More protests over AB creating new obligations

Geneva, 24 Oct (Chakravarthi Raghavan) - Increasing concerns among a very large membership of the World Trade Organization (WTO) over the way that the ‘runaway’ Appellate Body is functioning and expanding its own powers over the collectivity of the WTO members, were reflected at two meetings of the Dispute Settlement Body Wednesday.

The increasing disquiet of the membership over the free-wheeling procedures of the Appellate Body came up at a morning meeting to adopt a ruling against the EU on the dispute over the imports, labelling and marketing of tinned and preserved sardines and products - when a large number of the members who are involved in disputes (as complainants, defendants and third parties) took the floor to criticise two procedural decisions and assertion of rights by the AB in the dispute hearings.

While members are trying to avoid open confrontations, this mood may not last long given the fact that the earlier strongly held views of members about their rights and obligations being subject to change only in the negotiating process, may not last long.

One AB procedural decision related to the claim that the AB had a right to receive and deal with amicus curiae petitions, this time including from a WTO member (Morocco) which was not under the rules a third party to the Peru-EC dispute, but refusing to allow Colombia, a third party present as a ‘passive observer’ in the proceedings, from speaking and presenting some views.

The second AB decision was to allow the EU, the appellant in the sardines dispute, to withdraw conditionally its defective appeal petition and lodge another one to overcome the procedural objections to entertaining the appeal raised by Peru as a preliminary objection.

The DSB meetings were chaired by Ambassador Kare Bryn of Norway. The DSB chair, Uruguayan ambassador Mr. Perez Castillo was away, attending a Cairns Group meeting in Bolivia. In his absence, under the WTO agreed procedures and practices, the General Council chair (Canada’s Sergio Marchi) or the chair of the Trade Policy Review Body (Kenyas Amb.Amina Chawla) should have taken the chair. The Kenya ambassador was any way out of Geneva, and was not there to chair the TPRB meeting for review of Zambia’s trade policy (which in contravention of other decisions met at the same time as the DSB on Wednesday).  And to add to the problems of the membership, there were on Wednesday two more formal meetings - that of the anti-dumping committee (in informal and then formal sessions) and of the GATS rules group. Even the most active delegations, other than the majors were stretched.

There was no explanation provided by the WTO press spokesman to the media as to why Marchi did not take the DSB chair - whether he was out of Geneva or engaged elsewhere. A WTO deputy director-general, Mr. Rufus Yerxa appeared to have briefly taken the chair to start the DSB meeting and suggested that in the absence of all three, Mr. Bryn should take the chair.

It is not clear whether at the DSB, Mr. Yerxa explained to the members why the three chairs of the WTO bodies were not available (though privately some members explained why the Uruguayan and the Kenyan were not available). But no information was volunteered by the media office in the formal briefings over the DSB.

So much for the WTO observing its own rules for its own meetings.

On both the ‘procedural’ issues that in fact alter the rights and obligations of the WTO members, in its ruling (SUNS #5204), the AB division bench chaired by the AB’s Presiding member, Mr. James Bacchus of the US, in so many words asserted it had the power to do so, and could do whatever it was not prohibited from doing.

The AB cited no particular rule or provision of the Dispute Settlement Understanding (DSU) or the WTO treaty, but merely cited some of its earlier assertions in earlier reports, and which had been repeatedly objected to (on the amicus curiae issue) by the overwhelming majority of the membership, including at a General Council special meeting in 2000.

At the DSB meeting for adoption of the Appellate Body report on the Sardines case, a number of members spoke expressing concerns over these procedural issues.

Earlier, the DSB, apart from the Sardines report, also adopted the ruling in the case against Chile over its price band system of agricultural tariffs (dispute raised by Argentina), with Chile disagreeing with some of the interpretations of the AB and the panel over the price band system. Chile argued that its tariffs even under the price band system was within its range of bound tariffs, and blamed its recourse to the system because of the subsidised exports (by the EU and others). The EC too had some reservations over the panel and AB rulings.

Chile, Ecuador and Venezuela complained that developing countries were suffering as a result of the distortions caused in the agricultural market by the North.

On the Sardines case, apart from the differing views of EC, Peru and others on the substance of the rulings, including the issue of applicable international standards (whether only the standards adopted by consensus by the Codex Alimantarius and other international standard setting bodies should be taken account of, or also those set by majority), a number of members spoke on what they viewed as the systemic issues raised by the panel and Appellate Body rulings.

Apart from the views on the substance of the dispute, the views of members on the two procedural issues showed considerable disquiet and concern. While most of the interventions related to the amicus curiae issue, and the AB asserting its right to receive them, and using it to provide an opportunity to Morocco, not legally a third party under the DSU to present its views, while Colombia a notified Third Party was allowed to be a passive observer, but not to speak or respond since it had not given the AB any advice on what it wanted to say.

