principle can be found in the reluctance of the
Court to interfere where the institutions have not considered that there is a conf lict between the
international obligations and Community law87.

2.6.2. Recent Evolutions

The ECJ appears to be willing to improve the enforceability of WTO law under certain circum-
stances. This is illustrated well by the statements it made in the Biotechnology case88. The case involved
an action brought by the Netherlands for the annulment of a directive on the legal protection of
biotechnological inventions89. The applicant pleaded, inter alia, that the obligations created by the
directive for Member States are in breach of the TRIPS Agreement.

The ECJ interpreted the plea as being a complaint by a Member State that the Directive required
them to breach their own obligations under WTO law90. It did not, however, find that the Directive
created any such obligations on the Member States. What is remarkable is that, as the Court will

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refuse to review compatibility in the case of a direct breach by the Community of its own obligations,
it will now review compatibility in case of an indirect breach which results in the Member States
having to depart from their international obligations91. It is questionable whether there is a tenable
distinction between a provision resulting in direct or indirect breach92.

In Dior/Tuk93 the ECJ opened the door for individuals to rely directly on any provision of WTO law
in shared competence areas within fields in respect of which the EC had not yet legislated when the
legal system of a Member State allows for such a direct effect94. However, as the Community extends
its legislative activities to areas of shared competence the opening of possible direct effect will be
closed again95. The obligation of domestic courts to closely co-operate with the Community Courts
probably renders the possibility of national courts giving direct effect to a specific WTO provision
rather remote anyhow, as the reasoning on the basis of which the ECJ has concluded that W TO
Agreements have no direct effect concerns the most essential aspects of the Agreements96.

2.7. Level of Protection of Individuals

There are major conflicts of interests involved as regards the effect of WTO law in the EC legal order.
On one hand, there is a clash between the rights of private parties and the discretion given to the
political bodies of the Community. On the other hand, promoting trade and non-economic values
do not always go hand in hand97. The margin of manoeuvre left to the institutions appears to be
crucial in balancing these interests. Limited enforceability allows the institutions a wide discretion in
transposing WTO obligations into Community legal order and thereby allows it to take into account
non-economic interests. The exceptions make WTO law available to private parties once the institu-
tions have clearly signalled the intention to implement WTO law within the Community legal order.
They are limited in their import and subject to a restricted interpretation.

The position of the ECJ with regard to the lack of direct effect of WTO Agreements appears to be
wise at least in terms of political economy98. The exceptional ways to rely on WTO law appear to be
a fair attempt to strike a balance between the conflicting interests involved. They make WTO law
available also for individuals and may prove nearly as effective as direct effect in integrating WTO law
in EC law.

Which areas of WTO law remain closed to individuals as a matter of EC law? The areas of exclusive
competence of the Community cover GATT in total and parts of GATS and TRIPS and much of
these areas fall under the Nakajima exception. As regards the shared competence areas of TRIPS, they
are said to be under “a shadow of indirect effect”. Consequently, any parts of GATT and the parts of
GATS and TRIPS within Community competence, concerning which EC legislation does not refer
to W TO provisions or transpose them into EC law cannot be invoked by individuals in the Commu-
nity courts. The same applies to the shared competence areas of GATS99.

Some are not, on the other hand, pleased with the situation. One commentator claims that the EC is
left almost without judicial control in the area of international trade100. It should, however, be born
in mind that the Community will usually bear harsh economic consequences of its allegedly protec-
tionist acts on the international law level after such measures have been condemned by the WTO
dispute settlement organs. The lack of direct effect of W TO law does not imply that the ECJ has
given the Community institution permission to breach WTO law.

The central problem related to this work is that individual undertakings may suffer heavily of WTO-
illegal action of the institutions condemned at the international level by the WTO dispute settle-
ment organs and the continued exercise of judicial self-restraint might deprive them of any possibility

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to have their rights enforced. It has been argued that the ECJ should strengthen the legal effects of
the findings of the WTO dispute settlement organs, as greater legal effects are the minimum require-
ment from the perspective of the principle of legality101. At the same time that for instance Snyder
argues in favour of “an appropriate balancing of constitutional values” that the exceptional ways to
rely on WTO law may prove nearly as effective as direct effect in integrating WTO law in EC law, she
admits that there is a major gap in Community law as regards adopted WTO dispute settlement
reports102.

3. WTO DISPUTE SETTLEMENT DECISIONS IN THE EC LEGAL ORDER

3.1. The Status of Rulings of Judicial Bodies Set by an International Agreement

The ECJ has confirmed that the EC may enter into an international agreement whereby a judicial
entity is established if the structure and jurisdiction of such entity is compatible with the EC Treaty103.
The Court made a statement on judicial systems for the settlement of disputes and on the relation-
ship of such systems with the Community law in Opinion 1/91 on the EEA Agreement, in which it
examined the compatibility of the proposed EEA court system with the Community law. In prin-
ciple, the compatibility of a system of courts flows from the general competence and capacity of the
Community to act in international level, or as the ECJ phrased it:

“The Community’s competence in the field of external relations and its capacity to conclude interna-
tional agreements necessarily entails the power to submit to the decisions of a court which is created
or designated by such an agreement as regards the interpretation and application of its provisions.”104

If an agreement to which the Community is a party establishes a judicial organ to settle disputes
between the Community and other parties to the agreement, the decisions of that organ will bind the
ECJ if the latter is required to rule on the meaning of the agreement as part of the Community legal
order105. However, the ECJ has established in its opinion that the Member States and the Commu-
nity institutions should ensure that the pre-eminent role of the ECJ under the Treaties will not be
prejudiced.106 It set up certain conditions under which it is bound by another court:

“Where, however, an international agreement provides for its own system of courts, including a court
with jurisdiction to settle disputes between the contracting parties to the agreement, and, as a result,
to interpret its provisions, the decisions of that Court will be binding on the Community institu-
tions, including the Court of Justice. Those decisions will also be binding in the event that the Court
of Justice is called upon to rule on, by way of preliminary ruling or in direct action, on the interpre-
tation of an international agreement, in so far as the agreement is an integral part of the Community
legal order”107.

By saying that, the ECJ emphasised the binding character of judicial decisions on disputes between
the contracting parties to an agreement108. Moreover, as the ECJ assumed the EEA agreement not to
be directly effective, it implicitly established that the agreement in question itself does not need to
have direct effect for the purposes of binding character of judicial decisions on disputes between
contracting parties to an international agreement.109 Procedurally the WTO dispute settlement sys-
tem offers similarly strong checks and balances and procedural guarantees as the project of a com-
mon EEA court did110. The case law of the ECJ in Opinion 1/91 has been considered to indicate that
the Court should accept binding interpretations of WTO law made by the dispute settlement organs
in cases brought before it111.

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3.2. Legal Obligation to Implement DSB Rulings and Recommendations

3.2.1. General

The legally binding nature of the outcomes of WTO dispute settlement at the level of international
law should be separated from their effect in the Community legal order. The former aspect, i.e.
whether the Community is bound by the decisions, will be analysed in the light of the rules of public
international law and the agreement in question. Thus, one should firstly have a look at the wording
of the DSU in order to define the nature of the obligation set on a WTO member state as a result of
dispute settlement proceedings.

The new mechanism for the settlement of disputes established as a result of the Uruguay Round
negotiations has been claimed to entail a significant ‘legalisation’ of the system compared to dispute
settlement under GATT 1947112. At present, the WTO dispute settlement is a compulsory and bind-
ing system with stringent deadlines. Under the old system a consensus in favour of a report of a panel
or Appellate Body was required for its adoption, which meant that a dissatisfied party could block
consensus and prevent adoption of the report. The DSU reversed the requirement and provides that
the reports are adopted unless there is a consensus not to adopt them.113 The shift from “positive
consensus” requirement to that of “negative consensus” along with the establishment of a standing
appellate body composed of independent experts are the main features of the new system that have
persuaded many to emphasise its judicial character. By contrast, in the system under GATT 1947
commercial policy played a significantly more important role114.

3.2.2. Relevant Provisions

Article 3 DSU provides that a solution mutually acceptable to the parties to the dispute consistent
with the covered agreements is clearly to be preferred. In the absence of such a solution, “the first
objective of the dispute settlement mechanism is usually to secure the withdrawal of the measures
concerned”. Only if the immediate withdrawal of the measure is impracticable compensation should
be resorted to as a temporary measure pending the withdrawal of the measure which is inconsistent
with a covered agreement. The last resort is the possibility of suspending the application of conces-
sions or other obligations under the covered agreements on a discriminatory basis vis-a-vis the other
Member, subject to authorisation by the DSB of such measure.

Article 21 (3) DSU states that “if it is impracticable to comply immediately with the recommenda-
tions and rulings, the Member concerned shall have a reasonable period of time to do so.” If there are
no implementing measures by the end of the reasonable period Article 22 (1) DSU provides that
Compensation and the suspension of concessions or other obligations are temporary measures avail-
able. However, “neither compensation nor the suspension of concessions or other obligations is
preferred to full implementation of a recommendation to bring a measure into conformity with the
covered agreements.”

According to Article 22 (2) DSU the Member concerned should after a reasonable period of time has
lapsed, if so requested, enter into negotiations with a view to developing mutually acceptable com-
pensation. If no satisfactory compensation has been agreed on time, the other party to the dispute
may request authorisation from the DSB to suspend the application of concessions.

As to the nature of the retaliatory measures, Article 22 (8) DSU provides that the “suspension of

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concessions or other obligations shall be temporary and shall only be applied until such time as the
measure found to be inconsistent with a covered agreement has been removed, or the Member that
must implement recommendations or rulings provides a solution to the nullification or impairment
of benefits, or a mutually satisfactory solution is reached.” The DSB shall “continue to keep under
surveillance the implementation of adopted recommendations or rulings, including those cases where
compensation has been provided or concessions or other obligations have been suspended but the
recommendations to bring a measure into conformity with the covered agreements have not been
implemented.”

3.2.3. Nature of the Obligation

There is some ongoing debate as regards the nature of the legal obligation of WTO Members under
the W TO dispute settlement. The main disagreement concerns the question whether implementa-
tion of rulings and recommendations and compensation, or even acceptance of retaliation, can be
considered as separate options. In other words, does the international law obligation deriving from a
dispute settlement report give the option either to compensate with trade or other measures, or
alternatively to fulfil the ruling or recommendation of the report and bring its practices or law into
consistency with the WTO law?115

One interpretation,116 presented by Jackson, is that “an adopted dispute settlement report establishes
an international law obligation upon the member in question to change its practice to make it consis-
tent with the rules of the W TO Agreement and its annexes. In this view, the “compensation” (or
retaliation) approach is only a fallback in the event of noncompliance”117. Zonnekeyn represents the
same line of reasoning and states that:

“by accepting compensation, the respondent Member in a dispute, in se, recognises the binding effect
of WTO law since it acknowledges that its legislation or other measures are in breach of WTO law.
The compensation mechanism was not meant to give WTO Members complete freedom to leave
WTO inconsistent measures in place and does not, as a matter of principle, accord a “right” to
violate a legal obligation entered into under an international agreement.”118 Moreover, “compensa-
tion is not a method of settling disputes but simply a temporary instrument to ensure that any ben-
efits accruing to the other Members are not nullified or impaired as a result of the failure to comply
within the reasonable period of time set in the particular case and that the defaulting party is not
encouraged to persist indefinitely in its failure to comply”119.

An opposite view is that the WTO rules are not “binding” in the traditional sense but rely, instead,
upon voluntary compliance120. Non-compliance with international legal obligations is seen as a tradi-
tional option for ‘realpolitik’ by governments based on cost-benefit analysis121. It was phrased by Bello
as follows:

“Like the GATT rules that preceded them, the WTO rules are simply not “binding” in the traditional
sense. When a panel established under the WTO Dispute Settlement Understanding issues a ruling
adverse to a member, there is no prospect of incarceration, injunctive relief, damages for harm in-
f licted or police enforcement. The WTO has no jailhouse, no bail bondsmen, no blue helmets, no
truncheons or tear gas. Rather, the WTO – essentially a confederation of sovereign national govern-
ments – relies upon voluntary compliance. The genius of the GATT/WTO system is the f lexibility
with which it accommodates the national exercise of sovereignty, yet promotes compliance with its
trade rules through incentives.” 122

A textual analysis of the DSU shows that the language is ambiguous enough to give support to each

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of the competing views123. The present authors are inclined to find the argumentation of the advo-
cates of the former approach more convincing as one of main objectives of the WTO is to create a
stable and predictable multilateral trading system124. Considering compliance to be voluntary would
seriously undermine such features of the system. The possibility afforded by the DSU to maintain the
condemned measures for a temporary period after the ruling is important, as such flexibility is cru-
cial in cases where important socio-economic and political considerations are involved125. However,
the DSU does not provide for a possibility to maintain WTO-illegal measures permanently. In the
end, there is a ‘real’ obligation to comply.

3.3. Non-compliance with DSB Rulings and Recommendations in Actions for Annulment

3.3.1. Case Law

As regards the effect of the WTO dispute settlement outcomes in the EC legal order, some authors
have argued that at some point the denial of direct effect should recede before the principle of
legality. It has been suggested that adopted WTO dispute settlement results is where the line should
be drawn, and it should be possible to review the legality of EC measures in light of them126. The ECJ
has, however, not yet been persuaded by such line of reasoning. On the contrary, the characteristics
of the WTO dispute settlement appears to be one of the main reasons why the ECJ and the CFI have
refused to accord direct effect to WTO Agreements.

The conclusion drawn by the ECJ in Portugal from the Article 22(1) and (2) DSU was that “to require
the judicial organs to refrain from applying the rules of domestic law which are inconsistent with the
WTO agreements would have the consequence of depriving the legislative or executive organs of the
contracting parties of the possibility afforded by Article 22 of that memorandum of entering into
negotiated arrangements even on a temporary basis”127. The margin of manoeuvre and importance of
negotiations referred to in the case were most likely brought up by the Court bearing in mind in
particular the implementation phase of DSB rulings and recommendations. The view that even
adopted DSB decisions do not create an absolute and immediate obligation of compliance clearly
was a reason for the denial of the direct effect of the WTO Agreements128.

There was no DSB decision connected to the Portugal case and no such ruling or recommendation
was invoked. Therefore, it is necessary to examine how this specific issue has been dealt with else-
where in the case law. The Chemnitz129 case involved an action for annulment of a Commission
Decision addressed to the applicant rejecting a request for additional import licence under the tran-
sitional measures provided for in Council Regulation 404/93130 on the common organisation of the
market in bananas. The applicant based its action, among other grounds, on the allegation that an
adopted Appellate Body report had declared the overall system of licences for the importation of
third-country bananas incompatible with GATT. It submitted that decisions of the DSB are manda-
tor y and might have direct effect in Community law.

The CFI rejected the argument on the basis that the Commission had adopted amendments to the
Regulation, and thus acted to bring the arrangements into compliance with the AB report and the
decision of the DSB131. The rather striking element in the judgement is that there was not even any
discussion of the possibility that the modification of the Regulation might have failed to achieve
compliance132. The CFI also found that the applicant had not established a link in law between the
DSB decision and the action for annulment. It held that “in order for a provision in a decision to
have direct effect on a person other than the addressee, that provision must impose on the addressee
an unconditional and sufficiently clear and precise obligation vis-ƒ-vis the person concerned.” Con-
sequently, as the applicant did not put forward any arguments to show that these conditions were
met, the Court found no need to consider whether DSB decisions have ‘direct effect’ or not133. The

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application of such a requirement renders the possibility of private parties to rely on DSB decisions
in actions for annulment in any event rather remote.

Also in Comafrica134 the applicant invoked a decision of the DSB. The CFI did not state specifically
that adopted panel reports did not have ‘direct effect’ here either. Nevertheless, it rejected the argu-
ment concerning the DSB as irrelevant based on the reasoning that any final WTO ruling will leave
open the possibility for the Commission to pay compensation or will entail a modification of the
system in force, which does not rule out that the applicants could derive advantages in future years135.

There was a W TO dispute settlement decision involved also in Pfizer136 and Intervet137 but the Court
avoided ruling anything on their effect in the EC legal order. When an adverse WTO panel or
Appellate Body report and its deliberate non-implementation by the EC is involved, it is obvious that
politically ver y sensitive matters are present. The approach of the Courts relating to matters involving
DSB decisions has been rather careful, as these recent cases relating to the Hormones dispute138 well
illustrate. This demonstrates well the judicial deference of the Courts to the Community legislature
in politically sensitive matters139.

3.3.2. Comments

Even though the Court has been relatively careful with its statements relating to the effect of adopted
WTO panel or Appellate Body reports, the approach of the ECJ in Portugal and of the CFI in Chemnitz
and Comafrica ref lects their clear unwillingness to review Community law in the light of the WTO
dispute settlement results. As a general rule the ‘direct effect’ of WTO reports in annulment actions
seems to be ruled out by the Court140. It might still be argued, though, that the use of the WTO
dispute settlement should be allowed where the EC has not even attempted to either to implement
an adopted report or to agree compensation, or if it has not purported to implement the report and
negotiations on compensation have failed141.

Cottier has advocated for the principle of compliance as a basis of the policy of the EC towards
adopted WTO reports142. If the EC deliberately ignores an adopted report and decides upon expir y
of the reasonable period allocated to refrain from offering compensation and to take into account
the threat and execution of potential sanctions, Cottier suggests that the report should be ‘directly
effective’ under certain circumstances. Such decisions can be deliberately taken, and take into ac-
count the risk of sanctions in an overall balance of foreign policy interests. If the non-compliance is
arbitrary and shows mere political expediency, ‘direct effect’ should be allowed143. Compelling rea-
sons not to implement, on the other hand, would prevent such an effect144.

There are significant arguments against the abovementioned approaches. The reciprocity argument
applies to all circumstances where the EC has failed to implement a report. The ‘direct effect’ of
panel reports could place a huge amount of power in the hands of third states. They could rely on the
Court of Justice to enforce a ruling or recommendation and would, thus, have no need to negotiate
compensation in good faith145.

One argument against the enforceability of a WTO rule, the breach of which has been confirmed by
the DSB, is that as the W TO system is generally limited to orders for specific performance and ex
nunc termination of the unlawful measure146, a declaration by the ECJ that an EC measure if unlaw-
ful operates as a rule ex tunc. This is, however, not an insurmountable problem since the ECJ could
rely on Article 231(2) EC and decide that part of the effects of the measure in question shall be
considered as definitive rendering its ruling prospective in practice147.

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In my view, the arguments for the exclusion of automatic ‘direct effect’ of panel and Appellate Body
reports seem convincing. Allowing such an effect would not be in accordance with the core principles
underlying the argumentation of the Court as regards the effect of WTO law. If private parties would
be allowed to invoke the dispute settlement findings, the discretion of the institutions would be
considerably reduced and the opportunities for mutually advantageous adjustments could be pre-
vented. The downside of negotiated arrangements is, however, that they could have a price internally
when some private firms could be badly injured by the compensation offered or imposed in exchange
for a violation of the rules. ‘Direct effect’ does not, however, appear to be the appropriate remedy
against the risk taken by individual economic operators. Instead, a remedy limiting the discretion of
the institutions less harshly than ‘direct effect’ would be preferable.

