TWN Info Service on WTO and Trade Issues (Jun18/01)
1 June 2018
Third World Network

"WTO doesn't deserve to die through asphyxiation"
Published in SUNS # 8691 dated 31 May 2018

Geneva, 30 May (Kanaga Raja) - Warning that the WTO's Appellate Body (AB), with only four members now, is on the verge of becoming non-operational, an outgoing member of the adjudicatory body has said that the WTO does not deserve to die through asphyxiation.

[The seven-member AB is now functioning with only four members, one of whom (Mr. Servansing) is due for reappointment at the end of his current term, and has indicated his desire to continue. The DSB chair has started consultations on this.

[Two more of the current AB members are due to retire next year, and if the US continues with its consensus-blocking approach, the AB will no longer be able to function, lacking the minimum of three members to hear appeals.

[While dispute settlement can function, with disputes referred to panels automatically on a second request, and the panels can hear parties and third parties, and hand down rulings, when one of the parties notifies that it was appealing, until the AB is able to hear and give a ruling on points of law being appealed, the panel report cannot be adopted.

[Thus from next year, in practical terms the DSB will not be able to complete its task on disputes, paralysing the system. SUNS]

At a farewell ceremony at the WTO on Monday (28 May), departing AB member Mr Ricardo Ramirez-Hernandez said: "You, the Members, need to ask yourselves, what is the contribution of the AB to the international rule of law? What does this paralysis do to the WTO Dispute Settlement System as a whole?"

"This institution does not deserve to die through asphyxiation. You have an obligation to decide whether you want to kill it or keep it alive," he said.

In his farewell speech, Mr Ramirez-Hernandez also said that the crisis being faced by the dispute settlement mechanism and in particular, the Appellate Body could have been avoided if it had been addressed face-on, as it began to escalate.

Mr Ramirez-Hernandez's second and final four-year term as AB member expired on 30 June 2017. The initiation of the selection process to fill his vacancy and that of two other AB members have been repeatedly blocked by the US, prolonging the impasse over this issue which has been before the Dispute Settlement Body (DSB) for more than 17 months now (see separate story).

In his farewell speech, Mr Ramirez-Hernandez said that he is an international trade lawyer whose ultimate professional wish was to be part of this institution.

"I was part of a jewel in the crown created by you, the Membership. A sophisticated international adjudicatory system for solving disputes. A mechanism that has always privileged substance over form. One that follows a method o f interpretation and where parties' due process rights are fully respected."

An institution that strives to find, as Professor Howse puts it, the "equilibrium between domestic regulatory autonomy and trade liberalization", as agreed by WTO Members in the treaty text.

He thanked all of the participants involved in the dispute settlement process.

He said the Appellate Body Secretariat (ABS) and the other Dispute Settlement Divisions not only administer disputes but are also an essential element in the process of solving them.

They perform a unique task with the highest degree of expertise, and this organization should, especially in these times of uncertainty, recognize and act upon this fact.

Mr Ramirez-Hernandez also said that it is a good opportunity to set the record straight. "Our Secretariat is not the 8th ABM [Appellate Body Member]. It i s the engine that helps us reach our destiny. But we, the ABMs, are in the driver's seat."

He then went on to share some thoughts about the serious crisis that the dispute settlement mechanism and, in particular, the AB are currently facing.

"It seems to me that the crisis we now face could have been avoided if it had been addressed face-on, as it began to escalate. The WTO is a consensus-based collective. This means that this crisis should not be attributed to one Member. Rather there is a need to recognize the need for leadership within and outside this house."

A need to recognize that there must be genuine engagement when one Member i s raising problems. The signals have been there for some time. No matter how difficult or insurmountable the issues may seem, all those who are part of the WTO community must be willing to engage, and must refrain from putting personal or national trade interests before attempting to come up with a solution.

According to the retiring judge, the first question is whether the Membership still wants to have an instance to review panel reports.

"If the answer is affirmative then we have to face the conceptual differences among the Membership as to the nature of the WTO, i.e. is the WTO a contract or a constitution? And, following immediately from that question, what is the nature of the AB? Is it or should it be an International Court?"

Many of the issues identified in the lead-up to the current state of affair s go to the core and the nature of what the AB is or should not be. If Members want to make progress and solve the current deadlock maybe this is a good place to start.

