Abstract
At midnight of 10 December 2019, the WTO Appellate Body ceased to be operational, as the US has been vetoing since May 2016 the selection of the members of the World Trade Court. The WTO dispute settlement system hence risks paralysis—a scenario occurring in case the losing party of a panel report appeals the latter “into the void,” i.e. before an Appellate Body with less than three judges. In response to this event, the European Union is developing an articulated approach to guarantee a rules-based international trade system and the principle of cooperation as the pillars of the governance of the global economy. One element of the EU approach is an initiative for an interim appeal arbitration procedure based on Article 25 of the DSU. The present work is devoted to the analysis of this contingency measure, which may represent a bridge between the renovation of the existing multilateral dispute settlement system and the innovation of a new two-level international judgment mechanism for settling trade controversies.
Associate Professor of International Law, Università di Bologna.
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Notes
- 1.
See WTO (2016) Minutes of Meeting 23 May 2016. WT/DSB/M/379, at paras 6.2–6.10 reporting why the United States could not be able to accept the reappointment of Mr. Seung Wha Chang for a second four-year term; WTO (2017) Minutes of Meeting 31 August 2017. Doc WT/DSB/M/400, where it is recorded the US position of blocking any new appointment of AB members until the Dispute Settlement Body (DSB) did not consider the serious systemic implications of former appellate judges still serving as adjudicators after their term in office ended (on the basis of Rule 15 of the Working Procedures for Appellate Review, WT/AB/WP/6); see also the US President 2018 Trade Policy Agenda, where the US administration finally articulated the full list of criticisms on the Appellate Body practice and case-law (Office of the United States Trade Representative, The President’s 2018 Trade Policy Agenda, March 2018, at pp. 22–28), which were then constantly reported by the US diplomats in their official statements before the DSB (cf. e.g. WTO (2018) Minutes of Meeting 27 August 2018. WT/DSB/M/417, paras 4.2–4.17; WTO (2019) Minutes of Meeting 29 October 2018. WT/DSB/M/420, paras 4.2–4.19; WTO (2019) Minutes of Meeting 25 February 2019. WT/DSB/M/426, para 5.26).
- 2.
They are Mr. Ujal Singh Bhatia (India) and Mr. Thomas R. Graham (United States), who were serving as members of the Appellate Body since 11 December 2011.
- 3.
Statement delivered by Professor James Crawford, judge at the International Court of Justice (ICJ), in the interview given to Mizen R (2018) “Back to Square One” if WTO Appeals Body Fails: Judge James Crawford (3 August 2018) available at: https://www.afr.com/policy/economy/back-to-square-one-if-wto-appeals-body-fails-judge-james-crawford-20180802-h13hz0.
- 4.
See Article 17.1 of the Dispute Settlement Rules: Understanding on Rules and Procedures Governing the Settlement of Disputes, Marrakesh Agreement Establishing the World Trade Organization, Annex 2, 1869 U.N.T.S. 401, 33 I.L.M. 1226 (1994) [hereinafter DSU].
- 5.
Pursuant to Article 17.2 of the DSU, “[t]he DSB shall appoint persons to serve on the Appellate Body for a four-year term, and each person may be reappointed once,” and has the duty to fill vacancies “as they arise.” When selecting the judges of the Appellate Body, the DSB has to deliberate by positive consensus, which means that “no Member, present at the meeting of the DSB when the decision is taken, formally objects to the proposed decision” (Article 2.4 of the DSU, footnote 1).
- 6.
As just illustrated, the Appellate Body needs a minimum of three members to deliver its adjudicatory activity.
- 7.
See Articles 6.1, 16.4, 17.14, and 22.6 of the DSU.
- 8.
See Council of the European Union (2019) Background Brief of 22 May 2019 for the Foreign Affairs Council—Trade Issues of 27 May 2019 p. 2. Available at: https://www.consilium.europa.eu/media/39454/background-fac-trade_en.pdf.
- 9.
