Geneva-based reporter Ravi Kanth has two detailed pieces (here and here) on U.S. proposals for WTO dispute settlement reform, and the reaction of other Members to those proposals. It's difficult to analyze all of this without seeing the actual U.S. proposals, but I'm going to give it a shot anyway. I will address four specific issues: Settlements through Improved Interim Review; Making Appellate Review Optional; Scope of Appellate Review; and Role of Precedent / Member Review of DSB Decisions.
Settlements through Improved Interim Review
First up, it seems as though the U.S. wants to revise the interim review process so that it can provide a better basis for early settlements:
Further, the US argues, “we seek to improve interim review so that it can meaningfully support both a panel in its decision-making process and the parties as they seek a resolution to their dispute.”
In terms of the purpose, the US said to “help address these interests/concerns would be to clarify the purpose and scope of a panel’s interim review to include reconsideration of any issue of fact or law, including completion of the analysis.”
“Another would be to enable parties to request the assistance of a mediator to facilitate a resolution following issuance of the interim report and prior to circulation,” the US appears to have suggested.
Part of what may be going on here is that the U.S. doesn't want public WTO DSB reports finding that it is in violation of WTO obligations, perhaps because that's bad for U.S. politics. Could the system be improved based on the idea that an interim report would guide the parties to a resolution? That does happen from time to time, in cases where the parties are willing to make compromises. But I'm skeptical that it can be the default approach, mainly because parties often need a final public ruling in order to generate the political will to make the changes to the measure that are necessary for reaching a compromise. Having said that, this sort of settlement is an option already, and trying to facilitate such compromises through mediation seems fine. I'm not sure why it needs to be tied to the interim review though. Final reports get issued to the parties on a confidential basis, and it seems like the negotiations on a compromise could all be done then.
Also, I'm not sure I understood this part: "[to] help address these interests/concerns would be to clarify the purpose and scope of a panel’s interim review to include reconsideration of any issue of fact or law, including completion of the analysis." This seems like it would make the interim review more like appellate review, but maybe I'm not following.
Making Appellate Review Optional
Next up, the U.S. may want to make appellate review optional:
In the second proposal on an Appeal/Review Mechanism, the US suggests “defining the role of an adjudicator as helping Members resolve disputes, defining what an adjudicator should or should not address to assist in resolving the dispute, and defining what an adjudicator should give the parties to assist in resolving the dispute.”
The US says that it is concerned that “review by default rather than exception has led to negative systemic consequences.”
However, it did not provide any details in its proposal.
However, Washington contends that “one way to help address these interests/concerns would be to limit review of issues in a final panel report to be only by agreement between the parties, with the review adjudicator to be selected via a mechanism agreed by the parties.”
This sounds like it would be optional appellate review through an ad hoc appellate review mechanism. I'm not sure other Members would go for ad hoc appellate review, but if the U.S. is interested in optional review by the Appellate Body, I had a drafting suggestion for that a while back.
Scope of Appellate Review
Currently, under DSU Article 17.6, appeals can relate to "issues of law covered in the panel report and legal interpretations developed by the panel." The U.S. wants to narrow that:
The US says that it is concerned that “the system does not provide the proper incentives with respect to review: parties are incentivized to pursue appeals because the adjudicator reviews from a clean slate, and adjudicators are incentivized to provide expansive interpretations in order to distinguish their work from panelists.”
The US has underscored the need “to establish a standard of review for questions of law, under which an appellant must establish that the panel: (1) was guilty of gross misconduct, bias, or serious conflict of interest, or otherwise materially violated a rule of conduct; (2) seriously departed from a fundamental rule of procedure; or (3) manifestly exceeded its powers, authority or jurisdiction, and any of these acts by the panel materially affected the decision and threatens the integrity of the process.”
The proposed solution, according to the US, “would be one way to institutionalize the proper incentives for all participants, to limit the role of adjudicators in adding to or diminishing the rights and obligations of Members, and to reduce the complexity, length, and cost of any review.”
This approach would clearly narrow the scope of appellate review, although it's not clear to me exactly how narrow the scope would be under this standard. At the outset at least, there could be a significant number of appeals as people try to test out the boundaries of the standard. Regardless, I doubt other Members would accept this. What people generally want here is appellate review of the the core legal interpretations and conclusions of a panel, with a new set of judges looking at these questions de novo.
Role of Precedent / Member Review of DSB Decisions
The U.S. wants to undo certain precedents and more generally expand the ability of Members to rein in DSB rulings:
The third proposal by the US, which appears to have generated some serious comments, is on “no expansion of rights or obligations; consistency.”
