DSU Article 11 provides the following:
Article 11: Function of Panels
The function of panels is to assist the DSB in discharging its responsibilities under this Understanding and the covered agreements. Accordingly, a panel should 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, and make such other findings as will assist the DSB in making the recommendations or in giving the rulings provided for in the covered agreements. Panels should consult regularly with the parties to the dispute and give them adequate opportunity to develop a mutually satisfactory solution.
In its second sentence, Article 11 contains three requirements for panels in this regard. A panel is to make (1) “an objective assessment of the matter before it,” (2) which includes “an objective assessment of the facts of the case,” and (3) “an objective assessment of … the applicability of and conformity with the relevant covered agreements.” (Note that Article 11 says "should," but let's not get into the significance of that now).
The first and third requirements are quite broad and open-ended. In a sense, these are general, catch-all provisions that allow for an allegation that the panel committed some sort of error, mistake, etc. Any time a party has a concern regarding an insufficiency or flaw in a panel’s reasoning, or an approach by the panel that seems erroneous but is difficult to fit within a specific legal obligation, the party may try to fit its claim into these aspects of DSU Article 11.
In addition, the second requirement refers to "the facts of the case," and thus provides a way to get issues that involve facts before the Appellate Body, even though DSU Article 17.6 says: "An appeal shall be limited to issues of law covered in the panel report and legal interpretations developed by the panel."
When thinking about Article 11 as a mechanism for appeal, it is worth noting at the outset that the language of Article 11 was carried over from the Tokyo Round Dispute Settlement Understanding. Paragraph 16 of this Understanding states:
The function of panels is to assist the CONTRACTING PARTIES in discharging their responsibilities under Article XXIII:2. Accordingly, a panel should 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 General Agreement …
Thus, paragraph 16 mirrors closely the language of Article 11. It seems clear that this language was not originally designed as a standard for appellate review of panel proceedings, because it existed prior to there being an appeal mechanism. As to the actual purpose of the original language, during the Tokyo Round negotiations, a 1974 Secretariat note stated that an “objective assessment” was something that could only be provided by a neutral panel of experts, as distinguished from an assessment given by a working party:
Since 1952, however, the CONTRACTING PARTIES have normally established a panel rather than a working party to assist them in the examinations of matters raised under paragraph 2 of Article XXIII. A panel is more likely to arrive at an objective assessment of the facts than a working party since the parties to the dispute are normally members of a working party but are not represented on a panel, which is composed of individuals appointed in their personal capacity and not as representatives of their governments.
Paragraph 16 codifies this notion.
Regardless of its origins, however, Article 11 soon came to play an important role in WTO appeals. In the first few appeals of panel reports, no mention was made of DSU Article 11 or the "objective assessment" standard. "Objective assessment" was first mentioned in U.S. – Wool Shirts, the fifth appeal to be filed, where India argued: “By defining its task solely in terms of the measure to be brought into conformity with the ATC, the Panel curtailed India’s right to an objective assessment of all legal claims set out in the Panel’s terms-of-reference.”
An Article 11 appeal related to a panel’s factual findings was made in EC – Hormones, the eighth appeal, where the EC argued the following in its notice of appeal:
The panel failed to examine the applicability of the precautionary principle to all hormones in dispute, it distorted and interpreted erroneously the scientific and factual evidence submitted or referred to it by the European Communities, and it failed to make an objective assessment (as required by the DSU) of the scientific evidence presented to it by some of the scientific experts it has chosen.
The Appellate Body rejected the EC’s argument. In doing so, it seemed to impose a high standard for the reversal of a panel’s findings based on a failure to make an objective assessment of the facts, stating:
The question which then arises is this: when may a panel be regarded as having failed to discharge its duty under Article 11 of the DSU to make an objective assessment of the facts before it? Clearly, not every error in the appreciation of the evidence (although it may give rise to a question of law) may be characterized as a failure to make an objective assessment of the facts. In the present appeal, the European Communities repeatedly claims that the Panel disregarded or distorted or misrepresented the evidence submitted by the European Communities and even the opinions expressed by the Panel’s own expert advisors. The duty to make an objective assessment of the facts is, among other things, an obligation to consider the evidence presented to a panel and to make factual findings on the basis of that evidence. The deliberate disregard of, or refusal to consider, the evidence submitted to a panel is incompatible with a panel’s duty to make an objective assessment of the facts. The wilful distortion or misrepresentation of the evidence put before a panel is similarly inconsistent with an objective assessment of the facts.
The EC – Hormones Appellate Body report was circulated in 1998. The first Appellate Body finding of a violation of DSU Article 11 came in U.S. – Wheat Gluten, in 2001. That case involved a panel’s application of the standard of review to the determination made by a domestic trade remedy authority. Outside of the trade remedy review context, in Chile – Price Band in 2002, the Appellate Body concluded that, by making a finding that the duties resulting from Chile’s price band system are inconsistent with Article II:1(b) of the GATT, second sentence (which was not part of the matter before the panel), and also by thereby denying Chile the due process of a fair right of response, the panel acted inconsistently with Article 11.
In the ensuing years, appeals based on DSU Article 11 have become increasingly common. While reversals based on such an appeal are somewhat rare, they happen on occasion, and parties continue to make these arguments.
