TWN Info Service on WTO and Trade Issues (Apr19/07)
10 April 2019
Third World Network

Brazil’s proposal could deny AB of its impartial role

Published in SUNS #8879 dated 2 April 2019

Geneva, 1 Apr (D. Ravi Kanth) – In an attempt to appease the unilateral demands of the United States at the World Trade Organization’s Appellate Body (AB), Brazil has called for truncating the highest adjudicating body for global trade disputes, and thereby deny the AB’s independent and impartial role, trade envoys told the SUNS.

A two-page proposal on “Guidelines for the Work of Panels and the Appellate Body” circulated by Brazil at the WTO on Friday (29 March) seeks to bring about fundamental changes in the functioning of the AB.

The US has repeatedly maintained that the AB had overstepped its mandate in its rulings and failed to adhere to core provisions in the Dispute Settlement Understanding (DSU) such as the 90-day rule for issuing its findings and pronouncing obiter dicta findings.

The US has also incessantly attacked the rulings unfavourable to Washington on grounds that the AB went into the examination of municipal law in its findings and took recourse to earlier precedents established in various trade disputes.

Against this backdrop, Brazil has proposed crucial changes in the DSU, including opening the door for adopting DSB rulings/recommendations on the basis of “positive consensus” under which any one member can block the outcomes in global trade disputes, said a trade envoy from a developed country, preferring anonymity.

“Brazil’s extreme proposals must please the US,” the envoy said.

After deciding to forego the special and differential treatment in future trade negotiations and commitments, Brazil has now proposed that “descriptions or factual findings contained in the factual section of a panel report, issued to the parties pursuant to Article 15.1 of the DSU and possibly modified after the interim review stage, are not susceptible to appellate review.”

Effectively, this would not allow the AB to carry its own “independent and impartial analysis,” said a trade envoy who asked not to be quoted.

[Such a rule will be contrary to all principles of natural justice, whether under Anglo-Saxon or Continental jurisprudence, wherein any finding totally contrary to evidence adduced would automatically become an issue of law and not factual finding. SUNS]

The US had repeatedly charged the AB for carrying its own independent and impartial analysis by scrutinizing the factual findings of the panel. Brazil’s proposals attempt to deny that important role for the AB, the envoy argued.

On the question of retiring AB members to complete rulings in which they were involved after ceasing to be members, Brazil has proposed that “only the Ministerial Conference or the DSB may authorize a person who ceases to be a member of the Appellate Body to complete the disposition of any appeal to which that person was assigned while a member of the Appellate Body.”

Clearly, any one member can block the continuation of the ceasing member to continue in completing the adjudicatory work if it reckons that the findings could prove to be adverse for its interests, said another trade envoy, who asked not to be quoted.

As regards the “timeframes for issuance of Appellate Body reports,” Brazil says that “the deadlines established under Article 17.5 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (the “DSU”) are binding and accord no discretion to the Appellate Body to issue reports outside the 90-day deadline set out therein.”

Unless the parties to a dispute decide “to deem a report issued beyond the 90-day deadline set out in Article 17.5 to be an Appellate Body report circulated pursuant to Article 17.5 of the DSU,” the 90-day deadline cannot be changed, Brazil has argued.

The US also berated the AB for the “extent of analysis and findings by panels and the Appellate Body.”

To address the US concerns about the analysis and findings by panels and the AB, Brazil has proposed that “findings by a panel and the Appellate Body are restricted to those necessary to assist the DSB, in the context of a specific dispute, in making the recommendations or in giving the rulings provided for in the covered agreements, including recommendations pursuant to Articles 19.1 and 26 of the DSU.”

Further, Brazil has insisted that “Article 3.2 of the DSU is not meant to encourage panels or the Appellate Body to clarify existing provisions of the covered agreements outside the context of resolving a particular dispute, nor to provide opinions beyond the findings that are necessary to assist the DSB in making the recommendations or in giving the rulings in the context of a particular dispute.”

So, effectively, Brazil wants the AB to give up its vital adjudicating function by not examining the previous rulings or findings or the precedents that were established in the earlier disputes, the trade envoy said.

In short, every trade dispute needs to be decided on its own merits without recourse to the previous rulings.

“To address an issue pursuant to Article 17.12, the Appellate Body may consider and dispose of the issue to the extent necessary to assist the DSB in making the recommendations or in giving the rulings provided for in the covered agreements,” but “such action does not necessarily require addressing the merits of particular claims (e.g. by reasons of judicial economy),” Brazil has pro posed.

On the “value of adopted panel and Appellate Body reports,” the Brazilian proposal notes that under “Article IX of the WTO Agreement, the Ministerial Conference and the General Council have the exclusive authority to adopt interpretations of the WTO Agreement and the Multilateral Trade Agreements. ”

Yet, it says that “in deciding to adopt panel or Appellate Body reports, the DSB does not intend that such adoption constitute a general and prospective endorsement, by the WTO membership, of any interpretations of provisions of the covered agreements contained in the reports.

“Such interpretations, therefore, do not become definitive interpretations of the relevant provisions of the covered agreements by virtue of adoption of panel or Appellate Body reports by the DSB.

“Panels and the Appellate Body are thus not legally bound by the reasoning and findings of previous panel and Appellate Body reports.

“In recognition that such reports create legitimate expectations among WTO Members, they should be taken into account where they are relevant to any dispute, especially if adjudicators find the reasoning in such reports sufficiently persuasive to rely on it in conducting their own assessment of the matter in a dispute.”

In return for accepting these regressive proposals, Brazil has suggested that the US needs to agree to “filling of vacancies in the Appellate Body” so as to “ensure that vacancies in the Appellate Body shall be filled as they arise, as provided for in Article 17.2 of the DSU.”

In order “to assist Members in discharging that duty, the selection procedure to fill a vacancy that will arise as a result of the expiry of the mandate of an Appellate Body member,” the chair will launch the selection process 180 days before the expiry of that member’s mandate.

Further, “if a vacancy arises before the regular expiry of an Appellate Body member’s mandate or as a result of any other situation, the Chair of the DSB shall immediately launch the selection procedure with a view to filling that vacancy as soon as possible,” Brazil has argued.

In contrast to the proposal by the European Union, China, and India that called for ensuring the independent role of the AB and the safeguarding of the negative consensus principle for adopting the AB’s rulings, Brazil has gone to the other extreme of pandering to the unilateral demands of the US, trade envoys said.

It has taken almost 19 years for Brazil to swing from one extreme of being the champion of developing countries to the other extreme of legitimizing the hegemonic role of the US at the WTO, trade envoys told SUNS.