Can China drag India to WTO for banning Apps and Cancelling existing Orders?

A Techno-Legal Analysis

Can China drag India to WTO for banning Apps and Cancelling existing Orders?

By:

Vijay SARDANA

Advocate, Delhi High Court

Techno-legal Expert on Agribusiness 

& Consumer Products Industries

& 

Priyanka Sardana, Advocate, Supreme Court of India

& 

Aastha Sardana, Researcher on Legal Matters

After the border conflict with China, India took various decisions to block the trading interests of China in India. Let us keep the following facts in mind:

• China encroached about 400-meters of the territory which is on the disputed border.
• In conflict, India lost 20 soldiers and there are reports that China lost around 40 soldiers.
• China refused to accept the previous agreements on border disputes and delaying in maintaining status-quo. 
• India took various retaliatory actions and blocked various commercial interests of the aggressor in the interest of national security.
• Now, China is treating to take India to WTO for dispute resolution mechanism under the pretext of MFN status is violated.

What is the WTO position on such matters? 
The World Trade Organization (WTO) regime is rules-based. Member States can only invoke exceptions that are expressly provided for. National measures based on these exceptions must comply with the stated conditions and such measures are justiciable. 

However, one of the GATT exceptions, the national security clause in Article XXI GATT, has always been in a category of its own, an exception among the exceptions.

What is Article XXI: on Security Exceptions?

Nothing in this Agreement shall be construed

(a)  to require any contracting party to furnish any information the disclosure of which it considers contrary to its essential security interests, or

(b)  to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests

i. relating to fissionable materials or the materials from which they are derived;

ii. relating to the traffic in arms, ammunition and implements of war and to such traffic, in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment; 

iii. taken in time of war or other emergency in international relations, or

(c)  to prevent any contracting party from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security.

Now let us see what is the past experience at WTO on such matters.

Please note, the Dispute Settlement Body of the World Trade Organization (WTO) has never passed judgment on the validity of measures taken under this Article. It means there is no precedence before us.

What will happen if China approaches WTO on the trade restrictions in India on Chinese Products?

According to our assessment. the WTO regime is operating in a normal business environment with disputes related to trade. The Article XXI clearly makes Security Exceptions and no one can interfere in that. 

The UN Charter clearly says that Article 51 provides for the right of countries to engage in self-defence, including collective self-defence, against an armed attack (including cyber-attacks). 

This Article 51 of the UN Charter is particularly vague: it does not define what constitutes an attack. Is the seizure of ships or aircraft an attack? Is the accidental or intentional violation of another country’s airspace an attack? Is industrial espionage an attack? Is a spy satellite taking photographs of military installations an attack? It does not define what constitutes an armed attack. For example, is a cyber-attack an armed attack?

India China Border Conflict: 

The fact is War or other emergencies in international relations, like Indian-China border conflict leading to the death of security persons, “involves a fundamental change of circumstances which radically alters the factual matrix in which the WTO-consistency of the measures at issue is to be evaluated.”

Unlike the evaluation of measures are covered by the exceptions in Article XX, evaluation of measures under Article XXI(b)(iii) does not necessitate a prior determination that the measures would be WTO-inconsistent had they been taken in “normal times”. Therefor in the issues of national security, WTO cannot intervene.

Let us understand the disputes in the past and their outcomes at WTO:

In the GATT Analytical Index, the original thinking behind Article XXI has been explained as taking care “of real security interests and, at the same time, so far as we could, to limit the exception to prevent the adoption of protection for maintaining industries under every conceivable circumstance.”

Let us understand the intention behind the wording of Article XXI:

Paragraphs (a) and (b) of Article XXI, as mentioned above says, “it considers … essential security interests”

During discussions in the Geneva session of the Preparatory Committee, in response to an inquiry as to the meaning of “essential security interests”, it was stated by one of the drafters of the original Draft Charter that “We gave a good deal of thought to the question of the security exception which we thought should be included in the Charter. We recognized that there was a great danger of having too wide an exception and we could not put it into the Charter, simply by saying: ‘by any Member of measures relating to a Member's security interests,’ because that would permit anything under the sun. Therefore we thought it well to draft provisions which would take care of real security interests and, at the same time, so far as we could, to limit the exception to prevent the adoption of protection for maintaining industries under every conceivable circumstance.… there must be some latitude here for security measures. It is really a question of balance. 

