Judgement ByTeam D

8/13/2019 Judgement ByTeam D

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WORLD TRADE ORGANISATION

RURITANIA: MEASURES CONCERNING SUPPLY OF

YYTRIUM

(REPUBLIC OF RURITANIA

/

REPUBLIC OF POTOMAC)

JUDGEMENT

INTERNATIONAL

JUDGEMENT DELIBERATION 2012

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HEAD NOTE:

GATT, 1994 Article X, Xi, XX (g) It rests on the government and not the private

players or entity to decide the qota !or a particlar prodct or anything may it "e#

$rivati%ation o! sch sectors &ill lead to destrction o! healthy competition and &ill ma'e

the &hole sector nreglatory and ncontrolla"le &hich ltimately &ill lead to destrction#

atio ecidendi* +a-or prodcers and dominant players o! natral resorces shold !airly

allocate the resorces#.

SUMMARY:

In the particlar case, the complaint has "een soght "y ep"lic o! $otomac against

rep"lic o! ritania# In this complaint, the complainant has raised o"-ection against the

allocation o! all the prodction o! /ytrim to one speci!ic company and there"y promoting

anti competitive practices# The panel has considered varios provisions nder Article X, XI

and XX# 0ince this practice o! providing &hole prodction o! /ytrim to one company &ill

lead to not only monopoly "t also removal o! all other companies !rom the mar'et &ithot

giving them an eqal !ootage# rther the restriction on e2port o! ra& material has to "e

carried ot "y govt# 3ven i! a private entity restricts any e2ports on its o&n, it cannot violate

the provisions o! GATT, &hen the particlar state is a mem"er contry# It is also determined

that this practice may contine !or an inde!inite period and might "e till the reserve may "e

depleted, hence the panel cannot ta'e the argment o! reserving or sstaina"le se o!

resorces as it is $rima !acie an anti competitive practice# Also there is no signs &hat so

ever that the particlar resorce might get depleted in the near !tre# eeping all the

considerations nder vie&, the panel considers the complaint relevant and the resorces

mst "e spplied on eqal !ootage#

BACKGROUND:

ritania is a 5atral esorce rich contry# Avion etal 6orp (hereina!ter re!erred to as

+Avion.) esta"lished its initial research and development department in ritania in 1991#

0"seqently, it stepped into e2ploration and mining activities in varios parts o! ritania#

The ritanian la&s did not allo& a !oreign enterprise to acqire property or land in that

contry# ost o! the resorce7rich areas &ere still nder the control o! the government# The

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ritanian government a&arded mining leases to the interested parties "ased on a

discretionary system o! lease allocation# Avion etal 6orp received mining leases in

di!!erent parts o! ritania and in the !ar7!lng province o! 0inchria# 0inchria &as home

to a nm"er o! rare earth elements and chemicals, "t &as hitherto ne2plored# It &as alsolater discovered that there &as a"ndant spply o! rare earth elements and minerals in

0inchria#

Avion man!actred many rare earth minerals sch as "a2ite, manganese, magnesim,

alminim, lanthanm, %inc and many more and Avion prodction share o! these minerals

is 878: ; in ritania and 1 ; glo"ally &hereas Avion is the largest man!actrer o!

/ytrim having almost


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Avion also said that they are a cstodian o! rare natral resorces and that cannot increase

their otpt "eyond a sel! determined level o! :,, metric tons in a year# Avion also

mentioned that this limit is determined !or the preservation o! e2hasti"le natral resorces

and that they are reqired to honor their pre7e2isting commitments &ith other cstomers#They re!sed to give list o! companies@prchasers &ith &hom they had contracts "t it &as

apparent that l"erry &as the s"stantial prchaser o! the prodct#

ai-i 6o and et 6orp e2plored all the possi"ilities o! legal remedies in ritania or

$otomac# 0ince the alleged anti7competitive practice &as related to an agency sitated

