30.6.11

Reported liquor loss for next week

is the subject of my Trade Tripper column in this Friday-Saturday issue of BusinessWorld:

For now, we’ll discuss certain points of the Philippine win embodied in the WTO Appellate Body’s report in Thailand -- Customs and Fiscal Measures on Cigarettes from the Philippines (docketed as DS371). The case had to do with Thai taxes imposed on imported cigarettes covering the areas of customs valuation, excise taxes, VAT, and dual licensing requirements. Some commentators referred to the Philippine complaint as Thai Cigarettes II (a landmark case during the GATT days relating to health measures), as well as purportedly containing elements of the Korea -- Beef case.

The dispute involves the provisions of Articles 1 and 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (“DSU”), Article XXII:1 of the General Agreement on Tariffs and Trade 1994, and Article 19 of the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 (the “Customs Valuation Agreement”). A portion of the case deals with the validity of dual retail requirements, the Philippine complaint alleging that Thailand requires tobacco and/or cigarette retailers to hold separate licenses to sell domestic and imported cigarettes, respectively. The issue essentially is how the dual licensing requirement leads to discriminatory treatment against the imported cigarettes and thus is a violation of Article III.4 of the GATT.

A WTO panel did find that the Thais acted inconsistently with the provisions of Articles 1.1, 1.2, 1.2.a, 7.1, 7.3, 10, and 16 of the Customs Valuation Agreement; and Articles III.2 and III.4, as well as X.1, X.3.a, and X.3. of the GATT. The panel found also that “Thailand does not maintain or apply a general rule requiring the rejection of the transaction value and the use of the deductive valuation method.”

On appeal to the Appellate Body, Thailand focused on the panel’s findings under Article III:2, Article III:4, and Article X:3.b of GATT 1994. The AB basically upheld practically all of the panel’s findings, finding that Thailand did violate Article III:2, first sentence, Article III.4, and Article X.3.b of GATT 1994. The AB concurred with the panel that Thailand’s measures created a discriminatory tax liability against imported like products. The Thai VAT exemption effectively subjected Philippine exported cigarettes to taxes not applied to like domestic cigarettes. Denying the defense that the subject measures constitute necessary “administrative requirements,” it was found by the AB that Thailand failed to prove that such could be justified under Article XX.d of GATT 1994. It was also found by the AB that Thai Customs failed to provide an adequate “independent tribunals or procedures for the prompt review of customs guarantee decisions,” any such review being available only after customs had made final determination on the matter.

The interesting thing about it is that, after all is said and done, where a panel or the AB concludes that a law or measure is inconsistent with a WTO agreement, it merely recommends “that the Member concerned bring the measure into conformity with that agreement.” A finding of damages, unlike in domestic litigation, is rarely given in a WTO proceeding. Furthermore, it’s not, technically, the panel or the AB that “decides” a case. That power is with the Dispute Settlement Body, which is composed of the 153 members of the WTO, voting by way of a bizarre, quite futile, procedure called the “reverse consensus.”

Thailand actually has several options at its disposal at this point. It could, within 30 days after the date of adoption of the AB report by the DSB, inform the DSB of its intentions regarding the implementation of the recommendations and rulings of the DSB. If it is impracticable to comply immediately with the recommendations and rulings, the member concerned shall have a reasonable period of time in which to do so. What is “reasonable period of time” is unfortunately an issue-laden matter. Thailand could also raise the question as to whether it already acted in consistency with a covered agreement of measures taken to comply with the recommendations and rulings in relation to the subject dispute. In which event, such shall be decided through recourse to dispute settlement procedures, perhaps involving even the original panel. All this time, it must be said, the DSB shall be monitoring the implementation of the adopted recommendations or rulings. The issue of implementing the recommendations or rulings may be raised at the DSB by any WTO member at any time following their adoption.

The Philippines, however, is not without recourse: should Thailand not implement the AB recommendations and rulings within a reasonable timeframe, the Philippines may request compensation or for suspension of concessions. Compensation is voluntary and, if granted, shall be consistent with the covered agreements. If Thailand’s compensation offer be unsatisfactory, then the Philippines may request authorization from the DSB to suspend the application to Thailand of concessions or other obligations under the covered agreements.

More to come about this case (and our alleged sad loss in the liquor case) in future articles.

29.6.11

Philippines said to have lost liquor tax dispute

reported in today’s BusinessWorld:

Taxes levied by the Philippines on alcoholic drinks from the European Union and United States are illegal under global rules, the world’s trade dispute body ruled on Monday, according to sources close to the case.

Washington’s envoy in Manila said he welcomed the decision, while the Philippines’ tax chief -- insisting that the duty system was not discriminatory -- said it would be up to legislators to change relevant laws.

Sources said that a World Trade Organization (WTO) legal panel, in a confidential report circulated to the parties involved in the dispute, had ruled that the Philippines’ taxes discriminate against brands such as Jack Daniel’s and Jim Beam as well as Spain’s Brandy de Jerez, while favoring domestic producers catering to the country’s $3-billion spirits market.

The ruling is confidential until its publication in August, and trade officials for the EU and US were unable to comment on its contents. But it is being eyed keenly by Spanish brandy makers and US firms such Brown-Forman Corp. , which owns Jack Daniel’s, and Fortune Brands Inc., which makes Jim Beam.

“We have long questioned the Philippines’ discriminatory tax approach. We are optimistic of a positive result from the WTO panel, which will be particularly welcomed by Spain since Spanish brandy constitutes the main EU spirits export to the Philippines,” said Jamie Fortescue, director general of the European Spirits Organization.

The ruling dismissed Manila’s argument that imported whiskey and brandy do not compete with locally made alcohol and that differing taxes -- set according to the raw material used -- should therefore be legal, sources said.

It found that the purpose of a lower tax on domestic alcohol that can be directly substituted for imports was to protect domestic producers, an illegal aim under WTO rules.

The EU, whose annual global spirits exports amount to about 7 billion euros ($10 billion), blames the tax for halving EU spirits sales to the Philippines between 2004 and 2007 to 18 million euros. Brussels lodged a WTO challenge against the Philippines in January last year.

The United States, which followed suit with a similar challenge in April last year, similarly says the Philippines’ tax system -- imposing duties 10-40 times higher on spirits not distilled from materials such as sugar cane and molasses produced in the Philippines -- means it has failed to gain more than 5% of the country’s market.

In Manila, US Ambassador Henry K. Thomas said Washington welcomed the WTO’s preliminary decision.

“The US looks forward to a level playing field in the country, since the consumer benefits with fair prices even from goods coming from outside the Philippines,” Mr. Thomas Jr. said at the sidelines of a Management Association of the Philippines press conference.

