The european court of justice and direct effect for the gatt: a question worth revisiting

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Judson Osterhoudt Berkey

Harvard Law School

Final Revised Version

The European Court of Justice has long been criticized for consistently holding that the General Agreement on Tariffs and Trade (GATT) does not have direct effect. The end of the GATT Uruguay Round prompted a renewed analysis of direct effect by Kees Jan Kuilwijk. In his book, The European Court of Justice and the GATT Dilemma, Kuilwijk argues that the continued denial of direct effect not only proves that the ECJ has protectionist motives but also that it is unconcerned with individual rights.

Kuilwijk’s book not only updates the traditional critique of the Court’s doctrine but also illustrates the tendency of the traditional critique to fail to acknowledge the full complexity of the direct effect question. Thus, a more measured and thorough exploration of the legal, political, and economic issues involved in analyzing the direct effect may prove useful. This paper attempts such an analysis. Its purpose is not to advocate a particular position but merely to illustrate the gaps in the traditional critique.
As with any accomplishment in my life, tribute must first be paid to my family without whose love and support nothing would be possible. Beyond that, three individuals must be distinguished in particular. First, my mother, Dr. Judith O. Berkey, who has always taught me to pursue my dreams wherever they may lead. Second, Professor Richard Z. Lawrence who taught me international trade theory and provided useful comments on this paper during its progress. Lastly, and most importantly, a large debt of gratitude is owed to my supervisor, Professor Joseph H. Weiler. Not only did he help me develop many of the ideas contained in this paper but he also taught me to think like a lawyer and a scholar.

1. Introduction

Whether the European Court of Justice should permit enforcement of provisions of the General Agreement on Tariffs and Trade within the European Community legal system is a difficult question to answer.1 In his book, THE EUROPEAN COURT OF JUSTICE AND THE GATT DILEMMA, Kees Jan Kuilwijk concludes that the Court should do so by means of granting direct effect to the GATT.2 While Kuilwijk’s book contains a sophisticated legal, political, and economic analysis of the direct effect question and is a worthwhile addition to the prevailing academic view on this issue, its treatment of the relevant concerns does not always fully elucidate their complexity.

For that reason, this paper attempts to illustrate the competing considerations facing the ECJ in deciding whether to grant direct effect to the GATT. It will be shown that when one thoroughly examines the legal, political, and economic realities of the GATT it is no longer obvious, as Kuilwijk argues it is, that: 1) the ECJ’s jurisprudence requires direct effect, 2) denying direct effect is detrimental to the Community’s interests, and 3) direct effect is necessary to protect individual rights. After a brief introduction to the current ECJ doctrine and its critics, the paper will pursue the following distinct lines of analysis: 1) doctrinal, 2) motive, and 3) political economy. While the analysis is motivated by Kuilwijk's book, the discussion will often explore issues beyond the bounds of his critique.

1.1 Current State of the ECJ Doctrine

Four principles govern the domestic legal effect of international agreements. These principles are the following: 1) direct application, 2) direct effect, 3) supremacy, and 4) interpretation. The ECJ developed a common conception for each of these principles except direct effect.3 Although the Court granted direct effect to other international agreements, it held in International Fruit Company, an Article 177b preliminary reference decision, that individuals could not enforce GATT 47 provisions because the agreement lacked direct effect.

The Court reached this conclusion based on a consideration of the “spirit, general scheme and the terms of the General Agreement.”4 The Court held that, because the GATT 47 “is based on principles of negotiations undertaken on the basis of ‘reciprocal and mutually advantageous arrangements,’ [and] is characterized by the great flexibility of its provisions, in particular those conferring the possibility of derogation, the measures to be taken when confronted with exceptional difficulties, and the settlement of conflicts between the contracting parties,” it did not provide individuals with rights which could be invoked in national courts.5

The ECJ also held that member states could not enforce the GATT 47 provisions in Article 173(1) actions before the Court.6 The ECJ used International Fruit Company as a precedent in this decision to conclude that “those features of GATT, from which the Court concluded that an individual within the Community cannot invoke it in a court to challenge the lawfulness of a Community act, also preclude the Court from taking provisions of GATT into consideration to assess the lawfulness of a regulation in an action brought by a Member State.”7 Thus, the Court consistently held that the nature and structure of the GATT 47 precluded any of its provisions from having direct effect.

Although the ECJ denied direct effect to the GATT 47, it did allow some of the agreement’s provisions to have legal significance within the Community. The Court held that GATT 47 provisions could be used to interpret the meaning of Community legislation which expressly referred to those provisions. For example, in FEDIOL III, the ECJ held that the GATT 47 Article III prohibition against discriminatory taxes could be used to interpret the meaning of “illicit commercial practices” under the Community's New Commercial Policy Instrument Regulation because this regulation required the Community to comply with its international obligations. The Court distinguished its previous direct effect holdings by stating that “the GATT provisions have an independent meaning which, for the purposes of their application in specific cases, is to be determined by way of interpretation.”8 In the end, however, the Court found that the contested measures did not constitute an illicit commercial practice.

The Court also held that GATT 47 provisions can be used to interpret Community legislation when that legislation implemented a specific GATT 47 provision.9 For example, in Nakajima, the Court held that the GATT 47 Anti-Dumping Code could be used as grounds for reviewing the legality of an anti-dumping margin determined under the Community's Basic Anti-Dumping Regulation. In a manner similar to its decision in FEDIOL III, the Court held that this was possible because the regulation “was adopted in accordance with existing international obligations, in particular those arising from Article VI of the General Agreement and from the Anti-Dumping Code.”10 Again, however, the ECJ found that the substantive provisions of the Anti-Dumping Code had not been violated.

Because the ECJ has not addressed the direct effect question since the signing of the Uruguay Round Agreements, the above decisions constitute the Court’s doctrine towards the new GATT. Therefore, the current ECJ doctrine continues to hold that the GATT lacks direct effect and only has legal significance when Community legislation expressly refers to, or is intended to implement, specific GATT provisions.

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