Info Service on WTO and Trade Issues (Sept18/01)
3 September 2018
Third World Network
blocks AB member Servansing's reappointment
Published in SUNS #8743 dated 30 August 2018
Geneva, 29 Aug (Kanaga Raja) - The United States informed the WTO
Dispute Settlement Body (DSB) on Monday that it was not in a position
to agree to the reappointment of Appellate Body (AB) member Shree
Baboo Chekitan Servansing to a second term, effectively reducing the
seven-member adjudicative body to just three.
[Of the three now in the AB - the minimum needed to hear any appeal
- one is due to retire in October, and the other end of next year.
Unless the AB blockage is quickly resolved, the AB will be unable
to hear and dispose of any appeals from October, and by end of next
year will have only a single member. Under the DSU, the moment a member
notifies within the 30-day period between notification of panel ruling
and its adoption, the ruling remains suspended. And with no functional
AB, from October panels will rule, but the ruling may not take effect.
The integrated DSU, the single enforceable dispute settlement mechanism
in international agreements, will become non-functional and with it
more or less the WTO. SUNS]
Also at the DSB meeting, the US continued to block a joint proposal
sponsored by some 67 WTO Members that called for the simultaneous
launch of the selection processes to fill three current vacancies
on the Appellate Body as soon as possible.
In a related development, the US made a long statement criticizing
the Appellate Body for what in the US view was its consistent review
and reversal of "fact-finding" by WTO panels (see below).
Two Appellate Body members whose second and final four-year terms
have expired are Mr Ricardo Ramirez- Hernandez and Mr Peter Van den
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.
Under the agenda item on the possible reappointment of one Appellate
Body member, the Chair of the DSB, Ambassador Sunanta Kangvalkulkij
of Thailand, reported that she had carried out further consultations
with members on whether Appellate Body member Shree Baboo Chekitan
Servansing, whose first term ends on 30 September, should be given
a second term as Appellate Body member.
According to trade officials, the Chair said on the basis of her consultations,
she understood that there would not be a consensus to support Mr.
The Chair said that given that her consultation process was now concluded,
she would like to confer with all delegations on the way forward.
She added that her door was open for any member who wanted to discuss
the matter with her.
In its statement on this issue, the United States said for more than
15 years, across multiple US Administrations, it has been raising
serious concerns with the Appellate Body's disregard for the rules
set by WTO Members.
Through persistent over-reaching, the WTO Appellate Body has been
adding obligations that were never agreed by the United States and
other WTO Members, it maintained.
It said the President's 2018 Trade Policy Agenda outlined several
longstanding US concerns.
* The United States has raised repeated concerns that appellate reports
have gone far beyond the text setting out WTO rules in varied areas,
such as subsidies, anti-dumping duties, anti-subsidy duties, standards
and technical barriers to trade, and safeguards, restricting the ability
of the United States to regulate in the public interest or protect
US workers and businesses against unfair trading practices.
* On procedural, systemic issues, for example, the Appellate Body
has issue d advisory opinions on issues not necessary to resolve a
dispute, reviewed panel fact-finding despite appeals being limited
to legal issues, asserted that panels must follow its reports although
there is no system of precedent in the WTO, and continuously disregarded
the 90-day mandatory deadline for appeals - all contrary to the WTO's
agreed dispute settlement rules.
And for the last year, the United States said it has been calling
for WTO Members to correct the situation where the Appellate Body
acts as if it has the power to permit ex-Appellate Body members to
continue to decide appeals even after t heir term of office - as set
by the WTO Members - has expired.
This so-called "Rule 15" is, on its face, another example
of the Appellate Body's disregard for the WTO's rules.
"Our concerns have not been addressed. When the Appellate Body
abuses the authority it was given within the dispute settlement system,
it undermines the legitimacy of the system and damages the interests
of all WTO Members who care about having the agreements respected
as they were negotiated and agreed," the United States maintained.
The United States said that it will continue to insist that WTO rules
be followed by the WTO dispute settlement system.
"In this circumstance, the United States has determined that
it is not prepared to support the reappointment of Mr. Servansing
to the Appellate Body. This position is no reflection on any one individual
but reflects our principled concerns," it said.
