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RULELESS APPELLATE BODY AND POWERLESS DSB

by Chakravarthi Raghavan

Geneva, 7 June 2000 -- The Appellate Body (AB) of the World Trade Organization came in for some sharp criticism for ignoring the views of members at the Dispute Settlement Body (DSB), and functioning in what seemed to be a 'rule-less' way in claiming a right to accept and consider, at its discretion, amicus curiae briefs from individuals and organizations.

The AB had made such a claim (SUNS #4666, 'Trade: Appellate Body asserts right to receive amicus curiae briefs') in a report upholding a panel ruling that was held as illegal, and contrary to obligations under the Subsidies and Countervailing Measures (SCM) agreement, the US levy of counter-vailing duties on imports of certain hot-rolled lead and bismuth carbon steel products originating in the United Kingdom.

The DSB adopted Wednesday the reports of the panel and AB recommending that the US change its countervailing duty practices.

But a large number of members took the floor to strongly criticise the AB bench for its views on amicus curiae briefs, and demanded to know whether any particular working procedures to enable this had been adopted, as required under the DSU, by the AB in consultation with the chairman of the DSB and the Director-General.

The chairman of the DSB, Mr.Stuart Harbinson of Hong Kong, while confirming that the intent of the rule was to consult the DSB chair in his institutional capacity as representing the members, did not provide an answer straightaway as to whether or not the AB had in fact consulted the DSB chair and the DG in framing such a working procedure to enable the AB to take on board such petitions.

"It is not wise of me to give an off-the-cuff answer," Harbinson reportedly told the DSB and said he had asked the secretariat to consult their own records to see whether any consultations had taken place between the appellate body and the DG or with the previous chair of the DSB."

India earlier had said the requirement in the rules about the AB consulting the DSB Chair was in institutional capacity. There was no provision in the working procedures, finalized by the AB, in consultations with the DSB chair and the DG and communicated to members to enable accepting amicus curiae briefs, India insisted.

[In 1998, in dealing with the appeal by the US in the shrimp-turtle dispute, the AB had said that the DSU provisions enabling a panel "to seek" information from others in effect also meant an obligation to receive amicus curiae briefs sent to it. In the appeal process in that dispute the AB had issued a preliminary ruling accepting three briefs from environmental organizations, appended to the US submission, and also another brief sent directly to the appellate body. While it promised in the preliminary ruling to explain the legal basis for receiving amicus curiae briefs, the AB had failed to do so in its report.

[A range of countries, at the DSB meeting on 6 November 1998 (SUNS #4320), sharply rebuked the appellate body for usurping the rights of the WTO members in setting the rules and deciding such matters, and on top of it for even having failed to explain in its report under what rule or authority it accepted amicus curiae briefs.]

In the steel imports and countervailing duty case, the AB (while refusing to consider briefs filed before it by the US Steel industry lobbies) had however asserted a right to receive such briefs. It argued that there was nothing in the DSU or working procedures that specifically provide that the AB may accept or consider submissions or briefs from sources other than participants in the appeal and third party participants. On the other hand, it said, "neither the DSU nor the Working Procedures explicitly prohibit acceptance or consideration of such briefs. It then cited Art. 17.9 of the DSU -- 'working procedures shall be drawn up by the AB in consultation with the chairman of the DSB and the Director-General and communicated to the Members for their information." And in a footnote, the AB also added: "In addition rule 16 (1) of the Working Procedures allows a division hearing an appeal to develop an appropriate procedure in certain specified circumstances where a procedural question arises that is not covered by the Working Procedure."

At the DSB meeting Wednesday, on the substance the US differed with the reasoning of the ruling. But the EC, Mexico and Brazil welcomed the ruling of the panel and the AB on the substantive issue before it -- namely that the imposition of countervailing duties by the US was contrary to the provisions of the SCM agreement, and that in a countervailing duty investigation concerning a firm that had been privatized or had otherwise changed ownership, the investigating authority must examine whether the firm in question had a benefit during the investigation period. It could not presume that subsidies granted previously, even after change of ownership, pass through to new owners. Also,where a firm is privatized or otherwise changes ownership for fair market value, prior subsidies confer no benefit to the successor company.

However, the largest number of comments, and some only on that, came from members assailing the AB for ignoring their earlier views on amicus curiae.

