Retrospective Remedies in the WTO after Automotive Leather

Abstract

Prior to the Australia -- Automotive Leather implementation report, it was widely understood by WTO Members that the WTO did not provide for retrospective remedies. The multilateral trading system was about a balance of rights and obligations with WTO remedies to preserve future trading opportunities rather than redress past injury. The Automotive Leather implementation panel's findings that 'withdraw the subsidy' under Article 4.7 of the Agreement on Subsidies and Countervailing Measures (the SCM Agreement) required retrospective repayment of past subsidies appeared to challenge this long-standing understanding. This paper examines the Automotive Leather findings on remedy and argues that retrospective remedies have no basis either in past GATT practice nor under the WTO Agreements. The findings raised fundamental constitutional and democratic governance concerns given the legal constraints on the ability of Member governments to recall subsidies already provided lawfully and in good faith to private companies. They also highlight the need for caution in transposing currently accepted rules of the law of the European Community into the WTO legal order. Given the fundamental legal and policy concerns, the Automotive Leather findings on retrospective remedy have not been followed by panels and parties in subsequent WTO disputes. Canada's comments at the February 2000 meeting of the Dispute Settlement Body -- that the findings will be treated by WTO Members 'as a one-time aberration of no precedential value' -- have therefore proved prophetic. Copyright Oxford University Press 2003, Oxford University Press.