The underlying rationale of the third proposal by the US is that members’ interests include defining the role of an adjudicator as helping Members resolve disputes, defining what an adjudicator should or should not address to assist in resolving the dispute, defining what an adjudicator should give the parties to assist in resolving the dispute, maintaining the integrity of the system over time, having a system that respects the roles of the negotiating and monitoring functions of the WTO, maintaining policy space for Members where they have not clearly undertaken a commitment to govern their activities, and maintaining the prerogative of Members to agree to new commitments where they have not clearly undertaken a commitment to govern their action.
Despite members’ agreement that WTO reports are not precedent and should have no precedential effect, the US said “we are concerned that, over time, WTO reports have become de facto precedential, including through legal standards for precedent developed by adjudicators.”
The proposed solution to the third issue, according to the US, is that “one way to help address interests/concerns would be to correct erroneous interpretations in the past, including interpretations in past dispute settlement reports, including interpretations concerning the essential security exception (which the US recently rejected in a panel ruling in favour of China), trade remedies (including public body and benchmarks) and others identified by the United States or other members.”
Apparently, questions were raised on the third US proposal, namely, “Would this “correction of erroneous interpretations” result in retrospective correction of rights or obligations as well? Or is it to only establish a guideline for adjudication in the future, in which case this is more like a reiteration of sorts for the idea of a review by WG (Working Group)/committee”.
...
Brazil apparently asked whether the US proposal is tantamount to establishing a mechanism that is different from Article 9.1 of the Marrakesh Agreement or is it an authoritative interpretation invoking Article 9.2 on a closed list of cases.
Article 9.1 of the Marrakesh Agreement on decision-making states: “The WTO shall continue the practice of decision-making by consensus followed under GATT 1947. Except as otherwise provided, where a decision cannot be arrived at by consensus, the matter at issue shall be decided by voting. At meetings of the Ministerial Conference and the General Council, each Member of the WTO shall have one vote. Where the European Communities exercise their right to vote, they shall have a number of votes equal to the number of their member States which are Members of the WTO. Decisions of the Ministerial Conference and the General Council shall be taken by a majority of the votes cast unless otherwise provided in this Agreement or in the relevant Multilateral Trade Agreement.”
Article 9.2 states: “The Ministerial Conference and the General Council shall have the exclusive authority to adopt interpretations of this Agreement and of the Multilateral Trade Agreements. In the case of an interpretation of a Multilateral Trade Agreement in Annex 1, they shall exercise their authority on the basis of a recommendation by the Council overseeing the functioning of that Agreement. The decision to adopt an interpretation shall be taken by a three-fourths majority of the Members. This paragraph shall not be used in a manner that would undermine the amendment provisions in Article X.”
In response to the above queries, the US apparently suggested that this is not a precondition to go for Article 9.2 of the Marrakesh Agreement but that is one way where any member can propose to re-negotiate something.
The US also suggested that it does not envision a panel doing this but it is a member-driven process.
A couple years ago, I had some suggestions along these lines:
The Balance Between the "Legislative" and "Judicial" Functions
One of the major topics of discussion during the Appellate Body appointment crisis has been the role of WTO Members in overseeing the dispute settlement process. One of the Walker Principles proposals is for "a mechanism for regular dialogue between WTO Members and the Appellate Body where Members can express their views on issues, … in a manner unrelated to the adoption of particular reports." Such a process could be helpful, but is not likely to satisfy the United States. In the past, the United States (in a joint proposal with Chile) went much further on "Member control," suggesting the "partial adoption" of reports: "the DSB may by consensus decide not to adopt a finding in the report or the basic rationale behind a finding." This proposal was met with resistance, but perhaps there is a variation that might work.
WTO Agreement Article IX, on "Decision-Making," provides the following in paragraph 2: "The Ministerial Conference and the General Council shall have the exclusive authority to adopt interpretations of this Agreement and of the Multilateral Trade Agreements. … The decision to adopt an interpretation shall be taken by a three-fourths majority of the Members." This provision has never been used, which is not surprising given the difficulty of getting a three-fourths majority to support a particular interpretation. But it could play a role in addressing issues related to reasoning in dispute settlement reports.
Rather than have partial adoption of a panel or Appellate Body ruling, as suggested by the United States and Chile, parties to the dispute could identify reasoning in a report that they found problematic. Identifying this reasoning would not have any impact on adoption or implementation of the findings in the particular case. Instead, it would trigger a process of discussion for an Article IX:2 interpretation. Achieving such an interpretation would be a challenge, and cannot be expected to happen easily. However, in the meantime, the amended DSU would state explicitly that the particular reasoning that was identified as being of concern would not serve as persuasive authority for future disputes.
I'm curious what the U.S. and other Members think of this idea (or what anyone else thinks!).
