More Appeals in the WTO

As per the annual report of the Appellate Body of the WTO, there is more work in store for the Appellate Body in 2014. 

And this is why...

"According to the Legal Affairs Division and the Rules Division, a large number of panels will continue to be active for the foreseeable future. Twenty-seven requests for consultations were received in 2012, the highest number since 2002. This led to the establishment of 11 panels in 2012, the highest number in five years. There are currently seven panels in composition, and six more panel requests are pending before the DSB.Third party participation continues to be high.Four new requests for consultations have been received in 2013, and four panels have already been established this year covering five disputes. Significantly, the compliance proceedings in the aircraft subsidy disputes between the United States and the European Union are also presently under way. Thus, a large number of panel proceedings are currently in progress or about to begin. Assuming: (1) that panel proceedings take, on average, one year from the time of 

establishment of the panel; (2) that the compliance panel proceedings in the aircraft subsidy disputes will take 1.5-2 years; and (3) that, based on the consistent practice of WTO Members involved in disputes since 1996, roughly two-thirds of all panel reports circulated will be appealed the Appellate Body can expect to receive up to a dozen appeals towards the end of 2013 and in 2014. Such an increase in the number of appeals, on top of the increased complexity and size of the average appeal, is likely to exacerbate the challenges confronting the WTO dispute settlement system in the near future."

More disputes at the WTO, more appeals, more international rule making, more predictability and more compliance? 

EU and Japan also appeal - Ontario case becomes more interesting

I have blogged about the Canadian FiT case at the WTO case here, here and here. News of Canada appealing the matter was reported here. It was not surprising since Canada had lost the case and was contesting the finding of the panel report that it had violated the provisions of the TRIMS and GATT.

Reports of the EU and Japan cross-appealing caught my attention. This would presumably be mainly on the interpretation of the provisions of the ASCM, especially the definition of a subsidy and benefit.

It is clear that the Appellate Body would decide the legal contours of this dispute, especially the compatibility of local content requirements with WTO law in the context of governments guaranteeing a minimum feed in tariff. With a number of countries across the world, both developing and developed, having massive renewable energy support programs (many of them with local content requirements), the AB ruling all be keenly awaited. One hopes that going by timeframe of the Antigua and Airbus-Boeing cases at the WTO dispute settlement, the wait for a closure is not too long!

Cloves Cigarettes case - Will the ban be lifted?

A lot has been written about the Cloves Cigarette dispute (DS 406) between the United States and Indonesia which relates to the ban on clove based cigarettes which the WTO found inconsistent with U.S. obligations under the WTO. The Appellate Body ruled against the ban and the U.S. has a "reasonable time" up to July 2013 to comply with the decision. In what manner would the U.S. comply has been a subject matter of intense academic discussion which I have attempted to capture here, here, here and here.

Found this piece titled "Losing Flavor:Indonesia's WTO Complaint against the U.S. Ban on Clove Cigarettes"  in the American University International Law Review, though written prior to the Appellate Body decision, rightly forecasts the decision and offers a four options for the U.S. to follow:

1.It can legislate the ban to apply equally across all flavored-cigarette categories. A blanket ban on all flavored cigarettes would ensure that all flavored cigarettes, regardless of where they were manufactured, would be consistent with the nondiscrimination principles of Article III:4, GATT.

2.It can create other regulatory tools that can potentially realize the policy goal of reducing youth smoking. Such regulations could include any combination of the following policies, as long as the United States implements them consistently across all types of flavored cigarettes: taxation, packaging guidelines, or educational programs.

3. It can treat all flavored cigarettes equally by placing a temporary moratorium on the sale of all flavored cigarettes pending the result of a congressionally mandated scientific study.

4.It  can institute a temporary ban on menthol cigarettes that would “sunset” after the conclusion of the scientific report. After a temporary ban sunsets, Congress can choose to extend or eliminate it entirely.

How would the U.S. comply in this case? Will there be a "political" or "legal" settlement of this dispute? Will negotiations be the way out? Political feasibility, domestic pressure, elections and interpretation of what constitutes "compliance" will determine the course of action. One would have to wait for 2013 for this one to get solved.

