DISPUTE SETTLEMENT: AMBASSADOR XAVIER CARIM
WTO Dispute Settlement Body — Developments in 2016
Remarks by Ambassador Xavier Carim
Let me start by thanking the Graduate Institute of International and Development Studies for inviting me here today to offer an update on developments in the WTO Dispute Settlement Body in 2016 and to share my experience as the chair of the DSB last year. I am very pleased to be able to share the podium with the Chair of the Appellate Body and the Deputy Director General Brauner.
In many and varied ways, 2016 was a challenging year for the WTO dispute settlement system and for international trade more generally. We have witnessed a growing global debate about international trade and trade rules, with a range of views being expressed about the value of what has been achieved to date, how the benefits of trade are shared both within and across countries, and what might be achieved in future negotiations, including in the context of the WTO.
On the topic we are considering today - the WTO dispute settlement mechanism – we see an ever increasing workload as well as a growing and diverse range of WTO Members resorting to the mechanism to settle trade disputes.
The continuous increase in the workload of the dispute settlement mechanism, which reached a new high in 2016, can be seen as a sign of trust and confidence placed by Members in the system. And, in this light, the WTO dispute settlement system has become a victim of its own success, as the increasing number and complexity of cases handled by the Organization pose new challenges for the system, which I will outline as well.
Dispute settlement activity in 2016
2016 was the busiest year for the WTO dispute settlement system since its inception. In the course of last year, we have had 41 active panel, Appellate Body and arbitration proceedings, compared to 26 in 2015. On the panel level alone, the WTO was dealing - on average - with 19 active cases each month.
The WTO is not only handling more cases than ever before, but it has to deal with a large number of claims that frequently touch upon systemic issues that are of interest to many Members. In terms of substance, the reports that have been circulated speak for themselves. In some cases the interest is so high that the number of third parties poses something of a logistical or organizational challenge to the proceedings. One prominent example is the dispute over Australia's tobacco plain packaging regulations, which involves some 40 third parties.
But more generally in terms of subject areas and trends raised in dispute settlement matters, we saw a number of cases raising claims under the GATT and the TBT Agreement. We have also witnessed a growing role for "expert" evidence in proceedings, which adds to the complexity of disputes, as in the EU's complaint over Russia's ban on the import of pork meat. It will also come as no surprise that application of trade remedies remains an actively litigated topic. We have continued to see highly complex dispute proceedings between the EU and the US about subsidies to their respective aircraft industries.
With regard to trade in services, I might note Russia's complaint about the EU's 'Third Energy Package'. This case is ongoing and relates to important aspects of the EU's energy policy. This is one of five complaints filed by Russia with the WTO since its accession in 2012, making Russia one of the newer more active users of the dispute settlement system.
The general trend of continuously growing workload is further reflected in the number of new cases brought to the WTO in 2016. Last year, the Dispute Settlement Body received 16 requests for consultations, which is the first step in the formal process of resolving a dispute between Members. This is more than in 2015 and 2014, when Members filed respectively 13 and 14 such requests. The issues raised in the newly commenced proceedings are by no means less complex, compared to those currently handled by panels and the Appellate Body.
These statistics show that Members place real value in the dispute settlement mechanism. Members resort to the WTO dispute settlement to alleviate specific trade concerns and they also show a strong interest in compliance and implementation of panel and Appellate Body recommendations. The focus on compliance is reflected in an increased number of Article 21.5 proceedings – another highlight of 2016. At the end of last year, we had 6 active compliance proceedings at the panel level, compared with 2 in 2015 and 5 in 2014. A higher number of compliance proceedings also shows that implementing WTO rulings is not always a straightforward process.
For instance, in the Tuna dispute both the US and Mexico initiated simultaneous compliance proceedings to assess whether the amended US Tuna measure was consistent with WTO rules. Interestingly enough, this is the second round of compliance proceedings involving the US and Mexico. In parallel, both Members participated in an arbitration to determine the scope of potential retaliatory measures arising from a prior Appellate Body report in the first compliance proceedings. As a result, we had 3 distinct but parallel proceedings arising out of a single dispute.
Similar issues have emerged more recently in a dispute between Colombia and Panama over textile-related measures. These cases show the known problem relating to the structure and sequencing of compliance proceedings and Article 22.6 arbitrations, a subject that has been raised in the context of the DSU review process, and one which continues to affect the functioning of the WTO dispute settlement system.