&ithin the -risdiction o! ritania, the legal advice &as to e2hast the local remedies

availa"le in ritania# ai-i 6o# and et 6orp !iled a !ormal complaint "e!ore the

ritanian Antitrst 6ommission in 9# The 6ommission, ho&ever, dismissed the

complaint saying that non conclsion o! a contract "et&een t&o private entities !or the

spply o! a prodct is not a matter that cold "e decided "y the 6ommission#

The signatories to plrilateral Agreement &ere reqired to implement the international

treaty o"ligations at the mnicipal level throgh national legislation# It is assmed that "oth

ritania and $otomac had already -oined the plrilateral agreement and have incorporated

identical provisions o! the plrilateral agreement in their domestic la&s# This Agreement

only allo&s respective em"er contries to !ile a dispte at the ?TB, "t private

commercial practices &hich cold "e classi!ied as restrictive practices cold also "e "roght

"e!ore the dispte settlement "ody !or resoltion#

SUMMARY OF ISSUES RAISED:

The applicant has contended that Avion has violated Article Xi o! GATT "y re!sing to

enter into contract &ith "siness other than certain speci!ic "siness and has also said that

since mining is controlled "y ritanian government shold !airly allocate them and Avion

has entered into collsive Trade $ractices &hich is violative o! Article X o! GATT#

Avion is dominant player in spply o! /ytrim and re!sal to enter into contract other than

certain speci!ic enterprises is an a"se o! dominance and anti7competitive practise nder

Article Xi#

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Applicant has also contended that -sti!ication o! Avion is not relevant "ecase preservation

o! natral resorces shold "e in prsance o! governmental !nction or in con-nction &ith

governmental measres "t it is not in this sitation#

espondents have contended that government o! ritania have no role in spply o! ra&

material and it is totally nder private commercial dealing# They have also contended that

they have limited the spply o! ra& material in order to preserve the natral resorces &hich

are covered nder Article XX (g) and there!ore, it is not a anti7competitive practise#

DECISION:

+e& nations have "een so poor as to have "t one god# Gods &ere made so easily, and the

ra& material cost so little, that generally the god mar'et &as !airly gltted and heaven

crammed &ith these phantoms#.

ritania is the &orld>s largest prodcer o! /ytrim, &hich is sed !or the man!actre o!

high technology gadgets !or &hich there is a gro&ing mar'et &orld7&ide# ritania controls

almost C; o! the &orld7&ide prodction o! /ytrim#

Avion etal 6orp is the leading glo"al mining corporation &ith presence in varios parts o!

the &orld# Its main activities inclde e2ploration and mining o! minerals and other rare earth

metals# Avion etal 6orp>s parent corporation is registered in the neigh"oring -risdiction

o! $in' $ong "t has prodction !acilities in all mineral7rich contries in the &orld#

0ome o! the minerals and rare earths prodced "y Avion inclde "a2ite, manganese,

magnesim, alminim, %inc, silica, lanthanm, /ytrim and Ter"im, to name a !e

There are several other mining companies in ritania &hich e2plore prodcts sch as

manganese, magnesim, alminim and silica# Avion>s prodction share o! the a"ove

prodcts may "e "et&een 878: percent in ritania and 1 percent glo"ally# Do&ever,

Avion is "y !ar the largest man!actrer &hen it comes to the prodction o! /ytrim, &here

it has almost a s technological leaders in high tech

electronic goods and appliances# l"erry is incorporated in $otomac# Its ne& prodct e7

pod, a mlti7!nctional technological prodct has caght the &orld>s imagination# This

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prodct &hich contri"ted to less than percent o! l"erry>s &orld7&ide revene in 9

has sddenly emerged as the =gadget !or the !tre>#

l"erry decided that they shold =&or' &ith> Avion etal 6orp in esta"lishing a long7

term relationship &hich as per the !rther !acts &as dedced in terms o! common

nderstanding "et&een the parties "t as per the impression !rom the !acts no contract in

