Non-violation nullification of benefits
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Non-violation nullification of benefits (NVNB) claims are a species of
dispute settlement in the World Trade Organization Dispute settlement or dispute settlement system (DSS) is regarded by the World Trade Organization (WTO) as the central pillar of the multilateral international trade, trading system, and as the organization's "unique contribution to the stability of ...
arising under
World Trade Organization The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade. With effective cooperation in the United Nations System, governments use the organization to establish, revise, and e ...
multilateral and
bilateral trade agreements This is list of free-trade agreements between two sides, where each side could be a country (or other customs territory), a trade bloc or an informal group of countries. Note: Every customs union, common market, economic union, customs and mone ...
. NVNB claims are controversial in that they are widely perceived to promote the social vices of unpredictability and
uncertainty Uncertainty refers to epistemic situations involving imperfect or unknown information. It applies to predictions of future events, to physical measurements that are already made, or to the unknown. Uncertainty arises in partially observable or ...
in international trade law.Faunce TA, Neville W and Anton Wasson A. Non Violation Nullification of Benefit Claims: Opportunities and Dilemmas in a Rule-Based WTO Dispute Settlement System in Bray M (ed) Ten Years of WTO Dispute Settlement: Australian Perspectives. Office of Trade Negotiations of the Department of Foreign Affairs and Trade.Commonwealth of Australia. 123-140 Other commentators have described NVNB claims as potentially inserting corporate competition policy into the
World Trade Organization The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade. With effective cooperation in the United Nations System, governments use the organization to establish, revise, and e ...
Dispute Settlement Understanding (DSU).


Location of NVNB claims

NVNB claims are directly referred to in Article 26 of the
World Trade Organization The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade. With effective cooperation in the United Nations System, governments use the organization to establish, revise, and e ...
DSU, Article XXIII of the
General Agreement on Tariffs and Trade The General Agreement on Tariffs and Trade (GATT) is a legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas. According to its pre ...
1994 (GATT 1994) Article XXIII of the General Agreement on Trade in Services (GATS) and Article 64 of the
Agreement on Trade-Related Aspects of Intellectual Property Rights The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) is an international legal agreement between all the member nations of the World Trade Organization (WTO). It establishes minimum standards for the regulation by nat ...
(TRIPS).
In GATT jurisprudence, NVNB complaints appear to have originally been designed to counter the capacity of countries to avoid relatively simple obligations and specific tariff concessions in multilateral trade agreements, by making ambiguous domestic regulatory arrangements. NVNB claims provisions also exist in many bilateral trade agreements. In the Australia-United States Free Trade Agreement(AUSFTA) article 21.2 (c) provides an NVNB claim: The Australian academic
Thomas Alured Faunce Thomas may refer to: People * List of people with given name Thomas * Thomas (name) * Thomas (surname) * Saint Thomas (disambiguation) * Thomas Aquinas (1225–1274) Italian Dominican friar, philosopher, and Doctor of the Church * Thomas the A ...
has argued that by expressly applying Annex 2C on pharmaceuticals, the NVNB claim in article 21.2(c) of the AUSFTA may have been responsible for
lobbying In politics, lobbying, persuasion or interest representation is the act of lawfully attempting to influence the actions, policies, or decisions of government officials, most often legislators or members of regulatory agency, regulatory agencie ...
by United States negotiators around the
constructive ambiguity Constructive ambiguity is a term generally credited to Henry Kissinger, said to be the foremost exponent of the negotiating tactic it designates. It refers to the deliberate use of ambiguous language on a sensitive issue in order to advance some pol ...
of reward of
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(through the Medicines Working Group established by article 2C of the AUSFTA) that influenced Australian legislative changes impacting on reference pricing under the Pharmaceutical Benefits Scheme. He maintains that such pressure from NVNB claims is most likely to arise from 'behind doors' lobbying using threats of cross-retaliation (threatening a trade dispute in one trade area to obtain a result in a different sector) if a planned or existing domestic policy is perceived to breach the 'spirit' of the relevant
bilateral trade agreement A trade agreement (also known as trade pact) is a wide-ranging taxes, tariff and trade treaty that often includes investment guarantees. It exists when two or more countries agree on terms that help them trade with each other. The most common t ...
. Formal dispute resolution proceedings may never be initiated or be intended to commence if such lobbying is persuasive. If this hypothesis is correct, it represents a disturbing example of
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and has worrying implications for democratic
sovereignty Sovereignty is the defining authority within individual consciousness, social construct, or territory. Sovereignty entails hierarchy within the state, as well as external autonomy for states. In any state, sovereignty is assigned to the perso ...
. The Australian government, however, strenuously denies such claims.


