Animal Welfare, Public Morals and Trade: the WTO Panel Report in EC – Seal Products

On November 25, 2013, a panel established under the dispute settlement system of the World Trade Organization (WTO) issued its report in the EC – Seal Products dispute.[1] The decision arose from complaints by Canada and Norway against a legislative scheme adopted by the European Union (EU) in 2009 to prohibit the importation and marketing of seal products (the EU Seal Regime).[2] On January 24, 2014, Canada and Norway filed to appeal the panel's decision; the Seal Products dispute will now be considered by the WTO's Appellate Body. 

The panel's decision applies the WTO's jurisprudence on the "public morals" justification for restricting international trade in a new context: the protection of animal welfare. Drawing on the reasoning of US – Gambling[3] and China – Publications and Audiovisual Products,[4] the panel found that the evidence supported the EU's claim that its measures are based on concerns of public morality in the EU. Specifically, the overall objective of the EU Seal Regime is to address the moral concerns of the EU public regarding seal welfare.[5]

While other provisions of the WTO agreements refer to the protection of animal life and health as a legitimate objective that may justify trade restrictions, this ruling confirms that animal welfare may also be a matter of right and wrong within a particular WTO member and therefore may also fall under the rubric of public morals.

The membership of the WTO includes states with widely differing political and social systems (from Saudi Arabia to the Unites States, Israel and Sweden), where public morality and the state's role in encouraging or enforcing it are perceived in radically divergent ways. It is not surprising that WTO jurisprudence has avoided second-guessing the substantive choices of states about the content of public morality. What has permitted this deference, while still ensuring the integrity of trade rules, is an overriding norm that even where public morality is concerned, the means chosen must not unjustifiably, arbitrarily, or unnecessarily discriminate against other WTO members. 

Consistent with that overriding norm, the panel in EC – Seal Products carefully scrutinized the design and operation of exemptions from the EU's general ban on seal products, finding those exemptions non-compliant with WTO law.[6] The EU Seal Regime allows seal products to be imported if they are the result of subsistence hunting by Inuit or other indigenous communities (the IC exception) or if they are the by-products of marine resource management culls (the MRM exception).[7] The panel determined that the IC and MRM exceptions do not apply in an even-handed way as between all domestic and foreign producers.[8] The decision thus seems to indicate that the EU could render its scheme compliant with WTO law by reducing the scope of the exceptions and strengthening the regime.[9]

Claims by Canada and Norway

Canada and Norway claimed that the IC and MRM exceptions permit most seal products from Greenland and from EU member states with sealing industries (primarily Sweden and Finland) to be placed on the EU market, while excluding virtually all of the complainants' products. They argued that the EU Seal Regime amounts to an unnecessary restriction on trade and discriminates against Canadian and Norwegian products, in violation of the EU's basic trade law obligations to treat WTO members' products no less favorably than like products produced domestically (the national treatment obligation) or imported from other countries (the most-favored nation obligation). The complainants raised a number of claims, primarily under the WTO's Agreement on Technical Barriers to Trade (TBT Agreement)[10] and General Agreement on Tariffs and Trade 1994 (GATT),[11] but the panel report focused on the TBT claims. 

TBT Agreement: Article 2.1 (Claim by Canada)

The panel agreed with Canada that the EU Seal Regime has a detrimental impact on Canada's seal products, as most EU and Greenland products can enter the EU market under the IC or MRM exception, while most Canadian products cannot. But the panel made clear that those facts would not lead to a finding of "less favorable treatment," the trigger for a violation of Article 2.1 of the TBT Agreement, if the detrimental impact stems exclusively from a legitimate regulatory distinction.[12]

In assessing the regulatory distinctions established by the EU, the panel determined (based on extensive review of the parties' evidence) that seal hunts generally involve a risk – indeed, a virtual certainty – of inhumane treatment of seals (termed "adverse welfare outcomes," in the language of the experts who testified before the panel). This is because of the difficult physical conditions of the hunt and the commercial incentive to kill and collect seals as quickly as possible: factors that reduce the realistic prospect of consistently following, monitoring, and enforcing good animal welfare practices.[13] The panel's finding on this point is an objective finding of fact,[14] which is not subject to appeal; WTO appeals are limited to issues of law and legal interpretations.[15]

The panel determined that it was justifiable for the EU to distinguish IC hunts from commercial hunts, reflecting the importance of preserving the culture, tradition, and livelihood of Inuit and other indigenous communities.[16] But it found that the IC exception was not "designed and applied in an even-handed manner," because it is more easily available to Greenlandic products than to the great majority of Canadian seal products.[17] As for MRM hunts, the panel found that they are similar in relevant respects to commercial hunts, and thus the exception for these products is not based on a legitimate regulatory distinction.[18] Thus, as currently designed and applied, the IC and MRM exceptions to the EU ban were found to be discriminatory, in violation of Article 2.1 of the TBT Agreement.[19]

TBT Agreement: Article 2.2

Article 2.2 of the TBT Agreement requires that technical regulations be no more trade-restrictive than necessary to fulfill a legitimate objective. The panel found that the EU Seal Regime meets this test. 

