RESOLVING CONFLICT BETWEEN INTERNAL AND
EXTERNAL NORMS IN WTO DISPUTE SETTLEMENT:
Justifying the Divorce from Contractual Freedom Principle
LL.M. Thesis
International and European Law: International Trade and Investment Law
by
Mo Yang
m.yangdiem@gmail.com 12132853
supervised by James Mathis
24 July 2020
ABSTRACT
Against the background of economic globalization and treaty proliferation, how WTO agreements and non-WTO agreements interact on the platform of the WTO Dispute Settlement System (DSS) is an underlined issue with significant implications, considering that unreconciled conflicts between internal and external norms may undermine the legitimacy of a judicial body. The issue has been examined in academic literatures based on traditional international law logic of contractual freedom. The conclusion is that, the conflict would be sorted out after revealing a norm hierarchy by using techniques of lex specialis and lex posterior. However, when the conundrum came to the WTO DSS, there appeared divergent solutions and conclusions. It seems from jurisprudence that it is unlikely for a non-WTO agreement to block jurisdiction of a panel or establish a substantive defence of WTO obligations recognizable by WTO adjudicators. This thesis intends to explain and justify this discrepancy between theory and practice through an institutional and functional evaluation. The research reveals how panels and the Appellate Body conduct legal reasonings subject to mandates and goals bestowed by WTO member states and the political organ. The institutional design may lead to dysfunction of dispute settlement in an objective manner, but to its justification, being effective as an embedded organ trumps the pursuit of abstract coherence with general international law. Another point worth noting is that the Appellate Body has attempted to accommodate non-trade values into WTO internal norm systems by using interpretation tools. Therefore, it may constitute an innovative way of settling normative conflict between trade and non-trade agreements. Obviously, it is not a channel for bilateral or regional trade agreements to elicit legal effect in the WTO DSS, but such institutional bias is understandable since, after all, the ultimate goal of the DSS is to provide security and predictability to the multilateral trading system.
Table of contents
Abstract ... 2
I. Introduction ... 4
II. Normative Analysis and Theory Evolution ... 7
A. The Substance-Neutral Formula: A Manifestation of Contractual Freedom Principle ... 9
B. Self-Adjustment and Evolution of Legal Theories ... 11
III. WTO Jurisprudence ... 14
A. A Scarcity in Evidence ... 15
B. Some Consistent Positions in Jurisprudence ... 17
C. The Mindsets of WTO Adjudicators ... 22
IV. Institutional Analysis: “Pluralism” Has Its Agenda ... 28
V. Conclusion ... 34
I. INTRODUCTION
International norms are inherently susceptible to conflict. Unlike domestic legislative process, on the international level, the initiation of a treaty-making is usually to meet needs emerged abruptly and spontaneously at certain stage of development, and there is no structural grounds or some world legislators to create “a monolithic bloc of rules”.1 Each agreement is negotiated and concluded in isolation. As to the content, the words in international agreements usually own a feature of “contractual incomplete” to engage more consents from diverse states, which increases the risk of conflict between norms.
Furthermore, the recent proliferation of treaties has led to an unprecedented level of normative density and intensity which are likely to give birth to norm fragmentation. Under the globalization progress, countries try to achieve a deep and profound global cooperation through law making and dispute resolution. As a result, different sub-regimes—trade, environment, human rights, and so on—have emerged with their own rules and mechanism, supported by specialized expertise and directed by various values and subjective, without clear indication on what relationship they have with others.2 In the trade sphere, the establishment of WTO, which “resolved” to “develop an integrated, more viable and durable multilateral trading system”,3 has not restrained Member States from negotiating additional regional and bilateral trade agreements tailored to meet specific needs. As a consequence, normative conflicts may happen between WTO law and multilateral conventions in other regimes or other trade agreements to which WTO Member States are parties.
To clarify the target of examination, as far as this thesis is concerned, the discussion
1 Pauwelyn, Joost. Conflict of Norms in Public International Law: How WTO Law Relates to Other Rules of
International Law (Cambridge University Press 2003) 13.
2 U.N. GAOR, 61st Sess., Supp. No. 10, Rep of the International Law Commission, para. 482-3, U.N. Doc. A/61/10 (2006) [hereinafter ILC Fragmentation Report].
3 WTO Agreement: Marrakesh Agreement Establishing the World Trade Organization, Apr. 15, 1994, 1867 U.N.T.S. 154, 33 I.L.M. 1144 (1994) [hereinafter WTO Agreement].
of “normative conflicts” do not confine to the substantive relationship between rules containing colliding rights and/or obligations, but rather those conflicts manifested through application. For example, textually, a trade rule may not contradict an environmental provision, but through interpretation in light of context and purpose, there may appear contradictory conclusions as to the legality of a measure. Hypothetically, a conflict may arise before a WTO panel if a WTO Member adopts a trade-restrictive measure as a response to obligations contained a Multilateral Environmental Agreement, or to rights bestowed by bilateral trade agreements.
Obviously, those hypothetical situations are raised on the presumption that non-WTO law, including international agreements, is applicable in non-WTO dispute resolution. Despite the opposite opinion advanced in some early literature that panels and the Appellate Body can only apply the WTO Agreement and ones annexed to it,4 a mere glance of case law would be enough to confirm that external international agreements can be taken into account in WTO dispute settlement.5 What remains unclear and deserves further discussion is the legal status and functions of external international law in WTO Dispute Settlement System (DSS), and how panels and the Appellate Body would deal with the conflict of norms while maintaining judicial legitimacy and effectiveness as an institutionalized tribunal.
Primarily, it would be useful to clear the smog by displaying some obvious rules directing the panel and the Appellate Body. The examination starts with a harmonious reading of Dispute Settlement Understanding (DSU)6 with a purpose to find relevant
4 Marceau, Gabrielle. “A Call for Coherence in International Law—Praises for the Prohibition Against ‘Clinical Isolation’ in WTO Dispute Settlement” (1999) 33(5) Journal of World Trade 87; Trachtman, Joel P. “The Domain of WTO Dispute resolution” (1999) 40(2) Harvard International Law Journal 333, 342.
5 In European Communities—Measures Affecting Importation of Certain Poultry Products (EC-Poultry), WT/DS68/R, the Panel stated that “…we cannot summarily dismiss the significance of the Oilseeds Agreement in the interpretation of Schedule LXXX by recourse to the public international principles embodied in the Vienna Convention” (para. 207); In United States—Import Prohibition of Certain Shrimp and Shrimp Products
(US-Shrimp), WT/DS58/AB/R, the Appellate Body interpreted the term ‘natural resources’ by referring to Multilateral
Environmental Conventions including the Convention on the Conservation of Migratory Species of Wild Animals and UNCLOS (para. 130-2); In European Communities—Regime for the Importation, Sale and Distribution of
Bananas (EC-Bananas), WT/DS58/AB/R, the Appellate Body referred to the Lome Convention when interpreted a
waiver (para. 167).
