TWN Info Service on WTO and Trade Issues (May18/04)
4 May 2018
Third World Network
       
Longstanding impasse over AB appointments continues
Published in SUNS #8674 dated 3 May 2018

Geneva, 2 May (Kanaga Raja) - The United States has again blocked, for the eleventh time, efforts to launch the selection processes to fill three current vacancies on the seven-member Appellate Body (AB).

The impasse over this issue at the DSB has now been lingering for more than 16 months.

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

At the meeting, the United States said that it was not in a position to agree to a joint proposal co-sponsored by some 66 WTO Members that called for the simultaneous launch of the selection processes to fill the three vacancies as soon as possible.

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 M r 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.

A joint proposal on AB appointments was tabled at the DSB meeting by Argentina; Australia; Bolivia; Brazil; Canada; Chile; China; Colombia; Cost a Rica; Dominican Republic; Ecuador; El Salvador; the European Union (comprising 28 member states); Guatemala; Honduras; Hong Kong-China; India; Indonesia; Israel; Kazakhstan; Korea; Mexico; New Zealand; Nicaragua; Norwa y; Pakistan; Panama; Paraguay; Peru; the Russian Federation; Singapore; Switzerland; Chinese Taipei; Turkey; Ukraine; Uruguay and Viet Nam.

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

According to the proposal (WT/DSB/W/609/Rev.3), 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 referred 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 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 at the meeting, on behalf of the 65 WT O Members, plus the delegation of Iceland who expressed its intention to co-sponsor the proposal.

Mexico 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 and is against the best interest of its Members.

According to Mexico, 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," it said.

Mexico pointed out that the proposal seeks to:

(i) start three selection processes: one process to replace Mr Ricardo Ramirez-Hernandez, whose second term expired on June 30, 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 December 11, 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," said Mexico.

In its statement, the United States said that as it has explained in prior meetings, "we are not in a position to support the proposed decision."

For at least the past 8 months, the United States has been raising and explaining the systemic concerns that arise from the Appellate Body's decisions that purport to "deem" as an Appellate Body member someone whose term of office has expired and thus is no longer an Appellate Body member, pursuant to its Working Procedures for Appellate Review (Rule 15), it said.

During that period of time, the DSB has adopted by positive consensus two reports signed by someone no longer an Appellate Body member, and there currently remain five ongoing appeals where the term of one or more of the persons appointed to the division has expired.

In one instance, the person's term expired almost ten months ago, the Unite d States said. However, the Dispute Settlement Body has not yet addressed the problem of persons continuing to hear 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.

"We appreciate the recognition by Members at the last meeting of the fact that addressing this issue is a joint responsibility of all Members, and we appreciate the willingness they expressed to engage on this issue," said the United States.

The United States said it remains resolute in its view that Members need to resolve that issue as a priority.

"We therefore will continue our efforts and our discussions with Members an d with the Chair to seek a solution on this important issue," it said.

CONCERNS OVER APPELLATE BODY IMPASSE

Colombia (for the GRULAC, a group of Latin American and Caribbean countries), Canada, Pakistan, Hong Kong-China, Russia, Venezuela, Switzerland, Thailand, Chinese Taipei, Singapore, Norway, Australia, Brazil, Ecuador, Turkey, India, Panama, Honduras, Korea, New Zealand, Japan, China, the Philippines, Guatemala and the EU all took the floor on this issue.

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

Several members highlighted the dangers that the continued impasse in the Appellate Body pose not only to the dispute settlement system but the WTO a s a whole, and that members had an obligation under the WTO rules to initiate the process.

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

Several members also called on the US to share its views and develop ideas on how to resolve its problem.

India said it supports the proposal to commence the selection process to fill current vacancies in the Appellate Body as a matter of priority.

It recognised that the dispute settlement system of the WTO is the central pillar in providing security and predictability to the multilateral trading system.

India said the wide use of the WTO dispute settlement system in the 23 years of its existence is testament to Member's trust in the independence and effectiveness of the system.

"It would be a severe blow to the rules-based trading system if one of its central pillars were to lapse into ineffectiveness," India said.

India said that it deeply regrets that the DSB has been unable to fulfil its legal obligation under DSU Article 17.2 to appoint Appellate Body members as vacancies arise.

This is a serious and urgent concern for the multilateral trading system an d threatens to undermine the rights and obligations of the WTO Members.

"We, therefore, urge all Members to engage constructively to resolve this issue as soon as possible."

India said it remains committed to working with other interested members with a view to finding a way to allow the selection process to start and be completed as soon as possible.

China noted that members have been unable to launch the Appellate Body member selection processes for over a year and no progress has been made. The reason for this impasse is widely known both inside and outside the WTO.

Noting that the member who blocked the process in the name of systematic concerns laid out some of its reasoning in the previous DSB meeting, China said that it would like to respond to those assertions.

China noted that in the last two DSB regular meetings, the US asserted that China's interpretation of the word "rotation" "exhibits fundamental misunderstanding of the DSU".

However, said China, a careful reading of DSU Article 17 suggests otherwise. Article 17 of the DSU, entitled Appellate Review, lays out the basic rules for the Appellate Body.

While Paragraph 2 to Paragraph 14 of this article each focus on one specific aspect of the appellate review, Article 17.1 serves as the introductory paragraph with general rules and as a basis for subsequent paragraphs.

According to China, among the five sentences in this paragraph, the fourth sentence set forth the requirements of rotation, which means that the Appellate Body members do not enjoy life tenure or serve in one case throughout the term.

