Info Service on WTO and Trade Issues (Mar18/02)
6 March 2018
Third World Network
Impasse over AB selection continues, as US blocks latest proposal
Published in SUNS #8634 dated 5 March 2018
Geneva, 2 Mar (Kanaga Raja) - The impasse at the World Trade Organisation
(WTO) over the appointment of new Appellate Body (AB) members continues
with the United States once again blocking efforts to launch the selection
process to fill three current vacancies on the seven-member body.
At a meeting of the WTO's Dispute Settlement Body (DSB) on 28 February,
the United States said that it was not in a position to support a
new joint proposal sponsored by some 63 WTO Members that called for
the simultaneous launch of the selection processes to fill the three
vacancies as soon as possible.
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.
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 US once again 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.
[At a meeting of EU trade ministers in Bulgaria earlier this week,
the EU trade commissioner was reported in some media reports as suggesting
that the EU might explore with other WTO members a "flexible
response", namely of a WTO dispute settlement system excluding
the US. It was not clear from these reports how this is feasible,
since it will drastically and fundamentally change the rights and
obligations of members vis-a-vis the US inside the WTO. SUNS]
A joint proposal on AB appointments was tabled at the DSB meeting
by Argentina; Australia; Bolivia; Brazil; Canada; Chile; China; Colombia;
Costa Rica; Dominican Republic; Ecuador; El Salvador; the European
Union (28 member states); Guatemala; Honduras; Hong Kong (China);
India; Israel; Kazakhstan; Korea; Mexico; New Zealand; Nicaragua;
Norway; Pakistan; Panama; Paraguay; Peru; the Russian Federation;
Singapore; Switzerland; Chinese Taipei; Turkey; Ukraine; Uruguay;
and Viet Nam.
According to the proposal (WT/DSB/W/609/Rev.2), given the urgency
and importance of filling the vacancies in the Appellate Body, in
compliance with the DSU and so that it can carry on its functions
properly, the delegations proposed that, at its meeting, the DSB takes
a decision with regard to the following:
(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 selection process to replace Mr. Hyun Chong Kim,
who resigned from the Appellate Body as of 1 August 2017; and (iii)
a third selection process 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 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 a 30-day period after the date of its decision,
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 within 60 days after the deadline
for submitting nominations of candidates, so that the DSB can take
a decision to appoint three new Appellate Body members as soon as
Mexico introduced the joint proposal on behalf of the 63 WTO Members,
saying that the considerable number of Members submitting this joint
proposal reflects a common concern 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.
WTO Members have a responsibility to safeguard and preserve the Appellate
Body, the dispute settlement and the multilateral trading systems.
"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," said Mexico.
According to Mexico, the proposal seeks to:
(i) start three selection processes: one process to replace Mr Ricardo
Ramirez-Hernandez, whose second term expired on 30 June 2017; a second
process to fill the vacancy occurred with the resignation of Mr Hyun
Chong Kim with effect from 1 August 2017; 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 a deadline of 30 days for the submission of candidacies;
(iv) to request that the Selection Committee issues its recommendation
within 60 days after the deadline for nominations of candidates.
Mexico said 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 at the DSB, the United States thanked the Chair of
the DSB for his continued work on these issues.
It however said: "We are not in a position to support the proposed
"We have listened carefully to the interventions of other Members
at the last meeting and appreciate the willingness expressed by some
Members to engage on the important issues and concerns we have raised,"
the United States added.
However, the Dispute Settlement Body has yet to take any action to
address the problem of persons continuing to hear appeals well after
their terms of appointment, as set by the DSB, have expired.
According to the United States, one former Appellate Body member continues
to serve on an appeal, despite ceasing to be a member of the Appellate
Body eight months ago.
Another former member continues to serve on five appeals, more than
any actual Appellate Body member, despite ceasing to be a member of
the Appellate Body in December of last year.
"Some WTO Members may be comfortable with this situation, but
it is not legal under our multilaterally agreed rules. Under the Dispute
Settlement Understanding, it is the DSB that has the authority to
appoint Appellate Body members and to decide when their term in office
expires," the United States maintained.