6 Dispute Settlement Rules: Understanding on Rules and Procedures Governing the Settlement of Disputes, Marrakesh Agreement Establishing the World Trade Organization, Annex 2, 1869 U.N.T.S. 401, 33 I.L.M. 1226 (1994) [hereinafter DSU]
instructions and procedures. It leads to several semi-conclusions with little controversy. Firstly, according to Article 1.1, panel’s jurisdiction is limited to claims brought under “the agreements listed in Appendix 1 to the Understanding”, also known as “covered agreements”. Secondly, under Article 3.2, panels and the Appellate are required to apply customary rules of interpretation of public international law to clarify provisions of covered agreements, which has mostly been codified in article 31 to 33 in the Vienna Convention.7 Third, Article 3.2, 7.1, 7.2 and 11 constitute an implicit confirmation that in order to make “an objective assessment” of the applicability of WTO covered agreements, and to make “other findings” in the assistance of the DSB, panels may use non-WTO law in the interpretation, and furthermore, they have duty to address provisions in external agreements when parties cite to the dispute.
Still, textual reading of the DSU provisions is not sufficient to answer the research questions at stake. Because, on the one hand, the DSU does not contain an applicable law clause in the form of an exhaustive list, and on the other, it lacks a “conflict clause” setting hierarchy between norms. Accordingly, academic literature, represented by works from Pauwelyn and Bartels, have been devoted to contributing to both concerns. Regarding applicable law, an understanding echoing the judicial practice has emerged. It follows that, recognizing the distinction of jurisdiction and applicable law, one can assume that, despite the limited jurisdiction of the panel, all sources of international law are “potentially applicable” in WTO dispute settlement without differentiating customary international law or treaties.8 As for conflict clause, Bartels opined that Article 3.2 and 19.2 (requiring panels not to " add to or diminish the rights and obligations provided in the covered agreements”) have the equivalent function, as they ensure rights and obligations under covered agreements prevail in cases of inconsistency.9 However, Pauwelyn disagreed, he read those two provisions in the immediate context and concluded that Article 3.2 is a reaffirmation of the “the inherent
7 The United Nations. “Vienna Convention on the Law of Treaties.” Treaty Series, vol. 1155, May 1969, p. 331. 8 Bartels, Lorand. “Applicable Law in WTO Dispute Settlement Proceedings” [2003] 35(3) Journal of World Trade 499, 502; Pauwelyn, supra note 1, at 460.
limits” of a WTO panel as a judicial organ to interpret law, and it will have little guidance when conflicts appear. 10 According to Pauwelyn, no provision in the DSU has a function of conflict clause, what’s more, the DSU, as a technical instrument, is not even a suitable document where a conflict clause should position.11 Take a typical conflict clause—Article 103 of UN Charter—as example, this non-derogation clause is inserted into the same instrument of the substantive provisions, to which the clause is designed to set priority. All in all, the research questions are still open.
Against the background in legislative, and based on the inadequacy of the DSU reading, this thesis will go further and deeper in two parallel threads. One presents a normative analysis from theoretical aspects, accompanying with a glance on its self-adjustment as well as evolution (Part II); second concerns the WTO case law, it will be conducted in an empirical and problem-oriented manner, by putting salient rulings under scrutinization with the purpose to reveal some common reasoning patterns and mindsets of WTO adjudicators that are helpful to predict future cases (Part III). To follow up, the thesis tends to justify the discrepancy between theory and practice with some specificities of the WTO regime distilled from an institutional and functional evaluation (Part IV). Then would it conclude (Part IV).
II.
NORMATIVE ANALYSIS AND THEORY EVOLUTION
Driven by the natural preference of coherence over fragmentation,12 scholars are prone to indulge in theories of general international law in order to provide a substance-neutral and open-ended formula within which the interplay of WTO law and other norms can be examined as a matter of legal technique.13 The underlying logic and
10 Pauwelyn, supra n.1, 353. 11 Ibid.
12 See Pauwelyn, supra n.1, 468 (“if there is a way to give a meaning to those WTO provisions that does not detract from these other rules such meaning must be preferred”)
significance of this approach have been put forward by Pauwelyn,
Although different tribunals may be dealing with different claims, the applicable law to examine those claims should be the same no matter where the case is brought. Not to accept this proposition, necessarily results in the creation of small isolated pockets of international law, declined from other branches of the wider corpus of international. It goes against the unity of international law as well as the principle of pacta sunt servanda.14
That is to say, the purpose of the normative analysis is to help adjudicators resolve potential norm conflicts while maintaining judicial legitimacy to its maximum.15 Although there is no doubt that such work amounts to a theoretical legacy for later research, the problem is that the conclusions drawn from this delicate analysis do not echo the actual rulings of WTO DSS. However, in itself, the international law theory is not static or isolated, when globalization deepens the specialization of various fields, one is required to rethink several propositions: in the first place, what does it mean to understand international law as a coherent system so as to stay cautious of the danger of clinical isolation; additionally, to what extent various sub-regimes share commonality which imposes implications in judicial practice. To our assistance, in 2006, the study group of International Law Commission presented a report addressing the topic of fragmentation of international law. In this report, some presumptions and techniques relied on by the normative analysis were re-examined, above all, the report conveyed an important idea that the perception of “international law as a system” should not be taken for granted and the value of coherence should not be overestimated.16 To make it even more complex, a newly emerging trend of applying informal norms gives rise to a new round of academic discussions on the validity of the traditional narrative. As far as this thesis concerns, such development may turn a legal-status-based analysis into something superfluous.
14 Pauwelyn, supra n. 1, 461. 15 Ibid, 3.
A. The Substance-Neutral Formula: A Manifestation of Contractual Freedom Principle
Ideally speaking, if we perceive international law as a coherent system, what laws are applicable and which law should prevail could be determined abstractly by adopting a conflict-of-rules formula without getting into the substance, and regardless of which regime the claim is processed under. The normative work, for the sake of validity, is conducted in the form of deductive reasoning: the first premise is that all international law derives from the same authority—sovereignty, therefore, any law falls into the category of international law should not deviate from the principle of sovereignty, and when a dispute arises, the judicial body only needs to clarify the most valid sovereign intent.
Under this logic, the single most important statement that directs the analysis is that WTO law is not a “closed legal circuit” but of one part of international law.17 Therefore, the principles and fundamentals of general international law apply. On top of the list is the statement that the validity of international norms derives from one single source—state consent. Hence, there is no inherent hierarchy between different sources of international law. And as an inference of sovereignty, states have absolute freedom to conclude new treaties as well as to modify old ones. When conflicts appear, it is the rule that reflects the real and latest intention of the State that trumps. In the meantime, by perceiving WTO obligations as contractual rather than integral in nature, “where compliance with the rule is owned by one State to another, and vice versa,”18 one can presuppose the lawfulness and validity of inter se modification of WTO covered agreements between a limited number of states, as long as it will not affect rights of a third-party.19 Another inference from the central idea is that sub-regime legal systems should “fallback” on other general principles in international law when they
17 Pauwelyn, supra n.1, 35.
18 Hafner, Gerhard. “Should One Fear the Proliferation of Mechanisms for the Peaceful Settlement of Disputes?” in Caflisch, Lucius (eds). Règlement pacifique des différends entre états : perspectives universelle et européenne =
The peaceful settlement of disputes between states : universal and European perspectives. ( Kluwer Law
International 1998) 19 Pauwelyn, supra n.1, 53.
have not explicitly contracted out of it.20 Accordingly, since WTO agreements and the DSU do not provide a concrete conflict clause, the role should be played by Latin maxim lex posterior and lex specialis, which are techniques deriving from the basic principle of contractual freedom and pacta sunt servanda.