TBTs, WTO and protectionism

The debate in the international economic law and policy space with respect to protectionism has shifted from tariffs and import restrictions to a new form - technical barriers to trade. With recent disputes at the WTO focusing on technical measures and holding them incompatible with WTO law, the balance between regulating domestic policy space with such measures and barriers to trade is a delicate one. While some argue that the WTO Appellate Body decisions in COOL, Tuna and Clove Cigarettes is an infringement of domestic policy space, others take the position that discriminatory measures do impact trade and are unreasonable restrictions on free trade. The decisions have initiated a jurisprudence around the Technical Barriers to Trade Agreement which will develop over the years. the focus of disputes too will gradually shift from issues on tariffs to more subtle, nuanced technical measures.

An interesting conference on this topic is being held at the WTO Public Forum on this subject.Titled "TBTs on the Rise: The Future of Consumer Information Labels, Sustainability Standards and Product Bans in the Light of Latest WTO Case Law", it seeks to throw light on the several issues on this sententious topic.

"Ruling on the three disputes this year, the WTO Appellate Body, for the first time, established case law on various key TBT issues. The approach(es) deployed will critically inform future policy making on related areas – be it on biofuels, animal welfare or climate-related standards.

It is against this background that the session will explore the current technical regulation and standard landscape and the outlook for selected policy areas. Speakers representing a variety of angles will address, among others, the value of international standards, the future of labelling and the outlook for regulation in areas such as biofuels, tobacco, animal products and meat."

Would be interesting to get hold of the presentations and viewpoints taken at this forum. Can conclusions on protectionist trends be drawn from such measures? Are they permissible in the WTO context? Has the Appellate Body exceeded its mandate by a spate of "judicially active" decisions? Are countries increasingly using technical barriers to become protectionist? Does this have a developed-developing country angle?

Can questions of fact be reviewed on appeal - Standards of Appellate review in the WTO

This post is about the powers of the Appellate Body of the WTO to go into questions of fact on appeal. To what extent can the Appellate Body of the WTO review a Panel's decision? Can it go into the facts of the particular case or should it limit itself to legal interpretation or principles of law? Can it overrule the findings of fact of the panel or is its power of judicial review limited to legal interpretations? What are the standards of Appellate review in the DSU of the WTO? Often a case involves complex issues of fact and law. An appreciation of facts sometimes intertwines with the interpretation of law. Should the Appellate Body intervene in these circumstances or should it concur with the Panel's decision on the findings of fact. It is also observed that the Appellate Body in many instances is constrained by a limited appreciation of facts of the Panel. Is it reluctant to explore the facts of the case and content to rely on the adequate or inadequate appreciation of facts by the Panel. On the other hand, is an inadequate analysis of law itself a question of law and thus explorable by the Appellate Body? The lines between what constitutes a pure question of fact, law and legal application of the law to the facts of a particular case get blurred in complex situations. An analysis of how the Appellate Body has dealt with these situations and the jurisprudence developed is a fertile area for research.

Simon Lester has raised these issues and more in an article titled "The Development of Standards of Appellate Review for Factual, Legal and Law Application Questions in WTO Dispute Settlement" in the Trade, Law and Development Journal.

Some of the relevant provisions of the DSU that address the issue of the contours of the Appellate Body's interpretative flexibility are Article 11 and Article 17(6) of the DSU.

Article 11 deals with the functions of Panels and states:

The function of panels is to assist the DSB in discharging its responsibilities under this Understanding and the covered agreements.  Accordingly, a panel should make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements, and make such other findings as will assist the DSB in making the recommendations or in giving the rulings provided for in the covered agreements.  Panels should consult regularly with the parties to the dispute and give them adequate opportunity to develop a mutually satisfactory solution.

Article 17(6) of the DSU states that "An appeal shall be limited to issues of law covered in the panel report and legal interpretations developed by the panel."

While Article 17(6) is amply clear about the scope of an Appellate review, Article 11 gives leeway for the Appellate Body to exercise a wider ambit of judicial review. Simple questions of fact may be outside the scope of the Appellate body. On most occasions questions of fact and law do not overlap. However, an inconsistent application of law  to a set of facts, may require the interpretation of both the facts and the law. However, when application of law to particular facts becomes a complex issue of understanding the factual situation correctly or an inconsistent or non-objective assessment of the facts, Appellate review does play a role. There the simplistic distinction between law and fact disappear and converge into a complex quagmire of judicial appreciation and interpretation. 