Bureau of Internal Revenue (BIR) Commissioner Kim S. Jacinto-Henares, meanwhile, said it would be up to Congress to amend the country’s tax laws once the WTO ruling becomes final.

“I will still collect excise taxes, as stated in the National Internal Revenue Code (NIRC). There will be no changes until Congress amends the law,” Ms. Henares told BusinessWorld.

Under Section 141 of the NIRC, alcohol products produced from the sap of nipa, coconut, cassava, camote, buri palm or from the juice, syrup or sugar of the cane are charged an P8 excise tax per proof liter.

Alcohol products not made from the identified raw materials are levied an excise tax of between P75 to P300 per proof liter Imported spirits tend to fall under this category because they are usually made of barley, wheat and grapes, Ms. Henares explained.

25.6.11

Decoupling WTO from Doha

Can the WTO be decoupled from Doha? is the question that seems to be on everybody’s mind these days, particularly considering that most likely Doha will not be concluded this year (if at all). Excerpt of an article by Ujal Singh Bhatia, Former Indian Ambassador and Permanent Representative to the WTO in Geneva:

“The first will arrest the continuing erosion of the non-discrimination principle. The second will thwart the trend towards unequal rules being incorporated into RTAs. Together, they will reinforce the centrality of the WTO in the global trading system. The prolonged standoff over “new” market access, by preventing the WTO from fulfilling these objectives, is causing serious damage to the global trading system. The solution to the WTO’s problems, therefore, lies not in decoupling the WTO from the Doha Round, but in enabling it to achieve an ambitious Doha outcome based on its development mandate.

There are a number of factors that lend credence to the view that the support and leadership of the US and EU for the multilateral process is diminishing. First, both continue to be preoccupied with the management of the aftermath of the financial and economic crisis. Second, the political dynamic in the WTO has shifted towards greater equality of voice among members and it has become difficult for the erstwhile leaders to have a decisive say in moulding outcomes. The increasing focus of the US and the EU on RTAs is a response to this development. The ACTA negotiations (anti-counterfeiting trade agreement) are another manifestation of this response.”

23.6.11

Philippines’ WTO win on cigarettes

is the subject of my Trade Tripper column in this Friday-Saturday issue of BusinessWorld:

The country finally got good news in the international front when the WTO’s Appellate Body released last June 17, 2011, its report on Thailand -- Customs and Fiscal Measures on Cigarettes from the Philippines (docketed as DS371). The dispute is quite important considering that the livelihood of thousands of Filipino farmers was at stake. It should also quiet local critics of the WTO: say what they will, it cannot be denied that without the WTO’s highly efficient dispute settlement system, the country would not have been able to protect its interests as well as it did.

The case had to do with Thai taxes imposed on imported cigarettes, with Philippine total exports of our cigarettes significantly declining for the two years prior to the filing of the complaint. The dispute, as a whole, covers the areas of customs valuation, excise taxes, health and TV tax, VAT, and dual licensing requirements. Specifically, it involves the provisions of the Understanding on Rules and Procedures Governing the Settlement of Disputes ("DSU"), the General Agreement on Tariffs and Trade 1994 (the "GATT 1994," which is actually GATT 1947), and the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 (the "Customs Valuation Agreement"). The main cause of action of the Philippine complaint is whether Thailand is violating WTO national treatment provisions.

The WTO panel released its report last Nov. 15, 2010 (a copy of the 426 page report can be viewed at http://www.wto.org/english/tratop_e/dispu_e/371r_e.pdf). The WTO panel found that the Thais acted inconsistently with the provisions of Articles 1.1, 1.2, 1.2(a), 7.1, 7.3, 10, and 16 of the Customs Valuation Agreement; and Articles III.2 and III.4, as well as X.1, X.3(a), and X.3(b) of the GATT. The panel found also that "Thailand does not maintain or apply a general rule requiring the rejection of the transaction value and the use of the deductive valuation method."

On promptly appealing to the AB, Thailand focused on the panel’s findings under Article III:2, Article III:4, and Article X:3(b) of the GATT 1994. With its report, the AB essentially upheld all of the panel’s key findings and, thusly, an overwhelming victory for the Philippines. A copy of the AB report can be found in http://www.worldtradelaw.net/reports/wtoab/thailand-cigarettesphilippines(ab).pdf. The report, in conclusion, pointedly found:

"223. For the reasons set out in this Report, the Appellate Body:

"(a) with respect to the Panel’s findings under Article III of the GATT 1994 concerning Thailand’s treatment of resellers of imported cigarettes, as compared to its treatment of resellers of like domestic cigarettes:

"(i) upholds the Panel’s finding, in paragraph 8.3(b) of the Panel Report, that Thailand acts inconsistently with Article III:2, first sentence, of the GATT 1994 by subjecting imported cigarettes to VAT liability in excess of that applied to like domestic cigarettes;

(ii) with respect to the Panel’s findings under Article III:4 of the GATT 1994:

"- finds that the Panel did not err in concluding, in paragraph 7.738 of the Panel Report, that Thailand accords less favourable treatment to imported cigarettes than to like domestic cigarettes; xxx and

"(b) upholds the Panel’s finding, in paragraph 8.4(g) of the Panel Report, that Thailand acts inconsistently with Article X:3(b) of the GATT 1994.

"224. The Appellate Body recommends that the DSB request Thailand to bring its measures, found in this Report, and in the Panel Report as modified by this Report, to be inconsistent with the Agreement on Customs Valuation and the GATT 1994, into conformity with its obligations under those Agreements."

This is a good win for the country. It also clearly demonstrated how important it is for local industry to cooperate and work well with (rather than antagonize or take a suspicious stance vis-a-vis) our trade officials in handling disputes. In this case, the supportive attitude and competence of Philip Morris is to be commended. For Filipino lawyers, it also represents the first time the country won in an international dispute at the state-to-state level (the ICSID case involving the NAIA3 contract was on a state-to-private company level dispute). Prior to DS371, the Philippines had won none of its eight previous cases at the WTO (none also for the International Court of Justice). So I hope I be permitted in saying that, alongside trade officials Tom Aquino and Tong Buencamino and lawyers Dondi Teehankee and JV Chan-Gonzaga, I’m quite happy to at least have a small participation in this case as then legal adviser to the Philippines.

I’ll devote a future article to parse through some of the more interesting analysis and findings of the AB, as well as consequences moving forward. For the moment, a win is a win. It would be interesting to see how the other WTO case (DS396 and DS403) turns out, this time involving the EC’s and the US’ complaint that Philippine excise taxes on distilled liquor discriminate against imported whiskey. Hopefully, aside from the smokes, a victory drink would be forthcoming as well.