&riting &as made#

The !irst isse ta'en "y the panel !or consideration is &hether Avion has violated Article Xi

o! GATT "y re!sing to enter into contract &ith "siness other than certain speci!ic "siness

and since mining is controlled "y ritanian government, Avion has entered into collsive

Trade $ractices &hich is violative o! Article X o! GATT#

Avion and l"erry had no &ritten contract "et&een them that they cold prodce it "e!ore

the $anel# ailre o! sch a docment to "e prodced "e!ore the $anel, $anel assmes that

there has "een no contract o! sch a natre and i! as sch prima !acie there is no contract

there!ore, re!sal o! Avion to grant /ytrim to other companies is a "ad practise !ollo&ed

"y them as they are the &orld>s largest man!actrer o! /ytrim and other small

man!actrers are not capa"le enogh to spply constantly s!!icient amont o! /ytrim in

the mar'et# There!ore, the de!ence o! Avion that they are spplying /ytrim to the e2isting

cstomers and there!ore not capa"le o! spplying /ytrim to other companies !ails as they

cold not prodce any contact "e!ore the $anel#

There!ore, it is the &rong trade policy &hich has "een !ollo&ed "y the Avion#

5o& &hen &e loo' into the provisions o! Article X o! the GATT agreement, nder &hich

&e !ind clase 1(d) &hich speci!ically states*

The !ollo&ing shall "e prohi"ited as incompati"le &ithin the meaning o! this

$lrilateral agreement*

all agreements "et&een nderta'ings, decisions "y associations o! nderta'ings and

concerted practices &hich may a!!ect trade "et&een em"ers o! this plrilateral

agreement and &hich have as their o"-ect or e!!ect the prevention, restriction or

distortion o! competition &ithin the em"er 0tates, and in particlar those &hich*

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(d) apply dissimilar conditions to eqivalent transactions &ith other trading

parties, there"y placing them at a competitive disadvantageE

And

?hen &e !ocs on the other part o! Article X i#e# 6lase , &hich states thatE

X ()# Any agreements or decisions prohi"ited prsant to this Article shall "e

atomatically Foid#

eading Article X(1)(d) and Article X() together it can "e analysed and conclded that,

any mem"er contry applying dissimilar conditions to transaction "et&een nmeros parties

&ill "ecome void "y the e!!ect o! these t&o provisions o! article X# rther &hen &e see a

recent case regarding the same anti competitive practice, decided "y the panel, &hat they

re!erred to as crisis &as, +In this sense, as noted "y the 3ropean nion, i! there is no

possi"ility !or an e2isting shortage ever to cease to e2ist, it &ill not "e possi"le to +relieve

or prevent. it throgh an e2port restriction applied on a temporary "asis# I! a measre &ere

imposed to address a limited reserve o! an e2hasti"le natral resorce, sch measre &old

"e imposed ntil the point &hen the resorce is !lly depleted# This temporal !ocs seems

consistent &ith the notion o! +critical., de!ined as +o! the natre o!, or constitting, a crisis#.

0o "y no means it has "een sho&n "y Avion H co# that there &as a crisis or an rgent need

!or sch restriction and neither the spply &as to nmeros companies on a large scale#

rther in the same complaint china>s argment &as sht do&n on the simple "asis that

&hen a contry has some "ene!its and rights o! the GATT agreements it also has to a"ide "y

its o"ligations and rles !rther they cannot adopt anti competitive techniqes against

nations#

In 0 nder&ear, the Appellate Jody descri"ed the policy nderlying ArticleX* as pertaining to transparency and de process*

+Article X*, General Agreement, may "e seen to em"ody a principle o!

