TWN Info Service on WTO and Trade Issues (Apr18/01)
4 April 2018
Third World Network

US continues to block appointment of new AB members
Published in SUNS #8653 dated 3 April 2018

Geneva, 29 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 a joint proposal sponsored by some 64 WTO members that called for the launch of the selection processes to fill three current vacancies on the seven-member body as soon as possible.

The issue of launching selection processes for filling three vacancies came up at a meeting of the WTO's Dispute Settlement Body (DSB) on 27 March under the agenda item of Appellate Body matters.

Two Appellate Body members 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 that 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.

The joint proposal on Appellate Body 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.

At the meeting, Indonesia expressed its intention to co-sponsor the proposal.

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 Dispute Settlement Understanding (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 possible.

Mexico introduced the joint proposal on behalf of the 64 WTO Members plus the delegation of Indonesia which expressed its intention to co-sponsor the proposal, and said 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, it added.

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 2017;

(ii) to establish a Selection Committee;

(iii) to set a deadline of 30 days for the submission of candidacies; and

(iv) to request that the Selection Committee issues its recommendation within 60 days after the deadline for nominations of candidates.

Mexico said 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.

"We continue to urge all Members to support this proposal in the interest of the multilateral trade and the dispute settlement systems," it said.

The European Union then took the floor and said with each passing month, the gravity of the situation worsens. It called on Members to fill the vacancies on the Appellate Body as soon as possible.

In its statement, the United States thanked the DSB Chair for his continued work on these issues. However, it said, "We are not in a position to support the proposed decision."

"We have listened carefully to the interventions of other Members at recent meetings and appreciate the willingness expressed by some Members to engage on the important issues and concerns we have raised," it added.

However, the United States maintained, the Dispute Settlement Body has not yet addressed the problem of persons continuing to serve on appeals well after their terms have expired.

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, and so it is up to the DSB to decide whether a person who is no longer an Appellate Body member can continue to serve on an appeal, it said.

The United States recalled that at the 28 February meeting of the DSB, it drew Members' attention to questions raised by the Appellate Body's "unsolicited" Background Note on Rule 15. (See SUNS #8634 dated 5 March 2018.)

The United States maintained that in several respects, the document failed to provide a correct or complete presentation of the issue, and therefore failed to contribute to Members' consideration of this issue.

"In light of the troubling omissions we identified, we would request additional information to understand the reasons for these omissions," it said.

For example, the United States said it called Members' attention to the statements in the background note that "[m]any international adjudicative bodies follow transitional rules or practices similar to Rule 15" and "the statutes of some international tribunals contemplate that the term of office of an adjudicator is automatically extended until a successor is appointed."

The background note only acknowledges that no rule providing for the extension of a member's term until a successor is appointed exists in the DSU.

However, in analogizing to the rules of "some international tribunals" that remain unnamed, the document fails to acknowledge a key fact apparent from even a cursory review of such rules - which one would assume was undertaken to support the analogy - that the rules for those other tribunals are based on their constitutive texts.

Last month, the United States said it pointed to the example of the Statute of the International Court of Justice, which is annexed to and an integral part of the United Nations Charter.

"For the benefit of other Members, we would like to share what we have learned reviewing the rules applying to other international tribunals," it said.

This review confirms that the issue of who may continue to serve and decide a dispute is not a mere "working procedure" to be decided by the tribunal.

For example, like in the case of the International Court of Justice, the Statute of the International Tribunal for the Law of the Sea sets out for that Tribunal in Article 5(3) a transition rule for departing members.

Similarly, for the European Court of Human Rights, Article 23(3) of the European Convention on Human Rights sets out a rule for judges who have been replaced.

Unlike those other tribunals, Rule 15 is not set out in the constitutive text of the WTO dispute settlement system - the DSU, said the United States, adding that it has therefore not been agreed to by WTO Members.

"We would appreciate understanding from the Appellate Body why this basic difference between the DSU and "some international tribunals" was not reflected in what was purported to be a background document," the United States asked.

It said that it also previously called Members' attention to the Appellate Body's assertion in the Background Note 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 the DSB."

"This statement is misleading at best," the United States claimed.

It said the language appears to have been very carefully crafted to avoid mentioning that Rule 15 was, in fact, "criticized by [a WTO] Member in the DSB" and was "called into question" at the time of its adoption.

