Japan and the European Union will ask the World Trade Organization to indefinitely suspend procedures to settle their row with the United States over a sanctions law against Myanmar, government sources said Monday.

The decision follows a U.S. federal district court ruling in November that the controversial “Burma Law” in Massachusetts is unconstitutional because it “impermissibly” infringes on the federal government’s power to regulate foreign affairs. The law denies state contracts to American and foreign companies doing business in Myanmar.

Massachusetts has since suspended the law’s enforcement and appealed the ruling. “Because the law in question has been suspended, it no longer inflicts actual damage on Japanese companies,” a government source said. “That’s why we have decided to ask the WTO to suspend dispute-settlement procedures over the matter.”

The WTO will put off setting up a neutral panel to adjudicate the dispute, probably at least until early next year, the sources said. Its establishment was expected later this month.

Japan and the 15-nation EU filed a complaint with the Geneva-based watchdog on international commerce in July 1997, six months after the law took effect, saying it violates a WTO agreement on government procurement practices.

The accord covers central as well as local governments registered in the commitments made by WTO members. The U.S. agreed to put Massachusetts and other states under the WTO government procurement accord.

Myanmar — or Burma, as the Southeast Asian country has also been called — has been shunned by large parts of the international community due to violations of democratic principles and human rights by its military rulers, including a continued harsh crackdown on the prodemocracy movement led by opposition leader Aung San Suu Kyi.

Following the filing of the complaint, Japan and the U.S. held three rounds of consultations — in July, October and December 1997 — in the first stage of the WTO’s dispute-settlement procedure.

In autumn, Japan and the EU filed a request with the WTO for the establishment of the panel, the second stage of the procedure. The WTO decided in December to set up the three-member panel later this month, and a ruling would be handed down within nine months in principle.

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