DISPUTE SETTLEMENT: AMBASSADOR FERNANDO DE MATEO
WTO Dispute Settlement Body Ś Developments in 2014
Remarks by Ambassador Fernando De Mateo
Chairman of the General Council
Chairman of the DSB in 2014
8th Annual Update on WTO Dispute Settlement
Graduate Institute of International and Development Studies
24 March 2015
It is a pleasure to be here, and to follow in the footsteps of my predecessors by sharing some reflections about developments in the WTO’s dispute settlement system during the year in which I served as chair of the DSB.
This is the eighth DSB "check in" at the Graduate Institute, and I am pleased to carry on what I believe is a very worthwhile tradition.
I am especially pleased to be able to share my thoughts with you as we celebrate the WTO’s twentieth birthday.
On this important anniversary, I think all of us — WTO Members, Secretariat staff, commentators, and students — are entitled to feel both proud of the organization’s achievements and optimistic about its future. The WTO dispute settlement system is the most successful system of inter-state dispute resolution ever established.
Looking back over the work of the last 20 years, it is hard to disagree.
The approximately 500 disputes initiated over these last 20 years are undeniable evidence of the confidence that Members have placed in the system.
2014 was another big year in dispute settlement activity.
The Appellate Body issued reports in a number of systemically significant cases, such as China — Rare Earths1 — which addressed, among other things, the relationship between China’s accession protocol and the Marrakesh Agreement and the Multilateral Trade Agreements; EC — Seal Products2 — which addressed what constitutes a technical regulation under the TBT Agreement, as well as the meaning of "public morals"; and two cases that clarified the term "public body" as well as the calculation of "benefit" under the Agreement on Subsidies and Countervailing Measures.3
Panels were busy too, and issued a large number of reports on topics ranging from import restrictions and SPS measures to anti-dumping and countervailing duties.
2014 also saw a number of cases brought back to the WTO under Article 21.5 of the DSU, which, as you will know, provides that where parties to a dispute that has already been through the dispute settlement system disagree about whether compliance has been achieved, the existence or not of compliance can be determined by recourse to the same panel that heard the original dispute.
Thus, in 2014 such long-running cases as US — Tuna II (Mexico), EC — Fasteners and China — GOES4 were all referred to compliance panels.
In these brief remarks, I would like to speak about what I think have been the major challenges and successes of the DSB and the WTO’s dispute settlement system more generally over the last 12 months.
INCREASING DS WORKLOAD
I will start with the issue of workload, which was, I think it is fair to say, the "hot topic" of 2014.
2014 was, quite simply, one of the busiest years in the history of the WTO dispute settlement system.
Although the number of requests for consultations decreased, the number of panels established rose.
These were added to the twenty-three panels established in 2012 and 2013 (and to the three compliance panels also set up in those years), with the result that September 2014 saw the highest number of panels operating simultaneously in the WTO’s history.
Nine panel reports covering thirteen disputes were circulated over the course of the year.
The Appellate Body circulated five reports — a massive increase on 2013, during which only one report covering two disputes was adopted.
The DSB adopted five panel reports, together with their corresponding Appellate Body reports.
And it is not only the number of cases that is increasing.
2014 continued the trend of recent years towards increasing substantive and procedural complexity. Just as an example, the total number of pages in the 1981 GATT case Spain — Tariff Treatment of Unroasted Coffee was 8 pages. The panel report in China — Rare Earths issued in 2104 has 257 pages (without annexes).
Cases are generally bigger in terms of the number of parties, third parties, and claims; the number and length of exhibits; and the length of submissions. More and more cases are presenting complex procedural issues.
Also noteworthy has been the increasing demand for dispute settlement services in Spanish.
While all of this is to be welcomed as a sign of the system’s vitality and trust-worthiness, it also places significant strain on the Members and the Secretariat.
On two occasions last year5, requests were made to the DSB to extend the deadline for appealing a panel report. The reasons given for these requests included the Appellate Body’s already very heavy workload.
In both instances, the DSB decided to grant the requested extensions.
I expect that Mr Ramirez will touch on the Appellate Body workload in his remarks so I will not dwell on that point. I will mention only that the 90-day deadline has long been recognized as extraordinarily short.
Indeed, one of the miracles of the WTO system — brought about, of course, not by any supernatural power but by the exemplary talent and dedication of the Appellate Body members and their Secretariat — has been the Appellate Body’s ability to produce a jurisprudence of the highest quality despite operating under such severe time constraints.
Yet, last year the Appellate Body’s heavy case-load meant that it was necessary in four cases6 to continue working on an appeal beyond the 90 day time-frame.
This gave rise to some controversy in the DSB.
I want to emphasize that Members appear to agree that the Appellate Body should be given more time to complete its work when such is needed; the question is whether or not formal approval from the participants in the appeal or the DSB is required where a report cannot be issued in 90 days.
This is a somewhat technical but nevertheless important question, and I do not want to prejudge the answer either way.
Nevertheless, given that the Appellate Body’s case-load is likely to increase before it decreases, this is a question that the DSB may find itself reverting to again.
