Khóa luận tốt nghiệp: Paralysis of the WTO appellate body - Options to overcome

Dispute Settlement BodyDispute Settlement Mechanism Dispute Settlement Understanding Subsidies and Countervailing Measwes Agreement United Arab Emirates United States ‘Working Procedures

MINISTRY OF JUSTICE MINISTRY OF EDUCATION AND TRAINING

HANOI LAW UNIVERSITY

NGUYEN THI NGOC PHUNG

MINISTRY OF JUSTICE MINISTRY OF EDUCATION AND TRAINING

HANOI LAW UNIVERSITY

NGUYEN THI NGOC PHUNG

BACHELOR’S GRADUATION THESIS

HANOI- 2024

STATEMENT OF AUTHORSHIP

1 herewith formally declare that I myself have

wnifen the Bachelor's Thesis independently the

conclusions and data inthe Bachelor's Thesis are

rdhfil and reliable /

Confirmation of supervisor Author of Bachelor's Thesis

‘This research work would not have been finished without the essistence of

persons towhom I am extremely grateful

First and foremost, I would like to convey my heartfelt thanks to my

supervisor, Ngo Trong Quan, for his unwavering support of my studies end research,

aswell as bis patience, inspireion and vast knowledge His edvice was invaluable to

ae during the research and writing of this thesis

My deep eppreciation goes to all the teachers and staff members at Faculty of

International Trade and Business Lew at Hanoi Law University for their herchvork

end dedicetion Their invaluable insight end entlusissm in international lew left 4

strong impression on me from the frst day atthe university

I would like to express my profound gratitude to my family end friends for

their support end encouragement

Notwithstending all those support and knowledge shered-withme, any exxor in

this thesis is mine

LIST OF FIGURES AND TABLES

Figue 1 The number of nationals of countries who are Appellate Body members

(em 1995 ~203 16

Figure 2 Summary of options to overcome the Appellate Body paralysis 58

Figue 3 Flow Chast of the WTO Dispute Settlement Process n

Figure 4 Number of WTO disputesinvolving the US es respondent end compleinent,

1995-2019 B

Figure 5 Key procedures for setting WTO disputes vie MPLA 14

Dispute Settlement Body

Dispute Settlement Mechanism

Dispute Settlement Understanding

Subsidies and Countervailing Measwes Agreement

United Arab Emirates

United States

‘Working Procedures for Appellate review

World Trade Organization

‘MECHANISM AND THE APPELLATE BODY

1.1 The WTO Dispute Settlement Mechanism

1.1.1 Historical background

Dispute settlement methods

1.14, Dispute setlement procedures

1.2 The Appellate Body

2.22 Disregard of the 90-day deadline.

2.23 The problem of aivisory opinions

2.24, The scope of Appellate Review

2.25 The precedential value of Appellate Body Reports

1 Reasons for selecting the research topic

‘The World Trede Orgenizetion (WTO) is an international orgenizetion and

platform that regulates trade selations between its member states The WTO Dispute

Settlement Mechanism (DSM) is @ crucial pert of this orgenizetion, allowing states

to resolve their disputes azising out of international trade relations agreements, The

DSM is the inheritance of dispute resolution regulations that hay: had a positive

cffectforin the neesly 50-year history ofthe General Agreement on Teriffs and Trede

(GATT 1947 Lesmning from the inedequaciesin the past, procedural improvements

have been introduced into the new DSM, which contributes significantly to

improving the judiciel nature of this procedure and strengthening the binding nature

of dispute resolution decisions Therefore, the DSMis considered the most productive

international dispute resolution process and one af the most noteworthy festures of

the WTO This mechanism is made up of two tiers panel and Appellete Body (AB),

‘which are seguleted by e speciel agreement consisting of rules and procedures for the

adjudication of disputes- the Dispute Settlement Understanding (DSU),

‘The AB has a seat in Geneve endis « permanent body where cach eppedl is

considered by three out of seven members appointed by the DSB and broadly

representing WTO membership The AB is en initiative making the WTO's DSM

different from its GATT predecessor, to enhance the feimness and justice of dispute

resolution It has been instrumental in clesifying constructive ambiguities in

agreements made by the WTO, filling in gaps in legal documents, scrutinizing the

pene!'s controversial ruling, and consolideting legel principles from the panel's

diverse andl dissenting reports?

Inthe context of rising trede protectionism recently, the DSM in general, and

the AB in particule, heve faced en unprecedented crisis Though unprecedented in

its range end impact, this i not the first time the international trade dispute system

Jneroducti tothe đe esohton ma nen nthe WTO (Giới điệu cơ chế gi gyittrenh chấp wong

WTO), rwulable at ps fngannvto so daayen de /1 74g Boy vi-co-dụ-ghigyystrncdiực Đơn

‘mo acces on 207122003,

Đảm Vin den Bossthe end Wem Zdouc (2017), The Law and otc af the Wor Tae Orgentaton sth

“Bdtion, Cunge Universiy Dresp 221

Jamas J Nedamapra trả Pra Shards) (2019), “The cris the WTO AB: iupictins fr hư nd the mithuetl hăng systems", Centre for Tae cud bwestment Law Discusion Paper,G).P-2

hhas faced attacks from its members Since 2016, the US hes blocked the appointments

of AB members on tvo grounds G) the AB is not functioning according to its

nandste, and (9 the AB isnot pesforming a satisfactory job # On 10 December 2019,

the AB lostits minimum quorum required dus to the expiration ofthe four-year term

cf tro of the three lest standing mem bers Up to date, there ere no members of the

AB because the term of the lest siting AB member expired on 30 November 2020.6

‘The absence of the AB leaves appealed disputes in the no-acion stetus, which mey

ead to either the continustion of the inconsistent practices or retalitory actions by

the negetively affected member without WTO euthorizetion Both scenarios have

negative remifications on the efficiency of the WTO, pushing the orgenizetion to the

trink Acknowledging the grevity of this issue, WTO members have sterted

&scussion on a fully operational dispute resolution mechanism thet is availabe to all

members by 20247

‘This esearch is timely end responsive for two main reasons, First, the demise

of this orgenizationis# serious problem because it could hinder member steed access

to justice Thus, « study on the roots of paralysis as well as its consequences and

eppropriate solutions meets this urgent need Second, scholarly writings on this topic

in Vietnam are rare end not well-updated The author therefore chooses the topic

“Paralysis of the WTO Appellate Body - Options to Overcome’ for gracustion thesis

2 Literature review

‘There is substentel foreign literature on the history ofthe WTO andits dispute

resolution system, Asfor the background of the WTO dispute ettlement mechenism,

Mervyn Martin's book addresses the formetion end development of the dispute

resolution mechanism in GATT 1947 and the WTO.' To clarify the characteristics,

functions, end missions of botkes in the dispute resolution system, the suthor

saslyzed about 80 WTO cases in nearly 10 years (1995-2004) One of the most

“parca Son of tomate Law (2018), ed Sates Canes to Block New AB Mebers forthe

‘Wer Trade Orguuzation, Fideng the Colapst ofthe Appelite Process", American Jounal of heereticnal Lene, 113@),p £22

SAB Mebers, avuihble st: htpedhme ono zgiotgbdvEatop eis vi members deerp elite, access on 14/130003

thự

‘Mees told “inch te atin reac” indspnesttlement reform aes evel at

Eạc hy tre srgoelsibew be) ee 1243 êm acces on 22127023,

* Mera Maren QUIS), WTO Dgpte Sramese nông trả Deơtlgpaee”,ANaƒ Đưnasfenoi

“Thấy Law Series, (13) pp 325 ~ 339

comprehensive analyses of the issue of enforcement mechanismsis the book by Peter

Ven den Bossche and Wemer Zdoue, which offers a comprehensive overview of

dispute resolution mechanisms with reference to specific DSU provisions In

particular, the fifth edition promptly updated the WTO crisis and made œ single

proposal, which was the Multi-Perty Interim Appeal Arbitration Arrangement

(MPLA) in 2020?