An important development arose last year in the DSB as a result of the difficulties that were encountered around the question of the reappoint of an Appellate Body Member. The difficulties resulted in an agreement that the DSB convene a series of Dedicated Sessions on the question of reappointment in general and whether there was a need to modify the rules for reappointment. Although there was no specific outcome or decision in this regard, the exchange of views in those Dedicated Sessions revealed important insights into how Members view the relationship between the principles of the impartiality and independence of the Appellate Body, accountability to Members, and adjudicative approaches. I thought these exchanges assisted in gaining a better appreciation of the issues and Members views on them.
Let me now share with you how the dispute settlement system handled the workload it faced in 2016. The WTO succeeded in circulating in 2016 11 panel and 6 Appellate Body reports, as well as 1 arbitration decision. In terms of panel and Appellate Body reports, this was slightly more than the previous two years, when 15 reports were circulated each year.
It is worth mentioning that two panels have concluded their work in two extremely complex compliance proceedings between the United States and the European Union over subsidies to their respective aircraft industries. One of these reports is currently on appeal before the Appellate Body, while the other one will be circulated next month. Yet another panel handed down a complex ruling in a separate complaint involving the same parties relating to tax incentives for the US aircraft industry.
Amid the increasing number and complexity of cases, panels and the Appellate Body continued to maintain high standards of quality and rigor in their decisions. This has been possible in part thanks to certain measures undertaken by the Director General to improve the efficiency of the dispute settlement system, in particular increasing the number of lawyers assisting panels by moving 29 posts from throughout the Secretariat to the 3 legal divisions. As a result, at least for the time being, the queue of cases at the panel level has been eliminated.
But looking at the number of cases handled at the WTO last year, as well as the new complaints, it is difficult to ignore the strain placed on the capacity of the mechanism to deliver on all the terms of its mandate. In particular, improved handling of cases at the panel level has inevitably led to moving the queue up to the Appellate Body and translation.
As a result of reports becoming not only more numerous but often longer, the workload for the translation service has also significantly increased. Currently, we are experiencing an average waiting time between 2 to 8 months for a panel report to be translated into the other two working languages of the WTO.
Attempts are being made within the WTO to address these issues. Let me just briefly mention the informal consultation process led by DDG Brauner, aiming at improving the efficiency of the Dispute Settlement system. I understand that these discussions have focused on process and procedural issues including preliminary rulings and use of experts. Other issues are being discussed in a special session of the Dispute Settlement Body handling negotiations on the reform of the DSU, such as the above-mentioned sequencing issue and third party rights.
Finally, the WTO dispute settlement system is beginning to utilise digital technology to enhance efficiency. Working together with the Members, the Secretariat has created a digital platform allowing Members to file submissions by electronic means and consult case documents online, as well as to communicate with a panel or the Appellate Body. The new tool is currently at a pre-launch stage. We had first trials and several Members have agreed to use the digital registry in some recently initiated disputes. While we continue to improve the new system, the initial feedback has been very encouraging. Switching to a digital registry is a response to the needs of a modern dispute settlement system, dealing simultaneously with a large number of cases, in which numerous documents are filed as submissions and exhibits. Once the new tool is fully operational, the Members should find the system easier to operate and more efficient.
Overall, while 2016 was a very busy and challenging year for the WTO dispute settlement system, I was pleased to see the Organization dealing in an efficient manner with the increased workload and maintaining the highest professional standards. The growing interest in WTO dispute settlement is a testament to the trust and confidence that Members place in the mechanism and the multilateral trading system more generally. But it is also a challenge, as the large number of requests for consultations received last year shows that the trend of increasing workload is unlikely to slow down or reverse in the foreseeable future. Further improvements might, therefore, be needed so that the system continues to deliver on its mandate.
My experience in chairing the DSB over the last year has been an extremely rewarding one, both personally and professionally. In the course of the year, I gained a deeper insight into the intricacies of the procedures of the dispute settlement mechanism and at least some new insight into the complexities of the legal issues related to the enforcement and implementation of WTO rules. I have a better appreciation of the significant strengths of the DSU but also some idea of the areas in which Members believe it can be further strengthened.
Over the past year, I have also witnessed great professionalism and quality in delegations’ interventions and exchanges as part of the dispute settlement process, which again revealed a high regard and commitment to the system. In challenging times, like ours, it is very important to underline the achievements of the WTO in addressing trade concerns and the WTO dispute settlement mechanism certainly remains key in this regard.