Strictly sticking to the aforementioned premises, Pauwelyn introduced a two-level determination on operational latitude—“the general of the entire corpus of international law and the more concrete level of WTO dispute settlement.”21 At the general level, the principle of contractual freedom is the only yardstick, it says that all sources are potentially applicable, and a concrete hierarchy between norms manifests through the application of specific conflict clause in internal or external treaties, and in absence, lex posterior and lex specialis. At the second level, the limitation of jurisdiction kicked in, and accordingly, panels shall only enforce WTO covered provisions. The essence of this two-level manual is that WTO panels would “not create law but merely give effect to law created elsewhere by the WTO member itself”, from another aspect, for those norms that have been “taken away or overruled” by states at the first level through inter se agreements, panels shall not give them effect at the second level.22
Such maneuver may lead to following consequences: First, the WTO Panel should decline its jurisdiction when there are specific agreements between parties not to invoke the DSU, or when there is an exclusive or compulsory jurisdictional clause in another treaty, or the fork-in-the-road clause has been triggered.23 Second, even if the WTO Panel has successfully established its jurisdiction, when non-WTO agreements reflect a more specific or recent sovereign will, the panel should refrain from finding a violation under the WTO treaty and issue a status quo ruling.24
Despite the ostensive validity and persuasiveness of this normative reasoning—a
20 Ibid, 202. 21 Ibid, 473. 22 Ibid, 473-4.
23 Pauwelyn, Joost. “How to Win a World Trade Organization Dispute Based on Non-World Trade Organization Law?” (2003) 37(6) Journal of World Trade 997, 1028.
deduction from presumptions to conclusions, even look at the proposed consequences alone, one can play a hunch that the two-level operation is unlikely to be considered by WTO adjudicators. Case law shows that neither is jurisdictional rejection nor a status quo ruling an available judicial choice for WTO adjudicators. A detailed examination of case law also shows that the contractual freedom principle is far from the only benchmark to decide applicable law (see Part III). Notably, a discrepancy between theory and practice is around the corner.
B. Self-Adjustment and Evolution of Legal Theories
The factual proliferation and specialization of international law both contributed to and demanded a theory development. The resulted fragmentation on the surface may lead the theory to evolve in two directions: one highlights the unprecedented significance and urgency to maintain the unity of international legal order and the continued viability of general principles; the other gives effect to the flow of development in law-making and accordingly adjust the presumption that international law is a coherent system. At a certain point, the endeavor in the first direction will show its inadequacy. As the ILC Fragmentation Report puts it:
Special rules and rule-complexes are undoubtedly necessary…The law cannot resolve in an abstract way any possible conflict that may arise between [sub-regimes]. Each has its experts and its ethos, its priorities and preferences, its structural bias … Public international law does not contain rules in which a global society’s problem are, as it were, already resolved.25
In fact, pure normativism has its limits. And it is problematic to derive concrete inferences and operational implications from the proposition of the unity of international law.
First problem is the validity of the proposition itself. It is arguable to assume that various international agreements are contemplated by a uniform legislator. The
enforcement of contractual freedom principle is valid when treaties formed in different time slots and under different subject-matters can be assumed to express the intention of a uniform legislator—the state. Even though it is the same state that volunteers to get into different rights and obligation relations, it lacks “a sufficient sense of institutional coherence, continuity, and memory across these different branches.”26 The principle pacta sunt servanda do impose on states an obligation to be mindful of prior agreements they have reached when negotiating a new treaty. However, the expertise involved in different branches decides that people negotiating a trade treaty and an environmental one are likely from different knowledge backgrounds and in different value preferences. Even within the same field, it is possible that different negotiators inclined “to secure fuller satisfaction for their own views on debatable questions of detail at the price of conflict between different instruments and incoherence in the body of related instruments”.27 Since international agreements are not constituted under the uniform legislator mindset, conflicts are unavoidable. And if adjudicators continue to assume this uniform legislator and strictly apply contractual freedom rule, they would sacrifice their effectiveness as a judicial organ and forego its obligations to solve the disputes and provide security and predictability to the multilateral system.
Second, the standard conflict-solution techniques—lex specialis and lex posterior maxim—have limited functions. This point can be inferred from the former, for the conflict-solution technique is grounded on the grand presumption of the existence of a unitary legislator, and the true intent is usually the one that comes out later in time with more specific details. When the presumption of a unitary legislator shatters, the validity and applicability of standard techniques undermined. Another difficulty relates to the technique is of an operational perspective, as when a trade-restrictive measure is issued for environmental protection, it is hard to decide which law is more specific than the other.
26 Michaels, Ralf and Joost Pauwelyn. “Conflict of Norms or Conflict of Laws: Different Techniques in the Fragmentation of Public International Law” (2012) 22 Duke J Comp & Int'l L 349, 359.
Third, the institutional elements should not be overlooked in legal reasoning. Every sub-system has its purposes and preferences, and naturally, there are tensions between them that a neutral conflict solution cannot be reached easily. The two-level method held that, primarily, the interaction between norms would produce an order within themselves and institutional elements only decide whether or not this order can be enforced later. It is not practical, and neither is the way how conflicts appear before a tribunal. For judicial bodies, it is not a choice between trade commitments and environmental obligations that under its determination, but “a preference of the decision in the trade regime on the role of environmental concerns over the decision within the environmental regime on the role of trade.”28 The institutional elements should cover the whole spectrum of legal reasoning.
So far, the conclusion is that the single statement “WTO law is part of international law” is not enough to derive a conflict resolution formula. Both the fact pattern and the intuitional preference have impacts on legal reasoning. Techniques in general international law are applicable only when the relation between two norms in conflict conforms the unitary legislator assumption. All in all, it is only safe to say that conflict resolution between norms is a case-by-case determination.
Previous discussion has been evolved around the principle of contractual freedom. As in the domain of traditional international law, the state will is what decides the authority of international legal norms. Even the specialization does not change this basic but merely recognizes that the nature of state intention can be pluralistic rather just unitary. However, a rise of informal law nudges WTO law into a new era, within which the traditional consent-focused understanding of norm hierarchy is trivial. 29 This era is described by Pauwelyn as “trade 2.0”—a move from “thin state consent” to
28 Michaels and Pauwelyn, supra n. 26, 369.
29 A definition of “informal international law” can be found in Pauwelyn, Joost, editor; Wessel, Ramses A. and Wouters, Jan. Informal International Lawmaking (1st ed, Oxford University Press 2013) 15. (“Cross-border cooperation between public authorities, with or without the participation of private actors and /or international organizations, in a forum other than a traditional international organization (process informality), and/or as between actors other than traditional diplomatic actors (such as regulators or agencies) (actor informality) and/or which does not result in a formal treaty or other traditional source of international law (output informality).”)