Now and then, the Appellate Body has seemed to want to discourage those appeals. In China - Rare Earths, the Appellate Body said the following:
5.227 ... an Article 11 claim must be clearly articulated and substantiated with specific arguments, including an explanation of why the alleged error has a bearing on the objectivity of the panel's assessment. This Article 11 claim raised by China does not meet these requirements and we therefore reject it.
5.228. We emphasize that, in so finding, we do not wish to suggest that participants should simply present more extensive argumentation in support of claims under Article 11 of the DSU. Rather, we wish to encourage appellants to consider carefully when and to what extent to challenge a panel's assessment of a matter pursuant to Article 11, bearing in mind that an allegation of violation of Article 11 is a very serious allegation. This is in keeping with the objective of the prompt settlement of disputes, and the requirement in Article 3.7 of the DSU that Members exercise judgement in deciding whether action under the WTO dispute settlement procedures would be fruitful.
However, soon after saying this, the Appellate Body seemed to be willing to find violations again.
In 2018 (and perhaps before then, but this happened to be one instance I flagged), the U.S. expressed concern about a "low threshold" being used for Article 11 claims. The U.S. has continued to talk about Article 11 (see in particular here, which offers a lot of good detail and various ways the Appellate Body has expressed the standard), but it's not clear to me what exactly the U.S. position is on Article 11. Does the U.S. favor a narrow standard like in Hormones? Would it apply different standards for objective assessments of the facts as compared to the other objective assessments mentioned in Article 11? Would it support eliminating appeals under Article 11 entirely?
Most recently, the Appellate Body ruled on this issue in its final report, Australia - Plain Packaging. The majority finding started with language that seemed skeptical of a broad Article 11 standard:
6.48. The sheer volume of the appellants' claims under Article 11 of the DSU in these appellate proceedings is unprecedented. We recall that a claim that a panel has failed to conduct an objective assessment of the matter before it is "a very serious allegation". Not every error by a panel amounts to a failure by the panel to comply with its duties under Article 11, only those which, taken together or singly, undermine the objectivity of the panel's assessment of the matter before it. Indeed, as an example of the grave implications of claims brought under Article 11, the Appellate Body has considered that a panel's "[d]isregard", "distortion", and "misrepresentation" of evidence, "in their ordinary signification in judicial and quasi-judicial processes, imply not simply an error of judgment in the appreciation of evidence but rather an egregious error that calls into question the good faith of a panel". For these reasons, the Appellate Body has urged Members to consider carefully "when and to what extent to challenge a panel's assessment of a matter pursuant to Article 11". This is in keeping with the objective of the prompt settlement of disputes, and the requirement in Article 3.7 of the DSU that Members "exercise judgement in deciding whether action under the WTO dispute settlement procedures would be fruitful".
However, the majority then found violations of Article 11 in several instances, so the standard wasn't as narrow as one might have expected based on the quoted text.
In a separate opinion in the Plain Packaging case, one member of the Division expressed a preference for a much narrower standard. I am sympathetic to the view set out there.
The Appellate Body is finished for now, and the MPIA is now in effect. The agreed procedures for the MPIA have an interesting provision related to Article 11:
13. If necessary in order to issue the award within the 90 day time-period, the arbitrators may also propose substantive measures to the parties, such as an exclusion of claims based on the alleged lack of an objective assessment of the facts pursuant to Article 11 of the DSU.9
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9 For greater certainty, the proposal of the arbitrators is not legally binding and it will be up to the party concerned to agree with the proposed substantive measures. The fact that the party concerned does not agree with the proposed substantive measures shall not prejudice the consideration of the case or the rights of the parties.
Will arbitrators make use of this option to exclude certain kinds of DSU Article 11 appeals? Will the parties accept such proposals?
When thinking about the appropriate role for appellate review of panel reports, it's worth noting three categories of issues: legal interpretation issues; issues of applying the law to the facts (or legal characterization of the facts); and purely factual issues. Fitting a particular issue into one of these categories may be tricky at times, but generally speaking this division is a useful way of thinking about things.
There is probably general agreement that the standard for appellate review of legal interpretation issues is de novo. The appeals body has complete discretion here. In contrast, law application issues might have de novo review or might use something more deferential; and factual issues will involve a more deferential standard, and perhaps will not be reviewable at all.
These standards could be spelled out clearly in the text of the legal instruments at issue, or (more likely) could be defined somewhat vaguely there. There could also be no mention at all, and the courts will have to decide on their own how they want to approach things.
Under current WTO rules, both DSU Article 11 and Article 12.7 play some role here. Both can act as a check on the work of panels as part of appellate review of the categories of issues noted above (even though their connection to the specific categories is not always set out clearly). That may not have been the intended purpose of these provisions, but in practice that is how things have gone.
The question now is, what precise role do WTO Members want appellate review to play and how do they see Article 11 as part of this? They may not have thought too deeply about this during the Uruguay Round, but the lack of guidance for the Appellate Body has clearly caused some problems. The development of a new appeals mechanism seems like a good opportunity for some thinking about what an appeals body should be doing when it reviews panel reports, and what rules would ensure that it actually does what it should be doing.
As part of this, Members should consider that panels themselves may serve varying functions when reviewing domestic measures. In some cases, they function almost like an appeals court. For example, when a trade remedy investigation has been challenged, the panel is reviewing a quasi-judicial domestic decision. (The AD Agreement sets out a special standard for panels to follow, but the other trade remedy agreements do not). In contrast, if a domestic tax law is challenged, the panel is acting more like a lower court. The appropriate standard of appellate review could vary depending on what function the panel is performing.
