Inclusion of Appellate Body Remand Authority in the WTO Dispute Settlement Understanding : Grounds and Procedure

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INCLUSION OF APPELLATE BODY

REMAND AUTHORITY IN THE WTO

DISPUTE SETTLEMENT

UNDERSTANDING

GROUNDS AND PROCEDURE

MASTER’S THESIS

AMSTERDAM LAW SCHOOL - FACULTEIT DER

RECHTSGELEERDHEID

UNIVERSITY OF AMSTERDAM

Student:

Martin Reuling

Student Nr.:

10451587

Programme:

Research Master’s Public International Law

Supervisor:

Prof. dr. Pieter Jan Kuijper

Second Reader:

Dr. Catherine Brölmann

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STATEMENT OF AUTHENTICITY

This document is written by Student Martin Reuling who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

Amsterdam Law School is responsible solely for the supervision of completion of the work, not for the contents.

Amstelveen (NL), 20.08.2015

VERKLARING EIGEN WERK

Hierbij verklaar ik, Martin Reuling, dat ik deze scriptie zelf geschreven heb en dat ik de volledige verantwoordelijkheid op me neem voor de inhoud ervan.

Ik bevestig dat de tekst en het werk dat in deze scriptie gepresenteerd wordt origineel is en dat ik geen gebruik heb gemaakt van andere bronnen dan die welke in de tekst en in de referenties worden genoemd.

De Faculteit der Rechtsgeleerdheid is alleen verantwoordelijk voor de begeleiding tot het inleveren van de scriptie, niet voor de inhoud.

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ABSTRACT

To compensate for the limitation of the Appellate Body’s mandate to issues of law, the Appellate Body should have the competence to remand a case when it cannot resolve the dispute within the limits of its mandate. This thesis investigates on which grounds such remand should be allowed and how it should be organised.

Absent a remand authority, the AB has developed an inconsistent body of case law in which it either completes the analysis or declares itself unable to resolve the dispute. Completion of the analysis often amounts to a violation of the AB’s mandate enshrined in article 17.6 DSU and deprive parties of their right to an appeal. Abandonment of the case leads to a failure to meet the objective of expeditious and settlement of trade disputes. The AB has completed a panel’s analysis when it found there were sufficient uncontested facts available on the panel record or when there was a sufficiently close connection between the analysis of the panel and the analysis to be performed by the AB. However, due to an inconsistent application of these standards through the years a considerable degree of legal uncertainty remains.

Based on this analysis, two grounds for remand can be identified. The first ground would be insufficiency of the uncontested facts on the panel record to perform the analysis necessary to resolve the dispute. The second ground would be the necessity of a factual analysis that is substantially different from the one performed by the panel. In that case, the boundaries of the AB’s mandate and the due process right to an appeal discourage resolution of the dispute by the AB. Remand on these grounds could offer expeditious resolution of trade disputes and guarantee respect for the limits of the Appellate Body’s mandate.

A comparative analysis of national and international remand procedures indicates that review of the remand panel should be limited to those issues remanded by the AB and that the panel should be bound by the Appellate Body’s ruling. In addition, the creation of a mandatory remand would lead to unnecessary remands and delays in the resolution of trade disputes.

Remand proposals presented during the DSU review negotiations indicate that member states seek to retain considerable influence over the dispute settlement procedure. Most proposals presented during the negotiations would make remand contingent upon a request by one of the parties or a decision of the Dispute Settlement Body. This approach would limit the AB in the independent exercise of its mandate. Remand is an important instrument for the fulfilment by the Appellate Body of its mandate. To balance the diplomatic and judicial nature of the DSU, it is suggested to include an exclusive list of situations in which the AB would have an independent competence to remand a case, and to allow the AB to request a remand to the DSB in all other situations, on one of the two grounds for remand presented above. Separate adoption of AB and panel reports would permit adoption and implementation of the AB report during the remand. This would allow resolution of each element of a dispute at the earliest moment possible and add to the expediency of WTO dispute settlement.

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ACKNOWLEDGEMENTS

I would like to express my great gratitude to my supervisor, Professor Pieter Jan Kuijper, for his kind and stimulating guidance during this thesis project. His knowledge and experience are a great source of inspiration. He introduced me to the field of trade law. His lectures made Tuesday mornings enriching.

Warm thanks are due to the academic supervisor of the Research Master’s Public International Law, Dr. Catherine Brölmann, whose advice and periodic checks were a source of support throughout this programme.

I thank the professors and lecturers of Amsterdam Law School and Columbia Law School for the countless new insights and perspectives obtained during their courses.

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CHAPTER 1 INTRODUCTION

The WTO dispute settlement mechanism is widely considered one of the most effective instruments for the settlement of international disputes.1 This mechanism gradually evolved in the years after the creation of the GATT 1947, and received its current constitution in the Understanding on Rules and Procedures Governing the Settlement of Disputes (hereinafter Dispute Settlement Understanding or DSU), which was negotiated during the Uruguay Round Negotiations that led to the creation of the WTO in 1996.2 Disputes about the application or interpretation of a considerable number of trade-related Agreements (the “Covered Agreements”)3 negotiated within the GATT/WTO can be presented to the WTO Dispute Settlement Body (DSB), which will initiate a judicial procedure following consultations between the parties to the conflict. During the negotiations of the DSU, GATT member states decided a far-reaching reform of the GATT dispute settlement system. Two major changes would distinguish the WTO dispute settlement system from its GATT predecessor.

First, member stated decided to change the adoption procedure of panel reports from positive to negative consensus. At the same time, the reports of the newly created Appellate Body would also be adopted by negative consensus. Previously, the consensus of the GATT Council was required for the adoption of a panel report. In the new set-up a panel or AB report shall be adopted by the DSB, unless it decides by consensus to reject the outcome of the procedure.4_{Such consensus to reject is difficult to reach amongst all members of the DSB,}

and thus disputes are in practice resolved by the panel or AB. This change towards negative consensus is a clear example of how international law increasingly provides for legal procedures for the settlement of international disputes, thus excluding them from the

1_{See, for example, Debra P. Steger and Peter van der Bossche ‘WTO Dispute Settlement: Emerging Practice}

and Procedure’ (1998) 92 American Society of International Law Proceedings 79, 86; Alan Yanovich and Werner Zdouc ‘Procedural and Evidentiary Issues’ in Daniel Bethlehem, Donald McRae, Rodney Neufeld, and Isabelle Van Damme The Oxford Handbook of International Trade Law (Oxford University Press Oxford 2009) 344, 345.

2_{Petros C. Mavroidis and Mark Wu The Law of the World Trade Organization (WTO) (2}nd_{edn West Academic}

Publishing St Paul 2013) 930.

