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Info Service on WTO and Trade Issues (Oct24/12) Geneva, 15 Oct (D. Ravi Kanth) — The facilitator overseeing the discussions on the reform of the World Trade Organization’s dispute settlement system on 11 October called for more intensified discussions on several issues concerning the “appeal/review” mechanism in order to reach a “final solution”, said people familiar with the development. However, the 19-page draft “WTO confidential document” on “Appeal/Review tables”, seen by the SUNS, suggests that the road ahead appears to be “full of potholes” in creating a new mechanism to replace the Appellate Body, said people familiar with the development. At a meeting of Heads of Delegation on 11 October, the facilitator, Ambassador Usha Dwarka-Canabady of Mauritius, said that “we have been working steadily and making good progress, but I think we can all agree that we now need to further intensify our discussions at a more accelerated pace and focus specifically on finding convergence, in particular on appeal/review issues, to get to a final solution.” She said that members “will need a very special effort for the next ten weeks to get to convergence as we are mandated to do so.” Ambassador Canabady reminded members that trade ministers at the WTO’s 13th ministerial conference (MC13), which concluded in Abu Dhabi on 2 March, “gave us a timeline … We need to do our best to respect that decision and to put in the extra effort for the next ten weeks,” according to her statement posted on the WTO’s website. Under the respective mandates of the WTO’s 12th and 13th ministerial conferences, WTO members are required to “accelerate discussions in an inclusive and transparent manner, build on the progress already made, and work on unresolved issues, including issues regarding appeal/review and accessibility to achieve the objective by 2024 as we set forth at MC12.” The facilitator provided some details on how work has progressed in different areas of the appeal/review mechanism, suggesting that significant differences have emerged on who has to bear the litigation costs. Earlier, India proposed that in situations where a developed country loses a dispute, they should bear all the costs incurred by the complainant from a developing country. The facilitator ruled out an “early harvest” as proposed by some members, suggesting that members are working on securing a single package. The facilitator said that “there has been some valuable progress” on the appeal/review mechanism, arguing that members now “need to move forward and carve out solutions.” “Our hope is to use the month of October to develop as much convergence as we can, and hopefully start drafting in early November or even the end of October, if this is possible.” The co-convenor tasked with overseeing the discussions, Ms Jessica Dickerson of Australia, provided an outline on the six sub-topics under the appeal/review heading. The six sub-topics are “Scope of review”; “Standard of review”; “Form of the mechanism”; “Reducing/changing incentives to appeal”; “Clarifying Members’ expectations of adjudicators”; and “Access to the mechanism”. The co-convenor provided minimal comments on issues such as access to the mechanism, where a breakthrough has not been made despite intense work, on standard of review, and on scope of review. However, the co-convenor did not provide any assessment on the state of play in the most difficult area of the “form of the mechanism”, which is expected to replace the Appellate Body, as per the demands of a major industrialized country, said people familiar with the discussions. It appears that around 30 members took the floor to highlight their specific concerns/assessments during the meeting. However, the comments made by the members were not yet issued in a restricted document at the time of filing this article. FORM OF THE MECHANISM Out of the six areas of the appeal/review mechanism, it is rather moot as to what is going to be the “form of the mechanism”, said several people, who asked not to be quoted. In the WTO confidential document on “appeal/review tables”, the proposed reforms concerning the form of the mechanism and their implications appear to be unclear and lack clarity, said people familiar with the development. To start with, the current Appellate Body, which is the core of the dispute settlement system, comprises seven members, who are appointed by the WTO’s Dispute Settlement Body (DSB) under Articles 17.1 and 17.2 of the Dispute Settlement Understanding (DSU). The members of the Appellate Body have a tenure of 4 years, which can be extended once, if there is consensus. The proposed reform ideas on the “nature of the body” in the latest WTO confidential document are as follows:
The “key objective(s)” of the above five reform ideas are: “To address a concern that an institutionalized standing body (with a limited number of adjudicators) may be perceived as having greater authority and legitimacy than other adjudicators, which leads to “rule-making” and de facto precedent, and also does not guarantee correct decisions.” The above objective seems to reflect the intention of one major industrialized country and not the majority of members, said people familiar with the discussions. Nevertheless, the “observations” made by members as stated in the confidential document are as follows: Significantly, “Members have a shared interest in correctness and consistency. Most Members consider that a standing body of highly-qualified experts supports their interests, which include correctness, predictability, consistency, coherence, legitimacy, transparency, accountability, fairness