‘The problems of AB paralysis were discussed in several papers Mirct Jens

Lebne provided a chronology of AB paralysis and reviewed the five reasons stated

bby the US for the blockage, including (i) Rule 15 of the WP of Appellate Review,

@ 90-day deadline; (ii) Advisory opinions, Gv) Appellate review of fects and

municipal lew and (9) Precedential effect of AB reports.!9 Second an asticle by the

American Society of International Law explains why the US vetoed the process of

selecting AB members."! The paper questions and critically analyzes whether

long-standing concerns by the US are legally grounded Tard Lukes F, Innesebner and

Tenia Singla suggested using ad-hoc arbitration instead of reviewing proceedings

before the AB” Forth, former AB member Jennifer Hillman discussed three novel

proposals, including a seperate system for trade remedies, arbitration under Asticle

25 of the DSU, and procedural amendments Last, recent works by Bemard M Hoekman and Petros C Mavroidis,§ and Peter Van den BosschelẴ, evaluate the pros

and cons of reforming proposals

In Vietnam, there are also some studies using descriptive anelysis to evaluate

the chellenges of using the DSM and give preliminary proposals Remarkable works

Pets Van den Bossche ud Wem Zdouc 2021) Te Law cud Potcy ofthe World Trade Organization: Tent Cases, vt Merial, hs Bainon, Cekrdgt Univesty Ress.

"en Lele G018), Criss atthe WTO" I the Blocking of Appoinments tthe WTO AB by the Uhated States

Legally Jed”, Ce] Grossaaim Publishers, Bain,

"Sopra ng 4 pp 932-831

‘hmersimer Lies Fai and Sigh Tua G019), “The AB Deadlock athe WTO: TôntZy ng Sohtions

‘Wahi the DSU and Beyond”, Ditto del Conmercio Buerwzionale, (1), yp 73 — 108, thi a pen combracte3300054 acces an 2312/1013

"Jmfer Hila 015), “Tiree qproachestofvengthe World rade Organizations AB: the good the bad,

ad the vậy, Dunne of Ddơmaelenal Economic Low Lawes Em, pp 1 - 15, ND kề chr eel ecrnchNirs wprosches a Sgt eld wade its

‘he good he bad-and the ugh/access on 227122033.

ˆ Bemwnd M Hodanan md Pos C sores (2020), “To AB ornot the AB? Dspute Setlamn in WTO

‘Refann”, Joona of bueratinal Economie Lai, 33 3),pp 1-20

Pru Ven den Bossche (2023), “Cn the WTO Dispute Setlemme System Be Revived” Options for

‘Aadressing « Major Govemance File ofthe World Tade Orguuzstion”, World Trade buona Working

‘Paper, @Q).pp-1~30.

include an asticle by Trinh Hai Yen et al on the sole of appellate institutions, 15 and

Nguyen Mai Linh on the practical epplication of the WTO's intemational trede

spute resolution mechanism in Vietnam’ These documents identify three

challenges thet DSMis facing: () the ctspute resolution deadline, (i) the appointment

of AB members, end (i0) the content of the AB's judgment Both ofthese publications

cover solutions such es No-Appeal Pacts (NAPs) and Appeal arbitration procedures

However, Nguyen Mai Link's aiiele adds other solutions that do not use the AB

appeal procedure by either: @ a “flosting panel report” which means not approving

the panels report, or (i) commitment not to appsal before the dispute occurs or before

the penelissuesits report Other authors such as Vir Thi Kim Oanh et al # and Pham

‘Thanh Tùng et al analyzed the crisis of the AB end shered the seme opinion thet

seformingDSM in general and AB, inpesticuler, seems to be one of the most optimal

solutions On the other hang VuKim Nganet al recommended thet the Mult-Pasty

Interim Appesl Agreement (MPLA) be considered as an appropriate new proposal that

was widely supported by WTO members

Most of the above writings in Vietnem were published from two to five years

ago end therefore may not be relevant in the current context Agninst thet background,

this thesis attempts to fill the kterature gap by trecking the underlying reasons and

consequences of AB paralysis It also provides e critical evaluation of existing

recommendations to cherter a soadnep for the AB future operations

° reh Hài Yen, Nguyen ay Nguyen, Pham Thanh Ting (2020), “Tự ole of the agpeste mechan in

te fhe consistency and predictability c te WTO law (Vast tt ch pic dun din bio tn mit

(qui 8P dy dom tong gash, tp dng php hit WTO)", Heer Lav Review, 10 C49,gp 87 ~100,

‘Nawyen Main 2021), "Dw WTO s Mechomsqnfor tematinal Bade Dspte Setanta Practice

sn Vietumn after 26 years of Developments (Co ch gaa guyệt tal chấp trtơngroai uc t cin WTO vì tư

‘ub ép đựng tụ Việt Nua sea 26ndmphit ria)”, Journal of Lgulanve Sues, (3) pp 39 — 47

"Vu Thi Ee Ou, Tran Thị Av (2021), "Css ofthe WTO dist seimaere system andthe need

for tien hông hoàng hả thang gi yet wach chip WTO visi cin đội mớo”, 7epxe Trade and

CAgÄgry Review, G), taukble +t hips iopchvonglveng vyln+vkthsng homg eth

ca

Bum Thu Ting, Nqwen Tay Ngym C02), “Gisis n appointing mendes of te World Trật

(Orgmiswion’s AB (ohinghoing bồ nh hành viên cơ gum nh thẳm tô chức Đương mại tế gi)", State

ene Law Toxo (0).pp 6T 76.

‘Va Kan Nga, Homg Thi Minh Heng 2021), “Chsis athe World Bade Qrguistio’ dioptesetimaent

mechanism: Causes, pacts end proposis Hhinghoingtalce chế gai quyét tra chấp của chấ Hương

"mại tứ gt Nguyễn nhện túc động ving đi mt)", See and ae Jana (4) pp 70-34

3 Scientific and practical significance

Regarding scientific significance, this thesis conhibulse to the cusrent

scholership on the AB review proceedings in two main aspects: identifying the root

causes ofthe paralysis and developing a set of corresponding solutions The solutions

re limited to legiletive or judicil iitietives within the WTO

Regarding practical significence, the recommendations elaborated in this

thesis ae pasticulaly useful for WTO members using the DSM end AB proceedings

Given the inactivity of this adudicative body for s long time, it is timely end

responsive to the needs of WTO members weiting for a selieble and efficient tier of

‘wade ligitetion

4 Research abjectives

‘This thesis aims at analyzing the AB parelysis end developing corresponding

options for WTO members Specificelly, the study aims to examine bvo mein

esearch questions:

= Whet are the key seasons for the AB collapse (legel andlor political)?

= Whet are the options available to WTO members to fix the problem?

5, Subject matter and scope of research

Regarding subject matter

‘The thesis focuses on the parelysis of the AB end its dispute resolution

proceedings which are reguleted by the rules in the DSU In aóđkien, the rules and

segulstions regerding dispute settlement in the WTO-covered agreements or other

international conventions related to this topic will slso be mentioned

Regarcing scope

‘This study is not limited by geographical locetion, however, it focuses on the

US and other WTO member states It examines the dispute settlement practice of this

crgenization from the time when AB was paralyzed ntl 2024 The object of study

is sbout the parelysis of the AB which is measured through reasons why the US

‘locked the reappointment of AB members end options to overcome the existing

situation

6 Methodology

‘This thesis first employs the doctrinal method to enelyze various WTO legal

texts, pariculaly DSU provisions WTO dispute settlement reports are also analyzed

to better illustrate the effectivencss of the proposds The second method is the

comparative which is used to evaluate the advantages and disadvantages of different

options

7 Thesis structure

‘The thesis will be dividedinto three mein chapters:

Chapter 1: Overview of the WTO Dispute Settlement Mechanism end

Appellate Body

Chapter 2: The Paralysis of the Appellate Body

Chapter 3: Options to Overcome the Paralysis of the Appellate Body

OVERVIEW OF THE WTO DISPUTE SETTLEMENT MECHANISM

AND THE APPELLATE BODY

‘This chapter will introduce the DSM both ofthe ancient GATT andthe modem

WTO The weeknesses and criticisms of GATT's dispute settlement are enelyzed to

pave the way for the novelties introduced by the WTO The second section of this

chapter will provide « detailed enelysis of the fonctions of the AB together with an

exhaustive explanetion ofthe legal basis

1.1 The WTO Dispute Settlement Mechanism

‘The WTO Dispute Settlement Mechanism (DSM) is defined asthe principles

end legal ngưng of the WTO thet determine the order, procedures and apparatus for

sesolvingiintemetional trade disputes egreed upon by WTO members when there is «

&spute arising between WTO Members segerding rights end obligations under WTO

agreements! This section will enalyze the DSM in three aspects including @

historical background, notably from the GATT 1947 to the WTO era, 0) its features,