19.6.11

AB report on DS371 Thailand — Customs and Fiscal Measures on Cigarettes from the Philippines

The WTO Appellate Body released its findings in DS371 Thailand — Customs and Fiscal Measures on Cigarettes from the Philippines last 17 June 2011. Below is the summary of findings from the WTO website. The full report can be found here.

Summary of key findings

Thailand's appeal was limited to certain of the Panel's findings under Article III:2, Article III:4, and Article X:3(b) of the GATT 1994. The Appellate Body upheld the core findings challenged by Thailand on appeal.

The Appellate Body upheld the Panel's finding that Thailand acts inconsistently with Article III:2, first sentence, of the GATT 1994 by subjecting imported cigarettes to internal taxes in excess of those applied to like domestic cigarettes. The Thai measure at issue consists of an exemption from value added tax (“VAT”) liability for resellers of domestic cigarettes, together with the imposition of VAT on resellers of imported cigarettes when they do not satisfy prescribed conditions for obtaining input tax credits necessary to achieve zero VAT liability. The Appellate Body agreed with the Panel that this measure affects the respective tax liability imposed on imported and like domestic products. The Appellate Body therefore rejected Thailand's characterization of the measure as “administrative requirements”, as well as Thailand's argument that the measure should have been examined under Article III:4, and not Article III:2, of the GATT 1994.

The Appellate Body also upheld the Panel's finding that Thailand acts inconsistently with Article III:4 of the GATT 1994 by according less favourable treatment to imported cigarettes than to like domestic cigarettes. The Thai measure at issue consists of an exemption from three sets of VAT-related administrative requirements for resellers of domestic cigarettes, together with the imposition of these requirements on resellers of imported cigarettes. The Appellate Body found that the Panel properly analyzed this measure and its implications in the marketplace, and therefore agreed with the Panel that this measure accords less favourable treatment to imported cigarettes by imposing the additional administrative requirements only on resellers of imported cigarettes. The Appellate Body further found that the Panel did not fail to ensure due process or to comply with its duty under Article 11 of the DSU by accepting and relying upon evidence, submitted by the Philippines late in the Panel proceedings, relating to one of the administrative requirements. Due to an error in the Panel's identification of the basis for its finding, the Appellate Body reversed the Panel's finding that Thailand had not satisfied its burden of proving its defence under Article XX(d) of the GATT 1994. In completing the legal analysis, however, the Appellate Body found, as had the Panel, that Thailand failed to establish that the administrative requirements at issue are justified under Article XX(d) of the GATT 1994.

Finally, the Appellate Body upheld the Panel's finding that Thailand acts inconsistently with Article X:3(b) of the GATT 1994 by failing to maintain or institute independent tribunals or procedures for the prompt review of customs guarantee decisions. Thai Customs requires importers to provide a guarantee in order to obtain the release of goods from customs pending a final determination of customs value. The Appellate Body saw no error in the Panel's conclusion that Thailand's system for the review of guarantees does not comply with the obligation to ensure prompt review under Article X:3(b) because such review is not available until after a final determination of customs value has been made.

17.6.11

EO 45, designating DOJ as Competition Authority

Here's the full text of Executive Order No. 45, Series 2011:

MALACA√ĎAN PALACE
MANILA

BY THE PRESIDENT OF THE PHILIPPINES
EXECUTIVE ORDER NO. 45
DESIGNATING THE DEPARTMENT OF JUSTICE AS  THE  COMPETITION AUTHORITY

WHEREAS, Section 20, Article II of the 1987 Constitution provides that the State recognizes the indispensable role of the private sector, encourages private enterprise, and provides incentives to needed investments;

WHEREAS, Sections 13 and 19, Article XII of the 1987 Constitution provide that the State shall pursue a trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on the basis of equality and reciprocity and shall regulate or prohibit monopolies when the public interest so requires;

WHEREAS, recent developments from the World Trade Organization (WTO), the ASEAN Free Trade Area (AFTA), and the trade liberalization initiatives under the Asia Pacific Economic Cooperation (APEC) forum advocate competition in domestic and international trade;

WHEREAS, there is a need to promote competition and level the playing field in the market;

WHEREAS, Republic Act No. 4152 approved on 20 June 1964 vests upon the Secretary of Justice the duty “to study all laws relating to trusts, monopolies and combinations, to draft such legislation as may be necessary to update or revise existing laws to enable the Government to deal more effectively with monopolistic practices and all forms of trusts and combination in restraint of trade or free competition and/or tending to bring about non-competitive prices of articles of prime necessity, to investigate all cases involving violations of such laws, and to initiate and take such preventive or remedial measures, including appropriate judicial proceedings to prevent or restrain monopolization and allied practices or activities of trust, monopolies and combinations”;

WHEREAS, Act No. 3247 enacted on 1 December 1925 and Article 186 of the Revised Penal Code, as amended, both penalize monopolies and combinations in restraint of trade;

WHEREAS, the Department of Justice (DOJ) is the principal legal counsel and prosecution arm of the government under Section 3, Chapter 1, Title III, Book IV of Executive Order No. 292 (Administrative Code of 1987) and also the central authority for matters requiring international legal cooperation;

WHEREAS, the DOJ likewise serves as the principal agency mandated to enforce the rule of law and investigate and prosecute offenders; and,

WHEREAS, the President, under Article VII, Section 17 of the Constitution; has the power and control over executive departments, bureaus and offices, as well as the continuing authority under existing laws to reorganize such executive departments, bureaus and agencies.

NOW, THEREFORE, I, BENIGNO S. AQUINO III, President of the Philippines, by virtue of the powers vested in me by law, do hereby order:

SECTION 1. Designation of Competition Authority. The DOJ is hereby designated as the Competition Authority with the following duties and responsibilities:
a.Investigate all cases involving violations of competition laws and prosecute violators to prevent, restrain and punish monopolization, cartels and combinations in restraint of trade;
b.Enforce competition policies and laws to protect consumers from abusive, fraudulent, or harmful corrupt business practices;
c.Supervise competition in markets by ensuring that prohibitions and requirements of competition laws are adhered to, and to this end, call on other government agencies and/or entities for submission of reports and provision for assistance;
d.Monitor and implement measures to promote transparency and accountability in markets;
e.Prepare, publish and disseminate studies and reports on competition to inform and guide the industry and consumers; and
f.Promote international cooperation and strengthen Philippine trade relations with other countries, economies, and institutions in trade agreements.