3.4. Applicability of the Nakajima Doctrine

At first sight the implementation of an international obligation set on the Community by a DSB
ruling or recommendation seems like a clear case of application of the Nakajima exception. If the
Community institutions refer to a specific WTO panel or Appellate Body report when adopting a
measure or adopt a measure which attempts to implement such a report, it should be open to indi-
viduals to rely on that ruling as grounds to consider a Community act invalid. For example Peers
supports the idea that the enforceability of WTO dispute settlement results could be improved by the
application of the doctrine. He finds especially strong arguments for the review of EC acts in light of
WTO dispute settlement reports when the Community has purported to implement a W TO report.
However, its implementation attempts have subsequently been condemned by WTO arbitrators, as
has been the case in ‘the banana saga’148.

It would be exceedingly difficult to argue against the application of the Nakajima exception if a panel
or Appellate Body report was directly referred to in the contested act. However, the EC legislative
organs have omitted such direct referrals in the legislative measures adopted to comply with the
WTO dispute settlement outcomes that have so far been challenged in the Community Courts149.

It is also difficult to find credible arguments for the assumption that the modification of the Commu-
nity legislation in order to comply with a dispute settlement decision is not adopted “in order to
implement a particular obligation.” To start with, the requirement of “a particular obligation as-
sumed in the context of the WTO”, can easily be identified in the panel and Appellate Body reports
adopted by the DSB, which instruct the Community to bring its laws and regulations into conformity
and identify the relevant WTO rules. As Eeckhout phrased it: “it is hard to envisage a more precise
identification of relevant obligations than that resulting from WTO dispute settlement”150.

The requirement of an intention to implement is more problematic. The legislative measures adopted
by Community institutions as a result of W TO panel and Appellate Body reports in the Bananas case
clearly were adopted in order to implement the obligations, at least in the generally accepted meaning
of the term151. The preamble to Council Regulation 1637/98 explicitly refers to WTO commit-
ments152. Admittedly, no such referral to WTO provisions or to the WTO dispute can be found in
the Commission Regulation 2362/98153. The Council Regulation, however, mandated the Commis-
sion to establish a WTO-compatible banana regime and implementing the Council Regulation is the
sole purpose of the adopted provision154. The CFI, however found in a liability action that the Nakajima
exception does not apply to the 1998 Commission Regulation155.

If the non-compliance of the EC with WTO dispute settlement findings takes the form of passivity
on the part of the EC, the position of a private applicant harmed by the Community inaction is even
more difficult. When no measures are adopted, an action for annulment cannot be brought. The

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Nakajima exception cannot thus be of any benefit to individuals in case of an omission. This brings
us back to the scope of manoeuvre of the institutions, which would be put in jeopardy if this was not
the case.

3.5. Can Consistent Interpretation Benefit the Applicants?

Private applicants are not likely to benefit from consistent interpretation when they attack Commu-
nity law on the basis of non-compliance with DSB rulings and recommendations156. First, the lack of
implementing measures naturally prevents the application of the exception. Second, even if the insti-
tutions have undertaken to amend Community law to achieve compliance, it would be difficult for
the Court to find that Community measures can be given an interpretation consistent with WTO
obligations when an incompatibility has already been found by the DSB. Finally, the applicability of
consistent interpretation is questionable in the light of the general reluctance of the ECJ to apply the
principle in actions involving challenges by private parties to the validity of Community measures
claimed to be in conflict with WTO obligations157.

3.6. Should the Enforceability of Dispute Settlement Outcomes be Improved?

The overview to the enforceability of the WTO dispute settlement outcomes in the EC legal order
shows that so far they have not been given any legal effect at all. The lack of ‘direct effect’ of DSB
rulings and recommendations seems well founded but the same cannot be said about the very
minimalist application of the Nakajima doctrine. The case law illustrates well the shortcomings of the
Nakajima exception and the principle of consistent interpretation. The exceptional ways to rely on
WTO law cannot be used effectively in respect to DSB rulings and recommendations. Thus, the level
of protection they provide for private parties is not the same as in connection to W TO Agreements
in general.

It is doubtful whether it is appropriate that the Community law does not provide any kind of protec-
tion for private parties against the Community institutions acting in breach of the judicial obligation
set on the Community. One can also question whether it is acceptable to leave the matter on the level
of international law where the measures of enforcement are on a different level than within domestic
law and private parties are left out of possibilities to protect their private interests.

Especially the lack of justiciability or any kind of effect of WTO dispute settlement outcomes in EC
legal order illustrate well the clash between rights of private parties and the discretion given to the
political bodies of the Community. When the institutions, for one reason or another, ignore their
international obligations imposed by the WTO dispute settlement organs, the only problem is not
the apparent lack of respect of international commitments. Private economic operators within the
Community may also suffer heavily from the non-compliance of the Community. The situation seems
most unjustified when the other party to the dispute resorts to retaliatory measures, which may lead
to companies having absolutely nothing to do with the original dispute to suffer heavy losses.

In particular the narrow scope of application of the Nakajima exception shows that the problem,
again, boils down to the question of the margin of discretion of the political institutions of the
Community. As the Court has clearly been willing to respect the discretion of the institutions also
after the Community measures have been condemned at the level of the WTO law, it could be that
a solution limiting the discretion of the institutions to a lesser degree would meet less resistance
within the Court and allow it to take into account the principle of legal certainty.

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4. RELEVANT ASPECTS OF THE NON-CONTRACTUAL LIABILITY OF THE EC FOR
DISCRETIONARY MEASURES

4.1. The Basis of EC Liability

The non-contractual liability of the European Community is based on the Article 288(2) EC, which
provides that “in the case of non-contractual liability, the Community shall, in accordance with the
general principles common to the laws of the Member States, make good any damage caused by its
institutions or by its servants in the performance of their duties.” The Community may incur liability
for damage caused by adopting wrongful acts but it is also clear that omissions by the Community
institutions may give rise to liability in so far as the institutions have infringed a legal obligation to
act158. Article 235 EC explicitly states that the European Court of Justice has the jurisdiction in
disputes relating to compensation for damage described in the Art. 288 EC.

The general conditions for the liability of the Community have been clearly defined in the case law of
the ECJ. In order for the EC to incur non-contractual liability the applicant must prove, first, that the
institution against which the action is brought has acted unlawfully. Second, the applicant must show
that actual damage has occurred. Finally, there must be a direct causal link between the wrongful act
and the damage complained of159. Moreover, in the field of discretionar y measures, the Community
liability is subject to stricter conditions. Under the Schöppenstedt formula, as modified by the Bergaderm
case, an action for damages against a Community institution will only be successful if a sufficiently
serious breach of a rule of law for intended to confer rights on individuals can be shown160. Bergaderm
restated the conditions for imposing Community liability in the same terms as in the conditions for
the liability of the Member States for a breach of Community law.

4.2. Independent Form of Action

The action for damages under Article 288(2) EC is an independent form of action. That is to say that it
is not necessary first to bring an action for annulment under Article 230 EC to determine the unlaw-
fulness of the contested measure or an action for failure to act under Article 232 EC. Nevertheless,
an action for compensation brought on the basis of an act which has not been annulled requires the
establishment of the unlawfulness of the contested measure161. An act which is not illegal cannot
form the basis of an action in compensation162. Illegality is required but prior annulment is not
necessary. The action for damages has a different purpose as a part of the Community system for the
protection of individuals than the action for annulment. As the latter aims at setting aside a specific
measure, the purpose of an action for damages is to repair the damage caused by an institution163.

4.3. A Developing Remedy

The remedy under Article 288(2) EC has earlier been considered a measure of sanction against the
Community institutions for a ver y serious breach of law. More recently, it has rather started to re-
semble the right available for those who have suffered harm as a result of a breach of Community law
by a Member State. The remedy is now seen as one available to individuals who have suffered an
infraction of a Community law right arising through the fault of the Community institutions 164.

The action for damages under Article 288(2) EC comprises an important element in the system built
up to ensure the full effectiveness of the rules of Community law and of the effective protection of
the rights which those rules confer. One of the functions of the remedy has been considered as being
compensation for a possible “judicial deficit” found in the Community system for the protection of
individuals. The possibility of claiming damages where injuries have been caused by acts which can-

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not be challenged, provides for a new and additional opportunity for bringing court proceedings165.

The test for triggering the non-contractual liability of the Community has been very difficult to fulfil.
It is widely acknowledged by commentators that the principles developed by the ECJ and their appli-
cation tend to frustrate, rather than foster, the chances of success of applicants seeking for compensa-
tion166. Ward finds an element of irony in the case law as the Court, despite the express mandate in
Article 288 for the Court to protect individuals against abuse of authority on the part of the Commu-
nity institutions, has in fact minimised the accountability of EC decision makers for unlawful con-
duct167. Fines considers the restrictive mechanisms developed by the Court worrying from the point
of view of legal certainty. She claims that the Community institutions are in fact quasi non-liable and
the protection of the victim is not guaranteed168.

The Court has also been accused of using a double standard, depending on whether remedies are
sought against Member States or against Community institutions169. One reason behind the case law
has probably been that the Court wanted to ensure that the fledgling Community institutions were
not undermined by extensive challenge through judicial review procedures170. Effectiveness of the
Community order and effective judicial protection do not usually point in the same direction. Ad-
equate protection of individuals involved challenging the activities of the still fragile and young EC
institutions171.

There have been contemporary pressures confronting the Court to relax the test for accountability
under Article 288(2), which would increase applicants’ chances of success in non-contractual liability
claims172. For example Ward contends that given:

“the prominence of ‘protection of the individual’ as a value in the enforcement of Community law,
and the role of the imperative of ‘effective judicial protection’ in improving Member State remedies
and procedural rules, it may become increasingly difficult for the Community judicature to refrain
from internalising similar principles when the legality of Community measures is questioned by private
sector actors173.”

Also Waelbrook made similar statements some years ago and speculated then that the Court’s new
case law will lead in practice to an opening of the extremely strict conditions of Community liabil-
ity174. It appears that a step to this direction was recently taken as the Court made a new attempt to
unify the criteria of Member State and Community liability and sought inspiration from the rules
governing the former to determine the circumstances under which the Community may incur liabil-
ity175. The case law will show how big a step we are dealing with in practice. At least the applicants
have now good grounds to refer to the less strict rules governing the State liability for the support of
their cases176.

4.4. Principle of Parallelism

The principle of parallelism was introduced in the Brasserie du P˜cheur case. It requires that the con-
ditions under which a State may incur liability should not, in the absence of particular justification,
differ from those governing the liability of the Community institutions in like circumstances. The
doctrine is based on the basic idea that the protection of the rights which individuals derive from
Community law cannot vary depending on whether a national authority or a Community authority
is responsible for the damage177.

The judgement of the ECJ in Bergaderm case increased the relevance of the parallelism argument in
determining the conditions of the Community liability. At the same time the judgement unified the

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conditions of Community and Member State liability, it also brought a new element to the case law:
the reversal of inf luence. As the Court had earlier as a rule sought inspiration from the rules govern-
ing Community liability to determine the conditions for Member State liability, now the influence
was reverse178. In Bergaderm the Court referred to Brasserie du P˜cheur as an authority on the interpre-
tation of Article 288 (2) EC179 and reiterated there the principle of parallelism. Therefore, it is justi-
fiable to draw analogies form the rules governing the Member State liability to determine whether or
not the Community can be held liable under certain circumstances.

It should be noted, though, that there are important disparities between Community and State
liability. This relates to the different constraints under which the Community and the national legis-
lature operate within the bounds of the EC legal order. As the Community acts as the primary
legislature, the national legislature is bound by the principle of primacy180. Therefore, some gaps may
still remain in the analogy.

4.5. The Condition of Unlawfulness

4.5.1. A Breach of a Rule of Law

Under the Schöppenstedt formula, the applicant has been required to demonstrate a breach of a supe-
rior rule of law for the protection of the individual in order to establish the liability of the EC181. The
expression was replaced in Bergaderm with the condition that the defendant institution must have
infringed “a rule of law intended to confer rights on individuals”182.

Bergaderm deleted the reference to a breach of a “superior” rule of law. What is the significance of this
aspect of the judgement? It sees that the Court has not in general placed much importance on the
requirement that the rule of law must be superior in its case law. Thus, the omission of the term does
not make a real difference183. According to the case law, following types of norms can in principle
qualify as superior rules of law: Treaty provisions or other primary Community law, general prin-
ciples of law and Community acts which in formal ranking stand higher than the Community act
which caused damage184.

The general principles of Community law that the ECJ has accepted to operate as superior rules law
include the principle of protection of legitimate expectations185, the principle of proportionality186,
the principle of equal treatment187, the principle of proper administration188, the principle of care189,
and the prohibition of misuse of powers190. The ECJ has also held that fundamental rights form an
integral part of the general principles of law protected by the Court. Consequently, such rights as the
right to property and the freedom to pursue an economic activity have also been recognised as supe-
rior rules of law for the purposes of a liability action against the Community191.

Here the important question is whether an international agreement binding on the Community can
act as such a rule of law that its violation could give rise to the liability of the EC. Since the interna-
tional agreements form an integral part of the EC legal order and are hierarchically superior to
secondary Community law, the provisions of such agreements are in general able to trigger the liabil-
ity of the EC. However, the problem in respect to the WTO law is that it often has been considered
that an international agreement should have direct effect in order to be invoked in an action for
damages against the Community. The issue is, however, not entirely clear and will be discussed in
more detail below in the part discussing the invocation of W TO law in liability actions.

4.5.2. The Rule of Law Confers Rights on Individuals

The Court has accepted as a general rule common to the Member States the principle that the

Nordic Journal of Commercial Law, issue 2004 #1

violation of a legal provision may only entail liability for its author if the provision in question is
designed to protect the interests of the category to which the individual concerned belongs192. De-
spite the different phraseology used in Bergaderm, the requirement that the rule must intend to pro-
tect the individual remains conceptually the same193.

In practice, the Court has applied the requirement rather liberally and, at least as regards internal
Community law, the condition that the rule of law must be for the protection of the individual is not
very difficult to satisfy194. In a concrete case it may, however, prove to be problematic. When the
applicant wants to bring a compensation action against the Community for a breach of WTO rules,
it is likely that this requirement is the most difficult condition to meet.

4.5.3. Sufficiently Serious Breach

If an infringement of rights protected under the terms of a (superior) rule of law has been found, the
degree of seriousness of the breach will be assessed next. In the areas of legislation where the Com-
munity legislature enjoys wide discretionary powers195, it may incur liability only if the measure adopted
cannot be appropriately justified. In such areas of legislation the responsibility to compensate may
arise only if “the institution concerned has manifestly and gravely disregarded the limits on the
exercise of its powers”196. In its case law the Court has traditionally referred to two elements in
determining whether such disregard has occurred: the degree of harm suffered by individuals as a
result of the measure, and the extent to which the law has been violated197.

In the light of the Bergaderm judgement, the interpretation of the ECJ of the term ‘serious breach’ in
the context of Member State liability has now been confirmed to be of importance in the Article 288
(2) EC case law198. The seriousness of the breach committed by Community institutions will now be
dependent upon factors mentioned in Brasserie du P˜cheur, which include “the clarity and precision
of the rule breached, the measure of discretion left by that rule to the national or Community au-
thorities, whether the infringement and the damage caused was intentional or involuntary, whether
any error of law was excusable or inexcusable”199.

4.6. The Conditions of Damage and Causal Link

The second essential element for a successful action for damages under Art. 288(2) EC is the estab-
lishment of damage200. In general, the damage is required to be certain, specific, proved and quanti-
fiable for the Community to incur liability201. However, the fact that the amount of damage cannot be
precisely quantified in the application will not render the claim inadmissible202. The Court will most
commonly award damages for economic loss but also other types of damages can be awarded203. In
quantifying the damage, the extent to which the damage has been incorporated in the selling prices
of the complainant undertaking will be taken into account in accordance with the principle of unjust
enrichment204. The ECJ has held that there is a general duty to mitigate and the damages will be
reduced if the applicant fails to do so205.

Finally, there is the requirement of a causal link206 between the breach of an obligation resting on the
State and the damage sustained by the injured parties207. Causation is explicitly required by Article
288(2) EC. The causal nexus between the wrongful act or omission and the damage sustained should
be direct immediate and exclusive. It is assessed from a hypothetical perspective according to which
there is no causality involved where the same result would have occurred in the same way even in the
absence of the wrongful Community act or omission in question.208

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5. ARTICLE 288(2) EC CASE LAW INVOLVING NON-IMPLEMENTATION
OF DSB DECISIONS

5.1. Background - Bananas and Hormones Disputes

Private parties have recently brought several actions for damages to the Community Courts in con-
nection to the bananas209 and hormones210 disputes at the level of WTO. The applicants have initiated
the proceedings in order to get compensated for the loss they have suffered due to the non-compli-
ance by the EC with the international obligations to change its legislation imposed by the WTO
panel and Appellate reports in the transatlantic disputes211.

The companies that have initiated proceedings can be divided into two different groups. The first
group consists of the banana operators who have not been allowed to benefit from the volume of
licences and tariff quota to which they are entitled to on the basis of the panel and Appellate Body
reports212 and of the importers affected by the prohibition on the importation of beef from cattle
treated by hormones condemned by the decision of the DSB213. The second group is the European
companies affected by the retaliatory measures taken by the United States following the Community’s
failure to implement the rulings and recommendations of the DSB214.

As regards the Hormones case, the EC stated after the DSB gave its recommendation that it intended
to comply with its WTO obligations, and was granted a reasonable period to do so. That did not take
place. However, more than four years after the reasonable period lapsed, a directive has finally been
adopted in order to comply with the Appellate Body report215. Its compatibility with the W TO obli-
gations may, however, very well be challenged in the future. As regards the bananas dispute, a resolu-
tion is finally at sight216. It is not likely, though, that this will represent an end to actions for compen-
sation brought by private companies for financial loss caused by the outgoing regime.

5.2. Main Issue

The DSB decisions in the Bananas and Hormones cases have imposed obligations to the Community
to take action to amend its legislation to comply with the adopted dispute settlement reports. It is
questionable whether the fact that the WTO dispute settlement organs have confirmed the unlawful-
ness of the Community measures, repeatedly concerning the banana regime, suffices to trigger the
liability of the EC217. The applicants are required to show that the Schöppenstedt conditions are ful-
filled218. They thus need to show that a sufficiently serious breach of a rule of law intended to confer
rights on individuals has occurred.

The applicants have basically relied on two categories of rules as “rules of law intended to confer
rights on individuals” that have been breached. The first set of rules is WTO law, consisting of the
Agreements and of the dispute settlement findings. There are, arguably, two separate requirements
that these rules have to fulfil for purposes of an action for damages. First, it is clear that rule in
question has to meet the condition for liability that it is intended to confer rights on individuals.
Second, the rules should be susceptible to be relied on by private parties. There is, however, some
disagreement as to the issue whether or not the invoked rule needs to have direct effect for the
purposes of a compensation action.

Apparently frustrated by the reluctance of the Court to let individuals to rely on W TO law, many of
the applicants have relied also on other grounds to establish unlawfulness. Various principles of
Community law have been clearly identified as superior rules of law in cases involving non-imple-
mentation by the EC of DSB decisions. The pleas in question remain outside the scope of this thesis.

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However, Davies for instance considers it unlikely that the applicants could ‘circumvent’ the lack of
direct effect of WTO law by relying on these grounds219.

Among others, the following principles have been invoked: the protection of legitimate expecta-
tions220, the principle of proportionality221, the principle of equal treatment222, the right to prop-
erty223, the right of freedom to pursue a trade or business224, the principle of pacta sunt servanda and
the principle of sound administration225. The defendant institutions have not been found to have
breached any of the invoked principles in the concerned cases in such a manner that a compensation
action would have succeeded.