According to trade officials, no other delegation took the floor on
CONTINUED US BLOCKAGE OF AB SELECTION PROCESSES
Under the agenda item of Appellate Body appointments, a joint proposal
on AB appointment 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; Iceland; India; Indonesia; Israel;
Kazakhstan; Korea; Mexico; New Zealand; Nicaragua; Norway; Pakistan;
Panama; Paraguay; Peru; the Russian Federation; Singapore; Switzerland;
Chinese Taipei; Turkey; Ukraine; Uruguay; Venezuela; and Viet Nam.
According to the proposal (WT/DSB/W/609/Rev.4), 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 ref erred to above, propose 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 ma ke 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, speaking on behalf of the 67 co-sponsors, 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.
"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.
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 added.
The United States said as it has explained in prior meetings, "we
are not in a position to support the proposed decision. The systemic
concerns that we have identified remain unaddressed."
For example, it said, at the DSB meeting in August of 2017, "we
made clear our concerns with the issuance of appellate reports by
individuals who are no longer members of the Appellate Body."
Yet, one year later, an individual who is not currently a member of
the Appellate Body continues to decide appeals.
"As we have explained many times, it is for the DSB, not the
Appellate Body, to decide whether a person who is no longer an Appellate
Body member can continue to serve on an appeal."
The United States referred back to its statements at earlier DSB meetings
for more elaboration on its concerns.
"We therefore will continue our efforts and our discussions with
Members and with the Chair to seek a solution on these important issues,"
Argentina, Canada, Brazil, Thailand, China, Australia, Norway, Switzerland,
Korea, Japan, Singapore, Chinese Taipei, Chile, India, Hong Kong-China,
New Zealand, Mexico, the European Union, Guatemala, and Costa Rica
(for the GRULAC group of Latin American and Caribbean countries) took
the floor on this issue.
According to trade officials, these delegations reiterated their concerns
with the continued impasse over 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 growing dangers that the continued
impasse posed not only to the dispute settlement system but the WTO
as a whole, and that members had an obligation under the WTO rules
to initiate the selection process.
Other members reiterated that the US concerns and the issue of appointment
of AB members should be treated separately.
Several members said that the US should put forward concrete proposals
on how to resolve the problem.
Mexico, on behalf of the 67 co-sponsors of the joint proposal, expressed
regret that for the fourteenth 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
It said that no discussion should prevent the Appellate Body from
continuing to operate fully and Members shall comply with their obligation
under the DSU, to fill the vacancies as they arise.
"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," said Mexico.
US STATEMENT ON ARTICLE 17.6 OF DSU AND APPELLATE REVIEW
The US statement concerns Article 17.6 of the DSU and Appellate review
of panel findings of fact, including domestic law.
The US said that it requested this agenda item to draw Members' attention
to an important systemic issue with significant implications for the
operation of the dispute settlement system: Article 17.6 of the Understanding
on Rules and Procedures Governing the Settlement of Disputes (DSU)
and appellate review of panel findings of fact, including domestic
(or municipal) law.
The US said the DSU reflects Members' agreement on the functions assigned
to panels and the Appellate Body. In DSU Article 11, WTO Members agreed
that " a panel should make an objective assessment of the matter
before it, including an objective assessment of the facts of the case
and the applicability of and conformity with the relevant covered
In other words, "the matter" in a dispute consists of the
facts and the legal claims, and WTO panels are to make factual and
In Article 17.6 of the DSU, Members agreed that the Appellate Body
would have a significantly more limited role than panels. The DSU
explicitly provides that "[a]n appeal shall be limited to issues
of law covered in the panel report and legal interpretations developed
by the panel."
Yet, despite this clear, unambiguous text of Article 17.6, the Appellate
Body has consistently reviewed and even reversed panel fact-finding.
It has done so under different legal standards that it has had to
invent, and it has reached conclusions that are not based on panel
factual findings or undisputed facts, the US cl aimed.