In particular, said the United States, India had stated explicitly that Rule 15 - and, specifically, the continuation of an Appellate Body member after the expiry of his or her term without the approval of the DSB - raised a "systemic concern" and "was contrary to Article 17.1 of the DSU."

In this regard, a footnote in the US statement has cited DSB meeting minutes for 21 February 1996 set out in document WT/DSB/M/11.

[Interestingly, the US has not cited any objections that it may have raised, suggesting the US itself had not raised any objections, until now. SUNS]

The United States maintained that the criticism of Rule 15 in the DSB by a WTO Member at the time of its adoption is the type of basic information one would expect to be included in a document with the intention to make an objective presentation of the issue.

"Its omission raises serious concerns," said the United States.

It said it would appreciate receiving information from the Appellate Body explaining why India's intervention was not drawn to the attention of WTO Members in this document.

"We would further appreciate understanding why the Appellate Body's statement was drafted in the manner it was."

The United States also noted that only one Member has attempted to offer a substantive explanation of the legality of Rule 15.

China asserted that the "rotation" required by the DSU provides the legal basis for Rule 15.

"As we explained, that argument exhibits a fundamental misunderstanding of the DSU," the United States claimed.

According to the United States, Article 17.1 provides, in relevant part, that the Appellate Body "shall be composed of seven persons, three of whom shall serve on any one case. Persons serving on the Appellate Body shall serve in rotation. Such rotation shall be determined in the working procedures of the Appellate Body."

Rotation, as used in this provision, is concerned with ensuring variation among the individuals serving in different appeals.

But the very provision speaks of "[p]ersons serving on the Appellate Body" - not "person[s] who [have] cease[d] to be a Member of the Appellate Body."

The DSU provision on "rotation" has no relevance to the question raised by Rule 15 - continued service on an appeal by an individual who has ceased to be a member of the Appellate Body, the United States maintained.

It said as it noted previously, some WTO Members may be comfortable with the situation of former members continuing to act as though they are still members of the Appellate Body, but it is not legal under our multilaterally agreed rules.

The United States said it remains 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," it said.

The following delegations then took the floor: Canada, Brazil, India, Pakistan, Korea, Australia, Colombia, Indonesia, China, Panama, Thailand, Norway, Hong Kong-China, New Zealand, Switzerland, Peru, Venezuela, Chinese Taipei, Turkey, Singapore, Japan, and Mexico.

According to trade officials, they reiterated their concerns over the continued impasse on the appointment of new Appellate Body members. They urged all members to show flexibility in order to resolve the deadlock as soon as possible.

Several members highlighted the dangers the continued impasse pose not only to the dispute settlement system but also to the WTO as a whole.

Other members underlined that the US concerns and the issue of the appointment of AB members should be treated separately.

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 in a manner consistent with the DSU.

Brazil welcomed Indonesia as co-sponsor of the proposal on Appellate Body appointments.

It noted that the number of co-sponsors now reaches 65 Members, of diverse regions, and shows that the current impasse is a matter of concern to all WTO Members.

Brazil invited those Members that have not yet joined to support the proposal so that we can all benefit from an operational dispute settlement system as soon as possible.

According to Brazil, the importance of a functioning dispute settlement system has never been more evident than now.

With trade frictions on the rise, it is essential that all Members be assured that their disputes can be resolved by recourse to a rules-based, fast, efficient and neutral dispute settlement system such as the one we have at the WTO, it said.

Brazil said that it read with attention recent documents containing concerns regarding the multilateral trading system.

There are certainly issues that can be improved in the WTO in general and in its dispute settlement system in particular.

Brazil said it is willing to engage in conversations with interested Members in order to find solutions acceptable to the Membership.

"Having said that, we also repeat that we consider it unfortunate that a link has been made between any such concerns and the duty to fill the vacancies in the Appellate Body as they arise," it said.

Australia thanked the Chair of the DSB for his continued efforts in making progress on this issue.

It also thanked the Members, now numbering over 60, that have co-sponsored the proposal for the DSB to commence immediately a process to make appointments to the Appellate Body.

According to Australia, as has been repeated in this forum over many months, this proposal gives effect to the DSB's responsibility under Article 17.2 of the DSU requiring vacancies on the Appellate Body to be filled as they arise.

It invited other Members to show their support for this proposal, and join the long list of co-sponsoring Members.