SECTION 2. Office for Competition. There is hereby created the Office for Competition under the Office of the Secretary of Justice to carry out the duties and responsibilities set forth in Section 1. The Office shall be manned by such number of staff including legal and technical experts, consultants and resource persons to effectively and efficiently pursue its mandate. The Secretary of Justice shall designate the Chief/Head and members of the said Office.

SECTION 3. Funding. To carry out the provisions of this Order, initial funds for the operations of the Office for Competition shall be taken from the available funds of the DOJ. Thereafter, such amount as may be deemed necessary for the annual operations of said Office, shall be incorporated and included in the annual budgetary appropriations of the DOJ.

SECTION 4. Separability Clause. If any provision of this Executive Order is declared invalid or unconstitutional, the other provisions not affected thereby shall remain valid and subsisting.

SECTION 5. Repealing Clause. All orders, rules, regulations, and issuances, or part thereof, which are inconsistent with this Executive Order, are hereby repealed, amended, or modified accordingly.

SECTION 6. Effectivity. This Executive Order shall take effect immediately upon publication in a newspaper of general circulation.

DONE, in the City of Manila, this 9th day of June, in the year of our Lord, Two Thousand Eleven.
 
(Sgd.) BENIGNO S. AQUINO III
By the President:

(Sgd.) PAQUITO N. OCHOA, JR.
Executive Secretary

16.6.11

Retired but not tired

is the subject of my Trade Tripper column in this Friday-Saturday issue of BusinessWorld:

Early this week the man who taught me Constitutional Law, Supreme Court Justice Antonio Eduardo Nachura, retired. He was, is, someone I literally owe (along with Dean Mariano Magsalin, Jr.) my legal career -- encouraging me to continue my law studies after a series of disappointments almost made me want to stop, had supported my going to Cambridge, and with incredible generosity gave me, a then mere 39-year-old, the opportunity to become Bar Examiner for Political Law and Public International Law in 2009.

The newspaper accounts of his retirement ceremonies made much of the fact that he was given tokens that were symbolic or representative of his career: "a brass shingle, a photo album, a Philippine flag, a judicial robe, a book of court decisions, and a medallion, as well as a Supreme Court pen, flag, and seal." Mention was also made of the fact that Justice Nachura had the rare honor of serving in all three branches of government.

But even then, that doesn’t remotely capture what really makes him special. He will forever be for his students (and we will always just be his students) the personification of the lawyer we all want to be: pragmatic but scholarly, intellectual but easygoing, a serious man but of constant good humor, of high position but of down-to-earth humility. We would imitate him in class, trying to perfectly capture his distinct way of speaking, the ever present exhortation of "na-master niyo na iyan, kayang kaya niyo iyan!" This would be then followed by a shake of the head, a rueful smile, and a soft "ay naku ..." Any lawyer could say that he had the honor of learning constitutional law from so and so expert. But I think we, Nachura’s students, could claim the distinction that we actually had fun and looked forward, loved even, learning law from him.

This makes me truly doubt the wisdom of having a compulsory retirement age for Supreme Court justices. Why make it mandatory to retire somebody who is mentally alert, healthy, and with energy just because he or she reached a certain number? And I remember the other justices whose "early" retirement caused the Philippine judiciary to be deprived of their wisdom, experience, and intellect: Cesar Bengzon, who would go on to serve for years at the International Court of Justice, Florentino Feliciano, who would go on almost single-handedly to shape the judicial process of the World Trade Organization’s Appellate Body, Romeo Callejo (another professor of mine and who now teaches at Ateneo). The list goes on and on.

It just simply doesn’t make sense. Considering that the average life expectancy for Filipinos have steadily risen through the years (better nutrition, health care, lack of wars, etc.), why impose retirement at what is effectively quite young ages? This is all the more significant when one considers that global fertility rates are mostly declining (including that of the Philippines). The private sector has a general retirement age of 65. The military has an even more ridiculous retirement age: 56. Just when an officer (or even Chief of Staff) is reaching quite admirable levels of maturity, he is then told to go.

The Economist
, commenting on the matter (Pensions, April 7, 2011), declared: "many governments have started to deal with the ageing problem. They have announced increases in the official retirement age that attempt to hold down the costs of state pensions while encouraging workers to stay in their jobs or get on their bikes and look for new ones. [Accordingly], working longer has three great advantages. The employee gets more years of wages; the government receives more in taxes and pays out less in benefits; and the economy grows faster as more people work for longer. Older workers are a neglected consumer market, as our briefing on the media’s ageing audiences explains."

Other countries have certainly heeded the times. The US Army, for one, changed the mandatory retirement age from 55 to 62. The US Supreme Court currently has 4 (out of the 9) justices past 70: Scalia (74), Kennedy (73), Ginsburg (77), and Breyer (71). In the private sector, the UK is reportedly upping the retirement age to 68, the US to 67.

The Economist
actually presented (Schumpeter, April 7, 2011) three ways to get more efficient productivity out of senior folks: "The first is to treat them as mentors. Westpac, an Australian bank, has dubbed some older staff ‘sages’and asked them to codify the company’s informal knowledge. The second is to recognise that they respond to different incentives: they may be less interested in money and promotion and more concerned with flexibility. The third is to treat retirement as a process rather than a sudden event. Some employers offer older workers ‘bridge jobs’ between full-time work and retirement."

Indeed, considering the present dearth of talent in this country’s public service, we need all the Nachuras that we can get.

14.6.11

Of trade disputes

(published in the June 2011 issue of Billionaire Magazine)

Anatomy of a conflict

There are two ways to look at trade disputes: one is to view it as an unfortunate state of affairs, by which each country treats the other country as engaging in inconvenient behavior. The other is to consider it positively and look at it as an opportunity to manage better the relationships among States and determine a more efficient way of allocating scarce resources.


Trade disputes are better seen from the latter view, chosen from a list of voluntary options that, because of their legal nature and circumstances, could offer benefits that easily address the short-term needs of States. The term "conflicts" is a general term, indicating a "general state of hostility between the parties." "Disputes", on the other hand, refers to an actual specific disagreement, by which rights or interests of a party has been violated and which entitles parties to proceed against each other by a series of inter-locking claims, counter-claims, and so on.