Following Article 17.1, the specific rules on the rotation of the Appellate Body members' terms are provided in Article 17.2.

China said that if these rules are interpreted as suggested by the US, then the definition of "rotation" shall be narrowed to the rotation of members among different divisions only.

Such reading will render the structure and the content of Article 17.1 incomplete.

According to China, another assertion by the US in the previous DSB meeting was that unlike similar rules of many other international adjudicative bodies, the transitional rules of Rule 15 was not based on the dispute settlement system's constitutive texts, namely the DSU.

Therefore, the US believed that the AB made an improper analogy of Rule 15 to rules of other international tribunals and repeated this conclusion in previous DSB regular meetings.

China said it conducted a brief survey of transitional rules of international adjudicative bodies and found that for the African Court on Human and People's Rights, a rule similar to Rule 15 is included in Article 2.2 of the Rules of the Court, rules that were adopted by the court itself.

Moreover, said China, whether or not Rule 15 is part of the constitutive text should not prevent members from implementing such rule, or including such rule in the DSU as an amendment after negotiation.

The DSU itself was the result of Uruguay Round negotiation. In fact, the WTO did not exist before 1995. The entire multilateral trading system was the fruit of hard negotiations.

The US stated that "The United States 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."

Contrary to what the US has said, China said, "we do not see any efforts by the US to seek resolution or even any constructive engagement of the US in a meaningful discussion. Without such engagement, any discussion will not be productive".

Noting that there are currently three vacancies in the Appellate Body, China reiterated its concerns that the unreasonable blockage placed by the US will profoundly undermine the functioning of the system and credibility of the multilateral trading system.

This may eventually result in the complete paralysis of the WTO. Without such system and its enforceable dispute settlement mechanism, trade rules will be manipulated, China warned.

Unilateral and protectionist actions such as Section 301 investigations or Section 232 investigations and the subsequent measures will become prevalent, it said.

All of these will give rise to trade wars and further escalation of the situation, China further said.

Canada said it deeply regrets that the DSB has been unable to fulfil its legal obligation under DSU Article 17.2 to appoint Appellate Body members as vacancies arise.

Canada agreed that it is time to start a process or, if necessary, several processes to select new Appellate Body members for the three current vacancies.

Canada said that like other members, it is disappointed that the US 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 US to engage in discussions with interested members with a view to expeditiously developing a solution to the concerns that it has raised.

Korea said truly, it its not only the Appellate Body itself but the entire system that becomes weakened by the current deadlock situation.

Australia reiterated its serious concerns regarding the longstanding impasse which has prevented the appointment of Appellate Body members.

Russia said it is deeply concerned about the continuing US blockage of the selection process and the fact that the US links it with the resolution of the "problem".

For the past half a year, the US has neither put forward the concrete problem nor the possible ways to resolve it.

This leads to the inability of the WTO Members to engage in a meaningful discussion and move towards the resolution of this issue, said Russia.

Such unilateral actions kill the trust in the multilateral process and contributes to the chaos in multilateral rules even though they are taken under the pretense of compliance with the existing rules.

Russia said there is always room for improvement. But such improvement should not be contrary to the well-functioning of the dispute settlement mechanism and of the WTO system as a whole.

Russia called on the US to provide a clear picture of the problem at issue and its potential solutions or stop the blockage.

Japan emphasised that it is the responsibility of the entire membership, ac ting as the DSB, to ensure the proper functioning of the WTO dispute settlement system in a manner consistent with the DSU.

Singapore reiterated its serious systemic concerns on the lengthy delays in launching the Appellate Body selection process.

"With four out of seven Appellate Body positions to be filled, and with the term of another Appellate Body member set to expire in 5 months' time in September 2018, we are facing an imminent paralysis if the vacancies are not filled," it said.

Given its heavy workload and significance, a fully-staffed Appellate Body i s crucial to the proper operation of the WTO dispute settlement mechanism, which in turn is an integral part of the rules-based multilateral trading system.

The continued impasse adversely affects the credibility and functioning of the WTO, and it is essential that all current and future vacancies in the Appel late Body be filled without any further delays. Systemic issues which had been raised can be discussed in a separate process, it said.

Brazil said it has been now more than 16 months since we first started discussions on the current process to fill the vacancies in the Appellate Body. Unfortunately, no progress has been achieved.

Brazil remains extremely concerned with the current impasse and its effects on the proper functioning of the Dispute Settlement System and, more fundamentally, on this Organization and the multilateral trading system.

In fact, the underlying question is whether a rules-based system - which Brazil understands is what the WTO is all about - can survive without the guarantor of these same rules.

Brazil said it took good notice of recent documents containing concerns regarding the multilateral trading system.

There are certainly issues that can be improved in the WTO in general and i n its dispute settlement system in particular. For that, we need to be mindful of the significant achievements of the current system so far and at the same time goodwill to identify and improve specific issues of concern, it said.

In this sense, Brazil said it is ready to engage in conversations with interested Members and encouraged the prompt submission of concrete ideas and proposals to overcome this unfortunate impasse.

According to trade officials, the chair of the DSB, Ambassador Sunanta Kangvalkulkij of Thailand, said it was regrettable that members were still not in a position to launch the selection process for the three Appellate Body vacancies.

She said her door was open should any delegation wish to share ideas on how to resolve the matter. She also said it was her intention to consult with some delegations informally on the matter.