Or, alternatively, maybe there needs to be a pragmatic discussion which leaves this conceptual notions aside and goes to the very basic or minimal elements with which all Members can live with to have a fully functioning AB. But it is undeniable that there needs to be a discussion.

Mr Ramirez-Hernandez then addressed each of the issues that have been identified.

On Rule 15, he said Rule 15 is an operational rule. It was designed to expedite the dispute settlement process by avoiding a "reset" of a dispute if an AB Member's (ABM) term ended before a dispute was finalized. Nothing more.

Perhaps an objective criteria as to the circumstances in which such a "reset" would be appropriate would help.

"But in my view, a rule that leaves discretion to the Membership whether or not to extend an ABM's term after it has expired would not only create uncertainty but also jeopardize an expedited solution to a dispute."

He also said the 90-day rule is a great rule. It was for a long time a unique feature of the AB process.

Nevertheless, the growing complexity of WTO disputes, the high rate of appeal of panel reports and the number of issues appealed, the amount of jurisprudence, and size of the submissions, among other things, meant that this turned out to make a 90-day deadline unrealistic.

So, if the Membership wants to keep the 90-day rule, it may require some sacrifices. Attempts to address some elements that will help expedite the process have been made. For example, not long ago the AB put forward the idea of reducing the length of the submissions.

The idea was rejected by most of the Membership. If you want to preserve the 90-day rule, the praxis needs to change. For instance, by introducing summary judgements.

On the issue of reappointment, Mr Ramirez-Hernandez said that this is an issue in which "I believe the text is crystal clear. Reappointment is an option not a right. Upon reflection, this is an issue that is within the realm of only the Membership. Again, however, engagement is needed."

The Membership has adopted a process for the initial appointment of ABMs. WTO Members together need to agree on whether a process is needed for reappointment and, if so, what form it should take.

On the issue of advisory opinion, he said there is much scope for differences of opinion, in good faith, as to what rulings are necessary to resolve a dispute, and the extent to which rulings should be supported by reasoning.

Moreover, all active users have at some point or in some instance requested a finding of the AB that is not necessary to solve a dispute.

"I've seen Members seek an AB interpretation of a covered agreement despite the fact that such clarification was not necessary to solve the dispute. I've seen Members ask the Appellate Body to disapprove un-appealed panel statements and to set aside portions of panel reports, not to mention the frequent invitations to revisit the factual findings of panels."

In this regard, the membership needs to solve the tension between the principle that the aim of the Dispute Settlement Mechanism "is to secure a positive solution" to a dispute with the obligation of the AB to "address each of the issues raised" on appeal.

On the issue of gap filling, Mr Ramirez-Hernandez said no adjudicative entity is infallible and "I believe this is also true of the AB."

No system can exclude that some interpretations may diverge from expectations or be unacceptable to large parts of a constituency. Such risk needs to be mitigated through an operational negotiating branch that can adjust or realign the rules when this occurs.

"In addition, I haven't seen a WTO dispute in which all parties involved agree that there were mistakes made in the interpretation or that gap filling occurred. Maybe a serious discussion needs to take place about the method used for interpreting the covered agreements, for example, the Vienna Convention."

Members might decide that the significance to be attributed to negotiating history should be elevated beyond the role attributed to it in Article 32 of the Vienna Convention.

"Finally, let me express my concern that whilst trade evolves and becomes more and more sophisticated, WTO disciplines are at risk of remaining static. It adds an extra hurdle when the Membership wants to fix current problems with old rules. Membership needs to engage in a serious update of its current disciplines and clarify or correct those that it considers have not worked."

On the issue of reliance upon previous cases, Mr Ramirez-Hernandez said: "I 've never seen a Member who has not argued its case based on previous case law. This type of reliance upon de facto precedent seems to be one that Members themselves value and attach importance to - it is, after all, closely linked to the idea of security and predictability of trading relations."

Membership could very well stop doing this and ban the cogent reasons approach.

"I would just caution that this is precisely why many countries are complaining in the context of ISDS [Investor-State Dispute Settlement], that is, fragmentation and lack of cohesiveness in the ISDS jurisprudence."

On the question of independence and impartiality, he said that in his view, "this is the only non-negotiable aspect of our process if the Members decide to preserve the AB. As my former colleague David Unterhalter used to say, "the virtue o f independence may seem self-evident, but it is not to be taken for granted". "

Mr Ramirez-Hernandez pointed out that the AB now has only four Members. The AB is on the verge of becoming non-operational.

