Panels versus the Appellate Body: The DS344 Appeal

Some of you may recall the recent panel ruling in U.S. - Stainless Steel (Mexico) (DS344), where a panel decided not to follow the Appellate Body's "zeroing" jurisprudence, saying the following in this regard:

7.115 We respectfully disagree with the Appellate Body's reasoning. We recognize that our analysis inevitably resembles that of the panels in the last two cases that dealt with simple zeroing in periodic reviews, US – Zeroing (EC) and US – Zeroing (Japan), and that the Appellate Body reversed those panels' findings that simple zeroing is not inconsistent with Article 9.3 of the Anti-Dumping Agreement. We would like to underline, however, that our analysis is not simply an unthinking repetition of these past panel decisions. Rather, it reflects our own appreciation of the facts and the legal arguments presented by the parties in these proceedings, as is required by our obligation under Article 11 of the DSU to carry out an objective examination of the matter before us.

...

7.119 We are troubled by the fact that the principal basis of the Appellate Body's reasoning in the zeroing cases seems to be premised on an interpretation that does not have a solid textual basis in the relevant treaty provisions. We recall the rules on treaty interpretation (supra, paras. 7.3-7.5) which we have to follow in these proceedings. We are of the view that a good faith interpretation of the ordinary meaning of the texts of Articles VI:1 and VI:2 of the GATT 1994 and Article 2.1 of the Anti-Dumping Agreement, read in their context and in light of the object and purpose of the mentioned agreements, does not exclude an interpretation that allows the concept of dumping to exist on a transaction-specific basis. We recall that according to the standard of review that we have to follow in these proceedings (supra, paras. 7.1-7.2), we are precluded from excluding an interpretation which we find permissible, even if there may be other permissible interpretations.

Well, the Appellate Body has now circulated its decision in the appeal of that case, and had the following to say:

162. We are deeply concerned about the Panel's decision to depart from well-established Appellate Body jurisprudence clarifying the interpretation of the same legal issues. The Panel's approach has serious implications for the proper functioning of the WTO dispute settlement system, as explained above. Nevertheless, we consider that the Panel's failure flowed, in essence, from its misguided understanding of the legal provisions at issue. Since we have corrected the Panel's erroneous legal interpretation and have reversed all of the Panel's findings and conclusions that have been appealed, we do not, in this case, make an additional finding that the Panel also failed to discharge its duties under Article 11 of the DSU.

In the context of doing so, the Appellate Body offered some helpful clarifications of the role of precedent in the WTO dispute settlement system, including the following: "Ensuring 'security and predictability' in the dispute settlement system, as contemplated in Article 3.2 of the DSU, implies that, absent cogent reasons, an adjudicatory body will resolve the same legal question in the same way in a subsequent case."  The "absent cogent reasons" language appears to be the new standard for following precedent:  You must follow precedent unless you have "cogent reasons" for doing otherwise.

Comments

[Sungjoon Cho]

Simon,

Many thanks for such a timely posting. I believe this is in the right direction. I am not entirely sure what would be those "cogent reasons," but after all, the AB will determine this issue, and I guess there would be not many such reasons.

[Lorand Bartels]

This is an important and much anticipated ruling. Unfortunately, the AB's reasoning is disappointing.

It begins by emphasising that the dispute settlement system is based on security and predictability (cf Art 3.2 DSU), which leads it to this test: 'absent cogent reasons, an adjudicatory body will resolve the same legal question in the same way in a subsequent case.' So far, so good.

But what does this mean for the question at hand: whether panels must always follow adopted AB reports? In fact, we are never told. The AB sets the scene by reminding us that it is superior to panels in the same dispute. Then it comes to the point: '[t]he Panel's failure to follow previously adopted Appellate Body reports addressing the same issues undermines the development of a coherent and predictable body of jurisprudence clarifying Members' rights and obligations under the covered agreements as contemplated under the DSU.' This seems to mean that panels must always follow AB reports. But if so, then why did the AB not just say this? And why did it bother to come up with the 'cogent reasons' test? If that was not for the benefit of panels, for whose benefit was it? On the other hand, if panels have some discretion, then why did the AB not apply the test to the case at hand?

To these questions we have no answers. Instead, we have psychologizing: '[w]e are deeply concerned about the Panel's decision to depart from well-established Appellate Body jurisprudence clarifying the interpretation of the same legal issues.'

The weakness of this reasoning is compounded (though perhaps also explained) by the fact that these comments were merely dicta. The AB did not find it necessary to decide whether the panel had failed in its functions, having overturned the panel on substantive grounds.

This was sufficient for this case. But judicial economy can also be false economy. Whether the AB's approach in this report proves sufficient to ward off recalcitrance from future panels remains to be seen.

[Vydyanathan Lakshmanan]

In fact, the AB talking of 'cogent reasons' as the (only) ground for panel dissents - especially in the backdrop of this Panel's repeated attempts to cite where the AB previously went wrong on zeroing - appears to me to just close that one door that made the absence of stare decisis in WTO DS meaningful. The AB is simply telling panels that stare decisis may not be de iure; it could well be de facto.

[Anon99]

"But if so, then why did the AB not just say this?"

- Purely for political reasons. It cannot state that its reports are binding because some Members would see that as an encroachment upon the "exclusive authority" of the General Council to adopt interpretations.

"And why did it bother to come up with the 'cogent reasons' test?"

- For rhetorical purposes.

"If that was not for the benefit of panels, for whose benefit was it?"

- Members who find this kind of rhetoric comforting.

"On the other hand, if panels have some discretion, then why did the AB not apply the test to the case at hand?"

- Because it is just rhetoric, not an actual test.