(a) chspute settlement methods, and (jv) dispute setlement procedures

1.1.1 Historical background

‘The history of the GATT begins in December 1945 when the US invited its

‘wartime allies to enter into negotictions to conclude a multilateral agreement for the

seciprocel seduction of tariffs on trade in goods.” The establishment of GATT was

stacted in Fabruery 1946 when the United Nations Economie and Social Council hed

en International Conference on Trede end Employment to make e draft about «

convention establishing an International Trade Oxgenization (IT0).” While the ITO

‘was sll drafúng, some counties wented to remove trade baniers and also to create

en interim teriff reduction agreement, which they planned to operate until the ITO

‘was legally established However, the negotiations on the ITO were more difficult

‘because the US Congress eared thet the organization couldintesfere withthe internal

" Hong Phuoc Lang (2022), Dupe rsolgion mechan of he Word Trade Orgmizanen (WTO) nd

segue proposal for 7hexm (Cu cha giã nyt ran chip của Tổ cae Thương met te get WTO và mắt

a ed vin Đệ No), Master Thesis, oi Lee Dnivesty,

Sen neh 9p 210,

° TH Jacksem (1998), The World Trade Orgensction: Cnstingion and Jurispmidence (Royal utinge of

bexretion Afar), Soya net of erat Afuxs, Landon,» 15

“Dad

economic policy of the country The Truen administration, after more then tro

‘years of continuous ettempts, officially announced the felure to each en agreement

end temporarily ended the project to esteblish the ITO.» Following the failure to

estebish the ITO, 23 States, at the end of the second session of the Preparetory

Commission for the United Nations Conference on Trade and Employment, decided

to sign the GATT on 30 October 1947

Since its inception, GATT has been successful in promoting end ensuring the

substentil Kberalizetion of worlds trade, Duving the 1950s end 1960s, continuous

teriff reductions led to very high growth rates in world trade, averaging about 8% «

year The influe of new members in the Uruguay Round demonstrates thet the

svullilaterel trading system is recognized as an anchor for development end tool for

economic and trade reform However, by the easly 19805, the volume and complexity

of global commerce had well outpaced the nature and quantity of trade during the

GATT’s formative ysats3 While world trade had become far more complex end

important, the dispute settlement system in GATT hed been found wanting An

examination ofthe scope and depth of dispute settlem ent-seleted provisions indiceted

three mein shortcomings of GATT 19478

First, the dispute settlement system dusing the GATT period was simple In

terms ofthe scope of dispute resolution there ere anly bro types of disputes: @) claims

‘by one pasty thet another hes violeted the provisions of the General Agreement, and

@ objections by one pasty to practices of another that are not prohibited by the

General Agreement, but that nonetheless have an adverse effect on the objecting

pesty® These disputes only related to trads in goods, because trade in services was not covered by GATT rules?

Second, the dispute settlement procedure in GATT 1947 was considered to be

@plometic rather then legalistic}! GATT contained e limited number of provisions

‘Ridurd Toye 2003), ‘Developing Miuiteralion: The Hevane Chater andthe TT the Itematinal

‘ade Orgmustion, 1947-1948", The heeretional Hương Review,2Q),p.282

*Undarsending the WTO tps: ir bUÖetto gitiatE ei Andere

Galbraih Vrgnua (1962), "The Gaurd Agena on Tưiếc mã Trade "Chavet Psion, 43051) p.23.

—

° Wien J Davey (1987), “De Sete n GATT”, Forde Buematona La Journal, 11), 6T

Understanding the WTO evade a

pe ly vo zgioglsb Đua uti chế ehmdsrsnding « pf, accessan02/012026

` inst-UkichPetersnam (1993), htemational Coupettion Rules forthe GATT- MTO World Bade and Lega Sytem", Jota of World Trade,» 35-36,

concerning the peaceful resolution of controversies among states, meinly Articles

XXII end XXIIL The GATT envisaged a two-stage procedure for dispute resolution

For a start, the pasties had to investigate e possible friendly settlement through

‘ilsteral negotistions called consultations” The fundamental goal has always been

establishing « mutually eggeed solution Then, in case of felure of consultations, they

ad the opportunity to require a panel The parties through the GATT Council of

Representatives would establish e panel, which was made up of three to five

independent experts

Finally, GATT 1947 was e consensus-based system, meaning thet a single

objection could block the ruling According to Article XXIII 2, all issues and actions

must be approved by contracting patties This form of “positive consensus” has been

ciiticized asthe biggest flaw in the GATT 1947 DSM,} in the sense thet the losing

party in a chspute con prevent the panel from edopting a decision The Council made

decisions based on the consensus of the members in such processes as esteblishing

the panel, setting terms of reference, selecting panelists, end accepting the panel

recommendations

As a semlt, the system was characterized by delays, inconsistencies,

‘uncertainty, end inedequacy of enforcement Many contracting partes to GATT

1947 believed that the old rudimentary, end power-besed GATT system for resolving

sputes through diplomatic negotitions should be improved and strengthened to

‘become an claborete, rules-based system for resolving disputes through

adjudication After long discussions, the DSM negotisted diving the Uruguay

Round was estebished In WTO, DSMis the central piller of the multilateral trading

system and the stability of the global economy TM

1.12 Features

DSM hes a mumber of superior features compared to GATT 1947 Although

the WTO dispute settlement system is based on GATT 1947 dispute settlement

‘Avice 30 GATT 1947

ˆ YE Eenseo (1995), “The WTO Dispute Setimmt Mechnian Coverage and Procedures of the WTO

‘Undersandng”, Journal of Word Trai, 3909,p 9

` Sạn nơ 39.p31

Sipee note 2,p.296

Asin conrtion, vue

ipso st rglnghcbees cltlute eR c1 chen txe~Digpte 2setbomsne 6 20520

decane le 510; oh Dn D0be% DOenforcednccee on 090012031

provisions and practice, it has certain major changse:() the introduction of negative

consensus, (i) the speeding up of the process with an explicit time frame for

proceedings, (i) the addition of appellate review of panel reports, and (iv) the

addtion of compulsory enforcement mechenism to provide greater guerentees for

WTO members on protecting their sights >”

First, the WTO DSM hes remarkebly replaced the “positive consensus

principle with the "negative consensus" Accordingly, ll panel reports are

eutomsticelly adopted by the DSB unless « pasty hes notified its decision to appeel,

end so is the establishment of panels3 In practice, there is ahrays at least one

member who hes an interest in making the panel's conclusions binding as oversll, it

prevailed with the penel Rejection by negetive consensus is, therefore, more

theoreticel than practice, and has never happened within the WTO framework

Second, the WTO DSM hes an explicit time frame for proceedings with

minimum endl maximum pesiods for stages of the process A compleinant can only

sequest a panel after 60 days from consultetions2® Once the panel is established,

penelists must be appointed, and litigation begins with tro rounds of written

submissions and panel meetings The panel will issue « final report within9 months,

‘which is then circulated to WTO members Within 60 days, the repost is either adopted or appealed, with a maximum of 90 days for proceedings"! After adoption,

WTO members have a seasonable period to comply with the ruling,

‘Third, the WTO DSM has added an appellate review thet brings a fuxther

opportunity for dispute pasties to protect ther legel sights and benefits under WTO

lew The AB is a seven-member permanent body tasked with reviewing the legal

aspects of panel reports The eppellete process is the second end elso final

adjusdicative instance, Since it did not existin the old dispute settlement system under

GATT 1947, the addition of this second echudication phase was one of the major

innovations of the Uruguay Round of multileteral trade negotitions

"Hợi Law Univesity (2017), Peubook on heerasional Dade ene Hee: Law, The You Pabliching House Hanoi p 190.

atic 1SDSU,

arc 4.7 DSU

© Anh 11 9°DSU

«ities 1718 DSU,

>> aˆ 6u 5s process, acuble at

or lân vo øgiotdlstvbatep eis efdip silemat ct eeSefpl «acces on 0510/2004

Last, the WTO DSM strengthens its enforcement Ranetion by monitering and

supzrvising the implementetion of recommendations end rulings The monitoring

mechanism isimplem ented within 30 days from the epprovel date of the panel or AB

report? Atthe same time, the losing party must also notify the DSB of the measures

it intends to apply for implementation The DSB can give the country a reasonsble

period of time to implement the ruling Ifthe losing country sill does not implement

the DSB's ruling after this time, it must negotiate the level of compenstion within 20

days The final and most serious consequence a non-implementing member feces in the WTO eispute settlement system is etalietion 'Ẽ

1.13 Dispute settlement methods

‘The involvement ofthe penel and the AB is not the only way to settle disputes

‘between WTO members There are vesious other ways including (1) consultations,

© good offices, consilistion, and medistion; and (3) etbitretion

First, consiltetion is the mode in which pasties themselves negotiate by

seeking an agreed solution to resolve their dispute According to Asticle 4 of the

DSU, consultation is the first compulsory stage of the WTO dispute settlement

proceedings During this phese, the pasties have the opportunity to discuss the issue

end find œ setisfactory solution” If the consultations feil to settle e dispute, the

compleining pasty may request the establishment of a panel By contrast, conatetion

may be an ltemnative means of dispute settlement like negotiation

Second, good offices, concilistion, and medietion ere voluntary procedures

end require the pasties’ agreement Pursuant to Asticle 5 of the DSU, the patties

nay request the ebove methods et eny point of time in the dispute They may also be

terminsted at eny time end once terminated will allow the claimant to request the

establishment of a panel Ifthe pasties agree, good offices, conciliation, or mediation

proceedings may continue while the panel proceedings proceed

‘Thixd, erbitration may be used as an altesnative means of dispute settlement to

© Anich 313 DSU

«ee 222 DSU.

