Revival of Appellate Body

[ABS News Service/01.10.2024]

Geneva – A “confidential” document issued by the co-convenors overseeing the ongoing reform discussions of the World Trade Organization on Friday suggests the continuation of the Appellate Body to resolve global trade disputes is up for a toss, said people familiar with the developments.

In a nine-page “confidential” document, the co-convenors said: “Due to the binary nature of the discussions on the nature of the body, it was suggested that experts should focus more on the other elements under the sub-topic “Form of the Mechanism” outside of the element nature of the body,”

Several elements in the crucial “appeal/review” mechanism document prepared by the two co-convenors – Joel Richards of Saint Vincent and the Grenadines and Jessica Dickerson of Australia – are expected to be discussed today.

According to the co-convenors, discussions have been held on several sub-topics during the last month. The sub-topics include 1) Access to the mechanism; 2) Clarifying Members’ expectations of adjudicators; 3) Form of the mechanism; 4) Reducing/changing incentives to appeal; 5) Scope of review and 6) Standard of review.

Clarity Needed

It has become imperative to have clarity on the continuation of the Appellate Body, which is the core standing body that has successfully resolved hundreds of disputes over the years, said a legal expert, who asked not to be quoted.

While the United States opposes continuation of the Appellate Body, a majority of members want the highest limb for resolving global trade disputes to remain in place to ensure predictability and accountability for egregious trade measures taken by the powerful members, the expert said.

In fact, during last week’s dispute settlement body meeting, 130 countries steadfastly called for expeditiously filling the seven vacancies at the AB.

“Ultimately, it is one of the main legs of the enforcement scaffolding” without which the WTO’s covered agreements can be violated at will by the powerful members, the expert suggested.

Form of the Mechanism

In the confidential document on the sub-topic “Form of the Mechanism,” explained that “there are nine elements in the appeal/review tables, several of them with no specific reform ideas.”

The sub-topic on the form of the mechanism “focuses on how the structure and functioning of the appeal/review process should be organized.”

According to the co-convenors, “in the discussions, Members debated the merits of different models for adjudicating disputes, with a particular focus on whether to maintain a standing body or explore alternatives like ad hoc adjudicators.”

“The objective”, according to the co-convenors, “is to find a structure that supports fairness, consistency, and legitimacy in the WTO’s dispute settlement process.”

Surprisingly, the co-convenors seem to have ignored that apart from “fairness, consistency, and legitimacy in the WTO’s dispute settlement process,” the Appellate Body’s reports are binding on members to ensure that they act as a deterrent so that egregious and insidious measures are not repeated again, said people familiar with the developments.

“Under the current system,” the co-convenors argued, “the Appellate Body is a standing body composed of seven members, appointed by the Dispute Settlement Body (DSB). These members serve four-year terms, which may be renewed once (as per DSU or dispute settlement understanding Article 17.1 and 17.2).”

Further, “for the majority of Members, with respect to the nature of the body, a standing body is more consistent with their interest to ensure fairness, coherence, predictability and security,” the co-convenors noted.

Without indicating the name and number of countries, the co-convenors said: “However, it was acknowledged that correctness of decisions was also critical and that reforms should not lead to an outcome where incorrect decisions are perpetuated in pursuit of other objectives such as coherence and predictability.”

It appears clear from the tone and tenor of the above statement on the correctness of the decisions that it could be the United States, which appears determined to ensure the Appellate Body is spiked temporally, said people who asked not to be quoted.

The co-convenors said, “there was also support by several Members for an increase in the number of standing body adjudicators.”

It is common knowledge that one major industrialized country does not want the standing body of adjudicators.

“However, less support was expressed for ad hoc adjudicators, adding additional adjudicators at the interim review stage and review of the panel’s conclusions by a committee of WTO Members,” the co-convenors noted.

“Due to the binary nature of the discussions on the nature of the body, it was suggested that experts should focus more on the other elements under the sub-topic “Form of the Mechanism” outside of the element nature of the body,” the co-convenors maintained.

