GENERAL

EXCEPTIONS
• Article XX of the GATT 1994, entitled ‘General Exceptions’, states:

• Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable
discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this
Agreement shall be construed to prevent the adoption or enforcement by any [Member] of measures:

• (a) necessary to protect public morals;

• (b) necessary to protect human, animal or plant life or health;

• (c) …

• (d) necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement, including
those relating to customs enforcement, the enforcement of monopolies operated under paragraph 4 of Article II and Article XVII, the
protection of patents, trade marks and copyrights, and the prevention of deceptive practices;
• The panel in US – Section 337 Tariff Act (1989) noted with respect to the nature and function of
• Article XX:
• that Article XX is entitled ‘General Exceptions’ and that the central phrase in the introductory clause
reads: ‘nothing in this Agreement shall be construed to prevent the adoption or enforcement … of
measures … ’. Article XX(d) thus provides for a limited and conditional exception from obligations
under other provisions. The Panel therefore concluded that Article XX(d) applies only to measures
inconsistent with another provision of the General Agreement, and that, consequently, the application
of Section 337 has to be examined first in the light of Article III:4. If any inconsistencies with Article
III:4 were found, the Panel would then examine whether they could be justified under Article XX(d).
 US-SHRIMP CASE

• Measure at issue: US import prohibition of shrimp and shrimp products from non-certified countries (i.e.
countries that had not used a certain net in catching shrimp)
• Product at issue: Shrimp and shrimp products from the complainant countries.
• GATT Art. XX(g) (general exceptions – exhaustible natural resources): The Appellate Body held that although
the US import ban was related to the conservation of exhaustible natural resources and, thus, covered by an Art.
XX(g) exception, it could not be justified under Art. XX because the ban constituted “arbitrary and
unjustifiable” discrimination under the chapeau of Art. XX. In reaching this conclusion, the Appellate Body
reasoned, inter alia, that in its application the measure was “unjustifiably” discriminatory because of its intended
and actual coercive effect on the specific policy decisions made by foreign governments that were Members of
the WTO. The measure also constituted “arbitrary” discrimination because of the rigidity and inflexibility in its
application, and the lack of transparency and procedural fairness in the administration of trade regulations.
TWO-TIER TEST UNDER ARTICLE XX OF THE GATT
1994

• Article XX sets out a two-tier test for determining whether a measure, otherwise inconsistent with

GATT obligations, can be justified. In US – Gasoline (1996), the Appellate Body stated:
• In order that the justifying protection of Article XX may be extended to it, the measure at issue
must not only come under one or another of the particular exceptions – paragraphs (a) to (j) – listed
under Article XX; it must also satisfy the requirements imposed by the opening clauses of Article
XX. The analysis is, in other words, two-tiered: first, provisional justification by reason of
characterization of the measure under Article XX(g); second, further appraisal of the same measure
under the introductory clauses of Article XX.
• Thus, for a GATT-inconsistent measure to be justified under Article XX, it must meet: (1) the
requirements of one of the exceptions listed in paragraphs (a) to (j) of Article XX; and (2) the
requirements of the introductory clauses, commonly referred to as the ‘chapeau’, of Article XX.
• Hence, an analysis under Article XX first focuses on the measure at issue itself and then on the
application of that measure.
• Some measures need to be ‘necessary’ for the protection or promotion of the societal value they
pursue (e.g. the protection of life and health of humans, animals and plants), while for other
measures it suffices that they ‘relate to’ the societal value they pursue (e.g. the conservation of
exhaustible natural resources).
ARTICLE XX(B)

• As Article XX(b) covers measures designed for the protection of ‘human, animal or plant life or
health’, it covers public health policy measures as well as environmental policy measures.
However, as the panel noted in Brazil – Retreaded Tyres (2007), a party Article XX(b) with regard
to environmental policy measures ‘has to establish the existence not just of risks to “the
environment” generally, but specifically of risks to animal or plant life or health’.
• For this reason, not all environmental policy measures would fall within the scope of application of
Article XX(b) of the GATT 1994.
• The second element of the test under Article XX(b), the ‘necessity’ requirement, is more complex
than the first element.
• The first case in which the Appellate Body applied in the context of Article XX(b) this new approach to the
‘necessity’ requirement was Brazil – Retreaded Tyres (2007). In its report in this case, the Appellate Body
summed up how the ‘necessity’ requirement of Article XX(b) is currently interpreted and applied, as follows:
• [I]n order to determine whether a measure is ‘necessary’ within the meaning of Article XX(b) of the GATT
1994, a panel must consider the relevant factors, particularly the importance of the interests or values at stake,
the extent of the contribution to the achievement of the measure’s objective, and its trade restrictiveness. If this
analysis yields a preliminary conclusion that the measure is necessary, this result must be confirmed by
comparing the measure with possible alternatives, which may be less trade restrictive while providing an
equivalent contribution to the achievement of the objective. This comparison should be carried out in the light
of the importance of the interests or values at stake. It is through this process that a panel determines whether a
measure is necessary.
• Article XX(d) concerns and can justify measures:
• necessary to secure compliance with laws or regulations which are not inconsistent with the
provisions of this Agreement, including those relating to customs enforcement, the
enforcement of monopolies operated under paragraph 4 of Article II and Article XVII, the
protection of patents, trade marks and copyrights, and the prevention of deceptive practices.
• Thus, for a GATT-inconsistent measure to be provisionally justified under Article XX(d) the
measure: (1) must be designed to secure compliance with national law, such as customs law or
intellectual property law, which, itself, is not GATT-inconsistent; and (2) must be necessary to
secure such compliance.
• With respect to the first element of the Article XX(d) test, namely, that the measure must
be ‘designed to secure compliance’ with GATT-consistent laws or regulations, note that
the panel in US – Gasoline (1996) found that:
• maintenance of discrimination between imported and domestic gasoline contrary to
Article III:4 under the baseline establishment methods did not ‘secure compliance’ with
the baseline system. These methods were not an enforcement mechanism. They were
simply rules for determining the individual baselines. As such, they were not the type of
measures with which Article XX(d) was concerned.
 ARTICLE XX(G)

