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> Articles 3.2 and 11 of the DSU — Function of panels and the Appellate Body
> Articles 3.2 and 19.2 of the DSU — “not add to or diminish rights and obligations”. See also Interpretation (I.3)
C.3.1 Articles 3.2 and 11 of the DSU — Function of panels and the Appellate Body back to top
C.3.1.1 US — Certain EC Products, para. 92
… we observe that it is certainly not the task of either panels or the Appellate Body to amend the DSU or to adopt interpretations within the meaning of Article IX:2 of the WTO Agreement. Only WTO Members have the authority to amend the DSU or to adopt such interpretations. Pursuant to Article 3.2 of the DSU, the task of panels and the Appellate Body in the dispute settlement system of the WTO is “to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law” (emphasis added). Determining what the rules and procedures of the DSU ought to be is neither our responsibility nor the responsibility of panels; it is clearly the responsibility solely of the Members of the WTO.
C.3.1.2 Mexico — Taxes on Soft Drinks, para. 78
… Mexico’s interpretation would imply that, in order to resolve the case, WTO panels and the Appellate Body would have to assume that there is a violation of the relevant international agreement (such as the NAFTA) by the complaining party, or they would have to assess whether the relevant international agreement has been violated. WTO panels and the Appellate Body would thus become adjudicators of non-WTO disputes. As we noted earlier, this is not the function of panels and the Appellate Body as intended by the DSU.
C.3.1.3 US — Stainless Steel (Mexico), paras. 156–158, 160–162
… the second sentence of Article 11 begins with the term “Accordingly”. This term creates a link between the first and the second sentence of Article 11; it ties the second sentence to the general description contained in the first sentence. The second sentence enunciates two specific “functions” of panels, namely, the duty “to make an objective assessment of the matter before it” and “to make such other findings as will assist the DSB in making the recommendations or in giving the rulings” under the covered agreements.
We consider the meaning of “[t]he function of panels” in the first sentence of Article 11 is informed by the general provisions contained in Article 3 of the DSU, which sets out the basic principles of the WTO dispute settlement system. Article 3.2 provides that “[t]he dispute settlement system of the WTO is a central element in providing security and predictability to the multilateral trading system”; it serves “to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law”.
It is well settled that Appellate Body reports are not binding, except with respect to resolving the particular dispute between the parties. This, however, does not mean that subsequent panels are free to disregard the legal interpretations and the ratio decidendi contained in previous Appellate Body reports that have been adopted by the DSB. …
Dispute settlement practice demonstrates that WTO Members attach significance to reasoning provided in previous panel and Appellate Body reports. Adopted panel and Appellate Body reports are often cited by parties in support of legal arguments in dispute settlement proceedings, and are relied upon by panels and the Appellate Body in subsequent disputes. In addition, when enacting or modifying laws and national regulations pertaining to international trade matters, WTO Members take into account the legal interpretation of the covered agreements developed in adopted panel and Appellate Body reports. Thus, the legal interpretation embodied in adopted panel and Appellate Body reports becomes part and parcel of the acquis of the WTO dispute settlement system. Ensuring “security and predictability” in the dispute settlement system, as contemplated in Article 3.2 of the DSU, implies that, absent cogent reasons, an adjudicatory body will resolve the same legal question in the same way in a subsequent case.
In the hierarchical structure contemplated in the DSU, panels and the Appellate Body have distinct roles to play. In order to strengthen dispute settlement in the multilateral trading system, the Uruguay Round established the Appellate Body as a standing body. Pursuant to Article 17.6 of the DSU, the Appellate Body is vested with the authority to review “issues of law covered in the panel report and legal interpretations developed by the Panel”. Accordingly, Article 17.13 provides that the Appellate Body may “uphold, modify or reverse” the legal findings and conclusions of panels. The creation of the Appellate Body by WTO Members to review legal interpretations developed by panels shows that Members recognized the importance of consistency and stability in the interpretation of their rights and obligations under the covered agreements. This is essential to promote “security and predictability” in the dispute settlement system, and to ensure the “prompt settlement” of disputes. The Panel’s failure to follow previously adopted Appellate Body reports addressing the same issues undermines the development of a coherent and predictable body of jurisprudence clarifying Members’ rights and obligations under the covered agreements as contemplated under the DSU. Clarification, as envisaged in Article 3.2 of the DSU, elucidates the scope and meaning of the provisions of the covered agreements in accordance with customary rules of interpretation of public international law. While the application of a provision may be regarded as confined to the context in which it takes place, the relevance of clarification contained in adopted Appellate Body reports is not limited to the application of a particular provision in a specific case.