3_{The Agreements covered by the DSU are listed in Annex I to the DSU. The list includes the GATT itself, the}

GATS, the SPS and TBT Agreements, and the TRIMs and TRIPs Agreements.

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diplomatic realm and furthering the development of international regimes.5 In fact, one can say that judicial settlement of trade disputes will limit the risk of enduring trade conflicts that could threaten the stability of the international economic system.

Second, member states agreed to include an appellate procedure in Article 17 of the DSU. Article 17.1 of the DSU provides in the establishment of the Appellate Body (AB). This inclusion of an appellate stage is rather exceptional amongst systems of international adjudication.6 Negotiators believed that the diminishing influence of the member states on the outcome of DSB procedures had to be compensated for by an appellate stage, in order to remedy possible legal errors by the panels.7_{A second systemic reason for the establishment}

of the AB was the fact that Panels are established ad hoc for every case. The AB as a permanent body was deemed better suited to safeguard the unity of WTO jurisprudence. This brought a clear separation between the different organs and functions of the WTO and provided for an independent judiciary within the WTO framework.8

The DSU thus provides a two-stage system of dispute settlement. Pursuant to a complaint by a member state and following consultations between complaining and responding state, the dispute moves into the judicial phase of dispute settlement. In the first stage, an ad hoc Panel is constituted by the DSB, which will address the complaint. The function of the Panel then is to:

[M]ake an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements, and make such other findings as will assist the DSB in making the recommendations or in giving the rulings provided for in the covered agreements.9

Panels thus have the task to establish the facts of a case and make legal findings regarding the application or interpretation of relevant agreements and provisions. Should one of the state parties not agree with the findings of the Panel, it may appeal the report before the Appellate

5_{For a broader analysis of this development within several international organizations, see Alec Stone Sweet}

and Thomas L. Brunell ‘Trustee Courts and the Judicialization of International Regimes. The Politics of Majoritarian Activism in the European Convention on Human Rights, the European Union and the World Trade Organization’ 1 (2013) Journal of Law and Courts 61. Another enlightening analysis of European integration through jurisprudence of the European Court of Justice rather than political agreement can be found in Karen Alter Establishing the Supremacy of European Law. The Making of an International Rule of Law in Europe (Oxford University Press Oxford 2001) 182 ff.

6_{Marc Iynedjian ‘Reform of the WTO Appeal Process’ (2005) 6 Journal of World Investment and Trade 809,}

813.

7_{Fernando Piérola ‘The Question of Remand Authority for the Appellate Body’ in A.D. Mitchell Challenges}

and Prospects for the WTO (Cameron May London 2005) 193, 195.

8_{David Palmeter and Petros C. Mavroidis Dispute Settlement in the World Trade Organization. Practice and}

Procedure (Cambridge University Press Cambridge 2004) 227.

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Body. This appeal is, according to Article 17.6 DSU, ‘limited to issues of law covered in the panel report and legal interpretations developed by the panel’. It is clear from this sentence that the powers of the Appellate Body are limited to questions of law. Factual questions are thus excluded from its competence. Due to this limitation of its competences to questions of law and the exclusion of fact-finding competences, the Appellate Body resembles the highest courts in national jurisdictions. What the Appellate Body however lacks in comparison with these national courts is the right to remand a case to a lower instance for settlement in compliance with its ruling. In other words, unlike most national supreme courts, the Appellate Body may not refer a case to the original panel after reversing the panel’s findings. This is particularly problematic when the legal interpretation of the Appellate Body would require a new or complementary investigation of the facts in order to solve the issue at hand. The lack of competence to remand and the absence of fact-finding competences necessary to settle these cases have lead to various undesirable outcomes in AB case law. These will be discussed extensively in the chapter 3 of this thesis.

Already two years after establishment of the Appellate Body, Palmeter argued that the AB needed remand authority and that the absence of this mechanism could damage the acceptability and credibility of the WTO dispute settlement mechanism.10 The lack of remand authority of the AB has repeatedly been the topic of negotiations during the DSU Review Rounds that took place in the course of the Doha Round. Already in 2002, the chairman of the Special Session of the DSB concerned with DSU reform mentioned remand as one of the issues discussed at the first meetings on DSU reform,11 and in 2003 included remand in a draft compiling member state proposals in an attempt to reach agreement during the so-called ‘early harvest’ negotiations.12_{Remand remained part of DSU reform}

negotiations, and as late as 2011 the chair concluded that, in addition to issues that were already discussed and negotiated, ‘we will need to discuss … remand’.13

From the above it is clear that the lack of remand authority is widely seen as an important shortcoming in the DSU framework. In this thesis, I will seek to answer the question under which circumstances the WTO Appellate Body should have the competence

10_{David Palmeter ‘The WTO Appellate Body Needs Remand Authority’ (1998) 32 Journal of World Trade 41.} 11_{See WTO, Report by the Chairman, Ambassador Péter Balás, to the Trade Negotiations Committee (2 July}

2002), TN/DS/4 p 2.

12_{WTO, Annex to the Report by the Chairman, Ambassador Péter Balás, to the Trade Negotiations Committee}

(6 June 2003) TN/DS/9 artt 17(12) and 17bis; Wolfgang Weiss ‘Reforming the Dispute Settlement Understanding’ in Harald Hohmann (ed.) Agreeing and Implementing the Doha Round of the WTO (Cambridge University Press Cambridge 2008) 269, 273.

13_{WTO, Report by the Chairman, Ambassador Ronald Saborío Soto, to the Trade Negotiations Committee (21}

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to remand a case to a panel and how such remand should be organised. This will lead to questions relating to timelines, the role of member states and the independence of the Appellate Body from Member State pressure. Indeed, trade disputes often represent vast economic and political interests, and thus it is of great importance that these disputes are resolved as quickly as possible and under conditions that satisfy all parties to accept the outcome of the procedure.

1.1 The Practical Relevance of Remand and the International Rule of Law

The aforementioned attention for Appellate Body remand in subsequent negotiations and scholarly writing clearly demonstrates the importance of the subject. The peaceful settlement of international conflicts, and more specifically in this context, international trade disputes, is of great importance for the stability of the international community. Indeed, a stable system of international trade is crucial for global development and welfare and thus constitutes an important guarantee for international peace and security. This conviction already was one of the main motives behind the Bretton Woods Conference, during which the first foundations for the WTO were laid. Proponents of the creation of an International Trade Organization were convinced that economic protectionism following the Great Depression had severely damaged international trade, intensified the economical problems of individual countries and thus caused mistrust and enmity between states.14 These considerations still stand today, and in a world that is once again confronted with extremist ideologies growing on the fertile soil of economic deprivation, a system of enforceable and trustworthy rules of international trade are but one stepping stone for achieving a more prosperous and stable future.

