Sources of International Trade Law

Article 38.1 of the Statute of the International Court of Justice lays down the sources of law for
Public International Law generally by laying down that while deciding the disputes that are
brought before the Court, it shall have regard to the following:

(a) international conventions, whether general or particular, establishing rules expressly

recognized by the contesting states;
(b) international custom, as evidence of a general practice accepted as law;
(c) the general principles of law recognized by civilized nations;
(d) subject to the provisions of Article 59, judicial decisions and the teachings of the most
highly qualified publicists of the various nations, as subsidiary means for the
determination of rules of law.

However, unlike the Statute of the ICJ, there is no such exhaustive listing of the sources of
International Trade Law for the purpose of adjudication by the Dispute Settlement System of
WTO. Thus, one has to essentially refer to the Agreement establishing the World Trade
Organisation in order to find out the sources which has to be relied upon by the panels and the
appellate body.

These sources are generally to be classified into two categories firstly, sources of law and
interpretative elements. Article II of the Agreement establishing WTO and the DSU lays down
the following important sources of Law:

(i) covered agreements; and

(ii) international agreements incorporated in the covered agreements.

Covered Agreements:

All the covered agreements have specifically been included in Appendix 1 of the Dispute
Settlement Understanding. These include all the Multilateral Agreements and the Plurilateral
Agreements and the Dispute Settlement Understanding and the WTO Agreement themselves. In
addition to these specifically mentioned agreements, article 3.2 of the DSU mentions that the
Dispute Settlement System is to clarify the existing provisions under the covered agreements in
accordance with the customary rules of interpretation of public international law.
This therefore includes the following important principles which are incorporated in articles 31
and 32 of the Vienna Convention on the law of treaties, which are the standard principles for the
interpretation of the provisions of treaties in public international law:

(i) the ordinary meaning of its terms;

(ii) in the context of the treaty;
(iii) in light of the object and purpose of the treaty;
(iv) relevant subsequent practice;
(v) subsequent agreements on the same subject-matter; and
(vi) any other relevant rules of public international law.

Article 32 of the Vienna convention, in addition to these, permits the recourse to supplementary
means of interpretation, including the preparatory work of the treaty and the circumstances of its
conclusion, in order to confirm the meaning resulting from the application of article 31, or to
determine the meaning when the interpretation according to article 31 :

(a) Leaves the meaning ambiguous or obscure; or

(b) Leads to a result which is manifestly absurd or unreasonable.

These supplementary means of interpretation or the travaux preparatoires of the WTO regime
have not been identified by any provision of any agreement, but various decisions of panels and
the appellate body have referred to these at various times. These are:

(i) agreements between parties to a dispute;1

(ii) negotiating or discussion documents and the chairman’s notes have been taken up in
some cases;
(iii) prevailing practice at the time of negotiation of WTO agreements;2

International agreements reflected in the covered agreements:

Havana Charter:

1
EC – Poultry case, Canada – Diary case
2
EC – Customs Classification of Certain Computer Equipment.
Under article XXIX of GATT, the parties were to observe the provisions of various chapters of
the Havana Charter pending its application. However, with the advent of the WTO, there is no
realistic prospect of any level of importance for the Havana Charter.

Agreements reflected in TRIPS Agreement:

The Trips agreement at various places refers to the provisions of the Paris Convention for the
Protection of Industrial Property, 1967, the Berne Convention for the Protection of Literary and
Artistic Works, 1971, the International Convention for the Protection of Performers, Producers
of Phonograms and Broadcasting Organizations, 1961 (Rome Convention) and the Treaty on
Intellectual Property in respect of Integrated Circuits, 1989.

Agreements reflected in SCM agreement:

The export credits mentioned in the Arrangement on Guidelines for Officially Supported Export
Credits of the Organization for Economic Cooperation and Development (OECD) is specifically
mentioned in the SCM agreement to not to be an export subsidy.

Interpretative elements:

GATT panel reports:

Article XVI.1 of the WTO Agreement mentions that the “WTO shall be guided by the decisions,
procedures and customary practices followed by the Contracting Parties to GATT 1947 and the
bodies established in the framework of GATT 1947”. But this is not a reference to GATT panel
reports.

In Japan Alcoholic Beverages II, the panel dealt with the question of the value of adopted and
un-adopted reports of GATT panels, as to whether they are part of art. 1(b)(iv) of GATT 1994,
which includes “other decisions of the CONTRACTING PARTIES to GATT 1947”.

