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TWN Info Service on WTO and Trade Issues (Jan19/04)
23 January 2019
Third World Network


Process to address AB crisis kicks off, facilitator appointed
Published in SUNS #8828 dated 21 January 2019

Geneva, 18 Jan (Kanaga Raja) – An informal meeting of the WTO General Council on Thursday saw General Council Chair Ambassador Junichi Ihara of Japan kicking off a process of targeted discussions for resolving the current crisis in the WTO’s Appellate Body (AB).

According to trade officials, as part of this process, the Chair said that he was asked to find a facilitator (for the discussions) and he had selected Ambassador David Walker of New Zealand to serve as the facilitator to lead this process going forward.

The United States has been repeatedly blocking at the Dispute Settlement Body (DSB) the consensus to launch the selection processes to fill four current vacancies on the seven-member Appellate Body.

According to trade officials, the informal General Council meeting was at the level of heads of delegation (HoD), with an Ambassador plus one delegate from each mission being present.

There were two proposals before the meeting over the AB appointments, as well as one on adjudicative bodies – adding to or diminishing rights or obligations under the WTO Agreement.

All three proposals had earlier been tabled at a formal meeting of the General Council on 12 December 2018. (See SUNS #8817 dated 14 December 2018.)

The first proposal is from the European Union, China, Canada, India, Norway, New Zealand, Switzerland, Australia, Republic of Korea, Iceland, Singapore, Mexico, Costa Rica and Montenegro (WT/GC/W/752/Rev.2).

In their proposal, the proponents were deeply concerned that the enduring absence of consensus in the Dispute Settlement Body to fill the vacancies on the Appellate Body risks undermining the viability of the WTO dispute settlement system.

The proponents acknowledged the successful contribution of the dispute settlement system to the security and predictability of the multilateral trading system.

They recognised the essential role of the Appellate Body within the system that serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements without adding to or diminishing the rights and obligations provided therein.

At the same time, they acknowledged that concerns have been raised about the functioning of the dispute settlement system and are ready to work on solutions, while preserving the essential features of the system and of its Appellate Body.

To this end, the proponents called on all Members to fill the vacancies on the Appellate Body and to amend certain provisions of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU).

The proposed amendments aim at improving the DSU while addressing the concerns that have been raised on these issues, they said.

The proposed amendments relate to transitional rules for outgoing Appellate Body members; the issue of 90 days (for an AB report on appeal); the meaning of municipal law as an issue of fact; findings unnecessary for the resolution of the dispute; and the issue of precedent.

The second proposal is from the European Union, China, India and Montenegro (WT/GC/W/753/Rev.1).

In their proposal, the proponents said that they are mindful of the shared responsibility of all Members for the proper functioning of the WTO dispute settlement system that is essential to a multilateral trading system based on rules.

They acknowledged that concerns have been raised about the functioning of the dispute settlement system and are ready to work on solutions on the basis of the proposal to amend certain provisions of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) attached to document WT/GC/W/752.

At the same time, in order to achieve balance and taking into account the experience with the application of the DSU to date, they considered that these amendments should be accompanied by the amendments set out in the Annex (to their proposal).

These additional amendments aim at strengthening the independence and impartiality of the Appellate Body, improving efficiency so as to enable it to meet the required timeframes, and ensuring an orderly transition as well as an orderly launch of selection procedures, they said.

The proposed additional amendments relate to independence of Appellate Body members; efficiency and capacity to deliver; transitional rules for outgoing Appellate Body members; and the launch of the Appellate Body selection process.

The third proposal is from Australia, Singapore, Costa Rica, Canada and Switzerland, relating to adjudicative bodies – adding to or diminishing rights or obligations under the WTO Agreement (WT/GC/W/754/Rev.2).

In their proposal, the proponents recognized the central importance of a properly functioning dispute settlement system in the multilateral rules-based trading system, which serves to preserve the rights and obligations of Members under the WTO Agreement and ensures that rules are enforceable.

“We value the WTO dispute settlement system and wish to ensure it continues to serve all WTO Members.”

The proponents emphasized the collective responsibility of all Members to ensure the proper functioning of the WTO dispute settlement system, including the Appellate Body.

They acknowledged that for a number of years concerns have been raised by Members about the functioning of the WTO dispute settlement system.

In this regard, they welcomed any proposals addressing such concerns, including the communication to the General Council in WT/GC/W/752 from a number of Members.

They also noted those specific concerns raised regarding panels and the Appellate Body adding to or diminishing rights or obligations under the WTO Agreement.

“We recognize the importance of covering these specific concerns in future discussions on ways to safeguard and strengthen the WTO dispute settlement system and ensure its proper functioning.”

In this light, the proponents proposed the immediate initiation of a solution-focused process allowing for targeted discussions between interested Members on dispute settlement issues, including the specific concerns described above.

Without prejudice to each Members’ own views, this process could, for example, consider some possible options as set out in a document circulated by Canada in JOB/GC/201.

