TWN Info Service on WTO and Trade Issues (Jun18/02)
4 June 2018
Third World Network
  
US again blocks consensus over AB appointments
Published in SUNS # 8691 dated 31 May 2018

Geneva, 30 May (Kanaga Raja) - The United States has once again blocked at the World Trade Organisation (WTO) the launch of the selection processes to fil l three current vacancies on the seven-member Appellate Body (AB).

With the US repeatedly blocking consensus - for the twelfth time now - to begin the selection processes to fill these three vacancies, it has prolonged the impasse over this issue which has been before the Dispute Settlement Body (DSB) for more than 17 months now.

At a meeting of the DSB on Monday (28 May), the US once again informed Members that it was not in a position to agree to a joint proposal sponsored by some 67 WTO Members that called for the simultaneous launch of the selection processes to fill the three vacancies on the Appellate Body as soon as possible.

Two Appellate Body members whose second and final four-year terms have expired are Mr Ricardo Ramirez- Hernandez and Mr Peter Van den Bossche.

Mr Ramirez-Hernandez's second term expired on 30 June 2017, while that of M r Van den Bossche expired on 11 December 2017.

Another vacancy pertains to Mr Hyun Chong Kim from South Korea who had tendered his resignation with immediate effect on 1 August 2017, prior to taking up his appointment as a minister in the Korean government.

Meanwhile, a farewell ceremony was held for departing AB member Mr Ramirez-Hernandez at the WTO also on Monday.

In his farewell speech, Mr Ramirez-Hernandez said the crisis being faced by the dispute settlement mechanism and in particular, the Appellate Body could have been avoided if it had been addressed face-on, as it began to escalate.

"You, the Members, need to ask yourselves, what is the contribution of the AB to the international rule of law? What does this paralysis do to the WTO Dispute Settlement System as a whole?" said Mr Ramirez-Hernandez.

"This institution does not deserve to die through asphyxiation. You have an obligation to decide whether you want to kill it or keep it alive," he added. (See separate story).

In a related development, the Chair of the DSB, Ambassador Sunanta Kangvalkulkij of Thailand, also informed Members at the DSB meeting on Monday that she had received a communication indicating that Appellate Body Member Shree Baboo Chekitan Servansing was interested in serving a second term. His first four-year term expires on 30 September.

The Chair said that she would begin consultations with Members on the matte r and report back at the next meeting of the DSB on 22 June.

[The seven-member AB is now functioning with only four members, one of whom (Mr. Servansing) is due for reappointment at the end of his current term in September, and the DSB Chair has started consultations on his reappointment .

[Two more of the current AB members are due to retire next year, and if the US continues with its consensus-blocking approach, the AB will no longer be able to function, lacking the minimum of three members to hear appeals.

[While dispute settlement can function, with disputes referred to panels automatically on a second request, and the panels can hear parties and third parties and hand down rulings, when one of the parties notifies that it was appealing, until the AB is able to hear and give a ruling on points of law being appealed, the panel report cannot be adopted. Thus from next year, in practical terms, the DSB will not be able to complete its task on disputes, paralysing the system. S UNS]

According to trade officials, South Africa, on behalf of the African Group, told the DSB meeting that the group was increasingly concerned by the recent developments with respect to the appointment of AB members. It believed that some of the issues raised may be amenable to solutions in the short term while others would require more discussion.

The African Group was of the view that consultations on the reappointment of Mr Servansing should begin immediately so that the DSB is in a position to decide in September (see SUNS #8690 dated 30 May 2018).

On the filling of the three current vacancies on the AB, a joint proposal on AB appointments was tabled at the DSB meeting by Argentina; Australia; Bolivia ; Brazil; Canada; Chile; China; Colombia; Costa Rica; Dominican Republic; Ecuador; El Salvador; the European Union; Guatemala; Honduras; Hong Kong-China; Iceland; India; Indonesia; Israel; Kazakhstan; Korea; Mexico; New Zealand; Nicaragua; Norway; Pakistan; Panama; Paraguay; Peru; the Russian Federation; Singapore; Switzerland; Chinese Taipei; Turkey; Ukraine; Uruguay; Venezuela; and Viet Nam.

According to the proposal (WT/DSB/W/609/Rev.4), given the urgency and importance of filling the vacancies in the Appellate Body, in compliance with the DSU and so that it can carry on its functions properly, the delegations ref erred to above, propose that, at its meeting, the DSB takes a decision with regard to the following:

(1) to launch: (i) one selection process to replace Mr. Ricardo Ramirez Hernandez, whose second four-year term of office expired on 30 June 2017, ( ii) a second selection process to replace Mr. Hyun Chong Kim, who resigned from the Appellate Body as of 1 August 2017, and (iii) a third selection process to replace Mr. Peter Van den Bossche, whose second four-year term of office expired 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 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 a 30-day period after the date of its decision, for Members to submit nominations of candidates; and

(4) to request the Selection Committee to carry out its work in order to make recommendations to the DSB within 60 days after the deadline for submitting nominations of candidates, so that the DSB can take a decision to appoint three new Appellate Body members as soon as possible.

