TWN Info Service on WTO and Trade Issues (Sept24/04)
11 September 2024
Third World Network

Trade: WTO dispute settlement reform text proposes questionable changes
Published in SUNS #10070 dated 5 September 2024

Geneva, 4 Sep (D. Ravi Kanth) — The confidential draft “Appeal/Review tables” prepared by the co-convenors of the World Trade Organization’s dispute settlement system reform process seek to alter rather stealthily the existing parameters of “scope of review” and “standard of review” by the dispute panels and the Appellate Body without revealing the names of the countries that suggested these changes, said people familiar with the development.

In the email sent to members on 23 August, the facilitator overseeing the dispute settlement system reform process, Ambassador Usha Dwarka-Canabady of Mauritius, included what is referred to as the “WTO confidential” draft prepared by the co-convenors “at the request of Members.”

Even though she clarified that the draft tables are not negotiating texts, it has long been the practice in the WTO where issues are introduced somewhat surreptitiously which later are transformed into rules, said people familiar with the draft.

The two co-convenors of the appeal/review mechanism – Mr Joel Richards of Saint Vincent and the Grenadines and Ms Jessica Dickerson of Australia – with their limited expertise in WTO trade law jurisprudence, could not have drawn up the reform ideas without sounding them out to one key member, said people familiar with the development.

The mandate (WT/MIN(24)/37) agreed by trade ministers at MC13 states:

“Recalling our commitment made at our Twelfth Session to conduct discussions with the view to having a fully and well-functioning dispute settlement system accessible to all Members by 2024, we take note of the works done thus far.

* We recognize the progress made through this work as a valuable contribution to fulfilling our commitment. We welcome all submissions from Members that help advance our work.

* We instruct officials to accelerate discussions in an inclusive and transparent manner, build on the progress already made, and work on unresolved issues, including issues regarding appeal/review and accessibility to achieve the objective by 2024 as we set forth at MC12.”

Against this backdrop, the 14-page “WTO Confidential” draft, seen by the SUNS, contains the following tables: (A) “Scope of review”; (B) “Standard of review”; ( C) “Form of the mechanism”; (D) “Reducing/Changing incentives to appeal”; (E) “Clarifying Members’ expectations of adjudicator”; and (F) “Access to the mechanism”.

As previously reported in the SUNS, emphasis has been laid on the “Form of the Mechanism”.

SCOPE OF REVIEW

On the “Scope of review”, the co-convenors proposed several reform ideas such as “review of the panel’s objective assessment” and “filters, criteria or admissibility tests for claims”.

After pointing out the current practice regarding the panel’s “objective assessment” such as “a panel should make an objective assessment of the matter before it, including an objective assessment of the facts (DSU Art. 11)” and “appeals are limited to issues of law covered in the panel report and legal interpretations developed by the panel (DSU Art. 17.6)”, the co-convenors proposed three reform ideas.

These three ideas are:

1. “Clarify that a panel’s objective assessment of the facts is subject to appeal only to the extent that there is an egregious error in the panel’s assessment (i.e. an error that undermines the objectivity of the panel’s assessment).
2. Clarify that the parties should not resubmit factual arguments from the panel stage under the guise of challenging the objectivity of the panel’s assessment of the facts.
3. Clarify that questions of fact, including the meaning and effect of “municipal law”, are not within the scope of appeal/review.”

In response to these ideas, the co-convenors listed out the observations made by members without naming them.

For example, according to the confidential draft tables, “some Members have expressed support for Reform idea 1 (dealing with objective assessment and egregious error), although there are different views on what would be an “egregious” error.”

On reform idea 2 (on whether parties should or should not resubmit factual arguments), the co-convenors said members seek to clarify that “a party needs to identify a legal error in the panel’s assessment of the facts, not simply repeat the party’s factual arguments.”

As regards reform idea 3 (clarify that questions of fact, including the meaning and effect of “municipal law”, are not within the scope of appeal/review, which was raised by the United States in several trade disputes), members observed that “Reform idea 3 reflects a view that questions of fact are not within the scope of appeal/review, including because any consideration of the facts risks increasing the complexity and inefficiency of the process.”

Commenting on “filters, criteria or admissibility tests for claims,” the co-convenors said that the current practice is that “Parties to the dispute may appeal any issues of law covered in the panel report and legal interpretations developed by the panel (DSU Art. 17.4, 17.6), without seeking leave. Adjudicators (of the Appellate Body) shall address each of the issues raised (DSU Art. 17.12).”

The co-convenors proposed four reform ideas on “filters, criteria or admissibility tests for claims.”

These ideas are:

1. “Limit appeal/review claims to errors of law that would have a material impact on the respondent’s implementation obligations with respect to a measure.
2. With respect to any claim relating to the panel’s assessment of the facts, require the substance of the claim to be raised with the panel at the interim review stage, as an admissibility requirement to a party bringing an appeal/review claim.
3. With respect to any claim relating to the panel’s legal interpretation or application of the law to the facts, require or incentivize Members to raise the substance of the claim with the panel at the interim review stage.
4. Create a leave to appeal or permission to appeal mechanism so that only alleged errors of law that were (a) raised with the panel during interim review; and (b) with a real prospect of success, would be considered by the adjudicators.”