5.3. Atlanta

A finding made within the WTO dispute settlement system declaring a provision of Community law
incompatible with the WTO law was invoked first time in an action for damages in the Atlanta226

case. Before the CFI the applicant claimed compensation for the damage caused by Council Regula-
tion 404/93227, which prompted it to cancel shipping contracts for the transport of bananas, the cost
of which it remained liable for. Atlanta claimed that the import restrictions of the regulation were
contrary to GATT. The CFI rejected the argument by simply referring to Germany v. Council228 where
the ECJ had discarded a similar argument put forward by the plaintiff and dismissed the action229.

On appeal230, Atlanta submitted several pleas, the first one of which was based on the Appellate Body
report establishing the incompatibility of the Community’s common organisation of the market in
bananas with W TO law231. The Court found the plea inadmissible, since it was only raised the first
time at the stage of reply even though nothing prevented the applicant from submitting it at the time
of its application to the ECJ. The Court came to this conclusion despite the fact that the decision of
the DSB was not in fact published until six months after the lodging of the appeal. According to the
reasoning of the Court, the appellant could have maintained its plea of a breach of the provisions of
GATT, raised before the CFI, and adduced in particular the WTO dispute settlement in support of
its argument that the provisions of GATT were of direct effect232.

Atlanta left thus open the question whether an adopted panel or Appellate Body report could con-
tain rules of law protecting the individuals on which private applicants could rely on in an action for
damages. Advocate General Alber interpreted in Biret the judgement to support the view that a
liability action based on the Community’s non-compliance with a DSB decision could succeed. He
reasoned that the finding of the ECJ that the appellant could have maintained its plea and adduced
in particular the dispute settlement mechanism set up within the WTO in 1995 in support of its
argument that the provisions of GATT were of direct effect expressly indicates the possibility that the
new WTO dispute settlement mechanism could alter the effects of WTO law in EC legal order233.

5.4. Cordis, Bocchi and T. Port

The cases Cordis234, Bocchi235 and T. Port236 were all actions for damages brought to the CFI by appli-
cants in connection to the bananas dispute in order to get compensated for the loss they had suffered
as a result of the application of Commission Regulation 2362/98237. The Commission adopted the
Regulation in order to implement the Council Regulation 404/93238, which had been amended by
Council Regulation 1637/98239 in order to comply with the decision of the DSB which declared
certain aspects of the banana import regime of the Community incompatible with the WTO rules240.
The key issue in all three cases was the effect of the Community’s WTO infringement on actions for
damages241. To establish the unlawfulness of the Commission’s conduct, all the applicants claimed
that the detailed rules for the calculation of the reference quantity for the grant of import licences
contained in the Commission Regulation infringed the GATT, the GATS and the Agreement on

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Import Licensing Procedures.

The applicants apparently wished to distance themselves from the argument that WTO law contains
rules of law intended to confer rights on individuals, since they did not put such argument directly to
the Court242. Instead, they sought in the first place to rely on rules of law internal to the Community
legal order and argued that the Community institutions were guilty of misuse of powers. Since the
Community arrangements for banana imports had been declared incompatible with the WTO rules
by a decision of the DSB having the force of res judicata and the Community had undertaken to
rectify the infringements concerned, the institutions were, in the applicant’s view, precluded from
adopting further provisions in breach of those rules243.

Despite of the attempts made by the applicants not to base their case on the effect of WTO law, the
CFI made it quite clear that it is not willing to review the Community measures in the light of W TO
law in an action for damages any more than in other types of actions. It began by repeating the
general conditions for liability and referring to Bergaderm and noted, that the right to reparation
requires that the law infringed is intended to confer rights on individuals. Next, the CFI reiterated
the core aspects of Portugal and stated that the validity of Community law cannot be challenged in the
light of WTO law. It concluded that “the WTO rules are not in principle intended to confer rights
on individuals”, and therefore “the Community cannot incur non-contractual liability as a result of
infringement of them”244. With regard to the argument that the Commission had misused its powers,
the applicants referred to the Nakajima exception at the oral hearing for the support of their case245.
The CFI rejected also these arguments246.

5.5. Biret

5.5.1. Judgements of the CFI

The origins of the Biret cases247 are in the Hormones case between the EC and the United States. The
US brought the case to the WTO dispute settlement claiming that the EC’s ban on the importation
of beef from cattle treated with hormones for growth promotion purposes violated the SPS Agree-
ment248. The Appellate Body confirmed that the Community measures violated the SPS Agreement.
It came to that conclusion essentially on the ground that there had not been a sufficiently specific
scientific analysis of the cancer risks associated with the use of certain hormones as growth hor-
mones249. The DSB adopted the report of the Appellate Body and requested the Community to bring
the measures found to be inconsistent with the SPS Agreement into conformity with its obligations
under that agreement250.

The applicants brought actions under Article 288(2) EC before the CFI against the Community for
compensation for the damage they had suffered as a result of the import ban of beef treated with
certain hormones. They maintained that the Council action was unlawful on the ground that it was
in breach of the SPS Agreement251 and submitted that the DSB had confirmed that the directives in
question conflicted with WTO law.

The applicants argued that their case differs from Portugal in two respects. First, here the Community
rules were the subject of express criticism on the part of the DSB. Second, the Community’s breach
of its obligations was not temporary and negotiable. Rather, it was permanent, as the Community
had expressed its intention to maintain the embargo despite the current state of scientific research.
Thus, the argument that the dispute settlement mechanism is flexible was, according to the appli-
cant, immaterial in the case252. Furthermore, the applicants argued that the judgement in Portugal
f louts the wording of Article 300(7) EC and conf licts with the established case-law to the effect that
international agreements form an integral part of the Community legal order253.

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The CFI was not persuaded by the arguments put to it by the applicants and dismissed the actions. It
stated that it is firmly established case-law that in the view of their nature and structure the WTO
Agreements:
1. do not in principle form part of the rules by which the ECJ and the CFI review the legality of

acts adopted by Community institutions under Article 230 EC;
2. cannot be relied on by individuals before the courts;
3. any infringement of them will not give rise to non-contractual liability on the part of the Community254.

The CFI also stressed that “the purpose of the W TO agreements is to govern relations between States
or regional organisations for economic integration and not to protect individuals.” It reiterated the
argumentation familiar from Portugal that the judicial review of Community law in light of such
agreements would deprive the legislative and executive bodies of the Community of the discretion
enjoyed by similar bodies of the Community’s trading partners255. Also the applicability of the Nakajima
exception was considered – and rejected256.

The CFI rejected the possibility that a DSB decision might in any way alter the effect of WTO law in
EC legal order. It concluded that there is an inescapable and direct link between the DSB decision
and the plea alleging infringement of the SPS Agreement. The decision could therefore be taken into
consideration only if the Court had found that Agreement to have direct effect in the context of a
plea alleging the invalidity of the directives in question. For the support of this conclusion the CFI
referred to the findings made by ECJ in the Atlanta case257.

5.5.2. Appeals to the ECJ

Biret introduced an appeal against the judgement of the CFI. It claimed, primarily, that the CFI had
misconstrued Article 300(7) EC and negated its effectiveness. The judgement did not, according to
the appellant, “address the argument that the Community, in acceding to the dispute settlement
system set up by the WTO agreements, undertook to observe the procedure and the authority of
DSB decisions.” In the alternative, Biret requested the ECJ to develop its case-law and to acknowl-
edge that all or part of W TO agreements have direct effect and mentioned various reasons which
militate in favour of recognition of the Court’s power to review whether Community law complies
with the WTO law258.

Advocate General Alber delivered identical, and quite revolutionary, Opinions in the cases259. He
sided with the applicants and proposed that the Community may be held liable for the non-imple-
mentation of WTO dispute settlement decisions after the prescribed reasonable period to comply
has lapsed. Under such circumstances, private parties should, according to Alber, be allowed to rely
on W TO law in Community Courts to trigger the liability of the Community. The ECJ did not agree
with the Advocate General who suggested that the case should be referred back to the CFI. Instead,
it rejected the appeal. It is important to note, however, that the dismissal of the case did not indicate
a clear rejection of the arguments presented by Alber either. Rather, the ECJ avoided expressly reject-
ing or accepting, as Zonnekeyn named it, the “Copernican innovation” of Alber.

The ECJ found on appeal that the reasoning of the CFI was insufficient to deal with the plea put
forward by the applicant concerning the infringement of the SPS Agreement. According to the ECJ,
the CFI missed the central question to the arguments put forward by the applicant. The issue it
should have addressed was whether the legal effects of the DSB decision provided grounds for a
review of Community legislation in light of WTO rules in an action for damages, and thus called
into question the Court’s finding that the WTO rules did not have direct effect260.

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In addition to the disregard of the duty to state reasons, the ECJ found that the CFI made an error of
law as regards the scope of the Atlanta judgement. It stated that the case is irrelevant since the plea in
question was rejected as inadmissible and did not examine the substance of the plea261. Consequently,
Atlanta did not provide for any support for the finding of the CFI that a DSB decision cannot be
taken into consideration if the Court has not found the SPS Agreement to have direct effect.

Next, the ECJ turned to the question whether there were other grounds on which the rejection of the
plea could be founded. It ended up dismissing the plea on the ground that no damage to the appel-
lant had occurred after the reasonable period granted for the EC for compliance with the DSB
decision had expired. The reasoning was that the Courts may not carry out a review of the legality of
the Community measures before the period before the date the reasonable time to comply expires.
Such review would render ineffective the grant of a reasonable period for compliance. As regards the
time after the reasonable period expired, the ECJ found that, since the applicant could have not
suffered any damage (because it was in judicial liquidation), the Community cannot have incurred
liability262.

What is remarkable is that the ECJ left open the possibility that Community could incur liability
damages for failure to implement a WTO ruling in a case where conditions are right. In Biret the
issue of liability was not further dealt with only due to the circumstances in the case. The ECJ,
notably, did not reject the cases on the basis of the lack of ‘direct effect’ of WTO agreements. It
rather seemed to reproach the CFI for relying too much on this aspect of the case law and to reject the
view of that the lack of ‘direct effect’ of WTO Agreements automatically means that a DSB ruling
cannot be relied on in liability actions.

The approach of the ECJ to the effect of WTO law appears to be more relaxed than that of the CFI.
First, it did not confirm what the CFI considered to be established case-law that an infringement of
WTO Agreements will not give rise to non-contractual liability of the Community. Instead, it re-
ferred to paragraph 61 of the judgement of the CFI and agreed only with the usual obser vation that
the WTO agreements are not in principle among the rules in light of which the Court is to review the
legality of the acts of its institutions263.

In the meantime, the CFI had reiterated its finding that it is settled case law that any infringement of
WTO Agreements will not give rise to non-contractual liability on the part of the Community in the
Dole Fresh Fruit case264. The case was an action for compensation for damage suffered by the introduc-
tion of the banana export licence scheme by Council Decision 94/800. The applicant attempted to
rely on WTO law but the plea was held inadmissible as a new plea. Nevertheless, the CFI pointed out
that the argument was “completely irrelevant” on the above mentioned ground.

Second, the ECJ did not maintain a similar argument as the CFI submitted stating that the DSB
decision could only have taken into consideration if the Court had found the SPS Agreement to have
direct effect. Instead, it avoided the issue of unlawfulness and turned directly to the second condition
of Community liability, the existence of damage. Whether such approach ref lects mere circumspec-
tion on the part of the Court in a politically sensitive matter or a genuine willingness to give effect to
WTO dispute settlement outcomes in the Community legal order remains to be seen in future cases.
In any event, it is clear that the liability of the Community may, in any event, only extend to the time
after the reasonable period for the compliance with the DSB decision has expired and to the damage
occurred after such period has lapsed.

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It should be noted that the ECJ, indeed, did not really discuss the issue of unlawfulness in Biret. Even
though the judgements leave the impression that the Court might be inclined to recognise invocability
of W TO law in limited circumstances, there are other hurdles left on the way of bringing a successful
liability action for non-implementation of WTO dispute settlement results. The ECJ did not deal at
all with the condition that the rule of law invoked in an action for damages under Article 288(2) EC
should be one intended to confer rights on individuals. Neither did it assess whether the breach was
sufficiently serious to trigger the liability of the Community institutions.

As a conclusion of the discussed cases, it can be said that neither the CFI nor the ECJ had been
required to adjudicate on the question of whether or not WTO law contains rules of law which can
form the foundation for an action for damages before Biret265. In Biret such an argument was directly
put to the Court but the judgement of the ECJ nevertheless left the issue somewhat unclear.

5.6. ‘Innocent Exporters’ Cases

The implications of Biret will possibly be seen in the ‘innocent exporters’ cases that are at the mo-
ment pending in the Court of First Instance266. It will be interesting to see how the CFI reacts to the
new developments and interprets the cases267. The applicants in the cases are European traders who
seek compensation from the EC institutions because of their perceived losses resulting from the US
measures to suspend concessions in the transatlantic bananas dispute. Their main argument is that
the Community should be held responsible for the fact that the US has resorted to retaliator y mea-
sures as a response to the EC’s failure to implement the DSB rulings and recommendations268. They
maintain that the measures imposed by the US and the damage they have caused are the direct
consequence of the EC maintaining in force a system of rules the WTO has already ruled unlaw-
ful269.

The companies that have suffered losses in the face of the US measures are mainly comparatively
small firms and their lines of business do not relate to importing bananas in any manner270. In a
sense, these exporters have suffered on behalf of the entire Community271. Therefore, there is a clear
political need for regulation or other kind of solution providing for the possibility for the companies
to obtain compensation. In fact, there was a proposal in the European Parliament to establish a
compensation fund for these companies272. It has, however, been seen as questionable whether such
compensation would not amount to an unlawful subsidy under WTO law273. At present, an action
for damages against the Community institutions appears to be the only possibility for the companies
to obtain compensation.

The commentators that have discussed the chances of success of these actions have identified some
specific issues, which might cause problems to the applicants. Rosas found it altogether unlikely that
the claims will be successful274. First, he recalled that the measures to suspend concessions are taken
by the US, and not the EC275. Therefore, it might be difficult to establish the causal link between the
unlawful conduct and suffered damage. However, both Reinisch and Zonnekeyn rejected such a view
as the disruption of the causal nexus would only take place if the US measure would be unlawful as
such and would thus be the cause of the damage. As the DSB approved the retaliatory measures, they
are not unlawful and do not disrupt the causal link276. In the present author’s view, it should not
prevent the condition of causality of being met that the harmful measures are taken by the US. The
Community institutions were aware that such measures could be taken and, in a way, the EC ac-
cepted the measures when it intentionally breached the obligations imposed by the WTO reports.

Second, Rosas argued that private traders do not have a subjective right to a certain level of tariff
concessions277. The issue whether WTO law can confer rights on individuals will be discussed below.

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Suffice it to say that this probably is the strongest argument against the Community liability. Rosas
also found that the fact that suspension of concessions is a mechanism, which is built into the DSU
system itself and constitutes one of four modes of implementation which would prevent the success
of the actions278. The present author interprets the argument to imply that ‘choosing’ to be targeted
by retaliatory measures is comparable to complying with the obligations and no liability can arise as
the Community has not acted unlawfully. Such reasoning is not convincing as suspension of conces-
sions cannot, in my view, be considered as a “mode of implementation”. It, rather, is a temporary
measure that can be used to put pressure on the other party to end its non-compliance with interntional
obligations.

6. INVOCATION OF WTO LAW IN ACTIONS UNDER ARTICLE 288(2) EC

6.1. Is Direct Effect Required?

6.1.1. Community Liability in the Context of International Agreements

The jurisprudence of the Community Courts on invocability of the WTO law in general was dis-
cussed above. As noted, it is settled case law that the WTO Agreements are not in principle among
the rules in light of which the Court is to review the legality of measures adopted by the Community
institutions279. Does the requirement of direct effect apply in actions for damages? Does WTO law
contain provisions that qualify as (superior) rules of law for the purposes of an action for damages?

International agreements of the Community qualify as rules of law to be relied on in a liability action,
since they according to the case law form an integral part of the Community legal order and have
priority over secondary Community law280. There seems, however, to be no definitive answer to the
question whether Community liability for breaches of international agreements will arise only in
cases where an agreement can be shown to have direct effect281.

Neither the ECJ or the CFI has explicitly ruled that WTO Agreements should have direct effect in
order to be invoked in an action under Article 288(2) EC282. In Stimming283 the applicant claimed that
a regulation infringed the GATT 1947, the direct effect of which was categorically ruled out. The
court did not discuss the argument because the applicant did not specify which GATT rules he was
referring to284. AG Mayras did, however, address the issue. He presented serious doubts as to private
parties invoking GATT rules in liability actions and appeared to suggest that such action would
require the agreement to have direct effect285.
Another Advocate General expressed a clearly opposite view. AG Lenz was of the opinion in the
Italian bananas case that the possibility that in exceptional cases an infringement of provisions of
GATT might give rise to a liability in damages for the Community. He specified that “in particular,
one might envisage a case where in such a situation the Community makes no use of the possibilities
provided for in GATT of freeing itself from its obligations, but agrees that the dispute should be
decided by a neutral tribunal, and then however refuses to comply with the decision”286. As the
“neutral tribunal” referred to by Lenz hardly can be but a GATT panel, or a W TO panel or the
Appellate Body at present, what he most likely meant by his statement was that a private trader could
claim damages against the Community when it refuses to comply with a WTO panel287.

The more recent cases dealing with WTO law already discussed above offer some guidance but do
not resolve the issue. In Cordis, Bocchi and T.Port the statements of the CFI that suggested that the EC
cannot incur liability as a result of infringement of WTO rules appeared to be based on the view that
WTO rules are not intended to confer rights on individuals rather than on their lack of direct ef-
fect288. The reference to ‘the rights of individuals’ cannot be assimilated with direct effect289. The ver y

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notion of direct effect appears to indicate that provisions having such effect confer rights on individu-
als290 but, by contrast, it is possible that a provision confers rights on individuals despite of its lack of
direct effect291.

Also some commentators have doubted whether private parties may invoke W TO law as a standard
of reviewing the conduct of the EC institutions in an action under Article 288(2) EC. Maresceau
suggested that direct effect of the invoked international provision would be a conditio sine qua non for
allowing compensation for violation of international agreements. He found that the lack of direct
effect of GATT to constitute an insurmountable obstacle for bringing a liability action founded on a
breach of the Agreement292. More recently, other commentators have been convinced by the judge-
ments of the ECJ and CFI in Portugal, and Cordis, Bocchi and T.Port and considered it established case
law that W TO rules can not constitute superior rules of law in a compensation action under Article
288 (2) EC293.

The Biret case is quite interesting in this context. The finding of the CFI, that the DSB decision in
question could be taken into consideration only if the Court had found the SPS Agreement to have
direct effect, clearly implies that also the CFI considered direct effect as a prerequisite for relying on
WTO law in a liability action. Also Advocate General Alber was of the view that the relevant WTO
rules the applicant wishes to submit should have direct effect in order for the compensation action to
succeed. The condition is in his view cumulative to the requirement that the rule invoked in in-
tended to confer rights on individuals294. The ECJ, however, clearly rejected the straightfor ward posi-
tion of the CFI but the meaning of the judgement of the ECJ still remains somewhat ambiguous.