Operation of NVNB claims

Under such NVNB provisions, the full range of dispute resolution mechanisms may be invoked whether or not a breach of any specific provision is alleged or substantiated. The precondition is that a 'reasonably expected' 'benefit' accruing under the relevant trade agreement, has been 'nullified or impaired' by a 'measure' applied by a WTO Member. Five requisite elements of a NVNB claim arguably have been identified by Dispute Resolution Panels:
1. That a 'measure' has been applied by a party subsequent to the entry into force of the relevant trade agreement;
2. That a 'benefit' was reasonably expected by the other party as being negotiated in return for some textual agreement; and
3. That as a result of the application of the measure that benefit has been 'nullified or impaired.'
4. That the nullification or impairment was contrary to the legitimate or reasonable expectations of the complainant at the time of the negotiations
5. That such claims will only be used in extremely rare circumstances (for example proven bad faith during negotiations), due to their capacity to upset the certainty of the international trading order.


Debate about NVNB claims

Article 3.2 of the
World Trade Organization The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade. With effective cooperation in the United Nations System, governments use the organization to establish, revise, and e ...
DSU requires panels to clarify existing provisions of agreements in accordance with customary rules of interpretation of public international law. This leads to consideration of how the NVNB principle interacts with Article 26 of the
Vienna Convention on the Law of Treaties The Vienna Convention on the Law of Treaties (VCLT) is an international agreement regulating treaties between states. Known as the "treaty on treaties", it establishes comprehensive rules, procedures, and guidelines for how treaties are defined ...
, incorporating the principle of
pacta sunt servanda ''Pacta sunt servanda'', Latin for "agreements must be kept", is a brocard and a fundamental principle of law. According to Hans Wehberg, a professor of international law, "few rules for the ordering of Society have such a deep moral and religi ...
: "Every treaty in force is binding upon the parties to it and must be performed by them in good faith." NVNB claims appear to undermine this fundamental principle of international law by subsequent reinterpretations based on the 'spirit' of the agreement. Both the United States and European Economic Community have argued before a GATT 1994 panel that recourse to NVNB claims should remain 'exceptional' or the trading world would be plunged into a state of precariousness and uncertainty. Despite this, however, the United States has inserted NVNB claims in many bilateral trade agreements. The Appellate Body in the WTO ''EC - Asbestos Case'' agreed with the Panel in the WTO ''Japan – Film Case'', stating that the non-violation nullification or impairment remedy in GATT Article XXIII:1(b): "should be approached with caution and treated as an exceptional concept." The reason for this caution is straightforward. Members negotiate the rules that they agree to follow and only exceptionally would expect to be challenged for actions not in contravention of those rules. The governments of Canada, the Czech Republic, the European Communities, Hungary and Turkey have stated at the
World Trade Organization The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade. With effective cooperation in the United Nations System, governments use the organization to establish, revise, and e ...
that "the uncertainty regarding the application of such non-violation complaints needs to be resolved so as to minimize the possibility of unintended interpretation." Contemporary controversy over NVNB claims and proceedings arises in large part from their potential to allow a WTO Member to threaten a trade dispute if a wide and largely undefined range of domestic regulatory components are not altered, or compensation organised. It may facilitate a WTO dispute settlement process involving deliberate diplomatic ‘gaming’ of trade ‘rules,’ breaking of finely balanced textual truces and dispute panel interpretations that more an act of ongoing negotiation, than judicial analysis.Abbott FM, Non-Violation Nullification or Impairment Causes of Action under the TRIPS Agreement and the Fifth Ministerial Conference: A Warning and Reminder (2003).


WTO Moratorium on NVNB Claims

At the
WTO The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade. With effective cooperation in the United Nations System, governments use the organization to establish, revise, and e ...
meeting in Hong Kong in December 2005, the United States delegation pushed hard behind the scenes for trade concessions in return for its acquiescence to the moratorium on the use of NVNB provisions under TRIPS.Faunce TA, Neville W and Anton Wasson A. Non Violation Nullification of Benefit Claims: Opportunities and Dilemmas in a Rule-Based WTO Dispute Settlement System in Bray M (ed) Ten Years of WTO Dispute Settlement: Australian Perspectives. Office of Trade Negotiations of the Department of Foreign Affairs and Trade.Commonwealth of Australia. 123-140 fn 58 The resultant Ministerial Declaration left the position of NVNB claims under TRIPS extremely uncertain.


Circumscribing NVNB Claims in Trade Law Dispute Resolution Panels

One way of circumscribing NVNB claims so they are compatible with the obligation to act in good faith and with other rules of treaty interpretation under Articles 31 and 32 of the
Vienna Convention on the Law of Treaties The Vienna Convention on the Law of Treaties (VCLT) is an international agreement regulating treaties between states. Known as the "treaty on treaties", it establishes comprehensive rules, procedures, and guidelines for how treaties are defined ...
is to restrict their operation to ensuring 'transparency and openness' in the negotiating process. In consequence, in NVNB disputes, the inquiry to be made by a dispute resolution Panel is whether the complaining party was induced into error during negotiations by the other treaty Party about a fact or situation, that the former could not reasonably have foreseen.


See also

* Non-tariff barriers to trade


References

{{DEFAULTSORT:Non-Violation Nullification Of Benefits International law Commercial policy Economic globalization Justice World Trade Organization