US double standards in complaints against AB

It may have criticized the WTO Appellate Body when vetoing a second AB term for Seung Wha Chang, but the US had raised no grievance when the body issued several questionable rulings previously against developing countries, notes Chakravarthi Raghavan.

GENEVA: In directing its ire against the Appellate Body (AB) at the WTO’s Dispute Settlement Body (DSB) meeting on 23 May, though purportedly against Prof. Seung Wha Chang of South Korea and singling him out to deny him reappointment to the AB, the US was exhibiting its double standards in the international arena.

So long as the WTO’s dispute settlement panels and AB were piling obligations on developing countries and curtailing their rights, to pry open their markets to serve the mercantilist interests of its corporations, the US was all praise. But when some dispute rulings went against the US, particularly regarding its anti-dumping measures (aimed at protecting specific industries and enterprises), the US began to cry foul. This has now reached a crescendo in the US’ veto of Chang and voicing its views openly and stridently, initially through its trade officials in Washington and then at the DSB.

In the early years of the WTO and the functioning of its Dispute Settlement Understanding (DSU), when most of the rulings handed down by the panels and the AB were against the developing countries (and were virtually automatically adopted under the “negative consensus” rule, through which a ruling would be adopted by the DSB unless it decides by consensus not to do so), the US was one of the main beneficiaries and cheerleaders, often when the EU and Japan too were complainants.

Several of those rulings added to the obligations of the developing countries and curtailed their rights, and were grounded on questionable reasoning and conclusions, purportedly based on public international law interpretations codified by the Vienna Convention on the Law of Treaties (VCLT).

[The US never ratified the VCLT as the US Senate did not consent to it. However, the US State Department (to whose views on international commitments the US courts, including the Supreme Court, defer), in a statement by the Secretary of State, announced that the US abided by public international law.]

Selection of AB members

The US double standards, and the WTO and its secretariat acquiescing, began even in 1995 when the initial slate of seven AB members was agreed on 29 November 1995 after a difficult process of haggling involving the WTO Director-General, the US and the EU. The process resulted not only in the seven AB members being named, but also in a US national being selected to head the WTO’s legal division (and a Canadian to head the AB’s legal assistance secretariat). Under the old GATT forum which preceded the WTO, the legal division had been headed by a German national. Under the WTO, Europe as a whole got one seat on the AB!

For the selection of the AB members, candidates from 23 countries were interviewed. From among them a selection was made by a small committee consisting of the then WTO Director-General Renato Ruggiero and the respective chairpersons of the DSB (Don Kenyon of Australia), Goods Council (Minoru Endo of Japan), Services Council (Crister Manhusen of Sweden) and TRIPS Council (S.W. Harbinson of Hong Kong). (In 1995, Hong Kong was still a separate customs territory under the UK.)

In the selection process, the WTO members were “consulted” and asked for views on their preferred candidates and why, on the basis of criteria agreed by the DSB. However, the US was effectively given the “privilege” of objecting/vetoing some names (a question never posed to other members), thus helping to label the successful candidates as “pro-American”. Everyone involved in that process must be held responsible, but the major players were DSB chair Kenyon and Director-General Ruggiero: the two enabled the Americans to exercise such a “privilege”.

After some tussle (between the US and the EU over Europe’s claim for two seats), seven names were put before the DSB and accepted by consensus. India and Switzerland, while not blocking the consensus, however said they were not joining. Switzerland said there was an imbalance, complaining that the selection committee had not followed the criteria set out and agreed upon, and had taken a “restricted view” of the European entity. India, in a statement made available by its delegation to the media, detailed how one member alone had been given the option of saying “no” to individual candidates. The EU, while joining the consensus, expressed its dissatisfaction. (For a detailed report, see Chakravarthi Raghavan, “WTO establishes Appellate Body”, www.suns online.org/trade/process/followup/1995/11300095.htm.)

Conflicting or cumulative provisions?

The Uruguay Round (UR) agreements had been negotiated at various stages in formal and informal negotiating groups, with most of the negotiators having no clear view of the final outcome or of the institutional setup for the implementation of the agreements until the very end. This outcome, in the shape of the WTO Agreement – with annexed agreements relating to trade in goods, trade in services, trade-related aspects of intellectual property rights, trade policy review mechanism, some plurilateral agreements, and a Dispute Settlement Understanding for an integrated dispute settlement system – was negotiated within a small group of key countries (often between the US and the EU initially) and then presented to the other UR participants on a take-it-or-leave-it basis. The developing-country negotiators in Geneva and their capitals had very little time to study the final draft agreements and their implications; they never had any option to suggest changes.

