The Attack on the Appellate Body - Events of 10 December 2019
Steve Charnovitz
Today, the Standing Appellate Body was felled by the attack of the Trump Administration. By making appellate adjudications impossible, the Trump Administration is now empowered to strategically appeal any WTO panel decision against the US knowing that such appeal will prevent the panel report from being adopted. The Trump Administration may not appeal every panel decision, but they will surely appeal any compliance panel decision holding against the US.
This is a serious blow to the rule of law in the world trading system.
I did my best to head this off this looming disaster over two years ago when I posted the article "How to Save WTO Dispute Settlement from the Trump Administration" https://worldtradelaw.typepad.com/ielpblog/2017/11/how-to-save-wto-dispute-settlement-from-the-trump-administration.html. My solution was for the Appellate Body to immediately announce that whenever three or more vacancies exist on the Appellate Body, no new appeals would be accepted. This result could have been accomplished by adopting a new DSU Article 17.9 Working Procedure stating that the "completion of the appeal" under DSU Article 16.4 would "occur automatically on the same day that any new appeal is lodged." This solution would have enabled the DSB to move ahead with the adoption of WTO panel reports without benefit of a second-level review.
My recent essay "A WTO if you can keep it" presents the history of the trading system as context for discussing the campaign of the Trump Administration to checkmate international trade law. One part of my essay tells the story of my rescue plan and provides a legal analysis of it. My essay was published in November 2019 on QIL at http://www.qil-qdi.org/a-wto-if-you-can-keep-it/. An abstract appears on SSRN at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3498574.
The WTO would not have suffered today's damaging blow if the Appellate Body had adopted my solution while there was still time to do so. The optimal window for the Appellate Body to have acted began on 4 November 2017 (the day after I posted my article) when there were only two appellator vacancies. The optimal window for action ended on 11 December 2017 when a third appellator vacancy occurred. Less optimally, the Appellate Body could have adopted my proposal up to 30 September 2018 when a fourth vacancy ensued and the Appellate Body lost its judicial quorum (i.e., 4 of 7) for adopting new rules.
I am often asked how events would have played out if the Appellate Body had taken my advice. In this essay, I answer that question by laying out a ceteris paribus scenario of what would have happened if the Appellate Body had erected my proposed safety net on 10 December 2017 (the last day where there were five appellators in place). I call this alternative future the "Saved DSU Scenario." In this scenario, the Appellate Body would have stopped accepting new appeals on 12 December 2017 after the number of appellators had fallen from 5 to 4.
Nothing would have happened until late February 2018. On 22 February 2018, the panel in the Japan v. Korea Radionuclides case (DS 495) issued its decision. This panel found SPS violations by South Korea. In real life, the panel report was appealed on 9 April 2018, and on 26 April 2019, the DSB adopted the Appellate Body report which narrowed the ruling against Korea. In my Saved DSU Scenario, the panel report would have been adopted as it was by 22 April 2018 (i.e. within the mandated 60 days). So, the result would have still been Korea losing, but that result would have occurred over a year earlier. When the panel report went to the DSB in April 2018, there would have been a debate as to whether the action by the Appellate Body to withhold substantive consideration of the appeal was proper. After that debate, the DSB would have adopted the panel report under reverse consensus. In order to refuse the adopt the panel report, the DSB would have needed a consensus and that would have been impossible to obtain.
The next dispute to get to the DSB would have been the compliance panel in US - Countervailing Duty Measures on Certain Products from China (DS 437). This panel report was issued on 21 March 2018. Although the panel rejected some claims by China, the panel found that in several instances, the US government was still failing to comply with the WTO's rules on countervailing duties (CVDs). In real life, the panel report was appealed by the US on 27 April 2018. Thereafter, on 15 August 2019, the DSB adopted the Appellate Body report which upheld the panel report. In my Saved DSU Scenario, the panel report would have been adopted by 21 May 2018 with the exact same result that ensued over a year later in August 2019. The cause of justice would have been better served with that more rapid timetable.
When the CVD compliance panel report went to the DSB in spring 2018, a fiery debate would have ensued. The US government would have harrumphed that its right to appeal was being denied by the Appellate Body in yet another example of how the Appellate Body oversteps its mandate. Angrily, the US government would have argued that the DSB lacks authority to adopt the panel report. Other governments would have responded that the reason why the Appellate Body was unable to adjudicate the appeal is because the US government, for over a year, had been illlegally blocking the filling of vacant appellator seats. Following that debate, the DSB would have acted by reverse consensus to adopt the panel report. It would have been that easy!
