The U.S. actions at the WTO in relation to the reappointment of Seung Wha Chang, discussed in various recent posts (and comments) on this blog, have been heavily criticized by everyone I've talked to about the issue. However, I have heard sympathy for the substance of some of the concerns raised by the U.S. In this post, I'm going to talk about one of these concerns (I may get to some of the others in the future). This is from the U.S. statement at the DSB meeting where reappointment was discussed, and is the first point the U.S. makes to defend its actions:
First, in the recent DS453 appellate report in the financial services dispute between Panama and Argentina, more than two-thirds of the Appellate Body’s analysis – 46 pages – is in the nature of obiter dicta. The Appellate Body reversed the panel’s findings on likeness and said that this reversal rendered moot all the panel’s findings on all other issues, including treatment no less favorable, an affirmative defense, and the prudential exception under the GATS. Yet, the Appellate Body report then went on at great length to set out interpretations of various provisions of the GATS. These interpretations served no purpose in resolving the dispute – they were appeals of moot panel findings. Thus, more than two-thirds of the Appellate Body’s analysis is comprised simply of advisory opinions on legal issues.
The Appellate Body is not an academic body that may pursue issues simply because they are of interest to them or may be to certain Members in the abstract. Indeed, as the Appellate Body itself had said many years ago, it is not the role of panels or the Appellate Body to “make law” outside of the context of resolving a dispute – in effect, to use an appeal as an occasion to write a treatise on a WTO agreement.
But that is what the report did in this appeal
Summarizing briefly, in Argentina - Financial Services, the Appellate Body reversed the panel's findings on likeness. After doing so, the Appellate Body noted that this rendered the panel's findings on other issues moot. Nevertheless, it went on to make findings on the appeals of these other issues.
Here's how the Appellate Body explained its decision to make these other findings, despite the "likeness" reversal and the mootness of the other findings:
6.84. ... we note that, for the most part, the claims of error raised by Panama regarding the Panel's findings on "treatment no less favourable", as well as the Panel's findings under Article XIV(c) and paragraph 2(a) of the Annex on Financial Services, concern "issues of law covered in the panel report and legal interpretations developed by the panel", and hence fall within the scope of appellate review under Article 17.6 of the DSU. Moreover, several of the issues raised in Panama's appeal have implications for the interpretation of provisions of the GATS. With these considerations in mind, we turn to address the issues raised in Panama's appeal.
Let's look at each of the two reasons the Appellate Body seems to be giving for its decision to examine the other issues.
First, the Appellate Body notes that these appeals were properly made under the DSU. Here's the question then: When a WTO Member has concerns about a specific panel finding, and brings an appeal related to that finding, should its appeal always be heard? Members who file appeals may want the panel findings in question addressed by the Appellate Body, rather than just have them sitting out there as adopted findings, with the potential to influence later rulings even if they have been declared "moot."
For its part, the U.S. seems to want more use of judicial economy: When an issue can be avoided, the Appellate Body should avoid it, the U.S. seems to be saying. That's certainly a legitimate view of the role courts should play. But is it a view the Appellate Body must follow? Is the decision on how to approach this issue one that is inherently at the discretion of a court?
If you did want to require the exercise of judicial economy, it is not clear to me what kind of legal provisions would accomplish this, even if everyone agreed on the principle. I'd like to see what the U.S. has in mind in terms of imposing such constraints on the Appellate Body in the future. (I'm not aware of such provisions in domestic law, but maybe there are some examples out there.)
Second, the Appellate Body notes that several of these issues "have implications for the interpretation of provisions of the GATS." This kind of sounds like the Appellate Body wants to offer some systemic guidance to Members, and you can see how someone might object to this.
Hovering over all of this is the issue of remand authority, which the Appellate Body does not have. In domestic court appeals, an appellate court can reverse one issue, and send the case back to the lower court to re-do everything based on the new appellate reasoning on that issue. But WTO dispute settlement doesn't work that way. When the Appellate Body reverses on likeness, as it did here, it can't send the case back to the panel to apply the law to the facts under the legal standard (keep in mind, the Appellate Body did not decide whether the products at issue here were "like"). As a result, you can imagine that the Appellate Body might want to offer a bit more guidance on issues in the case that are not related to the reversed finding, in case a new complaint is brought and the panel has to address the claims again (which could be done in this case, although I have not heard that it will be). Otherwise, you could get into an endless cycle of reversals and refilings that means it could take a long time to resolve a particular case.
All in all, it seems to me that courts have a fair amount of inherent discretion in relation to what issues to address in a particular case, and in what way they will address them. I'm not sure this discretion is a problem, but if it is, there may be some solutions through modifications to the DSU that would provide objective criteria for how the Appellate Body should apply its discretion. Based on the experience of the last 20 years, WTO Members can weigh in on what the Appellate Body has been doing, and make specific proposals for changes if they think such changes are needed.