Managing Conflicts Between Rulings of the World Trade Organization and Regional Trade Tribunals: Reflections on the Brazil-Tyres Case

Abstract:     
The proliferation of international tribunals has given rise to much concern about potential conflicts between judicial decisions and possible ‘fragmentation’ of international law. Most of the discussions have focused on conflicts of jurisdictions and conflicts of norms that may result from competing or overlapping jurisdictions. The worst type of conflicts however is the conflict of obligations where a State cannot comply with the decisions of two tribunals at once because their separate decisions require the State to act in opposite directions.

Unfortunately, such a direct conflict of obligations has occurred as a result of the decision of the WTO Appellate Body in the case of Brazil – Tyres (DS332). The Appellate Body held that, by following the ruling of an arbitral tribunal of Mercosur – the regional trade agreement (RTA) between several South American countries – Brazil acted inconsistently with WTO rules. Furthermore, in the subsequent compliance proceedings a WTO arbitrator refused to allow Brazil time to negotiate a solution with other Mercosur countries. Consequently, Brazil found itself in a legal bind: it could not comply with WTO obligations without breaching its Mercosur obligations. Significantly, this conflict of obligations did not stem from competing or overlapping jurisdictions or conflicting treaty norms. Instead, it occurred entirely as a result of the Appellate Body’s interpretation of a WTO provision.

This paper submits that the conflict in this case could have been avoided because alternative interpretations, arguably legally sounder ones, do exist, and should have been avoided because there are international rules requiring a presumption against conflicts in treaty interpretation. The paper suggests that in rendering its decision the Appellate Body showed little concern regarding conflicts with the RTA, and that such lack of concern reflected an outdated mindset of WTO centrality or superiority. In light of international legal principles and the realities of the multi-polar global trading environment, the WTO judiciary is urged to adopt a clear policy on the avoidance of conflicts with RTA decisions.

Keywords: WTO, RTA, Regional Trade Agreements, Conflict of Obligations, International Law, Treaty Interpretation, International Tribunals, Brazil, Environment, Trade in Wastes, Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal

JEL Classification: K33

Accepted Paper Series