The findings of the ECJ in Biret could imply that under very specific circumstances WTO rules can
be relied on in actions under Art. 288(2) EC despite their general lack of direct effect. Similarly as
Zonnekeyn, the present author finds the position of Alber that certain rules “are suddenly blessed
with direct effect in the framework of a damages claim” rather unconvincing295. In the author’s view
the most reasonable solution could be to consider that, under the specific circumstances pointed out
by the ECJ, certain provisions become invocable despite their lack of direct effect, as is the case when
the Nakajima doctrine is applied. This exception would, however, apply only in liability actions.

6.1.2. Parallelism – Direct Effect a Condition for Member State Liability?

Some commentators have referred to the case law of the ECJ with regard to the liability of the Mem-
ber States to support their views of the necessity of direct effect of the invoked provision in actions
for damages296. As the jurisprudence involving Community liability provides for no final answer to
the question whether or not direct effect is required, it is necessary to examine the rules governing
the Member State liability in this context. As the ECJ apparently wants to harmonise the liability
doctrines, it would be clearly against the trend to consider direct effect as a condition of Community
liability if it is not required for a Member State to incur liability.

In the Francovich297 case, which introduced the possibility of holding Member States liable for a
breach of Community law the Court held that the directive invoked in the case was not required to
have direct effect in order to be invoked in an action for damages against a Member State298. From
Francovich the conclusion can be drawn that the condition for Member State liability that the mea-
sure is intended to confer rights on individuals to exist in the context of international agreements
may be fulfilled whether direct effect exists or not299. Consequently, the lack of direct effect of the
WTO Agreements would not as such prevent Member State liability from arising under some cir-
cumstances when its provisions have been breached300. In principle, the present author sees no com-
pelling reason not to apply the same reasoning to the Community liability as well301.

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Some commentators see that allowing individuals to claim damages against Member States even
where the Community provisions they wish to rely on were not directly effective is the most impor-
tant element of Francovich302. Therefore not allowing private parties to rely on WTO rules because of
their lack of direct effect would miss the core of the rules of the jurisprudence303, especially if the
Court truly wishes to unify the conditions of Community and State liability.

It should be noted, however, that as clear as Francovich appears to be, it is possible to interpret the
judgement also in another way. According to van Gerven the Court did not in fact base the applicant’s
right to reparation directly on the provisions of the directive which conferred specific rights, but used
these provisions to flesh out provisions of the Treaty and of the directive which, in themselves, were
sufficiently precise and unconditional in order to base the right to reparation thereon in principle.
He contends that provisions that lack direct effect may not give rise to liability, since, by definition,
individuals cannot rely upon such provisions in order to derive rights from them.304

6.2. Relevance of the Nakajima Doctrine

6.2.1. Applicability in Actions under Article 288(2) EC

When the applicability of the doctrine in the context of an action for damages under Article 288(2)
EC is considered, it should be noted that the exception can be applied under the same circumstances
as in other types of actions. When the liability of the Community is invoked on the basis of the
Nakajima doctrine, the direct effect of WTO law becomes a non-issue305. If the conditions for the
application of the doctrine were met, the applicant would, however still be required to show that the
behaviour of the defendant institution is unlawful and that the other conditions for a successful
liability action are met. The Community would thus not incur liability even though its actions were
reviewed under the on the basis of the Nakajima doctrine if the rule of law relied on by the applicant
was not intended to confer rights on individuals.

6.2.2. Cases Relating to the Bananas Dispute

The Community banana import regime was challenged in a liability action in Cordis, Bocchi and
T.Port. In these cases the CFI rejected the applicants’ argument that the Community was guilty of
misuse of powers in adopting the Commission Regulation 2362/98. The applicants claimed that the
regulation contained infringements of WTO rules despite of the fact that the Community had given
an undertaking to the DSB to repeal the provisions of its regulations which conflicted with W TO
rules. Even though the applicants did not rely on the Nakajima exception in the clearest possible
way306, the CFI considered the applicability of the doctrine to the case and concluded as follows:

“Neither the reports of the WTO Panel of 22 May 1997 nor the report of the WTO Standing Appel-
late Body of 9 September 1997 which was adopted by the Dispute Settlement Body on 25 September
1997 included any special obligations which the Commission intended to implement, within the
meaning of the case-law, in Regulation No 2362/98. The Regulation does not make express reference
either to any specific obligations arising out of the reports of WTO Bodies or to specific provisions of
the agreements contained in the annexes to the WTO Agreement”307.

The CFI rejected thus the relevance of the doctrine without analysis, even though it is hard to find
any other reason for amending the Community’s banana import regime but the Appellate Body
report308. Therefore, it is not surprising that the finding has been harshly criticised by commenta-
tors309. As mentioned above, it is clear that the contested Commission Regulation was adopted to
establish a WTO-compatible regime in line with the panel and Appellate Body reports. It was adopted

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with the sole purpose to implement Council Regulation 1637/98, which explicitly refers to WTO
obligations and was adopted, even according to the CFI310, in order to comply with the DSB decision
of 25 September 1997.

The ECJ dealt with a similar situation quite differently in the Kloosterboer case311. The case concerned
a challenge by a preliminary reference against a Commission Regulation imposing additional duties
on frozen chicken fillets. The plaintiff argued that the duties infringed both the WTO Agreement on
Agriculture (AA) and the Council Regulation which had been amended with a view to implementing
the provisions on additional duties of the AA. The relevant provisions of the Council Regulation
were a direct copy of the AA provisions and the intent to implement emerged expressly from its
preamble. The Advocate General considered that this was a clear case for applying the Nakajima
exception. The ECJ seemed to be evading the question since it conducted its analysis mostly with
reference only to the implementing Council Regulation and not the AA. Even though the ECJ did
not explicitly say that it was applying the Nakajima exception, the case has been seen as “an ideal
example” of its application.312

To the defence of the CFI in Cordis, Bocchi and T.Port it has been said that it looked at the Commis-
sion Regulation in isolation and was therefore entirely correct since the provision does not contain
any indication of an intention to implement WTO obligations313. It has been suggested that the
Court should come to a different conclusion when it will be required to consider the Commission
Regulation in light of the 1998 Council Regulation. It will be invited to do so in the Chiquita314 and
Cartondruck315 cases. It has been submitted that the Court should then consider whether the refer-
ence in the Council Regulation to WTO law is specific enough to indicate an intention to imple-
ment particular WTO obligations as the Regulations in question are so closely connected.

In Banatrading316 the applicant was suing the Council for damages on the grounds that the entire
banana regime since 1993 was in violation of WTO law. It argued at the hearing that, despite of the
lack of direct effect of W TO Agreements, it was none the less for the Court to review the legality of
the Community measure in question in the light of the WTO rules where the WTO has found that
there has been a breach of those rules, the Community has undertaken to implement the recommen-
dations and subsequent decisions of the Dispute Settlement Body and has not taken the measures
necessary to comply with the recommendations and decisions within the prescribed time-limit317.
The CFI rejected the argument as a new plea in law and did not discuss it any further318.

In the present author’s view there is no compelling reason why the Court could not apply the Nakajima
exception in the future actions challenging the Community banana regime. On the other hand, it is
possible for the Court to continue with the ver y narrow interpretation of the doctrine and rule that
the wording in the Council Regulation does not trigger the application of the doctrine. In the light of
the its ver y clear reluctance to review the Community banana regime in light of WTO it seems
unlikely that it would suddenly change its standpoint and limit the judicial deference it has shown to
the discretion of the institutions.

6.2.3. Cases Relating to the Hormones Dispute

The CFI found the Nakajima doctrine inapplicable also in Biret. It held that the circumstances of the
case did not correspond to either of the situations where the doctrine could be applied. Since the
contested directives were adopted several years before the entry into force of the SPS Agreement, it is
not logically possible for them either to give rise to a specific obligation entered into under that
agreement or to refer expressly to some of its provisions319. The CFI thus did not consider the appli-
cability of the Nakajima doctrine in relation to the DSB decision. It is explained by the fact that the

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Community had not yet taken any final action to amend its legislation in connection to the hormones
dispute.

The findings of the CFI in connection to the applicability of the Nakajima doctrine were not subse-
quently questioned by the ECJ, unlike some of the other conclusions the CFI had drawn. The Advo-
cate General, however, assessed further whether the doctrine should be applied after all. In particu-
lar, Alber discussed whether the statement made by the Community that it intended to comply with
its W TO obligations but needed a reasonable time do so, can be considered as a Community mea-
sure taken with the intention to implement a particular obligation assumed in the context of the
WTO. Alber, however, came into the conclusion that the statement was given in respect to the WTO
and belongs to the area of international law. It cannot, as such, produce such legal effects as the
application of the Nakajima doctrine would require320.

In September 2003 a directive was finally adopted to implement the 1998 DSB recommendation321.
The new provision refers expressly to the WTO ruling, which indicates that private parties should
now be able to ask the Courts to review the legality of the directive in the light of the relevant WTO
provisions and case-law by applying the Nakajima doctrine322. This clearly involves a situation where
the Community institutions have used their discretion and deliberately made WTO available to
individuals. The WTO ruling is referred to in the preamble to the directive in the following way:

“In the light of the results of a dispute settlement case brought before the World Trade Organisation
(WTO) by the United States of America and by Canada (the Hormones case) and recommendations
made in that respect by the WTO Dispute Settlement Body on 13 February 1998, the Commission
immediately initiated a complementary risk assessment, in accordance with the requirements of the
Agreement on the Application of Sanitary and Phytosanitary Measures (WTO-GATT) as interpreted
by the Appellate Body in the Hormones case, of the six hormonal substances (…) whose administra-
tion for animal growth promotion purposes is prohibited by Directive 96/22/EC”323.

If the Court were to improve the protection of the individuals in respect to the WTO-illegal behaviour
of the Community institutions, especially as regards non-implementation of the outcomes of dispute
settlement, the Nakajima doctrine perhaps is not the best solution, as can be seen from Biret. The
doctrine can not be applied in the absence of implementing measures. It is difficult to see why
individuals should be let to rely on DSB decisions when the Community has attempted to imple-
ment them but failed in it while, by contrast, if the decisions were completely ignored, individuals
could not enforce them in any manner.

6.3. Invocability of WTO Law in Case of Non-Implementation of DSB Decisions?

6.3.1. Biret – A New Exception Established?

It is possible to interpret the judgement of the ECJ Biret in the way that a new exception to the
general rule concerning the effect of WTO law in the EC legal order was established and WTO law
was made available to private parties under certain circumstances in actions under Art. 288 (2) EC324.
The ECJ did not explicitly state so but at least it left open the possibility that a liability action for
failure to implement a WTO ruling could succeed if the damage arises subsequent to the period
within which the EU should have implemented the WTO ruling. It will not be seen until the advent
of future cases as to which direction the case law develops.

Advocate General Alber was firmly advocating for allowing ‘direct effect’ to WTO rules in Biret
under the circumstances of the case: there was an adverse DSB decision addressed to the Community
involved, the reasonable period for its implementation had lapsed and the EC had failed to withdraw

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or amend its WTO incompatible directives. A more thorough analysis of this new approach to the
invocability of WTO dispute settlement decisions will probably be helpful to shed some light on the
meaning of the Biret judgement of the ECJ, although it remains to be seen if similar reasoning will be
used by the Court. The potential adoption of a new exception will be analysed in the light of the most
important aspects behind the general reluctance of the Court to let private parties to rely on W TO
law.

6.3.2. Limits of Applicability

Both the ECJ and Advocate General were of the view that private parties should not, in any event, be
allowed to rely on WTO law before the reasonable period granted for the implementation of the
panel and Appellate Body reports has lapsed325. Therefore, the possible liability of the Community
would extend only to damage suffered by the applicant after such a period has expired. The EC
would thus not incur liability, for example, for losses suffered from the beginning of the establish-
ment of a W TO-illegal banana import regime, or the introduction of the import ban on hormone
treated meat, or even from adoption of the dispute settlement reports. The position of the companies
claiming compensation for the damage they have suffered on account of retaliatory measure taken by
the other parties to the disputes would not be affected by the limitation, since these measures are
generally resorted to after the period for compliance have lapsed.

6.3.3. Effect on the Margin of Manoeuvre of the Institutions

What appears to be common to all of the exceptional ways for private parties to make use of WTO
law is that the application of the exceptions does not interfere with the institutional balance the
Courts have been carefully guarding. The analysis of the applicability of the Nakajima doctrine showed
that this applies to it and the same appears to be the case concerning the effect of WTO law intro-
duced by the ECJ in the Biotechnologies case326 and the principle of consistent interpretation. It is
therefore necessary to assess whether, and to what extent, the review of relevant Community action
or inaction after the period for implementation of a DSB decision has expired in a liability action
would undermine the institutional balance maintained by the Court.

Advocate General Alber discussed the issue quite broadly and started by giving a rather detailed
analysis of the WTO dispute settlement system. He essentially argued that there is no permanent
alternative to complying with rulings and recommendations of the DSB and underlined that compli-
ance cannot, in the end, be avoided by negotiations between the parties to the dispute327. It should be
noted, however, that the ECJ emphasised in Portugal that to require the judicial organs to refrain
from applying W TO inconsistent rules would have the consequence of depriving the legislative or
executive organs of the possibility of entering into negotiated arrangements even on a temporary ba-
sis328.

Alber further stressed that, even though non-implementation may be a commercial policy option, it
is not under any circumstances a legally valid option, as under the W TO law there is no discretion
left to the legislative and executive organs that could be limited by recognising direct effect to WTO
law. The existence of such a commercial policy option on the whole is due to the lack of enforcement
measures under international law. The fact that suspension of concessions is the only measure under
international law to coerce the Community to comply with the DSB decision cannot, as the Advocate
General in my opinion quite rightly argued, be used as an argument by the Court to justify that they
are not respected. The Court had a choice to make between accepting the commercial policy option
through the exercise of judicial self-restraint329, or respecting the principle of legality by recognising
the binding effect of the DSB decisions and the right of individuals to rely on them in a compensa-
tion action. Alber urged the Court to make a decision in the favour of the latter.

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What the present author finds more noteworthy in the Opinions is the arguments Alber submitted
to distinguish between giving effect to DSB decisions in liability actions on one hand, and in actions
that could lead to annulment on the other. As an action for damages cannot as such compel the
institutions to adopt or withdraw any measures to change the legislation, the risk of the success of
such an action would lead to a lower degree of limitation of the discretion of the institutions than
would an action conceivably resulting in the annulment of a measure. Alber made it clear that the
type of effect of DSB decisions he advocates for is only to be applied in actions for damages and
would merely give the applicant the right to claim compensation from the Community. Consequently,
in Biret the action could have not resulted in the Court requiring the institutions to allow the import
of beef treated with hormones330.

Implementing the WTO dispute settlement recommendations given in Bananas and Hormones cases
involves taking important socio-economic and political considerations into account. As regards the
prohibition of import of beef treated with hormones it is obvious that health and consumer protec-
tion were crucial for the introduction of the measures adopted by the institutions and remain central
in the (non-)implementation of the DSB recommendation331. With regard to the issue of common
market organisation for bananas, some Member States of the EC believe that they have a moral
responsibility towards some of the ACP countries producing bananas and immediate compliance
with the DSB rulings could have put such interests into jeopardy332. We are, thus, dealing with situa-
tions where the discretion of the Community institutions plays an important role.

However, the interests of some private operators can be in a clear conflict with the more general
interests, as for example the position of the companies targeted by punitive duties well illustrates.
Accepting the type of effect of DSB decisions proposed by Alber could perhaps be desirable. At the
same time it could not compel the institutions to adopt or amend legislation which conflicts with the
highly important general interests concerned, it would still guarantee that the rights of private parties
are not entirely ignored when the Community is acting in a manifestly WTO-illegal manner. In the
present author’s view, this would lead to a better balance of interest than giving effect to DSB deci-
sions in annulment actions, or not according them any effect at all.

It would still be wrong to say that the possibility to bring actions for damages invoking W TO law even
under these exceptional circumstances would not limit the discretion of the institutions in any man-
ner. Naturally the risk of liability arising as a consequence of their actions affects the decision-making
of the legislative organs. It increases the pressure on the institutions in respect to implementing
rulings and recommendations of the DSB. However, the significance of such limitation of discretion
should be weighed against the principle of legality. Accepting the proposed type of effect of DSB
decisions in liability action would mean giving much more respect to the latter than has been the case
so far.

6.3.4. Reciprocity Argument

The ECJ did not make any inquiries in Biret whether any of its major trading partners would also
allow a liability claim based on measures found to be in violation of WTO law by the DSB. As it did
not even mention such considerations, it might be prepared to waive the requirement of reciprocity
in this connection333. The Advocate General submitted some observations on the issue. His attitude
towards the reciprocity argument in general is quite critical. He contended that the argument is a
pure policy argument only disguised as a legal argument by calling it the “principle of reciprocity”334.

First, Alber acknowledged that the US legislation has excluded the possibility of private claims against

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WTO-illegal provisions. He went on and considered that the Council’s unilateral statement335 could
not as such establish a similar position for WTO law in the Community legal order.

Alber came to a similar conclusion as AG Saggio in Portugal and considered that the statement the
Council made in the preamble of its Decision concluding the WTO agreement lacks legal relevance
in the Community legal order mainly on the ground that the Court is under Article 300 (7) EC
bound by the WTO Agreement and a provision of secondary Community law may not conflict with
Treaty provisions.

Alber also reminded of the rule laid down by the ECJ in Kupferberg that lack of reciprocity may not as
such prevent the direct effect of an international agreement binding on the Community336. He did
not elaborate much on what makes the argument less important to the proposed effect than it is with
regard to WTO law in general. He found it doubtful whether the Community’s position in negotia-
tions really could be weakened by allowing ‘direct effect’ to WTO law in a limited manner in actions
for damages. Such effect would, according to Alber, only occur if it were possible for the parties to the
dispute to agree that WTO-illegal provisions could remain in force permanently.337 Finally, Alber
emphasised that the principle of legality would be trumped if the Court would find such a policy
argument more important.

The type of effect proposed here is clearly far more limited than the one in issue in Portugal. The risk
of being systematically faced with liability for the harm caused by retaliator y measures could weaken
the Community’s position in negotiations and limit its ‘bargaining power’ to some extent. The argu-
ment is, however, less forceful than if the effect could lead to the annulment of the Community
measure. It should be noted that the Court does not apply the argument consistently as it did not
consider the lack of reciprocity an obstacle when it established the Nakajima exception and recon-
firmed its applicability in the framework of W TO law, even though the application of the exception
renders the legal effects of WTO Agreements within the Community legal system further reaching
than in the legal systems of the Community’s main trading partners338. Therefore, in the present
author’s view the principle of reciprocity cannot as such prevent the Court from letting private par-
ties to rely on W TO law under the exceptional circumstances under consideration.

7. ESTABLISHING UNLAWFULNESS

7.1. General

If the ECJ considers that WTO law could be relied on by private parties in a liability action, the
applicants would still have to show that the behaviour of the Community institutions was unlawful.
The liability cases in issue involve situations where the WTO dispute settlement organs have con-
firmed the unlawfulness of the conduct of the institutions. Whether this suffices to trigger the liabil-
ity of the Community will be assessed in the light of the Schöppenstedt conditions. The applicant
would, thus, have to show that the WTO rules relied on are intended to confer rights on individuals.
This condition will undoubtedly be very difficult to meet. If the applicant would succeed in this, he
would still have to prove that the breach was sufficiently serious.