Trade disputes are normally initiated at the WTO level if a member considers that any benefit accruing to it directly or indirectly under the WTO agreements are being “nullified or impaired or that the attainment of any objective [thereof] is being impeded as the result of (a) the failure of another contracting party to carry out its obligations under th[e WTO agreements], or (b) the application by another contracting party of any measure, whether or not it conflicts with the provisions of th[e WTO agreements], or (c) the existence of any other situation.” Which is a long, convoluted way of saying that WTO members can file cases anytime they feel like it.
The Philippines, for example, is currently locked in several trade disputes at the WTO. There is DS371, formally designated as Thailand — Customs and Fiscal Measures on Cigarettes from the Philippines. There’s also Philippines – Taxes on Distilled Spirits (docketed as DS396). Then there are the two complaints filed in 2002 against Australia (DS270 and DS271), and our third-party complaints in DS375/376/377- EC Measures on certain ITA Products, that were concluded last year.
The stakes for these cases are unimaginably high. Despite the innocuous or dry sounding titles of the cases, EC’s (later joined by the US) whiskey complaint against the Philippines, for example, involves trade valued in the hundreds of millions of dollars. The complaint in this case centers on whether Philippine excise taxes on distilled liquor (as imposed by RA 9334) discriminate against imports and in favor of domestic products. The Thai cigarettes complaint, involving allegations of Thai discrimination against cigarettes imported from the Philippines, would have an effect on 95% of Philippine cigarette exports. An incredibly historic WTO case that had a huge effect on the Philippine coconut industry went by the harmless sounding title ”Desiccated Coconut”.

Anatomy of a complaint


The first significant stage of a WTO dispute would be the “consultations stage”.
By provisions of Article 4 of the WTO Dispute Settlement Understanding, if a request for consultations is made, a reply to such request must be made by the requested country within 10 days after the date of its receipt and shall enter into consultations in good faith within a period of no more than 30 days after the date of receipt of the request, with a view to reaching a mutually satisfactory solution. If the consultations fail to settle the dispute within 60 days after the date of receipt of the request for consultations, the complaining country may request the establishment of a panel. The complaining country may also request for a panel during the 60-day period if both countries jointly consider that consultations have failed.

However, it may be almost axiomatic to say, in a manner that would make Clausewitz proud, that the outcome of the dispute is settled even before the first documents or pleadings had been filed in the case. International law experts George
Norman and Joel Trachtman:Measuring the Shadow of the Future: An Introduction to the Game Theory of Customary International Law presented “a game theoretic model to identify the circumstances under which States have a rational incentive to comply with customary international law”. The reason as to why States do follow international law is a topic deeply discussed even in law school’s early days. For Norman and Trachtman, State compliance depends on the magnitude of the “shadow of the future” and how such could be employed to increase chances of compliance. According to their theory, a State complies with customary international law out of fear that if it doesn’t it will result in it being unable to realistically invoke international law at a future date when it needs to.

The point here is that it would be interesting to see what inputs game theory could provide on the probable outcome of trade cases. This is because, while normally one would think that the moment a dispute comes before a panel then chances are 50-50 for either party. However, this apparently is not so according to the 2002 findings of Andrew Guzman of the University of California, Berkeley, in his paper The Political Economy of Litigation and Settlement at the WTO. He found that complainant countries (or countries that complain against other countries’ trade barriers) in WTO disputes have almost a 90% chance of winning. These findings were corroborated in A Theory of WTO Adjudication by Juscelino Colares of Syracuse University, which made use of empirical analysis of WTO adjudication from 1995 through 2007, revealing again a high disparity between complainant and respondent countries’ success rates: Complainants do win 90% of the time. This rather unfortunate statistic is obviously well above the “win rate” of any domestic legal system (or any other international dispute system for that matter).


Anatomy of a dispute


As stated above, the proceedings begin with a “consultation”. Think of the consultations stage as the domestic litigation equivalent of pre-trial proceedings. If consultations fail to settle a dispute, the complaining party can now request for the establishment of a panel.


Panels are usually made up of three members (sometimes, in quite rare instances, five). Panel members are selected with a view to ensuring the independence of the members, a sufficiently diverse background and a wide spectrum of experience. When a dispute is between a developing country Member and a developed country Member (as in the case of DS396), the panel shall, if the Philippines so insist, for example, include at least one panelist from a developing country Member. The panel’s powers are usually laid down in what is called the terms of reference. Normally, the terms would read something like: "To examine, in the light of the relevant provisions in (name of the covered agreement(s) cited by the parties to the dispute), the matter referred to the DSB by (name of party) in document ... and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in that/those agreement(s)." Parties, of course, are free to add any other term they can agree upon and the panels are to address the relevant provisions in any covered agreement or agreements cited by the parties to the dispute.


Where more than one WTO Member requests the establishment of a panel related to the same matter (again, as in the case of DS396, where, apart from the EU, the US has already indicated filing a complaint against the Philippines) a single panel may be established to examine these complaints taking into account the rights of all Members concerned. Single panels are encouraged to be established to examine such complaints whenever feasible.


Also, as in the case of DS396, several countries (including China and Thailand), have indicated interest in the case as “third parties”. A third party is any WTO member having a substantial interest in a dispute. It shall have an opportunity to be heard by the panel and to make written submissions. A third party could eventually morph into a complainant in its own right and in such a case, the dispute shall be referred to the original panel wherever possible.


After the panel process, a party may appeal to the Appellate Body, which works as some sort of “supreme court” of the WTO. Unlike our Supreme Court, however, the AB may only uphold, modify or reverse the legal findings and conclusions of the panel but not remand.


The interesting thing about it is that, after all is said and done, where a panel or the AB concludes that a law or measure is inconsistent with a WTO agreement, it merely recommends “that the Member concerned bring the measure into conformity with that agreement”. A finding of damages, unlike in domestic litigation, is rarely given in a WTO proceeding. Furthermore, it’s not, technically, the panel or the AB that “decides” a case. That power is with the Dispute Settlement Body, which is composed of the 154 members of the WTO, voting by way of a bizarre, quite futile, procedure called the “reverse consensus”.


The beauty (and the power) of the WTO dispute system has to do with its speed and efficiency. It is, simply put, the most effective international dispute settlement system around today. Victors, of course, could crow back to their home constituencies and continue to laud the benefits of the global trading system. Losing governments, on the other hand, are not necessarily left completely beaten. They could also go home happy. For any policy measure that they have longed to implement but were afraid to due to political consequences, the losing government could finally implement their desired policies and shift the blame on the WTO for "forcing" them by way of the adverse ruling. In the meantime, business must go on for both the companies of the winning and losing companies.

All of the above also underlines one important thing: international trade disputes are really no places for domestic industries involved to engage in flaky thinking or grandstanding. Particularly as international trade dispute litigation is a hugely expensive (not to mention research intensive) affair, for which domestic industries have a (general) tendency to be suddenly work shy despite their heated patriotic rhetoric.