The EC said the way the AB had dealt with the amicus curiae briefs was not satisfactory. It had made clear that individuals and organizations not members of the WTO had no legal right to make submissions to or be heard by the AB and that the AB did not have the legal duty to accept or consider unsolicited amicus curiae briefs submitted by non-WTO members. Nevertheless, the AB had concluded, it had the legal authority under the DSU to accept and consider amicus curiae briefs in an appeal in which it found it pertinent to do so.

"However," complained the EC, "the AB does not provide any guidance to WTO Members on under which circumstances the AB might find it pertinent and how this will be articulated within its working procedures."

The US viewed as one positive aspect of the AB's report, the finding that "it has the authority to take into account submissions filed by interested members of the public, or socalled amicus submissions."

"By allowing affected private parties to state their views in WTO appeals, the AB has taken a positive step in the direction of making the WTO a more open organization and enhancing public confidence in the WTO dispute settlement process. The opportunity to provide submissions in an appeal builds on the opportunity already present to provide submissions at the panel level... the opportunity at the panel level seems to have been working well. The same should be true at the appeal level. ... the US is confidence that the AB is fully able to adopt procedures for amicus submissions in an appeal that alow the AB to benefit from those submissions without unduly burdening the system or the parties."

Mexico welcomed the AB's view that non-members of the WTO had no right to make submissions or be heard by the AB. But Art.17.9 of the DSU could not be used (by the AB) to legitimise receipt of communications. This would affect the rights and obligations of parties to a dispute, and third party intervenors, arising from the WTO agreement and its DSU.

Canada said it had a number of concerns over the AB view that under Art. 17.9, the AB had broad authority to adopt procedural rules that did not conflict with any rules and procedures of the DSU or the covered agreements, and that as long as it acted consistently with the provisions of the DSU and covered agreements, it had the legal authority to decide whether or not accept and consideration any information it believed to be pertinent and useful in an appeal.

Firstly, Canada questioned whether the general authority conferred by Art.17.9 to draw up working procedures provided a sufficient juridical basis for the AB to accept and consider amicus briefs. Secondly, the AB had provided no guidance as to when, in future cases, it would be prepared to accept and consider amicus briefs. Thirdly, by explicitly recognizing that it must act consistently with the DSU, the AB seems to have precluded its consideration of amicus briefs that contain new facts or that seek to re-argue issues of facts decided by the panel. To do otherwise would seem to contravene Art.17.6 of the DSU which limits the AB jurisdiction to issues of law. However, the AB's reasons did not specifically address whether it could consider factual information in an amicus submission.

The Ab's decision on this critical issue, Canada said, raised more than matters of procedure. It highlighted the importance of Members deciding and clarifying the DSU rules, whether amicus briefs should be permitted and if so under what conditions. The use of amicus briefs raised many complex and controversial questions, but these were issues of systemic concern that need to be addressed directly by Members.

Japan also voiced its serious concerns over the legal argument included in the findings of the AB regarding interpretation of the DSU in connection with treatment of amicus briefs. Japan's view on this had not changed since it presented its views at the DSB in the shrimp-turtle case. Japan did not at all finding convincing the AB's argument referring to Art. 17.9 of the DSU as providing the legal basis.

"The issue of amicus briefs should be decided by Members, possibly by clarifying the current DSU. It is highly regrettable, if the AB repeatedly makes findings on this controversial issue without taking into consideration the numerous opposite opinions expressed by Members."

Argentina said it could not agree with the AB's interpretation of Art. 17.9 on its right to receive amicus briefs. Such a position would alter fundamentally the WTO and the DSU as an intergovernmental process.

Hong Kong China (HKC) took the floor to register "our grave concern" on the AB's opinion (in paras 36-42 of its report) on amicus curiae briefs, and the AB position in para 42 that "we are of the opinion that we have the legal authority under the DSU to accept and consider amicus curiae briefs in an appeal in which we find it pertinent and useful to do so."

This view, HKC said, "is legally unsound and practically problematic." The AB relied on its own interpretation of Art. 17.9 of the DSU to justify its claim. But Art.17.9 was all about "procedures" for appellate Review. By the very definition of the word "procedures", the AB is only enabled to draw up a set of working procedures under certain constraints. The proper issues to be considered in this context shall be procedural in nature. Admission of amicus briefs by the AB "is not procedural in nature, it is a substantive issue". It affect the intergovernmental nature of the WTO, the rights and obligations of Members and may also affect the final rulings of the AB on a particular case. Art.17.9 and by extension the AB's working procedures are not applicable to the consideration of this substantive issue.