In Biret unlawfulness was claimed to be constituted by the adoption of directives imposing a WTO
incompatible ban on importation of hormone treated beef339 and the subsequent failure by the EC to
withdraw or amend these measures within the prescribed reasonable time340. Correspondingly, the
Community has, allegedly, acted unlawfully when it has adopted the WTO-illegal banana import
regime and failed to amend it to comply with the DSB decisions given in connection to the bananas
dispute.

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7.2. Does WTO Law Contain Rules Intended to Confer Rights on Individuals?

The ECJ has said on numerous occasions, although not in actions under Article 288(2) EC, that
WTO provisions are not intended to confer rights on individuals, which they can rely on before the
courts341. As noted, the CFI has recently made similar statements also in liability actions342. The
requirement in question seems to be the most difficult precondition of liability to meet. In the light
of the statements of the ECJ and the CFI, it seems that accepting that some of the WTO provisions
could be intended to confer rights on individuals would mean, especially for the CFI, adopting a new
stance. The Opinions of Advocate General Alber in Biret urged the Court to change its view and
brought up several arguments in support of the view that the SPS Agreement, indeed, is intended to
confer rights on individuals.343 The ECJ did not discuss the issue but, instead, rejected the plea on
the basis that no damage had been suffered.

The CFI stressed in Biret that “the purpose of the WTO agreements is to govern relations between
States or regional organisations for economic integration and not to protect individuals”344. It is true
that the WTO is an inter-governmental organisation in which private business operators do not have
any direct role345. They have, however, been claimed to be the main beneficiaries of the multilateral
trading system346. For example Petersmann considers that “the formulation of international trade
rules in terms of rights and obligations of states is no convincing reason for preventing individuals
from invoking precise and unconditional international guarantees of freedom and non-discrimina-
tion”, such as the GATT rules underlying the customs union rules of the EC Treaty347.

Indeed, one of the most important reasons for the establishment of a ‘rule-oriented’ international
economic system by the WTO Agreements was the security and predictability it guarantees for pri-
vate business operators, which enable them to plan better for longer-term investment and operate in
the commerce between nations with vastly differing governmental and cultural structures348. In Sec-
tion 301 case the WTO panel recognised that:

“Proving security and predictability to the multilateral trading system is another central object and
purpose of the system (…) The security and predictability on question are of ‘multilateral trading
system’. The multilateral trading system is, per force, composed not only of States but also, indeed
mostly, of individual economic operators. The lack of security and predictability affects mostly these
individual operators. Trade is conducted most often and increasingly by private operators. It is through
improved conditions for these private operators that Members benefit from WTO disciplines.” 349

It is clear, at least in the light of the panel report in the Section 301 case, that at the level of WTO the
rules appear to be envisaged to be for the protection of the individuals. The approach is very different
of than the view of the ECJ and the CFI as the following passage of the Section 301 case well illus-
trates:

“it would be entirely wrong to consider that the position of individuals is of no relevance to the
GATT/WTO legal matrix. Many of the benefits to Members which are meant to flow as a result of
the acceptance of various disciplines under the GATT/WTO depend on the activity of individual
economic operators in the national and global market places. The purpose of many of these disci-
plines, indeed one of the primary objects of the GATT/WTO as a whole, is to produce certain
market conditions which would allow this individual to f lourish”350.

It should be noted that the ECJ has held in the Kampffmeyer351 case that if a rule has the function of
protecting or developing the general interest, this will not necessarily prevent it from having a dual
purpose in that it also has the function of protecting the interests of individuals. The fact that the
WTO Agreements have as their purpose the protection of a general interest – namely the liberalisation

Nordic Journal of Commercial Law, issue 2004 #1

of trade – does not as such exclude that the provisions can protect the interests of individuals at the
same time.352

Neither has the applicant been required to prove that the rule of law alleged to have been breached is
intended to protect the specific interests of the individual concerned. Instead, it has been sufficient
to show that the rule is for the protection of the individuals generally353. The condition is, thus, easier
to satisfy than the requirement of direct and individual concern under Article 230(4) EC, which has
been applied ver y strictly by the Courts354.

Alber argued that the provisions of the SPS Agreement in specific aim to abolish discriminator y
measures, which restrict the private business operators’ right of freedom to pursue trade. He also
submitted that the WTO Agreements regulate primarily market access rules and within the EC legal
order similar rules, for instance Article 25 EC, are directly applicable. This part of the reasoning of
Advocate General is not necessarily watertight bearing in mind the established case law of the Court,
according to which the similarity between provisions of EC Treaty and of international agreements
does not indicate that the provisions should be interpreted in the same way. The reason for this is
that the purposes of other agreements vary from that of EC Treaty355. Clearly there are huge differ-
ences between the objectives of the EC Treaty and the WTO Agreements356.

7.3. Does the Non-implementation of DSB Rulings and Recommendations Involve a Suffi
ciently Serious Breach?

7.3.1. The Brasserie du Pecheur Criteria

The actions for damages brought due to non-implementation of DSB decisions in Bananas and Hor-
mones cases involve targeting Community action or inaction in legislative fields characterised by the
exercise of wide discretion357. In such areas of legislation the applicant has been required to show that
the institution concerned has manifestly and gravely disregarded the limits on the exercise of its
powers in order to establish a sufficiently serious breach358. Even though the criteria have been noto-
riously difficult to fulfil, the discretion of the institutions is not unlimited as has been seen for
example in the Sofrimport359 and Mulder360 cases.

Earlier, the ECJ seemed to demand that the conduct of the defendant institution lying behind the
illegality be shown to be verging on the arbitrary361. It has, however, subsequently held that fault in the
nature of arbitrariness is not required for liability362. Some commentators have suggested that arbi-
trariness would still have to be demonstrated in circumstances in which the discretion of the institu-
tion adopting the legislation is as wide that the institutions have almost unrestricted powers of ac-
tion363.

After the Bergaderm judgement, that strengthened the significance of the principle of parallelism, it
might be thought that it is sufficient for the applicants to show that the breach is sufficiently serious
in the light of the criteria established by the ECJ in Brasserie du Pecheur. Accordingly, the factors to be
taken into account are the clarity and preciseness of the rule, whether the infringement and damage
caused was intentional or involuntary, whether any error of law was excusable or inexcusable and the
measure of discretion left by that rule to the national or Community authorities364.

It seems convincing to maintain that the WTO rules dealt with are adequately clear and precise
especially as they have been dealt with during the WTO dispute settlement procedure and their
content has been clarified by the WTO organs. Neither can an excusable error of law be involved
after the WTO-breach has been confirmed and a specific obligation to amend the legislation has
been set. Reinisch simply contends that the DSB decision excludes any discretion the violated WTO

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rule could otherwise leave to the Community authorities 365.

As regards the intentional or involuntary nature of the breach and the damage caused, it would
appear somewhat peculiar to maintain that the institutions were not aware that their action was in
breach of WTO law, in particular as regards the failure to amend the condemned rules. Zonnekeyn
asserts that it was so obvious that the amendments to the banana import regime were contrary to
WTO law that one could argue that the EC consciously tried to avoid the implementation of the
WTO rulings366. Naturally the same applies to the disregard of the DSB recommendation in the
Hormones case.

Both commentators who have discussed this problem, Reinisch and Zonnekeyn, agree that the breach
can be seen as sufficiently serious in the light of the Brasserie du P˜cheur conditions367. It is not entirely
clear whether it is enough that these conditions are met for the Community to incur liability. There-
fore, a brief look at the other conditions the have been considered essential in the case law concern-
ing actions under Art. 288 (2) EC will be necessary.

7.3.2. Other Conditions

In assessing the seriousness of the breach made by Community institutions, the Court has taken into
account the consequences of the breach. In the Ireks-Arkady case the violation of the superior rule of
law was qualified as manifest and grave because it affected a limited and clearly defined group of
commercial operators and went beyond the bounds of the economic risks inherent in the activities in
the sector concerned368. As regards the ‘innocent exporters’ cases, it is clear that the punitive import
duties applied to a particular group of products affect a limited and clearly defined group of compa-
nies369. Whether or not the companies will otherwise be affected by the upholding of WTO-illegal
banana import regime or the ban on importation of hormones treated beef, depends on the circum-
stances of each case.

It might be thought that the liability actions based on non-implementation of W TO dispute settle-
ment should be rejected if a large number of traders had been affected by the breach. It is clear that
that such a factor cannot any longer affect the assessment of gravity of the breach. In the HNL case
one of the grounds to reject the claim was that the contested measure affected a very large category of
traders. The case law was, however, relaxed in that regard in Mulder370. There the ECJ considered that
the damage need only be confined to a ‘clearly defined group’, as opposed to a ‘limited group’. The
Court appeared to agree with the view that the fact that loss has been caused to a large number of
traders rather constitutes an indicator of the seriousness of the breach than a ground for rejecting the
claim, even though such conclusion might have serious financial implications.371

As regards the condition that the consequences of the behaviour of the defendant institution were
serious, in the sense that they exceeded the bounds of the economic risks inherent in carrying on
business in the relevant sector of the market372, the unification of the conditions of Community and
Member State liability makes it arguable, whether the condition should be taken into consideration
at present. A similar condition is not to be met under the rules governing the Member State liabil-
ity373. Tridimas seems to consider that the condition remains a requirement for Community liability
also after Bergaderm374. Craig and de B³rca, on the other hand, have taken the view that the applicant
should no longer, as a matter of principle, have to show that the loss suffered was serious, since it is
not a part of the Brasserie du P˜cheur test375. If the Court is serious about unifying the conditions also
in practice, the condition should not be taken into consideration.

What may cause problems to the applicants is that a breach has not been considered sufficiently

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serious where the Community institution has exercised its discretion in the way it did because of an
overriding public interest which justified the harm caused to individual interests376. The Court has
tried to justify the general difficulty of recovering compensation from the Community for loss caused
by its measures as follows:

“the legislative authority, even where the validity of its measures is subject to judicial review, cannot
always be hindered in making its decisions by the prospect of applications for damages whenever it
has occasion to adopt legislative measures in the public interest which may adversely affect the inter-
ests of individuals377.”

What makes the situation slightly problematic is that there is no clear definition for “an overriding
public interest” but it is dealt with subjectively on a case by case basis378. Nonetheless, it is the supe-
rior rule of law which will set the limitation on the freedom of action by the Community institu-
tion379.

8 Conclusion

The overview to the position of the individual in relation to the WTO law within the Community
legal order shows that the ECJ has categorically ruled out the possibility that private parties could
challenge Community measures on the basis of WTO law provisions. Instead, the Court has sup-
ported a limited enforceability of WTO law. WTO law rules may become available to private parties
through the application of the Nakajima doctrine and the principle of consistent interpretation. The
ECJ has also more recently introduced new situations where private parties may be allowed to rely on
WTO law provisions. The statements made in the Biotechnologies and Dior/Tuk cases can be seen to
ref lect the discomfort the ECJ appears to be experiencing with the general position that the WTO
Agreements are not considered justiciable and cannot be relied on by private applicants380.

The lack of justiciability of WTO law relates to the conflict between the empowerment of individuals
and courts on one hand and the discretion of the political and executive institutions of the Commu-
nity on the other. The exceptions developed in the case law make WTO available to private parties
making sure at the same time that the margin of discretion of the Community institutions is not
seriously undermined. They can be seen as fair attempts by the Court to strike a balance between the
power of the Community institutions and the interests of the individuals. The solution appears to be
wiser in the current international setting than allowing direct effect to WTO law, thereby tying the
hands of the Community institutions at the international level. In principle, the present author
agrees with this. The analysis above showed, however, that the exceptions have several shortcomings
and their limited applicability can leave important gaps to the system.

One of such gaps exists in the case of WTO dispute settlement decisions. The analysis of how such
decisions have been dealt with in actions for annulment showed that so far they have not been given
any effect in the Community legal order despite of their, arguably, binding nature at the interna-
tional law level. The ‘direct effect’ of DSB decisions appears to be, in the present author’s opinion,
rightfully ruled out and the very narrow approach to the Nakajima doctrine has prevented the deci-
sions from becoming available to private parties through the application of that exception. Neither
can the principle of consistent interpretation benefit the applicants in any manner in this context.

What is the effect of the general rules on invocation of WTO law on liability actions? What makes
the question interesting is that it has been considered that a rule of law does not necessarily have to
be directly effective in order to be invoked in a liability action. The CFI has, however, adopted a
stance according to which it follows from the position of W TO law in Community legal order that it

Nordic Journal of Commercial Law, issue 2004 #1

cannot benefit private parties in liability actions unless an exception applies. The ECJ seemed to
reproach the CFI in Biret for taking such a shortcut.

The CFI examined the applicability of the Nakajima exception in liability cases involving non-imple-
mentation by the EC of DSB decisions. The inadequacies of the doctrine apply similarly to liability
actions and other types of actions. First, the exception is of no use if the EC has ignored the DSB
decision and not even attempted to implement it. There is no convincing reason for distinguishing
between the position of the applicant, on one hand, in a situation where the EC has attempted to
implement a DSB decision but failed in it and, on the other hand, in a situation where the EC has
not taken any action in order to amend its condemned legislation.

Second, the scope of application of the Nakajima exception is very narrow. This implies that the
institutions have a complete freedom to control the application of the exception by means of preambular
language. This of course fits neatly in the picture where the Court exercises judicial self-restraint and
is not willing to limit the discretion of the institutions. It was shown that allowing private parties to
rely on WTO law in liability actions would not limit the discretion of the institutions to a similar
extent as making WTO available to the applicants in actions, which could lead to annulment. This is
mainly because the applicant can merely claim compensation in a liability action and the Court
cannot compel the institutions to take any legislative measures. Since the Nakajima exception applies,
in principle, similarly in both types of actions, such considerations cannot, however, be taken into
account in its application. Taking into account these shortcomings of the exception, it can be con-
cluded that if the Court wished to enhance the legal effects of an adopted WTO dispute settlement
finding the Community does not comply with, the Nakajima exception probably does not provide for
the best means to it.

The Biret case gave some indications that the ECJ might be willing to let private parties to rely on
WTO law provisions in liability actions under the circumstances that there is a DSB decision obligat-
ing the EC to amend its legislation but it has failed to do so within the prescribed reasonable period
of time. The Community could in any event incur liability only for damage suffered by the applicant
after the period for the implementation has lapsed. In order to determine whether such an ‘excep-
tion’ could be established, it was necessary to assess whether or not the proposed type of effect of
WTO law would clash with the underlying principles of the case law of case law of the ECJ regarding
the effect of WTO law in the Community legal order.

The fact that the Community’s main trading partners, at least the US, do not allow a similar effect to
WTO law in their legal order would speak against the exception. However, this is not a compelling
reason to reject such an effect as the principle of reciprocity has not been applied consistently as also
the Nakajima exception allows such effects to WTO law in EC legal order that do not exist in the legal
orders of its main trading partners.

The effect of the exception on the margin of manoeuvre of the Community institution is crucial. It
can be concluded that establishing the type of effect in question would limit the discretion of the
institutions to some extent but not as forcefully as if DSB decisions were allowed to relied on by
private parties in other types of actions. Deciding whether to accept the exception involves a careful
balancing of interests. The interests of individuals and the importance principle of legality should be
weighed against the commercial policy interests of the Community and the wide discretion of its
political institutions. In the present author’s view the balancing of interests should under the limited
circumstances in question lead to allowing private parties to rely on WTO law.

Nordic Journal of Commercial Law, issue 2004 #1

Even though private parties were allowed to rely on WTO law in liability actions, they would still
have to show that the defendant institutions have acted unlawfully. This would require the applicant
to establish that the WTO provision relied on are intended to confer rights on individuals. It seems
that this is the biggest obstacle in bringing a successful action for damages on the basis of WTO law
as both the CFI and the ECJ have stated that the W TO Agreements are not intended to confer rights
on individuals.

As regards the chances of success of the liability actions brought due to non-implementation by the
EC of DSB decisions from the point of view of establishing the sufficient seriousness of the breach,
it can be concluded that in the light of the (arguable) relaxation of the relevant conditions, it does not
appear to be ruled out that the applicants might succeed in showing that the breach was sufficiently
serious. However, if the Court is not really serious about unifying the conditions of Community and
Member State liability also in practice, the possibility for the actions in question to succeed is ex-
tremely hard to reach even though the applicants were otherwise allowed to rely on WTO provisions.

(Footnotes)
1 European Communities – Regime for the Importation, Sale and Distribution of Bananas, Report of the Panel of 22 May 1997, WT/DS27/

R; European Communities – Regime for the Importation, Sale and Distribution of Bananas, Report of the Appellate Body of 9 Septem-
ber 1997, WT/DS27/AB/R.

2 European Communities – Measures concerning meat and meat products (Hormones), Report of the Panel of 18 August 1997, WT/DS26/
R/USA; European Communities – Measures concerning meat and meat products (Hormones), Report of the Appellate Body of 16
January 1998, WT/DS26/48/AB/R.

3 The Opinions of Advocate General Alber of 15 May 2003 in Cases C-93/02 P, Biret Internationa SA v. Council and C-94/02 P,
Etablissements Biret and Cie SA v. Council, not yet reported.

4 Cases C-93/02 P, Biret International SA v. Council and C-94/02 P, Etablissements Biret and Cie SA v. Council, not yet reported.

5 Snyder, 2003.

6 Mainly Zonnekeyn, 2001a; Zonnekeyn, 2003.

7 Reinisch, 2000.

8 Peers, 2001b.

9 Davies, 2003.

10 The most important of these include: Tridimas, 2001; Wakefield, 2002; Ward, 2000.

11 It does not follow from Article 300 (7) EC that the Community should give effect to its international obligations in a certain way.
It also cannot be concluded from it that when the EC fails to respect its international obligations, review of legality should be an
option. Klabbers, 2000, p. 271.

12 Cases 21-24/72, International Fruit Co.NV v. Produktschap voor Groenten en Fruit, [1972] 1219.

13 Case 181/73, Haegeman v. Belgium, [1974] ECR 449. Since no supplementary measure transposing the provisions into the EC
legal order is needed to form an integral part of that legal order, the Court appears to adhere to a monist approach to the
relationship between international law and Community law. Lenaerts – de Smijter, 2000, p. 104. However, the status of WTO
law in EC legal order has provoked many to argue that the approach is dualist rather than monist.

14 Normally, in public international law, individuals are third parties to international agreements even if intended to be the

Nordic Journal of Commercial Law, issue 2004 #1

beneficiaries. Treaties have a binding effect only between the signatories. Cheyne, 1994, p.586. The effects of treaties in national
legal orders vary from one state to another. In some States the legal system allows individuals to invoke the provisions of treaties
in courts if, normally, treaty has been attributed with direct effect. Schermers, 1982, p. 567.

15 Case 104/81, HZA Mainz v. Kupferberg [1982] ECR 3641.

16 Schermers, 1982, p. 567.

17 See case Jego-Qu–r– where the CFI quite revolutionarily tried to introduce a change in the conditions for access to court and UPA,
where the ECJ strictly overruled CFI’s decision. Case T-177/01, Jego Qu–r– v. Commission [2002] ECR II-2365; Case C-50/00P,
Union de Pequenos Agricultores v. Council [2002] ECR I-6677.

18 Cases 21-24/72, International Fruit Co.NV v. Produktschap voor Groenten en Fruit, [1972] 1219.

19 The discussion between the establishment of the WTO and the ruling of the ECJ in Portugal v. Council was extensive. See inter
alia Monta»a i Mora, 1996; Eeckhout, 1997; Scott, 1995; Louis, 2000; Lauwaars, 2000; Petersmann, 1995.