“thick stakeholder consensus”,30 within which the public concerns would not be addressed through applying outside treaties but by interpreting the GATT exceptions based on the consensus evidenced in various treaties or other instruments. As such, it has witnessed a transition from the traditional “consent-based” approach to a non-legislative normative creation by establishing a “common understanding” among membership.31
How the DSS manages this transition through legal reasonings will be discussed in detail in the next Part. As far as this section concerns, such practice has an unconventional impact on the normative analysis. It says that a comprehensive analysis on validity and hierarchy of norms seems superfluous, and another set of questions arise, including inquiries on the legitimacy basis of informal law, and who (states, organizations and tribunals) play what role in its genesis.
III. WTO JURISPRUDENCE
For WTO adjudicators, the interaction of WTO and non-WTO law has never been an innovative subject. WTO law expressly incorporated some external multilateral treaties. The nature of those provisions has been confirmed by the panel as “extended context” of WTO provisions, meaning, after incorporation, external international law has the same status as provisions in covered agreements in interpretation, and their own negotiating history should be given the same weight as that of WTO agreements.32 What remains contested is the function and effect of non-incorporated international law, especially those providing divergent obligations and/or rights. The relevance and efficiency of this case study is subject to the scarcity in evidence, not only regarding the number of relevant cases, but also the subject matter in adjudication. Regardless of
30 Pauwelyn, Joost. “Rule-Based Trade 2.0? The Rise of Informal Rules and International Standards and How They May Outcome WTO Treaties.” (2014) 17(4) Journal of International Economic Law 739, 749.
31 Vidigal, Geraldo. “From Bilateral to Multilateral Law-Making: Legislation, Practice, Evolution and the Future of Inter Se Agreements in the WTO.” (2013) 24(4) European Journal of International Law 1027, 1041.
the insufficiency in material, some consistent and constructive stances of adjudicators uncovered from existing reports. Furthermore, the rhetorical, procedural and substantive choices of panels and the Appellate Body revealed some of their mindsets on external norms treatment.
A. A Scarcity in Evidence
On the outset, it bears noting that Panels and the Appellate Body alike are not ones that predominate the outcome of a case, the fact pattern, the formation of parties’ submissions and other economic considerations all influence in the advancement and trajectory of a case.
To that, the jurisdiction determination in Mexico-Soft Drink is an obvious example. In its first written submission, Mexico argued that it is inappropriate for the Panel to exercise jurisdiction when the US’s claims are linked to a broader dispute under the NAFTA.33 Even though, in the end, the Panel rejected Mexico’s request to decline jurisdiction, it left a window open on this point by stating that
Even assuming, for the sake of argument, that a panel might be entitled in some circumstances to find that a dispute would more appropriately be pursued before another tribunal, this Panel believes that the factors to be taken into account should be those that relate to the particular dispute.34
For the Panel, the rejection partly grounded on the specific factors in the fact pattern, that “neither the subject matter nor the respective positions of the parties are identical in the dispute under the NAFTA”.35 On its appeal, Mexico did not take a chance to rewire this point, instead, it targeted the “implied jurisdictional power” of the Panel, and claimed that the Panel “should have exercised this power in the circumstances of this
33 Panel Report, Mexico — Tax Measures on Soft Drinks and Other Beverages (Mexico-Soft Drink), WT/DS308/R, para. 7.11 (referring to Mexico's first written submission to the Panel, paras. 88-92, 102-103).
34 Ibid, para. 7.17. 35 Ibid, para. 7.14.
dispute.”36 The Appellate Body was fully aware and recalled what “Mexico does not claim”, and hence focused its reasoning on the ambit of jurisdiction of the panel.37 As a result, we did not receive an analysis from the Appellate Body on the meaning of “same dispute” across fora, even though the fact pattern of the case put this point at the frontline.
Such submission choices are driven by strategic considerations or limits in fact patterns also show in substantive stages. For instance, in Peru-Agriculture Product, the Free Trade Agreement (FTA), which allows Peru to maintain a WTO-inconsistent measure, has not entered into force at the time the same measure was challenged in WTO. Therefore, Peru’s argument that “the relevant clauses in the FTA modified certain obligations between the parties under the WTO agreements” can be easily rejected due to this fact. And it was what the Panel did, by stating that “it is not necessary for this Panel to express an opinion” on legality and effect of such modification.38 Hence, on appeal, Peru sought to the approach of “systemic integration” through Article 31(3) of the Vienna Convention,39 which has been proved to be a long shot. (see below)
Another example is the common practice in defendant parties’ endeavor to squeeze the WTO-inconsistent measure into one of the exceptions listed under Article XX of the GATT, rather than invoke Article XXIV even though they recognize the possibility that “Article XXIV may justify a measure which is inconsistent with certain other GATT provisions”.40 It is understandable considering that in Turkey-Textile case, the Appellate
36 Appellate Body Report, Mexico-Soft Drink, WT/DS308/AB/R, para. 44. (referring to Mexico's appellant’s submission, paras. 71)
37 Ibid.
38 Panel Report, Peru-Additional Duty on Imports of Certain Agricultural Products (Peru-Agriculture Product), WT/DS457/R, para. 7.528.
39 Article 31(3) of the Vienna Convention, entitled "General rule of interpretation”, states: “There shall be taken into account, together with the context:
(a) any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions;
(b) any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation;
(c) any relevant rules of international law applicable in the relations between the parties.”
40 The Appellate Body Report, Peru-Agriculture Product, WT/DS457/AB/R, para. 5.114. (referring to Peru’s appellant’s submission, para. 197)
Body adopted a stringent judicial scrutiny on such measures making conditions attached to this provision are impossible to fulfill.41
In ideal circumstances for the purpose of case study, every factor for argument would be self-evident and submissions would accurately hit the core of contention. Whilst in reality, it is cost-and-benefit considerations that hold the wheel. For what we have at hand, however, it is possible to reveal some stances of WTO adjudicators through a work intertwined with inductive reasoning and reflective thinking. As presented in the next sector, the Panel and Appellate Body reports have shown consistent positions on some salient issues.
B. Some Consistent Positions in Jurisprudence
1. It is nearly impossible for a defendant to invoke a non-WTO agreement to block the jurisdiction of the panel.
To this point, the most representive case is Mexico-Soft Drinks. In the report, the Appellate Body established that “Member is entitled to a ruling by a WTO panel.”42 Importantly, the conclusion is reached from a harmonious reading of DSU provisions (Article 3.2, 7.1, 7.2, 11, 19.2, and 23), which lead to the irrelevance of the fact pattern in the determination of jurisdiction. According to the Appellate Body report, the term used in the DSU—“shall” in Article 7.2 and Article 23, “should” in Article 11— indicates that it is an obligation of the panel to “make an objective assessment of the matter before it”, and this obligation has an effect of limiting “the implied judicial power” of the panel.43 That is to say, although the panel has discretion in establishing its own working procedures, it cannot decline its jurisdiction after the case has been filed properly according to the DSU.44 Furthermore, the express limitation in Article
41 The Appellate Body Report, Turkey-Restrictions on Imports of Textile and Clothing Products(Turkey-textile), WT/DS34/AB/R, para. 58 (“… in a case involving the formation of a customs union, this “defence” is available only when two conditions are fulfilled. First, …the measure at issue is introduced upon the formation of a customs union that fully meets the requirements of sub-paragraphs 8(a) and 5(a) of Article XXIV. And…the formation of that customs union would be prevented if it were not allowed to introduce the measure at issue.”)
