This is a guest post from Brazilian trade lawyer Luiz Eduardo Salles
BILATERAL AGREEMENTS AS AN OPTION TO LIVING THROUGH THE WTO AB CRISIS
The trade law community’s hottest topic these days has been the crisis stemming from the US’ persistent refusal to appoint new Appellate Body members. Indeed, the US’ tactic has the potential to paralyze the WTO dispute settlement arm, and more dramatically, the entire rules-based multilateral trading system (see, for instance, Shaffer, Elsig and Pollack here: https://www.huffingtonpost.com/entry/the-slow-killing-of-the-world-trade-organization_us_5a0ccd1de4b03fe7403f82df). It is thus brainstorming time, and a number of ideas are up for grabs. I would suggest that WTO members also consider using bilateral procedural agreements not to appeal specific panel reports. This could help alleviating the burden on the Appellate Body in the short to medium term, without requiring significant institutional change.
From an institutional perspective, three main alternatives have been suggested to deal with the deadlock in WTO dispute settlement. These are (1) amending the Working Procedures of the Appellate Body to prevent new appeals (see Charnovitz here: http://worldtradelaw.typepad.com/ielpblog/2017/11/how-to-save-wto-dispute-settlement-from-the-trump-administration.html and the discussion in the comments section); (2) resorting to majority voting in order to appoint new Appellate Body members (see Kuijper here: http://worldtradelaw.typepad.com/ielpblog/2017/11/guest-post-from-pieter-jan-kuiper-professor-of-the-law-of-international-economic-organizations-at-the-faculty-of-law-of-th.html#comments and the discussion in the comments section); (3) establishing an agreement among like-minded WTO members (which would ideally mean every member but the US) replicating WTO dispute settlement without the US (see Kuijper, above link and discussions in the comments section). Any of these institutional alternatives would require broad and consistent support, which seems implausible in the short to medium term. And, while the forthcoming Ministerial in Buenos Aires might offer just the occasion for some action by the broader Membership (probably but for the US), each of the above alternatives also risk inflicting a lot of pain at the trade system and may be doing more harm than good. Arguably, one should also consider less radical, more mundane procedural solutions that may help alleviate the burden on the Appellate Body while dust settles – and hoping that the dust will eventually settle. After all, it is brainstorming time.
From a procedural perspective, the alternative that has been more forcefully suggested is resorting to arbitration under Art. 25 DSU as a proxy to appeal proceedings (see, for example, Andersen et al, here: http://graduateinstitute.ch/files/live/sites/iheid/files/sites/ctei/shared/CTEI/working_papers/CTEI-2017-17-.pdf). This alternative is attractive for several reasons. First, it avoids overburdening the Appellate Body at such difficult times. Second, it does not require any agreement beyond the specific parties to disputes. Arbitration can be employed in any case, provided that the disputing parties agree. In addition, because arbitration is a highly flexible mechanism that is embedded in the DSU itself, there would be no disruption within the WTO. From the parties’ perspective, they could move on with the proceedings while the Appellate Body remains impaired. More broadly, if enough parties accept to use this mechanism as a temporary scape valve, the US’ hijacking the Appellate Body loses much of its sense in the short term. The WTO should then be able to breathe until dust settles – at least if dust does not take too long to settle. (Of course, if, unfortunately, dust does not settle, more drastic solutions will be required.)
Parties simply agreeing not to appeal would be an even simpler alternative compared to arbitration as a proxy to appeals. While using arbitration would reproduce the current system, dispensing with appeals would simplify the current system on a case-by-case basis. Procedural agreements would share much of the advantages of the arbitration mechanism: avoiding an overburden on the Appellate Body, not requiring any institutional change, being apt for use in any case upon agreement by the parties.
Moreover, procedural agreements would have certain advantages compared to appeals. Firstly, they would significantly reduce costs for parties. Thus, procedural agreements would be suited especially for some developing and least developed countries concerned about the spiraling complexity of WTO litigation. Secondly, procedural agreements drafted at the panel stage could be made contingent on the impairment of the Appellate Body – for instance, an agreement may provide that the waiver only applies if the AB does not have a certain number of members by a given date.
Procedural agreements not to appeal would be no novelty in WTO dispute settlement. For instance, in Automotive Leather (DS 126), as part of their sequencing arrangements, the US and Australia agreed that both “will unconditionally accept the review Panel report and there will be no appeal of that report”. Other procedural agreements have been used by the US and Ecuador and Thailand, for instance, after the US defeats in several of the zeroing disputes (see DS 335 and DS 383).
Waiving appeals could also shorten WTO dispute settlement timeframes, leading to faster resolution of disputes. This has certainly been a consideration in prior procedural agreements. On the other hand, in politically charged cases (which WTO disputes often are), taking longer to reach an outcome could be important, in particular for respondents. In those cases, procedural agreements could be more difficult to achieve. (Indeed, the present crisis could be aggravated if parties deliberately appealed taking into account that the Appellate Body is presently impaired and will take longer to decide appeals). Yet, procedural agreements may also address the expected period of time for implementation, where the parties’ concerns regarding timeframes could be negotiated. In this sense, there would be no disadvantage in procedural agreements compared to arbitration.
A more obvious obstacle to procedural agreements could be that the parties simply value the chance to appeal. If that is the case, and if the crisis remains, then arbitration could be used as a proxy to an appeal. Indeed, the Appellate Body is a correcting mechanism to avoid mistakes by panels. And so it is. However, if panels can and do err, it does not take much to realize that the Appellate Body can and does err just the same. In fact, whether there has been an error is also a question to which there can be a wrong answer. While the Appellate Body is, indeed, the jewel of the crown and an essential legitimizing factor for WTO dispute settlement, living without it, at least in some cases, may be necessary to avoid a complete burnout.
