TWN Info Service on WTO and Trade Issues (Jul18/02)
2 July 2018
Third World Network
  
US prolongs stalemate by again blocking consensus on AB selection
Published in SUNS #8710 dated 28 June 2018

Geneva, 27 Jun (Kanaga Raja) - The United States, at a meeting of the WTO Dispute Settlement Body (DSB) on 22 June, has once again blocked the repeated attempts of a majority of WTO members to launch the selection processes to fill three current vacancies on the seven-member Appellate Body (AB).

By repeatedly blocking the consensus to begin the selection processes to fill these three vacancies, the US has prolonged the impasse over this issue which has been before the DSB for some 18 months now.

Speaking at the presentation of the Appellate Body's latest Annual Report a t the WTO on 22 June, following the DSB meeting, the chair of the Appellate Body, Mr Ujal Singh Bhatia, warned that the year-long impasse on the process for appointing AB Members is debilitating the AB.

"Its reduced strength is undermining the collegiality of our deliberations, and the lack of proper geographical representation threatens its legitimacy," he said.

He further warned that "the reduction in our numbers will cause further delays in appellate proceedings. Unless WTO Members take swift and robust action to remedy this situation, there may soon come a time when appellate proceeding s are paralysed if fewer than three AB Members are available."

Mr Bhatia pointed out that the institution of a standing body tasked with reviewing panel decisions is widely considered as the crowning achievement of the Uruguay Round of negotiations.

Impairing that achievement would deprive the WTO of ensuring the principled and consistent application of multilateral trade rules.

"It is our shared responsibility to maintain and preserve the trust, credibility, and legitimacy that the WTO dispute settlement system in general and the Appellate Body in particular have built over more than 20 years. WTO Members must embrace this responsibility and engage in constructive dialogue to ensure t he continued good health of a system that is uniquely effective, but which can not be taken for granted," he concluded. (See SUNS #8708 dated 26 June 2018).

At the meeting of the DSB on 22 June, the US once again declared 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 Mr 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.

In a related development, the Chair of the DSB, Ambassador Sunanta Kangvalkulkij of Thailand, informed members at the DSB meeting that she is continuing to seek their views on whether Appellate Body member Shree Baboo Chekitan Servansing, whose first term ends on 30 September 2018, should be given a second term. The Chair said that she would report back at the next DSB meeting in July.

[The seven-member AB is now functioning with only four members, one of whom being Mr. Servansing. 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. With any party in a panel proceeding still able, under the DSU, to give notice of appeal (pending whose disposal the ruling cannot be adopted) , this would paralyse the entire dispute settlement system and for practical purposes make it ineffective.]

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 (28 member states); 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 referred 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 t he 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, 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 and the multilateral trading systems.

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

According to Mexico, the proposal seeks to start three selection processes for Mr Ramirez-Hernandez, Mr Hyun Chong Kim and Mr Peter Van den Bossche; to establish a Selection Committee; to set a deadline of 30 days for the submission of candidacies; and to request that the Selection Committee issues its recommendation within 60 days after the deadline for nominations of candidates.

Mexico said 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.

"We continue to urge all Members to support this proposal in the interest of the multilateral trade and the dispute settlement systems," it added.

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

"The systemic concerns that we have identified remain unaddressed," it said .

For example, concerns 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 Working Procedures for Appellate Review (Rule 15).

The United States noted the respect that some Members expressed at the last meeting on the need for the DSB to observe its obligations under the DSU.

In this regard, it maintained that it is the DSB, not the Appellate Body, 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, not the Appellate Body, to decide whether a person who is no longer an Appellate Body member can continue to serve on an appeal.

"This is an area of responsibility that the DSB needs to address, and we appreciate that Members have expressed a willingness to engage on this issue."

"In past months, we have drawn attention to at least two aspects of the Appellate Body's unsolicited background note on Rule 15 that raise concerns," said the United States.

It noted that the document failed to provide a correct or complete presentation of the issue, including on past Member statements and other international tribunals. "We have asked for clarification to be provided by the Appellate Body on those misstatements and continue to await an answer."

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

"A number of ideas have been mentioned in the context of informal discussions in which we have 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."