Therefore, remand authority can be closely linked to the international rule of law. This term encompasses a broad range of ideas and principles that is somewhat difficult to define. In 2004, then-Secretary General of the United Nations Kofi Annan gave the following definition of the international rule of law:

[A] concept at the very heart of the [United Nations] Organization’s mission. It refers to a principle of governance in which all persons, institutions and entities, public and private, including the State itself, are accountable to laws that are publicly promulgated, equally enforced and independently adjudicated, and which are consistent with international human rights norms and standards. It requires, as well, measures to ensure adherence to the principles of supremacy of law, equality before the law, accountability to the law, fairness in the application of the law, separation of powers, participation

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in decision-making, legal certainty, avoidance of arbitrariness and procedural and legal transparency.15

Inclusion of remand authority of the Appellate Body within the DSU framework would improve fair, foreseeable and transparent application of the Covered Agreements and enhance legal certainty. In that way it would broaden the acceptability of DSB reports, thus stimulating Member States to comply with the rules and strengthening the international rule of law. Tamanaha argues that international law covers a growing area of subject matters, of which the fields of international trade and commerce are covered by the most extensive regimes, partly regulated and applied under the aegis of the WTO Appellate Body.16 Hence, a well-functioning remand of the Appellate Body can be directly linked to and seen as both an element and an expression of the international rule of law.

The absence of remand authority can become problematic in a number of situations, including the application of judicial economy in the course of an analysis under Article XX of the GATT. Article XX allows WTO Member States to justify violations of any GATT obligation by one of the general exceptions mentioned in paragraphs (a) to (j), provided that the contested measures are not applied in a way that leads to ‘arbitrary or unjustifiable discrimination’ or a ‘disguised restriction in international trade’.17 In order to justify its shortcomings, a Member State must thus prove that its contested measure can be brought under one of the exception clauses of paragraphs (a) to (j) and, and subsequently show that the measure is consistent with the requirements of the so-called chapeau of article XX. As a consequence, article XX is seen to require a two-tier test. In its report in US-Gasoline, the AB stated that the first step of this test was ‘provisional justification’ under one of the listed exceptions, followed by an analysis of the contested measure’s compliance with the chapeau.18 As a consequence, if a panel rejects a Member State invocation of one the exceptions listed in Article XX, it might not proceed to assessing the compliance of the measure with the chapeau. Should the Appellate Body disagree with the panel and accept the invocation of one of the exceptions, it will have to assess the compliance of the measure with the chapeau without the fact-finding work of the panel. In some cases the facts are

15_{UN Secretary General, The Rule of Law and Transitional Justice in Conflict and Post-Conflict Societies.}

Report of the Secretary-General (23 August 2004), UN Doc S/2004/616 p 4.

16_{Brian Tamanaha On the Rule of Law. History, Politics, Theory (Cambridge University Press Cambridge 2004)}

127.

17_{Article XX GATT. The list of exceptions includes: protection public morals (a), and the protection of animal,}

human or plant life (b), upholding of GATT-consistent national legislation (d), prison labour (e), the protection of national treasures (f) and conservation of exhaustible natural resources (g).

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sufficiently clear for the AB to complete the second step of the analysis. In other cases, however, the facts may not be well established while the AB lacks the competence to review issues of fact. In such cases, the AB might either have to leave the case unresolved or complete the factual analysis in absence of such capacities. The first outcome would amount to a non licet, since the panel report is rejected without an AB ruling to fill the gap, and thus the legal question at the heart of the dispute remains unsettled. In the second outcome the AB would have to go beyond its capacities, which could give rise to concerns of legality and deprive parties of their right to an appeal.19 Both outcomes are obviously undesirable.

The problem also arises in the broader context of judicial economy. In some cases a panel judges on one part of the claims and decides not to discuss the rest of the claims. For example, if a panel finds that a measure is GATT inconsistent because it constitutes a de-jure quota that violates Article XI GATT, the panel may leave the claim that the measure amounts to a de-facto quota unresolved because it has already ruled the measure GATT inconsistent. If the AB would reverse this ruling and rule the measure de-jure consistent with the GATT it might subsequently have to look at the second claim of de-facto inconsistency. In this case a different analysis would be necessary, and the panel might not have come to an analysis, or even establishment, of the facts necessary for the second claim. In that case the Appellate Body, unable to remand the case to the original panel, either has to complete the analysis ultra vires, or decide not resolve the case, which would constitute a denial of justice. These examples clearly demonstrate the need for inclusion of remand in the DSU.

1.2 Methodology

In order to answer the main research question it is necessary to address a number of issues. In chapter 2, I will try to analyse why remand was not included in the original DSU. This will provide insight into the matters that require consideration when deciding the inclusion of a remand procedure. Chapter 3 will contain an analysis of Appellate Body case law in which the lack of remand authority has become problematic and of the solutions the AB chose to overcome these issues. This will allow better understanding of the situations in which remand would be necessary and how it could improve the system of WTO adjudication. In chapter 4 I will discuss how remand is organised in a number of international and domestic regimes. This chapter will show certain recurring elements of remand and thus allow a more profound insight in the commodities and interests that need to be balanced when remand is to be

19_{Mervyn Martin WTO Dispute Settlement Understanding and Development (Martinus Nijhoff Publishers}

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successful. Subsequently, chapter 5 will provide an overview of the different proposals for remand that WTO Member States presented during DSU reform negotiations and their reception by other states and in scholarly literature. This will lead to a better understanding of the particular requirements and interests that should shape remand in the DSU context and show how the dispute settlement mechanism could be reformed most effectively. Based on the preceding steps of the analysis, chapter 6 will provide a response to the main research question.

The question under what circumstances the Appellate Body should be granted the right to remand a case back to the original panel and how this remand should be organised is of a normative nature. Thus, an answer to this question will not be a factual conclusion, but a subjective submission of possible elements of a remand procedure. The research question is aimed at a highly procedural matter, investigating how the current procedure is shaped, why it is shaped that way, what outcomes this procedure produces, how comparable systems are shaped and function, what reform proposals were made and how they were evaluated in order to find how the WTO system could be improved. The different steps of the analysis require different approaches to the law. Since this thesis is focused on a reform of the law from a procedural viewpoint I will try to adhere to an internal perspective, discussing the law from the view of someone applying it, someone arguing from within the regime. This predominance of the internal perspective is already implied by the fact that this is a legal thesis, which is inherently based on the premise that there is a system of laws that needs to be accepted and applied in conformity with its prescriptions. However, this perspective will not be sufficient for all parts of the analysis. I will begin with an analysis of the reasons behind the current state of the DSU, more specifically the absence of remand. In order to do this, I will apply an external perspective that allows approaching the law as an instrument that is shaped by practical, political, economical and cultural circumstances. Subsequently, when discussing the Appellate Body case law, I will apply a more internal perspective and move to a discussion of the application and functioning of the law from the perspective of a person working with it. This perspective allows a clear demonstration of the problems with which the AB is confronted and how it tries to achieve, within its limited capacities, a suitable solution.