!ndamental importance that o! promoting !ll disclosre o! governmental acts

a!!ecting em"ers and private persons and enterprises, &hether o! domestic or

!oreign nationality# The relevant policy principle is &idely 'no&n as the principle o!

transparency and has o"viosly de process dimensions# The essential implication is

that em"ers and other persons a!!ected, or li'ely to "e a!!ected, "y governmental

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There!ore, the de!ence ta'en "y the Avion that since de to limit o! qantity can "e

e2traction they are not a"le to spply /ytrim to any other company other than its e2isting

cstomers is !ailed and dismissed "y the $anel#

Article Xi * General 3limination o! Mantitative estrictions states that A"se "y

nderta'ing in a +ominant $osition. &ith the relevant mar'et#

It is generally nderstood that Article XI* 1 permits the application o! e2port dties, ta2es

and other charges (hereina!ter, e2port dties), "t prohi"its all other measres &hich might

restrict the qantity o! e2ports o! a prodct (hereina!ter, qantitative e2port restrictions)#

Mantitative e2port restrictions prohi"ited "y Article XI* 1 incldes measres sch as

qotas, "ans, minimm prices and non7atomatic licensing reqirements# Mantitative

e2port restrictions made e!!ective throgh state7trading operations are also covered "y

Article XI* 1#

The scope and type o! measres that may restrict the qantity o! e2ports o! a prodct and

there!ore violate Article XI* 1 is potentially very large#

In this case Avion is in a dominant position "ecase it is the &orld>s largest man!actrer o!

/ytrim and other man!actrer o! /ytrim are not a"le to continosly spply the ra&

material &hen ai-i and et 6orp# 6ontracted &ith sch other man!actrer !or the spply

o! /ytrim# There!ore, Avion is in the dominant position in respect o! the mar'et o!

/ytrim#

Mantitative restrictions (Ms) are measres &hich prohi"it or restrict the qantity o! a

prodct that may "e imported# A typical e2ample o! qantitative restrictions &old "e a

measre allo&ing the importation o! 1, &idgets only# This qantitative restriction is

also re!erred to as a qota# A tari!! qota, ho&ever, is not a qota and is not considered to "e

a qantitative restriction# A tari!! qota is a qantity &hich can "e imported at a certain

dty# or e2ample, a em"er may allo& the importation o! :, &idgets at 1 per cent ad

valorem and any &idgets imported a"ove this qantity at per cent ad valorem. Tari!!

qotas are not qantitative restrictions since they do not prohi"it or restrict importation#

They only s"-ect imports to varying dties#

2The Jloom"erg Na& eportsAntitrst H Trade vol# 11th3dn#

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The only permitted restrictions on trade are dties, ta2es and other charges, and not

prohi"itions, qotas or licensing# This general rle is not &ithot e2ceptions,

$anel &old li'e to mar' the points in the china>s case*

+Althogh the ?TB $anel actally admitted that re!ractory7grade "a2ite is

+essential. to 6hina "ecase o! its important indstrial role, it ho&ever re-ected to

validate 6hina>s measres> con!ormity &ith Article XI*(a) GATT 1994 "ecase o!

(i) the lac' o! temporariness and (ii) the !ailre o! 6hina to demonstrate the physical

e2istence o! a shortage*

+The $anel does not consider 6hina>s application o! the measre to "e +temporarily

applied. &ithin the meaning o! to -sti!y its imposition nder that provision as a

measre to either prevent or relieve a +critical shortage. O###P a +shortage. re!ers to a

de!iciency in the qantity o! goods# The prodct>s importance in se, thogh

relevant in an assessment o! &hether a prodct is +essential. to a em"er, and

perhaps indicative o! !tre demand !or a prodct, does not in!orm &hether a

shortage crrently e2ists#.8This case in &hole smmarises the implication o! Article

XI# The t&o important aspects that lac' o! temporariness and secondly need !or sch

restriction na"le o! sho&ing any physical shortage even are le!t nans&ered in this

case that &hen Avion is e2porting everything to l"erry than &hy there is no

scope !or other companies &hen the prodction "y Avion is at a very large scale and

it in any case is e2porting and continosly prodcing the rare earth mineral# rther

e2tracts !rom the -dgement read as,

+The $anel does not consider that 6hina>s restriction on e2ports o! re!ractory7grade"a2ite, &hich has already "een in place !or at least a decade &ith no indication o!