• Article XX(g) concerns measures relating to the conservation of exhaustible natural resources. Like Article XX(b), it
addresses measures that depart from core GATT rules for environmental protection purposes. Article XX(g) sets out a three-
tier test requiring that a measure: (1) relate to the ‘conservation of exhaustible natural resources’; (2) ‘relate to’ the
conservation of exhaustible natural resources; and (3) be ‘made effective in conjunction with’ restrictions on domestic
production or consumption.

• With respect to the first element of the test under Article XX(g), namely, that the measure must

• relate to the ‘conservation of exhaustible natural resources’, the Appellate Body, in US – Shrimp

• (1998), adopted a broad, ‘evolutionary’ interpretation of the concept of ‘exhaustible natural Resources. It noted: We do not
believe that ‘exhaustible’ natural resources and ‘renewable’ natural resources are mutually exclusive. One lesson that modern
biological sciences teach us is that living species, though in principle, capable of reproduction and, in that sense, ‘renewable’,
are in certain circumstances indeed susceptible of depletion, exhaustion and extinction, frequently because of human
activities. Living resources are just as ‘finite’ as petroleum, iron ore and other non-living resources.
• The Appellate Body thus concluded on the scope of the concept of ‘exhaustible natural
resources’ that ‘measures to conserve exhaustible natural resources, whether living or
non-living, may fall within Article XX(g).
• According to the Appellate Body in US – Shrimp (1998), Article XX(g) requires ‘a close
and real’ relationship between the measure and the policy objective. The means
employed, i.e. the measure, must be reasonably related to the end pursued, i.e. the
conservation of an exhaustible natural resource.
• For a GATT-inconsistent measure to be provisionally justified under Article XX(a), the measure must
be: (1) designed to protect public morals (meaning that the policy objective pursued by the measure is
the protection of morals); and (2) necessary to fulfil that policy objective. With regard to the term
‘public morals’, the panel in China – Audio visual Products (2010) adopted the interpretation given to
this term in the context of Article XIV(a) of the GATS by the panel in US – Gambling (2005).
• As discussed below, the panel in US – Gambling (2005) found, in brief, that: (1) the term ‘public
morals’ denotes standards of right and wrong conduct maintained by or on behalf of a community or
nation; (2) the content of the concept of ‘public morals’ can vary from Member to Member, depending
upon a range of factors, including prevailing social, cultural, ethical and religious values; and (3)
Members should be given some scope to define and apply for themselves the concept of ‘public
morals’ in their respective territories, according to their own systems and scales of values
CHAPEAU OF ARTICLE XX OF THE GATT 1994

• Article XX sets out a two-tier test for determining whether a measure, otherwise inconsistent with
GATT obligations, can be justified. First, a measure must meet the requirements of one of the
particular exceptions listed in the paragraphs of Article XX. Secondly, the application of that
measure must meet the requirements of the chapeau of Article XX.
• The chapeau of Article XX, with regard to measures provisionally justified under one of the
paragraphs of Article XX, imposes:
• the requirement that such measures are not applied in a manner which would constitute a means of
arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a
disguised restriction on international trade.
• In short, the object and purpose of the chapeau of Article XX is to avoid that provisionally justified
measures are applied in such a way as would constitute a misuse or an abuse of the exceptions of
Article XX.
• The Appellate Body in US – Shrimp (1998) also addressed the question of whether the application of
the measure at issue constituted an ‘unjustifiable discrimination’ within the meaning of the chapeau.
• The Appellate Body noted the following:
• Another aspect of the application of Section 609 that bears heavily in any appraisal of justifiable or
unjustifiable discrimination is the failure of the United States to engage the appellees, as well as other
Members exporting shrimp to the United States, in serious, across-the-board negotiations with the
objective of concluding bilateral or multilateral agreements for the protection and conservation of sea
turtles, before enforcing the import prohibition against the shrimp exports of those other Members.
• The Appellate Body made three observations in this respect:-
• First, the Congress of the United States expressly recognised in enacting Section 609 the
importance of securing international agreements for the protection and conservation of the sea turtle
species.
• Secondly, the protection and conservation of highly migratory species of sea turtle, i.e. the very
policy objective of the measure, demands concerted and cooperative efforts on the part of the many
countries whose waters are traversed in the course of recurrent sea turtle migrations. The need for,
and the appropriateness of, such efforts are recognised in the WTO Agreement itself, as well as in a
significant number of other international instruments and declarations.
• Thirdly, the United States negotiated and concluded the