The same internal perspective will be used during the analysis of the functioning of comparable international and domestic legal regimes in chapter 4. This chapter will however shift to an external perspective when explaining the causes of differences between various regimes. Here an external perspective is necessary because it does justice to the fact that

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differences between legal systems cannot always be explained by legal reasoning, and that systems that are not perfect from the viewpoint of procedural perfection are sometimes the best result possible given the circumstances of their creation. Since this chapter will contain a comparative analysis, it is particularly important here to pay attention to the selection of cases to be compared. The topic of case selection will be extensively discussed in the introduction of chapter 4.

In Chapter 5 the analysis of Member States proposals for inclusion of remand into the DSU will combine both perspectives, discussing both the procedural merits and shortcomings of proposals from an internal view and explaining their configuration by Member State interests from an external perspective.

In the end, the Conclusion will both apply an internal perspective, based on the existence and authority of the law in place and arguing based on systematic considerations, while applying an external approach in order to corroborate the political questions that lie behind the negotiation of international law. In this way, the research should result in a conclusion that offers both internal and external validity.

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CHAPTER 2 WHY THE APPELLATE BODY WAS NOT

GRANTED REMAND AUTHORITY

The Dispute Settlement Understanding does not grant the Appellate Body the competence to remand a case to the original panel. Since this thesis focuses on the question how remand should be included in the DSU, it is important to begin with a discussion of the reasons that led to the absence of remand in the DSU. This question receives no or only very little attention in the majority of literature, yet it is a crucial question when one seeks to propose inclusion of remand into the DSU. Initial concerns or obstacles need to be addressed if resistance is to be overcome and remand to be included into the DSU. Several potential explanations for the absence of remand can be identified.

Pauweleyn suggests that the absence of remand from the DSU could be explained by the intention of the negotiating parties to create a swift, efficient procedure that offers finality and security within a limited period of time. He adds that most GATT disputes at that time revolved around comparably small, more or less undisputed complexes of facts that would not necessarily require factual appeal or remand for determination of new facts. Negotiators might have been satisfied that the interim review stage and the competence of the AB to modify a panel report would suffice for an effective determination of facts. Alternatively, he states that the DSU appeal procedure resembles national courts of cassation but lacks remand because negotiators “failed to include” it into the DSU. 1 This seems to imply that negotiators would have forgotten the possibility to include remand, which appears highly unlikely.

Palmeter, when discussing the absence of and need for remand in the DSU, states that the exact reasons for the absence of Appellate Body remand from the DSU are unclear and gives two additional potential explanations. First, he suggests that the negotiators of the DSU feared a lengthy and inefficient procedure that would not lead to an acceptable solution within a reasonable period of time. Second, he suggests that remand was not included because a dispute settlement system including remand would be inconsistent with the time

1_{Joost Pauweleyn, ‘Appeal without Remand’ ICTSD Issue Paper No. 1 (International Centre for Trade and}

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frame of Section 301 of the 1974 US Trade Act.2 Iynedjian only refers to the first argument of concerns for a speedy and efficient procedure.3

The first explanation offered by Palmeter, Iynedjian and Pauweleyn suggests that the negotiators deemed it preferable to create the DSU without Appellate Body remand for reasons of efficiency. Indeed, some WTO Member States seem to be opposed to inclusion of remand into the DSU, as they fear that inclusion of a remand procedure into the DSU could lead to lengthy procedures where cases are repeatedly remanded and appealed. It would seem likely, however, that such consideration would have led to more discussion during the negotiations and hence would have received more attention in subsequent literature. The limited attention for the reasons for the absence of remand from the DSU seems to indicate that remand was scarcely a subject at all during the negotiations. Furthermore, if remand were to be omitted from the DSU for considerations of promptness, it would seem surprising that the subject has been discussed in review rounds ever since the conclusion of the DSU.4

The second explanation offered by Palmeter would imply that practical constraints on the negotiators inspired the decision to leave remand out of the DSU. It indeed seems credible that the timeframe of Section 301 of the 1974 US Trade Act constituted an obstacle to the inclusion of remand in the DSU. A comparison of the DSU and the 1974 US Trade Act shows that under both instruments the decision to take unilateral sanctions against another state will follow within 18 months after the initiation of the procedure. Section 301 of the 1974 US Trade Act entails an exact timetable for the investigations by the US Trade Representative in preparation of unilateral sanctions against another state that violates a trade agreement. This provision prescribes two procedures for investigation and sanctioning of violations of trade agreements by other countries. The first procedure is mandatory pursuant to a complaint by the US industry; the second, discretionary, procedure can be initiated by the United States Trade Representative (USTR) whenever there appears to be a violation of an international trade agreement.5 According to the Trade Act, the USTR has to decide on unilateral sanctions against another state within 18 months after receiving a petition from the US industry.6 The USTR is however not required to investigate and take sanctions if the

2_{David Palmeter ‘The WTO Appellate Body Needs Remand Authority’ (1998) 32 Journal of World Trade 41,}

43.

3_{Marc Iynedjian, ‘Reform of the WTO Appeal Process’, (2005) 6 Journal of World Investment and Trade 809,}

817.

4_{See Report by the Chairman, Ambassador Péter Balás, to the Trade Negotiations Committee (2 July 2002),}

TN/DS/4 2.

5_{1974 US Trade Act, §301, 19 U.S.C. §2411 (1994).}

6_{For an overview of the timeframe set by the 1974 US Trade Act, see Annex II to the WTO panel report in}

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WTO Dispute Settlement Body settles the case within the same 18-month term, in other words, if the US has initiated proceedings pursuant to the DSU that result in a ruling within 18 months.7_{Hence, in order to prevent the US from taking unilateral actions outside of the}

WTO framework, the negotiators of the DSU had to create a dispute settlement mechanism that fits the timeframe of the 1974 US Trade Act.