9.6.11

Doha: dead or a lite

is the subject of my Trade Tripper column this Friday-Saturday issue of BusinessWorld:

The focus of the trade world now is Doha. And just to show how freakishly convoluted trade talks are, the arguments currently revolve around whether Doha is "dead" or not, or whether one should go for "full" Doha or Doha "lite." If the general public nowadays doesn’t give a damn about it, I sometimes imagine because it was planned to be that way by trade experts, what with their endlessly monotonous declarations that could make an insomniac owl go to sleep.

Doha can’t be dead. As Jagdish Bhagwati pointed out: "if Doha was dead, one had to ask why the negotiators were still negotiating, and why nearly all G-20 leaders were still issuing endorsements of the talks each time they met." Indeed, the issue is not the death of Doha but rather how to end it. One way or another, Doha will be closed and it’s the manner of its conclusion that will (don’t ask me why) determine the future of the World Trade Organization.

Indeed, what is ominous is the fact that people from the developed countries are beginning to voice out something they were quiet about before. It’s something I’ve long suspected that they don’t like about the Doha Round: its "developmental" aspect. As reported in Reuters, one commentator, speaking under anonymity, said: "A development agenda should never have been introduced into the WTO in 2001. The WTO is about mercantilist interest, and there is no space for philanthropy. It’s dog-eat-dog according to a set of rules. You’re either a player or you’re not a player, and if you are not a player, you should get out of the way."

While definitely betraying a wrong appreciation of what the WTO stands for (a mere reading of the preambular provisions of the WTO Agreements would point this out), nevertheless, the comment does reveal the thinking behind some of the developed country calculations: launch a round with some nice motherhood statements, let the developing countries flounder in their under-resourced and unorganized way through the talks, conclude like Uruguay, and developed rich countries happy again. Unfortunately, the developing countries were apparently not given copies of the script. Learning from the Uruguay Round and gaining further experiences from Cancun and Hong Kong, the poorer countries learned to stand their ground and maintained focus.

The fact is, the poorer countries got so good at playing the WTO game that now commentators from the richer countries are floating ideas about letting the WTO "die." For instance, Daniel Altman of Newsweek gleefully calls for "good riddance" to the WTO, saying that "trade negotiations would actually go much further if the WTO simply closed down its talks altogether." His argument essentially is that "this is where the future of free trade lies: in pragmatic regional deals, not utopian global ones ... The majority of nations can simply leave the obstructionists behind and move forward with regional trading partners. Eventually, most of the world’s trading nations will arrange themselves into just a few big blocs."

All this sounds good, rational even. But for a developing country like the Philippines, it should be disconcerting. The argument above is designed to benefit developed countries. For developing countries, with its limited resources, the reverse is true. For the simple reason that free trade agreements are not free. Their very nature and number provides for an increasingly complex international trading system. Considering the concerns raised regarding the Philippines’ capacity to keep up with its multilateral trading commitments, this obviously would be multiplied in view of the inevitable proliferation of FTAs should the WTO indeed be waylaid. Among areas of concern would be the varied ROOs, dispute settlement jurisdictions, customs procedures, SPS and TBT measures, and -- perhaps -- smuggling.

Even the jewel of the WTO, its dispute settlement system, Professor Bhagwati insightfully maintains, would be rendered null: "the willingness of WTO members to invoke the Dispute Settlement Mechanism, the pride of the WTO -- and, indeed, of international governance -- would also be sapped. Tribunals established within PTAs ["Preferential Trade Agreements"] would take over the business, leading to the atrophy, and eventual irrelevance, of the DSM."

The foregoing are also the reasons why Doha should not be allowed to fail. Indirectly, they’re also the reasons why we can’t allow Doha "lite." The reasoning behind the latter seems to be that "something is better than nothing." And the answer to that is: "a something that does nothing is still nothing." Doha lite focuses on less-developed countries, with minimal mention of the concessions for developing countries (which include the Philippines). As Professor Bhagwati pointed out: "in multi-faceted talks that straddle several different sectors (for example, agriculture, manufactures, and services) and diverse rules (such as anti-dumping and subsidies), countries have negotiated concessions with one another in various areas. Whatever balance of concessions has been achieved would unravel if we were to try to keep one set and let go of another."

8.6.11

Connecting past and future

is the article I wrote as part of Ateneo Law School’s 75th anniversary:

“What’s past is prologue.” So wrote William Shakespeare in – which is most appropriate for this piece – his play The Tempest. For the Philippines is certainly, whether its people realize it or not, in the middle of a tempest. Socially, culturally, politically, economically, the country is caught in an intense debate about itself and its future. But as nothing exists in a vacuum, then our choices moving forward would always be bound within the context of our history. Again, whether or not our people realizes that. Or accepts it.

Ateneo, of course, is very much intertwined with our history and Ateneo Law’s contribution to it could very much be the subject of its own, quite lengthy, article. However, I would like to focus on one individual in particular: Fr. Horacio De La Costa, the Jesuit priest-scholar, the first Filipino Provincial of the Philippines, and special counselor in Rome to Fr. General Pedro Arrupe.

In my particular field of international trade law and policy there are certainly lot’s of people to look up to: John Jackson, Robert Hudec, Jagdish Bhagwati, Amartya Sen. There is, sadly, a dearth of Filipinos among that list. Clearly there is Florentino Feliciano and Lilia Bautista. But among them all, Fr. Dela Costa for me stands out for his clear eyed and Christian vision of what a proper trade and developmental policy should be for a developing country. As such, he is for me a sort of mentor despite him not actually being a lawyer or economist, despite the fact that he has not even heard of the World Trade Organization, and despite him having died more than thirty years ago.

For somebody like me who has long been advocating for caution of Philippine entry into free trade agreements, Fr. Dela Costa had this to say: “Free trade between an industrial country and an agricultural country is to the detriment of the agricultural country … Our negotiating position … cannot be other than based on our national interest … and at the same time, on social justice.” (Trade between the unequal, lecture 30 August 1968). It must be emphasized that recent studies from international organizations would recently confirm the correctness of his assertions.

In the current discussions regarding poverty and inequality in the Philippines, Fr. Dela Costa’s words (from his paper Philippine economic development, 27 January 1966) ring fresh and relevant:

“We must now make our own decisions and must take the full consequences of the decisions we wrongly make, or weakly make, or cravenly fail to make. We no longer have a mother country or a colonial master to blame for our shortcomings; we only have ourselves.”