42 Appellate Body Report, EC-Poultry, supra n5, para. 52. 43 Ibid, para. 47-52.
3.2 and 19.2 has the effect of preventing the panel from declining its jurisdiction since that would amount to “diminish” the right of a complaining Member to “seek the redress of a violation of obligations” under WTO agreements.45
The WTO adjudicator’s proneness to assure and preserve the right of Member to seek redress through WTO Dispute Settlement Body is further manifested in how they treat the estoppel inhibiting the ability of a WTO member to initiate a WTO dispute settlement proceeding. In EC-Sugar, the Appellate Body does not even bother to get into the detail of the content of the estoppel. Instead, it replaced the content of the estoppel with the “good faith” requirement contained in Article 3.10 of the DSU.46 And if one takes a look at Article 3.10, it is not hard to notice that this provision is declarative, meaning it is unlikely that any Member may successfully claim a defence from this provision.
Against DSU provisions and case law, it seems that the requirement of jurisdiction is formalistic. Thus, as long as “the specific measures” have been identified and “legal basis” under WTO covered agreements have been provided (Article 6), the jurisdiction establishes automatically and there is little room for panels and the Appellate Body to take determination (Article 3.2, 7, 11, 19.2, and 23). If anything, it is for Members themselves to decide whether it is fruitful to take action (Article 3.7).
2. Non-WTO agreements can be applied to interpret WTO provisions, but its function is limited to interpretative exercise. Therefore, a prima facie WTO-inconsistent measure is unlikely to be read as WTO-consistent by interpreting WTO provisions in light of a subsequent agreement.
It is unsurprising that the most common use of non-WTO agreements by panels and the Appellate Body is as “any subsequent agreements” or “any relevant rules of international law” to interpret a provision in WTO covered agreements. These two types
45 Ibid, para. 53.
46 Appellate Body Report, European Communities – Export Subsidies on Sugar (EC-Sugar), WT/DS265/AB/R, WT/DS266/AB/R, WT/DS283/AB/R, para. 312.
of sources have been codified respectively in Article 31(3)(a) and Article 31(3)(c) of the Vienna Convention as the context that a tribunal “shall” take into account when interpreting a provision. And it is Article 3.2 of the DSU that explicitly requires the dispute settlement system to “clarify” WTO provisions in accordance with “customary rules of interpretation of public international law” which are embodied in Article 31 to 33 of the Vienna Convention.
The relevance of Article 31(3)(a) and Article 31(3)(c) have been confirmed by the Panels and the Appellate Body, but their functions are subject to two limits. The first is the limitation provided in Article 3.2 and Article 19.2 of the DSU that they cannot “add to or diminish the rights and obligations provided in the covered agreements”. Second one concerns the natural limits in usage as an interpretative tool. Both limitations work to confine the function of a judicial body to applying rules rather than creating new rules. As the Appellate Body observed in US-Clove, “Article 31(3)(c) must be read into the treaty for purpose of its interpretation” rather than “replace or override the terms” contained in covered agreements.47
Some Member states opined that since “any subsequent agreements” and “any relevant rules of international law” are two standards can be met easily, they can invoke inter se agreements which have modified WTO obligations as a defence under the hook of interpretation. The flaw of this claim is obvious. Interpretation as a process is inherently irreconcilable with modification as a consequence. If a provision was modified through interpretation, the conclusion will be nothing but that the arguments are “beyond the scope of an interpretative exercise as envisaged in Art. 3.2 of the DSU and in Art.31 of the VCLT”.48 For the Appellate Body, “interpretative exercise” means “ascertaining the ordinary meaning of treaty terms” and “reflecting the common intention of the parties to the treaty.”49 And “common intention” means that the interpretations based on asserted subsequent agreements or asserted relevant rules of
47 Appellate Body Report, United States-Measures Affecting the Production and Sale of Clove Cigarettes, WT/DS406/AB/R, para. 269.
48 Appellate Body Report, Peru- Agricultural Products, supra n. 40, para. 5.96. 49 Ibid, para. 5.93.
international could not reach a result that is only applicable between some of its parties, but it needs to conform with the common intention of the treaty parties as a whole.50
3. The question of whether a provision in an FTA may modify bilateral relations between certain members under WTO rules would not be subject to Article 41 of the Vienna Convention,51 but to the WTO provisions regarding exceptions.
This issue was examined in the Peru-Agriculture Product Appellate Body Report as an obiter dictum.52
It bears noticing that, in this case, the disputants and the third parties have different opinions over the applicability and effect of an FTA. Some states recognized that, a valid FTA might prevail over the WTO Agreement between certain Members according to Article 41 of the Vienna Convention (Peru, Brazil);53 However, other states held an opposite view, stating that the FTA is not relevant to resolve this dispute since conducting such assessment would tantamount to acting beyond the terms of reference
50 Ibid, para. 5.94-5.95; See, Panel Report, European Communities - Measures Affecting the Approval and
Marketing of Biotech Products (EC-Biotech), WT/DS291/R, WT/DS292/R, WT/DS293/R, para. 7.74 (“if a rule of
international law is not applicable to one of the Parties to this dispute, it is not applicable in the relations between all WTO Members. Therefore, … we do not agree … that we are required to take into account the Convention on
Biological Diversity in interpreting the multilateral WTO agreements at issue in this dispute.”)
51 Article 41 of the Vienna Convention, entitled "Agreements to modify multilateral treaties between certain of the parties only”, states:
1. Two or more of the parties to a multilateral treaty may conclude an agreement to modify the treaty as between themselves alone if:
(a) the possibility of such a modification is provided for by the treaty; or (b) the modification in question is not prohibited by the treaty and:
(i) does not affect the enjoyment by the other parties of their rights under the treaty or the performance of their obligations;
(ii) does not relate to a provision, derogation from which is incompatible with the effective execution of the object and purpose of the treaty as a whole.
2. Unless in a case falling under paragraph 1(a) the treaty otherwise provides, the parties in question shall notify the other parties of their intention to conclude the agreement and of the modification to the treaty for which it provides.
