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“The text of Article XXIII:1(b) simply refers to ‘a benefit accruing, directly or indirectly, under this Agreement’ and does not further define or explain what benefits are referred to. Past GATT panel reports have considered that such benefits include those that a Member reasonably expects to obtain from a tariff negotiation.
The first GATT report analysing Article XXIII:1(b) was the 1950 Report of the Working Party on Australian Subsidy on Ammonium Sulphate. The Working Party found that the withdrawal by Australia of a wartime subsidy on sodium nitrate fertilizer while maintaining a subsidy on ammonium sulphate fertilizer, although not inconsistent with Australia''s GATT obligations, nullified or impaired benefits accruing to Chile under the General Agreement. The Working Party agreed that impairment would exist if the Australian action ‘which resulted in upsetting the competitive relationship between sodium nitrate and ammonium sulphate could not reasonably have been anticipated by the Chilean Government, taking into consideration all pertinent circumstances and the provisions of the General Agreement, at the time it negotiated for the duty-free binding on sodium nitrate. The working party concluded that the Government of Chile had reason to assume, during these negotiations, that the war-time fertilizer subsidy would not be removed from sodium nitrate before it was removed from ammonium sulphate.
For these reasons, the working party also concluded that the Australian action should be considered as relating to a benefit accruing to Chile under the Agreement, and that it was therefore subject to the provisions of Article XXIII. ... The inequality created and the treatment Chile could have expected at the time of the negotiation, after taking into consideration all pertinent circumstances, including the circumstances mentioned above, and the provisions of the General Agreement, were important elements in the working party''s conclusions’.
The 1952 Panel Report on Germany - Sardines also based a non-violation finding on an ‘action of the German Government, which resulted in upsetting the competitive relationship between
could not reasonably have been anticipated by the Norwegian Government at the time it negotiated for tariff reductions on
’. In so finding, the panel noted that Norway ‘had reason to assume’ that the fish they were interested in would not be treated less favourably.
Two GATT study groups elaborated these concepts in the context of subsidies, in each case focusing on whether a party had reasonable expectations that certain treatment would continue. In 1955, a working party wrote:
‘So far as domestic subsidies are concerned, it was agreed that a contracting party which has negotiated a concession under Article II may be assumed, for the purpose of Article XXIII, to have a reasonable expectation, failing evidence to the contrary, that the value of the concession will not be nullified or impaired by the contracting party which granted the concession by the subsequent introduction or increase of a domestic subsidy on the product concerned’.
A 1961 report, citing the foregoing paragraph, stated:
‘In this connexion it was noted that the expression ''reasonable expectation'' was qualified by the words ''failing evidence to the contrary''. By this the Panel understands that the presumption is that unless such pertinent facts were available at the time the tariff concession was negotiated, it was then reasonably to be expected that the concession would not be nullified or impaired by the introduction or increase of a domestic subsidy.’
The 1990 Panel Report on EEC - Oilseeds approached a non-violation complaint as follows:
‘The Panel examined whether it was reasonable for the United States to expect that the Community would not introduce subsidy schemes systematically counteracting the price effect of the tariff concessions.
. . .
The Panel does not share the view of the Community that the recognition of the legitimacy of such expectations would amount to a re-writing of the rules of the General Agreement. The contracting parties have decided that a finding of impairment does not authorize them to request the impairing contracting party to remove a measure not inconsistent with the General Agreement; such a finding merely allows the contracting party frustrated in its expectation to request, in accordance with Article XXIII:2, an authorization to suspend the application of concessions or other obligations under the General Agreement. The recognition of the legitimacy of an expectation thus essentially means the recognition of the legitimacy of such a request. The recognition of the legitimacy of an expectation relating to the use of production subsidies therefore in no way prevents a contracting party from using production subsidies consistently with the General Agreement; it merely delineates the scope of the protection of a negotiated balance of concessions. For these reasons the Panel found that the United States may be assumed not to have anticipated the introduction of subsidies which protect Community producers of oilseeds completely from the movement of prices for imports and thereby prevent tariff concessions from having any impact on the competitive relationship between domestic and imported oilseeds, and which have as one consequence that all domestically-produced oilseeds are disposed of in the internal market notwithstanding the availability of imports’.
As suggested by the 1961 report, in order for expectations of a benefit to be legitimate, the challenged measures must not have been reasonably anticipated at the time the tariff concession was negotiated. If the measures were anticipated, a Member could not have had a legitimate expectation of improved market access to the extent of the impairment caused by these measures.
Thus, under Article XXIII:1(b), the United States may only claim impairment of benefits related to improved market access conditions flowing from relevant tariff concessions by Japan to the extent that the United States could not have reasonably anticipated that such benefits would be offset by the subsequent application of a measure by the Government of Japan. In the case before us, there is disagreement between the parties on this issue of reasonable anticipation with respect to each and every ‘measure’ claimed by the United States to nullify and impair benefits accruing to it under GATT.”
（ii）Non-foreseeability of Measures at Issue
As noted above, for expectations to be legitimate, all measures of the party making the concession that could have been reasonably anticipated at the time of the concession must be taken into account. Of course, as with the first element (application of a measure), the complaining party has the burden of demonstrating the “benefit accruing”. In the context, there would be certain logic in making a distinction between the concept of legitimate expectation of a benefit and that of the reasonable foreseeability of a measure. In particular, the need to prove that a complained-of measure was objectively non-foreseeable at the time of negotiations leads to an implicit recognition of legitimacy of the expectations as crucial to the decision of whether or not the state can claim nullification or impairment.
As noted previously, a WTO member may be assumed, for the purpose of Art. XXIII, to have a reasonable expectation, failing evidence to the contrary, that the value of the concession will not be nullified or impaired by the member which granted the concession by the subsequent introduction or increase of a domestic measure. And in this connexion it is noted that the expression “reasonable expectation” is qualified by the words “failing evidence to the contrary”. By this it suggests that the presumption is that unless such pertinent facts were available at the time the concession was negotiated, it is then reasonably to be expected that the concession would not be nullified or impaired by the introduction or increase of a domestic measure. I.e., the complainant could not have reasonably anticipated that its benefits would be offset by the subsequent application of a measure by the complained-of Government. As suggested, in order for expectations of a benefit to be legitimate, the challenged measures must not have been reasonably anticipated at the time the concession was negotiated. If the measures were anticipated, a Member could not have had a legitimate expectation of improved market access to the extent of the impairment caused by these measures. However, what factors should be considered to determine whether a Member should have reasonably anticipated measures that it claims nullified or impaired benefits? In this regard, the Panel in Japan-Film（DS44）rules in relevant part:14
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