India, neither a party nor a third party in the dispute, in a statement at the DSB, presented a clear legal analysis on both procedural issues.

Some of the members also however expressed their concern over the AB ruling allowing the EC to conditionally withdraw its petition of appeal and relodge it with a new petition.

Peru, which had raised the dispute, said that while no major consequences had flown out of the EC’s unexpected action in this way, “unnecessary complications were introduced in the dispute settlement procedures.” A new procedural right for one party in a dispute created obligations for another. And as the AB had itself observed in the past, “a WTO member cannot be assumed to have accepted an obligation in the absence of a specific treaty language to that effect.” Yet the AB had endorsed the EC’s conditional withdrawal and presenting a new petition on the basis that “what is not specifically prohibited by the DSU or the working procedures is permitted.” This led to the sanctioning of practices not contemplated by the DSU drafters, and thus new procedural obligations had been created that “were not negotiated and accepted.”

On the acceptance of Morocco’s amicus curiae submission, Peru also complained that the AB’s ruling that it could do so as a consequence of previous erroneous rulings was also erroneous. The DSU drafters had not contemplated participation of third parties outside the conditions of those who notify their third party rights either at the DSB where the panel is set up or within ten days thereafter.

The fact that amicus curiae briefs are not specifically prohibited does not mean they are allowed. Members have not accepted such an obligation to respond to amicus curiae briefs. This meant the AB must refrain from exposing members to the need to respond to such briefs. This issue should be resolved by Members, and not by the AB on a case-by-case basis.

Chile complained that by accepting an amicus curiae brief from Morocco, which was not a third party, the AB had created a new category of members, creating rights and obligations not negotiated or recognised by the members under the treaty.

The US, in its intervention, confined its remarks to the substance of the rulings, and made no comment on the procedural problems. Normally, the US supports amicus curiae briefs, but in this dispute and the DSB discussions it did not comment.

Mexico reiterated the opposition to the AB accepting amicus curiae briefs, and over the fact that Colombia a third party was a ‘passive observer’ and not allowed to speak. The AB has claimed rights to receive amicus curiae briefs on the basis of its own earlier observations, and that it could do what it has not been prohibited from doing. Mexico also complained of the AB shifting the burden of proof. This would have very serious consequences for the members, since in a dispute where a defending party cites an exception it was for it to prove that its measures were covered by the exception, not for the complainant to prove that the exception would not cover the complained measure.

Colombia said it had been discriminated against, and was told that it could not make any comments. It had become difficult to understand the AB as an institution, since it would not even recognise the rights of Colombia as a notified third party to the dispute.

Canada also expressed its concerns over the AB accepting two amicus curiae briefs, one by a private individual and another from Morocco, which as a WTO member had not exercised its third party rights at the panel stage. Canada had repeatedly urged the AB to exercise caution on unsolicited briefs, and this caution was appropriate since such participation had important systemic and institutional implications for the WTO. “It is clear,” said Canada, “that Members alone have the right to participate in dispute settlement proceedings.” Morocco had a clear right to participate as a party or third party in the dispute. But this should not be confused with the issue of non-Member participation as amicus.

India said that it was neither a party nor third party in the sardines dispute.  But the AB’s report had raised issues of a systemic interest: the issue of adequacy and conditional withdrawal of notice of appeal, and the manner in which an amicus curiae brief was admitted and accepted by the AB. This was not the first case, nor likely to be the last, where the issue of adequacy of appeal has arisen. It arose in the shrimps-turtle case. A group of countries have submitted proposals to the Special Session of the DSB (on the DSU review) on this. Hence, India hoped the AB would address this issue in an appropriate manner.

But the conditional withdrawal of appeal by the EC was more serious. On 25 June, the EC had filed a notice of appeal, on 27 June Peru had sought preliminary rulings on four of the nine points raised by the EC. In response, the EC withdrew its appeal and replaced it by another notice of appeal on 28 June. This was not the first time that a notice of appeal had been withdrawn. But in earlier cases, it had been done with the full knowledge and agreement of the appellees. In this case it was withdrawn conditionally in response to the preliminary objections by Peru. The AB in its report had not addressed this issue. Instead it has adopted an ad hoc, case-by-case approach. The AB had allowed the EC conditional withdrawal on the basis that there was no abuse of process, and the conditions under which this could be done, but adopted a case-by-case approach.