The US went on to discuss what it said are two particular issues of
concern relating to the Appellate Body's review of panel findings
First, the US said that it reviewed the relevant provisions of the
DSU to explain the Appellate Body's lack of authority to review a
panel's findings of facts. The invention of an authority to review
panel fact-finding, contrary to the DSU , has added complexity, duplication,
and delay to every WTO dispute, it said.
Second, it maintained that the Appellate Body has compounded the error
by asserting that it can review panel findings concerning the meaning
of a Member's municipal law, which is the key fact to be demonstrated
in any dispute.
According to the US, the concerns involving appellate review of municipal
law are just one symptom of a broader departure by the Appellate Body
from the terms agreed by Members in the DSU. The fundamental issue
is that the DSU explicitly limits the scope of an appeal, and there
is no basis in the DSU for the Appellate Body to review a panel's
findings of facts.
Members agreed in the DSU to expressly limit the authority of the
Appellate Body to legal findings by a panel, not factual ones. Indeed,
it is difficult to see how Article 17.6 of the DSU could be any clearer:
"An appeal shall be limited to issues of law covered in the panel
report and legal interpretations developed by the panel."
In fact, in an early report, the Appellate Body conceded as much.
It stated that: "Findings of fact, as distinguished from legal
interpretations or legal conclusions, by a panel are, in principle,
not subject to review by the Appellate Body."
However, the Appellate Body at the same time asserted that there was
a "standard of review" applicable for panels in respect
of "the ascertainment of facts" under the relevant covered
The US claimed that the Appellate Body's approach skipped over the
key threshold question: how, in light of the limitation of appeals
in Article 1 7.6 of the DSU to "issues of law and legal interpretations"
was the Appellate Body authorized to "review" a panel's
"ascertainment of facts"?
This question needed to be addressed and resolved before moving on
to deter mine what would be the "standard" for any such
But the Appellate Body did not engage on this threshold question.
It did not explain the basis for its assumption that it could review
a panel's findings of fact when the DSU expressly limits the Appellate
Body's review to "issues of law and legal interpretations."
Then, even aside from the lack of any basis for the Appellate Body
to review a panel's factual findings, there is a real question about
what the Appellate Body considered to be the "standard of review"
for a panel's factual findings.
Not surprisingly, there is no provision in the DSU that refers to
a "standard of review" for a panel's factual findings, since
the DSU does not provide for the Appellate Body to conduct any such
review, said the US.
Faced with this lack of any agreed "standard of review,"
the Appellate Body asserted that Article 11 of the DSU provided such
a standard. In so doing, however, the Appellate Body again ignored
the text of the DSU and simply asserted that the DSU text said something
different from what Members agreed.
The language in Article 11 of the DSU that the Appellate Body relied
upon is: "a panel should make an objective assessment of the
matter before it, including an objective assessment of the facts of
the case." Key to this text is the word "should."
Members are all familiar with the difference between "should"
and "shall" and choose carefully whether to use "should"
or "shall" in particular parts of the agreements they negotiate.
In fact, Members have been known to spend weeks or even longer negotiating
over exactly this point - whether to use "should" or "shall."
And in the DSU, Members chose to use "should" in 21 instances,
and to use the word "shall" in 259 instances.
Yet, said the US, in describing the text of Article 11, the Appellate
Body did not engage on this important textual issue. Instead, the
Appellate Body simply referred to this "should make" language
as a "mandate" and a "requirement" for panels.
To the contrary, the decision of WTO Members to use the term "should"
indicates that Members did not intend to create a legal obligation
subject to review, a conclusion that is directly reinforced by the
limitation on appeals to issues of law in Article 17.6.
According to the US, from its assertion that "should make"
sets out a "mandate" and a "requirement", the
Appellate Body proceeded to state: "Whether or not a panel has
made an objective assessment of the facts before it, as required by
Article 11 of the DSU, is also a legal question which, if properly
raised on appeal, would fall within the scope of appellate review."
Over a year later, the Appellate Body confirmed that it had failed
to engage in a textual analysis of "should" in Article 11,
when it stated simply that: "The word "should" has,
for instance, previously been interpreted by us as expressing a "duty"
of panels in the context of Article 11 of the DSU."