20 Eeckhout, 1997, p. 42.

21 In addition to that, the most notable features in the new system are the single undertaking approach, the abolition of the so-
called grandfather rights, a legal personality for the new organisation and the stringent conditions required for adopting
safeguard measures. Monta»a i Mora, 1996, p. 51. See for a comprehensive examination of the main changes in the mechanism
Petersmann, 1997, pp. 177-199.

22 Case C-149/96 Portugal v. Council,[1999] ECR I-9395. See for more detailed comments inter alia Eeckhout, 2002; Zonnekeyn,
2000; Rosas, 2000; Desmedt, 2000; Peers, 2001; van den Broek, 2001; Griller, 2000.

23 Council Decision 96/386/EC of 26 February 1996 concerning the conclusion of Memoranda of Understanding between the
European Community and the Islamic Republic of Pakistan and between the European Community and the Republic of India
on arrangements in the area of market access for textile products, [1996] OJ L153/47.

24 Case C-149/96 Portugal v. Council [1999] ECRI 8395, para. 47.

25 Ibid. para. 32.

26 Griller, 2000, p. 442.

27 The issue is by its nature as such that it is impossible to entirely exclude from discussion the political considerations underlying
the more or less legal reasoning.

28 Case C-149/96 Portugal v. Council [1999] ECRI 8395, para. 36.

29 Ibid. para. 37.

30 Ibid. para. 39.

31 Case C-149/96 Portugal v. Council [1999] ECRI 8395, para. 40.

32 Ibid. para. 41. The finding of the Court that WTO Agreements do not provide neither for mandatory or suggested direct effect
of any parts of the agreement seems correct. It has been argued that the WTO itself prefers negotiations to clear and uncondi-
tional judgements and does not expect, or want, its members to accord direct effect to WTO rules. Due to the complex
character of the rules and mechanisms, the disputes concerning the application of WTO rules might be best resolved before the
WTO’s dispute settlement bodies. Certainly there would be a danger that other instances, i.e. national or even Community
Courts, would not be capable of giving appropriate and consistent interpretation of the rules. See, Pischel, 2001, p. 130;
Eeckhout, 1997, p. 50. Contra Petersmann, 2001, p. 105.

33 Case C-149/96 Portugal v. Council [1999] ECRI 8395, para. 45. The Court came to this conclusion regardless of the fact that it
had stated in Kupferberg that “the fact that the courts of one of the parties consider that certain of the stipulations in the
agreement are of direct application whereas the courts of the other party do not recognise such direct application does not in
itself constitute a lack of reciprocity in the implementation of the agreement.” Case C-104/81 HZA Mainz v. Kupferberg [1982]
ECR 3641, para. 18. It would seem at first sight that the doctrine of non-reciprocity in respect of direct effect conf licts with such

Nordic Journal of Commercial Law, issue 2004 #1

position but, as Kuijper puts it, “it does not stand up to scrutiny when a treaty may have such important and wide-ranging
consequences for the national economy as does the GATT, and now the WTO and its Annexes. In the case of such a treaty, the
party whose constitutional and judicial system does not know the mechanism of direct effect of treaty provisions – or, worse still,
specifically excludes such direct effect – places itself in such a favourable position that it becomes fundamentally unfair to its
trading partners. In this way it shields itself against what was called above the most powerful enforcement mechanism for
treaties, and its negotiators, when discussing interpretation and application of the treaty, arrive with free hands at the table,
contrary to their counterparts from countries with direct effect, whose hands are tied by the interpretations of their courts.”
Kuijper, 1995, p. 64.

34 Case C-149/96 Portugal v. Council [1999] ECRI 8395, para. 46.

35 See for an analysis on the political ground s behind the Court’s case law Pischel, 2001.

36 Case C-149/96 Portugal v. Council [1999] ECRI 8395, para. 46.

37 Eeckhout, 2002, p. 96.

38 Snyder, 2003, p. 331.

39 Van den Broek, 2001, p. 440. Note that the question whether WTO law confers rights to individuals is very debatable.

40 According to Zonnekeyn, the marge de manoeuvre argument of the ECJ is ”clearly not a legal argument and an assault to the “trias
politica” principle.” See Zonnekeyn, 2000b, p. 299.

41For the defence of the Court can be said that at least it did not try disguise its true grounds behind the judgement by formal legal
reasoning. Eeckhout, 2002, p. 96. The current view of the Court on the relationship between the WTO law and EC law have
seems quite realistic. As Snyder put it, the ECJ “articulated a view of the relationship between WTO law and EC law which was
less legalistic, more politically cognisant and hence more realistic in the current international setting. It began to point the way
toward a much more coherent conception of the relation between the two sites, notably with regard to who should make the
basic decisions about the impact of WTO law in the EC legal order and how such decisions should be made.” Snyder, 2003, p.
329.

42 The same does not, however, necessarily apply to the same extent with respect to the implementation of DSB rulings and
recommendations. See Cottier – Schefer, 1998, pp. 112, 117.

43 See for a comprehensive work on the relationship between the EU and the WTO and on how the two sites take non-economic
interests into account, Dillon, 2002.

4 4 This is not to say that the commercial policy interests would not, more or less, play the main role here.

45 Council Decision 94/800 EC of 22 December 1994 concerning the conclusion on behalf of the European Community, as
regards matters within its competence, of the agreements reached in the Uruguay Round multilateral negotiations (1986-1994),
[1994] OJ L336/1, last recital of the preamble.

46 As regards the effects of the preambular statement at international level, Saggio considered it very clear that a unilateral interpre-
tation of the agreement made in the context of an internal adoption procedure cannot limit the effects of the agreement itself.
This is in accordance with customary law on the interpretation of treaties, which was embodied in the Vienna Convention of
22 May 1969.

47 Para. 20 of the Opinion of Advocate General Saggio of 25 February 1999 in the Case C-149/96 Portugal v. Council [1999] ECRI
8395.

48 Case C-149/96 Portugal v. Council [1999] ECRI 8395, para. 48.

49 Case C-149/96 Portugal v. Council [1999] ECRI 8395, para. 42.

50 Case C-17/81 Pabst & Richarz v. Hauptzollant Oldenburg [1982] ECR 1331; Case C-12/86 Demirel v. Stadt Schwäbisch Gm·nd, [1987]
ECR 3719; Case C-192/89 Sevince v. Staatsecretaris van Justitie, [1990] ECR I-346.

51 Meaning ACP countries. Case C-87/75 Bresciani v. Amministrazione Italiana delle Finanze, [1976] ECR129.

Nordic Journal of Commercial Law, issue 2004 #1

52 Snyder, 2003, p. 334. See also Rosas, 2000, p. 813.

53 See for a critical and thorough analysis of this aspect of Portugal v. Council, Griller, 2000, p. 457 – 460; Peers, 2001a, p. 121.

54 Eeckhout, 2002, p. 95.

55 Dillon described the nature of WTO law as follows: “GATT/WTO-law is not merely a set of international obligations, freely
undertaken, falling only on the regulatory efficiency of the Community. Rather (…) it is a unique kind of law, having open-
ended implications, capable of interfering with legislative and regulatory programmes of the widest variety.” Dillon, 2002, pp. 6,
384.

56 Such autonomy might, according to Snyder, lead to “the phenomena of judicial self-empowerment and “creeping competence”,
whit which the WTO probably is not equipped with to deal with. Snyder, 2003, p. 333.

57 Snyder, 2003, p. 333.

58 The applicants raised an ‘absence of direct effect’ -argument in the cases where the exception was established. The Court decided
with apparent ease not to look for direct effect. It may appear somewhat odd taking into account how the Court has insisted on
direct effect otherwise in connection to WTO law and international agreements in general. See Klabbers, 2003, pp. 287-288.

59 Case C-70/87, Fediol v. Commission, [1989] ECR 1781.

60 Case C-69/89, Nakajima v. Council [1991] ECR I-2069.

61 Case C-149/96, Portugal v. Council,[1999] ECR I-9395, para. 49.

62 Case C-69/89, Nakajima v. Council [1991] ECR I-2069.

63 Eeckhout, 1997, p. 44. See also Case C-280/93, Germany v. Council [1994] ECR I-4973 and Case C-188/88, NMB v. Commission,
[1992] ECR I-1689.

6 4 Case C-70-87, Fediol v. Commission, [1989] ECR 1781 para 21. The ‘New Commercial Policy Instrument’ has subsequently been
replaced by the Trade Barriers Regulation. Council Regulation 3286/94/EC [1994] OJ L349/71.

65 Cases T-33 and 34/98, Petrotub SA and Republica SA v. Council, [1999] ECR II-3837; C-352/96, Italy v. Council, [1998] ECR I-6937;
T-55/99, Confederacion Expanola de Trasporte de Mercancias (CETM) v. Commission, [2000] ECR II-3207.

66 Case C-76/00P, Petrotub SA and Republica SA v. Council and Commission [2003] ECR I-2877.

67 Case C-76/00P, Petrotub SA and Republica SA v. Council and Commission [2003] ECR I-2877, para. 56.

68 See e.g. Griller, 2000b, p. 464.

69 According to the preamble, the regulation was “adopted in accordance with existing international obligations, in particular those
arising from Article VI of the General Agreement and from the Anti-Dumping code.” Case C-69/89 Nakajima v. Council [1991]
ECR I-2069, paras. 30-31. In Petrotub: “The preamble to the basic regulation, and more specifically, the fifth recital therein,
shows that the purpose of that regulation is, inter alia, to transpose into Community law as far as possible the new and detailed
rules contained in the 1994 Anti-Dumping Code.” Case C-76/00P, Petrotub SA and Republica SA v. Council and Commission [2003]
ECR I-2877, para. 55.

70 Davies, 2003, p. 320.

71 Naturally, a more general reference to WTO commitments is required.

72 See Peers, 2001b, p. 610.

73 See Zonnekeyn, 2001b, p. 602. Similarly, see Snyder, 2003, p. 347.

74 The ECJ stated that: “by adopting the Regulation pursuant to agreements concluded with non-member countries following
negotiations conducted on the basis of Article XXIV (6) of GATT, the Community sought to implement a particular obligation
entered into within the framework of GATT.” Case C-352/96, Italy v. Council [1998] ECR I-6973, para. 20.

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75 Snyder, 2003, p. 347. Case C-45/86, Commission v. Council, [1987] ECR 1493.

76 See similarly, Davies, 2003, p. 318.

77 Snyder, 2003, p. 347.

78 Along with the application of the principle of consistent interpretation.

79 An interesting parallel exists with the direct effect of directives in internal European law. The Court has refused to give directives
horizontal direct effect but has effectively enlarged the scope of directives by the quasi-horizontal effect resulting from the
Marleasing case. The approach reaches a balance between sovereignty and individual rights leaving governments a certain
amount of discretion and at the same time ensuring that they comply with their obligations. Van den Broek, 2001. p. 438.

80 The rather limited scope for the actual application of the doctrine is explicable on the basis that the Court does not wish to
interfere with executive discretion. Davies, 2003, p. 323.

81 Case C-61/94, Commission v. Germany, [1996] ECR I-3989.

82 Case C-53/96 Hermes International v. FHT Marketing Choice BV [1998] ECR I-3603.

83 Weatherill – Beaumont, 1999, p. 417. The formula is similar to the one used in the case C-106/89 Marleasing SA v. La Comercial
International de Alimentacion SA [1990] ECR I-4135.

8 4 Neuwahl, 1996, p. 321.

85 Snyder, 2001, p.363. See also Neuwahl, 1996, p. 322; Trachtman, 1999, p. 677.

86 Davies, 2003, p. 321. For instance in the case C-61/94 Commission v. Germany [1996] ECR I-3989 the German Government
argued that Community law precluded it from complying with the International Dairy Agreement. The ECJ rejected the
argument on the basis of the obligation to interpret Community law in a manner consistent with international agreements.

87 Davies, 2003, p. 321.

88 Case C-377/98, Kingdom of the Netherlands v. European Parliament and Council of the EU [2001] ECR I-6229.

89 Directive of the European Parliament and of the Council 98/44/EC [1998] OJ L213/13.

90 Case C-377/98, Kingdom of the Netherlands v. European Parliament and Council of the EU [2001] ECR I-6229, para. 55.

91 See also the Opinion of Advocate General Jacobs of 14 June 2001 in Case C-377/98, Kingdom of the Netherlands v. European
Parliament and Council of the EU [2001] ECR I-6229. AG Jacobs argued inter alia that “it is in any event desirable as a matter of
policy for the Court to be able to review the legality of Community legislation in the light of treaties binding the Community.
There is no other court which is in a position to review Community legislation; thus if this Court is denied competence,
Member States may be subject to conflicting obligations with no means of resolving them.”

92 It seems logical that the Court, as Davies suggested, introduced the rather unconvincing distinction between a directive which
brings the Community itself in breach of its international obligations and a directive which requires the Member States to
breach their international obligations in order to avoid an overt interference with the separation of powers. Davies, 2003, pp.
322-323.

93 Joined Cases C-300/98, Parfums Christian Dior v. Tuk Consultancy BV and C-392/98, Assco Ger·ste GmbH, Rob van Dijk v. Wilhelm
Layher GmbH & Co KG, Layher BV, [2000] ECR I-11307, para. 48.

94 van den Broek, 2001, p. 416. The ECJ stated in para. 48 that “in a field in respect of which the Community has not yet legislated
and which consequently falls within the competence of the Member States, the protection of intellectual property, and measures
adopted for that purpose by the judicial authorities, do not fall within the scope of Community law.”

95 van den Broek, 2001, p. 416.

96 See Opinion of Advocate General Cosmos in Cases C-300/98 and C-392/98, Parfums Christian Dior v. Tuk Consultancy BV, [2000]
ECR I-11307, paras. 56 – 82.

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97 Rosas, 2000, p. 816.

98 The position of the EU has been described in the following way: “the effect of WTO rules is intended to be limited to interna-
tional responsibility without threatening the predominance of national (or Community) rules in a domestic context. It is a
strategy of combining the utmost effect of WTO law abroad with a view to foster market access rights while leaving traditional
constitutional allocations of power at home as unimpaired as possible.” Cottier – Schefer, 1998, p. 111.

99 Snyder, 2003, p. 364.

100 Van den Broek, p. 440.

101 Eeckhout, 1997, p. 53.

102 Snyder, 2003, pp. 362, 364.

103 Zonnekeyn, 1999, p. 719.

104 Opinion 1/91 (Re the EEA Agreement) [1991] ECR 6079 para. 40.

105 Macleod – Hendry – Hyett, 1996, p. 137.

106 Macleod – Hendry – Hyett, 1996, p. 137. See Opinion 1/76 (Re the Draft Agreement for a Laying Up Fund for the Rhine) [1977] ECR
741, Opinion 1/91 (Re the EEA Agreement) [1991] ECR 6079 and Opinion 1/92 (Re the EEA Agrreement) [1992] ECR I-2821.

107 Opinion 1/91 (Re the EEA Agreement) [1991] ECR 6079 para. 39.

108 Eeckhout, 1997, p. 52.

109 Opinion 1/91 (Re the EEA Agreement) [1991] ECR 6079 para 21.

110 Cottier, 1998, p. 371.

111 Zonnekeyn, 2000a, p. 108.

112 See for a comprehensive analysis of the changes in the system: Petersmann, 1997, pp. 177-199.

113 Palmeter – Mavroidis, 1999, p. 153.

114 See inter alia the Opinion of AG Alber in Case C-93/02 P, Biret International v. Council, para. 74.

115 Jackson, 1998, p. 85.

116 See Waincymer, 2002, ch. 9.7 for summary on the different views on the issue.

117 Jackson, 2000, p. 163.

118 Zonnekeyn, 2000a, p. 103.

119 Zonnekeyn, 2001a, p. 259.

120 Lukas calls this approach “pragmatic” as the former is “legalistic”. See Lukas, 1995, p. 197-199.

121 See for an assessment of the political and legal costs of non-compliance: Cottier, 1998, p. 364-367.

122 Bello, 1996, 416-417.

123 Article 3(7) for instance indicates that in the absence of a mutually acceptable solution, the first objective is usually to secure the
withdrawal of the measures concerned if they are inconsistent with the agreement. This supports the non-binding nature of the
obligation. On the other hand, to argue to the contrary, one may refer to Article 22 (1) or to the part of the Article 3(7), which
states that compensation should be resorted to only if immediate withdrawal is impractical and only as a temporary measure. See
Waincymer, 2002, ch. 9.7.2.

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124 See United States – Sections 301-310 of the Trade Act of 1974, report of the Panel of 22 December 1999, WT/DS152/R, para. 7.76.

125 See Kessie, 2000, p. 4.

126 Eeckhout, 1997, p. 53. See also Davies, 2003, p. 317 and Louis, 2000, p. 504. Louis finds that such a “position, which consists
in admitting the legal value of WTO provisions once that have been clarified through what is more and more like to a due
process of law seems reasonable. Conversely the immediate recognition of direct effect would interfere with this perspective. It
would bring in the mechanism an element of automatism contrary to the intergovernmental trust of the system.”

127 Note that the ECJ also explicitly referred to the legal position of the Community after the reasonable period for implementation
has expired. C-149/96 Portugal v. Council [1999] ECRI 8395, para. 39-40. Emphasis added.

128 Eeckhout, 2002, p. 104. See also Omega where the Court stated that “ the resolution of disputes concerning WTO law is based,
in part, on negotiations between the contracting parties. Withdrawal of unlawful measures is indeed the solution recommended
by WTO law, but other solutions are also authorised, for example settlement, payment of compensation or suspension of
concessions. Joined Cases C-27/00 & C- 210/00, The Queen v. Secretary of State for the Environment, Transport and the Regions ex
parte Omega Air Ltd; Omega Air Ltd. Aero Engines Ireland Ltd, Omega Aviation Services Ltd. v. Irish Aviation Authority [2002] ECR I-
2569, para. 89.

129 Case T- 254/97, Fruchthandelgesellschaft mbh Chemnitz v. Commission [1999] ECR II-2743.

130 Council Regulation 404/93/EC [1993] OJ L47/1.

131 Case T- 254/97, Fruchthandelgesellschaft mbh Chemnitz v. Commission [1999] ECR II-2743, paras. 26-27.

132 Davies, 2003, p. 324.

133 Case T- 254/97, Fruchthandelgesellschaft mbh Chemnitz v. Commission [1999] ECR II-2743, para. 30.

134 Case T-230/97 Comafrica SpA and Dole Fresh Fruit Europe Ltd & Co v. Commission [1997] ECR II-3031.

135 Ibid. para. 40.

136 See Case T-13/99, Pfitzer Amimal Health SA v. Council [2002] ECR II-1961.

137 See T-212/99, Intervet International BV formerly Hoechst Roussel Vet GmbG v. Commission [2002] ECR 1445.

138 European Communities – Measures concerning meat and meat products (Hormones), Report of the Appellate Body of 16 January 1998,
WT/DS26/48/AB/R.

139 See Snyder, pp. 338-339.

140 Eeckhout, 2002, p. 104. See Also Peers, 2001a, p. 116. Also Davies finds it “highly unlikely that a private applicant would ever be
able to rely on a decision of the DSB in order to invalidate a Regulation.” Davies, 2003, p. 309.

141 Peers, 2001a, p. 116.

142 As the EC is now faced with decisions which are binding in international law, and brought about in respect of due process of
law and procedures equivalent to judicial settlement in national or international law.

143 Cottier, 1998, pp. 373-375.

144 Legal distinction between different types of non-implementation based on the motives and reasons stated in support of non-
compliance would probably prove problematic. See Peers, 2001a, p. 117.