The various agreements under the rubric of “trade in goods” had been negotiated disjointedly, with different negotiating groups on different issues, often with one or two delegates of developing countries having to shuffle between negotiating groups meeting at the same time. Compromises in differing language were agreed for more or less the same concepts. Some of these were such that even at the time of the official-level conclusion of the negotiations in November-December 1993, possible conflicts inter se were envisioned.

To reconcile these, two safeguards were suggested. One was to subject all the agreements to “legal scrutiny and reconciliation” before settling on a final draft. At the time of legal scrutiny, when some of the inconsistencies and impreciseness in language were raised and pointed out by some developing countries, Canada argued that reopening compromise texts arrived at after much difficulty may unravel the entire package of agreements.

While an important consideration, this was not such an insurmountable obstacle. With clear instructions for time-bound discussions to produce uniformity and clarity without endangering or changing substance, solutions could have been found. Nevertheless, with delegations weary after seven years of negotiations, the Canadian suggestion – that these matters could be resolved through the dispute settlement process – prevailed.

In this respect, some of the built-in safeguards were pointed to:

1. The dispute settlement process, through the panels and AB, was to “clarify” the existing provisions of the agreements in accordance with customary rules of interpretation of public international law. However, recommendations and rulings adopted by the DSB cannot add to or diminish the rights and obligations provided in the agreements (DSU, Article 3.2).

2. Under Article IX:2 of the WTO Agreement, “The Ministerial Conference and the General Council shall have the exclusive [emphasis added] authority to adopt interpretations of this Agreement and of the Multilateral Trade Agreements. In the case of an interpretation of a Multilateral Trade Agreement in Annex 1, they shall exercise their authority on the basis of a recommendation by the Council overseeing the functioning of that Agreement. The decision to adopt an interpretation shall be taken by a three-fourths majority of the Members. This paragraph shall not be used in a manner that would undermine the amendment provisions in Article X.”

3. The negotiators recognized that conflicts were likely to arise from the General Agreement on Tariffs and Trade (GATT) 1994 and several multilateral agreements covering various aspects of “trade in goods”, put together in Annex 1A (titled “Multilateral Trade Agreements on Trade in Goods”) of the WTO Agreement. As such, Annex 1A itself has a “general interpretative note” which stipulates: “In the event of conflict between a provision of the General Agreement on Tariffs and Trade 1994 and a provision of another agreement in Annex 1A ..., the provision of the other agreement shall [emphasis added] prevail to the extent of the conflict.”

While every participant which signed on to the WTO Agreement at Marrakesh in 1994 also had to sign on to all the agreements listed in Annexes 1, 2 and 3 (but not the plurilateral agreements listed in Annex 4, where adherence was to be voluntary), the WTO Agreement has no provision on the sum total of rights and obligations under the various agreements.

In terms of customary rules of interpretation of public international law, when a country is a party to several agreements, it is expected to implement all in good faith, with specific obligations in one overriding the general in another, and a subsequent agreement between the same parties on a specific subject overriding an earlier one etc.

From the outset, however, contrary to these customary rules of interpretation, the WTO’s dispute settlement panels and AB, aware that their rulings would be automatically adopted by the DSB under the “negative consensus” rule, in a series of disputes raised by the US against individual developing countries (and in the banana dispute against the EU), held that the rights and obligations of the various agreements were “cumulative”, even though those who negotiated, drafted and concluded the agreements did not formulate any such requirement.

The AB said that it would clarify and reconcile the various agreements such that there are no conflicts and in such a way that a WTO member state would be obliged and enabled to observe all the obligations of all the agreements.

In several of its rulings, the AB “interpreted” the accords cumulatively, increasing the obligations of developing countries and restricting their rights, in effect using the DSU and the “negative consensus” requirement for adoption of rulings to open up developing-country markets to the transnational corporations (TNCs) of the US. Some egregious examples are detailed below.

The AB bias in favour of the US, and acting against developing countries to open up their markets, began from the outset in its rulings on a series of disputes raised by the US and/or the EU.

In a dispute against Indonesia over its domestic auto production project, which involved some subsidization for local procurement, the panel ruled that when a number of international agreements are entered into by the same parties at the same time, there has to be a presumption that there are no conflicts.

