TWN Info Service on WTO and Trade Issues (Feb18/01)
2 February 2018
Third World Network

Continuing impasse over AB selection process
Published in SUNS #8607 dated 25 January 2018

Geneva, 24 Jan (Kanaga Raja) - The United States has once again blocked efforts to launch the selection process to fill three current vacancies on the seven-member Appellate Body of the World Trade Organisation (WTO).

At a meeting of the WTO's Dispute Settlement Body (DSB) on Monday (22 January), the United States rejected a new joint proposal tabled by some 60 WTO members that called for the simultaneous launch of the selection processes to fill the three vacancies.

This continuing impasse over the appointment of new Appellate Body members came during the discussions under the agenda item of Appellate Body matters.

The two Appellate Body members in question 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 the second term of Mr Van den Bossche expired on 11 December 2017.

According to trade officials, both Mr Ramirez-Hernandez and Mr Van den Bossche are continuing their work on appeals to which they were assigned to before their second terms expired.

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 light of these developments, the Appellate Body is now down to four members from its regular seven-member complement.

With the United States blocking the launch of the selection processes to fill these vacancies, effectively it will become impossible for the Appellate Body to hear and dispose of appeals.

Under the agenda item of Appellate Body matters, the Chair of the DSB, Ambassador Junichi Ihara of Japan, reported on his most recent consultations with WTO members concerning in particular the continued deadlock over the launch of the selection processes to fill the three vacancies on the Appellate Body.

According to trade officials, the Chair said that there were differences with regards to Rule 15 of the Working Procedures for Appellate Review, which allows Appellate Body members to continue working on cases they were assigned to before their terms ended.

But there was also a common understanding that such a transitional arrangement was needed, the Chair added.

[Rule 15 of the Working Procedures for Appellate Review states: "A person who ceases to be a Member of the Appellate Body may, with the authorization of the Appellate Body and upon notification to the DSB, complete the disposition of any appeal to which that person was assigned while a Member, and that person shall, for that purpose only, be deemed to continue to be a Member of the Appellate Body."]

According to the Chair, at the same time, there appears to be broad recognition that Rule 15 could be updated and improved.

Several members considered the Appellate Body's 24 November explanation of the operation of Rule 15 and its practice to be a useful clarification.

A number of delegations said that the transitional arrangements for Mr. Ramirez-Hernandez and Mr. Van den Bossche could be addressed by the DSB's endorsement of their continued service, while many delegations emphasized that, while addressing matters related to Rule 15, the selection process of Appellate Body members should be launched without delay.

The Chair said he would continue his informal consultations on the matter. He encouraged delegations to come up with concrete ideas for a solution.

A joint proposal on AB appointments was tabled at the DSB meeting by Argentina; Australia; Brazil; Chile; China; Colombia; Costa Rica; Ecuador; El Salvador; the European Union (28 member states); Guatemala; Honduras; Hong Kong-China; Kazakhstan; Korea; Mexico; New Zealand; Nicaragua; Norway; Pakistan; Panama; Paraguay; Peru; the Russian Federation; Singapore; Switzerland; Chinese Taipei; Turkey; Ukraine; Uruguay; and Viet Nam.

(Canada and the Dominican Republic also expressed their intention to co-sponsor the joint proposal.)

Citing the urgency and importance of filling the vacancies in the AB, in compliance with the DSU and so that it can carry on its functions properly, the joint proposal (WT/DSB/W/609 /Rev.1) called on the DSB, at its meeting on Monday, to take a decision with regard to the following four elements:

(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 one to replace Mr. Hyun Chong Kim, who resigned from the Appellate Body as of 1 August 2017; and (iii) a third one 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 2018 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 22 February 2018 at 6 pm 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 as soon as possible so that the DSB can take a decision to appoint three new Appellate Body members as soon as possible.

Mexico introduced the joint proposal on behalf of the 58 WTO Members plus Canada and the Dominican Republic, who expressed their intention to co-sponsor the proposal.

It said that this joint proposal continues to reflect the increased concern of a considerable number of Members 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.

According to Mexico, WTO Members have a responsibility to safeguard and preserve the Appellate Body, the dispute settlement system and the multilateral trading system.

"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," it said.

Mexico said that the proposal seeks to:

(i) start three selection processes: one to replace Mr Ricardo Ramirez-Hernandez, whose second term expired on 30 June; a second process to fill the vacancy that occurred with the resignation of Mr Hyun Chong Kim with effect from 1 August; and a third process to replace Mr Peter Van den Bossche, whose second term expired on 11 December;

(ii) to establish a Selection Committee;

(iii) to set 22 February as the deadline for the submission of candidacies; and

(iv) to request that the Selection Committee issues its recommendation as soon as possible.

Mexico underlined that 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.

In its statement, the United States said: "We are not in a position to support the proposed decision."

As noted in the past, said the United States, Mr. Ramirez continues to serve on an appeal, despite ceasing to be a member of the Appellate Body nearly 7 months ago.

Now, a new situation has arisen: Mr. Van Den Bossche continues to serve on 5 appeals, despite ceasing to be a member of the Appellate Body in December of last year.

According to the United States, the latest decision by the Appellate Body to, in its words, "authorize" a person who is no longer a member of the Appellate Body to continue hearing appeals creates a number of very serious concerns.