"Whether the AB's approach in this report proves sufficient to ward off recalcitrance from future panels remains to be seen."

- Doubtful.

[anon200]

Here is how I interpret what the AB did here:

MEMO

To: Future Panels
From: The Appellate Body

You really, really should follow prior Appellate Body decisions. It would be quite bad for the system if you do not. But if you've got what you think are compelling reasons for not doing so, we understand if you feel you have to go your own way. Bearing in mind, of course, that if you do, we will almost certainly reverse you on appeal. You may think your reasons are pretty good, but if they were really that persuasive we would have gone that way ourselves, hence they are not, in fact, "cogent".

[Tomer Broude]

Stare decisis does apply de facto. A court would be suicidal to act otherwise. That does not mean that an appellate court is not open to change, especially as years go by and the personalities on the bench vary. But in the communication between lower and higher courts, as between advocates and judges, the kind of frontal arguing that was pursued here rarely brings change. "Distinguishing", however, can be a powerful tool, and I believe this is what the AB meant by "cogent" (see also para. 149). Not to be as facetious as anon200, but the operative signal is "even if we are persuaded that we were wrong in the past, you have to bring a ladder: explain how we can rule differently and still remain infallible".

[Vydyanathan Lakshmanan]

Dr. Broude,

The "absent cogent reasons" exception simply seems to fill in the blank and the exclamation that is left if the AB were to say "it is inappropriate for a panel to overturn well-established AB case-law." The AB simply needed words to placate the situation. As I mentioned in my post, it would be difficult to say this Panel's reasoning was not "cogent". The AB may not agree with one or more parts of the panel's analysis (indeed the analysis was "misguided" to the AB), but it is amply clear the Panel had developed a logical case for zeroing, albeit in its own way. Seen in this backdrop, I think the AB just wanted words that would pass off as still leaving some space for panels to disagree. To read anything more into the "cogen[cy]" requirement would let the AB achieve its purpose - of having made out a meaningful ground for panel dissent, which sadly is not the case. If the AB had instead said "we do not believe the Panel's interpretation to be correct, and we therefore, and for that reason alone, overturn the Report in full", it would have fetched an applause for itself.

[Simon Lester]

Looking again at the "cogent reasons" sentence, something occurred to me. The Appellate Body says that "an adjudicatory body will resolve the same legal question in the same way in a subsequent case." I wonder if the use of the singular -- "an adjudicatory body" -- could be taken to mean that this sentence only applies when a specific body, e.g., the Appellate Body, is considering its own past statements. In other words, the "cogent reasons" language applies when the Appellate Body is considering past Appellate Body statements (or specific panels are considering their own past statements). Note that it is the subsequent paragraph, para. 161, where the Appellate Body discusses the difference between the Appellate Body and panels, putting the Appellate Body at a higher level.

So, maybe the Appellate Body was saying: "We can go against our past rulings when we have 'cogent reasons.' Panels, on the other hand, must follow Appellate Body rulings." That's a big maybe, though, and even if it were accurate, that might not be how panels take it.

[Tomer Broude]

Much ado? An adjudicatory body WILL (not MUST) resolve in the same way. It is not bound to do so, however. This is what the absence of Stare Decisis in international law and WTO law means, essentially. However, as a matter of policy, and in fulfilment of the role of appellate body, the default is that the AB follows its own rulings. Formally, panels (and the secretariat - much of this is a secretariat-AB thing rather than an "independent panel"-AB thing) can do as they please as long as they satisfy the objective assessment requirement - but in real life if they stray too far they will be overturned by the AB. Unless they persuade not only in that their logic is good, but that it is good enough - and specifically so - to justify a ruling from the AB that would distinguish or even alter its previous jurisprudence.

[lekan]

I feel very strongly that the jurisprudence of the wto on this is not quite clear . it is rudimentary in international law that there is no room for stare decisis(how true this is in practice is another kettle of fish ). I think it is a mark of warning to those who feels that stare decisis does not have a say in the jurisprudence of the body . in actual fact it does . it is in my opinion a restatement of the obvious.
one can say that the AB is only given an stern adjuration to the panel for it is not true in my humble opinion that stare decisis does not exist in the wto jurisprudence and indeed in the world court.
Lastly , as much as i agree that precedence should be followed , it should not be slavishly done so as to work injustice on any party. As such the AB is only preaching the agelong principle of precedence in a harder stance.
the 'cogent reason' appellation is only restating the old rule in new sentence.

[Anon99]

The purpose of the DSU negotiations is to improve and "clarify" the Dispute Settlement Understanding. Why don't the negotiators set out a rule/standard in the DSU? Why are Members leaving this issue to panels and the AB to figure out?

[Christoph Herrmann]

I see the things a bit different from most previous comments. The actual purpose of the statement made by the AB may have been for the sake of application of Art. 11 DSU and the claim brought by Mexico on this basis. Was it not for this provision, in my view, the AB would not bother about panels departing from its jurisprudence anyway. It could reverse them anytime on appeal. Should parties not appeal despite the departure from standing case-law, that is fine. They are the "masters of the dispute" if you like the analogy. However, if the AB ever wanted to change its own case law, be it because of the arguments of panels or on other grounds, the AB might be facing the problem that it agrees with a panel departing from previous AB-rulings. It would be complete nonsense in such situation to leave the substantive findings of the Panel unreversed, but then dismiss the whole report on the basis of a breach of Article 11 DSU. You need to have a yardstick against which you can tell appealing parties: yes, we know, the Panel did not follow our previous case, but that does not mean that they did not meet their task, i.e. a claim - like Mexico's - would be rejected in the case where the AB changes its own case law. In the other cases, Art. 11 DSU is meaningless anyway.