However, on a plain reading of texts, it is clear that the UR negotiators, in reaching the various WTO accords on trade in goods, did envisage conflicts, and hence inserted the overriding general interpretative note to Annex 1A.

The panel got around this by arguing that the note could apply to any conflict between the obligations of GATT 1994 and the Agreement on Subsidies and Countervailing Measures (SCM), but not between the Agreement on Trade-Related Investment Measures (TRIMs) and the SCM Agreement. The “non-conflict” between the TRIMs and SCM Agreements was deduced by “interpreting” the TRIMs Agreement as a “full-fledged” agreement of the WTO, and the references in the TRIMs Agreement to the “provisions” of Article III of GATT 1994 (against investment measures) as a reference not to the Article as such – as would be the ordinary meaning of the term in public international law interpretations – but only to its “substantive aspects”!

The panel did not explain where it got this “qualification” to distinguish between “substantive aspects” and the Article itself. It used the AB ruling in the US-EU banana dispute (see below) to buttress this view and promote the theory of “cumulative obligations” on the same subject in different agreements.

However, if the TRIMs and SCM Agreements are separate accords, the special rights given to developing countries under the SCM Agreement (to promote industrialization through subsidies and incentives, including for the use of domestic goods in preference to imported goods) ought to have prevailed over the more general TRIMs Agreement.

In commenting on the Indonesia auto dispute in the South-North Development Monitor (SUNS), trade expert and former Indian ambassador to GATT Bhagirath Lal Das pointed out that in reaching the conclusion of no conflict between the TRIMs Agreement (a general accord) and the specific SCM Agreement, the panel had taken “circuitous routes, making a subtle, but tenuous, distinction between Article III of GATT 1994 and ‘the provisions’ of this article.” This appears totally artificial, as an article cannot be viewed as separate from its provisions. Das said: “One may be tempted to ask: what is the content of Article III of GATT 1994, devoid of its provisions contained in its various paragraphs?”

Indonesia did not appeal the panel ruling but implemented it. In this instance, it bowed to the International Monetary Fund (IMF), which required Indonesia, in return for an IMF loan to meet the country’s financial crisis, to implement the ruling, end the subsidy and abandon its automobile project. The IMF thus advanced the mercantilist interests of its major shareholders, the US, the EU (France, Germany and the UK) and Japan.

[The accord with the IMF (and the picture of the flamboyant way the then IMF boss Michel Camdessus stood behind then Indonesian President Suharto as the latter signed the accord) sealed Suharto’s fate, and the corrupt Suharto regime gave way to successors who did not want to pursue the projects whose beneficiaries were Suharto’s sons.]

In the earlier banana dispute, the US, in pursuing the interests of its Chiquita banana TNC (which procured and exported bananas from Central and South America, but not from the US), had challenged the EU’s wholesale distribution regime under the WTO’s General Agreement on Trade in Services (GATS); the US had no locus standi in a dispute involving Annex 1A accords on trade in goods, since it exported no bananas.

[The US withdrew its own initial complaint and joined the Central American countries as co-complainant. Chiquita had banana plantations in Central America and exported bananas to the EU at MFN rates, as against the preferential tariff regime for bananas from African, Caribbean and Pacific (ACP) countries.]

The issue raised by the US complaint hence was over the EU’s obligations under Annex 1A agreements in relation to banana imports, and the accord in Annex 1B (GATS), and whether the invocation of GATT accords (by Guatemala and others) excluded a claim by the US under GATS.

The WTO treaty itself has no provision analogous to the Annex 1A general interpretative note when it comes to possible conflicts amongst the agreements in Annexes 1A, 1B, 1C (the TRIPS Agreement) and 2 (DSU). Thus, on questions of conflict among the first three (e.g., conflict between the general and the specific), a presumption (rebuttable though) of no conflict is possible. But all Annex 1A accords are covered by the mandatory general interpretative note, which shows that the signatories envisaged possible conflicts and ways to resolve them.

At first (in the banana dispute), the panels said that the obligations under GATT, GATS and the TRIPS Agreement were “cumulative”. This itself was questionable. But to import this to make GATT 1994 and the other goods agreements in Annex 1A cumulative, as in the Indonesia auto dispute, is nonsense. If the negotiators had intended it, they would have said so, as both this writer and Das pointed out at a 2000 trade seminar in Harare (see Martin Khor, “WTO dispute system tilting balance against South”, SUNS, No. 4638, 31 March 2000).