The US accuses the Appellate Body of (i) persistent overreaching, i.e. of interpreting WTO law beyond its text; (ii) delivering advisory opinions by intervening on issues not necessary to resolve a dispute; (iii) asserting that appellate reports have the value of precedent for future panels, although WTO Members did not agree on a system based on the stare decisis principle; (iv) reviewing panel findings of fact and considering panel findings on municipal law as legal issues rather than issues of fact, thus infringing Article 17.6 of the DSU; (v) constantly disregarding Article 17.5 of the DSU, pursuant to which appellate proceedings “[i]n no case shall … exceed 90 days,” as the World Trade Court systematically delays the delivery of its reports; (vi) too often applying Rule 15 of the Working Procedures of Appellate Review, thus illegitimately allowing a person who has ceased to be an Appellate Body member to continue deciding appeals even if his/her term has not been extended by the DSB. On these highly important and sensitive issues see Lo et al. (2020) and Lehne (2019).
- 10.
Cfr. WT/GC/W/752/Rev.2 and WT/GC/W/753/Rev.1. These two communications have been highly considered by Ambassador David Walker, appointed by the General Council as facilitator of the WTO informal process on matters related to the functioning of the Appellate Body, who very recently delivered the draft for a General Council Decision aiming at gathering the positive consensus of the WTO membership to overcome the impasse: see doc. WT/GC/W/791.
- 11.
See Republic of Korea – Compliance with Obligations under Chapter 13 of the EU – Korea Free Trade Agreement, Request for Consultations by the European Union, 17 December 2018, and Republic of Korea – Compliance with Obligations under Chapter 13 of the EU – Korea Free Trade Agreement, Request for the establishment of a Panel of Experts by the European Union, 4 July 2019 both available at https://trade.ec.europa.eu/doclib/cfm/doclib_section.cfm?sec=130.
- 12.
See the Note Verbale of the Delegation of the European Union in Kiev presented to the Ukrainian Ministry of Foreign Affairs requesting consultations under the EU-Ukraine Association Agreement on 15 January 2019. Ref. No 005/2019; Note Verbale of the Delegation of the European Union in Kiev presented to the Ukrainian Ministry of Foreign Affairs requesting the establishment of an arbitration panel under the EU-Ukraine Association Agreement on 20 June 2019. Ref. Ares(2019)3929269 - 20/06/2019.
- 13.
See the Note Verbale of the Delegations of the European Union to the Kingdom of Lesotho, the Republic of Botswana, the Kingdom of Eswatini, the Republic of Namibia and the Republic of South Africa requesting consultations with the Southern African Custom Union (SACU) under the Economic Partnership Agreement between the European Union and the Southern African Development Community Member States (SADC), 14 June 2019. Ref: NV/2019.
- 14.
For the presentation of the EU proposal for an interim appeal arbitration as well the indications of all the relevant documents see Sect. 3 of the present work.
- 15.
Regulation (EU) No 654/2014, OJEU L 189/50 27 June 2014.
- 16.
See European Commission, Proposal for a Regulation of the European Parliament and of the Council concerning the exercise of the Union’s rights for the application and enforcement of international trade rules, 12 December 2019, COM(2019) 623. Cf. also the Report by the European Commission on the EU Enforcement Regulation, 12 December 2019, COM(2019) 639.
- 17.
9 November 2011, WT/DS160/ARB25/1.
- 18.
See Articles 93 and 94 of the Havana Charter for an International Trade Organization, Havana, 24 March 1948, UN Doc E/CONF.2/78, 3.
- 19.
GATT Dispute Settlement Rules and Procedures, L/6489 (12 April 1989), BISD 36S/61. On these historical aspects of arbitration within the multilateral trade system cf. Hughes (2004), pp. 75–86.
- 20.
- 21.
On the role devised for third parties in WTO litigation shaped by the case law of WTO adjudicators see Baroncini (2019), pp. 1767–1800.
- 22.
WTO Panel Report, United States – Section 110(5) of the US Copyright Act, 15 June 2000, WT/DS160/R.
- 23.
9 November 2001, WT/DS160/ARB25/1. On this award see Grossman and Mavroidis (2003), pp. 281–299.
- 24.
