At yesterday's DSB meeting, the U.S. had a 26 page statement (pp. 9-35) on "precedential value of panel or Appellate Body reports." You may need to read the whole thing to fully digest their argument, but here are some key portions:
10. The United States requested this agenda item to draw Members’ attention to an important systemic issue, the concern that the Appellate Body has sought to change the nature of WTO dispute settlement reports from ones that assist in resolving a dispute, and may be considered for persuasive value in the future, to ones that carry precedential weight, as if WTO Members had agreed in the DSU to a common law-like system of precedent.
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14. Remarkably, the Appellate Body has more recently suggested that a panel must follow a prior Appellate Body interpretation absent undefined “cogent reasons” for departing from that interpretation. ...
51. The Appellate Body report in US – Stainless Steel (Mexico) contains the Appellate Body’s first effort to introduce the concept of “cogent reasons.” The Appellate Body’s articulation of the “cogent reasons” approach comprised several disparate statements; key among them is the contention that “[e]nsuring ‘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.”
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88. Fourth, in its discussion of cogent reasons, the Appellate Body also misunderstands or misrepresents why parties often cite to adopted panel and Appellate Body reports in dispute settlement proceedings. There is nothing surprising about the fact that parties in WTO disputes cite to reports to the extent they may consider them persuasive. As mentioned, we would expect this, and expect panels to do the same. But there is no support for the proposition that parties cite to reports because they consider them somehow binding on or precedential for subsequent panels and the Appellate Body, which is what the Appellate Body appears to imply. Here again, the Appellate Body ignores that there is a significant difference between citing a report for its persuasive value, on the one hand, and arguing that the report is binding or precedential for future panels, on the other
DSU Article 3.2 says: "The dispute settlement system of the WTO is a central element in providing security and predictability to the multilateral trading system," and it "serves to ... clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law." Panels and the Appellate Body will be the ones applying the customary rules of interpretation, so I'm not sure how to get around the fact that panels and the Appellate Body are doing some of the "clarifying" (the U.S. may have been implying otherwise in paras. 67-68 of its statement, but I wasn't sure).
The question then becomes, what is the role of these clarifications? Are they of "persuasive value" or part of a "system of precedent"? And what's the difference between these two in terms of the degree of deference given to past panel and Appellate Body reports? Precisely what value for past reports does the U.S. have in mind?
Over on twitter, Rob McDougall said the following:
“Absent cogent reasons” implies “follow it unless there is a reason not to”; “persuasive value” implies “follow it if there is reason to”. This reverse onus could be significant in many ways.
Basically, under the current Appellate Body approach, the default is to follow the reasoning of past cases, and an argument for a departure from past cases faces the burden of offering "cogent reasons." In contrast, if the past reasoning had "persuasive value," panels and the Appellate Body could look to past cases and would follow them where they considered the reasoning and found it convincing.
I'm not sure we would see much difference in outcomes if the approach were changed, but the tone might be different. I suspect there is some variation in tone across domestic and international courts on these issues. (On twitter, Niccolo Ridi points to an example from investment tribunals.) Perhaps an approach with a different tone would alleviate some of the U.S. concerns?
The U.S. is offering criticisms of the Appellate Body, but has not made specific proposals for changes to the rules, so in the interests of perhaps helping things along, let me suggest the following amendment to DSU Article 3.2 that might further the U.S. cause (new language in bold):
2. The dispute settlement system of the WTO is a central element in providing security and predictability to the multilateral trading system. The Members recognize that 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. Clarifications provided by panels and the Appellate Body can have persuasive value, but are of less authority than the interpretations adopted under Article IX:2 of the WTO Agreement. Recommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreements.
I don't know if this will satisfy the U.S., but we have to start somewhere. I also don't know if it will be acceptable to other Members, who had the following to say on the issue in response to the U.S. statement at the DSB meeting:
Colombia, Chile, Canada, Brazil, Australia, Japan, Singapore, the Philippines, Mexico, China, New Zealand and the European Union took the floor to comment. Many of these members agreed with the US that there was no power under the DSU or the WTO Agreement giving the Appellate Body authority to issue rulings that set binding precedent, but several members questioned whether the Appellate Body was asserting such an authority.
Several said the "cogent reasons" pronouncement which the US claimed the Appellate Body was asserting in "Stainless Steel" was not correct and that in fact the Appellate Body said in the same ruling that it "is well settled that Appellate Body reports are not binding, except with respect to resolving the particular dispute between the parties". There is a difference between previous rulings setting binding precedence and previous rulings serving as guidance for the Appellate Body and panels to refer to; WTO members themselves, including the US, often refer to previous rulings when making their arguments before a panel or Appellate Body. In fact, they noted, Article 3.2 of the DSU specifically cites the role of the dispute settlement system in providing security and predictability to the multilateral trading system, and reference to these previous rulings, as appropriate, helps fulfill that role. Several other members, such as China and Colombia, said that US concerns on the matter were no reason for the US to continue holding up the appointment of new Appellate Body members.
