By Atul Gupta
Article II of the GATT, 1994 provides that a Member country shall follow MFN principle. Article II.2 provides for exception to the MFN principles. One of such exception permits imposition of Anti-dumping Duty in terms of Article VI of the GATT, 1994. Article VI of GATT 1994 provides for imposition of Anti-dumping Duty on fulfilment of certain conditions. WTO Members also entered into an Agreement on implementation of Article VI of the GATT, 1994 (known as WTO:ADA) which in:
Article 1 provides that the provisions contained in the Agreement will govern the application of Article VI of GATT 1994 in so far as action is taken under Anti-dumping legislation or regulations;
Article 18.1 reiterates that no specific action against dumping from another Member can be taken except in accordance with the provisions of GATT 1994, as interpreted by this agreement;
Article 18.4 provides that each Member shall take all necessary steps, of general or particular character, to ensure, not later than the date of entry into force of the WTO Agreement for it, the conformity of its laws, regulations and administrative procedures with the provisions of this Agreement as they may apply for the Member in question.
Therefore, if any law, regulation or administrative action adversely affects interest of a producer or exporter of another Member, then such law, regulation or administrative action should be in conformity with the GATT, 1994 as well as WTO: ADA. However, a Member is at liberty to have more onerous law, regulation or administrative action for its subjects which does not adversely affect the interest of a producer or exporter of another Member. Such instances may be like:
a sunset review may be conducted within a period shorter than 5 years;
investigation shall be completed within a period shorter than one year, if it does not affect the time required by a producer or exporter to file response and make preparation for onsite verification;
mandating for acceptance of domestic sales price in the exporting country as normal value though such sales price is below the cost of production.
In the above background, the Supreme Court of India had an occasion to interpret the legal provisions relating to imposition of definitive anti-dumping duty retroactively.
Indian investigating authority takes almost 18 months time to complete most of the investigations, though the Indian law, in line with Article 5.10 of the WTO:ADA, stipulates that the investigations shall be concluded within a period of one year. It is however provided that only in “special circumstances” the period to conclude investigation may be extended by a further period of six months. The exception to extend the period by six months has been used as a rule by the Indian investigating authority without disclosing any special circumstance. Such extension of the time period of investigation has created a problem as to how to protect the Domestic Industry during the interregnum, i.e. “gap period” between the date when provisional duty expires after six months of its imposition and the date when the definitive duty is imposed.
In these circumstances, the Central Government tried to achieve the goal of protecting the Domestic Industry during such interregnum by imposing definitive anti-dumping duty from the date of imposition of provisional anti-dumping duty. The Customs authorities were recovering anti-dumping duty on imports which had entered into India during the interregnum because according to them anti-dumping duty was imposed with retrospective effect and there is no hiatus provided in the Indian legal provisions or in the notifications which imposed anti-dumping duty.
Certain importers raised the dispute about such illegal action of the customs authorities and the matter reached the Supreme Court of India for interpretation and decision. The Apex Court after referring to various previous authorities, summarized the principles for interpretation of a domestic law where a corresponding international treaty or agreement exists:
(1) Article 51(c) of the Constitution of India is a Directive Principle of State Policy which states that the State shall endeavour to foster respect for international law and treaty obligations. As a result, rules of international law which are not contrary to domestic law are followed by the courts in this country. This is a situation in which there is an international treaty to which India is not a signatory or general rules of international law are made applicable. It is in this situation that if there happens to be a conflict between domestic law and international law, domestic law will prevail.
(2) In a situation where India is a signatory nation to an international treaty, and a statute is passed pursuant to the said treaty, it is a legitimate aid to the construction of the provisions of such statute that are vague or ambiguous to have recourse to the terms of the treaty to resolve such ambiguity in favour of a meaning that is consistent with the provisions of the treaty.
(3) In a situation where India is a signatory nation to an international treaty, and a statute is made in furtherance of such treaty, a purposive rather than a narrow literal construction of such statute is preferred.
(4) The interpretation of such a statute should be construed on broad principles of general acceptance rather than earlier domestic precedents, being intended to carry out treaty obligations, and not to be inconsistent with them.
(5) In a situation in which India is a signatory nation to an international treaty, and a statute is made to enforce a treaty obligation, and if there be any difference between the language of such statute and a corresponding provision of the treaty, the statutory language should be construed in the same sense as that of the treaty. This is for the reason that in such cases what is sought to be achieved by the international treaty is a uniform international code of law which is to be applied by the courts of all the signatory nations in a manner that leads to the same result in all the signatory nations.
After referring to various provisions of the WTO:ADA and the Indian legal provisions, the Supreme Court also came to a conclusion that the delicate balancing act between protection of domestic industry and the hardship caused in the course of international trade has been tilted in favour of the latter.
It was held that the Central Government does not have any power to impose anti-dumping duty with retrospective effect except in the case of Section 9A(3) of the Customs Tariff Act, 1975 which is in line of Article 10.4 of the WTO:ADA. Finally, it was held that the definitive anti-dumping duty can be collected only for the period for which provisional anti-dumping duty was imposed and the Central Government cannot collect anti-dumping duty on the imports entered into India during the interregnum.
This is a leading judgment which enumerates the principles for interpretation of Indian domestic law in terms of an international treaty. It also clarifies that absence of a provision of the WTO:ADA in Indian law does not mean that the authorities are not obliged to follow the same. The authorities in India are bound by the provisions contained in the WTO:ADA unless India has enacted a legal provision which is more onerous to its subjects and at the same time which is not adverse to the interest of a producer/exporter of another Member country. The judgment may also prompt the Indian Investigating Authority to complete the investigations ‘normally’ within a period of one year so that the domestic industry may be continued to be protected in a manner which is legal and also consistent with India’s international obligations.
[The author is a Joint Partner, International Trade Practice, Lakshmikumaran & Sridharan, New Delhi]