The WTO has one of the best functioning dispute settlement systems in international law today, with a record of more than 500 trade disputes resolved in a matter of 20 years, dealing with all kinds of issues from bananas to sea turtles, alcoholic beverages to aircraft subsidies, computers to patents, cars to newspapers. Inter-states complaints on all barriers to trade can be brought before the dispute settlement system, where a panel will rule on the claim if no mutually agreed solution has been reached during a phase of bilateral consultations. A panel is composed of three adjudicators or panelists selected from a list of governmental and non-governmental individuals nominated by WTO Members, and their reports are adopted by reverse consensus by all the WTO Members. Appeals are dealt with by the Appellate Body (AB), a standing body of seven judges that can uphold, modify or reverse the legal findings and conclusions of a panel, through reports issued by a randomly chosen three-member bench. Both panels and AB rule in unison, without the option of individual opinions. The seven AB members are appointed by the WTO Members for four-year terms, with the possibility of being reappointed once. The dispute settlement system is becoming increasingly popular, with a record of 30 active dispute settlement panels per month in 2015. While there is much at stake – economic and political interests - for the countries party to a dispute, panels and AB have delivered complex legal rulings – and especially the AB’s rulings have been praised for their high legal quality and are hence widely accepted. And yet, the AB is currently facing a grave systemic crisis that puts in question the very essence of the dispute settlement system.
A few weeks ago, one of the sitting members of the AB, the South Korean Mr. Seung Wha Chang, was denied a second term due to objections by the US. Ever since the WTO was created, granting a second term for a sitting member has been common practice. However, with regard to Chang, a well-respected scholar in international trade law, the US has put its foot down, blocking his reappointment. They accuse the Korean member of deviating from his appropriate role ‘by restricting the rights or expanding trade agreement obligations’ in four cases the US was a party to. However, how could the US know Chang’s line of thinking, since AB rulings are authored by the division as a whole, without individual rulings on the issue? By interference? By inside info? And why Chang? He seems to be the most convenient target: he was sitting on all four cases that the US was unhappy with; his first term had passed (do not pick a fight with a member with a long remaining term, and nothing can be done when a judge is already in the second term); and as an academic he seems to be a safer target than a member with deep government connections.
Days after the US’ position was made public, the other six AB members wrote a strong letter of support for Chang to all WTO Members, emphasizing his ‘integrity, independence and impartiality’. The sitting judges recalled that all decisions taken involve an intense process of discussion among all the AB members, and are thus reports of the AB as a whole. Furthermore, the WTO adjudicating system is ‘based on WTO Members’ trust in the independence and impartiality of AB members’ and ‘linking the reappointment of a member to specific cases could affect that trust,’ they wrote. Soon after, another letter was written by all the former, living AB members, expressing their utmost concern on the issue.
The US has been criticized for not implementing rulings in some important cases. US measures have been condemned by the AB in numerous cases. The US seems to be sending a signal now: behave or we’ll block your reappointment. Even though the US claims to have received a ‘surprising amount of quiet support behind the scenes,’ publicly the US seems to be rather lonely in its position – and rightly so. While there might be good reason to raise the issue of an activist bench, and WTO Members have the right to discuss whether, and if so, how, to restrict the AB’s authority – thinking of issues such as a possible legal basis for exercising judicial economy or a legal basis to curtail more systemic guidance - this unprecedented move by the US cannot be the way forward. With this political move, the US is threatening the independence of the judiciary and hence the very essence of the WTO dispute settlement system.
NB: As a little extra salt in the current wounds, the WTO Members cannot agree on the successor for the Chinese AB member Ms Yuejiao Zhang, whose second term expired at the end of May. From seven, the AB is thus currently down to five members. To be continued!