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TWN
Info Service on WTO and Trade Issues (Sept24/05) Geneva, 9 Sep (D. Ravi Kanth) — As experts on 9 September take a first look at the draft proposals contained in the “WTO confidential” document aimed at resurrecting an appeal/review mechanism at the World Trade Organization, the multilateral trade body’s enforcement function is unlikely to stop the imposition of unilateral trade measures based on national security considerations, said people familiar with the development. On 6 September, China initiated dispute settlement proceedings against Canada for levying unilateral tariffs of 100% on all Chinese-made electric vehicles and a 25% tariff on steel and aluminum products imported from China. China said that the Canadian duties on Chinese products “are unilateral and protectionist in nature and would severely damage the multilateral trading system and disrupt [the] global electric vehicle as well as steel and aluminum supply chain.” According to several media reports, the Canadian decision to impose these duties on Chinese products is being viewed as a show of solidarity with its neighbour, the United States, which has also imposed similar measures on various Chinese products. Although China has requested consultations with Canada at the WTO under Article IV of the Dispute Settlement Understanding (DSU), it would certainly be aware that there is unlikely to be an early resolution to the dispute as the WTO’s enforcement function is partially dysfunctional, said people familiar with the development. DSS REFORM Against this backdrop, the meeting of experts on 9 September to consider the “WTO confidential” draft tables on different elements of the proposed appeal/review mechanism to replace the binding Appellate Body assumes importance, said people familiar with the development. Despite caveats issued by the facilitator overseeing the discussions on the reform of the dispute settlement system (DSS) that the draft tables do not constitute a negotiating text, privately, members expressed fears over the confidential document. The facilitator, Ambassador Usha Dwarka-Canabady of Mauritius, is tasked with overseeing the DSS reform discussions with a specific mandate. That mandate, as spelled out by trade ministers at the WTO’s 13th ministerial conference (MC13) in Abu Dhabi on 2 March this year, 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.” Although the proposals are only meant for “fine-tuning” the proposed reform ideas in the new appeal/review mechanism, they do not seem to instill any confidence that the two-tier dispute settlement system with a binding Appellate Body that undergirded the WTO’s enforcement function will be restored, said people familiar with the discussions. Also, doubts are being expressed whether the proposals would be circulated without first being vetted by one major industrialized country that paralyzed the Appellate Body in December 2019, said a legal expert from a developing country, who preferred not to be identified. The 14-page “WTO confidential” draft contains the following tables : (1) “Scope of review”; (2) “Standard of review”; (3) “Form of the mechanism”; (4) “Reducing/changing incentives to appeal”; (5) “Clarifying Members’ expectations of adjudicator”; and (6) “Access to the mechanism”. As previously reported in the SUNS, the following areas have already been covered: (1) “Scope of review”; (2) “Standard of review”; and (3)” Form of the mechanism”. EXCEPTIONAL CASES The draft tables on “reducing/changing incentives to appeal” include a controversial proposal requiring members to “give a collective, non-legally binding, political commitment to file only in the exceptional review”. In a member-driven, rules-based multilateral trade body, where each member is endowed with certain rights and obligations, it seems somewhat odd for Members to take an upfront “political commitment” to reduce appeals. The two co-convenors on the appeal/review mechanism – Mr Joel Richards of Saint Vincent and the Grenadines and Ms Jessica Dickerson of Australia – noted that “some Members support [the] reform idea because they agree that appeals should be exceptional.” “However, the wording of such a commitment would need to be carefully crafted,” the co-convenors said. Without naming the countries, the co-convenors said, “some Members preferred the idea that appeals should not be “systemic” or “automatic” and that we should seek to limit frivolous and tactical appeals.” In contrast to undertaking such a non-binding commitment, the co-convenors said: “There is broad support to preserve the right of Members to appeal. In this regard, some Members cautioned that there should be no political pressure on Members to reduce appeals.” More pointedly, they said that “some Members have concerns regarding the reform idea.” On the same note, the co-convenors observed that “there is recognition by some Members that a political commitment to reduce appeals could be a useful signal for Members to exercise restraint.” From the above observations, the co-convenors are presenting a rather “misleading picture,” said a legal expert, who asked not to be quoted. RPT FOR COMPLIANCE The reasonable period of time to implement the rulings and recommendations of a dispute panel, or RPT, as it is often referred to, has been best observed in its breach by many members, particularly the United States. At present, “RPT is determined after the date of adoption of a panel or Appellate Body report (under Article 21.3 of the Dispute Settlement Understanding).” The co-convenors included the following two ideas in the table: (1) Change the calculation of the RPT so that the start date for RPT is when an appeal is initiated by the responding party; (2) Provide the responding party with a longer RPT if it does not appeal. While “it is the view of some Members that [the] reform idea could reduce responding Members’ incentive to file tactical appeals to gain additional time to comply,” several other Members expressed sharp concerns and questions, according to the draft tables. The co-convenors said that members’ responses include the following: * it could impact negatively on Members that require sufficient time to make legislative amendments; * Members need to consider how a change in the RPT would work if a decision, after appeal, is changed substantially; * if the RPT starts from the date of appeal, how would it work if the compliance process cannot start until there is an appeal report; * changes to the RPT may not be suitable for every type of case. For example, in areas such as anti-dumping, Members need to ensure that the investigating authority would have sufficient time to conclude its work before the expiration of the RPT. According to the co-convenors, “some Members have also suggested that these discussions should be linked to relevant aspects of the Draft Consolidated Text (see Title IV: Compliance).” USE OF INTERIM REVIEW Under the current practice in the Dispute Settlement Understanding, “parties