Australia said that like many others in this room, it is disappointed that progress on making appointments to the Appellate Body has eluded us.

Australia highlighted the following concerns: the DSB continues a discussion which is now over a year old; during this time, the Appellate Body's caseload has grown; and a system which it supports and has helped build with other Members, is no longer functioning as it should and this situation is only set to worsen.

This stalemate within the DSB poses a systemic threat to the WTO's ability to settle disputes in accordance with the DSU.

In light of such risks, Australia, like other Members, is now grappling with many questions about the immediate and long-term impact on the dispute settlement system, including:

* how do we assure our ability as Members to enforce other Members' obligations under the WTO Agreements and provide security and predictability to the multilateral trading system in the absence of a properly functioning dispute settlement system?

* do we need to review elements of our dispute settlement system?

Australia said that the good news is that in this room there is a body of Members with the will and commitment to find a way forward.

Australia said that it has heard the concerns raised by one Member regarding the operation of the transitional provisions for outgoing Appellate Body members.

However, we must move beyond discussing the "problem" and turn our energy to discussing solutions, it said.

To this end, it has also heard other Members in clear terms indicate their willingness to explore options for addressing the concerns that have been identified. Indeed, many have been engaged in working with others to find positive solutions.

Australia said it remains committed to such efforts and it invited all Members, including the US, to join "so that together we can move forward and find ways to ensure the ongoing integrity and functioning of our valued dispute settlement system."

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

Like other Members, Canada said 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 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.

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.

Thailand said that it shares the view that the current impasse gives rise to a serious systemic concern over the proper functioning of the WTO dispute settlement mechanism, as well as the credibility and sustainability of the rule-based multilateral trading system as a whole.

It said that the DSB is entrusted with a duty to establish a standing Appellate Body. Therefore, we all share a responsibility to discharge this important function. It supports the launching of the Appellate Body selection processes as soon as possible.

Regrettably, it appears that the presence of divergent views continue to keep the DSB away from arriving at a consensus decision.

Despite the fact that the impasse over the filling of current vacancies of the Appellate Body Members remain, Thailand said it is encouraged by the willingness of Members to engage in a constructive manner.

In particular, Thailand appreciated the points made by the United States in the last DSB meeting (as well as today) which explained in more detail its concerns over the consistency with the DSU of the Appellate Body's authority and long-standing practice which allows a former Appellate Body Member to continue to serve on an appeal.

Thailand welcomed this engagement. It believes that it is important to clearly understand what the problem is, before the DSB could properly, and collectively, address the question of how to fix it.

Thailand encouraged continued engagement of the membership and looked forward to the US suggestions on possible way forward that may help address its concerns and unlock the impasse.

Indonesia recalled its Minister's statement at the WTO informal gathering in New Delhi on 20 March 2018 and said that it would like to express its support and co-sponsorship of the joint proposal in document WT/DSB/609/Rev.2 to launch the selection processes for the vacancies of the Appellate Body members.

Indonesia said it believes that the DSB has been trusted to resolve trade disputes between Members since its establishment.

It has also been widely believed to be the essential element to sustain the centrality of this organisation.

Indonesia views that this system is the heart of the WTO. If your heart is not functioning well, then it will make the entire system of your body not functional.

Furthermore, said Indonesia, the current impasse on the selection of members of the Appellate Body should raise concern as the credibility of the rules-based multilateral trading system is at stake.

"We should seek to resolve this issue as quickly as possible. We must find ways to keep the system effective and functional," it said.

With regard to the selection process, Indonesia was of the view that any systemic concern raised by a certain member should not be linked to the decision on how to fill the vacancy in the Appellate Body, which according to Article 17 of the DSU, shall be filled as they arise.

If a member considers Rule 15 is the real problem, we would like to invite that member to submit a concrete proposal in order to facilitate the discussion, it said.

Mexico, on behalf of the co-sponsors of the proposal, regretted that for the tenth occasion, we have still not achieved consensus to start the selection processes for the vacancies of the Appellate Body and have failed to fulfil our duty as Members of this Organisation.

By failing to act today, "we will maintain the current situation which is seriously affecting the workings of the Appellate Body against the best interest of its Members," it said.

According to trade officials, the outgoing chair of the DSB, Ambassador Junichi Ihara of Japan, said he regretted that members were not able to reach agreement on launching the selection process.

He said that the "sense of crisis shared by many members today needs to be translated into concrete actions."