145 Peers, 2001a, p. 117. Peers does not argue that DSB decisions should not have any effect at all but rather argues that the effect
should be based on the Nakajima doctrine. Similarly, see Eeckhout, 2002, p. 110.

146 Petersmann, 1997, p. 139.

147 Bourgeois, 2001, p. 121.

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148 Such a situation is the first one of the three different scenarios described by Peers, which may lead to a different end result. The
second scenario involves a situation where the EC has purported to implement a panel report and it has been agreed at WTO
level that the implementation is correct. In this case the EC act should not be reviewed in light of the panel report even if the
applicant disagree with the WTO-compatibility. In the third scenario the EC’s purported implementation has been challenged
at WTO level but the dispute has not been concluded yet. In this unlikely case EC courts should suspend the case. Peers, 2001a,
p. 117.

149 Such referrals have been omitted in all other ‘implementing’ measure concerned except for the very recent Directive adopted as a
result of the Hormones case. The Directive explicitly refers to a DSB recommendation. It appears clear that the Nakajima
exception applies if that Directive is challenged on the basis of WTO obligations. Directive 2003/74/EC of the European
Parliament and of the Council of 22 September 2003 amending Council Directive 96/22/EC concerning the prohibition on
the use in stockfarming of certain substances having a hormonal or throstatic action and of beta-agonists, [2003] OJ L262/17.

150 Eeckhout, 2002, p. 107.

151 “Implementation” as defined in the case law seems to have a different meaning from the common sense or generally accepted
meaning. Snyder, 2003, p. 347. See for a comprehensive list of ‘evidence’ supporting the view that the 1998 and 2001 legislation
adopted as a result of the banana dispute was intended to implement WTO obligations Peers, 2001b, pp. 611-612, 614-615. See
also Zonnekeyn, 2001b, pp. 603-604.

152 The Regulation explicitly provides that “the Community’s international commitments under the World Trade Organisation
(WTO) and to the other signatories of the Fourth ACP-EC Convention should be met, whilst achieving at the same time the
purposes of the common organisation of the market in bananas.” Council Regulation 1637/98/EC [1998] OJ L210/28, second
recital of the preamble.

153 Commission Regulation 2362/98/EC [1998] OJ L293/32.

154 See Peers, 2001b, p. 611.

155 The CFI found that neither the panel report nor the Appellate Body report adopted by the DSB “included any special obliga-
tions which the Commission intended to implement.” It also found that the Commission Regulation in question does not
make express reference to any specific obligations arising of the reports of WTO bodies. Case T-18/99, Cordis Obst und Gem·se
Grosshandel GmbH v. Commission [2001] ECR II-0913, para. 59. The findings will be discussed further below. They apply in this
context to other types of actions as well.

156 In general, as the dispute settlement results clearly are part of the WTO law, EC acts should, as far as possible, interpreted in the
light of panel and Appellate Body reports. Peers, 2001a, p. 118. Case T-256/97 BEUC v. Commission [2000] ECR I-1209 confirms
the application of the principle of consistent interpretation to W TO rules.

157 Davies, 2003, p. 321.

158 Steiner, 1995, p. 146. See for example Case C-146/91, KYDEP v. Council and Commission [1994] ECR I-4199, para. 58

159 Case 4/69, Alfons L·tticke GmbH v. Commission [1971] ECR 325, para. 10.

160 Case 5/71, Zuckerfabrik Schöppenstedt v. Council, [1971] ECR 975 at 984, para 11; Case C-352/98P Laboratories Pharmaceutiques
Bergaderm and Goupil v. Commission [2000] ECR I-5291.

161 Wakefield, 2002, p. 43.

162 Except for the very rare cases where the liability of the Community for valid legislative (‘strict liability’) acts might occur. See for
an overview of conditions Bronkhorst, 1997, pp. 153-167.

163 Brealey – Hoskins, 1994, p. 232.

164 Wakefield, 2002, p. xv, 89. The right to get compensated for damage caused by the Communities has even been regarded as a
fundamental right. See Schermers – Waelbrook, 2001, p. 520.

165 Schermers – Waelbrook, 2001, p. 548. See also Fines, 1997, p. 23. Fines is of the opinion, though, that the remedy does not
fulfill this function.

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166 This is well illustrated by the fact that up until the year 1996 there had been only 8 successful Article 288 (2) claims brought to
the Community Courts. Opinion of AG Tesauro in Joined Cases C-46/93 and C-48/93 Brasserie du P˜cheur SA v. Federal
Republic of Germany and Factortame III and The Queen v. Secretary of State for Transport ex parte Factortame Limited and Others [1996]
ECR I-1029, n 65.

167 Ward, 2000, pp. 8-10.

168 See Fines, 1997, pp. 21-23.

169 As the Court “ forces national tribunals to offer the citizen full protection, that is remedies which are much more effective than
those which, in comparable situations, are available against Community institutions.” Caranta, 1995, p. 725. Also Ward points
out that imperatives of a different nature than of ‘the individual’ and the need for an ‘effective remedy’ have prevailed when
disgruntled subjects have questioned the legality of Community measures. Ward, 2000, p. 11.

170 Ward, 2000, p. 11.

171 Kilpatrick, 2000, p. 8-9.

172 Ward, 2000, p. 289.

173 Ward, 2000, p. 322.

174 Waelbroeck perceived such direction in the case law as the Court had shown a more flexible approach in accepting liability of
institutions even in the context of their legislative activity. Waelbroeck, 1997. p. 335.

175 Case C-352/98P Laboratories Pharmaceutiques Bergaderm and Goupil v. Commission [2000] ECR I-5291

176 For instance the seriousness of the breach is assessed according to a more relaxed criteria in the context of Member State
liability. Some argue that the same standard now applies to Community liability as well. See Craig – de Burca, 2003, p. 557.

177 Joined Cases C-46/93 and C-48/93, Brasserie du P˜cheur v. Germany and R. v. Secretary of State for Transport, ex parte Factortame and
others, [1996] ECR I-1145, para. 42.

178 Tridimas, 2001, p. 326. See also Reinisch, 2000, p. 44.

179 Case C-352/98P Laboratories Pharmaceutiques Bergaderm and Goupil v. Commission [2000] ECR I-5291, para 40.

180 Tridimas, 2001, p. 322.

181 Case 5/71, Zuckerfabrik Schöppenstedt v. Council, [1971] ECR 975 at 984, para 11

182 Case C-352/98P Laboratories Pharmaceutiques Bergaderm and Goupil v. Commission [2000] ECR I-5291, para 62.

183 Rather, the breach of a “superior” rule of law has been considered to be implicit in the concept of unlawfulness which normally
is a condition for Community liability to arise. See Tridimas, 2001, pp. 328-329. On the other hand, Aalto is of the opinion
that the requirement of a “superior” rule of law was central to the differences between Community and Member State liability.
Aalto, 1999, p. 96. In my opinion deleting the reference to a superior rule is not crucial as it still in a way remains as a condi-
tion, since a measure can only breach another rule if the latter is superior. See similarly para. 76 of Opinion of AG Tesauro in
Joined Cases C-46/93 and C-48/93 Brasserie du P˜cheur SA v. Federal Republic of Germany and Factortame III and The Queen v.
Secretary of State for Transport ex parte Factortame Limited and Others [1996] ECR I-1029.

184 Tridimas, 2001, p. 329; Craig – de Burca, 2003, pp. 549-550.

185 E.g. Case 74/74, CNTA v. Commission [1975] ECR 533, para. 44, where the Court held that the Commission had infringed a
superior rule of law by failing to include in a regulation “transitional measures for the protection of the confidence which a
trader might legitimately have had in the Community rules.” See also Schermers – Waelbroeck, 2001, p. 554.

186 Joined Cases 63-69/72, Werhahn v. Council [1973] ECR 1229; Case T-489/93, Unifruit Hellas v. Commission [1994] ECR II-1201.

187 E.g. Joined Cases 83 and 94/76, 4, 15 and 40/77, HNL and Others v. Council and Commission, [1978] ECR 1209, para. 5; Case
238/78, Ireks-Arkady [1979] ECR 2955, para. 11; Case T-489/93, Unifruit Hellas v. Commission [1994] ECR II-1201, paras. 76-80.

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188 Case T-105/96, Pharos v. Commission [1998] ECR II-285, paras. 73-78.

189 Case T-167/94, Nölle v. Council and Commission [1995] ECR II-2589, para. 76.

190 Case C-119/88, AERPO and Others v. Commission [1990] ECR I-2189, para. 19.

191 See Schermers – Waelbroeck, 2001. p. 554 and Lenaerts – Arts, 1999, pp. 264-265.

192 The requirement resembles the German ‘Schutznormtheorie’, according to which the State is liable only when it breaches a legal
norm that protects a subjective public right of the injured party. Such rule must be intended to protect a specific circle of
individuals to which the injured party belongs, and not only individuals in general. Similar principles are known also in
England and in the Netherlands. The ECJ has in practice applied the condition more liberally. Schermers – Waelbroeck, 2001,
p. 553-554.

193 Tridimas, 2001, p. 327.

194 There are, however, some principles of Community law that have not been considered to have the protection of individuals as
their purpose. The ECJ has held, for instance, that the objective of the rules governing the division of powers between the
Community institutions is to maintain a balance between the institutions, and not to protect the individual.

195 In Bergaderm, the ECJ placed a particular emphasis on the degree of discretion enjoyed by the author of the act for the purpose
of determining whether or not the breach is serious. The requirement of a sufficiently serious breach applies to all acts in
relation to which the institution concerned enjoys wide discretionary powers irrespective of whether the measure is legislative or
administrative in nature. By contrast, if the violation occurs in circumstances where the institution in question has only
considerably reduced, or even no discretion, the mere infringement of Community law may be sufficient to establish the
existence of a sufficiently serious breach to be found. Case C-352/98P Laboratories Pharmaceutiques Bergaderm and Goupil v.
Commission [2000] ECR I-5291, para. 44. The ECJ referred there to Hedley Lomas, a case dealing with the liability of a Member
State. Case C-5/94, The Queen v. MAFF, ex parte Hedley Lomas [1996] ECR I-2553.

196 Joined Cases 83 and 94/76, 4, 15 and 40/77, HNL and Others v. Council and Commission, [1978] ECR 1209, para 6.

197 Tridimas, 1998, p. 23.

198 See Craig – de B³rca, 2003, p. 555.

199 Joined Cases C-46/93 and C-48/93 Brasserie du P˜cheur SA v. Federal Republic of Germany and Factortame III and The Queen v.
Secretary of State for Transport ex parte Factortame Limited and Others [1996] ECR I-1029, para. 56.

200 For a more specific analysis, see Toth, 1997, p. 180-191.

201 Although the Treaty requires the Community to make good “any damage”, a more restrictive approach has been applied in the
case law of the Court.

202 Brealey – Hoskins, 1994, p. 234. The ECJ held that it can declare the EC liable for “imminent damage foreseeable with
sufficient certainty even if the damage cannot yet be precisely assessed”. A reason for this view is that ”to prevent even greater
damage it may prove necessary to bring the matter before the Court as soon as the cause of damage is certain.” Joined Cases 56-
60/74, Kampffmeyer v. Commission and Council [1976] ECR 711, para. 8.

203 Such as damages for personal injuries and for pain and suffering. Damages may also be claimed for penalties paid for repudia-
tion of contracts, for lost profit on concluded of foreseeable contracts and for the wrongful abolition of production refunds.
Brealey – Hoskins, 1994, pp. 234-235.

20 4 Van Gerven, 1994, p. 30.

205 Douglas-Scott, 2002, p. 401. The duty to mitigate derives from a general principle common to the legal systems of the Member
States “to the effect that the injured party must show reasonable diligence in limiting the extent of his loss or risk having to bear
the damage himself.” Joined Cases 104/89 and 37/90,. Mulder II [1992] ECR I-3061, para. 26.

206 For a more specific analysis, see Toth, 1997, p. 191-198.

207 As formulated in Bergaderm. Case C-352/98P Laboratories Pharmaceutiques Bergaderm and Goupil v. Commission [2000] ECR I-5291,

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para 42.

208 Toth, 1997, p. 192.

209 See for details of the dispute: Jackson – Grane, 2001; Komuro, 2000.

210 See for details of the dispute: Pardo Quintillan, 1999, pp. 156-166; Dillon, 2002, pp. 131-140.

211 European Communities – Regime for the Importation, Sale and Distribution of Bananas, Report of the Panel of 22 May 1997, WT/
DS27/R; European Communities – Regime for the Importation, Sale and Distribution of Bananas, Report of the Appellate Body of 9
September 1997, WT/DS27/AB/R; European Communities – Measures concerning meat and meat products (Hormones), Report of the
Panel of 18 August 1997, WT/DS26/R/USA; European Communities – Measures concerning meat and meat products (Hormones),
Report of the Appellate Body of 16 January 1998, WT/DS26/48/AB/R.

212 Cases C-104/97 P, Atlanta AG v. European Community [1999] ECR I-6983; T-18/99, Cordis Obst und Gem·se Grosshandel GmbH v.
Commission [2001] ECR II-0913; T-30/99, Bocchi Food Trade International GmbH v. Commission [2001] ECR II-0943; T-52/99, T.Port
GmbH & Co. KG v. Commission [2001] ECR II-0981; T-3/99, Banatrading GmbH v. Council [2001] ECR II-2123; T-57/00, Banan-
Kompaniet AB and Skandinaviska Bananimporten AB v. Council and Commission, judgement of 6 March of 2003, not yet reported.

213 Cases C-93/02 P, Biret Internationa SA v. Council, not yet reported; C-94/02 P, Etablissements Biret and Cie SA v. Council, judge-
ments of 30 September 2003, not yet reported.

214 The so-called ‘innocent exporters’ case include at least: Case T-69/00, Fiamm SpA and Fiamm Technologies Inc. v. Commission and
Council; Case T-151/00, Le Laboratoire du Bain v. Council and Commission; Case T-301/00, Groupe Fremaux SA and Palais Royal Inc.
v. Council and Commission; Case T-320/00, Cartondruck GmbH & Co. KG v. Commission and Council and Case T-383/00, Beamglow
Ltd. v. Council, European Parliament and Commission. All these cases are still pending. Case law followed until 31 December 2003.

215 On the basis of the results of further analysis of the risks associated with the use of the substances in question a directive seeking
to maintain the prohibition was adopted. Directive 2003/74/EC of the European Parliament and of the Council of 22
September 2003 amending Council Directive 96/22/EC concerning the prohibition on the use in stockfarming of certain
substances having a hormonal or throstatic action and of beta-agonists, [2003] OJ L262/17.

216 The Commission approved a regulation that would implement a new banana regime. The regulation is a result of an under-
standing reached by the EC and US pursuant to which the EC would introduce a tariff-only regime for imports of bananas no
later than the beginning of the year 2006. See in more detail Jackson – Grane, 2001, p. 591. Council Regulation 216/2001/EC
[2001] OJ L031/2 and Commission Regulation 896/2001/EC [2001] OJ L126/6.

217 Zonnekeyn, 2001a, p. 262.

218 Since we are dealing with discretionary measures. It is now rather the degree of discretion enjoyed by the defendant institution
than the fact whether the required measure is legislative or non-legislative in nature that counts for the application of the
Schöppentstedt formula as modified by Bergaderm. See Craig – de Burca, p. 549.

219 See Davies, p. 317.

220 Cases C-93/02 P, Biret Internationa SA v. Council and C-94/02 P, Etablissements Biret and Cie SA v. Council; Case T-52/99, T.Port
GmbH & Co. KG v. Commission [2001] ECR II-0981; Case T-69/00, Fiamm SpA and Fiamm Technologies Inc. v. Commission and
Council, pending.

221 Case T-30/99, Bocchi Food Trade International GmbH v. Commission [2001] ECR II-0943; Case T-52/99, T.Port GmbH & Co. KG v.
Commission [2001] ECR II-0981.

222 Case T-30/99, Bocchi Food Trade International GmbH v. Commission [2001] ECR II-0943; Case T-52/99, T.Port GmbH & Co. KG v.
Commission [2001] ECR II-0981.

223 Case T-52/99, T.Port GmbH & Co. KG v. Commission [2001] ECR II-0981; Case T-69/00, Fiamm SpA and Fiamm Technologies Inc. v.
Commission and Council, pending.

224 Case T-30/99, Bocchi Food Trade International GmbH v. Commission [2001] ECR II-0943

225 Case T-69/00, Fiamm SpA and Fiamm Technologies Inc. v. Commission and Council, pending.

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226 Case T-521/93, Atlanta and Others v. European Community [1996] ECR II-1707.

227 Council Regulation 404/93/EC [1993] OJ L47/1.

228 Case C-280/93, Germany v. Council [1994] ECR I-4973.

229 The CFI concentrated in the case mainly on pleas based on breach of certain fundamental rights. The plea concerning
infringement of GATT was one of the ten pleas the CFI did not discuss in detail. Case T-521/93, Atlanta and Others v. European
Community [1996] ECR II-1707, para. 77.

230 Case C-104/97 P, Atlanta AG v. European Community [1999] ECR I-6983.

231 European Communities – Regime for the Importation, Sale and Distribution of Bananas, Report of the Appellate Body of 9 September
1997, WT/DS27/AB/R;

232 Case C-104/97 P, Atlanta AG v. European Community [1999] ECR I-6983, paras. 17-23.

233 Para 73 of the Opinion of AG Alber in C-93/02P, Biret International SA v. Council [2003].

23 4 Case T-18/99, Cordis Obst und Gem·se Grosshandel GmbH v. Commission [2001] ECR II-091.

235 Case T-30/99, Bocchi Food Trade International GmbH v. Commission [2001] ECR II-0943.

236 Case T-52/99, T.Port GmbH & Co. KG v. Commission [2001] ECR II-0981.

237 Commission Regulation 2362/98/EC [1998] OJ L293/32.

238 Council Regulation 404/93/EC [1993] OJ L47/1.

239 Council Regulation 1637/98/EC [1998] OJ L210/28.

240 Note that this was explicitly mentioned by the CFI. See cases Cordis, Bocchi and T.Port, para. 8.

241 The applicants also attempted in each case to base their actions on other issues, including the duty to state reasons, proportion-
ality, equal treatment and the right to pursue trade.

242 The judgement in the Portugal case was given after the lodging of the appeals. The parties were called on to submit their
observations on the possible consequences of the judgement. The applicants admitted that the WTO provisions did not have
general direct effect but this did not affect the argumentation based on rules internal to Community legal order. E.g. Case T-30/
99, Bocchi Food Trade International GmbH v. Commission [2001] ECR II-0943, para. 38-39.

243 Case T-18/99, Cordis Obst und Gem·se Grosshandel GmbH v. Commission [2001] ECR II-0913, para. 34. The applicant put forward
an argument that since the EC had given an undertaking to the DSB to repeal the provisions conflicting with the WTO rules, it
had acted in breach of the principle nemini licet venire contra factum proprium when putting that undertaking into practice by
adopting a regulation containing infringements of those rules. The Court rejected the argument because an act of a Community
institution is vitiated by misuse of powers only if it was adopted with the exclusive or main purpose of achieving an end other
than stated and the applicant did not even allege that the Commission had acted in such a way. Paras. 35, 52-54.

