Service on WTO and Trade Issues (May16/20)
30 May 2016
Third World Network
US stands alone in vetoing reappointment of Chang to AB
Published in SUNS #8247 dated 25 May 2016
Geneva, 24 May (Kanaga Raja) - The United States stood virtually alone
at the World Trade Organisation in its stead-fast opposition to the
reappointment of Mr Seung Wha Chang of Korea for a second four-year
term to the Appellate Body (AB).
The US voiced its opposition to Mr Chang, whose first four-year term
of office expires on 31 May 2016, at a meeting of the Dispute Settlement
Body on Monday (23 May).
According to trade officials, no member openly sided with the US in
vetoing Mr Chang's re-appointment to the AB. Reportedly in somewhat
ambiguous statements, Colombia said that the arguments of the US are
partially reasonable, while Iceland said the US concerns are legitimate.
Some 30 delegations intervened under the agenda item of the issue
of possible reappointment of one Appellate Body member.
[In a comment, Mr. Chakravarthi Raghavan, Editor-Emeritus of the SUNS,
points out that among the four disputes cited by the US against reappointment
of the Korean jurist, and questioning the AB rulings, three disputes
seem to involve anti-dumping issues, where the AB has consistently
ruled against the US use of "zeroing" in holding imports
as being dumped.
[So far, the US has not implemented the DSB recommendations to change
its regulations and domestic law to end this practice! The US is now
the only WTO member insisting on its right to use "zeroing".
The EU, against whom the first AB ruling holding "zeroing"
as contrary to the WTO Anti-Dumping Agreement was given, accepted
the ruling, and eschewed the practice, unlike the US.
[In the Argentina-Panama dispute, the fourth the US has cited, the
AB ruling in effect means WTO members can adopt a similar approach
to countries who do not share tax information. While the US ostensibly
is fighting such tax-shelter countries in demanding information from
other nations that enable bank secrecy about US nationals or enterprises
having accounts, in fact recent reports have brought out that several
of the states of the US have laws enabling non-disclosure of real
owners of firms and their tax status.
[More detailed analysis of the consequences of the US stand at the
WTO will be in an article in a future issue of SUNS.]
VIEWS OF MEMBERS
In its statement at the DSB, the US said that "after a careful
review of Mr Chang's service on the Appellate Body, the United States
has concluded that it does not support reappointing him to a second
term, and the United States would object to any proposal to reappoint
The US added, "we do not consider that his service reflects the
role assigned to the Appellate Body by WTO Members in the WTO Agreements.
Any failure to follow scrupulously the role we Members have assigned
through these agreements undermines the integrity of, and support
for, the WTO dispute settlement system."
The US elaborated that reappointment is not automatic, and cited Article
17.2 of the DSU that provides that each member of the Appellate Body
"may be reappointed once." Action by the DSB to reappoint
requires a consensus of WTO Members, the US said.
Based on a careful review, the US concluded that Mr Chang's performance
does not reflect the role assigned to the Appellate Body by Members
in the DSU.
According to the US, the role of the Appellate Body as part of the
WTO's dispute settlement system is to decide appeals of panel reports
to help achieve "[t]he aim of the dispute settlement mechanism
[...] to secure a positive solution to a dispute," as set out
in DSU Article 3.7.
And the DSU reminds panels and the Appellate Body not once, but twice,
that "in their findings and recommendations, the panel and Appellate
Body cannot add to or diminish the rights and obligations provided
in the covered agreements."
Yet, the US maintained, the reports on which Mr Chang participated
do not accord with the role of the Appellate Body. It added that it
had previously explained at DSB meetings its concerns with the adjudicative
approach in a number of Appellate reports with which Mr Chang was
involved. And these concerns have arisen in disputes in which the
United States was a party and in those in which it was not.
The US went on to cite four cases. The first being the recent DS453
Appellate report in the financial services dispute between Panama
and Argentina, where the US said that more than two-thirds of the
Appellate Body's analysis - 46 pages - is in the nature of obiter
The US said the Appellate Body report went on at great length to set
out interpretations of various provisions of the GATS. These interpretations
served no purpose in resolving the dispute - they were appeals of
moot panel findings, Thus, more than two-thirds of the Appellate Body's
analysis comprised simply of advisory opinions on legal issues.