Mexico, speaking on behalf of the 67 co-sponsors of the joint proposal, said that the considerable number of Members submitting this joint proposal reflects a common concern with the current situation in the Appellate Body that is seriously affecting its workings and the overall dispute settlement system against the best interest of its Members.

WTO Members have a responsibility to safeguard and preserve the Appellate Body, the dispute settlement process and the multilateral trading system.

Thus, said Mexico, it is our duty to proceed with the launching of the selection processes for the Appellate Body members, as submitted today to the DSB.

According to Mexico, the proposal seeks to:

(i) start three selection processes: one process to replace Mr Ricardo Ramirez-Hernandez, whose second term expired on 30 June 2017; a second process to fill the vacancy occurred with the resignation of Mr Hyun Chong Kim with effect from 1 August 2017; and a third process to replace Mr Peter Van den Bossche, whose second term expired on 11 December 2017;

(ii) to establish a Selection Committee;

(iii) to set a deadline of 30 days for the submission of candidacies; and

(iv) to request that the Selection Committee issues its recommendation within 60 days after the deadline for nominations of candidates.

Mexico said that the proponents are flexible in the determination of the deadlines for the selection processes but they should take into account the urgency of the situation.

It continued to urge all Members to support the proposal in the interest of the multilateral trade and the dispute settlement systems.

In its statement, the US said that as it has explained in prior meetings, “we are not in a position to support the proposed decision."

According to the US, for at least the past 8 months, it has been raising an d explaining the systemic concerns that arise from the Appellate Body's decisions that purport to "deem" as an Appellate Body member someone whose term of office has expired and thus is no longer an Appellate Body member, pursuant to its Woking Procedures for Appellate Review (Rule 15).

During that period of time, the DSB has adopted by "positive" consensus four reports signed by someone no longer an Appellate Body member, and there currently remain two ongoing appeals where the term of one of the persons appointed to the division has expired.

[The US claim that the reports have been adopted by "positive consensus", however, appears questionable, since in terms of Article 17.14 of the DSU, the question of "positive consensus" arises only for non-adoption. The US attempt at the DSB meeting to have the DSB adopt the AB report on the Airbus compliance panel ruling by "positive consensus", namely unanimous consent of members, failed when the EU and Brazil among others made clear that the adoption was by the normal negative consensus. See SUNS #8690 dated 30 May 2018 - SUNS]

However, the US claimed, the Dispute Settlement Body has not yet addressed the problem of persons continuing to hear appeals well after their terms have expired.

Repeating the arguments it has made at previous DSB meetings, the US maintained that under the Dispute Settlement Understanding, it is the DSB that has the authority to appoint Appellate Body members and to decide when their term in office expires, and so it is up to the DSB to decide whether a person who is no longer an Appellate Body member can continue to serve on an appeal.

Last month, the US said it repeated concerns with the Background Note circulated by the Appellate Body on Rule 15 and asked for Members to be provided additional information.

The US said to recall, it pointed out that, unlike other international tribunals cited in the Background Note, Rule 15 is not set out in the constitutive text of the WTO dispute settlement system - that is, the DSU. It has therefore not been agreed to by WTO Members, the US argued.

"We therefore asked to be informed by the Appellate Body why this basic difference between the DSU and "some international tribunals" was not reflected in what was purported to be a background document," it said.

The US said it also called Members' attention again to a misleading, at best, statement that appeared to have been very carefully crafted to avoid mentioning that Rule 15 was, in fact, "criticized by [a WTO] Member in the DSB" and was "called into question" at the time of its adoption, contrary to assertions in the Background Note.

The US maintained that the criticism of Rule 15 in the DSB by a WTO Member at the time of its adoption is the type of basic information one would expect to be included in a document with the intention to make an objective presentation of the issue.

"We therefore asked to be informed by the Appellate Body why India's intervention was not drawn to the attention of WTO Members in the Background Note and further asked why the Appellate Body's statement was drafted in the manner it was," it said.

"We have yet to receive information in response to either of these inquiries," the US added.

[When Rule 15 was notified to the DSB by the AB as a working procedure, India had voiced its systemic concerns, but the US at that time had remained silent. SUNS]

The US said it appreciated the recognition by Members at the last meeting of the fact that addressing this issue is a joint responsibility of all Members, and it appreciates the willingness they expressed to engage on this issue.