Under the DSU, a panel has to be established within 90 days after the initial request for consultations.8 Article 20 of the DSU prescribes that an AB report should be adopted by the DSB within 12 months after the establishment of a panel.9 Usually, member states are bound to implement an AB ruling within a reasonable period of time, which needs to be set by arbitration within 90 days after the circulation of the final report if parties are unable to reach agreement on a timeframe before.10 Hence, the reasonable period of time should be determined within 15 months after establishment of the panel and thus within 18 months after the initial request for consultations.11 Should implementation still not take place, the complaining state can either request compensation from the defendant state, or request the DSB authorisation to suspend concessions under the WTO Agreements. These are both temporary measures that do not affect the primary objective of bringing domestic laws in compliance with WTO obligations.12

According to the reasoning of the United States Government, retaliation, or trade sanctions, may be initiated by the US Trade Representative as soon as the reasonable period of time for implementation has been determined and the complainant questions compliance with the DSB report, hence after a maximum of 18 months following the initial request for consultations. The US Government thus treats DSB authorisation to suspend concessions as an ex post facto test for the legitimacy of imposed retaliatory measures. Should the DSB reject the request for authorisation of sanctions afterwards, the US will offer compensation for the period that the concessions were suspended. In this way, the US Trade Representative can take a decision on retaliatory measures (in this case the suspension of certain concessions resulting from one of the Covered Agreements) within the 18-month period prescribed by the

7_{1974 US Trade Act, § 301 (2)(a), 19 U.S.C. §2411(2)(a) (1994).} 8_{Article 4(7) DSU.}

9_{Thomas A. Zimmermann Negotiating the Review of the WTO Dispute Settlement Understanding (Cameron}

and May London 2005) 67.

10_{Article 21(3)(c) DSU.}

11_{This is expressly reiterated in Article 21(4) DSU.} 12_{See Article 22 DSU.}

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1974 Trade Act. Simultaneously, the legitimacy of the retaliation will be evaluated by the DSB.13

These corresponding timeframes would have allowed the US negotiators to reassure the US Congress that the DSU created comparable procedures and outcomes as existing American legislation and at the same time guaranteed other states that the US would not take unilateral sanctions outside of the WTO framework. Some negotiating parties, such as the European Communities, Japan, Brazil and India were nonetheless suspicious of Section 301, fearing that it might lead to unilateral US sanctions in disregard of GATT obligations. These parties stressed the importance of respect for the multilateral trade system, and thus tried to limit situations in which the US or any other State would take unilateral actions outside of the DSU framework.14 When the US House of Representatives discussed amendment of Section 301 to include the WTO dispute settlement procedure as a ground for the USTR not to begin investigations, the House made it clear that the WTO dispute settlement was only one road for the settlement of trade disputes, that would not limit the US in its power to take unilateral sanctions outside the WTO framework.15 This once again shows how important it was that the negotiators created an international trade dispute settlement mechanism that could effectively address trade disputes before the USTR would have to act based on Section 301.16 However, the internal law of the United States offers another explanation for the absence of remand from the WTO. Under US constitutional law, an agreement on non-tariff barriers (NTB) requires approval of the United States Congress before it can be implemented. The 1974 US Trade Act introduced a so-called ‘fast track’ procedure for this approval, which provided for expedited consideration of a trade agreement (or more precisely, of the

13_{A famous example of the US taking unilateral measures without authorisation by the DSB is the EC: Bananas}

case. In this case, the panel had ruled the EU’s system for the importation, sale and distribution of bananas inconsistent with the covered agreements. The EU attempted to implement this ruling and created a new banana regime. The US, however, was not satisfied about WTO-consistency of the new regime and proceeded to take unilateral measures at the end of the agreed reasonable period of time for implementation, which would become active one month after the reasonable period had lapsed. The EU challenged these measures and requested establishment of a compliance panel to rule on the consistency of the new EU regime with WTO law. See WTO,

European Communities: Regime for the Importation, Sale and Distribution of Bananas - Recourse to Article 21.5 by the European Communities (EC: Bananas) - Report of the Panel (12 april 1999) WT/DS27/RW/EEC 3.

14_{Zimmermann (n 9) 55. Robert Read even labels the prevention of unilateral US sanctions as a ‘primary}

objective’ of Canada, the EU, Japan and large parts of the developing world during the DSU negotiations, see Robert Read ‘Trade Dispute Settlement Mechanisms: The WTO Dispute Settlement Understanding in the Wake of the GATT’ in Nicholas Perdikis and Robert Read (eds) The WTO and the Regulation of International Trade.

Recent Trade Disputes between the European Union and the United States (Edward Elgar Cheltenham 2005)

29, 35.

15_{A. Lynne Plucke and William L. Reynolds, ‘Rules, Sanctions and Enforcement under Section 301: At Odds}

with the WTO?’ (1996) 90 AJIL 675, 688.

16_{John Croome Reshaping the World Trading System. A History of the Uruguay Round (Kluwer Law}

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legislation incorporating the agreement into US law) by both the Senate and the House of Representatives. Under this fast track procedure, the President was required to inform the Congress ninety days in advance about his intention of signing an NTB agreement. Congress would subsequently consider the agreement in close consultations with the Administration and signify its consent or rejection within the ninety days until signature. After signature, the implementing legislation could be adopted swiftly following simultaneous consideration in both Houses. The Congress would usually signify its willingness to use the fast track for approval of an agreement under the condition that the agreement be signed before a specified date. This procedure was equally incorporated in subsequent US Trade Acts, including the 1988 Trade Act which governed the implementation of the Uruguay Round agreements.17

The initial deadline set by Congress for fast track approval of the Uruguay Round agreements lapsed in the summer of 1993. Congress extended the deadline for signature until 15 April 1994, however simultaneously extending the notification period from three to four months. This meant that the President had to notify the US Congress of its intention to sign the Uruguay Round agreements before 15 December 1993. Hence, if the US were to implement the agreements and thus be able to fulfil its obligations under the agreements, it was crucial that the agreements were sufficiently concluded for submission to Congress on 15 December 1993.18 This undoubtedly put serious time constraints on the Uruguay Round negotiations. The fact that the US only signed the agreements on 15 April 1994 and thus on the very last day on which they were open for signature clearly indicates that the negotiators had struggled to finish the agreements within the deadline for approval by the US Senate. Since the US and other countries were for different reasons keen on creating a dispute settlement mechanism with short timeframes agreement on remand might not have been feasible within the time left for negotiations.