"The Appellate Body," the US said, "is not an academic
body that may pursue issues simply because they are of interest to
them or may be to certain members in the abstract. Indeed, as the
Appellate Body itself had said many years ago, it is not the role
of panels or the Appellate Body to 'make law' outside of the context
of resolving a dispute - in effect, to use an appeal as an occasion
to write a treatise on a WTO agreement. But that is what the report
did in this appeal."
Second was in DS430 (India - Measures Concerning the Importation of
Certain Agricultural Products), a dispute in which the United States
was the complaining party and prevailed. The US maintained that the
Appellate Body report engaged in a lengthy abstract discussion of
a provision of the SPS Agreement without ever tying that discussion
to an issue on appeal, and even expressed "concerns" in
that discussion on findings of the panel that were not raised by either
party in the appeal.
"It is not the role of the Appellate Body to engage in abstract
discussions or to divert an appeal away from the issues before it
in order to employ resources on matters that are not presented in,
and will not help resolve, a dispute," the US said.
A third example occurred in DS437 (United States - Countervailing
Duty Measures on Certain Products from China), where the US said it
explained its concerns that the Appellate Body report suggests a view
of dispute settlement that departs markedly from that set out in the
DSU and reflected in numerous prior reports. There, the Appellate
Body report rejected a party's appeal, but then went on to reverse
the Panel report and to find a breach on the basis of an argument
and approach entirely of the Appellate Body's creation.
"This approach suggests that panels and the Appellate Body are
to conduct independent investigations and apply new legal standards,
regardless of what either party actually argues to the panel or Appellate
Body. But that is not right. Under the DSU, panels and the Appellate
Body are to consider the evidence and arguments put forward by the
parties to make an objective assessment of the matter before it."
Fourth, in DS449 (United States - Countervailing and Anti-dumping
Measures on Certain Products from China), the US said the Appellate
Body report took a "very problematic and erroneous approach to
reviewing a Member's domestic law, risking turning the WTO dispute
settlement system into one that would substitute the judgement of
WTO adjudicators for that of a Member's domestic legal system as to
what is lawful under that Member's domestic law."
It is inappropriate for a WTO adjudicator to say it would decide the
"right" result under a Member's law, in the abstract, while
ignoring key constitutional principles of that Member's domestic legal
system, but that is what the Appellate Body did, the US argued.
The US said that it is also concerned about the manner in which Mr
Chang has served at oral hearings, including that the questions posed
spent a considerable amount of time considering issues not on appeal
or not focused on the resolution of the matter between the parties.
"Together, the appeals in which the member participated indicate
that he has not been willing to adhere to the proper role of the Appellate
Body," the US maintained. "We do not see how holding a member
accountable for the views they have endorsed and their actual service
carries a risk for the trust WTO Members place in the independence
and impartiality of the Appellate Body. To the contrary, WTO Members'
trust is not built on a vacuum. It is based on the actual performance
of the Appellate Body."
The US said it is disappointed at the suggestion that the DSU should
now be re-interpreted to reduce the role of the DSB and WTO Members
in the WTO dispute settlement system. "This is not a suggestion
the United States can support or a way to sustain confidence in the
WTO or its dispute settlement system."
The US underlined that its position on this issue is not one based
on the results of those appeals in terms of whether a measure was
found to be inconsistent or not. Instead, the concerns raised are
important, systemic issues that go to the adjudicative approach and
proper role of the Appellate Body and the dispute settlement system.
Referring to the letter sent to the DSB by the six remaining Members
of the Appellate Body in support of Mr Chang, the US considers that
the action by these Appellate Body members to interject themselves
in a decision in which they have no role is, to say the least, "unfortunate".
The fact that these Appellate Body members are seeking to provide
views on this issue is, regrettably, another instance in which Appellate
Body members are acting outside the role assigned to them by WTO Members
in the DSU, it said.