But there was no interpretation in the EC - Hormones report on the
term "should make" or how it could be understood as expressing
a "duty", or legal obligation. The Appellate Body did not
explain how asserting that, contrary to the plain text, the language
in Article 11 was a "requirement" could transform this "requirement"
into a "standard of review."
The Appellate Body had correctly explained just prior to this erroneous
statement that: "The consistency or inconsistency of a given
fact or set of facts with the requirements of a given treaty provision
is, however, a legal characterization issue. It is a legal question."
The US agreed, but said that it does not follow that a panel's assessment
of the facts became a "legal question" just because a party
to the dispute disagreed with it. It would still be an issue of "facts"
and "factual findings" and would not become an "issue
of law or legal interpretation."
The Appellate Body's decision to undertake a review of panels' findings
of fact therefore has no basis in the DSU. And the decision to review
panel fact finding has had a number of adverse effects on the dispute
settlement system, the US claimed.
For instance, the Appellate Body has itself repeatedly complained
about the increased workload due to appeals under Article 11 of the
DSU. The Appellate Body has complained that the number of Article
11 appeals has increased over time, and that Article 11 appeals have
in turn increased the complexity of appeals, the length of submissions,
and the need for the Appellate Body to devote time and resources to
become familiar with the basis for a panel's factual findings.
The opportunity for Article 11 appeals of the facts has also meant
that a party to a dispute may try to re-litigate the entire case it
presented to the panel. That is, it may challenge all the panel findings,
or at least the key findings, under D SU Article 11, and then all
the panel legal interpretations and legal conclusions under the relevant
provisions of the covered agreements.
These developments in turn are then cited as reasons explaining the
difficulties of the Appellate Body to meet the 90-day deadline mandated
under Article 17.5 of the DSU. "But these difficulties are, as
we have explained, significantly of the Appellate Body's own creation,
and another source of serious concern with t he functioning of the
Appellate Body," the US maintained.
Appellate Body review of facts also undermines the value of the interim
review of panel reports and can make the panel process significantly
less efficient, it said.
The Appellate Body's approach to the standard of review under Article
11 ha s also been inconsistent. Initially, the Appellate Body set
a very high threshold and explained that for an Article 11 appeal
to succeed, the party needed to demonstrate that the panel had committed
"egregious error that calls into question the good faith of the
However, over time, the Appellate Body has altered its approach. For
instance, more recently the Appellate Body has explained that "for
a claim under Article 11 to succeed, we must be satisfied that the
panel has exceeded its authority as the trier of facts."
The Appellate Body went on to explain that this means that "a
panel must provide a "reasoned and adequate" explanation
for its findings and coherent reasoning. It has to base its findings
on a sufficient evidentiary basis on the record, may not apply a double
standard of proof, and a panel's treatment of the evidence must not
This would appear to be a much lower threshold that is significantly
different from an "egregious error that calls into question the
good faith of the panel."
The shifting nature of the Appellate Body's approach under Article
11 would appear to be a result of the fact that Members never agreed
that the Appellate Body would review a panel's factual findings and
therefore Members never negotiated the basis or standard for such
Instead, the Appellate Body has struggled to formulate its own approach,
without the benefit of guidance from Members, said the US.
Following its assertion that it has the authority to review and even
revers e panel findings of fact, the Appellate Body has also asserted
that it has the authority to review panel findings on the meaning
of a WTO Member's challenged domestic law. This is another serious
error, the US claimed.
In the WTO system, as in any international law dispute settlement
system, the meaning of municipal law is an issue of fact. In a WTO
dispute, the interpretation of the WTO Agreement or relevant covered
agreements is the issue of law for the WTO dispute settlement system,
The relevant provisions of the DSU reflect this straightforward division
be tween issues of fact and law, said the US, citing in this context
Articles 6.2, 1 1 and 12.7.
Thus, the DSU makes clear that the measure at issue is the core fact
to be established by a complaining party, and the WTO consistency
of that measure is the issue of law, the US maintained.
This proposition - that municipal law is an issue of fact - is not
unique to the WTO dispute settlement system. In fact, it is well-recognized
in international law generally.
The US said that it is aware of at least 10 times that WTO panels
have disagreed with the Appellate Body, and instead found that the
meaning or operation of a WTO Member's domestic law is an issue of
fact, and not an issue of WTO law.