It is not only the Appellate Body that has struggled under the weight of an increasingly heavy workload. At the panel level, too, delays caused by insufficient resources have resulted in established panels waiting in the wings for Secretariat staff to assist and support them.7
Some Members have expressed dissatisfaction that their cases have not proceeded through the dispute settlement system as quickly as they might have hoped. These Members have emphasized the importance of the dispute settlement system operating "by the books", that is, in accordance with the letter, as well as the spirit, of the DSU.
Other Members, however, appear to recognize that, given the current resource squeeze, it is in many cases simply not possible to proceed any faster without sacrificing the high quality for which the WTO dispute settlement system has become renowned.
And all Members have made clear that quality must not be compromised.
DIRECTOR-GENERAL’s SPEECH TO DSB
Concerns about delays and resource constraints led to one of the most interesting and unusual DSB events of 2014: the visit to the DSB of the Director-General (DG).
It is very rare for the DG to attend DSB meetings. To my knowledge, this has only ever happened once before, some years ago now, when, at least in the view of some, the future of the Organization hung in the balance because of complications arising from the Bananas saga.
Clearly, then, it has been the practice of Directors-General to attend the DSB only where there is an issue of the utmost importance to be discussed.
DG Azevêdo attended the DSB’s regular meeting in September to discuss resource constraints and work-load issues.8
The DG explained that, as I have said, both the number and complexity of cases have increased rapidly in the last few years — indeed, according to his calculations the total number of active proceedings being assisted by the Legal Affairs Division, the Rules Division, and the Appellate Body Secretariat has almost doubled since 2012.
The DG expressed his understanding that delays in dispute resolution can be frustrating for Members and may have very significant consequences, including in financial terms.
However, he explained that many of the challenges currently facing the dispute settlement system are attributable to factors over which the Secretariat has little or no control, including:
- budgetary limitations;
- the difficulty of recruiting and retaining qualified, experienced lawyers to work in the dispute settlement divisions;
- and the fact that certain constraints are "built into the system", as it were, by the DSU itself, including the fact that the Appellate Body consists of only 7 members, which limits how many appeals can be heard at one time.
These factors cannot easily be changed.
Nevertheless, the DG noted that some steps had been taken to try to alleviate the strain, including temporary and permanent reallocation of Secretariat staff to dispute settlement divisions, the hiring of lawyers on temporary contracts to assist panels or the Appellate Body in particular cases, and the creation of several new permanent positions in the dispute settlement divisions.
Before concluding his address, the DG appealed to WTO Members themselves to assist, wherever possible, in ensuring that the dispute settlement system continues to operate efficiently and effectively.
Among other things, he recommended that Members continue to search for ways to streamline the dispute settlement process, and also suggested that Members might consider the possibility of increasing the number of Appellate Body members from 7 to 9 so as to enable more appeals to be heard simultaneously.
Members responded very positively to these comments. Many praised the work of the dispute settlement system, recognised its centrality to the WTO, and affirmed their commitment to working towards easing some of the current stresses.
Many Members also expressed their agreement with the DG that the health of the dispute settlement system is a "structural" problem with ramifications for the entire WTO system.
Interestingly, some Members expressed the view that Members themselves could contribute to easing the burden by thinking carefully about how they litigate before panels and the Appellate Body.
I was encouraged to hear many Members call for renewed effort to successfully conclude the ongoing DSU negotiations, which are aimed at reforming and streamlining the system in light of experience accumulated over the last 20 years.
I am pleased that my good friend Ambassador Saborio is able to continue to lead this work despite having moved on to other endeavours.
I am also aware that Members are working among themselves with a view to furthering some reform ideas.
I firmly believe that there can be success in this area, and I would even go so far as to suggest that a positive result in the DSU negotiations could provide inspiration for the rest of the Doha round.
As students and commentators of the system, you may be able to contribute by developing and encouraging creative solutions to the challenges we face.
As outgoing chair, I would like to take this opportunity to express my hope that the Members, aware as they evidently are of the importance of the dispute settlement system’s work, will continue to provide the necessary support to ensure that panels and the Appellate Body remain fully capable of producing reports of the highest quality and, in so doing, contributing to the prompt and fair settlement of international trade disputes.
IMPORTANCE OF SURVEILLANCE AND ENSURING MEANINGFUL COMPLIANCE
I would like now to say a few words about an ongoing challenge that the DSB continued to face in 2014: the importance of surveillance and ensuring meaningful compliance.
Article 21 of the DSU provides that the DSB shall "keep under surveillance the implementation of adopted recommendations and rulings". The purpose of surveillance is to ensure "prompt compliance" by WTO Members with adopted findings of panels and the Appellate Body.
Prompt compliance is, as Article 21 itself says, "essential in order to ensure effective resolution of disputes to the benefit of all Members".
Surveillance of cases in which full compliance has not yet been achieved is one of the most important ways in which the WTO system ensures that adopted panel and Appellate Body findings are not simply disregarded, but are rather implemented in such a way as to remove any WTO-inconsistency.
