APPELLATE BODY DEADLOCK CONTINUES AT WTO

9:24 AM Oct 31, 1995

APPELLATE BODY DEADLOCK CONTINUES AT WTO
Geneva 31 Oct (Chakravarthi Raghavan) -- The European Union Council of Ministers appear to have objected to the proposed composition of the Appellate Body of the Dispute Settlement Mechanism at the World Trade Organization and has asked the EU's negotiators to undertake renegotiations to secure a better balance.

The Dispute Settlement Body of the World Trade Organization is due to meet Wednesday, with the composition of the Appellate Body as an item.

According to a broadcast by the French Radio International and other reports received here, France and some others objected to what they saw as a appellate body dominated by US allies, and accused the EU's Executive Commission and its Trade Commissioner, Sir Leon Brittan, of having bungled the negotiations and allowing the establishment of a body dominated by allies of the United States.

The French minister was quoted as telling the media, after the meeting of the Council of Ministers at Luxembourg, that it was totally unfair that Europe, accounting for 45% of the world trade had only one seat on the appellate body, while the other six had gone to the United States and its close allies.

The EU Council of Ministers has not cleared the list and is due to meet again on 10 November.

There have been some reports that the EU Commission has been asked to withhold its consent and ask for a "rebalancing" of the membership. Last week, the chairman of the DSB, Australia's Don Kenyon, put forward at an informal meeting of the heads of delegations a list of seven names for the appellate body membership.

The names suggested by Kenyon were: James Bacchus (former US Congressman and leading Congressional voice on trade issues), Christopher David Beeby (diplomat and foreign office official of New Zealand), Claus-Dieter Ehlermann of Germany (leading trade lawyer and expert), Florertino Feliciano of the Philippines (Associate Judge of the Supreme Court), Said El-Naggar of Egypt, Mitsuo Matsuhshita of Japan and Julio-Lacarte Muro of Uruguay.

Except for the German, the others are in the APEC forum or in the Cairns Group or allied to the United States, the Europeans and some others have been privately complaining.

At the heads of delegations meeting where these names were announced, the EU, Switzerland and Brazil expressed some reservations. India went further and said that the process of selection over the last several months had run contrary to the original intentions and that the outcome would reflect adversely on a key element of the WTO system and its credibility.

A selection body consisting of Kenyon, Amb. Kesavapani of Singapore (WTO General Council Chair), Amb. Minoru Endo of Japan (Chair of the Goods Council), Amb. C. Manhusen of Sweden (Chair of the Services Council), Stuart Harbinson of Hong Kong (Chair of TRIPs Council), and the WTO Director-General Renato Ruggiero were entrusted with the task of choosing the seven for approval by the DSB.

The Appellate Body members, according to the WTO's Dispute Settlement Understanding, were required to have "demonstrated expertise" in law, international trade and the subject matter of the WTO's covered agreements in general.

At the outset, in inviting nominations from governments, Kenyon had said that the persons to be named needed to have the "demonstrated expertise" in all three areas. The EU and the Americans also talked at that stage of the Appellate Body being chosen purely on merits, without any regional or other considerations.

The selection body interviewed more than 30 candidates, and appears to have chosen a tentative list of seven.

At that stage, when Kenyon told the DSB that he was in a position to announce the names, but that he was holding consultations to ensure consensus, some of those in the selection committee had privately indicated that the problem was over the insistence of the US and EU to have two nominees each. Several others had said that Kenyon should go ahead and propose the names, so that the US and EU would either have to say no publicly or accept it.

But Kenyon did not do so and, on the basis of the tentative list, appears to have started consultations, with the United States and the European Union and the two at the beginning held out for two seats each.

Using this as leverage, some of the trade diplomats say, the United States got an American national appointed to head the legal division of the WTO secretariat, and a Canadian national to head the secretariat division of the Standing Appellate Body -- two departments of the WTO secretariat who play a key role in guiding the panels and the appellate body in disputes.

While publicly the dispute over the last several months appeared to dwell on the insistence of both US and EU to have two seats each, some European sources complain that Kenyon and the selection committee allowed the United States to manipulate the process, by withholding consensus to ensure selection of candidates from countries who could generally be expected to be pro-United States.

Whether this is in fact what happened would be difficult to pin down, but atleast in terms of the end-result, it could not be said that all the candidates possess all the three qualifications set in the DSU, and which Kenyon at the outset loudly proclaimed.

There are also reports that both US and EU used subtle tactics to keep out personalities who might take a strong and independent stand against them. But in the process, the US could be said to have been more successful.

With most trade disputes involving the US, EU, Canada and Japan, and the appellate body intended to provide some authoritative rulings on trade law, and with the general expectations that nationals of countries would not be on the 3-member appellate body panel to hear appeals, the composition of the other members become important.

Other observers suggest that while there might have been some grumbling, if the selection committee at the very beginning of the WTO process had gone ahead and announced the names, the credibility would have been enhanced. But it will be wrong to assume that the nominees favoured by the United States would in turn favour the US, but might prove to be independent and go against the US. However, they start from an unnecessary handicap caused by the prolonged consultations, adding to the many credibility issues that the WTO has accumulated over these last ten months of its first year.