The WTO Dispute Settlement System: a fall from grace - What happened?
Since the establishment of the WTO, the promise was made that the world would finally have an effective system of enforcement for trade and IP law. Peter van den Bossche discusses the American boycott of the Dispute Settlement System (DSS) under the WTO, in light of the TRIPS Agreement, at the IGIR – IEEM IP Seminar in Macao.
The golden years of the DSS
From its establishment, the DSS received 590 requests for consultations from Members and 64 compliance cases, 41 of which related to TRIPS. In 50% of the TRIPS cases, a mutually agreed solutions could be reached in the consultations phase. For the other 50%, a panel was established. Overall, compliance with panel reports (i.e. judgments) among WTO Members amounts to about 85%.
Such wide-spread reliance on an international dispute settlement system is unprecedented. It is out of question that the DSS as part of the WTO has been a magnificent departure from previously existing mechanisms that were incomplete and did not secure compliance. Nonetheless, we are witnessing a shift of perception of the DSS: from being ‘the jewel in the crown’ to a body in looming crisis, developing into an existential one.
The looming crisis
Between 2005 and 2011, the DSS was overburdened with a barely manageable workload. Aggressive antagonistic discourses started to come about and there was a general tendency to undermine the independence and impartiality of judges.
The institutional imbalance that laid at the foundations of the WTO also started to surface. While the legislative branch of the organization did not function as well as envisioned, the branch of the judiciary (the DSS) was more functional than ever. DSS rules were never adapted to the changing circumstances and no negotiations were started. This imbalance became evident and gradually weakened the public perception of the system.
The existential crisis
It is worrying to see how it has developed into an existential crisis of the system that threatens its very existence. The Trump Administration, in 2018, circulated a report amongst the WTO Members, outlining a number of concerns. This report arguably pinpoints the start of the downfall.
The US submits that there are important issues to be discussed:
- the overreach of the Appellate Body (AB). Here, the US argues [see Lighthizer’;s declarations] that the AB exceeded its mandated powers exercising judicial activism, primarily in trade remedy cases.
- the uncertainty as to the binding nature of precedent reports. While the AB treats precedent case law as binding (for the purposes of judicial consistency), that is not explicitly provided by the Dispute Settlement Understanding (DSU).
- the 90 days maximum timeframe. All cases should be finished within 90, nonetheless, the cases now have become so elaborate that it is not possible to finish a case in 90 days.
- the role of the AB secretariat. The US contests that the AB Secretariat has exceeded its mandate by physically drafting panel reports, although accepts that the Secretariat does not have a say in the actual content of the reports.
- A number of AB judges effectively exceeding their term of office by relying on art. 15 of the Working Procedure to finish the cases on which they were working, even after the expiration of their mandate.
The US clearly outlined its intention to put a hold on the approval of the WTO’s entire budget as “the organization’s compensation structure creates an incentive for appellate members, who can make more than 300,000 francs a year, to string out cases to boost pay”.
A number of engagements by other WTO Members tried to address these concerns. The US participated in the discussions by means of a notetaker and disregarded any patch that was proposed to move forward.
The threat that December 11th 2019 poses
Based on these concerns, the US has decided not to nominate a replacement and block the reappointment of any judge for the AB (more info here, by Jens Hillebrand Pohl). On December 10th 2019, Amb Ujal Bhatia (India) and Mr. Thomas Graham (US) will end their term of appointment at the AB. The AB will be left with one judge only, Ms. Zhao Hong (China). The AB requires three judges to function. After December 10th 2019, there is no capacity for the AB to hear any new case, nor will it be able to approve any new panel report, or approve any retaliatory measure. Arguably, the essence of the DSB will fail.
The DSS is trembling. Yet, the WTO has never been busier than now: there are 74 pending cases, of which 24 are consultations, 36 are panel proceedings and 12 AB proceedings. There is an existential crisis, but WTO Members seem to keep relying on the system, more than ever: are Members just being oblivious to an unavoidable reality or is the system worth holding on to?
|Written by Debe Debernardi IPKM student 2019/2020 - more blogs on Law Blogs Maastricht|