The WTO has a well-designed dispute settlement mechanism. Often dispute settlement has been praised as the most commendable activity of the WTO. For solving disputes among members, the WTO has a Dispute Settlement Body (DSB).
Though the DSB is the main wing of the WTO that manages disputes, it is assisted by several wings in solving disputes. The functionality of the DSB is to manage the functioning of these various wings in dispute settlement.
The DSB is comprised of the representatives of all the WTO members and it is just a copy of the General Council.
The two important wings crated by the DSB for settling disputes are the temporarily constituted Panels and the Appellate Body. Panels make enquiry about the disputes to the DSB whereas the Appellate Body attends complaints regarding Panel verdicts.
The Appellate Body has been created by the Dispute Settlement Body as a standing tribunal to hear appeals from WTO panel reports. It was established in 1995 under Article 17 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). As the appellate authority in dispute settlement, the Appellate Body is the main part of the WTO’s dispute settlement mechanism.
Main function of the Appellate Body is to hear appeals from reports issued by the Panels in disputes brought on by WTO members.
Functions of the Appellate Body
It is a standing body of seven persons that hears appeals from reports issued by panels in disputes brought by WTO Members. The DSB creates panels on disputes filed by members. The Appellate Body can uphold, modify or reverse the legal findings and conclusions of a panel, and Appellate Body Reports, once adopted by the Dispute Settlement Body (DSB), must be accepted by the parties to the dispute. The Appellate Body has its seat in Geneva, Switzerland.
Appellate Body Members can also determine, through binding arbitration the “reasonable period of time” for the implementation by a WTO Member of Appellate Body or panel rulings as recommended by the DSB.
This means that if a verdict is made by the DSB, the concerned member country should implement that verdict within a set time period. Sometimes members demand time to implement the verdict. Here, the Appellate Body can determine the reasonable time period for the implementation of the verdict.
Constitution of the Appellate Body
The Appellate Body is composed of seven members who are appointed by the DSB to serve for four-year terms, with the possibility of being reappointed once. Each person may be reappointed for another four-year term. Terms are staggered, ensuring that not all Members begin and complete their terms at the same time.
The Appellate Body membership shall be broadly representative of membership in the WTO. The Appellate Body receives administrative and legal support from the Appellate Body Secretariat.
Qualifications of the Appellate Body members
As peer the WTO rules, “The Appellate Body shall comprise persons of recognized authority, with demonstrated expertise in law, international trade and the subject matter of the covered agreements generally.”
Chairman of the Appellate Body
A Chairman is elected among the Members to serve a one-year term, which can be extended for an additional period of one year. The Chairman is responsible for the overall direction of Appellate Body business.
Appointment of the Appellate Body members
The Appellate Body Members are appointed by the Dispute Settlement Body that comprised of all members of the General Council. This means that the Appellate Body members are selected by all WTO members. The decision to appoint persons to the Appellate Body is taken by consensus among all WTO Members.
Attending a case by the Appellate Body
A Division of three Members is selected to hear each appeal; each Division elects a Presiding Member. The process for the selection of Divisions is designed to ensure randomness, unpredictability and opportunity for all Members to serve regardless of their national origin. To ensure consistency and coherence in decision-making, Divisions exchange views with the other Members of the Appellate Body before finalizing Appellate Body Reports.
Regulation of the Appellate Body
The conduct of Members of the Appellate Body and of the Appellate Body Secretariat are regulated by the Rules of Conduct for the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). These Rules emphasize that Appellate Body Members shall be independent, impartial, and avoid conflicts of interest.
US vetoing of the appointment members to the Appellate Body
Recently, the US has vetoed appointment of judges of the Appellate Body.
The US raised mainly procedural objections to the appointment, blaming that DSB verdicts generally are against it. Washington accused that the Appellate Body had over-reached and created law through legal rulings.
US claims that the Appellate Body, through its rulings, adds or diminishes to the rights of WTO members by reinterpreting WTO agreements. The WTO members never agreed to those interpretations.
The US also warned about the disregard for the 90-day deadline for issuing rulings. Similarly, it objected to the continued service by Appellate Body members in handling cases after their terms have expired. But the major complaint is the accused ‘judicial overreach’ by the Appellate Body, which is a more controversial issue and will be difficult to resolve.
Other than the US, few members also have suggestions about reforming the DSB. Still, there is no unanimous opinion about the reform. More importantly, none is as critique as the US in the case of DSB functions.
The US demanded changes in the functioning of the Appellate Body and asked for an amendment of the existing rule which allows judges to continue on cases they are assented to before their terms ended.
Many WTO members questioned the US action of blocking the appointment of judges to the Appellate Body. The DSM, according to the WTO, is “recognized as the fundamental pillar of the organization and enjoys wide support and confidence among the membership, which values it as a fair, effective and efficient mechanism to solve trade problems.”
Any reform of the WTO should prioritize the reform the WTO dispute settlement system because of the acute and immediate crisis in the functioning of the Appellate Body.
Over the last one year, several countries have submitted reform packages for WTO that also includes changes in Dispute Settlement Mechanism.