As observed by Simon Lester:

"As a matter of policy, it may be desirable to give the Appellate Body a good deal of leeway in reviewing a panel’s examination of the measures that are being challenged. However, Article 17.6 explicitly narrows the scope of appellate review to ‘issues of law’ and ‘legal interpretations’. Arguably, the Appellate Body’s decision to consider the panel’s construction of the challenged measures, outside the context of WTO obligations, as a law application issue stretches the boundaries of this provision, as the Appellate Body seems to have taken a very broad view of what constitutes a law application question. The result of this interpretation is an expansion of the scope of issues over which the Appellate Body can exercise a review.  For those who think that appellate review is a good idea, this development may be a positive one. On the other hand, to the extent that the Appellate Body’s interpretation goes in a direction different than what the drafters intended, it may cause concerns."

To what extent the Appellate body might go to unravel facts in an Appellate review would depend on the particular facts and circumstances of each case (We lawyers love this phrase - "depend on facts and circumstances of each case"). However, the limits of Article 17(6) and the purpose of an appellate review to decide on matters of legal interpretation might hold it back. It would be worthwhile to make an analysis of the cases where the Appellate Body has crossed the line? Or perhaps, it draws the line itself, so never crosses it.

Strategic Litigation at the WTO

A recent paper by Tilman Kruger on "The Judicialization of Governance in the WTO: Strategic Litigation as an Explanatory Factor?" throws up very interesting issues about the role of the Appellate Body of the WTO, a rule based system vis a vis a power based system, "judicial activism" of the adjudicatory bodies, the impact of the failure of political negotiations on judicial decision making, interpretation of Agreements in the light of global realities when political deadlock fails to suitably legislate to reflect business realities. 


The political and judicial organs have been the two sides of the multilateral organisation. However, with the Doha Development Agenda facing an impasse and consensus looking bleak atleast till the economic downturn subsides, observers believe that the judicial organ has played a decisive part in laying down the "law" for countries to follow. While a majority of decisions are based on a safe "textual" interpretation of the provisions, it is inevitable that instances of creative interpretations and "judicial activism" find their way in Appellate Body decisions. Also when there is ambiguity in the trade agreements and the ambiguity does not get resolved by political consensus and amended rules, the judicial organs have to perforce play the role of interpreting the rules in the light of their understanding of reality and law. It is akin to national judicial bodies "judicial activism" when the legislative or executive branch fails to deliver. However, there are dangers of this judicial activism from political resistance to non-compliance.

Another important point that is made by Tilman is the concept of "strategic litigation" in promoting judicialization of the WTO. Alvaro Santos too in his brilliant piece had alluded to strategic lawyering by Brazil to further its domestic agenda at the WTO. 

Tilman compares the U.S. and EU attitudes towards engaging the WTO to strategically litigate to further their long term interests. the ability to "strategically litigate" at the WTO depends on a variety of factors, especially domestic ones. The paper argues that the Eurpoean Commission's Director General of Trade is far more independent to initiate disputes at the WTO level thatn the USTR which is constrained by domestic political compulsions. This would be true of many other countries. Explaining the importance of "strategic litigation" (using the WTO judicial process to pursue long term interests), the author notes:

"Viewed through the lens of strategic litigation, important shifts in the evolution of WTO governance and its judicialization did not result from a conspiracy of some sorts, blatant judicial activism or an unfettered influence of powerful WTO members. At the same time, they are more than just the results of one or another form of judicial interpretation. In the incidents discussed, the strategic behavior of litigants brought the Appellate Body in a position in which it modified and developed aspects of WTO law and governance. WTO dispute settlement proceedings thus served as an effective forum for the shaping of WTO governance – in the court room, not in the green room."

A few important points that this paper highlights:

1. The importance of judicialization of the WTO in light of the complex political deadlock of the Doha round needs no emphasis.

2. Judicialization can range from over active engagement of member states to an Appellate Body engaging in creative interpretation of Agreements.

3. Developing countries may have a few points to take from the strategy EU or Brazil undertakes in this regard. While there is a constant domestic criticism that WTO is leading to an erosion of sovereignty, can developing countries explore the possibility of engaging in strategic litigation at the WTO to further their domestic development agenda. Trachtman has argued that the WTO offers sufficient policy space for countries to implement their domestic policy space. Can this be channelized to engage the WTO, in the judcial body, with strategic litigation to achieve long term, development goals? What would it entail domestically for developing countries to achieve this?

4. The tension over judicialization underlines the dichotomy between a rule based and power based system. While both are important constituents of the system, a tilt in either favour may be disastrous for the multilateral system. It would be the responsibility of member countries to engage in continuous dialogue to ensure that the balance is not breached. More decisions should be the result of the court room rather than the green room, but to gain wider consensus and implementability the role of negotiation and political consensus is equally important, perhaps not of the green room variety.


