Addressing the dispute settlement crisis at the WTO

Bernard Hoekman,
European University Institute,

Petros C. Mavroidis,
Columbia Law School,

Following a decision by the United States not to approve new appointments to the WTO Appellate Body (AB), as of mid-December 2019 the appeals function of the WTO stopped working because the number of AB members had dropped to one (at least three AB members are needed to consider an appeal of a panel report). The US took this action because it was dissatisfied with the functioning of the WTO appeals process, arguing that the Appellate Body had exceeded its mandate. As a result of the US action, the findings of WTO dispute settlement panels can no longer be appealed. Interim responses to this situation – such as an  EU-Canada-Norway initiative to use an ad hoc appellate process if countries agree to this before a WTO dispute resolution panel is formed to consider a case [i] — are not a solution to the demise of the multilateral appeals process, as they will not lead to an internally coherent jurisprudence for all WTO members, the raison d’être of any appellate process.

While most WTO members oppose the US decision to block new appointments to the AB,[ii] expert survey data indicate that the United States is not alone in having concerns about the performance of WTO dispute adjudicating bodies. A long-running effort to review and renegotiate improvements to the operation of the WTO dispute settlement system illustrated this as well: it led to numerous proposals to improve the system. This review process did not deal with some of the concerns recently raised by the US and, perhaps more important, insofar as it did do so, it did not result in agreement to address the issues raised. The proximate reason for the failure to agree to changes that would address the concerns raised by some WTO members is that WTO working practice in based on consensus. This precluded any proposed reforms to the WTO dispute settlement process from being adopted and implemented. The consensus working practice is also the reason why the United States was able to block new appointments to the Appellate Body, even though most WTO members opposed this. Although WTO members gave a mandate to Ambassador David Walker of New Zealand in 2018 to explore how to resolve the issues raised by the United States, this process also was not able to lead to a resolution. Arguably it could not do so as it did not address the quintessential US criticism concerning alleged overstepping by the Appellate Body of its mandate.

WTO adjudicators unavoidably will have discretion when ruling on specific trade conflicts, as they must interpret an incomplete contract (the WTO) by using another incomplete contract (the Vienna Convention on the Law of Treaties, which does not assign specific weights to its various elements). As it not possible to write complete contracts, in our view resolution of the dispute settlement crisis must center on ensuring that WTO members cannot use the dispute settlement system to circumvent their rule-making responsibilities and to improve the quality of WTO adjudicators. We suggest three specific actions.

First, where they are not clear, rules should be clarified by the WTO membership, not by the Appellate Body. One way to encourage this would be for the WTO membership to require remand of cases where the rules are unclear to the WTO bodies that are responsible for the implementation of the agreements that are invoked in a dispute.

Second, a lesson from recent events is that more political oversight and interaction between WTO members and a reconstituted Appellate Body is needed. In doing so, it is useful to distinguish between substantive and procedural rules. A step forward would be to agree that changes to the latter can be decided with majority voting. Given that WTO dispute settlement procedures mostly involve large trading nations and blocs, the membership should be prepared to adopt weighted voting on proposed procedural changes, based, for example, on shares of world trade.

Third, WTO members should pursue greater professionalization of the panel stage of dispute settlement by appointing a roster of 15 to 20 permanent panelists that would serve one term of 8 to 10 years. Similarly, they should appoint Appellate Body members for an equally long non-renewable term. A commission of eminent experts well-versed in GATT/WTO dispute settlement should be entrusted with the task to screen both the panelists and Appellate Body members proposed by the members of the WTO. If the membership would be bold enough to adopt a proposal along the lines indicated here, we might start seeing some light at the end of the tunnel.

[i] See
[ii] This is clearly reflected in the proposal supported by 119 members calling for launching the selection processes for the six vacancies in the Appellate Body.

Expert article 2715

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