This is where the rub lies," said people, suggesting that members must first decide whether the standing body as the Appellate Body is known will remain or not, said people who asked not to be quoted.

At the technical meeting on September 9, Members had an opportunity to provide initial comments on the appeal/review tables that were issued in August.

Curbing Incentives to Appeal

According to the co-convenors, the technical meeting on the sub-topic of “Reducing/Changing Incentives to Appeal” explored “various reform ideas aimed at addressing the behavior of WTO Members regarding the appeal process, with the goal of reducing unnecessary appeals and improving the efficiency of dispute resolution.”

As per the current system, “any party to a dispute can appeal the issues of law covered in a panel report without requiring permission, and the adjudicators must address each issue raised (as per DSU Articles 17.4, 17.6, and 17.12)..”

The co-convenors said that “there is a general concern that there is no to little incentive for Members to refrain from filing unnecessary or tactical appeals.”

During the discussion on the political commitment to make a collective, non-legally binding political commitment to limit appeals to "exceptional circumstances” earlier this month, the co-convenors noted that “most Members wish to ensure that the right to appeal is preserved.”

Scope and Standard of Review

During the technical discussions held on September 17, experts focused on two sub-topics: “Scope of Review” and “Standard of Review”.

According to the co-convenors on “Scope of Review”, “one element of the discussions focused on clarifying the extent to which appeal/review adjudicators can assess and modify the findings of a panel in a WTO dispute, particularly when it comes to the panel’s assessment of facts versus issues of law.”

“Under the existing system, a panel must make an objective assessment of the facts (as per DSU Article 11) and apply the law to the facts. However, appeals are limited to issues of law covered in the panel report and legal interpretations developed by the panel (DSU Article 17.6)”, the co-convenors noted.

They maintained that “an important part of the discussions focused on whether factual issues should be subject to review at all, and how much deference appeal/review adjudicators should give to a panel’s assessment of facts.”

“Therefore, one reform idea was for Members to clarify that a panel’s assessment of the facts should only be addressed on appeal if the panel makes an “egregious error,” the co-convenors said.

“This idea seeks to limit the situations in which factual assessments by panels are appealed”, only in cases where the error undermines the objectivity of the panel’s findings would an appeal be considered,” the co-convenors argued.

Without naming the member, the co-convenors said that “one Member observed that it could not contemplate a situation in which an appeal/review mechanism would be reviewing questions of fact.”

On the scope of review, according to the co-convenors, “the first reform idea proposes that appeals should be limited to errors of law that would have a material impact on the respondent’s implementation (MII) obligations”

“This reform seeks to ensure that only significant legal errors that would materially affect a Member’s compliance obligations are eligible for appeal,” the co-convenors said, suggesting that “it is designed to focus appeals on substantial issues, thereby reducing the number of frivolous or less impactful claims.”

Concerning “Standard of Review,” this concerns the level of scrutiny or deference that appeal/review adjudicators should apply when examining the decisions made by a panel.

According to the co-convenors, “the core question revolves around how thoroughly appeal/review adjudicators should reassess the panel’s findings, particularly legal interpretations, and what the threshold should be for overturning a panel’s decision.”

Expectations of Adjudicators

During the discussion on “Clarifying Members’ Expectations of Adjudicators” on September 24, the discussions were focused “on defining the roles, responsibilities, and behavior of adjudicators with respect to timeframes, output and streamlining.”

The co-convenors noted that three new reform ideas were proposed “in terms of the element concerning adjudicators’ ability to make their own working procedures.”

The three new reform ideas include “(I) working procedures will cover only procedural aspects; (ii) working procedures will be formulated in consultation with DSB and not the DSB Chair and the Director-General; and (iii) the period of review of working procedures will be linked to the accountability mechanism in the Informal Consolidated Text.”

The unnamed member is making attempts to ensure that the ability of the adjudicators to create their own working procedures are being constrained.

The co-convenors informed members that “the next technical meeting on appeal/review will be held on October 2. The sub-topic to be discussed will be “Access to the Mechanism.”