views of former Appellate Body member

Impasse on the WTO Appellate Body – Any Progress Likely by the 12th Ministerial?

The last Appellate Body decision is supposed to be issued by the end of March 2020, involving the cases challenging Australia’s plain packaging requirements for tobacco products. After that there will be no Appellate Body functioning until/unless there is a resolution of the many concerns that have been raised by the United States over the last two decades.

A significant number of active dispute settlement users are working through an arbitration process pursuant to Article 25 of the Dispute Settlement Understanding that they can use for disputes between each other and hope to have worked out the process by June. Other countries have found one-off approaches (such as agreeing to postpone right to appeal til a second tier review is reestablished) or have agreed not to take an appeal from a panel decision. All such actions are intended to be temporary in duration, but may be in place far longer than many Members think simply because of the failure to fully engage in understanding how the problems arose in the first place.

The United States has not only presented its case to the Dispute Settlement Body and the WTO General Council over the last several years but has also released a detailed report on the WTO Appellate Body last month which reviews the problems and costs to the U.S., as covered in a recent post. See https:://currentthoughtsontrade.com/2020/02/14/ustrs-report-on-the-wto-appellate-body-an-impressive-critique-of-the-appellate-bodys-deviation-from-its-proper-role/.

While many WTO Members hope for a quick resolution to the Appellate Body’s situation, the United States has indicated repeatedly that any resolution can only occur after Members come to grips with why the Appellate Body deviated from the mandate of the Dispute Settlement Understanding on so many issues and with such frequency. While the U.S. has opined about possible reasons for the deviation, there has been little discussion to date among the Members on the reasons why.

A very interesting speech was given by one of the Appellate Body members whose term expired on December 10, 2019 at this year’s Georgetown University Law Center’s International Trade Update on March 5, 2020. The speech by Thomas Graham provides his personal views based on his time on the Appellate Body. The speech adds a different perspective on some possible reasons for why the problems identified by the United States developed over time. Because of the importance of the views of a former Appellate Body member on the core issues facing the WTO Members in finding a path forward on dispute settlement, the speech in its entirety is attached below.

T.Graham.GreenwaldLecture.FINAL_

Mr. Graham (pages 8-9) identifies aspects of performing his function as an Appellate Body member that struck him as leading to the problems identified by the U.S. and others:

(1) “the degree of control by the Appellate Body staff leadership”;

(2) “an over-emphasis on ‘collegiality’ that shaded into peer pressure to conform”;

(3) “an excessive striving for consensus decisions coupled with a discouragement of dissents”;

(4) “a sense of infallibility — ‘It’s right because we say it’ – and of entitlement, to stretch the words of agreed texts, and to stretch decisions beyond merely resolving a particular dispute”;

(5) “an undue adherence to precedent”, baking in mistakes’.

“Together, these characteristics amounted to the Appellate Body acting like a court that was not accountable to anyone.”

Because the WTO Members had no practical means of correcting appellate decisions and were unable to negotiate modifications to the rules and because Appellate Body decisions are automatically adopted absent a negative consensus, the Appellate Body was not accountable to the Membership or to the Dispute Settlement Body.

The above aspects of the operation of the Appellate Body and the practical constraints on Members or the DSB in being able to correct actions by the Appellate Body coupled with the refusal of WTO Members to take U.S. concerns seriously has led to the current crisis.

While other former members of the Appellate Body may disagree with Mr. Graham’s view of the internal operation of the Appellate Body and how the issues flagged led to the Appellate Body deviating from its limited role, the speech is an important contribution to the discussion that needs to occur within the WTO about the proper function of any second stage review system, why the Appellate Body deviated from that function/role and what steps Members need to agree upon to ensure the second stage review system is limited to the role Members assign the system.