First, and foremost, as stated at past meetings, the Appellate Body simply does not have the authority to deem someone who is not an Appellate Body member to be a member.

It is the DSB that has a responsibility under the DSU to decide whether a person whose term of appointment has expired should continue serving.

The United States said it is resolute in its view that Members need to resolve that issue first before moving on to the issue of replacing such a person.

Second, consider that in one current appeal, only one member of the Division hearing that appeal continues to be a member of the Appellate Body pursuant to DSB appointment decisions.

Third, the United States noted that, with the most recent Appellate Body "authorization", one person who is no longer a member of the Appellate Body is serving on more appeals - at least five -- than anyone who is a member of the Appellate Body.

"And so, in addition to our concern that all of this is contrary to the DSU and without any DSB authorization, we have to ask: is this reasonable or appropriate?"

The United States said it has continued to convene meetings to discuss this issue informally with a number of delegations.

"This outreach has been productive in that we believe we have heard a general recognition that it is the DSB that has the authority to set the term of an AB member under DSU Article 17.2; it follows that the DSB has a responsibility to decide whether a person should continue serving beyond that term."

"We have also heard agreement from several delegations that Rule 15 raises difficult legal questions that the DSB should address," said the United States.

"In the course of our engagement, we have not heard delegations reject the importance of the issue we have brought to the DSB's attention. To the contrary, we have heard a willingness of delegations to work together on this issue to find a way forward."

It also recalled that the Appellate Body provided Members with a Background Note on Rule 15.

"That communication appears to raise more questions than it answers. We look forward to discussing that communication with Members as well."

"We therefore will continue our efforts and our discussions with Members and with the Chair to seek a solution on this important issue," the US concluded.

According to trade officials, many members that took the floor reiterated their concerns about the continued impasse and the impact it could have on the WTO's dispute settlement system as well as the WTO as a whole.

They were prepared to discuss the concerns about Rule 15 and other procedural matters, but said there should be no linkage between these discussions and the launch of the selection process, which needed to begin as soon as possible.

Members that spoke included Pakistan, China, Colombia (for the GRULAC group), Canada, Australia, Brazil, Uruguay, Norway, Panama, Singapore, Switzerland, New Zealand, Japan, Chinese Taipei, Turkey and the European Union.

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

It was pleased to join the proposal submitted by more than 30 delegations and urged the DSB to adopt it without further delay.

Like other Members, it was 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 with Members.

However, Canada said 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 processes to start and be completed as soon as possible.

China said that the growing number of co-sponsors of the joint proposal demonstrates an increasing concern among the Membership over the current situation.

Even though three vacancies have arisen in the Appellate Body, none of them can be filled because of the concerns raised by the United States.

With regard to Rule 15 of the Working Procedures for Appellate Review, China said that it is open to engage in further discussion on this provision in a proper forum.

"However, this is without prejudice to our position that China cannot agree with the US that this rule raises any concerns."

According to China, a careful reading of the rules and procedures suggests that the Appellate Body is acting precisely within its mandate under the DSU in including Rule 15 in the Working Procedures for Appellate Review.

First, as Rule 15 of the Working Procedures for Appellate Review applies only to "A person who ceases to be a Member of the Appellate Body", it does not extend the terms of the Appellate Body members.

Second, past DSB decision supports the inclusion of Rule 15 in the Working Procedures for Appellate Review.

Rule 14 of the Establishment of the Appellate Body (WT/DSB/1), which was adopted by the DSB in 1995, states that "Matters such as guaranteeing the rotation required by the DSU ... should form part of the working procedures."

China said that by allowing Appellate Body members whose terms have expired to finish the cases they were previously assigned, Rule 15 clearly guarantees the rotation required by the DSU, and therefore should be included in the working procedures of the Appellate Body.

As Members have previously pointed out, the dispute settlement is one of the major functions of the WTO. And the Appellate Body is a critical component of such a mechanism.

China said ensuring the integrity, independence and impartiality of the Appellate Body contributes immensely to the proper settlement of disputes between WTO Members, and ensures the stability of the application and predictability of the WTO rules.

Moreover, it is the responsibility and obligation of the DSB to launch the selection process because Article 17.2 of the DSU provides that "[v]acancies shall be filled as they arise."

According to China, by linking the initiation of selection processes and the alleged systematic concerns, the US fails to fulfil its obligation and is undermining the proper functioning of the dispute settlement system.

Now the US refuses to put an end to such blockage, China charged. Moreover, it refuses to elaborate all of its concerns or provide any concrete proposals to resolve its concerns.

In this regard, China urged the US to lift its illegal and unreasonable blockage and the selection process shall launch immediately.

Japan said that it is extremely unfortunate that the DSB is not in a position to launch the selection processes today.

Appointing a Member of the Appellate Body is one of the important functions entrusted to the DSB under the DSU.

Japan emphasised that it is the responsibility of the entire membership, acting as the DSB, to ensure the proper functioning of the dispute settlement system, including the Appellate Body in transition, in a manner consistent with the DSU.

Chinese Taipei emphasised that the credibility and effectiveness of the Appellate Body is in the best interests of the entire WTO Membership. It is therefore very disappointing that such a prolonged deadlock still exists today.

It called on all Members to launch the selection process without further delay.

According to trade officials, India and Egypt also expressed their support for the joint proposal. India said that a further delay in launching the selection process could have major consequences for the timeliness and quality of WTO dispute rulings.