CONCERNS OVER THE CONTINUED IMPASSE

According to trade officials, the European Union, Colombia (for the GRULAC group), Canada, Pakistan, Hong Kong-China, Russia, Venezuela, Switzerland, Thailand, Chinese Taipei, Singapore, Norway, Australia, Brazil, Turkey, India, Korea, New Zealand, Japan, China, the Philippines, Guatemala and South Africa (for the African Group) spoke on this issue.

Most of them referred to their previous statements on this matter.

In general, they reiterated their concerns over the continued impasse in the appointment of new Appellate Body members and urged all members to show flexibility in order to resolve the deadlock as soon as possible.

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

Other members reiterated that the US concerns and the AB appointment issue should be treated separately.

Several members pointed out that the rights and obligations of all WTO members were being undermined by the US actions.

In a statement, Colombia, for the Group of Latin American and Caribbean countries (GRULAC), expressed deep concern over the situation, 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, it warned.

Colombia noted that the delay in launching the replacement process, with regards to the three vacancies that have already arisen, is an infringement of a legal obligation emanating from a covered agreement.

This has serious 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 to day adversely affects trade multilateralism.

Colombia said 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 to be linked to the replacement of the vacancies already arisen or to arise."

Moreover, said Colombia, a proper interpretation of Article 17.2 of the DSU, read together with Article 2, does not warrant the view that positive consensus is necessary to launch the selection processes.

[Art. 2.4 states: "Where the rules and procedures of this Understanding provide for the DSB to take a decision, it shall do so by consensus." Fn.1 to "consensus" says: "The DSB shall be deemed to have decided by consensus on a matter submitted for its consideration, if no Member, present at the meeting of the DSB when the decision is taken, formally objects to the proposed decision".

[Art. 17.2 states: "The DSB shall appoint persons to serve on the Appellate Body for a four-year term, and each person may be reappointed once. However, the terms of three of the seven persons appointed immediately after the entry into force of the WTO Agreement shall expire at the end of two years, to be determined by lot. Vacancies shall be filled as they arise. A person appointed to replace a person whose term of office has not expired shall hold office for the remainder of the predecessor's term."]

"Therefore, we do not understand why these processes have not been initiated yet," said Colombia.

Colombia 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.

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.

Referring to its previous statements on this matter, India reiterated its serious concerns about the current impasse in filling vacancies in the Appellate Body and its effect on the credibility of the WTO.

India said that it is a co-sponsor of the proposal backed by 67 WTO members to fill these vacancies as a matter of priority.

India recognised that the dispute settlement system of the WTO is the central pillar in providing security and predictability to the rules-based trading system.

With the resurgence of unilateral measures and protectionism, the role of an independent and effective guarantor of these rules becomes all the more important.

And yet, said India, with the term of another Appellate Body member set to expire in three months' time, and with no resolution in sight, "we are moving even closer to an imminent paralysis of the Appellate Body."

This is a grave situation that has already begun to undermine the rights an d obligations of all WTO Members, not just in terms of longer delays, but also with respect to uncertainty regarding their right to have a second stage of review in the form of an Appellate Body, a right that was negotiated and agreed to by all WTO Members.

The mismatch between the resources of the Appellate Body and the number, size and complexity of the appeals before it, has intensified with the ongoing impasse in filling the vacancies in the Appellate Body, said India.

Is it reasonable to expect a seriously understaffed Appellate Body to meet the time-frames stipulated in Article 17.5 of the DSU, India pointedly asked.

India said it strongly believes that the process of filling vacancies in the Appellate Body should be de-linked from discussions about procedural issues and reforms related to the Appellate Body.

"We have repeatedly stated that India is willing to engage constructively with Members who offer concrete proposals and solutions to address the concerns that they have about the functioning of the Appellate Body."

However, India pointed out, filling vacancies in the AB should not be held hostage to this process.

Brazil said the current impasse regarding the filling of the vacancies in the Appellate Body is already causing concrete nullification and impairment to the rights of Members under the DSU, especially those that trust and use the system to solve disputes based on the rules we all agreed on.

Members and parties to disputes are facing legal uncertainties that are affecting their rights not only to have an appeal report, but also, potentially, to have a panel report in the future, by force of Article 16.4 of the DSU.