Same wording, different

interpretations

In another set of rulings, despite its own so-called “collegiate” working procedures, the AB provided two different views on the same wording in two different provisions invoked in two different, more or less contemporaneous disputes.

In the Turkey-India dispute (see Chakravarthi Raghavan, “WTO Appellate Body extending its jurisdiction”, SUNS, No. 4537, 26 October 1999), in obiter dicta on points of law not raised in appeal by either India or Turkey, but of indirect benefit to the US in future disputes, the AB handed down a ruling contrary to its earlier views on the India balance-of-payments (BOP) case.

The AB’s obiter dicta (against which the US expressed no criticism then) opened the way for customs unions to depart from GATT obligations other than those in Article I, the MFN provision of GATT. The AB said: “... we are of the view that Article XXIV may justify a measure which is inconsistent with certain other GATT provisions. However, in a case involving the formation of a Customs Union, this ‘defence’ is available only when two conditions are fulfilled. First, the party obtaining the benefit of this defence must demonstrate that the measure at issue is introduced upon the formation of a customs union that fully meets the requirements of sub-paragraph 8(a) and 5(a) of Article XXIV. And, second, the party must demonstrate that the formation of a Customs Union would be prevented if it were not allowed to introduce the measure at issue. Again both these conditions must be met to have the benefit of Article XXIV.”

In these obiter dicta, the AB obliquely sought to expand its own jurisdiction in future cases: “We wish to point out that we make no finding on the issue whether quantitative restrictions found to be inconsistent with Article XI and Article XIII of the GATT 1994 will ever be justified by Article XXIV. We find only that the quantitative restrictions at issue in the appeal in this case were not so justified. Likewise, we make no finding either on many other issues that may arise under Article XXIV. The resolution of those other issues must await another day. We do not believe it necessary to find more than we have found here to fulfil our responsibilities under the DSU in deciding this issue.”

In the Turkey-India dispute, the Uruguay Round Understanding on Article XXIV (on customs unions) was involved. In the India BOP dispute, where India sought to justify its quantitative restrictions (QRs) on BOP grounds, the UR Understanding on Article XVIII:B (on BOP) was involved. The language used in paragraph 12 of the Article XXIV Understanding, and that in footnote 1 to the Article XVIII:B Understanding both seek to ensure that the right of WTO members to raise disputes under Articles XXII and XXIII “with respect to any matter arising out of” either of the Articles and Understandings is preserved.

In the case against India’s QRs, where India pleaded BOP justification, and in the case against Turkey, where Turkey claimed justification under provisions on customs unions, the panels faced the issue of whether the BOP justification in the first and the customs union justification in the second were matters that could be raised before and disposed of by a panel, or whether they should be decided by the respective substantive WTO bodies where all members are represented.

In the BOP case, the AB, like the panel, interpreted the Understanding to provide jurisdiction to both the WTO’s BOP Committee and the panels to hear and decide. The US blocked any conclusion of the Committee and raised a dispute, which the panel and the AB adjudicated, declaring the Indian QRs illegal.

At the stage of the DSB’s adoption of the rulings (under the “negative consensus” rule), India and several other developing countries strongly objected to this interpretation, seeing it as a serious inroad into the special and differential (and more favourable) rights assured to developing countries under the WTO, GATT 1994 and its Article XVIII:B.

In the Turkey case, however, the panel took the opposite view that, arguably, the issue of compliance of a customs union with Article XXIV was for the WTO body (in this case, the Committee on Regional Trade Agreements) to decide, but that panels could go into disputes with respect to “any matters arising from the application of these provisions relating to customs unions, free-trade areas or interim agreements leading to the formation of a customs union or free trade areas.”

The panel reports on the India BOP case and the Turkey Article XXIV case were due to be circulated to all DSB members at about the same time (in both cases, advance copies were provided to the dispute parties as per the rules). If the two reports had come out at the same time, both would have landed in the AB at the same time and the AB (functioning under self-assumed collegiality powers) would have been forced to deal with the fact of the identical language in the GATT 1994 provisions relating to both the disputes.

But the publication of the report on the Turkey dispute was delayed (by the secretariat) by a little over a month after it was ready, on the ground of time needed for translation; it thus went to the AB later.

