6:48 AM Nov 29, 1994


Geneva 28 Nov (Chakravarthi Raghavan) -- Should or could the World Trade Organization's Dispute Settlement Understanding (DSU), through its Appellate Body, impart some coherence and consistency to the GATT/WTO law, filling in gaps left by negotiators, through interpretations of the multilateral agreements annexed to the WTO?

This is probably one of the thorny questions awaiting answers and solutions from trade diplomats as they make preparations for the entry into force of the World Trade Organization on 1 January 1995.

The WTO's Preparatory Committee's Sub-Committee on Institutional, Procedural and Legal Matters, which is chaired by Amb. Kesavapani of Singapore, is looking into these and other matters relating to composition and terms of reference of the various bodies and instruments of the WTO.

The subcommittee which held a meeting Monday to consider, among others, proposals about the composition of the Appellate Body, procedures for selection and appointment of the seven members of that body, their remuneration and whether they will function as a one collegiate organ, is reported to have put off decisions pending further consultations.

With the United States ratification process having taken the turn it has, and the vote scheduled in the two Houses of Congress for Tuesday and Friday, decisions on several of the preparatory questions have had to be put off till the vote.

Partly this is because if the US Congress negatives the agreement, there is no point in any one working at and producing solutions on such matters. But partly too there has been the tacit general understanding not to say or do anything that would give a handle to the WTO opponents in Washington. While the prospects for US acceptance seem better now than a week or ten days ago, it is still seen as dicey and delicate.

Before President Clinton and Senate Republican leader Bob Dole reached the "compromise" they did over the WTO agreement and the US domestic judicial review panel, senior officials of the US and the EU had discussed the questions relating to the composition and appointment of members of various important bodies of the WTO -- including the Appellate Body under the DSU.

Some of these have been incorporated into a secretariat non-paper for the Kesavapani sub-committee, but decisions on them were put off Monday pending further consultations.

While the Clinton-Dole compromise could be dismissed as essentially an internal US matter, the credibility of the future WTO dispute settlement system (in the eyes of the international trading community) would well depend on the nature of the Appellate Body, its composition, and whether it would be able to, and in fact function, not only independently but appear to be doing so without looking over its shoulders on the threat of US domestic review process if it were to rule against US?

The WTO's DSU envisages an Appellate Body which could hear, appeals by either party to a dispute against a panel report (which would otherwise be adopted automatically), and give rulings on "issues of law covered in the panel report and legal interpretations developed by the panel".

Both panels and the appellate body are intended to hear disputes and resolve them in the light of the agreement or agreements cited by the parties bringing up the dispute.

GATT panels in the past, and probably in the future too, generally look into past precedents or interpretations cited by parties (in panel reports that have been adopted by consensus by the GATT CPs), and while not bound by them generally follow the same line.

The Appellate body is to consist of seven members, three of whom are to serve on any one case, with the three chosen by rotation. The members are chosen for four-year term, renewable once, but with three of the first appointees, chosen by lot, to retire after two years.

There is no provision in the DSU to suggest that while three members, serving in rotation will head particular appeals, it will be a collegiate decision of the seven-member body.

Nor is there any provision in the DSU (or general principles of interpretation in international law and commercial law) to suggest that the Appellate Body will in fact function like any highest judicial body inside a country, like a Supreme Court in Anglo-Saxon legal systems, which through a process of interpretation (and application of res judicata principles) in effect over time produce coherent law.

But the GATT secretariat 'non-paper', which seemingly leaving the issue for decision later when the DSU and its Appellate Body come into being and settle their working procedures, nevertheless appears to envisage such a role.

Among the 'matters concerning the internal procedures of the appellate body', that it suggests should be left for the future Appellate Body decision, are issues such as the manner of rotation of the Appellate Body members and "the participation in a particular case of the non-sitting members".

The wording "participation...of the non-sitting members" appears to envisage a collegiate role for the Appellate Body to provide internal consistency and coherence over the 400 and odd printed pages of detailed rules of separate agreements (clobbered together into one Annex of the WTO to compel everyone to accept everything).

If some have some inconsistencies or different nuances of rights and obligations, it was because the participants could not reconcile them and left them vague or used ambiguous language.

And unlike courts in domestic law, the DSU (whether panels or its appellate body) "cannot add to or diminish the rights and obligations provided in the covered agreements", and interpretations of international law has to be provided by the Contracting Parties, a trade official noted.

With a US domestic review process functioning as a constant shadow over the DSU, and with many ambiguities left deliberately in many agreements, attempts to bring about coherence could in fact result in stamping the current 'trade power' on to the system to the detriment of the developing world, they note.

Some of the other issues in the paper relate to the remuneration, qualifications and the impartiality of the members the appellate body.

But they won't be on whole-time payment. At least to begin with, the Appellate Body members, it is suggested, should be paid a monthly retainer of $5000 to be available on call, plus a 'fully-adequate' daily fee, travel allowance and per diem etc for the periods of actual work in hearing cases.

The DSU requires that the Appellate Body "shall comprise persons of recognized authority, with demonstrated expertise in law, international trade and the subject matter of the covered agreements generally".

But the non-paper suggests that the expertise of each member would not have to be demonstrated equally in all three areas but within the Appellate Body as a whole -- which appears to suggest either a selection process for any case of the three members from their expertise or a collegiate functioning of the body, but neither of which is provided for. Rather there is a procedure for 'rotation' of members for each appeal hearing.

The DSU also provides that members of the Appellate Body, "shall not be affiliated with any government".

But the paper interprets this to mean "any attachment with a government that compromise their independence of judgement", in a sense qualifying the requirement against 'affiliation'.

But with the roles relating to legal interpretations with important commercial implications, the issue of commercial affiliations or interests also arise.

The DSU in this area merely provides that "they shall not participate in the consideration of any dispute that would create a direct or indirect conflict of interest".

The US has sought to address this issue by proposing some rules of 'ethical conduct' for disclosure by panellists and appellate body members to the Registrar of the DSU, the duty to disclose any 'interest'. The US proposal would in effect import into the DSU system, the US domestic 'conflict of interest' rules.

One trade official said that at the international level this could have some repercussions and ultimately keep away the kind of expertise needed. Also, in a case involving say disputes between two TNCs -- whose cases have been respectively taken up by their home governments -- would non-interest in the two alone suffice? What about interest in other commercial or business activities?

Several of these questions are not simply procedural, but involve many substantive questions, and are difficult to be disposed of in the short period of time before WTO entry into force -- particularly by relatively junior negotiators on the spot.