Article 2.2 provides a non-exhaustive list of legitimate objectives, but it does not expressly include the protection of public morals (which is one of the regulatory safe harbors under GATT Article XX(a) as mentioned further below). The panel – consistent with the Appellate Body's statements regarding the similar balance struck in the TBT Agreement and the GATT between trade liberalization and the right to regulate[20] – found that addressing public morals regarding seal welfare is a "legitimate objective" within the meaning of TBT Article 2.2.[21]

The complainants had argued that a less trade restrictive alternative measure could nevertheless have been adopted, conditioning market access for seal products on labeling and certified compliance with animal welfare standards. Crucially, the panel found that this proposed alternative would not make an equivalent contribution to the EU's seal welfare objective, citing the practical challenges of monitoring and complying with meaningful animal welfare standards in the difficult conditions in which seal hunting takes place. In essence, the panel found that the inhumane killing of seals could not be avoided given the conditions of the hunt, and that the complainants had failed to establish the existence of a reasonably available less trade restrictive alternative, taking account of the risks of non-fulfilment of the EU's objective.[22]

GATT

Applying similar reasoning to that under TBT Article 2.1, the panel endorsed claims by Canada and Norway of discrimination contrary to GATT Articles I:1 and III:4, and rejected the EU's public morals defense under GATT Article XX(a) because the discrimination inherent in the measure is inconsistent with the "chapeau" to that provision. The panel also addressed the EU's alternative argument that the ban is "necessary to protect animal life or health" pursuant to GATT Article XX(b). The panel summarily rejected this argument, stating that the EU had not established a prima facie case.[23]In fact, given the focus on public morals in the pleadings, the panel never considered the alternative pleadings on "animal health" – what it was really doing was exercising judicial economy. 

Questions Remaining

EC – Seal Products is an important addition to existing WTO jurisprudence on the public morals exception under GATT.[24] But it leaves some questions open, perhaps to be clarified by the WTO Appellate Body. 

The first question raised by the panel report is how the test for a "public morals" defense will be applied in future. Some commentators have argued that the panel's pluralistic approach opens the floodgates for protectionist measures to be shielded by the public morals defense. But this argument ignores aspects of the panel report that foreclose such abuse of the public morals exception. The panel subjected the EU's measure to rigorous scrutiny to determine whether it was non-discriminatory and even-handed, and whether an alternative, less trade-restrictive measure was reasonably available. 

Second, while the decision is an important vindication of the right of sovereign governments to enact laws reflecting their moral concerns, it is not clear on how such laws can be designed to reflect compromise between competing or countervailing objectives (as they inevitably must be in pluralist societies where moral beliefs are diverse and where policymaking involves trade-offs) while avoiding being deemed discriminatory under WTO law. 

The IC exception is a case in point: as the panel acknowledged, it reflects a compromise between the objective of expressing moral concern regarding seal welfare and a second important purpose – protecting indigenous culture and traditions – and the panel is clear that balancing competing objectives in this way is legitimate.[25] But the exception was found not to be not "even-handed" because it gives an unfair advantage to Greenland, where virtually all sealing happens to be done by Inuit hunters.[26] That conclusion cannot logically rest on numbers alone. As the Appellate Body held in the Dominican Republic – Import and Sale of Cigarettes case, disparate impact cannot be based simply on relative market share and structure or production levels;[27] further, disparate impact does not amount to less favorable treatment if it stems "exclusively from a legitimate regulatory distinction."[28] Although the panel in EC – Seal Products did accept in principle that regulatory schemes can be designed to balance different objectives, its discrimination finding puts into question the extent of deference afforded to sovereign states to strike delicate compromises in real world circumstances.

About the Authors:

Rob Howse is Lloyd C. Nelson Professor of International Law at New York University School of Law. Joanna Langille is a visiting researcher at Yale Law School and a doctoral candidate at the University of Toronto Faculty of Law. Katie Sykes is an assistant professor at the Thompson Rivers University Faculty of Law and a doctoral candidate at the Schulich School of Law, Dalhousie University.