TWN Info Service on WTO and Trade Issues (Jul18/21)
27 July 2018
Third World Network
       
US again stymies efforts at WTO over AB selection
Published in SUNS # 8729 dated 25 July 2018

Geneva, 24 Jul (Kanaga Raja) - The United States, at a meeting of the WTO Dispute Settlement Body (DSB) on 20 July, has again blocked the consensus to launch the selection processes to fill three current vacancies on the seven-member Appellate Body (AB).

By repeatedly thwarting the attempts of a majority of WTO members to begin the selection processes to fill these three vacancies, the US has prolonged the deadlock over this issue which has been before the DSB for over 18 months now.

At the meeting of the DSB on 20 July, the US once again declared that it wa s not in a position to agree to a joint proposal sponsored by some 67 WTO members that called for the simultaneous launch of the selection processes to fill the three vacancies on the Appellate Body 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 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.

In a related development, the Chair of the DSB, Ambassador Sunanta Kangvalkulkij of Thailand, also reported that she is continuing to seek the views of members on whether Appellate Body member Shree Baboo Chekitan Servansing, whose first term ends on 30 September 2018, should be given a second term.

The Chair said she would report back at the next DSB meeting at end August. She also invited any delegation with views on the matter to contact her directly.

Meanwhile, under the agenda item of other business, Honduras put forward a non-paper aimed at fostering discussions on the functioning of the Appellate Body (see below).

A joint proposal on AB appointment was tabled at the DSB meeting by Argenti na; 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 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, 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.

It said that 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.

According to Mexico, the proposal seeks to start three selection processes for Mr Ramirez-Hernandez, Mr Hyun Chong Kim and Mr Peter Van den Bossche; to establish a Selection Committee; to set a deadline of 30 days for the submission of candidacies; and to request that the Selection Committee issues its recommendation within 60 days after the deadline for nominations of candidates.

Mexico said the proponents are flexible in the determination of the deadlines for the selection processes, but they should take into account the urgency of the situation.

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

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

"The systemic concerns that we have identified remain unaddressed," it maintained.

For example, 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," it said.

REACTIONS FROM MEMBERS OVER AB IMPASSE

South Africa (for the African Group), the European Union, Costa Rica (for t he Group of Latin American and Caribbean countries, or GRULAC), Canada, Japan, Pakistan, Australia, New Zealand, Norway, Switzerland, Russia, Chinese Taipei, Hong Kong-China, Chile, Thailand, Brazil, Singapore, Ecuador, Mexico (on its own behalf), Uruguay, Egypt, Turkey and Venezuela all spoke on this issue.

According to trade officials, nearly all of the delegations referred to their previous statements on the matter.

They reiterated their concerns over the continued impasse concerning 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 over AB appointments posed not only to the dispute settlement system but also the WTO as a whole, and that members had an obligation under the WTO rules to initiate the selection process.

Other members pointed out that the US concerns and the AB appointment issue should be treated separately.

Several members also said that the US should put forward ideas on how to resolve the problem.

Brazil said that it believes a lot has been said on the importance of restoring the Appellate Body to its full composition as mandatorily required by Article 17 of the DSU.

"Unfortunately, no action has been taken, the deadlock is more deadlocked than ever."

The concerns raised just now by the United States, systemic or not, in no way justify the blocking of the selection process for vacancies in the Appellate Body, which in fact worsens and deepens the very concerns the United States wants to solve, said Brazil.

"We notice at the same time, however, that new consultation and panel requests keep being filed, by many Members, including the United States."

According to a rough perusal of the latest figures in disputes, there are currently more than 30 disputes with panels established or consultations requested.

"If the current impasse is not addressed urgently, we will all very soon hit a tremendous wall, with panel reports that (in most cases) cannot be submitted to appeal and thus cannot be adopted by Members either, a scenario that clearly constitutes a serious and concrete nullification and impairment to the rights of Members in the DSU, which spend a considerable amount of resources to bring disputes and submit them to the rule of law," said Brazil.

According to Brazil, this scenario deprives Members and their private sectors of a trusted, independent and efficient track to solve trade disputes.

"This extreme fallout from the current impasse is simply one that Members cannot afford to accept."

Brazil hoped that all Members will together work to tear down that wall of reluctance, so that it does not become our common wailing wall.

Norway referred to its previous statements in the DSB related to the same agenda item.

"We continue to encourage all members to support the proposal to launch the process of filling the vacancies in the Appellate Body without further delay," it said.

"Although we do not agree that there is a link between filling the vacancies and solving the procedural issues raised before the DSB, we reiterate our continued openness and willingness to engage constructively with all and any member on their grievances with the system," it added.

Switzerland also referred to its previous statements on this matter.

"What we cannot but emphasize once again are our deep systemic concerns," it said.

The mounting insecurity surrounding the future of the WTO's dispute settlement mechanism is increasingly affecting all dimensions of the multilateral trading system.

"We believe that it is a shared responsibility of all WTO Members - and particularly major ones - to engage seriously and constructively in order to address the present challenges and move beyond this impasse without further delay," it added.

The EU pointed out that with each passing month, the gravity and urgency of the situation increases.