“the roctss - Sages ima pial WTO dipur setlmat case, evubble et

Ips Jarra axgfenglshlt cúi e/g setlement đt 661081 em, access 08012024pean 31p IDE

© ace 4 5DSU,

_——.

find the solution for certain disputes between WTO members concerning issues that

sxe cleanly defined by both parties Under Article 25 of the DSU, ifthe partes decide

to-use arbitration, they must agree on the specific procedure to be followed and also

aggee to abide by the arbitrator's award However, « distinction must be made between

sbitration under Article 25 of the DSU end erbitration under Articles 21.3 and 22 6

of the DSU, which is not an altemnative method of dispute resolution

1.1.4 Dispute settlement procedures

‘The WTO dispute settlement proceedings may be described as « four-stege

procedure, consisting of 4) consultations; đi) panel process, (i) appellate process,

end Gv) implementetion and enforcement

In the first stage, as mentioned in the above peregraph, the WTO dispute

settlement process is elways initiated with e formal sequest for consultetions by the

government of « member state regarding complaints made ageinst enother

government of a member state The purpose of consultetions is for the governments

concemed to try to resolve the dispute themselves before advancing to the

adjuaicative stage The consultations were designed to provide an opportunity for the

pecties involved to clarify the fects, understand the nature of the complaint, end for

each to explain their positions on the matter

Inthe second stage, if consiltetions do notresolve the dispute the complainant

nay request the DSB to establish a speciel panel to assess the dispute.‘! When a

complainant requests the establishment of a penel, the DSB hes no choice but to

epprove the request unless there is an agreement to do otherwise Once the DSB

epprovesthe cleimants equestto establish a panel, the panel'sterms of reference will

‘be drawn up, The panel typicelly consists of three to five panelists selected on an

ad-hoc basis The DSU stipulates thet each member of the panel must be selected from

the Secretasiet’s nominetion list However, if the parties cannot agree, the Disector

General (DG) of the WTO may be asked to select stable panelists on their behalf,

‘The DSU provides thet the penel's ction is to make an objective assessment to

detesmine whether the measwe complained of complieswith WTO lew Immediately

rr

sấu fame

© goth 4.7 DSU.

© poche 61 DSU

‘upon completion, an interim report will be dkafted end sent to the parties for

comments The final repost of the penel will then be issued end transmitted to the

DSB for adoption

If the panel's repost is eppesled, the DSB will not adopt it but will sefer the

sepott to the AB for legal review AB proceedings are commenced by e written

notice to the DSB end # notice of appecl filed with the AB Secretasist, The AB's

scope of review is limited tothe legal issues addvessed in the panel's report and the

{egal interpretations provided by the panel As with panel proceedings, oral and

‘written submissions will be made end-will be followed by a heating The AB, et the

end ofits review, will issue œ decision in œ report to uphold, modify, or reverse the

decision ofthe panel * Regerding the DSU, AB repartswill be automstically adopted

‘by the DSB unless otherwise decided

Finally, as soon as the panel or the AB report hes been adopted by the DSB,

the losing party is expected to comply with its recommendations The losing pasty

will either comply with the recommendetions immedistely or request 4 reasonsble

time” to implement the recommendations and rulings of the DSB

1.2 The Appellate Body

Besed on the DSU end Working Procedures for Appellate Review (WP), this

section discusses (1) the establishment, 2) composition, end (3) proceedings of AB

1.2.1, Establishment

By the ete 1980s end cedy 1990s, emid the Uzuguay Round of trede

negotiations, the caseload hd increased, but there were concerns about the increased

‘locking of panel reports by losing parties Ar pat of the Uruguay Round

negotiations on dispute procedures, there wes « push to shift the requirement for

adopting « panel report from « positive consensus (which is whet allowed losing

countries to block) to a negative consensus, under which the report would be adopted

welsse ll GATT parties opposed adoption This possibility of quasi-autametic

` Angrb 164 DSU

s Anocb 17 6 DSU.

“9 gosh 173 DSU

— 10.150

© Accordingto Article 21 3 DSU he rouetubl period may be detemaned i ree ways: (2) proposed by the

respondent thổ approved bythe DSB, (0) decaed by te prtis wshin 45 days eter the adoptum of « panel

cụ AB report; and (0) decide by mn arbastor tahán 80 days after the adoption of apanelorthe Art.

adoption concesned some of the negotistors, as pane! reports might not aways be of

the highest quality If adoption were to be automatic, they wanted e check to ensure thet egregious mistakes did not become e formal past of GATT laơ.'® To advess this concer, they created an eppellete review mechanism known es the AB St

‘The creation of AB has two important mesnings First, the AB serves es en

addtional safety valve for members, helping to protect them from automatically

adopted “bad panel reports! Second, the establishment of the AB was the “guid pro quo’ for losing the political sight to block the adoption of penel reposts

‘The AB was estebished by the DSB asa stendinginternational tribunal to heer

sppeelsfrem WTO panel reports pursuant to relevant provisions of the DSU as well

sin the Decision of February 1995 Of the twenty-seven aticles of the DSU, only

Asticle 17, entisely deals with the AB end the appellate review process The

establishment of the AB is an integral past of the 1994 Masrekesh Agreement

Moreover, its possibility of appellate review of panel reports is one of the mein

innovations tothe old GATT dispute settlement system brought about by the Uruguay

Round of Multilsteral Trade Negotistions Therefore, the creation of an appeal

mechanism is seen as an edditional safeguard for members, which will protect

members against exroneous panel reports being allowed to be adopted According to

Peter Ven Den Bossche introduction of appellate review procedure is a quid pro quo

(1£ afawor inrehzn for afavor) for the quesi-autom tic adoption of panel reports

‘As per Asticle 24 of the DSU, the DSB decides on the appointment of the AB

members by consensus Members of the AB are appointed by the recommendation of

4 selection committee, composed of the cheispersons of the General Council, the

DSB, the councils for goods and services, the TRIPS Council, and the DG The

selection committee selects from candidates nominated by WTO members

`9 2o Lester 2020), "Cen tari Appeal Arburtin Peserve the WTO Diguae Syston”, Free Trade hile, Hebert A 3ful Contr fr Trade Policy Site, Ơ7),p, 2.

ae

“Debra P Seger C019, 4 1800p af Law end Layers nthe GATTIWTO: The Development of the Rube of

Lea nthe MAiltIserol Drading System, Cambridge Unarersty ress, 3.447

ˆ Deter Van Den Bosse (2005), ‘Frm Aftertughtto Caren The WTO Aypelate Body md 2s Rist

to romnunce te Werld Trading System", Maaonche Facil af Law Working Paper (),p 7

* Sopra note đ0,p 447

°)Beubiidsoentf the Appelate Body CWTDSBI), approved on 10 Rtbrusy 1995

© Sopranote 61,37

12.2 Composition

a Requirements

Unlike penels the AB is a permanent international tribunel, which is

composed of seven persons who are to be eppointed by the DSB for a four-yeer tem,

seappointment being possible only once The conditions to became a member of the

AB are stictly regulatedin Aticle 17 3 DSU Accordingly, there are four mandatory

requirements for AB members Fist, they must have professional experience in

international trade Lew and the contents of relevant agreements in general They can

come from eny professional background as long es they have demonstrated expertise

in lew, intemational trade, and/or the subject matter of the covered agreements

generally Second, they shell not be affiisted with eny government The AB

membership shell be “broadly representative of membership in the WTO" Thixd,

they must be available to work at any time on short notice and must keep up to date

