The U.S. Comments On the MPIA and Treaty Interpretation

At the December 19 DSB meeting, the U.S. tied one of its broad criticisms of the WTO dispute settlement system to a recent criticism by another WTO Member of a specific MPIA award:

• We would like to make one further point in response to the interventions we just heard that tout the Multiparty Interim Appeal Arbitration Arrangement (MPI-AAA) for preserving access to appellate review.

• In particular, we recall the recent interventions by certain MPI-AAA members criticizing aspects of the most recent MPI-AAA arbitrator’s award – namely, the arbitrator’s interpretation of certain obligations under the TRIPS Agreement.

• One MPI-AAA member noted that the MPI-AAA arbitrator had replaced the panel’s interpretation of the plain language of the TRIPS Agreement with a “‘corollary’ theory” that is not based on the text of the agreement and that “mak[es] up new rights and obligations out of whole cloth.” In “making up new rights and obligations” the interpretation threatens “confusion and uncertainty” as well as harmful “systemic consequences” for Members.

• Without opining on the substance, it strikes us that concerns expressed with the MPI-AAA arbitrator’s award correspond to concerns with WTO dispute settlement that we have raised in the past.

• Specifically, the United States has identified numerous instances where the dispute settlement system has adopted interpretations that depart from the plain text as agreed to by Members, contrary to Article 3.2 of the Dispute Settlement Understanding.

• In addition, the MPI-AAA arbitrator’s “corollary theory” appears to rely on precedent, at least in part. Specifically, to reach its “corollary theory”, the MPI-AAA arbitrator ascribes to Article 7 and Article 8 a particular function in interpreting different provisions of the TRIPS Agreement: that “IP rights are not an end in themselves” but must instead “contribute to a balance of rights and obligations.” The MPI-AAA arbitrator reached that conclusion after reciting a passage from a previous panel report, without further explanation of why it is persuasive or even makes sense. In its use of precedent, the MPI-AAA arbitrator appears to repeat the same systemic error that the United States has criticized in past reports.

• The experience of the MPI-AAA arbitrator’s award underscores the need to address the fundamental problems that we have identified, not to simply restore the conditions that gave rise to the problems in the first instance.

In response to this U.S. statement, I want to first note that I can see how "MPI-AAA" reflects the full title of the appeals mechanism better than "MPIA" does. However, I think we are all settled on MPIA and I'd rather not have to go through another TPP to CPTPP-type adjustment!

On the substantive point the U.S. makes about interpretation, DSU Article 3.2 says in part that "[t]he Members recognize that [the dispute settlement system] 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." The interpretation rules that WTO Members have relied on in this regard are Articles 31, 32, and 33 of the Vienna Convention on the Law of Treaties, which set out a number of elements to guide the process of interpretation.

Regardless of the rules of interpretation that are followed, it's extremely difficult, in my view, to have adjudication without the losing party finding the adjudicator's interpretation to be objectionable in some way. Maybe the losing party thinks the adjudicator was too textual, maybe not textual enough, maybe some other criticism. Disagreements about specific interpretations are a big part of the reason why there is adjudication in the first place, and in most cases adjudicators can't make both parties happy. WTO dispute settlement is no different in this regard.

But none of that changes the value of appellate review at the WTO. As I put it here, two key reasons why a two-tier system is better than a one-tier system in the context of WTO disputes are:

First, panels often have a very difficult job, because they have to sort through complicated facts and deal with a large number of legal claims. As a result, they are not able to devote their full attention to every legal issue that arises in a case. This means they are likely to get things wrong now and then. Appellate review can correct these errors. In an appeal, fewer issues are (or should be) before the Appellate Body than were before the panel, and therefore the Appellate Body can take the time needed to explore the contested legal issues more fully. (To be clear, none of this says anything about the inherent capabilities of panelists versus the appeals "judges." It's just about the nature of the proceedings at each stage, and how busy panels can be with the specific work required at the first tier stage).

Second, on a number of core WTO principles, as well as many lesser principles, reasonable people can disagree (and they often do!). The non-discrimination principle is a great example of this, where there are many and varied views of how the relevant obligations and exceptions should be interpreted and applied. That disagreement inevitably finds its way into WTO panel rulings, which is a problem because if different panels are saying different things, we don't know what the law is. Appellate review can offer a coherent interpretive approach that provides certainty, so that governments (and businesses, NGOs, etc.) know what has been agreed to in situations where the text of the agreement is vague.

Related to the points about the value of appellate review, it's important to recognize that there's nothing inherent in having an appellate review body that makes disagreements about interpretation a particular problem. If there were no appellate review, similar critiques of adjudicators' interpretations would simply be directed at panels. So while – as noted by the U.S. in its statement – China was critical of the MPIA Arbitration Award in China – Enforcement of Intellectual Property Rights (DS611), that doesn't undermine the argument for appellate review or call into question appellate institutions. Rather, it's just an inevitable part of adjudication and interpretation.

Could there be adjustments or additional guidance on how panels, the MPIA, or other arbitrators should carry out their interpretation (in the abstract, outside the context of specific disputes)? I think that, practically speaking, it would be a challenge for WTO Members to reach agreement here, but I'd be interested to hear from the U.S. or other governments on how exactly they would like to see interpretation carried out in WTO dispute settlement, in terms of the weight placed on text/context/object and purpose, or on some other interpretive issues. While such a debate might not lead to any concrete outcomes, I think it's worthwhile for governments to consider these issues and weigh in on them.