Thereafter, two more appealed cases would have come to the DSB. First, the panel in the Japan v. Korea - Pneumatic Valves case (DS504) would have issued its report on 14 April 2018 finding antidumping violations by Korea. In real life, the panel report was appealed, and then on 30 September 2019, the DSB adopted the Appellate Body report which made technical modifications to the panel report while reaching nearly the same conclusions. In my Saved DSU Scenario, the panel report would have been adopted over a year earlier by 14 June 2018 with nearly the same result that ensued in September 2019. Second, the panel in the Russia v. Ukraine - Ammonium Nitrate (DS 493) case would have issued its report on 29 May 2018 finding antidumping violations by Ukraine. In real life, the panel report was appealed, and then on 30 September 2019, the DSB adopted the Appellate Body report which upheld the panel. In my Saved DSU Scenario, the panel report would have been adopted over a year earlier by 29 July 2018 with the the same result that ensued over a year later in September 2019.
Besides those four cases, no further cases appealed after 11 November 2017 have been completed so as to be eligible for adoption by the DSB.
Since May 2018, 14 panel reports have been issued that were appealed. For all these appeals, the appealing governments were on notice that their appeal was unlikely to be decided. Nevertheless, these governments appealed anyway. In some instances, the appeals may have been bad faith appeals principally intended as a way to prevent the adoption of the panel reports. (One of these 14 appeals has now been withdrawn). In my Saved DSU Scenario, either these panel reports would not have been appealed or, if they were appealed, the appeal would have been dismissed. Then all of these panel reports would have been adopted in the same customary manner as the four cases discussed above.
I will not take the reader through all 14 cases. But to highlight a few of them, the US appealed Supercalendared Paper (DS 505) in 2018 after losing this CVD case; the US appealed Pipe and Tube (DS 523) in 2019 after losing this CVD case; Canada appealed Differential Pricing Methodology (DS 534) in 2019 after the panel issued a narrow ruling against the US in an antidumping case; the US appealed Renewable Energy (DS 510) in 2019 after losing this case under GATT. At the DSB, the US would have objected to the adoption of Supercalendared Paper, Pipe and Tube, and Renewable Energy, but those panel reports would nevertheless have been adopted months ago rather than remaining in limbo inside the Appellate Body. The DSB debate on Differential Pricing Methodology would have been interesting because, on the merits, Canada had strong grounds to appeal. But regardless of those legal merits, following the debate, the DSB would have adopted that panel report. Another case that would have played out was Russia v. EU Energy Package (DS 476), a GATT and GATS case, in which the EU appealed in 2018 after the panel vindicated several of Russia's claims while ruling against other claims. After the EU appealed, Russia also appealed. In my Saved DSU Scenario, either the panel report would not have been appealed or, if it were appealed, the appeal would have been dismissed and then the panel report would have been adopted by the DSB in 2018.
In summary, there are now 13 appealed cases at the Appellate Body which may never be adjudicated. In my Saved DSU Scenario, 11 of these panel reports would have already been adopted -- six of them in 2018 and five of them in 2019. Two of those 13 panel reports, against India and the EU, have been appealed within the past month and therefore would probably not yet have been brought to the DSB for adoption. Given current circumstances, both the EU and India appeals are strategic, bad-faith appeals that warrant dismissal.
In my Saved DSU Scenario, the DSB would have continued to be able to adopt all panel reports throughout 2018 and 2019. No interruption of the predictability and security of the WTO panel process would have occurred. Going forward from today, there would not have been any need to seek patches and workarounds because appeal would have been temporarily taken off the table by the Appellate Body in late 2017 until such time as the US allowed the DSB to refill the vacant seats on the Appellate Body. The core part of WTO dispute settlement would have been saved. The WTO would have enjoyed a soft landing rather than suffering a constitutional crisis.
To be sure, the Saved DSU Scenario was unable directly to prevent the demise of the Appellate Body. But that result is no different than what has eventuated in real life. The Appellate Body itself could not be saved from the Trump Administration. But the Appellate Body could have saved WTO dispute settlement from the Trump Administration.