In both cases, before the panels, India had taken the same position. But by the ‘fortuitous’ circumstance of the AB hearing in the BOP case taking place before the Turkey dispute appeal, the US was able to get the AB in the BOP case to rule on the simultaneous jurisdiction of the WTO legislative body and of the panels. In the Turkey dispute, though the US had been an interested third-party intervener before the panel, it did not intervene at the AB stage!

Nevertheless, the AB (which under the DSU cannot create or abridge rights and obligations of the WTO), by means of obiter dicta that more often come out of courts of record in Anglo-Saxon common law jurisdictions, “invited” future appeals in future disputes to enable it to rule on this contradiction in interpretation of the same wording in the Understandings on Article XVIII:B and Article XXIV.

The “shrimp-turtle” ruling

In the “shrimp-turtle” dispute, raised by India, Malaysia, Pakistan and Thailand against US restrictions on imports of shrimp caught using nets that may ensnare turtles (see SUNS, No. 4301, 14 October 1998), the AB:

1. Cleared the way for non-governmental organizations (NGOs) to file amicus curiae briefs and intervene, in effect ruling that the panel’s right to “seek” information should not be read narrowly but as enabling it to make use of information it had not in fact “sought”. The verb “seek”, which (by any ordinary meaning of the word in any dictionary) requires an active role of the panel, is thus made to mean to “receive”, even when the panel did not initiate any move on this! The US and EU NGOs cheered, little realizing that this meant rich corporations and their lawyers could also intervene – which they did, as in a subsequent steel import dispute.

2. Imported and expanded the scope of the GATT “exceptions” in Article XX by setting aside the panel ruling on this as a “serious error” of legal reasoning. The AB held that the panel did not examine the ordinary meaning of Article XX (unlike in the Indonesia auto ruling, there was no discussion here as to whether this meant the “substance” of the provisions or the entire Article) nor look at the application of the measure, but rather focused on the design of the measure and addressed “a particular situation where a Member has taken unilateral measures which, by their nature, could put the multilateral system at risk.”

The panel had formulated a broad standard and test for excluded measures, and found the US shrimp ban as falling under this class because it imposed conditions for market access based on adoption by the exporting country of conservation policies prescribed by the US. The AB, however, accepted the US plea that Article XX(g) about the conservation of “exhaustible natural resources” applied not merely to mineral resources but also to living natural resources, and spoke of an “evolutionary” approach to treaty interpretation. The AB held that the treaty interpreter must interpret the treaty in the light of contemporary concerns of the community of nations about protection and conservation of the environment. According to the AB, while Article XX of GATT 1947 (reflecting the understanding at that time on mineral and living resources) was not modified by GATT 1994 in the Uruguay Round, the WTO Agreement had “the objective of sustainable development” in its own preamble, and thus, the term “natural resource” used in Article XX(g) was not static but “by definition, evolutionary.” Evolution in five years of life of the WTO and GATT 1994!

Negotiating history

Public international law interpretation, as codified in the VCLT, requires the words of a treaty to be interpreted in accordance with their “ordinary meaning”, but where language is ambiguous or unclear, reference can be made to the negotiating history to arrive at a meaning. Under the Vienna Conventions on Plenipotentiary Diplomatic Conferences for negotiating treaties/agreements, while concluding a treaty, the plenipotentiaries are also authorized to draw up and approve a “negotiating history” to be part of the records of the conference. Any other “negotiating history”, however drawn up, is of no value.

The Uruguay Round’s concluding meeting of plenipotentiaries at Marrakesh was not presented with, nor did it approve or adopt, a negotiating history. (This was unlike at the end of the previous Tokyo Round, when the negotiating history, drawn up by the secretariat, was adopted.) At the Marrakesh plenipotentiary ministerial meeting, only formal documents and reports of the Uruguay Round were derestricted and published. Although much of those negotiations had taken place in informal meetings where informal proposals by participants and sometimes “non-papers” (those without identified authors) were tabled and considered, none of these can be found in the derestricted formal Uruguay Round documents.

Yet, WTO dispute settlement panels, purporting to exercise a need to clarify meanings of language in the WTO accords (rather than on the basis of the ordinary meaning deduced from a dictionary), have been using “negotiating history” produced by the secretariat (the legal division servicing the panels, in consultation with substantive divisions), behind the backs of parties after they had presented and argued their cases. This is a gross violation of the principles of natural justice common to all systems of law and public international law. The secretariat records resulted, in two dispute cases explained below, in some strange “negotiating history”.

