Can the Eu's Reform Proposal for the Wto Dispute Settlement Understanding Break the Impasse at the Wto?

• Publication year: 2019
• Author: Federica Ronchetti*

CAN THE EU'S REFORM PROPOSAL FOR THE WTO DISPUTE SETTLEMENT UNDERSTANDING BREAK THE IMPASSE AT THE WTO?

Federica Ronchetti*

Kai P. Purnhagen**

I. INTRODUCTION

For almost two years, President Donald J. Trump's administration has been blocking the appointment of new members of the Appellate Body (AB) of the World Trade Organization (WTO), preventing the vacancies from being filled and compromising the ability of the system to solve problems. The concern is that the US is weakening the Dispute Settlement Understanding (DSU)-based system with this obstruction; in fact the number of AB panelists has already decreased from 7 to 3, which is the minimum quorum for each dispute case, according to article 17.1 of the DSU.

In June 2018, the European Union (EU), following a European Council mandate, began working with other member countries to develop reform proposals for the AB. We will introduce, discuss, and analyze the proposals, and we will evaluate whether the solutions proposed are likely to solve the current impasse. We conclude that, although the submitted proposals address the major substantive, procedural, and institutional issues raised by the US during various WTO meetings, the feasibility and effectiveness of the proposed solutions are highly doubtful.

II. US CRITICISMS AND THE EU'S PROPOSED SOLUTION

Before introducing the solutions proposed by the EU, we first outline the criticisms voiced by the US.

A. The US Criticisms

Over the last few years, and especially since the election of President Donald J. Trump, the US has raised a number of concerns about the functioning and procedures of the AB. The criticisms include, among others, that the AB exercises a "persistent overreach."¹According to US Ambassador Dennis Shea, this encapsulates three US concerns, namely: (1) the AB has consistently overstepped its authority by interpreting WTO members' domestic laws; (2) AB members have issued advisory opinions on findings not needed to resolve the dispute at hand; and (3) the AB has treated its findings as if they were setting precedents for the adjudication of subsequent disputes, although each of these actions lacked a foundation in WTO law.² The US has also complained that the AB is violating the 90-day deadline for completing appeals set out in article 17.5 of the DSU, and that panel members are continuing to hear appeals after the expiration of their terms, contrary to Rule 15 of the AB Working Procedures. Additionally, the US has criticized the number of panelists and their employment conditions, stating that although AB positions are formally considered to be part time, its members are required under article 17.3 of the DSU to "be available at all times and on short notice," which essentially makes them full time. The US argues that this burden not only limits the number of possible candidates, but also leads to delays in issuance of final decisions.³

AB members are appointed by the Dispute Settlement Body (DSB), which is composed of representatives of all 164 member countries. Appointment decisions, according to article 2.4 of the DSU, shall be made by consensus, meaning that the formal objection of any member can block any appointment or reappointment. Thus, by denying the consensus for the nominated candidates, the US has been able to block the appointment of new AB members and the reappointment of AB members ending their first 4-year mandate. The obstruction has already started causing major damage to the system: as AB Chairman Mr. Ujal Singh Bhatia underlined, forming three-member panels has become difficult, especially with potential conflicts of interest.⁴ In addition, by December 2019 the term of office of two further members will expire,⁵ rendering it impossible for the AB to form a sitting panel to address filed appeals and eventually blocking the institution's operation altogether.⁶ More broadly, such system paralysis could reduce the member countries' faith in the institution and possibly also decrease their participation in the negotiations.⁷

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B. The EU's Proposed Solutions

In order to solve the impasse and get the US to release the blockade, in December 2018 the EU and other WTO members jointly formulated a concept paper with reform proposals.⁸ One proposal is for a new transitional rule allowing outgoing AB members to continue working on the disposition of a pending appeal. Another proposal is to authorize exceeding the 90-day decisional time frame stipulated in article 17.5 of the DSU, if the parties involved in the dispute agree.⁹ With regard to the staffing issues, the proposal also includes extending the term of office of the AB members from 4 years to 6 or 8 years, together with an increase of their number from 7 to 9 and the conversion of the position to full time.

Another suggestion was to amend article 17.12 of the DSU by adding a sentence requiring the DSB to address...