244 E.g. Case T-18/99, Cordis Obst und Gem·se Grosshandel GmbH v. Commission [2001] ECR II-0913, para. 51.

245 Eeckhout, 2002, p. 108.

246 See 6.2.2. for further analysis.

247 Case T-174/00, Biret Internationa SA v. Council [2002] ECR II-17 and Case T-210/00, Etablissements Biret and Cie SA v. Council
[2002] ECR II-47.

248 The EC adopted Directive 81/602 which requires that Member States prohibit the administering to farm animals of substances
designed to promote growth. Council Directive 81/602/EEC [1981] OJ L222/32. Directive 88/146 requires that Member States
prohibit importation of animals and of meat from animals to which have been administered the prohibited hormonal sub-
stances. Council Directive 88/146/EEC [1988] OJ L70/16. Those directives were repealed by Directive 96/22, which confirmed

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the prohibition and added a substance to the list of prohibited substances. Council Directive 96/22/EC [1996] OJ L125/3.

249 European Communities – Measures concerning meat and meat products (Hormones), Complaint by the United States, Report of the
Appellate Body of 16 January 1998, WT/DS26/48/AB/R.

250 See McNeils, 2001, pp. 192-194.

251 They also claimed that the Community was in breach of the principle of protection of legitimate expectations.

252 Case T-174/00, Biret International SA v. Council, [2002] ECR II-17, para. 58.

253 Ibid. para. 59.

25 4 Case T-174/00, Biret International SA v. Council, [2002] ECR II-17, para. 61.

255 Ibid. para. 62.

256 Ibid. paras. 63-64. See 6.2.3.

257 Case T-174/00, Biret Internationa SA v. Council, [2002] ECR II-17, para. 67.

258 Case C-93/02P, Biret Internationa SA v. Council, [2002] paras. 38-46.

259 The Opinions of the Advocate General Alber of 15 May 2003 in Cases C-93/02 P, Biret Internationa SA v. Council and C-94/02 P,
Etablissements Biret and Cie SA v. Council.

260 Case C-93/02P, Biret International SA v. Council [2003], para. 56.

261 Case C-93/02P, Biret International SA v. Council [2003], para. 59.

262 Ibid. paras. 61-64.

263 Compare Case C-93/02P, Biret International SA v. Council [2003], para. 52 and Case T-174/00, Biret Internationa SA v. Council,
[2002] ECR II-17, para. 61.

26 4 Case T-56/00, Dole Fresh Fruit International Ltd. v. Council and Commission [2003]

265 Davies, 2003, p. 314. Also the Opinions of Advocate General Alber of 15 May 2003 in Cases C-93/02 P, Biret Internationa SA v.
Council and C-94/02 P, Etablissements Biret and Cie SA v. Council

266 Case T-69/00, Fiamm SpA and Fiamm Technologies Inc. v. Commission and Council; Case T-151/00, Le Laboratoire du Bain v. Council
and Commission; Case T-301/00, Groupe Fremaux SA and Palais Royal Inc. v. Council and Commission; Case T-320/00, Cartondruck
GmbH & Co. KG v. Commission and Council; Case T-383/00, Beamglow Ltd. v. Council, European Parliament and Commission.. All the
cases are still pending. Case law followed until 31 December 2003.

267 In my opinion it is rather unlikely that the CFI would come up with anything ‘inventive’, taking into consideration the way the
ECJ in the UPA case put the CFI back to its place after its judgement in J–go-Qu–r– relaxing the criteria of admissibility of
actions for annulment brought by individuals. Case T-177/01, J–go Qu–r– v. Commission [2002] ECR II-2365; Case C-50/00P,
Union de Peque»os Agricultores v. Council [2002] ECR I-6677. See also Ragolle, 2003, p. 100.

268 Rosas, 2001, p. 140.

269 See Zonnekeyn, 2001a, p. 253-254.

270 See Kessie, p. 8. They include for instance manufacturers of batteries, bath products, cotton linen and cardboard cartons.

271 Zonnekeyn, 2001a, p. 265.

272 Reinisch, 2000, p. 51.

273 Zonnekeyn, 2001, p. 265, note 52.

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274 By contrast, Zonnekeyn is of the view that the companies have a reasonable chance to succeed despite the restrictive application
of the criteria for Community incurring liability. Zonnekeyn, 2001a, p. 261.

275 Rosas, 2001, p. 140.

276 Reinisch, 2000, pp. 45, 51; Zonnekeyn, 2001a, p. 271.

277 Rosas, 2001, p. 140.

278 Ibid.

279 Case C-149/96 Portugal v. Council,[1999] ECR I-9395, para. 47; also inter alia Case C-76/00P, Petrotub and Republica v. Council
[2003] ECR I-79; Case C-93/02P, Biret International SA v. Council [2003] not yet reported, para. 52.

280 For example Fines concluded on the basis of the Odigitria case that liability can occur on the basis of a unilateral approach to
external relations. Fines, 1997, p. 27. In Odigitria the CFI accepted the condition that an action under Article 288 (2) EC could
only be successful if a sufficiently serious breach of a superior rule of law for the protection of individuals as being relevant to
determining Community liability in the field of external relations. Case T-572/93, Odigitria AAE v. Council and Commission
[1995] ECR II-2025.

281 See for an overview of jurisprudence and academic writing on the issue: Gasparon, 1999, pp. 619-622.

282 Zonnekeyn, 2001a, p. 265.

283 Case 90/77, Helmut Stimming KG v. Commission [1978] ECR 995. Discussed in Gasparon, 1999, p. 621.

28 4 Case 90/77, Helmut Stimming KG v. Commission [1978] ECR 995, para. 107.

285 Opinion of AG Mayras in Case 90/77, Helmut Stimming KG v. Commission [1978] ECR 995.

286 The Opinion of Advocate General Lenz in Case C-469/93, Amministrazione della Finanze dello Stato v. Chiquita Italia SpA [1995]
ECR I-4533, para. 21.

287 See Monta»a i Mora, 1996, pp. 50-51.

288 Similarly, Zonnekeyn, 2003, p. 764. Peers, on the other hand, interprets the statements of the CFI to imply that a measure
could not be classified as an act intending to confer rights on individuals unless that measure could be relied on in courts. In
any event, he claims that such finding of CFI was blatantly wrong and ‘direct effect’ is not a pre-condition for liability. Peers,
2001b, p. 612.

E.g. Case T-18/99, Cordis Obst und Gem·se Grosshandel GmbH v. Commission [2001] ECR II-0913, para. 51.

289 Zonnekeyn, 2001a, p. 265.

290 See Gasparon, 1999, p. 615. Contra Aalto, 1999. pp. 86-89.

291 As was the case in Joined Cases C-6/90 and C-9/90, Francovich and Others v. Italy [1991] ECR I-5357.

292 Maresceau, 1986, p. 118. See similarly Gilsdorf – Oliver, ‘Haftung der Gemeinschaft und ihrer Bediensten – Artikel 215’ in H.
von der Groeben – J. Thiesing – C.-D. Ehlermann (eds.): Kommentar zum EU-/EG-Vertrag, Vol. 5, fifth edition, 1997, para. 36 as
quoted in Reinisch, 2000, p. 46.

293 See Craig – de B³rca, 2003, p. 550.

29 4 The Opinion of the AG Alber in Cases C-93/02 P, Biret Internationa SA v. Council and C-94/02 P, Etablissements Biret and Cie SA
v. Council, para. 46. The same view is supported by Davies who is of the opinion that “since WTO rules cannot be relied upon,
the legal position of applicants would not be improved even if WTO rules did confer rights on them.“ Davies, 2003, p. 310.

295 See Zonnekeyn, 2003, p. 765.

296 See Zonnekeyn, 2003, pp. 764-765; Peers, 2001b, p. 612.

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29 7 Joined Cases C-6/90 and C-9/90, Francovich and Others v. Italy [1991] ECR I-5357.

298 The ECJ has explicitly said that the lack of direct effect does not exclude liability. Aalto, 1999, p. 101.

299 Gasparon, 1999, p. 616.

300 Aalto, 1999, p. 101.

301 A commentator has suggested that holding the Community liable for a breach of WTO law would be more likely than the
liability of a Member State. See Manin, 1997, pp. 413-415 as quoted in Aalto, 1999, p. 101.

302 See Snyder, 1993, p. 9.

303 Peers, 2001b, p. 612.

30 4 See van Gerven, 1994, pp. 21-22. He reasoned that provisions may be insufficiently precise or too conditional for specific rights
to be derived therefrom, but may nevertheless be used in order to make operative a right to reparation that can be based on
other, in that respect sufficiently precise and unconditional, Community law provisions.

305 Zonnekeyn, 2001a, p. 267.

306 According to Eeckhout the applicants merely referred to the exception in a rather confusing way at the oral hearing. Eeckhout,
2002, p. 108.

307 Case T-18/99, Cordis Obst und Gem·se Grosshandel GmbH v. Commission [2001] ECR II-0913, para. 59.

308 Davies, 2003, p. 324.

309 Especially Peers, 2001b and Zonnekeyn, 2001b. See also Eeckhout, 2002, p. 107.

310 See Case T-18/99, Cordis Obst und Gem·se Grosshandel GmbH v. Commission [2001] ECR II-0913, para.8.

311 Case C-317/99, Kloosterboer Rotterdam BV v. Minister van Landbouw, Natuurbeheer en Visserij [2001] ECR I-9863.

312 Snyder, 2003, p. 344.

313 Davies, 2003, p. 319. Also the fact that the applicants did not really base their case on the Nakajima doctrine has been consid-
ered to explain the outcome and lack of reasoning. See Eeckhout, 2002, p. 108.

314 Case T-19/01, Chiquita v. Commission,, pending. See Davies, 2003, p. 319.

315 Case T-320/00, Cartondruck GmbH & Co. KG v. Commission and Council; T-383/00. See Zonnekeyn, 2001a, p. 254.

316 Case T-3/99, Banatrading GmbH v. Council of the EU [2001] ECR II-2123.

317 Ibid. para. 38.

318 The CFI understood the argument as being based on Portugal where the ECJ confirmed the applicability of the Nakajima
exception in the context of the WTO Agreements. The applicant was not allowed to rely on Portugal as a new matter of law,
since they should have known at the time of bringing the case about the similar exception applying in the context of GATT
1947 case law. Case T-3/99, Banatrading GmbH v. Council of the EU [2001] ECR II-2123, paras. 38, 46-49. Peers criticises the CFI
for dismissing of the argument as out of time. He contends that since the Court considered the GATT 1947 and GATT 1994 as
legally distinct treaties, rulings on their legal effect should logically also be considered as legally distinct rulings. See Peers,
2001a, p. 609.

319 Case T-174/00, Biret International SA v. Council, [2002] ECR II-17, para. 64.

320 The Opinion of the Advocate General Alber in Case C-93/02P, Biret International SA v. Council [2003], paras. 66-69.

321 Directive 2003/74/EC of the European Parliament and of the Council amending Council Directive 96/22/EC concerning the
prohibition on the use in stockfarming of certain substances having a hormonal thyrostatic action and of beta-agonists [2003]
OJ L262/17.

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322 Zonnekeyn, 2003, p. 763, note 11.

323 Directive 2003/74/EC of the European Parliament and of the Council amending Council Directive 96/22/EC [2003] OJ
L262/17, 3rd recital of the Preamble.

324 See Berg, 2003, http://www.amrecht.com/berg1.shtml.

325 Case C-93/02P, Biret International SA v. Council [2003], para 62.

326 Case C-377/98, Kingdom of the Netherlands v. European Parliament and Council of the EU [2001] ECR I-6229.

327 Para. 83 of the Opinion of AG Alber of 15 May 2003 in the Case C-93/02P, Biret International SA v. Council [2003], not yet
reported.

328 Case C-149/96 Portugal v. Council,[1999] ECR I-9395, para. 40.

329 Which would in any case only be a temporary option as acknowledged by the ECJ in Case C-149/96 Portugal v. Council,[1999]
ECR I-9395, para. 40.

330 Para. 93 of of the Opinion of AG Alber of 15 May 2003 in the Case C-93/02P, Biret International SA v. Council [2003], not yet
reported.

331 While the international community and the WTO are pressuring the EC to change its stance, internal pressures, namely that
EU consumers do not want hormones treated beef, are heavily weighted to the other extreme. McNelis, 2001, p. 207. As there
was an equivalent ban on the use of hormones by the EC’s own farmers, the EC was, allegedly, politically speaking totally
unable to withdraw the ban. Abbott, 2002, p. 7.

332 While it also has been suggested that the Commission does not want to alienate the powerful distributors of bananas. See
Kessie, 2000, p. 5.

333 Berg, 2003, http://www.amrecht.com/berg1.shtml.

33 4 Para. 102 of the Opinion of AG Alber of 15 May 2003 in the Case C-93/02P, Biret International SA v. Council [2003], not yet
reported.

335 The Council stated that “by its nature, the Agreement establishing the World Trade Organisation, including the annexes
thereto, is not susceptible to being directly invoked in Community or Member State courts” Council Decision 94/800 EC of 22
December 1994 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of
the agreements reached in the Uruguay Round multilateral negotiations (1986-1994), [1994] OJ L336/1, last recital of the
preamble.

336 Case C-104/81 HZA Mainz v. Kupferberg [1982] ECR 3641, para. 18. Note, however, that the ECJ did not find its arguments in
Portugal to conflict with Kupferberg, since it did not base them on the lack of reciprocity as such but on disuniform application of
the WTO rules it might lead to.

337 Para. 102 of the Opinion of AG Alber of 15 May 2003 in the Case C-93/02P, Biret International SA v. Council [2003], not yet
reported.

338 Monta»a i Mora, 1996, p. 47. See also Peers, 2001, p. 121.

339 The SPS Agreement applies also to measures adopted before its coming into force. Para. 41 of the Opinion of AG Alber of 15
May 2003 in the Case C-93/02P, Biret International SA v. Council [2003], not yet reported.

340 A duty to act is required for the purposes of the Community incurring liability due to an omission. The recommendation of the
DSB of 13 February 1998 establishes such an obligation. Para. 43 of the Opinion of AG Alber of 15 May 2003 in the Case C-
93/02P, Biret International SA v. Council [2003], not yet reported.

341 See, for example, Joined Cases C-300/98, Parfums Christian Dior v. Tuk Consultancy BV and C-392/98, Assco Ger·ste GmbH, Rob
van Dijk v. Wilhelm Layher GmbH & Co KG, Layher BV, [2000] ECR I-11307, para. 44.

342 The CFI held that it is clear that “the WTO Agreement and its annexes are not intended to confer rights on individuals which

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they could rely on in court.” Case T-52/99, T.Port GmbH & Co.KG v. Commission [2001] ECR II-0981, paras. 46. See also Case T-
174/00, Biret International SA v. Council, [2002] ECR II-17, para. 62.

343 Paras. 115-119 of the Opinion of the Advocate General Alber in Case C-93/02P, Biret International SA v. Council [2003].

34 4 Case T-174/00, Biret International SA v. Council, [2002] ECR II-17, para. 62.

345 Different domestic legal systems merely sometimes provide for an indirect access to the WTO dispute resolution. In the EC such
measure is the Trade Barriers Regulation (Council Regulation 3286/94/EC). See Lukas, 1995, pp. 185-192.

346 Kessie, 2000, p. 2.

347 Petersmann, 1997, p. 238.

348 Jackson, 1998, p. 77.

349 WT/DS152/R, United States – Sections 301-310 of the Trade Act of 1974, report of the Panel of 22 December 1999, para. 7.76.

350 Ibid. para. 7.73.

351 The ECJ stated in the case, inter alia, that “the fact that these interests are of a general nature does not prevent their including
the interests of individual undertakings such as the applicants.” Joined Cases 5, 7, and 13 to 24/66, Kampffmeyer v. Commission
[1967] ECR 245.

352 See para. 118 of the Opinion of the AG Alber in Case C-93/02P, Biret International SA v. Council [2003], not yet reported.

353 Zonnekeyn, 2001a, p. 263. Case C-282/90, Vreugdenhil v. Commission [1992] ECR I-1937.

35 4 Joined Cases 5, 7, and 13 to 24/66, Kampffmeyer v. Commission [1967] ECR 245.

355 The ECJ ruled in Polydor that a provision of the free trade agreement between the Community and Portugal was not to be
interpreted in the same way as a provision of the EEC Treaty even though the provisions were identically worded. Case 270/80,
Polydor Ltd. and RSO Records Inc. v. Harlequin Record Shops Ltd. and Simons Records Ltd. [1982] ECR 329.

356 See also Zonnekeyn, 2003, p. 767.

357 CAP undoubtedly is a legislative field characterised by the exercise of such discretion. Ward, 2000, p. 310. See also Case T-30/
99, Bocchi Food Trade International GmbH v. Commission [2001] ECR II-0943, para. 91.

358 Ward, 2000, p. 310. Joined Cases 83, 94/76, 4, 15, 40/77, HNL and Others v. Council and Commission [1978] ECR 1209.

359 Case C-152/88, Sofrimport SARL v. Commission [1990] ECR I-2477.

360 Joined Cases C-104/89 and C-37/90, Mulder II [1992] ECR I-3061

361 Joined Cases 116 &124/77, Amylum v. Council and Commission [1979] ECR 3497, para 19; Case 143/77 Koninklijke Scholten-Honig
v. Council and Commission [1979] ECR 3583, para. 16.

362 For example Arnull included arbitrariness to the conditions of liability. In the Stahlwerke Peine-Salzgitter ruling the ECJ explicitly
pointed out that conduct verging on the arbitrary is not a condition of liability. See Arnull, 1997, p. 141 and Case C-220/91P,
Commission v. Stahlwerke Peine Salzgitter [1993] ECR I-2393.

363 See Wakefield, 2002, p. 123-124.

36 4 Joined Cases C-46/93 and C-48/93 Brasserie du P˜cheur SA v. Federal Republic of Germany and Factortame III and The Queen v.
Secretary of State for Transport ex parte Factortame Limited and Others [1996] ECR I-1029, para. 56.

365 See Reinisch, 2000, p. 50.

366 Zonnekeyn, 2001a, p. 269. See similarly Reinisch, 2000, p. 50.

367 Zonnekeyn, 2001a, p. 269; Reinisch, 2000, p. 49.

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368 Case 238/78 Ireks-Arkady [1979] ECR 2955, para. 11.

369 Zonnekeyn, 2001a, p. 269.

370 Joined Cases C-104/89 and C-37/90, Mulder II [1992] ECR I-3061; see also opinion of AG Van Gerven, para. 28.

371 Arnull, 1997, p. 148. See also Ward, 2000, p. 311.

372 A commercial undertaking is considered to have volunteered to the economic risk and uncertainties inherent in the sector in
which it is operating. Joined Cases 83 and 94/76, 4, 15 and 40/77, HNL and Others v. Council and Commission, [1978] ECR 1209,
para 7. See Wakefield, 2002, p. 89. See also Arnull, 1997, pp. 141, 146.

373 Tridimas, 1998, p. 23.

374 He refers to the situation as an important gap in the analogy between Community and State liability. See Tridimas, 2001, p. 329.

375 Craig – de B³rca, 2003, p. 557.

376 van Gerven, 1994, p. 27; Wakefield, 2002, pp. 88-89.

377 Joined Cases 83 and 94/76, 4, 15 and 40/77, HNL and Others v. Council and Commission, [1978] ECR 1209, para 5. See also
Arnull, 1997, p. 150.

378 Wakefield, 2002, p. 128. In any case, the effects of a measure on individuals which are known or ought to be known to the
adopting institutions should be considered before the adoption of legislation in general interest, even though it might be
necessary for these individual interests to be overriden.