It would also be for the DSB to decide whether a person who is no
longer an Appellate Body member can continue to serve on an appeal.
The Appellate Body simply does not have the authority to "deem"
someone who is not an Appellate Body member to be a member.
The United States said: "Appointing Appellate Body members, or
determining that a private individual can nonetheless serve on an
appeal, is not a power we WTO Members have assigned to the Appellate
"We have heard a few Members say that Rule 15 does not raise
any legal concerns for them because the DSU does provide to the Appellate
Body the authority to establish its working procedures, or because
it represents long-standing practice."
But those assertions are in error, said the United States, adding
that neither the Appellate Body's authority to draw up its working
procedures nor "practice" can amend the DSU.
[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."]
The United States said that as the Appellate Body itself noted many
years ago: "Although panels enjoy some discretion in establishing
their own working procedures, this discretion does not extend to modifying
the substantive provisions of the DSU. To be sure, Article 12.1 of
the DSU says: "Panels shall follow the Working Procedures in
Appendix 3 unless the panel decides otherwise after consulting the
parties to the dispute". Yet that is all that it says. Nothing
in the DSU gives a panel the authority to disregard or to modify other
explicit provisions of the DSU."
Just as a panel may not disregard or modify the DSU through adoption
of its working procedures, so too the Appellate Body may not disregard
or modify the DSU through its working procedures.
Similarly, the fact that the Appellate Body has taken the same action
repeatedly does not change the rules in the DSU.
"The DSU sets out our multilaterally agreed rules for WTO dispute
settlement. If those rules are to be modified, this could only occur
through agreement of all WTO Members," said the United States.
It also recalled that the Appellate Body provided Members with a Background
Note on Rule 15 (JOB/AB/3).
As the United States noted previously, that communication appears
to raise more questions than it answers.
In several respects, this document fails to provide a correct or complete
presentation and therefore does not contribute to Members' consideration
of this issue.
First, said the United States, the Appellate Body nowhere addresses
the legal basis for including Rule 15 in working procedures that otherwise
relate to the consideration of appeals by Appellate Body members -
not persons who are not Appellate Body members.
Nor does the document address how continued service by an ex-Appellate
Body member relates to the DSB's appointment decision under Article
17 of the DSU.
Instead, the Appellate Body appears to rely on policy considerations
of efficient functioning.
Second, the Appellate Body asserts that "[u]ntil recently, the
application of Rule 15 has never been called into question by any
participant or third participant in any appeal, nor has it been criticized
by any Member in the DSB when an Appellate Body report signed by an
AB Member completing an appeal pursuant to Rule 15 was adopted by
Unfortunately, the United States maintained, the Appellate Body appears
to have very carefully crafted this language in a manner to avoid
mentioning that in fact Rule 15 was "criticized by [a WTO] Member
in the DSB" and was "called into question" at the time
of its adoption.
That WTO Member stated explicitly that Rule 15 raised a "systemic
concern" and "was contrary to Article 17.1 of the DSU".
"The omission of this statement from the AB Background Note is
misleading at best. WTO Members deserve to be fully informed of the
facts, including that Rule 15 has been a serious concern from the
very beginning," said the United States.
Third, the Appellate Body states that Rule 15 "as initially conceived
was intended to apply for relatively short periods of transition."
If this is the case, the Appellate Body has acted inconsistently with
its own understanding of this provision in the past, not just the
present. In some cases, an Appellate Body member was appointed to
a division shortly before their term ended.
According to the United States, in one case, the Appellate Body member
was appointed to a division just three days before the term ended
- meaning almost the entirety of the appeal was expected to occur
after the individual had ceased to be a member.
Fourth, it is misleading for the Appellate Body Background Note to
analogize to the rules of "some international tribunals"
that remain unnamed.
The rules for those other tribunals are based on their constitutive
texts. For example, the transition rule for the International Court
of Justice is set out in its Statute, which is annexed to and an integral
part of the United Nations Charter.
