Efficient Breach, Reliance and Contract Remedies at the WTO

Abstract

Recent attempts by scholars to apply the doctrine of efficient breach to the remedial system of the World Trade Organization (WTO) in order to maximize the joint welfare of trading parties suffer from two principle shortcomings – the difficulty of calibrating an appropriate remedy based on foregone trade and the reality that those truly injured by breach are the private third party exporters, not the contracting Member States. This article therefore proposes a remedy for WTO agreement violations consisting of monetary damages assessed at the reliance measure of common law contract. Breaching WTO Members will compensate exporters in the injured state in an amount commensurate with their expenditures undertaken in anticipation of liberalized trade, obviating the need for an estimated counterfactual and structuring reparation according to actual individual losses rather than on an aggregate state level. In addition to encouraging efficient breach, this method of setting damages has precedent in international law which should foster compliance, is aligned with the tort–like nature of WTO violations and serves an evidentiary purpose that is reflected in the common law’s concept of vesting of third–party rights.