52 The Appellate Body, Peru-Agriculture Product, supra n. 40, para. 5.111.
53 Panel Report, Peru-Agriculture Product, supra. 38, para. 7.507-8. (referring to Peru’s second written submission, para. 2.59, 2.63-2.65; opening statement at the second meeting of the Panel, para. 58); para. 7.518. (referring to Brazil’s response to Panel question No. 1, p.1)
of the Panel under the DSU (Guatemala, the United States). 54
In the Report, the Appellate Body did not treat this issue as one regarding judicial power as Guatemala suggested, instead, it resorted to substantive provisions in the GATT 1994, and observed that the provisions addressing amendments, wavers, and exceptions for regional arrangements “prevail over the general provisions of the Vienna Convention, such as Article 41.”55 Essentially, the Appellate Body’s reasoning consisted two parts, firstly, it categorized the issue of applying a conflicted FTA as a departure from WTO rules, and since WTO law contained relevant norms, the WTO law prevails over international law with regard to all disciplines involving exceptions and modifications.
The reasoning was presented only for sake of argument, but its legitimacy and validity is likely to be called into question. As a matter of fact, in order for a specific provision to prevail over a general one, there should be a prerequisite determination at the outset, on whether these two provisions fall into a “general and special” relation for regulating the same subject matter with different levels of specificity. Firstly, Article X of the WTO Agreement is the amendment provisions providing detailed procedures, it is special as regard to Article 40 of the Vienna Convention, which is entitled “Amendment of multilateral treaties”, rather than Article 41 of the Vienna Convention, which deals with the bilateral relations between parties to a multilateral agreement. Therefore, it is not a suitable scenario to apply lex specialis technique and replace the potential application of Article 41 of the Vienna Convention. In a like manner, provisions addressing preferential trade agreements (PTAs) in WTO agreements— Article XXIV of the GATT 1994 and the Enabling Clause for developing countries are also designed to meet specific scenarios. The Enabling Clause aimed to facilitate trade of developing countries. As for Article XXIV, according to the Appellate Body in Turkey Textile, it offers a potential defence to a measure inconsistent with certain GATT
54 Ibid, para. 7.511. (referring to Guatemala’s response to Panel question No. 21, para. 33 and 39); para. 7.519. (referring to United States’ third-party statement, para. 19)
provisions relating to the “duties and other regulations of commerce” applied by the constituent members of the PTA to trade with third countries.56 Both exceptions are designed to provide some flexibility to non-discriminatory principle in multilateralism, and it would be farfetched to use these provisions to limit the power of certain Member States to form special relations when there is no third party involved.
Since the provisions listed by the Appellate Body all have clear-cut functions, there is no obvious inference that the existence of those provisions prohibits Member States from forming preferential arrangements. As such, the takeaway from this unconvincing reasoning is the tendency of the Appellate Body to rely on provisions of WTO agreements to resolve a categorized issue, revealing its institutional bias to preserve the multilateral system.
C. The Mindsets of WTO Adjudicators
Besides the aforementioned legal stances expressed in the reports, one can reflect the mindset of WTO adjudicators from their judicial choices. Here I conclude three: 1. For WTO adjudicators, there is a presumption against conflict, which means the
inconsistency between WTO and non-WTO agreements is not a contentious point to solve.
As the Study Group of International Law Commission recalled in the Fragmentation Report, the tradition for international tribunals to start its work with resolving the conflict or overlap between all applicable legal materials dated back to the very first case of the Permanent Court of International Justice.57 However, it is not a standard step followed by panels and the Appellate Body, as institutional judicial bodies. Indeed, the very specific task for panels to assess facts, find the applicability of and conformity with WTO agreements echoes a presumption against conflict.58 For panels, the
56 Appellate Body Report, Turkey-Textile, supra n. 41, para. 52. 57 ILC Fragmentation Report, supra n. 2, 486.
potential inconsistency between WTO and non-WTO agreements do not change the ambit of their functions, in other words, the legality of a measure under an FTA would not change its inconformity with WTO obligations.
Examples can be drawn from the reluctancy of panels and the Appellate Body to interpret external general agreements when they are called upon. In EC-Poultry, it is the complainant who invokes the bilateral treaty, and the Appellate Body replied that “it is Schedule LXXX, rather than the Oilseeds Agreement, which forms the legal basis for this dispute”, and the panel and the Appellate Body will only examine the bilateral treaty “to the extent relevant to the determination” of WTO obligations.59 And in the Mexico-Soft Drink case, even though for the purpose of dispute resolution, a mere clarification of the term “law or regulation” as referred exclusively to domestic law suffices for the Appellate Body to reject Mexico’s invocation of exceptions under Article XX of the GATT, the Appellate Body explicitly rejected to interpret NAFTA based on one statement that WTO panels and the Appellate Body would not become adjudicators of non-WTO disputes, because “this is not the function of panels and the Appellate Body as intended by the DSU”.60
Therefore, one can infer that, to discharge the function, WTO adjudicators do not need to and also reluctant to examine rights and obligations under distinctive sets of rules side by side. Indeed, even though international law is naturally plagued with normative conflicts, from the perspective of a judicial body, a presumption against conflict means that, whether there is normative conflict or not, that is the problem on legislative level, and would not enlarge the specific function of panels. Hence, a relevant hierarchy between WTO and non-WTO norms has been established ad hoc due to the rise of the very particular legal issue— “conformity with WTO agreements”.61
2. Non-WTO agreements play significant roles in standard control and factual
59 Appellate Body Report, EC-Poultry, supra n. 5, para. 81, 84-85. 60 Appellate Body Report, Mexico-Soft Drink, supra n. 36, para. 78. 61 ILC Fragmentation Report, supra n. 2, para. 485.
assessment.
The previous analysis on jurisprudence seems to demonstrate that panels and the Appellate Body would simply disregard non-WTO agreements in the determination of jurisdictional and substantive claims. However, it is not a comprehensive explanation of the role played by non-WTO agreements in WTO adjudication. WTO case law has shown that non-WTO agreements can not only be used to interpret a standard-like term, but also be invoked to assess the reasonableness of a measure implementation.
In the first scenario where there is a standard, rather than a rule, to apply, panels and the Appellate Body may rely on non-WTO agreements to expand the exceptional circumstances to WTO obligations.
At the outset, a distinction between rule and standard is called upon. According to Trachtman, “the distinction relates to how much remains to be done to determine the applicability of the norm to a particular circumstance”.62 A rule is specified with regard to the conduct to which it is applied; while a standard provides “a general guidance to both the person governed and the person charged with applying the law.”63 For example, the subsections of Article XX of the GATT 1994 displays a wide range of such standards. To be specific, it requires a standard delimitation when it comes to issues like to what extent a measure is “necessary” or “relating to” the goal it is designed to achieve, which value accounts for “public morals” or how to define a treatment as “arbitrary and unjustifiable”. Since the application of standards suggests a wider range of discretion, there would be fewer obstacles for WTO adjudicators to apply non-WTO agreements, and that is the moment when WTO adjudicators expanded its role as “a transmitter of rules” to “a guardian of a set of standards”.64
The Shrimp case amounts to a clear illustration. The Appellate Body intended to read the words “exhaustible natural resources” in the light of “contemporary concerns