‘with dispute settlement activities and other relevant activities of the WTO Fousth,

they shall not pasticipete in the review and consider disputes that may create a diect

or indixect conflict of interest

RulelI of the Rules of Conduct®” states thet each member shall be independent

endimpertil, shall evoid direct or indirect conflicts of interest, and shell respect the

confidentislity of proceedings of bodies under the DSM so thet through the

obsarvence of such stendards of conduct the integpity and imparielity of thet

mechanism are preserved ®

b Divisions

Divisions of the AB are selected randomly on @ rotetion basis to ensure equal

representation among the members, regerdless of their netionality ® In fact, the

smunber of netionals of counties thet are members of the AB from 1995 to 2019 is

shown in the following chest

‘Panels we adhoc bodies whichnermally consist of ee parsons

“gu Setlement ts Manca ngsy staf eof document doanis:23240417 ena p +

Rus of conduct fr the wnderstanding onmules mvdprocedes goveming the stement of dps Rules

cf Conduct) avelable RHbcJAnfnx to orgfenglshtrtap 1H50, ese bam access en 10712024

°° Bnh IL Ras of Cond.

© poche 62 WP

Figure 1 The number of nationals of countries whe are Appellate Body

members (from 1995 ~ 2020)

——=

‘Source: The author compiles based on the WTO website porial 78

‘Through the above date, the mumber of citizens of the US becoming AB

members accounts for the largest proportion, which means that political factors sill

have & certain impact on the choice of members of the AB Inthe process of selecting

the first seven members, the US and EU requested two positions each”! While EU countries put forward cendidetes with backgrounds in trade lew,”? the US did not

rnominete any trade lew practitioner or an academic working on trade lew The Office

of the US Trade Representative (USTR) suggested to the Membership two candidates

with quite different profiles: « former Congressmen (James Bacchus) nominated by

the White House and a professor of internstional economic law not specialized in

trade lay 3 As a result, James Bacchus from the US was selected as one of the first seven members of AB.”*

According to Rule 6.1 of the WP, a division consisting of three members shell

bbe established to hear and decide an appeal The AB members joining a division shell

‘be selected on the basis of rotation while taking nto account the principles of random

* appellate Body menbers htps Jin one acgienghiatop elisa ehb mesbers disap elm

' Eìng, Matred and Poll, Mask CO1), "Agats, Tustees, and itemwtimal Courts The Poltics of

‘tical Appommane atthe Werld Trade Organon” Eimcperi Zomno of beernaionaRelaons,200)

Ba

Tait

> Sapranwte 7p 24

“ WIDSBIM® (1 mid 29 November), Janes Bach from the US, Christopher Baby from Nev Zea,

ChusDiter EAlmmwma fom Gamay, Sul EiANggw from Egypt, Fienvo Picine from te

‘Phlppines, uo Lacarte-Mir rom Uruguay and Masto Matsusaa from apa.

selection, unpredictability, and opportunity for all members to serve regardless of

their national oigin "5

At the beginning of each year, the AB elects one of its members to be the

chairmen of the AB for the coming year The Chsismanis responsible for the overell

rection of the business of the AB, including the supervision of the intesnal

functioning of the AB”” A member who intends to resign shall notify histher

intentions in writing to the Chsirman who shell immedistely inform the Chairmen of

the DSB, the DG, end other members of the AB 7® According to Rule 15 of the WP,

the person who ceases to be e member of the AB may, with the euthorization of the

AB end uponaoification to the DSB, complete the disposition of any eppeal towhich

thet person was essigned while a member Thet person shall be deemed to continue

tobe amember of the AB

© AB Secretariat

Asticle 17.7 of the DSU states thatthe AB hesits own administrative end egal

staff (the secretariat), whose role is to assist the AB members in discharging their

oties, The existence of the secretaiat and its institutional function reinforces

collegiality After all, st is the same clerks thet work with different divisions and

provide input siming to guarentee the coherence of case lew across cases Thus, an

thos of collegial understending is cemented throughout the orgenizetion, and it is

quite difficult to associate particular AB members with specific views, unless, of

course, such references are made in their publicetions outside the WTO

Under the Rules of Conduct, the Secreteist is explicitly held to the seme

professional stenderds as AB members” Thismay indicate @ ignificent contribution

boy the secreteriet to the proceedings with regard to both procedurel and substantive

support provided by the seoreteriat

the AB may consider facts on appsdl, (ii) whether penel findings on the mesning of

domestic Law fall within the scope of appellate review and (jv) whether the current

WTO rulss prohibit obiter dicta” or advisory opinions

First, the question of who cen appecl, only parties tothe dispute may appeal @

penel decision! Thixd perties who heve notified the DSB of « substantial interest in the matter, may make written sibmissions and be heard by the AB ®

Second, the question of whether the AB may consider facts on eppedl, the AB

does not review factual findings or findings on issues of fact An appeal shall be

limited toissues of law coveredin the panel seport and legl interpretations developed

boy the panel Appellate review is in principle limited to legel findings, that is,

findings on issues of lew

“Thi, whether panel findings on the meaning of domestic law fall within the

scope of appellate review is a question of lew, which the AB cen review to ascertain

the member's compliance with WTO obligetions

In EC - Hormones, issues of fact and issues of lew are distinguished by AB

‘The determinetion of whether or not # certain event did occur in time and space is

typically « question of fact For exemple, the question of whether or not « member

state adopted on intemetional stenderd, guideline, or recommendation is « factual

question The determination of the credbility and weight properly to be ascribed to «

given piece of evidence is pest and parcel of the fact-finding process end is, in

principle, left to the discretion of a panel However, the consistency or inconsistency

of & given factor set of facts with the requirements of & given treaty provision is @

legal issue ®” Whether or not a panel has made an objective assessment of the facts

° Obiter ctacanve understood a th expresso of gener] opinions emunks or statements egaring cst

qt gl povsen tat ue umecesay fa resoknm af tke diye, wulie t anh rốn § SOO.

‘DB asp ngige “ES Cotaloguelalst=P51141 51125 151126251126 251197 251126 261130 251120251

1343511350 Cre Catalog dade x=DFU ata =¥7 1857150 corde eee

‘nRecordeWade an SpuadiecordePuee vue a 120012036

Tarte 174 DSU.

poche 174 DSU.

© gosh 17 6DSU

* Anoch 176 DSU.

`* Appalh Body Report, DS 16: United Sats — Section 211 Onntồne Appropriations Act of 1998 (US

‘Séenon 211 Appropriations Ae) pass 104-105

‘S agpebte Body Bape, DS 26: Sieopean Countess ~ Measures Concerning Meat cut Meat Prods(Be Hormones pes 132

` mã

before it as vequired by Asticle 11 of the DSU, is also a legal question which, if

properly reised on appeal, would fell within the scope of appellate review

Fouth, regarding the question of whether the euent WTO rules probibit

obiter dicta or advisory opinion A closer reading of the DSU shows that the DSU

ot only does not prohibit but also explicitly requires the AB to go beyond merely

solving disputes The WTO's dispute settlement system sims to preserve the sights

end obligations of members under the covered agreements end to clarify the existing

provisions of those agreements under customary rules of interpretation of public

international Inw®* To clasify the existing provisions of those egreements in

accordance with customary rules of interpretation of public internetional lay, the

'eaty provisions often have to be conducted beyond the narrow confines of individual

Gisputes Indeed, it could be argued that using the term “clarify” here widens the

general roles of panels and AB end ensbles them to provide “guidance” to the

members’ future conducts under the covered agreements?

‘As for issues or provisions not rsised by pasties, Article 17 of the DSU does

not prohibit the AB from considering or ruling on such issues In the opinion of

Professor Hemy Geo? Asticle 17.6 DSU only describes whet the parties to the

&spute cen appeal and does not impose restrictions on whet the AB can decide on

The ime frame

Appallete review proceedings shell, asa general rule, not exceed 60 days from

the date of the filing of a notice of eppeel to the date of the circulation of the AB

seport®? Fusthermore, when the AB considers that it cannot complete the appellate

seview proceedings and circulete its seport within 60 days, itis required to inform the

DSB of the seasons for the deley end give an estimate of the period within which it

‘will cizculate its repor In most appeals thus fer, the AB has cixculated its report on

ey 90 of the appellate review process? In afew exceptional cases, the AB hes, with

`! pric 3.2 of he DSU.

