WTO: 2016 NEWS ITEMS

DISPUTE SETTLEMENT


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NOTE:
This summary has been prepared by the WTO Secretariat’s Information and External Relations Division to help public understanding about developments in WTO disputes. It is not a legal interpretation of the issues, and it is not intended as a complete account of the issues. These can be found in the reports themselves and in the minutes of the Dispute Settlement Body’s meetings.

Appointment of new Appellate Body member

The chairman of the DSB, Ambassador Xavier Carim of South Africa, recalled that a Selection Committee was established by the DSB at its meeting on 25 January 2016 and was requested to carry out a selection process for the appointment of a new Appellate Body member to replace Ms Yuejiao Zhang, whose second term of office expires on 31 May 2016. The Selection Committee was also requested to make its recommendation on a replacement before 12 May 2016 in time for the meeting of the DSB on 23 May 2016.

The chair reported that in carrying out this request, the Selection Committee conducted thorough interviews with seven nominated candidates on 7 and 8 April 2016, with a view to identifying those individuals who possess the qualifications and expertise as required by the Dispute Settlement Understanding (DSU) for Appellate Body members. As part of the selection process, the Committee met individually with 50 delegations to hear their views on the candidates. The Committee also received in writing the views of 23 delegations.

The Chair said that the Selection Committee regretted that despite its best efforts, it was not in a position to recommend a candidate that would enjoy the consensus of the entire membership. Nevertheless, the Selection Committee was not giving up on the possibility that it might still find a consensus on one of the seven candidates and, therefore, needed more time to consult further on this matter.

Australia said that the high quality of the candidates reflected the importance of the Appellate Body’s work. Australia emphasized the importance of merit in considering the most suitable candidate and encouraged members to place priority on the proper functioning of the Appellate Body and to show flexibility.

Japan also noted the high quality of the candidates and emphasized that an individual’s qualities and qualifications should be the guiding principle in the selection of an Appellate Body member. Japan further stated that, given the workload of the Appellate Body, the WTO dispute settlement system cannot afford having an unfilled vacancy for an extended period of time.

The European Union noted the link between this agenda item and the issue of the workload of the Appellate Body. It stressed that a fully operational Appellate Body is essential for the proper functioning of the WTO dispute settlement system and stated that the members have sufficient choice among the candidates to make a decision. Brazil and Hong Kong, China shared the concern about the effect that a prolonged vacancy could have on the workload of the Appellate Body.

Guatemala noted that this was the first time a Selection Committee had not recommended a candidate on the grounds that it considered the candidate would not be accepted by WTO members. Guatemala considered this to be problematic because, in its view, the task of a Selection Committee is to present a decision regardless of whether their selected candidate would be accepted by WTO members or not. For its part, Mexico submitted that it was for the DSB to decide which candidate would be the next Appellate Body member and cautioned that if the Selection Committee were to present the seven candidates to the members the issue would be politicized.

 

Reappointment of Appellate Body member

On the issue of the possible reappointment of one Appellate Body member, the chairman recalled that in accordance with the DSB decision of 25 January 2016, the DSB chair was requested to carry out consultations on the possible reappointment of Mr Seung Wha Chang for a second four-year term beginning on 1 June 2016. Since then, both he and his predecessor had carried out informal consultations with interested delegations on this matter. As a result of these consultations, he had hosted a very informal meeting on 10 May for delegations to pose questions to Mr Chang.

A total of 26 delegations, including several EU member states, participated in that meeting. Several delegations posed questions to which Mr Chang gave his replies, and the meeting was then concluded.

The following day, on 11 May, one delegation informed the chair that it would be unable to support Mr Chang’s reappointment. If this situation remained unchanged and there were no consensus on the matter of reappointment, Mr Chang’s term as an Appellate Body member was to expire on 31 May.

The United States stated that it did not support Mr Seung Wha Chang’s reappointment and would object to any proposal to this effect because, in its view, his service did not reflect the role assigned to the Appellate Body.