In this context, it cited the following panel reports: US - Section
301 Trade Act; US - Section 129(c)(1) URAA; Mexico - Olive Oil; Colombia
- Ports of Entry; EC - Fasteners; US - Countervailing Measures on
Certain EC Products; EC - Bed Linen (Article 21.5 - India); US - Zeroing
(EC); US - Poultry (China); and US - Countervailing and Anti-Dumping
That so many WTO panels have come to this conclusion in light of the
clear text of the DSU is not surprising. Nor is it surprising that
numerous WTO Members have also come to the same conclusion in their
disputes, the US maintained.
It cited the following examples: Canada in China - Auto Parts; China,
in EC - Fasteners; China, in US - Countervailing and Anti-Dumping
Measures (China); Colombia in Colombia - Ports of Entry; Dominican
Republic in Dominican Republic - Import and Sale of Cigarettes; EU,
in US - Large Civil Aircraft (21.5 - EU): EU, in United States - Conditional
Tax Incentives for Large Civil Airc raft; EU in European Communities
- Trademarks and Geographical Indications (Australia); EU in EU -
Fatty Alcohols; Guatemala in Guatemala - Cement (Panel); Hong Kong
in US - Shrimp; India in India - Patents (US); Mexico, in US - Anti-Dumping
Measures on Oil Country Tubular Goods; Peru in EC - Sardines; and
Philippines in Thailand - Cigarettes.
Thus, said the US, in at least 15 instances of which it is aware,
other WTO Members too have disagreed with the Appellate Body's assertion
that it has the authority to review a panel's factual findings on
the meaning of a WTO Member's domestic law. Despite this repeated
disagreement with its approach, over many years, however, the Appellate
Body has not reconsidered its view. Nor, has it ever engaged with
the DSU text that demonstrates that its approach is erroneous and
contrary to that text.
The Appellate Body has not treated panel findings concerning the meaning
of municipal law as a factual issue. Instead, it has treated the meaning
of municipal law as a matter of WTO law, to be decided by the Appellate
Body de novo in an appeal under Article 17.6 of the DSU, the US claimed.
"The Appellate Body's approach in conducting its own de novo
review of the meaning of domestic law is inconsistent with the appropriate
functioning of the dispute settlement system. It departs from the
basic division of responsibilities where panels determine issues of
fact and law, and the Appellate Body may be asked to review specific
legal interpretations and legal conclusions."
According to the US, it also represents a serious waste of the limited
resources of the WTO dispute settlement system, adding complexity
and delay to the process. No purpose is served by having a panel engage
in a detailed review of a factual record related to the meaning of
a domestic measure, and then to have the Appellate Body engage in
its own de novo review of the exact same factual issues, so that the
parties have to argue all the same factual issues a second time ,
the US maintained.
The Appellate Body's expansion of its review authority, contrary to
the DSU text, has added complexity, duplication, and delay to almost
every dispute, as a party to the dispute can now challenge on appeal
every aspect of the panel's finding s.
"The United States does not consider this a desirable outcome.
But more importantly, it does not reflect the WTO dispute settlement
system as agreed by Members in the text of the DSU. Therefore, whether
or not a WTO Member considers appellate review of facts desirable,
that review is neither legal nor legitimate under our agreed WTO rules,"
Chile, Japan, Australia, Canada, Brazil, China, the Philippines, Mexico
and the European Union took the floor with regards to the US statement.
According to trade officials, most of them agreed that the issue was
complex and expressed their willingness to discuss the matter with
Some members urged the Appellate Body to exercise caution on review
of facts or said the Appellate Body has no mandate to undertake its
own independent rev iew of the meaning or interpretation of domestic
However, China, Brazil, Mexico and the Philippines said the line between
issues of fact and issues of law was not always clear and that the
Appellate Body should be able to step in to provide some clarity.
The EU said that, in its view, the Appellate Body has fully respected
the relevant provisions of the DSU. It was however open to discussions
on possible improvements in the operation of the dispute settlement
The Philippines asked the US to tell WTO members what solution it
proposes to address the problem.