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.
DSU REFORM
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. +