The WTO Dispute Settlement Reform Process is underway. The WTO website provides brief overviews of the meetings as they happen, but for those of us who want more than just a short summary, we can follow it a few weeks behind the actual current developments as meeting minutes are derestricted. The Minutes of the Heads of Delegation meeting from May 30 are now available.
The Facilitator of the process is Usha Dwarka-Canabady of Mauritius, who has been a panelist herself several times. For this meeting, Dwarka-Canabady had "encouraged Members to share ideas on how experts could take technical work forward on" the issues of "appeal/review and accessibility." On appeal/review, her specific question for Members was: "Being mindful of the interest-based negotiating modality that Members have been using to make progress on dispute settlement reform, describe your delegation's interest on appeal/review, including possible characteristics and ideas for developing convergence." Here's a sampling of what delegations said on the issue of appeal/review, which is obviously one of the most important elements in getting the dispute settlement mechanism fully functioning again:
Australia:
"Turning to Question 1, the right to appeal/review is fundamental to meeting Australia's interests in a dispute settlement system that produces coherent, robust and legally sound outcomes. Such outcomes reinforce the security, predictability, legitimacy and credibility of the rules-based multilateral trading system in the WTO. Appeal/review also provides an important check and balance to mitigate against legal error and encourage consistent decision-making. This is vital to maintaining confidence in the system. Retaining an appeal/review tier in a reformed system is therefore important to Australia. We do, however, acknowledge that the Appellate Body was not functioning, in some respects, as intended under the Dispute Settlement Understanding and that we need to address the concerns that arose. To do this, we will need to focus on ways to change the behaviour of both Members and adjudicators so that appeal/review works in the interests of all Members. For Members, we need to incentivise a more disciplined approach to appeals. For example, we could explore options for streamlining appeal processes to ensure adherence to time limits, including by setting word limits on submissions. We could also consider options to make better use of interim review at the panel stage. For adjudicators, we need appropriate guardrails around their role. This could include reforms that go to the standard and scope of review, and clarifying our expectations that adjudicators should focus on resolving the dispute between the parties. We will also need to think about the type of institutional structures that will support Members' interests, including the proper role of the Secretariat. Some of these ideas have already been raised in the informal process, so we should build on that work.
Switzerland:
"On appeal/review, for Switzerland, a reformed dispute settlement system must preserve the right of Members to have an appeal or review of panel reports. It is also essential to preserve the rules-based nature of the system, that it is protected from power dynamics and ensures predictability for Members. It is key for us that the appeal/review process allows for the final and binding resolution of trade disputes. We also believe that the procedural rules for appeal/review rules should not be overly prescriptive or too detailed, and leave some degree of flexibility. That being said, we find it useful to discuss possible "filters" in order to have a more selective number of issues going to appeal/review. In this regard, we are in particular open to discuss how the interim review phase of the panel process could be strengthened. Given the little time that we have, it may be efficient to focus our discussions in a first step on principles, before turning to more detailed rules. It may also be useful to approach the discussion on appeal/review based on different sub-topics. In our view, the following topics would deserve particular focus: First, access to appeal/review – how do we make sure that the most significant legal issues go to appeal/review. The scope of the review is also an important topic – for instance, with regard to the objective assessment of facts. On these topics, very useful discussions have taken place last year and at the beginning of this year, and we should really build on those discussions. Further, discussions on other issues such as the standard of review, institutional aspects, monitoring of the mechanism, and the interplay with the panel process may also be useful.
EU:
"At the outset, I would like to recall that, for the European Union, a fully functioning dispute settlement system is crucial. The system has not been fully functioning for over four years. The more time passes without a solution, the more we undermine the rules underpinning the WTO system and its credibility. At MC13, the Ministers instructed us "to accelerate discussions in an inclusive and transparent manner, build on the progress already made, and work on unresolved issues, including issues regarding appeal/review and accessibility to achieve the objective by 2024 as we set forth at MC12." It is clear that, if we want to achieve our objective, this process must be strictly focussed on resolving the outstanding issues. We must avoid ending up in an exercise similar to that of the DSU review process – those discussions have lasted for over two decades and did not lead to a result. To that end, we must build on the progress already achieved through interest-based discussions in the informal process. That work is reflected in the text contained in the report of the DSB Chair in JOB/GC/385. It is against this background that I will address the two questions asked by the Facilitator.