Some authors and participants present during the negotiations also point out that the topic of appellate review was only tabled at a very late stage of the Uruguay Round negotiations.19 This would have prevented extensive discussion on procedural elements of the appeal procedure, including remand. Van den Bossche suggests that the addition of appellate review to the DSU system was an “afterthought” rather than the outcome of prudent

17_{John J Jackson, William J. Davey and Alan O. Sykes Legal Problems of International Economic Relations.}

Cases, Materials and Text on the National and International Regulation of Transnational Economic Relations

(3rd_{edn West Publishing Corporation St Paul 1995) 142-143 and 147-148; US Omnibus Trade and}

Competitiveness Act 1988, Section 1103, 19 U.S.C.A. 2903.

18_{ibid 149.}

19_{Opinion of participant observer PJK during the negotiations, as expressed during an interview on 14 October}

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procedural design.20 He rightfully points to the fact that the entire appellate stage is prescribed in only one article of the DSU, whereas the panel procedure is extensively regulated in Articles 6 to 16 of the DSU. This indeed seems to be an indication that Appellate Body review was included into the DSU at a comparably late moment in the negotiating process. The limited time that this would have allowed for discussion of the set-up of the appeal procedure offers a likely explanation for absence of remand from the DSU. This argument is linked to the strict deadline for approval by the US Senate.

Therefore, it seems most likely that the DSU does not provide a remand mechanism due to the late moment in which negotiators considered inclusion of an appeal procedure into the DSU and the time constraints that resulted from the deadline of the US Senate for implementation of the agreement. The constraints of the 1974 US Trade Act may well be an important reason why inclusion of remand was no longer feasible at this late stage of negotiations. It might be dissatisfying that remand was left out of the DSU because of time constraints and reasons of domestic legislation of one Member State. At the same time it is a perfect example of how practical constraints can shape the development of international law. Considerations of procedural perfection cannot always supersede the factual situation of multiple sovereign states trying to reach agreement on specific matters within the framework of their respective legal regimes and democratic systems. Due to the contractual nature of international law, and the importance of inclusiveness of international trade agreements, it is highly likely that the negotiators of the DSU preferred to agree on a text that would have a considerable chance of adoption and implementation by all Member States, including the US, and leave some issues to be resolved in future negotiations. It might also be for this reason that the negotiators agreed to hold periodic review stages after conclusion of the DSU.21

20_{Peter van den Bossche ‘From Afterthought to Centerpiece: the WTO Appellate Body and its Rise to}

Prominence in the World Trading System’ in Giorgio Sacerdoti, Alan Yanovich and Jan Bohanes (eds) The

WTO at Ten. The Contribution of the Dispute Settlement System (Cambridge University Press Cambridge 2006)

289, 294.

21_{World Trade Organization, Ministerial Decision on the Application and Review of the Understanding on}

Rules and Procedures Governing the Settlement of Disputes, adopted 14 April 1994, available at: https://www.wto.org/english/docs_e/legal_e/53-ddsu.pdf (last accessed 19 August 2015).

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CHAPTER 3 BETWEEN SCYLLA AND CHARYBDIS:

APPELLATE BODY CASE LAW AND THE

ABSENCE OF REMAND AUTHORITY

The Appellate Body has been confronted with its lack of remand authority in a considerable number of cases. The Appellate Body has applied two different solutions in such situations. The first solution is to ‘complete the analysis’, in other words, to perform by itself the factual analysis necessary to answer the legal question that the AB has established. The second solution is to not finish the analysis and declare itself incompetent to rule on the case. In that case the dispute settlement procedure will have to start anew, beginning with a Member State request for consultations to the Dispute Settlement Body.1_{In some instances the Appellate}

Body has completed one panel analysis and refrained from completing a second analysis within the same report. This was for example the case in the Appellate Body Report EC-Hormones.2

Both solutions clearly entail procedural and legal problems. Even more problematic is that the jurisprudence of the Appellate Body does not show a clear demarcation line between cases in which the AB will complete the analysis and cases in which it will abandon the case.3_{This causes a considerable degree of legal uncertainty for member states. In this}

chapter I will discuss several cases of Appellate Body jurisprudence in order to show in which situations the absence of AB remand constituted a problem to the fulfilment of the AB’s mandate.

1_{Valerie Hughes ‘The Dispute Settlement System – From Initiating Proceedings to Ensuring Implementation:}

What Needs Improvement’ in Giorgio Sacerdoti, Alan Yanovich and Jan Bohanes The WTO at Ten. The

Contribution of the Dispute Settlement System (Cambridge University Press Cambridge 2006) 193, 223.

2_{WTO European Communities: Measures Concerning Meat and Meat Products. Complaint by the United}

States (EC: Hormones) – Report of the Appellate Body (16 January 1998) WT/DS26/AB/R to be discussed

below.

3_{Bryan Mercurio ‘Improving Dispute Settlement in the World Trade Organization: The Dispute Settlement}

Understanding – Making it Work?’ (2004) 38 Journal of World Trade 795, 815; Alan Yanovich and Tania Voon ‘Completing the Analysis in WTO Appeals: The Practice and its Limitations (2004) 9 Journal of International Economic Law 933, 949; Fernando Piérola ‘The Question of Remand Authority for the Appellate Body’ in A.D. Mitchell Challenges and Prospects for the WTO (Cameron May London 2005) 193, 205; Yang Guohua, Bryan Mercurio and Li Yongjie WTO Dispute Settlement Understanding: A Detailed Interpretation (Kluwer Law International The Hague 2005) 212.

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The selection of cases in this chapter is mainly based on the case selection in scholarly writings concerning remand and the overview of cases in which AB completion of the Panel’s analysis was considered on the website of the WTO.4_{Most authors discuss a}

rather limited number of cases. In this chapter I will bring together the most important cases discussed throughout literature and add more recent Appellate Body case law, in order to trace how the case law on this topic has developed over the years, to discuss some remarkable outcomes and show how the issue has remained problematic until today. Discussing all available cases would however go beyond the scope of this thesis.

The cases in which the absence of remand posed a problem can be roughly divided into two categories.5_{The first contains cases in which the panel exercised judicial economy.}

Should the AB reverse the panel’s findings on a part of an analysis, it would have to perform the following steps of the analysis without the mandate to consider factual questions or remand the case back to the original panel. Alternatively, a panel may decide that a contested measure amounts to a violation of one provision and thus no longer investigate compliance of the measure with other provisions. In a number of cases the AB reversed the primary finding of a violation by the panel and was subsequently faced with the obligation to investigate consistency of the measure with the other provisions. This often necessitates a factual analysis. In some instances, this would even require new fact-finding. Such fact-finding is clearly outside the scope of the mandate of the Appellate Body, and in this case the AB usually refrains from completing the analysis.