and efficiency.” Further, “most Members have expressed that these interests would not be met by reform ideas 1, 4 or 5. Regarding reform idea 1, many Members have also said that ad hoc adjudicators would not meet their interests. Some Members have indicated a willingness to explore a form of standing body that differs in some respects to the current system (such as reform idea 2). “Reform idea 3 (a mix of standing and ad hoc adjudicators – such as one standing Member and two ad hoc adjudicators in a Division) has not yet been discussed”, as per the table. In short, on the form of the mechanism, there is a huge divide between the majority of members – who want a body that is structured on the lines of the existing Appellate Body – on the one side, and a major industrialized country, on the other, said people familiar with the discussions. SELECTION OF ADJUDICATORS As per the current practice, the members of the Appellate Body (who are now being referred to as “adjudicators” in the reform language) are appointed “on the basis of a proposal formulated jointly, after consultations, by the DG, DSB Chair, and the Chairs of the Goods, Services, TRIPS and General Councils (Preparatory Committee Recommendations, para. 13).” The proposed reform idea on the selection of adjudicators is as follows: “Appointment of adjudicators via a mechanism agreed by the disputing parties (on a bilateral or plurilateral) basis”. The “key objective” of the above reform idea is “to address a concern that adjudicators appointed by the Membership (through the DSB) are perceived to speak on behalf of all Members, which may add to the weight that is accorded to their decisions.” As regards the observations made by members as per the confidential document, it is said somewhat misleadingly that “this Element is linked to the previous Element (“Nature of the body”). While reform idea 1 relates to the selection of adjudicators, it also presupposes that there would be no standing body.” While the idea that there would be no “standing body” seems to be emanating from the thinking of one industrialized country, “some Members consider that appointment of adjudicators by Members is important to their interest in legitimacy, as well as in the representativeness and diversity, and expertise and impartiality of the adjudicators.” There appears to be an effort to take the members in the wrong direction, said a person, who asked not to be quoted. On another sub-topic of “Adjudicators’ ability to make their own working procedures”, the current practice is that the Appellate Body members make their own procedures in consultation with the DSB chair. The proposed reform ideas on the adjudicators’ ability to make their own working procedures include: “1. Ensure that the Working Procedures cover only the procedural aspects of appeal/review. 2. Adjudicators to develop Working Procedures in consultation with the DSB, instead of the DSB Chair and the DG.” The key objective(s) of the above reform idea of the adjudicators’ ability to make their own working procedures are: “To address a concern that adjudicators do not alter Members’ rights without their consent; to enhance adjudicator consultation with Members regarding the Working Procedures; and to subject the Working Procedures and their implementation by adjudicators to regular review by Members.” Clearly, the objectives reflect what the United States has all along been demanding in allegedly “tarnishing/ maligning” the role of the Appellate Body members, said several people who asked not to be quoted. ADJUDICATORS’ DECISION-MAKING The current practice as per the DSU is: Article 17.1; Working Procedures, para. 3(1). Collegiality Adjudicators shall (a) convene on a regular basis to discuss matters of policy, practice and procedures; (b) stay abreast of dispute settlement activities and, in particular, receive all appeal documents. A division shall exchange views with other adjudicators before finalizing a report. (Working Procedures, para. 4). Consensus Adjudicators shall make every effort to take their decisions by consensus. Where a decision cannot be arrived at by consensus, it shall be decided by majority vote. (Working Procedures, para. 3(2)). While the key objective is “to address a concern that collegiality and consensus emphasize consistency above correctness and are not necessary or appropriate to resolve disputes”, the observations made by members suggest that it “would raise the threshold for the reversal of a panel decision and that majority decision-making should be preserved.” More importantly, “many members have expressed that they have an interest in a system that delivers consistent and predictable decision-making by adjudicators, which, for some, is supported by the collegiality and consensus principles.” ADJUDICATORS’ IMPARTIALITY & INDEPENDENCE As per the current practice in the DSU: “Adjudicators shall be unaffiliated with any government and shall not participate in the consideration of any disputes that would create a direct or indirect conflict of interest (DSU Art. 17.3). Adjudicators shall be independent and impartial (Rules of Conduct, para. 1).” On this issue, “most Members consider that it is essential to maintain the independence and neutrality of adjudicators, which supports interests including legitimacy, accountability and transparency.” In conclusion, the chances of reaching an outcome on the appeal/review mechanism by the end of the year appear somewhat bleak given the intractable differences among members, said people familiar with the discussions. +
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