The United States underscored that the reappointment of Appellate Body members is not automatic and it is an important responsibility entrusted to WTO members. The United States noted the text of the DSU which states that “in their findings and recommendations, the panel and Appellate Body cannot add to or diminish the rights and obligations provided in the covered agreements.”

The United States recalled that in previous DSB meetings it had expressed concern with the Appellate Body’s adjudicative approach in a number of appellate proceedings in which Mr Chang was involved. In addition to its views on certain reports, the United States stated that it was also concerned about the manner in which Mr Chang conducted oral hearings. It noted that his questions spent a considerable amount of time on issues that were not on appeal or that were not focused on the resolution of the matter between the parties. The United States did not consider it difficult to ascertain from the questions posed by a member of a division at an oral hearing that the member was associated with the views expressed in a report related to those questions.

In response to some delegations’ suggestion that the reappointment should be treated as though it were automatic in order to avoid interfering with the “independence” of the Appellate Body, the United States recalled that from the very first time an Appellate Body member was being considered for reappointment, WTO members have been clear that reappointment is not automatic.

As to the letter circulated by Appellate Body members on 18 May, in which the six colleagues of Mr Chang expressed their views on the issue and support and respect for him, the United States considered the Appellate Body’s action “unfortunate”, noting that any decision concerning appointment or reappointment of Appellate Body members must be made by the DSB and not the Appellate Body. Although the United States understood that Appellate Body members wished to show their appreciation for a colleague, it nonetheless considered this to be another instance of Appellate Body members acting outside the role assigned to them by WTO members in the Dispute Settlement Understanding.

In conclusion, the United States stressed that its position is not based on the legal outcomes of the appeals, but instead on the approach chosen by the Appellate Body in each appeal on which this member served and whether that approach accords with the role that WTO members assigned to the Appellate Body, as reflected in the DSU. The United States' full statement is available here.

Korea noted that, before the United States objected to Mr Chang’s reappointment, there was a “widely-held” view that he served the Appellate Body honourably during his term. Having requested the United States to reconsider its position, Korea expressed its disappointment with the statement made by the United States confirming its opposition. Acknowledging that Appellate Body members do not have a right to be reappointed, Korea nonetheless considered that any opposition to reappointments should only be for “compelling and legitimate” reasons.

Korea expressed several “systemic” concerns with the United States’ position. First, referring to the confidentiality of Appellate Body proceedings, Korea stated that an Appellate Body member should not be “singled out” for any criticism directed at the Appellate Body for its report. Secondly, Korea considered such opposition as “an attempt to use reappointment as a tool to rein in Appellate Body Members for decisions they make on the bench”. According to Korea, were the United States to prevail, it would seriously undermine the independence and integrity of the Appellate Body as first-term Appellate Body members may have to reflect more on how their rulings would be viewed by major WTO members, rather than on the merits of the cases.

While acknowledging that the United States’ concern regarding the mandate of the Appellate Body is “legitimate”, Korea considered that the constructive way forward would have been through discussions, and not through the removal of an Appellate Body member. In Korea’s view, replacing Appellate Body members will not eliminate the difference in views regarding the consistency of specific Appellate Body reports with the Appellate Body’s mandate. Korea therefore urged the United States to withdraw its opposition and expressed its willingness to work with all WTO members to explore improvements to the WTO dispute settlement system.

Brazil, Chinese Taipei, Colombia, Iceland, India, Switzerland and Uruguay expressed their concern that the reappointment process is not the appropriate moment to raise issues relating to the quality of Appellate Body reports and noted that the DSU provides for other opportunities to do this before the DSB.

Brazil, China, Chinese Taipei, Egypt, the European Union, Honduras, India, Indonesia, Iceland, Korea, Oman, Mexico, Switzerland, Thailand and Viet Nam shared the concern that the United States’ opposition to the reappointment of Mr Chang based on the results of certain appeals in which he was involved may undermine the members’ confidence in the Appellate Body and the WTO dispute settlement system. For Brazil, the underlying question was how a member of the Appellate Body can discharge properly and independently its functions if worried, tempted or put under pressure to satisfy specific opinions of members throughout its mandate, so as to be reappointed. Egypt and Nigeria were deeply concerned that denying reappointment as a reprisal for rulings or legal interpretations would compromise the independence and impartiality of the Appellate Body.

