TWN Info Service on WTO and Trade Issues (Jun17/08)
16 June 2017
Third World Network

Delays in handling appeals will have implications for WTO
Published in SUNS #8479 dated 12 June 2017

Geneva, 9 Jun (Kanaga Raja) -- The Appellate Body of the World Trade Organisation has at present been unable to fully staff all appeals pending before it, and the expected increase in the number of appeals in large and complex disputes will further exacerbate the problem of delays in their disposal, according to the Chair of the Appellate Body, Mr Ujal Singh Bhatia.

This warning came in his keynote address, titled "The Problems of Plenty: Challenging Times for the WTO's Dispute Settlement System", that was made at an event organised for the first time by the Appellate Body on Thursday evening to mark the release of its Annual Report for 2016.

Also in attendance at the presentation of the Annual Report was Mr Thomas R. Graham, Chair of the Appellate Body in 2016.

[The AB Chair's address at the AB organized event, and covering several aspects of the AB's work and rulings, and the Chair's reference to the respect it commands among the Members and wider public as an international adjudicatory panel, coincidentally comes at a time when the US, a major player in conclusion of the Marrakesh Treaty, with its attendant dispute settlement system, under the Trump administration, has launched a major assault on the DSU. See separate article on parallel meetings in Paris at the OECD, and of some trade ministers on the sidelines of this year's meeting. SUNS]

"This problem cannot be expected to go away by itself," Mr Bhatia stressed. "Delays compel WTO Members to look for other solutions, potentially elsewhere. And in this, it is the weaker countries that stand to lose the most," said the Appellate Body Chair.

"The consequential delays in handling appeals have implications not only for the dispute settlement process of the WTO, but also for the WTO itself," he said further.

[At present there are two upcoming vacancies at the Appellate Body. The second four-year term of Mr Ricardo Ramirez Hernandez will expire on 30 June 2017, and the second four-year term of Mr Peter Van den Bossche will expire on 11 December 2017. At its meeting on 22 May, the DSB again failed to reach an agreement on the procedures for selecting two new AB members to replace them. See SUNS #8469 dated 24 May 2017.]

In his address, Mr Bhatia said that in the 22 years of its existence, the Appellate Body has come a long way, from a hesitant after-thought to a mature and well-respected international tribunal.

Its 146 adopted reports, along with more than 300 panel reports, constitute tens of thousands of pages of jurisprudence which is as wide in its reach as it is deep in its probing of the meaning of the covered agreements.

He highlighted a diversity of issues that have come up before the Appellate Body over the last two or three years that includes: environmental protection, renewable energy subsidies, tax evasion, money laundering, patent protection, animal welfare, food safety, consumer information, dumping, so-called non-market economies, and multilateral trade rules and RTAs (regional trade agreements).

Pointing out that the prestige that the Appellate Body now enjoys has a solid foundation which is based on several pillars, Mr Bhatia said: "The strongest pillar in this foundation is the shared commitment of all stakeholders to the belief that a rules-based multilateral trading system is a global public good that can be sustained only by a predictable, fair and prompt resolution of disputes."

As the drafters of the DSU (Dispute Settlement Understanding) recognized, the WTO dispute settlement system is central in providing security and predictability for multilateral trade, by preserving Member's rights and obligations, and in clarifying the provisions as they exist in the covered agreements.

Indeed, the creation of the Appellate Body shows that Members recognized the importance of predictability, consistency and stability in the interpretation of their WTO rights and obligations. The rules and process governing panel and appellate proceedings show the emphasis Members placed on the promptness of dispute resolution.

Including the requirement of "prompt" resolution of disputes in the WTO dispute settlement mechanism was a major feature that distinguished it from other international adjudicative systems.

"The special emphasis on promptitude was based on the common understanding that, in the world of commerce, time really is money. However, it is important to recognise that, in recent years, the WTO dispute settlement system has substantially ceded ground on this distinction," Mr Bhatia observed.

In this connection, he said, it is pertinent to recall that the demonstrated success of the dispute settlement system in effectively, predictably and expeditiously resolving disputes is why it is often called the crown jewel of the WTO. It is by no means an exaggeration to maintain that the good health of this system is vital for orderly global exchange.

However, the Appellate Body Chair noted that over the last several years, the Appellate Body has repeatedly informed WTO Members that, in view of the limited resources available to it, the increasing build-up of appeals is steadily leading to significant delays in their disposal.

"The mismatch between Appellate Body resources and the number, size and complexity of appeals has significantly intensified this year."

Mr Bhatia pointed out that at present, the Appellate Body is dealing with five appeals, including the very large compliance appeal in the "EC - Airbus" dispute.