62 Trachtman, Joel P. The Economic Structure of International Law (Cambridge, Mass: Harvard University Press 2008), 213.
63 Ibid.
of the community of nations” on the environment protection.65 And according to the Appellate Body, this “contemporary concerns” can be found in modern international conventions and declarations including the 1982 United Nations Convention on the Law of the Sea (“UNCLOS”), the Convention on Biological Diversity (“CBD”), the Convention on the Conservation of Migratory Species of Wild Animals (“CCMSWA”), and the Convention on International Trade in Endangered Species of Wild Fauna and Flora (“CITES”). As a result, the trade restrictive measure has been provisionally justified thanks to the broad interpretation that categorizes turtles as “exhaustible natural resources”. But it is noted that, in reaching this conclusion, the Appellate Body was fully aware that certain parties to the dispute are not even parties to some of the multilateral conventions mentioned above.66 It suggested that the legal status of these instruments was not determinant since the purpose is to find whether or not there is a common understanding on “natural resources” evidenced in different international texts so that such understanding can represent the “contemporary concerns of the community of nations” at large. Later, the Panel in EC-Biotech recalled Shrimp case and recognized the possible influence of external international instruments with “informative character” on interpretation, since those texts “may provide evidence of the ordinary meaning of terms in the same way that dictionaries do”.67
Secondly, it is common for WTO adjudicators to rely on non-WTO international instruments as evidence of fact to support an argument.68 In Australia-Plain Packaging case, Panel cited World Health Organization (WHO) Framework Convention on Tobacco Control (FCTC) and its guidelines to reaffirm the gravity of the global tobacco epidemic and the effectiveness of plain packaging measure to pursue objective, hence, by following up on its commitments under the FCTC, Australia has not caused an
65 Appellate Body Report, US-Shrimp, supra n. 5, para. 129. 66 Ibid, footnote 113.
67 Panel Report, EC-Biotech, supra n. 50, para. 7.92.
68 Panel Report, Australia - Certain Measures Concerning Trademarks, Geographical Indications and Other Plain
Packaging Requirements Applicable to Tobacco Products and Packaging (Australia-Plain Packaging),
WT/DS435/R, WT/DS441/R, WT/DS458/R, WT/DS467/R, para. 7.412; Panel Report, United States - Measures
“unjustifiable encumbrance” on the use of trademarks.69 As such, WHO FCTC was not invoked as a conflicting treaty, or to interpret standard-like terms such as “arbitral” or “unjustifiable”. Rather, its significance lies in its function as a factual context against which the appropriateness of a measure is to be assessed.70 Moreover, in the appeal stage, the Appellate Body, recognizing such extensive references, reassured that the FCTC and its Guidelines has not been given “undue legal weight”.71
Essentially, how legal regimes outside the WTO change over time is highly relevant to WTO adjudication, and the significance of a non-WTO instrument should not be perceived merely based on its legal status or normative hierarchy.
3. The panel and the Appellate Body have shown no interest in reconciling its judgment with those from other fora.
The DSU does not regulate on how panels and the Appellate Body should treat judgments from other fora. However, in jurisprudence, panels and the Appellate Body have presented a rather clear message that it is not their role to facilitate the compliance of judgements from another forum. This stance can be puzzled out from Mexico-Soft Drink and the Brazil-Retreaded Tyers cases.
First of all, the Appellate Body in Mexico-Soft Drinks established that a WTO-inconsistent measure designed to comply with an international ruling could not be justified by Article XX(d) exception. It is not only because the Appellate Body refused to see international agreements as “laws and regulations”, but also subject to the specific rule on countermeasures in WTO dispute settlement system. According to the Appellate Body, if Mexico is allowed to adopt a WTO-inconsistent measure “to secure compliance” with other Member’s international obligations, in the same vain, a WTO Member can adopt such measure in response to another Member’s failure to comply
69 Panel Report, Australia-Plain Packaging, supra n. 68, para. 7.798, 7.2592, 7.2604.
70 Zhou, Suzanne. “The WHO FCTC in the WTO Panel’s Decision in Australia-Plain Packaging” (ILA Reporter, 27 February 2019) < http://ilareporter.org.au/2019/02> accessed 20 July 2020.
with rulings and recommendations of the DSB, which is in contradiction with Article 22 and 23 of the DSU and Article XXIII:2 of the GATT 1994.72
If one considers that “to secure compliance” of international rulings as a subjective aspect of a measure is indeed not strong and convincing enough to pass the threshold of Article XX subsection, the Brazil-Treated Tyres case demonstrated how stringent the Appellate Body are in considering rulings from other fora.
The measure—an import ban—adopted by Brazil had been challenged in both MERCOSUR and WTO dispute settlement systems, and since Brazil lost the MERCOSUR proceedings, it was under an obligation to apply exemptions of such measure to MERCOSUR Members. While in WTO proceedings, the measure had been provisionally justified under Article XX(b) (necessary to protect human life or health), the Appellate Body determined that the MERCOSUR exemption made the measure applied in a manner that constituted “unjustifiable discrimination” because the discrimination was not aimed to achieve the objective of the measure, and thus, failed the “chapeau” of Article XX.73 In that, the Appellate Body deemed that a judicial ruling from another forum did not constitute a justifiable reason for discrimination between different WTO Members. It deserves noting that there is no clear definition of the term “unjustifiable”, and it is not far-fetched for one to see complying with a judicial ruling as a justifiable basis, especially when other standards contained in the same sentence (“arbitrary” and “a disguised restriction on international trade”) suggest a certain level of severity in the manner of the measure’s application. Additionally, the connection between the measure and the objective it is designed to achieve is covered in subsection of Article XX by the term “necessary” or “relating to”. The “chapeau” examination could have focused on the manner of the application of the measure, rather than the relevance with the objective. As the last section mentioned, the Appellate Body has wider discretion on the determination of standards, including on the term
72 Appellate Body Report, Mexico-Soft Drink, supra n. 60, para. 77.
73 Appellate Body Report, Brazil-Measures Affecting Imports of Retreated Tyres (Brazil-Retreated Tyres), WT/DS332/AB/R, para. 228-229.
“unjustifiable”. Therefore, it is plausible to understand such interpretation as a reflection of the Appellate Body’s attitude towards coexistence with other fora rather than evidence of the textual reading of a term. Just as Howse observed it, “had the Appellate Body taken a positive view of the co-existence of regional fora with the WTO dispute settlement system, it could easily have found that Brazil’s discrimination in favour of MERCOSUR members was not ‘unjustifiable’.”74 Put differently, the finding of “unjustifiable discrimination” implied that the Appellate Body has no interest in addressing fragmentation concerns on deviating jurisprudences.