As for the first question, in relation to appeal/review, we have heard at MC13 that the overwhelming majority of Members wants to preserve a two-tier system. The EU explained its interests at the outset of the informal process. I will not repeat all of those interests today but let me recall and clarify the EU's interest in the right to appeal review before a standing adjudicative body. This interest supports our broader, overarching interests.
a. Firstly, we are interested in a system that effectively preserves the WTO rights and obligations, which implies correctness of decisions, and the therefore the right to review legal errors on appeal.
b. Secondly, we have an interest in a dispute settlement that supports the rules-based multilateral trading system. In order for the dispute settlement system to do that, it must guarantee a degree of consistency, security and predictability.
c. Thirdly, dispute settlement must be legitimate and fair.
The consolidated text only contains a placeholder on the issue of appeal/review but detailed discussions on this issue already took place. Some ideas have emerged to try to reconcile the interest of Members in having a two-tier system and the interest to avoid that this leads to "law-making" or overreaching by adjudicators. The interests of Members were discussed in detail in the informal process. While the discussions should remain "interest-based", we now need to focus on solutions. Going forward, we propose that the experts pick up discussions on appeal where they were left off before MC13. Building on the work done already, the task should be to identify solutions that meet the interests of all Members. In doing so, they should be mindful about the package of reforms that is being developed, including those reforms that are part of the consolidated text and go towards addressing the concern with law making and overreaching by adjudicators. The EU will continue its constructive engagement and openness to reform. We will seek to preserve the right to appeal review, the adjudicators' ability to review and correct legal errors, and a standing adjudicative body. We believe it is possible to reconcile these characteristics with the interests of all Members, including the interests in avoiding law-making by adjudicators and in focussing the dispute settlement function on resolving disputes.
Antigua and Barbuda, on behalf of the ACP Group:
"On appeal/review, the ACP's core interest remains the full restoration of a binding two-tier dispute settlement system in the WTO. Recourse to appeal/review of panel decisions should be automatic. Rather than diminishing the role of such a mechanism, our reform efforts should strengthen it by focusing on the following:
a. shielding appointed members to any appeal/review mechanism from any attempt by any Member to unduly influence their decisions.
b. guaranteeing the right of due process for all WTO Members.
c. institutionalizing reasonable timelines for the appeal review mechanism to conclude its work.
d. ensuring that the appeal/review mechanism Secretariat has the necessary resources – human, technical and financial – to do its work adequately and easily.
e. keeping open the possibility of expanding the number of members appointed to any appeal/review mechanism and also keeping open the possibility of making adjustments to the duration of their tenure so as to ensure continuity and reduce the chances of collapsing the entire system.
Under the informal process, we are aware of a number of ideas which have emerged to reform what is currently the Appellate Body. Members have floated ideas with respect to standards of review for example. However, what we do not want is any outcome which would create a chilling effect for any Member to avail itself of its right to appeal a panel decision. It is also important that we look at the overall balance of issues. For instance, if Members want to establish an accountability mechanism, improve panel composition, implement word limits and time limits for written and oral submissions respectively, along with a host of other new reforms, then the antecedents are there for a new system to emerge which addresses some of the longstanding issues of some Members. Therefore, we anticipate that in the context of overall improvements to the system, restoring two-tier dispute settlement is certainly not a difficult ask.
Singapore:
"In response to your first question, Singapore's interests as a small developing country who attaches the highest importance to a rules-based multilateral trading system, are two-fold. One, Singapore values the security and predictability of a dispute settlement system that is underpinned by (i) compulsory jurisdiction, (ii) automaticity and (iii) binding and enforceable outcomes. The appeal stage of the dispute settlement system, served by a standing body, is a key feature of the rule of law which is critical for instilling confidence in the system. For sovereign nations to accept and implement the Dispute Settlement Body's rulings and recommendations, they must have confidence that these recommendations are "right" in that legal errors have been corrected and WTO rules had been consistently and fairly applied. The right to appeal ensures this. From discussions in the past year, we note that many other Members share these interests, and we have also heard other interests, including those articulated by the United States. Experts have been exploring promising ideas to address all interests in a balanced way and we support continuing discussions on two specific issues: (i) a proposed standard of review called "material impact on implementation" to filter claims that would be eligible for appeal; and (ii) make better use of the interim review stage of the panel process to correct egregious errors of fact."