have an opportunity to submit a written request for the panel to review precise aspects of the interim report prior to (the) circulation of the final report to the Members (DSU Art. 15). The template timetable for panel work, including the interim review stage is at DSU, Appendix 3.” The co-convenors suggested two reform ideas: (1) “Require or incentivize the parties to raise alleged errors of both fact and law with the panel during the interim review stage”, and (2) “extend the time for the panel to conclude its work at the interim review stage.” They noted that “there appears to be some support to make more effective use of interim review stage of panel proceedings.” Further, “some members have recognized that more effective use of interim review stage could: * provide an opportunity for a panel to correct both factual and legal errors, thereby improving the quality of its report (or provide an opportunity for the panel to improve its reasonings); * potentially avoid some appeals or narrow the number of claims on appeal; and * disincentivize Members from saving their best legal arguments for the appeal/review stage.” However, “some Members have expressed concerns about making interim review too complex or lengthy.” EXPECTATIONS OF ADJUDICATORS Under the current practice, “the proceedings shall not exceed 60 days from the date a party to the dispute formally notifies its decision to appeal to the date the adjudicators circulate the report.” “In case the Appellate Body considers that it cannot provide its report within 60 days, it shall inform the DSB (Dispute Settlement Body) in writing of the reasons for the delay together with an estimate of the period within which it will submit its report and in no case, the proceedings shall exceed 90 days (DSU Art. 17.5).” The reform idea suggested in the draft tables would require “Clarify(ing)/establish(ing) expectations to ensure that timelines are met.” According to the co-convenors, “Members are broadly supportive of clarifying/establishing expectations for adjudicators with respect to timeframes so as to ensure adherence to such timeframes.” The co-convenors said that “many Members support the existing DSU timeframes as being appropriate.” However, “Members also raised several questions for further reflection.” The questions include: * “Should the existing 60/90-day time limits be retained? * Practically, how do we ensure that adjudicators can meet these timelines? * What was the rationale behind the 60/90-day timeframes? * Do the current timeframes allow for efficiency?” On the issue of “adjudicators’ output”, the existing practice suggests that “appeals are limited to issues of law covered in the panel report and legal interpretations developed by the panel (DSU Art. 17.6). Adjudicators shall address each of the issues raised (DSU Art. 17.12).” Also, “reports shall be drafted without the presence of the parties to the dispute and in the light of the information provided and the statements made (DSU Art. 17.10)”, “opinions expressed by individual adjudicators shall be anonymous (DSU Art. 17.11)” and “the adjudicators may uphold, modify or reverse the legal findings and conclusions of the panel (DSU Art. 17.13).” The three reform ideas floated on the “adjudicators’ output” seem somewhat controversial and suggest a departure from the existing practice. The three proposed reform ideas include:
In response to reform idea 1, namely that appeal/review reports should only focus on what is necessary to resolve the dispute/arguments by the parties, the co-convenors suggested that “some Members are of the view that reports should be clear, precise, focus on what the parties have argued and contain correct legal analyses.” Without naming the countries, the co-convenors said that “some Members consider that certain aspects of judicial economy in the Draft Consolidated Text can also be applied to appeal/review adjudicators (see Title V, Chapter II of Draft Consolidated Text).” On the precedential value of reports as stated in reform idea 2, “some Members consider that it is important to clarify that adjudicators’ reports/decisions do not have precedential effect. Some Members think this concern is addressed by some aspects of the Draft Consolidated Text (see Title V, Chapter III of Draft Consolidated Text) on this issue.” As regards clarifying the adjudicators’ responsibilities in relation to decision-making and drafting reports, as contained in reform idea 3, the co-convenors noted that “some Members consider that the Draft Consolidated Text contains ideas with respect to adjudicators’ role in drafting reports, which could also be applied to appeal/ review adjudicators (see Title VII, Chapter II of Draft Consolidated Text).” In a similar vein, on clarifying adjudicators’ role in streamlining the appeal/review process, the co-convenors suggested a reform idea that would require members to “establish or clarify Members’ expectations of adjudicators in relation to streamlining the appeal/review process.” While “some members see it as beneficial to clarify expectations of adjudicators to make the process more efficient” by establishing word and time limits for the parties’ submissions, “some other Members consider that there are useful ideas in the draft Consolidated Text,” they noted. ACCESS TO APPEAL/REVIEW MECHANISM Under the current practice, members enjoy “automatic access by any party which has notified the DSB (Dispute Settlement Body) of its decision to appeal a panel report (as per Article 16.4, 17.4 of the Dispute Settlement Understanding).” The reform idea on access to the mechanism appears to be a break with the practice of automatic access. It is proposed: “access to the mechanism by agreement (bilaterally or plurilaterally) of the disputing parties on a one-off or ongoing basis.” In sharp response to the above idea, the co-convenors noted that “the majority of Members consider that the right of appeal must be guaranteed and therefore should not be contingent on the agreement of the other party.” According to the confidential draft, “there is broad support for the current system under which any party may seek appeal/review (compulsory jurisdiction).” More importantly, “this is seen as essential, especially for developing countries and LDCs so as to help them to navigate power imbalances. Some Members also consider that there should be no opportunity for an opposing party to strategically block an appeal,” the co-convenors noted. One unnamed member seems to have argued that “the right of appeal is not an inalienable right and the disputing parties should be able to decide which aspects of the system will assist to resolve their dispute.” In short, the “WTO confidential” draft on the appeal/review mechanism seems to be replete with controversial reform ideas that could make the WTO’s enforcement function ineffectual. It could essentially pave the way for ensuring that “might is right”, said people familiar with the provisions. +
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