“But this is not all. We must also find some workable integration of the twin objectives of productivity and equity. Simple justice demands that labor, agricultural as well as industrial, receive as much of a share of what it helps to produce as will bring it at least within hailing distance of a human level of living. While doing this, we must bend every effort to produce more, for unless we do, unless we produce a great deal more, a redistribution of the product, no matter how equitable, cannot substantially raise levels of living across the board.”

“The people, then, all the people, must contribute to development … If we want economic development, this is the price that we must pay. And so, one question remains. Do we want it?”

Fr. Dela Costa had also hit on something forty years ago that I am only now am pitifully discovering on my own: that most of the country’s problems are self-inflicted, stemming from a lack of confidence in ourselves and each other. This was a theme he tackled in March of 1971, in his lecture The Filipino national tradition: “Would it be thought discourteous on our part if we were to recall that it was once said of England that patriotism was the religion of the English? And that it was not so long ago that American school texts prescribed formuse in the Philippines quoted with reverence the dictum of an American naval officer, ‘My country, may she always be right, but right or wrong, my country’?”

Furthermore, with words that are highly applicable to our political leaders today, Fr. Dela Costa wrote: “the quality of a society depends, in large measure, on the quality of its leaders. A democratic society, to be viable, needs a special kind of leaders – leaders who look on leadership not as dominance but as service.” (Philipine problems in historical perspective, paper, 20 March 1970)

Fr. Horacio Dela Costa, who once wrote that “those who know their history are encouraged to surpass it” and advises those undergoing tribulations that Jesus Christ on the cross is him “showing us how to take it like a man”, is therefore both an inspiration and a hurdle. For our problems and solutions cannot be same thing decades in and out. By now we should have taken his counsel and rendered him irrelevant. The fact that we haven’t displays the tragedy of his genius and of our ignorance.

Teaching has always been an act of faith and optimism, that our words would find resonance with our students, not really for the legal knowledge imparted to them but more for the responsibilities we hope they respect and carry forward to make a better country for us all. Fr. Dela Costa was definitely a teacher: “Permit me to propose the following, purely as a speculation: that the Filipino, given half a chance, given a situation even slightly competitive, has quite consistently been willing, ready and able to compete; and that if he has so seldom actually done so, this may only be because the conditions have so seldom been verified.” His optimism is well placed, our inability to learn is our irresponsibility that we need to correct.

To be with Ateneo Law School for me is therefore also to continually be in touch with Fr. Dela Costa: both mentoring about our past while leading towards our future. To teach in Ateneo enables me to learn from our failures, to live on our promises, and to look towards hope.

2.6.11

Reaction by Senator Saguisag

With permission, here is an e-mail sent to me by Rene Saguisag, a former Senator and Cabinet official, in reaction to my article A Legal Disobedience, which appeared in the 27 May 2011 issue of BusinessWorld. Note that it contains - to my utter frustration - the one line (that uttered by St. Thomas More) I should have logically put in the article but bizarrely forgot to do so. That alone shows why Senator Saguisag is the far better writer than I am:

Dear Jemy:

Edifying, what you wrote today on disobedience.

I applaud Manny Pacquiao for supporting our Church on RH. But, is he just being sandbagged as a polite guest? And he is unlike Muhammad Ali, who put himself where his mouth is, in conscientious objection and refused to serve in the military. Does Manny have the time and inclination to study when his handlers say to ready for the next match in the Manly Art of Modified Murder? Or concert? Study takes time - to avoid being told in effect na huwag daw pong makialam sa usapan ng mga matatanda.

We may risk prison terms to raise a moral issue. In that sense, disobedience is not in accord with a law perceived as unjust. On June 26, 2005, after Garci, the Inquirer headlined my tax revolt call. I started making amends only after PNoy was sworn in. Antigone, in ancient times, said never surrender one's conscience to the State; in burying her brother, she defied Creon's law but not the superior unwritten law.

In the early 80's, we boycotted elections. Anding Roces, who just passed away, was prosecuted. MABINI defended him. Makati municipal Judge Elo Ynares- Santiago acquitted him, at a time when the Supreme Court (SC) was so accepting. (Elo is a retired SC Justice, and could replace Mercy Gutierrez but the Consti is wise in saying at 70, no more long-term jobs, ad hoc tasks maybe.) Anding's defense: "The right to vote comes from the State. The right not to vote comes from God. Render unto Ceasar what is Ceasar's and to God what is God's."

The Comelec, scratching its head, charged him. Elo mooted the cry of Boadbil's mother on seeing her son weep when sent to exile, last turning to look at the beloved Granada he had lost, in 1492, on the spot now known as El Ultimo Suspiro del Moro - The Last Sigh of the Moor. "Weep not like a woman," she reproved, "for the loss of a kingdom you could not defend as a man." The late Chit Estella was said to write "like a man." In my case, I say, no Rene, sans a gutsy principled Dulce, believing that life, liberty, family, security, work and comfort did matter, but there were things that mattered more, which we greatly wanted.

At a time of great want, Manny Pacquiao spends ostentatiously in his seemingly never-ending parties. It is the time he spends on lawmaking that matters, not the millions spent ostentatiously, on nation-wide TV at that. He was even honored by the House he disrespects (or at least, he does not take seriously). But is he really our anti-RH poster boy?

Peshawataro was a young Indian brave who decided that kidnapping a neighboring tribe maiden for sacrifice must end; he freed an abducted girl and returned her to her people. He rode back, submitting himself to his fellows, who did nothing. It was time to stop the folly. They had only needed an act of such courage to make that clear. Girouard v. U.S. involved an alien seeking naturalization but who had made it clear that as a pacifist, he would assume no military combat role. The U.S. SC said in 1946 that "the Bill of Rights recognizes that in the domain of conscience there is a moral power higher than the State." Nixon's first pardon was to commute a prison term of a New York neurosurgeon who, heeding his conscience, had refused to pay taxes and gave the money to blacks.

If my Church goes for Civil Disobedience, amen. The King's good servant, but God's first. Let's protect babies who cannot lobby or vote. Poverty requires RH? What might I have become as a rich kid? We seven siblings had the advantage of poverty, driving us to get a good education and develop street smarts, to help give our people a better life. The Good Lord takes care of the lilies of the field like me, even if it took the 2007 passage of my Dulce for me, as co-heir, and star boarder, to be able to sleep under the roof of a house I can call my own, for the first time in my life, ever. I live in Palanan, Makati, where there could be five simultaneous wakes, on the streets, telling the short and simple annals of the poor. They are lilies.

Have a good weekend.