We are deeply concerned about the Panel’s decision to depart from well-established Appellate Body jurisprudence clarifying the interpretation of the same legal issues. The Panel’s approach has serious implications for the proper functioning of the WTO dispute settlement system, as explained above. Nevertheless, we consider that the Panel’s failure flowed, in essence, from its misguided understanding of the legal provisions at issue. Since we have corrected the Panel’s erroneous legal interpretation and have reversed all of the Panel’s findings and conclusions that have been appealed, we do not, in this case, make an additional finding that the Panel also failed to discharge its duties under Article 11 of the DSU.
C.3.1.4 US — Continued Zeroing, para. 365
The Panel engaged in circuitous reasoning and it is not clear whether the Panel in fact found that it could invoke cogent reasons to depart from previous Appellate Body rulings on the same legal issue. The statement of the Panel that it “is important for a panel to have cogent reasons for any decision it reaches”, regardless of “whether or not the panel follows such reports”, is ambiguous. Ultimately, the Panel in this case did follow previous Appellate Body reports. In the light thereof, the Panel does appear to have acceded to the hierarchical structure contemplated in the DSU. …
C.3.1.5 China — Publications and Audiovisual Products, paras. 213, 215
We observe that reliance upon an assumption arguendo is a legal technique that an adjudicator may use in order to enhance simplicity and efficiency in decision-making. Although panels and the Appellate Body may choose to employ this technique in particular circumstances, it may not always provide a solid foundation upon which to rest legal conclusions. Use of the technique may detract from a clear enunciation of the relevant WTO law and create difficulties for implementation. Recourse to this technique may also be problematic for certain types of legal issues, for example, issues that go to the jurisdiction of a panel or preliminary questions on which the substance of a subsequent analysis depends. The purpose of WTO dispute settlement is to resolve disputes in a manner that preserves the rights and obligations of WTO Members and clarifies existing provisions of the covered agreements in accordance with the customary rules of interpretation of public international law. In doing so, panels and the Appellate Body are not bound to favour the most expedient approach or that suggested by one or more of the parties to the dispute. Rather, panels and the Appellate Body must adopt an analytical methodology or structure appropriate for resolution of the matters before them, and which enables them to make an objective assessment of the relevant matters and make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in the covered agreements.
In our view, assuming arguendo that China can invoke Article XX(a) could be at odds with the objective of promoting security and predictability through dispute settlement, and may not assist in the resolution of this dispute, in particular because such an approach risks creating uncertainty with respect to China’s implementation obligations. We note that the question of whether the introductory clause of paragraph 5.1 allows China to assert a defence under Article XX(a) is an issue of legal interpretation falling within the scope of Article 17.6 of the DSU. For these reasons, we have decided to examine this issue ourselves.