Another five appeals are likely to be filed later this year, including, again, in two very large disputes - the "US - Boeing" compliance case and Brazil - Certain Measures Concerning Taxation and Charges.

At present, the Appellate Body has been unable to fully staff all appeals pending before it. By the end of the year, if all five of the projected appeals materialise, there will be further delays of several months in fully staffing and taking up these appeals.

"This problem cannot be expected to go away by itself," Mr Bhatia stressed.

In view of the high number of ongoing panel proceedings and filings at the panel stage, the workload of the Appellate Body is unlikely to abate in the next few years, he cautioned.

Further, the expected increase in the number of appeals in large and complex disputes - such as the EC - Airbus compliance dispute currently before the Appellate Body - will further exacerbate the problem of delays because such appeals require a larger legal team and added support staff than most other appeals, and these larger appeals also require a longer period of time to be heard.

Thus, he said, a significant portion of the Appellate Body's resources will be unavailable for other appeals for considerable periods of time.

"The consequential delays in handling appeals have implications not only for the dispute settlement process of the WTO, but also for the WTO itself," the Appellate Body Chair underlined.

"To the extent that delays in dispute resolution involve delays in the assertion of the rule of law, they provide an incentive to those who benefit from those delays."

When delays in WTO dispute resolution become the norm, they cast doubt on the value of the WTO's rules- oriented system itself. An erosion of trust in this system can lead to the re-emergence of power orientation in international trade policy.

"Delays compel WTO Members to look for other solutions, potentially elsewhere. And in this, it is the weaker countries that stand to lose the most," said the Appellate Body Chair.

On the issue of delays in WTO dispute resolution including in appellate proceedings, Mr Bhatia drew attention to three developments in 2016.

The first was on the appeal rate of panel reports. He said while the appeal rate may fluctuate somewhat from year to year, over the previous 10 years the average was 68%. However, he noted that in 2016 the appeal rate had risen to 88%.

Moreover, in recent years, most of the non-appealed panel reports were rather short, whereas the longest and most complex panel reports were almost always appealed.

The second development is the increasing number, complexity and duration of Article 21.5 compliance proceedings. In 2016, Article 21.5 proceedings were initiated in six disputes.

Article 21.1 of the DSU provides that "prompt compliance with the recommendations and rulings of the DSB is essential to ensure effective resolution of disputes to the benefit of all members".

"To this end, the increased activity in compliance proceedings is troubling," said Mr Bhatia.

A third development relates to the well-known sequencing issue between Article 21.5 compliance proceedings and Article 22.6 arbitration proceedings on the level and nature of suspension of concessions or other commitments.

"We note that in a number of recent cases, Article 22.6 proceedings have been directly initiated at the end of the RPT (the reasonable period of time) without a sequencing agreement between the parties. This development appears to be related to the larger issue of delays in WTO dispute resolution."

"Parallel proceedings under Article 21.5 and Article 22.6 involving the same dispute - in the absence of sequencing agreements - convey an impression of dysfunction," Mr Bhatia said.

He added that addressing the sequencing issue is of great importance for the successful operation of the WTO dispute settlement system, in which WTO-consistency is to be determined multilaterally and which provides for the right of appellate review of panel findings of inconsistency in Article 21.5 proceedings.

The situation therefore requires responsible and careful action by Members to ensure that the system continues to function well, said Mr Bhatia, noting that this matter came up for extensive discussion in recent DSB meetings, including, in particular, the last meeting of the DSB.

"It is our hope that broad agreement can be reached among Members on this important issue," he said. "There could be multiple reasons for these recent developments, but it is hard to ignore the underlay of restlessness with the increasing delays, which seem to be pushing Members to explore other options in pursuing their disputes. We can only speculate about the medium-term consequences of these developments on the credibility and utility of the WTO dispute settlement system."

These developments emphasise the need for concerted action by WTO Members to find solutions to the capacity constraints of the system. The dispute settlement system is the product of negotiations between WTO Members and functions in their interest.

"In a rapidly changing global trade environment, and a sustained rise in dispute settlement activity, it is important that adaptations are made whenever necessary, so that the system can continue to respond effectively to changing situations," the Appellate Body chair emphasised.


Mr Bhatia also highlighted the issue of reform of the DSU, noting that negotiations in this regard have been continuing for almost two decades.

Needless to say, the Appellate Body itself has a role to play in improving its working procedures and internal practices. It is fully cognisant of this responsibility and constantly reviews its procedures and practices with the view to producing leaner reports more quickly, without compromising on quality.

"In our consultations with Member representatives over the last few years, we have noted the high level of satisfaction among Members regarding the Appellate Body's functioning. We have also received some criticism."