In a ruling against Korea in a dispute raised by the US on the plurilateral Government Procurement Agreement (for an analysis of the ruling, see SUNS, No. 4670, 18 May 2000), a panel headed by Michael Cartland, a former Hong Kong representative to GATT/WTO, first gave an expanded interpretation of the rarely invoked “non-violation” clause in GATT Article XXIII.1.b (only eight cases till then in the 50-year history of GATT invoked this clause). The ruling spoke of impairment to the US arising out of “reasonable expectation of an entitlement” to a benefit that had accrued “pursuant to the negotiation”, rather than “pursuant to a concession exchanged in the negotiations,” the traditional view of public international law (codified in Article 26 of the VCLT, which incorporates the principle of pacta sunt servanda).

This finding by the Cartland panel enabled its further finding that there had been lack of “good faith” in negotiations or “treaty error” on the part of Korea, and that the DSU could be used to invalidate a part of the treaty (Government Procurement Agreement), and a DSB recommendation substituted, to enable a party to withdraw reciprocal concessions. The panel arrived at this expanded view of pacta sunt servanda by delving into the negotiating history, not of the Government Procurement Agreement but of the VCLT itself, citing the statement of the International Law Commission in transmitting the draft VCLT to the UN General Assembly, which had set up the Commission and adopted the VCLT!

Having given this obiter dicta, which opened up the scope for future complaints, the panel however ruled against the US on the ground that the US had not exercised “due care” in the negotiating process! The US did not appeal, and the panel report was adopted, in effect putting the DSB imprimatur on this expanded clarification/interpretation of “non-violation” complaints and “good faith” in negotiations, and the ability of panels to remedy “treaty error” and “lack of good faith” in negotiations by substituting their own judgment in lieu of actual scheduled commitments – a veritable “Daniel come to Judgment”, to use Shakespearean language. The US did not protest such an expanded remit for dispute settlement.

Balance between judicial and

political bodies

The manner in which the dispute settlement process was being invoked, and rulings handed down, elicited some criticism at that time from a former GATT law official Frieder Roessler, a German national who had headed its legal division during the Uruguay Round and into the WTO, and later headed the Geneva-based Advisory Centre on WTO Law (set up to help developing countries, in particular least developed countries, with legal assistance in disputes).

In a critique of the functioning of the WTO’s dispute settlement system, particularly the way panels and the AB made use of the procedural rights in the DSU to virtually nullify the substantial rights and obligations of members under the WTO agreements, Roessler said that the competence of panels and the AB could not be determined by themselves exclusively on an interpretation of the DSU, but in the context of the complex institutional structure of the WTO and the division of decision-making among different organs, set out in the Marrakesh treaty and which reflect legitimate, negotiated policy objectives.

WTO panels, Roessler said, should respect the competence and discretionary powers of the political bodies established under the agreements, and should not reverse their determinations. And if a competent WTO body has not yet made its determination, panels should not step in and preempt that determination. The role of panels, he added, should be limited to protecting WTO members against an abusive resort to provisions governing, for example, BOP measures and regional trade agreements – against measures that fall outside the discretionary authority of the BOP Committee or the Committee on Regional Trade Agreements.

Roessler’s views were put forward in a paper, “The institutional balance between the judicial and political organs of the WTO”, presented at a June 2000 seminar at Harvard University (for a report on the paper, see SUNS, No. 4685, 16 June 2000).

The US at that time voiced no criticism of the way panels and the AB were clarifying and interpreting the WTO agreements such that it seemed to increase the obligations of developing countries to the benefit of the US and its mercantilist interests. This bias at the WTO came into play to a much greater extent in the 1996 US presidential election campaign (Bill Clinton vs Bob Dole contest), where the WTO, its DSU and loss of US sovereignty became an issue and one of the campaign slogans was “Two strikes and we are out”; the WTO and its panels and the AB seemed to be trying to ensure there was no such opportunity!

In a similar vein to Roessler’s paper, Bhagirath Lal Das, former Indian ambassador to GATT, a trade law expert and author of several books on the WTO system and its imbalances, in a critique of the way the panels and the AB were functioning, went so far as to call for the abolition of the standing Appellate Body itself (see Bhagirath Lal Das, “The panel and appeal process at the WTO”, SUNS, No. 4689, 19 June 2000).