In its intervention, Korea said that it had previously asked the United
States to reconsider its position, and was extremely disappointed
that the US confirmed its opposition today.
"We are not arguing that Appellate Body Members have a right
or a privilege to be reappointed. It is WTO Members who have a right
to agree or disagree with the reappointment of any Appellate Body
Member. However, in view of the importance of the Appellate Body,
if this right is ever to be exercised, it should be for compelling
and legitimate reasons."
"The US is telling us in effect that they are opposed to the
reappointment of Professor Chang because they believe that Professor
Chang has restricted the rights or expanded the obligation of WTO
Members through the Appellate Body decisions he is involved with."
Korea was of the view that the US position is inappropriate and raises
serious systemic concerns. First, it said that an Appellate Body member
should not be singled out for any criticism directed at the Appellate
Body for its reports. As the AB Members confirmed in the letter, an
AB decision cannot be attributed to a particular Member, because it
is the decision of the "Appellate Body".
Korea cited Article 17 of the DSU which provides that the proceedings
in the Appellate Body shall be confidential and opinions expressed
in the Appellate Body reports shall be anonymous.
Second, said Korea, "this opposition is, to put it bluntly, an
attempt to use reappointment as a tool to rein in Appellate Body Members
for decisions they make on the bench. Its message is loud and clear:
'If AB Members make decisions that do not conform to US perspectives,
they are not going to be reappointed'."
Needless to say, Korea warned, if the US position is allowed to prevail,
it would seriously undermine the independence and integrity of the
Appellate Body. "First-term AB Members may have to reflect more
on how their rulings will be viewed by major Members rather than on
the merits of the cases. It will also create a dangerous precedent
that other WTO Members may be tempted to follow."
Korea said it agrees with what the six remaining Appellate Body members
said in their letter to the DSB, that: "[W]e are concerned about
the tying of an Appellate Body reappointment to interpretations in
specific cases, and even doing so publicly. The dispute settlement
system depends upon WTO Members trusting the independence and impartiality
of Appellate Body Members. Linking the reappointment of a Member to
specific cases could affect that trust."
According to Korea, for an adjudicator to be truly independent, he
or she must have assurance that his or her decisions, made in good
conscience, will not result in what is effectively removal from office.
"The US opposition contravenes this most fundamental judicial
principle", Korea underscored. "This alone should be sufficient
grounds for us to reject the US opposition. Yet there is another aspect
of its position, one that is no less significant, which concerns us
deeply. It relates to how we address differing viewpoints in this
The US claims that the AB rulings Professor Chang was involved with
went beyond the AB mandate, which is to adjudicate appeals and clarify
existing provisions of the covered agreement, without adding to or
diminishing the rights and obligations provided in those agreements.
The request that the AB remain within the boundary of its mandate
is itself legitimate. Yet, to argue that some AB decisions were not
consistent with the AB mandate and oppose reappointment of an AB member
who participated on those decisions on that basis conceals one important
There are different views among WTO Members on the role and jurisdiction
of the Appellate Body. In other words, there is no agreement on where
the boundary of the AB mandate exactly lies, said Korea.
Under these circumstances, the positive and constructive way forward
would be to continue efforts on building consensus through discussions.
Instead, the United States has chosen the very different path of imposing
its own perspective on WTO Members and the Appellate Body through
the removal of an Appellate Body member.
"This approach is misguided. Replacing AB Members will not eliminate
differences in views regarding the consistency of specific AB decisions
with its mandate," Korea stressed.
Korea proposed that Members launch a discussion devoted to the question
of the boundary of appellate review with the goal of finding a common
understanding. "We believe that this is the right way to address
the concerns of Members, including the United States, while maintaining
the integrity and independence of the Appellate Body."
Korea said that it does understand and respect the intention of the
United States to raise an important issue relating to the dispute
settlement system. "Good intentions, however, do not justify
a wrong course of action. We cannot find justification in the US opposition
to reappoint Professor Chang. We could like to urge the United States
to reconsider and withdraw its opposition," it said.