Before some Members decide to take other routes such as Article 25 or plurilateral agreements, it is essential, as the AB Chair said recently, that the Membership truly engages in a constructive dialogue and tries to come up with a compromise.

"You, the Members, need to ask yourselves, what is the contribution of the AB to the international rule of law? What does this paralysis do to the WTO Dispute Settlement System as a whole? This institution does not deserve to die through asphyxiation. You have an obligation to decide whether you want to kill it or keep it alive."

He said that in their discussions, there are also topics that the Membership may want to reflect under the current system.

On transparency, he said that the Membership has been pretending to be transparent, and the AB has been an accomplice to it. WTO hearings are not public. The fact that a few of them are broadcast, sometimes even days after the actual hearing takes place, in a room at the WTO headquarters is just simulating transparency.

To truly achieve transparency, all WTO dispute settlement hearings should be broadcast live, of course always addressing any confidentiality consideration.

On the issue of damages, he said the great limitations or defects of the current prospective remedies system are well known. Back in 2002, Mexico, among other Members, made a first attempt to address one of the major defects of the DSU, the prospective nature of the remedies. The best deterrent for unilateral actions is that they are not free of consequences.

Mr Ramirez-Hernandez also said remand is a tool that would greatly facilitate the work and streamline the dispute settlement process. It would be worthwhile to explore proposals that have already been tabled by some Members.

On the WTO and RTAs (Regional Trade Agreements), he said that maybe the Membership could revive the discussion about the interactions between the WTO and regional agreements dispute settlement.

"Given the amount of expertise and knowledge developed over the past decade s, the WTO could become the dispute settlement centre for all RTAs. We need to brand the name," he said.

"Although I've seen countries argue their cases in Spanish, not all Spanish-speaking countries plead in Spanish. In many ways, we have surrendered dispute settlement to English. If that is what you decide then let's stop the pretending game and accept that all disputes be adjudicated in English. We will save a lot of money and resources if we do so. If on the other hand, you want to preserve the Spanish language, you have to make it relevant. The same applies to French."

Mr Ramirez-Hernandez said coming from a developing country and, now more often in developed countries, very often you hear in the same sentence that international trade, globalization, and liberalism are to blame for poverty , loss of jobs and lack of development.

"They are easy targets. They are faceless causes that can't defend themselves. Faulty internal industrial and agricultural policies, lack of rule of law, and corruption are hardly mentioned."

"The rules-based international trading system that I was mandated to protect contributes to global prosperity."

The Membership should address how to spread across the populations of all its Membership the benefits of trade instead of finding ways to concentrate it. This organization needs to stop talking about barriers, and start building bridges for a better distribution of the benefits of international trade and to address the new challenges world international trade faces, he said.

Globalization is a reality. Global value chains and global warming are just two examples to illustrate the fact that we are facing global challenges that can be addressed only with global solutions.

"Have no doubt, with or without the WTO, trade will continue, and globalization, and the technology that bolsters it, can't be stopped. But without a framework of binding and updated rules, anarchy and powerful actors, private and public, will take over."

This will not be good, especially for those developing and least developed countries that require a system in which, to the eyes of the law, every country is equal, he concluded.


Also at the farewell ceremony, Mr Ujal Singh Bhatia, the Chairman of the Appellate Body, said it is important from the AB's perspective to reflect on the legacy Ricardo leaves behind, not only through the body of the AB Reports h e was involved with, but also through his ineffable contribution to the AB's ethos.

"Both of these assessments are more important now than ever before, for reasons which stare us in the face."

He said that he has had the pleasure of working with Ricardo on a number of appeals. Simply put, his judicial approach reflects three overarching considerations:

* First, his ability to assess merits of claims through the prism not only of individual merit, but also of larger systemic principles.

* Secondly, a constant recognition of the underlying value of the idea of the rules-based global trading order that the WTO symbolises.

* And thirdly, that the "Independence and Impartiality" of the AB must not remain only an abstract idea. These values must suffuse every action and decision of the AB.

These considerations together pervaded and defined his no-nonsense approach to adjudication, he said.

Mr Bhatia said that Mr Ramirez-Hernandez's ability to form strong personal bonds with his colleagues and his consensual approach added immeasurably to collegiality within the AB, based as it was, on a totally objective and fair minded approach to dispute resolution.