The acceptance of the amicus curiae briefs was more serious, with the AB asserting it had “the legal authority” to accept and consider such briefs. This itself was based on the AB’s assertion of such a right in the Bismuth steel case, where the AB resorted to negative reasoning that what was not prohibited was permissible. “This assertion has no legal basis in the DSU or covered agreements.”

The AB was a creation of the members to help in resolving disputes among them.  Panels and the AB can neither receive or accept for consideration any dispute directly, unless referred to them by the DSB, nor are their findings binding on the parties directly, as in law courts, without being adopted by the DSB. The role of panels and the AB had been clearly laid down in the DSU. The AB had a limited mandate to clarify legal issues raised in panel reports, clarify the covered agreements and make findings that would help the DSB in making rulings on trade disputes. The membership had retained to themselves the interpretative authority, and the AB had no ruling authority, only a recommendatory one. It was the DSB alone that had the ruling authority and make its rulings binding on the disputing parties. The AB could not assert that “what is not prohibited is permitted.” Only the membership and the members have the residuary authority in the WTO, and the AB could only have the authority explicitly granted to it by its creator, the DSB and the Membership.

Having said in the Bismuth case that only Members had the ‘legal right’ to participate in panels and AB proceedings, and that panels and the AB had the legal duty to consider them - thus establishing a correlation between rights and duties - and that non-parties had no such right, the AB then asserted its legal authority on the ground that neither the DSU nor its working procedures did not prohibit such authority. If there was a ‘legal right’ as asserted by the AB, there must be a corresponding “legal obedience”. Whose legal obedience was the AB seeking here? Being a creature of the DSB, the AB cannot seek its creator’s “legal obedience”.

In the November 2000 Special Session of the General Council, several members had pointed out that amicus briefs was not a procedural issue, but one that affected the inter-governmental character of the WTO, and that accepting amicus briefs adversely affected rights of members.

In this particular instance, acceptance of amicus briefs had created an imbalance in rights and obligations of members. Any member wanting to present views to panels/AB had to reserve third party rights following certain procedures within the time-periods. In addition, a third party has to graduate into a third participant according to the AB’s working procedures to be able to present its views at the oral hearing. This was an additional obligation placed by the AB through its working procedures. This obligation was not negotiated by Members during the Uruguay Round, and would mean that amicus parties enjoyed more rights than Members, but without any obligations.

Colombia, which reserved its third party rights following DSU procedures, was disallowed from presenting its views. It was only a ‘passive observer’ when the AB considered amicus briefs. This unfortunate procedure had occurred as the AB did not pay heed to the views of Members at the 22 November General Council meeting.

And if the AB report’s paras 155, 169,170 and 314 were read together, “one would realise that the AB accepted the amicus briefs for the sake of asserting its so-called legal authority to accept such briefs. In the end it found Morocco’s brief as not relevant to the case.” But irrespective of whether it was relevant or not, in India’s view, the AB did not have the authority.

The Indian delegate pointed out that the membership were engaged in negotiations on amendments and clarifications to the DSU, including the issue of amicus briefs - a contentious issue among the Members. The AB’s decision was “prejudicing the on-going negotiations.”

In an earlier case (involving the US), the AB had recognized the ongoing efforts by Members to clarify the sequencing of Art 21.5 and 22 of the DSU, and refrained from making any comment. Likewise in this case too, the AB should have refrained from accepting amicus briefs, leaving it to members to sort it out.

The DSU system was an intergovernmental one. Allowing non-Members and non-parties to participate and submit amicus briefs would undermine this character. Member governments raised disputes at the WTO, after consulting domestically all stake-holders, and taking the overall interests of the state they represented. NGO entities seek to represent their sectoral interests. If they were allowed to influence the process, it would severely erode the authority of Members and their ability to participate effectively in the DSU process. Even if they were required to respond to amicus submissions, it would add to their obligations, beyond what was negotiated in the Uruguay Round. And given the requirement to respond to such submissions within the prescribed time-frame, it would be burdensome to developing country members. And constraints of financial resources would also prevent NGO entities from the developing countries to effectively participate in the process, and a burdensome proposition for the panels, the AB, arbitrators and the secretariat which is required to meet strict time schedules.

Technically, the DSB took note of the views and adopted the reports.

However, the issues raised are being dealt with in the DSU review negotiations, chaired by Hungary’s Ambassador Peter Balas, in the separate informal DSB consultations over the AB’s amendment of its working procedures. The issue also came up in an afternoon meeting of the DSB over the AB’s communication to the DSB chair for discussions on “issues of mutual interest.”

The overall picture that is emerging for observers and outside legal experts is that the attempts of the membership to abide by the ‘consensus’ practice, is resulting in more and more onerous obligations. – SUNS5220

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