Korea requested the DSB continue discussions on reappointment so that
"we may find a solution that safeguards the integrity of the
Expressing support for Korea and other members in support of the reappointment
of Mr Chang, India said that "a successful dispute settlement
mechanism is grounded on an independent and impartial Appellate Body,"
adding that the alleged reasons cited by the US are "troubling".
India underlined that the reappointment process and the basis for
opposition to the reappointment will "undoubtedly have serious
consequences on the independent functioning of the Appellate Body."
(See SUNS #8246 dated 24 May 2016 for details on India's remarks.)
The European Union said it is seriously concerned about the United
States' veto against the re-appointment of Prof. Chang on the basis
of his alleged track record on the Appellate Body. "This is unprecedented
and poses a very serious threat to the independence and impartiality
of current and future Appellate Body members."
In the view of the EU, in order to ensure the independence of the
Appellate Body, re-appointments should be more or less automatic if
the AB Member indicates that they are available for a second term.
In particular, the re-appointment process needs to be conducted in
a way that respects this independence. This implies that Appellate
Body members cannot be scrutinised on the basis of the positions they
may or may not have taken when performing their judicial function.
The EU said that it supports the re-appointment of Prof. Chang for
another term, and hopes that this re-appointment can still take place.
"This being said, the situation is very serious and arguably
the damage has already been done. The events of the past days may
taint any future re-appointment process."
Therefore, the EU believes that it is of utmost importance that a
systemic solution be found to this problem. The Appellate Body must
remain fully operational and the independence and impartiality of
its members must be protected. "In our view, the repetition of
the current crisis in future re-appointment processes would be untenable,"
said the EU.
Japan said that the US action is "extraordinary, exceptional
in nature, and has no precedent, and any act by a WTO Member of this
nature and magnitude must be exercised with extreme caution."
On its part, Japan said that it does not have objection to the re-appointment
of Mr. Chang, who has no doubt served faithfully and honourably on
the Appellate Body for the last four years.
Japan agrees that as an adjudicative body, the independence and impartiality
of the work of the Appellate Body must be fully respected because
this would ensure the credibility and proper functioning of the WTO
dispute settlement system.
Japan cited the first sentence of Article 17.2 of the DSU; which reads:
"The DSB shall appoint persons to serve on the Appellate Body
for a four-year term, and each person may be reappointed once."
According to Japan, nothing in this text suggests that the re-appointment
is pre-determined or a forgone conclusion.
Japan said that the problem is not simply about the propriety of the
system of re-appointment, or the length of the term of the office.
The heart of the issue lies in divergent views on the proper roles
of the Appellate Body and its institutional relationship with the
While nobody questions the importance of the judicial 'independence',
the Appellate Body is part of the much larger institutional structure
of the WTO and in that context there appears to be disagreement as
to the degree and nature of such "independence", whether,
how and to what extent the power and authority of the Appellate Body
should or can be circumscribed, and whether and how the Appellate
Body can or should discipline itself in exercising its authority.
In other words, there is a tension between the notion of the "separation
of powers", on the one hand, and that of "checks and balances"
on the other, if such notions ever exist in the WTO institutional
framework, and the question is how to strike the right balance.
In short, said Japan, there is no easy fix to the problem because
the issue is deeply rooted in the differences in opinion with respect
to the place of dispute settlement in the WTO regime at large. As
difficult and fundamental as it may be, the issue can only be addressed
and solved by WTO Members themselves.
Brazil said that the issue is one that goes to the heart of the matter,
an item that has to do with one essential pillar of the WTO and the
principle on which rests the Appellate Body: the independence and
impartiality of its members.
"And the underlying question with which we have to deal here
is: How can a member of the Appellate Body discharge properly and
independently its functions if worried, tempted, or put under pressure
to satisfy specific opinions of Members throughout its mandate, so
as to be reappointed?"
Brazil has always believed that if reappointment to a second mandate
at the AB is not automatic, in view of article 17.2 of the DSU, it
should be understood as quasi-automatic: only a specific set of objective
circumstances could justify the non-reappointment, such as health
conditions, malfeasance, a member's own desire not to continue etc.