IV. INSTITUTIONAL ANALYSIS: “PLURALISM” HAS ITS AGENDA The last two parts, conjointly, put forward a discrepancy between the theoretical analysis from international law academics and the WTO jurisprudence on the issue of what weight non-WTO agreements have in the resolution of trade disputes. It will be a mistake to rush to criticize theoretical analysis as not realistic or jurisprudence as lack of normative legitimacy before taking an examination on the design of the system, the mandate of the WTO Dispute Settlement System (DSS) and their implications on judicial operations. As Horn and Mavroidis point out, it is unsatisfactory of some empirical literature to evaluate the performance of the system, “without explicitly specifying what it is meant to achieve.” 75
Adjudication constitutes a part of an internal governance of the system. Rational and equitable settlement of disputes based on law and reason provides “a better incentive to comply with international trading obligations”.76 However, the rationality and equality do not mean the judicial decisions are clean from institutional bias. The
74 Howse, Robert. “The World Trade Organization 20 Years On: Global Governance by Judiciary” (2016) 27 European Journal of International Law 9, 74.
75 Horn, Henrik and Petros C Mavroidis, “International Trade: Dispute Settlement” in Andrew T nGuzman and Alan O Sykes (eds), Research Handbook in International Economic Law (Edward Elgar Publishing, London 2007) 190.
76 Cameron, James and Kevin R Gray, “Principles of International Law in the WTO Dispute Settlement Body” (2001) 50 Int’l & Comp L Q 248.
“pluralism” has its agenda, and embodies the WTO DSS with specific characteristics, underlying purposes and judicial limits. As Abi-Saab, a former Appellate Body member who has had seats on several international benches, provided, “the generic concept of ‘judicial function’ has to be fitted into the particular structure and adapted to the special parameters of the international legal system.”77 Additionally, he stressed that, as a judge, he is required to take into account four elements placed in “concentric circles” when settling concrete disputes, first, the role and mandate of the tribunal; second, the judicial policy formulated in decision-making; third, the role of political organ in institutional setup; and fourth, the credibility and legitimacy of the tribunal to the international community at large.78 Inspired by this metaphor, this Part will focus on the position and constraints of the DSS in the institutional setup, and the impact it has to the rulings we remunerated in the last Part.
A. The mandates of the DSS, and their implications on judicial operations
The mandates of the DSS can be revealed from a reading of DSU articles and an examination on institutional design of the system.
First and foremost, the ultimate mandate of the DSS is to provide “security and predictability to the multilateral trading system” (Article 3.2). Unlike other ordinary tribunals, WTO DSS as an institutional court does not list disputes settlement as the ultimate mandate, but rather an intermediate goal. Holding an exclusive jurisdiction (Article 23) to clarify WTO provisions in accordance with customary international law, the judicial system serves to preserve and legitimatize multilateral trading system, not undermine it in any way. As Article 3.5 indicates, settling the dispute peacefully in alternative means is not an excuse of deviating from WTO obligations. Keeping in mind of multiple goals of the DSS in different priorities, one would understand better the Appellate Body reasonings regarding the inter se modifications of FTA in
Peru-77 Abi-Saab, Georges. “The Normalization of International Adjudication: Convergence and Divergencies” (2010) 43 NYU J Int Law & Politics 10.
Agriculture Product case, in which it, after distilling out the subject matter of the issue, directly go through WTO agreements for legal resources on modification, rather than compare horizontally the applicability of WTO agreements and FTA based on the specific case scenario. The critic that the Appellate Body, in disregarding the FTA, failed to provide an objective and comprehensive assessment of the fact may need to be reassessed in consideration of the administrative role of the DSS in judicial governance. Another political consideration is that bilateral and regional negations initiated outside the WTO mechanism are subject to the asymmetric bargaining power between states, and one of the purposes of establishing the WTO is to achieve a balanced economic prosperity among countries in different development levels.79 In Peru-Agriculture Product case, Guatemala draws attention to “the danger of WTO Members being permitted to waive their right to challenge measures through free trade agreements,” because “this would open the way for political pressures and negotiating power imbalances to impair the rights of smaller and weaker parties.”80
Second, even though the WTO DSS is more rule-based in comparison with the GATT era, some elements of member-driven and diplomacy nature sustained. For instances, the initiation of the proceedings falls in the judgment of member states (Article 3.7); and when adopting a report, member states have rights to make comments and critics on the legal reasonings and rule applications (Article 14.3 and17.14). Accordingly, the member-driven nature directs the DSS to show deference to exclusive authorities of the political organ in decision-making on interpretations and waivers,81 and avoid trespassing the authority bestowed to it by Member States. For adjudicators, such deference is essential, for it decides whether the court will nurture or lose the support from mandate creators and gradually earn more authority and resource in order to operate more effectively.82 Targeting at existing jurisprudence, Member States have
79 Recognized in WTO Agreement, supra n. 3.
80 Panel Report, Peru-Agriculture Product, supra n. 38, para. 7.517. 81 WTO Agreements, Article IX.
82 Shany, Yuval. Assessing the Effectiveness of International Courts (First edition, Oxford: Oxford University Press 2014), 311.
expressed concerns that if the WTO DSS were to “become a forum for WTO Members to obtain findings as to the consistency of another Member’s measure with any non-WTO agreement, this would be a departure from the function the non-WTO dispute settlement system was established to serve.”83 And scholars have been warning the practitioners for getting into the trap of judicial activism, which is detrimental to their internal legitimacy.84 It is noted that a pursuit of internal legitimation does not go without price, “it accounts for some serious dysfunctions of dispute settlement.”85 And it hints that the same claims may not be examined in the same manner between the WTO DSS and other ordinary tribunals, as some scholars have wished.
Third, the panels and the Appellate Body are of subsidiary status to the DSB in assistance of it to make recommendations (Article 11, 7.1 and 19.1). In order to be effective as an assistant, panels and the Appellate Body shall only make rulings that constructive to the DSB, otherwise the ruling would be “improper or even ultra vires”.86 In operation, WTO adjudicators abide by some implicit orders and judicial constrains. First of all is the “must rule” duty. In comparison with “ordinary” courts, the Appellate Body does not own an ability to declare a case as “inadmissible” or to suspend the proceedings when the same dispute is under decision of another forum.87 This order has already been engraved in the mindset of Appellate Body Members, as in an interview, they stressed that “not ruling is not an option” that they have, because “not ruling would also be a ruling in favor of the respondent”.88 Secondly, under Article 19.1 of the DSU, panels and the Appellate Body can only recommend the Member to bring its WTO-inconsistent measure into conformity, and they have no power to make
83 The Appellate Report, Mexico-Soft Drink, supra n. 36, footnote 106 (referring to the United States’ appellee’s submission, para. 18)
84 Bartels, Lorand. "The Separation of Powers in the WTO: How to Avoid Judicial Activism" (2004) 53(4) International and Comparative Law Quarterly 861.
85 Weiler, J.H.H. “The Rule of Lawyers and the Ethos of Diplomats Reflections on the Internal and External Legitimacy of WTO Dispute Settlement.” (2001) 35(2) Journal of World Trade 191, 193.
86 Bartels, supra n. 84, 875.
87 Bartels, supra n. 84, 862.
88 See Shlomo-Agon, Sivan. “Clearing the Smoke: The Legitimation of Judicial Power at the WTO (World Trade Organization Dispute Settlement System)” (2015) vol 49(4) Journal of World Trade (Law-Economics-Public Policy) 539, 552. (referring to an interview with former AB members.)