According to the co-convenors, “many Members have expressed a willingness to explore ways to reduce the scope of issues brought for appeal/review.”

On reform idea 1 concerning limiting appeal/review claims to errors of law that would have a material impact on the respondent’s implementation obligations with respect to a measure, the co-convenors said that members “intended to limit appeals to claims that matter to the parties because they would have a material impact on the respondent’s implementation obligations.”

While “some Members consider reform idea 1 could have a positive impact on the behaviour of Members and adjudicators, there may be a need to consider (i) whether or how reform idea 1 would apply to claims relating to procedure or to the integrity of the proceedings; and (ii) guidance to adjudicators”, the co-convenors maintained.

On reform idea 2 dealing with claims relating to the panel’s assessment of the facts, the co-convenors said “some Members have said the reform idea 2 is appropriate given the panel’s role as the trier of facts.”

On reform ideas 2 and 3 (dealing with claims relating to the panel’s legal interpretation), the co-convenors said: “Members are generally more comfortable with requiring legal issues relating to the panel’s assessment of the facts to be raised at interim review, than with requiring other legal issues (such as relating to interpretation or application of the law to the facts) to be raised. Members need to reflect further on whether reform idea 3 should be a requirement or an encouragement.”

As regards reform idea 4, which deals with creating “a leave to appeal or permission to appeal mechanism so that only alleged errors of law that were (a) raised with the panel during interim review; and (b) with a real prospect of success, would be considered by the adjudicators”, the co-convenors said that “some Members hold the view that there should be no leave/permission to appeal mechanism because they consider that appeal/review should be automatic.”

Without indicating the number of countries, the co-convenors said: “Many Members have also expressed concern that reform idea 4 would add another step to the process that would make it more complex, costly and time consuming.”

According to the co-convenors, “another view is that it would make an important change if the standard to grant leave was high.”

As regards who would decide whether leave was granted, the co-convenors said that “some Members want impartial adjudicators to decide. Another view is that adjudicators would not filter claims effectively, as they would always be inclined to grant leave. There would also be a need to consider how the decision-maker would assess prospects of success and whether this would require reference to past decisions.”

STANDARD OF REVIEW

The current Dispute Settlement Understanding (DSU) requires appeals to be “limited to issues of law covered in the panel report and legal interpretations developed by the panel (DSU Art. 17.6).”

However, according to the co-convenors, “there is no explicit standard of review in the DSU” and “the adjudicators apply the customary rules of interpretation of public international law and give no deference to the panel’s decision on legal issues (DSU Art. 3.2)”.

Under the rubric of standard of review, the co-convenors suggested the following reform ideas:

1. “A high or limited standard of review that gives some deference to the panel (such as a standard under which an appellant must establish that the panel’s decision on a legal issue was “clearly erroneous” or “plainly unreasonable”).
2. Standard of review under which an appellant must establish that the panel:
3. was guilty of gross misconduct, bias, or serious conflict of interest, or otherwise materially violated a rule of conduct;
4. seriously departed from a fundamental rule of procedure; or
5. manifestly exceeded its powers, authority or jurisdiction, and any of these acts by the panel materially affected the decision and threatens the integrity of the process.”

The co-convenors suggested that members made seemingly differing observations.

One view, according to the co-convenors, “is that reform ideas 1 or 2 would change the incentives for appeal and address concerns with judicial rule-making, de facto precedent and gap-filling.”

“Some Members have suggested that these concerns can be addressed by some of the proposed reforms in the Draft Consolidated Text, such as the guidelines for adjudicators (see Title H of Draft Consolidated Text).”

However, “many Members have said reform ideas 1 and 2 would not meet their interests in being able to seek correction of legal errors, as well as other interests, including consistency, coherence, legitimacy and fairness. Those Members consider that reform ideas 1 and 2 could result in inconsistent outcomes which would undermine predictability,” the co-convenors maintained.

Although the dispute settlement system reform process was initiated and mandated by trade ministers at the WTO’s 12th and 13th ministerial conferences, much of the proposed reforms are seemingly aimed at satisfying the US, which successfully made the WTO’s highest adjudicating body, the Appellate Body, dysfunctional, said people familiar with the development.

Ironically, the US appears to be eschewing its multilateral leadership role in establishing the General Agreement on Tariffs and Trade (GATT) in 1948 and the World Trade Organization in 1995, said people familiar with the development.

Regardless of whichever party comes to power after the upcoming November elections in the US, the new administration is likely to accelerate the process of carving out new areas of “in-shoring” and “re-shoring” as well as drawing up new supply chains based solely on its national security-driven considerations, said people familiar with the development. +