"Henry ho (2020), “Disuptive constuction or cansructiv destruction? Reflections onthe Appellte Body

ss", Singrpore Management hen, (),p 17.

Tad

"Dt

w Ariel 175 DSU

° The process - Sages in atypical WTO disp setemaee casem v9uÌHD a

Impeshroor no øglotltvEatop tim efdimp element Bt pưốcZpt eM acess on 1401034

the agreement of the pasties, circdlateditzrzports after day 90.

‘The 90 day time freme for the appellate review isnot selistic, asthe statistics

shows thatthe everage duration of eppellete review is now longer then90 days The

seasons for exceeding the DSU time frames are mostly du to the complexity of the

issues end the workload of the AB which might require more time to resolve and

complete e report However, the DSU does not contein any provision penalizing the

AB for missing the 90-day deadline nor does it indicate any legel consequences for

faite to comply with the deadline

« Thereport

‘An AB report hes two sections which are the descriptive past and the findings

section It shall be edopted by the DSB and unconsttionally accepted by the parties

tothe dispute unless the DSB decides by consensus not to adopt the AB repost within

30 days following its circulation to the members” Even if adopted, the reports of

penels and the AB are not binding precedents for other disputes between the same

pasties on other matters or different pasties on the seme matte, even though the seme

questions of WTO law might axise °° Suppose the reasoning developedin the previous

seport is persuasive from the perspective of the panel or the AB in the subsequent

case, the panel or the AB will likely repeat and follow it to enhance the secusity and

predictability of the mulieteral trading system Inthe words ofthe AB, these adopted

AB reports “create legitimate expectations among IVTO members, and therefore

should be taken into account where they are relevant to ary dispute?

Ta

” The longest eppelite review to date is inthe cas of US Lange Ci Anco hướng mare than 600 days.

” The deserve put conan the factual end rocedsrl background of tht Gigyute and gang the scgaants ofthe paticpats mổ thĩd pưtt pgte, Inthe findings section, the AB adavesesm detalthe sues

ae eh spel hat Ee con hơơng and reasoning m suppor of Sach cond ass, and sates VATE

‘he eppeeed panel faudngs and conchusns are wheld modified orrevest.

ame 1718 DSU.

° Legal effect of panel and appellate body repars and DSB recommendations av rings, eA: et:

Imps Antntvta argfenglset, dig ef sen tee 7S2pL em access on [402024

tape

CONCLUSION OF CHAPTER 1

‘The frst chapter hes described the theoretical issues related to the WTO DSM

end AB Firs it elaborates onthe historical context ofthe DSM from the GATT 1947

period to the WTO esteblishment, the methods end procedues conteined in thet

DSM Second, it summarizes the formation, composition, end procedures related to

the AB Its establishment can be explained by the broad concern of GATT 1947

members regarding another tier of adjudication to promote consistency and avoid

enors of lew, if eny, by ad-hoc panels The operations of this permanent organ ere

segulated in the two WTO legel instruments including the DSU end the Working

Procedures for Appellate Review This chapter hes highlighted the limited scope of

AB review and the stict timeframe specifically designed for each stage in the AB

proceedings

‘THE PARALYSIS OF THE APPELLATE BODY

Chapter 2 analyzes the paralysis of the AB, which contains three sections

First, the development of paralysis is divided into two periods of time: before and

after 2010 Second, the chapter provides a deteiled analysis ofthe reasons which the

US hes invoked for its blockage and critically evaluates whether these reasons are

valid Third, this chapter will discuss the consequences of non operational AB

241 The paralysis

Based on an assessment of appointment and reappointment procedures, some

controversies beceme the seeds leading to the current perelysis of AB According to

Peter Ven den Bossche, 2010 was the milestone when WTO dispute settlement wes

‘under pressure by some members, notebly the US has taken a stand ageinst the AB

whenever the AB has ruled ageinst this country." Therefore, this section will

evaluate the AB paralysis in two periods: (0) before 2010 and (i) after 2010

LLL Before 2010

Duringthe early years the AB was considered asthe “Jewel of the crown

‘The nodal agency for this gem was undoubtedly the AB, which was tobe commended

for the top quality ofits work and the authoritative and professional interpretations it

ad madk regarding the WTO agreements that this body wes asked to adjudicate

The basic rules on the composition of the AB and the eppointment of its

members were stipulated in paragraphs | to 3 of Article 17 DSU Accordingly, the

DSB appointed eltogether 27 persons to the AB from 1995 and reappointed 17 of

these for e second term." According to Article 2.4 of DSU, the DSB shall take such

1a

4 decision by consensus Therefore, AB members are appointed by consensus, which

means thet there should not be any objections from one of the WTO members to the

eppointment Although most of these appointments and reeppointm ents proceeded

smoothly, there were two noteworthy controversies during thet time

First, the appointment of the first seven AB members in 1995 took almost @

Supra note 9p 500

° Petr Van dan Bossehe (2021), “Tt Demise of the WTO Appelate Body: Lessons for Govemunce of

Jbemmationa Adjudicetim?”, World Trade Duiace Workong Paper, Ợ),p, 3

“Appellate Body AntralRiparfar 2018, March 2019 (WT/AB29),pp 148 15

yea,Ề meinly beceuse the US end the EU initially each insisted on two AB

members, which were opposed by most of the other member states These were

overall 32 condidates from 23 counties (13 slone from EU states) A totel of 54

seperate delegetions provided their views to the Committee of the Six (C6).

However, demends by the EU and the US derailed the process The EU signaled thet

tro seats should go to nationals from EU counties to reflect the Community's

importance ase trading entity Similarly, the US argued thet itwanted two rests given

its sole in-world trade." Over time, the US showed a willingness to accept one seat ifthe EU didthe seme In November 1995, the agreement was seachednot to block the suggested list prepared by the C6, and the original members!” of AB were finally

spproved by the DSB

Second, already in 2001, Claude Berfield of the Washington-based Am sicen

Enterprise Institute suggested thet the WTO dispute settlement system is

‘substantively and politically unsustainable Around that time, the US begen

vigorously criticizing cextein AB jurisprudence, especially in the areas of safeguards,

subsidies, countervailing and enti-cumping duty measures, end the issue of stenderd

of review and other proceduel issues TM Itis well documented thet Mest Jenow (AB

member 2003-2007) was not put forwerd for another term by the USTR because he

‘was not considered sufficiently aggressive in defending the US position and elected

not to write frequent separate or dissenting opinions H9

‘These first hwo controversies were about national representation, reflecting the

fact that, although AB members are sequiredto be “independent and impartial” and,

as mentioned in the first chepter, “iouafiltated with ay government’, national

sepresentation is sill considered important by most member states By contrast, the

mejor appointment conflicts after thet did not concesn the nationality, but rather the

© Mantes of the DSB meeting of 1 and 29 November 1995 (WTD SBMA), pp 3-6

© Sopra note 63

ws ghe 1p 23

ve Sugrenete 713.22

The dighalauvslbs of the AB were: Jats Ba ôn tụ US, top Bey fram New Zeland,

Chur Diter Ehlemem fom Gumey, Sud FENNggw from Egypt, Fienuo Flies from te

‘Phulppines, flo Lacte-Mir rom Uruguay and Maso Matsusaa from apa.