Who will bear the costs attached to the very concrete and substantial damages incurred by Members that can no longer count on this system to settle their trade disputes, Brazil asked.

Any problems or grievances related to Rule 15 of the Appellate Body Working Procedures must be addressed and solved on its own merits and cannot be blown out of proportion to serve other purposes.

The link being made between the use of Rule 15 and the selection processes, or with negative consensus for adoption of reports, has no legal merit, Brazil made clear.

China referred to its previous statements on this matter, reiterating that the US has an obligation to abide by all of the rules it has previously agreed to. And it has an obligation to interpret these rules in good faith.

China also believes that when Members have different views on a specific is sue, discussion and negotiation is the best way to move forward.

However, the US constantly refuses to engage in meaningful discussion after raising its concerns with respect to the functioning of the Appellate Body and takes actions that exacerbate the current situation.

China again urged the US to fulfill its commitments under the WTO agreement s and interpret all WTO rules in good faith.

The European Union noted that with each passing month the gravity and urgency of the situation increases and that the WTO Members have a shared responsibility to resolve this issue as soon as possible.

In its statement, Canada expressed deep regret that the DSB has been unable to fulfil its legal obligation under DSU Article 17.2 to appoint Appellate Body members as vacancies arise.

Canada agrees that it is time to start a process or, if necessary, several processes to select new Appellate Body members for the three current vacancies.

Like other members, Canada said it is disappointed that the United States has linked the start of the Appellate Body selection processes to the resolution of certain procedural concerns it has shared.

It invited the United States to engage in discussions with interested members with a view to expeditiously developing a solution to the concerns that it has raised.

Canada said that it remains committed to working with other interested members - including the United States - with a view to finding a way to address those concerns so as to allow the selection process to start and be completed as soon as possible.

Norway continued to encourage all members to support the proposal to launch the process of filling the vacancies in the Appellate Body without further delay.

It is imperative that all WTO Members work together and show flexibility and commitment to find solutions to surpass the ongoing deadlock, it said.

As stated on previous occasions, Norway said it does not agree that the process of filling vacancies should be dependent on finding solutions to procedural issues related to the practice of the Appellate Body.

"However, we reiterate our openness and willingness to listen seriously and engage constructively with all and any member on their grievances with the system," it added.

Chinese Taipei also referred to its statements regarding this matter in the previous DSB meetings.

It said as one of the initial co-sponsors of the proposal, "we regret to see no progress on this issue for such a long period of time."

Chinese Taipei again called for a frank and constructive conversation among the Members.

"We believe it is the only way out of this impasse," it said.

Singapore reiterated its serious systemic concerns on the lengthy delays in launching the Appellate Body selection process.

It said the term of another Appellate Body member is set to expire in three months' time on 30 September 2018, and if nothing is done by then, the Appellate Body will be down to just three members, which is the bare minimum to form a Division for the hearing of a case.

Singapore appreciated the Chair's efforts on the possible reappointment of this Appellate Body member and on the filling of the other vacancies, and looks forward to any positive efforts in this regard.

If vacancies are not filled as they arise, this will lead to not just the p aralysis of the Appellate Body, but also shake the foundation of the entire WTO dispute settlement mechanism, since panel reports that are appealed to a non-functioning Appellate Body cannot be adopted by the DSB and will be rendered unenforceable, it said.

Singapore called for all Appellate Body vacancies to be filled immediately. Systemic issues which had been raised can be discussed in a separate process.

"We stand ready to engage constructively and work with other Members, as well as the Chair, to help resolve this impasse," it said.

Australia referred to its previous statements on this matter and reiterated its serious concerns regarding the DSB's inability to commence an Appellate Body appointment process.

Australia pointed out that this risks the enforceability of the WTO rights we have all enjoyed for 23 years.

It also acknowledged the concerns that have been raised regarding the funct ioning of the WTO dispute settlement system.

"We remain committed to resolving this impasse as a priority, and are ready and willing to work with others on pragmatic solutions," said Australia.

Like others, Switzerland also referred to its previous statements - and in particular its deep systemic concerns - regarding this matter.

Switzerland reiterated its call on all Members to engage constructively in discussions on any issues raised with the objective of moving beyond the present, damaging impasse quickly and of securing a well-functioning WTO dispute settlement mechanism that is fit for the future.