• Inter-American Convention for the Protection and Conservation of Sea Turtles. The existence of this regional
agreement provided convincing demonstration that an alternative course of action was reasonably open to the United
States for securing the legitimate policy goal of its measure, a course of action other than the unilateral and non-
consensual procedures of the import prohibition under Section 609.

• However, the record did not show that serious efforts were made by the United States to negotiate similar agreements
with any other country or group of countries.145 The Appellate Body therefore concluded:

• Clearly, the United States negotiated seriously with some, but not with other Members (including the appellees), that
export shrimp to the United States. The effect is plainly discriminatory and, in our view, unjustifiable. The
unjustifiable nature of this discrimination emerges clearly when we consider the cumulative effects of the failure of
the United States to pursue negotiations for establishing consensual means of protection and conservation of the
living marine resources here involved.
 GENERAL EXCEPTIONS UNDER THE GATS

• Like the GATT 1994, the GATS also provides for a ‘general exceptions’ provision allowing Members to deviate, under certain
conditions, from obligations and commitments under the GATS. Article XIV of the GATS provides, in relevant part:

• Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or
unjustifiable discrimination between countries where like conditions prevail, or a disguised restriction on trade in services,
nothing in this Agreement shall be construed to prevent the adoption or enforcement by any Member of measures:

• (a) necessary to protect public morals or to maintain public order;

• (b) necessary to protect human, animal or plant life or health;

• (c) necessary to secure compliance with laws or regulations which

• are not inconsistent with the provisions of this Agreement including

• those relating to:

• (i) the prevention of deceptive and fraudulent practices or to deal with the effects of a default on
services contracts;
• (ii) the protection of the privacy of individuals in relation to the processing and dissemination of
personal data and the protection of confidentiality of individual records and accounts;
• (iii) safety
TWO-TIER TEST UNDER ARTICLE XIV OF THE
GATS
• to determine whether a measure can be justified under Article XIV of the GATS, it must be
examined, first, whether this measure can provisionally be justified under one of the specific
exceptions of paragraphs (a) to (e) of Article XIV; and, if so, second, whether the application of
this measure meets the requirements of the chapeau of Article XIV.
• Article XIV(a) of the GATS deals with measures which are ‘necessary to protect public morals or
to maintain public order’. Article XIV(a) sets out a two-tier test to determine whether a measure
is provisionally justified under this provision. The Member invoking Article XIV(a) must
establish that: (1) the policy objective pursued by the measure at issue is the protection of public
morals or the maintenance of public order; and (2) the measure is necessary to fulfil that policy
objective.
US-GAMBLING (2005)

• With regard to the first element of this two-tier test, note that the panel in US – Gambling (2005) dealt extensively
with the interpretation and application of this element. Antigua and Barbuda challenged the GATS-consistency of
a number of US federal and state laws, including the Wire Act, the Travel Act and the Illegal Gambling Business
Act, which prohibit the remote supply of gambling and betting services, including Internet gambling.
• The United States, inter alia, argued that the
• measures at issue could be justified under Article XIV(a) of the GATS, as necessary to protect public morals and
maintain public order. With regard to the meaning of the concepts of ‘public morals’ and ‘public order’, the panel
in US – Gambling (2005) found that it:
• can vary in time and space, depending upon a range of factors, including prevailing social, cultural, ethical and
religious values.
 CHAPEAU OF ARTICLE XIV OF THE GATS

• Article XIV of the GATS sets out a two-tier test for determining whether a measure, otherwise inconsistent with
GATS obligations, can be justified. Under this test, once it has been established that the measure at issue meets
the requirements of one of the particular exceptions of paragraphs (a) to (e), it must be examined whether the
measure meets the requirements of the chapeau of Article XIV. The chapeau of Article XIV requires that the
application of the measure at issue does not constitute: (1) ‘arbitrary or unjustifiable discrimination between
countries where the same conditions prevail’; or (2) ‘a disguised restriction on trade in services’.
• The panel in US – Gambling (2005) looked at this case law and concluded: To sum up these interpretive
principles, the chapeau of Article XX of the GATT 1994 addresses not so much a challenged measure or its
specific content, but rather the manner in which that measure is applied, with a view to ensuring that the
exceptions of Article XX are not abused. In order to do so, the chapeau of Article XX identifies three standards
which may be invoked in relation to the same facts: arbitrary discrimination, unjustifiable discrimination and
disguised restriction on trade. In our view, these principles would also be applicable in relation to Article XIV of
the GATS.