ARGUMENTS OF THE PARTIES REGARDING LEGAL issues concerning SCM ARTICLES 1 AND 392

ARGUMENTS OF THE PARTIES REGARDING LEGAL issues concerning SCM ARTICLES 1 AND 3⁹²

1. GENERAL

   1. Arguments of Canada

      1. Principles of Treaty Interpretation

1. 
   Canada observes that Article 3.2 of the Understanding on Rules and Procedures Governing Dispute Settlement (DSU) provides that the WTO dispute settlement system serves to clarify the existing provisions of the covered agreements in accordance with “customary rules of interpretation of public international law.” Canada recalls the Appellate Body’s view that the rules of treaty interpretation set out in Articles 31 and 32 of the Vienna Convention on the Law of Treaties (Vienna Convention)⁹³ have attained the status of customary or general international law.⁹⁴
   
2. 
   Canada states that according to Article 31 of the Vienna Convention, an international treaty must be interpreted “in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.”⁹⁵ For Canada, Article 32 of the Vienna Convention provides that supplementary means of interpretation, including the negotiating history, may also be used to confirm an interpretation of the agreement or to resolve ambiguities in the text.⁹⁶
   
3. 
   Canada submits that several other interpretative principles are also applicable to the present case, recalling that the Appellate Body has noted that the principle of effectiveness flows from Article 31:
   

1. 
   For Canada, similarly, good faith underlies the principle that the interpreter must avoid interpreting the treaty in a way that would lead to a manifestly absurd or unreasonable result.⁹⁸
   

1. Burden of Proof

   1. 
      Canada observes that in its report in United States - Measure Affecting Imports of Woven Wool Shirts and Blouses from India,⁹⁹ the Appellate Body dealt extensively with the issue of allocation of the burden of proof,¹⁰⁰ stating:
      

1. 
   For Canada, a prima facie case of inconsistency means that the complainant must adduce sufficient evidence that would permit a tribunal to find for the complainant in the absence of evidence to the contrary.¹⁰² The respondent must then present enough evidence to cast doubt on the proposition of the complainant to prevent the tribunal from finding in favour of the complainant.
   
2. 
   According to Canada, international tribunals, for obvious reasons, have refused to accept unsupported statements of the parties as evidence. Canada recalls the statement by the British-Mexican Claims Commission of 1926, “’if an international tribunal were to accept all ... allegations without evidence, it would expose itself to the not unjustifiable criticism of placing jurisdiction as between nations below the level prevailing in all civilized States for jurisdiction as between citizens.‘”¹⁰³
   

1. A complainant must present a prima facie case in respect of each element of its claim.

   1. 
      For Canada, a prima facie case is one which, in the absence of effective refutation by the defending party, requires a panel, as a matter of law, to rule in favour of the complaining party presenting the prima facie case.¹⁰⁴ Canada states that the Appellate Body has observed that a panel should begin its analysis of each legal provision by examining whether the complaining party has presented evidence and legal arguments sufficient to demonstrate that the challenged measures are inconsistent with respect to each relevant legal provision for which an inconsistency is alleged,¹⁰⁵ and that for claims with multiple elements, all the elements of that claim must be established.¹⁰⁶
      
   2. 
      Thus, in Canada’s view, Brazil must present a prima facie case with respect to each element of its claim, that is, Brazil must demonstrate that a programme, activity or transaction at issue is:
      

(b) contingent on export performance, in the sense that it would not be paid unless exports took place, that there would be rewards if exports took place or that there would be penalties if exports did not take place (paras. 5.55 -5.80).

2. The principles applicable to the evaluation of evidence

   1. 
      Canada notes the Appellate Body’s observation that in evaluating the evidence presented by the complaining party to determine whether a prima facie case has been made with respect to each element of its claim, a panel must be satisfied that the adduced evidence is “sufficient to raise a presumption that what is claimed is true”,¹⁰⁷ that mere assertions of fact do not amount to proof and cannot be relied upon by a complaining party to meet this standard,¹⁰⁸ and that it is not enough for the complaining party to merely raise a reasonable doubt as to whether a measure might be inconsistent with a WTO provision.¹⁰⁹
      
   2. 
      Canada submits that a panel should not accept that a prima facie case has been established where the evidence presented in support of an allegation:
      

(b) is internally inconsistent and does not amount to proof;

(c) consists of press reports which are uncorroborated or do not otherwise contain material with an independent title of credibility and persuasiveness;¹¹⁰ or

(d) is so meagre that it can be ignored.¹¹¹

1. 
   In Canada’s view, submitting a large volume of documents does not demonstrate that a prima facie case has been made. (para. 4.110). Rather, it must be shown that the evidence adduced is credible and cogent, and that it establishes a prima facie case for each element of the claim. Canada submits that applying these principles, Brazil has not made out a prima facie case against any of the programmes, activities or transactions it has impugned.
   

