TWN Info Service on WTO and Trade Issues (Sept17/01)
6 September 2017
Third World Network

Impasse deepens over AB selection process, US comes under criticism
Published in SUNS #8526 dated 5 September 2017

Geneva, 4 Sep (Kanaga Raja) - The continued impasse over the launching of the process for the selection of new Appellate Body (AB) members to replace the two AB members whose terms have either expired, or will expire soon has deepened with the United States saying it was not in a position to agree to launch the process until its concerns over the continued service of former AB members are addressed.

According to trade officials, this came during the discussions on Appellate Body matters at the meeting of the WTO Dispute Settlement Body (DSB) on 31 August.

The US told the meeting that in its view, simply moving forward with filling vacancies risks perpetuating and leaving unaddressed the concerns it believes require the urgent attention of the DSB.

The two Appellate Body members in question whose second four-year terms have expired or are expiring soon are Mr Ricardo Ramirez-Hernandez and Mr Peter Van den Bossche.

The second term of Mr Ramirez-Hernandez had already expired on 30 June. He however is continuing his work on three ongoing appeals in which he is involved.

The second term of Mr Van den Bossche will expire on 11 December 2017.

The situation seems to have now been further compounded by the sudden departure of Appellate Body member Mr Hyun Chong Kim of South Korea who tendered his resignation (with immediate effect) on 1 August prior to his appointment as a minister in the Korean government.

According to trade officials, the DSB Chair, Ambassador Junichi Ihara of Japan, noted that while resignations of Appellate Body members normally take effect 90 days after a notice has been submitted, Article 17.3 of the WTO's Dispute Settlement Understanding states that Appellate Body members "shall be unaffiliated with any government".

Thus, Mr. Kim's decision to tender his resignation took immediate effect, he said.

The Chair said with the Appellate Body now facing three vacancies on its seven-member slate, he had proposed to launch the selection processes for all three vacancies, and for candidates to be chosen by the same selection panel, as soon as possible.

He said he had consulted with WTO members on his proposal but that further consultations were needed.

PROPOSALS FROM THE EU AND LATIN AMERICAN COUNTRIES

According to trade officials, both the European Union and a group of seven Latin American countries (Argentina, Brazil, Colombia, Chile, Guatemala, Mexico and Peru) again submitted updated proposals to launch the selection process(es).

The European Union called for all three selection processes to be launched immediately and to be completed as soon as possible.

The Latin American countries again called for the selection process to replace Mr. Ramirez-Hernandez to be launched first.

In its proposal (WT/DSB/W/597/Rev.3), the European Union proposed that, at its meeting on 31 August 2017, the DSB take a decision with regard to the following four elements:

(1) to launch one selection process to replace Mr Ricardo Ramirez-Hernandez, whose second four-year term of office expired on 30 June 2017, and to launch another selection process to replace Mr Peter Van den Bossche, whose second four-year term of office will expire on 11 December 2017;

(2) to establish a Selection Committee, consistent with the procedures set out in document WT/DSB/1 and with previous selection processes, composed of the Director-General and the 2017 Chairpersons of the General Council, the Goods Council, the Services Council, the TRIPS Council and the DSB, to be chaired by the DSB Chair;

(3) to set a deadline of 28 September 2017 at 6 pm for Members to submit nominations of candidates; and

(4) to request the Selection Committee to carry out its work in October 2017 in order to make recommendations to the DSB as soon as possible so that the DSB can take a decision to appoint two new Appellate Body members as soon as possible, and at the latest at its regular meeting scheduled for 22 November 2017.