This includes, identifying options for binding or non-binding guidance to be provided to adjudicative bodies on specific issues, such as through the development of a clear pathway for the potential negotiation and adoption of “authoritative interpretations”.

Discussions could also consider options to strengthen frameworks that secure the proper balance in the functions and responsibilities of the Dispute Settlement Body on one hand, and of the adjudicative bodies on the other hand, they said.

As the issues underlying the specific concerns referred to above are multi-faceted in nature, the proponents recognized that no single means can fully address the issues, rather a combination of approaches may be necessary.

DISCUSSION AT GC MEETING

According to trade officials, at the informal General Council (GC) meeting on Thursday, Ambassador Ihara reported that after the General Council meeting of 12 December 2018, he had held consultations with some 25 delegations that he said was conducted in a constructive spirit.

Delegations expressed their desire to see the crisis in the AB resolved in an urgent manner. An immediate action should be the unblocking of the selection process for AB members.

Delegations wanted a focused solution-oriented approach, and that there should be a degree of fluidity in the interactive process that allows for different configurations.

Some delegations highlighted the need for a clear timeline, while some others said that this depended on overall political considerations.

Yet others pointed to 11 December 2019 as being the deadline as that is when the AB will not be able to function (when the second terms of Appellate Body members Thomas Graham and Ujal Singh Bhatia expire leaving just one sitting AB member. Three members are required to hear an appeal).

All delegations said that they wanted a stocktaking of the process that began on Thursday at the upcoming formal General Council meeting on 28 February.

According to trade officials, the appointed facilitator, Ambassador Walker, then began specific discussions on the three proposals.

During the discussions, the European Union highlighted proposal WT/GC/W/752/Rev.2 co-sponsored with China, Canada, India, Norway, New Zealand, Switzerland, Australia, Korea, Iceland, Singapore, Mexico, Costa Rica and Montenegro.

According to trade officials, the US said that this proposal does not address its concerns. It said the Appellate Body should follow the rules from 1995, adding that the existing Articles are not being adhered to.

Ukraine said that it would like to see all these proposals put together in some kind of a simple template so that it could follow it more closely.

Japan said that there is need for greater clarity, and for some kind of constructive criteria with respect to AB members staying on beyond the expiry of their terms.

On advisory rulings, Japan pointed to a phrase that says that the Appellate Body must adhere to the facts at hand to the extent necessary to resolve the dispute. It said that it is examining the issue of municipal law closely.

Egypt said that perhaps the issue should be taken up in the discussions on DSU reform. It would like more clarification on the other proposals.

Ecuador expressed support for the EU proposal. On the 90-day rule (for issuance of Appellate Body reports), it wants to see safety, security and predictability in the dispute settlement system.

Benin expressed concern over the non-functioning of the Appellate Body. This would have knock-on effects on the dispute settlement understanding, it said.

Brazil said that getting the AB selection process underway is the gateway issue on which everything else hinges. Otherwise, there will not be a functioning DSB by 2020. It is agreeable to the question of changing the terms and number of Appellate Body members.

Russia said that proposal W/752 is a good basis for the work. It did not like the idea that appeals consistently run beyond the 90-day limit.

It also did not like any suggestion that rulings by the Appellate Body should add to or subtract from members’ rights and obligations.

Peru called for urgent and full attention to the issue, while Turkey said that there is need for a clear and well-defined process that is multilateral in nature.

Malawi, on behalf of the African, Caribbean and Pacific (ACP) group of countries, said that they are not a demandeur, but there is need to unblock the process. It supported all efforts to try and move this process forward.

For the ACP, the most important thing is to protect and preserve the independence and impartiality of the dispute settlement system.

The Philippines agreed on a solution-based approach, while Canada said that proposal W/752 was drawn up specifically to address the US concerns, but if there are other things that the US wants, let’s discuss these.

China said that the proposal does actually address the US concerns, while Singapore asked how much time should an AB member have on the case.

The EU said that the points that have been put forward have been heard before, but we are in a solution-oriented system, so clarify where the problems are and tell us.

The EU then highlighted proposal WT/GC/W/753/Rev.1 co-sponsored with China, India and Montenegro.

According to trade officials, the US said that this proposal would make the Appellate Body less accountable.

Australia introduced proposal WT/GC/W/754/Rev.2 co-sponsored with Singapore, Costa Rica, Canada and Switzerland.

It called for a discussion on whether the Appellate Body rulings have added to or diminished the rights and obligations of members.

It further asked: Should we amend the dispute settlement understanding? Should we have binding or non-binding guidance? Are there some kind of pre-emptive steps that could be taken to ensure that this kind of thing does not happen?

Canada expressed support for the proposal, while the United States welcomed it, saying that it shows that there is widespread concern about Appellate Body “over-reach”.

The EU said that it is ready to engage, but that its proposal has already addressed many of these issues.

 


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