'2 sạn he 9p 500

Bad

5 ty LDunotf and Ma A Pollack (2017), “he Judicial TilaenaTM erin Journal of uematonal

‘Lae, 111Q),pp 267 =368

attitude and performance (but not qualification) of the disputed cendidetes, endit was

sways the US who had objections

3.12 After 2010

Since 2010, the US began threstening the independence and impastiality of

WTO adjudicators by blocking the reappointment of AB members in 2011, 2014,

2016, and again in 2019 `1 The following peregyaph shell analyze this statement

Signs of AB's cisis were considered to have begun in 2011 under President

Berack Obama Specifically, the Obama administration blocked the appointment of

Jennifer Hillman for a second term in 2011 and cleimed thet the WTO hes feiled to

protect American interests which may well be releted to the zeroing controversy TP

‘The US also blocked the initial eppointment of James Gathi, « lew professor at

Loyola University in Chicago who was nomineted by Kenya in 2014.13 This was

sepeatedin 2016 whenit blocked the seeppointm ent of Seung Whe Cheng from South

Kores on the grounds of his judiciel acivisn and overreaching decision-making

spproach The Obame Administration ennounced its decision to block Judge

Chang's reappointment at the DSB meeting on May 23 The reason given was that

they disagreed-with the jurisprudence articulated in four recent decisions of the AB

of Judge Cheng who decided the case, Two of those cases involved China

succesfully chellenging countervailing duties imposed by the Obama

Adiinistration At the DSB meeting the Administration clsadly stated thet AB jurists

needed to be ‘tesponsible” end “accountable for the views thay have endersedl “H7

‘The US sejection of Mr Cheng led to long stand-off, during which Korea did

“not wish to propose another cendidete, The Obama Administration's announcement

dlicited an outery of opposition in the world trade community According to an

account of the DSB Meeting published by the WTO, mamerous governments led by

gra note 100,p 01

ˆ Rabat Howse (2016), "The World Trade Orgmization 20 Years On: Globel Govemunce by Jaliciny”,

Buropean Jotona of eematona Za, 270), 7

° Daagese stan C016) ory Đa of the United Sutes Bang to temationa Le, JIidion D Mortenson 11003),

°< uted Sates Contino Block New Appellate Body Monbesvfrth World Trade Orguniction Rising

‘he Colapse of the Appelate Process, avaible ot lis Jar cembridge ergot fosmalfanerian

{emma of atomic nad suts ct to blac no ape ato ener fore

‘orld bade ggenchuen it me dh colapeeof -spelte

BocessEPIPS64 ASOD 3 CDESC AODAEFUEABETICaccess on 19012024

* Sam by the Unied Sates atthe Meeting of tht WTO Disp Setlement Body Geneve,23 My 2016

South Korea, either objected to the US position or expressed concerns about the

damage that could be done to the WTO The other complaining governments included

Breail, Chine, Colombia, Egypt, the European Union, Honduras, Icelend, Indi

Indonesie, Mexico, Nigeria, Omen, Paraguay, Russia, Switzeslend Taiwan,

Theilend, Turkey, Urugusy, end Vietnam." The deadlock wes only broken in le

2016 by the appointment of Mrs Zhao Hong from China end Mr Kim HyunrChong

from Korea, who wes a former Trade Minister end UN Ambassador of Korea!”

In June 2017, the US blocked the seasch for @ new member for Mexicen ME,

Remizez-Hemandez after he finished his two terms et AB, which begen to put this

agency in crisis Two months later, AB member Hyun Chong Kim unexpectedly

tendered his resignation beceuse he had been eppointed as Korean trade ministes He

sesigned with immediate effect, ie, es of 1 August 2017, although Rule 142 WP

sequires thet resignation should take effect only 90 days after the nolification unless

the DSB decides otherwise, With the term of Ramirez Heméndez having ended on

30 June 2017, there were now two vacancies on the AB, with a third thet of Ven den

Bossche, to follow only four months Iter

‘The year 2018 hasbeen momentous forthe WTO, a turning point in the history

of the organization, with the US tuning its beck to 70-yeerold support of

svultileteraism in principle end practice "8 The Trump Administration beers en

astonishing resemblance with Obam is in its hostility against the AB However, the

Trump Administration did this in « much mare radical way, as it targeted the

svultlaterel trade system as « whole Having repeetedly expressed its doubt end

hostility against the WTO, Trump took action by staring « trade war and rejecting

the commitment drafted and signed by the US." In August 2018, the US ennounced

its plans to block the reeppointment of the AB member from Mewitius, Shree Baboo

Chekiten Servansing P0

” Save ChưngvEz (2019), ‘How WTO Digpats Seulement Sucunbedto the up ARmiietim", GU

Lae Schoo! Puble Let esecrch Paper, (7.24

‘per, PJ C019), “Stam the Bow: US Amack onthe WTO Appelite Body”, Legolas of Economic buegraion, 4ŠQ),p 3

°"G Sacerdati Q018), “Tae WTO Dispute Setinuant Syston and the Challenges to Mobi:

Consolsatng 4 "Comin Gobel Good”, Question of haeretional Lan, (63),g 37

"Wen Rang, Xe Tayi 2020), hw [từ of the WTO Diqpate Sim anÄ Possble Sobtions - A

Historica Assesaua", Jounal 70 & Chana 10G),p ST

‘Sataments by the United Sates atthe Meetng of the WTO De Setlmmant Body,27 Angust 2018,

Ta2019, the US sejected two sóikional proposalsto fill the seats of Ujal Singh

Bhatia of Indie and Thomes Graham of the US, whose second tems expired in

December At the end of its term in December 2019, AB was officially inactive By

November 30, 2020, a the end of the term of the lest permanent AB member, Ms

Hong Zheo from China, all AB seats were officially empty

‘The mumber of new disputes brought to the WTO for resolution in 2020, 2021,

2022, and 2023 fall to 5, 9, 7, end 4 respectively, while in 2018, st was 39 WTO

members agreed to undertake a comprehensive review of the functions of the WTO to

ensure the organization can respond more effectively to the challenges facing the

multilateral trading system Ministers at the 12th Ministerial Conference (MC12)

adopted the Outcome Document on 17 June 2023, which sets out a oadmap for WTO

reform and commits to having a well-functioning dispute settlem ent system fully by

20241

From 26 to 29 February 2024, the 13th Ministerial Conference of the WTO

(MC13) took place in the United Arab Emirates (UAE) DSM in general and AB

in perticulas, have been stuck for years because of disagreements aver how to operate

it Thus, MC13 mainly focused on reforming the DSM to resolve international trade

disputes However, on 2 March 2024, MCI3 ended without any importent

‘breakthrough in DSM reform because the Council only recognized the progress and

reaffirmed their commitment to finding proposals to restore - a fully functioning

spute settlement system by the end of 2024.25

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system From 1995 to 2019, the US was a plaintiff in 124 out of 593 disputes at the

WTO." However, of the 155 disputes in which the US was a defendant, 90% of the

cksputes resulted in a report stating thet US law or measures applied by the US were

inconsistent with the WTO agreements” Therefore, the USTR hes issued a

statement blocking the reappointment of en AB member for @ second term because

of a series of AB disputes that brought many disadvantages to the US The US hes

delivered five statements in the DSB on concerns raised by the functioning of the AB

‘undler the DSU, including) rule 15 of the WP; (i) disregard of the 90-day deadline;

Gd the problem of advisory opinions, (iv) the scope of Appellate Review, and (1)

the precedential value of AB reports 1

2.2.1 Rule 15 of the Working Procedures for Appellate Review

Rule 15 of the WP states:

‘Apperson who ceases to be amember of the AB may, with the euthorizetion

of the AB and upon notification to the DSB, complete the disposition of

any appeal to which thet person was assigned while a member, and thet

person shall, for thet purpose only, be deemed to continue to be & member

of the AB

‘The US claims thet Rule 15 of the WP violates Article 17.2 of the DSU,

according to which the DSB shall appoint persons to serve on the AB for a four-year

tem, and each person may be reappointed once 128

First, the US argued thet the AB simply did not have the authority to deem

someone who was not an AB member to be a member Article 17.2 of the DSU

gives the DSB the power to appoint and reappoint AB members, so the DSB hes the

responsibility to decide whether a person whose term of eppointment hed expired,

should conlnue serving as a member of the AB or not by positive consensus

However, the AB adopted Rule 15 to give itself the authority to allow persons whose

—

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terms as AB members had expired to pasticipate in endrule on disputes 31

Second, the US noted that a person who was no longer a member of the AB

hadmade more appeels than eny other person who was a member of the AB? Even

if the application of Rule 15 were characterized as merely extending the term of &

curent AB member, such action would be inconsistent with the four-year term set by

the DSU and the DSB Therefore, the US was concemed that all of this was contrary

to the DSU end without any DSB authorization B3

By contest, China had stated that the AB was acting precisely within its

‘mandate, including Rule 15, China held this position for two reasons Fisst, Rule 15

applied only to “a person who ceases to be amember of the AB”, and therefore, did

not extend the terms of the AB members Second, a past DSB decision supported the

inclusion of Rule 15 in the WP, whichwasRule 14 on the Establishment of the AB lồ%

‘This rule provided thet “Matters stich as guaranteeing the rotation required by the