Japan said that any act by a WTO member of the nature and magnitude of the one taken by the United States "must be exercised with extreme caution". Japan stated that it did not have any objection to the reappointment of Mr Chang "who had no doubt served faithfully and honourably on the Appellate Body for the last four years". Japan also said that the independence and impartiality of the work of the Appellate Body must be fully respected because this would ensure the credibility and proper functioning of the WTO dispute settlement system.

Argentina regretted the decision taken by one member to oppose the reappointment of Mr Chang, a person for whom Argentina has the highest professional esteem. But Argentina also defended the right of all members to express their opinions over the rulings of the Appellate Body or over its members. Argentina also said that the Appellate Body has been and is a fundamental factor in the establishment and consolidation of a system that, even if it could be improved, has demonstrated its efficiency and high legal quality to resolve disputes among WTO members.

Brazil, China, Chinese Taipei, the European Union, Honduras, India, Indonesia, Iceland, Korea, Oman and Mexico added that there is no basis for attributing a decision by the Appellate Body to a single Appellate Body member. India emphasized that the reappointment process must not compromise the independence and impartiality of the Appellate Body. Rulings were made by divisions of three and singling out an individual member was a serious threat to the collegiality and independence of the Appellate Body.

Canada, the European Union, India and Viet Nam added that the United States’ statement of opposition based on previous Appellate Body decisions could create a dangerous precedent for other reappointment proceedings and affect an Appellate Body member’s decision-making during their first term. The European Union stated that “the damage” had already been done, and the events of the past days may taint any future re-appointment process. In the view of the European Union, Mexico and Brazil, to ensure the independence of the Appellate Body, re-appointments should be more or less automatic if the Appellate Body member indicates that they are available for a second term. Mexico identified specific circumstances in which appointment should not, in its view, be automatic, including: (i) the Appellate Body member does not seek reappointment; (ii) the Appellate Body member is unable to continue to serve as Appellate Body member; and (iii) all WTO members by consensus would be opposed to a second term for a given Appellate Body member.

For Brazil, it is not acceptable to object to the reappointment of a member to a second mandate on the grounds that certain legal decisions by certain individuals in a collegiate body are wrong or not satisfactory or because they do not correspond to a member’s specific interests or expectations.

Australia, New Zealand, Norway, Singapore and Viet Nam noted that the United States’ opposition to reappointment could leave the Appellate Body without two members for the foreseeable future and thereby lead to delays. Hong Kong, China also noted that it hoped not to see a long vacancy in the Appellate Body. Canada stressed that members should focus on resolving the immediate problem of filling these vacancies in order to have a well-functioning Appellate Body, especially since it is heading towards a period of heavy workload.

Chinese Taipei, Nigeria, Paraguay, Russia, Thailand and Turkey shared the concerns about the systemic implications of this opposition and their interest in maintaining the impartiality and independence of the Appellate Body. For Switzerland, the rejection of reappointment challenged the Appellate Body as an institution and was detrimental to the rule of law.

Chinese Taipei, India and Switzerland argued that reappointment would be the best course of action in this case. The European Union said it supports the reappointment of Mr Chang for another term, and hoped that this reappointment could still take place. However, the European Union felt that this would no longer be possible following the statements made by other delegations earlier in the meeting.

Brazil suggested that members could consider amending the DSU such that a single six or seven-year mandate for Appellate Body members could be established. In Brazil’s view, this would close the loophole for undue interference and pressure, and ensure an adequate working environment for Appellate Body members.

The chair concluded that the profound issues that had been raised deserved further consideration. He said: "We are faced with a complex and difficult situation and it is apparent that we will have to continue to reflect and to consult further on this matter." He encouraged members to consult with each other and consider how to proceed in light of the current difficulties.

The next regular DSB meeting is scheduled for 22 June 2016.

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