WT/DS136/AB/R, WT/DS162/AB/R, para 54.
- 25.
WT/DS160/ARB25/1, para 2.1.
- 26.
Andersen S et al (2017) Using Arbitration under Article 25 of the DSU to Ensure the Availability of Appeals. CTEI Working Papers CTEI-2017-17, p. 1; See also Bacchus J (2018), Saving the WTO’s Appeals Process, www.cato.org/blog; Hillebrand (2019), pp. 139–155.
- 27.
See World Trade Online, EU Moving Forward with WTO Appellate Body Backup Plan, 28 May 2019 available at: https://insidetrade.com/daily-news/eu-moving-forward-wto-appellate-body-backup-plan [subscription needed].
- 28.
Cf. Council of the European Union (2019), Note from General Secretariat of the Council, WTO Appellate Body, 20 May 2019, 9506/19.
- 29.
Council of the European Union (2019) Conclusions, Foreign Affairs: Trade Issues, 27 May 2019, 9753/19, p. 3.
- 30.
See the post by Tom Miles, Chief Correspondent at the Reuters Geneva Bureau, dated 6 June 2019, appeared as a comment to Charnovitz S (2019) The WTO Appellate Body Crisis: A Critique of the EU’s Article 25 Proposal. IELP Blog available at https://ielp.worldtradelaw.net/2019/06/the-wto-appellate-body-crisis-a-critique-of-the-eus-article-25-proposal.html.
- 31.
See Council of the European Union, 10905/19. The EU procedure just described in the text represents the application of the “Arrangements for Non-Binding Instruments” agreed among the Secretary Generals of the Council, the Commission and the EEAS as a follow-up to the judgment of the EU Court of Justice in case C-660/13, Council of the European Union v European Commission, EU:C:2016:616. See Council of the European Union (2017) Information Note, 4 December 2017, 15367/17.
- 32.
Council of the European Union (2019) Conclusions Agriculture and Fisheries, 15 July 2019, 11255/19, p. 11.
- 33.
European Parliament (2019) European Parliament resolution of 28 November 2019 on the crisis of the WTO Appellate Body, P9_TA-PROV(2019)0083, para 5.
- 34.
Canada-EU Summit Joint Declaration, July 17–18, 2019, Montreal, para 12, available at: https://www.consilium.europa.eu/media/40403/final-2019-joint-declaration-final.pdf.
- 35.
Ibid.
- 36.
Ibid.
- 37.
JOB/DSB/1/Add.11, slightly modified on 21 October 2019 by the WTO document JOB/DSB/1/Add.11/Rev.1.
- 38.
PV(2019) 2306 final, European Commission, Minutes of the 2306th meeting of the Commission held in Brussels (Berlaymont) on Wednesday 4 September 2019 (morning), p. 10.
- 39.
See European Commission Adopts Mandate to Extend Interim Appeal Arbitration Arrangement, Brussels, 4 September 2019 available at: https://trade.ec.europa.eu/doclib/press/index.cfm?id=2059.
- 40.
JOB/DSB/1/Add.11/Suppl.1.
- 41.
JOB/DSB/1/Add.11/Rev.1, Interim Appeal Arbitration pursuant to Article 25 of the DSU, at p. 1.
- 42.
Ibid.
- 43.
Ibid.
- 44.
Ibid.
- 45.
Ibid.
- 46.
Ibid.
- 47.
Ibid.
- 48.
Ibid.
- 49.
JOB/DSB/1/Add.11/Rev.1, Interim Appeal Arbitration pursuant to Article 25 of the DSU, para 1.
- 50.
JOB/DSB/1/Add.11/Rev.1, Interim Appeal Arbitration pursuant to Article 25 of the DSU, para 2.
- 51.
Ibid.
- 52.
JOB/DSB/1/Add.11/Rev.1, Interim Appeal Arbitration pursuant to Article 25 of the DSU, para 3.
- 53.
JOB/DSB/1/Add.11/Rev.1, Interim Appeal Arbitration pursuant to Article 25 of the DSU, para 6.