Unlike for those other tribunals, Rule 15 is not set out in the DSU
and has not been agreed by WTO Members.
Fifth, said the United States, it is not clear from the communication
whether the outgoing Appellate Body member participates in the Appellate
Body's decision to "deem" them to be an Appellate Body member
after their term expires.
Rule 15 applies to a person "who ceases to be" a member.
But some Appellate Body decisions authorizing a person to continue
to work on an appeal have been taken prior to the expiry of that person's
term of appointment.
This raises the question whether the Appellate Body's decision under
Rule 15 would be affected by that person's participation in that very
Sixth, the Appellate Body indicates that a new Appellate Body member
is not permitted to participate in the exchange of views of an appeal
involving a former Appellate Body member.
The Note does not explain what is the legal basis for denying a legitimate
Appellate Body member appointed by the DSB the ability to participate
in the exchange.
Rule 4(3) of the Appellate Body Working Procedures states that "the
division responsible for deciding each appeal shall exchange views
with other [Appellate Body] Members before the division finalizes
the appellate report for circulation to the WTO Members."
It appears that the Appellate Body may be treating a Rule 15 situation
as an exception to Rule 4(3), without having amended the Appellate
Body Working Procedures, said the United States.
It reiterated that 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
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.
"We therefore will continue our efforts and our discussions with
Members and with the Chair to seek a solution on this important issue."
CONCERNS OVER THE CONTINUED IMPASSE
According to trade officials, some 21 members took the floor to voice
their concerns over the continued impasse over the launch of the selection
They expressed concern over the delay and the impact that it could
have on the WTO's dispute settlement system as well as the WTO as
While they were prepared to discuss concerns about Rule 15 and other
procedural matters, there should be no linkage between these discussions
and the launch of the selection processes, which needed to begin as
soon as possible.
According to trade officials, Panama said the impasse not only affected
the dispute settlement system, but also the trade interests of all
It said the delays have already contributed to a backlog of cases
which is leading to economic losses in member countries due to the
longer settlement of disputes.
Kazakhstan said it would be useful if the US could answer some questions,
such as whether it expects the DSB to take a decision on continued
service every time an Appellate Body member's term is due to expire
or has expired, or whether new rules were needed.
The European Union said that it was still waiting for the member blocking
the appointment process to set out the terms of engagement on the
issue of Rule 15.
It said that it has not seen any engagement from that delegation so
According to trade officials, several members mentioned an eventual
collapse or paralysis of the Appellate Body should the impasse continue.
Other members that spoke included Canada, Colombia (for the GRULAC
group), Norway, Australia, Japan, Israel, Turkey, China, Uruguay,
Pakistan, Mexico (on its own behalf), Singapore, Switzerland, New
Zealand, Chinese Taipei, and Honduras.
Canada deeply regretted 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
It said that it is pleased to join the proposal submitted by more
than 30 delegations. It urged the DSB to adopt it without further
Canada said that like other Members, it is 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
At the last DSB meeting, the United States remarked that it "is
resolute in its view that Members need to resolve [the Rule 15] issue
before moving on the issue of replacing [outgoing Appellate Body members]."
Canada invited the United States to engage in discussions with interested
members with a view to expeditiously developing a solution to the
concerns that it has raised - 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.
Colombia, on behalf of the Group of Latin American and Caribbean countries
(GRULAC), expressed its deep concern "about the situation we
have reached, which affects the good performance of one of the central
bodies of the WTO."
If this problem continues without being solved, it will imply, in
the short term, practically the paralysis of the Appellate Body, putting
the entire dispute settlement system at risk.
It noted that the delay in launching the replacement process, having
already arisen with three vacancies, means failure to comply with
an existing mandate, and involves a flagrant breach of a legal obligation
emanating from a covered agreement.
According to GRULAC, this has serious systemic consequences and is
a bad precedent for the organisation.
It inflicts damage and affects the image and credibility of the WTO,
particularly taking into account the complex international scenario
that today adversely affects trade multilateralism.
