At this point, many people are probably zoning out while trying to read all the recent "zeroing" decisions. But buried in the latest panel decision (DS322) is an interesting question regarding the role of precedent in WTO dispute settlement. Briefly, the Panel decided not to follow the approach of the Appellate Body in a previous case (DS294) in extending the "product as a whole" rationale for prohibiting zeroing beyond the "average-to-average" comparision method in AD Agreement Article 2.4.2. In this regard, the Panel said in para. 7.99:
However, while we recognize the important systemic considerations in favour of following adopted panel and Appellate Body reports, we have decided not to adopt that approach for the reasons outlined below.733
It then explained its substantive disagreement with the Appellate Body's approach. In addition, in Footnote 733 it further explained its view of the role of precedent:
It is well established that panel and Appellate Body reports are not binding, except with respect to resolving the particular dispute between the parties to the dispute, but that such reports create "legitimate expectations" among WTO Members and should therefore be taken into account where they are relevant to any dispute. Appellate Body Report, US – Softwood Lumber V, paras. 109-112; Appellate Body Report, Japan Alcoholic Beverages II, pp. 12-15; Appellate Body Report, US – Shrimp (Article 21.5 – Malaysia), para.109. The Appellate Body has stated that "...following the Appellate Body's conclusions in earlier disputes is not only appropriate, but is what would be expected from panels, especially where the issues are the same". Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews, para. 188. This notion of an "expectation" that panels will follow Appellate Body reports (as well as panel reports) is supported by important systemic considerations, including the objective, referred to in Article 3.2 of the DSU, of providing security and predictability to the multilateral trading system. At the same time, a panel is under an obligation under Article 11 of the DSU to "make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements..." Moreover, Article 3.2 of the DSU requires a panel "to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law" and provides that "[r]ecommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in covered agreements".
http://www.worldtradelaw.net/reports/wtopanels/us-zeroingjapan(panel).pdf#page=72
It appears that the Panel was suggesting that there could be a tension between following precedent and conducting a proper interpretation. I would be curious to see if others had thoughts on this. What should panels do when confonted with a prior Appellate Body (or panel) intepretation they disagree with? Similarly, what should the Appellate Body do when confronted with a prior Appellate Body interpretation it disagrees with?
This Panel was fairly blunt about what it was doing. Should it have tried to finesse the issue a bit more (e.g. try to distinguish the cases somehow)? What will the Appellate Body have to say about this issue in the inevitable appeal?
It is of particular interest to note that one of the panelists in this case was David Unterhalter, who has just been appointed to the Appellate Body.