United Kingdom:
"You asked two questions, the first of them on appeal and review. We have four overriding interests on appeal and review. The first is that we have high quality prompt decision-making from adjudicators in the system. The second is that we have a system which promotes a coherent and predictable set of rules and therefore secures a predictable and stable trading environment for businesses and the Members who represent them. The third is that we have an appeal review mechanism which does not have an overweighted influence on the substantive rules themselves, i.e. there is no gap filling. And fourth, that we have a reduction in the number of appeals because we are concerned that, to an extent, appeals have become routine, rather than something more significant and substantive. Beyond those four points, we are flexible and pragmatic. We have tried to remain so through the rather excellent informal process that we have had over the last year or so. We have tried to engage substantially in it and in good faith through that interest-based approach and we hope to continue to do so.
You asked about particular ideas for trying to develop convergence. So again, four points. First, as I mentioned, we put forward a paper – some of you may have seen it, some of you may have even read it – back in October, a non-paper which set out a few ideas – not an attempted solution, merely an attempt to generate ideas and stimulate discussion. Second, we have had various discussions on that non-paper and the ideas it contains during the Marco Molina process. Third, we are pleased to see that others have engaged with those ideas and that some of those ideas have now developed and evolved thanks to that interaction. That is something we should try and continue – which brings me to my last point. We welcome further discussions on the ideas put forward and we do think that this is a potential landing zone with room for developing those ideas further.
Japan:
"On the first issue, appeal/review, this is a proposal for enabling our experts to most effectively work at an outcome of this file, rather than this delegation's interest. We tend to consider the form of mechanism issue like standing two-tier system or a single tier system as the entrance question of this file. This issue, however, will tend to end up with being a binary choice issue. Instead, we should start with discussing the substance of the system design, like (i) concrete ideas on defining the scope and reducing the number of cases which are eligible for appeal, and (ii) the issue of the standard of review. We could also include in the priority agenda (iii) streamlining of the appeal procedure."
China:
"On appeal review, like many others, it is China's core interest to retain an independent, impartial, binding, two-tier dispute settlement system. This is the central element in providing security and predictability to the multilateral trading system as enshrined in the DSU. Based on the intensive discussions of the past two years, I detect two elements that are crucial for our further work.
a. First, the imperative to take a holistic approach to address the appeal review issue. We should also bear in mind that Members have collectively explored tools to balance and improve a mutually supportive system as reflected in the consolidated text. For example, treaty interpretation, no precedential effect, focus on what is necessary to resolve dispute, and advisory working group to review interpretations in particular, as well as strengthened panel stage and accountability mechanism in a more general sense.
b. Second, the value of a "filter and focus" approach to explore a more focused and efficient appeal review mechanism. Under this approach, Members have conceptually discussed what I summarize as a "seven-element framework", which covers Interim Review, material impact on implementation (MII), admissibility check, order of analysis, streamlined process, output of appeal, and incentives to reduce frivolous appeals. The above elements, in our view, could serve as a good basis for finding balanced and comprehensive solutions to this critical issue."
Of course, the key to all of this is the U.S., whose statements at this meeting seemed to reflect its previously stated views:
United States:
"With respect to the first question, we have heard today some interests – though many more positions – on the issue of appeal/review. The United States has an interest in a dispute settlement system that supports parties in the resolution of their disputes and that has legitimacy, not just here but also at home. In that context, we would like to explore further with delegations whether appeal/review is a necessary feature of a system that supports parties in resolving their disputes. We have heard points made about the need for consistency and the ability to correct legal errors. We do not view a standing Appellate Body as the only way of achieving those objectives. Consistency, if wrong, does not serve anyone's interests. In addition, you can have a binding system without having a second tier – and by "binding," we mean finality in the dispute. We have seen how an appeal/review mechanism – and by extension the dispute settlement system – can stray from this foundational purpose. USTR published a report on the Appellate Body in 2020 that identified several U.S. concerns with that appeal mechanism. I encourage my colleagues to look at that report if you are not familiar with it – even if just the Executive Summary. It is a useful document in understanding the U.S. perspective and is available on the USTR website. Notwithstanding these concerns, we have made clear our commitment to work towards a system that meets the interests of all delegations."