DSU should form part of the working procedwes” By allowing the AB members,

whose terms had expired, to finish the cases to which they had previously been

assigned, Rule 15 guaranteed the rotation required by the DSU, and should, thus,

form part of the working procedures, The US argued thet Asticle 17.1 gave the AB

authority to come up with procedures for the rotation of persons serving an the AB,

not the authority to resurect «former AB member or extend his or her tem

In November 2017, in response to concems expressed by the US, the AB

circulated to WTO Members a Background Note on Rule 15.5 Accordingly, Rule

15 of the WP allows the AB member whose temure expires to continue the pending

appeals at hend upon approval of AB and after notification to DSB This rule saves

‘time that would have been taken to replace the retired member and the new member

to acquaint with the case However, the US still disagreed with the response of the

AB asit reised more questions thenits enswers l9”

2.2.2, Disregard of the 90-day deadline

Bacgond Note on Fle 15 ofthe Waking Procedures for App Thực Body Reviw: Commumcition rom

‘he Appelste Body JOBIAB3),24 November 2017

° Sự nga 127,p 34

Intesms of disregard for the 90-day deadline for appeal procedures, thế legal

‘basis in Article 17.5 of the DSU has made it mandatory forthe AB to issue « repost,

in principle, within 60 days of the fling of en appeal to the AB, and at the most,

within 90 days From 1995 uni 2011, the AB complied with the 90-day deadline

However, after 2011, the US allsgsd thet the AB hed routinely violeted Article 17.5

sndignoredthe deadline mandated Ê Since May 2014, no single compleint hes been completed within 90 day BÊ The average length of appeals of thet period is 163 đeys 2 In response, the AB explained the reasons for the delay as follows: #1

The AB faces e substentil workload, with several appellete proceedings

in perllel, often with overlap in the composition of the divisions heering

the different eppedls Due to the number end complexity of the issues

seised on appeal [ ] aswell asthe shortage of staf in the AB Secretariat,

the AB will not be able to cizculate its Report by the end of the 60-day

petiog or within the 90-day timefieme provided for inthe last sentence

of Asticle 17.5 of the DSU

‘This hes been sepestedly acknowledged by the membership, including the US

twas only in June 2018 that the US chenged course and suddenly cleimed, without

even mentioning the workload problems, thet the AB could have complied with the

deacline if only it hed wented to ¥? The US cxiticism is based on three arguments

First, the AB couldhave evoided the deleysifithad limiteditself to addressing

the issues necessary to resolve the dispute In other words, the US claimed thet the

sein, if not the only reason for the deleys was the AB's feilure to refrain from

‘unnecessary consideretions 4

Second, regardless of the reasons for the delays, the AB does not have the

power to điregard Asticle 17.5 of the DSU In the absence of e DSU amendiment, or

ther appropriste DSB action, Asticle 17.5 sets out a rule Because WTO members

have not amended Article 17.5 to provide for an exception itis the responsibility of

> Supra ng 127,926

° mtes ofthe DSBmeetng of 22 Jme 2018 (WTDSBAMHI4) par 5.15

-*US Sateen atthe Meeting of the WTO Dispute Setiemsnt Body, 2? hme 2018,p 9

«Mantes of thề DSB mưsing of 28 October 2015 (WIDSBIMISED) pare 94

“9 Am note 10,p 50

© Sigrenate 139,puas 516-519.

the AB tofollow that rule

‘Third, in any case, an extension of the 90-dey deadline should only be possible

with the consent ofthe pasties because the US believed that AB's disregard of Article

17.5 éiminishes the rights of WTO members, However, WTO members including the

EU, Breail, end Chine pointed out thet requiring the pasties to consent to any delay

‘would undermine the negative consensus rule of Asticle 17.14 of the DSU If a pasty

refused to consent after the 90-day deadline had passed, it could in effect block the

adoption of the report HS

Ta sum, the AB hes indeed feiled to comply with the 90-day deadline of Asticle

1755 of the DSU, sesely until 2011 and consistently since 2014 However, the reesons

for thisfeilue were largely beyond the control of the AB due to the increased manber

end especially the increased complexity of disputes

2.23 The problem of advisory opinious

‘The US seised two issues regerding advisory opinions, including () the AB

hnas repeatedly rendered edvisory opinions onissuesnot necessary toresolve disputes,

end Gi) the issuance of advisory opinions ham s the DSM.

First, in terms of the AB advisory opinions on issues not necessary to resolve

sputes, there are three cases where the AB issued advisory opinions that the US

considers unnecessary, including () China — Publications end Audiovisual

Products," (i) Argentina ~ Financial services, and git) BU ~ PET®

In China — Publications and Audiovisual Products, the US sued China and

sppied meanwes effecting the business sights and distibution services of

publications end audiovisual entertainment products The measure in that case simed

to limit the capacity of foreign enterprises to import end distribute foreign

publications and audiovisual products, China argued thet its measures ware aimed at

protecting public morality according to Asticle XX (4) GATT 1994 As a result, the

AB upheld the panel's conclusion thet China hed not demonstrated thet the relevant

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“$363: Chana Measives Afecting Trading Rights eu Distribution Services for Cetin Publications aed

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provisions were “necessary to protect public morals t9

‘The problem was thet the AB had adopted an intespretation of paragraph 5.1

of Chine's Accession Protocol, which hed not been eddessedin the patie# appellate

submissions! The US also noted thet the AB discussion of this issue wes not

necessary and clear That discussion listed fectrs thet “map” be relevant, and used

terminology not found in the Protocol whose precise meaning was not immediately

epparent Since the AB plainly represented an inappropriate advisory opinion,

some WTO members (the EU end Japes) raised concerns sbout the AB's actions in

the DSB?

In Argentina — Financial Services, Panama sequested consdltadions with

Argentina with respect to certain measures imposed by Argentina that affect trade in

goods and services, Panama claimed thet the measuresvioleted AsticlesII'1 and XVIL

of the GATS because its services were treated less Fevorably than like services from

counties qualified as cooperative end like domestic Argentinian services"

Argentina argued that evenif there were such violations they could justified ether

by Article XIV(O of the GATS or Paregraph 2(4) of the GATS Annex on Financial

Services The penel found thet although there wes no violation of Asticle XVII of

the GATS, all measures were inconsistent with Article II of the GATS, and these

inconsistencies could not be justified by either Article XIV(0) of the GATS ar by

Paragraph 2(4) of the GATS Annex on Financial Services “ The parties eppesled

the panel's findings on “Tikeness" and “treatment no less favorable

‘The question for the AB wes whether the penel correctly determined thet

services and service suppliers of certain countries were “Tike” within the meaning of

the GATS The US argued thet the AB disegyeed with the panel's conclusions on this

matter, end should have concluded its analysis Instead the AB steted “Several of

the issues raised in Panama's appeal have implications for the interpretation of

provisions of the GATS With these considerations in mind we hun to adévess the

* appelate Body Repent, DS363, China Publications pin 415

° Arnaes ofthe DSBmvithg of 19 October 2010 (WUD SBMI78) pee 77

issues raised in Panama's appeals" The AB then undertook a 46-page analysis

endinterpretations of verious provisions of the GATS, every part of which was obiter

dicta, Once agein, the US emphasized thet AB hed taken it upon itself to offer

interpretations not necessary tothe resolution of a dispute

In BU — PET, the EU imposed countervailing meestes on certain

polyethylene terephthalate from Pakistan In thet dispute, Pakisten protested thet the

EU's imposition of anti-subsidy duties on PET from Pakistan was inconsistent with

the WTO Agreement on Subsickes and Countervailing Measures (SCMA)." After

the panel bad been established by the DSB in Merch 2015, the BU in Merch 2016 hed

asked the panel to cease its work because the challenged measure had expired in

September 2015 1 Pakistan admitted thet the EU measwe had expised but saised a question of whether it violated the SCMA The penel found some violations of the

SCMA, but, given thet the measure hed already expired, made no recommendetion

pursuant to Ast 19.1 of the DSU thất the EU should bring the measwe into

conformity with the SCMA."*! On appel, the EU argued that the panel should not

have concluded on en expired mesure end asked the AB to quash the panels seport

inits entirety 19

‘The AB rejected thet request and found thet the expiration of « measure by

itself was not sufficient to depsive the panel ofits euthosity to conclude the measwe's

consistency with WTO lew AB thenresolved the parliez complaints onissues elated

toSCMA.® The US believed thet Pakisten sought an advisory opinion on the future pplication of the SCMA, not the EU's expired measures TM According to the US, the

penel end the AB should heve found the request Pakistan's demand fells outside the

terms of reference lể

Besed on three examples, the US concluded that the purpose of the dispute

sesolution system is not ebout making the lev, but to help member counties resolve