Mr Bhatia categorised this criticism as broadly covering three areas: (1) timeframes for appellate review; (2) allegations of "over-reach" by the Appellate Body; (3) issues relating to the "comprehensibility" of Appellate Body reports.

Addressing each of these issues in turn, he said that firstly, the DSU provides for a strict timeframe for appellate review. The Appellate Body gives much importance to the need to keep appellate proceedings as short as possible. However, it is obliged to address each finding and each legal interpretation appealed.

In addition, the DSU explicitly provides that it is the mandate of the WTO dispute settlement system, and therefore also of the Appellate Body, to clarify the provisions of the covered agreements, with the objective of resolving the often-complex disputes between WTO Members and providing security and predictability to the multilateral trading system.

WTO Members expect from the Appellate Body, and the Appellate Body has the responsibility to provide, reports of the highest quality, which, once adopted, assist the DSB in resolving disputes between Members.

"As the forum of last recourse, the Appellate Body cannot afford to take shortcuts," Mr Bhatia underscored.

Secondly, he noted that the allegations of "over-reach" by the Appellate Body involve issues regarding the depth, as well as the breadth, of its analysis.

"We are well aware that panels and the Appellate Body cannot add to or diminish the rights or obligations provided for in the covered agreements."

As is also well known, the Appellate Body's mandate requires it to address all issues raised on appeal. Moreover, the Appellate Body has to bear in mind that, while adoption by the DSB makes its rulings binding on the parties to the dispute, they also serve the purpose of providing guidance to other WTO Members, and thereby aid in avoiding future disputes.

Dispute settlement practice demonstrates that WTO Members attach significance to the reasoning provided in previous panel and Appellate Body reports. Adopted panel and Appellate Body reports are almost always cited by parties in support of their legal arguments in dispute settlement proceedings, and are relied upon by panels and the Appellate Body in subsequent disputes, Mr Bhatia explained.

In addition, he said, when enacting or modifying laws and national regulations pertaining to international trade matters, WTO Members take into account the legal interpretation of the covered agreements developed by panels and the Appellate Body.

"As mentioned above, the clarifications of provisions of the covered agreements, as envisaged by Article 3.2 of the DSU, elucidate the scope and meaning of the provisions that are at issue in a dispute. They are an essential part of the mandate of the WTO dispute settlement system and the Appellate Body."

While the application of a provision may be regarded as confined to the context in which it takes place, the relevance of clarifications contained in adopted panel and Appellate Body reports is not limited to the application of a particular provision in a specific case.

As the DSU stipulates, the Appellate Body has to discharge this mandate "in accordance with the customary rules of interpretation of public international law".

"The Appellate Body is constantly aware of the need to ensure that each and every of its clarifications of WTO provisions meets this standard," Mr Bhatia pointed out.

Finally, Mr Bhatia made clear that the issue of "comprehensibility" of its reports is something that the Appellate Body takes very seriously.

Appellate Body reports cannot afford to be Brahminical treatises, intelligible to a chosen few. Their purpose is to resolve disputes, and for that they must be capable of being understood by all stakeholders.

As mentioned by his predecessor Tom Graham, the recent innovation of the "Findings and Conclusions" section in the Appellate Body reports should help in their de-mystification. But this remains a work in progress.

"Overall, I would agree that, as in other dispute settlement mechanisms, there is still some scope for efficiency gains in the Appellate Body's work."

There is much to be said for the virtues of relentless focus, brevity and reader-friendliness, while at the same time ensuring parties their "day in court" by addressing their arguments and due process concerns, as well as guaranteeing the accuracy, quality and depth of the legal reasoning on the often very difficult issues raised in an appeal.

"The purpose of this address is not to present a litany of woes. Indeed, there is much today in the WTO's dispute settlement system that should be celebrated, not bemoaned. The system at large, including the Appellate Body, commands enormous support and respect from its users," said Mr Bhatia, adding that the compliance rate with DSB rulings and recommendations remains very high.

There is universal recognition that, amid the proliferation of bilateral and plurilateral trade agreements, the WTO dispute settlement system has played a crucial role in making WTO law one of the liveliest and most effective branches of public international law.

The increasing use of WTO case law by other dispute settlement systems testifies to the growing influence of the WTO's dispute settlement system on international dispute settlement.

Overall, said Mr Bhatia, there is much in the WTO's dispute settlement system that is rightly envied by other international adjudicatory systems.

"But like any other man-made system, the WTO's dispute settlement system should not be taken for granted. It requires nurturing through timely interventions when problem areas emerge. The issue of delays is one such problem area which calls for broad, systemic solutions. It should be possible to find such solutions through determined action by WTO Members," he concluded. +