1. Judicial Economy

   1. 
      Canada argues that the principle of judicial economy has guided panels since the inception of the GATT. Canada states that, relying on GATT panel practice and Article 11 of the DSU, the Appellate Body observed in Shirts and Blouses that:
      

“A panel need only address those claims which must be addressed in order to resolve the matter in issue in the dispute.”¹¹² [italics added by Canada]

2. 
   Canada submits that given the accelerated time-frame of the SCM Agreement Article 4 process, the principle of judicial economy is particularly important; in Canada’s view the Panel should address only those issues which must be addressed in order to resolve the matter in issue in the dispute.
   
3. 
   Canada observes that in the present case, Brazil makes one claim with respect to each impugned Canadian programme, transaction or activity: a violation of SCM Agreement Article 3. For each of these claims, Canada states, Brazil must demonstrate two distinct and necessary elements:
   

(ii) that the subsidy is contingent, in law or in fact, upon export performance (SCM Agreement Article 3).

1. 
   Canada believes that in response it suffices for Canada to show that Brazil has failed to demonstrate either one of the two necessary elements. Indeed, Canada argues, to resolve each of the claims in the dispute, if the Panel finds that either one of the two necessary elements has not been shown, then the relevant claim fails and the aim of the dispute settlement system – to secure a positive solution to the dispute -- will have been met.
   
2. 
   In accordance with the principle of judicial economy, Canada argues, it is not necessary for this Panel to determine whether impugned programmes, activities or transactions are “subsidies”, if it finds that they are not “contingent … on export performance”, and vice versa. Canada indicates that its arguments with respect to Articles 1 and 3 of the SCM Agreement focus, therefore, on the element that allows the Panel to dispose of each of Brazil’s claims in the most efficient manner possible.
   

1. Response of Brazil

   1. 
      Regarding the weight to be attached to the evidence it has submitted, Brazil notes that this evidence includes statements by current and past presidents of the EDC, other EDC officials, the Canadian Department of Industry Minister, other Industry Canada officials, and members of the Canadian Parliament. Brazil refers the Panel to an article provided by Canada¹¹³. Brazil argues that Canada considers this article, which concerns the evidentiary standards applied by the International Court of Justice, to provide the relevant framework for the Panel in its consideration of the evidence presented by Brazil. Brazil agrees.
      
   2. 
      In particular, Brazil directs the Panel’s attention to the ICJ’s treatment of public statements by high government officials in the Nicaragua case, discussed thoroughly in the article, and notes a finding by the Court in that case:
      

1. 
   In Brazil’s view, the Court in fact considers statements by a party that are “’against its own interest‘” to be “’of superior credibility‘” and on equal footing with evidence offered by disinterested witnesses, and deems that such statements “’may . . . be construed as a form of admission.‘”
   
2. 
   According to Brazil, the author of the article concludes that the Court “’arrived at a process of taking at face value the public statements of high officials when such statements were arguably made against the legal interest of the state in the government of which such officials served,‘” and of taking “’the unfavourable evidence as probative, but in general to reject the favorable evidence as not being disinterested or veracious‘”. Brazil states that the author concludes that these evidentiary practices are not restricted to the particular circumstances of the Nicaragua case, but have in fact “’long been employed by the Court in normal bilateral litigations as a way of winnowing through the vast quantities of documentary assertion and evidentiary pleading to which it is normally subjected . . .‘”
   
3. 
   Brazil reiterates that it has faced tremendous difficulty in these proceedings, given the unreasonable secrecy of the Canadian government and given Canada’s failure to fulfill its duty of collaboration, recognized in Argentina – Measures Affecting Imports of Footwear, Textiles, Apparel and Other Items, as central to the WTO dispute settlement process. For this reason, and because Canada has apparently agreed that the ICJ’s evidentiary rules are relevant to the Panel’s weighing of the evidence, Brazil asks that the Panel attach particular weight to the contemporaneous statements by Canadian government ministers and officials offered by Brazil as evidentiary proof of its claims. Brazil argues that these statements, made against Canada’s legal interest, are, in the ICJ’s words, “’of superior credibility.’”
   
4. 
   Brazil argues that although Canada has secured a statement by a Bombardier officer attempting to explain away his recent comments confirming Bombardier’s use of Canada Account funds at non-commercial rates, no other such statements have been offered to correct or explain the dozens of comments by current and past presidents of the EDC, other EDC officials, the Canadian Department of Industry Minister, other Industry Canada officials, and members of the Canadian Parliament offered by Brazil as “’statements against interest‘” in support of Brazil’s claims.
   
5. 
   According to Brazil, the many statements by many Canadian ministers and officials therefore retain, in the words of the ICJ, their “superior credibility” and persuasiveness as reliable indications of the accuracy of the facts asserted. For Brazil, post-hoc rationalizations and defences offered by Canada in the course of these proceedings, coming not from the ministers or officials themselves, and lacking any contemporaneous connection to the original statements, are not under the ICJ’s practice considered credible or persuasive.
   
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