&hen it &ill "e &ithdra&n and every indication that it &ill remain in place ntil the

reserves have "een depleted, can "y any de!inition "e considered to "e +temporarily

applied. to address a critical shortage &ithin the meaning o! Article XI*(a)# Bn this

"asis, the $anel concldes that 6hina cannot -sti!y its e2port qota prsant to

3?T@0894@1 (0)E ?T@089:@1 (3)E ?T@089C@1 (e2ico)# at Q#84 increased its domestic consmption o! certain ra& materials

(!lorspar and re!ractory7grade "a2ite) and there!ore !ailed to pt in place even7

handed measres. 1s

good that they have tried to preserve the natral resorces "t they shold not se anti7competitive policies and shold not monopoly the mar'et &hich may lead to e2ploitation o!

ltimate consmers#

CONCLUSION:

The dispte &hich o!!icial transcripts are availa"le here !lo&s !rom measres restricting

the complainant !rom importing ra& material !rom the sole prodcer Avion H co#

0ince ai-i and et corp# Dad already contracted &ith other companies &hich man!actrer

very less amont o! /ytrim and have !ailed since they &ere na"le to provide continos

spply o! /ytrim and since Avion controls the man!actrer o! /ytrim glo"ally there!ore,

Avion shold provide them a air allocation and spply o! ra& material#

In !acts it is stated that Avion has considered itsel! as a cstodian o! 5atral esorces and

there!ore, they cannot increase the otpt limit in order to provide ra& material to any other

company, other than its e2isting cstomers#

Today, in this age o! glo"alisation and technological advancement &hen almost all

e2hasti"le natral resorces are depleting readily and rapidly, it is good that natral

resorces are conserved and sed sstaina"ly so as to preserve them !or !tre generations

also "t this limit &hich is !i2ed "y the Avion is a sel! determined limit and is not "ased on

any scienti!ic calclations or on the recommendations o! Government or any other

international organisation# Avion has ar"itrarily !i2ed the limit o! e2traction o! ra& material#

acts states that the Government o! ritania does not allo& any !oreigner to acqire land,

they only give the lease to e2tract the natral resorces and the Government o! ritania has

"een consistently and continosly monitoring the e2traction o! natral resorces, there!ore

i! there &old have "een any need to pt a restriction on qantity o! natral resorces to "e

e2tracted then the Government o! ritania cold have pt sch a limit on the e2traction#

There!ore nless any limit is not !i2ed "y any proper athority, the sel! determined limit o!

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Avion cannot "e considered to "e the athoritative limit "eyond &hich Avion cannot

e2plore the natral resorces#

The e2port restraints challenged in this dispte inclde e2port qotas and e2port dties, as

&ell as related minimm e2port price, e2port licensing, and e2port qota administration

reqirements# These types o! e2port restraints can s'e& the playing !ield against the

complainant and other companies in the prodction and e2port o! nmeros technological e

7prodcts# The e2port restraints can arti!icially increase &orld prices !or these ra& material

inpts &hile arti!icially lo&ering prices !or l"ery prodcers# This ena"les l"erry>s

domestic do&nstream prodcers to prodce lo&er7priced prodcts !rom the ra& materials

and there"y creates signi!icant advantages !or l"ery>s prodcers &hen competing against

complainant and other prodcers "oth in domestic mar'et and other contries> mar'ets# The

e2port restraints can also create s"stantial pressre on !oreign do&nstream prodcers to

move their operations and, as a reslt, their technologies to l"erry#

Dence!orth, the de!ence ta'en "y the Avion that since de to limit o! qantity &hich can "e

e2tracted they are not a"le to spply /ytrim to any other company other than its e2isting

cstomers is !ailed and dismissed "y the $anel# The panel is o! the vie& that there shold "e

a spervision o! the Government in allocation o! ra& material and a !air part o! /ytrim

shold "e made availa"le to the ep"lic o! $otomac# 6omplaint allo&ed#

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