GRULAC said it has heard of concerns expressed in relation to the
functioning of the dispute settlement system and specific issues regarding
decision-making, which would be causing the impediment to launch the
"We cannot validate that these concerns prevent a legal obligation
from being fulfilled and are linked to the replacement of the vacancies
already arisen or to arise. We want to be clear in pointing out that
the operation of the system cannot be stopped, while the concerns
of some of the members haven't been resolved."
It called attention on the seriousness of keeping blocked the replacement
of vacancies. It also considers that the selection process should
not be conditioned to a different process, which must be addressed
on its own merits.
In this sense, GRULAC urged "the membership to find a solution
that allows us to advance as soon as possible in the fulfilment of
the legal obligation that we have mentioned."
Japan supported the proposal to launch the selection processes to
fill three vacancies on the Appellate Body.
"Yet again, the DSB is unable to launch the selection processes,"
Putting the issue in perspective, Japan said that currently, seven
appeals are pending before the Appellate Body, of which one appeal
was initiated in 2016 and the other six in 2017.
Of those seven pending appeals, the oral hearings are yet to take
place in four appeals. For instance, as for the two appeals initiated
last September, the oral hearings are not scheduled until May and
New appeals are expected to come, all of which must be assigned to
any three of the incumbent Members of the Appellate Body, who are
at present four.
This would mean that the appellate proceedings in any new appeals
could be delayed further and could take a number of months to complete
and likely exceed a year.
"By failing to act now, we are effectively creating a situation
in which a losing party at the panel stage in a dispute can hinder
the whole dispute settlement processes and further delay its possible
implementation of the DSB recommendation and the ultimate resolution
of the dispute, simply by filing an appeal irrespective of merits
of its case."
Such a situation is wholly unacceptable and inappropriate; it belies
the very principle of the prompt settlement of disputes enshrined
in the DSU, said Japan.
It emphasised once again that it is the responsibility of the entire
membership, acting as the DSB, to ensure the proper functioning of
the dispute settlement system in a manner consistent with the DSU.
It said that the resolution of any question requires the clear understanding
of what exactly the question is. The narrower the question is, the
easier it may well be to find a possible solution.
In previous DSB meetings, Japan noted, the United States has raised
the issue of Rule 15 as the basis for its position not to support
the launching of the selection processes.
For example, at the DSB meeting of 22 January, the United States stated,
"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 is resolute in its view that Members need
to resolve that issue first before moving on to the issue of replacing
such a person."
In the same meeting, the United States also questioned the applications
of Rule 15 and their consequences and asked "is this reasonable
The issue the United States resolutely views that "WTO Members
need to resolve ... first before moving on to the issue of" the
selection processes appears to be confined to the legal question associated
with Rule 15 and the "reasonableness" or "appropriateness"
of the way Rule 15 applies under the current circumstances facing
the dispute settlement system today.
According to Japan, putting aside the modality or sequence of the
issues to be addressed, as reported by the Chair at the DSB meeting
of 22 January, these are precisely the issues several concerned delegations
are debating and seeking to find a solution on.
From Japan's perspective, a common theme threading through both Rule
15 and the selection or appointment of new Appellate Body Member(s)
is how to ensure the proper functioning of the Appellate Body during
a time of "transition".
Indeed, this is a good opportunity for the DSB to take a responsibility
for clarifying and improving transitional arrangements for the Appellate
Body in a manner consistent with the DSU.
Japan noted that the United States acknowledged "a willingness
of delegations to work together on this issue to find a way forward"
and stated "We ... will continue our efforts and our discussions
with members and with the Chair to seek a solution on this important
Japan welcomed the engagement of the United States and, on its part,
Japan will continue to work with other interested delegations to assist
the DSB in this common endeavour.
According to trade officials, the Chair of the DSB, Ambassador Junichi
Ihara of Japan, said it was regrettable that the DSB was not in a
position to take a decision on the matter and that the sense of crisis
expressed by some members should be shared by the membership as a
The Chair said that he would continue consultations until his final
meeting as DSB chair in March.