The proposal by the seven Latin American countries for approval by the DSB at its meeting on 31 August 2017 reads as follows:

"The Dispute Settlement Body agrees to the following four elements:

(1) to launch a selection process for the vacancy in the Appellate Body that arose on 1 July 2017;

(2) to establish a Selection Committee, consistent with the procedures set out in document WT/DSB/1 and with previous selection processes, composed of the Director-General and the 2017 Chairpersons of the General Council, the Goods Council, the Services Council, the TRIPS Council and the DSB, to be chaired by the DSB Chair;

(3) to set a deadline of 29 September 2017 at 6 pm for Members to submit nominations of candidates; and

(4) to request the Selection Committee to carry out its work throughout October/November 2017 in order to make a recommendation to the DSB as soon as possible, so that the DSB can take a decision to appoint a new Appellate Body member no later than at its regular meeting scheduled for 22 November 2017."

THE US POSITION AND MEMBERS' REACTIONS

In its statement on this issue, the US said the resignation of Mr. Kim from the Appellate Body raises important systemic questions for the DSB to consider and resolve.

At the time of Mr. Kim's resignation, he was one of three members of the Appellate Body serving on the appeal in the dispute EU - Antidumping Measures on Imports of Certain Fatty Alcohols from Indonesia (DS442).

The Chair of the Appellate Body has informed the DSB that the Appellate Body expects to circulate its report in this dispute no later than Tuesday, September 5.

However, said the United States, Members have been informed that, on August 1, Mr. Kim "tender[ed] [his] resignation as an Appellate Body Member, effective 1 August 2017."

A WTO press release dated 1 August 2017 reflects the view that "the resignation was with immediate effect."

In light of that information, Mr. Kim is no longer an Appellate Body member as of August 1, the United States maintained.

"Therefore, the report to be circulated on September 5 would not appear to be on behalf of three Appellate Body members."

According to the United States, this raises concerns under Article 17.1 of the DSU, which states that "three [members] shall serve on any one case."

Given Mr. Kim's resignation to become Korea's Trade Minister, the United States considers it necessary and appropriate for his resignation to have been effective immediately.

However, the WTO press release is in tension with Rule 14(2) of the Working Procedures for Appellate Review, which states that a "resignation shall take effect 90 days after the notification ... unless the DSB decides otherwise."

The United States noted that the Appellate Body's rule as drafted would permit any appellate report on which the individual was working to be issued before that resignation became effective.

This reinforces that a person must be a member of the Appellate Body when that report is circulated to the DSB.

The United States further noted that Mr. Ramirez is serving on this same appeal, although his second term expired on June 30.

This means that on the date the Appellate Body report is circulated to the DSB, only one signatory would appear to actually be an Appellate Body member.

"These are unprecedented circumstances, and the United States considers that the DSB needs to consider the implications and decide how to handle this situation."

In addition to the Alcohols (DS442) dispute, Mr. Ramirez continues to serve on two other appeals, the United States noted.

In a letter to the DSB Chair, the Chair of the Appellate Body has stated that Mr. Ramirez "has been authorized, pursuant to Rule 15, by the Appellate Body to complete the disposition of these appeals."

Rule 15 only applies to "[a] person who ceases to be a Member of the Appellate Body," said the United States.

According to the United States, under DSU Article 17.2, it is the DSB that has the authority to appoint and reappoint members of the Appellate Body.

The DSB exercised that authority in reappointing Mr. Ramirez "for a second four-year term of office, starting on 1 July 2013."

As decided by the DSB, his appointment as an Appellate Body member expired on June 30, 2017.

It is only by virtue of that DSB decision that WTO Members have been considering the issue of a selection process to replace him.

But Members have not discussed how any continued service on appeals might affect that process, the United States maintained.

"We appreciate that the approach of Rule 15 could contribute to efficient completion of appeals. As a party in two pending appeals, the United States would welcome Mr. Ramirez's continued service on the appeals to which he had been assigned as of June 30," it said.

Under the DSU, however, the DSB has a responsibility to decide whether a person whose term of appointment has expired should continue serving, as if a member of the Appellate Body, on any pending appeals.

"We consider the DSB should also discuss this issue so it can take appropriate decisions. We look forward to consulting with the Chair and other Members on these important systemic issues," said the United States.

According to trade officials, the DSB Chair said the US points merited the attention of the DSB and that in order to give members the opportunity to discuss them, he was ready to hold an informal open-ended meeting on the matter as soon as feasible as well as meet with delegations individually.