The WTO Members have a shared responsibility to resolve this issue as soon as possible.

The EU invited all other Members to endorse the joint proposal, so that the appointments can be made as soon as possible.

Referring to its statement in previous DSB meetings, the EU said: "We were very clear that - even though we think that Rule 15 is legitimate - we are ready to engage in discussions on Rule 15, if that helps to unblock the appointments to the Appellate Body."

"We are still waiting for an engagement on these terms by the delegation that is blocking the appointments," it added.

Referring to its past statements, Singapore reiterated its serious systemic concerns on the lengthy delays in launching the Appellate Body selection process.

It pointed out that the clock is ticking and the term of another Appellate Body member is set to expire in 2 months' time on 30 September 2018.

"We appreciate the Chair's efforts on the possible reappointment of this Appellate Body member and on the filling of the other vacancies, and look forward to any positive efforts in this regard."

The dispute settlement mechanism will be paralysed if Appellate Body vacancies are not filled as they arise, since panel reports that are appealed to a non-functioning Appellate Body cannot be adopted by the DSB and will be rendered unenforceable, it said.

Singapore called for all Appellate Body vacancies to be filled immediately. Systemic issues which had been raised can be discussed in a separate process.

"We stand ready to engage constructively and work with other Members, as we ll as the Chair, to help resolve this impasse," it said.

Hong Kong-China referred to its statement made in previous DSB meetings on this matter.

"We reiterate our deep concern with the prolonged impasse over the Appellate Body member selection process," it said.

Hong Kong-China said that it is prepared and committed to engage with all Members constructively in further discussion on possible way forward that may address the procedural concerns raised by a Member.

It invited the concerned Member to submit concrete proposal to facilitate meaningful discussion.

Chinese Taipei referred to its statements in the previous DSB meetings.

As one of the initial co-sponsors of the proposal, it hoped the Members could work together to find the solution to this impasse as soon as possible.

Korea expressed support for the statement made by Mexico on behalf of the proponents of the joint proposal.

It referred to its previous statements on this matter.

Japan expressed support for the joint proposal. It also referred to its previous statements on this matter.

NON-PAPER FROM HONDURAS

Under the agenda item of other business, Honduras said it was taking the initiative to put forward an informal paper aimed at fostering discussions among members regarding concerns with the functioning of the Appellate Body.

Honduras said that it believes the WTO dispute settlement system is crucial to the satisfactory functioning of the WTO and that it was vital that all members start engaging on the issue in a constructive manner.

In light of the situation currently faced with the Appellate Body appointme nt impasse, taking into account the importance of the dispute settlement system to the well-functioning of the WTO and Members' duty to ensure the proper functioning of it, Honduras believes that action is urgently needed.

Members should start a constructive discussion aimed at addressing Members' concerns, it said.

Honduras said it is fully aware that there are several issues that must be resolved. However, it considers that the discussion should start addressing two core issues regarding Rule 15 of the Appellate Body Working Procedures for Appellate Review.

Rule 15 currently provides for:

"A person who ceases to be a member of the Appellate Body may, with the authorisation of the Appellate Body and upon notification to the DSB, complete the disposition of any appeal to which that person was assigned while a member, and that person shall, for that purpose only, be deemed to continue to be a Member of the Appellate Body."

According to Honduras, there are currently no specific criteria for determining when the Appellate Body member should continue to serve on an appeal under Rule 15.

A number of options for objective and reasonable criteria could be considered:

1. Regarding the issue of when an Appellate Body member can continue to serve beyond the four year term for the purpose of completion of duties on an appeal:

A. An Appellate Body member shall be able to continue to serve on cases where the oral hearing has occurred or started. [In a case where a hearing has not been (started) yet, the outgoing Appellate Body member should be replaced with an alternate Appellate Body member.], or

B. No member of the Appellate Body shall be assigned to a new appeal later than 60 days before the final date of his/her appointment.

2. Regarding the issue of who decides if an Appellate Body member should serve after his/her four year term has expired:

C. The Appellate Body can continue to apply Rule 15 of the Working Procedures which allows an Appellate Body member to complete his/her work on ongoing appeals subject to approval by the Appellate Body and upon notification to the DSB.

D. In the event WTO Members alternatively decide that the DSB should approv e the continuation of an Appellate Body member under Rule 15, the reverse consensus rule could apply.

This would avoid a situation where an Appellate Body member who meets the relevant criteria could be blocked by a single WTO Member.

E. In the event WTO members decide that the DSB should approve the continuation of an Appellate Body member under Rule 15, an alternate approach could be that the positive consensus or positive consensus minus the parties of the dispute could apply.

Honduras said that there may be other possible approaches.

It said that it is presenting this non-paper in an effort to make a positive contribution to the current discussion.

Honduras believes that the only solution to the current situation is constructive dialogue and real engagement from all WTO Members.

The United States thanked Honduras for its engagement on this issue.

"We agree with the view that the only solution to the current situation is dialogue and engagement from all WTO Members."

It looked forward to reviewing the non-paper.

According to trade officials, Canada and Australia also thanked Honduras for the initiative and expressed their willingness to engage in order to find a solution.