The panel answered the question with regard adopted panel reports in affirmative and with
regard to un-adopted reports, the panel answered in negative, holding that the same have “no
legal status in either the GATT or the WTO system”. But at various times, they have been
referred to for their persuasive value by panels where they supported their view or understanding
on an issue.
WTO Panel and Appellate Body reports:

As a formal matter, in the same manner as the article 59 of the Statute of the International Court
of Justice, there is no value for the pervious decision of WTO panel and Appellate Body, which
bind only the parties to those particular disputes. However, the panels have very rarely deviated
from the interpretation placed upon a provision by the Appellate Body and hence have at various
times referred to the decisions of the Appellate Body for the same. In the US – Shrimp case, the
Appellate body held that the same reason for which adopted GATT panel reports would also
apply for WTO panel and Appellate Body reports.

Decisions and recommendations by various WTO organs:

The decisions and recommendations of WTO councils or committees have at various times been
referred to by the panels and the Appellate Body. One example is the India – Quantitative
Restrictions. Mexico – Anti Dumping Measures on Rice Fittings.

International Agreements not reflected in the WTO Agreement:

Tokyo round agreements have been referred to discern the interpretation of their successor
agreements.

Also specific referred agreements in WTO decisions such as the Lome Convention, which was
referred in EC – Bananas III, bilateral agreements between the parties and as also Multilateral
agreements such as the regional and other environmental agreements were also referred in US –
Shrimp case.

Acts adopted by various International Organisations:

Such as the UN resolutions3 or other guidelines of other organizations may also be referred to by
the panels or the appellate body.

Decisions by international courts:

In India – Patents case, the appellate body referred to the PCIJ jurisprudence for deciding the
issue.

3
State Responsibility report, adopted as a UN resolution was referred in US – FSC.
Domestic Law and Practice:

The domestic law provisions of individual countries have often been a question of fact before
panels. The consistent approach is that the domestic law cannot overrule the WTO law.
However, this has not stopped the panels to refer to domestic laws for providing an inspiration to
WTO law, especially as a gap filling exercise. For example, in EC – Conditions for the granting
of Tariff Preferences to Developing Countries, the panel referred to the Codes of Conduct for
Attorneys in EU and in other individual states of US, Canada and also states of EU, to deal with
the representation conflicts in representation before WTO.

Unilateral declarations by WTO Members:

Unilateral declarations made by the parties formally in generally as also during the course of the
proceedings have been taken into consideration by the panels and the appellate body.

Customary International Law:

General Principles of Law:

(i) Estoppel
(ii) Good Faith (Bona Fides)
(iii) Mistake of fact
(iv) Res Judicata
(v) In dubio mitius
 Principles of International Trade Law

Free Trade as a principle requires that International Trade is conducted without any interference
by the states. It has for a very long time, been major aims of International Trade Law, though
even today, an alluring utopian dream. This is because each and every state even today, tries in
some way or manner to give some sort of a benefit to its own traders or producers or
manufacturers.

Non-Discrimination between the products and merchants and businesses of different nations is
one of the important principles of International Trade Law. Non-discrimination implies an equal
treatment to all the nations’ businesses and products across the different countries. Another
aspect to this is the non-discrimination between one’s own products or businesses and those of
other nations, which in itself is also supporting the Free Trade principle.

Open market access while originally only a little more that Free Trade, with the onset of the
globalization which has significantly reduced the time and space limitations and constraints,
there has been a huge proliferation of Multinational companies across the different nations, with
the same businesses flourishing and building corporate empires transcending national
boundaries. Open market access implies the reduction and eradication of all the barriers to the
entry and the operation of all these businesses in different nations.

Freedom to contract as a principle in itself is distinct from others since this principle implies a
participation of the private individuals in the economic decision making. At one extreme, it
would imply a complete absence of government from the economic sphere. However, in most
countries today, it has been interpreted to mean a freedom to individuals to decide on their own
as to any economic decision. In most countries, it is to be achieved by the privatization of
exclusively public sector spheres and liberalization of the restrictions and restraints such as the
production quotas etc.

Good Faith as an element permeates the entirety of the principles of International Trade Law. It
is the bona fides with which every party must conduct itself in respect of its obligations. With
respect to the implementation of any treaty, the principle in itself is incorporated in the form of
the legal principle of pacta sunt servanda. In the private sphere, it is even more ancient, having
been recognized as being the basis for the Lex Mercatoria itself.
Most of these principles have been, in some form or the other been adopted in the GATT and
WTO regime. For example, the principles of Free-Trade and Non-discrimination have been
incorporated in MFN and National Treatment principles. They have also been adopted as the
Schedule of Concessions, whereby gradual reduction of the Tariff obligations has been achieved.