The US said that it remains resolute in its view that Members need to resolve that issue as a priority.

A number of ideas have been mentioned in the context of informal discussion s in which the US has participated, representing a diversity of views on possible solutions.

"We therefore will continue our efforts and our discussions with Members and with the Chair to seek a solution on this important issue," the US concluded.

CONCERNS VOICED BY MEMBERS

Colombia (for the GRULAC group), Canada, Australia, Chinese Taipei, Thailand, Singapore, India, Norway, Pakistan, Russia, Switzerland, Brazil, Korea, Ukraine, Hong Kong-China, China, Japan, Mexico (on behalf of itself), Uruguay, Guatemala, Ecuador, Turkey, Costa Rica and New Zealand all took the floor on this issue.

According to trade officials, these members reiterated their concerns over the continued impasse with respect to the appointment of new Appellate Body members. They urged all members to show flexibility in order to resolve the deadlock as soon as possible.

Several members pointed to the dangers that the continued impasse pose not only to the dispute settlement system but also the WTO as a whole, and said that members had an obligation under the WTO rules to initiate the selection process to fill the vacancies on the Appellate Body.

Other Members underlined that the US concerns and the issue of AB appointments should be treated separately.

Several members also called on the US to share its views and develop ideas on how to resolve its problem.

According to trade officials, Russia, Switzerland, Brazil, Korea, China, Guatemala, and Turkey criticised the US directly or indirectly for failing to put forward any proposals over the past half year for resolving the problem and /or failing to engage in any meaningful discussion on its concerns.

Canada expressed deep regret that the DSB has been unable to fulfil its leg al obligation under DSU Article 17.2 to appoint AB members as vacancies arise. Canada agreed that it is time to start a process or, if necessary, several processes to select new AB members for the three current vacancies.

Like other members, Canada said it is disappointed that the US has linked the start of the AB selection processes to the resolution of certain procedural concerns it has shared with members. Canada invited the US to engage in discussions with interested Members with a view to expeditiously developing a solution to the concerns that it has raised.

Japan said that it is the responsibility of the entire membership, acting a s the Dispute Settlement Body, to ensure the proper functioning of the WTO dispute settlement system in a manner consistent with the DSU. It welcomed the readiness expressed by many Members to engage and it looks forward to working with ot her interested Members in this common endeavour.

Colombia, on behalf of the Group of Latin American and Caribbean countries (GRULAC), expressed the group's deep concern about the situation we have reached, which it said affects the good performance of one of the central bodies of the WTO. If this problem continues without being solved, it will imply, in the short term, practically the paralysis of the Appellate Body, putting the entire dispute settlement system at risk.

Colombia noted that the delay in launching the replacement process, having already arisen with three vacancies, means the failure to comply with an existing mandate, and involves a flagrant breach of a legal obligation emanating from a covered agreement.

This has systemic consequences and is a bad precedent for the organisation. It inflicts damage and affects the image and credibility of the WTO, particularly taking into account the complex international scenario that today adversely affects trade multilateralism, said Colombia.

It said that it has heard of concerns expressed in relation to the functioning of the dispute settlement system and specific issues regarding decision-making, which would be causing the impediment to launch the replacement process.

"We cannot validate that these concerns prevent a legal obligation from being fulfilled and are linked to the replacement of the vacancies already arisen or to arise."

Colombia pointed out that the operation of the system cannot be stopped, while the concerns of some of the members have not been resolved. It called attention to the seriousness of keeping blocked the replacement of vacancies. It also considers that the selection process should not be conditioned to a different process, which must be addressed on its own merits.

In this regard, Colombia urged the membership to find a solution that allows us to advance as soon as possible in the fulfilment of the legal obligation that it has mentioned.

The Russian Federation said it is deeply concerned about the continuing US blockage of the selection process and the fact that the US links it with the resolution of the "problem".

Russia said that for the past half a year, the US has neither put forward the concrete problem nor the possible ways to resolve it.

This leads to the inability of the WTO Members to engage in a meaningful discussion and move towards the resolution of this issue.

According to Russia, such unilateral actions kill the trust in the multilateral process and contributes to the chaos in multilateral rules even though they are taken under the pretense of compliance with the existing rules.

There is always room for improvement. But such improvement should not be contrary to the well-functioning of the dispute settlement mechanism and of the WTO system as a whole.

Russia called on the US to provide a clear picture of the problem at issue and its potential solutions or stop the blockage.

According to trade officials, the Chair of the DSB said it was regrettable that members were still not in a position to launch the selection process and that the matter required political engagement by members.

She asked members to share their views on how to proceed and said she was ready to hear from delegations on their ideas.