A New Approach to the Appellate Body Impasse at the WTO

Accommodating American Exceptionalism

On Wednesday Joanna Langille and I had the opportunity to present in Ottawa some of the ideas in our recent American Journal of International Law article. The occasion was the opening panel of a conference on WTO dispute settlement reform. Responding to questions from Ottawa law school dean Kristen Boon, I tried to elaborate on how the approach in our essay might bear on the crisis in dispute settlement precipitated by the demise of the Appellate Body.

In the AJIL piece, Langille and I emphasize the systemic legitimacy function of the Appellate Body, which has articulated jurisprudential principles to sustain a delicate equilibrium between the need to police and discipline cheating on general trade rules, on the one hand, and, on the other, the imperative to preserve policy space for deep regulatory diversity -what we call “pluralism.”

As I indicated in my answers to Dean Boon, the good news is that the jurisprudential acquis of the AB has so far outlasted the AB itself. For example, the voluminous literature on the WTO compatibility of the EU’s CBAM continues to rely on the lines drawn in foundational WTO AB reports like Gasoline and Shrimp. Recent post-AB Panel reports, and the couple of ad hoc arbitration awards substituting for appellate review, (Turkey-Pharmaceuticals and Colombia-Frozen Fries), have relied heavily on AB case law. At the same time, as in Frozen Fries, arbitrators have shown a willingness to depart selectively from AB precedent where the AB got it badly wrong (in Frozen Fries, the arbitral award breathed life into the standard of review for anti-dumping in 17.6 of the AD Agreement, which the AB had essentially written out of WTO law based on a tortured interpretation of the Vienna Convention on the Law of Treaties).

So, from a systemic legitimacy point of view, one could argue that we now have the best of both worlds. Adjudicators understand their responsibility to preserve the legal security created by the bulk of AB jurisprudence while exercising the freedom to deviate and correct course where there are good reasons to do so.

But many trade law and policy scholars and practitioners look at the AB in a different way. They would rather emphasize the AB as an indispensable cornerstone of compliance and enforcement in individual disputes (although ultimately compliance itself is affected by systemic legitimacy); without the AB, appealing into the void is always possible, and the guaranteed access to enforcement measures under DSU Article 26 disappears. Simply put, appealing into the void blocks the Dispute Settlement Body from considering the adoption of the panel report and thus the losing Member can preclude any binding effect. Of course, not all reports are appealed into the void, and the demise of the AB may have led to durable settlements in some cases, but still the disappearance of the AB is more than a mere chink in the armor if one views the DS system as primarily a compliance mechanism. Unfortunately, this can only be fixed by either appointing a new AB bench (so far unacceptable to the US), or amending the DSU to allow for binding panel reports without a right of appeal.

But there are also real risks of losing the systemic legitimacy function of the AB, given some of potential looming disputes that raise sensitive issues of policy space and that present legal issues of first impression (including potentially on climate measures). How, then, to address this need for an appellate instance in the face of the apparent intransigence or at least indifference of the Biden Administration on restoring the AB? The solution I shared at the Ottawa conference may seem radical from the perspective of what the WTO originally aspired to. But in the current situation I think it is worth consideration: the AB could play a meaningful systemic legitimacy function even if some WTO Members (i.e. the US) no longer accept compulsory appellate jurisdiction.

Let’s face it, is there any international court where today in fact the US subjects itself to compulsory jurisdiction without qualification? As American international lawyers know all too well and often regret, the US has progressively narrowed to almost zero the kinds of situations where it adheres to the compulsory jurisdiction of the ICJ. The US hasn’t even joined the International Criminal Court-though it has been known to support selectively particular prosecutions. The AB was a big exception to American exceptionalism-to a conception of sovereignty that seems to preclude bowing before international courts (while somehow New York Convention and ICSID arbitral awards are different- though the former are subject to judicial review or possible non-enforcement in domestic court on grounds including public policy). But even in the case of the AB it was necessary to propose an unusual domestic safety device in order to approve the WTO Single Undertaking, including the DS system. Thus, the Dole Amendment would have allowed the triggering of a resolution in Congress for withdrawal from the WTO if a panel of US jurists determined that 3 rulings of the Appellate Body in a prior 5 year period constituted judicial overreach adverse to the United States. The Dole Amendment was never passed but at the conclusion of the Uruguay Round it was on the shelf as a reminder and perhaps a threat that US acceptance of AB compulsory jurisdiction and finality of its rulings was not entirely unconditional.

My proposal today is that a new Appellate Body be appointed, and that in return for not blocking consensus on these nominations, the US would be accommodated by a waiver that allows the US government to avoid the Appellate Body exercising jurisdiction in any case where the US is a party (though of course also being able to consent to AB competence if Washington wants to in a given case). Under a waiver, it might also be possible to accept AB jurisdiction subject to reservations (for example, excluding AB jurisdiction over matters of national security under GATT Article XXI).

As with the ICJ , the AB could play an important systemic legitimacy function even without the US accepting routinely its jurisdiction in disputes involving the United States. Many states do not accept the compulsory jurisdiction of the ICJ, but they still cite ICJ rulings as valid indicators of the content of international law, and have often based their international conduct, or at least the legal stances they take on that conduct, on the law as set out in ICJ opinions. At UNCITRAL, states are now considering proposals for appellate review aimed at creating a consistent jurisprudence in Investor State Dispute Settlement, but this would probably be on an opt in basis-not all states would be expected to buy into appellate review, only a critical mass.

Besides a waiver, there may be other ways of regaining the systemic legitimacy function in WTO dispute settlement, like giving the MPIA a greater sense of institutional gravitas-perhaps a small permanent secretariat and a core group of standing judges supported and paid for by the membership of the MPIA. A substantial expansion of its membership would also be needed for the MPIA to be seen as a genuine world economic court.