Rene Saguisag UIOGD

Trade and human rights

is the subject of my Trade Tripper column in this Friday-Saturday issue of BusinessWorld:

Kent Brockman of KBBL-TV News once famously declared: "Democracy simply doesn’t work." But then his comment should be taken with a grain of salt. Firstly, because Brockman was saying that under duress as the Earth was about to be hit by Bart’s comet. Another more obvious reason is that Kent Brockman is a character from the Simpson’s.

I got reminded of that immortal quote quite inadvertently by a seminar recently conducted at Ateneo in Rockwell. It had something to do with human rights being sacrificed at the "altar" of "free trade." Considering its venue, the seminar was somewhat quirky because Ateneo Law School has in its faculty two international trade lawyers who were both previously Bar examiners for political and international law. Neither of which were asked to speak at the seminar. But I digress. The real point is that Kent Brockman’s (as well as Homer Simpson’s) logic seems to be very much in play here. And equally as wrong.

As we all know life has its inevitable ups and downs. Unfortunately for trade these days every day is a Monday. To the glee particularly of those who’ve never been fans of trade anyway. But as with democracy, while trade is obviously not perfect, nevertheless, no rational, sane alternative to it exists. And as if on cue, reports come out that the Philippine economy slowed in the first quarter. One reason? The slowdown in international trade. And why the slowdown in world trade? Most likely because, as the WTO, OECD, and UNCTAD report suggests, the: "G20 governments have introduced more trade barriers, including export restrictions, in the past six months than in previous periods since the financial crisis began xxx Although measures to lower trade barriers are also accelerating, new import restrictive measures taken by G20 economies over the period October 2010 to April 2011 cover around 0.6% of total G20 imports which is also an increase over the previous six months (0.3%). Export restrictions are also on the rise. This adds to the cumulative total of world trade affected by new restrictions since the crisis began. Despite the positive forecasts for 2011, the outlook for world trade remains clouded by a number of significant risk factors in addition to the recent natural disasters in Japan. Sovereign debt problems, rising prices for food and other primary commodities, and unrest in major oil exporting countries generate uncertainties for the near future."

How does the foregoing relate to human rights? Human rights deal with individual dignity, reasonable standards of living, employment and proper work conditions, education, the right to information and access to media, protection of the environment, healthcare, maternity rights and benefits, security of life and property, and so on. All that requires money. And international trade, despite the occasional hiccups, has proven very adept at boosting the economies of countries in the world. Not to mention the transparency that the multilateral trading system brings. No protectionist rhetoric will ever be able to deny that fact. As WTO Director-General Pascal Lamy more elegantly puts it: "The opening of markets creates efficiency, stimulates growth and helps spur development, thereby contributing to the implementation of the fundamental human rights that are social and economic rights. One could almost claim that trade is human rights in practice!"

The OECD posits that a "10% increase in trade is associated with a 4% rise in per capita income; an ‘open’ foreign direct investment climate could be expected to yield a 3/4% increase in OECD area GDP per capita; lower regulatory barriers to competition could result in a 2-3% increase in OECD area GDP per capita; full tariff liberalization in agriculture and industrial goods could increase global welfare a further 100 billion USD."

The problem with the Philippines is not that we trade, it’s that we don’t trade enough to be able to override our problem of profound inequality. Because whatever benefits the Philippines may have had from trade were prevented from reaching our poor and instead were selfishly gobbled up by our oligarchic elite. US Secretary of State Hillary Clinton was spot-on when she declared that the Philippine problem lies in the fact that "the elite in business and politics basically call the shots, and there’s not much room for someone who’s hardworking, but not connected."

Hence, one sees 40% of Filipino kids below 5 years old being severely undernourished, with an estimated 8.1 million families (around 43% of the population) self-rating themselves as "poor." More objective numbers aren’t better. An ADB study ("Poverty in the Philippines") reported that the number of poor Filipinos increased to 27.6 million. The World Bank found "the overall incidence of poverty" upped to 32.9%.

If we want to uphold human rights, we should encourage greater trade coupled with "solid social policies to redistribute wealth" (to borrow Lamy’s words). As Jagdish Bhagwati, with marvelous common sense, pointed out: "slowly growing or stagnant economies cannot rescue the poor from their poverty."

Reaction from EU Ambassador

Here’s the reaction by Ambassador Guy Ledoux, Head of Delegation of the European Union to an article of mine in BusinessWorld:

Jemy Gatdula (in his article "No to the ICC," April 2) admits himself that the ICC is "a good idea," yet claims that it should not be "something the Philippines should be concerning itself with right now." This conclusion is not only unfortunate, but fails to convince.

Mr. Gatdula argues that ratifying the Rome Statue would not serve the national interest, as the chances of the Philippines making use of the ICC to protect its citizens is minimal, in particular as many host states of Filipino Overseas Workers are not (yet) party to the Rome Statute. This argument misses the wider implications of supporting the only permanent international criminal court. In order to truly reach our common goal of ensuring that perpetrators of heinous crimes are always, without exception, brought to justice, it is crucial to continue working for universal acceptance of the Statute and the Court. On our way, the distribution of justice might at times seem to be uneven, maybe even unfair, but our response to this challenge cannot be less justice, backing away from the great achievements already made. Instead, we must continue down the path we have chosen and intensify our efforts for more justice.

Mr. Gatdula equally argues that while human rights should be "aggressively protected," also the national interests of the Philippines should be upheld. In reality, however, there is no such thing as a trade-off between peace and justice. Peace and stability are bound to fall apart sooner rather than later if the wounds of the past are left to fester.

Debates on whether issues of war and peace take precedence over questions of crime and punishment are not confined to the Philippines. Nor is the ICC, as is often alleged, a place where the West judges the rest. We in Europe know from first hand what is at stake. The story of the International Criminal Tribunal for the former Yugoslavia (ICTY) holds many parallels with the debate which surrounds these days the potential ratification of the Rome Statue by the Philippines. There too, the chief prosecutor was always seen as an agent of foreign powers meddling in the internal affairs of a sovereign nation.

But the lessons to be drawn from the ICTY’s history are, in the end, very clear: it has impressed on national courts and leaders the need for serious legal proceedings. As the ICC acts only as a court of last resort, the primary responsibility for bringing offenders to justice lies with states themselves -- and this is where it should lie. In that respect, the Philippine Act on Crimes Against International Humanitarian Law, Genocide, and Other Crimes Against Humanity, is a clear sign that the Philippines is committed to justice and moving in the right direction. Since what happens in court is not just about whether or not some individuals end up behind bars, it is about changing a culture of impunity, but beyond that it is about the victims, the ones who bear the scars of the crimes and had suffered the brutality of the criminals.