The US said that it is not in a position to support the proposed decision (in reference to agenda item 7 on the EU proposal).

"We consider that the first priority is for the DSB to discuss and decide how to deal with reports being issued by persons who are no longer members of the Appellate Body. Members should consider how resolution of those issues might affect a selection process. An informal DSB meeting would be a good place to start."

According to trade officials, the US said that its position not only applied to the EU proposal but also the Latin American proposal.

[Previously, the US had said it was ready to go along with the proposal from the seven Latin American countries (on the selection process for Mr Ramirez-Hernandez) but was not in a position to agree to the launch of a selection process for a vacancy that will only occur in December (to replace Mr Van den Bossche). See SUNS #8508 dated 24 July 2017.]

According to trade officials, many WTO members voiced concerns over the US stance at the DSB meeting.

While some said they understood the US concerns and were ready to discuss them, they also stressed that the issue of reappointing Appellate Body members and discussing systemic issues should not be linked.

Brazil said that the US stance "made a difficult situation even worse".

Mexico and Canada said the continued impasse risks creating a "dysfunctional" situation.

China insisted that no linkage should be made between the two issues and that the current situation was "severe", while Australia said that it did not understand the logic of the US argument.

According to trade officials, other members expressing concern over the continued delay in launching the selection process(es) were Korea, Pakistan, Japan, Switzerland, Singapore, New Zealand, Chinese Taipei, Norway, Cameroon, Chile, Russia, and the Dominican Republic.

Switzerland said that "we're facing a crisis, even wider and more worrying this time".

Korea said it recognises that a vacancy in the Appellate Body has arisen since Mr Hyun Chong Kim tendered his resignation on 1 August with immediate effect.

He then was appointed as Korea's Trade Minister and he took office on 4 August.

Korea believed that Mr Kim made best efforts to fulfil his obligation as an Appellate Body member during (his term) in office until his resignation.

His resignation was due to unforeseen development of establishment of a new administration in Korea.

Korea said that it remains committed to the WTO dispute settlement system in which the Appellate Body plays a crucial role.

In this regard, Korea said that it is fully supportive of launching the selection process as soon as possible.

In Korea's view, the discussions to launch the selection process for the vacancy of Mr Kim could be made taking into account the discussions on the selection process for the vacancy of Mr Ramirez and another upcoming vacancy.

Korea said it is ready to show flexibility on how and when the three selection processes are launched, as long as the period of vacancies can be limited to the minimum.

Korea pointed out that the current situation of prolonging deadlock is unusual. It is the systemic interest that is being undermined and victimised by conflicting positions on this procedural and technical matter.

"Thus, it is our view that the DSB should not let this happen again," it said.

In a second intervention, the United States thanked Members for their interventions. "We have been listening carefully," it said.

A number of Members have raised questions on the logic of linking the concerns the United States has raised under Item 6 (on Appellate Body matters) with the selection of Appellate Body members.

"There also seems to be some confusion regarding the US position. We further hear the concern that the DSB has the responsibility to address the systemic concerns raised," it said.

As Members are aware, the United States has a number of long-standing concerns frequently expressed in the DSB regarding the "critical necessity" of the DSB asserting the authority assigned to it under the DSU, it said.

"The issue the United States raised earlier concerning the continued service of former Appellate Body members is an important example of these concerns that we have been raising for some time."

"In our view, simply moving forward with filling vacancies risks perpetuating and leaving unaddressed the concerns we believe require the urgent attention of the DSB."

"Our view under this item also applies to the proposal that has been put forward under Item 8 by Mexico, Argentina, Brazil, Colombia, Chile, Guatemala, and Peru," said the United States.

According to trade officials, the Chair of the DSB concluded by saying that he was ready to hold an informal open-ended meeting as soon as possible to discuss the concerns raised by the US.

The next regular meeting of the DSB is scheduled to take place on 29 September.