Guest Post from Pieter Jan Kuijper on the US Attack on the Appellate Body

Guest post from Pieter Jan Kuiper, Professor of Law at the Faculty of Law of the University of Amsterdam:

What to do about the US Attack on the Appellate Body?

Recently Steve Charnovitz has advanced the idea (IELP blog 3 Nov 2017) that the Appellate Body should use its power to amend or redraft the Working Procedures for Appellate Review without the approval of the Members by closing itself to further appeals, once the number of its members falls to four. This should be done in such a way that instituting an appeal from a panel report would at the same time trigger the completion of the appeals procedure. This would have the effect of rendering the panel report final unless rejected by a negative consensus. This solution – which skirts the edges of the law - would demand great unity and decisiveness inside the Appellate Body and support from a large majority of the Member States of the WTO.

It is probably much better – and fairer to the remaining members of the Appellate Body - to find a solution in the political organs of the WTO or among a large group of Member States, excluding the US, outside, but close to the WTO. A solution, moreover, that should recognize that the WTO is about to lose one of its two main functions so carefully constructed in the ‘nineties: the dispute settlement function that guarantees a peaceful solution to trade disputes and helps to prevent them from ballooning into political disputes that might well contribute to violent conflict between states further down the road. If this capacity of the WTO is destroyed, we will not be able to reconstruct it for at least a generation.

This is no small matter, it is a true emergency. Times of emergency justify emergency measures, also in the law of international organizations. An old example is the Uniting for Peace Resolution of the General Assembly of the UN (GA Res. 377(V), of 3 November 1950), which empowered the General Assembly to act in cases of threat to the peace or breach of the peace when, due to the veto of one of its permanent Members, the UN Security Council failed to exercise its ‘primary responsibility’ for maintaining international peace and security. Emergencies also allow states to invoke the clausula rebus sic stantibus in treaty law (Art. 62 Vienna Convention on the Law of Treaties). They allow states and organs of international organizations to take measures to take decisions that are arguably legal, but that they would not take under normal circumstances. The ambush killing of the Appellate Body by the US clearly falls outside “normal circumstances.”

The WTO itself offers the opportunity of a simple solution, which can be temporary and proportionate, only for as long as the US continues to obstruct the replenishment and functioning of the Appellate Body. This is the recourse to majority voting. Often referred to as “the nuclear option” in the WTO Secretariat, it has hardly ever been used. Nevertheless recourse to majority voting is perfectly legal, once it is clear that consensus cannot be reached (Art. IX:1 WTO Agreement).

Members of the Appellate Body are appointed by the DSB and Article 2(4) DSU determines that the DSB decides by positive consensus (except in the case of adoption of panel reports). However, the consensus rule of the DSU has to be interpreted in the light of Article IX:1. All the more so because Article XVI:3 WTO clearly creates a hierarchy between the WTO Agreement and the other Multilateral Trade Agreements, including the DSU. In the end, therefore, the DSU can have recourse to majority voting. Moreover, the (re)appointment of Appellate Body Members could be placed directly on the agenda of the General Council of the WTO, as has happened in the past, when Members wanted to censure the Appellate Body for making rules related to the handling of amicus curiae briefs (Special Session of the General Council of 22 November 2000, see WTO doc. WT/GC/M/60).

Direct appointment of AB members by the General Council applying majority vote, under the strict limitation that this is an exceptional one-off measure connected to the threat of malfunctioning of the Appellate Body, and accompanied by explicit openness to further discussions with the US, seems to be the best possible option for action inside the WTO. Ideally, merely the threat of majority voting may create leverage to arrive at consensus. For example, when the accession of Russia to the WTO was taken hostage by Georgia to resolve its bilateral conflict with Moscow, a clear hint to the effect that Georgia might well be outvoted in the WTO if need be, made the Georgian government rethink the issue.

It might be important not to single out the US too much. In that case, the General Council could take a decision, obviously needing the support of a very large majority, identifying certain categories of decisions that in future could be taken by such a super-qualified majority. The nomination of Appellate Body members would have to be one of these categories. This is a technique of simplifying decision-making in international organizations without amending their founding treaties that has been tested to good effect in the OECD, another organization seemingly stuck in the straightjacket of consensus, but in need of increased effectiveness of decision-making after its membership nearly doubled in the last two decades (OECD doc.C(2006)/78/Rev. 1, 10 Feb 2011).

However, if WTO Members are so strongly opposed to majority voting as to shy away from action inside the WTO, they will have to seek a solution outside the WTO. Such a solution requires a large number of Member States (which should at least include the major trading powers) immediately to start a negotiation group called “The Real Friends of Dispute Settlement”, from which the US would be excluded. As soon as the US would have caused the membership of the Appellate Body to fall to a number, which would make it obviously impossible to deliver AB reports within or near the deadline of 90 days, this group would already have drawn up a new treaty. It would contain a procedure for appellate review only, or even a complete dispute settlement procedure, based on existing provisions of the DSU with the fewest changes possible, as otherwise the drafting would take too long. Provisional application of this treaty should be possible in order to ensure that it would become operational very quickly. The sitting members of the Appellate Body would resign and be taken over as members of the Appellate Tribunal of the new treaty, to be joined by newly selected members. On a voluntary basis, the Members of the Appellate Body Secretariat could leave the WTO as well and join the new Appellate Tribunal. Moreover, this new Tribunal could be opened up as Appeals Tribunal from decisions of the dispute settlement mechanisms of regional FTA agreements. The costs of this new Tribunal could be defrayed by member contributions, which would not be too onerous for the members, since their contributions to the WTO budget should drop, as the expenses for the Appellate Body (and perhaps also the panel procedures) would become redundant. Insofar as having recourse to this treaty and its dispute settlement mechanism were to imply a breach of obligations under the DSU, and notably of the compulsory nature of the procedure to seek redress of a violation of obligations under the WTO Agreements (art. 23 DSU), this could be justified by invoking the rebus sic stantibus doctrine.

On balance the majority vote solution is probably the best because it permits an exact dosage of the “emergency measures” and it keeps the Appellate Body anchored inside the WTO. It may lead to the US leaving the WTO in a huff, but that may be repaired under a future administration. Moreover, an impulsion to walk away from the WTO may confront the US with the reality that leaving will make it into an international trade pariah that can be treated in trade matters as other countries please. It might finally dawn on even the Trump administration that such is not a pleasant perspective even for what now is still the second trading nation in goods and services in the world.

P.J.Kuijper