A second category of cases in which the absence of Appellate Body remand becomes apparent contains cases in which the AB replaces the panel’s legal analysis by its own. The AB can, for example, change the legal standard applied by the Panel, come to a different finding concerning the applicability of an article, or find that the panel erred on its terms of reference or the legal question posed. In that case the panel has often not performed the factual analysis relevant to the AB’s standard or to the provision which now needs to be

4_{Inter alia on David Palmeter ‘The WTO Dispute Settlement System in the Next Ten Years’ in Merit E. Janow,}

Victoria Donaldson and Alan Yanovich (eds) The WTO: Governance, Dispute Settlement, and Developing

Countries (Juris Publishing Huntington (NY) 2008) 845; Marc Iynedjian ‘Reform of the WTO Appeal Process’

2005 (6) Journal of World Investment and Trade 809; Edwini Kessie ‘The “Early Harvest Negotiations” in 2003’ in Federico Ortino and Ernst-Ulrich Petersmann (eds) The WTO Dispute Settlement System 1995-2003 (Kluwer Law International The Hague 2004) 115; Yanovich and Voon (n 3); Piérola (n 3) and Hughes (n 3). The WTO provides a highly useful overview of relevant cases on its website, WTO Website, ‘Completion of the Legal Analysis by the Appellate Body’, available at:

https://www.wto.org/english/tratop_e/dispu_e/repertory_e/c4_e.htm (last accessed 15 August 2015).

5_{Alan Yanovich and Werner Zdouc ‘Procedural and Evidentiary Issues’ in Daniel Bethlehem, Donald McRae,}

Rodney Neufeld, and Isabelle Van Damme The Oxford Handbook of International Trade Law (Oxford University Press Oxford 2009) 344, 370.

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applied, and thus the AB has to proceed into its own factual analysis of the case, or abandon the case entirely.

The overview of Appellate Body case law in the following paragraphs will follow the categorisation of AB cases mentioned above. In paragraph 3.1, the distinction between fact-finding, factual analyses and legal analyses will be explained in order to clearly define the limits of the jurisdiction of the Appellate Body. Paragraph 3.2 will provide an overview of cases in which absence of AB remand became problematic pursuant to the exercise of judicial economy by the panel. Cases in which the absence of remand became apparent following reversal of the panel’s judicial analysis by the AB will be discussed in paragraph 3.3. Paragraph 3.4 will present an analysis of these developments in Appellate Body case law and their consequences. In this paragraph it will be argued that the current situation poses a threat to the efficiency and legitimacy of the WTO dispute settlement procedure as a whole. Paragraph 3.5 will bring together the most important inferences from this chapter in a short conclusion.

3.1 Fact-Finding, Factual Analyses and Legal Analyses

In order to better understand the scope of the mandate of the Appellate Body, it is important here to draw a distinction between fact-finding, a factual analysis and a legal analysis. Fact-finding is interpreted here as actively collecting evidence and hearing parties in order to establish facts. A factual analysis of the case means sorting the facts in order to create a certain fact pattern or narrative. In the factual analysis evidence is weighed and combined to make factual findings. A legal analysis is the last step of analysing a case. In this phase, the AB determines legal standards, applies legal standards to the facts and legally qualifies the factual findings in order to answer the main legal question. In this phase the AB no longer sorts the facts of the case. Only the final step of legal analysis falls within the mandate of the AB as it is enshrined in article 17.6 DSU.

Indeed, it is often difficult to determine whether an analysis is factual or legal. In many cases, the analysis is mixed, which means that the AB has to perform both a factual and a legal analysis.6 A strict interpretation of the DSU implies that if the AB engages in such mixed analyses, it violates the limitations of its mandate. The analysis in this chapter will be based on such strict interpretation of the AB mandate.

6_{Tania Voon and Alan Yanovich ‘The Facts Aside: The Limitation of WTO Appeals to Issues of Law (2006)}

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3.2 Judicial Economy

The first case in which the limitation of the Appellate Body’s jursidiction to questions of law and the lack of remand authority proved to be an problematic is US - Gasoline, only one year after its establishment in 1995. In this dispute, Venezuela and Brazil complained against an air pollution regulation adopted by the United States pursuant to the 1990 US Clean Air Act. This regulation prohibited the sale of conventional gasoline in certain metropolitan areas of the US with high air pollution, and prescribed the exclusive sale of reformulated gasoline instead. Simultaneously, the regulation provided standards for regular gasoline to be imported into or produced in the US. The US justified the regulation under reference to article XX (b), (d) and (g) of the GATT. The panel ruled that the US regulation was inconsistent with Article III.4 of the GATT that provides for national treatment in the field of any laws, regulations or requirements concerning the sale, distribution or transport of goods. Furthermore, the panel held that this violation could not be justified by reference to one of the exceptions listed in Article XX GATT.7 The Appellate Body reversed this ruling and concluded that the regulation could be brought under Article XX(g) GATT. The AB subsequently added that Article XX contains a two-step test that not only requires a measure to be brought under one of the subparagraphs (a) to (j) of article XX, but also requires the measure to be consistent with the chapeau of said Article.8 Consequently, the AB appreciated whether the measure was applied in a manner consistent with the chapeau of Article XX. The language of the AB report clearly indicates that the Appellate Body applied a new analysis to the facts of the case. The wording applied equally suggests, however, that the AB based its analysis on the facts established in the panel record.9_{This means that the AB has not engaged in new fact}

finding. Nonetheless, the AB seems to have overstepped its mandate to only rule on issues of law. In this sense, the completion of the analysis by the AB constitutes a violation of article 17.6 DSU.

The second case in which the AB reversed the finding of a panel that had exercised judicial economy is Canada – Periodicals.10 The dispute arose out of a US complaint against Canadian treatment of periodicals printed outside Canada. Canadian legislation prohibited the

7_{WTO United States: Standards for Reformulated and Conventional Gasoline (US: Gasoline) – Report of the}

Panel (29 January 1996) WT/DS2/R para 8.1.

8_{WTO United States: Standards for Reformulated and Conventional Gasoline (US: Gasoline) – Report of the}

Appellate Body (29 April 1996) WT/DS2/AB/R p 22; Petros C. Mavroidis and Mark Wu The Law of the World Trade Organization (WTO) (2nd_{edn West Academic Publishing St Paul 2013) 289.}

9_{WTO US: Gasoline – Report of the Appellate Body (n 7) p 22-29.}

10_{WTO Canada – Certain Measures Concerning Periodicals (Canada: Periodicals) – Report of the Appellate}

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importation of periodicals with special editions containing advertisements directly aimed at the Canadian market (“split-run periodicals”). Second, special legislation allowed Canadian publishers to print their periodicals in the US but taxed the value of the advertisements therein. Third, the Canada Post Corporation applied lower rates for domestically printed periodicals. The US held that the taxation on advertisements violated Article III.2 and III.4 GATT.