The surveillance function exercised by the DSB is unique; it is not found in other international dispute resolution mechanisms and may explain the very high level of compliance we see in the WTO dispute settlement mechanism.
Overall, it stands around 90% or higher, depending on how you define compliance.
Nevertheless, it seems to me that the Membership has not made the best use of this unique surveillance tool.
Unfortunately, some cases seem to have been stuck, as it were, on the surveillance "watch list" for years now. It is also unfortunate that many of the same Members make the same observations month after month, without offering anything new or constructive. Still others say not much at all.
The start of each DSB meeting is more tolerance than surveillance, more a formality than a genuine effort at ensuring prompt compliance.
This should be fixed.
I would ask all of you to reflect on this and to think about how we might make better use of this unique tool as we start off each DSB meeting.
SELECTION OF A NEW APPELLATE BODY MEMBER
Turning now to a more cheerful subject: the appointment, after a long and demanding search, of a new member of the Appellate Body. I was honoured to play a part in this very important achievement of the DSB in 2014.
On 26 September last year, the DSB appointed Mr Shree Baboo Chekitan Servansing to the Appellate Body for the standard term of four years commencing 1 October.
Mr. Servansing is, if I may say so, an excellent choice. I have known him personally for many years, and can say without reservation that he is a man of exceptional talent and wide-ranging experience. I have no doubt that he will serve the WTO system with distinction.
It is always difficult to conclude these types of address.
The dispute settlement system is currently facing a difficult time. I have no doubt that it can overcome it, and I am pleased to say that in my opinion the quality of panel and Appellate Body reports remains as high as ever, even if delays are becoming more common.
I am sure that things will get better. But I am also convinced that the future of the system depends on the Membership coming together and taking meaningful steps to ensure that the dispute settlement system is able to retain its prime position not only as "jewel in the crown" of the WTO, but also as one of the most efficient international tribunals the world over.
In this respect, I urge all Members to come together in 2015 to move towards completing the ongoing DSU reform negotiations. There are a number of simple, non-contentious political reforms that could be easily implemented and that would greatly enhance the system’s efficiency.
There is no reason why these reforms should not be brought into effect as soon as possible.
As I noted in my farewell address when stepping down as chair of the DSB, it is my belief that the DSB, and the dispute settlement system more generally, are at least partly responsible for the fact that the financial crisis of 2007-2011 did not lead to the sort of world witnessed in the 1930s.
In the face of creeping protectionism, the DSB and the dispute settlement system have performed superbly to ensure that international trade remains free and fair, while also respecting the sovereign rights of Members.
The DSB will be chaired over the next 12 months by Ambassador Harald Neple. I am told that the first DSB meeting chaired by Harald was over and done with in little more than a quarter of an hour! A very impressive feat of "Nordic efficiency", and one that augers well for those, like me, who believe that streamlining the dispute settlement system can start "at home", as it were, in the DSB itself.
I am very glad indeed to leave this most impressive and dynamic WTO body in such experienced hands.
It has been a pleasure and an honour to serve as chair of the DSB for a year.
Although a chair is, of course, only a piece of furniture, I hope that, thanks to your support, I have been able to set in motion processes that will ensure the continued vitality of the dispute settlement system well into the future.
1. Appellate Body Reports, China — Rare Earths, WT/DS431/AB/R; WT/DS432/AB/R; WT/DS433/AB/R (7 August 2014). back to text
2. Appellate Body Reports, EC — Seal Products, WT/DS400/AB/R; WT/DS401/AB/R (22 May 2014). back to text
3. Appellate Body Report, US — Carbon Steel (India), WT/DS436/AB/R (8 December 2014) and Appellate Body Report, US — Countervailing Measures (China), WT/DS437/AB/R (18 December 2014). back to text
4. China — Countervailing and Anti-Dumping Duties on Grain Oriented Flat-rolled Electrical Steel from the United States. back to text
5. Joint Request by India and the United States for a Decision by the DSB, India — Measures Concerning the Importation of Certain Agricultural Products, WT/DS430/7 (7 November 2014) and Joint Request by Peru and Guatemala for a Decision by the DSB, Peru — Additional Duty on Imports of Certain Agricultural Products, WT/DS457/6 (5 December 2014). back to text
6. EC — Seal Products, WT/DS400, WT/DS401; China — Rare Earths, WT/DS431, WT/DS432, WT/DS433; US — Carbon Steel (India), WT/DS436; and US — Countervailing Measures (China), WT/DS437. Additionally, as of 24 March 2015, one Appellate Body report had been issued after the 90-day deadline in 2015: Argentina — Import Measures, WT/DS438, WT/DS444, WT/DS445. back to text
7. See e.g. Communication from the Panel, European Union — Anti-dumping Measures on Biodiesel from Argentina, WT/DS473/7 (11 December 2014). back to text
8. The Director-General’s address is recorded in full in the Minutes of Meeting of 26 September 2014, WT/DSB/M/350 (21 November 2014). back to text