1st June 2007
Appeal Without Remand
The creation of the WTO dispute settlement system has been called a major achievement by observers and its importance has been echoed from all sides of the multilateral trading system. The Dispute Settlement Understanding (DSU), the agreement that governs the WTO dispute settlement mechanism, seeks to ensure an improved prospect of compliance, given its provisions on compensation and retaliation, and thus constitutes a central element in providing security and predictability to the multilateral trade system.
With more constraining procedures, and a fast-growing jurisprudence, the dispute settlement system has, however, become significantly more legalized and consequently more complex. This, in turn, has raised the demands on the capacity of Member countries interested in engaging the system to protect or advance their trade rights and objectives. While developing countries’ participation in trade disputes has increased tremendously since the time of the GATT, most disputes are still confined to a small number of ‘usual suspects’ – countries such as the US, the EC, Canada, Brazil, India, Mexico, Korea, Japan, Thailand and Argentina. So far, 76% of all WTO disputes have been launched among this group of Members. This begs the question of engagement of other Members, and in particular of developing countries which may be facing undue trade restrictions.
Various reasons have been propounded for this lack of active engagement for the majority of the Membership. These include, a lack of awareness of WTO rights and obligations; inadequate coordination between government and private sector; capacity constraints in monitoring export trends, identifying existence of undue trade barriers and feasibility of legal challenge; financial and human resources constraints in lodging disputes, and often a lack of political will - the ‘fear factor’ - i.e., that trade preferences or other forms of assistance will be withdrawn, or some form of retaliatory action will be taken, if developing countries pursue cases against certain major trading partners. While many of these constraints need to be addressed at the national level, the current review process of the DSU also offers a potential avenue to improve the functioning of the DSU. In this respect, the absence of a remand procedure has often been highlighted as one of the areas where the system could be improved.
Imagine, for instance, a poor developing country that mustered the political courage and financial resources to file a WTO complaint. While a WTO panel initially decides against it, on appeal, the Appellate Body reverses the panel ruling but, decides that it cannot come to any conclusion because of gaps in the panel’s factual record. So, after on average, one and a half years of litigation, the Member country ends up with an empty bag. This scenario can, and has, played out in the WTO arguably because of a design flaw in the DSU: the Appellate Body does not have the mandate to decide on factual questions, which sometimes means it cannot complete the analysis and resolution of a case. Yet, at the same time, the Appellate Body cannot remand a case back to the original panel, which sometimes forces a complainant to re-file a case from scratch. Consequently, in a growing number of disputes the Appellate Body has left parts of cases, or, on some occasions, entire cases, unresolved. The absence of a remand procedure can force developing country complainants to go through two full proceedings before they achieve a result. Given time and resource constraints, such re-filings subsequent to the Appellate Body finding that it “cannot complete the analysis” may simply be excluded as the money and or human resources may simply not be available for a second round of consultations, panel proceedings and Appellate Body hearings.
The study examines the origins and extent of this “design flaw” and offers possible solutions to alleviate the problem, either through a formal amendment of the Dispute Settlement Understanding (DSU) and/or practices that do not require DSU amendment. The study argues that WTO dispute settlement needs an explicit remand process because of, firstly, the increasing legal and, especially, factual complexity of trade disputes and, secondly, to save the time, resources and other costs involved in a complete re-filing of a dispute in a system without remand. Four remand (or “referral”) proposals are currently on the table of the ongoing DSU review negotiations. The study, in analyzing these, proposes to expand remand to also include cases where the Appellate Body cannot complete the analysis on grounds relating to due process. Moreover, it proposes to put the right to seek remand solely in the hands of complainants. In the author’s view, complainants are the rightful party which benefit from completing the analysis. To give defendants the right to ask for a remand risks exposing the mechanism to delaying tactics.
The study concludes with an alternative solution to address the remand problem, combining, firstly, reducing the margin for judicial economy by panels; secondly, better rules and more scope for the Appellate Body itself to complete the analysis; and thirdly, an expedited remand process bearing in mind the preferences expressed by WTO Members and the lessons learnt in domestic and international appeal and remand systems.
This paper is produced under ICTSD’s research and dialogue program on Dispute Settlement and Legal Aspects of International Trade which aims to explore realistic strategies to maximize developing countries’ capability to engage international dispute settlement systems to defend their trade interest and sustainable development objectives. The author is Joost Pauwelyn, Professor of Law at Duke University, Durham, North Carolina.
We hope you will find this study a useful contribution to the debate on whether a remand procedure should indeed be incorporated into the WTO Dispute Settlement Understanding and, if so, the form such a mechanism should take.