Academic journal article The George Washington International Law Review

Conflicting Obligations for Oil Exporting Nations?: Satisfying Membership Requirements of Both OPEC and the WTO

Academic journal article The George Washington International Law Review

Conflicting Obligations for Oil Exporting Nations?: Satisfying Membership Requirements of Both OPEC and the WTO

Article excerpt


On July 8, 2004 the Office of Senator Frank Lautenberg (D-NJ) released a report entitled Busting Up the Cartel: The WTO case Against OPEC (Lautenberg Report).1 The Lautenberg Report contends that countries that are members of both the World Trade Organization (WTO) and the Organization of Petroleum Exporting Countries (OPEC or the Organization),2 and that abide by OPEC-mandated oil production quotas, are thereby in violation of the General Agreement on Tariffs and Trade (GATT) Article XI:1 prohibition on quantitative export restrictions.3 The Lautenberg Report concludes that the United States Trade Representative (USTR) should bring a claim against OPEC members at the WTO for their alleged violations.4

The Lautenberg Report is not the first challenge to OPEC's legitimacy emanating from the United States.5 OPEC has never been viewed favorably by the American public: "In the public's perception, [OPEC] epitomizes a greedy, rapacious international cartel that preys on the American public in defiance of our one hundred and ten year tradition of market competition embodied in the Sherman Act."6 U.S. citizens have twice challenged the cartel-like nature of OPEC under U.S. antitrust laws.7 Both cases were dismissed, however: the first under the doctrine of sovereign immunity and the Act of State Doctrine;8 the second on the theory that, absent consent, there were no acceptable means for serving an international organization like OPEC with process, and, therefore, the court could not establish jurisdiction.9

These cases left Congress with the impression that it is either impossible or extremely difficult to sue OPEC.10 In response, Congress introduced a number of bills abolishing certain defenses and immunities that it perceived were standing in the way of a successful antitrust action against the Organization.11 Because no suit has since been brought, the question remains whether the judiciary will feel comfortable holding foreign oil-producing nations liable under U.S. antitrust laws.

While it is not clear that a U.S. court can legitimately order foreign oil-producing nations to comply with U.S. standards of competition, it is clear that the WTO Dispute Settlement Body can legitimately require WTO members to comply with WTO standards of international trade.12 Accordingly, recent congressional efforts to challenge OPEC focus on OPEC's alleged inconsistency with the WTO.13 Although they are two of the most visible international economic institutions, OPEC, and the WTO are often "associated with diametrically opposed players in the global economy: the WTO with the sometimes savage rules of the market and OPEC with the often demonized intergovernmental manipulation of prices."14

The first attempts to invoke WTO law to "bust up the cartel" were instigated by Representative Peter DeFa/io (D-OR).15 DeFazio was largely unsuccessful, however, in achieving sufficient support for his ultimate objective: to pass a bill that would require the USTR to initiate dispute settlement proceedings against OPEC nations that are members of the WTO.16 But in light of the recent tumult over high gas prices, there has been a renewed interest in DeFazio's cause from other offices on Capitol Hill, most notably from Senator Lautenberg.17 The Lautenberg Report provides the first detailed legal argument that a basis for pursuing OPEC members at the WTO exists. On July 8, 2004, Senators Durbin, Levin, and Reid-all of whom were apparently persuaded by the Lautenberg Report-joined Senator Lautenberg in introducing legislation to the Senate virtually identical to the bill introduced by Representative DeFazio,18 which is still pending in the House.19

While it remains to be seen whether increasing gas prices will be enough of an impetus to rally the rest of Congress behind either of these bills, their allegations raise an issue that is important to WTO jurisprudence irrespective of whether the bills are passed; namely, whether a country can be a member of OPEC and the WTO while simultaneously fulfilling its obligations to both organizations. …

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