- 54.
JOB/DSB/1/Add.11/Rev.1, Agreed Procedures for Arbitration under Article 25 of the DSU in Dispute DS X, para 2.
- 55.
Ibid.
- 56.
JOB/DSB/1/Add.11/Rev.1, Agreed Procedures for Arbitration under Article 25 of the DSU in Dispute DS X, para 5.
- 57.
Ibid.
- 58.
Ibid.
- 59.
JOB/DSB/1/Add.11/Rev.1, Agreed Procedures for Arbitration under Article 25 of the DSU in Dispute DS X, para 11.
- 60.
See WTO (2010) Appellate Body, Working Procedures for Appellate Review (16 August 2020) WT/AB/WP/6.
- 61.
See supra, para 2.
- 62.
JOB/DSB/1/Add.11/Rev.1, Agreed Procedures for Arbitration under Article 25 of the DSU in Dispute DS X, para 9.
- 63.
Ibid.
- 64.
JOB/DSB/1/Add.11/Rev.1, Agreed Procedures for Arbitration under Article 25 of the DSU in Dispute DS X, para 9.
- 65.
JOB/DSB/1/Add.11/Rev.1, Agreed Procedures for Arbitration under Article 25 of the DSU in Dispute DS X, para 10.
- 66.
JOB/DSB/1/Add.11/Rev.1, Agreed Procedures for Arbitration under Article 25 of the DSU in Dispute DS X, para 8.
- 67.
Miles (2019).
- 68.
Ibid.
- 69.
Ibid.
- 70.
Baschuk (2019).
- 71.
On these aspects cf. Kong and Guo (2019), pp. 273–292.
- 72.
See Kujiper (2018), pp. 1–12, pp. 10–11.
- 73.
The principle of exclusive WTO jurisdiction has been interpreted as follows: “Article 23.1 … prescribes a general duty of a dual nature. First, it imposes on all Members to ‘have recourse to’ the multilateral process set out in the DSU when they seek the redress of a WTO inconsistency. In these circumstances, Members have to have recourse to the DSU dispute settlement system to the exclusion of any other system, in particular a system of unilateral enforcement of WTO rights and obligations. This, what one could call ‘exclusive dispute resolution clause’, is an important new element of Members’ rights and obligations under the DSU. Second, Article 23.1 also prescribes that Members, when they have recourse to the dispute settlement system in the DSU, have to ‘abide by’ the rules and procedures set out in the DSU. This second obligation under Article 23.1 is of a confirmatory nature: when having recourse to the DSU Members must abide by all DSU rules and procedures.” WT/DS152/R, para 7.43.
- 74.
JOB/DSB/1/Add.11/Rev.1, Agreed Procedures for Arbitration under Article 25 of the DSU in Dispute DS X, para 8.
- 75.
WTO (2010) Appellate Body, Working Procedures for Appellate Review (16 August 2010) WT/AB/WP/6.
- 76.
WTO (1996) Rules of Conduct for the Understanding on Rules and Procedures (11 December 1996) WT/DSB/RC/1.
- 77.
See Hazarika and Van Vaerenbergh (2019), pp. 595–628.
- 78.
WTO (2019), Interim Appeal Arbitration pursuant to Article 25 of the DSU, 22 October 2019, JOB/DSB/1/Add.11/Rev.1, para 2.
- 79.
WTO (2019), Agreed Procedures for Arbitration under Article 25 of the DSU in Dispute DS X, 22 October 2019, JOB/DSB/1/Add.11/Rev.1, para 8.
- 80.
WTO (2019), Interim Appeal Arbitration pursuant to Article 25 of the DSU, 22 October 2019, JOB/DSB/1/Add.11/Rev.1, paras 2–3.
- 81.
Cf. Kanth (2019).
- 82.
EU proposal reported by Kanth (2019).
- 83.
Kanth (2019).
- 84.
Seventh recital of the preamble of the EU Proposal amending the EU Enforcement Regulation, in COM(2019) 623, p. 9.
- 85.