It is worth remembering that this quasi-automatic nature of the reappointment
process has been the rule in the WTO for many years; this important
feature was attested to Brazil by several of the original members
of the Appellate Body.
"The reasons we now hear, however, for the objection to the reappointment
of Mr Chang are of an altogether very distinct nature and have nothing
to do with the circumstances mentioned before. They are very far from
what would be considered acceptable reasons, directed as they are
towards the alleged vices, excesses or errors in some Appellate Body
Moreover, these criticisms are attributed to one specific member of
a Division tasked to decide a case, which is composed of three members,
and these three members are part of an Appellate Body of seven members.
"And as we know these 7 members are collegially responsible for
each report," said Brazil.
According to Brazil, what does not seem to be fitting is to object
to the reappointment of a member to a second mandate on the grounds
that certain legal decisions, by certain individuals in a collegiate
body, are wrong or not satisfactory or, worse, because they do not
correspond to a Member's specific interests or expectations. This
runs counter to all canons of independence which are inherent to any
decision-making instance, whichever legal nature one may want to assign
"If the alleged reasons for objection are of this caliber, then
the integrity of the WTO's main adjudicatory body is clearly jeopardised,
" said Brazil. "It is evident that if all Members acted
according to the logic and arguments used in the present instance
to not reappoint the member of the Appellate Body in question, we
would soon transform that body in a tool of our own interests, something
that cannot be the universal law we strive for, the general rule which
allows for trustworthy and impartial decision-making in an international
As to what Members can concretely do, Brazil said that considering
that Article 17.2 of the DSU establishes that "each member may
be reappointed once", and no clear rules indicate the circumstances
that could justify non-reappointment, WTO Members could consider amending
the DSU to the effect that a single 6 or 7 year mandate for Appellate
Body members be established, so as to close the loophole for undue
interference and pressure, and to ensure an adequate working environment
for AB members.
At the same time, provided that independence and impartiality are
thus safeguarded throughout the mandate of AB members, Members could
weigh the pros and cons of introducing a regular "moment of interaction"
between Members and the Appellate Body - disconnected from the moment
of reappointment - as a means of allowing for the legitimate interest
of Members to convey their views on matters of concern regarding dispute
"This could become an opportunity for an exchange of opinions
on several issues, as long as the adequate rules of procedure are
Chinese Taipei said that members should be extremely cautious and
employ a great deal of self-restraint when considering whether or
not a reappointment should be blocked. Barring certain exceptional
circumstances, such as ethical misconduct or a serious medical condition
affecting the candidate's ability to perform the function, the reappointment,
in principle, should usually be allowed to take place.
Its understanding is that the Appellate Body's decisions on appeal
are drafted by a three-person division, with consultations taking
place later among all 7 members. "We can see no reasonable basis
for exclusively attributing a particular legal view, or views, expressed
in the Appellate Body's Reports to one single Appellate Body Member."
It said that it is most concerned that any blockage of a reappointment
which is based on the Appellate Body's legal views in certain disputes
may be an intervention in the core of the authority of the institution,
and that it could also have a chilling effect on the individual Appellate
Body Members and seriously undermine the institution's independence
in carrying out its prime responsibility, which is "to clarify
the existing provisions of those agreements in accordance with customary
rules of interpretation of public international law."
Australia said that non-reappointment should only be exercised in
While recognising that the reappointment of Appellate Body Members
is not automatic, New Zealand emphasised that consensus should only
be blocked in rare and exceptional circumstances.
The Chair of the DSB, Ambassador Xavier Carim of South Africa, said
he will be away from Geneva from 25-28 May and from 31 May to 3 June.
He said that on his return, he will make himself available to meet
with delegations and consider any suggestions.
Meanwhile, under a separate agenda item, concerning the replacement
of Ms Yue Jiao Zhang of China, whose second and last term of office
at the AB ends on 31 May 2016, the Chair reported that the Selection
Committee was not in a position to recommend a candidate that would
enjoy the consensus of the entire membership. He said that the selection
committee will continue its consultations.
There are seven nominations for the post from Japan, Nepal, China
(two), Turkey, Australia, and Malaysia.