5. The ability to engage in "Strategic litigation" is also dependent on a variety of domestic factors. Primary amongst them is what importance WTO litigation is given in the political and bureaucratic circles in the context of a country's development agenda as well as economic strategy. How is it perceived domestically as well as what level of engagement exists in understanding and comprehending the potential it has to achieve its purpose. Further, the level of independence the agency representing the country at the WTO has in terms of taking decisions to strategically litigate is also important. Is it taken at the political level (legislative or executive) or at the bureaucratic level. This would decide to a large extent the degree of strategic litigation as well as the shift from an adhoc based system to a more long term view of the possibilities. 

A Dispute Tribunal for the WTO - Feasible?

The Dispute Settlement Mechanism in the WTO is often referred to as the crown jewel due too its effective mechanisms of dispute resolution and compliance. A judicial rule based system in an institution which has a history of political negotiation is indeed viewed as one of the positives of the WTO. While the failure of the Doha round of negotiations is viewed as a serious blow to the "negotiating" and "rule making" power of the WTO, the DSM has stood strong in contrast over the past decade. Some argue that the failure of the negotiation causes a serious strain on the judicial branch since disputes that are essentially political and require new rules are tried to be settled within existing legal frameworks leading to tensions.

A brief paper titled "Establishment of a Dispute Tribunal in the WTO" by Debra P Steger highlights another challenge to the DSM - the inadequacy of the Dispute Panels to address the increasing complexity and quantity of disputes at the WTO. Advocating for setting up a Dispute Tribunal which would be a permanent body consisting of international trade law experts to replace the ad hoc Panel system, the author seeks an overhaul of the DSM for ensuring that the legitimacy and credibility of the system is maintained. Highlighting the inadequacy of the Panel system as it exists today, the author states that the increasing complexity of the cases involving interpretation of many agreements as well as the inability to complete the cases within the stipulated time frame has aggravated the need for reform within the system. Increased competence and expertise in international trade law matters is the need of the hour.

Favouring the permanent Tribunal system with a set of part-time members, many advantages are seen in terms of timeliness and efficiency of disposal of cases, experience and expertise, independence and impartiality, collegiality and consistency in decision making, greater geographic diversity in members as well as a strong two-tier system along with the Appellate Body.

"There are compelling reasons to create a dispute tribunal at this point in the history of the WTO. As the WTO adjusts to the rapidly changing global economy, disputes are becoming more complex and challenging, both on their facts and in the novelty of the legal issues presented. Moreover, higher quality decisions would be produced by a tribunal whose members are available at all times and on short notice to serve on cases. This would allow the two-tier system in the WTO to function as it was designed, and enable the Appellate Body to focus on its mandate which is to review issues of law and legal interpretation in panel reports.

Finally, a dispute tribunal would result in significant time savings and efficiencies as compared with the present ad hoc panel system. Time would be saved in panel composition, and other procedural and organizational efficiencies would ensue from having members available at all times and on short notice to serve on cases and from the experience, knowledge and collegiality that would develop over time in the dispute tribunal as an institution.

There is currently a gap between the goals of the DSU and actual experience with respect to the timeliness of the dispute resolution system. While the number of disputes has been declining in recent years, panels have not generally completed their cases within the DSU timeframes and the Appellate Body has also recently begun to request the DSB to extend its timeframes. These delays could ultimately be problematic for the reputation of the WTO both with Members and stakeholders. If these delays continue and become accepted practice, they could undermine respect for the DSU as well as the credibility and legitimacy of the WTO."

The legitimacy of the multilateral system is under serious stress due to the failure of the Doha round. The judicial wing of the WTO has continued to perform an important role to implement a rule based system of mutlilateral trade devoid of "power-based" influences. Will the WTO members be ready for this reform? Though the Panel members are mandated to act independently without any affiliation, doubts have often been raised about the effectiveness of this mandate.   Is the present Panel system more favourable to members? Would the creation of the Tribunal be viewed as "over-judicialisation" of the WTO? Will the Tribunal system be an answer to this? Will the Tribunal be able to overcome the lack of progress in rule making with its judicial interpretation? Is there a danger of "judicial activism" wherein unintended interpretations may go beyond the original mandate? This possibility is true of the present panel system too but the likelihood of it happening more in a body of trade law experts seems more likely. While strengthening the DSM is pivotal to the continued credibility of the WTO, is the creation of the Tribunal system the answer?