The first sentence of Article III.2 GATT prohibits application of taxes or charges on foreign products in excess of those levied on like domestic products. The second sentence of this provision prohibits any internal charge, measure, regulation or tax that affords protection to domestic products. The Panel ruled that the taxation on advertisements violated the first sentence of Article III.2 GATT, since it deemed domestic and foreign produced periodicals like products. It exercised judicial economy and did not proceed to an analysis of the second sentence of Article III.2.11 Simultaneously, the Panel found the other measures GATT inconsistent.

After appeal by both Canada and the US the Appellate Body had to rule on the consistency of the taxation with Article III.2 GATT. The AB reversed the panel’s finding that foreign split-run and domestic periodicals are like products. As the facts collected by the Panel had not convinced the AB of the likeness of foreign and domestic periodicals, it proceeded to an analysis of the second sentence of Article III.2 GATT. Despite Canadian claims that the AB lacked jurisdiction to complete the analysis since none of the parties had appealed the panel’s findings on the second sentence of article III.2 GATT, the AB explicitly stated that it could do so based on the prior factual analysis of the Panel:

As the legal obligations in the first and second sentences are two closely-linked steps in determining the consistency of an internal tax measure with the national treatment obligations of Article III:2, the Appellate Body would be remiss in not completing the analysis of Article III:2. In the case at hand, the Panel made legal findings and conclusions concerning the first sentence of Article III:2, and because we reverse one of those findings, we need to develop our analysis based on the Panel Report in order to issue legal conclusions with respect to Article III:2, second sentence, of the GATT 1994.12

11_{WTO Canada – Certain Measures Concerning Periodicals (Canada: Periodicals) – Report of the Panel (14}

March 1997) WT/DS31/R) para 5.27.

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The Appellate Body not only completed the analysis, but also stated that it would be ‘remiss’ if it had not done so. The Appellate Body subsequently completed the analysis, claiming that there was sufficient basis in the panel report to do so.

Vermulst, Mavroidis and Waer claim that the AB has gone beyond a mere question of law and entered into a factual analysis of the case.13 Indeed, the AB seems to have engaged in an analysis of the facts of the case. Whereas the first sentence of article III.2 GATT prohibits internal taxation or charges of foreign products in excess of taxes levied on domestic products, the second sentence prohibits any internal measure that would afford protection to domestic products. These standards clearly require a different analysis of facts. In investigating consistency with the second sentence of article III.2, the AB gave an extensive analysis of the facts established in the panel report and applied standards from existing case law to these facts. Although it refrained from new fact finding, it thus seems to have gone into a factual analysis of the case. Hence, the AB appears to have violated its mandate of article 17.6 DSU.

The emphasis that the AB placed on the close link between both questions indicates that the AB sought justification for its completion of the analysis. While this justification in the first place relates to Canada’s jurisdictional objections based on the fact that no party appealed the panel’s findings on this provision, it also seems to serve as a justification for completion of the analysis. This justification is not convincing. A strong link between both steps of the analysis does not necessarily constitute a convincing argument for the AB to complete the analysis and enter into a factual analysis of the case. Such argument might be valid when both steps relate to an identical set of facts, and when only the legal question asked in relation to these facts is different in the second step of the analysis. As was discussed above, the facts relevant for performing both tests are fairly different. The AB only states that the questions are closely linked. Therefore it fails to convincingly justify completion of the analysis.

In EC – Hormones, the Appellate Body had to rule on the consistency of EC legislation with the WTO SPS Agreement.14 Canada and the US had complained against EC legislation prohibiting importations of meat from cattle that had been treated with specific hormones. The panel ruled that the EC legislation violated Articles 3.1, 5.1 and 5.5 of the

13_{Edwin Vermulst, Petros C. Mavroidis and Paul Waer ‘The Functioning of the Appellate Body after Four}

Years. Towards Rule Integrity 1999 (33) Journal of World Trade 1, 7.

States (EC: Hormones) – Report of the Appellate Body (16 January 1998) WT/DS26/AB/R and

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SPS Agreement.15 The AB reversed the ruling of the Panel in relation to Article 5.5 of the SPS Agreement.

The panel had ruled that the EC legislation made an unjustifiable distinction between hormones that occurred naturally in the animals and hormones that had been given to the animals for reasons of growth stimulation. Therefore it had not proceeded to analyse the second question of article 5.5, whether the EC legislation also distinguished in an unjustifiable manner between the application of hormones for reason of growth stimulation and the application of hormones for therapeutic reasons. The Appellate Body reversed the Panel’s primary finding that the EC legislation made an unjustifiable difference between naturally occurring and applied hormones. Therefore, it had to investigate the second question and thus extend its analysis to the factual evidence relevant to answer the second question. The Appellate Body expressly stated that it would go beyond the panel’s analysis, but also added that the facts surrounding the question had been fully argued before the panel:

Because, however, we have reached a conclusion different from that of the Panel, we consider it appropriate to complete the Panel’s analysis in order that we may be in a position to review the Panel’s conclusion concerning consistency with Article 5.5 as a whole. The matter of therapeutic and zoological uses of hormones was fully argued before the Panel.16

The Appellate Body subsequently performed the analysis and found that the EC legislation was unjustifiable in the light of Article 5.5 of the SPS Agreement. Whereas it did thus not itself collect evidence to resolve the issue, the AB did engage in an analysis of the facts previously collected by the panel. This analysis clearly seems to have gone beyond mere questions of law. In this sense the AB did go beyond its legal mandate as prescribed by Article 17.6 DSU. This view also occurs in literature.17

However, in the same report, the AB refrained from completing the panel’s analysis in regard to Article 5.6 SPS Agreement because it deemed the necessary facts had not been sufficiently established by the panel. The panel had found the EC legislation inconsistent with Article 5.5 SPS Agreement and therefore not investigated consistency of the measure with Article 5.6 SPS Agreement for reasons of judicial economy. The Appellate Body found that the panel had erroneously concluded that the contested EC legislation amounted to ‘unjustifiable or arbitrary’ differences in treatment that amounted to ‘discrimination or a

States (EC: Hormones) – Report of the Panel (18 August 1997) WT/DS26/R/USA and WT/DS48/R/CAN para

9.1.

16_{WTO EC: Hormones – Report of the Appellate Body (n 14) para 222.} 17_{Yanovich and Voon (n 3) 943.}

Inclusion of Appellate Body Remand Authority in the WTO Dispute Settlement Understanding : Grounds and Procedure