The admission of amicus curiae briefs by the AB is not explicitly provided for under the existing DSU nor was it envisaged during the drafting of the DSU. "The unilateral expansion of its legal authority by the AB which goes beyond the confines of the DSU is not only a glaring act of judicial activism, but also an apparent violation of the amendment provisions as stipulated by Art.X.8 of the Marrakesh Agreement. Furthermore, acceptance of a brief which contains factual information runs counter to the letter and spirit of Art. 17.6 of the DSU."

The AB's view, HKC added, is also practically problematic and certainly not a model of clarity. The only criterion put forward by the AB, distinguished which briefs it will accept and which not is "in which we find it pertinent and useful to do so."

"But how is useful and how is useless? The AB refuses to bind its discretion, which it should not have any way, ex ante in this respect. We are left in a state of uncertainty. Moreover, if the AB accepts what the panel previously rejected, the AB will be taking a decision on an evidentiary basis which does not correspond to that of the panel... HKC considers that the AB's opinion on the question of amicus curiae briefs is legally unsound and practically problematic."

Hungary also commenting on this said the AB's approach was a matter of concern. Acceptance of amicus briefs is an issue going beyond a simple question of procedure. It touched upon the basic inter-governmental nature of the dispute settlement mechanism and therefore an issue of substance with far reaching implications and should be left to Members to decide on this matter. Hungary was also concerned that having taken the position it had the legal authority to decide whether or not accept and consider such briefs, the AB did not consider it necessary to elaborate on the criteria for such a decision, leaving Members without any guidance for future cases which was clearly a systemic problem.

India welcomed the ruling, reiterating an earlier decision, that the standard of review in Article 17.6 of the Anti-Dumping Agreement (ADA) is relevant only to the ADA, and not to the SCM agreement.

As for amicus curiae briefs, India continued to have serious reservations about the approach of the AB, and was convinced that the DSU, by not prohibiting, permitted panels and the AB to consider amicus briefs. Such an interpretation would result in a situation where not only NGOs but also powerful business associations as in this case, would be able to intervene in the dispute settlement process. This was not a good development from the point of view of the long term health of the dispute settlement system, meant to be a mechanism for resolution of disputes between Members.

"There is no provision in the working procedures, which were finalized by the AB after consultation with the Chairman of the DSB and the DG and communication by the AB to the Members, which enables the AB to accept amicus curiae briefs. The AB argues that neither the DSU nor the working procedures explicitly prohibits acceptance or consideration of such briefs. This approach goes completely against the basis on which the DSU was negotiated. We sometimes wonder whether in any system it is possible to list out all the prohibitions in order to prevent a situation of the type we are facing today. This approach that what is not explicitly prohibited can be permitted on a discretionary basis, may not be consistent with the elements of predictability and security of a rule-based system. This is not a matter of procedure but substance."

In a second intervention later, India made clear that the consultation required with the DSB chair, was not in his personal capacity,but as a representative of members. Brazil, in remarks confined to the substance of the ruling, welcomed it and said that like the UK, Brazil too had privatized steel production. And like the exports of the UK, Brazilian exports too were subject to US countervailing duties over the past decade, based on the US presumption that subsidies conferred to a company prior to privatization somehow pass through to the purchaser. This presumption has been found to be inconsistent with the SCM agreement. Recognizing that the inconsistencies in the US were not specific to this particular dispute, but all CVD investigations involving privatized companies, the panel had suggested that the US should take all appropriate steps, including a revision of its administrative practices, to prevent future violations of the SCM. To be consistent with US obligations under the SCM, all US CVD decisions must conform to the panel's clarifications. There were no legal or procedural barriers to delay a US decision to swiftly and comprehensively incorporate the panel's recommendations into its CVD practice. No change in law was necessary. There were hence no justifications for delay on US part in conforming its practice with the panel's decision.

Malaysia shared the grave concerns of other members over the issue of amicus briefs and registered its strong exception to the AB's argument.

Pakistan also shared serious reservations over the arguments of the AB on amicus briefs and underlined that the AB's jurisdiction was limited to issues of law under Art.17.6 and the AB should not be encouraged to go beyond the provisions of the DSU.

Ecuador too shared concerns over amicus briefs and said the AB's arguments were inconsistent with the DSU.

Thailand said the issue was one of substance and not of procedure. (SUNS4684)

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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