INTRODUCTION

On 17 February 1999, the Dispute Settlement Body (the “DSB”) adopted the Appellate Body Report and the Panel Report, as upheld by the Appellate Body Report, in Korea - Taxes on Alcoholic Beverages. The measures in dispute in the underlying proceedings are contained in Korea's Liquor Tax Act and Education Tax Act. The Panel concluded that “soju (diluted and distilled), whiskies, brandies, cognac, rum, gin, vodka, tequila, liqueurs and ad-mixtures are directly competitive or substitutable products” and the measures in dispute result in “dissimilar taxation … applied in a manner so as to afford protection to domestic production,” and, therefore, the measures are inconsistent with Article III:2, second sentence, of the GATT 1994. This conclusion was upheld by the Appellate Body. The Appellate Body and the Panel recommended that the DSB request Korea to bring the Liquor Tax Act and the Education Tax Act into conformity with its obligations under the GATT 1994.

On 19 March 1999, Korea informed the DSB, pursuant to Article 21.3 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (the “DSU”), that it would implement the recommendations and rulings of the DSB in this dispute. Korea indicated that it was impracticable to comply with the recommendations and rulings immediately, and that it would therefore require a reasonable period of time to complete the implementation process.

Following the meeting of the DSB on 19 March 1999, the European Communities and Korea held consultations to determine a mutually agreeable period of time for implementation. The United States and Korea also held consultations on this matter.

By communication of 9 April 1999, the European Communities and the United States requested that the reasonable period of time be determined by binding arbitration, pursuant to Article 21.3(c) of the DSU. In a joint letter dated 23 April 1999, Korea, the European Communities and the United States informed the Chairman of the DSB that they had agreed that I should act as Arbitrator. In this letter, the parties noted that a period of 90 days is set forth in Article 21.3(c) of the DSU for completion of arbitration proceedings and the issuance of an arbitration award.