Article 1(1)(a) of the EU Proposal amending the EU Enforcement Regulation, ibid.
- 86.
See Article 3 of the EU Enforcement Regulation.
- 87.
Article 1(1)(b) of the EU Proposal amending the EU Enforcement Regulation, COM(2019) 623, at p. 9.
- 88.
COM(2019) 623, p. 2.
- 89.
ILC (2001) Report of the International Law Commission on the work of its fifty-third session, 23 April–1 June and 2 July–10 August 2001, Official Records of the General Assembly, Fifty-sixth session, Supplement No.10. 2001 vol. II(2) Doc. A/56/10.
- 90.
UNGA Res (2002) Responsibility of States for internationally wrongful acts, A/RES/56/83.
- 91.
Yearbook of the ILC, 2001, vol. II, Part 2, pp. 31–143.
- 92.
COM(2019) 623 p. 4.
- 93.
Ibid.
- 94.
Yearbook of the ILC, 2001, vol. II, Part 2, p. 137.
- 95.
COM(2019) 623 final, cit., p. 4.
- 96.
Ibid.
- 97.
Lam (2020), pp. 331–348.
- 98.
See the previous paragraph and Trade Promotion Council of India, WTO: Interim Arrangement for Global Trade Disputes, 16 December 2019.
- 99.
Originally threatening to veto the entire 2020 WTO budget, the US administration conditioned its endorsement to the latter to the acceptance by the rest of the WTO membership of drastic cuts of the Appellate Body’s expenses: “[t]he deal limits annual spending for appellate body members to no more than 100,000 francs, an 87% reduction from the full allotment, and caps spending by the body’s operating fund to 100,000 francs, a 95% reduction” (Baschuk B (2019) WTO Members Agree on a 2020 Budget, Averting Jan. 1 Shutdown. In Bloomberg, 5 December 2019). See also the statement of the US Ambassador Dennis Shea on Appellate Body members’ compensation delivered at the DSB meeting of 22 November 2019: Statements by the United States at the Meeting of the WTO Dispute Settlement Body Delivered by Ambassador Dennis Shea, U.S. Permanent Representative to the World Trade Organization, Geneva, November 22, 2019.
- 100.
Statements by the European Union at the WTO General Council Meeting, 9–10 December 2019.
- 101.
See UNGA (26 November 2019) GA/EF/3528.
- 102.
UNGA (20 November 2019) A/C.2/74/L.15/Rev.1, where it is stated inter alia that the EU “attach the greatest importance to the development and strengthening of a multilateral trading system centered around the WTO that is open, transparent, universal and rules-based,” and that “[a]s a matter of urgency, the WTO two-step dispute settlement mechanism needs to be restored and Appellate Body nominations need to resume without delay.”
- 103.
The Twelfth WTO Ministerial Conference (MC12) will take place from 8 to 11 June 2020 in Nur-Sultan, Kazakhstan.
- 104.
See Ursula von der Leyen, President-elect of the European Commission, Mission Letter to Phin Hogan, Commissioner-designate for Trade, Brussels, 10 September 2019, p. 4.
- 105.
Challenges to the EU integration process range from the thorny saga of Brexit to the highly unsatisfactory approach on migration policies.
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Acknowledgements
The author is very grateful to Professors Colin Picker, Meredith Kolsky Lewis, Junji Nakagawa, Peter-Tobias Stoll and Dr. Holger Hestermeyer for having been involved in the present research project and their important comments, together with those of the other experts participating at London Workshop, on the first version of this contribution, conveyed during the King’s College October 2019 meeting. The work is updated to January 1, 2020.
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Baroncini, E. (2020). The EU Approach to Overcome the WTO Dispute Settlement Vacuum: Article 25 DSU Interim Appeal Arbitration as a Bridge Between Renovation and Innovation. In: Lewis, M.K., Nakagawa, J., Neuwirth, R.J., Picker, C.B., Stoll, PT. (eds) A Post-WTO International Legal Order. Springer, Cham. https://doi.org/10.1007/978-3-030-45428-9_7
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