C.3.1.6 US — Large Civil Aircraft (2nd complaint), para. 502
In [finding that the Panel erred in denying the various requests made by the European Communities with respect to an Annex V procedure,] we are not asked to, and we do not, disturb the Panel’s factual finding … that “the DSB never took any action to initiate an Annex V procedure” in this dispute. We are also mindful that it is not for panels, or the Appellate Body, to review DSB actions in a particular dispute or to direct that specific actions be taken. At the same time, however, the DSU stipulates that panels and the Appellate Body are to clarify relevant provisions of the covered agreements in accordance with the customary rules of interpretation of public international law in such a way as to preserve the rights and obligations of Members and contribute to the security and predictability of the multilateral trading system, consistently with the objective of securing a positive solution to individual disputes. The DSU does not identify specific provisions of the covered agreements, or particular obligations thereunder, that are exempt from or not susceptible of interpretation by panels or the Appellate Body. To the extent that they are at issue in a specific dispute, even provisions relating to the functioning of the DSB or the dispute settlement process itself are properly the subject of interpretation by panels and the Appellate Body, as the content of such provisions also affects the rights and obligations of WTO Members. Moreover, and as explained further below, the conduct of an Annex V information-gathering procedure bears a direct relationship to a panel’s discharge of its adjudicative function in a dispute involving allegations of serious prejudice.
C.3.1.7 US — Large Civil Aircraft (2nd complaint), para. 535
With respect to the [European Union’s request that we complete the analysis and find that, as a matter of law, all of the conditions for the initiation of an Annex V procedure were fulfilled in this dispute and such procedure was initiated, and/or is deemed to have been initiated, and/or should have been initiated], we recall that, in our interpretation of paragraph 2 of Annex V above, we identified the two conditions that must be satisfied in order to trigger the initiation of an Annex V procedure, namely, a request for initiation by a Member, and the DSB’s establishment of a panel. In this dispute, the Panel made an explicit finding that no Annex V procedure had been initiated by the DSB. Even if this finding rested upon a mistaken and incomplete interpretation of paragraph 2 of Annex V, it is uncontested that no Annex V procedure was carried out as a consequence of the requests made by the European Communities in 2007 and the establishment of the Panel in that same year. More than five years later, we do not see how the findings that the European Union seeks to have us make, on appeal, would contribute to resolving the dispute at this stage. Accordingly, it is unnecessary for us to make a ruling on whether the conditions for the initiation of an Annex V procedure were fulfilled.
C.3.2 Articles 3.2 and 19.2 of the DSU — “not add to or diminish rights and obligations”. See also Interpretation (I.3) back to top
C.3.2.1 US — Wool Shirts and Blouses, p. 19, DSR 1997:I, p. 323 at 340
… Given the explicit aim of dispute settlement that permeates the DSU, we do not consider that Article 3.2 of the DSU is meant to encourage either panels or the Appellate Body to “make law” by clarifying existing provisions of the WTO Agreement outside the context of resolving a particular dispute. A panel need only address those claims which must be addressed in order to resolve the matter in issue in the dispute.
C.3.2.2 Chile — Alcoholic Beverages, para. 79
… In this dispute, while we have rejected certain of the factors relied upon by the Panel, we have found that the Panel’s legal conclusions are not tainted by any reversible error of law. In these circumstances, we do not consider that the Panel has added to the rights or obligations of any Member of the WTO. Moreover, we have difficulty in envisaging circumstances in which a panel could add to the rights and obligations of a Member of the WTO if its conclusions reflected a correct interpretation and application of provisions of the covered agreements. Chile’s appeal under Articles 3.2 and 19.2 of the DSU must, therefore, be denied.
C.3.2.3 Mexico — Taxes on Soft Drinks, para. 53
A decision by a panel to decline to exercise validly established jurisdiction would seem to “diminish” the right of a complaining Member to “seek the redress of a violation of obligations” within the meaning of Article 23 of the DSU, and to bring a dispute pursuant to Article 3.3 of the DSU. This would not be consistent with a panel’s obligations under Articles 3.2 and 19.2 of the DSU. We see no reason, therefore, to disagree with the Panel’s statement that a WTO panel “would seem … not to be in a position to choose freely whether or not to exercise its jurisdiction”.
C.3.2.4 Mexico — Taxes on Soft Drinks, para. 56
… We see no basis in the DSU for panels and the Appellate Body to adjudicate non-WTO disputes. Article 3.2 of the DSU states that the WTO dispute settlement system “serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements”. (emphasis added) Accepting Mexico’s interpretation would imply that the WTO dispute settlement system could be used to determine rights and obligations outside the covered agreements. …
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