In analyzing the AB views in two separate disputes (against Korea and Argentina) involving the WTO Agreement on Safeguards, heard and rulings handed down at the same time by two different division benches of the AB, Das pointed to the “extraordinary coincidence” of six paragraphs in the two AB reports having the same wording. He added: “The members of the AB divisions in these two cases were two totally different sets of members ... Each of these reports is signed by the respective sets of three members each. It is surprising how these two different sets of persons ended up writing exactly the same language in some parts of their respective reports. The AB is like a judicial body in the WTO. One has to presume that the AB in a case writes its own reports, and does not get it written by some other persons. This presumption seems to be hit by the exact convergence of the language in some parts of the two reports ...”

After Das’s article came out in SUNS, WTO officials explained to this writer about “collegiality” under the AB’s working procedures – which at that time were not made public but were available to WTO members – and that in the light of conclusions by the AB division, reports were drafted by the AB secretariat and approved by the division benches! A recent letter by six AB members to the DSB chair (written in connection with the issue of Chang’s reappointment) both explains and brings to the public record how the AB division bench of three members hearing an appeal invariably consults and interacts throughout with the four other members of the AB who do not participate in the hearing, and that this is done in terms of the AB’s working procedures.

Not yet in the public record then but known, as this writer had done at that time, by talking to some panel and AB members (after the rulings), it would appear that after hearing the parties and third parties in a dispute, panels, in reaching their conclusions, are “guided” by officials of the legal (and substantive) divisions of the WTO secretariat “servicing” the panel; and in most cases the secretariat also draws up a draft report.

In the case of the AB, as mentioned above, the three-member division bench interacts throughout, without the presence of the parties and third parties to the appeal, with the other members of the AB, and their reports too are drafted by the AB secretariat’s legal assistance.

In any domestic jurisdiction, this is enough to make a ruling or decision (judicial, quasi-judicial or administrative) illegal and invalid. The WTO apparently is a different animal, and part of the DSU review process that should be undertaken as a priority over any other negotiations at the WTO must address these issues and ensure rulings adopted at the DSB do not add to or diminish the rights and obligations provided in the WTO agreements.

Freewheeling ways

In one US-EU dispute over countervailing duties under the Agreement on Subsidies and Countervailing Measures, the AB ruled against the US but in the process, through its freewheeling ways without any authority of the rules, managed to raise more controversies.

The US, in its notice of appeal, had not spelt out the legal grounds and panel decisions thereof, as required under the AB working procedures. When the EU asked for dismissal of the appeal on that ground, the US said there was no such requirement in the DSU. Instead of upholding its own working procedures, the AB division “requested” the US to file its grounds of appeal and accepted it even though the time for appeal had expired!

The AB also asserted its right to receive an amicus curiae brief, this time from an industry association, but then decided there was nothing in the brief! In the process, it gave NGOs superior rights over WTO members that are third parties which had not notified their intention to intervene in the appeal or those members other than third parties which can’t claim any right to be heard!

On substance, the AB turned down the US arguments about when a “benefit” is conferred, but refused to provide any authoritative ruling that would end future disputes.

In the EU-Canada patent case, the panel used the “negotiating history” of the TRIPS Agreement provided in a note by the secretariat that purported to draw a history of the negotiations “on the basis” of draft legal texts in the negotiating group in the spring of 1990, a secretariat composite text, and subsequent chairman’s informal text and revisions, as well as “parallel work” in the WIPO Committee of Experts on preparations for a Patent Harmonization Treaty.

The secretariat note admitted that these texts had not been circulated to the TRIPS negotiating group, but still used them on the ground that WIPO representatives had kept negotiators “informed” of developments! (See Chakravarthi Raghavan, “WTO panel hits stockpiling exception in Canadian Patent Act”, SUNS, No. 4630, 21 March 2000.) At Marrakesh, all formal documents and reports were derestricted; however, the reports of various meetings of the TRIPS negotiating group were, at that juncture in 1994, available even to Uruguay Round delegates only as drafts (subject to editing and corrections from delegations); the reports were finalized and made public only in 1995 or 1996, after the WTO came into being.

While the AB has in other instances shown willingness to create law and do what it wants regarding NGO briefs, on the sequencing issue (compliance panel first before retaliation authorization request, or Article 21.6 of the DSU vs Article 22) where the Quad (the US, the EU, Canada and Japan) disagreed considerably, the AB noted lack of clarity and said it was for the WTO members to clarify through interpretation or change of rules! (See SUNS, No. 4812, 12 January 2001.) (SUNS8258/8259)                      

Third World Economics, Issue No. 618, 1-15 June 2016, pp4-9