We have got to have some exceptions. We cannot make it too tight, because we cannot prohibit measures, which are needed purely for security reasons. On the other hand, we cannot make it so broad that, under the guise of security, countries will put on measures which really have a commercial purpose”. The Chairman of Commission suggested in response that the spirit in which Members of the Organization would interpret these provisions was the only guarantee against abuses of this kind. 

It means every situation will be evaluated on its merit. India-China disputes if we go by the evidence and the merit of the case, it will be difficult for Chai to defend its position at international forums. In our view, China will not take the matter to WTO. 

Let us also evaluate past cases:

Portugal – Ghana Dispute

In 1961, on the occasion of the accession of Portugal, Ghana stated that its boycott of Portuguese goods was justified under the provisions of Article XXI:(b)(iii), noting that “… under this Article each contracting party was the sole judge of what was necessary for its essential security interest. There could, therefore, be no objection to Ghana regarding the boycott of goods is justified by security interests. At that time it was debated that it might be observed that a country’s security interests might be threatened by potential as well as an actual danger.

EU-Argentine Dispute:

During the Council discussion in 1982 of trade restrictions applied for non-economic reasons by the EEC, its member States, Canada and Australia against imports from Argentina, the representative of the EEC stated that “the EEC and its member States had taken certain measures on the basis of their inherent rights, of which Article XXI of the General Agreement was a reflection. The exercise of these rights constituted a general exception and required neither notification, justification nor approval. This procedure showed that every contracting party was - in the last resort - the judge of its exercise of these rights”.

The representative of Australia “stated that the Australian measures were in conformity with the provisions of Article XXI:(c), which did not require notification or justification”. 

The representative of the United States stated, “The General Agreement left to each contracting party the judgment as to what is considered to be necessary to protect its security interests. The CONTRACTING PARTIES had no power to question that judgement”.

Ministerial Declaration adopted 29 November 1982 at the Thirty-eighth Session of the CONTRACTING PARTIES provides that".. the contracting parties undertake, individually and jointly: ...to abstain from taking restrictive trade measures, for reasons of a non-economic character, not consistent with the General Agreement”.

The question of whether and to what extent the CONTRACTING PARTIES can review the national security reasons for measures taken under Article XXI were discussed again in the GATT Council in May and July 1985. 

It was concluded that this provision should be interpreted in the light of the basic principles of international law and in harmony with the decisions of the United Nations and of the International Court of Justice and should, therefore, be regarded as merely providing contracting parties subjected to aggression with the right of self-defence.

The action was taken by Arab League:

Article XXI(b)(iii) says…“taken in time of war or other emergencies in international relations” The 1970 Working Party Report on “Accession of the United Arab Republic” notes that in response to concerns raised regarding the Arab League boycott against Israel and the secondary boycott against firms having relations with Israel, the representative of the UAR stated that “the history of the Arab boycott was beyond doubt related to the extraordinary circumstances to which the Middle East area had been exposed. The state of war which had long prevailed in that area necessitated the resorting to this system. … Because of the political character of this issue, the United Arab Republic did not wish to discuss it within GATT.

It would not be reasonable to ask that the United Arab Republic should do business with a firm that transferred all or part of its profits from sales to the United Arab Republic to an enemy country”.

The Way Forward:

After careful assessment of the Article XXI and based on the previous disputes and issues raised by many countries at GATT meeting, we can conclude the following: 

1. India has not violated any commitment under GATT/WTO agreement.
2. UN Charter allows India to take necessary action in the interest of National security of India.
3. All evidences are against China and therefore China will not be able to defend its position in any forum.
4. India is free to take all possible action, which India feels in the national interest and no international law cannot force India to deal with the enemy state.

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