Had the Appellate Body followed my suggestion in December 2017, it could have focused its efforts on the six appeals that were in chambers at that time and issued decisions much sooner. To wit, the appeal in EU - Aircraft (Art. 21.5) was lodged on 13 October 2016 (sic), but was not decided until 15 May 2018. The appeal in US - Aircraft (Article 21.5) was lodged on 29 June 2017, but was not decided by the Appellate Body until 28 March 2019. The appeal in EU - PET was lodged on 30 August 2017, but was not decided until 10 May 2018. The appeal in Brazil - Taxation was lodged on 28 September 2017, but was not decided until 13 December 2018. The appeal in Indonesia - Iron and Steel was lodged on 28 September 2017, but was not decided until 15 August 2018. The appeal in US - Tuna II (Second Recourse to Article 21.5) was lodged on 1 December 2017, but was not decided until 13 December 2018.
In short, under my solution, by dismissing all new appeals after 11 December 2017, the Appellate Body could have moved closer to meeting its 60-day deadline through more rapid processing of its backlog of cases. There would have been plenty of work for the Appellate Body to do through March 2019. After March 2019, under my proposal, the three remaining appellators would have had a much lighter inbox. In my view, sparing them the cases appealed after 11 December 2017 would have been more appropriate than piling on numerous new cases which the remaining appellators cannot possibly adjudicate in 60 days.
Even with just the one appellator left today, some WTO governments will continue to appeal. In fact, even a completely empty Appellate Body bench will not stanch the appeals. That's why I posited in November 2017 that there needed to be a common sense connection between the percent of appellators available and the willingness of the Appellate Body to accept new appeals. My proposal, in effect, was that if less than 70 percent of the appellator seats were filled, then the Appellate Body should proclaim itself closed for new business until the missing judges were replaced.
Having laid out this ceteris paribus Saved DSU Scenario, I want to point out that in my original Blog post in November 2017, I suggested that all other things would not be equal. That is, rather than just a static scenario, there could have been a dynamic scenario leading to an even better WTO future. The thought I expressed was that if the Appellate Body adopted my simple rescue plan and demonstrated to the Trump Administration that while the US could kill the Appellate Body, the US could not kill the automaticity of the adoption of WTO panel reports, there could have been a positive behavioral adjustment in the Trump Administration. I said at the time, and I still believe, that if the Appellate Body had outwitted and outflanked the Trump Administration, the Administration would have backed down in blocking Appellate Body appointments. The jig would have been up, so to speak.
The Administration's purpose in emptying out the Appellate Body is not principally to prevent second level appellate review because as many commentators have noted, such review benefits the US as much as anyone. Rather, the Administration's purpose is to immunize the US from accountability in the WTO regarding the protectionist and nonmarket trade policies of the Trump Administration. The US assault on the panel report adoption process also knocked the WTO off balance, thereby helping the Trump Administration thwart the WTO's legislative mission of opening markets and promoting the rule of law.
Today, the Saved DSU Scenario looks pretty good compared to the status quo. But my rescue plan could have enabled an even better future outcome. I will call it the Dynamic Scenario. In this scenario, after it was demonstrated to the US in May 2018 that panel reports would continue to be adopted in the future just as they had been in past via reverse consensus, the Trump Administration would have backed down and agreed to a deal to fill the vacant appellator seats. The US might not have given this for free; some deal might have been required to respond to the US demands regarding the jurisprudence, customary practices, and staffing in the Appellate Body. But if my plan had prevented the disruption of the adoptability of WTO panel reports, then the Trump Administration would have had far less negotiating leverage than it enjoys today to demand changes in the DSU to weaken the WTO compliance process.
To be sure, I have no crystal ball. My Dynamic Scenario regarding the Appellate Body may be too optimistic given the Trump Administration's concerns that the normativity of Appellate Body rulings against the US would make it marginally harder for the Administration to proceed willy nilly with more protectionist and unilateral trade measures. But if so, then the fallback of the Saved DSU Scenario would be far superior to what world trading system will suffer through now.
That's because the most fundamental advance in dispute settlement between the GATT and the WTO -- the automatic adoption of panel reports -- would have been preserved by my plan. Now, it is lost. Certainly, panel reports can still be adopted. It's just that we've lost automatic adoption of cases with violations without the approval of the scofflaw defendant.
Let me conclude with the biggest irony: I have recently been informed by a WTO insider that the Appellate Body — which is so commonly and wrongfully accused of considering itself above the rules* — was unwilling to adopt my rescue plan because they believed it was against the rules.
*See, for example, Alan Price, "Trump Administration Is Right: The WTO Is Broken," Law 360, 9 December 2019.
